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DXC Technology(DXC) - 2025 FY - Earnings Call Transcript
DXCDXC Technology(DXC)2025-05-29 18:15

Financial Data and Key Metrics Changes - The company reported a book-to-bill ratio of over 1.0, indicating a positive revenue trajectory is being established [11] - The guidance for free cash flow is set at 600million,reflectingareductionfromthepreviousyear′srangeof600 million, reflecting a reduction from the previous year's range of 680 million to 690millionduetoadecreaseinafter−taxEBITandanincreaseinrestructuringcosts[54][58]BusinessLineDataandKeyMetricsChanges−Thecompanyisfocusingonstrategicprojects,whichhaveshownstrengthinthepipeline,whileshorter−termproject−basedserviceshaveseenaslowdown[31][32]−Theaveragecontractvalue(ACV)forbookingshasincreased,withlonger−termdurationscomparedtothepreviousyear,indicatingashiftinthemixofworkwon[37]MarketDataandKeyMetricsChanges−Thecompanyhasobservedvaryingimpactsacrossdifferentindustriesduetomacroeconomicfactors,withsomeindustriesexperiencingmoreturbulencethanothers[27][28]−Thereisanotedincreaseincustomerengagement,withclientsexpressingadesiretoexpandtheiruseofthecompany′sservices[22][25]CompanyStrategyandDevelopmentDirection−Thecompanyisundergoingaturnaroundfocusedonfourpillars:people,process,culture,andscale,aimingtounifyoperationsandimproveefficiency[5][10]−ThemanagementisprioritizingAI−centricworkandmodernizationinfinancialservicesaskeygrowthareas[11][26]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgestheexecutionriskassociatedwithchangesbutbelievestheriskofnotmakingchangesisgreater,especiallygiventhehistoryofrevenuedecline[19][20]−Theoutlookremainscautiousduetoeconomicuncertainties,butthereisconfidenceinthecompany′sabilitytoexecuteonitspipelineandachievepositiverevenuegrowth[61]OtherImportantInformation−Thecompanyhasinitiateda690 million due to a decrease in after-tax EBIT and an increase in restructuring costs [54][58] Business Line Data and Key Metrics Changes - The company is focusing on strategic projects, which have shown strength in the pipeline, while shorter-term project-based services have seen a slowdown [31][32] - The average contract value (ACV) for bookings has increased, with longer-term durations compared to the previous year, indicating a shift in the mix of work won [37] Market Data and Key Metrics Changes - The company has observed varying impacts across different industries due to macroeconomic factors, with some industries experiencing more turbulence than others [27][28] - There is a noted increase in customer engagement, with clients expressing a desire to expand their use of the company's services [22][25] Company Strategy and Development Direction - The company is undergoing a turnaround focused on four pillars: people, process, culture, and scale, aiming to unify operations and improve efficiency [5][10] - The management is prioritizing AI-centric work and modernization in financial services as key growth areas [11][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the execution risk associated with changes but believes the risk of not making changes is greater, especially given the history of revenue decline [19][20] - The outlook remains cautious due to economic uncertainties, but there is confidence in the company's ability to execute on its pipeline and achieve positive revenue growth [61] Other Important Information - The company has initiated a 150 million share repurchase program for 2026, with plans to deploy it opportunistically throughout the year [62] - There is an emphasis on maintaining a solid foundation before considering mergers and acquisitions, ensuring any future deals are beneficial for both parties involved [65][68] Q&A Session Summary Question: What is the company's outlook on client demand? - The company has seen strong engagement from clients, with many expressing a desire to utilize more of its services, indicating a positive demand environment [22][25] Question: How does the company plan to sustain its book-to-bill ratio above 1? - The company is focusing on improving its go-to-market strategy and ensuring a robust pipeline of strategic projects, which are expected to drive sustained growth [31][33] Question: What are the expectations for revenue guidance in fiscal 2026? - The company has guided for a revenue decline of 3% to 5%, accounting for economic uncertainties and the impact of project-based services [40][41]