DXC Technology Company

At this time, I would like to welcome everyone to the DXC Technology Q3 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 again, press star one. Thank you. I would now like to turn the floor over to John Sweeney, Vice President of Investor Relations. John, you may begin your conference.

Thank you, and good afternoon, everybody. I'm pleased that you're joining us for DXC Technologies' third quarter fiscal year 2024 earnings call. Our speakers on the call today will be Raul Fernandez, President and 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 SEC rules, we provide a reconciliation of these measures to their respective and most directly comparable GAAP measures. These reconciliations can be found on the table, 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 risks and uncertainties, which could cause actual results to differ materially from those expressed on the call. Our discussion is 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 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, Raul Fernandez. Raul.

Thanks, John, and good evening, everyone. Thank you for joining today's call. I'm Raul Fernandez, President and CEO of DXC. Before we start, I would like to thank Mike Salvino for his contributions to DXC. As you saw in the press release issued before the call today, the Board of Directors has appointed me to be the President and CEO of DXC. I am honored and excited to take those positions, and therefore, I am no longer interim CEO. Let me take you through our agenda for the call. I will start my commentary by sharing my observations of DXC. We will then review the business performance and discuss each of our six offerings. Rob will then discuss our financial results in more detail. And finally, I will leave you with a few key takeaways before opening the call up for questions. As you can see on slide five, we had solid performance in the third quarter. Organic revenue growth came in At the midpoint of our guidance range, adjusted EBIT margin and non-GAAP EPS were both above our guidance range. Free cash flow was $585 million in the quarter, an excellent result and up 26% as compared to prior year. As you may know, I have been a DXC board member since 2020, having previously served as chairman of the Nominating and Corporate Governance Committee and as a member of the Compensation Committee. A little over 40 days ago, I was appointed interim president and CEO. In my first 40 days plus, I have met with employees, customers, partners, and investors. As a director, you get a good sense of the business, its values, and its challenges. But as an operator, you get to go deeper and fully appreciate the talents, technologies, and great work that our employees do every day around the world. You also get a really good sense of how we can work smarter and elevate our performance. In the last 40 days, I have learned to more deeply appreciate the mission-critical nature of the work our employees do on behalf of our clients, the digital systems that we build and implement, and the technology and software that we operate for global brands. And here's a great example of our capabilities. I recently visited our Madrid office and met with the leadership and full team. I got to listen to the great capabilities that we have, and the team briefed me on the work they do with Banco Sabadell, a leading Spanish financial institution. The bank decided to realign their business processes by splitting applications testing from development and maintenance in order to improve quality, time to market, and cost efficiencies. DXC partnered with Banco Salvador to achieve this goal. Legacy application development increased and the speed of bringing applications into production accelerated by 50%. The team reduced application modernization costs by 40% and reduced testing time by 30%. As a result of this initial success, the bank is expanding our engagement into other critical business operations. Now, I will take a few minutes to share my priorities and the near-term actions we are taking. The foundation of our business is service delivery excellence. DXE is trusted with delivering mission-critical IT services for our customers, and we will continue to drive an intense focus on delivery and customer satisfaction. While our company has an impressive collection of assets, technology, and people, it's clear that we need to sharpen our execution and accelerate our performance. To accomplish this, we're going to continue the full implementation of our operating model, establishing global offerings with full responsibility for offering development, delivery, solution design, and P&L accountability. In addition, we will sharpen our sales execution through a geographic market-based sales team. This will enable us to develop market-leading offerings with the right solutioning and pricing and with local sales execution. I have learned that there are many compelling attributes of DXC that are either underappreciated or unknown outside the company. We will change this by doing a better job of highlighting each of our six offerings, showcasing how we tailor our services to empower customer success. We will emphasize the unique value we deliver and highlight our competitive advantages with much greater clarity. As CEO, it is imperative to stay closely connected to our employees and our customers, as they have great ideas and insights that can be harnessed to take the company to the next level. I'm going to invest the time to get this feedback on an ongoing basis. Focusing on these priorities will allow us to achieve our financial objectives maintaining our solid investment grade credit rating, investing back into the business, and delivering on our capital allocation priorities, including 5X. The board and I are fully aligned on our capital allocation strategy. With that said, let's move to review our three GBS and our three GIS offerings. In analytics and engineering, we engineer great products, services, experiences, and operations for global brands. Our A&E team has an unmatched array of talent across AI, engineering, software development, and deep industry knowledge. That combination makes us a trusted partner. An example of our tremendous work here is in the auto industry. The competitive landscape for auto manufacturers is shifting to full digital transformation. And we have been instrumental in helping our clients make that transition. A leading German premium auto manufacturer has told us that, quote, we would not have had autonomous driving without DXC. Next up, applications. The applications business is made up of two components, custom application development and enterprise applications. DXC is uniquely positioned to service this market because of our decades-long and deep industry expertise. Moreover, because of our heritage in running mission-critical systems, we know how to get value quickly and with minimal operational risk. Our focus and strategy has led us to build our strategic business unit centered around platforms such as SAP, ServiceNow, and Oracle. By developing specific expertise on these platforms, we are more competitive in large deals for these implementations and integrations, while maintaining robust project work capabilities. Early results are encouraging, with new logos increasing quarter over quarter. Also, the size of new work versus renewals is going in the right direction, and our deal sizes are gradually increasing year over year. More data and more tools require our customers to be better and faster across business functions. We have a great experienced global talent base to help with that. As we all know, AI will impact all aspects of society. But in the near term, customers with large data sets are best positioned to extract value from AI. We have many global customers with large data sets and we have the expertise to help them leverage this data to extract actionable insights and optimize operations for improved efficiency and innovation. To round off our GBS segment, I'm excited to give you a little bit more detail about our insurance software and VPS offering. Our software insurance business unit facilitates the operations of 80% of Fortune 500 insurance companies. Our work is valued and appreciated by our customers. We earned about 500 customer renewals in fiscal year 23, demonstrating the stickiness of our platform with our insurance customers. We're building out our portfolio of SaaS-based products to provide our customers with additional features and solutions, and in many cases, are co-developing those solutions with our customers. Turning to GIS, let's start with our security offerings. Cybersecurity is a top C-suite concern given the increase in global and state-sponsored incidents. Customers want simplicity in their security ecosystem. We are able to deliver that for them through our best of suite security solutions in which we devise and implement a security setup where the tools work seamlessly with each other to create the best possible security environment for each customer's needs. The need for security continues to grow, and we fully expect to participate in this growth to a better degree than we have historically. In cloud and ITO, DXC is one of the largest service providers in the industry. The key to delivery in this space is to leverage automation, working in conjunction with experienced IT professionals that can handle required interventions. With our new geographic sales organization being closer to the customer, we are focused on increasing our share. We are able to provide experienced live support to your current environment, and with our team, we have all the right capabilities to modernize and streamline IT platforms as we enable our clients' cloud transitions. Next, we have Modern Workplace. AI will have a big impact here, enabling greater ticket issue resolution in an automated fashion. Our customers move from working in one place to embracing a distributed, location-agnostic work model. Employees expect mobility, employees expect customer service and support models, and a frictionless IT experience. We aim to provide a near-zero touch support model that enables employees to onboard, work, and solve problems without using traditional IT support mechanisms like calling in and logging in tickets. With this approach, we enhance and hit on the metrics that are important to our customers. These metrics are employee productivity, engagement, and sentiment. Our financial focus is on improving the business mix. By this, I mean further reducing low margin resale revenue and driving a higher level of services, including those directly associated with AI and automation. Okay, with that, I'll turn the call over to Rob to discuss the financials.