DXC - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the DXC Technology, Third Quarter FY ’18 Earnings Call. Today’s call is being recorded. At this time I would like to turn the conference over Mr. Jonathan Ford, Head of Investor Relations. Please go ahead sir.

Jonathan Ford

afternoon good and you everyone. Thank you I DXC us the joining third am quarter pleased Technology, fiscal for call. are XXXX earnings

Services of of Our will been fiscal historical pro Officer. will giving discussion HPES, forma forma consummated explains XXXX. we The posted results be third the operations accompany had company the will is being and the and business today's to include results to quarter if combined the dxc.com/investorrelations XXXX. effect our the it Enterprise of statements our call pro Saleh, quarter that on and quarterly on third at of Paul Financial President as results Officer; of Chief XXXX two our to Mike Chief each today. HPE The our the slides X, our comparisons Slide for and of webcast the or Chairman, on for April discussion Executive merger speakers Lawrie, of are call based CSC website fiscal legacy which

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

Mike Lawrie

know going is today. Okay, interest and you thanks DXC. your thank there for a in lot on I everyone

more or a your then four then points share five into As Paul will my is key will of questions. detail it I open go little any to custom and up we’ll and

was was XX% EBIT flow million adjusted adjusted was EPS in adjusted $XXX and $X.XX, cash million non-GAAP EBIT the free quarter Third we $XXX margin of and quarter. generated third

X.X% in sequentially. reflects Sequential for that was quarter and was and was X.X% X% the revenue basis and our comparisons strong was was and GAAP basis. accounting $X.XXX the And quarter on revenue on last reset contract third of a impact All in the X.X% up in purchase down down on sales USPS growth book-to-bill constant ad in Xx. year-over-year and currency quarter sequentially the revenue project was revenue billion year. exclude revenue year-over-year Our price a one-time up

XX%. grew Our in and achievements digital and the was grew second quarter. year-over-year up X.X% BPS X.X% IP including book-to-bill digital a Year-to-date revenue milestone X.Xx digital completed and quarter and was revenue was was X.X% down life that contract our X.Xx, in reflecting industry quarter. IP and book-to-bill sequentially. our BPS large Industry revenue sequentially year-over-year deal third insurance the In down the was XX% was BPS

achieve we the during merger third Now quarter continue milestones. to integration

cost and May XXXX. $X.X deal on Vencore savings XX separation the which and one KeyPoint deliver and allow of savings, to The Form more our cost run of exiting close we roughly the necessary billion business reviews. track with or sector implies are combination $X.X the to public in year to to filed expect now fiscal continues progress. SEC of We Today U.S. billion rate

and Finally target remains to net a range cash for of are free target and our to XX% our in to of $XX.X currency billion additional reflecting this we EPS flow target revenue realization $XX constant increasing adjusted XXXX fiscal continue billion XXXX to of on year, income. fiscal we non-GAAP adjusted synergy $X, $X.XX

Now into more a on points. of those let detail me go little each

$X.XX. third tax XX.X%. EPS rate was The As was said, non-GAAP I quarter effective

quarter adjusted was EBIT Third $XXX million.

one-time XX%. basis reclassifications All the points margin second impact Now points year-over-year, quarter. EBIT basis was up was adjusted of up margin EBIT lease for adjust and sequentially. comparisons XXX sequential margin catch-up XXX during the This was

plans cost ongoing we Now day. the with are our consistent synergy the investor at EBIT outlined actions improvement taking reflects

both to through and as continue party well productivity accelerate third automation. address teams efforts as increased delivery our Bionics program contractors. Our internal drive These labor, scale to

tighten we management resulting spend, of of supply cost existing roles. contractor process continue also business. elimination enhanced thousands business, deliver to workforce our while effectively the or labor contractor conversion required in to staffing on the In We new controls more chain for

XXX% negotiations, maintenance to quarter vendor initiatives $XXX non-labor spend, including adjusted $X income. approximately management net reductions several cash for track consolidation, the of or was third in-year rate generated billion in-quarter free executing ongoing And of the also optimize deliver target flow which versus adjusted actions synergy are billion. to cost on our quarter million means Collectively are $X.X We savings, more in of or demand $XXX and million realization we of expense.

XXX% billion adjusted cash or year-to-date, was the income. flow of For adjusted $X.XX net free

to revenue turning for basis. and for a XXXX. up adjusting was $X.XXX a were the Revenue was In X.X% in USPS quarter, $X currency year-over-year in revenue up Xx. third revenue Sequentially was billion revenue GAAP constant contract Now down book-to-bill fiscal sequentially. year-over-year X.X%. the the down reset bookings third quarter on Total of X% X.X% billion was in

up offset In experienced third billion. revenue headwinds ES historically sequentially revenue mentioned, book-to-bill $X.XXX year-over-year overall. year-over-year and GBS year-over-year was and headwinds quarter. and our add I revenue X.X% Through X.Xx X.X% work to was GBS basis up XXX down as on basis and revenue quarter currency, billion project up was revenue each November. the able points was sequentially. the focused In significant XXX we the down GBS margin was the sequentially. year-over-year was margin X.X% security. a digital points GIS in sequentially. those billion. third sequentially, grow were was This the segment was layers, and optimization. takeout quarter In This client project infrastructure $X.X the party offerings actions, the GIS In improvement sales X.X% of was constant of quarter the XX.X%. was legacy and Now and cost impact and management the reflects down the year-over-year transformations cloud revenue business and In revenue $X.XXX labor GIS reflects revenue leveraging sequentially. X.X% including of $X.XXX of constant quarter. improved X.Xx X.X% in resources of and reduction up in continued down billion in and was book-to-bill currency bookings GIS headwinds management represented up third based X.X% revenue was utilization of

USPS Now actions said year-over-year in process XXX a and up as reset quarter improvement year I segment XX.X%. earlier, quarter, quarter, third automation. basis were of the basis XXX million that In provided during million cost was $XXX and sequentially. $XXX contract the the revenue and points large This in roughly quarter. reflects This had one GIS revenues we margin was the points last third time

X.Xx, this XXX of was benefit and quarter reflecting X.X% XX.X%, million The up excluding up up awards basis for USPS XXX year-over-year sequentially. lumpiness sequentially. USPS of typical in the basis which booking was points revenue the were contract industry. in margin the year-over-year UPS a $XXX segment points and timing Now book-to-bill was X.X%

an in million the also separation combination of the the Vencore new and USPS moments. client Now contract expand than continued few deals $X on of value. I’ll business to DXC the a quarter its logo update and in total adding provide greater KeyPoint XX by in base

digital IP industry our results. BPS and move let Now me to

revenue major XX% more X.X% automotive us auto Could and the two was the quarter the second and scale book-to-bill down Analytics generate was programs. USPS with reflecting portfolio companies. cuts Enterprise to book-to-bill down revenue allow capabilities transformations. our X.Xx. the Recent in and digital German revenue manage was companies Apps was growth to the across Cloud to GIS more was Year-to-date R&D Consulting XX% GBS, infrastructure expanded was DXCs revenue in year-over-year discussed, of environment through and XX% impactful up up are year-over-year third X.Xx Apps and sequentially. include Security digital XX% data deal The sequentially cloud These Xx. consulting, from the was was large and was the up as was and analytics effectively security. cycles includes achievements the drive develop book-to-bill as Bank, start Apps quarter and we XX% up quick client all book-to-bill year-over-year of up Cloud an deals well to offerings and autonomous Cloud large in and contract and significantly minestrone Digital in quarter. X.X% driving with but in revenue offerings. X.X% team Enterprise reporting leveraging revenue rapidly and continues year-over-year shorten segments quarter in As Enterprise The analytics understand Xx. insights year-over-year quarter. wins three was a up

this said are our continuing growth before the security to of we’ve and invest to consulting capabilities. business we As through expansion

book-to-bill management services our BPS in as industry business revenue down BPS and healthcare, and quarter travel offerings, address year-over-year transportation sequentially. book-to-bill as ransom IP was in might launched I and as logo add, reflecting IP the consulting up diagnostic the deal Book-to-bill a flat The X.X% as account. in in the life well with insurance, IP banking, the revenue Industry where book-to-bill X.X% X.Xx. was including BPS large Industry and was the IP year-over-year X.X cyber revenue roughly full Industry including was was offerings threats increase sequentially and X.X% up businesses. security deal. up to XXrd X.X% in and which in X.Xx, as our access well also large insurance and was down includes process contract as new Medicaid We year-over-year, X.X% is and agency service new and a state sequentially. quarter again service, a the quarter, a security was medicate BPS was identity insurance State the our X.X%.

more Now to I our more a on company accounts calls, develop than our partnerships, we digital model next formed million and $XXX new clients, across this created discussed are and each. business few we XX% previously In by with increased team opportunities from leveraging our pipeline assets and transformations months. accounts scaling we earlier over at to digital than the as several pilot new digital XX the valued jointly

business capable roadmaps revenue a wallet We engagements which while business their not believe to and allows do digital by transformations digital survey the quickly reusable capabilities review for and result, result expanded transformation in agendas. third of Framework as for IT create of executing also found for their share clear than are more assets, of DXC shape IT modular DXC. offerings providers initial a partner like a This recent internal greater organizations Digital revenue DXC companies to opportunities unlocking the us develop these Harvard our blueprint. clients, DXC. growth services digital typically The leveraged overall transformation a outcomes to And aligns that

products infrastructure and as process integrated AWS, delivering an the oriented applications Transformation Orland’s new expand experience also continue to bundling a consumer offerings, and services while insurance businesses, consumption allows launched insurances service And five customer leading including partner quickly, industry quarter with in to based to pricing We across with servicing Digital streamlined digital structure. business solution announced a New recently including claims. on create a This Center. transformation our we the globally, simplified insurers centers launch DXCs digital

DXC on renewal And transformation expanded Microsoft We included sold focus today major from products company largest also to infrastructure consumer on our Azure and workforce deal with through XXX,XXX we far native cloud with to on and so than capabilities. environments our continue training legacy up-skill completed DevOps hybrid University, competed that and have Overall infrastructure, training digital employees a cloud. DXC this More have Agile. courses and XXX,XXX year. cloud our programs a employees programs heavy focus application,

integration our here, to model to fourth the to we we continue turning point milestones sell on Now deliver previously discussed. bill achieve and execute operating merger

more We X.X roughly primarily are billion X.X XXXX. on reductions savings Bionics. exiting including of rate of our of deployment actions by cost savings billion global track the management optimization year workforce program run were one the or and savings to and deliver, addition cost acceleration The of fiscal automation driven

recently for the public with integration The We was new filed that based an to operational registration and Vencore and close KeyPoint. and company. review each will summits bringing and And this Day a sector the anticipated Investor finalized the on new the are the U.S. the the before, prior announced on the I have we team business as to model company of company. senior standalone a Form statement at and to underway leaders expect also together part the deal is we as operating for We’ve said operate we of in of leadership series company from close of new separation company SEC the today. time integration conducted XX the deal May process,

it conclude to currency increasing Now to continue I before constant synergy EPS billion realization net over and turn adjusted year remains $X, we XXXX $XX.X in be $XX Paul, the income. for to to adjusted and our fiscal to just revenue expect cash our of are to free this to we flow target reflecting target range non-GAAP additional $X.XX of for billion XX% a

we’ll and for that So any with back that, might have. Paul then to questions and I’ll turn it over be you

Paul Saleh

you everyone. Thank Mike and greetings

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

pro all of First, unaudited last to a results of the the statement December and prior the as the of conform quarters forma pro the HPES rate for the operations QX XXXX methodology XX, same year quarterly reference XX.X%. we two pro prior and forma include nine three Also months in such, first ended results tax year of forma for XXXX. nine CSC used ending for of three and the the for non-GAAP operations October to assume months year flat our XX, and results

write the purchase prior of third for the fiscal pro-forma price impact accounting, quarter addition, In ’XX not. results year whereas reflect revenue does a differed down

CSC’s we million $X.XX non-GAAP associated that quarter severance the the cover actuarial fiscal quarter. represent laid $X.XX one-time rationalization. had quarter, related $XXX per line programs current diluted costs. pretax workforce share with this $XX post exclude quarter. results million of million and gains our are intangibles billion $X.XX pretax diluted diluted restructuring, In to third for envelope data and Lastly, share. from $X.X in integration million share. non-GAAP was GAAP In results share, per And and that Pension is transaction of transaction facilities amortization or acquired out $XXX in integration, benefit we of some costs with were to restructuring, Year-to-date, $X.XX costs had amortization or expense pretax or and $XXX which related methods diluted per intangibles and years. amounted and and These per will the million costs now with restructuring the in $XX in pretax or employment settlement of optimization quarter, integration tax the Also other spend center items I 'XX. items consistent with included prior we

differed tax of from reform, including results impact accrual our the tax US by include provisional of the tax offset liabilities, the federal under required benefit rules. reprising the new tax Third quarter

regulatory U.S. a we global tailwind. We’re reform expect awaiting the early agencies to It’s provisions, tax further still reform the including the guidance moderate tax avoidance and income erosion base provide but overall from non-tax tell, on interpretation still anti related to of tax. to intangibles those

our the the $XX of in quarter revenue Revenue $X.XXX in price Now write GAAP quarter to by Purchase billion reduced quarter third differed basis. more results representing detail. a revenue. on million let’s in down accounting turn a was

workforce, expected For the $XXX on our EBIT was million X.X% sequentially. XX% $XXX quarter. optimize base quarter Adjusted reflects year. in the the versus in revenue reduced comparisons that million and extract to compared catch is actions the amortization combination best we USPS last margin down shoring for This $XXX pyramid lease quarter, rebalance for up greater of our revenue for was additional X.X% year-over-year On be write now our efficiencies second we with supply basis that real correction. workforce. after impact recorded an the chain last price X% estate the basis improvement of integration was quarter constant currency million. and our All EBIT down footprint. In revenue labor down one-time we’re to benefit differed accounting year reclassification revenue of after the quarter prior normalizing intangibles. a that up In fiscal adjusting to XX% through PPA of automation, by estimate continue is up but exclude was one-time contract in cost X% in our reset and rationalize purchase restructuring, of We of and sequentially. $XXX million and a this and X.X% taking

EPS during data reduce new procurement the savings We of of total our $X.XX supply identifying existing In mix Year-to-date rebalance global of achieve compliance to jurisdictions. our EPS the billion was quarter which specific the of foreign improve analytics cost $X consolidate are continuing reduced have was suppliers. the digital XX% was line restructuring, certain of diluted extracting on-track our rate for tax XX%. items, we total to for the billion from XX.X%, mine and XX%. reflecting were $XX.XX to one-time. more leverage skill the the third for retraining the In $X.XX. X.X $X.XX $X.X continue work rate tax take of rate an integration attributes key run of of workforce. greater $X.X exiting to efficiencies. non-GAAP and the Non-GAAP and In income We in our was overall statement with in capabilities billion Booking billion the we’ve rate demand, tax tax incremental quarter real EBIT fiscal the target roughly in book-to-bill that of estate and amortization intangibles. was book-to-bill and our operations revenue full year-to-date non-GAAP over adjusted of one-time square is to in $XXX In and in-year including eliminated diluted for ratio employees non-GAAP million in or non-GAAP which square quarter in we spend footage billion, mix, translates adjusted to of billion X,XXX one-time. XX.X% and was for $X.XX by year also of space ’XX. Year-to-date quarter addition ongoing opportunities tax we’re around our were our $XX.XX savings, for chain we our million delivered feet Year-to-date quarter out billion bookings

to Global in let’s services quarter. Now billion third segment turn was business our the $X.X results. revenue

was was improvement in GBS was year-over-year the profit X.X% internal reductions with and out cost price third and purchase This year-over-year second X.X% and including currency constant quartet. down XX.X% reflects take party of In in million, down margin impact actions, quarter of was expenses. the compared XX.X% In was the million labor $XXX revenue up third and profit X.X% revenue margin up $X both sequentially. Excluding accounting X.X% sequentially. GBS

a was billion revenue booking were bookings the book-to-bill BGS billion for $X.X Year-to-date times. of margins $X.X of of in X.X X.X billion profit $X.X GBS billion, for was our Our a for quarter $X.X times. and book-to-bill XX.X% were segment

was the in to billion global services, infrastructure revenue $X.X now quarter. Turning

are up currency in profit Excluding sequentially. the with quarter, but improvement XX.X% lease impact the billion second automation taking up the million benefits segment we drive rebalancing, actions X.X% X.X% including $XX times. chain third Bionics was program In the down cost $X.X revenue $X.X constant Bookings of profit of and year-over-year and reclassification was to million GIS quarter billion book-to-bill our profit in was were labor year-over-year quarter. the last shoring, quarter pyramid best from X.X% a operating for price or sequentially. margin X.X and XX.X% $XXX accounting In GIS of X.X% billion was The one-time down impact of impact GIS was greater for of purchase efficiencies, book-to-bill the of savings. was the GIS Year-to-date reflects catch and $X.X our bookings supply profit margins a and XX.X% up in for revenue was Segment billion. $X.XXX was times. quarter, compared normalizing revenue X.X were

by was there profit million quarter X.X% X.Xx. second $XXX Turning for was normalizing catch and in with and with the for and USPS segment the of million a a the in achievements. one-time was was XX% past segment executions reclassification of program the for margin sequentially. were driven XX.X% margin The billion, impact USPS now revenue bookings up X.X% our revenue was billion were $XXX year-over-year the up USPS profit was revenue $XXX for X.Xx. in profit to indirect this $X.X quarter, U.S. costs associated Year-to-date and in in Bookings quarter. public million, compared the book-to-bill was and a sector; fees book-to-bill improvement margin was up milestone award $X.X reduction $XXX quarter. USPS of XX.X% quarter million successful

programs. net adjusted highlights receivable from was Adjusted billion management. cash other improvement of XXX% for securitization This quarter, $XXX free excludes capital to flow financial was net $X.XX in or adjusted quarter the working XXX% free or Year-to-date cash the adjusted million adjusted cash ongoing income. flow reflects flow free income. Turning of in proceeds

leases was leases Year-to-date was quarter X.X% revenue, which CapEx of the revenue to billion the associated of or the reclassification capitalize X.X% reclassification of $XXX Our X.X% with $X.XX of leases. in CapEx operating operating was of to or million capitalized leases. reflecting

million our During $XXX repurchase. share to the billion. Year-to-date of at capital quarter Cash $XXX in in we and we of the shareholders form dividends. returned in $X.X our $XX end and million of $XX quarter through the shareholders capital million of dividends returned the was million have

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

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

our increasing this to continuing target are range We year $X.XX reflecting EPS a $X, full operation of to non-GAAP from for realization the additional year. synergy

EPS of reform a to be quarter. to provide the Our rate continues benefit full target to the full assume XX%. federal to tax U.S. the still likely year expect for XX% XX% between tax XX% a rate year. will fourth We tax moderate in

adjusted net XX% the that, income. the free operator flow now adjusted for for hand of the with remains call cash target back Q&A fiscal to And session. I’ll Our the

Operator

with Thank will you. first El-Assal [Operator come from Instructions] Ramsey question Jeffries. Our

Damian Wille

going wait Ramsey. for but to I I wanted to is a some it tailwind. you had official you that before rate, tax guidance to on reform you mentioned you. ask giving guidance be were the for know This Damian to just said guys. Hi was going on

you’ve capital free about think your you how about talk those So proceeds we and laid tax from your reform flow can then, of broader context out. allocation strategy the just of should on already use cash

Mike Lawrie

going change. can to Mike The that’s here. is then model, and chime Paul, the terms in capital not This you of allocation

conclude to to fiscal get here next may we’re continue year year. we that to that. to with our into stick and go and going want this forward something Paul So add as you

Paul Saleh

couple think I the that well we expect is of points. Yeah, a tailwind

so think, I doesn’t change the it way.

Mike Lawrie

Doesn’t change the model. allocation capital

Damian Wille

business, and rate the as wanted terms it a of harden I the business are point the just it business. we of runoff the expectations in some your decline leaves rate off on the to of Should legacy of sticky long and at moderate infrastructure less on follow-up a falls decline sort as ask, more book term just to Got what there? expect

Mike Lawrie

We’ve the of dissynergies been of more less legacy some we and decline that to seen revenue candid. successful little we offsetting terms cloud I other You in and little more We’ve business. offerings. know be have in think digital had we a planned our successful been infrastructure have offsetting with a than

has that candor a we had in communicated. and gone than better modeled litter we what So had what all

Now same year. ran as look are to run a plates we we out lot the we going next into that year, of this

ramping our of of investment the are our up in recruiting skills, as digital people the both retraining our well as So people. we

are significantly we We to our to in the road investing are print. accounts transformation number digital blue of and take map trying

So decline the success around we us continue given plate the offsetting of same are going with IPO that the has some that in to traditional business.

Damian Wille

Thank you.

Operator

We’ll to go next KeyBanc. Arvind Ramnani with

Arvind Ramnani

Hey, congrats another good on quarter.

had Just questions. of couple a

kind is and just revenue came which know You came from of at billion, in slightly above an the $X.X uptick in bookings prior quarter.

reshaping you context looking feel it is entity; combined the and provide you what the including more this for? responding You to together we our know to seasonality? broader a kind to putting market with partnerships environment also how can is of to do been is And clients relative have reflective of a are capabilities or healthier the are demand how you

Mike Lawrie

to going that first. with part the I’m start back of listen, Yeah

responded very have well. partners Our

large, services So that are end-to-end a means independent, we company.

technology their We are our partner for their of partners to solutions ideal the get technology many to and market.

So this through around side important pace the increasingly unprecedented say is of every and capabilities. forward Arvind. week, are that – industry the moving it our is of would gives lock good of progress them this a next to phase terms to to in at business digital along continue I they so as partner the which partnerships go those and frankly we that’s quarter and as very choice the in, ability every avoid a deepening clients

and we India what was of and just my you, you, to on are and never the terms and I I in with to tell I been. was spent China in road. two in Singapore In weeks got Japan have be I honest I seeing, life

very all You understand their front in the cautious witnessed operate than how do know have are they all study eye. or the the I the digital have nothing thing. confirm to review Harvard all whether they they have Beijing in could that is transforming technologies very, internally of impact They about be did downtown day, to plans these They skeptical as same talking their businesses and next that all skills of and this more They this my Tokyo are talking that. do industries and I the with life. this. never clients to

and We mean U.S. when growing. seeing China all all of the growth the and parts India the saw you world. time good Europe are in was Japan I last and and

longer about term pretty So optimistic demand profile. I’m the

opportunity Now form of more a good do ahead. way to and much work there demand, amount is the minimize time. much any businesses transition a have and BPS don’t that our been capture work to some is clearly to to there more in IP, of for want to and lot or investing of shape But that business we digital, our continuing industry we are I

Arvind Ramnani

follow-up. great That’s and a quick it to hear just

you this know on you targets get integration to of, ahead are You had and underway. based clearly kind time and of settle your cost really

any lessons qualitatively business and for the close a acquisition owned source numbers and get a trying specifically the beyond on the Just HP a ago, talk feel learnt about now to the versus about year? to year integration having can process you of

Mike Lawrie

really very detail, to I upfront be there integrate resources. employee for get covers for mean of consolidated generated under that’s us to you terms every the merger find we able and for learnt company. the that integration, think things new But is that frankly, and correct force and next sticking at systems, that other integration mange of to results serve integrate allow a only have will unifying respond that the to processes human being us a integration went lesson that March not going scale was from all in But I only and term end a did lot we’ll things partners go our well. the benefit. think on detailed Like you workday processes resource to not we platform our the lessons as prepared our think as of advantage and is is in always and of That we finding these for the are better and clients base, a significant address but to new example, a imperative there but is long a then a as next the into all just step scale than we of biggest point disciplined are One, human here, absolutely and posted our to to lot when all Well I my lot be witnessing we things. in to learnt. synergies the to this important is a are begin day the scale, several and of as planning years has is have allowing and we to are systems. or able continue very planning we

Arvind Ramnani

Thank good you and very much, for luck XXXX.

Mike Lawrie

Thank you.

Operator

We’ll go of Friedman Susquehanna. James to next

James Friedman

Jamie time. Susquehanna. ask I’ll its interest Mike of in Hi, two front just at up the

quarter if final last fourth us there; to that quarters, first then my year; intended but the XX, the with Mike why is recollection I two, My now of four year-over-year call the regard So suggests don’t know if any was recollection math March. timing right. we end say, then there happens of have we you just the now it thinking for year-over-year mean and my quarter to Form and to you. you that. the of timing. is of one. grow timing. Thank contextualize I in out’s is you happened And my May what are going instead are remind March. thank that original but my the Could stuff as the complain, that’s Those that was three is

Mike Lawrie

one and approval accounting in and the days closed getting will Yes, in and work and I time today review to had the process. for – – days communicated the and approved to about we do that the second March, some had issues transaction that the and first. firm approved had I numbers the the end the scheduled, that firm early and had Form we am XX necessary all we lost we was is you accounting we’ve XX XX for April we about thought USPS able Yes. candidly this that know we SEC I and take be allowing filed audit to an behind at of getting now completed

May. now So month saying of the that’s why I’m

Paul Saleh

think question on are you think right. I other I the about last year, Yes, know absolutely you

usually and of you posting significant a their at you to we down other you price November this if would at typically HPES at of end their because saw think January look I decline basis. or – they them, of at level a will October a year-over-year it, a back accelerated fourth the kind quarter for there, look decline recognition we growth on on is some sequentially revenue quarter revenue so as sequentially. quarter And which saw or time one you lot a historically saw

think see, kind I able project last dollars mitigate hundred mitigating sequentially we close even… was year about of have to declines year been think you the a to and those could million I this few work as and

Mike Lawrie

the offering in the digital And any offering digital growth. are separation we growth; seeing as

Paul Saleh

would right, absolutely levels we at these year-over-year. are you show And growth

James Friedman

Thank you.

Operator

Thank you.

Our will Essex next question with Morgan from Brian Stanley. come

Brian Essex

a synergies for good of transfer know the you amount forma numbers? around and spend on all parse you advantage it versus and afternoon jurisdictions may anticipated question. part just and post know have the then could comments pricing low understanding you you post the (b) of you maybe part taking for thank that in a USPS wanted reforms those know you some tax beneficiary I Congrats that maybe and as played with long DXC does to some on consideration address tax maybe term spend. DXC Hi, those pro impact tax cost taking meaningful reform question, at a be decisions to that of quarter. know Any if

Paul Saleh

are those very good questions. So

to it break So like would I into pieces. its

federal For USPS so maybe be the The reform they local. the obviously benefit new percent from will about tax filer would a for then state and tax about they or and four U.S. will there. XX% rates be and

be So would at they total XX% the they closer in to would would a been XX% rate. versus have they otherwise

the deal for them new gov. So a that’s good for

we it. There There in DXC are benefiting things are play to are tax said. tax be from the lower that certainly as into For going we other are rate reform a on on are There foreign forces of our foreign That’s taxes earnings, some of earnings. contra type some minimum payment there. to on bailing a tax kind minimum non-U.S. tax subsidiaries. also

So it’s a balancing act.

sure We are we current the to position environment. many of make revisiting our how in optimize do tax

is In expect U.S., higher UK. fact our are in what’s than the for really taxes foreign interesting the now

a about side. you transfer Co.; have more – in a point if bit well rethink still company the tailwind DXC you on think we it, enter correctly to at as net-net So commercial is point out overall pricing and the particular the little this but time Remain for

Mike Lawrie

thing it And to I with longer is Paul, other us tailwind is will think our one there it. associated that structures. I’ll do But simplify just a allow add term I think

will have that people are we the has is So employees a and try and over global a of that to a lot of ability the simplify on one reform many and other that so benefits countries. when a is to that to other number that running structures lot years benefits corporation have and that has, entities of basis tax on think created do tax be large this dependent optimize the we legal in structure you global I the downstream of

that DXC KeyPoint. question to and said, spin businesses as help is and USPS So Paul and the I Vencore when think you it’s that definitely all up, post add benefit it’s the going going to there

Brian Essex

of at budgets and on of any point, on to just that discretionary you of Right, this kind that? side customer the follow seeing are up

Mike Lawrie

tell indicated – interested. saying that will worldwide me they I businesses I positive. it their mean a actually see you, as you that. No, visiting I’m not I know was want it on to help well. was with clients as have That in I But to even basis, many

know but overall, feedback positive nothing you clients on So from basis. a I’ve worldwide got

Brian Essex

Very helpful. you. Thank

Paul Saleh

for to was immediate qualified our because the is is I think of PPNE expenditures. second, build One expense there customers I actually There going opportunity tax to that, reform. of the on part some

they So it in get could it’s encouragement just for of some them maybe qualified... really depreciation some XXX% an and on because

Mike Lawrie

That’s yet to play-out.

Paul Saleh

Yes.

Operator

Equity our next DeepDive question take Research. We’ll Rod Bourgeois from with

Rod Bourgeois

It’s talk about to the guys Hey, the side addition I want synergies to digital on mix encouraging you aspirations. all internally drive digital cost more Hey to multiple efforts sales. guys. in that have of

moving digital like So drive view is, mix major going front? acquisitions as your organic sales are sufficient my you you on a forward efforts higher needle your avenue looking the the keep feeling are question to to do digital or

Mike Lawrie

Yeah, that’s Rod. question good a

and build done. to capability. service to some we’ve continue probably that We acquire, this will now year did Tribridge we that with out think other I that acquisitions

always within acquisitions. have revenue that those And so So of X% the buy acquisitions growth been allocation or model to our said in capital we’ve around areas. digital we’d targeted like

So that will we continue as forward. go

pleased are we mean the I organic. So with

are seeing that are good Oracle, with cloud and and we in now really our so growth we We service stuff Microsoft XX%, in are that. enterprise is areas. some like growth SAP and I pleased mean XX% business, seeing apps

little a We gets traditional bit good that our the growth with ITO businesses. masked business cloud are seeing the infrastructure in with associated headwind

merger in our that basis is organic cyber also really investing an the a we’re disinvestment are to big and the reinvesting where time investing This and and security investing. are more We we there in prior in in are clients. that, businesses existing we

digital we’re teams. So we account appointing are what calling

and we for focused in many a beginning to dis-intermediating responsible that direction teams of the driving the So fully employed, for. legacy we’ve just a And on we are have different it’s a is different then responsibility And run systems process. platform that the thought team that growth. move a and that is a our of most we digital actually culture; or requires are having separate and the environments business cases one team concluded mindset. running in maintaining this busy and digital It have different

are to results. to big beginning organic ignite trying we see sales those making some investment around are we a So and digital

think accounts. I scale my to that commentary, said to in XX I going are we

has good all growth into are we growth misunderstand me, those revenue, seeing look out. of but that Pipeline are We now. converted to encouraging don’t as pipeline signs get

Rod Bourgeois

I but across digital guess metric clients, Hey, particularly existing getting some do going arena? note; if still and amidst I’m legacy track in all is, work a savings there going you so of tracking to in pursuing you some at a in the your cost progress that’s there on? cross as direction now related the that the compression off. had it selling expansion Is runs you the industry, is scope that are are also is Great. right traditional on what on that to metric on the track to work have good right

Mike Lawrie

stated to digital good that a so offerings, question. we that our and called around Annual We year. trying within very think as incremental track work project this existing our primarily also is ABR drive Yeah, base. also this are and our around It offerings of I Revenue we that’s Billed is new something which really

Now that ABR metric is still immature.

quarters report do ready not has am a in a because data I been to not to ABR I will in little am to row. history So ready more tell that, What points. you on it, three publically because I see increasing want now is that just that I

am base that third that ready a report are until yet can the as see quarter not a good I’m through good that we P&L. of linked again in So saw we and we the sort growth quarter. But quarter comfortable really be to to what ABR seeing metric first in saw and in line we the second running growth I the

work that this in in of for that for us on internally us. the sold ABR, for first yield we up it’s P&L in on yet. encouraging that are so sign not quarter, forth, has ready we initial so those we done third and second in second, but So encouraging what percent quarter. are and a some seeing shown and organically posts primetime and But The quarter the in XX% some we the actually the sold and we’ve fourth think ABR of seventy

Rod Bourgeois

about to later. to Thanks. forward trend, Alright, a the well a more ring great. three sounds that in it has that and ABR Look hearing nice quarters that row

Mike Lawrie

Rod. Thanks

Paul Saleh

Thanks Rod.

Operator

Our Schneider next come Goldman question Jim will Sachs. from with

Jim Schneider

plan. see full about overall and you question. maybe that if and buckets a the you for look But second. up kind up side at on buckets to some and could other think are clearly on plan rebalancing broad you piece you can Can identified, more where longer the for little and for obviously with out afternoon the talking cost and headcount of basis you year. my Good driven synergies good individual guide synergy be aggregate synergy end maybe go talk a where just Maybe wonder you’ve running the of a upside behind of it’s the buckets, actually back very about the But workforce you the bit a thanks it. ahead might some and talk number the where up in of little stepping this of number I

Mike Lawrie

Where little are think let’s where than little that chain, we I but were in start we we with more behind is behind. get bit thought. are Yeah they procurement to delayed going aren’t and the them, a that supply savings a not we

realization base of the very next continue the that are to of manage but year. bit work through have our flow with, that still see later, we and some aggregate we’ll labor to contingent is of still comfortable do force. coming we so a that number quite We how a So subcontractor little with

long this continuing that see positive. comfortable as anticipated, ’XX. had continuing through this with we ahead we where through frankly advanced and we see our a our is fiscal bigger say a automation, there a are quarter, area trend An and what are having very And are fourth are about that’s term is I’d just than and and not lean That see I impact pleased the really So analytics. we on we our and Bionics business of that. getting behind. sort methodologies the I

the was off it the an ahead. delivery Early investment achievement. It was money going are organization. sort we we that over of So handsomely our speed paid lot and made; in behind of put year of a biggest the sort probably best it of it’s and full we has

we The our have done whole process thing methodology. other agile is

the that As We and see some as very our as we take to externally client. of offering that methodology internally reengineer we’ll our using for pack set an and up then processes are promising.

there, rate ahead not was big a or yield and what right much we fiscal of had increased be. but policies clearly the the procurement, on we in the ’XX. year little on would and are not our the and why where behind our isn’t fiscal number then end increased more seeing is the standpoint a that are we we than the are and we of But we So skewed Bionics to that’s we I’d but and thought we synergies side are automation exist I harmonization think existing the materially and absolute real-estate what slight synergies thought, asset was better area standpoint stuff synergies we then probably it timing from that pretty all anticipated around say ahead.

Jim Schneider

that were you the look as all trends for represent you Great, and Could, post if on Analytics, building into maybe look combine give asked today? kind focus areas of kind I etcetera, sign and some thanks might Securities Enterprise that as on to are of next mix on early the year, seeing bookings much then mean can you you, digital. those us how all underlying based of maybe of questions industry IP, the you targeted some BPS, in

Mike Lawrie

right XX%, of range of a Well, but of The the we’d to the my to business number digital off business. you top head, sort see XX% have I total our business, like a IP know somewhere… approach begin don’t

Paul Saleh

XX% to XX%

Mike Lawrie

some just the That growing. is another remediation. completely and The third signed now. XX%. most behind almost to that accounts in major the is quarter insurance We we’ve XX% particularly deal us business, gotten BPS of needed

and the last We too in more If some business needed for investment beginning us. that you investment and BPS to we solid to pay about insurance methodologies. to the that we off get make talked remember year, is remediate made

Jim Schneider

you. Thank

Mike Lawrie

just Let’s more. take one

Operator

to We’ll go Bank Jason now American. of Kupferberg with

Jason Kupferberg

you? how are guys, Hey

Mike Lawrie

Alright yourself? about Jason, how

Jason Kupferberg

in XX%. a I’m so question good. call quarter, to Margins. re-classes, had strong lease it about wanted guessing adjusted from your the the I maybe EBIT. XX% help call at X% Good, probably Real ask you I’ll

my and I right. math Day kind of the is there XX% to if last think year’s XX know You that in Analyst XX% know [inaudible] you fiscal from to your to guide so was get

as see should thinking as where target other there wanted about considerations could go? just know to is I you that be far if So any multi-year we

Mike Lawrie

yeah, one, Well I think you’re accurate.

are we fact had had and and also revenue margin year year. the a that’s what increased that the off that We this than than we got seeing little largely we this expected expansion we anticipated less bit due to better a run little synergies had

factors is What a going the am card, those this excited and am at am conspire it’s expand update going of term model. year. wild be faster something So the reduced operating that’s first a is in to to seen ready pretty leverage we’re about, little taking time long a am a the because the frankly longer not two automation. operating that operating I we to I what the that margins I being are seeing and impact been a see to think automation not carefully look seen I and services business this have for of this because business. I labor based beginning – I never leverage for in business in I years, through time have some to true leverage business into XX be really have

all So attainment, as investment think a performance. the which we’re people critical making factors to as incremental in synergies helping the our results think better that, margin in revenue I expand well then are drive in re-skilling I

Jason Kupferberg

you digital. I you’d some that outlook ask now I in right heel other some areas focus fashion, relative I just where to security a I [Achilles][Ph] Okay, the it down broke the What’s follow-up quick to since too. maybe the mean analytics are helpful energy? M&A and the maybe of a on mean want of of digital guess there? Is

Mike Lawrie

look working it things the in the mean confident business merger cyber I merger pretty of pretty back. and I’ll back I and was that one beginning prior to post reinvest see and tell we are to that so the that discovered Yeah, growth, we at that will was am come been you to business, hard that have we in when dis-invested that sequential I

lot very there. with innovation opening comments I scales business, – of doing auto our the labs really I looking some you the We really I this talked some analytics analytics out companies accounts my attracting and India many the across think of week we know now talent some of good was a see cyber In coming analytics many and some in things the were about The We last capabilities. capability of we’re industries. in at strong are business. definitely

scaled process some And the so sort ourselves as packaging an of done in of call they across can look many be we’re in can unique up we��re into multiple is the what that analytics we’ve because business things entry offerings one-off other one-off multiple and particularly I’ll be accounts. that business. point capability metrics delivery industries harvesting solved, of digital So take of that business, many instances, and now those instructive things the and using around a analytics it’s we our at some infrastructure instances,

to process. business capabilities analytics add etcetera we we’re where that out which also understand can lean better and analytics things, applying other and driving insights the these we of own some is our using greater business, where automation then business, We’re can into do our to

that rethink process a transactions, procurement smaller that we absolutely You more of onboard? how require and transactions re-engineering whole trained? decisions. to will value retain? number we know I most fundamental mean business around that is of volume own prudent process all to is how procure. complete to our while understand thousands make critical we’re our based. The we we’re analytics we way Are we’re Are are hire? end-to-end so business people process; a How try we now we of of a doing we to our used we manage this, capability recruit? and hire we’ve people low doing How some that That

So you those better we are move going to businesses confident perform know forward. I as am

Jason Kupferberg

good Okay, Thank you. color.

Operator

Mr. session. question-and-answer today’s concludes that And

this I’ll or to turn closing any back you the at conference time Ford for remarks. additional

Jonathan Ford

now. We’ll our the you thank close joining Yes, for call call.

Operator

This call. your for Thank you concludes today’s participation.

may now disconnect. You

DXC Technology (DXC) 9 Feb 182018 Q3 Earnings call transcript