Rob Del Bene
Chief Financial Officer at DXC Technology
Thanks, Raul, and good afternoon, everyone. Today, I'll review our second quarter results and provide you with our latest updates to our full year fiscal 2025 outlook, along with our view for the third quarter.
Before discussing our performance, I want to point out a change in our reporting of adjusted EBIT. Starting in the second quarter, gains and losses on the sale of real estate and facilities will no longer be included in the calculation of adjusted EBIT as these transactions are considered to be non-operational.
During the quarter, we executed sales of approximately $60 million with a loss of $27 million. To be clear, the cash proceeds from these transactions are not included in free cash flow and the losses, which were not included in any previous guidance for adjusted EBIT, are excluded from the reported second quarter adjusted EBIT results. We have provided a historical view of our results, reflecting the reporting change in our Excel data sheet that you can download from the IR section of DXC's website.
And now, on to our results. Total revenue of $3.2 billion declined 5.6% year-to-year organically, which was towards the high end of our guidance range. Our book-to-bill ratio for the quarter was 0.81, a modest improvement from 0.77 in 1Q. The trailing 12-month book-to-bill ratio was 0.88, the same as last quarter.
Adjusted EBIT margin expanded 130 basis points year-to-year to 8.6%, above our guidance for the quarter. This performance was primarily driven by a higher yield from cost management initiatives and a non-recurring benefit related to the settlement of a legal matter, which added 30 basis points to the margin.
Non-GAAP gross margin for the second quarter was 25.1%, expanding 170 basis points year-to-year. One full point of impact was due to a reclassification of business development costs to SG&A, which is a better representation of the nature of the spending. Absent this change, gross margin would have expanded 70 basis points year-to-year, primarily due to ongoing cost management within our GIS segment.
Non-GAAP SG&A as a percentage of revenue was 10.4% compared to 9.4% last year. The one point increase was related to the reclass of business development spending. Excluding the impact, non-GAAP SG&A as a percent of revenue would have been flat year-to-year.
Non-GAAP EPS was $0.93, up from $0.70 in the second quarter of last year. The $0.23 increase was primarily driven by higher adjusted EBIT and the impact of a lower share count, each contributing a $0.09 improvement.
Now, turning to our segment results. GBS, which represents 52% of total revenue, was down 1.6% year-to-year organically. The GBS profit margin increased by 30 basis points year-to-year to 12.8% largely due to more efficient resource management. Within the GBS segment, Consulting & Engineering Services declined 3.4% year-to-year organically largely due to market pressures impacting custom application projects, which contributes about two-thirds of CES' total revenue. The book-to-bill ratio of 0.93 improved from the first quarter, while the trailing 12-month book-to-bill ratio remains stable at just over 1.0.
Insurance and horizontal BPS grew 4.4% year-to-year organically. Embedded in this performance is our core insurance services and software business, representing close to 80% of the total, which was up 5% organically year-to-year. The book-to-bill ratio was 0.78 and on a trailing 12-month basis was 0.95. And as a reminder, bookings in this business tend to be lumpy with significant variation quarter-to-quarter, given the higher concentration of large and longer duration deals.
GIS, which represents 48% of total revenue, declined 9.6% year-to-year organically, as services revenue was down 8% in line with prior quarter, and resale declined 19%. Profit margin expanded almost 2.5 points year-to-year to 8.2% largely due to disciplined resource management, ongoing actions to optimize our data centers and networks, and the lower mix of resale revenue.
Within GIS, Cloud, ITO & Security revenues declined 10.1% year-to-year organically with services revenue down 9% and resale revenue down about 25%, as we continued to reduce the number of low-margin deals. The book-to-bill ratio was 0.69, primarily attributed to the timing of certain large deal renewals and our disciplined approach to new deals. The trailing 12-month book-to-bill ratio equaled 0.71.
Modern Workplace declined 8% year-to-year organically with services revenue down 7% and resale revenue down 12%. The book-to-bill ratio equaled 0.8 and the trailing 12-month book-to-bill ratio was 0.91, both in line with last quarter.
Now, turning to our cash flows and balance sheet. During the quarter, our free cash flow, defined as operating cash flow less capex, equaled $48 million compared to $91 million in the same period last year. The decline was largely driven by DSO performance, which deteriorated in the quarter.
Capital expenditures equaled $147 million, down $10 million year-to-year and new lease originations were [Technical Issues] about $10 million, down $14 million from last year. Taken together, capital expenditures and leasing originations declined $24 million for the prior period and as a percent of revenue, improved by 50 basis points to 4.8%.
Our free cash flow for the first half of fiscal 2025 equaled $93 million, compared to $16 million for the same period last year. And as a percent of revenue, capex and lease originations improved 70 basis points to 5.5%.
Now, a moment on our restructuring efforts, where we're taking a very measured approach. At the beginning of the year, we told you we would increase spending by approximately $250 million year-to-year. We're now revising that to a maximum of $150 million. This adjustment is reflected in our updated free cash flow guidance.
With disciplined hiring practices, we have reduced our net head count [Phonetic] by approximately 4,500 since the beginning of the fiscal year, putting us on track to achieve our cost saving plans for the year. We currently anticipate utilizing the full $250 million into fiscal 2026.
During the quarter, we reduced our debt through cash payments of approximately $227 million driven by retiring our outstanding commercial paper balance and paying down capital leases. This action was partially offset by the impact of the strengthening euro on our outstanding euro-denominated bonds.
Now, let me provide you with our latest thinking on our full year outlook. As we have half the year behind us, we're tightening the range for revenue and now, are expecting total revenue to decline between 5.5% and 4.5% year-to-year organically with the midpoint of the range unchanged. Given market conditions and somewhat longer conversion times we are seeing in our CES business, we now anticipate full year GBS revenue to decline slightly year-to-year, offset by GIS performance slightly better than our prior expectation.
As a result of our strong performance in the first half of the year, we're raising our full year adjusted EBIT margin outlook to a range of 7.0% to 7.5%, up from our prior guidance of 6.5% to 7.0%. We expect our adjusted EBIT margin during the second half of the year to be lower than the first half. This is primarily due to merit increases and ramping investments in sales, marketing, and IT, all partially offset by labor efficiencies.
We continue to expect a full year non-GAAP effective tax rate of approximately 32%. Full year non-GAAP diluted EPS is now anticipated to be between $3 and $3.25 compared to the prior outlook of $2.75 to $3. This update is primarily driven by the increase of our adjusted EBIT margin outlook.
Free cash flow for the full year is now expected to be approximately $550 million, an increase from our prior view of about $450 million. This improvement is largely due to the increase of our EBIT outlook and lower anticipated restructuring spending to a maximum of $150 million. These cash flow benefits are being partially offset by the expansion of working capital.
And now, for the third quarter. We expect total organic revenue to decline 5.5% to 4.5% with a sequential improvement in our book-to-bill ratio. We anticipate adjusted EBIT margin in the range of 7.0% to 7.5%, reflecting the higher investment activity I just mentioned. And finally, non-GAAP diluted EPS of $0.75 to $0.80.
And with that, let me turn the call back to Roger.
