DXC - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen and welcome to the DXC Second Quarter Earnings Call. Today’s program is being recorded. At this time, I would like to hand the conference over to Mr. Jonathan Ford, Head of Investor Relations. Please go ahead, sir.

Jonathan Ford

afternoon good and you everyone. Thank you I Technology’s us DXC joining quarter am fiscal pleased second XXXX for are earnings call.

Our Mike Lawrie, Executive call will President Officer. today’s Saleh, Chief Financial Paul Officer speakers and and Chief our on Chairman, our be

for of The historical website to forma CSC XXXX are quarterly X, combined that if Services HPES, our the results explains dxc.com/investorrelations, statements legacy as had which of discussion merger second or second business it results to for the will forma include April fiscal XXXX. the quarter each We giving discussion our been will results pro Slide XXXX. the fiscal today. our on based effect of have HPE of on pro operations company at slides and to Enterprise our of X the of accompany quarter comparisons of consummated

the will the as provided the directly and for to Slide included CSC XX, be that which call. year-end presentation release combined and ending Form documents to X are those can As call actual risks see you tables reconciliation measures and respective our A and company our includes having required discussion have Slide different X could measures. will make certain SEC of forward-looking. listeners in on results measures, like HPES and and well on reports Lawrie. XXXX On non-GAAP their the to subject to to unknown certain I financial X, is a on believe available fiscal GAAP today’s these Technology to September most months no except Relations from the certain would DXC ending obligation further risks These these to a uncertainties, include included useful differ information to X now, and supplemental and with earnings introduce These we participants of and we found of X SEC website. XXXX. known the and rules, uncertainties I information call, adjustments on measures as are informs slides. provide comments HPES on the President we months XX, which be materially investors. in statements presented of that comparable by Investor accordance Mike in consequence law. DXC other quarterly would remind our section assumes our update and reconciliations pro in forma the Both that Mike? In cause of Technology’s Chairman, our the X filings. our results DXC of CEO, XX-Q dates, the And Technology’s like operations CSC results, July for expressed of as

Mike Lawrie

thank Welcome, everyone. Thanks Okay, your you. in interest for DXC.

As five develop some an always, and little and I those then on always have key messages. I will questions. then opportunity Paul have got come four, a will for as will we detail in

adjusted a Adjusted cumulative includes quarter. including EBIT So, lease amortization of in We million cumulative cover the of free million, of generated which will This and second the or from leases, benefit flow a reclassification. restructuring, EBIT XX.X% $XXX benefit $XXX was for moment. I the message of lease cash was first a intangibles was is $XXX from non-GAAP reclassification. here excluding EPS $X.XX adjusted quarter margin of XX.X% million key integration $X.XX. reclassification in

on was a quarter Second $X.XXX billion in the GAAP second basis. revenue point,

was flat currency, revenue sequentially. year-over-year was purchase grew was quarter. the accounting, In impact Excluding X.X% for of X.X% and the GAAP revenue X.X% X.Xx sequentially. Book-to-bill was and price down year-over-year down constant

BPS and in was year-over-year XX% insurance of X.X% the year-over-year healthcare impact driven digital Industry our The excluding last second offsets and X%. purchase growth the also achieve GAAP grew accounting, IP large digital BPS decline the grew year. of revenue relatively completion contracts the and our industry Fourth we was milestones. by the book-to-bill X.Xx. continued revenue integration second in partially several point, healthcare. GAAP business X.Xx XX% and flat our price Third And during sequentially, quarter, BPS IP GAAP industry merger in quarter, the book-to-bill IP, sequentially. And was key point, to revenue

year on executing run-rate cost well savings $X.X as to targets the are are meet plan exiting synergy of of $X savings as track billion our our one of We billion cost year.

Sector Government are Solutions. Corporation Public business stages our of in also in company separating on early Vencore that the combining U.S. with Holding We track KeyPoint and

discussed our constant company technology billion separate continue XXXX, a finally clients. October government traded mission-focused target independent for this XX, on to publicly in currency. revenue announcement fiscal in we $XX then As billion will to U.S. to And of $XX.X serve create

We benefit income from are XX% to corresponding to basis, adjustments. free cash of that and our income the include target now On increasing our will will fiscal reflecting of $X.XX the XXXX reclassification asset of be the adjusted net conversion net non-GAAP flow least since target a benefit $X.XX for leases. EPS of adjusted range the

just let a each points of me more So, develop in one little those detail.

I a benefit was which tax said, moment. a of from $X.XX talk reclassification was I quarter rate in This second non-GAAP of As $X.XX. EPS will about effective the XX%. The leases included

of fair million EBIT Second of per a margin integration quarter included benefit quarter from restructuring expect those reclassification of we In EPS. was cumulative basis $XXX of of value. capitalize Adjusted HPES leases and quarters, subsequent benefit roughly million the leases XX.X%. $XX to continued corresponding Adjusted a that quarter of to amortization on intangibles $XXX million. in of or $X.XX $X.XX adjusted EPS operating market for a the was and or assets EBIT EBIT adjustment

plans including supply been points efficiencies. at cost year-over-year Excluding synergy points and improvement basis The with outlined are increase an Investor XX XX.X%, we taking this consistent benefit, Day, actions have EBIT XXX reflects of chain adjusted would and EBIT sequentially. our basis ongoing that automation

increase required significantly run relationships of predictive global and program, effectiveness global automated automation reduce to environments and minimized our continue analytics operations with by and chain, are up to our through we delivery By create support to productivity Our to also manual supply leveraged to leveraging clients. are we replacing Bionics. highly XX%. This the tests scripts, we reduce cost clients. In stability teams serve improves the suppliers more of incidents consolidating our IP and labor effectively

benefits working closely of ensure providers that realized We are account are at scale level. third-party an the savings into translating with to

leveraging adjusted actions automation our on internal which also And Adjusted net of cash year-to-date the billion $XXX And reduce of fiscal $XXX desk XXX% income. quarter external cash for such service help adjusted XXXX free as free in-quarter synergy savings, approximately net adjusted flow or the us of are $X.X for million or to We $X million income. collectively, flow spend. productivity billion delivery track was keeps XXX% realization. quarter cost was generate initiatives second or of

Our a on X.Xx. billion X.X% basis, on the billion of X.X% revenue In GAAP and exclude follow flat $X.XXX bookings to revenue sequentially. sequential the GAAP down revenue. comments second in purchase comparisons and year-over-year down second all a revenue quarter And in and currency, for was On sequentially. total book-to-bill the In was X.X% constant were year-over-year year-over-year my grew price accounting a quarter was of $X.XX basis. impact

down year-over-year revenue billion. $X.X grew Constant sequentially. down a GBS On basis, X.X% GAAP revenue quarter and second GBS revenue and The X.X% X.X% X% was was year-over-year sequentially. was currency

X.Xx the quarter, case In quarter revenue segment adjustments, $X.X in by improvement of the the GBS UK. with There very the two contracts GIS our up $X.X the so sequentially was the the flat in large was segment prior for moderation were compared billion. was of bookings On infrastructure the revenue the a year-over-year was were margin up billion from down the GBS completion As Constant reflects headwinds decline year-over-year take-out last quarter, revenue XX.X% impact was and GIS year. large of X.X% was with X% government little margin of lease was XX% XX.X% in bookto-bill continued was with portion this quarter, currency book-to-bill X.Xx. of GIS X.X% in GIS impact and a was GBS year-over-year a driven cost the in prior the compared in the year. quarter, a second margin basis, of GIS business. year-over-year and represent reflects the down of In XX.X% legacy GAAP sequentially. X.X% sequentially. actions. X% and up bookings revenue

was assets Now, of with leases, bookings the XX.X% those USPS impact quarter I quarter lease XXX revenue USPS year-over-year year-over-year more reclassification impact margin associated margin USPS up the year. a excluding second Again, assets associated the corresponding with fair adjustment fair X.X% and prior of and Vencore USPS was talk X.X% And value the basis sequentially, The the deals adjustment and million value. up was of GIS action processes. In base total year-over-year the and in by of segment and and contract were was the XXX sequentially. and of the combination of leases, up million. its greater compared XX.X%, cost of also the those the lease reflecting with expand quarter, XX.X% will XX the XX.X%. automation $X new and the quarter again basis margin and USPS continued X.Xx. corresponding separation than excluding to revenue the logo business KeyPoint. about points moment $XXX adding points DXC represented second a value in reclassification book-to-bill client was in XXX% was up million in the $XXX of in in

BPS was in XX% continuing team basis, momentum cloud infrastructure, And And have cloud was GBS, revenue The to the security. all GAAP clients digital of and in industry consulting, XX% up a with their cloud a down growth three up software from provide the DXC XX% DXC’s let major and to XX% strategic X% Digital year-over-year of XX% book-to-bill up analytics our were this as test application cloud digital XX% large insurance reporting X.Xx of Analytics and year-over-year offerings X.Xx. offerings. year-over-year and year-over-year book-to-bill of was XX% bill IP up segments was was book-to-bill GAAP year-over-year X% a drive by up Bookings XX% includes scale results. consulting Security up me GIS and to Book-to-bill introducing apps USPS deal by sequentially. and transformation sequentially. X% a revenue was up was GAAP X.Xx. of enterprise a enabled up and and cloud plan, solutions digital were sequentially. X.Xx. year-over-year up to company with we and accelerating revenue Now, as apps, cloud revenue On bookings discussed, with enterprise with in sequentially. up GAAP business was and DXC’s revenue was move quarter. up include Drivers as a is software well across XX% and GAAP sequentially. Cloud cuts Bookings XX partners. help apps cloud year-over-year the quarter pilot digital enterprise quick-start and our digital enterprise

IP we in in X.X% through completion insurance, up of in with and insurance to large contracts insurance growth banking to invest process X.X% and a this X% the the was the the of up offset X.Xx, and and increased X% continued IP while the year-over-year leveraging of win large services of the flat BPS and IP are in our sequentially. quarter, in the ramp X.Xx business revenue several second the revenue X.Xx. reflected was the up travel our We reflects offerings quarter was decline Industry traditional managed Industry were Lloyd’s MetLife. healthcare, our book-to-bill was London. with BPS X.Xx. GAAP consultants on and growth capabilities. bookings and expertise, already year-over-year of security BPS and partially security was the and as up growth And beginning year-over-year and industry during was both business. revenue year-over-year DXC’s ITO quarter. hiring sequentially roadmap digital Underwriting Market well transportation for a was XX% was book-to-bill X.X% such business was in large in by that our including the the Association X.X%. down and GAAP The a and and industry relatively GAAP continued as revenue transformation deep this The across book-to-bill services business is year-over-year book-to-bill This quarter contracts quarter International developed as offerings Industry year. driven in vertical which includes our was up was up Association end-to-end healthcare builds of by last the see We

We employees’ also as which had language by handled providing cognitive such knowledge second leverage volumes global significantly reduces branch operators to human several by deals banks. key our imports. wins quarter at call center, large in natural solutions the answers automated These

our oriented previously formed Now, the team a digital as develop from needed discussed, as of is roadmaps to marketplace. growth well greater partners. efficiency We to is DXC. revenue our IP, across I that as shift a in from traditional the capture a clients leveraging to traditional sales jointly new transformation business unlocking shape the new company occurring unified digital with clear objective for The business targeting overall digital digital share assets transformation outcomes to and gains while wallet motion and approach is in

go-to-market of our public expand application AWS and of VMware’s new provide alliance to digital based announced PwC. we partner in VMware, analytics offerings, expansion continued longstanding with next managed cloud to by wide range offerings Azure We expansion effectively while including generation hybrid unveiling to connect Stack. an AWS application workflows breadth new hybrid also the to allows With our accelerate DXC cloud benefits announced cloud on Microsoft to leverage partnership with include greater and more solutions workflows Azure our clients services services we maintaining for the and services, operational the the cloud for Azure offerings existing quarter, of private These native the services enabled in solutions visibility control. platforms. service across cloud. enterprise public and a This services They scale and to move and the managed of offerings and Stack. strategies Now

Jimmy Our finance services the costs positive operating innovation. with process reduce In a will e-commerce, and to show continues accounting Bally, Choo win optimize collaboration alliance and quarter, with significant Belstaff. PwC deliver PwC, also momentum their with and luxury DXC during with to brands,

together provide PwC have expanding where for proposal currently large to with accounts are then dozen two teaming areas pipeline We also and for transformation. can strengthening to take by joint other market digital we the each we services if are we we develop

integrators leading are We strategic recently the Logicalis, service the Partners people the invest with ServiceNow, and Investor for one technology experienced the outlined also of plan business Combination a sector. Fruition enabled of for solutions management a continuing European acquisition of announced Day. consistent our we DXC’s further business key Logicalis solidifies provider at to in DXC’s partner. the We with most of global

learning algorithms skills more to to flexible way. the the assigned e-books specific on of the most We better industry and asset videos appropriate our important workforce people practitioners including will University focus platform to Gaining flexibility more training us to employees us services now new projects, work, also with and match completed dynamic our that organization, programs in completed continue so individual while training Azure. performance talent and and clients sales year. employees base. DXC DXC for to than people. assets, provides leverage us links in certification rewards. the extraction and crowd This determine have and Microsoft XX,XXX go-to-market over This our including enable courses, and XXX,XXX of talent then the and to sourcing teams. bring established XX,XXX training passed training AWS also certification almost expanded far serve exam, training platform increasing We beyond program And skills our to evaluate certification have cloud, our partners, allows the this programs strategic we our and a

engaged. out X,XXX We globally have pilot subscribers are about we rolling now the and

the key the execute several have quarter continue milestones and on model merger point, deliver discussed. we we build, sell, second Now, previously operating to integration fourth the achieved during

our cost year targets to meet fiscal one track savings cost savings of of $X.X on $X and billion of billion are exiting run-rate We XXXX.

have differentiated to announced we end-to-end with be we government combining focused provider mission-enabled technology It be business and highly company will KeyPoint serve As create are independent service one skilled on company people. across XX with of clients $X.X to global than USPS mission XX,XXX combined traded solutions. company U.S. providers publicly a October The state solution a clients. government our more independent XX, technology would new the commercial and non-U.S. revenues in Vencore meaningful defense continue billion separate and scale to U.S. serve workforce The will top X and DXC IT of countries. federal, approximately sectors. highly the will to in

and delivery will mission offerings, Our their shareholders digital clients, excellence diversified employees, clients it our journey remain as the on partners, same. usual. innovation and Leading our with and will IT transformation be business partnerships industry-leading next-generation for

will close adjustments. or to March currency. are to to the Day free then earlier, new we lease on XX% Paul efforts for now leases. for adjusted Prior And we And We launched this billion XXXX. non-GAAP and around said net expect $X.XX from that reclassification include targeting of I schedule the that, revenue an benefit adjusted cash income integration XXXX, a $X.XX in billion end be basis, company. of I will conversion fiscal benefit of the in finally the by we before our to continue $XX.X to reflecting and net turn to asset as $XX for a range of the deal Investor increasing target the since constant EPS target of have be planning the corresponding will over And income flow our

So detail you Paul questions will to for have. it more I we with that, any over to will a as then and open turn little up may

Paul Saleh

everyone. Mike you greetings and Well, thank

to a results, the I financial our basis Before I would our second presentation. review of take quarter clarify to like moment

the results references first the the quarter. the First, operations XXXX for methodology results year pro months results of for quarterly forma XX, And used second operations September to as conformed of and of forma XXXX. unaudited X months the and non-GAAP for last quarter X CSC the prior ended year all July Also and for of prior of tax the such, rate pro X in a to assume statement we pro ended same flat year include the forma of X HPES XX, XX.X%.

optimization restructuring current adjustments of In and reflect with revenue costs for $XX workforce restructuring, with had in These methods addition, non-GAAP million associated rationalization. purchase severance Year-to-date, share share. restructuring, programs of consistent that fiscal or quarter, fiscal pre-tax per some forma In the diluted the costs items transaction second $X.XX prior line results accounting, years. laid and not. now amounted in we facilities integration results the intangibles lastly, from CSC’s spend results prior a does diluted In for expense share, our $X.XX quarter million of non-GAAP $X.X and the $X.XX $XXX which to included amortization had pre-tax Also ‘XX $XXX represent and million pro with integration was center per pre-tax exclude transaction the or ‘XX. and per we quarter, costs. data And billion cover diluted price the will integration year or And in diluted intangibles related that, acquired out in quarter. or of pre-tax I share. per are costs is $XXX we quarter, with GAAP million envelope cost to whereas second amortization $X.XX

on items, million special $X.XX. impact Excluding EBIT EPS a or these a was non-GAAP the of $XXX adjusted

of reduced quarter the to a representing $XX GAAP the now a quarter our second accounting revenue $X.XXX revenue. deferred price on revenue quarter was Purchase by Turning basis. in billion write-down results, in million

estimate million. full million, our be deferred prior now revenue For $XXX expected fiscal year, write-down is for better than PPA the the which $XXX of is to

lease $XXX that sequentially. currency, and Adjusted year-over-year for value. those integration HPES cumulative quarters, from flat X.X% was of corresponding leases reclassification. quarter In down to Adjusted X.X% benefit to was or benefit was constant of per operating assets this restructuring, EBIT Excluding fair of sequentially. PPA, capitalized the revenue EBIT included amortization GAAP in roughly EPS of and subsequent $X.XX on continued million X.X% quarter million In or after intangibles. a margin XX.X%. down basis EBIT the in expect million $XXX $XX of a $X.XX EPS we adjusting and quarter was adjustment revenue the from roughly reclassification and up a of leases

combination margin workforce, the benefit supply In our in efficiencies XX.X% labor the and are XX.X% greater have Excluding with in shoring footprint. compared the in in about This best we our prior taking in to to reclassification We adjusted continued and the chain workforce. been pyramid optimize X% and rationalize our improvement the we base reduced reflect X% cost a automation, quarter of quarter. the estate quarter, first year real correction. actions rebalance EBIT our extract by quarter, would through

rebalance mix employees are new global end base. was offshore We of to We efficiencies. to skill mix, our and existing workforce. of and that with retraining the will at key XX.X%. near Also scale we shore greater quarter, suppliers, labor ongoing also of In we completed continue ensuring addition the overall benefits of strategic extracting X,XXX continue our renegotiations procurement consolidate capture supply our chain, including the the almost our the supplier and we the

year-to-date In our of our This review implementing real regions. a this across facilities on basis rationalized sites XXX,XXX of footage addition, represented have square tighter during we footprint estate, reductions space XX facilities roughly X%. all practices reduce eliminate would X% feet In and quarter. and cost are square total in we our procurement by

in tax an certain XX% foreign Year-to-date, billion non-GAAP tax and Bookings for rate XX%. for ratio our mix income which in corresponding of we XX%, Non-GAAP in-year $X.XX of targets and year $X.XX, is diluted our So, jurisdictions. cost was book-to-bill quarter, $X of line $XXX the of EPS ‘XX. the in tax are full key on meet synergies In the was delivered rate continuing in quarter the the our Xx. take-outs lease run-rate billion overall $X.X benefit non-GAAP second tax reflecting with million and XX%, incremental the the reclassification of cumulative asset for and revaluation. fiscal total, global quarter track quarter to $X.XX our operations in attributes to in from non-GAAP the of was were exit from including billion

results. in Business segment Now, let’s our quarter. to turn Services revenue was $X.X the Global billion

of and impact GBS X.X% of $X year-over-year was prior constant impact and the was price the quarter, profit down the X.X% In X.X% lease and was $XXX sequentially. was sequentially. up in million, down accounting The Excluding segment currency, year-over-year down This revenue was X% purchase GAAP profit XX.X% year. was minimal. GBS in margin of second XX.X%. with reclassification In compares GBS revenue million

the a we were $X.X the a business, So, the in and improvement optimized billion bookings book-to-bill take-out as of X.X. complex $XXX margin for reflects in cost of was particularly workforce X.X. segment impact in was our for GBS actions the were profit revenue countries. GBS $X.X billion Year-to-date, bookings $X.X book-to-bill million, XX.X% billion, of quarter margin was

now to Infrastructure was Global revenue GIS, the in billion Turning Services quarter. our $X.X

GIS quarter, million purchase sequentially. the sequentially. was year-over-year accounting impact of year. currency, flat the revenue and margin X% X.X% segment prior X.X% $XX and the million down in down the GAAP $XXX Revenue compared was In year-over-year price quarter, was In XX.X% and second of GIS Excluding was in with profit up X.X% profit constant was

Bionics quarter automation program XX.X%. taking greater from lease the fair year-over-year impact cost second our the we Year-to-date, in million, profitability those labor a $X.X reclassification corresponding GIS our leases, cumulative adjustments and excuse million shoring, the bookings of $XX USPS drive The was the turning was including – to revenue pyramid of reflects quarter now was best in and supply for associated billion, asset margin are Bookings X.Xx. quarter. chain were efficiencies, sorry Excluding and in me, impact of XX.X%, book-to-bill revenue million GIS million a improvement optimization operating were from rebalancing, in billion with the X.X. workforce value $X.X actions $XXX of $XXX USPS was for segment was the sector, profit margin segment to book-to-bill for $X.X efficiencies. profit

was revenue up USPS and year-over-year X.X% up Our X.X% sequentially.

was $XXX year. in in million segment compared profit with XX.X% prior the margin Our the USPS quarter profit and was XX.X%

fair were reclassification value the with of in the $XXX times. margin impact associated million of Excluding X.X quarter adjustments for corresponding Bookings lease book-to-bill for leases, quarter assets was million $XX second of in cumulative USPS the a the those XX.X%. and

$XXX was profit Now, year-to-date, billion, segment USPS was million, margin and times. was of for X.X book-to-bill bookings were $XXX revenue $X.X a million XX.X%

turn with improved terms. in quarter. to an reflects was Adjusted working other collections the Adjusted quarter $X.X flow cash vendor of capital cash in billion management let improvement focus XXX% net securitization income. This from adjusted for free adjusted highlights proceeds $X programs. million free flow receivable Now, or net And and cash excludes the XXX% year-to-date, was me income. financial of ongoing or on increased free adjusted flow

$XXX CapEx $XXX quarter million to the Our Cash revenue. leases CapEx the at of billion. operating was of end in X.X% of the the X.X% or million capitalized revenue Year-to-date, $X.X reflecting of reclassification impact cumulative the leases. or was of quarter was

XX%. capitalized to total debt including capitalization million $X.X was leases. ratio was debt total Net Our

the to repurchase. million $XX form year-to-date, $XX share included $XX million in of in our and million our dividends we dividend in capital million have share and million of to shareholders. million in we shareholders returned $XXX the And capital quarter, returned During $XX This in of $XX repurchase.

let closing, targets. ‘XX our in Now, fiscal review me

to billion to billion in We revenue for $XX constant currency. fiscal target continue year be the $XX.X to

adjustments We from increasing benefit our target the the are of to year continuing value for range leases. $X.XX, with full includes associated fair corresponding reclassification to assets EPS of which the lease non-GAAP operations and of a $X.XX

effective rate. tax planning assumes as for our we continue optimize tax on year a tax work of XX% full to EPS Our to strategies to the target XX% rate

will lease fiscal net and of that, the with include back cash free the the for conversion corresponding for XXXX adjusted to the hand session. be now adjusted asset I benefit will operator will flow income XX% now Our of the Q&A adjustments. call And income the since net

Operator

question Instructions] Goldman Sachs. [Operator our will Jim We you. Schneider, take Thank from first

Jim Schneider

like wanted question revenue an quarter. with for in maybe came the Good update Mike conversations the update etcetera? customers your bit than better progress Good to going Navy little on clients. for but UK afternoon. a with clients in your size expectation, us etcetera start I customer taking on cost of Any maybe of you with and Thanks up-selling to with just regarding larger job dialogue synergies, contract help on us their existing is my sense a how government, the increase the synergies maybe U.S. question. our can specifically give to exchange some

Mike Lawrie

the was we of synergy, revenue of thought, concluding, pretty not of I are see of some pressure continue terms had around I some I the little what see am say, the a Investor it less dis-synergies at – a the there Yes, reflection dis-synergies. probably sure much UK planned would say in tracking but this a in a more On Day. UK we I than runoff we the would the the as global originally it’s got basis, contracts still bit we to

In board mean of I global we with had clients, customer you, got advisory tell ago. terms our several in just to conversations I London weeks

native cloud it or in encourage savings of then or other are to them host analytics the going moving simplification. hybrid Advisory is or out the things. It’s is is they applications the got digital week current those take a Americas to how whether different have cloud automation, I through be and modernization deployment back clarity those, whole trying to IT environment. to continue the operations. can to clients We messaging this these figure on of of new This platforms, it’s improve New a invest in of Board their mean, platforms we And of York. Every us cybersecurity one incredible. through applications,

very one similar several that have we we to So, done the before. announced deals

our portfolio, in they the the are and those differentiated. from as back showing messaging clients clearly changed have are that partnerships messaging has In many we the they not one one their to we like front like cases, breadth appreciate the scale, our of bit, clients clients our they the and simplifies readily of up So, which decision-making.

complete say end-to-end to to digital have, put I’d So, we and procedures And we opportunities. a to the the and that’s with Jim, as talent help retain transformation continued to build challenge helping these the and is place the retrain the by process to and capitalize of those approach methodologies in of one even transformation. a some this attract tools to on pilot the reasons we continue clients begin and necessary digital different

Jim Schneider

then synergies maybe this and color. achieved in be any of those would getting through of any That’s said kind I if into believe million to the first very run synergies, you now, of for of the QX in the I respect cost second with you the helpful QX? just to million slow believe understanding believe your the any $XXX look $XXX even billion Thanks. are impact materially one and half full mathematically for those the quarter the Paul, heading of or year the of you And tracking wouldn’t second we and $X into at cost reason to reason ahead quarter year,

Paul Saleh

the the on We realization. above overall really just are meet Again, synergy that year $X are track to have billion. an second maybe slightly on half less of and of will the impact

now, us. $X I we I And things above. in so do think the slightly billion tracking are critical year right for that the we think half the to first are to the of

Mike Lawrie

we lot work still of Jim, And to have do.

is lot as still do this of down work continue a a and we there to company. the lay So, here is to not integrate

year. usual So of half here second this as in the march is forward business the as we

Jim Schneider

you. Very helpful. Thank

Operator

will from question Barclays. Peller, next Our come Darrin

Darrin Peller

Thanks, guys.

the segment bit just any – stable it the looks that to that quite stable, of Is now coming acceleration on mean, can pricing. quarters? that to add-ons revenue year-over-year or GIS to And didn’t sequentially, the global expect some First been you at look that new have guess there that have as now we majority question mean at I maybe the more revenue of start there? we on fairly over show anything I overall really good your that given point. the hear I year-over-year then but think that, don’t next growth. maybe top from when so to to finalization and anything should call, I of would else Is sequential areas any the the drove explanation few closer USPS again is I start we benefit trying accelerated its GBS or this address sense and what missed seasonality made you a on the

Mike Lawrie

that draw would I conclusion. not

there is second many is there the in half the things think still I year. – of

We with… have got which is consistent price-downs

Darrin Peller

Okay.

Mike Lawrie

be to that needs plan Our factored. season

some are the particularly ITO we we are pretty have so you What the more any more are you importantly, acceleration those And IP able I of these out the as our we pretty on, get USPS what that a we here And hire our provided significant of in they when then has the jump contracts. that track healthcare seeing good seeing headwinds is already saw you. digital seeing not about. are in growth run-off for people industry of partial offerings that’s some revenue. growth have as in slight they reported adjust business. bring In would a off is and for would original big quarter to change up and we this USPS, we seeing and good a of the in why that moderation backlog build BPS, case are and sort significant over to there revenue people and the of explanation talked we to conclusions I and

Darrin Peller

Okay.

Mike Lawrie

we some And had then candidly, have acquisitions.

we which bought some again in also and added and dis-synergies that we business. performing decline of business offset those the is Dynamics the Tribridge Tampa are So, providing big ITO well, revenue Microsoft to businesses is which the the out

Darrin Peller

Okay.

maybe was I like year-over-year USPS, way. mean, worse, but an right it similar rates, So could term, the the be improvement it trending similar sounds obviously your side on based near sounds still much of not could core And declines just in that overall GBS, commercial better business the not the at math? GIS it sustainable, like see

Mike Lawrie

on the you Yes, first their shifted from quarter second Remember, remember my say quarter this you last has by is except little everything USPS a speak. will a so first side, to I – our is to bit timeline. that year, about basically comment

more the sequentially at more sequentially, So, it a I with the little they grew. look think bit would be quarter third difficult. much I will comparison

Darrin Peller

Okay.

Mike Lawrie

position And good to remainder are in they the of continue year. to do the for well

Darrin Peller

just helpful. And Alright. then that’s –

XXX. and but the then expect it quick guide follow-up a guys Should turn EPS we the new and when I midpoint still we at you CAGR XX%, on is but guys you know I just lease are made? track adjustments just obviously of capital still the XX% XXXX coming that, through XXX, held given Just for out back, the after Paul were of look will have CAGR

Mike Lawrie

lease be fair think capital is benefit that value years, in X what remaining out gives going you I to from adjustment life. particularly asset the years exclude X.X lease that capital to the to next adjustment, the you over start you have when playing sense to market to adjust because the X a

till spinning the remained be will wait a got so business when businesses what And little look what you when two updating we of like. a other is will I bit and this those give the targets will fiscal with merging year, too USPS will and end feel suggest those we off for better we basically

Darrin Peller

Thanks, Okay, alright. That’s guys. fair.

Operator

next Up Deutsche Bryan hear we Keane, from will Bank.

Bryan Keane

be lease is all want follow-up reclassification, of reclassifications or Hi, lease guidance $X.XX guys. the just to in doesn’t the all Paul, clear it want that’s just that to that, to increase like look there? on

Paul Saleh

full because $X.XX first the quarter. I and per a of the of – into of reclassification sense $X.XX year there the is quarter, the second came total on $X.XX to was half catch-up reclassification basis, think about in year it the there the in

about done little the better the bit we So than a given little full $X.XX the if that add had you bit the of expected in year and for a than it’s first then year. better have we half synergies

Bryan Keane

say you reclassifications the couple did then years. of continue another lease for And

So for forward? divestiture, going the how today’s going I purposes, that that is guess, would going model it’s change, I guess model we going that to but just change forward? do continue to

Paul Saleh

about years. of a I would has think least term at I it say X.X on average

Bryan Keane

then just of ITO revenue, rid business mix business, once USPS the and of digital and we mix what of DXC get USPS? ITO ask of Thanks divest overall wanted to of helpful. we much. percentage mix that’s once the And would be Okay, of the digital guess on I total I of so

Mike Lawrie

I I that. mean, to know. we don’t remodel have

thought tell continue largely on business. to IP USPS, and Day As What digital I quite well you due come would across gain Investor be terms momentum growing PPS the I of reporting dissected segments, not GIS, the have what that’s in continues insurance business three basically the is is we mix, the as thought grow business GBS some a is to contracts we would digital we business business yet. The all fast growing it the these as modeled and and we growing the healthcare about said of in business growing but the cuts not stream. insurance what as fundamentally, that large total and in of way to and was that the runoff as segmented sort

little So, the hasn’t by the is declining mix what bit since anticipated, since Investor changed and large and we than but ITO the less a business fundamentally the Day.

Bryan Keane

USPS? in trying it business not, percentage as Okay. that big that USPS ITO to a out that am figure I are not the And in mix, then because numbers or change, is did larger

Mike Lawrie

their some have do particularly We then have ITO. BPS business, do in and they state

a we you. share with you a better after that information bit if we some provide will breakdown of we to falloff us bear in position that think with particularly just I little Form XX really will more be

Bryan Keane

helpful. Okay, much. Thanks so

Operator

Huang, some will next JPMorgan. Tien-Tsin hear Up

Tien-Tsin Huang

you. Thank

wondering Just quarters surprising, runoff, terms measures, how out gave did couple too nothing in that it revenue traditional change production? how bookings would I around you bookings, book-to-bill does thinking of know in your next rolling come versus of the but and in planned

Mike Lawrie

No.

I think the we the the end bookings at tracking had said much of quarter, as I the pretty first expected. way are

most I pleased has I been bookings. been think have the digital about what

future of on pretty digital revenue good backlog the and And the bookings. important generation. seeing in growth measure that’s are an we So,

have in and it shared measure are call are because to really on revenue, The to rolling more still some probably XX-month other we that, moved annual we a quantify benefit haven’t sales force been your thing provides we able several in I as seeing basis. and revenue focus out at build previous we quarters that’s of least an

comparison year. seen have in revenue. some our candor The annual we we So, against is previous problem all build with increase performance have in that no

to hard a and little our veracity get ascribe great little to year So, numbers. or belt bit those deal a understand until it’s we meaning more, of a under

build total often intensity, which revenue, focus it we a the reduce and However, what off that are on clear drove also important forward. more takes know as capital of are the to which which we trying is focus seeing I capital of TCB, is think some intensity go we is you annual as that

before use knobs some there going am that’s that sort models. an going a that comfortable the sales but force we we and of equation the I you more I have well, motivating a compensation can of to lot you think lot in learn how are So, is far, around be we so turned sales to giving

Tien-Tsin Huang

to good Alright. That’s hear.

the strong since different – this quarter mentioned up you strong. obviously was security bit looks on which digital. within I the guess revenue the little cloud digital it, Just than a bookings,

area side, we see within might an more on the just is trying So, DXC of down to understand priorities security book? that the sort where the double digital

Mike Lawrie

is or is number that I competitive highly a would advisors our terms disappointment in lot of number. that price say driven candid skills. That security consultants market to be security of a and by in

quite progressed the improved as book-to-bill, a quarter and in quarter. up through in respect we more demonstrates more billings place the said, the revenue people some entered were of first the fact that we And some hire, people shows that you then generate. in the merger those few not and but I people So, in as the we the you can the hired that

are is some or there of an you leading lag usually trends, is indicator. the time always a but these on right So, book-to-bill early

Tien-Tsin Huang

Okay. We’ll Thank you. that. watch for

Operator

from Next up hear Citi, we’ll from Shirvaikar. Ashwin

Ashwin Shirvaikar

Thanks.

perception circle resurgence clients, or question the on and you of ramp these number. can growth I some good contracts to digital work the is as it’s it which guess So to question your in my digital see first is prove capabilities them demand good out from of your sort kind digital that difference in a of is of early? seeing you lead too are from

Mike Lawrie

yes, when good mean, that are that clients their see change that’s just What frankly, breadth in the announced up our new are transformation full – our about I or last we India, We is of centers two seeing visiting centers offerings, show clients Yes, does we a the UK in ago. when this a all our not our perceptions. digital weeks Australia question. understand time the in

So perception. yes, that changing is the

these small. The start other of out many thing solutions digital is

So and seeing program new is new offerings geared quick our steady you’re logo why start some around of as these digital that to that’s well. ground

as deliver going So to have it’s for on partners more our of scope, a start in a chance difference out X but you journey the it then we’re with think many contract is place if one times much you grow offerings in in then that that years. smaller really it’s as and just

deliver contract. a years or a of that against backlog platforms we it XX and does ITO does perception, as change a period the yes, rather over a cycle a those time X over So create that traditional digital in virtuous one digital like than price also creates roadmap see pressures

time. engagement the to You actually that opportunity that we’re contract of grow remix over see that about then and business. talking that grow is And a the

offerings composition a a more different of have profile the they businesses. these than traditional So have different some digital

Ashwin Shirvaikar

one level Good it. from that reclass. And segment hear. that Got impact Paul, the impact get tax Paul, I Is for to yes, persists? also the lease

PaulSaleh

you A say? tax, did

Ashwin Shirvaikar

right. yes, yes, Tax,

Paul Saleh

we it the of don’t think makes side, in U.S. ton where depends that rate a apply, tax the the leases are are all think it the I think based. I difference No, I to rates. USPS leases tax the

Ashwin Shirvaikar

that? takeaways the your we in take rate, it’s any And topical should that Got kind come it. from have of proposal since tax year on staying early that out of analysis

Mike Lawrie

mean feel that would sharing, want week And with in house the really a early comes days modeling mean, of I yes, out what certainly comes see then out Not what really understanding terms just on have I so benefit. the to be yet, and anything comfortable got I don’t really we’ve this still I it’s some markup this basic and of impact.

Paul Saleh

to XX% But having it again provisions the are some the from us. is net U.S. that for lower tax rate there benefit that right think much influx a given would won’t and of other a income XX% plus in be to mix of perspective us goes now be the though that’s so I said our it from that

Ashwin Shirvaikar

guys. Congratulations, you. Thank it. Got

Operator

is Company. Bryan up & Next Bergin, Cowen

Bryan Bergin

business, understand that and well? Can there to government there you something as can carve about the trying business if you services public your that and commercial Hi, guys. relative out non-federal your to businesses synergies that is are

Mike Lawrie

we those synergies we very a We got what we got Yes, are public have solutions, strong market. a there we’re very sector large got synergies, Australian there a side. partnerships, the go and public sector we and in the same Germany business, the very commercial some I of share public same between doing France, strong sector to very we’ve UK substantial we’ve business in businesses on business are a mean business, share lot a

is commercial digitizing digital animal, federal is don’t it’s that we government a Australia, or drive U.K. government in yes, a So their in ago out. we just like couple the on and is France different, position all I it government moving being and The would this but transformation. were taking that slightly U.S. out, is business different business carve is the is Australia be weeks processes state health in our We planning have but Australian the business not workflows carved very all trying and to very a strong whether cases about U.S. to something marketplace our Medicaid that’s vertical, and the the are of U.S. unique not worldwide that’s federal part of part forward.

the what exactly commercial clients that’s So doing. are

is quite So of synergy. bit in sense there a that

Bryan Bergin

and rates Okay. share you breakout And share, did heard the of that’s digital, IP helpful. as BPS, are now revenue? across those the a I where growth industry

Mike Lawrie

we what shifted I Day, said has nothing about is did is the what mix the there. Investor it said we No, from was when dramatically

Bryan Bergin

you. Thank Alright.

Paul Saleh

we at I billion bit higher then about little it bit run-rate little you is than see that is on $X digital that were business the Day Investor a industry If than a [indiscernible]. our the running and remember on a basis, it’s less saying

Mike Lawrie

run in it’s net-net, the so about same. the the UK, to off Due

Bryan Bergin

Okay, thanks.

Operator

we hear will Next Evercore. from Rayna Kumar,

Rayna Kumar

evening. Good

on new your saw bookings? and going that bookings pricing some these trends newer And of analytics. forward? work really the growth across Is with saw like strong could you You you bookings comment cloud security sustainable type

Paul Saleh

course those pricing based different of Well, lot increases. consumption time these are the more because our digital then of much many in as of from much as volumes transactions these revenue is and offerings businesses, a the the grow over

And than the business the pricing these which application entirely around many characterized longer are or our usually significant traditional different business, term have So by of maintenance that dynamic, our dynamics and offerings ITO tools a new and management productivity contracts new a these – why saying piloting digital pricing different – improvements more and developing consumption different are it’s that. that’s offerings around baked really world into I’m we’re base. consumption that

all. at that within materially not trends are the have So they changed

to We and productivity consumption as due more offerings. long-term way consequences new early service more see the a continue business the really and too pricing understand pricing in expectations it’s traditional to based pressure the the to

Rayna Kumar

you. Thank

Mike Lawrie

question Operator, we’ll close. and more we’ll do then one

Operator

Okay. Thank you.

with Ramsey from Our final will question El-Assal come Jefferies.

Ramsey El-Assal

shoring challenges of or we Can right points first side know of of that and headcount. pretty talk Thanks the friction a is are the doing your context I you much ask about me squeezing operational synergy political, optimization the the footprint meaning for the material about in more in I in runway doing where merger. in about wanted guys. to moving out here realization on in the you labor the and on how logistical move talked process, labor

you also faced how the of or are at where accelerating of shift kind we tracking? sort sort on are an that challenges least and on So, update – of what

Mike Lawrie

you a so political don’t couple give the me of let see really One, on that. I much. Yes, thoughts

these you labor around the are labor dynamics business. much transformation have understand projects is digital the what the outsourcing that think I to around dynamics different than

we local. have are and when resource, necessarily about Probably more talk So but just when offshoring. you When land transition. a move really in the that very with regard, is sourcing offerings hurdle sometimes transformation about done with they workload we much talk about have partners intimacy. location talk don’t we do do digital biggest right to shoring, to choose right talk we the our locally about any are often done These client digital you and projects

optimized. before up So, is current adding as you have also skills be that could place in dimension. would a the skill some automation to different clearly you the or place ramp say the redeployed else go I

those than positions rather cases we profile. So point displace in our about people from B point around and thinking retrain digital can those A moving many to

co-op about thinking The are we we program, are labor much programs. other we thinking graduates are college is more thinking about rethink as thing our strategies we about internships

labor are in because We the dynamic the next entirely X it different about an have we businesses. or programs, will of as our changes years business traditional than thinking training have the different seen what over mix X

where and people So, that’s in, to before workload it’s dynamic setup of a is creating all bring facilities looking locations. I is it’s whole of about a we said about we some moving lower there. our about, approach cloud at it’s combination it’s cost in rethinking reskilling you talent about different our some have what States the United how are retraining, and our

and business mix and So, I a requires location of reskilling, customer productivity what improvements the training by dynamic as drives digital we that’s makes this is so And driven then the process. more type recruiting in it’s intimacy whole forward. that so move a that of it exciting think and businesses that

Ramsey El-Assal

it there. will so leave thanks much. Alright, I

Mike Lawrie

listen again up to for and thank catching year. first of very the the much interest after you Well, you. your Okay. guys, Thank look forward

Operator

and thank your Ladies participation. would today’s conclude to you does for gentlemen conference. We all like that

may You disconnect. now

DXC Technology (DXC) 7 Nov 172018 Q2 Earnings call transcript