The operator welcomes everyone to the DXC Technology Q1 Fiscal Year 2025 Earnings Call and introduces the speakers, Raul Fernandez and Rob Del Bene. The agenda for the call is outlined, with Raul providing an overview of the results and strategic initiatives, followed by Rob discussing the financial performance and outlook. The speakers will then take questions. A disclaimer is given about forward-looking statements and non-GAAP financial measures. Raul thanks the operator and begins his remarks.

The speaker is pleased with the company's first quarter results, which exceeded expectations. The company's teams are focused on implementing solutions to capture opportunities in the technology market and improve financial performance. Revenue declined 4% on an organic basis, but adjusted EBIT margin and non-GAAP diluted EPS increased. The company also generated free cash flow. However, due to market uncertainty and cautious customer behavior, bookings remained under pressure and the company is revamping its go-to-market approach within its sales organizations.

The company has implemented various strategies to improve client relationships and expand their pipeline. This includes dedicated client partners, updated compensation structure, and a clear distinction between existing and new clients. They have seen early success in the form of new deals and a larger mix of larger deals in their pipeline. Two notable deals include a SAP migration for ContiTech and a long-term IBM mainframe managed service agreement with First Horizon Bank. The company has also taken tactical actions, such as consolidating their analytics, engineering, and applications business under one division.

The company has restructured its offering structure and aligned its business to five verticals to develop targeted solutions for specific industries. They have also implemented new initiatives to enhance their operating and delivery model. In the insurance software and BPS unit, they are exploring opportunities for further growth. In the GIS unit, they have brought together different teams under one leader to develop and deliver secure technology solutions to meet customer needs. The company's integrated workforce in GIS is one of the largest and most experienced in the market.

The company has over 49,000 certifications in AWS, Google Cloud, and Microsoft Azure, as well as specialized security technologies. They are focused on developing targeted offerings, investing in top performing accounts, and driving deeper penetration of their AI data-driven intelligent automation platform. They are also implementing AI and GenAI tools in their modern workplace to enhance chatbot capabilities and have taken steps to improve operational efficiency through consolidation and standardization. The company is also revamping their go-to-market approach and redirecting investments towards more value-added initiatives, resulting in improved delivery metrics and client satisfaction. The speaker also briefly mentions their passion for protecting intellectual property.

The author discusses their commitment to ethical and responsible innovation at DXC and their recent favorable judgment in protecting their intellectual property. They also express gratitude for their team's response to a recent software update that caused disruption for customers, highlighting their dedication to customer service. The author also emphasizes the importance of being effective in capturing new business and creating better economic models for renewals in order to drive the company's transformation.

In the paragraph, Rob Del Bene discusses the company's first quarter results and provides an update on their outlook for fiscal year 2025 and the second quarter. They have made changes to how they report results and will now disclose revenue and book-to-bill ratios for their two segments, Global Business Services and Global Infrastructure Services. Total revenue declined 4% year-over-year, with GBS revenue increasing 1% and GIS revenue declining 9%. The company's book-to-bill ratio for the quarter was 0.77 and their adjusted EBIT margin expanded 40 basis points. This was due to better than anticipated performance, despite continued pressure on customer spending and a more selective approach to new deals.

In the first quarter, the gross margin for the company increased by 80 basis points due to cost management. SG&A remained flat due to prudent spending. Non-GAAP net income and EPS also increased, driven by lower outstanding shares. GBS saw a 1% increase in organic revenue, while profit margin declined. CES declined by 1% and had a book-to-bill ratio of 0.88. Insurance and BPS grew by 5% organically, with a book-to-bill ratio of 0.65. GIS saw a decline of 9% in organic revenue, in line with expectations.

In the first quarter, the company saw a decline in resale revenues and services revenues, but still managed to expand profit margin by two points. This was due to better resource management and cost actions. The book-to-bill ratio was 0.67, and the trailing 12-month ratio was 0.76. Cash flow improved compared to the same period last year, driven by a stronger working capital position and lower CapEx spending. The company also began executing on restructuring initiatives announced last quarter.

The company saw minimal impact on cash flow in the first quarter, but expects the program to ramp up throughout the year. Their balance sheet is strong with $1.3 billion in cash and cash equivalents. They plan to invest in their business and prioritize reducing debt levels. The company expects a decline in total revenue for the year, but with a better-than-expected start, they are confident in achieving their outlook. They also expect slightly positive topline growth for GBS and a decline in GIS full-year topline. The adjusted EBIT margin is now expected to be in the range of 6.5% to 7% and the non-GAAP effective tax rate is now expected to be approximately 32%.

The company has updated its outlook for the full year, with higher expected non-GAAP diluted EPS and free cash flow. This is due to an increase in adjusted EBIT margin outlook and better working capital performance. The company also expects a decline in organic revenue for the second quarter and has a policy of not commenting on market rumors. The focus remains on executing their enhanced operating model and aligning sales and account organization by geographic markets.

The company's strong performance in the first quarter was driven by an increase in volume activity in their ITO business, which was widespread among their client base. However, this increase is not expected to continue in the second quarter. The company is taking a disciplined approach to new deals, which includes more than just price, such as optimizing their global delivery network.

The company is focused on execution, particularly with existing customers, and has seen positive results in renewals and new deals. They are also working on improving various aspects of the business, with progress being seen in many areas but more room for improvement overall.

The company is working on improving its operational discipline and execution, with a focus on existing delivery networks and bringing in new talent. They are also investing in industry knowledge and have hired a new head of marketing. In terms of consulting and engineering, there has been some stabilization, but it varies by industry and vertical. Clients may release deferred spend as they gain confidence in the company's capabilities.

The speaker believes that their company's focus on self-improvement and execution will have a bigger impact on their business than the overall economic environment. They have seen some positive signs in certain areas of their business, such as data and AI, and are undergoing changes in their operating model to drive growth. They believe that this will help them overcome the tepid spending environment and lead to success.

The speaker, Raul Fernandez, explains that the company's margin expansion is a holistic approach that involves analyzing existing contracts, pricing strategies, and differentiation from competitors. He also mentions that the team has implemented automation into accounts.

The company has become more labor efficient and has driven down costs. There has been an improvement in signed margins, but the focus is on delivering to those margins. The team is meeting customer commitments at a high rate and the trend is positive. The company has not guided margins at a segment level, but expects stability in margins for both GBS and GIS. The company is being more selective on large deals due to the soft discretionary spending environment, but it can be lumpy in a given quarter.

The speakers discuss the book-to-bill ratio for GBS and GIS, with GBS experiencing a low-single digit decline and GIS experiencing a larger decline due to larger deals. They expect improvements in bookings for both units based on an improving pipeline and pursuit of new business and renewals. The teams are operating at a new level, leading to a solid book-to-bill ratio over a 12-month period.

The speaker discusses the success of their new go-to-market strategy and operating model, stating that it will take a full year to fully implement but will lead to steady progress and improved results. They also mention early signs of success with winning new clients, but are unable to share details without permission.

The speaker is asking about DXC's investment plans, noting that they have been focusing on share buybacks and improving free cash flow. They then ask about the company's future plans for investment.

The speaker is asked about their company's capacity to invest while also doing buybacks and improving free cash flow. They mention a focus on integration and streamlining operations, which allows them to reinvest in talent, training, and innovation. They also mention the potential for growth in the Generative AI space and their advantage in working with customers' internal data. The speaker then defers to another person to comment on their go-to-market investments.

The company is investing in geographic market organization and GenAI practices to drive growth. They have ample flexibility to invest in the business as their cash generation is stable and balance sheet is strong. The current geography oriented sales model is a better coordination and collaboration of resources and skills across the company and globe compared to the prior offering-led operating model. The company has better tools to manage and find talent for projects.

The company is focusing on developing expertise in industry verticals for its consulting and engineering businesses. This includes creating replicable frameworks and code bases for solutions and investing in internal collaboration and communication. The goal is to have a stronger impact and improve overall performance.

Raul Fernandez discusses the potential for internal collaboration and cross-selling within the company, citing examples of successful cross-selling with customers. He also mentions the potential for growth in the company's install base. In regards to bookings, he attributes the recent decrease in GBS book-to-bill ratio to macro volatility and a focus on improving the quality of the pipeline.

The speaker discusses the company's ability to address challenges in a competitive way, with a focus on technical solutions and pricing. They mention working on multiple large deals and being confident in their ability to execute on opportunities in the pipeline. They also mention that some deals can be multi-year and that the pipeline expansion is due in part to the CES business. The call concludes with the speaker thanking the participants and looking forward to the next quarter.

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