DXC Technology Company (NYSE:DXC) Q3 2019 Earnings Conference Call Transcript

Feb 07, 2019 • 05:00 pm ET

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DXC Technology Company (NYSE:DXC) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, everyone, and welcome to the DXC Technology Third Quarter Conference Call. A reminder that today's call is being recorded.

And at this time, I'd like to turn the conference over to Jonathan Ford, Head of Investor Relations. Please go ahead, sir.

Executive
Jonathan Ford

Thank you and good afternoon, everyone. I'm pleased you're joining us for DXC Technology's third quarter fiscal 2019 earnings call. Our speakers on today's call will be Mike Lawrie, our Chairman, President and Chief Executive Officer; and Paul Saleh, our Chief Financial Officer. The call is being webcast at dxc.com/investorrelations and we've posted slides to our website, which will accompany the discussion today.

Slide two informs our participants that DXC Technology's presentation includes certain non-GAAP financial measures and certain further adjustments to these measures, which we believe provide useful information to our investors. In accordance with SEC rules, we have provided a reconciliation of these measures to their respective and most directly comparable GAAP measures. These reconciliations can be found in the tables included in today's earnings release as well as in our supplemental slides. Both documents are available on the Investor Relations section of our website.

On slide three, you'll see that certain comments we make on the call will be forward-looking. These statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those expressed on the call. A discussion of risks and uncertainties is included in our annual report on Form 10-K and other SEC filings. I would like to remind our listeners that DXC Technology assumes no obligation to update the information presented on the call, except as required by law.

And now, I'd like to introduce DXC Technology's Chairman, President and CEO, Mike Lawrie.

Executive
Mike Lawrie

Okay. Thank you and good afternoon, everyone. As usual, I have my four, five points to make and then I'll turn this over to Paul and then we'll have plenty of time for any of your questions.

First, our non-GAAP EPS in the third quarter was $2.23. Adjusted EBIT was $840 million and adjusted EBIT margin was 16.2% and we generated $503 million of adjusted free cash flow in the third quarter. In terms of revenue in the third quarter, revenue was $5.178 billion on a GAAP basis. In constant currency, revenue was down 2.6% year-over-year and was up 4.3% sequentially. Bookings were up 3% year-over-year and 22% up sequentially for a book-to-bill of 1.1x.

Third point around digital. In constant currency, our digital revenue grew 16.9% year-over-year and 9.5% sequentially, driven by strong bookings in the first half of the year, particularly in cloud. Digital bookings in the quarter were up 85% year-over-year for a book-to-bill of 2.1x. Bookings were very strong across all digital offering families and cloud had a 3.3x book-to-bill in the quarter. Industry IP and BPS revenue was up 2.6% year-over-year and 6% sequentially, and the industry IP-BPS book-to-bill was 0.8x.

Fourth, we continue to make strategic investments in digital assets and capabilities. As you know,