DXC Technology Company (DXC) — Q4 2021 Earnings Call Transcript

Thank you and good afternoon everyone. I'm pleased that you are joining us for DXC Technology’s fourth quarter fiscal 2021 earnings call. Our speakers on the call today will be Mike Salvino, our President and CEO; and Ken Sharp, our Executive Vice President and CFO. This call is being webcast at dxc.com/investorrelations and the webcast includes slides that will accompany the discussion today. Today’s presentation includes certain non-GAAP financial measures, which we believe provides 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 and the webcast slides. Certain comments we make on the call will be forward-looking. These statements are subject to known and uncertain risks and uncertainties, which could cause actual results to differ materially from those expressed on the call. A discussion of these risks and uncertainties is included in our Annual Report on Form 10-K and other SEC filings. I now like to remind our listeners that DXC Technology assumes no obligation to update the information presented on this call, except as required by law. With that, I'd like to introduce DXC Technology's President and CEO, Mike Salvino. Mike?

Thanks, John. And I appreciate everyone joining the call today. And I hope you and your families are doing well. Today's agenda, we'll start by giving you a quick update on our strong Q4 performance. Next, I will highlight the progress we're making on our transformation journey. Our strong Q4 results were driven by executing on the three key areas of our transformation journey which are focused on our customers, optimize cost and seize the market. I will then hand the call over to Ken to share our detailed Q4 financial results, guidance for FY ’22 and longer term outlook. Finally, I will make some closing remarks before opening the call up for questions. Regarding our Q4 performance, our revenues were $4.39 billion, approximately $85 million above the top end of our guidance. This is the third straight quarter of revenue stabilization and we expect this trend to continue in FY ’22. Concerning adjusted EBIT margin, we delivered 7.5% also higher than the top end of our guidance. This too is the third straight quarter of sequential margin expansion and is driven by our cost optimization program. We expect margins to continue to expand in Q1 of FY ’22. Book-to-bill for the quarter was 1.08 underscoring the success of bringing the new DXC which focuses on our customers and colleagues to the market. This is the fourth straight quarter that we've delivered a 1.0 or better book-to-bill, we expect our success of winning in the market to continue in Q1 of FY ’22. I'm pleased with the momentum we have achieved all the work in FY ’21 to inspire our people, invest in our customers, take cost out without disruption and win in the market has positioned us very well for financial success in FY ’22 and longer term. Now, I will cover the good progress we are making on our transformation journey starting with our customers. Our investment in our customers continues to be the primary driver of revenue stabilization. When we deliver for our customers and are seen as a trusted partner, customers are more likely to renew existing work and consider us for new work. Let me give you an example. We’ve recently signed a five-year expansion with Zurich Insurance Group. We'll provide IT outsourcing and security services as part of their global IT transformation focused on improving the customer and employee experience. This is a perfect example of delivering for customer, strengthening the relationship and then a customer wanting to work with DXC in the future. This is strong evidence that our investment in our customers is paying off, which gives us confidence that we can flatten organic revenue during FY ’22. Now, let me turn to our cost optimization program, we have achieved our goal of $550 million of cost savings in FY ’21. Our cost optimization program was responsible for the strong adjusted EBIT margin of 7.5% in Q4. We have done well optimizing our costs and continuing to deliver for our customers without disruption. You will hear from Ken that we expect to continue to expand margins in FY ’22. Seize the market is the final area of our transformation journey, in this area we are focused on cross selling to our existing accounts and winning new work. The 1.08 book-to-bill that we delivered this quarter is consistent evidence that our plan is working. In Q4, 53% of our bookings were new work and 47% were renewals. Ahold Delhaize is a great example of an existing customer who has renewed work with DXC and given us new work, we will be providing infrastructure services, application outsourcing, cloud migration and workplace services in a hybrid cloud environment for the retail business services group, to reduce costs and support their business critical systems that enable each of their local brands to stock their shelves. Our ability to deliver a consistent book-to-bill of over 1.0 in each of the four quarters of FY ’21 is clear evidence that we can win in the IT services industry. This is translating into improving quarterly organic revenue growth, which we expect will flatten during FY ’22. Now before I turn the call over to Ken, I would like to thank our colleagues, our customers and our shareholders for their support. As we are witnessing the ongoing impact of COVID-19 our focus continues to be on our people. Currently, we are focused on the more severely impacted areas of India and the Philippines. The dedication of our team is a source of great pride for us at DXC as our people continue to take care of themselves, their families and to deliver for our customers. Now let me turn the call over to Ken.

Thank you, Mike. In the past three quarters, we have stabilized our revenue on a sequential basis and guided to the fourth quarter of revenue stability. This is a significant accomplishment by my DXC colleagues. It is not lost on Mike and me that investors look at revenue growth on a year-over-year basis. However, when a company has a period of significant decline and change to its business, strategy and leadership, you first have to stabilize revenues sequentially. As we all know, once you achieve four quarters of sequential revenue stability, you achieve year-over-year revenue stability. Going forward, we will pivot our narrative accordingly. Turning on to our financial priorities on Slide 10. We are working to build a stronger financial foundation and drive the company in a disciplined and rigorous fashion to unleash the true earnings power. To that end, remediating our material weakness and the impact it has on our corporate governance is a key focus. Our second priority is to have a strong balance sheet. We paid down $6.5 billion of debt in the past nine months, and subsequent to year end retired an additional $500 million. We are now approaching a far more manageable $5 billion debt level. Further, we have relatively low maturities over the next three years. We remain committed to an investment grade credit profile, and I believe our actions more than demonstrate our commitment. Third, we will focus on improving cash flow. The company previously provided an adjusted cash flow presentation that added back certain cash costs. We changed this presentation. And in our earnings release, we adopted a traditional free cash flow definition of cash flow from operations less capital expenditures. We expect this will improve our focus on our true earnings power and will allow you to better understand our performance. As part of our focus on the business and cash optimization, we will continue our portfolio shaping efforts to increase the focus on our core business. Fourth, we will reduce restructuring and TSI expense to approximately $550 million in FY ’22 to under $100 million in FY ’24, ultimately improving cash flow. Fifth, we will have a thoughtful and disciplined approach to capital allocation. As we generate free cash flow, we will appropriately deploy capital to invest in our business and return capital to our shareholders, all the while staying focused on maintaining our investment grade credit rating. For the quarter, DXC exceeded the top end of our revenue, adjusted EBIT margin and non-GAAP diluted earnings per share guidance. GAAP revenue was $4.39 billion, $85 million higher than the top end of our guidance. On an organic basis, revenue increased 0.4% sequentially. Organic revenue declined 7% year-over-year due to the previously disclosed run-offs and terminations. As we mentioned, on our third quarter earnings call our Q3 10.5% year-over-year decline would be the high watermark. GAAP EBIT margins were negative 16.8% in the fourth quarter, impacted by approximately $1.1 billion of costs including pension mark-to-market, asset impairments, restructuring PSI, loss on disposals and debt extinguishment costs. Excluding these items, adjusted EBIT margin was 7.5% in the fourth quarter, an improvement of 50 basis points from the third quarter. Non-GAAP diluted earnings per share was $0.74, and was negatively impacted by $0.04 due to a higher than expected tax rate of 32%. In Q4, bookings were $4.7 billion for a book-to-bill of 1.08. The fourth straight quarter of a book-to-bill greater than 1. For the full year, this takes our book-to-bill to 1.12 compared to 0.9 in FY ’20. Turning now to our segment results, the GBS segment. The top half of our technology stack includes analytics and engineering applications and the horizontal BPS business. GBS was $2 billion or 46% of our total Q4 revenue. Organic revenues increased 2% sequentially, primarily reflecting the strength of our applications and analytics and engineering business. Year-over-year, GBS revenue was down 4% on an organic basis. GBS segment profit was $315 million with a 15.8% profit rate, up 160 basis points from Q3. GBS bookings for the quarter were $2.39 billion for a book-to-bill of 1.2 and a full year book-to-bill of 1.32 compared to 0.99 in the prior year. Now turning to our GIS segment, which consists of IT outsourcing, cloud and security and the modern workplace. Revenue was $2.39 billion, down nine-tenths of a percent sequentially and down 9.3% year-over-year on an organic basis due to the previously disclosed terminations and run-offs. Our ITO business had positive sequential revenue growth in the quarter. The ITO business benefited from approximately a $100 million of resale revenue resulting from a typical Q4 increase of customer demand due to their fiscal year end. GIS segment profit was $98 million with a profit margin of 4.1%, a 40 basis point margin improvement over the third quarter. GIS bookings were $2.3 billion for a book-to-bill of 0.98. Book-to-bill for FY ’21 was 0.94 compared to 0.83 in the prior year. Now turning to one of my favorite slides, our enterprise technology stack. This slide demonstrates how winning in the market for four consecutive quarters translates into revenue stability and the progression that our team has been able to achieve by focusing on our customers. Before I get into the details, I want to provide you the three changes to the stack you can expect for next year. First, as we think about next year, you will see our sequential quarter comparison give way to a year-over-year comparison. Second, we delivered on the sale of the healthcare provider software business therefore, this will no longer be included. Third, the modern workplace and horizontal BPS businesses will be integrated into the enterprise technology stack above. Once again, we had three layers of the stack achieve a book-to-bill greater than one and sequential growth. Now let me drill down one level. IT outsourcing revenue was $1.19 billion in the quarter up 1.4%. The first positive sequential growth since we began tracking in this manner. ITO book-to-bill was 0.98 in the quarter. Cloud insecurity revenue was $524 million declined 1.6% sequentially, and was down 5.7% year-over-year. The cloud and security business had a difficult compare as the third quarter grew 4.7% sequentially. Book-to-bill was 1.08 in the quarter. Moving up the stack the applications layer posted a 1.9% sequential growth and was down 7.2% year-over-year. Book-to-bill was 1.06. Analytics and engineering revenues were $478 million up 2% on a sequential basis and up 8.4% compared to the prior year. Analytics and engineering book-to-bill was 1.46 in the quarter, the modern workplace and BPS revenues were $795 million down 3.3% sequentially and down 10.5% compared to the prior year. As we previously mentioned to you, these two businesses just began their transformation journey. So you should expect some unevenness in performance. Moving on to cash flows on Slide 15. Fourth quarter cash flow from operations totaled an outflow of $280 million. Free cash flow for the year was negative $652 million impacted primarily by four non-recurring items, Q4 tax payments of $531 million related to the business sale. As you may recall, we planned $900 million of tax payments, so this results surpassed our expectation. As we told you before in Q3, $832 million related to writing the U.S. State & Local Health and Human Services business for sale and normalizing payables and $200 million related to deferrals of certain tax payments due to COVID relief legislation that will be paid during FY ’22. One of our key initiatives we are employing to drive cash flow and improve earnings power is to wind down restructuring and TSI costs. Since DXC was formed four years ago, we had significant cash outflows with approximately $900 million in expense per year on average. In FY ’22, this will be reduced to approximately $550 million, with a larger portion being allocated to facilities restructuring efforts to improve the work experience for our people as we reshape our portfolio for our virtual model. We have heard from many of our analysts and investors that our cash flows are hard to understand. As we previously discussed, we changed our free cash flow presentation. We believe this will allow investors to better understand our performance. Second, we acknowledge our cash flow conversion does not correlate well to earnings. As part of our effort to build a sustainable business, we will continue to evaluate these historical practices of using capital leases to a much greater level long-term purchase commitments and selling our receivables, unwinding these historical practices may have an impact on short-term cash flow. We will also focus our efforts to build the necessary rigor associated with capital budgeting to better control our outsize capital spends. On Slide 17, we detail our efforts we have undertaken to strengthen our balance sheet. As you can see, we have achieved a lot in this area, reducing our net debt leverage ratio by more than one turn from the high watermark of 2.4 to 1 at the end of March. Another goal we gave you was to improve financial visibility and we are committed to providing annual and longer term three year guidance. Starting with our first quarter guidance on Slide 18. Organic revenues declines are expected to moderate, down 2% to down 4% in the first quarter year-over-year. This translates into reported revenues between $4.08 and $4.13 billion. Our sequential revenue is lower for two reasons. First, previously mentioned lumpiness of resale revenue that occurs in Q4. Second, our portfolio shaping efforts reduced revenue by about $100 million. EBIT margin is projected at 7.4% to 7.8% including 20 basis points of margin headwinds, due to the sale of our healthcare provider software business. Non-GAAP diluted earnings per share is expected to be in the range of $0.72 to $0.76. Moving on to our FY ’22 guidance on Slide 19. Organic revenue growth of minus 1% to minus 2%. On a year-over-year basis, divestitures will account for $1.2 billion of the revenue decline. Our previously disclosed terminations and run offs wind down in the first half of FY ’22. We expect to see further improvement in the quarterly year-over-year organic revenue growth rates as we move through the year. This translates into revenue of $16.6 billion to $16.8 billion. EBIT margin is projected at 8.2% to 8.7%. Non-GAAP diluted earnings per share is expected to be $3.45 to $3.65 an increase of 42% to 50% year-over-year. Free cash flow is projected to be $500 million. Now moving on to our longer term expectations on Slide 20. Organic revenue growth of 1% to 3%. Adjusted EBIT margin of approximately 10% to 11%. Non-GAAP diluted earnings per share of $5 to $5.25. Free cash flow of approximately $1.5 billion. I should note, our guidance does not anticipate additional portfolio shaping. With that I will now turn the call back to Mike for his closing remarks.

Thanks Ken. Let me share three key takeaways on the progress we're making at DXC. First, as I reflect on FY ’21, we delivered on our commitments and here's how. With regard to our people, we moved from a workforce that was not engaged to one that is now engaged and inspired. Concerning our customers, we went from challenged accounts to building a level of customer intimacy where we are delivering and building strong partnerships and being proactive with our customers. Customers are clearly seeing the new DXC. We changed the direction of our revenues and margin from declining to improving. In the market, we went from losing to winning, and we’ve repaid over $6 billion in debt, taking our balance sheet from highly leveraged to strengthened. The next key takeaway is that FY ’22 will be the year we build the foundation for growth. What that means is we will retain and continue to attract talent, we will build our customer intimacy to deliver revenue stability and continue to win in the market, all while we expand margins and deliver increased free cash flow. Finally, we expect to deliver positive organic revenue growth, longer term. In closing, we are confident that the momentum we created in FY ’21 will continue in FY ’22. We hope that you will join us on June 17 for our Analyst day, as we're excited to showcase the strength and depth of our new leadership team and discuss our business in more detail. With that, operator, please open the call up for questions.

Thank you. Hi, Mike. Hi Ken.

Hi Ashwin.

It's good to see the track record building up here steadily. As I look at the continued sequential progress in the top of the stack, and in areas like analytics apps, cloud is traction in these areas beginning to also help your customer discussions as it relates to more traditional areas like ITO. And the purpose of what I'm trying to figure out is, how much of this will continue to be a revenue mix shift story so that the new contracts and aggregate can start being in positive territory as opposed to having to dig out for hold on every renewal?

Ashwin, the place where I would start is ITO. And our strategy is everybody knows that we've been very solid in that area. And what you can see is we've now turned that to positive growth. Our strategy is to understand our customers' higher tier states. And by doing that, that clearly opens up the conversation to go up the stack. That along with what I said at the end around we got to deliver, we continue to improve those partnerships. And then now we're being proactive, hence the reason why we're starting to bring ideas around the blue, the analytics, and also how to do application rationalization and so forth. So what you're seeing Ashwin is a flow up the stack, but it starts with the green to make sure that we're delivering on the ITO base, which is the higher tier states that I talked about.

Got it understood. And then just a quick question on these longer-term expectations and I've imagined that you'll get into this and you said at your analyst day in more detail. But why broadly speaking is low single-digit organic revenue growth and low double-digit EBIT margin that I target versus a higher or lower level?

Well look Ashwin, where we are, as you see the trajectory that we're going. So when I reflect, let's just take FY ’21 to FY ’22, we just delivered a year where we were minus 9.6% organic revenue, and now I'm guiding towards minus one to minus two. And basically, we're showing that that new revenue is coming on board and we're closing the gap of that lost revenue we had in FY ’21. We also just delivered 6.2% adjusted EBIT margin for FY ’21. And I'm guiding now towards $8.2 to 8.7%. So then I sit there and I look at it and go, alright, EPS, same drill $2.43, I'm guiding to $3.45 to $3.65. And then, if that's not enough, then I sit there and go. Alright, now we're delivering on the restructuring and TSI commitment we said which we're going to go after reducing that 900 to 550 and also paying down debt. And then the other focus area for us is, is you can tell Ken's drive in a higher level of clarity in these numbers have you seen. So I look at that progress going through ’22 and then hitting ’24 and say I think that's the right trajectory.

And Ashwin, I just would add, you can imagine when you set a long-term plan with a new leadership team that's been in the business working real hard to kind of dig through it. Where there were a lot of pluses and minuses we looked at this was our build up and this is the numbers we felt were a relatively high probability plan that we could get to.

Understood. Thank you guys. See you in a couple of weeks.

Thanks Ashwin.

Hi, guys, congrats on the progress. I want to ask about employee morale. Mike, maybe you can give us an update on how that's doing and also supply side in India, retention in India and then I heard you guys going to be hiring more in India? So just maybe an update on India as well.

Brian thanks so much. On employee morale is strong, I look back and reflect on where we started. Most of you all can take a look at Glassdoor, I think we started around 37%. We're well above 70% right now. And we're positioned to continue to take care of our folks. We're running a workforce right now that is a nice balance between work-from-home and also coming into work. So I think giving folks that option is increasing morale. But look, they like the changes that we're making. Now, when I look at India, India is that's where roughly India and the Philippines is about a third of our population. What's going on, I think we've done a fantastic job, actually being very proactive with how to deal with that situation. As we immediately went and doubled our benefits. We secured beds and supplies for our folks over there we gave additional financial support for our families. And then now we're working on getting vaccines for our colleagues. So when you do all that, it's a rough spot. But the bottom line is, the morale seems to be pretty high over there and our attrition looks good. What was the rest of your question, Brian?

I also understand you're hiring more in India too I think, to change the mix?

So now the reason for that is I've said over and over again, I want to motivate an employee base. And it's very hard to do that when you've got the percentage of contractors that was here at DXC when I started. So we're driving that down. And it's a combination of that strategy, to remove contractors and flip them to employees, and also put the work in the area where we want to scale. That's our consistent strategy that you see us implementing. And then some of that is also the new work coming on board.

Got it. And then just as a follow up, Mike, how would you characterize these long-term targets? I know when you first got to DXC you set some targets right off the bat, probably wasn't even your guidance, per se. But just your level of confidence to achieve these targets versus the original ones you said, I think it was right when you started?

Yes, strong confidence around ’22, strong confidence around ’24. As you can imagine, we've been studying this business for 20 months. I've had a lot of new people look at it with the new management team that I've brought. So the confidence is high.

Great, congrats on the transformation.

Thanks, Brian.

Hey, guys, thank you. In the context of the pretty strong now book-to-bill ratios we're seeing for the last several quarters, especially coming from probably the more sophisticated engineering demand areas. And just sort of following up on Brian's questions around supply side. I just want to revisit your view on your ability to meet the demand in terms of fulfilling on those bookings. If you can give us any color on utilization rates you have or attrition levels you're seeing now versus last couple of quarters, specifically numbers around it. And really just thinking about where those numbers should head as part of the guidance in the next couple of years? It would be helpful.

Okay, so Darrin, what I would say is this, with morale, and that's why I focused on the people. So when I talk about the new DXC and I talk about focusing on our customers and our colleagues, the key thing around the colleagues that the colleagues stay, and we also make this place a lot simpler to work hence the reason why we continue to look at some of the cost savings initiatives. As it relates to employees though, I always go back to employee morale, that's employee engagement. You all can see a lot of the numbers. Like I said, on Glassdoor, and comparably, what I can tell you is, our employee engagement has significantly increased over the last 12 months. It's not only increased by what our folks are saying about what's going on, but also how many people actually take the survey, which is huge. Because if you can’t even get people to engage in taking the survey, then it's a little hard for us to understand what we need to do to inspire them. So that's the way I would say that. On top of that, the other nugget I will give you is we've gone from having to proactively reach out to go get talent, to now our folks are getting proactive calls, who want to join the journey. And there's nothing more inspiring for our management team, when you have good talent reaching out to say, hey, I want to be a part of this.

That's all good color directionally. I guess when we think about just as a quick follow-up on a bigger picture question, Mike. The portfolio of businesses that you have now, there's been some presentations over the past year, but you seem like you're obviously in a very good position now, especially on a sequential basis with data points on that and book-to-bill showing it. So just high level any thoughts on your overall business portfolio where you want to be in terms of what businesses are part of it are still there, maybe there's some that you still think about moving around a little bit I’d be curious to hear. Thanks again, guys.

What I would say is that I am pleased with our current position and I believe I've mentioned that repeatedly. As Ken pointed out, we will continuously evaluate our portfolio. If we see an opportunity to enhance shareholder value by adding to or reducing our holdings, we will certainly consider it. One area we have not discussed before is our analytics and engineering segment, where more than half of the business relates to a niche area known as data cleansing. Many people focus on AI, machine learning, and data analytics, but projects often stall because the data isn't clean. Our capabilities in data cleansing are impressive, and we serve some of the biggest names in the industry. So again, I am confident in our current situation and believe we are making solid progress.

Great. All right. Nice job, guys. Thank you.

Hi, good afternoon, guys. Good stuff this quarter. I had a follow-on question on bookings and the relation. How should we think about the relationship between book-to-bill and revenue growth, just noting that trailing 12 months book-to-bill now is 1.12x as you called out, but then you're still guiding for the upcoming fiscal year to obviously a major improvement but still year-on-year declines in revenue. So how do we think about that relationship, I guess that means that there's like a backlog in there that kind of needs to be refilled? What sort of the lag time or can you give some color on to the relationship between book-to-bill and revenue growth? Thank you.

Okay, Lisa. Thanks. So first of all, think about our guide, our guide in Q1 is minus two to minus four. But yes, we're guiding for the full year of minus one to minus two. So that said revenues coming on board. Second thing is when I think about book-to-bill, it split into two ways and that's why I specifically call out 53% is new work. That's work we've never seen before and 47% is renewals. My focus with our leadership team is to show the market that this revenue is not going away from us anymore. And that we are closing that gap that I called out in FY ’21 in terms of the lost revenue, and I think we're doing a very, very good job doing that, as you can see that the trajectory is pretty significant calling out minus 9.6 to minus one to minus two.

Okay, good. And then just a follow-on question related to talent and the overall organizational transformation. I know at sort of your transformation journey you've highlighted a number of different aspects of the transformation like deep layering and simplification and increasing lines of accountability et cetera. Can you just kind of update us more holistically on where you are on your overall organizational transformation?

So the overall organizational transformation, first of all the leadership team is built out and you will see a number of them on June 17. So I'm looking forward to showcase and the talent that we brought in across the board, people that are running P&L, is people that are running delivery, people that are running for instance, our HR along with our CIO, because those folks to help generate the positive morale that's going on along with driving the business. So, back to your specific question, when I think about what we're doing with our talent, now what we're doing is filling in the next layer underneath the direct reports of my management team. And that's where I mentioned to Darrin to say, was pretty neat is to see that people want to join us now. One of the things I think early on that I discussed on this call was, hey, Mike, can you really attract talent to DXC? And we've done that, and now the momentum in the market that we're showing people want to join something that's got positive momentum. So I look forward to seeing the new talent that's going to come our way in fiscal year ’22.

Terrific, thank you.

Hi, good afternoon, guys. Thank you. Wanted to ask here question on margin first. So you completed the $550 million program for ’21. Can you provide more color on your goal here for fiscal ’22, and just talk about the largest opportunities you still have around cost?

So what you will see is, look, our cost levers that we had last year will continue this year. So cost levers, the first one is the contractor conversions. Second is, we will continue to look at our facilities that also helps with our environmental footprint. Third is, we will continue to look at what I call the simplicity of running our organization. How inefficient is it that product has impacted on the corporate level along with our operations. And then the fourth one, Bryan is around, what Vinod refers to is AI operations. So that's the automation of what we do in our facilities. So we totally delivered on the $550 million. And what I'll do is call out again, we just delivered 6.2%. So when we guide to $8.2 to $8.7, that says we shouldn't be doing just as much next year and if you net it out with the investment we're making on our customers and our colleagues, that's how you get to those numbers.

Make sense. And then on the portfolio shaping comments, can you just dig in a little bit more there on the types of work you might still be backing away from? Did you quantify what was built into that ’22 guide, I wrote down $100 million here but not sure if that was for the full year. And is there still there sort of an anticipation that could still evolve to a potentially higher level?

Yes, so Bryan, I'll try to give you some color here. The $100 million was for the stuff that's, principally the healthcare provider software business that exited April 1, I would say we continue to look at our portfolio, specifically, maybe the more smaller non-core assets that aren't integrated into the technology stack and aren't driving synergies in the business. Also, on a year-over-year basis, right, we called out $1.2 billion as well. So hopefully that gives you some color. And as Mike said, we're continuing to look at the portfolio holistically. I think that's just kind of what you do in a business. I wouldn't use it as anything more than that. Certainly, if there's a piece of our business that we do want to move out and we do something with we'll certainly update our guidance with you.

Okay, understood. Thank you.

Thanks, Bryan.

Okay, great. So hey, Mike, you just finished your first full fiscal year as CEO and you share dell with a lot of stuff during that year, everything from the COVID crisis to debt concerns, even had the unsolicited takeover bid. So you've also had time to get to know your major clients through all those challenges. So what I want to ask I mean as you draw in that fiscal ’21 experience, what are your main takeaways about DXC's fundamental drivers that are now influencing your go-forward financial output outlook. So essentially, what did you learn from fiscal ’21? I'd also say that your 2024 guidance suggests that you're seeing more turnaround to come. So it'd be great to get your overall take on the drivers there. Thanks.

Thanks, Rod. I would say there are five drivers. So the first one we've talked quite a bit about, which is people. And when I look at what we've done over the last year, going from not engaged to engaged that's special. But the key thing moving forward is now the games about retaining and continuing to attract, which I called out as our focus for ’22. That will help us fuel us into the future. The second one is customers, we've talked a lot about that. We began the year talking about challenged accounts and here we are, we're finishing the year, talking about customer intimacy, and on June 17, you all won't have to listen to me anymore. We're stacking up clients, videos to talk about the transformations that we're doing for them, meaning moving up the stack. So when I talk about we've delivered for clients, when I've talked about we're building strong relationships, that's pretty remarkable, in terms of what we've turned around over the last 12 months, I'd be remiss if I didn't talk about revenue and margin, the trajectory there is going the right direction. The fourth one is winning in the marketplace going from losing to winning, and then cleaning up that balance sheet Rod was huge. And even with Ken coming aboard, and just the stuff we did within the last quarter just continues to position us for stronger strength moving forward. So those are the five things I would call out in terms of how we're looking and that are going to guide us in ’22 in the future the people, the customers the revenue margin the marketplace. And let's just call it the balance sheet and our investment grade profile.

Got it. And then I just want to dig a little deeper on the ITO business. You've shown some revenue stability there over the last couple of quarters. So I want to ask that does that ITO revenue stability looks sustainable? It would be great if you could give some more color on the ITO revenue drivers and trajectory? Thanks.

I was hoping someone would ask me that question because we've been discussing this ongoing issue for a long time. I want to reassure everyone that all the effort doesn't simply vanish. As you can see on page 14 of our enterprise technology stack, the business has improved from a negative 5.2. By really focusing on our customers and their strategies, we can start to see progress. However, I don’t want to get too caught up in any specific part of the stack; what matters to me is the overall direction of the business, which is definitely positive. Our focus on ITO and addressing the gap in the market has been extremely beneficial for us. That's how I would respond to that question.

Alright, thanks.

Rod, anything else?

Yes, well, I mean, I guess the related question on ITO that revenue stability plays out. Do you see additional margin levers in the ITO business specifically as well?

Yes, I mean, look, let's just talk about GIS as a whole. Remember, we had to show up in Q1 with pretty much no margin and we're at 4.1%. And when I talk about contractor conversions when I talk about putting people in terms of efficiency and automation and so forth, look, that's only going to help those margins. Fair enough. I want to thank everybody for joining the call. I would tell you that we are very pleased with the momentum we achieved in FY ’21. We're also confident that that's going to continue in FY ’22. Again, I hope you can join us on June 17 to meet the new team and also the Analyst day festivities. And with that all the best to you and your families and operator, please close the call.