Q2 2023 DXC Technology Co Earnings Call
Except as required by law and with that I'd like to introduce <unk> Technology's, Chairman, President and CEO , Mike Salvino, Mike.
Thanks, Jon and I appreciate everyone joining the call today and I Hope you and your families are doing well <unk>.
Today's agenda will begin with an overview of our Q2 results next I will update you on the progress we're making on our transformation journey. Our Q2 results show that our transformation journey is back producing the kind of results that we've grown accustomed to.
Ken will then discuss our financial results in more detail and provide our guidance and finally I will make some closing remarks before opening the call up for questions.
Our Q2 results for organic revenue adjusted EBIT margin and non-GAAP EPS were all at the top end of our guidance.
In Q2 revenue was 357 billion and organic revenue was negative one 5% organic revenue is one of the best results that we've produced four quarter since I've been at DXP are.
Adjusted EBIT margin was seven 5%, a 50 basis point improvement compared to Q1, driven by our execution of our cost optimization efforts, our non-GAAP EPS was <unk> 75.
Our trailing 12 month book to Bill was 1.04, and our Q2 book to Bill was <unk> 83, I will look at both of these numbers to see if we're driving the kind of new work to grow GBS and continue to shrink the negative revenue declines in Gis.
The trailing 12 month book to Bill of over one means that we are still on track with our plans and the Q2 book to Bill reflects us breaking in a new sales model for GBS and Gis that I won't comment on shortly.
Overall I'm pleased with how we have delivered in Q2 and more importantly, we have our execution momentum back. So let me give you some additional color around our transformation journey.
The first step is to inspire and take care of our colleagues. The good news is that our attrition remains well under control.
Our growth in GBS demonstrates that we can recruit and retain top talent like engineers and software developers, who create innovative solutions for our customers.
These engineers and software developers are highly sought after in the market and we're doing a great job of recruiting and retaining them. The reason for all this is my leadership team is focused on changing the culture of DXP, we are making sure. We're taking care of our people working together and we know how to make positive business impact.
<unk> for our customers.
The next step is to focus on our customers. The key metric here is our net promoter score and our most recent NPS score was 33 above the top end of the industry benchmark. It is clear that our customers value our services the value that customers place on delivery has helped us stable.
Our revenue in Q2, we achieved sequential organic revenue growth as well as driving our yearly organic revenue to minus one 5% are focused on delivering for our customers has enabled us to grow GBS for six consecutive quarters and shrink the negative organic revenue growth.
With a gis to minus five 8% in Q2.
This was 140 basis point improvement over Q1, and the best organic revenue result for Gis since I've been at DXP.
On our last earnings call, we committed to $500 million of cost take out in FY 'twenty three and I am pleased to report that we are delivering we've made progress on all five levers, while taking care of our customers and colleagues as a reminder, the five levers our staff optimization contractor convert.
Versions office and data centers network, and telecommunications and third party spend.
Our progress so far has allowed us to expand our margin from 7% in Q1 to seven 5% in Q2, and we are on track to hit our FY 'twenty three margin goals.
This is a testament tomorrow leadership team I mentioned on the last earnings call that my leadership team had delivered a similar cost takeout plan in FY 'twenty, one and the team is delivering again as I expected.
In the area of sees the market we are implementing a new sales model. This model distinguishes between our two businesses of GBS and Gis as we believe they require two different sales organizations.
The GBS sales organization is focused on relationship selling this means selling to our cost.
It is based on value, which we define as helping them increase revenue and decrease costs.
In the automotive industry, our engineering team works with over 90% of all automotive manufacturers software development is increasingly important with the change to software defined vehicles as it improves the in car experience and connects the driver to the automotive manufacturer and.
An example of one of our relationships in this spaces with Cariad Volkswagen groups in House automotive software company. We have worked with them to develop a uniform scalable software platform that will be adopted across vehicles for most of the Volkswagen group's brands.
Drivers will experienced $24 seven connectivity lower maintenance downtime and higher residual values for their cars.
As you can see our distinct engineering work drives value for our customers I firmly believe that our engineering and software development capability is one of the best kept secrets, but we are gaining momentum changing this perception.
And Gis our sales organization is oriented toward RFP focused selling which is highly price competitive we continue to implement a disciplined sales approach with the deals we are bringing into Gis. Our belief is we can be disciplined as customers are seeking us out against our competition because of our strong.
<unk> delivery reputation.
We are beginning to see this disciplined sales approach payoff internally, which gives us confidence that we're on the right path with Gis.
Overall, we continue to see demand in the market and with the new sales model for GBS and Gis you will see us accelerating new work versus renewals in this quarter. Our new work was 63% of our total sales one of the best new results, yet and finally I'm.
I'm pleased with our financial foundation and the steps, we have taken to make DXP, a quality company, our debt and our capital allocation are two steps that I would like to highlight we.
We have effectively managed our debt below our target level of $5 billion.
That in Q2 was $4 5 billion down from $4 8 billion in Q1 concerning capital allocation, we have delivered $500 million of cash back to shareholders. Since we announced our buyback program in February .
Now before I turn the call over to Ken I want to comment on our press release, we issued on October four.
We have been approached by a financial sponsor regarding a potential acquisition of DXP consistent with our fiduciary responsibility to maximize shareholder value. We are engaged in preliminary discussions and are sharing information. However to date no formal proposal has been received also.
There are no assurances that any proposal will be received or determined as adequate by our board of directors.
We do not intend to comment further on this matter.
As you can see by our Q2 results our leadership team remains focused on our transformation journey and delivering for our customers and colleagues now let me turn the call over to Ken.
Thank you Mike turning to our progress we continue to move forward on our key initiatives Q2 organic revenue declined one 5% a 110 basis point improvement from the first quarter adjusted EBIT margin and non-GAAP diluted earnings per share were at the top end.
Of our guidance range at seven 5% and 75, respectively.
Free cash flow of 17 million, leaving us a little better than breakeven free cash flow for the first six months of the year, we expect our FY 'twenty three free cash flow will be backend loaded similar to last year as you recall, we delivered over $700 million of free cash flow last year.
Moving to slide 12 on a year over year basis, we have margin headwinds of about 130 basis points from lower pension income 70 basis points exiting Russia, 30 basis points, and FX 30 basis points second quarter gross margin dip.
Climbed to 110 basis points compared to prior year and is up 120 basis points sequentially.
We anticipate our gross margin will improve in the third quarter as our cost optimization efforts gain traction.
G&A as a percent of sales decreased by 10 basis points driven by our cost optimization efforts depreciation was lower by 60 basis points. Other income decreased primarily due to lower noncash pension income of about $30 million per quarter as a result.
Adjusted EBIT margin declined 110 basis points compared to prior year and is up 50 basis points sequentially.
<unk> was down 15.
Compared to prior year and was impacted by 10 from FX headwinds <unk> from lower pension income <unk> due to higher tax rate.
<unk> from lower margins. These impacts were partially offset by <unk> 16.
Due to lower interest expense and a lower share count the U S. Dollar has strengthened at an unprecedented level given the global nature of our business, let's put the FX headwinds for the full year and context compared to prior year.
Revenue is expected to be negatively impacted by $1 2 billion, a $200 million increase from our prior guidance.
Adjusted EBIT is expected to be negatively impacted by $130 million and 25 basis points of margin EPS is expected to be negatively impacted by 40.
The FX impact the profit impacts cash flow by $100 million about 60% of our debt is denominated in currencies other than U S. Dollar.
<unk> reduced our debt by approximately $400 million since our refinancing specific.
Specific to Q2 compared to the prior year quarter, FX impacted revenue $300 million adjusted EBIT margin by almost 30 basis points.
By 10 three.
Free cash flow by approximately $30 million.
Okay.
Let's turn to our segment results, we continue to see improvement in the business mix as GBS becomes a larger portion of the business, which is our focus year over year, our GBS revenue mix increased to 150 basis points to 48% of Dxp's total revenue GB.
<unk> has consecutively growth for six quarters, and as our higher value business with higher margins and lower capital intensity.
GBS grew organically three 4% driven by strong analytics and engineering growth. The GBS profit margin declined 320 basis points year over year and was up 80 basis points sequentially.
Gis organic revenue improved to a decline of five 8% Gis profit margin increased 70 basis points year over year, though down 30 basis points sequentially.
Okay.
Turning to our six offerings, starting with GBS analytics and engineering continued its strong organic growth up 14% A&D is seeing notable strength with automotive banking and capital markets customers applications declined one 1% on lower project revenue.
Insurance software and bps is up one 1%.
Moving to our Gis offerings security was down 10, 8% as the prior year period had a higher volume of resale revenue impacting the compare.
Cloud infrastructure and it outsourcing had a strong quarter with a decline of <unk>, 9% that was better than our expectation. This is good performance as we saw almost 20% declines just two years ago.
Modern workplace was down 16, 9% and continues to underperform our expectations. We believe we've made the right investments in modern workplace and expect to see the revenue declines moderate.
Turning to our financial Foundation on Slide 16.
That is down to $4 $5 billion and below our target debt level of $5 billion. We recently entered into a $500 million term loan that is undrawn to provide us additional financial flexibility, we continue to tightly manage our restructuring and tsi expenses.
These expenses totaled $57 million in the quarter or <unk> $92 million for the first half of the year, we expect to see an uptick in restructuring expense in the second half of the year as we execute on our cost optimization efforts you will note in our 10-Q, we disclosed.
$8 million reserve associated with a long standing historical matter with the Securities and Exchange Commission. This matter relates primarily to disclosure associated with the company's transaction separation and integration costs included in its non-GAAP measure.
Others from the time of the merger the <unk>.
Reserve represents our best estimate of the potential settlement based on ongoing discussions with the SEC.
I should note that under our leadership, we have substantially driven down the tsi expense, while increasing the related disclosures of these expenses.
Capital expenditures and capital lease originations as a percent of revenue were six 2% in the quarter up 100 basis points as compared to prior year, we continue to examine our capital expenditures and capital leasing as our capital intensity presents a significant long term.
Term opportunity to improve cash flow.
Our 500 million dollar portfolio shaping proceeds goal is on track as we previously disclosed we have one regulatory approval remaining to divest our German banks for $300 million euros.
As we continue to review our facility portfolio, we've identified additional underutilized offices and data centers that we expect to sell that will generate $250 million of incremental cash proceeds.
These facility sales have been gaining traction as we execute on our virtual model and make thoughtful decisions on asset returns.
The facility sales may create losses on disposal that would impact our non-GAAP results as our guidance does not include any estimate for these losses, we will be sure to break these out separately in the future to the extent they occur.
<unk> to our $1 billion share repurchase we did not repurchase any shares in the quarter due to interest received from our financial sponsor as you know we are halfway through the $1 billion share repurchase.
As customer bank deposits change, we are reaffirming our F Y 2000 for guidance with that let me turn the call back to Mike for his final thoughts.
Thanks, Ken and let me leave you with a few key points.
R Q2 results demonstrate we are delivering and expect to achieve our FY twenty-three goals.
Also I expect our execution momentum to continue because by focusing on our transformation journey. We have created the following repeatable drivers of our business.
Due to our culture, we have the ability to recruit and retain top talent like the example of engineers and software developers that I mentioned due to our ability to deliver for our customers, we have stabilized or revenue.
Due to our experienced leadership team, we are executing on our cost optimization efforts and expanding margin.
Our new sales model distinguishes between GBS in Gis and will help us to accelerate new work.
<unk> renewables.
And due to our financial Foundation, we have created a quality company that is driving shareholder value. These.
These repeatable drivers of our business allow my leadership team to now focus on the future versus the past and gives us the confidence in achieving our FY 2000 for adults with that operator, please open the call up for questions.
Thank you and as a reminder.
If you would like to ask a question. Our first question will come from Brian Bergen County.
Hi, Thanks.
Thanks. This is zack he's been on for Brian a good good progress on the overall.
Panic revenue from our first question was on the bookcase number.
And quarter below one on the book to Bill take last quarter. The sub one result was explained by three to four conscious deal pushups. So.
First off these skills ended up closing during two Q and then the expectation was above one this quarter. So just trying to better understand at the letter results with all due to the new sales model or was there something else here.
Oh look here's here's where I'm at I really liked what we're doing with the new sales model.
Like I said on the call.
It totally enables us to accelerate the new work in GBS and be very disciplined with what we're doing in Gis. So when I think about the book to Bill. This is what I've been starting to say now for probably two or three quarters I'm looking at both the 12 month trailing along with <unk>.
Quarter. So, let's just let's just take it up as you went from one quarter to the next if you look at what we did last quarter are trailing 12 month was well over one and we delivered a 0.87 and we drove revenue growth or minus 2.6 to minus 1.5.
And this quarter were in the exact same spot.
Right so.
We're at eight three and again the trailing 12 month is definitely over one and we expect to continue to drive revenue growth. So then when I look at the new sales model and GBS, we definitely want to keep the book to build over one and right now the trailing 12 month is 118.
In Gis Alright, we've got roughly at 9 billion dollar backlog and my point is I think I can afford and we can afford to be patient I'm definitely comfortable because we're very focused on the discipline deals.
That are coming in that we're putting on top of their business now in terms of your question about the three or four did they close.
We definitely close one and I will tell you that we've been working on a 600 million dollar deal over the last six months that we expect to close tomorrow and what I can tell you about that deal visit the economics are definitely better than the deal of got today. So that's what I would talk to you about in terms of book to Bill still feel very calm.
Comfortable hence the reason.
We guided the way we did for Q3.
Got it that's helpful and then switching gears over to the macro.
Didn't really hear anything in the way of macro incrementally weighing on performance. So perhaps you just comment on the nature of services that clients are leaning into her or deemphasizing here and how that could potentially impact segment performance.
Just just high level thoughts on what you're hearing from clients submit the macro and and digging a little deeper into potential secondhand locations. Please.
Okay, well thanks for that question the color I would give you is this we definitely continue to see the demand.
And when you look at G. B S, which is the business that we're focused on for growth.
I would have thought if the macro economic environment was going to hit us It was going to hit us and analytics in engineering and what you see with that is we've got a trailing 12 month book to bill of over one.
You also see growth of 14%. So I think that speaks to not only the quality of the people and what the value. We can deliver like to carry that example, but we're not seeing Matt backup.
In the Gis business, we have definitely seen a situation where the deals have gotten bigger when you are talking about infrastructure modern workplace people want more cost savings. So that's making the deals bigger like the DLL reference and yet they are taking a little bit longer but I don't think it's because of the macroeconomic conditions I think it's more.
Based on our discipline approach to say, we are going to do deals that are better than the deals we have today.
So thanks for those two questions.
Savannah next question.
And our next question what comes on the <unk>.
Okay. Let's go ahead.
Uhm. Thank you guys I appreciate on the does it come and get a date.
Going back to the <unk>.
Comedy.
The kidney within these <unk> could you.
Could you provide more granular detail with regards to are you adding to the to the overall sales force how you swapping out certain parts of it.
Kidney I understand the.
Relationships selling peace in G. B S. Because that say it on your cost is going to come.
Can you can you can talk to <unk> numbers seems force tug, it's things like that.
Any any of the details.
Okay Ashwin thanks for that.
Let's talk GBS for so GBS, what we're doing there when I would say relationships sellers. These are folks that I'm used to in my past. These are folks that are going to be out there they're going to know, let's take my example that I gave the automotive industry incredibly well or you can take.
Ray for instance, real has two leads our insurance business. These folks no senior people all across the industry and what they're doing is they're talking about what's going on in the industry. How can you provide value and then what we can do and what you have in that Salesforce Ashwin does you have.
Got projects that we have piloted that then we will grow over time, which you see in the <unk> space and then you've got other pieces were sitting with a client and were literally sketching out together what that projects should look like that we want a pilot that's what I call relationship sales were literally.
In there.
Most as a strategic advisor talking to the client about how they can drive more revenue or decrease more cost now that workforce is something that Michael Corcoran and ray had been adding to for probably now the last.
Three to four months that I expect to continue to add to it but as you know ashwin those folks.
It takes a long time to to find the exact folks you want so again I think we can afford to be patient.
Because we have a decent workforce, but we're going to continue to add to it. Okay. The reverse is tours in terms of Gis Gis, we've been very focused it as a quota carrying workforce that focuses on rfps. So here I am being very focused around are you hitting your quota and are you doing.
Being the kind of discipline deals we want.
And that's why you guys see the numbers for instance, <unk> being yet.
Negative, 0.9% now that would have been unheard of two or three years ago. So we're being very disciplined about the work that were that were putting on top and that's why I gave you. The example would be typically I don't get on an earnings call and talk about a deal I'm Gonna closed tomorrow, but it's a significant deal and I can tell you that it's better economics.
I have today, so hopefully that gives you a little bit more color ashwin.
Yeah, now that that's quite quite helpful.
Ashwin Ashwin can I say, one more thing.
Okay. The other color I would give you as well.
When I came here three years ago.
You all remember all the revenue runoff. So that sales force originally was focused on making sure that the revenue didn't run off so what what is what does that mean most of that salesforce was focused on renewables.
It wasn't focused on new work and that's why I called out to 63%, that's why I called out to shift.
Between the two businesses because we're not running some generic salesforce anymore that is just trying to do renewals were being very targeted in terms of GBS versus Gis. So.
<unk>, sorry about that sorry to interrupt you, but I thought that was key too.
No no. That's all thank you for that.
In terms of the <unk>.
Back to the book to Bill as the as we think of sort of the pipeline right.
You know, what's going to <unk> check book to Bill coming in the in the coming quarters.
Can you talk about the health of pipeline any decision, making that's being pushed out not because you're the discipline, but because clients have been careful what they want to do <unk>.
We can talk about that.
Okay. So I would tell you that that both of us GBS pipeline and the Gis pipeline.
Are very healthy okay. The GBS pipeline is filled up with work. We're piloting that we are now scaling the Gis pipeline is reversed okay. We're seeing that pipeline grow based on the performance of our competition.
And that's why harp so much on you have to deliver for your customers if you're not delivering for your customers you're never going to get new work and what we've seen in the industry and the Gis phase is deals are coming to the market before their contract has expired and they want to talk to us which are <unk>.
Towards us ashwin to be disciplined so I'm not worried about the pipeline and again I'm not really worried about the book to bill either and that's the proof point is this quarter, meaning where we probably we printed what our second best total at minus 1.5% for the total company we definitely grew.
GBS again, and then we printed our best total for growth and Gis at minus five eight so our focus is now that new work because I think the renewals are well in hand, I think the revenue as well in hand, now it's time to focus on the new work and growth that's our attitude.
Got it thank you.
Savannah next call our next caller question.
Alright next question, what kind of pet.
Okay.
Please go ahead.
Hi, good afternoon gazing ma'am, thanks for taking my question.
What I can dig in on the free cash flow branch can I know you've kept the outlook intact at $700 million for this year at 1.5 billion again for next year I know, there's a lot of moving piece is going on in there can you just help them again bridge.
That outlook that you see not only the back end loaded.
Fiscal year, but I'll still looking out into physical 24, how you get some that $700 million and 1.5 million. Thank you.
Yes.
That's great Lisa.
Maybe a couple of things right, we talked about this current year being back end load a very.
Consistent with last year, we generated 650 million of free cash flow in the back half of last year. So.
I think we feel pretty comfortable with that we had a number of discrete cash outflows that happened in the first half of this year about $500 million. So I think when you look first half second half I mean, certainly I would prefer not to have the seasonality of cash but have it be more linear but we're <unk>.
Double with a 700 million Guy and then look into FY 2004.
Certainly the improved margins are a big piece of the cash uplift the reduction of restructuring and Tsi and then we continue to work through.
Our capex and just understand how we're signing new deals and making capex commitments.
On our Gis side, it's running.
Far higher than our peers.
It's call at 10, 11%, 12% when you look at any given period.
And that mountain these minimum come down to the piers, which are sitting closer to 6% the GBS side of the business is.
Course at 1% to 2%. So I think we've got enough levers as we look at it plus working capital of course that.
We have bridges back to the the billion dollars five we're going to keep executing to get there.
It's as simple as that.
So let me, let me add to that because.
The focus right now is FY 2003, and if you look at what we did last year.
In the back end loaded nature of that.
We've got a team now that is a year smarter as a year.
More focused on us, making sure we have the collections and so forth you had those two numbers up at 643, plus what we've already done and you're roughly around 650, so that gives us a lot of comfort in terms of what we're gonna do.
And I think Ken has done a great job with the finance team, making sure that we've gotten a lot of the expenditures out of the way in the first half.
So at least so that would be our answer to your your first question do you have a second question.
Okay.
He had a question and also in that revenue outlook.
At the upper end of your range into T. Let him down one and a half per cent mechanic basically that you highlighted when is.
The best results he's had over the last few years <unk> revenue outlook impact with three Q, just wondering do you see upside to that.
Thank you.
Given the positive trajectory you saw this clinton thank you.
Like I said I think we've got a management team now that knows the business a lot better.
Than it ever has so what we feel very comfortable about the guy not only for <unk>.
Q3, but also for the entire FY twenty-three and like I said, I would like or unlike our momentum.
Because I think everybody has seen with what we just printed that our execution momentum back and I expect that to continue.
Savannah.
Next question.
Thanks Lisa.
Yes, our next question will come from <unk>.
Right.
Please go ahead.
Hey, guys, Hey, so I wanted to ask about the.
Business and specifically, we'd love to hear your comments on the underlying enablers of the lesson decline that you're seeing in that legacy business any color on pricing new logos add on work that might be contributing to that stabilization and <unk> and also whether those.
Enablers for <unk> can be applied in the near future in the workplace business.
Okay. Thanks for I appreciate the question.
[laughter] I'll be honest with you, it's kind of nice staring at that 0.9% isn't it from.
From almost what 22 or three years ago, and what I would tell you is look we ran the playbook on that business, we scaled our global delivery network. So we're literally putting the right people and the right locations to make sure that work is done in.
In the appropriate manner, Ken talked about the data centers.
We're really starting to get after the data centers and the consolidation and so forth.
And then the last pieces the discipline sales approach, meaning look we're just not going to take a deal that if it can't get better than what we're sitting on right now or what I think is the appropriate deal economics in the market, we're not gonna take it.
So that's the playbook and.
I think we've had a very patient approach with it and we will continue might be a little bit lumpy, but I think that as well at hand.
Now turning to your second part of your question on modern workplace.
Look that business is testing our patience testing my patience.
Because it doesn't go unnoticed that without modern workplace, we would have grown one per cent and organic revenue this quarter, which a lot of people want to know how we're going to get to our FY 2004 targets. That's right at the low end of our of our FY 2004 targets. So we're staying.
With the playbook, we think it works we think that.
We can get a significant increase in in that business and.
That's where we're going.
Roger you have a second question yeah. The follow up I mean, you're getting a lot of questions about the you've had the last couple of quarters of booking book to Bill has been on the soft side plus you've got some macro uncertainty out there now so you're getting a lot of questions on that front. So I guess my question is you mentioned in your commentary with your new sales model.
Or that you are now seeing that new sales model work pay off internally can you just elaborate on what you're specifically seeing that's giving you encourage it internally with the with the revenue trajectory based on the new sales model.
Okay. So what we're seeing internally is better deal economics full-stop.
That means better terms that means making sure we get Cola.
That means better margin that means better.
Long term outlook in terms of our delivery. So it is definitely a healthier.
Deal model and you know if you don't get these large deals right. They.
They can impact you for several years to come that's what's happening in the market right now.
You know look we've been added for three years.
And I think we're on a very very good spot.
With definitely <unk> and we're heading in the right direction with modern workplace.
Look to switch gears GBS in totally different.
Alright, GBS, we don't respond.
To just wrote Rfps from secure.
Procurement, where literally dealing with the senior executives at these clients.
Talking about what needs to happen next that's why that automotive example, rod was so good in my comment hopefully wasn't lost on the people on the call that has always been one of our best kept secrets that we're changing that perception in the market were competing against against different competition now.
And we're winning because we're providing that value I mean, when you're right in the middle of dealing with a a.
The software that goes into the cockpit of the car you're right at the heart of what these automotive manufacturers are doing so again I liked where we're at and the reason I say that is not just because of the existing.
Call it numbers or position we're in.
Want to come back to what I call repeatable drivers because you can't get to we're we're trying to get to which is to ultimately be very competitive in the I T. Industry. If you don't have these repeatable drivers AK that culture delivering for our customers a team that can take cost out all one.
Kyle our customer NPS stays high.
The sales model was sort of that last piece that we're doing and then you have seen what we've done with our financial foundation, meaning the that the capital allocation of material weakness in the governance. So.
Look I like it we've got a good quality company and I Hope also my comments weren't loss that my team now is more focused on the future than dealing with the past.
So hopefully that gives you a little <unk> and appreciate the the question.
Okay cool.
Our next question what <unk>, Okay, Bye bye with both of America.
Please go ahead.
Hi, Jason Hi.
Hi, Good evening. This is Tyler Dupont on for Jason. Thank you for taking the question.
Just relating to margins.
Particularly I was wondering if you could talk a little bit more about the conversations you're having with clients around pricing you've mentioned in previous quarters, you made conscious decisions.
To kind of push out projects that didn't have the right price and you were looking for and it looks like the three Q guide is around 75 steps above.
Two Q at the mid point.
So so how quickly to what extent do you think you can continue to pass on price increases.
If at all or if there's any additional levels you have available to us.
Okay. So we looks like GBS in Gis GBS, we've seen price increases.
And that's just the market, we talked about how scares those engineers and software developers are so our clients are willing to talk to us about price increase because the value we're delivering.
For them in the in the market on Gis.
I keep saying it over and over again, meaning the exercise that we have to go through with a client is to show them. How the deal they're sitting on right now is not priced appropriately that it was done years ago and it literally doesn't make any sense in today's day and.
Age and that takes time, alright, because a lot of deals were done when you look at the space. It was basically a very price competitive.
Price competitive environment and what we're doing is literally stacking what we can do our qualities our capabilities and then our references up against who's in the market and we're doing incredibly well so and we're going to continue to play that game because I believe it's working not only.
People may want to point at the quarterly book to Bill, but again I look at that 12 months trailing and we're fine and that's going to help us fueled the growth that we need to hit are both short term and long term targets.
Okay, great. Thank you I appreciate that and just one quick follow on I know, you've you've mentioned macro and you mentioned the progress you've had can your segments, but if I'm trying to think of macro for more of a geographic standpoint is there anything specific to call out there I know.
Soft acquisition, a while ago that that may have had some some negative impact given what's happening in eastern Europe . So just any thoughts there.
I mean look we stay very close to that situation I think that we've done a fantastic job taking care of our people. It is a very unfortunate situation with Ukraine, but we haven't we haven't seen increased cost or what have you in that region.
And.
Again luck soft as as as a major piece of that a team and you can see that business continue to grow along with the book to Bill is is very healthy.
Okay, great well I appreciate that thank you very much.
No problem Savannah, one final question.
And our final question, what kind of <unk>.
Laurel.
<unk>.
Hey, guys, you've got Jonathan on for James I. Appreciate you taking my questions first one will be on tour. The lengthening decision cycle, but he talked about can you can you talk through which specific areas you may be seeing that and how you are contemplating that and your outlook for the year.
Give me that question again.
So you had mentioned some lengthening decision cycles earlier.
And this discussion can you talk about which specific areas, you're seeing that in and how how you're taking account for that.
How you were counting for that in your current outlook.
Okay, you're talking about lengthening decisions on deals.
Correct is that what you are saying, okay. So look I mean, that's baked into the outlook I mean, it's as simple as that and what we've done is we've looked at and specifically that's the Gis business and that is literally what I'm messaging to you all that we're going to continue to take a disciplined approach.
That's going to continue to help us drive our margins, it's going to help us continue to consolidate our data centers going to continue to help us scalar GDN. So that we can get that business to a spot where we feel really good about it. So yes, that's definitely baked into.
What our guidance is.
Understand if you go back if you go back and look at what I've been saying since the beginning of the year, it's been baked into the yearly guidance for a whole year, alright, I've been talking about this discipline approach.
Got it thanks, Mike in on on that point around scaling global delivery and want to talk to a hiring so can you dig into potential competition for talent.
And and how you're thinking about wage inflation in the current environment.
Okay. So the competition for talent, usually we focus on.
It's across the board, but literally the high skilled peace pieces that we have a lot of competition around is what I highlighted in my prepared remarks, it's usually in GBS and look you can pay people whatever you want if you don't have the right culture, those folks will not stay around.
And that's what my team has been focused on it's been focused on since we put in the transformation journey very proud of the culture that we put together, especially how we've cared for people. During Covid also the Russia, Ukraine situation that culture. It keeps people around it's not just the wages and that's the way we think about it.
Fair enough.
Loud and clear.
I appreciate all right, we'll look I appreciate everybody joining the call today, and what I would finish with before I close the call as you can see that our queue to results. We've got our execution momentum back we're very focused on our transformation journey, because we think it's delivering for our customers and colleagues along with that.
It is building what I call. These repeatable drivers of the business that allows my leadership team to now focus on the future versus the past and gives us the confidence that we can hit both are short term and long term goals and with that Savannah police close the goal.
Okay. Today's conference. Thank you for your participation I only ask that.
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