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Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXC Technology Third Quarter Fiscal Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. And I would now like to turn the conference over to Roger Sachs, Head of Investor Relations. Roger, you may begin.

Roger Sachs: Thank you, operator. Good afternoon, everybody, and welcome to DXC Technology’s third quarter earnings call. We hope you had a chance to review our earnings release posted to the IR section of DXC’s website. Speakers on today’s call are Raul Fernandez, our President and CEO, and Rob Del Bene, our Chief Financial Officer. Our agenda will be as follows. Raul will provide an overview of our results and an update on our strategic initiatives. Rob will then walk you through our financial performance for the quarter as well as update you on our full-year outlook and provide some thoughts on our fourth quarter. Raul and Rob will then take your questions. Certain comments made during today’s call are forward-looking and subject to risks and uncertainties, that could cause actual results to differ materially from those expressed on the call.

You can find details of those risks and uncertainties in our Annual Report on Form 10-K and other SEC filings. We do not commit to updating any forward-looking statements during today’s call. Additionally, during this call, we will be discussing non-GAAP financial measures, that we believe provide useful information to our investors. Reconciliations to the most comparable GAAP measures are included in the tables that are in today’s earnings release. And with that, let me turn the call over to Raul.

Raul Fernandez: Thank you, Roger. Good afternoon, everyone, and thank you for joining us today for our third quarter fiscal 2025 earnings call. I’m pleased with our third quarter performance. Our operating model changes and focused on disciplined execution is reflected in our results. Revenue, adjusted EBIT margin and non-GAAP EPS all came in ahead of guidance. We also delivered strong free cash flow. Our revamped go-to-market approach is paying off driving a meaningful uptick in bookings. Reflecting on my first year as CEO, I’m more convinced than ever that we are on the right path. Our top priority is to drive profitable and sustainable revenue growth. Our evolving leadership team is establishing a culture grounded in client centricity, performance management and accountability.

As a result, we are becoming more innovative, faster and better positioned to win in the market. We have a strong portfolio of complementary and transformative IT services all of which we plan to invest in and grow. Specifically, during the quarter, total revenue declined 4.2% year-over-year on an organic basis, adjusted EBIT margin equaled 8.9%, expanding 140 basis points year-over-year, non-GAAP diluted EPS was $0.92, up 7% year-over-year and we generated free cash flow of $483 million for a year-to-date total of $576 million, exceeding our full-year fiscal 2025 guidance. Global uncertainties ranging from trade policy, geopolitical conflicts, inflation and labor costs continue to pressure corporate spending for discretionary projects. At the same time, clients are balancing cost optimization with investments in AI-driven transformation programs.

We also see some clients committing to projects for the full-year ahead. Our revamped go-to-market approach is beginning to deliver results. As expected, bookings across our offerings improved significantly over the last quarter, with gains in both large and shorter-cycle projects. A clear sign, we are connecting better with customers. This momentum is evident in our book-to-bill ratio of 1.3x, the highest in eight quarters. Our pipeline continues to grow, including a higher mix of larger deals in consulting and engineering services. While these engagements have less near-term revenue impact, we believe they build on a solid foundation for future growth. We continue to invest in training our client partners and refining our performance management processes to drive the continued expansion of our pipeline and grow future bookings.

Additionally, during the third quarter, we continued to progress on the tactical actions we began earlier in the fiscal year. In our Global Business Services segment, where we help clients accelerate digital transformations, we continue to drive more scalable and standardized solutions to support growth. Specifically in consulting and engineering, first, we expanded our enterprise application capabilities that help clients leverage AI, driving increased bookings. Examples include: collaborating with SAP to incorporate their business AI solutions into our industry frameworks and helping clients accelerate their SAP S/4HANA cloud projects as well as the formation of a new center of excellence with ServiceNow, combining DXC’s deep IT industry expertise with ServiceNow’s GenAI solutions creating a powerful platform to help clients increase their AI adoption.

And second, we are also helping clients unlock the full potential of GenAI by ensuring their data is clean, current and reliable, paving the way for secure deployments and scalable solutions tailored to their evolving needs. Let me highlight details of two examples of recent GenAI engagements. We worked with Singapore General Hospital to create an AI-powered solution to help doctors quickly analyze clinical data to improve patient treatment plans and alleviate the overuse of antibiotics. With just a few clicks, doctors can access if antibiotics are needed and recommend the right treatment and dosage quickly. Next, building on DXC’s deep automotive expertise, we expanded our partnership with Ferrari to develop the software that powers the next-gen infotainment system for the recently launched F80 supercar.

The new digital cockpit delivers an enhanced user experience, providing real-time performance data through seamless high-speed displays for public road use that transforms into a racing display when the drivers are on the track. Our capabilities in the insurance business remains strong. We are the category leading software and services provider for life and wealth, global specialty and reinsurance industries. We continue to invest to grow our cloud-based software solutions and are well positioned to help clients migrate their workloads to the cloud for scalability and cost efficiency. At the same time, we are exploring new markets to drive further growth. In our Global Infrastructure Services segment, which represents our portfolio of technology solutions, we focused on delivering secure cutting-edge services to meet our clients’ evolving needs.

During the quarter, we laid the groundwork for the redesign and expansion of our AI capabilities in the software platforms across our cloud and ITO security and modern workplace offerings. We are partnering with clients to design and build industry-specific AI accelerators that will drive innovation in cloud infrastructure, security and data management. We continue to improve our delivery metrics and overall quality of service, leading to record Net Promoter Scores. These efforts reflect our commitment to driving innovation and measurable value for our clients. I’m also excited to announce that Brad Novak has joined our leadership team as our new CIO, bringing over 30 years of experience in data architecture and technology strategy. Brad’s mission is clear.

Increase AI usage across DXC’s infrastructure and operations, advance our data strategy and deliver on our ERP consolidation road map. Brad is the latest example of top-tier talent DXC is able to attract. I am pleased with our ability to bring in new leaders, both on my executive team and throughout the organization to help execute on our strategic priorities. To conclude, we believe that our biggest near-term opportunities lie in our initiatives to improve effectiveness across the full cycle of capturing new business including better solutioning, using the right pricing models and driving better economics on renewals. With revenue growth being our clear goal, I am encouraged by the positive progress we’ve made in expanding our pipeline and bookings.

Looking back over my first year as CEO, I’ve gained a deeper appreciation of the essential services we provide. We play a pivotal role in driving global commerce. We have strong and lasting relationships with clients that view us as strategic partners, leveraging our global delivery capabilities to help them with their transformation journeys. That said, our goal remains clear, to drive profitable revenue growth. Together with our experienced leadership team, I’m confident, we have a strong portfolio of complementary and transformative IT services to deliver long-term success and continue building strong value for all stakeholders. The past is history. Today, we are a coordinated team running fast, breaking out of silos and bringing out the best in each other.

With that, let me turn the call over to Rob for a detailed review of our third quarter results.

Rob Del Bene: Thank you, Raul, and good afternoon. Today, I’ll go over our third quarter results, provide our view for the fourth quarter and update our full fiscal year 2025 guidance. While facing incremental FX headwinds, 3Q total revenue of $3.2 billion fell in line with our expectation, while organic revenue declined 4.2% ahead of the top end of our guidance range. As Raul mentioned earlier, our book-to-bill ratio significantly improved to 1.33x driving the trailing 12-month ratio to 0.96, up from 0.88 last quarter. Adjusted EBIT margin expanded 140 basis points year-over-year to 8.9%, ahead of our expectations. This performance was primarily driven by higher yields from cost management initiatives, as well as the deferral of certain planned marketing and IT investments to ensure they are more closely aligned with our evolving business priorities.

In the quarter, we also recognized a 50 basis point benefit from equity compensation savings associated with executive leadership changes made during the quarter as we continue to reshape and strengthen our senior team. These tailwinds were partially offset by a $10 million charge related to the disposal of hardware assets as we consolidate our data centers. Non-GAAP gross margin for the third quarter came in at 25.1%, an improvement of 150 basis points year-to-year. This expansion was primarily driven by savings from disciplined resource management practices and the impact from restructuring more than offsetting lower revenue and the data center hardware asset disposal. Non-GAAP SG&A as a percentage of revenue increased 70 basis points year-over-year to 10.3%.

This was primarily driven by lower revenue and investments in our sales team as well as IT infrastructure related to our ERP consolidation efforts. These impacts were partially offset by the equity savings from recent executive leadership changes. As a reminder, the year-to-year changes in our non-GAAP gross margin and non-GAAP SG&A are normalized for the reclassification of certain business development costs to SG&A that I discussed last quarter. Non-GAAP EPS was $0.92, up from $0.86 in the third quarter of last year. The $0.06 increase was primarily driven by higher adjusted EBIT of $0.10, lower net interest expense and taxes of $0.02 each and the impact of a lower share count of $0.03, partially offset by an $0.11 decline to non-controlling interest that included as non-recurring benefit in the third quarter of last year.

Now turning to our segments. GBS, which represents 52% of total revenue, was down 50 basis points year-to-year organically. The GBS profit margin increased by 150 basis points year-to-year to 13.4%, largely due to more efficient resource management. Within the GBS segment, Consulting and Engineering Services organic revenue declined 2.2% year-to-year. This is primarily driven by ongoing market pressures affecting custom application projects which account for roughly two-thirds of CES revenue. However, this decline was partially offset by momentum in our Enterprise Applications business as we continue to increase our capabilities. The book-to-bill ratio improved in the quarter to 1.28 due to third quarter seasonality and our improving go-to-market execution.

The trailing 12-month book-to-bill ratio remained stable at slightly more than 1.0. Insurance and horizontal BPS organic revenue grew 5.6% year-to-year. Our insurance services and software business representing approximately 80% of the total, continued to deliver mid-single-digit growth. This performance was driven in part by expanding software license revenue that increased at a mid-teen rate. The book-to-bill ratio for insurance and horizontal BPS was 1.05, including a higher mix of new work compared to bookings during the first half of the year. On a trailing 12-month basis, that book-to-bill ratio was 0.82. GIS, which represents 48% of total revenue, declined 7.8% year-to-year organically as services revenue was down approximately 7% and resale fell approximately 16%.

Profit margin declined 50 basis points year-to-year to 6.5%, reflecting the impact of lower revenue and the hardware asset disposal charge that I referred to earlier. These headwinds offset the benefit of our ongoing efforts in resource management and optimizing software and data center costs. On a sequential basis, the GIS profit margin declined 170 basis points, primarily due to the hardware asset charge and last quarter’s discrete benefit related to the settlement of a legal matter. Within GIS, cloud, ITO and security organic revenue declined 6.6% year-to-year, with services down approximately 7%, narrowing the rate of year-to-year decline by 2 points from last quarter. 3Q resale was down approximately 2%, improving from steeper declines in recent quarters, and we continue to be selective on our resale opportunities based on deal economics.

The book-to-bill ratio of 1.51 was driven by timing of renewals and our improving go-to-market effectiveness. The trailing 12-month book-to-bill ratio equaled 0.90. Modern Workplace declined 11.3% year-to-year organically, with services revenue down approximately 5% and resale revenue down about 30%. The book-to-bill ratio equaled to 1.25 and the trailing 12-month book-to-bill ratio was 1.04. Turning to our cash flow and balance sheet. During the quarter, we generated $483 million of free cash flow compared to $585 million in the same period last year, with the delta primarily driven by working capital. Additionally, CapEx increased by $46 million to $167 million, largely reflecting our efforts to reduce new financial lease originations, which were limited to just $3 million in the quarter.

Taken together, CapEx and lease originations as a percent of revenue equaled 5.3%. As a reminder, financial lease originations are not included in free cash flow. Fiscal year-to-date free cash flow through December 31, 2024, totaled $576 million, exceeding our prior full-year guidance of approximately $550 million. This outperformance was primarily driven by adjusted EBIT for the first nine months of the year, exceeding our expectations along with lower than anticipated restructuring charges. Our disciplined resource management practices, which have driven a net headcount reduction of nearly 5,900 since the start of the year have enabled us to remain on track to meet our cost savings targets for the year. With our measured and deliberate approach on directing actions to the right areas across our organization, we are now expecting restructuring charges to be a maximum of $100 million above last year compared to $250 million we initially outlined.

We will continue to drive targeted restructuring reductions across our operations into fiscal 2026, utilizing the remaining funding planned for fiscal 2025. Total debt at the end of the quarter was equal to $3.8 billion reflecting approximately $80 million of capital lease pay down and the currency impact on our euro-denominated bonds. Total cash on our balance sheet increased by approximately $480 million quarter-over-quarter. This was driven by strong free cash flow and asset sale proceeds of more than $80 million from facility sales and the divestiture of a non-core business in Asia Pacific. Through December 31, we’ve generated approximately $150 million of cash through dispositions and sale of other assets with line of sight to additional transactions.

As a reminder, these proceeds are not included in our reported free cash flow. As a result of our strong free cash flow generation, asset sales and debt reduction over the first nine months of the fiscal year, we have lowered net debt by more than $750 million to $2.1 billion, with approximately $1.7 billion of cash on hand, we have delivered on our objective of strengthening our capital structure and we will update our capital deployment priorities as we enter the new fiscal year. Now let me provide you with a view of our fourth quarter. We expect total organic revenue to decline 5.5% to 4.5%. We anticipate adjusted EBIT margin to be about 7%, reflecting the expected sequential decline in revenue, the impact from merit increases and increased investments in sales, marketing and IT.

We expect non-GAAP diluted EPS of about $0.75. And now for the full-year. We now expect total revenue to decline between 4.7% and 4.9% year-to-year organically compared to the prior guide calling for a decline of 5.5% to 4.5%. We continue to anticipate full-year GBS revenue to decline slightly year-to-year and GIS to decline at high single-digit rates. We now expect our full-year adjusted EBIT margin to be approximately 7.9%, up from our prior guide range of 7.0% to 7.5%. This being the third time this year that the guide has been increased. We now expect a full-year non-GAAP effective tax rate of approximately 33%, bringing our full-year non-GAAP diluted EPS to be about $3.35, an increase from our prior guide of $3 to $3.25. Free cash flow for the year is now expected to be approximately $625 million, an increase from our prior view of about $550 million.

This improvement is largely due to the increase in our adjusted EBIT guidance and the lower anticipated restructuring spending. And with that, let me turn the call back over to Roger.

Roger Sachs: Thank you, Rob. We now like to open the call for your questions. Operator, can you please provide the instructions?

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Bryan Keane with Deutsche Bank. Please go ahead.

Bryan Keane: Hey guys. Thanks for taking the question. Just wanted to ask about the organic growth in the third quarter kind of beat expectations in your guidance. But for the fourth quarter, as we jump over to that quarter, it’s still – it’s a slight decrease from where we did in the third quarter, and I know the bookings are up. So just trying to reconcile the increase in the book-to-bill and what that means for organic growth, especially as we turn into fourth quarter and into next year?

Rob Del Bene: Bryan, it’s Rob. Thanks for the question. The reason for that slight decrease in quarter-to-quarter guidance is related to the bookings in the first half of the year. And you’ll recall, our bookings were in the range of 0.8 for the first half. And that takes time to flow through bookings into the pipeline into the backlog rather into revenue. So that will be a bit of a drag for the next couple of quarters. And the better bookings that we experienced in the third quarter will start to layer in over time. So it’s primarily the first half that causes the decrease.

Bryan Keane: Got it. And that’s helpful. And then just obviously, turning to the adjusted EBIT margins, quite a bit above our expectations in the quarter and you are raising guidance again. Just trying to make sure I understand the puts and takes between where we were in the third quarter to the fourth quarter because it’s a little bit lower level, even though we’re increasing the full-year?

Rob Del Bene: Yes. So the drivers – the eight, nine had – we referred in the call to some equity comp benefits that we experienced in the third quarter which were one-time in nature. So that drove about a 40 basis point help. So the bridge is really going from about 8.5 to 7. And the primary driver of the reduction is going to be the revenue decline quarter-to-quarter dropping down to the bottom line. And along with that, we have merit increases that we’ve given to employees where we had one-month in the third quarter and three months’ worth in the fourth quarter. So those are the two primary drivers of the margin degradation.

Bryan Keane: Okay. That’s really helpful. Thanks for taking the question.

Rob Del Bene: Thank you.

Operator: Your next question comes from the line of Jonathan Lee with Guggenheim Partners. Please go ahead.

Jonathan Lee: Great. Thanks for taking the questions. Tremendous to see the book-to-bill strength in the quarter. How much of the bookings momentum was driven by seasonal budget flush activities? And how would you characterize the deal environment into fiscal 4Q?

Raul Fernandez: So it’s Raul here. Thank you for the question. Look, the demand environment is not a big factor for us because we’ve got to execute operationally across the board from pursuits through pitches and conversion, et cetera. And really, that is what had a big impact in terms of getting that book-to-bill up. It starts with people, right leaders in the right place. Pipeline, obviously, bigger is better and better quality is better. We’re working on that and making progress. Conversion rate increasing another factor, again, getting better, but still a lot more to do. And then we did some revisions of comp plans within the year, and we’re carrying that forward as we’re smarter about what we need to get out of our sales force. But across the board, better proposals, better sales and marketing material, all had an impact on that.

Jonathan Lee: Thanks for the detail there, Raul. As you think about calendar year 2025, and I know it maybe early. Is there anything in your customer conversations that would give you confidence that perhaps calendar 2025 should be better than calendar 2024 for you from a demand perspective?

Raul Fernandez: I think the demand for the set of services that we have is very solid. We are operators and we’re trusted partners with global companies that make multiyear commitments to us to help them run their businesses. And that is longer term, multiyear, larger. Then on the other side of our business, on consulting and engineering, they’re shorter term. They’re more transformational. They get booked and they get burned on a quicker sequence. So for us, it’s more of the mechanics of getting the right combination of those in place so that we can have more predictability and see an upward slope. But I’m more focused on internal operations, management measurement performance than I am – the external environment is good.

I mean, look, technology is changing every industry in every country everywhere. And it’s not going to stop. If anything, it’s going to get faster pace of change increases, AI adds another dimension of complexity. Complexity means that our customers need people who are experienced and can bring very relevant and current expertise to the table. So demand environment is solid, but we also – looking across all of our verticals, had a pretty solid across every single vertical performance in the last quarter. And again, I don’t see anything today that shows the blip. Obviously, there – you can read in the newspaper every day, there’s trade policy that can change certain industries and have big impacts and could impact demand. But right now, our execution and our performance against the backdrop of demand that we have and then being successful in new pursuits, that’s the key to success for us.

Jonathan Lee: Appreciate the comments.

Operator: Your next question comes from the line of Tien-Tsin Huang with JPMorgan. Please go ahead.

Tien-Tsin Huang: Hi, Raul and Rob. I wanted to ask on the margins. I heard that there was a deferral, I think, of some marketing expenses. Just curious if I heard that correctly, and did you size that? And is that going to be pushed out into fiscal 2026? And same question on the restructuring charges, the $100 million max now that’s below the $250 million. Is the $250 million target now lower? Or is it just a push out as well?

Rob Del Bene: Yes. So the investments – we had some investments included in the guide for 3Q and a modest increase in 4Q as well. And I just want to take back, Tien-Tsin, we’ve had new marketing leaders added, a new CIO added, new leaders in our go-to-market in both Europe and the Americas. And these leaders are being really – we’re being really deliberate and thoughtful on where we make our investments. So while we left room in the guide, they’re onboarding, they’re evaluating what we have in-house. And again, we’re being very deliberate and a little slower than I originally plugged into the guide in terms of the incremental investments. So we’ll continue to be extremely thoughtful and prudent as we go forward with the investments.

We do expect an uptick. We’re basically rebuilding our marketing function. So we are expecting increased investments over time. And we have system consolidations in IT that we’re going to be investing in, along with providing much better AI capability in-house to become more efficient and streamlined. So the IT investments will increase modestly over time. And then perhaps once we get past the bubble, they’ll come back down. And from a sales perspective, we’ll continue to build our capability and drive in an effort to drive future revenue growth.

Raul Fernandez: Yes. Just a data point to back that up, our marketing leader came in June, right? So we’re talking about six, seven months of effectively being on the ground and rebuilding the team. So a relatively new team, getting a handle on what we had and what we need to do and just taking a little bit more time, but I’d rather be thoughtful and deliberate and use the dry powder at a later date.

Rob Del Bene: Yes. And so Tien-Tsin, on your question on restructuring, I mentioned in the prepared remarks that we’ve been able to execute on our cost reductions with less restructuring. Similar to the investments, we’re being extremely targeted and thoughtful about where we deploy the restructuring dollars. So we do plan on continuing that effort. We are going to keep drilling down and rationalizing our spend profile, our overhead, become more efficient and carry that $150 million into fiscal 2026, which on the surface would be a $50 million year-to-year increase. So that’s our current plan. And we’ll add more to that 90 days from now when we do the year-end call.

Tien-Tsin Huang: Understood. Thank you.

Rob Del Bene: Thank you.

Operator: Your next question comes from the line of Bryan Bergin with TD Cowen. Please go ahead.

Bryan Bergin: Hi, guys. Good afternoon. Thank you. I wanted to dig in on the free cash flow outperformance here. And first, Rob, just to clarify on the margin that rolls into that, was the 8.5% the clean op margin relative to your plan for the quarter?

Rob Del Bene: Yes.

Bryan Bergin: And then as we think about the sustainable versus the transitory factors that you’re talking more about here, things like timing on some of the restructuring and these margin items versus more efficient working capital and CapEx, like what are the puts and takes as we look forward here and consider your prior view of returning to a foundational level of roughly $700 million of free cash flow?

Rob Del Bene: Yes. No, thanks for the question, Bryan. So let me step through this. So our guide is for the full-year is now $625 million up from the $550 million. If we think of that – the two primary impacts to that, which we went – have gone through all year is the incremental restructuring, which is now targeted at a max of $100 million and then the shift of capital leases to capital expenditures. If you make those two adjustments, our free cash flow for fiscal 2025 is right on top of where we were in fiscal 2024, at around $750 million in that ballpark. So our underlying free cash flow generation is stable. Now going from 2025 to 2026, I would think of that $625 million as a good foundation. We will continue to minimize capital leases, which will put a little pressure on capital going forward, and we have to work through the dynamics going forward 90 days from now.

The restructuring right now, what I’m suggesting is we are holding that $150 million, and we’ll spend that as needed in fiscal 2026. So that would be a $50 million worth of pressure on the $625 million. But we have working capital. We have our EBIT profile. We have cashed out. So we have a number of significant drivers of free cash flow that we’ll be working through during the fourth quarter before we set our guide for next year.

Bryan Bergin: Okay. Okay. That’s helpful. And then as we kind of marry the cash flow, the balance sheet, your net leverage looks like it’s down to about one turn, gross debt down. Just how are you thinking about capital allocation here? I know there wasn’t much buyback in the quarter. I’m curious if anything would preclude you to start becoming more active there? Or are you reaching a point where M&A starts to become more of a priority?

Raul Fernandez: We’re going to give an update on capital allocation for next year at the next call. We’re going to evaluate what we have in terms of opportunities to get the biggest return for our investments. As you know, part of what I’ve been doing is with the team is making sure that we’ve got an operating system that is effective on a stand-alone basis. But more importantly, if we were to do any sort of smaller M&A that we can be super accretive, both in terms of revenue, clients, people, et cetera. So those are not fully aligned yet, and we’ll give you more color on capital use in the next quarter, but we’re making progress along that front so that we have the optionality.

Rob Del Bene: Yes. And Bryan, I would just add that we’re executing exactly as we told you we would at the beginning of the year. We suspended the buyback. We focused on improving our balance sheet this year. We’ve accomplished that and we’re going to reevaluate our priorities next quarter as we head into fiscal 2026. All three levers are still important to us, having the right capital profile, investment in the business and return to shareholders are all important to us.

Bryan Bergin: Okay. Understood. Thank you.

Rob Del Bene: Thanks.

Operator: Your next question comes from the line of Matthew Roswell with RBC Capital Markets. Please go ahead.

Matthew Roswell: Yes. Good evening. Congratulations on a good quarter. I guess – could you talk a little bit about what you’re seeing in terms of win rates and pricing, and for pricing, especially around renewals and whether you’re kind of through most of the legacy, not very profitable contracts?

Rob Del Bene: Thanks, Matthew. It’s Rob. So I would describe our pricing dynamics this year as being stable and that is across the board. Now with regard to renewals, this is a very targeted conversation – contract by contract. We have renewal strategies for each of our contracts. And in cases where we set out to have better economics going forward, it’s both economics and terms going forward. We have been able to accomplish that. Our intention is to go into every renewal coming out of it with good economics for us, having a customer who is equally happy with the outcome of the discussions and the negotiations and have a win-win. So we’ve done a good job in the contracts we’ve targeted for better terms and better prices and we’ll continue to operate that way. We go into at each renewal with the intention of renewing that contract.

Matthew Roswell: And I guess in terms of the win rates, are you seeing them improved?

Rob Del Bene: Yes, they’ve been very stable. Through the first half of the year is stable. In the third quarter, we actually did better. So we had improved win rates in the quarter. And it’s another indication that the go-to-market changes that we’re making are taking hold. And along with the pipeline generation and the bookings improvement, the win rates have improved. And I’d also add, I mentioned it earlier, that our pipeline in the fourth quarter is also positioned very well for us.

Matthew Roswell: Excellent. Thank you very much.

Rob Del Bene: Thank you.

Operator: Your next question comes from the line of Jamie Friedman with Susquehanna. Please go ahead.

James Friedman: Hi. Good evening. Raul, I was hoping to get your perspective as to which of these segments have the most opportunity for improvement. The book-to-bills by segment really vary or they diverge from the reported revenue growth rates. So maybe that’s part of the answer. But from your perspective, which of these segments do you think is under-indexing either the market or your objectives?

Raul Fernandez: Yes. So look, one point I want to make is that now having been here a full-year, operating all of the units that we have, that I feel that we’ve got a very solid portfolio that is in current demand and that is well positioned for future demand. So we are focused on building across every one of our segments, our two offerings in the geographies, building on top of the great clients that we have today and then being worthy of competing and winning on net new accounts. And we’re starting to get great early indicators that as we bring the new face of DXC into the marketplace and tell our story in a more efficient and effective way that we can click up on our conversion rate. So I’d say across the board, they all have room to improve.

And that improvement is in execution. That improvement when you get down into the ingredients of what it takes to win, it’s the right solution, it’s the right sales and marketing material, it’s the right pitch, it’s the right price. So I don’t have a segment where, oh, gosh, we’ve got, that’s a big turnaround there. They all have room to grow and they all have room to improve. Insurance is performing very, very well and will continue to perform well. And I think we’re very well positioned globally in multiple areas there. And so I’m excited to continue to build upon that success. But my approach is holistic and there’s upside across the entire portfolio.

James Friedman: Thanks for that. And then if I could just ask Raul, or Rob, how should we be thinking about the opportunities between revenue growth and margin, between GBS and GIS? Is there a zero sum there? Or can they both move in the same direction, hopefully up? But how do we think about the dynamic of those two, revenue and margin?

Rob Del Bene: Yes. So Jamie, it’s Rob. Look, I think we have opportunity across the board for improvement, as Raul mentioned. From an opportunity standpoint, the dynamics of the businesses are different, as you know. CES is more project-oriented, with the GIS business units being longer term in nature in terms of the contracts, longer-term outsourcing contracts. So the dynamics are different in that regard. There’s opportunity for improvement in both. There’s margin opportunity also across the board. So we’re going after all of it. We’re going after all of it. And we’ll give you more color for 2026 as we get to next year’s guide.

James Friedman: Okay. Thank you, guys.

Operator: Your next question comes from the line of [Steve] Bachman with BMO Capital Markets. Please go ahead.

Keith Bachman: Hi. It’s Keith Bachman from BMO. Sorry about the background noise. I wanted to ask about dispositions. You’ve been doing a nice job of paring back in some businesses. You did some more this quarter. Is there more room to run? And I have to ask about managed services, which has been a drag for years. And I understand that the book-to-bill is positive. But mainly, when your revenue is declining 10%, it’s easier to have a positive book-to-bill. But is there more that you can do on, more broadly, paring back on areas that you don’t see performance improving? And is there a magnitude that you can help us think about? Thank you. And that’s my first question.

Rob Del Bene: Yes. Let me take the first one on the dispositions. We’ve had $150 million in dispositions so far this year. And we do have a list of other opportunities that we’re actively pursuing. So there is more room to run. And I’m not going to quantify that. But I think, yes, at the beginning of the year, we set out to get a couple of hundred million dollars of dispositions. And the timing is uncertain with these, especially when you’re trying to sell facilities. But we’re happy that we’re at the $150 million mark. I’ve got an opportunity list that would be in excess of what we originally were earmarking. And I think we’ll be successful in executing on that list, but the timing is uncertain.

Keith Bachman: Okay.

Raul Fernandez: Yes. Just on the managed services, one of the areas of investment has been in bringing talent that has great track records of success in building SaaS products in scale in various industries. They’re here less than six months. They’re actively working on the internal offering that we currently have today that supports our existing managed services account. And they’ll be having a rollout of new features, functionality, essentially a relaunch of the whole product set, in the next six to nine months. So that’s an area that we’re investing in. It’s an area that I expect to see improvement, and it’s an area where the talent that we brought in is making an impact, but a little bit too early to roll out today.

Keith Bachman: That leads into my second question. How stable do you think your very senior leadership team is? Do you think there’s more you need to add? Or do you feel like you have the team in place? And related to that, I’m not quite clear, there was a gain on your margin from equity. Does that mean that some folks didn’t stay who were recently hired? I wasn’t clear what the genesis of that was. Congrats.

Rob Del Bene: Yes. I’ll let Raul take the question. But just on the financial impact in the third quarter, the benefit was just a reversal of equity that we had accrued that the executives left and we reversed those accruals.

Raul Fernandez: Yes. And I’m super happy with the velocity that we’ve been able to bring in super experienced talent that I’ve worked with, in many cases, across different companies over the last 20, 25 years, having them join, having them have an impact has been terrific for me personally. And so the good news is that, that network is in place. That network still has more to go, if needed. But as you know, as you bring on every team, you get everybody settled and you get everybody going in the same direction. And that’s what’s happening today. So I’m super happy on the talent side, and we’ll make changes as needed, but very satisfied with where we are today.

Keith Bachman: Many thanks.

Operator: Your next question comes from the line of Jason Kupferberg with Bank of America. Please go ahead.

Tyler DuPont: Good afternoon, Raul and Rob. This is Tyler DuPont on for Jason. Thanks for taking the questions. I wanted to start by touching on bookings. It was nice to see positive bookings on a quarterly basis for both GBS and GIS for the first time in quite a while. Can you maybe discuss how much of that was due to large deal wins versus the smaller deals? I guess what I’m trying to get at is the duration and ramp timeline and what that looks like for these new bookings as well as the potential ability to backfill as we move through calendar 2025?

Rob Del Bene: Yes. Thanks for the question, Tyler. We did have a significant renewal in the third quarter. And we mentioned it in the call at the end of the second quarter that there was a big opportunity that slipped out of the quarter, which we ended up booking like the next week or within 10 days of the beginning of this quarter and that was approximately $400 million. So our book-to-bill without that big renewal was still very healthy in the 1.2 range approximately. The rest of the bookings, they were healthy across the board. There was a good mix of project-based services and outsourcing, longer-term outsourcing services. So the strength of those bookings will start manifesting themselves as we progress through fiscal 2026. And as I mentioned earlier, the pipeline looks good for the fourth quarter, and we’re expecting another good bookings quarter in the fourth.

Tyler DuPont: That’s helpful, Rob. Just shifting gears a bit. I also wanted to ask about margins. I know it’s been brought up a couple of times. It’s nice to see the outperformance in the quarter. But just wanted to get your take on the sustainability of the margins by segment. I know 4Q is taking a step down. And in 3Q, we saw GBS really outperform on the segment level. But just as we look through 4Q and we look through calendar 2025, just sort of what sort of dynamics are you expecting? What segments do you anticipate will drive further expansion? Anything along those lines would be helpful.

Rob Del Bene: Yes. Again, we’ll pass on commenting on fiscal 2026 expectations. But on the fourth quarter, the items we mentioned earlier, both the revenue declines and the merit increases will be across the board, so they will impact both of the segments in the fourth quarter from a quarter-to-quarter perspective.

Tyler DuPont: Understood. Thank you.

Rob Del Bene: Thank you.

Operator: Your next question comes from the line of James Faucette with Morgan Stanley. Please go ahead.

James Faucette: Great. Thanks very much. You guys have answered a lot of my questions today, and I appreciate all the details. Just wondering if you can give us a little bit of incremental color on what industry verticals you see delivering kind of better-than-expected growth versus maybe which ones were weaker than maybe you would have thought?

Rob Del Bene: Yes. So James, let me take that and to address that for both GBS and GIS separately. But from a GBS perspective, we had strength in the quarter in the insurance sector, public sector was strong, did well in communications and media and in healthcare as well. So those were our better performers, growth sectors for GBS. And in GIS, we did well in travel and transportation and healthcare, energy, those were primarily the better performing sectors. And from a quarter-to-quarter perspective, we had kind of broad broad-based improvements quarter-to-quarter in both GBS and GIS.

James Faucette: Got it. Appreciate that. And then when you think about particularly the public sector, how should we think about potential benefits or disruptions from at least what you’ve seen thus far from a public policy standpoint and intentions under the new administration?

Raul Fernandez: Yes, I’ll take that. Just to be clear, when we talk about public sector, it’s public sector outside the United States, so heavy in the UK, Ireland, Australia. So U.S. domestic cuts or changes in budgets, et cetera, do not have an impact on us here.

James Faucette: That’s great color. Appreciate that. Thanks so much guys.

Raul Fernandez: Thank you.

Operator: Your final question comes from Rod Bourgeois with DeepDive Equity Research. Please go ahead.

Rod Bourgeois: Hey. I want to ask a big picture question here. I think in three months, when you guide to next year, I want to talk about investment priorities. But for now, I guess I’d like to ask, are you approaching a new stage in your turnaround effort? Perhaps you could characterize the phase that you’ve been in over the last year and if you’re seeing a new phase that’s on the horizon. It seems like you’ve been working on a lot of the blocking and tackling in the last year. So if you could just give us a big picture perspective on the overall turnaround trajectory there?

Raul Fernandez: Sure. Let me give it a shot first. Look, we’ve changed behavior, and now we need to sustain that behavior change and continue to get better along the way. We’re getting better wired to win on a consistent basis, but it’s still early, and there’s a lot of work left to be done. So I think it’s about consistency and scale on the positives, and then getting to the next set of items that needed to be fixed on the checklist. It’s big, it’s global. It takes a little bit of time, but we’re very happy with the progress that we’re making, and we’re very happy with the plans that we have to make continued progress in the upcoming year.

Rod Bourgeois: Okay. All right. Well, maybe more to come on that in three months. I want to ask about your Q4 revenue guidance. I know you addressed that some earlier. But since you’re implying a sequential revenue decline, I want to ask more about that. Because there is considerable history for positive quarter-to-quarter revenue seasonality heading into the March quarter, so I’m wondering if your guidance is conservative or if there are some above-normal revenue runoffs occurring on existing deals. I mean I know you had weak bookings in the first half of last year, but you’ve also had years in the past with weak bookings, but still positive seasonality in the March quarter. So just maybe your guidance is conservative or maybe there’s another factor that’s at play. I just wanted to ask on that. Thanks.

Rob Del Bene: Yes, Rod, I’d describe our guidance is right down the middle. I would not characterize our revenue guidance as conservative. So that’s for starters. In terms of dynamics, the overwhelming driver of the revenue decline is the first half bookings and that bleeding through the second half of the year and into the fourth quarter. So that is the primary driver. It’s not new runoffs or other exposures.

Rod Bourgeois: What I’m not following is bookings is adding to backlog. So in order for revenues to decline, there has to be some form of runoff on your existing run rate, particularly in a quarter where there’s positive seasonality. So I know the bookings were weak, but that’s translating into a net runoff, it appears. And I’m just inquiring if that’s what you…

Raul Fernandez: Yes. Look, not all bookings are equal in terms of period of performance for burn, et cetera. So while it’s an important number, the ingredients of the number, what can get burned within the next two quarters, within the first year of the signing, varies. In some very large deals, the ramp-up is slow and then hits. On smaller ones, you book, bill and you burn, right? So it’s all in the nature of what the booking was and is and how we’re dealing with two or three quarters ago. But part of what we need to do is to increase the topline, the revenue side, and that will help smooth these sorts of transitions out over the next quarters.

Rod Bourgeois: All right, guys. Thanks.

Rob Del Bene: Thank you.

Operator: And that concludes our question-and-answer session. And I will turn the conference back over to Roger Sachs for closing remarks.

Roger Sachs: I want to thank everybody for joining us today, and we look forward to speaking with you next quarter.

Operator: And ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation, and you may now disconnect.