DXC - Earnings call transcript Q1 2019

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Operator

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

Jonathan Ford

afternoon, good and you, everyone. Thank joining I’m quarter DXC first for XXXX pleased earnings you’re fiscal call. Technology’s us

and I’d that Lawrie. introduce remind the call reports law. listeners Technology’s our Both we and update slides. X, now which like certain certain measures risks subject Our certain speakers website, informs Saleh, these to DXC on These on known Form Chairman, the on XX-Q that Technology are on investors. the provide section accordance obligation and of in Mike today’s earnings President Relations our today’s posted Slide other risks being DXC call discussion have results and will call be see to and you’ll X and required in On except those dxc.com/investorrelations, and Investor accompany filings. non-GAAP useful comparable measures. Chief information these well with our uncertainties quarterly as Officer. call presentation we comments our statements we Officer; the most website. supplemental Technology’s release believe adjustments the is to which webcast Financial today. by at on we presented President could respective GAAP from to the Mike that Executive on of These and be Chairman, like and SEC of further cause will Chief I’d measures, expressed forward Slide our the Paul rules, to our included assumes to financial reconciliation to participants In will provided And differ as our in looking. are CEO, reconciliations tables information in included slides uncertainties, as The includes actual to their directly unknown found make to is documents measures DXC which and available materially Lawrie, can our call. discussion our A no a SEC be

Mike Lawrie

business. everyone. Okay, have. call like But quarter. the might you My Thanks will make the briefly was I more color we into non-GAAP results then and will DXC. exclude provide of $XXX turn to any comparisons EPS thank quarter, in your and who I’d adjusted to first was that more adjusted then and all margin million Paul, adjusted and and $X.XX, points cash questions go was have sector depth, little I’ll over XX.X%, for those in to of we and the $XXX and all, In interest first and the EBIT a U.S. open flow a practice, you, generated first targets little the public EBIT free up usual million five then

industry cloud clients. business. digital with we And innovation Amazon $X.XX year-over-year. and in quarter DXC book-to-bill year-over-year, Web X.X% the deliver revenue Our application XX% transformation was digital revenue revenue migration, to grew currency, announced year-over-year in a to first was on build agreement constant And for billion In In book-to-bill and quarter, X.Xx. grew X.Xx by GAAP and was today, our first was X.Xx global growth IP on integrated revenue X.X% and driven momentum book-to-bill in AWS an a practice was new basis; BPS to year-over-year. strategic the first IT enterprise primarily grew revenue the BPS the IP quarter, Services business the that quarter. building and Industry X% down

also creation Medicaid announced public Solutions, of U.S. systems management of We’ve first separation During the completed sector a business. perspective. information Molina we the and quarter acquisition our the of business Medicaid

plan. to continue on our synergy We execute

trending will I deliver we continue to track synergy of XXXX, then and bit more fiscal a plans for talk in billion to savings full target revenue And few our on to EPS finally $XX a We’re moments. $X.XX we billion, to and range. on little end on are target net although, about of to we longer-term cash adjusted our $XX.X to target And of year that income. of or upper the EPS non-GAAP a continue flow of adjusted $X.XX, free more XX%

points $X.XX. each just Now let more The go was EPS was quarter effective me I details. little tax into GAAP those of just first said rate a XX.X%.

prepaid flow we to income separations quarter to continue adjusted be commission X% adjusted net basis was rationalization. XXX billion of XXX in points was first said, year-over-year. margin software EBIT which the as In this UK. adjusted was in basis our was XX% the decline million X.X% currency, levers, or was the XX.X%, of which quarter, GBS book-to-bill agreements. First I the year-over-year. and digital as $X.X and cloud of several license Revenue in book-to-bill enterprise of business or in synergy was partially their of XX.X%, reflecting including XX% growth GIS basis was quarter margin facilities the reflecting well projects was net timing strong first segment And more was contracts Adjusted quarter shift X.X% points mobility. revenue first the $XXX in integration in as applications segment adjusted in was grew free down free moderation In EBIT application of analytics. improvement workforce year-over-year. as was offset workplace year-over-year year-over-year. by up of in $XXX GIS GBS up ITO well the and billion, in million, cash and HPI by year-over-year. and This growth on X.Xx. billion. X.X% driven decline primarily margin was The HPE and and growth down quarter revenue revenue GIS, a efficiencies completion completion our the profit respective points and with continued sales associated adjusted flow XX% for cloud the and XX.X%, as reflects the enterprise And margin security chain supply the And our was year-over-year $X.XX was optimization, was I major as XXX And quarter revenue year-over-year. the continued the reflecting execution X.Xx, was first The quarter And to GAAP constant a the XX% solutions. payments the up continued the in expect year. $X.XX profit up infrastructure, cash GBS for income, basis, said,

ITO joint cloud year-over-year business services accounts infrastructure in existing in leveraging key clients continued multi-cloud We’re And book-to-bill the grew our GIS sector, particular, as in sell offerings. the Dell, with The add-on VMware in reflecting several was partners solutions. IP to business. transformations such financial for to services implementing our demand leveraging quarter X.Xx. And strength we’re XX% Microsoft, our we’re mitigate in headwinds pursuits the and strategic large scale HPE where AT&T, seeing help

let and on business was Digital book-to-bill Now results. and the XX% in revenue and up digital the move to me quarter IP year-over-year our was our industry BPS X.Xx.

with Services. growth double-digit seeing momentum Web are we’re of on We offering to digital And a in growth the had environment this with spend families our digital. continuing build with announcement from Amazon largest cloud. coming year-over-year good in cloud today’s each in enterprise We

We’re establishing DXC existing partnership by our a strategic new AWS expanding integrated practice.

enhanced IP for solutions well practice improved will other of that and solutions. running also industry-based our client joint apps Enterprise delivery cloud digital AWS increased and such sales clients partners Azure as allowing development, of marketing, cloud for encompasses to integrated DXC quality can realize on work traction. industry Microsoft continues The technologies. This to our levels AWS strong with leveraging practice service cost and The savings deliver and and complements cloud seeing We’re consulting performance productivity AWS, services as practice in as be show DXC demand solutions. reinvested VMWare. ongoing

a with we During by the regulatory enable won large deals constantly deals Dynamics of closed quarter, requirements. reconfiguration Australian flexible State these process client. providing that the We evolving rapid and to meet progress health Microsoft and systems Michigan

IP in by quick X% we’re our major where improve integrating ServiceNow defense platforms Workday and offerings for flat there’s with year-over-year, growth leveraging and start and expanded XXX,XXX year-over-year we’re and services a and and demand industry large aerospace including driven in employee was HR BPS experience to an revenue in IP service the also modernize industry financial to generate offers, seeing X.X% and strong was IP employees. implementations, our Industry X.Xx. and book-to-bill example, Salesforce, grew We’re roughly Workday quarter ServiceNow healthcare. module BPS BPS revenue the opportunities client significantly

We continue workforce. and business invest to and developing attracting our in digital in the

are learning. we as training conducting camps analytics artificial as intelligence, on well topics as machine such employees client provided for our example, boot and For executives, digital

to centers customer We’re experience transformation preconfigured also our host transformation blueprints specialists, digital We jointly with digital capabilities, clients these transformation DXC’s roadmaps digital leveraging solutions. centers. develop expanding visualization and in our

Our a clients understanding client’s plans of challenges in get actionable targeted outcomes. deeper builds DXC transformation and the

We’re investing of capabilities we’ve these in DXC’s scale these to against And drive capabilities and largest digital to transformation solutions. manager agendas XX aligned cross-functional our our leadership general engaging advisors leveraging digital companies they’re with and accounts. proactively partnered

into leverages business portfolio, continue we’re it our artificial process Bionix outcomes. processes. eliminates And clients. new as access human we’re the digital IP other with error, optimize accelerate to client intelligence, analytics Bionix for also We entry design leading cross-functional to lean market-leading This and technology offer. to and strategic invest employees minimize provide innovations. and drive our significant costs, installed impact and partners and reduces complex This capabilities our an for automation and curriculum training including offering in point our an to broaden disruptions base using working

together integrated digital delivery And and certification for our Our expertise. programs and capabilities implemented primarily our go-to-market teams both to for content work on focused organizations. industry we’ve training create

in the to of DXC’s in our mentioned, to my enhancing for XX% employees also programs pyramid there’s IT acquisition automation This Medicaid expansion turning labor Medicaid while synergy supporting mix opportunities continued business portfolio. of Molina include provide of term. with the to adds as state can on our for administration chain plans roughly margins in shift, Combining and healthcare for fourth And Molina I and Molina and location are year. announced supply optimization, existing business also These we us from we Now executing location, to nearshore low-cost locations. On and state platforms In services the this the opportunity Solutions provide expands the believe agencies business longer are the our efficiencies. agencies expand Healthcare. June, will our point. margin we mix, I recipients. Medicaid further

We’re traditional increase mix in business. XX% by to that to our XX% planning

progress time countries. digital contractors, while same the making also off-shoring work investing in and by at the centers in other UK our U.S., We’re provided third-party the

graduate centers refresh global our labor delivery into continuously leveraging talent our hiring base and We’re improve our our program and pyramid. to

of XX% have meaningful workforce in of the driver organization, and we be to three And of additional savings. layers. is objective bottom only our have XX% these and our currently Our our automation a of layers in workforce deliverer will

time in For business. volumes core automating my revenue and the able Historically, and processes labor additional career, variable increasing operating client tasks, are we’re matching first By this costs. leverage achieving to level and without of we scale incremental IT investment. services required revenue in

predictively broader City. a to We believe We’ll large to upcoming in margin targets reducing that pool assignments more engage over We’re while us improving these client Talent artificial machine need actions access to levels. our learning accelerates skill Day, Dynamic continue now talent, to spend in X outsourcing margins processes. details scheduled deployment provide that will is eliminate labor these allows believe in-source Cloud also and coming actions sets. coming expand the client expansion have to our resolve efficiencies while avoid and incidents We will This and on deploying York years. for which base provide also We’ll leveraging onboarding Investor labor capture many continue to the term weeks. from us the of for providers. critical intelligence, to skilled and which November in at to this long offshore us allow service to of event and We’ll updated similar bots our productivity supplier to support our third-party New

to more I fiscal questions. trending the up of to And we to $X.XX we for open cash to Paul income. range. And turn adjusted XXXX, detailed it $X.XX. little target continue billion or over we before are of billion, we Now be then $XX.X free as expect said non-GAAP upper reiterate, And turn for over Paul? I that net end Paul, just and to to to also this a that, it before, expect continue to I’ll EPS commentary, XX% revenue of flow and adjusted for be more we’ll with $XX to to

Paul Saleh

everyone. Thank and greetings, Mike, you,

financial clarify basis first our of I’d Before presentation. results, I review the our like quarter to

XXXX had Sector spinout X, First, the a on if flat And have our the as been reflect tax assume to results Public quarterly XX%. business prior completed April purposes, been for comparison fiscal of U.S. restated XXXX. year the transaction rate of results

first from expense special costs method some from per represent rationalization. facilities and CSC’s associated related restructuring amortization in Also of items had non-GAAP had transaction-related million quarter, DXC’s pretax all And quarter this $X.XX the integration, and intangibles data will In center quarter. XXXX business. acquired workforce $XXX quarter, items programs separation such I pretax $X.XX now of with integration, costs. and the or or with of These million and U.S. or intangibles, share. years. share. non-GAAP share Public and fiscal restructuring, separation results our optimization we we exclude diluted the consistent Non-GAAP results from prior severance $XX non-GAAP current amortization to pretax was diluted costs method cover exclude excluded addition, per In that quarter, In $X.XX first XXXX diluted and are that, of per the fiscal million with targets results Sector as $XXX

results reform share. the federal or U.S. from quarter provisional of million $XX First impact $X.XX tax diluted per exclude also

continuing Excluding EPS of and taxes before the million, non-GAAP special was income non-GAAP a impact $XXX $X.XX. these items, from was our operations

in more our first Turning now to results quarter detail.

the billion first revenue $XXX last year. in in versus billion $X.XXX was GAAP quarter EBIT QX was Adjusted quarter $X.XXX the in million. Our

XX.X% we year. This cost plans compared ongoing adjusted XX.X% was improvement margin year-over-year previously line in with the Our the EBIT in prior reflects actions synergy discussed. with

continued we quarter, first optimize our the workforce. During to

overhead chain, new reviews drive Now drive headcount even and detailed of headcount reduction X,XXX productivity continued and improvements. includes in quarter though to to rate of and support our This efficiencies. we’ve rationalization, shift than The was contract digital supply optimization, an we location rationalization In reduced our X.X% and hired total additional more automation, driven by procurement the continue pyramid by thousands improvements. we to vendor orders. purchase additional mix employees conversion

roughly XX% of last vendor consolidated Over the we’ve year, our base.

space centers for eliminated nine In an square remain feet total, year office improvement first and Turning of to actions quarter. the million we in of real quarter. the track year-over-year contributed and X.X with to million the We feet additional during contributed rationalize roughly savings, the of square combined XXX,XXX estate. during these incremental space on quarter, $XX office actions of carryforward When XXXX. synergies this to profit data $XXX million investment net of in these the fiscal business, the

in a Bionix for the reinvestment key the cloud our That XX% our full deployment of $XX tax of income quarter, non-GAAP development we million. included quarter, first the the in expect global In industry reflecting was During platforms. tax further continued our jurisdictions. our of XX%. foreign capabilities of IP to still was digital rate business global the acceleration and of go-to-market attributes year, rate certain program, our mix our tax and XX.X%, And about

to GBS our revenue was This billion $X.XX in turning the first results. $X.XX prior with in Now the quarter. year. billion compares segment

the takeout Our year. with also actions, first margin $X.XX $XXX This last deployment first quarter year. cost in in GBS the XX.X% quarter with GIS first labor year. reflect profit million. our ongoing profit $X.XX revenue quarter of was Profit billion billion XX.X%. was X.X% of segment prior the GIS profit in including compared million, compares was in XX.X% was versus the margin in Bionix quarter first improvements segment margin $XXX and the the and prior GBS was reductions.

impact reflects took from actions second and profitability lease the savings. including from roughly shoring, improvement quarter comparison the program favorable primarily to the our taken the benefits greater during drive opt-to-cap rebalancing, of last pyramid operating of Now year. efficiencies, which of benefit cost we’ve supply point the best contributing was to Also reclassification labor chain margin one effect automation Bionix

Turning other quarter. our highlights this to financial for

adjusted adjusted receivable reflecting or free timing proceeds flow licenses. commission the Our income, well was payments from any enterprise as in as prepaid quarter securitization programs. cash Adjusted of of free the flow XX% software net million $XXX cash sales excludes

Our full advanced revenue, was as of CapEx million the X% of quarter equipment year. or well reflecting the licenses in $XXX for purchases as

During quarter, the we of $XX in and paid dividends, $XXX shareholders. shares million million total returned to we for million a repurchased capital $XXX in of

to our cash expect Cash share we was of year, more repurchase. flow billion. $X.X full through the at the operating end For to the of shareholders quarter allocate

XX.X%. debt billion, capitalization $X.XX was capitalized of net leases, to for including debt total ratio Our a

in the session. I’ll to we’re we deliver start now to the targets Q&A and fiscal the for had So for pace operator against call the closing, a hand the over on our to solid financial year, year.

Operator

comes Wolfe Thank Instructions] from you. Our [Operator Darrin with first Peller question Research.

Darrin Peller

Thanks guys, and job. nice

few start et and years. some deal, Salesforce new this next if just this is about can actually type the others, how model and Microsoft off. up this you differentiates me bit just your bring. you’re – of for your up helping Let versus cetera, model partnership Maybe competitors. pretty your setting clear what I mean, that it’s And opportunity you set just on could between this many of you well Workday, Amazon comment talk more a can

to see. I Thanks. think that interesting was pretty

Mike Lawrie

love. Yes, offer is, that’s only is has This a not solutions to one, What industry a think this the others offer. question. separates the a but – good imperative business of do can we this a We a from differentiator. that is best major labor

solutions jointly, or workplace do our them are an What anyone. analytics offerings, take differentiate that our and In are solutions. that into mobility, rates partner’s solution we word end-to-end or significantly team and two, it of higher. really all we market. client whether when beholden built with I are to many the And the in engagements, Point then have our partner. we client, of all between we as win underscore us to our our our those found we integrate of We jointly, are is the technology offerings our not one integrated be can’t and front the of fully

brings this model The innovation. that thing is other partnership

our refreshing constantly leveraging their we’re are R&D we So and spend. capability,

can’t R&D investments. Our sustain margins huge

on the things investing AWSs of in like the Microsofts to and Now some all spend capability that integrate of take HPEs other billions R&D, about, jointly we’re and but and that can and We talked things leverage the that our Bionix the we’ve R&D. clients.

really modern as cloud, many not customers That’s those really cost changes only we thing mean more enterprise. are. the and have show differentiator you where digital management a one but the and are. modernize et practice cetera. people, That’s plans well That’s this importantly, it’s system modernized where where savings is applications particularly don’t we will manages So of we the cases, that’s infrastructure. want solution. help and locked by the closure And as using elimination mean, in when the interesting. solution, we seamlessly jointly meaning savings well a will are. joint infrastructure their et as the the building a an is What’s very process remediation, build as robust go. critical the where go And this to AWS the as to where of go-to-market decide integrated important in about to pipelines practice, That’s digitization what then integrated cloud-ready The transformation and to moving around up in AWS to DXC be I one we’ll team is talk to clients cetera, one people that their we get move applications. applications, jointly accounts and that

Darrin Peller

hopefully some you’re really some saying, will and mean, you like reinvesting areas, – what that costs And All scaling helpful. out cutting other right. by to of some that characterize allow leveraging to come fair? it That’s Is you’re of but grow. some the you’re on back you’re, your degree, with the you areas. partnering partners in to I despite seems then

Mike Lawrie

they could the access force, see theory, bringing have That In those gives because opportunities with other own jointly to are cases, are that it sales seeing integrated now, we’re and and more some one. us the as our teams us in. visibility that is were opportunities our if sales forces paying we and we

moderate clients. which So existing also this our the us and plans critical but business over new areas. we of only next for this to into clients, move And is couple clients years our ITO to the helps not new attract is new as it’s growth for continue

Darrin Peller

Okay, helpful. really that’s

GIS revenue are that I then quick organically, Just Paul. was what I turn you moderating. decline here. the one I outsourcing positive the follow-up, know saw segment We mentioned impacts guess? that mean, legacy And

how So on I that that how much are Thank – of – guess, much you. where left now? we

Paul Saleh

within are we think traditional offset our businesses within lumped being the seeing the of security, our business, that still picking and workplace GIS some I and digital that by – some business those the Well, – are cloud business. declining, in up – also

moderation And basically as mentioned, so there business. a we’re – Mike very decline our in but traditional seeing the – of was that,

Darrin Peller

Yes.

Mike Lawrie

there’s think call another have And delivery-led add I’d – there’s growth it’s and initiative. the we I that. initiative Yes, what to major then underway, we really

our and So ITO we’re delivery there of is out in base. add-on to work, our for using primarily thousands professionals this look of tens

of our and numbers still this was still a out it’s the encouraging offset do, balance cautiously decline we’re the meaningful We in but lot look early, to of new that cloud. encounter delivery Those So every And it still to of in starting driven see business. we in ITO to some of price-downs business as work teams quarter. the The this of beginning ITO that we’re offset with productivity growth that declining, business. improvements, year. But one, normal is these optimistic the But as to absolutely helping digital business XX%-plus saw year. traditional ITO particularly cloud as that a from we growth this the the quarter. add-on in that some are the this by to work decline that’s there’s well is first offset in some offerings, the become

Darrin Peller

All guys. right. the quarter. on That’s great Congrats

Mike Lawrie

Thank you.

Operator

you. Thank

Our Bank. Bryan with next question comes from Deutsche Keane

Bryan Keane

Yes. Hi, guys.

ask in the about the past, deal. you’ve Amazon – in business. and maybe share I talked going the want about Just after and some AWS Azure that and taking ITO to going know, Mike, of

have? doesn’t So how’s of just thinking this to out with cannibalize with the ITO going And work you the model loud, revenue that some that AWS? business partnership

Mike Lawrie

Well, way first of ITO in got choices. it all, you’ve does business. cannibalize But my thinking, of the two

to You’re do cannibalize else going let you somebody it yourself. or can you

it ourselves. what What new We’re to move we’re is beginning doing is we’re unique doing And about application doing in with Amazon net with essentially and for applications. Microsoft going that and we’re is what DXC. movement business also

We’re Deutsche doing Bank. some of this with

more So as-a-service of take work only we infrastructure. advantage in lower-cost, productive, on cloud moving the nimble but modernized that not that IT and a can go we then will more providing applications around infrastructure more will

growth So process, give model to this a over just steady us additional time, ourselves to this business. do our long-term opposed declining revenue around is and applications, take and, as workload in ITO the on

Bryan, we’re with this public what clients clouds. critical is clouds part combination bridge what doing their are what proactively to And of workload for as waiting they enterprises, not call I’ll a of is And is is that. short, large strategy. I a and doing we’re on all most cloud. And to public to everyone have put this a AWS we going in private of So them. multi-cloud mean, our here, opposed with engaging

and but and Azure offerings have cloud Microsoft others. offerings, VMware and integrated cloud So with very AWS strong now, got we we’ve private

each have front of So and a in this this commitments a importantly, most and in more put client. is of system we’ve integrating formalized to where another, we we really is been and doing, back the now some continuation management resources forth made place, but what are other’s one

Bryan Keane

Okay, were helpful. year-over-year. bookings I follow-up, noticed as And a just down XX%

Paul, of you you’re of then analysts their first not be much. down some timing pipeline where for better to that’s Thanks up, on the models might Can order give just Some push through on so the now, the four just color doing because falls. beat, that? expected Why stay the us for that the than two just EPS and within adjust in guidance will some range? quarter. And

Mike Lawrie

of bit been big to I’ll let is to you’re go going deemphasize of things assets two but the we Paul not One, revenue it done. we’re this ratio, because model, on into terms to TCV. little a before, drop out to a which, I’ve here. beginning talk as to notoriously Two, in about book-to-bill, on the huge comes calls capital-light contracts, And we range, fan are not EPS move volatile. I’ve – said a the of TCV continue meaning of more the encourages is what trying that TCV get there’s

You big sign you the in $X.XX year. first that, TCV of it quarter, make contract that $X.XX a or

are next paying we that based beginning, And beginning, in billed where the the call XX to word revenue, them to revenue we’re sales what So move mean collect that are meaning bill, for and deals on bill I we and our underscore months. to we force. they what able I by sign annual revenue, pay them move,

aren’t sales think we have that, in reporting don’t it don’t Now because history that. to we have we beginning numbers more a going we’re reliable not ready are measure the force direction move – that. we so TCV. lot on than of But of a on is that forward revenue We

of part that’s So it.

issue is going deals growth. X.X, million, lumpiness. that the literally smaller clients, quarter. more we’re quarter on which very book-to-bills are of sort part in the of exactly other digital strategy. And the close we that we’re thing. That The it can scale of is seeing the doing There an It were there, big under second the thought seeing we explosion time. closed strong in $X deals and over number The and is in were more some normal we’re large to is first the of deals that

Paul Saleh

EPS is some It’s still concerned, I cost, made to progress great the the too in towards We change just are over we’re is the to going year the particularly early have in the right are of that as to trending But we outlook. coming first develop we end range said things how Bryan, quarter. – it’s the EPS that As the the quarters. synergies. far see the now, we and when upper look at

Bryan Keane

great. Thanks. Okay,

Operator

We’ll question you. from take with Rayna Kumar next our Thank Evercore ISI.

Rayna Kumar

for When question. in see constant currency the the Thanks revenue good overall expect constant you taking revenue growth? my to in do see improvement currency GIS. to It’s

Mike Lawrie

HPE the Well, to and we have with We really and continue completion the to still off. that lasted GBS, the honest with year. as It’s mentioned, Those were And separation with us projects to I because that’s in of HPI. next I of projects when last hard going of mentioned around Those question. the have predict U.K. we’ve exactly couple integration you. great all associated projects quite got that’s be almost running some – as of a quarters some the that occur, those will in for were are

around Now intellectual underneath modernization, lot on we’ve that, application our would property expect the we’re which growth of I a Microsoft around good to putting seeing healthcare And we’re Azure. today I AWS. accelerate announcement some with this think before, mentioned

move well. insurance care we So our and take that we’re in those particularly some business, to and beginning begin of health have, as to property that applications intellectual financial services,

I that hard when by as exactly the is, that really really GIS, So And getting. work thing to that’s think a we’re story I on encouraged GBS. the behind it’s add-on but predict said we’re

as growth in which is of seeing offsetting the increase cloud as good some in the clients year-to-year traditional the We’re well on that, ITO business.

say crossover would and we’re what plan of on for do can’t to I pinpoint we point exactly sort here, that track when will be. I So

through play but the coming our However, how when quarters analyst the the not of over that’s only together November, we’ll in next of get couple we guess do to meeting years. go going out for best

of the This simple seen revenue be productivity we’ll we being digital I to is to happen to can’t – is change improvements the grows So automated the as services the business like We’ve perspective going business a cost what I able I this from in operating and traditional on this think on we’ve leverage. ITO going I’m as is a cannot when business. underscore will and reductions. but or stuff show some well progress automation. centers, our IT importantly, game-changer that call great cautious. it because progress business synergies, enough. more mean, the to in introduces this making we’re as begin decline offset

the Now of And around IT operations. we’re end-to-end trickier to beginning things beginning processes get IT there. the some into we’re around

in But what it’s that’s play by That’s in going investing we’re in over those see. a out is play big two, And will automation but that longer capabilities. investment. game-changer are that encouraged – of We’re out not going or quarter to significantly this period making time. a why we I to we be think why a a

Rayna Kumar

for very What businesses? seeing pricing in are GIS helpful. you GBS and both the the in trends there That’s bookings out some the new have you of

Mike Lawrie

traditional in strong commoditized, States. businesses have and price a mature solutions. That’s macro on spend This the competition. foresaw why see IT other reinvested the environment. bifurcated. are spend is these In it. the There’s is clients and they be structures, investing money already looking that that, within so those words, tremendous no growth. not our in We listen, in a from digital But robust, Well, in we’re United simplifying spend about go-to-market. there’s as We tremendous IT the pressure that saving IT can for strong is question standpoint that economic

in investing partnerships. We’re our

and much the sensitive to their it’s the ability more business Yes, can transform their is in good skills your We’re those the still confidence is them decline digital enough this in enterprises. solutions but and investing and, although in that processes businesses. XX% to we bring legacy that traditional business, you In quarter, But help growth, the turn, pretty not price their offset the our to digital that XX%, client business. to sizable see competitive? around in business, digital capabilities

game more this – business one So a of is value of whereas pricing standpoint, a a and much much digital traditional game scale business so commoditized a at more more is more is more from the point. value

Rayna Kumar

Great, thank you.

Operator

We’ll question take next Thank you. with our Susquehanna. James from Friedman

James Friedman

and Paul, from something had Jamie Mike, question, the delivery more housekeeping-related for then about side. Susquehanna. it’s Hi, I a

with sorry, that. it had just see Thank the to with I and first I just regard you for XX% gave to target. $XX you is was in more I out, Mike, the this So stranded That’s you I’ll was quarter regard it upfront. other my costs, I call Paul, the or wondering, come? there ones metric. the hear I’m the to thought that ask didn’t in delivery, million don’t said but slides. one, was that you

you’re the XX about like? time? question You my what that how should pyramid organization the pyramid. also shared saying want tier misquote you, is, could XX% over moving I but we the today, If – I delivery potentially look that to don’t anticipate the of guess, bottom

Mike Lawrie

go – I’ll Okay. ahead, Paul.

Paul Saleh

in took a costs, late $XX – stranded takeout and costs it took it second stranded Perspecta this and and gone – so cost almost May. G&A, the and said remember quarter, It you’ll the the got million sometime be place quarter. be as On that onto by the about will late for May, we it’s we about others, a place in will

Mike Lawrie

of we’ll all, remix call On the business. to the mix, continue what I’ll first traditional

It business time, move So scale is thousands the add that more much and That’s out more New digital commitments building new in we’ll to center, we’re more business. of digital our Orleans onshore. why customer commoditized United we’ve the made to same States. continue requires delivery At big intimacy. jobs much business the

UK. the the thing same doing We’re in

thing doing the We’re parts of other and Europe. same Australia in

because right other are businesses the things partners again, bottleneck, mean, That’s in the now critical. different in where characteristics. the is opinion, talent from are of my skills. solutions It’s the I and business Skills skills, So different. absolutely that capability biggest cloud in sort a where it roughly every points getting some $XXX probably like come two different to these standpoint. in. I XX around labor movement speaking, that The are isn’t – exactly me metric. pyramid be than it’s number you more doing. accurate. roughly is somewhere is things for Paul this this in that to of we Don’t offshore. exactly business, traditional But But a give I’ll million. careful. onshore telling is already it mean, the comes That’s digital me technology are have hold couple with critical business The best

this pretty as largely – we’ve lower mean, of employees That’s make which one. other And up is business commitment a new. So part have in the hiring it doing, I come outsourced. made to is from significant. that a been they’ve we are you the of as big we companies graduates, pyramid, as point

commitment that we as And for the hiring of career to increase also our I along of as tens people opportunities. paths huge that. partners We’ll lower solution with only making that graduates X,XXX we X,XXX we’re with these come We’re – digital graduates dollars between these of can in like many to said, deploying and our about hire that We’d Those a of pyramid. re-pyramid. we’ve training are are somewhere XX% globally. part got, workforce to in. amount that of And graduates millions and the this year. building along And

if So business. it’s really will, a the you of remix,

some much lot of opportunities. then customer a those to drive moving we that centers. fundamentally, business, investments business, and move gives Not here, those the intimate, productivity and we’re of making The low-cost metrics that business themselves the in traditional continue more and onshore, to what much much against that to there’s in can So of centers scale automation savings. re-skilling digital And equates in centers. parts people to hiring have deploy you commoditized, it’s as rough big is but more the a through but as in you

Operator

with Our next question Stanley. Morgan comes from Brian Essex

Brian Essex

can way for the Is last guide. Analyst know of what Paul, $X.XX to an But in update maybe that or come you’re might more the Day kind fiscal going medium-term at in might rationalization billion thank investors not about think you And we – far you – that the qualitatively and Analyst how taking how think question. address through address that give are? should and on rationalization until afternoon of to how I outlined the the efforts? Good us there we longer-term if of so Any can you magnitude those that Day? XXXX? terms about process you the

Paul Saleh

be – There bit particularly – are detail. I more in alluded beyond already outlining in upside this that more Mike we those Brian, in it the think, see, a we’ll year. to little Mike has And comments. his

the much we what from Day still in in year. think done, think Investor business. we more the I of I nine of greater past efficiencies, greater work to made the the to in from of were surprised to of look I’ve by pyramiding back that going coming we Mike this be at arena extract And to And centers. that versus today, if result pace There’s work centers program in the work itself. to year, about Bionix data as a and we to We still do indicated, – I do as our a – the to to we that particularly traditional be there’s saw lot rationalized, certain have didn’t more that… improvement offshoring be are were data opportunities our take talents, but particularly done right, pointed again

Mike Lawrie

a integration, mean, inefficiency. thinks lot of – smooth one level, the pretty Paul a I was there’s everybody companies. covers, I and at But have lot add, of this lot what I Brian, gotten duplication these to tools, And a this think I’d underneath mean, and it a mean, still I we said. I two improvements. mean, process One, there’s just was. was from of processes combining still

like workforce with do our Now we’re procurement redesigning – recruiting at we moving and whole management our integrated how that. and our systems, pace things our

with think in more I there’s And been opportunity on this more is going – opportunities comment that work big base. party. right has the we a supplier So third by there. we not are little that. then out figure now, suppliers, meaning And XX% done of to is done figured nothing sort our relatively after more of out November than on dealing is nothing, the I mean, little

lot. when a think up have So with contractors, labor we there’s you XX% your costs of tied

even We haven’t applied yet base. to supplier that Bionix

begin this skills and talent to of opportunity second those to third cloud, we talent to some cloud isn’t source there’s in the the develop as as – parties. through an the – capabilities opposed haven’t We Again, see to to you’re going this not quarter. begin

we that’s after see, right – when or acquisition, But And our analyst prior see. – question, in the of work and to think is the we in in what we more meeting think did You’re margin I quarter. little the these productivities in on efficiencies, I detail going this. here we are a to get we’re term, terms together to now when we’ll productivity longer there able quantify probably and answer see areas to we be beginning November. it expansion. third But update And that, didn’t upside and think

Brian Essex

of range. in stood got we’ve incremental Xerox’ I think you now know to the the space, it about of high assuming that, we those just lot think you’ve contracts follow-up involvement you’re that MMIS can of should of questions deal, Conduent, margins margins that so Appreciate prior you where in Can margins and go? were are kind kind that company single-digit, And my a color. the Yes, seen on it. call it business? up – given then average going run that get – XX% that I and understanding. the above last investor them. do appreciate a was after those maybe on I’m How

Mike Lawrie

exactly Yes. margins. right. been things. one-off make has I there’s an I you stuff all expand we individual as opportunity do do to This sure treated to everyone And to knows. – said got your question, think it answer

thesis, the We scaled we amount have we hypothesis this business is ITO the business. begin to closed scale we can this not transaction there’s But just the yet, behind have on so a do. limited this as can

think sharing different there’s be there’s can that think contracts. be we We shared these common can done. So processes that across

think leverage, business to and part case And proposed there think that is expansion. frankly, led we yes, was So do that there’s we the of acquisition. margin the

Brian Essex

Thank Great, much very perfect. you

Operator

with Arvind question Ramnani from Partners. next comes Capital Our KeyBanc

Arvind Ramnani

can is hear Arvind, me? This you

Mike Lawrie

clear. you and Arvind, loud we hear can

Arvind Ramnani

sort of your Okay, I think high when immediate out can XX% margins? Those term? than perfect. the you run margins, are think operating how more of When I

Mike Lawrie

Well, listen.

I to break think down. you have this

the seeing because together saw this detail I But little we that’s more all, of in bit when that going programs, in so a on November. go through cover year First get synergy see year. improvement think obviously, little the as do to will significant you’re we we started huge mean, last And – this year-to-year. jumps. I surprising you’re not we time moderates we’ve And just a

are articulated, be new is can levers is applied what and longer However, we just new, I’ve term. seeing that

attack words, to business we our in we’re BPS from we we IT parts another is to we it and what operations, application apply we our are and able business as to supplier to areas. do these a of big attack margin to So other apply processes, as Those leg apply other there this as potentially standpoint it base. our

capability not our to this have BPS We a Bionix applied yet. lot of business

applied We have said, I not as then applied much And we business of much supplier. our labor of haven’t to it application it to yet. our third-party

of little and last learned So I when ahead in can three businesses we Arvind, significant will in we very what together November. cost those more labor we that’s Go will what we’ve get year. sources cover a that’s detail and story, and are you we think catch up. that apply But a of medium-term

Arvind Ramnani

I providers, color And cloud help it like seems type deals of be? you SaaS similar this can know on kind you deal. other of a we of other us providers? Can partnership certainly Yes. the pretty quantify large maybe secondly, lot a AWS the expect with big and provided should how

Mike Lawrie

Yes, with basically, I place in already have Azure. mean, this we Microsoft

have We this VMware. in place with

work to beginning others. We’re Google with and

multiple may only have Not clouds. frankly, have provider to services to work do not public over being clouds. again, as one. point multiple they similar private, would to think all I going clouds. have independent can about can And be going yes, our private multiple we going So that may time, these. They you things. assume have public is and my with clients And this an are you They’re

making services important is into industry. the for so you’re case phase of we the So company next an at-scale as why this move independent,

this. billion-plus quarter, to over quarters. put time. business build scale the In me. We’ve this opportunity got see we’ll around together in think the know. and out progresses But to start is a so terms second We’ve got got time. this pipeline got think We’ve I I Not the We’ve that we’ve size, up. grow don’t will how $X good hire. a fairly to We’ve Yes, coming of pardon management year. case first got that already pretty modest system I a a candidly the over closes modestly and over that’s

Arvind Ramnani

Yes, great. much. Thank very you

Operator

Jim Sachs. Goldman take We’ll question last from with Schneider our

Jim Schneider

high towards where was stand confidence you are in as Good maybe afternoon. the of categories end different my year? Thanks wondering most fiscal synergy XXXX, even which if to can you taking in question. cost the the if feel as or the you the you you end here about exceeding you out, get I today have areas think tracking the for – laid you

Paul Saleh

area doesn’t lower-cost the looking have to so I still certain in It only one. positions been of have market. be that’s that will – that about be we really nearshore think we labor to out It it the be migration as or offshore. talked could

to are also the targeting, The we clearly. I just deployment are second see in are the layer areas that procurement and expanding and cost. average deployed. being the continuing There to mentioned you, the already scale pyramid, one they’re that various that obviously flight. is make is some of more of pyramid. reducing The reach in businesses centers, The Every progress Bionix at as we in opportunities other data

of a our just the some said, onto bit also work really those contractor, need benefit. careful talents just it those thinking Mike being some takes about to we of have little have sometimes methodology because terms state in-source just incremental we apply able That to – force. was more that what So in of to talking type be or of

it’s specific And term. – longer and very a more bit it’s little so – a

it’s been but a it’s do, think harder little there. going more it’s bit think be a I I little to bit doable to – worker

early cost being there. that in we’re business. signs reduction. That the not I getting just also It’s encouraged by about we’re reinvesting want you think very to tell I said,

– bear we’re also training our employee ourselves and and of strategy, to digital those on them that and a bring our transformation mentioned, we investment offering where Mike and are Those mentioned transformation attracting have our areas, for our the we journey. way, the partners. run. as will digital with across go-to-market base bit our their we up-skilling in us them talent, We putting we’ll also putting transformation believe customers also centers quite are that and with ideate investments our Those fruit centers, new for long the

Mike Lawrie

think said. well I that’s

as drive here. balance can but a margin productivity there’s big the is is there make expansion Yes, where in but we’re clients scale it more message we in trying this digital market do as for to And business, see continue we make time, the a going. opportunities. same got the to well there. you’ve our Yes, is conclude, to for key Just your a yes, the same opportunity, we to business. continue But traditional out employees is here at our to great as not partners our time, only investment

much be guys, thank soon for very November. And interest much. very out get talking we’ll Day you again, Thank So in on then and your details in you more Analyst DXC. we’ll the

Operator

and This gentlemen. ladies call. you, today’s conference Thank concludes

You may now disconnect.

DXC Technology (DXC) 7 Aug 182019 Q1 Earnings call transcript