The paragraph introduces the DXC Technology Q4 Earnings Call and the speakers, John Sweeney and Raul Fernandez. It mentions that the call is being webcast and includes non-GAAP financial measures. It also states that certain comments may be forward-looking and reminds listeners of the company's obligation to update information. Raul Fernandez will give a brief introduction and review the company's financial performance and offerings, followed by Rob Del Bene discussing the fourth quarter financial results and fiscal year 2015 guidance. Raul Fernandez will make final remarks before opening the call for questions.

In the fourth quarter of fiscal year 2024, DXC experienced a 5% decline in revenue but still exceeded expectations with an adjusted EBIT margin of 8.4% and non-GAAP EPS of $0.97. They also achieved free cash flow of $756 million for the year. The company is not satisfied with their current state and is focused on improving. The CEO has met with customers, employees, and investors and has a strong team in place. DXC is the leading provider of insurance software and services globally, with a strong customer base and high retention rates. This business unit is a key strategic partner for global insurance companies.

The insurance software and services business represents a significant portion of the company's revenue and grew by 4.5% in the quarter. The company plans to accelerate its growth and shift towards SaaS and recurring services. The consulting and engineering services business, now led by Howard Boville, has a history of driving transformative change for major brands in financial services and automotive manufacturing. The company is focused on improving the profitability of this business unit. The security business is essential for many of the company's other services, and its teams work closely with clients to provide secure and resilient services.

DXC Technology has a strong presence in the security business, with over 3,000 security professionals and eight global security operations centers. They provide round-the-clock coverage and are constantly called in to assist companies dealing with security incidents. They are focused on leveraging their expertise to enhance their GBS and GIS offerings and have recently added industry veterans to enable growth. In their cloud and ITO business, they provide critical services for essential workloads for major companies and government organizations. They operate across the entire technology domain and are well positioned to help customers modernize their estates and securely operate across multiple environments. They are pivoting their focus to high quality, profitable, and cash generating service revenue rather than the heavy hardware and data center outsourcing deals of the past.

The company supports over 7 million devices and employees, with a focus on the employee experience. They are increasingly utilizing AI and expect 75% of their workforce to be non-human in the near future. The company is undergoing a restructuring initiative to simplify processes, reduce costs, and improve efficiency. This includes consolidating acquired business systems and aligning the organizational structure. The CFO will now provide financial results and outlook for the future.

In the fourth quarter, the company's total organic revenue growth declined by 4.9%, with GBS revenue remaining flat and GIS revenue declining by 9.3%. However, adjusted EBIT margin improved by 80 basis points compared to the previous quarter due to cost reduction initiatives. Non-GAAP EPS decreased by $0.05, mainly due to a negative impact on adjusted EBIT, higher taxes, and non-controlling interest. Free cash flow for the quarter was $155 million, lower than expected due to working capital and higher cash tax levels. For the year, free cash flow totaled $756 million, showing consistent cash generation performance. Gross margin remained flat at 23.6%, while SG&A decreased by 70 basis points due to spending management and a one-time insurance reimbursement. Depreciation and amortization remained flat as a percentage of revenue, reflecting continued capital discipline.

In the third quarter, other income for the company was $39 million, a decrease of $48 million compared to the previous year. This was mainly due to lower pension income and gains on asset sales. The GBS segment had nearly flat organic revenue due to a challenging market for analytics and engineering and applications. However, profit margin increased due to a higher mix of higher-margin services. The GIS segment also saw a decline in organic revenue, but this was due to a disciplined financial approach with new deals and renewals. Margins declined due to lower pension income. Within GBS, both Analytics and Engineering and Applications saw a 1% decline in organic revenue, while Insurance saw a 1% increase, with strong performance from the insurance software and services business.

In the fourth quarter, the insurance book-to-bill ratio was 0.8x, but can vary based on timing of large renewals. The GIS segment saw a 9% decline in security and a 7% decline in cloud infrastructure and IT outsourcing, but there was a strong book-to-bill ratio of 1.29x due to large renewals. The company reduced total debt levels by $450 million and net interest expense increased due to higher interest rates. Restructuring and TSI expense was $21 million and operating lease payments were down $9 million. Capital expenditures were $125 million and lease originations were $21 million. The company deployed $450 million to reduce debt levels.

The company has reduced its debt and returned capital to shareholders through share repurchases. They plan to continue reducing debt and improving profitability through a restructuring program. The company expects a decline in organic revenue for the full year of 2025, with a return to growth in the second half of the year. The adjusted EBIT margin is expected to be 6% to 7%, reflecting lower revenue and investments in productivity improvements. The impact of a restructuring action will be seen in late fiscal 2025 and into fiscal 2026.

The company is selling some of its real estate assets, which will bring in cash but negatively impact their adjusted EBIT margin. Their non-GAAP diluted EPS guidance for the year is $2.50 to $3, with a non-GAAP effective tax rate of 30%. Their free cash flow guidance for the year is $400 million, but this is lower than the previous year due to reduced debt levels and increased spending on restructuring. The first quarter outlook is not positive, with declining revenue in A&E applications and GIS services.

The speaker, Raul Fernandez, discusses the expected decline in total company organic revenue and adjusted EBIT margins for the upcoming quarter. He also mentions the addition of new executives to the team and their potential impact on the company's transformation. The speaker is asked about the company's restructuring plans and how they may differ from previous efforts. He explains that previous restructurings did not establish a strong foundation for profitable growth and that he has spent time evaluating the company's systems and processes.

The company has a large number of systems, business processes, and legal entities that were acquired over time but never integrated or deduped. The new CEO acknowledges this and plans to reset the organization from the bottom up. Any restructuring charges will not be included in the adjusted EBIT margin. The GBS division is expected to see a recovery in the second half of the year due to improved pipelines and conversion rates, as well as new leadership and life cycle management.

The company is working on improving their preproposal, proposal, and pitching processes to increase efficiency and eliminate delivery issues. They have brought on experienced executives who have confirmed that there is a lot of room for improvement. The company is encouraged by their progress and has the right people, structure, and incentives in place. Bookings were consistent with the previous forecast, with strong renewals in the A&E sector.

The speaker mentions that renewals do not immediately result in revenue growth in the first half of the year, but provide a strong foundation for the second half. They also mention that there was strong renewal activity in both GBS and GIS, and expect new content to improve throughout the year in fiscal 2025. The speaker also confirms that there will be more additions to the management team, but they feel that they have already assembled a strong team.

The speaker thanks the person asking the question and responds to a question about free cash flow. They mention a $250 million restructuring headwind and the impact of curtailing new lease originations on the free cash flow number. They also mention operating leverage and working capital improvement as ways to improve free cash flow in the future. They clarify that lease originations will go from $185 million in FY 2024 to zero in 2025, resulting in a $185 million reduction in free cash flow.

The company is focused on achieving profitable growth and is actively working to improve its revenue retention and eliminate unprofitable contracts. This change in strategy has been incorporated into their 2025 outlook, with a focus on reducing low-margin resale and being selective in their business contracts. The company expects to see negative single-digit growth in GIS and negative double-digit growth in resale.

The speaker discusses the current macro environment and client behavior, noting that the company's focus is on improving efficiency and optimizing their go-to-market strategy. They also mention their goal to have 75% of their workforce be non-human and how they are working towards that through small resolutions across multiple factors.

The speaker discusses the use of AI in Copilot and how it will shift the workload from relying on humans to relying on technology. They mention that the speed of compute behind AI is doubling every six months and that they are experimenting with this across multiple accounts. They also mention other levers they have to improve contract profitability, including reducing physical capacity and implementing restructuring measures.

The company is working on improving efficiency and infrastructure at the account level through restructuring funding. They have high NPS scores but are aiming to eliminate overhead costs and improve margins in the Consulting and Engineering business. The realignment of the company on a business unit basis is expected to improve pre-bid solutioning, staffing, and execution. The company is focused on making small improvements that will have a positive impact on a monthly and quarterly basis.

The speaker discusses the elements of their new go-to-market strategy, which includes focusing on local geography, engaging with global offerings, and prioritizing the customer. They have received positive feedback from customers during conversations about the new strategy. They also mention plans to explore partnerships in the insurance business unit to accelerate growth. A question is asked about improving the sales process and messaging to customers.

The speaker discusses how the pipeline is expanding but conversion rates are stable. They believe that improvement in conversion rates will come from focusing on fundamentals, cross-selling to existing customers, and better collaboration between divisions. They have already seen success in this approach during meetings with existing customers.

In this paragraph, Raul Fernandez and James Faucette discuss the current state of the company's cross-selling efforts and the potential for growth in the GIS market. Fernandez believes that they have the necessary assets to compete and grow, but they need to align internal systems and perform consistently while undergoing transformation. Faucette asks about the company's thoughts on GIS and market growth over time, to which Fernandez responds that their goal is to reach market growth rates in the low negative single-digit range after rationalizing their portfolio and focusing on profitable contracts. However, Fernandez also acknowledges that the company is currently operating at a worse level than that.

The first goal for the company is to reach a normal or baseline level in comparison to its competitors. After achieving this, the next step is to set new targets and surpass them. In the near term, the focus is on matching the growth rate of competitors. The speaker expresses appreciation for employees and investors and acknowledges the urgency to improve. The call is then concluded.

This summary was generated with AI and may contain some inaccuracies.