Paul Obrecht

Paul Obrecht asked for more color on DXC Technology's geographical performance, specifically the declining trend in the US versus improvements in the rest of the world. He also inquired about the detailed productivity and cost savings achieved over the last year due to the internal embedding of AI.

Answer

CFO Rob Del Bene explained that US performance has decelerated, with a more pronounced focus on longer-term projects and slower short-term projects, while Europe and APAC regions show an improving trajectory. He confirmed internal benefits from AI, with headcount reductions keeping pace with revenue, and expects AI to accelerate future cost reductions.

Paul Obrecht followed up on DXC Technology's cost management discipline, requesting more details on the productivity and cost savings achieved over the last year due to increased internal AI embedding.

Answer

CFO Rob Del Bene confirmed internal benefits from AI, stating that headcount reductions have kept pace with the company's revenue profile, continuing prior years' discipline. He expects this trajectory to accelerate in the future specifically due to AI, enabling further cost reductions.

Paul Obrecht from Wolfe Research LLC inquired about the general state of enterprise readiness for AI adoption and how DXC employees are responding to significant internal changes and new leadership.

Answer

President & CEO Raul Fernandez characterized the current environment as an 'era of experimentation,' noting that significant work on data readiness is required. He described employees as 'energized' and committed to a winning culture, acknowledging the turnaround is a non-linear journey but that a strong foundation has been laid.

Speaking for Darrin Peller, Paul Obrecht inquired about the company's current cross-sell motion and whether GIS clients are showing more demand for GBS offerings. He also asked for a margin bridge from fiscal 2025 to the 2026 guidance and the drivers for margin expansion throughout the year.

Answer

CEO Raul Fernandez described using client engagement forums to showcase DXC's full end-to-end capabilities, which helps drive cross-sell opportunities. CFO Rob Del Bene explained the FY26 margin guide reflects revenue declines offset by cost discipline, with room for increased investments in growth capabilities like sales and marketing. The lower Q1 margin reflects seasonality, with improvement expected through the year as cost actions take hold.

Paul Obrecht, on for Darrin Peller, asked for more detail on the value-added services (VAS) from the 2024 investment strategy, including merchant adoption and the product pipeline. He also requested an update on sales productivity and the timeline for ramping up the new hires from 2024.

Answer

CEO Bruce Lowthers highlighted successful products like the account/card and ePIN offerings, and new launches including the Pago wallet in Peru and a 'lockable card' for subscription management. On sales productivity, he noted that all new reps were hired by Q3 2024 and that enterprise sales productivity saw approximately 40% growth, with the focus in 2025 on continued ramp-up to drive future growth.

Paul Obrecht questioned the ramp-up progress for the 170 new sales hires and the reasons for the deceleration in SMB direct growth from 10% to 5%.

Answer

CEO Bruce Lowthers explained that new enterprise hires take about six months to ramp while SMB hires take three to four months, with performance currently meeting or slightly exceeding expectations. He clarified that the SMB direct growth deceleration was a direct result of a proactive decision to 'prune' the portfolio by exiting the highest-risk merchants, a move made possible by strong growth in other areas that keeps the company ahead of its initial annual guidance.

Asked about the customer reception of the new industry-based go-to-market model and the timeline for Gen AI to become a material revenue contributor.

Answer

The industry-based go-to-market approach is resonating well with clients and helping win new logos, though it is still early in its implementation. Gen AI is not expected to materially contribute to revenue until late 2024 or 2025, as most work is currently proof-of-concepts and data platform preparation.

Inquired about demand trends across different industry verticals and the company's headcount strategy for 2024.

Answer

Executives noted that while all verticals were down, financial services is stable and energy/public health is a focus area. The decline in auto was mostly due to pricing. Headcount is currently decreasing due to attrition but they are selectively hiring and are confident they can ramp up quickly when demand returns.