DXC Technology Company

Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the DXC Technologies fourth quarter fiscal year 2023 earnings conference call. 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star 1. Thank you. John Sweeney, VP of Investor Relations, you may begin your conference.

Thank you, and good afternoon, everybody. I'm pleased that you're joining us for the DXC Technologies' fourth quarter fiscal year 2023 earnings call. Our speakers on the call today will be Mike Salvino, our Chairman, President, and CEO, and Ken Sharp, our EVP and CFO. This call has been webcast at DXC Investor Relations website, and the webcast includes the slides that will accompany the 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 to the respective and most directly comparable GAAP measures. These reconciliations can be found at the tables included in today's earnings release and in the webcast slides. Certain comments we make on the call would be forward-looking. These statements are subject to known risks and uncertainties, which could cause actual results to differ materially from those expressed on the call. A discussion of the risks and uncertainties is included in our annual report in Form 10-K and other SEC filings. I'd now like to remind our listeners that DXC Technology assumes no obligations to update the information presented on the call except as required by law. And with that, I'd like to introduce DXC Technology's Chairman, 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 overview of our solid Q4 results where we delivered another strong quarter across our financial metrics. Next, I will discuss our transformation journey and provide insights concerning how the work we did in FY23 positions us for success in FY24. Ken will then discuss our financial results in more detail and provide an update on our guidance. And finally, I will make some closing remarks before opening the call up for questions. We are pleased with our performance in Q4 and in FY23, as it shows that we can execute and positions us for more progress in FY24. Revenues were $3.59 billion and our organic revenue was minus 2.9%. We have driven roughly the same level of revenue in constant currency, excluding dispositions, for all four quarters in FY23, which positions us to continue improving our revenue performance in FY24. Our EBIT margin increased from 7% in Q1 to 8.9% in Q4. This shows that we can continue to invest in our business early in our fiscal year and still deliver on our EBIT margin goals for the year. We see a similar EBIT margin progression in FY24. We delivered over $700 million in free cash flow and like EBIT margin, increased it throughout the year. This positions us to expand free cash flow in FY24. Our non-GAAP EPS increased to $1.02, growing 21.4% year on year. This is the first time we've exceeded a dollar in a quarter over the past three years, which shows that our capital allocation strategy is working. And finally, we delivered another strong quarter of book to bill at 1.04. In the quarter, four out of our six offerings delivered a book to bill over one. Now I will turn to our transformation journey and give you more details concerning how we drove the execution of our numbers in the quarter and position DXC for success in FY24. The first step is to inspire and take care of our colleagues. We've done a good job changing the culture of DXC, and we've also built a strong team that is executing, and I'm happy with how we've been able to add talent to our team. To enhance our execution, we have changed our operating model to be led by our offering leaders. Our new operating model gives our organization clarity and places seven of our most experienced leaders into the market focused on growth, differentiation, coaching our people, and actively managing the details of our business. GBS is a great example. Our A&E, along with our insurance offerings, have been the main reason we have driven consistent growth in GBS for eight straight quarters, and GBS continues to become a larger part of our overall revenue. Michael Corcoran and Ray August, who lead A&E and insurance, respectively, were early adopters of our new operating model, and they have achieved both market growth and differentiation. Michael and Ray are just two of the seven experienced leaders now driving our business through our offering-led operating model that went live on April 1. The next step on our transformation journey is focused on our customers. In FY23, our efforts to focus on our customers translated into revenue stability. As Ken will show, we have had four consecutive quarters of similar revenue once currency and divestitures are removed. We feel strongly that our revenue is now stable, is higher quality, and is trending more towards GBS due to our customer delivery and our enhanced relationships we have developed. Our net promoter score for the quarter was 29, which is near the top end of the industry benchmark range. We wanted to get more insight into what our customers thought of us, as we have seen the external perception of DXC change, so we hired an outside firm to do a deeper survey of our customers. What we got back gives us confidence that we are positioned for future success concerning revenues because our customers view the work we do for them as essential, They want us to help them evolve to their technology future, and they trust us. This has been our platform since I arrived at DXC. Focus on delivering for our customers in GIS, as this will build trust in DXC and ultimately change our external perception, which will allow us to grow GBS. And that's exactly what we've done. The fact that GBS has grown now consistently over the last two years and continues to become a larger part of our overall revenue is an outstanding proof point that this strategy is working. In FY24, we expect to be even more aggressive with this strategy due to our new operating model that takes our most experienced leaders and focuses them on spending even more time with our customers during relationship selling, which was the change we made in our sales approach two quarters ago. The third step is to optimize cost. We have built a team that knows how to drive cost optimization and expand margin, as you saw that in FY23, driving even margin to a high of 8.9% in Q4. The expansion of margin throughout the year was a function of our cost optimization initiatives that focused on staff optimization, contractors, real estate and data centers, and third-party expenses. In FY24, we will stay focused on these items with an increased emphasis on contractors and data centers. Specifically in the ITO space, we are moving towards what we call infrastructure light, which means we will not use our balance sheet to do deals, we will shed a significant number of our data centers, and we will shed existing contractors in favor of full-time employees. These are the key items around our more disciplined approach to deal-making and managing our ITO work. These items, along with us managing the decline of our pension income that does not generate cash, will produce higher quality margin for us in FY24. In the area of seize the market, our new sales approach is working, as we have delivered another quarter of a book-to-bill over one. The relationship selling that we are doing in GBS delivered a book-to-bill of 1.04. The book-to-bill of GIS was 1.03, which shows that we are taking work from our competition and our more disciplined approach to dealmaking is working. We are seeing that our external reputation has changed. and that our customers see the work we do for them as essential, which speaks to our GIS business, and they want to work with us to help them evolve to their technology future, which speaks to our GBS business. Another proof point that we are making the right moves in the market and changing our external reputation to being a trusted partner is the 2023 Gartner Outsource Services Magic Quadrant, where we moved into the leaders quadrant, increasing an ability to deliver and completeness of vision. In FY24, we will continue to focus on our sales approach, which should be even easier with our new streamlined operating model. We believe that the market needs our services and that we are uniquely positioned to continue to deliver a book to bill of one. The final step is our financial foundation. Our execution in this area has placed us in a position of financial strength heading into FY24. In FY23, we were able to maintain our solid investment grade credit profile, deliver over 700 million of free cash flow for the second straight year, and deliver on our $1 billion commitment to repurchase our shares. In FY24, we plan to do more of the same. maintain our investment grade credit profile, expand our free cash flow, deliver higher quality revenue margin in EPS, and repurchase another billion dollars of our shares. And with that, let me turn the call over to Ken.