Business

DXC Technology’s results in the third quarter (ended Dec. 31) demonstrated the “solid momentum in executing on our transformation journey,” Mike Salvino, its CEO and president, said Feb. 4 during an earnings call with analysts.

That is “translating into consistent quarter-on-quarter revenue stability, sequential margin expansion and a book-to-bill number of one or greater,” he said.

The company’s profit soared to $1.1 billion ($4.29 a share) from $90 million (32 cents a share) a year ago.

DXC is “on track to complete” the sale of its healthcare provider software business and use the proceeds to pay down debt, which would further strengthen its balance sheet, Salvino said.

The company has also “built and finalized” a new leadership team that he said is “executing on our transformation journey and producing strong results.”

Salvino is “pleased with the level of stability and momentum we are achieving,” he said, adding: “We have done well attracting talent, improving the environment for our people, strengthening our customer relationships, taking out costs without disruption and continuing to win in the market. We expect all of this positive momentum to continue in Q4.”

In the company’s Global Business Services (GBS) business, revenue increased 2.2 percent from the second quarter this year, “primarily reflecting the strength of our analytics and engineering business,” new CFO Ken Sharp told analysts.

GBS margins improved 10 basis points from Q2 “despite a headwind of about 300 basis points” from the company’s sale of its U.S. State and Local Health and Human Services (HHS) business to Veritas Capital early last year, Sharp said.

In the company’s Global Infrastructure Services (GIS) segment that includes IT outsourcing, cloud and security, and the modern workplace layers of the firm’s enterprise technology stack, revenue inched up 1.3% from Q2 and there was a GIS segment profit of $88 million with a profit margin of 3.7%, a 210 basis points margin expansion over Q2, Sharp noted.

One thing that Sharp said “drives home the positive impact of our transformation journey” is its “continued revenue stabilization and strengthening of our book-to-bill for each layer of our stack that has been part of the transformation journey” since Q1. In Q1, “all four layers of our stack had negative sequential growth, whereas we are now reporting sequential growth improvement for all layers in Q3,” he said.

“We believe building strong relationships” with DXC information technology outsourcing (ITO) customers and “delivering effective solutions will improve revenue performance,” Sharp told analysts, noting cloud and security revenue was up 4.7% from Q2. “Moving up the stack, the applications layer posted 2.6 percent sequential revenue growth,” he said.

Salvino had pointed out on an earnings call in late 2019 that the company was out to make improvements in the ITO business. On that front, he told analysts early last year that DXC had been “focusing on account management and delivery capabilities and we’re making good progress.”

The company recently received what it said was an “unsolicited, preliminary and non-binding proposal” to acquire it from Atos SE, a French multinational information technology service and consulting company. “Prior to receiving the proposal, DXC had no knowledge of any interest from Atos,” it said.

The DXC board “reviewed the proposal carefully with our financial and legal advisors and found it to be inadequate and lacking certainty given the value our board believes we can create on a stand-alone basis by executing on our transformation journey,” Salvino told analysts Feb. 4. “After sharing some high-level information with Atos to help them understand why their proposal undervalue DXC, Atos and DXC agreed to discontinue further discussions,” he said, adding: “We are confident in our transformation journey, and our Q3 results show strong evidence that our team is executing.”