Good day, everyone, and welcome to the CSC Third Quarter 2016 Earnings Call. Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Neil DeSilva. Please go ahead, sir.

Thank you very much, and good afternoon everyone. I'm pleased you've joined us for CSC's third quarter 2016 earnings call and webcast. Our speakers on today's call will be Mike Lawrie, our Chairman and Chief Executive Officer; and Paul Saleh, our Chief Financial Officer. As usual, the call is being webcast at csc.com/investor_relations and we've posted some slides to our website which will accompany our discussion today. Please note that we will be filing our 10-Q for the third quarter early next week. On the slides, on slide two, 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 the actual results to differ materially from those expressed on the call. A discussion of risks and uncertainties is included in our Form 10-K, Form 10-Q and other SEC filings. Slide three informs our participants that CSC'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've 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. Finally, I'd like to remind our listeners that CSC assumes no obligation to update the information presented on the call, except, of course, as required by law. And now, I'd like to introduce CSC's Chairman and CEO, Mike Lawrie. Mike? John Michael Lawrie - Chairman, President & Chief Executive Officer: Okay. Thank you, everyone. Thanks for dialing in with us here and your interest. As is my practice, I've got four or…

Thank you, sir. And we will pause for a brief moment to assemble our roster. And we will take first James Friedman with Susquehanna.

At the Investors Day, you had suggested that the return to growth was more of a ZIP code than a mailbox. I was wondering if you could update your thoughts on that in terms of whether we're headed towards that same or accelerating or decelerating relative to that target? John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. You've got the phraseology exactly right. That's good, very good. It's very similar to what we said at the Investor Day. I think we're on track to close the UXC transaction at the end of the month. And hopefully we'll be able to get Xchanging done, barring no difficulties from the regulatory process in April, towards the end of April, maybe early May or roughly that timeframe. That does begin to add a fair amount of revenue. The other thing is we continue to see the gap close between the decline in our legacy business and the growth of our new offerings. I don't have the exact numbers, but again I'll give you the ZIP code as opposed to a mailbox. A year or so ago, a year-and-a-half ago, we were probably losing $200 million to $300 million a quarter in legacy revenue; and the revenue we were getting from our new offerings was less than $100 million. And if I take a look at where we've been in the last couple quarters and this quarter, that gap now has been cut by almost half. So between assuming that that trend continues and based on the book-to-bill's that we're seeing, we expect that to continue and we did see a moderation very consistent with what we talked about in the Investor Day in our legacy business, particularly GIS. I'd say that crossover point is probably sometime middle of next year.

Okay, thanks. And then just one follow-up maybe for Paul. How should we be thinking about working capital? I know it's one of your housekeeping questions, but is working capital a source or use of capital? And, in general, what should we be thinking about capital return priorities for the year? Paul N. Saleh - Chief Financial Officer & Executive Vice President: I think working capital has been a drag in the past for the company. Our focus right now is on improving our collection as we highlighted during our Investor Day; and that's basically the focus of every one of our businesses. And so we'll be giving a little bit more guidance on it as the quarter progress. As far as our capital priorities, I think we outlined them again on our Investor Day that first we've continued to invest in the business; and, in fact, we are actually continuing to increase the investment that we are making in our offerings and with our partners as well. And the second thing is we're continuing to look at acquisitions like we have in the past. Obviously, Mike mentioned the UXC and Xchanging. That should keep us busy for the near-term. And then the rest of it is a return of capital to the shareholders in the form of buyback and in dividends. In the quarter, we were really out of the market given the separation for quite some time. But we will continue to resume what you saw us do in the past of returning more capital to the shareholders in the form of repurchases. John Michael Lawrie - Chairman, President & Chief Executive Officer: I think just one other follow-up because you asked a good question. The thing that I've noticed or what's changed a little bit since we spoke at the Investor Day in November is we have seen some of this discretionary spending, consulting projects, that kind of stuff, as we mentioned. First of all, we have seen some of the start dates be pushed out. So instead of starting this month, it will get pushed back 60 days or 90 days. And it was part of what contributed to the third quarter, particularly in the Americas. So we definitely have seen – and I don't want to say it's due to the macro environment – but clearly we've seen a little shift in the last 60 days in some of this discretionary spending in the start dates for some of the projects. And right now if I had to bet, I'd say that's going to continue into the fourth quarter and our outlook and what we are targeting now reflects that shift. But the underlying model that we talked about hasn't changed at all.

Thank you.

And next we have Edward Caso with Wells Fargo.

Hi, good evening. It's actually Rick Eskelsen on for Ed. I just wanted to follow up on the first question going back to the inflection point for growth. I believe when you talked about it at the Investor Day, the assumption was a smaller amount of inorganic contribution; and now it seems like the crossover point includes the much bigger contribution from those two acquisitions. So maybe if you could focus in on the organic growth and when you think the organic crossover point happens and how that may or may not have changed versus your Investor Day expectations? John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. I don't think it's changed since the Investor Day. I'd say probably the second half, which is what we talked about at the Investor Day on the inorganic. Since then, of course, we've gotten the shareholder approval on Xchanging, which we didn't have in November; and that is a more sizable inorganic. So that does accelerate a little bit. But the trend line on this legacy decline and the growth of the new offerings is right about what we thought it was. Now we'll see whether that trend continues. But certainly through the third quarter we saw that trend absolutely continue to show itself. So, again, I'd say if it was just inorganic by the second half of next year based on this trend line that we're seeing, but with the shareholder approval of Xchanging I think that will move up; and I think the inorganic growth will be a little bigger contributor.

Thank you. Then just following up on that. On the Fixnetix and Fruition acquisitions, I think you expected $75 million to $80 million contribution in the second half. Just want to check if that's changed? And then maybe if you can size what the one-month contribution that you have embedded in the numbers from UXC is? Thank you. John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. I think the UXC – Paul, correct me if I'm wrong – was about $25 million, $30 million, something in that range for the fourth quarter. That's the assumption. And the $75 million on Fruition and Fixnetix I think is pretty much in that ballpark for the second half.

Thank you very much.

Next we'll move to Bryan Keane with Deutsche Bank.

Hi, guys. Just to clarify that then, what is the annual contribution from UXC and Xchanging we can expect once those deals close? John Michael Lawrie - Chairman, President & Chief Executive Officer: I can't give you an exact number because we're translating an IFRS revenue stream back to a GAAP revenue stream. So we're doing network now. What I can tell you is we're pretty much locked in now on the synergy case and are working that. But the revenue, I just don't have the exact translation yet because that has to go through a lot of accounting rigor.

Okay. And then how about for earnings? What would be the earnings impact that we can expect, will the deals be accretive? John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. Well, when we talked about this at Investor Day, we said that these would be mildly dilutive. What we're trying to do through the synergy case is get those to more of a breakeven. But we don't have that yet in any of our numbers in the fourth quarter obviously. And hopefully I'll have a little better insight into that when we report our full year earnings, which will be in early May. So assuming that Xchanging does close towards the end of April, or early May, we should have a little better handle on the dilution. But the plan was originally that these were going to be slightly dilutive in fiscal 2017; and what I'm trying to do is drive a synergy case that would get that to not accretive, but not dilutive in fiscal 2017.

Okay. And then just two small items, I guess, what percentage of CSC revenues falls under this discretionary bucket that you speak of? And then the next-generation offerings, is there a quarterly revenue number that we're at that you could give us? Thanks so much. John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. I think the next-generation revenue is now approaching – again, these aren't GAAP numbers, but a couple of hundred million dollars a quarter. And as I said, the decline is less than $200 million now on the – or less than $300 million in the legacy business. That's why this gap has narrowed. So on the – what was the other?

Yeah. Just trying to get a handle on the percentage of revenue of discretionary... John Michael Lawrie - Chairman, President & Chief Executive Officer: Discretionary. That's a really hard thing to get a handle on, because a lot of our consulting business is systems integration business. It's the deployment of applications. It's pure consulting projects. So it's a combination of those things. And I wouldn't say it's all discretionary by any means, but the dates by which they can start are often highly discretionary. So, again, you get the TCV signing, but the start date can be delayed and pushed out. So that's where the variability comes. Paul N. Saleh - Chief Financial Officer & Executive Vice President: I will add. Generally speaking, our backlog, right, if I look back, it represents 80% of the upcoming quarter revenue; and 20% will be sell and bill in the quarter. However, as Mike mentioned, just don't look at the 20% as just being discretionary because what we see sometime is also a potential delay in the backlog as people decide to push out maybe their start date on some of the contracts. But generally speaking, those would give you a little bit of a sense of the sell and bill within a quarter.

Okay. Thanks, Mike and Paul.

And next we move to Joseph Foresi from Cantor Fitzgerald.

Hi. I was wondering if we could just spend a little bit of time on the bookings versus the short-term slow down. Has that caused bookings to back up a little bit? And maybe we could just dive a little bit into the bookings on both the GBS and GIS sites? John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. The bookings on GBS were a little better. And that frankly reflects some new deals that we were able to drive in the quarter, particularly around some of our application modernization work and some of the deployment around new applications as well as our insurance software business. So that was encouraging because that typically builds earlier than some of the GIS or the bigger outsourcing contracts where you usually have to go through a transition and you really don't start to book the revenue until you went through the transition. You're really capitalizing the expense as you know through the transition and you take that off the balance sheet to match it against the revenue once you get into full operation. The next-gen things like cloud and cyber, those bookings were pretty consistent with what we've seen in the past. So there's really not much different about this quarter than what we saw in the previous quarters. What was a little different this quarter is we saw a little better book-to-bill in GIS; and some of that was the result of a couple of contracts that we were able to renew and get done in the quarter.

Assuming we saw a further slowdown and not – and you said not just a delay, but maybe even some cancellations, do you believe that the next-generation revenues might be at risk from a discretionary perspective? John Michael Lawrie - Chairman, President & Chief Executive Officer: No. I don't. Because again we could see some delay in the start dates, but I don't see those at risk. Those are usually multi-year programs. I cited an example of a large insurance client. And once that gets done, it gets approved by a board. These are all decisions that get board approval because they require capital and they are usually multi-year in nature. So these are not projects that get really stopped. You might have a consulting contract around IT consulting or something in that nature that could get certainly delayed or canceled; but the big stuff, no. The only thing we see in the bigger stuff is sometimes it will get delayed in the start date. And as Paul said, you've got 80% of your revenue stream under contract anyway. So if it got worse – if the macro environment got worse, I don't see a huge impact to that formula.

Okay. And then last one from me, you talked about the facility in Puerto Rico and I know that you're slimming down the pyramid. Maybe you could just give us an update on that and is there any way to quantify it on the margin side? Thanks. John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. The center in Puerto Rico, we actually bought from a client. So we bought that center from United Technologies; and it's got several hundred people in it. It's got the room to expand, which we are planning to do. And the whole plan there was to take security work, what we call ITAR work – this is particularly for our aerospace clients – and being able to move some of that work to that center in Puerto Rico. Puerto Rico has a labor cost that's roughly $0.65 on the dollar and has got all of the necessary security ratings and certifications so that we can move – work that has those security restrictions we can move to a lower cost delivery center. That was the reason we bought it. And we're planning to expand it as we go forward and offer that to other clients, particularly aerospace and defense clients.

Thank you.

Next we have David Grossman with Stifel Financial. David M. Grossman - Stifel, Nicolaus & Co., Inc.: Hi. Thank you. Just I wanted to follow-up on the bookings side. I think if I'm remembering right, in the second quarter we had a relatively weak quarter and at the time we talked about some slippage into the fiscal third quarter. Just curious, did any of that flow over into the third quarter? And if so, how much of the strength in the third quarter reflects some of that? John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. You're right. I think a couple of hundred million dollars we did not close in the second quarter; and that did flow over to the third quarter. So I don't know the exact number. It's somewhere in the neighborhood of $200 million, $250 million. David M. Grossman - Stifel, Nicolaus & Co., Inc.: Okay. And then just getting back to the free cash flow, I think, Paul, you said that working capital has been a drag. You're hoping to convert that over the next several months or quarters into more of a tailwind. And I'm sorry if this has been disclosed already, but can you remind us what the free cash flow number was through the six months on a restated basis? And how we should think about the different components of cash flow including CapEx, depreciation, et cetera? Paul N. Saleh - Chief Financial Officer & Executive Vice President: That's a good question. Actually we have not provided the restatement of free cash flow. We indicated that free cash flow would be about 100% of net income and you should just really work off of that right now. I think post-separation is going to be much easier again to track the…

Next we have Keith Bachman with BMO.

Hi. Thank you. I have two questions, if I could. On the M&A front, for CSC you have a couple of larger deals that you're going to close here shortly and then integrate. Does that suggest you'll have to take a timeout so to speak to make sure that you get these integrated appropriately or you still look to do other deals even of comparable size? And then I have a follow-up. John Michael Lawrie - Chairman, President & Chief Executive Officer: Yeah. We're not planning to do anything of that size. We need to get these businesses integrated, get the management teams in place and we need to make the business plan that we have behind these acquisitions. Now there maybe a couple of small deals, $10 million to $15 million something like that, but not of the scale. We need to get these fully integrated and we need to drive the revenue. The revenue is critical for us here as we talked earlier on the Q&A section on the crossover and we need to get the cost out so that these can actually help us drive profit growth in the out year. So as I said, we don't see a lot of profit growth in the next fiscal year, but they become very important levers for us as we go forward. So, no, I'm not planning anything of that size right now.

All right. Fair enough, Mike. Then my follow-up would be on GIS. Your constant currency revenue growth is a little bit lower relative to GBS, but your bookings are actually up year-to-date. How are you thinking about the growth potential in that particular business as you look over the next couple of quarters. It's really similar to the previous question. With the bookings up higher, what do you need to do to get that business turned around from a top line perspective? John Michael Lawrie - Chairman, President & Chief Executive Officer: Well, what's happening is, in those bookings, there's obviously renewals; and those renewals are often at a lower rate than the business that we had previously. Do you follow me?

Yeah. John Michael Lawrie - Chairman, President & Chief Executive Officer: I mean, I'll give you an example. I won't give you any names there. I mean we signed an outsourcing contract I think it was 17 years ago and the TC value of that was $2.5 billion. We just renewed that recently and it's $600 million; same surfaces. That gives you some idea of what's happened in that IoT market. So that's part of it. So what we're doing is we're offsetting that with additional project work or additional offerings. And a lot of our new offerings come in at a lower revenue rate. So, for example, MyWorkStyle or cloud. So what we're seeing and was a critical part of the transformation of the GIS business is to establish more of these newer offerings, albeit smaller, but they grow over time. And that is one of the things that in addition to the fact we had so many lousy contracts that were underwater we had to get restructured. That's what takes time in the transition because you're replacing much bigger deals with a higher volume of smaller deals.

Okay. Thanks, okay. John Michael Lawrie - Chairman, President & Chief Executive Officer: The other thing underneath that is, we'll show a TCV of X, but some of this is as-a-service, so we actually recognize the revenue as it gets built, which is a smaller number on a monthly basis than the old contract which was over a longer period of time but included the charge-back of capital and everything else. Does that make sense?

Yeah. It does, Mike. Many thanks. John Michael Lawrie - Chairman, President & Chief Executive Officer: I mean, as we've talked about before that's the really hard part. But what is encouraging is we're beginning to see some real traction on these deals. And I'd tell you, I call out our partners, I mean this big deal we took away, a really big deal we did with Amazon. Just we closed I mean a lot of deals in the third quarter with Amazon and Microsoft and I talked about AT&T these are really, really important deals that if we deliver are going to grow over time.

Got it. Thank you, Mike.

We'll move next to Jason Kupferberg with Jefferies.

Thanks, guys. I understand you can't precisely size the revenue contribution from UXC and Xchanging given the accounting translation. But can you give us a rough estimate after those deals have closed, what percent of your total revenue will be coming from next-gen offerings and what percent of your revenue will still be coming from legacy on-premise infrastructure outsourcing? John Michael Lawrie - Chairman, President & Chief Executive Officer: I really don't know exactly. I can tell you that UXC will probably be somewhere, after we do the translation back to GAAP, of $400 million to $500 million and Xchanging will be roughly in the same ballpark; again, that's IFRS accounting for Xchanging. So that will be translated back. So think of this as $800 million to $1 billion and then you've got – again I'm just giving a rough idea here, you've got a couple of hundred million of revenue coming from other next-gen offerings. And then if you look at our IoT business, that dependency on the IoT business is declining. I don't know the exact number, but somewhere probably in the neighborhood of $2.5 billion. So now all of a sudden you've got $1.2 billion or so in 2016, so you take somewhere around $1.5 billion of either acquisitions or next-gen revenue against a base of $2.5 billion. So you've got it. That's exactly what drives the conversion point.

Okay. And just as a follow-up, I mean the midpoint of the new fiscal 2016 EPS guidance looks like the March quarter EPS is kind of flattish with December. I think usually there would be some seasonal strength there, but anything changing with your margin expectations for the year? I understand the top-line dynamics obviously have changed a little bit. John Michael Lawrie - Chairman, President & Chief Executive Officer: There's going to be some fluctuation in the margins. For example, in GIS, this quarter we did have a contract settlement which helped the margins. That will be a one-time thing. But the overall trend line is what we talked about at the Investor Day. We're still making investments. I mean we're still investing in these offerings. We have not stopped at all. If anything, we're investing a little more particularly around training and the tools to drive automation in our GIS business. So we have not backed off that at all. What is different and what gave us a little more caution, just to be perfectly candid about it, is we have seen a slowdown and a delay of the start dates on some of this discretionary work; and that is new. That is absolutely new from when we met in November. And I don't know what to attribute that to. I've noticed it. I mean, I've seen it across the board. That does impact utilization because you put resources in place based on a revenue trajectory. And then what you have to do is you've got to adjust to that. Now we were able to make some adjustments this quarter, but we've got to continue those adjustments in our cost base if the start dates and some of this discretionary spending continues not materialize at the level that we had expected. That's the dynamic we've got to manage, and that's what gave us a little more caution in the fourth quarter because those are not things that you turn on a dime. They take a while to do, particularly outside of the United States. And we're really seeing some of this discretionary hit in almost every geography.

Any change in your confidence level in any of the long-term financial targets back from the November meeting? John Michael Lawrie - Chairman, President & Chief Executive Officer: No, no. No.

Okay.

Operator, let's take our last question.

And we'll take our last question from Rod Bourgeois with DeepDive Equity Research.

Hey, guys. Hey, two questions that I think are very quick. First on the tax rate side, can you just give us a view on what you think your normalized tax rate is prior to acquiring Xchanging? And then what you expect the tax rate to be after closing on the Xchanging deal? John Michael Lawrie - Chairman, President & Chief Executive Officer: Okay. Let's just do one at a time. So I think, Paul, we're still roughly in the 20% range that we shared. Paul N. Saleh - Chief Financial Officer & Executive Vice President: Yes, it is. John Michael Lawrie - Chairman, President & Chief Executive Officer: Think of this as sort of 18% to 22% if you had a range, but somewhere around 20%. That's what we talked about at the Investor Day and that hasn't changed, even post these acquisitions. Paul N. Saleh - Chief Financial Officer & Executive Vice President: Correct. I think the cash taxes would be below that, slightly below that just because we have the valuation, the NOL, excuse me, out of the UK. And then one our objective is to utilize some of those NOLs with the Xchanging. They will help the cash flow. But the provision will be around 20%.

Okay. And then, Mike, just to close it out. I mean clearly the new information here is these discretionary project delays. Do you attribute it to market forces, to macro environment or are those CSC-specific issues? Are you able to decipher where it's coming from? John Michael Lawrie - Chairman, President & Chief Executive Officer: I think it's a little of both to be candid. I mean I have certainly seen some caution in the marketplace over the last six weeks or seven weeks. I just have been out really around the world over the last two weeks and have talked to a lot of CIOs and even more over the phone. And I do see some caution. That's one. And then two, there's always issues within CSC. I can tell you that. There's always issues. We know the right skills. There are some issues that we should be doing a better job and generating demand. So I would never blame this all on macro issues. But I do think there are some macro issues and I think there are some internal issues. But the positive thing here just to finish this off is that I really feel very comfortable that the game plan that we laid out in a great amount of detail at the Investor Day, that whole thesis and that whole game plan is very much intact. And I feel even more confident now that we've gotten through the final shareholder approval with UXC, which actually just occurred this week, and then getting through the shareholder approval with Xchanging. Because those were – when we met in November we had planned to do it, we put an offer in, but they had not been accepted and we had some competitors that were flying overhead on both of those. So I feel more confident about that. And we know how to manage costs. We've demonstrated that. When you have some hiccups here you have to manage those costs and it takes you a little time to adjust. But I feel very confident in our ability to do that. So, yes, I feel probably just as strong and more confident than I did in November that the longer-term game plan that we outlined is a good one and intact and we're executing against it.

All right. Thanks.

Well, thank you everyone for being on the call. And we'll talk to everyone next quarter.