DXC Technology(DXC) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q4 2025 was $3.2 billion, a decline of 4.2% year-over-year on an organic basis [16] - Adjusted EBIT margin was 7.3%, down 110 basis points year-over-year [17] - Non-GAAP EPS was$ 0.84, down from $0.97 in the same quarter last year [18] - Full year total revenue was$ 12.9 billion, down 4.6% year-over-year on an organic basis [24] - Non-GAAP diluted EPS for the full year was $3.43, up 11% year-over-year [24] Business Line Data and Key Metrics Changes - GBS (Global Business Services) revenue, which represents 51% of total revenue, declined 2.4% year-over-year organically [19] - GIS (Global Infrastructure Services) revenue, representing 49% of total revenue, declined 6% year-over-year organically [22] - Within GBS, consulting and engineering services saw bookings up 9% year-over-year with a book-to-bill ratio of 1.22 [20] - Insurance Services and Software business grew 1% year-over-year organically, while BPS (Business Process Services) organic revenue grew 2.7% year-over-year [21] Market Data and Key Metrics Changes - Bookings increased by more than 20% year-over-year, resulting in a book-to-bill ratio of 1.2 for Q4 [5] - The second half of the year saw a bookings growth rate of 24% [5] - The pipeline in consumer industries and retail has dropped, particularly in project-based services [34] Company Strategy and Development Direction - The company is focused on achieving sustainable profitable revenue growth and reversing eight consecutive years of revenue decline [5] - Investments are being made in sales capabilities and marketing to deepen customer relationships and expand the pipeline [7] - The company plans to restart its share repurchase program, indicating confidence in future growth [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic uncertainties and emphasized the importance of operational discipline [14] - The impact of AI is seen as a significant opportunity for growth, with increasing spending from clients [10] - Management noted that while there are challenges in certain sectors, overall demand remains strong in banking, capital markets, and insurance [35] Other Important Information - The company will report financial results under a new segment structure starting in Q1 2026, which includes Insurance Services and Software, Consulting and Engineering Services, and GIS [30] - The company generated$ 687 million of free cash flow for the fiscal year, driven by better working capital management [25] Q&A Session Summary Question: Demand trends and industry impacts - Management noted good progress in large contracts but identified softness in consumer industries and retail [34][35] Question: Free cash flow guidance - The $600 million target for free cash flow was explained as adjusted for after-tax EBIT guidance and increased restructuring spending [36] Question: Macroeconomic outlook for revenue guidance - Management indicated that the guidance accounts for uncertainty and potential economic deterioration [40] Question: Pricing environment - The pricing environment has been stable, with improvements noted in mega deals [41] Question: Gen AI spending and project growth - Management highlighted that Gen AI spending has been primarily in smaller pilot projects, with significant potential for growth [45][46] Question: Revenue growth conditions - Management emphasized the importance of a qualified pipeline and execution capabilities for future growth [55][56] Question: Insurance segment reporting - The company will break out insurance as a separate segment starting in 2026, reflecting internal management structures [83] Question: Investment priorities - Investments will focus on replicable capabilities and sales and marketing to drive growth [92][94]