DXC - Earnings call transcript Q2 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 Second for XXXX pleased Earnings you're Fiscal Call. Technology's us

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

Mike Lawrie

you, everyone. thank time good afternoon with for Thanks and the taking Okay, us.

key to I and As to up then four/five open have. then will questions it over you will we that have Paul, develop usual, little any which and points turn bit a it I

second non-GAAP EBIT $XXX $X.XX, primary EPS in talk I'll down was on maintenance second adjusted quarter was X.X% our First, billion basis; the in generated and million XX.X%, book-to-bill the a was our roughly of below in GAAP the ramp-up $XXX in contracts The margin more of Revenue and million, digital flow second adjusted and revenue cash The adjusted decline the in each $X.XXX was free application about for quarter $XXX was a million currency EBIT expectations quarter. quarter. we in slower was constant moment. a these two management for quarter. business, on and and few year-over-year, causes X.Xx a were large the and

up the XX% digital a point, revenue digital contracts. X.X% book-to-bill were the in few X.Xx. constant and reflecting Bookings large ramp-up year-over-year our currency sequentially X.X% on Third in year-over-year, quarter slower for of grew

to plans year non-GAAP our a margin on million, revenue delays this of management down to the At and shortfall the more this and a the on combined was improvement and book-to-bill quarter of million we we're the year for execute end BPS Medicaid of billion year up X.X% the second margin the with our deliver for now currency savings expect BPS systems versus completed X.X% IP information headwinds quarter Medicaid guidance $XXX was and and revising industry now full Molina full plan of $XX.X and we business; our we and IP have range revenue given cost Our sequentially, will revenue expect X.Xx. I'll net plans, million adjusted a digital about our to takeout And Solutions, we're the billion. year-over-year the in our $XXX industry of original contracts, target to $XXX And free improvement or we're finally, of raising and of moment. to talk our the to we acquisition $XX.X and XX% more continue cash a making target $X.XX, flow income. range adjusted EPS target and to continue progress of $X.XX to

points. let go each Now those briefly me of just into five

EPS $X.XX tax non-GAAP and quarter effective was second XX.X%. the as Our said rate was I

And XX million, and In Second XXX adjusted savings margin XX.X%, $XXX was the sequentially. was that workforce basis points was GBS and and was $XXX XXX basis rationalization. the of up The up EBIT up segment sequentially. GIS, profit reflects execution improvement for year-to-date, year-over-year basis net or basis was points as EBIT income, free was this XX.X%, XX and sequentially. this of optimization, flow of cash profit this adjusted said, for basis quarter discussed, adjusted quarter XXX adjusted $XXX adjusted year-over-year cash flow points adjusted efficiencies income. was basis points margin XX% I points and lever continued margin XX or the free was facilities and XXX% we supply chain was year-over-year the million, previously points including net margin XX.X%, million

currency, and billion I on was $X.XXX as In GAAP in was down revenue was book-to-bill said, the onto constant second X.Xx. basis. X.X% Now quarter revenue revenue; a the year-over-year,

was the roughly As quarter. our below million revenue expectations $XXX for mentioned, I

a we of First, few the contracts. ramp-up delays large digital saw in

we strong Several their scaling growth. bring than million. continue to cost $XXX by as see on dedicated Since synergy a had a realization the digital had our to significant higher, result, also in revenue impacted resources hiring we've we solutions, while and to demand and bench. the support roughly And quarter creating launch were these us delays behind longer DXC's a together transformations; to we're accelerate limited takeout, and clients for engine. a digital very focus market taking digital our on digital Now it expected is

the accelerate building and process, to cost we've management we're capabilities disciplined labor that in been digital more bench fastest revenue. our Now contracts growing staff rapidly still and

other leveraging digital side, to generate the Bionix we're be client that On can parts upon business transformations. savings in the accelerated used of

reason $XX revenue by application decline second spend maintenance several as was these investments. accounts, IT The The This driven expectations our business. the large remix million. in roughly our miss including business in in missed and Americas, clients maintenance the their application miss for $XXX million reduction management HPE was by largely in particularly

previously this of X% up projects adjusting miss for year-over-year X.X% in HPI, was about HPE Now was down and ramp integration disclosed business for the and Americas down the sequentially.

more traditional business changes businesses, identify up XX% and region made business, the strong the and the applications sequentially. improve our X.X% GIS leadership also to application projects Americas a we're currency constant in book-to-bill effectively added these sales in Now had both, application we X% discussed. pursue but was taking quarter, in year-over-year The GBS recently and Americas projects. steps in sequential down these global with less very cloud services of completion in the $X.X we services in quarter bookings believe year-over-year will traditional was $X.X performance transformation specialists revenue billion, XX% to the decline GBS the GIS was of driven growth. expected we was HPE book-to-bill revenue the a was second year-over-year in Cloud and was half and In constant reflecting drive in growth billion. and the add-on year. currency. offset revenue actions decline business of second from Xx. And quarter year-over-year the quarter with down and by in I just the the X.Xx,

return to forward. Now was moving giving this Overall, to more revenue bookings, normal GIS the book-to-bill X.Xx. in we GIS expect levels quarter

Now to with up we quarter the In X.X% BPS earlier. in slower infrastructure year-over-year, currency, X.Xx again our few and on mentioned contracts business IP by digital revenue constant that and was move digital workplace were very strong our digital offerings. book-to-bill Bookings our the ramp-up driven on a a cloud results. I digital industry and reflecting

more reflects seeing demand Our and which the year-over-year these sequential, than XX% digital up also pipeline capabilities. strong XX% we're for is

in with with DXC. X.Xx solutions. We're the bank and the constant investing we're to tightly the Bookings risk solution risk we're existing currency currency to continues addresses year-over-year, a I Defense X.X% large This were integrate automated grew with the the business risk and year-over-year, of more of solutions. where and a and digital deals client provider. security book-to-bill. Bookings X.X% with client bank X.Xx. include UK in growth automation orchestration grew Bookings gain strong identify Xx a quarter response included for in of and a enterprise In apps traction strong with domain Australian cloud in in working energy European was workplace also large demand and security models book-to-bill. in platform by impacted and quarter banks digital to part Our the integrate risk developing predictive constant that operations as the automation quarter the Enterprise XX% with Administry previously for discussed. a delays book-to-bill we security consulting

in ServiceNow and Now a Oracle offerings bookings cloud environments railway. Health, larger to large constant quarter. with said of X.X% include develop last a non-recurring was cloud reflects the with currency, in in quarter client European aerospace a X.Xx rapidly a and XX% deals growth a deal were deal large-scale Germany SAP UAE. our we U.S., I Lower major in X.X% diagnose than Wales Key million up with grew deal. and year, quarter Sequentially, for roadmaps. deal South year-over-year quarter. $XXX as book-to-bill infrastructure quarter and continue grew multiple leverage Ministry currency, including strong of in infrastructure, the the the to the constant In QuickStarts X.X% the transformation a wins an up client, an we In including new second large

Now Norway. currency insurance moving including down and deals delays healthcare was Queensland primarily year-over-year to constant by driven revenue agencies in and BPS; X.X% in and with a this contracts and health few industry IP

BPS will Second revenue ramping our benefit also on half from some life of contracts insurance including Brighthouse. revenue

to factories Azure new to for AI migration the continue Azure tools and the industry's Manila in for in Microsoft certified and first integrated of innovative our additional the the factory portfolio; faster, implementing applications which example, dedicated growing DXC's end analytics teams establish Azure cloud in Warsaw to by to achieve analytics Bangalore. more the we cloud, with analytics of clients to data two and plan in rapidly migrations migration accelerate efficient services. migration We establish We need pre-billed help invest December. response factory analytics rapidly digital and and

last our supporting and Molina agencies from our point, expands of programs of state fourth with the services Medicaid we business recipients. expand acquisition the enhancing to This business and us my opportunities edge to completed Molina the in in we Molina Now existing Combining healthcare agencies Medicaid portfolio. Healthcare. the the to DXC's can month margins provide for while will Medicaid administration the Solutions provide IP state platforms business

a announced recently it's world-class also working of scale. And that lead well a broad accelerate service argo's is we DXC argodesign argodesign, in and talent will We and in industry deliver together IT in user And transformation services design to on enable will the digital as two are to further designs Nordics. inner-phase now leverage design digital the enhance ServiceNow which at expand management. ServiceNow largest ServiceNow digital solutions capital part enterprise a and the digital range service consultancy portfolio risk transformation. partner design in transformations. management of ServiceNow beyond acquisition a which and and key will leading yesterday, practice. solutions to as developing clients elements experience cloud-based a is BusinessNow acquisitions DXC build DXC's TESM based global TESM the announced as delivering ServiceNow acquisitions; as These our of compliance, -- foundation human wide capabilities client extend end-to-end, independent for will further as and BusinessNow our and Austin. partner

original as continue million mentioned, of our year deliver million. margin improvement to to versus execute now we I in $XXX Now target plan, $XXX our expect savings and on the for

of versus drive XXX can points basis to points by our XXX we margin margin 'XX believe XX.X%. further current we addition, of expansion basis fiscal In

and also while clients, levels. automation savings drives Our for service program, DXC our Bionix, significant improving

Our we're or alpha automated agreements more priority resolving workforce digital our now XX% service XX% [ph] largest incidence level deployed reduction than of driven physical is our a delivery and and where incidence. high for exceeding in responsible center,

standardizing to plan and to roughly favorable and Our hardware scale to workforce optimize near low reduce spend, centers optimizing labor executing drive for third-party to labor We're asset vendors shift to expense. our as facilities pyramid also well. exit shore to XX% expect our and mix and will cloud cost labor of needs similar We'll actions more pyramid, we our utilization. costs increase continue continue drive in data and our facilities, efficiency leveraging and points as specifications as XX greater and reduce non-labor to improvements we're to our footprint spend, our maintenance we and subscale in we And fiscal and well lower utilization improve by center in also We'll further continue rates. we talent consolidate decrease locations. low to

more provide and levers we'll plan Investor on margin Now detail of these Day on our each expansion at Thursday. our

year our I Now conclude the for arrange I the $XXX said and with contracts, guidance to combined just $XX.X Paul, as to $XX.X full million to shortfall before earlier, year. quarter delays full over currency And this have of some on we're expect the headwind billion revising the billion. to this to digital revenue we turn a now, for revenue

impact actions cost decline. are Our this takeout mitigating of revenue the

progress the back period. it range target turn takeout, $X.XX, when we adjusted question to $X.XX as our to more to non-GAAP XX% with adjusted or income. to then net over cost and that, on I'll a Paul I expect we cash and come we're of to flow be we're And get raising Given said, making of Paul? EPS free the

Paul Saleh

complex related diluted programs, second of separation Also results transaction costs to represent Thank share. that $X.XX items I'll or pretax optimization expense $X.XX from $X.XX IT diluted pretax These and and rationalization. of of had in million and and in diluted quarter, or current Year-to-date greetings, and pretax or particularly workforce are some In by million restructuring amounted $XXX THE was our per cost In we the start acquired restructuring, integration, this transaction-related facilities excluded you, or costs had legacy associated of non-GAAP center countries, with data from share Mike, covering quarter. amortization per $XXX quarter, per per $XXX share. the everyone. quarter, the pretax million diluted integration severance the costs to reflecting $X.XX systems [ph]. separation intangibles costs $XXX million the we share.

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

in XX.X% year. prior Now Adjusted in EBIT let me revenue billion. results more to with turn $X.XXX the $XXX XX.X% the million. detail. EBIT GAAP our margin Adjusted was second was quarter in quarter was compared second in the quarter

plans. in Now this year-over-year improvement takeout cost executing reflects the progress on our we're synergy and making

and of for standardizing also our and We're efficiencies, agreements, benefiting software with overhead align additional During quarter, the the our second optimize further and portfolio, in enterprise license a procurement of from chain, we headcount rationalizing of by supply In we by continued USPS driving our driven workforce. associated capabilities We the the total ongoing to long-term stranded around elimination we're partner that our and reduced Bionix, solutions. over are consolidation the X,XXX quarter business. cost labor with contract people demand. we're few rationalization, sourcing opportunistically strategic deployment

of we nine space to eliminated quarter, during during turning rationalize to centers real XXXX. remain on-track an fiscal feet estate; the and the square office we XXX,XXX additional Now data

the million revised in offset these The $XXX to now Now revenue will deliver the takeout of on-track our target $XXX the of for incremental during total, million the actions of savings impact year us million. quarter. $XXX second of original versus help cost incremental contributed guidance. synergies We're

$XXX jurisdictions. we the certain of global in centers fiscal with million investments was Amazon year. to and income in non-GAAP $XXX of of rate tax digital our the mix the our services. attributes continued deployment buildout practice reflecting remain key and on-track expansion In XX.X%, quarter, reinvest our Bionix, web include million the foreign our tax These this Now integrated roughly of to business transformation

of year, the tax still With we to XX% impact work U.S. through a full we expect tax continue of XX% as reform. rate to the

was was Year-to-date our XX% to in of year. of turn takeout fixed million, This the segment reflects revenue enterprise profitability the contract were with $X.X the taken billion, and including actions was segment the bookings the revenue X.Xx. million, of revenue segment program, vendor billion we've our from for $X.X GIS reflect on second was GBS XX.X%, price profit of the rollout prior million, book-to-bill in GIS was billion was segment segment billion, second profit year-over-year. $XXX and of actions, let's was was margin our a base, were from $X.XX XX.X%, compared margin bookings Year-to-date, impact Xx. quarter. GIS suppliers, consolidated revenue and profit improvements basis point profit GBS in Bionix Now and million, quarter margin labor. operating and our on the was gains GBS our insourcing XXX benefit was efficiencies, margin for range results. licenses. was well to was up drive $X.X cost book-to-bill GBS as productivity $XXX the greater $XXX consolidation $XXX contracts, billion and improvement margin of XX.X%, lower as profit quarter. billion profit $X.X in XX.X%, $X.XX

to the in flow quarter net was $XXX cash Turning XXX% or for financial of million income. quarter; highlights free adjusted other the adjusted

Now adjusted cash annual cycle an impact million and pay Adjusted flow free from the net was the cash additional payout securitization in adjusted programs. flow income. receivable of excludes or is Year-to-date, this free bonuses. XX% the of quarter, $XXX despite

Cash quarter our of Our basis CapEx capitalized million capitalization X.X% revenue. leases was was XX.X%. net total ratio at including to $XXX year-to-date end billion a the for the the debt total quarter $XXX on a revenue, million was $X.X billion, or and CapEx was of in $X or debt X.X% of of

portfolio, upgraded in to for rating [indiscernible] offerings their Europe and to rating outlook stable. reaffirm and in bond the S&P it's During company it's two further debt quarter Moody's DXC the the quarter, and issued rebalance

in form million shares shareholders and $XXX paid flow million to repurchases. in to dividend, in total to shareholders for our returned year, in In we've $XXX capital more of of Year-to-date, we cash we the through quarter, $XXX $XX million $XXX operating of repurchased for the to allocate $XXX the During expect million share shareholders. in million the a share second dividend million and of half of returned repurchase. our capital

the just additional our The revised reflecting $XX.X headwinds. currency of discussed, time, we've range for the year are revised to revenue targeted we for back closing, the phasing and our $X.XX our applications cost digital Mike billion At the to an in the to in billion, operator session. So Q&A I'll to target $XXX business. the from of reflecting quarter same and on we're programs. raising million shortfall $X.XX million our the $XX.X contracts in takeout call now hand $XXX $XXX EPS million to revenue making progress

Operator

[Operator James Friedman first And Susquehanna. comes question from Instructions] with our

James Friedman

to I just I thought to I there quick going you had wanted apologize points housekeeping check; missed a you kind do I'm in got coming but XXX basis if the a points just sound right, this year, of but with EBITDA margin up $X ballpark? Paul, wrong, if XXX that said, Does Mike, numbers. I were basis of the and expansion. billion I that's

Mike Lawrie

I said by XXXX.

announced I'm between -- basis now talk there about this more bit fiscal XXX and XXXX. and Thursday; a another saying timeframe the we to margin, XX.X% was points and expansion the on at Investor points So, from Day of but basis is little XXX today we'll Jamie

James Friedman

and going sort to digital at headcount, you the throughout the hearing it's the eliminating not But staffing of will contract hearing am on same opportunity is internal I to are labor industry. be theme digital that I'm that of unique time been direction increasing what that that challenges you're a obviously The the some your overtime? at address and part right DXC, is the

Mike Lawrie

resources is are what are beginning two-fold. demand. that a that, we've labor point basis, dedicated by we a harder are head and is to put certainly of yes, number It's hiring expensive two, some one. in using skills of to to less spend internal we a digital digital Point our place come on machine, one; so number it hire global the One, future reducing resources because external do is two, or

bookings tightly X.X have with skill, you system, So built And now demand hire of there a we lot digital head. the cost saw going this and last integrated out. been our for to as for we have in to management workforce so we've growth, we recognize and the is and running the we're very year begin as sequential substantial taken the demand

thing that talent now talent of basis is other global we're The the to on many that our which digital gives ability contract. a digital us and apply cloud scaling source our to

outside earlier demand head a inside, matter of growing of to skills are and around then putting that drive combination so of our remixing digital some opportunities a of So traditional of dedicated revenue, can to it's focus from we the a quite it's rapidly. hire a particularly our recognition

Operator

next comes Morgan Essex from with Our question Stanley. Brian

Brian Essex

I side insourcing pointed if seeing. if it touch could nature? in customers -- customers that you short-term Mike anything was is you the else business; the something are could there to Is guess and long-term on your that mix duration of the I management in wondering your or was or application that more you address investments

Mike Lawrie

it seeing the What cause shortfall, some of is where application big to have. substantial I some their we're the platforms in of instances, our about $XX begin as And cited to on some think an the example systems, was of systems. large we million, plans contemplate of upgrade are U.S. that I existing scaling to that. And in clients that did the HPE those as some of act are particularly upgrades maintenance clients they some seeing

that to that throughout we our a we little unplanned we honest see as didn't clearly as exited first this the was saw quarter on quarter. be as So part,

widespread, see I it as did in the particularly that that as the I but in quarter, don't this continuing impact States. future So don't see United

Brian Essex

revenue housekeeping; impact? constant a and performance FX performance the the quick the -- in Maybe quarter total what currency just was on

Paul Saleh

for ask X.X% did down on a what year? currency constant the you full -- basis, and

Brian Essex

Yes, basically…

Paul Saleh

was X.X%. basis GAAP

Operator

with comes Cantor next Jelso Our [ph] Fitzgerald. question from

Unidentified Analyst

just growth concern the long a and could the there clearly, quarter's you're is, that a crossover a bit maybe line from accelerate? take want don't would to that for anything is this you when come away maybe to mean results I about I is My while Analyst talk but business expecting to taking think Day through it first the some takes happen. question top time here to little

talk that. you bit a could little about maybe So

Mike Lawrie

we're going much to here. on; don't talk on is about so in lot detail I Investor there a detail to at greater We're a quarters I declining couple that the of going the projected, I the But Thursday can months. signed call to get that. -- long one, when as the are four what basically more some But revenue, an think ramp here into or the contracts elongation recognizing absolutely in things our quarters numbers want slower Conference, some seeing is line. of about mainstream it's seeing three the business, we this that had at we're is rate also demand less, very a we bookings be are when are support What we it's and but strong a from digital, seeing and little and basically that on that's as

result of is as of is Some as client not being staff and us initiated, quickly. to some that a it able of

and this out, from showed up a what than say of started revenue we fiscal the of our is performance year in would the that's quarter. in I in more we Now as these had mentioned, coming on some But focus putting a what we're as -- we little expected can so hiring, I digital general, slower we revenue this and staff lot when bookings contracts quickly.

Unidentified Analyst

revenues; be believe for you need issue that's the do given structural the loop? the just competitive color in an ability markets little or your that kind more grow. and disadvantage that Thanks. to looking the issue slowness at a close to and if The on a I'm a of believe structural do bit internal putting you you you might is premium

Mike Lawrie

I think particularly execution I management in a are application, some there our issues it's our always business. part, think combination, maintenance and on

and I the issue, our that experienced so seeing digital market. an that model, unique Americas we're working at to in that applications sales a integrate with matter back very don't that move gone I've concluded more proposition example, orientation all, state, of have both wasn't sales do many being as is a a bit able really little the through business, value to changes, general solutions we're the I fact, execution an doesn't disadvantaged made to some into specialist absolute to anything in take of is infrastructure. more that and No, to For we've we're able existing what we new think think well of IT as where are application, these as a

business view yes, disadvantage that some don't point is of DXC that they the think as as view application a today. these so at slowly I about moving industry maintenance as I mist differentiator. So my I digital advantage are a explains -- we begin certainly is some scale execution with investments, all, it talked from more issues, I particularly enterprises issue think compelling of but it's do and an issue. And [ph] coupled that to the that that

Operator

Jim from Schneider Our next question Goldman comes with Sachs.

Jim Schneider

you expect those the longer? relative quarter. their little some shortfalls thing much How the that quarter view the if Is of to could wondering as or you about pieces would you to take to view revenue to a transitory, how of revenue transitory? ones two in you going state? saw recover something or prior talk it is be one that's quickly going do you for And those was of back Mike I to bit as

Mike Lawrie

we'll we and are we third I quarter. stage the in beginning do projecting improvement some think think

application year. half I this So make we'll the by growth our sequential don't some the see second in business million $XX of in But think you when through business second up. in you this that as we go quarter, miss maintenance

the things, weakness staff to the you force the project you then a then large as more that Now so some fix to do recognize doesn't is, digital little on out-quarters. and the I And of in ability some these around more what other persist allows revenue little mentioned execution quickly. you the sales a quickly

this the the to second be. currency yes, it's to exactly answer in hard but headwinds, we the what mean I is So expect going other of think I the year than to half that's project improvement

Our estimate bit. vary is that little that but right million about a answer could now Does question, $XXX Jim? your

Jim Schneider

largest potential does, just It maybe know ask but higher in kind we're because of hear that's a points I XXX contributor basis I three maybe obviously you. at Day; lot -- where as thank today? can us to more the basis we wanted to what's that And margins than are my substantially follow-up, of -- Analyst sense going about years over maybe the points you give single just the a then to XXX driving to increase

Mike Lawrie

I've revolves tell optimization you saying again and through. around it but workforce this results come over It been revolves around I the beginning the saying at are What over I'll keep overall, to Bionix, workforce. really and

this on my than only by serious higher We productivity we're are business. largest volumes, not don't calls decline, if in we're incidents I while we're script And where we're centers seeing digital now up I not or operating handling, leverage seeing picked handling but physical more mean XX%. know up our digital seeing our you because center. handling we're

what continued expansion and margin Bionix. the and optimization contributor work this timeframe So automation we the the call is biggest workforce over to around

XX the God in And certainly about well. getting in drive hearing of cloud are the terms chain continued there this, all talent margin we're around invested be we those but Now God contract stuff workers will of thank still did don't and on contributors is but feet more can more expansion. that and of large the estate those which the issues mitigating as much; so be efficiencies that expansion, thank using also confident in all margin just us supply I these bringing what got will the talk efficiencies, ramp-up we you're need we've because execution levers today there addition, we square this that some million to -- to real in and of offset; that slower arena projects. some in some mentioned it world in-house What revenue, of digital of

workforce made programs. optimization that investment of automation we're absorb revenue So able other in to some by decline that and this we've

Operator

with next Rod question from Equity comes Our Deep Dive Research. [ph]

Unidentified Analyst

Just growth revenue clarifications on a couple picture. of the

cost takeout like focus where of feel cause And outperforming of do intense of to to are your you the revenue is sort starting an the revenue that expectations; some you these to to be challenges? versus the focus intense do see that seem there that's your mitigate you corner is that cost feel on trade-off, ability So, on you part case, turn like if a of trade-off?

Mike Lawrie

bench. And said, tightly, labor are Listen, programs getting confident this drive run and in I this workforce digital tightly; more now run to and a we into very very -- ability our going we have and we're at quarter digital our thin very we've as growth. workload

sales on The is digital here, is the these Rod, much other many -- projects of cycle these factor shorter.

you how year, So workforce your old whole digital lot business. puts into a the you people could measured and to a be on and unlike six a skills months, months heck that of the a these two in are lot bringing or IPO managing of more business are projects are new how that three pressure

So to when demand; it's issue more that cost I the demand, that and think not growth can more demand, we There so bookings, mean our you you satisfy focus it's need of expand is the question trade-off we'll much a demand. and this see is issue digital isn't respond to bench is demand. between an the quickly I see no to the sequential being able that in with bookings an there this so

Unidentified Analyst

sounds to and revenue you on these need in Are the the client of you that two side, apps sounds digital, it that. it application maintenance, so those maintenance terms In the spending in clarified it's staffing, the like in And approach, route so issues on had just address the disruption caused business? it's some upgrades sales issues recently -- work. software it's sales like in

Mike Lawrie

I maintenance fall-off see Yes, I this didn't I the see did, that's Paul think said. it, didn't. We business; did not well in maybe

remix their us undertaking, some choose let So that's of that. upgrades cases IT we me investments to by did perfectly they see, to in about application. these -- for That begin that be some and individual some do took not of surprise, to an because of in as are their projects that what digital candid some client-by-client they major they preparation

is reason I having in United quarters, went a And sales thing more would for deployed concluded to a force. that second some after generalist two was were the wasn't we watching we by that and that for the the the sales The model States, missing we that add-on application right of get work approach. specialized

incremental to we add-on sales this So up place we've in put that have which projects didn't that those get, pick dedicated will gone we particularly force of quarter. corrected that allow in and some on and we've us application back,

two the are those So things.

Unidentified Analyst

the inability able a Is the strong challenge actually actually that words, ramp if is digital you could fast deal? but case you win a have talked staff digital enough there, Final other the ability In this growth an the clarification; prevents it, land there. and is the you have side, to the you'd demand being revenues; where to the about from on to staffing case? we staffing deal more have

Mike Lawrie

else, a our I pipelines yes, lot but factor. I it want Yes. but have and slowness, this everything a positive, on happening of we're is those what's winning mean, metrics to deals, we and some very all but clear; to all blame are at of had don't book-to-bill that's

big short offering, of for when when move this these users. a driven a of took XXX,XXX I major is we deal of -- well. mean, get a client, our mean, live on as digital new Some over -- users many scale they period automotive example, to very client that is you time, XXX,XXX for projects workplace just I

to instances, $XXX of contributed I difficulty skills that onboarding stack in some So the client -- with that the the also to in necessary we and some the bringing going talked adequately roughly more that shortfall That is about. million have new slowly. sales has more coupled

it's So just it's two thing. one things, not

Operator

from comes Our Darrin next question Peller Research. with Wolfe

Darrin Peller

deals long you you're when if your will and should do announcing there talking to doing How that think you're right incremental with can you it's expect resources that cloud be but I you you take quarter others. it yet talking we then, know with still about ServiceNow to in and and or last for Amazon on; revenues to those plans coming the -- and I'm for come that around to curious that enablement, digital whether do forward partner you're different talent talent are actually about -- for actually new that you're couple with their when right-sized? you around have or partnerships are more it staffing your share all hear is just partners? the new

Mike Lawrie

we to acquisition need. skills is the strategy acquire help our of that Part

these So this model new is skills, a before in [ph]. different staffing source we business the had we've when than

For example, on people we're a of contract. program, takes professional, and hiring them than into new. hiring a longer just our more that's training hiring worldwide That universities a out many bringing little them flopping

model; staffing source, and how the we changing whole our is the as So business more we to recruit more digital. how of change revenue we mix

now time, and with Azure mainstream Microsoft very The a example and the which optimization cycle skills. here a our other two lot and that in also really digital about are this, is is is we and business then thing this. lot an so different is dimensions our of and here example continue think business as we looking different a that we're partners drive We're our productivity certifying offerings a new helpful reductions our AWS other working partners; at of training to has through of One scaling. model in in sourcing of programs.

be the source bench of to build the that up So that done some up to things of it's to we're winning. and contracts skills combination a digital the need capability build

Darrin Peller

to what's I just fast couple. last next look your again, into bookings next I we can the going and to the when easier about at compares for some with to revenue that the ensure are those like start going the from side. just honestly, you after partnerships; enough a able to talent quarter But this think where I light that sort of source trends getting year, when be tunnel wonder -- businesses, the and quarter and if of end you're fiscal standpoint show on mean,

Mike Lawrie

us can, we Listen, change. forced think we to it

we these skills. I in recruiting put had place for digital said, to a As dedicated engine

last has in using standpoint scaling come the a are We on-stream our from and now really months. which Talent Cloud, several just here

do a sourcing I to yes, able standpoint. to think So, that we're demand going from be meet

Darrin Peller

are and Look, flow regards we'll the given more mean probably capital I from but around cash -- hear we'll Investor allocation bought standpoint, to the your opportunities? more your with this, a you allocation now, hear what again, I latest prices back thoughts Day guess where at just share capital Mike

Mike Lawrie

we're share I in as yes, pretty do it's planning and to that tremendous to point, detail part cover to little that's investment. a our buybacks capital model should allocation return a shareholder can that, but you be at mean of said, allocated at this expect this Thursday; Paul more buybacks, as level. more allocate much to capital simple, And we'll more on

Operator

comes question next our Deutsche with Bank. Bryan And from Keane

Bryan Keane

figure how I top going is the is with initiatives, and the impact cost on to at was wondering Mike, DXC senior the just trying and an morale line? that the maybe changes out having management saving

Mike Lawrie

are the delay they quite growing organization and moving you because see most whenever think adding good. improved around I a or morale, aren't or senior accounts our morale value, the positions in where managers the where that think I and that is remove of in understands that. future lot We're digital, we're involved you the instances, workforce an

I've launched as lot last just aren't well digital we've as also tremendous geography, On improvements example. the seeing weeks lab in another -- in forward I where it hand, and good on for are mean Asia and as we're innovation in moving other and varies else, digital, accounts been say isn't got I the a quickly -- several was as everywhere Singapore, you've and India that I'd opportunity, and I declining morale by just and

would lot right-sizing you and happy the you a people the digital people little and So to upbeat about that. cost we be Were Yes, their primarily would is not buoyant the new make been of about and workforce. in the transition expect to more concerned as to yes, are focus on and areas, very have future. expect slower these still

Bryan Keane

here some made contribution the And And total recently, then for for acquisitions much 'XX how and you've about from acquisitions? fiscal can figure Paul, acquisition for a these several contribution; Thanks. of is the revenue year I then there acquisitions total think to on we just for through just company? revenue was was trying quarter, out

Paul Saleh

X%. less for than will think I full it the be year

past I you, number to aside lower this X% back in terms I have think but this the front the And what's get we of year. said think little X% number to bit basis. the in I in the a to quarter year-over-year be on for will we'll in on have don't I

Mike Lawrie

the end the of a because close a was there is the in smaller contribution no didn't obviously, a that quarter. Australia quarter in of acquisitions announced quarter, the we'd Not deminimis second couple Molina and until the we in lot impact announced acquisitions two yesterday;

Bryan Keane

last after And Paul, the is already that that $XXX one, total an my the is because were full $XXX had FX, that then a decline expecting incremental year for for you quarter just year of contribution million in I notes FX 'XX. or in first the fiscal million

Paul Saleh

you range the the remember, you the compared gave is this if think I total, beginning the for we as of -- Yes, to with at that year.

beginning for compared with the So full $XXX rates year. those of the the million year, it's of

Operator

question from [ph] Ashwin next And our comes Citi. with

Unidentified Analyst

breakdown possible. a if get of kind to wanted I

revenues $XXX parts by incremental which million. The is there some the by lowered your roughly are other XXX-ish, offset acquisition. moving here is potentially FX You've

for down a is look will are So how at you -- this break in assumption an you that guys the Can bit? hit. taking another delay putting much it,

Mike Lawrie

it Yes, for you. down I'll break

roughly in doing sign. income, around what expect already some roughly it's we expect happen have that contracts we million then we is So about $XXX talked to are of we million signed we're the rephasing that the $XXX And what and to been it's quarter. digital the second what

we that's to go revenue; from So given signing million. another how $XXX contract to will we are be rephasing quarter, experience quickly our this able roughly

we some talked of last the quickly that all it you skills tell this because of ramp-up will we've I talked factors part of about just is we've but breaks call, least things some how can the precise down. about, other Now how and the the that's in

Unidentified Analyst

training, you EPS that from there; costs up? ahead, hiring assume hire paying for our such implied potentially baked-in colleges the and margin out we number put things the you also hiring mentioned incremental should And like are

Mike Lawrie

the make, to hiring to this a digital given doing bench. digital not in All accounts, that this those the we're EPS. of much yes, we in road, are at this resource And some build doing delivery projections investments out include centers, you and need question, investments there, we've disciplined that more that down that the investments the in the factored make the answer we're way. extricated; they margin on be on we're aren't projects doing our embedding projections so your have differently, so we a our are to we all to that this to to is expansion gave planning we're But you

Paul Saleh

$XXX the When we savings year. at said started the million when what million -- compared you already, had look $XXX we of year the with we incremental synergy this over

those we've on So we're our to made for some revenue. outlook of that absorb able revisions

Unidentified Analyst

understood. it, Got

Paul Saleh

confident $X.XX. -- increasing or to range felt to EPS how that's $X.XX comfortable to And put in our

Unidentified Analyst

days. See couple you in Thanks. a

Mike Lawrie

And you. Thank now. operator, call the conclude we'll

Operator

you. Ladies today's this gentlemen, Thank teleconference. concludes and

You hope you for disconnect. thank have a do day. may now you and nice joining, We

DXC Technology (DXC) 6 Nov 182019 Q2 Earnings call transcript