What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-05-19 compared with 2022-05-26 · 198 added, 231 removed, 301 unchanged (59% of the section changed)

10 unchanged sentences

DXC helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds.

The world’s largest companies and public sector organizations trust DXC to deploy services across the Enterprise Technology Stack to drive new levels of performance, competitiveness, and customer experience.

The world’s largest companies and public sector organizations trust DXC to deploy services to drive new levels of performance, competitiveness, and customer experience across their IT estates.

We generate revenue by offering a wide range of information technology services and solutions primarily in North America, Europe, Asia, and Australia.

4 unchanged sentences

Results of Operations

The following table sets forth certain financial data for fiscal 2022 and 2021:

The following table provides financial data for fiscal 2023 and 2022:

Fiscal Years Ended

1 unchanged sentence

Revenues $ 14,430 $ 16,265

Income before income taxes 1,141 654

Income tax expense 405 800

Net income (loss) $ 736 $ (146)

Diluted income (loss) per common share:

(Loss) income before income taxes (885) 1,141

Income tax (benefit) expense (319) 405

Net (loss) income $ (566) $ 736

Diluted (loss) income per common share:

$ (2.48) $ 2.81

Fiscal 2022 Highlights

Fiscal 2022 financial highlights include the following:

• Fiscal 2022 revenues were $16,265 million, a decrease of 8.3% as compared to fiscal 2021.

See "Revenues” below for additional information.

• Fiscal 2022 net income and diluted income per share were $736 million and $2.81, respectively, compared to net loss and diluted loss per share of $146 million and $0.59, respectively, for fiscal 2021.

Net income increased by $882 million during fiscal 2022 as compared to the prior fiscal year.

The increase was primarily due to increases in non-service components of net periodic pension income attributable to changes in mark-to-market actuarial assumptions and asset valuations, cost optimization realized in the current period, lower costs after the dispositions of the HPS and HHS businesses, lower transaction, separation and integration-related costs, a reduction in restructuring activities, and decreases in depreciation and amortization, partially offset by a reduction in revenue, an increase in debt extinguishment costs, and the gain on disposition of the HHS business during the third quarter fiscal 2021.

Net income included the cumulative impact of certain items totaling $171 million during fiscal 2022, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, gains on dispositions, impairment losses, debt extinguishment costs, pension and other post-retirement benefit ("OPEB") actuarial and settlement gains, and a tax adjustment.

• Fiscal 2022 income tax expense decreased significantly compared to fiscal 2021 as a result of the gain on disposition of the HHS business, which included the impact of non-tax deductible goodwill in fiscal 2021.

• Our cash and cash equivalents were $2,672 million at March 31, 2022.

• We generated $1,501 million of cash from operations during fiscal 2022, as compared to $124 million during fiscal 2021.

During fiscal 2022 and fiscal 2021, the distribution of our revenues across operating segments and geographies were as follows:

Our revenues by geography and operating segments are provided below:

Fiscal Years Ended Fiscal Year Ended

3 unchanged sentences

United States $ 4,320 $ 4,775 (9.5) % $ 4,320 (9.5) %

2,295 2,413 (4.9) % 2,199 (8.9) %

United Kingdom 1,883 2,295 (18.0) % 2,137 (6.9) %

Other Europe 4,429 5,117 (13.4) % 4,849 (5.2) %

10 unchanged sentences

For more information, see "Non-GAAP Financial Measures."

The decrease in revenues for fiscal 2022 compared with fiscal 2021, reflects the disposition of the HPS business during the first quarter of fiscal 2022, in addition to disposition of the HHS business during the third quarter of fiscal 2021.

Project completions, project terminations, and contractual price adjustments also contributed to the decrease in revenues.

The decrease in revenues was partially offset by additional services provided to new and existing customers, increased pass-through revenue associated with the resale of hardware and software, and increased run-rate project volumes.

Fiscal 2022 revenues included a favorable foreign currency exchange rate impact of 0.8%, primarily driven by the weakening of the U.S.

dollar against the British Pound, Canadian Dollar, and Australian Dollar.

For a discussion of risks associated with our foreign operations, see Part I, Item 1A - Risk Factors subsections titled, "Our ability to compete in certain markets we serve is dependent on our ability to continue to expand our capacity in certain offshore locations.

However, as our presence in these locations increases, we are exposed to risks inherent to these locations which may adversely affect our revenue and profitability." and “Our international operations are exposed to risks, including fluctuations in exchange rates, which may be beyond our control."

Total revenue for fiscal 2023 was $14.4 billion, a decrease of $1,835 million or 11.3%, as compared to the same period a year ago.

The 11.3% decrease against the comparative period includes a 6.0% unfavorable foreign currency exchange rate impact, a 2.6% decline in revenue from the disposition of certain businesses, and a 2.7% decline in organic revenue.

Organic revenue growth is a non-GAAP measure.

For more information, see "Non-GAAP Financial Measures."

The unfavorable foreign currency exchange rate impact is primarily driven by the strengthening of the U.S.

dollar against the British Pound, Euro, and Australian Dollar.

For a discussion of risks associated with our foreign operations, see Part I, Item 1A - "Risk Factors."

Global Business Services

Our GBS revenues were $7.6 billion for fiscal 2022, a decrease of 8.9% compared to fiscal 2021.

GBS revenue in constant currency decreased 9.3% compared to fiscal 2021.

The decrease in GBS revenues was primarily due to the disposition of the HPS business at the beginning of the first quarter of fiscal 2022, the disposition of the HHS business during the third quarter of fiscal 2021, and project completions.

The decrease in GBS revenues was partially offset by an increase in run-rate project volumes and additional services provided to new and existing customers.

GBS revenues were $7.0 billion for fiscal 2023, a decrease of $638 million or 8.4% compared to fiscal 2022.

The 8.4% decrease against the comparative period includes a 5.9% unfavorable foreign currency exchange rate impact and a 4.9% decline in revenue from the disposition of certain businesses, partially offset by 2.4% organic revenue growth from additional services provided to new and existing customers.

Global Infrastructure Services

Our GIS revenues were $8.7 billion for fiscal 2022, a decrease of 7.7% compared to fiscal 2021.

GIS revenue in constant currency decreased 8.9% compared to fiscal 2021.

The decrease in GIS revenues reflects project completions, project terminations, a decrease in run-rate project volumes, and contractual price adjustments.

The decrease in GIS revenues was partially offset by additional services provided to new and existing customers and increased pass-through revenue associated with the resale of hardware and software.

During fiscal 2022, GBS and GIS had contract awards of $9.4 billion and $8.7 billion, respectively, compared with $11.0 billion and $8.8 billion, respectively, during fiscal 2021.

GIS revenues were $7.5 billion for fiscal 2023, a decrease of $1,197 million or 13.8% compared to fiscal 2022.

The 13.8% decrease against the comparative period includes a 6.0% unfavorable foreign currency exchange rate impact, 0.6% decline in revenue from the disposition of certain businesses, and a 7.2% decline in organic revenue from project completions, early terminations, and lower resale revenue.

Costs and Expenses

Our total costs and expenses were as follows:

Fiscal Years Ended

Amount Percentage of Revenues

(in millions) March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021 Percentage Point Change

Dollar Amount

Fiscal Years Ended Change

(in millions) March 31, 2023 March 31, 2022 Dollar Percent

Costs of services (excludes depreciation and amortization and restructuring costs) $ 11,246 $ 12,683 $ (1,437) (11.3) %

6 unchanged sentences

Gain on disposition of businesses (190) (371) 181 (48.8)

Other (income) expense, net (1,081) 102 (6.6) 0.6 (7.2)

Other expense (income), net 1,084 (1,081) 2,165 (200.3)

Total costs and expenses $ 15,315 $ 15,124 $ 191 1.3 %

The 330 basis point decrease in total costs and expenses as a percentage of revenue for fiscal 2022 primarily reflects cost optimization realized in the current period, lower costs after the dispositions of the HPS and HHS businesses, lower transaction, separation and integration-related costs, a reduction in restructuring activities, decreases in depreciation and amortization and an increase in other (income) expense attributed to income from non-service components of net periodic pension (income) expense, partially offset by a decrease in gain on disposition of businesses and an increase in debt extinguishment costs.

Costs of Services

Cost of services, excluding depreciation and amortization and restructuring costs ("COS"), was $12.7 billion for fiscal 2022, as compared to $14.1 billion in fiscal 2021.

COS decreased $1.4 billion compared to the prior fiscal year.

The decrease in COS was primarily due to cost optimization savings realized during fiscal 2022 and reduced costs resulting from the dispositions of the HPS business during the first quarter of fiscal 2022 and the HHS business during the third quarter of fiscal 2021.

COS as a percentage of revenue decreased 1.7% as compared to the prior fiscal year.

The decrease was primarily driven by cost reductions exceeding the associated decline in revenue compared to the same period in the prior fiscal year.

Costs of services, excluding depreciation and amortization and restructuring costs ("COS"), were $11.2 billion for fiscal 2023, a decrease of $1,437 million compared to the prior fiscal year.

The $1,437 million decrease in expenses was primarily due to a favorable foreign currency exchange rate impact of $761 million, a decrease in volumes from divestitures and lower revenue levels, and a reduction in professional services and contractor-related expenses from our cost optimization efforts.

Gross margin (Revenues less COS as a percentage of revenue) was 22.1% and 22.0% for fiscal 2023 and 2022, respectively.

Selling, General and Administrative

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"), was $1.4 billion for fiscal 2022, as compared to $2.1 billion in fiscal 2021.

SG&A decreased $0.7 billion compared to the prior fiscal year.

The decrease in SG&A was primarily driven by lower transaction, separation and integration-related costs, cost optimization savings realized during fiscal 2022, and reduced costs resulting from the dispositions of the HPS business during the first quarter of fiscal 2022 and the HHS business during the third quarter of fiscal 2021.

Transaction, separation and integration-related costs, included in SG&A, were $26 million during fiscal 2022, as compared to $358 million during fiscal 2021.

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"), was $1.4 billion for fiscal 2023, a decrease of $33 million compared to the prior fiscal year.

In fiscal 2023, SG&A as a percentage of revenues was 9.5%, an increase of 80 basis points against the comparative period.

The $33 million decrease in SG&A expenses was primarily due to a favorable foreign currency exchange rate impact of $68 million, lower real estate costs and other professional and contractor-related expenses, and a $10 million decrease in transaction, separation and integration-related (“TSI”) costs, partially offset by a $46 million charge for merger-related indemnification expenses, $29 million for arbitration losses, and $8 million for the SEC Matter.

Depreciation and Amortization

Depreciation expense was $625 million for fiscal 2022, as compared to $754 million in fiscal 2021.

Depreciation expense decreased $129 million primarily due to a reduction in assets due to impairment of un-deployed assets in the prior year, and asset retirements.

Amortization expense was $1,092 million for fiscal 2022, as compared to $1,216 million in fiscal 2021.

Amortization expense decreased $124 million primarily due to a decrease in customer related intangibles related to the disposition of the HHS business during the third quarter of fiscal 2021 and a reduction in transition and transformation contract cost amortization due to contract completions.

Depreciation expense was $519 million for fiscal 2023, a decrease of $106 million compared to the prior fiscal year.

The decrease in depreciation expense was primarily due to lower average net property and equipment balances and a favorable foreign currency exchange rate impact of $30 million for fiscal 2023.

Amortization expense was $1,000 million for fiscal 2023, a decrease of $92 million compared to the prior fiscal year.

The decrease in amortization expense was primarily due to a decrease in software amortization, a reduction in transition and transformation contract cost amortization due to contract completions, and a favorable foreign currency exchange rate impact of $43 million for fiscal 2023.

Restructuring Costs

1 unchanged sentence

During fiscal 2023, management approved global cost savings initiatives designed to better align our workforce and facility structures.

Total restructuring costs recorded, net of reversals, during fiscal 2022 and 2021 were $318 million and $551 million, respectively.

Total restructuring costs recorded, net of reversals, during fiscal 2023 were $216 million, a decrease of $102 million compared to the prior fiscal year.

See Note 13 - "Restructuring Costs" for additional information about our restructuring actions.

Interest Expense and Interest Income

Interest expense for fiscal 2022 was $204 million, as compared to $361 million in fiscal 2021, a decrease of 43%.

The decrease in interest expense was primarily due to a reduction in bonds and term loans and the Company's refinancing of its high coupon debt during fiscal 2022, decreased amounts drawn on our revolving credit facility, and decreases to finance leases and asset financing.

Interest income for fiscal 2022 was $65 million, as compared to $98 million in fiscal 2021.

The decrease in interest income was primarily driven by lower income from our multicurrency cash pools and money market accounts as well as decreases in lease interest income.

For fiscal 2023, net interest expense (interest expense less interest income) was $65 million, a decrease of $74 million as compared to the prior fiscal year.

The decrease in net interest expense against the comparative period was primarily due to higher income from notional cash pool deposits due to global interest rate hikes, a reduction in notes payable and term loans resulting from the Company's refinancing of its high coupon debt in fiscal 2022, and decreases in interest expense from finance leases and borrowings for asset financing.

Debt Extinguishment Costs

Debt extinguishment costs for fiscal 2022 were $311 million, as compared to $41 million in fiscal 2021.

Debt extinguishment costs for fiscal 2022 include costs related to the full redemption of our Euro-denominated term loan facility, two series of 4.45% senior notes due fiscal 2023, 4.25% senior notes due fiscal 2025, 2.75% senior notes due fiscal 2025, 4.125% senior notes due fiscal 2026, 4.75% senior notes due fiscal 2028, 7.45% senior notes due fiscal 2030, extinguishment of debt associated with asset financing, and costs related to the decrease in our revolving credit facility limit from $4 billion to $3 billion.

Debt extinguishment costs for fiscal 2021 consisted primarily of costs related to the redemption of 4.00% senior notes due fiscal 2024.

Gain on Dispositions

During the first quarter of fiscal 2022, DXC sold its HPS business for $551 million which resulted in an estimated pre-tax gain on sale of $331 million, net of closing costs.

Insignificant businesses were also sold during fiscal 2022 that resulted in a gain of $53 million.

There were no debt extinguishment costs recorded for fiscal 2023.

Debt extinguishment costs were $311 million for fiscal 2022, for the partial and full redemption of term loans, senior notes, and extinguishment of debt associated with asset financing.

Gain on Disposition of Businesses

During fiscal 2023, DXC sold its FDB business, resulting in a pre-tax gain of $215 million.

During fiscal 2023, DXC also sold certain insignificant businesses that resulted in a net loss of $25 million.

During fiscal 2022, DXC sold its HPS business resulting in a pre-tax gain on sale of $331 million.

During fiscal 2022, DXC also sold certain insignificant businesses that resulted in a gain of $53 million.

This was partially offset by $13 million in sales price adjustments related to prior year dispositions, which resulted from changes in projected closing net working capital.

During the third quarter of fiscal 2021, DXC sold its HHS business for $5.0 billion which resulted in an estimated pre-tax gain on sale of $2,014 million, net of closing costs.

Insignificant businesses were also sold during fiscal 2021 that resulted in a loss of $10 million.

Other (Income) Expense, Net

Other (income) expense, net comprises non-service cost components of net periodic pension (income) expense, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, equity earnings of unconsolidated affiliates and other miscellaneous gains and losses.

The components of other (income) expense, net for fiscal 2022 and 2021 are as follows:

Other Expense (Income), Net

Other expense (income), net comprises non-service cost components of net periodic pension income, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, equity earnings of unconsolidated affiliates and other miscellaneous gains and losses.

The components of other expense (income), net for fiscal 2023 and 2022 were as follows:

Fiscal Years Ended

(in millions) March 31, 2022 March 31, 2021

Non-service cost components of net periodic pension (income) expense $ (1,066) $ 110

Foreign currency loss 13 14

Other gain (28) (22)

(in millions) March 31, 2023 March 31, 2022 Dollar Change

Non-service cost components of net periodic pension expense (income) $ 1,180 $ (1,066) $ 2,246

Foreign currency (gain) loss (15) 13 (28)

Gain on sale of assets (90) (88) (2)

Other loss 9 60 (51)

Total $ 1,084 $ (1,081) $ 2,165

The $1,183 million increase in other income, net, for fiscal 2022, as compared to the prior fiscal year, was due to a year-over-year increase of $1,176 million in non-service components of net periodic pension income attributable to changes in mark-to-market actuarial assumptions and asset valuations, a $6 million increase in other gains from sales of non-operating assets, and a year-over-year favorable foreign currency impact of $1 million.

Other expense (income), net, was $1,084 million and $(1,081) million in fiscal 2023 and fiscal 2022, respectively, a change of $2,165 million compared to the prior fiscal year that was primarily due to:

• net periodic pension expense increased by $2,246 million primarily due to a $1,070 million mark-to-market pension loss in fiscal 2023 versus a $664 million gain in fiscal 2022, a $361 million settlement loss in fiscal 2023 related to the buy-out of a defined benefit pension plan in the U.K., and $131 million less pension income in fiscal 2023 due to changes in expected returns on assets and other actuarial assumptions.

See Note 14 - "Pension and Other Benefit Plans" for additional information.

• a foreign currency gain of $15 million in fiscal 2023 versus a $13 million loss in fiscal 2022 primarily due to movements of exchange rates on our foreign currency-denominated assets and liabilities, related hedges including forward contracts to manage our exposure to economic risk, and the cost of our hedging program.

• a $2 million of increase in gains from sales of assets.

• a $51 million decrease in other losses, primarily due to a greater amount of impairment losses in the comparative period.

Our effective tax rate ("ETR") on income (loss) from continuing operations, before taxes, for fiscal 2023 and 2022 was (36.0)% and 35.5%, respectively.

2 unchanged sentences

In fiscal 2023, the ETR was primarily impacted by:

• A reduction in base erosion and transition taxes, which increased income tax benefit and decreased the ETR by $81 million and 9.1%, respectively.

• Income tax and foreign tax credits, which increased income tax benefit and decreased the ETR by $71 million and 8.0%, respectively, offset by tax expense on U.S.

international tax inclusions which decreased tax benefit and increased the ETR by $51 million and 5.8%, respectively.

• Non-taxable gains and losses from business divestitures, which increased income tax benefit and decreased the ETR by $67 million and 7.6%, respectively.

In fiscal 2022, the ETR was primarily impacted by:

• Income tax and foreign tax credits, which decreased income tax expense and decreased the ETR by $174 million and 15.2%, respectively.

1 unchanged sentence

• Adjustments to uncertain tax positions that increased the overall income tax expense and the ETR by $78 million and 6.8%, respectively.

In fiscal 2021, the ETR was primarily impacted by:

• Impact of the HHS and other business divestitures, which increased tax expense and increased the ETR $344 million and 52.6%, respectively.

The HHS tax gain increased tax expense and the ETR as the tax basis of assets sold, primarily goodwill, was lower than the book basis.

• Continued losses in countries where we are recording a valuation allowance on certain deferred tax assets, primarily in Belgium, Denmark, Italy, France, Luxembourg, and U.S., and an impairment of the full German deferred tax asset, which increased income tax expense and increased the ETR by $1,565 million and 239.3%, respectively.

• An increase in Income Tax and Foreign Tax Credits, which decreased income tax expense and decreased the ETR by $319 million and 48.7%, respectively.

• Local losses on investments in Luxembourg that increased the foreign rate differential and decreased the ETR by $1,226 million and 187.5%, respectively, with an offsetting increase in the ETR due to an increase in the valuation allowance of the same amount.

• The Company recognized adjustments to uncertain tax positions that increased the overall income tax expense and the ETR by $112 million and 17.2%, respectively.

The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal 2009 through the tax year ended October 31, 2018.

1 unchanged sentence

The IRS examined several issues for these tax years that resulted in various audit adjustments.

The Company and the IRS Office of Appeals have an agreement in principle as to various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs and tax planning strategies in previous years.

As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in the IRS Office of Appeals or the U.S.

Tax Court, these matters are not fully reserved and would result in a federal and state tax expense of approximately $458 million (including estimated interest and penalties) for the unreserved portion of these items and related cash cost if we do not prevail.

The Company and the IRS Office of Appeals have settled various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs and tax planning strategies in previous years.

As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in the U.S.

Tax Court, these matters are not fully reserved and would result in incremental federal and state tax expense and cash tax payments of approximately $477 million (including estimated interest and penalties) for the unreserved portion of these items if we do not prevail.

We have received notices of deficiency with respect to fiscal 2009, 2010, 2011 and 2013 and have timely filed petitions with the U.S.

1 unchanged sentence

Tax Court matters to be resolved in the next 12 months.

The Company has agreed to extend the statute of limitations for fiscal years 2008 through 2010 to April 30, 2022, for fiscal years 2014 through fiscal 2017 to February 28, 2023, and for the tax years ended October 31, 2017, and October 31, 2018, to September 30, 2023.

The statute of limitations on assessments for fiscal years 2011 through 2013 has expired, with the exception of a $6 million refund claim for 2012 for which the statute remains open.

However, as previously noted, fiscal years 2011 and 2013 are in the U.S.

Tax Court and consequently these years will remain open until the U.S.

Tax Court proceedings have concluded.

The Company expects to reach resolution with regard to disagreed items for fiscal years 2009 through 2013 no earlier than fiscal 2025, and to reach resolution for fiscal years 2014 through 2017, within 12 months.

The Company’s fiscal years 2009, 2010, 2011 and 2013 are in the U.S.

Tax Court, and consequently these years will remain open until such proceedings have concluded.

The statute of limitations on assessments related to a refund claim for fiscal year 2012 is open through February 28, 2025.

The Company has agreed to extend the statute of limitations for fiscal and tax return years 2014 through 2020 to September 30, 2024.

The Company expects to reach resolution for fiscal and tax return years 2009 through 2020 no earlier than fiscal 2025.

The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions.

1 unchanged sentence

The Company believes the outcomes that are reasonably possible within the next 12 months to result in a reduction in its liability for uncertain tax positions, excluding interest, penalties, and tax carry-forwards, would be approximately $16 million.

Earnings (Loss) Per Share

Diluted earnings (loss) per share for fiscal 2022 was $2.81, as compared to $(0.59) in fiscal 2021.

The earnings per share increase was due to an increase of $882 million in net income.

Earnings Per Share (EPS)

Diluted (loss) earnings per share for fiscal 2023 was $(2.48), as compared to $2.81 in fiscal 2022.

The decrease in earnings per share was due to a decrease of $1,286 million in net income attributable to DXC common stockholders.

Diluted EPS for fiscal 2023 includes $0.74 per share of restructuring costs, $0.06 per share of transaction, separation and integration-related costs, $1.38 per share of amortization of acquired intangible assets, $0.22 per share of merger-related indemnification, arbitration loss, and SEC Matter costs, $0.06 per share of impairment losses, $4.89 per share of pension and OPEB actuarial and settlement losses, $(0.92) per share of net gains on dispositions, and $(0.52) per share of tax adjustments primarily relating to tax adjustments to impair or recognize certain deferred tax assets and adjustments for changes in tax legislation.

Diluted earnings per share for fiscal 2022 includes $0.99 per share of restructuring costs, $0.07 per share of transaction, separation and integration-related costs, $1.35 per share of amortization of acquired intangible assets, $0.09 per share of impairment losses, $(0.93) per share of net gains on dispositions, $(1.99) per share of pension and OPEB actuarial and settlement gains, $0.93 per share of debt extinguishment costs, and $0.17 per share of tax adjustments primarily relating to tax adjustments to impair or recognize certain deferred tax assets and adjustments for changes in tax legislation.

Diluted loss per share for fiscal 2021 includes $1.79 per share of restructuring costs, $1.06 per share of transaction, separation and integration-related costs, $1.59 per share of amortization of acquired intangible assets, $0.55 per share of impairment losses, $(4.22) per share of net gains on dispositions, $1.57 per share of pension and OPEB actuarial and settlement losses, $0.12 per share of debt extinguishment costs, and $0.55 per share of tax adjustment relating to a valuation allowance on deferred tax assets offset by changes in outside basis related to held for sale classification of the HPS business.

Ukraine / Russia Update

Subsequent to the end of the quarter, DXC exited its domestic Russian business.

This action achieves a significant portion of our commitment to exit Russia.

The sale of this business has provided continuing employment opportunities for many former DXC employees who have chosen to stay in Russia.

The exit of this market will reduce revenues by approximately $140 million annually.

The company is transitioning global business previously serviced by our DXC Russian colleagues to international teams and expects to complete this process by the end of the second quarter.

DXC's Ukraine business supported approximately $250 million of revenue, predominantly serving international customers.

Despite the ongoing conflict, these revenues have only seen a minor impact stemming from the conflict.

Our global teams have worked to augment their Ukrainian colleagues, and to continue to deliver for our customers through the conflict.

Non-GAAP Financial Measures

We present non-GAAP financial measures of performance which are derived from the statements of operations of DXC.

These non-GAAP financial measures include earnings before interest and taxes (“EBIT”), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, and non-GAAP EPS, and constant currency revenues.

We believe EBIT, adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, and non-GAAP EPS provide investors with useful supplemental information about our operating performance after excluding certain categories of expenses.

9 unchanged sentences

Further, assets such as goodwill may be significantly impacted by market conditions outside of management’s control.

Selected references are made to revenue growth on an “organic basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates and without the impacts of acquisitions and divestitures, thereby providing comparisons of operating performance from period to period of the business that we have owned during both periods presented.

Organic revenue growth is calculated by dividing the year-over-year change in GAAP revenues attributed to organic growth by the GAAP revenues reported in the prior comparable period.

This approach is used for all results where the functional currency is not the U.S.

We believe organic revenue growth provides investors with useful supplemental information about our revenues after excluding the effect of currency exchange rate fluctuations for currencies other than U.S.

dollars and the effects of acquisitions and divestitures in both periods presented.

There are limitations to the use of the non-GAAP financial measures presented in this report.

6 unchanged sentences

This approach is used for all results where the functional currency is not the U.S.

Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Fiscal 2022 Highlights.”

Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenues.”

Certain non-GAAP financial measures and the respective most directly comparable financial measures calculated and presented in accordance with GAAP include:

Fiscal Years Ended

(in millions) March 31, 2022 March 31, 2021 Change Percentage Change

Income before income taxes $ 1,141 $ 654 $ 487 74.5 %

Dollar Amount

Fiscal Years Ended Change

(in millions) March 31, 2023 March 31, 2022 Dollar Percent

(Loss) income before income taxes $ (885) $ 1,141 $ (2,026) (177.6) %

Non-GAAP income before income taxes $ 1,092 $ 1,236 $ (144) (11.7) %

Net income (loss) $ 736 $ (146) $ 882 604.1 %

Net (loss) income $ (566) $ 736 $ (1,302) (176.9) %

Adjusted EBIT $ 1,157 $ 1,375 $ (218) (15.9) %

4 unchanged sentences

• Amortization of acquired intangible assets – includes amortization of intangible assets acquired through business combinations.

• Gains and losses on dispositions – gains and losses related to dispositions of businesses, strategic assets and interests in less than wholly-owned entities.

• Pension and OPEB actuarial and settlement gains and losses – pension and OPEB actuarial mark to market adjustments and settlement gains and losses.

• Debt extinguishment costs – costs associated with early retirement, redemption, repayment or repurchase of debt and debt-like items including any breakage, make-whole premium, prepayment penalty or similar costs as well as solicitation and other legal and advisory expenses.

• Merger related indemnification – represents the Company’s current estimate of potential liability to HPE for a tax related indemnification;

indemnification on the Forsyth v.

and HPE litigation (2) ;

and indemnification on the Company’s final liability to HPE on the Oracle v.

HPE litigation.

These obligations are pursuant to HPES merger.

• SEC Matter - represents the Company’s liability related to a previously disclosed investigation into its historical determination and disclosure of certain “transaction, separation, and integration-related costs” as part of the Company’s non-GAAP adjustments.

• Gains and losses on dispositions – gains and losses related to dispositions of businesses, strategic assets and interests in less than wholly-owned entities.

• Arbitration loss - reflects losses arising from arbitration decisions in the third and fourth quarters of fiscal 2023.

• Impairment losses – impairment losses on assets classified as long-term on the balance sheet.

• Tax adjustments – reflects discrete tax adjustments to impair or recognize certain deferred tax assets and adjustments for changes in tax legislation.

Income tax expense of merger and divestitures is separately computed based on the underlying transaction.

• Tax adjustments – discrete tax adjustments to impair or recognize certain deferred tax assets and adjustments for changes in tax legislation.

Income tax expense (benefit) of merger and divestitures is separately computed based on the underlying transaction.

Income tax expense of all other (non-discrete) non-GAAP adjustments is computed by applying the jurisdictional tax rate to the pre-tax adjustments on a jurisdictional basis.

(1) TSI-Related Costs for both periods presented include fees and other internal and external expenses associated with legal, accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential acquisitions, dispositions and strategic investments, whether or not announced or consummated.

The TSI-Related costs for fiscal 2023 include $16 million of costs incurred in connection with activities related to acquisitions and divestitures.

The TSI-Related costs for fiscal 2022 include $14 million of costs to execute dispositions (including $2 million for the sale of HHS which closed in October 2020 and $12 million for the sale of HPS which closed on April 1, 2021);

$2 million legal costs and a $(12) million credit towards Perspecta Arbitration settlement;

$5 million in expenses related to integration projects resulting from the CSC – HPE ES merger (including costs associated with continuing efforts to separate certain IT systems) and $17 million of costs incurred in connection with activities related to other acquisitions and divestitures.

The TSI-Related costs for fiscal 2021 include $250 million of costs to execute dispositions (including $142 million for the sale of HHS which closed in October 2020 and $61 million for the sale of the healthcare software business which closed on April 1, 2021);

$42 million in expenses related to integration projects resulting from the CSC – HPES merger (including costs associated with continuing efforts to separate certain IT systems) and $66 million of costs incurred in connection with activities related to other acquisitions and divestitures.

(2) Gains and losses on dispositions for fiscal 2022 include a $331 million gain on sale of the HPS business, gains of $23 million on other dispositions and loss of $13 million on adjustments relating to the sale of the HHS business.

Gains and losses on dispositions for fiscal 2021 includes a $2,014 million gain on sale of the HHS business, a gain of $5 million on sales of other insignificant businesses, and a $15 million loss on equity securities without readily determinable fair value, which were adjusted to fair value following receipt of a bona fide offer to purchase.

(3) Debt extinguishment costs adjustments for fiscal 2022 includes $18 million to fully redeem two series of our 4.45% senior notes due fiscal 2023, $7 million associated with asset financing, $1 million to fully redeem our Euro-denominated term loan facility, $41 million to fully redeem our 4.25% senior notes due fiscal 2025, $26 million to fully redeem our 2.75% senior notes due fiscal 2025, $58 million to fully redeem our 4.125% senior notes due fiscal 2026, $87 million to fully redeem our 4.750% senior notes due fiscal 2028, $71 million to fully redeem our 7.45% senior notes due fiscal 2030, and $2 million related to the decrease in our revolving credit facility limit.

Debt extinguishment costs adjustments for fiscal 2021 includes $34 million to fully redeem our 4.00% senior notes due fiscal 2024 and $7 million to partially redeem two series of our 4.45% senior notes due fiscal 2023 via tender offer.

(4) Impairment losses for fiscal 2022 includes a $10 million impairment charge of capitalized TSI related property and equipment and a $21 million impairment charge of loan receivable and stock warrants associated with a strategic investment.

Impairment losses for fiscal 2021 were $190 million.

This includes $165 million impairment for assets pre-purchased through preferred vendor agreements and determined un-deployable, $12 million partial impairment of acquired software, $7 million partial impairment of internally developed software intended for internal use and external sale, and $6 million of capitalized transition and transformation contract costs.

(5) Tax adjustment for fiscal 2022 includes a $50 million net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates, and $(7) million of adjustment to the transition tax.

Tax adjustment for fiscal 2021 includes $175 million for the impairment of the German deferred tax asset via a valuation allowance, $9 million for tax expense relating to the USPS spin-off, offset by $35 million tax benefit related to the held for sale classification of the Healthcare Provider Software business, and $7 million tax benefit related to prior restructuring charges.

The German tax asset was created from multiple periods of losses in Germany that, if not for certain non-GAAP adjustments of restructurings, pension mark to market loss, and impairments, would not have required the asset to be impaired and a valuation allowance established.

$5 million in expenses related to integration projects resulting from the HPES merger (including costs associated with continuing efforts to separate certain IT systems) and $17 million of costs incurred in connection with activities related to other acquisitions and divestitures.

(2) See Note 21 – “Commitments and Contingencies,” Forsyth, et al.

and Hewlett Packard Enterprise.

(3) See Note 21 – “Commitments and Contingencies,” SEC Matter.

(4) Gains and losses on dispositions for fiscal 2023 include a $215 million gain on sale of the FDB business and a net loss of $25 million on dispositions related to certain insignificant businesses.

Gains and losses on dispositions for fiscal 2022 include a $331 million gain on sale of the HPS business, gains of $23 million on dispositions related to certain insignificant businesses, and a loss of $13 million on adjustments relating to the sale of the HHS business.

(5) Impairment losses for fiscal 2023 include an $8 million impairment charge for customer related intangible assets and an $11 million impairment charge associated with a strategic investment.

Impairment losses for fiscal 2022 include a $10 million impairment charge of capitalized TSI related property and equipment and a $21 million impairment charge of loan receivable and stock warrants associated with a strategic investment.

(6) Debt extinguishment costs for fiscal 2022 were $311 million for the partial and full redemption of term loans, senior notes, and extinguishment of debt associated with asset financing.

(7) Tax adjustment for fiscal 2023 includes $(87) million net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates, $(28) million of adjustments to transition tax, and $(5) million for changes in valuation allowances on deferred tax assets.

Tax adjustment for fiscal 2022 includes $50 million net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates and $(7) million of adjustment to transition tax.

A reconciliation of reported results to non-GAAP results is as follows:

5 unchanged sentences

Integration-Related Costs Amortization

Assets Impairment

Losses Gains and

Dispositions Pension and

Assets Merger Related Indemnification,

Arbitration Loss, and SEC Matter Gains and

Dispositions Impairment

Losses Pension and

OPEB Actuarial

and Settlement

Extinguishment

Adjustment Non-GAAP

Income before income taxes 1,141 318 26 434 31 (341) (684) 311 — 1,236

Income tax expense 405 65 7 90 7 (104) (171) 73 (43) 329

Net income 736 253 19 344 24 (237) (513) 238 43 907

net loss attributable to non-controlling interest, net of tax 18 — — — — — (5) — — 13

Net income attributable to DXC common stockholders $ 718 $ 253 $ 19 $ 344 $ 24 $ (237) $ (508) $ 238 $ 43 $ 894

Losses Tax Adjustment Non-GAAP

(Loss) income before income taxes (885) 216 16 402 83 (190) 19 1,431 — 1,092

Income tax (benefit) expense (319) 44 3 81 31 25 4 291 120 280

Net (loss) income (566) 172 13 321 52 (215) 15 1,140 (120) 812

net income attributable to non-controlling interest, net of tax 2 — — — — — — 2 — 4

Net (loss) income attributable to DXC common stockholders $ (568) $ 172 $ 13 $ 321 $ 52 $ (215) $ 15 $ 1,138 (120) $ 808

Effective Tax Rate 36.0 % 25.6 %

4 unchanged sentences

Diluted EPS 228.99 232.62 232.62 232.62 232.62 232.62 232.62 232.62 232.62 232.62

* The net periodic pension cost within net income includes $441 million of actual return on plan assets, whereas the net periodic pension cost within non-GAAP net income includes $581 million of expected long-term return on pension assets of defined benefit plans subject to interim remeasurement.

Fiscal Year Ended March 31, 2022

13 unchanged sentences

Income tax expense 405 65 7 90 7 (104) (171) 73 (43) 329

Net (loss) income (146) 459 271 409 141 (1,084) 404 31 142 627

Net income 736 253 19 344 24 (237) (513) 238 43 907

net income attributable to non-controlling interest, net of tax 18 — — — — — (5) — — 13

Net (loss) income attributable to DXC common stockholders $ (149) $ 459 $ 271 $ 409 $ 141 $ (1,084) $ 404 $ 31 $ 142 $ 624

Net income attributable to DXC common stockholders $ 718 $ 253 $ 19 $ 344 $ 24 $ (237) $ (508) $ 238 $ 43 $ 894

Effective Tax Rate 35.5 % 26.6 %

4 unchanged sentences

Diluted EPS 255.21 255.21 255.21 255.21 255.21 255.21 255.21 255.21 255.21 255.21

* The net periodic pension cost within net loss includes $1,401 million of actual return on plan assets, whereas the net periodic pension cost within non-GAAP net income includes $659 million of expected long-term return on pension assets of defined benefit plans subject to interim remeasurement.

Reconciliations of net income to adjusted EBIT are as follows:

Reconciliations of revenue growth to organic revenue growth are as follows:

Fiscal Years Ended

March 31, 2023 March 31, 2022

Total revenue growth (11.3) % (8.3) %

Foreign currency 6.0 % (0.8) %

Acquisitions and divestitures 2.6 % 6.5 %

Organic revenue growth (2.7) % (2.6) %

GBS revenue growth (8.4) % (8.9) %

Foreign currency 5.9 % (0.4) %

Acquisitions and divestitures 4.9 % 13.2 %

GBS organic revenue growth 2.4 % 3.9 %

GIS revenue growth (13.8) % (7.7) %

Foreign currency 6.0 % (1.2) %

Acquisitions and divestitures 0.6 % 0.5 %

GIS organic revenue growth (7.2) % (8.4) %

Reconciliations of net (loss) income to adjusted EBIT are as follows:

Fiscal Years Ended

(in millions) March 31, 2023 March 31, 2022

Net income (loss) $ 736 $ (146)

Income tax expense 405 800

Net (loss) income $ (566) $ 736

Income tax (benefit) expense (319) 405

Interest income (135) (65)

4 unchanged sentences

Amortization of acquired intangible assets 402 434

Merger-related indemnification 46 —

SEC Matter 8 —

Gains on dispositions (190) (341)

Pension and OPEB actuarial and settlement (gains) and losses (684) 519

Debt extinguishment costs 311 41

Arbitration loss 29 —

Impairment losses 19 31

Pension and OPEB actuarial and settlement losses (gains) 1,431 (684)

Debt extinguishment costs — 311

Adjusted EBIT $ 1,157 $ 1,375

1 unchanged sentence

Cash and Cash Equivalents and Cash Flows

As of March 31, 2022, our cash and cash equivalents ("cash") was $2.7 billion, of which $1.3 billion was held outside of the U.S.

We maintain various multi-currency, multi-entity, cross-border, physical and notional cash and pool arrangements with various counterparties to manage liquidity efficiently that enable participating subsidiaries to draw on the Company’s pooled resources to meet liquidity needs.

As of March 31, 2023, our cash and cash equivalents ("cash") were $1.9 billion, of which $0.7 billion was held outside of the U.S.

We maintain various multi-currency, multi-entity, cross-border, physical and notional cash pool arrangements with various counterparties to manage liquidity efficiently that enable participating subsidiaries to draw on the Company’s pooled resources to meet liquidity needs.

A significant portion of the cash held by our foreign subsidiaries is not expected to be impacted by U.S.

5 unchanged sentences

We have $0.1 billion in cash held by foreign subsidiaries used for local operations that is subject to country-specific limitations which may restrict or result in increased costs in the repatriation of these funds.

In addition, other practical considerations may limit our use of consolidated cash, including cash of $0.6 billion held in a German financial services subsidiary subject to regulatory requirements, and $0.2 billion held by majority owned consolidated subsidiaries where third-parties or public shareholders hold minority interests.

During the third quarter of fiscal 2022, we entered into an agreement to sell our German financial services subsidiary.

In addition, other practical considerations may limit our use of consolidated cash.

This includes cash of $0.1 billion held by majority owned consolidated subsidiaries where third parties or public shareholders hold minority interests.

The following table summarizes our cash flow activity:

Fiscal Year Ended

(in millions) March 31, 2022 March 31, 2021

(in millions) March 31, 2023 March 31, 2022 Change

Net cash provided by (used in):

8 unchanged sentences

Operating cash flow

Net cash provided by operating activities during fiscal 2022 was $1,501 million as compared to $124 million during fiscal 2021.

The increase of $1,377 million was primarily due to an increase in net income, net of adjustments of $1,578 million, partially offset by a $201 million unfavorable change in working capital due to higher working capital outflows during fiscal 2022 .

Net cash provided by operating activities was $1,415 million and $1,501 million, respectively, in fiscal 2023 and fiscal 2022, a decrease of $86 million compared to the prior fiscal year.

The decrease was primarily due to:

• a decrease in net income, net of adjustments of $455 million.

• a $369 million favorable change in working capital during fiscal 2023 compared to fiscal 2022 primarily from improvements in our cash collections and payables cycles.

These improvements were partially offset by a decrease in advance contract payments and deferred revenue due to timing of certain large customer cash receipts in fiscal 2022 .

The following table contains certain key working capital metrics:

4 unchanged sentences

Investing cash flow

Net cash (used in) provided by investing activities was $(60) million during fiscal 2022 as compared to $4,665 million during fiscal 2021.

The decrease of $4,725 million was primarily due to a decrease in business dispositions of $4,414 million, the absence of proceeds from acquisitions and cash collections related to deferred purchase price receivables of $184 million and $159 million in fiscal 2021, and a decrease in proceeds from sale of assets of $64 million.

This was partially offset by proceeds from short-term investing of $24 million in fiscal 2022.

Net cash used in investing activities was $635 million and $60 million, respectively, in fiscal 2023 and fiscal 2022, a change of $575 million compared to the prior fiscal year.

The change was primarily due to:

• cash outflows from business dispositions of $147 million in fiscal 2023 caused by net cash deposit outflows from the sale of the FDB Business, compared with a cash inflow of $533 million in fiscal 2022 resulting from various business divestitures in fiscal 2022.

• an $80 million year-over-year decrease in cash outflows from capital expenditures primarily from software purchased and developed.

• $71 million of incremental proceeds from sales of assets, partially offset by a $46 million decrease in proceeds from short-term and other investing activities.

Financing cash flow

Net cash used in financing activities during fiscal 2022 was $(1,818) million as compared to $(5,476) million during fiscal 2021.

The $3,658 million decrease in cash used was primarily due to decreased net repayments on long-term debt of $2,624 million and net draws on commercial paper of $529 million.

In addition, net repayments totaling $1,500 million were made during fiscal 2021 on lines of credit that were not drawn against during fiscal 2022 and dividends of $53 million were paid in fiscal 2021, but not paid during fiscal 2022.

This was partially offset by share repurchases of $628 million in fiscal 2022, an increase in payments for debt extinguishment costs of $303 million, an increase in payments on capital leases and borrowings for asset financing of $60 million, and an increase in payments for other financing activities, net, of $58 million, primarily due to an $85 million repayment of liability resulting from a financing transaction entered in fiscal 2017.

Net cash used in financing activities was $1,507 million and $1,818 million, respectively, in fiscal 2023 and fiscal 2022, a change of $311 million compared to the prior fiscal year.

The lower net cash used in financing activities was primarily due to:

• a $479 million decrease in payments on capital leases and borrowings for asset financings, as the Company continues reducing the volume of these financing arrangements.

• a $216 million decrease in cash outflows from net borrowings on long term debt, including the payment of debt extinguishment costs in fiscal 2022.

• a $73 million increase in cash inflows from other financing activities, primarily due to a fiscal 2022 $85 million repayment of a liability resulting from a financing transaction entered in fiscal 2017.

• a $406 million increase in cash outflows from net repayments on commercial paper borrowings, as the Company reduced its activity in the European commercial paper market due to lower operating cash requirements.

• $51 million of higher cash outflows from increased share repurchase activity and related taxes paid on net share settlements.

Debt Financing

4 unchanged sentences

Total debt $ 4,400 $ 4,965

The $0.5 billion decrease in total debt during fiscal 2022 was primarily attributed to the retirement of all the remaining $319 million of the 4.45% senior notes due fiscal 2023 using the proceeds from the sale of our HPS Business, and the repurchase of the $33 million of the 4.125% senior notes due fiscal 2026.

More than $550 million of net finance lease liabilities and borrowings for assets acquired under long-term financing were also repaid using the proceeds from the divestitures of other businesses and existing cash on hand.

The decrease was partially offset by the issuance of Euro and U.S.

Dollar Senior Notes of which proceeds were used to repay term loans and senior notes as discussed below.

Euro Senior Notes Issuance

During the second quarter of fiscal 2022, we issued (i) €750 million aggregate principal amount of our 0.450% senior notes due fiscal 2028 and (ii) €600 million aggregate principal amount of our 0.950% senior notes due fiscal 2032 (collectively, the “Euro Notes”).

The proceeds from the Euro Notes were applied principally to the repayment in full of the €400 million aggregate principal amount of outstanding borrowings under our Euro-denominated term loan facility, the repayment of our U.S.

dollar-denominated 4.25% senior notes due fiscal 2025 and the repayment of our Sterling-denominated 2.75% senior notes due fiscal 2025.

Dollar Senior Notes Issuance

During the second quarter of fiscal 2022, we issued (i) $700 million aggregate principal amount of our 1.80% senior notes due fiscal 2027, and (ii) $650 million aggregate principal amount of our 2.375% senior notes due fiscal 2029 (collectively, the “USD Notes”).

The proceeds from the USD Notes were used for the repayment of our remaining 4.125% senior notes due fiscal 2026, our 4.75% senior notes due fiscal 2028 and our 7.45% senior notes due fiscal 2030.

The $0.6 billion decrease in total debt during fiscal 2023 was primarily due to net decreases in commercial paper borrowings, finance lease liabilities and borrowings for asset financing.

The redemption of the mandatorily redeemable preferred stock outstanding and a favorable foreign currency exchange rate impact also contributed to the decrease in total debt during fiscal 2023.

We were in compliance with all financial covenants associated with our borrowings as of March 31, 2023 and March 31, 2022.

12 unchanged sentences

The recovery of these investments is over the life of the contract and is dependent upon our performance as well as customer acceptance.

The following table summarizes our total liquidity:

(in millions) March 31, 2022

Cash and cash equivalents $ 2,672

Available borrowings under our revolving credit facility 3,000

Total liquidity

During November 2021 we amended our revolving credit facility to, among other things, decrease available borrowings from $4.0 billion to $3.0 billion.

Our liquidity of $5.4 billion as of March 31, 2023, includes $1.9 billion of cash and cash equivalents, $3.0 billion of available borrowings under our revolving credit facility, and $500 million of available borrowings under our term loan credit agreement.

Share Repurchases

During fiscal 2018, our Board of Dire ctors authorized the repurchase of up to $2.0 billion of our common stock and during fiscal 2019, our Board of Directors approved an incremental $2.0 billion share repurchase.

On February 2, 2022, we announced our intention to repurchase incrementally up to $1.0 billion of our outstanding shares of common stock in the open market.

This program became effective on April 3, 2017 with no end date established.

During fiscal 2022, we repurchased 18,818,934 shares of our common stock at an aggregate cost of $634 million.

S ee Note 16 - "Stockholders' Equity" for more information.

S ee Note 16 - "Stockholders' Equity."

To maintain our financial flexibility, we continued to suspend payment of quarterly dividends for fiscal 2023.

4 unchanged sentences

See Note 4 - "Receivables" and Note 21 - "Commitments and Contingencies" for additional information regarding these off-balance sheet arrangements.

Contractual Obligations

Our contractual obligations as of March 31, 2022, were as follows:

Cash Commitments

For a description of the Company’s cash commitments to debt, leases, pension and other benefit plans, and minimum purchase commitments, refer to “Note 11 - Debt”, Note 5 - "Leases”, "Note 21 - Commitments and Contingencies", and “Note 14 - Pension and Other Benefit Plans ”for the estimated future benefit payments under our Pension and OPEB plans.

Our other cash commitments as of March 31, 2023, were as follows:

(in millions) Less than

2-3 years 4-5 years More than

$ 249 $ 159 $ 1,428 $ 2,152 $ 3,988

Finance lease liabilities (2)

300 303 69 — 672

Operating Leases (2)

415 533 203 155 1,306

Purchase Obligations (3)

828 642 253 — 1,723

Tax Reform - Transition Tax (1)

43 66 — — 109

Interest and preferred dividend payments (5)

62 104 83 59 308

Interest payments (2)

74 118 57 32 281

(1) Amounts represent scheduled principal payments of long-term debt and mandatory redemption of preferred stock of a consolidated subsidiary.

(2) Amounts represent expected undiscounted cash payments.

See Note 7 - "Leases" for more information.

(3) Includes long-term purchase agreements with certain software, hardware, telecommunication and other service providers and excludes agreements that are cancellable without penalty.

If we do not meet the specified service minimums, we may have an obligation to pay the service provider a portion of or the entire shortfall.

See Note 23 - "Commitments and Contingencies" for more information.

(4) The transition tax resulted in recording a total transition tax obligation of $276 million, of which $284 million was recorded as income tax liability and $8 million recorded as a reduction in our unrecognized tax benefits, which has been omitted from this table.

Total $ 117 $ 184 $ 57 $ 32 $ 390

(1) The transition tax resulted in recording a total transition tax obligation of $198 million, of which $223 million was recorded as income tax liability and $25 million was recorded as an unrecognized tax benefit receivable, which has been omitted from this table.

The transition tax is payable over eight years;

8% of net tax liability in each of years 1-5, 15% in year 6, 20% in year 7, and 25% in year 8.

We have made our first four payments.

We have made our first five payments.

See Note 15 - "Income Taxes" for additional information about the transition tax, and the estimated liability related to unrecognized tax benefits.

(5) Amounts represent scheduled interest payments on long-term debt and scheduled dividend payments associated with the mandatorily redeemable preferred stock of a consolidated subsidiary excluding contingent dividends associated with the participation and variable appreciation premium features.

(6) See Note 13 - "Income Taxes" for additional information about the estimated liability related to unrecognized tax benefits, which has been omitted from this table.

See Note 15 - "Pension and Other Benefit Plans" for the estimated liability related to estimated future benefit payments under our Pension and OPEB plans that have been omitted from this table.

(2) Amounts represent scheduled interest payments on long-term debt.

Critical Accounting Estimates

The preparation of financial statements, in accordance with GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities.

These estimates may change in the future if underlying assumptions or factors change.

Accordingly, actual results could differ materially from our estimates under different assumptions, judgments or conditions.

The preparation of the financial statements, in accordance with GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities.

The Company bases its estimates on assumptions regarding historical experience, currently available information, and anticipated developments that it believes are reasonable and appropriate.

However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates.

We consider the following policies to be critical because of their complexity and the high degree of judgment involved in implementing them:

revenue recognition, income taxes, business combinations, defined benefit plans and valuation of assets.

We have discussed the selection of our critical accounting policies and the effect of estimates with the Audit Committee of our Board of Directors.

revenue recognition, income taxes, defined benefit plans, valuation of assets, and loss accruals for litigation.

We have discussed the selection of our critical accounting policies and the effect of estimates with the Audit Committee of our Board.

Revenue Recognition

31 unchanged sentences

Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur.

The majority of our global unremitted foreign earnings have been taxed in the U.S.

or would be exempt from U.S.

The majority of our global unremitted foreign earnings have been taxed or would be exempt from U.S.

tax upon repatriation.

Such earnings and all current foreign earnings are not indefinitely reinvested.

The following foreign earnings are considered indefinitely reinvested:

The following earnings are considered indefinitely reinvested:

approximately $484 million that could be subject to U.S.

1 unchanged sentence

under section 1.245A-5(b) of the final Treasury regulations;

and our accumulated earnings in India as of March 31, 2021.

and approximately $200 million of our accumulated earnings in India.

A portion of these indefinitely reinvested earnings may be subject to foreign and U.S.

state tax consequences when remitted.

The Company will continue to evaluate its position based on its strategic objectives and future cash needs.

Considerations impacting the recoverability of deferred tax assets include the period of expiration of the tax asset, planned use of the tax asset and historical and projected taxable income as well as tax liabilities for the tax jurisdiction to which the tax asset relates.

The Company will continue to evaluate its position based on its future strategy and cash needs.

Considerations impacting the recoverability of deferred tax assets include the period of expiration of the tax asset, planned use of the tax asset, historical and projected taxable income as well as deferred tax liabilities for the tax jurisdiction to which the tax asset relates.

In determining whether the deferred tax assets are realizable, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies and recent results of financial operations.

1 unchanged sentence

However, valuation allowances are subject to change in future reporting periods due to changes in various factors such as when inputs or estimates used in determining valuation allowances significantly change or upon the receipt of new information.

We determine whether it is more likely than not a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit is recorded in our financial statements.

A tax position is measured as the portion of the tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority (that has full knowledge of all relevant information).

We may be required to change our provision for income taxes when the ultimate treatment of certain items is challenged or agreed to by taxing authorities.

The Finance Act 2021 in the U.K.

took effect after Royal Assent was received in June 2021.

The Finance Act 2021 included increases in the corporation tax and diverted profits tax rates beginning on April 1, 2023, establishes a new temporary 130% super deduction for first year capital allowances and temporarily extends the carry-back of trading losses.

The increase in the U.K.

corporate tax rate and super deduction have been factored into the calculation of our income tax provision.

Business Combinations

We account for the acquisition of a business using the acquisition method of accounting, which requires us to estimate the fair values of the assets acquired and liabilities assumed.

This includes acquired intangible assets such as customer-related intangibles, the liabilities assumed and contingent consideration, if any.

Liabilities assumed may include litigation and other contingency reserves existing at the time of acquisition and require judgment in ascertaining the related fair values.

Independent appraisals may be used to assist in the determination of the fair value of certain assets and liabilities.

Such appraisals are based on significant estimates provided by us, such as forecasted revenues or profits utilized in determining the fair value of contract-related acquired intangible assets or liabilities.

Significant changes in assumptions and estimates subsequent to completing the allocation of the purchase price to the assets and liabilities acquired, as well as differences in actual and estimated results, could result in material impacts to our financial results.

Adjustments to the fair value of contingent consideration are recorded in earnings.

Additional information related to the acquisition date fair value of acquired assets and liabilities obtained during the allocation period, not to exceed one year, may result in changes to the recorded values of acquired assets and liabilities, resulting in an offsetting adjustment to the goodwill associated with the business acquired.

We determine whether it is more likely than not a tax position will be sustained upon examination by the appropriate taxing authorities before any portion of the tax benefit is recorded in our financial statements and only the portion of the tax benefit that is measured as greater than 50% likely to be realized upon settlement with a taxing authority (that has full knowledge of all relevant information) is recognized.

We may be required to change our provision for income taxes when the ultimate outcome of a tax position is agreed to by taxing authorities or otherwise effectively settled.

In the U.S., the IRA was signed into law on August 16, 2022.

We do not currently expect the IRA to have a material impact on our Consolidated Financial Statements.

Defined Benefit Plans

28 unchanged sentences

The discount rate used in an income approach is based on our weighted-average cost of capital and may be adjusted for the relevant risks associated with business-specific characteristics and any uncertainty related to a reporting unit's ability to execute on the projected future cash flows.

Assumptions and Estimates Used to Analyze Contingencies and Litigation

We are subject to various claims and contingencies associated with lawsuits, insurance, tax and other issues arising in the normal course of business.

The financial statements reflect the treatment of claims and contingencies based on management's view of the expected outcome.

DXC consults with outside legal counsel on issues related to litigation and seeks input from other experts and advisors with respect to matters in the ordinary course of business.

If the likelihood of an adverse outcome is probable and the amount is estimable, we accrue a liability in accordance with ASC 450 "Contingencies." Significant changes in the estimates or assumptions used in assessing the likelihood of an adverse outcome could have a material effect on our results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis