Loading...
01/11 03:43
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call revealed mixed financial results: a decline in revenue and margins, but an increase in new business signings and backlog. The Q&A indicated some optimism about AI-related growth and confidence in future targets, but also highlighted macroeconomic uncertainties affecting client decisions. The shareholder return plan seems stable, with potential debt refinancing. However, the lack of clear guidance and uneven contract renewals pose risks. Given these factors, the stock is likely to remain stable, resulting in a neutral prediction for the next two weeks.
Total Revenue $432 million, down 11.4% year-over-year due to Ex-L&S renewal timing.
Ex-L&S Revenue $361 million, down 8.5% year-over-year due to lower discretionary volumes in DWS and CA&I segments.
New Business TCV $337 million, up more than 80% year-over-year, driven by new logo signings.
Gross Profit $108 million, with a gross margin of 24.9%, down from 27.9% year-over-year due to low Ex-L&S revenue.
Non-GAAP Operating Profit Margin 2.8%, down from 7.1% year-over-year, in line with low single-digit expectations due to timing of L&S renewals.
Adjusted EBITDA $40 million, with a margin of 9.3%.
Net Income Negative $30 million, translating to a diluted loss of $0.42 per share.
Free Cash Flow $13 million, more than doubling from $4 million year-over-year.
Pre-Pension Free Cash Flow $23 million, up $11 million year-over-year.
Cash Balances $393 million, up from $377 million at year-end.
Net Leverage Ratio 3.2 times, relatively stable year-over-year.
Capital Expenditures Approximately $20 million, relatively flat year-over-year.
Backlog $2.9 billion, up 2% sequentially and 4% year-over-year.
DWS Segment Gross Margin 14.2%, down 20 basis points year-over-year due to investments in labor and training.
CA&I Segment Gross Margin 19.5%, up 10 basis points year-over-year.
ECS Segment Gross Margin 47.7%, down 690 basis points year-over-year due to timing of renewals.
Device Subscription Service (DSS): DSS signings included a large new logo win with a leading global technology supplier, providing services for 380,000 devices across 14 countries.
Post-Quantum Cryptography (PQC) solution: Launched a PQC solution to assess organizations' cryptographic environments and identify vulnerabilities.
Service Experience Accelerator: Rolling out a technology framework for service desk using generative AI to enhance service delivery.
Logistics Optimization Offering: Introduced multi-modal routing capabilities to enhance shipment execution and analytics.
Branch Banking Solution: Launched a new version of the branch banking solution and expanded partnership with Thought Machine.
New Business TCV: First quarter new business TCV was $337 million, up more than 50% sequentially and over 80% year-over-year.
DSS Opportunities: Built a significant pipeline of DSS opportunities during 2024, with clients moving forward with investments.
Security Services Growth: Expect security to remain an area of outsized growth, with new contracts signed for Managed Security Services.
Client Signings: New business signings from the back half of 2024 are ramping in all segments, primarily multi-year contracts.
Operational Efficiencies: Expect enhanced delivery operational efficiencies and upside in L&S solutions to improve profitability.
Workforce Optimization: Increased internal fulfillment on new business engagements by upskilling workforce and frontline workers.
Cash Flow Improvement: Pre-pension free cash flow was $23 million, up $11 million year-over-year, reflecting improved working capital dynamics.
Clear Path Forward 2050 Strategy: Investments in technology, talent, and innovation to enhance ecosystem and drive revenue growth.
Partnerships Expansion: Added two key technology partners to DWS Alliance ecosystem, enhancing IT Service Management capabilities.
Market Positioning: Achieved titanium partner status at Dell, enhancing growth incentives and access to resources.
Macroeconomic and Geopolitical Uncertainty: The company acknowledges ongoing macroeconomic and geopolitical uncertainty, including tariffs and trade restrictions, which could impact business activities.
Delayed Decision Making: Increased scrutiny on federal government spending has caused delayed decision making at state, local, and higher education clients, potentially affecting new business signings.
Revenue Exposure to China: Less than 1% of revenue is generated from China, indicating low exposure to geopolitical risks associated with that market.
Public Sector Concerns: Concerns related to federal funding levels among public sector clients are translating into delayed decision making, which may impact revenue.
Contract Renewal Timing: The timing of license and support contract renewals is uneven, which can lead to fluctuations in revenue recognition and impact financial performance.
Economic Factors Impacting Revenue: The macro environment is affecting the timing of new business signings, which may have a marginal impact on revenue generation.
Client Sector Exposure: The company has low exposure to higher risk client sectors such as automotive and retail, which may mitigate potential risks.
Pension Contributions: The company expects to make significant pension contributions, which could impact cash flow.
Operational Efficiency: While the company is focused on improving operational efficiencies, any setbacks in this area could affect profitability.
Clear Path Forward 2050 Strategy: The strategy focuses on expanding and enhancing the ecosystem to drive increased consumption, retention, and revenue growth.
Device Subscription Service (DSS): Significant pipeline of DSS opportunities, including a large contract for 380,000 devices across 14 countries.
Partnerships: Added key technology partners to enhance IT Service Management capabilities.
Security Solutions: Launched Post-Quantum Cryptography solution and expanded Managed Security Services.
AI Solutions: Developing solutions to facilitate AI adoption, including Service Experience Accelerator and logistics optimization offerings.
Revenue Growth Guidance: Reiterating total company revenue growth guidance range of positive 0.5% to positive 2.5% in constant currency.
Non-GAAP Operating Profit Margin Guidance: Expecting a range of 6.5% to 8.5%, with a path to exceed the midpoint.
Pre-Pension Free Cash Flow Guidance: Expecting approximately $100 million of pre-pension free cash flow for the year.
Capital Expenditures Guidance: Anticipating capital expenditures of approximately $95 million.
Second Quarter Revenue Expectations: Expecting approximately $375 million of Ex-L&S revenue, representing mid-single-digit sequential growth.
Shareholder Return Plan: The company expects to achieve approximately $100 million of pre-pension free cash flow for the full year 2025, which will allow for the preservation of strong cash balances. Additionally, there is an ongoing review of outstanding debt to consider refinancing or expanding the debt structure, which may further support shareholder returns.
The earnings call presents a mixed sentiment. Financial performance shows some improvements, like increased free cash flow and AI-driven margin enhancements, but is offset by a significant net loss and revenue shortfall. The Q&A highlights positive AI impact but also reveals concerns about pricing pressure, government shutdown effects, and vague guidance. While the company is optimistic about future performance, immediate financial metrics and uncertainties suggest a neutral outlook.
The earnings call revealed mixed financial results: a decline in revenue and margins, but an increase in new business signings and backlog. The Q&A indicated some optimism about AI-related growth and confidence in future targets, but also highlighted macroeconomic uncertainties affecting client decisions. The shareholder return plan seems stable, with potential debt refinancing. However, the lack of clear guidance and uneven contract renewals pose risks. Given these factors, the stock is likely to remain stable, resulting in a neutral prediction for the next two weeks.
The earnings call highlights strong financial performance with a 7% revenue increase, improved gross margins, and a significant rise in License and Support revenue. Despite some declines in specific segments, the company’s optimistic guidance and increased free cash flow expectations are positive indicators. The Q&A session revealed strong pricing power and higher renewal volumes, reinforcing a positive outlook. However, concerns about discretionary business and unclear management responses slightly temper the sentiment. Overall, these factors suggest a positive stock price movement in the short term.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
