Q1 2026 DXC Technology Co Earnings Call
To ask a question simply press star, followed by the number 1 on your telephone keypad to withdraw, your question, press star 1. Again, I would now like to turn the call over to Roger Sachs vice president of investor relations. You may begin.
Thank you, operator. Good afternoon, everybody, and welcome to dxc Technologies, first quarter, fiscal, 2026 earnings conference. Call. We hope you've had a chance to review our earnings release posted to the IR section of DX's website.
Speaking on today's call are Raul Fernandez, our President and CEO; Ramnet Vancat Ramen, our new President of the Consulting and Engineering Services segment; and Rob Del Bene, our Chief Financial Officer.
Let me walk you through today's agenda.
First, Rahul will provide an overview of our results and an update on our strategic initiatives. Rob will then walk you through our financial performance for the quarter, as well as provide some thoughts on our second quarter and fiscal full year guidance. Robin will then take your questions. Certain comments made during today's call are forward-looking and subject to risks and uncertainties that can cause actual results to differ materially from those expressed on the call. You can find details of these risks and uncertainties in our annual report on Form 10-K and other SEC filings. We do not commit to updating any forward-looking statements during today's call.
Additionally. During this call, we will be discussing non-gaap Financial measures that we believe provide useful information to our investors, reconciliations to the most comparable gaap measures are included in the tables included in today's earnings release. And with that, let me turn the call over to Raul.
thank you, Roger, we delivered first quarter results at the high-end of our guided ranges for both organic Revenue growth, and adjusted ebit margin with non-gaap, EPS above the high end of guidance,
Specifically, during the quarter, total revenue declined 4.3% year-over-year on an organic basis.
Adjusted ebit margin was 6.8%, non-gaap diluted EPS was 68 cents and we also had another strong quarter of free cash flow generating 97 million compared to 45 million last year in q1.
Bookings increased 14% year-over-year our third consecutive quarter of double digit growth.
Resulting in a trailing 12-month book-to-bill ratio of 1.06 up from 1.03, at the end of fiscal 2025.
Growth was broad-based across many of our industry verticals.
This trajectory underscores, the emerging stronghold of our new, go to market, initiatives and improved execution.
We saw strong bookings in both Europe and Asia, Pacific, this quarter with book to Bill ratios. Well above 1 driven by public sector strength across, both regions and solid deal flow in manufacturing and consumer goods retail in Europe.
With a healthy Pipeline and steady deal inflows. We remain confident in our ability to consistently drive a trailing 12-month book to Bill ratio above 1.0.
We continue to attract top tier experienced talent to our leadership team with a shared passion to win.
I'm thrilled to welcome industry. Veteran ramnath ven guitar as president of Consulting and Engineering Services to leave the business into its next phase of growth.
Ramnath brings nearly 30 years of global experience from Accenture, where he built and grew high-performing businesses across industries and regions.
He has a strong track record of helping clients. Embrace Next Generation Technologies, especially Ai and delivering operational excellence through Innovation and disciplined execution.
Ram brings fresh perspective to CES, and we're confident, his leadership will help sharpen our go-to Market, Focus drive growth and unlock the segments full potential.
Thank you for the warm welcome.
I'm excited to join the dxc family, and Lead our CES business.
And such a pivotal time.
The first few weeks have been energizing, and I've been extremely impressed with our exceptional talent and the value that we're delivering for our clients,
I look forward to scaling our Innovation agenda to keep Pace with the rapidly. Changing, technology, landscape and deliver greater value for our clients and our shareholders.
Back to you Ralph. Thank you, ramnath
AI is redefining every business process and redefining every customer interaction.
Our approach to AI Solutions is centered around. Integrating AI seamlessly into the fabric of our clients operations ensuring that AI is not just an add-on, but a core component of their business strategy and go to market.
Combining our deep domain expertise with advanced AI capabilities.
We help clients across our segments move faster operate smarter and unlock outcomes that were previously Out Of Reach.
Recognizing that technology is only as good as the people behind it, we're investing with urgency in Talent training. Over 50,000 gen AI enabled engineers, and achieving AI Readiness across 92% of our technical teams.
Combined with our deep industry expertise, these capabilities are positioning dxc to lead with AI and deliver, real Enterprise grade impact.
We are seeing results from our investments.
We're proud to share. The dxz has been recognized by Gartner as an emerging leader in the inaugural Consulting and implementation Services Market quadrant for generative AI
We believe this recognition reflects both the strength of our current AI capabilities and our clear strategic vision for helping clients deploy, gen AI at scale with speed security and real business value.
It reinforces our position as a trusted transformation partner for Enterprises navigating complex, regulated Industries with emerging Technologies.
Let me share a couple of examples of how we are using AI based solutions to deliver impact for clients.
First, we signed a long-term agreement with uni caja
1 of Spain's, top Banks to modernize core operations, including mortgages payments procurement and Loan management.
Tackling fragmented processes, limited agility and Rising costs.
At the heart of the transformation is AI and gen AI.
Empowering document automation intelligent, customer communication, virtual assistants, and frictionless, resolution of customer needs.
The result faster service smarter operations and significant cost savings over time.
Next, a leading German automotive supplier. Turn to us to take control of a fragmented. Sap environment spread across 6 vendors in multiple countries and sites.
They needed. 1 partner to help them streamline sap service across manufacturing supply, chain Logistics, finance and procurement.
We're delivering exactly that: standardizing processes, cutting through complexity, and building a unified, efficient SAP service landscape that enhances productivity and drives growth.
As we expand our market reach, we know partnerships are key to scaling, which is why we continue to deepen our global ecosystem to unlock new opportunities. That's why I'm thrilled to announce that DXC has entered into a strategic partnership with Boomie, a leader in AI-driven integration automation.
Boomi connects applications, automates workflows, manages APIs, and ensures data integrity across cloud and on-premise environments.
By combining boomys AI tools with dxz, full stack, engineering Talent. Our customers can link their different systems, like orders inventory and shipping. So everything works together seamlessly.
This end-to-end connectivity helps clients streamline operations.
Automate routine tasks and reduce complexity.
It also enables faster smarter decision-making by surfacing insights faster to accelerate transformation
With 95% investigation, accuracy.
In marketing, we've cut content, creation, and video production time down by 30%.
In HR Predictive Analytics are helping us identify attrition risks, accelerate Talent matching and improve General Workforce utilization.
Our legal team is automating contract reviews and risk assessments. Lastly, in finance, we're improving forecasting speed and accuracy through AI-driven insights.
We're not just applying AI to improve our operations, we're pressure testing, and documenting our journey as client zero.
This hands-on experience helps us move faster, learn in real time, and bring smarter, more scalable solutions to our clients.
While first quarter organic Revenue growth came in at the high end of our guide. We know we need to do better and we're taking action.
Our pipeline continues to expand, and we're building toward more consistent bookings growth.
Our focus is clear, driving sustainable profitable growth.
we're sharpening execution across the company with our leaders, instilling a winning culture and tackling the structural and operational issues that matter the most
As part of this journey, we continue to build a workplace where all 120,000 colleagues feel valued supported and empowered that commitment was recently recognized by Newsweek which named DXE 1 of America's greatest workplaces for the second consecutive year.
Over the past 18 months, we've rebuilt our foundation, streamlining operations, strengthening leadership reorienting around Innovation, proactive, solutioning Performance Management, execution and talent.
Turnarounds of this magnitude take time, but we're clear on the road ahead. We're moving in the right direction and we have confidence in achieving our full year guidance.
Now, let me turn it back over to Ron.
Thank you, Raul, and good afternoon everyone today, I'll go over our first quarter results and provide guidance for the second quarter and our updated full fiscal year 2026 Outlook.
Before I begin a quick, reminder starting with first quarter. We're reporting our financial results in 3, segments that better align with how we run the business.
These are Consulting and Engineering Services or CES.
Global infrastructure services or GIS which includes cloud and IPO modern workplace security and horizontal Bo.
And finally Insurance software and services, or simply insurance.
For reference, we filed an AK last week that includes 2 years of Revenue, organic Revenue growth, and segment profitability under the new structure. This information is also available in our Excel data sheet which will be posted to dxc as investor relations website. Immediately, following today's call,
And now, starting with the first quarter results.
Total revenue is $3.2 billion, declining 4.3% on an organic basis, towards the top end of our guidance range.
As Rebel noted earlier, bookings grew by 14% year-to-year marking our third straight quarter of double digit growth.
Are booked to Bill ratio 0.9 for the quarter. Moderated from the levels, we achieved. During the second half of last year, largely reflecting typical seasonality in our business and the deferral of a couple of longer term. Larger deals in GIS,
adjusted ebit margin was 6.8% down modestly by 10 basis points year to year.
We're investing to support future Topline growth, while continuing to drive productivity to offset Revenue declines with the transition to 3 segments. We adopted an updated classification of spending between cost of goods sold and sgna as a result. Non-gaap growth margin expanded by 140 basis points. While sgna is a percent of Revenue increased by 230 basis, points reflecting the reclassification and Investments.
Given the request classifications, We Believe adjusted even represents the clearest view of profitability. For our results in the near term.
Partially offset by lower net. Interest expense, and now turning to our segment results.
CES, which represents 39% of total revenue declined? 4.4% year-over-year on an organic basis.
This reflects ongoing pressure and short cycle. Custom application projects with clients continuing to invest in larger, strategic deals which typically have significantly longer duration than short-term project-based services.
Underscoring client confidence in our capabilities. We drove bookings growth of 32% year-to-year for a strong book, to Bill ratio of 1.2. The third straight quarter of good performance, our trailing 12-month book, The Bill also stands at approximately 1.2, which we expect to lead to improving. CES Revenue, performance in the second half of this year and in fiscal 2027.
GIS, which represents 51% of total revenue, grew 5.7% year-over-year organically. This growth was consistent with our fourth quarter performance and in line with our full year expectations.
Bookings for GIS School modestly year to year with a book to Bill of 0.7 driven by a couple of large deals. I got deferred out of the quarter, which we expect to close in the coming quarters.
the trailing 12-month book to Bill improved to approximately 1.1,
Insurance, which represents 10% of total, revenue grew, 3.6% year-to-year, organically largely due to growth in software and volume-based increases in existing accounts.
We continue to expect business to grow at mid-single-digit rates for the year.
Now, turning to our cash flow and balance sheet.
During the quarter, we generated 97 million of free cash flow up from 45 million last year, this increase was largely driven by lower in Period Capital requirements and the timing of certain software payments.
As a result Capital expenditures as a percentage of Revenue, the client to 2.8% compared to 6% and the same period last year.
We also continued to minimize new financial lease originations, recording only $1 million this quarter.
Restructuring payments for the quarter, for an incremental 4 million year to year.
Since the start of fiscal 2025, we've taken deliberate steps to strengthen our balance sheet by reducing debt, and building cash to create Financial flexibility.
Over the past five quarters, we paid down nearly $350 million of capital leases while limiting new finance lease originations to just $25 million. These efforts, partially offset by currency movements and our euro-denominated bonds, have brought our total debt down $60 million to approximately $4 billion.
Over the same time period, our ability to consistently generate, strong free, cash flow enabled us to increase our cash balance by almost 570 million since the start of fiscal 2025 bringing it to 1.8 billion.
As a result, we have reduced our net debt by approximately 630 million.
With this solid Financial Foundation, we will continue to execute with focus and discipline against our Capital, allocation priorities for the year that include continuing to invest in our business. To accomplish our top priority driving sustained profitable Revenue growth
Further strengthening our balance sheet by minimizing new financial lease originations and retiring a portion of our senior notes maturing in January 2026. We are also returning capital to shareholders with plans to spend $150 million on share repurchases in fiscal 2026.
During the first quarter, we used our free cash flow to support these priorities reducing both debt and returning Capital to shareholders this included, 49 million of Capital East, paid amounts and repurchase of 3.3 million shares for $50 million with a cash outlay of 48 million.
Now, let me provide you with our full year, fiscal 2026 guidance. We continue to expect total organic Revenue to decline, 3% to 5% as a result of the benefit from currency Tailwind. We now, expect total reported Revenue in the range of 12.6 to 12.9 billion, an increase of approximately 430 million at the midpoint of the guide.
With an improving performance in the second half of the year, as the larger longer duration, deals ramp.
GIS is anticipated to decline at a mid single digit rate, organically, and insurance is expected to grow organically at a mid single digit rate in line with recent performance.
We continue to expect adjusted ebit margin to be between 7% and 8%.
We now expect non-gaap diluted EPS to be between 2 dollars and 85 cents and 3.35 cents an increase from our prior guide of 275 to 325 reflecting our higher reported Revenue projections. We continue to expect free cash flow for the full year to be approximately 600, million reflecting our evict guidance, and our continued expectation of $30 million of incremental restructuring spend in the year.
For the second quarter of fiscal 2026, we expect total organic Revenue to decline, 3 and a half percent to 4 and a half percent. We anticipate adjusting, the ebit margin in the range of 6 and a half percent to 7 and a half percent. And finally non-gaap diluted EPS of 65 to 75 cents with that. Let me turn the call back over to Roger.
Thank you rob. We'd like to now open the call for your questions. Operator, can you please provide the instructions?
Again, to ask a question.
Simply press star, followed by the number 1 on your telephone keypad. And our first question comes from the line of Brian Bergin. With TD Cohen, please go ahead
Hey guys, can you hear me?
Sure. Can I ask?
Hey Brian, sorry about that.
Um, I wanted to ask about just cash flow, the puts and takes as you move through the balance of Q1.
Fiscal Q1 2026, just the confidence. You have there anything we should be mindful of as you move through the remaining quarters.
um,
We we're confident in the guide we gave we did as we just mentioned, did a little better in the first quarter. Um, we we have levers uh we still have room for improvement and working capital. So that's a lever going forward.
Brian. We expect we're going through the analysis of the new tax legislation, and we think it will be a modest improvement from a cash tax perspective going forward, which is not baked into the current guide yet. We have to do our work, and we'll update you in 90 days on that.
So there's you know there's ample uh there's ample evidence here that we're going to continue the work the number. And so I feel really good about the guide.
And and from a risk perspective, I feel really good about it.
Okay. It's clear. Um, as it relates to bookings, you know it sounds like the you know some things may have moved to the right a little bit understandable in this environment just your 2 Q expectations. Just comment on Pipeline View, replenishment Post 1 Q signings. Those kind of things.
Yep. Yep. Yep. Our our pipeline for 2 Q is is strong and the and the way in the short term
The, the best indicator of General strength is the the non- mega pipeline. So below a hundred million dollar deals, if you will not that's not skewed by, you know, 1 or 2 big deals.
And and that that pipeline shows solid growth.
Across the board. It's most pronounced in CES
So the expectation is we'll we'll have another good quarter in 2q on bookings, generally.
Um, I I'm expecting, you know, we, we have the opportunity, let me put it that way. We have the opportunity to further expand the trailing 12 months into Q.
So it would be, you know, 3 quarters in a row, 4 quarters in a row of expanded trailing 12 months. So that's our expectation.
Okay, very good. Thank you.
Thanks.
Your next question comes from the line of Jonathan Lee with Guggenheim Partners. Please go ahead.
Great. Thanks for taking my questions. Can you walk us through what is contemplated in your fiscal 2026 revenue growth outlook from a macro perspective across the range, as well as across each of the segments? And can you also talk through the thought process of maintaining your revenue growth outlook despite an incremental quarter of visibility and the outperformance in the quarter?
Yes. So so thanks for the question. Jonathan look from a from a macro perspective, my comments will be similar.
To last quarter.
In that, in our guide, our minus 3 to Minus 5 guide, we left room for economic uncertainty and and I, I should say a worsening of conditions because of economic uncertainty. So, you know, that still stands said it last quarter still stands, we haven't seen a worsening in conditions.
So, I feel like we still have room at the low end of the guide, should conditions change.
Um, so feeling, you know, feeling solid in our in our guidance range uh from that perspective.
and and and and our prepared comments, we mentioned that see we do expect
Uh narrowing of the declines and CES. As we progress through the year, we're starting, you know, we we could see the layering in of the larger contracts that have come from the solid book to bills over the last 3 quarters.
So it'll start to turn into better Revenue, performance progressively as we go through the year and into fiscal 27.
So feeling good about that trajectory, um, Insurance. You know, we've got a solid backlog, um, you know, confident in the, in the midst of single digit, uh, projections for the year, maybe a little better in the second half than the first half is my expectation and GIS is going to be in, in, in the range of, of the first half of the year, will carry over into the second half of the year. That's, that's the current expectation. Although the, the pipeline's are are good in GIS as well. So, you know, hopefully we can improve that performance, but that's the current View.
Thanks for that color, Rob. And just to follow up, have you seen any changes to yield or win rates around your bookings given, you know, Liberation? I know we've been there. Any other macro factors?
Yeah, so we've been extremely consistent in first in the promo pricing perspective.
our, our
our, our pricing has been, you know, very, very consistent year-to-year, quarter to quarter
In, in the first quarter, our win rates increased.
Uh, hello to me single digits.
And that increase came in both CES and GIS.
Which was encouraging to us. So we, you know, had good performance from that perspective.
Appreciate that robbed.
Thank you.
Your next question comes from the line of
Jamie Friedman with Fescue Hannah. Please go ahead.
Hi. Um,
I had a couple of questions, I'll just ask them both up front. So, in terms of the decline in the insurance booking,
has the company begun the
um,
Journey of transitioning from my term to subscription. Yeah. And if not.
When do you expect that? Or would you expect that to occur? That's the first question. And then just a very big picture question, but I'd love to get your perspective on.
If AI.
Uh, improves or in any way deteriorates.
Your your perception of your competitive position.
Thank you.
Sure, let me start with the the last part. And then, uh, Rob will pick up on, uh, on the insurance. Uh, question, um, no look from from, uh, any time a new cycle of Technology, where literally we're Reinventing every process, every customer interaction, every business to business interaction. It creates a great opportunity, not just for established players. But obviously, for startups and disruptors, we, we've got an incredible Foundation, um, with our long, uh, history of relationships. Um, running very complex systems for our customers in, in many cases, in highly regulated Industries,
Remains Super Time intensive AI can produce code fast, but it often lacks the conceptual contextual depth needed for accuracy security and compliance and so it requires basically more testing. So while coding time goes down, testing time goes up slightly again, super early stage of learning by doing and we're learning by doing across all of our business functions and then across um our companies that uh that we serve globally. Rob back on insurance. Yeah. Jamie on, on here, Insurance question. The, the Dynamics uh the bookings, and backlog, Dynamics and insurance.
Are different than the other 2. The other 2 offerings that we have. It's it's it's the offering that has the most Revenue coverage from in the in the backlog.
So the and the booking Cycles are, they're, they're tend to be larger renewals at come periodically. Um, so, so in in period And even the trailing 12 months of bookings for the insurance business, doesn't have the same relationship to near-term revenues, as it does in the rest of the business.
And that's why I'm confident, even with the bookings, well below a book, the bill of 1, the last few quarters.
I know we have the backlog to deliver the mid single digit Revenue progression through throughout the year. So I'm feeling, you know, I feel good about that. Um, we haven't in your second point on that question, was the transition to SAS? And we have not had a significant transition yet. It's you know, strategically we're going to get there and we're going to go, you know, we're going through the the planning of that transition as we speak and and that'll be unveiled at a later time.
Got it. Thank you both.
Thank you.
Our next question comes from the line of Keith Bachmann with
BMO.
Hi, thank you very much. I know Brian had asked about.
Uh, the bookings outlook for the September quarter. I wanted to raise that up a little bit. And just how should we be thinking about?
Booking.
through the year, in terms of the pipeline,
And really, the orientation of my question. I just, what do you think the bill needs to be?
um,
Such that when you arrive at 27, you know a zero or in in terms of Revenue growth might might be possible, but I'm just trying to, you know, can you can you talk about bookings trends that we might expect for the year?
To yeah. And and what does it need to be to to to get to a zero? Yeah.
Yeah, so so, so, Keith. Thanks for the question and there, there, there's a lot packed into that question. First, I just preface everything. What we, we don't, we don't give guidance on on bookings, right?
But I'll tell you that, um, the the full year of pipelines we have are healthy. They're strong.
So, that is a good indicator and gives us confidence in future bookings. And you heard Raul's comments at the beginning of the call.
And so it's a Preface on data, it's prefaced on on what's in our current pipelines. The the
The the level of book to Bill required does vary by offerings, just heard my comments related to the insurance business. So I'm going to set that aside as I answer this question because it has different Dynamics
The the portfolio, the rest of the portfolio.
CES has less and backlogged than GIS as you enter a year or enter a quarter. So the bookings Dynamics are more important in CES to to get higher book to bills. Consistently to get a trailing 12 months, you know, above 1, to get to sustained to stabilize and get to sustain growth.
A little less. So in GIS.
Higher for CES; a little lower for GIS.
And let me, let me just give some additional color, just just, um, on on the Dynamics of this, as I've been here 18 months, um, realized early on that the company had done obviously, a, a good job. Historically, in responding to rfps and being competitive in renewals, we are much better competitively in in our RFP process and we're getting much better in our renewal uh statistics. But we're also adding proactive solutioning. And that is key. That is us bringing net new ideas. Net new solutions that leverages some aspect of our implementation Heritage and that leads to more opportunities with a higher probability of wins. So, this proactive solutioning that we're literally rolling out this quarter. And, and and Beyond in scaling, We'll add to the pipe that that, uh, Rob commented on.
It makes sense. Any comments on how duration may change as the year unfolds?
Of of your of your backlog.
Yeah, Keith hard to predict. Um it depends entirely on the mix of smaller Project based services and larger deals. I'll tell you the project Based Services as I described them earning 6 to 9 months
And and the larger, the larger more strategic deals burn anywhere in the range of 15 to 25 months.
So that that mix really determines what the average duration is so mixing any quarter could, you know, could vary, pretty significantly. Um, and so we have been had a, a larger mix to the more strategic deals, the last 3 quarters, which, which is why in CES, we have not had Revenue improvements to date, but we could see it, you know, we could see it on a, on a going forward basis.
All right, makes sense. Many thanks gentlemen. Cheers.
Thank you. Thank you.
Your next question comes from the line.
Hey guys, thanks for the question. It's Antonio on for James. I wanted to double click in
Uh, into the contracts that you guys are. Um, looking into like as far as shutting some of the, the, um, of the lower margin contracts and, uh, how the sales traction around that is going with those new pricing constructs.
Yeah, Antonio we so. So the approach we've taken on from a contractual standpoint where we have a contract
Where the where the margins are. Not favorable. We always enter into the the renewal period with a strategy to to work with the customer on both price and terms.
To improve the situation for us and to deliver more value to the customer. So that's that's the way the way we approach this, we don't approach it with a definitive list of contracts. We want to exit
So I I'd say over the last over the last couple of years as we've, you know, as we've approached the market upon renewal, we've been able to get more favorable terms and arrive at a mutually beneficial relationship going forward.
That's helpful and then on gen AI. Um you know what type of investment strategy are you pursuing their is it more um uh like organic more more like an organic? And then how is that baked into some of these new engagements as far as pricing goes as well?
Sure, um, look, I I think all companies that have have got a, a, a history, uh, or Heritage of of using technology to advance their businesses are actively learning by doing. And, and we are doing the same thing across our internal functions and also across key functions such as our security operations centers, where we're deploying disruptive, but proven technology, testing that technology, uh, getting kpis that are clear uh, in in, in early, um, PC's and learning how to scale those, uh, in a much broader way. So we, we are getting and, and seeing the impact of efficiency how that efficiency then uh leads to both Revenue growth as well as cost. Uh,
Be with the breadth and depth of where we're applying AI. Not just for our own internal operations, but being thought Leaders with our customers.
Got it. Thank you.
Your next question comes from the line of tension Hall with JP Morgan. Please go ahead.
Thanks so much ra. I also want to pick your brain on AI. I'm curious if you're seeing
existing clients look to, uh, re-engage with dxc to
Consider adding AI content. And if that is happening already,
Is it impacting your bookings and ARR? And is there any way that it always is that? That question of...
addition or subtraction, that kind of thing. Just want to pick your brand on that.
Yeah, no, no, no, no. It's absolutely Edition. It's additive and what I mentioned earlier about proactive, solutioning what we're trying to do is to focus in on highly scalable replicable Frameworks that are AI Centric.
And and have some other uh, hook where we've got some Advantage. Right? So we know the industry, it's a highly regulated uh business that we've been serving for many years. We know the existing business processes. We know the existing um data situation meaning, is it ready to use? Do we both need to work on it uh to get it ready to use. So we are targeting our our, our new proactive solutions that we're bringing to our
Customers which by the way, are being, uh, you know, everybody wants to hear new ideas that have real bottom line impact and results. And so I'm happy with the, uh, with the packaging up that we've, we've got with these proactive Solutions and the initial conversations we're having with great clients.
Great. I appreciate those thoughts and and Rama, welcome to the call. If you're on the call, can I ask a question to you, just
Coming from Accenture.
Evaluating Cs and the time you've been there, how, how strong are the bones there? Do you anticipate making, uh, meaningful or just more modest changes? Any thoughts on the delivery capability? That kind of thing. Thank you.
Thank you, thank you for the welcome. Um, it's been um um. It's been a fabulous experience coming in and taking a look at um,
The strength of the people and the capabilities that we have at DXC, the client's stories and examples that we have. What we really need to do is make sure that we follow the pieces that Raul mentioned at the beginning, which is sustainable, profitable growth.
And there are really.
Strong foundational elements that are in there uh which Rob spoke about the book to bill is very strong with 1.2. So my focus is really going to be on how do we convert the backlog without any leakages and make sure that in a programmatic way convert those to revenues.
Which is on the top line side and on the execution side. Clearly, there are efficiencies to be had.
whether it's on operational efficiency or on delivery execution uh by streamlining some of the processes that we have and making it a lot more simpler but
The the foundational elements are extremely strong. The client base is fantastic. And, and the people capability is absolutely world class. So I'm uh, very, very bullish of, uh, being able to convert this and really translating, uh, what Rob and Ralph said, uh, from a strong book to Bill to a strong Revenue, growth story,
Excellent. Roger, don't be mad. Third question, really, really quick, just robbed for you. The just, the gross margin comparability. I haven't gotten through the restatements is when we're getting this question, is there a way to
To get a comparable gross margin figure for the quarter.
Um, yeah. I mean, our our, our gross margins and and you'll see it. You'll see it in the, in the data sheets, or or gross margins are stable. Um, you know, we had some as, as we've uh, sharpened, our
We've gone through a lot of integration work systems work as we've sharpened, our uh, classification of spending between cost and expense.
Um, on a, on a year-to-year basis. You see the mark, the gross margins going up?
Um, so that year that year to year is really the result of sharpening, our pencil and better aligning spending with cost versus expense but our but our margins quarter of quarter consistent. So and you know, we expect that going forward. So
thank you for taking my question.
Thank you.
Hi thanks. This is Paul Breton for Darren Raul you. You obviously have extensive visibility into Enterprises infrastructures and data foundations. Can you just provide us with an update on Enterprise Readiness for AI? You know what share of of Enterprises are actually ready to leverage these AI Solutions versus the ones who still have extensive work to do before being able to leverage it.
You know, I I I spent time obviously with our customers but I'm also an investor in in earlier stage companies. So I, I measure ourselves not just against the big competitors and then obviously, leading class companies in in many industries that we serve, but also, uh, up and-coming disruptors. And so I looking looking at it from that point of view, I'm I'm very optimistic that this will have a profound business impact and will change every interaction, every business to business interaction, every business to Consumer interaction. But that change using AI will require a rethink. And process will require a relook at data.
And will require a new methodology. We've talked a lot in the past about waterfall and agile. There will be a new way that we Implement and part of what we're doing. Um what we're what we're documenting by doing is trying to put together a framework that we can share with our customers to take this journey in a in a much more streamlined fashion. We are in the era of experimentation. All of us are trying it in many ways.
There is no way to learn, uh, other than doing. So, curiosity, is King here and it's super important for our customers, but there is a lot of data Readiness that that needs to be addressed, obviously, um, privacy and and all other types of regulatory issues need to be addressed. So plenty of work to be done because again, this isn't a plug-in and just accelerate an existing process, this will be rethinking every process using AI to replicate human functions. Using AI to augment human intensity by lowering operational intensity. So plenty of change, and if you're in the front line of that change and you can document that change and share that change and experience with your customers, you're in a great position as a partner.
Thanks that's really helpful and then there's obviously been lots of change on our way at the company in the past few years, with with new leaders coming in and efforts to enhance the operating model revamp to go to market approach. Can you just touch on how employees have been responding to these changes internally?
Yeah, employees are energized, um, committed to a winning culture, committed to competing across every opportunity. Um and I think what we've brought, if you think about the last you know, 18 months and and I think about it in 6 month increments the first month was Heavy assessment and beginning to bring in new Talent. The second the second 6 month period was adding to new 10.
Talent and laying the foundation for new, go to market Solutions, and uh, and and and processes. And and we're in the, in the middle of the, of the last period. The next 6 months, where we're, where we're scaling those. And as we enter the second year, um, we think that the foundation that we've laid is very, very strong. The new Talent um, has, has has been here for, for a period of time. And you can see the impact that they've got across the organization, but it it's, it's not going to be a linear Journey. It hasn't been and we'll have accelerations in some areas. We'll we'll have some areas that don't move as quickly, but we feel that we've got a handle on how to turn this company into a sustainable Growth Company.
Appreciate the caller. Thank you.
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Our next question comes from the line of Rob Borgas with Deep Dive Equity Research. Please go ahead.
Uh great thank you Rod Bush here. Hey, so historically DXE margins seasonally improved as the fiscal year would progress
I think your guidance is not implying seasonally better margins down the road. So I'm wondering if is that reflecting some guidance conservatism or are? There other factors at work to offset the past seasonality that would exist
Yeah, thanks for the question Rod. So
you're you're right 1 Q to 2 Q.
Seasonality fairly consistently. So a little less. So this year, um, so that's true. However, we do have margins increasing in the second half of the year in the guide inherent in the guide.
so, so we do
We do have an expectation that we'll be improving margins in the back half of the year. So, it's a little different pattern than previous years. But nevertheless, progressive margins, as we go along.
Okay. Okay great. And then hey just a big picture question. You mentioned the goal of achieving profitable Revenue growth and I just wanted to ask, can you can you just outline the main dxc, repositioning factors that give you confidence that you're going to hit that crossover point at some point where you move into profitable growth or
Or maybe it's achieving growth, that's more kind of at par with with a peer group or something but what are the main factors and and when do you see that crossover point being reached?
Sure, we've touched on a couple of them, obviously, a trailing book to bill is, is key to that. And, and Rob mentioned where the hurdle point is on that. But for us, it's it's, it's really around sales opportunities. And the our Effectiveness in, in winning, um, it comes down to winning, renewals that make sense economically for us. And the customer, it comes down to winning
Situations where we get invited to compete and, and those are RFP or advisory driven opportunities. And then 1 new gear, which was not here before are the new proactive Solutions where we've stepped back and we've thought, what can we do, what can we bring using AI? That leverages some Heritage meaning industry knowledge process knowledge technology, knowledge data, knowledge with proactive and highly replicable Solutions and that is just coming into the marketplace today and we are scaling that and and that's what gives me confidence that we're on the right trajectory
Thank you.
Thanks for
With no further questions in queue, I will now turn the call back over to Roger Sachs.
Remarks. Great. Thank you everybody for joining us today and we look forward to speaking with you again, next quarter.
Thank you.
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