• Total Revenue: $3.2 billion, declined 4.2% year over year organically.
• Adjusted EBIT Margin: 8.9%, expanded 140 basis points year over year.
• Non-GAAP EPS: $0.92, up 7% year over year.
• Free Cash Flow: $483 million for the quarter, $576 million year-to-date.
• Book-to-Bill Ratio: 1.33, highest in eight quarters.
• Non-GAAP Gross Margin: 25.1%, improved 150 basis points year over year.
• Non-GAAP SG&A: 10.3% of revenue, increased 70 basis points year over year.
• GBS Segment Revenue: 52% of total revenue, down 0.5% year over year organically.
• GBS Profit Margin: 13.4%, increased 150 basis points year over year.
• GIS Segment Revenue: 48% of total revenue, declined 7.8% year over year organically.
• GIS Profit Margin: 6.5%, declined 50 basis points year over year.
• Debt Reduction: Net debt reduced by more than $750 million to $2.1 billion.
• Cash on Hand: Approximately $1.7 billion.

• Warning! GuruFocus has detected 8 Warning Signs with DXC.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• DXC Technology Co (NYSE:DXC) reported revenue, adjusted EBIT margin, and non-GAAP EPS all ahead of guidance.
• The company delivered strong free cash flow of $483 million for the quarter, exceeding full-year fiscal 2025 guidance.
• DXC's revamped go-to-market approach resulted in a significant uptick in bookings, with a book-to-bill ratio of 1.3x, the highest in eight quarters.
• The company is investing in AI-driven transformation programs and has formed strategic partnerships, such as with SAP and ServiceNow, to enhance its service offerings.
• DXC's insurance and horizontal BPS segment showed strong performance with organic revenue growth of 5.6% year-over-year.

Negative Points

• Total revenue declined 4.2% year-over-year on an organic basis.
• The global infrastructure services segment saw a 7.8% year-over-year organic revenue decline.
• The company faces ongoing global uncertainties, including trade policy, geopolitical conflicts, inflation, and labor costs, which pressure corporate spending.
• Adjusted EBIT margin is expected to decline in the fourth quarter due to revenue decline and merit increases.
• There is a need for continued restructuring, with charges expected to be a maximum of $100 million above last year.

Q & A Highlights

Q: Can you explain the slight decrease in organic growth guidance for the fourth quarter despite strong bookings? A: The decrease is due to the lower bookings in the first half of the year, which takes time to flow into revenue. The improved bookings in the third quarter will start to impact revenue over time. - Robert Del Bene, CFO

Q: What factors contributed to the adjusted EBIT margin exceeding expectations in the third quarter? A: The margin was boosted by one-time equity compensation benefits and cost management initiatives. However, the fourth quarter margin will be impacted by revenue decline and merit increases. - Robert Del Bene, CFO

Q: How did seasonal budget flush activities impact bookings, and what is the outlook for deal environment? A: The improvement in bookings was driven by operational execution rather than seasonal factors. The demand for our services remains solid, and we are focusing on internal operations to improve predictability and growth. - Raul Fernandez, CEO

Q: Can you discuss the impact of deferred marketing expenses and restructuring charges on margins? A: We are being deliberate with investments, including marketing and IT, which are expected to increase over time. Restructuring charges are now expected to be lower than initially planned, with some spending pushed to fiscal 2026. - Robert Del Bene, CFO

Q: What are the opportunities for improvement across DXC's segments, and how do you view the potential for revenue growth and margin expansion? A: All segments have room for improvement, particularly in execution. We are focused on building across all offerings and geographies, with insurance performing well. Both revenue growth and margin expansion are possible across segments. - Raul Fernandez, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.