DXC Technology Company

Thank you for standing by. My name is Jessica and I will be your conference operator today. At this time, I would like to welcome everyone to the DXC Technology Q2 earnings 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, press star 1 again. Thank you. I would now like to turn the call over to John Sweeney, Vice President of Investor Relations. John, please go ahead.

Thank you. Good afternoon, everybody. I'm pleased that you're joining us for DXC Technologies' second quarter fiscal year 2024 earnings call. Our speakers in the call today will be Mike Salvino, Chairman, President, CEO, and Rob DelBene, our EVP and CFO. The call has been webcast at DXC's Investor Relations website, 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 the SEC rules, we provide reconciliation to measures of the respective and most directly comparable non-GAAP measures. These reconciliations can be found in the tables, including in today's earnings release and in the webcast slides. Certain comments you make on the call will 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 these risks and uncertainties is included in our quarterly report on Form 10Q 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 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 update on our overall business performance. Next, I will update you on our performance of our GBS and GIS businesses. Rob will then discuss our financial results in detail and our guidance. And finally, I will make some closing remarks before opening the call up for questions. We are pleased with our financial performance in Q2, as our leadership team continues to strengthen and execute on our offering-based operating model. Organic revenue for Q2 was minus 3.6%, above our guidance, and consistent with our Q1 performance. Our GBS business performed better than we expected at 2.4% organic revenue growth, and GIS showed progress, going from organic revenue of minus 9.9% in Q1 to minus 9.1% in Q2. Our EBIT margin was 7.3%, which is better than our guidance, and quarter on quarter was an 80 basis point improvement due to both GBS and GIS margins improving. ETS was $0.70 at the high end of our guidance, and book-to-bill was $0.81, and our trailing 12-month book-to-bill is now $1.02. Free cash flow was $91 million, which was an increase over the minus $75 million we delivered in Q1. This execution shows that we are beginning to see the benefits of our new offering-based operating models. where we are now running global offerings with the goal of driving revenue growth and expanding margins, EPS, and free cash flow. The Q2 results clearly showed we achieved all four goals when compared to Q1 performance. As you have heard consistently from us over the last several quarters, our management team is laser-focused on transitioning DXE from stability to higher performance. That work started with reinforcing our financial foundation and customer relationships and moved on to ensuring we have the right talent in the right places to execute on our growth and expansion goals. With the moves that we have made over the last several months, I now believe we absolutely have that team in place. In Q2, we added two more senior executives to our leadership team to strengthen our ability to run our offering-based operating model, and consistently deliver on our financial commitments. Howard, Andrew, and Rob mark three senior executives with significant senior management experience and expertise in critical parts of our business that have joined us to play key roles for DXE alongside the other talented members of our senior leadership team. Howard will be running our applications offering and be accountable for our AI strategy, Andrew will be running our modern workplace offering, and obviously Rob is our new CFO, who has been making a huge impact in driving our financial performance. Howard has joined us from IBM. He is an IT services expert with proven experience in creating growth strategies and executing against them, as he did at IBM with their cloud business. Prior to IBM, Howard was the CTO of Bank of America, which gives him a unique perspective of what customers want in an IT service provider. Howard is the perfect choice to lead our applications offering. Andrew joins us after working for some of the largest and well-respected brands in the technology industry. Most recently, he was the Chief Digital Officer at Microsoft, where he was our customer for the modern workplace services we provide to them. Prior to Microsoft, I worked with Andrew at Accenture, where he was the CIO and delivered innovative digital services to a very demanding workforce. His ability to run global P&Ls and deliver these services makes him the perfect choice to run our global modern workplace offering. Howard and Andrew, combined with Chris, who runs ITO, gives us three former CXOs of Fortune 500 companies leading almost 70% of our revenues. These three bring deep customer and industry relationships to DXC and the ability to attract top talent to help us deliver on our financial targets. Now, turning to our GBS business, GBS grew organically for the 10th consecutive quarter in Q2 and now accounts for 49.7% of our total revenue. As we have stated repeatedly, consistently growing this high-value business and having it become the majority revenue source of DXE is important to our overall growth strategy. As you can see from the results this quarter, we're delivering on that goal. The 2.4% organic revenue growth was moderately ahead of our growth expectations for the quarter due to the stronger performance across all three offerings. Also, I was pleased to see us expand margins from 11.3% in Q1 to 12.5% in Q2. Our insurance offering has benefited the most from our new operating model because it's been in the model the longest. Our insurance offering delivers a SaaS model to our customers, and we are the world's largest provider of insurance software and VPS solutions to the industry. Under our new model, Ray can now focus on selling these capabilities to existing customers and delivering services more efficiently. His team has done an outstanding job of beginning the modernization process of our insurance software products, positioning our insurance offering for further growth. This is just one example of how our right model and right leader approach is clearly making a positive impact and starting to generate solid financial performance. I believe that kind of production across DXE is only beginning. Another key attribute of our growth strategy is selling our GBS offerings to our GIS customers. On a yearly basis, we generate roughly 370 million in revenue by selling analytics and engineering to our GIS customers, and this is growing 11% in FY24 so far. The new operating model is allowing Michael and his team to continue having success in a very tough market. Another example, of us having the right model and the right leader is our applications offering, which generates roughly 1.2 billion of revenue by selling to GIS customers. But it is not growing in FY24 so far. Fixing this is one of Howard's highest initial priorities, as we have charged him with responding to the AI demand and getting our customer base ready to accept this technology. Moving now to our GIS business. where this quarter we moderately moved it in the right direction, shrinking the decline in revenue from minus 9.9% in Q1 to minus 9.1% in Q2, while margin increased from 5.2% in Q1 to 5.8% in Q2. Like GBS, all three offerings performed better than our expectations. Let me highlight the progress we have made in the quarter to continue fixing our IPO business. We have discussed moving to an infrastructure light model. As part of this effort, and as we've communicated on prior calls, we plan on selling facilities. Chris and Rob are making progress on this initiative with plans to sell facilities in the back end of the year. Executing on this will allow us to sell underutilized assets, making us more efficient overall and helping us fix the margin of the GBS business moving forward. We recently assigned a deal to become the partner of choice for AWS. This partnership incentivizes us and our customers to move their systems that are essential to their operations to the cloud. We plan to use this deal to move some of our customers that are using a data center that is on-prem and sub-optimized to the cloud to improve the cost economics for our customers and ourselves. Now let me turn the call over to Rob to discuss the details of our financials.