Q4 2021 DXC Technology Co Earnings Call
Yes.
Good day, and thank you for standing by and welcome to the T X gene technology FY 'twenty, 1 Q4 earnings call at.
At this time all participants are in a listen only mode.
After the Speakers' remarks, there will be a question and answer session to ask the question. During the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to your Speaker today, John Sweeney Vice President of Investor Relations. Please go ahead.
Thank you and good afternoon, everyone I am pleased that youre, joining us for Dx C Technologies' fourth quarter fiscal 'twenty 'twenty, 1 earnings call. Our speakers on the call today will be Mike Salvino, our president and CEO and Ken Sharp, our executive Vice President and CFO. This call is being webcast of TX <unk> Dot com.
<unk> co.
Slash Investor Relations on the webcast includes slides of the company the discussion today.
Today's presentation includes certain non-GAAP financial measures, which we believe provides useful information to our investors in accordance with SEC rules. We've provided a reconciliation of these measures to the respective and most directly comparable GAAP measures. These reconciliations can be found on the tables included in today's earnings release on the web.
Cash wise.
Certain comments, we make on the call will be forward looking these statements are subject to known and uncertain risks and uncertainties, which could cause actual results to differ materially from those expressed on the call of discussion of these risks and uncertainties is included in our annual report on form 10-K on other SEC filings I would now like to reminder of.
Listeners the PX technology assumes no obligation to update the information presented on this call except as required by law and with that I'd like to introduce Dx C Technologies', President and CEO, Mike Salvino, Mike.
Thanks, John and I appreciate everyone joining the call today and I Hope you and your families are doing well.
Today's agenda will start by giving you a quick update on our strong Q4 performance next I will highlight the progress we're making on our transformation journey. Our strong Q4 results were driven by executing on the 3 key areas of our transformation journey, which our focus on our customers optimize.
The cost and sees the market.
I'll, then hand, the call over to Ken to share our detailed Q4 financial results guidance for FY 'twenty, 2 and longer term outlook. Finally, I will make some closing remarks before opening the call up for questions.
Regarding our Q4 performance our revenues were 4.39 billion approximately 85 million above the top end of our guidance. This is the third straight quarter of revenue stabilization and we expect this trend to continue in FY 'twenty 2.
Concerning adjusted EBIT margin, we delivered 7.5% also higher than the top end of our guidance. This too is the third straight quarter of sequential margin expansion and is driven by our cost optimization program.
We expect margins to continue to expand in Q1 of FY 'twenty 2.
Book to Bill for the quarter was 1.08 underscoring the success of bringing the new Dx C, which focuses on our customers and colleagues to the market. This is the fourth straight quarter that we've delivered of 1 point of where better book to Bill We expect our success of winning in the market to continue in Q1.
On of FY 'twenty 2.
I am pleased with the momentum we have achieved all of the work in FY 'twenty, 1 to inspire our people invest in our customers take cost out without disruption and win in the market has positioned us very well for our financial success in FY 'twenty, 2 and longer term.
Now I will cover the good progress we are making on our transformation journey, starting with our customers on.
Our investment in our customers continues to be the primary driver of revenue stabilization.
When we deliver for our customers and are seen as a trusted partner customers more likely to renew existing work and consider us for new work. Let me give you. An example, we recently signed a 5 year expansion with Zurich insurance group will provide a T outsourcing and security services as part of their.
Global it transformation focused on improving the customer and employee experience.
This is a perfect example of delivering for our customer strengthening the relationship and then of customer wanting to work with <unk> in the future. This is strong evidence that our investment in our customers is paying off which gives us confidence that we can flatten organic revenue during FY 'twenty 2.
Now, let me turn of our cost optimization program, we have achieved our goal of $550 million of cost savings in FY 'twenty 1 our.
Our cost optimization program was responsible for the strong adjusted EBIT margin of 7.5% in Q4.
We've done well optimizing our costs and continuing to deliver for our customers without disruption.
You will hear from Ken that we expect to continue to expand margins in FY 'twenty 2.
Sees the market as the final area of our transformation journey in this journey in this area. We are focused on cross selling to our existing accounts and winning new work the other 1.
1.08 book to Bill that we delivered this quarter is consistent evidence that our plan is working in Q4, 53% of our bookings were new work and 47% were renewals of.
The hold the haze of Great example of an existing customer who has renewed work with DXP and given us new work, we will be providing infrastructure services application outsourcing cloud migration and workplace services in a hybrid cloud environment for the retail business services group.
To reduce cost and support their business critical systems that enable each of their local brands the stock their shelves.
Our ability to deliver a consistent book to bill of over 1 O in each of the 4 quarters of FY 'twenty..1 is clear evidence that we can win in the it services industry. This is translating into improving quarterly organic revenue growth, which we expect will flatten during FY 'twenty 2.
Now before I turn the call over to Ken I would like to thank our colleagues our customers and our shareholders for their support.
As we are witnessing the ongoing impact of COVID-19, our focus continues to be on our people.
Currently we are focused on the more severely impacted areas of India and the Philippines. The dedication of our team as a source of great pride for us at <unk> as our people continue to take care of themselves their families and to deliver for our customers now let me turn the call over to Ken.
Thank you Mike in the past 3 quarters, we have stabilized our revenue on a sequential basis and guided to the fourth quarter of revenue stability.
This is a significant accomplishment by Mike DXP colleagues. It is not lost on Mike and me that investors look at revenue growth on a year over year basis. However, when a company has a period of significant decline in change to its business strategy and leadership.
You first have to stabilize revenue sequentially.
As we all know once you achieve 4 quarters of sequential revenue stability you achieve year over year revenue stability going forward, we will pivot our narrative accordingly.
Turning on to our financial priorities on Slide 10, we are working to build a stronger financial foundation and drive the company in a disciplined and rigorous fashion to unleash the true earnings power to that end remediated, our material weakness and the impact it has on our.
Corporate governance is a key focus our second priority is to have a strong balance sheet, we paid down $6.5 billion of debt in the past 9 months and subsequent to year end retired an additional $500 million.
We are now approaching a far more manageable 5 billion dollar debt level.
Further we have relatively low maturities over the next 3 years, we remain committed to an investment grade credit profile and I believe our actions more than demonstrate our commitment third we will focus on improving cash flow. The company previously provided in the.
Adjusted cash flow presentation that added back certain cash cost we changed this presentation and in our earnings release, we adopted of traditional free cash flow definition of cash flow from operations less capital expenditures, we expect this will improve.
Our focus on our true earnings power and will allow you to better understand our performance.
As part of our focus on the business and cash optimization, we will continue our portfolio shaping efforts to increase the focus on our core business fourth we will reduce restructuring and tsi expense to approximately $550 million in FY 'twenty.
2 to under $100 million in FY 'twenty for ultimately improving cash flow fifth have a thoughtful and disciplined approach to capital allocation as we generate free cash flow, we will appropriately deploy capital to invest in our business and return cash.
Capital to our shareholders all the while staying focused on maintaining our investment grade credit rating.
For the quarter DXP exceeded the top end of our revenue adjusted EBIT margin and non-GAAP diluted earnings per share guidance.
GAAP revenue was $4.3 9.085 billion higher than the top end of our guidance on an organic basis revenue increased 4% sequentially.
Organic revenue declined 7% year over year due to the previously disclosed runoffs and terminations as we mentioned on our third quarter earnings call. Our Q3, 10.5% year over year decline would be the high watermark GAAP EBIT margins were.
<unk>, 16.8% in the fourth quarter impacted by approximately $1.1 billion of cost, including pension mark to market asset impairments restructuring tsi loss on disposals and debt extinguishment costs. Excluding these items adjust.
The EBIT margin was 7.5% in the fourth quarter, an improvement of 50 basis points from the third quarter.
Non-GAAP diluted earnings per share was <unk> 74 cents and was negatively impacted by 4 cents due to a higher than expected tax rate of 32%.
In Q4 bookings were $4.7 billion for a book to Bill of 1.0 wait the fourth straight quarter of a book to Bill greater than 1 for the full year. This takes our book to Bill to 1.12 compared to 0.9 and the FY 'twenty.
Turning now to our segment results. The GBS segment, the top half of our technology stack includes analytics and engineering applications and the horizontal bps business GBS was $2 billion or 46% of our total Q4 revenue organic revenue.
Revenues increased 2% sequentially, primarily reflecting the strength of our applications and analytics and engineering business.
Year over year GBS revenue was down 4% on an organic basis GBS segment profit was $315 million with a 15, 8% profit rate up 160 basis points from Q3 <unk>.
<unk> bookings for the quarter were 2.39 billion for a book to Bill of 1.2, and a full year book to Bill of 1.32 compared to <unk> 99 in the prior year.
Now turning to our Gis segment, which consist of IP outsourcing cloud and security and the modern workplace revenue was 2.39 billion down 9 tenths of a percent sequentially and down 9.3% year over year on an organic basis.
Due to the previously disclosed terminations and Runoffs.
Our I T O business had positive sequential revenue growth in the quarter. The I T O business benefited from approximately $100 million of resale revenue, resulting from a typical Q4 increase of customer demand due to their fiscal year end.
Gis segment profit was 98 million with a profit margin of 4.1%, a 40 basis point margin improvement over the third quarter.
Gis bookings were $2.3 billion for a book to Bill of 0.98 book to Bill for FY 'twenty, 1 was 0.94 compared to 0.83 in the prior year.
Now turning to 1 of my favorite slides, our enterprise technology stack. This slide demonstrates how winning in the market for 4 consecutive quarters translates into revenue stability and the progression that our team has been able to achieve by focusing on our customers before I.
Get into the details I want to provide you the 3 changes to the stack you can expect for next year first as we think about next year, you will see our sequential quarter comparison give way to a year over year comparison.
Second we delivered on the sale of the health care provider software business. Therefore, this will no longer be included third the modern workplace and horizontal bps business will be integrated into the enterprise technology stack above.
Once again, we had 3 layers of the stack achieve of book to Bill greater than 1 and sequential growth now let me drill down 1 level.
It outsourcing revenue was 1.19 billion in the quarter up 1.4%. The first positive sequential growth since we began tracking in this manner.
I T O book to Bill was 0.98 in the quarter.
Cloud and security revenue was $524 million declined 1.6% sequentially and was down 5.7% year over year, the cloud and security business had a difficult compare as the third quarter grew 4.7% sequentially book to Bill was 1.0 weight in the quarter.
<unk> moving up the stack the applications layer posted a 1.9% sequential growth and was down 7.2% year over year book to Bill was 1.06.
Analytics and engineering revenues were $478 million up 2% on a sequential basis and up 8.4% compared the prior year analytics and engineering book to Bill was 146 in the quarter.
The modern workplace and bps revenues were $795 million down, 3.3% sequentially and down 10, 5% compared to the prior year.
As we previously mentioned to you. These 2 business is just began their transformation journey. So you should expect some unevenness in performance.
Moving on the cash flows on slide 15 fourth quarter cash flow from operations totaled an outflow of $280 million free cash flow for the year was negative 652 million impacted primarily by for nonrecurring items Q4 tax payments of <unk>.
$531 million related to the business sale as you may recall, we planned $900 million of tax payments. So this result surpassed our expectation as we told you before in Q$3.832 million related the readying the U S state and local health and human services.
And as for sale and normalizing payables and $200 million related to deferrals of certain tax payments due to COVID-19 relief legislation that will be paid during FY 'twenty 2.
1 of our key initiatives, we are employing the drive cash flow and improve earnings power is the wind down restructuring and tsi cost since <unk> was formed 4 years ago, we had significant cash outflows with approximately 900 million in expense.
Per year on average.
In FY 'twenty, 2 this will be reduced to approximately $550 million with a larger portion being allocated to the facility's restructuring efforts to improve the work experience for our people as we reshape our portfolio for our virtual model.
We have heard from many of our analysts and investors that our cash flow is hard to understand as we previously discussed above we changed our free cash flow presentation. We believe this will allow investors to better understand our performance second we acknowledge our cash flow conversion.
<unk> does not correlate well to earnings as part of our effort to build a sustainable business. We will continue to evaluate these historical practices of using capital leases to a much greater level of long term purchase commitments and selling our receivables unwinding. These historical practices may have.
On impact on short term cash flow, we will also focus our efforts to build the necessary rigor associated with capital budgeting to better control our outsized capital spend.
On slide 17, we detail our efforts we have undertaken to strengthen our balance sheet. As you can see we have achieved a lot in this area, reducing our net debt leverage ratio by more than 1 turn from the high watermark of 2.4 to 1 at.
The end of March.
Another goal. We gave you was to improve financial visibility and we are committed to providing annual and longer term 3 year guidance, starting with our first quarter guidance on slide 18 organic revenue declines are expected the moderate down 2% to down 4% in the.
The first quarter year over year. This translates into reported revenues between 4.08 billion and $4..1 3 billion. Our sequential revenue is lower for 2 reasons first previously mentioned lumpiness of resale revenue that occurs in Q4 <unk>.
Our portfolio shaping efforts reduced revenue by about $100 million.
EBIT margin 7.4% to 7.8% includes 20 basis points of margin headwinds due to the sale of our health care provider software business non-GAAP diluted earnings per share in the range of 72 to 76.
Moving on to our FY 'twenty 2 guidance on slide 19 organic revenue growth of -1 to -2% on a year over year basis divestitures will account for $1.2 billion of the revenue decline our previously disclosed terminations of.
Runoffs wind down in the first half of FY 'twenty, 2 we expect to see further improvement in the quarterly year over year organic revenue growth rates as we move through the year. This translates into revenue of $16.6 to $16.8 billion.
EBIT margin 8.2% to 8.7% non-GAAP diluted earnings per share of $3.45 to $3.65 and.
An increase of 42% of 50% year over year.
Free cash flow of $500 million.
Now moving on to our longer term expectations on slide 'twenty organic revenue growth of 1% of 3% adjusted EBIT margin of approximately 10% to 11% non-GAAP diluted earnings per share of $5 of $5.25 free cash.
Cash flow of approximately 1.5 billion I should note our guidance does not anticipate additional portfolio shaping with that I will now turn the call back to Mike for his closing remarks. Thanks, Ken Let me share 3 key takeaways on the progress we're making of DXP.
First as I reflect on FY 'twenty, 1 we delivered on our commitments and here's how we're.
With regard to our people we moved from a work force that was non engage to 1 of them that is now engage and inspire.
Concerning our customers. We went from challenge accounts to building a level of customer intimacy, where we are delivering building strong partnerships and being proactive with our customers customers are clearly seeing the new DXP.
We changed the direction of our revenues and margin from declining to improving in the market. We went from losing to winning and we repaid over 6 billion in debt, taking our balance sheet from highly leveraged to strengthened the.
The next key takeaway is that FY 'twenty 2 will be the year, we build the foundation for growth what that means is we will retain and continue to attract talent.
We will build off our customer intimacy to deliver revenue stability and continue to win in the market all while we expand margins and deliver increased free cash flow.
Finally, we expect to deliver positive organic revenue growth longer term.
In closing we are confident that the momentum we created in FY 'twenty..1 we will continue in FY 'twenty 2.
We hope that you will join US on June 17th for our Analyst Day is we're excited to showcase the strength and depth of our new leadership team and discuss our business in more detail with that operator. Please open the call up for questions.
Thank you at this time I would like to remind everyone in order to ask the question Press Star then the number 1 on your telephone keypad again that of Star then the number 1 on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
We have our first question coming from the line of Ashwin share of Vikar with Citi. Your line is open.
Hi, Thank you Hi, Mike Hi, Ken.
I Ashwin Hey, it's good to see the track record of building up steadily.
The.
As I look at the continued sequential progress in the top of the stack and in areas like analytics apps cloud is the traction in these areas beginning to also help your customer discussions as it relates to more traditional areas like I T O and the purpose of what I'm trying to figure it out is.
How much of this of continued to be of revenue mix shifts study. So that you know.
The new contact in the aggregate can.
The start being in positive territory as opposed to having to dig out of the hold on every day Neil.
Ashwin the the.
The place where I would start is T O and our strategy is everybody's known that we've been we've been very solid in that area and what you can see as we've now ill turn that to positive.
Growth and our strategy is to understand our customers.
As states and by doing that that clearly opens up the conversation to go up the stack that along with what I said at the end around we got to deliver we continue to improve those partnerships and then now we're being proactive hence the reason why we're starting to bring ideas around.
The blue the analytics and also how to do application rationalization and so forth. So what youre seeing ashwin as of flow up the stack, but it starts with the grain to make sure that we're delivering on the I T O base, which is that the I T of states that I talk.
<unk>.
Got it understood and then just a quick question on the longer term expectations and I imagine you can get into this in the analyst day.
And in more detail, but.
Why broadly speaking is low single digit organic revenue growth and low double digit EBIT margin, the right target worse, as a higher or lower level.
Well look cash from where we are as you see the trajectory that were going so when I when I reflect let's just take FY 'twenty 1 to FY 'twenty 2.
We just delivered a year, we were -9.6% organic revenue and now I am guiding towards 1 -1 to -2.
And basically we're showing that that new revenue is coming on board and we're closing the gap of that lost revenue we had in FY 'twenty 1.
We also just delivered 6.2% adjusted EBIT margin for FY, 'twenty, 1 and I'm guiding now towards.
8.2 to 8.7%.
So then I sit there and I look at it and go alright.
Same drill $2.43 I'm guiding to $3.45 to $3.65, and then if that's not enough then I sit there and go alright, now we're delivering on the restructuring and Tsi commitment, we said, which we're going to go after reducing that 900.
The $5.50.
And also paying down debt and then the other focus area for US is as you can tell ken's driving.
Higher level of clarity on these numbers have you seen so I look at debt progress going through 'twenty, 2 and then hitting 24 and saying I think that's the right trajectory.
Yes on Ashwin I, just would add and you can imagine when you set of long term plan with and without the new leadership team. That's been in the business working real hard to kind of dig through it where there was a lot of pluses and minuses. We looked at this was our buildup and we you know.
This is the numbers, we felt were a relatively high probability plan that we could get to.
Understood. Thank.
Thank you guys see on a couple of weeks. Thanks Ashwin.
We have our next question coming from the line of Bryan Keane with Deutsche Bank. Your line is open.
Hi, guys congrats on the progress.
Wanted to ask about employee morale, Mike maybe you could give us an update on how that's doing and also.
The supply side in India.
The retention in India, and then I.
I heard you guys are gonna be hiring more in India. So just maybe an update on India as well.
Bryan. Thanks, so much on unemployed morale is strong I look back and reflect on where we started the.
Most of you all can take a look of glass store I think we started around 37% were well above 70% right now.
And we're positioned to continue to take care of our folks.
We're running the.
The work force right now that is a nice balance between work and work from home and also coming into work. So I think giving folks that option is increasing morale.
But look they like the changes that we're making now when Mike when I look at India, India is that's where roughly India and the Philippines is about a third of our population.
What's going on I think we've done a fantastic job actually being very proactive with how to deal with that situation as we immediately win and doubled our benefits, we secured beds and supplies for our folks over there we gave additional financial support for our families.
And then now we're working on getting vaccines for our colleagues so.
When you do all of that it's a rough spot, but the bottom line is the morale seems to be pretty high over there on our attrition looks good.
<unk>.
So what was the rest of your question Bryan.
It was the end.
I also understand you're hiring more in India too I think.
The change the mix yet.
So now the reason for that as I've said over and over again I want to motivate an employee base and it's very hard to do that when you've got the percentage of contractors that was here at <unk>. When I started so we're driving that down and it's a combination of that strategy to remove <unk>.
Contractors' and flip them to employees and also put the work in the in the area, where we want of scale. That's our consistent strategy that youll see us implementing and then some of that is also the new work coming on board.
Got it got it.
Then just as a follow up Mike how would you characterize these long term targets I know when you first got the DXP you set some targets right off the bat.
It probably wasn't even your guidance per se, but.
Just your level of confidence to achieve these targets first of the original once you said I think of it was right when you started.
Yeah strong strong confidence strong confidence around 22 strong competence around 'twenty for.
As you can imagine we've been studying this business for 20 months of had a lot of new people look at it with the new management team that I've brought so the confidence is high.
Great.
Congrats on the transformation.
Thanks Bryan.
We have our next question coming from the line of Darrin Peller with Wolfe Research. Your line is open.
Hey, guys. Thank you.
In the context of the pretty strong now book to Bill ratio as we're seeing for the for the last several quarters, especially coming from the probably the more sophisticated engineering demand areas.
And just sort of following up on on the on Brian's questions around the supply side.
I just wanted to revisit your view on your ability to meet the demand in terms of.
Fulfilling on that those bookings.
Any if you can give us any color on utilization rates you have the attrition levels Youre seeing now versus last couple of quarters, specifically in the numbers around it and.
It really just thinking about where those numbers should head.
As part of the guidance on the next couple of years I think it would be helpful.
Okay. So darrin what I would say is this.
With morale and that's why I focused on the people. So when I talk about the new <unk> and I talk about focusing on our customers and our colleagues the key thing around the colleagues of the colleagues day.
And we also make this this place a lot more simple or 2 to work. Hence the reason why we continue the look at some of the cost savings of the cost savings initiatives as it relates to employees, though I always go back to employee morale. That's employee engagement you all can see.
A lot of the numbers like I said on Glassdoor and comparably.
What I can tell you is our employee engagement has significantly increased over the last 12 months, it's not only increased by what our folks are saying about what's going on but also how many people actually take the survey, which is huge because if you can't even give people to engage.
And taking the survey and it's a little hard for us to understand what we need to do to inspire them.
So that's the way I would say that on top of that the other nugget I will give you is we've gone from having to proactively reach out to go get talent to now our folks are getting proactive calls to 1 of join the journey and there is nothing more inspiring for our management team.
<unk> when you have good talent, reaching out to say, hey, I want to be of part of this.
That's all good direct color Directionally.
I guess, when we think about just as a quick follow up on a bigger picture question, Mike the portfolio of businesses that you have now.
You know theres been some puts and takes over the past year, but you seem like you're obviously in a very good position now, especially on a sequential basis with data points on that it and book to Bill is showing it.
Just high level of any thoughts on your overall business the portfolio, where you want to be in terms of what business is part of it are still there maybe there is some that you still think about.
Moving around a little bit of be curious to hear thanks again guys.
Okay. So darren the.
What I would tell you is.
Like the hand, we have and I think I've said that over and over again.
We will continue as Ken mentioned, we're always going to study of the portfolio and if we think we've got an opportunity to either add to orders subtract or subtract from it.
To create shareholder value, we definitely will look at it.
On 1 of the things that we have is we've got a couple of things we've never talked about before I look at the <unk>.
Analytics and engineering piece and over half of that business is something that the market doesn't touch talk much about and that's called data cleansing of lot of people want to talk about AI and machine learning and data analytics, and so forth, but where those projects Darren.
Get curtailed is you can't scale of lot of that stuff because of the data is not clean and what we can do with the data cleansing efforts that we have.
It was pretty impressive and we do it for some of the biggest names in the industry. So again like to hand that we have and I think we're making good progress.
Great Alright, nice job guys. Thank you.
We have our next question coming from the line of Lisa Ellis with Nancy Nathanson. Your line is open.
Hi, good afternoon guys.
That's the quarter I had a follow on question on bookings and the relation how we should think about the relationship between them.
Book to Bill and revenue growth.
Noting that trailing 12 month book to Bill now is 1.1 to ask as you called out, but then you're still guiding for the upcoming fiscal year, 2 obviously, a major improvement, but still year on year declines in revenue. So how do we think about that relationship I guess that means that there was like the backlog in there of that.
It needs to be refilled.
What's sort of the lag time or.
Can you give some color on sort of the.
On the relationship between book to Bill and revenue growth. Thank you.
Okay. Lisa. Thanks, So first of all think about our guide our guide in Q1 is -2 to -4 but you were guiding for the full year -1 to -2 so that's that says revenues coming on board second thing is when I think about book to Bill.
The split into 2 ways and that's why I, specifically call out 53% as new work. That's that's work we've never seen before and 47 per cent is renewals my focus with our leadership team is to show the market that this revenue is not going away from us anymore and that we are closing.
That gap that I called out in FY 'twenty 1 in.
In terms of the lost revenue and I think we're doing a very very good job.
Doing that as you can see that the trajectory is pretty significant calling out -9.6 the -1 to -2.
Okay. Good and then just a follow on question related to talent and the overall organizational transformation I know, it's part of your transformation journey, you've highlighted a number of different aspects of the transformation like delayering and simplification and increasing lines of accountability.
He et cetera can you just kind of update us more holistically on where you are on your overall organizational transformation.
So the overall trends in the overall organizational transformation first of all the the leadership team is built out and you will see a number of them on June 17th So I'm looking forward to showcase in the.
The talent that we brought in across the board people that are running P&L of the people that are run on delivery people that are running.
For instance.
Our HR along with our CIO, because those folks to help generate the positive morale that's going on along with the.
Along with driving the business.
So.
Back to your specific question when I think about what we're doing with our talent now what we're doing is filling in the next layer underneath the direct reports of my management team and that's where I mentioned to Darren to say well, it's pretty pretty need is to see that people want to join US now 1 of the thing.
Things I think early on that.
I discussed on this call was hey, Mike can you really attract talent to DXP.
And we've done that and now the momentum in the market.
We're showing people 1 of joined something that's got positive momentum. So I look forward to seeing the new talent that is going to come our way in fiscal year 'twenty 2.
Terrific. Thank you.
Thank you we have our next question coming from the line of Bryan Bergin with Cowen Your line is open.
Hi, Good afternoon, guys. Thank you.
I wanted to ask here a question on margins. Firstly, you completed the $550 million program for 'twenty..1 can you provide more color on your goal here for fiscal 'twenty 2 of it and just talk about the largest opportunities you still have around cost.
So what you will see us look our cost levers that we had last year. We will continue this year. So cost levers. The first 1 is the contractor conversions second is we will continue to look at our facilities that also helps with our environmental footprint.
Third as we will continue to look at the what I call. The simplicity of running our organization how inefficient is at the boat that has.
Impacted on the corporate level of along with our operations and then the fourth 1 Bryan is around what the node refers to is AI operations. So thats the automation of what we do.
In our facilities. So we totally delivered on the $5.50, and what I'll do is call out again, we just delivered 6.2%.
So when we guide to 8.2 to 8.7.
Says, we should be doing just as much next year and if you net it out with the investment we're making on our customers and our colleagues that's how you get to those numbers.
Okay makes sense and then on the portfolio shaping comments can you just dig in a little bit more there on the types of work you might still be backing away from and did you quantify what was built into that 'twenty..2 got of I wrote on 100 million here, but not true up that was for the full year and are there still is there an anticipation that that could still evolve to a potentially.
Higher level.
Yes, so bryan ill try to give you some color here the $100 million was for the stuff that's the.
The principally the healthcare provider of software business that exited April 1.
I would say we continue to look at our portfolio specifically, maybe the more smaller non core assets that are integrated into the technology stack and arent driving synergies in the business.
Also on a year over year basis, right, we called out $1.2 billion as well. So hopefully that gives you some color we will and as Mike said, we're continuing looking at the portfolio Holistically I think thats just kind of what you do in the business I wouldnt use it as anything more than that certainly if there is a piece of our business that.
We do want to move out and we do something with Wil will certainly update our guidance with you.
Okay understood. Thank you.
Thanks Bryan.
Thank you we have our next question coming from the line of Rod bourgeois with deep dives equity your line is open.
Okay, Great. So hey, Mike you just finished your first full fiscal year as CEO and you share dealt with a lot of stuff during that year.
Everything from the Covid crisis to debt concerns even had had the unsolicited takeover bid.
You've also had time to get to know your major clients through all of those challenges. So what I wanted to ask I mean, as you draw on that fiscal 'twenty 1 experience.
What are your main takeaways about <unk> fundamental drivers that are now influencing your go forward financial output of.
Outlook, so essentially what did you learn from fiscal 'twenty..1 I would also say that your your 2024 guidance suggests that that youre seeing more turnaround to come so it would be great to get your overall take on the drivers there. Thanks.
Thanks Rod.
The I would say theres 5 drivers. So the first 1 we've talked quite a bit about which is people and when I look at what we've done over the last year going from not engage to engage that's that's the special but the key thing moving forward is now the game is about retaining and continuing.
To attract which I called out is our focus for 'twenty, 2 that will help us fuel us into the future. The second 1 is customers. We've talked a lot of that a lot about that we we began the year talking about challenged accounts and here. We are we're finishing the year talking about customer intimacy and on June <unk>.
<unk> you.
You won't have to listen to me anymore.
Stacking of clients.
Videos to talk about the transformations that we're doing for them, meaning moving up the stack. So when I talk about we've delivered for clients when I've talked about we're building strong relationships that's pretty remarkable in terms of what we've turned around over the last 12 months.
I'd be remiss, if I didn't talk about revenue and margin the trajectory there is going the right direction the.
The fourth 1 is winning in the marketplace going from losing 2 to winning and then cleaning up the balance sheet Rod was was huge and even with Ken coming on board and just the stuff. We did within the last quarter just continues to position us for stronger strength moving forward. So.
Those of the 5 things I would call out in terms of how we're looking and that are going to guide us in 'twenty, 2 and future of the people the customers the revenue margin the marketplace in and let's just call it the balance sheet and.
Our investment grade profile.
Got it and then I just wanted to dig a little deeper on on the <unk> business.
Shown some revenue stability there over the last couple of quarters.
So what I want to ask does that Ato revenue stability look sustainable.
The great. If you could give some more color on the <unk> revenue drivers and trajectory. Thanks.
Right I was hoping somebody was going to ask me that question because we.
We've had to talk about the secular issue forever and I've had to be able to tell people that hey, all of that work doesn't naturally just go away.
And what you've seen now on page 14 of our enterprise technology stack, you've seen of business go from negative 5 point too that when you focus with your customers you get into many of you focus on there of stage you can start turning it around now.
Now, having said that I'm not going to get to wound up about any layer of the of the stack what I care about is the overall trajectory of the business, which is which is where it's going in the right direction.
But I think our focus ride on the Ato, making sure we fill a void that's sitting there in the market, that's serving us incredibly well.
So that's the way I would answer that's the way to answer that question.
Alright, thanks, Rod anything else.
Yeah, well I mean, I guess the.
The the related question on IPO.
As that revenue stability plays out do you see additional margin levers and the idea of business specifically as well.
Yeah, I mean look we.
On let's just talk about Gis as a whole remember we had to show up on Q1 with.
Pretty much no margin and we're at 4.1% and when I talk about contractor conversions when I talk about putting people.
In terms of efficiency and automation and so forth.
Look that's only going to help those margins fair enough.
Got it thanks guys.
So look I want to thank everybody for joining the call.
I would tell you that we are very pleased with whom the momentum we achieved in FY 'twenty..1. We're also confident that that's going to continue in FY 'twenty..2 again I hope you can join US on June 17th to meet the new team and also the the analyst day festivities and with that all the best to you and your families and opera.
Greater please close the call.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
[music].
Yeah.
[music].
John.
The increase.
[music] accounts.
Yes.
John.
[music].
Yes.
Yes.
[music].
Yes.
Okay.
Yes.
Yes.
[music].
John.
Welcome to the the conferencing center after the tone. Please enter your pass code then press the pound key your line will then be placed on hold until the conference begins.
[music].
Thank you for your patience. Please stay on the line for the next available operator.
And then.
Okay.
Net.
[music]. Thank you for your patience. Please stay on the line for the next available operator.
Thank you for calling me and of any of the gone physical and to join and please.
If you're on mute the some of your life and pick up home speak of the ankle.
The decline General response with Golf guide Thank you.