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Item 1. Financial Statements

2023-08-03 compared with 2023-02-02 · 240 added, 370 removed, 651 unchanged (48% of the section changed)

1 unchanged sentence

Index to Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)

Condensed Consolidated Statements of Comprehensive ( Loss ) Income for the Three and Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)

Condensed Consolidated Balance Sheets as of December 31, 2022 and March 31, 2022 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)

Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2023 and June 30, 2022 (unaudited)

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended June 30, 2023 and June 30, 2022 (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 202 3 and March 31, 202 3 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 202 3 and June 30, 202 2 (unaudited)

Condensed Consolidated Statements of Changes in Equity for the Three Months Ended June 30, 202 3 and June 30, 202 2 (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended Nine Months Ended

(in millions, except per-share amounts) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021

Three Months Ended

(in millions, except per-share amounts) June 30, 2023 June 30, 2022

Revenues $ 3,446 $ 3,707

5 unchanged sentences

Interest income ( 49 ) ( 20 )

Debt extinguishment costs — 2 — 311

Loss (gain) on disposition of businesses 5 ( 29 )

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DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited)

Three Months Ended Nine Months Ended

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

Three Months Ended

(in millions)

June 30, 2023 June 30, 2022

Net income $ 42 $ 103

Other comprehensive (loss) income, net of taxes:

Foreign currency translation adjustments, net of tax (1)

10 99 ( 331 ) ( 75 )

Cash flow hedges adjustments, net of tax (2)

( 19 ) 1 ( 17 ) 9

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments, net of tax expense (benefit) of $ 0 and $ 5

Cash flow hedges adjustments, net of tax expense (benefit) of $ 1 and $( 1 )

Pension and other post-retirement benefit plans, net of tax:

Amortization of prior service cost, net of tax (3)

( 1 ) ( 2 ) ( 5 ) ( 6 )

Amortization of prior service cost, net of tax benefit of $ 0 and $ 4

Pension and other post-retirement benefit plans, net of tax ( 2 ) ( 2 )

Other comprehensive (loss) income, net of taxes ( 10 ) 98 ( 353 ) ( 72 )

Comprehensive (loss) income 51 200 ( 161 ) 125

comprehensive (loss) income attributable to non-controlling interest 4 5 2 20

Comprehensive (loss) income attributable to DXC common stockholders $ 47 $ 195 $ ( 163 ) $ 105

(1) Tax (benefit) expense related to foreign currency translation adjustments was $( 5 ) and $ 4 for the three and nine months ended December 31, 2022, respectively, and $( 3 ) and $( 2 ) for the three and nine months ended December 31, 2021, respectively.

(2) Tax (benefit) expense related to cash flow hedges adjustments was $( 5 ) and $( 6 ) for the three and nine months ended December 31, 2022, respectively, and $ 1 and $ 3 for the three and nine months ended December 31, 2021, respectively.

(3) Tax benefit related to amortization of prior service costs was $ 0 and $ 4 for the three and nine months ended December 31, 2022, respectively.

There was no tax benefit related to amortization of prior service costs for the three and nine months ended December 31, 2021, respectively.

Other comprehensive income (loss), net of taxes 35 ( 178 )

Comprehensive income (loss) 77 ( 75 )

comprehensive income attributable to non-controlling interest 6 1

Comprehensive income (loss) attributable to DXC common stockholders $ 71 $ ( 76 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions, except per-share and share amounts) December 31, 2022 March 31, 2022

(in millions, except per-share and share amounts) June 30, 2023 March 31, 2023

Current assets:

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DXC stockholders’ equity:

Preferred stock, par value $ 0.01 per share, 1,000,000 shares authorized, none issued as of December 31, 2022 and March 31, 2022

Common stock, par value $ 0.01 per share, 750,000,000 shares authorized, 231,350,636 issued as of December 31, 2022 and 240,508,348 issued as of March 31, 2022

Preferred stock, par value $ 0.01 per share;

authorized 1,000,000 shares;

none issued as of June 30, 2023 and March 31, 2023

Common stock, par value $ 0.01 per share;

authorized 750,000,000 shares;

issued 210,584,214 as of June 30, 2023 and 218,058,482 as of March 31, 2023

Additional paid-in capital 8,677 9,121

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Accumulated other comprehensive loss ( 739 ) ( 774 )

Treasury stock, at cost, 3,278,690 and 2,878,079 shares as of December 31, 2022 and March 31, 2022

Treasury stock, at cost, 4,507,506 and 3,333,592 shares as of June 30, 2023 and March 31, 2023

( 217 ) ( 187 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months Ended

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

Three Months Ended

(in millions)

June 30, 2023 June 30, 2022

Cash flows from operating activities:

3 unchanged sentences

Operating right-of-use expense 90 106

Pension & other post-employment benefits, actuarial & settlement losses — 7

Share-based compensation 23 28

1 unchanged sentence

Gain on dispositions ( 9 ) ( 62 )

Unrealized foreign currency exchange loss (gain) 80 ( 20 )

Provision for losses on accounts receivable 2 2

Unrealized foreign currency exchange loss 23 46

Impairment losses and contract write-offs 7 —

Debt extinguishment costs — 311

Other non-cash charges, net ( 2 ) 3

Changes in assets and liabilities, net of effects of acquisitions and dispositions:

Decrease in assets 84 386

Decrease (Increase) in assets 63 ( 69 )

Decrease in operating lease liability ( 90 ) ( 106 )

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Software purchased and developed ( 85 ) ( 50 )

Business dispositions 52 519

Business dispositions, net of cash sold ( 7 ) ( 36 )

Proceeds from sale of assets 11 14

1 unchanged sentence

Other investing activities, net 2 5

Net cash (used in) provided by investing activities ( 299 ) 93

Net cash used in investing activities ( 199 ) ( 192 )

Cash flows from financing activities:

1 unchanged sentence

Repayments of commercial paper ( 305 ) ( 239 )

Borrowings on long-term debt — 19

Principal payments on long-term debt — ( 2,872 )

Payments on finance leases and borrowings for asset financing ( 131 ) ( 159 )

Proceeds from bond issuance — 2,918

Proceeds from stock options and other common stock transactions — 1

Taxes paid related to net share settlements of share-based compensation awards ( 33 ) ( 12 )

Payments for debt extinguishment costs — ( 344 )

Repurchase of common stock ( 325 ) ( 352 )

Repurchase of common stock and advance payment for accelerated share repurchase ( 285 ) ( 272 )

Other financing activities, net ( 2 ) ( 5 )

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Net decrease in cash and cash equivalents including cash classified within current assets held for sale ( 282 ) ( 473 )

Change in cash classified within current assets held for sale ( 494 ) 63

Cash classified within current assets held for sale — 10

Net decrease in cash and cash equivalents ( 282 ) ( 463 )

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

Three Months Ended December 31, 2022

Three Months Ended June 30, 2023

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Paid-in Capital

Accumulated Deficit Accumulated

Comprehensive Loss

Treasury Stock (1)

DXC Equity Non-

Controlling Interest Total Equity

Shares Amount

Balance at September 30, 2022 233,278 $ 2 $ 9,733 $ ( 4,211 ) $ ( 724 ) $ ( 185 ) $ 4,615 $ 321 $ 4,936

Net Income 59 59 2 61

Other comprehensive loss ( 12 ) ( 12 ) 2 ( 10 )

Share-based compensation expense 24 24 24

Acquisition of treasury stock ( 1 ) ( 1 ) ( 1 )

Share repurchase program ( 2,064 ) ( 87 ) 30 ( 57 ) ( 57 )

Stock option exercises and other common stock transactions 137 — —

Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 1 )

Balance at December 31, 2022 231,351 $ 2 $ 9,670 $ ( 4,123 ) $ ( 736 ) $ ( 186 ) $ 4,627 $ 325 $ 4,952

Three Months Ended December 31, 2021

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Loss Treasury Stock Total

DXC Equity Non-

Controlling Interest Total Equity

Controlling Interest

Shares Amount

Balance at September 30, 2021 255,003 $ 3 $ 10,646 $ ( 5,225 ) $ ( 482 ) $ ( 170 ) $ 4,772 $ 311 $ 5,083

Balance at March 31, 2023 218,058 $ 2 $ 9,121 $ ( 4,665 ) $ ( 774 ) $ ( 187 ) $ 3,497 $ 323 $ 3,820

Net income 36 36 6 42

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Share repurchase program (2)

( 10,976 ) ( 466 ) 184 ( 282 ) ( 282 )

Stock option exercises and other common stock transactions 3,502 — —

Non-controlling interest distributions and other — ( 4 ) ( 4 )

Balance at December 31, 2021 248,356 $ 3 $ 10,383 $ ( 5,058 ) $ ( 385 ) $ ( 171 ) $ 4,772 $ 315 $ 5,087

Nine Months Ended December 31, 2022

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Loss

Treasury Stock (1)

DXC Equity Non-

Controlling Interest Total Equity

Shares Amount

Balance at March 31, 2022 240,508 $ 3 $ 10,057 $ ( 4,450 ) $ ( 385 ) $ ( 173 ) $ 5,052 $ 323 $ 5,375

Net income 188 188 4 192

Other comprehensive loss ( 351 ) ( 351 ) ( 2 ) ( 353 )

Share-based compensation expense 73 73 73

Acquisition of treasury stock ( 13 ) ( 13 ) ( 13 )

Share repurchase program ( 10,915 ) ( 1 ) ( 461 ) 139 ( 323 ) ( 323 )

Stock option exercises and other common stock transactions 1,758 1 1 1

Balance at December 31, 2022 231,351 $ 2 $ 9,670 $ ( 4,123 ) $ ( 736 ) $ ( 186 ) $ 4,627 $ 325 $ 4,952

Nine Months Ended December 31, 2021

Balance at June 30, 2023 210,584 $ 2 $ 8,677 $ ( 4,445 ) $ ( 739 ) $ ( 217 ) $ 3,278 $ 325 $ 3,603

Three Months Ended June 30, 2022

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Paid-in Capital

Accumulated Deficit Accumulated

Comprehensive Loss Treasury Stock Total

DXC Equity Non-

Controlling Interest Total Equity

Controlling Interest

Shares Amount

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Stock option exercises and other common stock transactions 1,338 1 1 1

Non-controlling interest distributions and other ( 3 ) ( 1 ) ( 4 ) ( 40 ) ( 44 )

Balance at December 31, 2021 248,356 $ 3 $ 10,383 $ ( 5,058 ) $ ( 385 ) $ ( 171 ) $ 4,772 $ 315 $ 5,087

(1) 3,278,690 treasury shares as of December 31, 2022.

Balance at June 30, 2022 232,995 $ 2 $ 9,708 $ ( 4,239 ) $ ( 563 ) $ ( 183 ) $ 4,725 $ 324 $ 5,049

(1) 4,507,506 treasury shares as of June 30, 2023.

(2) On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (the "IRA") into law.

The IRA imposes a 1% excise tax on share repurchases completed after December 31, 2022.

We reflect the excise tax within equity as part of the repurchase of the common stock.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DXC Technology Company (“DXC,” the “Company,” “we,” “us,” or “our”) 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.

With decades of driving innovation, 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.

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.

Basis of Presentation

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income as the “statements of comprehensive (loss) income,” (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) as the “statements of comprehensive income,” (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

The accompanying financial statements include the accounts of DXC, its consolidated subsidiaries, and those business entities in which DXC maintains a controlling interest.

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Non-controlling interests are presented as a separate component within equity in the balance sheets.

Net earnings attributable to the non-controlling interests are presented separately in the statements of operations and comprehensive (loss) income attributable to non-controlling interests are presented separately in the statements of comprehensive (loss) income.

Net earnings attributable to the non-controlling interests are presented separately in the statements of operations and comprehensive income attributable to non-controlling interests are presented separately in the statements of comprehensive income.

All intercompany transactions and balances have been eliminated.

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These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (“fiscal 2023”).

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Use of Estimates

The preparation of the financial statements, in accordance with GAAP, requires the Company’s management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period.

The preparation of the financial statements, in accordance with GAAP, requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

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

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Recent Accounting Pronouncements

Recently issued ASUs effective after December 31, 2022 are not expected to have a material effect on DXC’s condensed consolidated financial statements.

Recently issued Accounting Standards Updates (ASUs) effective after June 30, 2023 are not expected to have a material effect on DXC’s condensed consolidated financial statements.

DXC TECHNOLOGY COMPANY

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Note 2 – Divestitures

Fiscal 2023 Divestitures

During the first nine months of fiscal 2023, the Company sold insignificant businesses that resulted in a loss of $ 12 million.

FDB Assets Held for Sale

During the third quarter of fiscal 2022, DXC entered into a purchase agreement to sell its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ").

The closing of the transaction was subject to certain conditions, including receipt of certain regulatory consents.

During the third quarter of fiscal 2023, DXC obtained regulatory consent for the FDB sale.

As of December 31, 2022, the FDB Business met the requirements for presentation as assets held for sale under GAAP.

On January 3, 2023, DXC completed the sale of its FDB Business for € 308 million (approximately $ 323 million as of January 3, 2023) resulting in an estimated pre-tax gain of approximately $ 180 million to be recognized in the fourth quarter of fiscal 2023.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Assets held for sale are reported at carrying value, which is less than fair value.

FDB’s assets held for sale and related liabilities as of December 31, 2022 were as follows:

(in millions) December 31, 2022

Cash and cash equivalents $ 509

Receivables and contract assets 67

Prepaid expenses 1

Total current assets held for sale 577

Intangible assets, net 45

Property and equipment, net 1

Other assets 12

Total non-current assets held for sale 106

Total assets held for sale $ 683

Accounts payable $ 5

Accrued expenses and other current liabilities 532

Income Taxes Payable 1

Total current liabilities related to assets held for sale 538

Non-current income tax liabilities and deferred tax liabilities 7

Other long-term liabilities 4

Total long-term liabilities related to assets held for sale 11

Total liabilities related to assets held for sale $ 549

In addition to the FDB Business, certain other insignificant divestitures are included in the Company’s balance sheets as assets held for sale.

Fiscal 2022 Divestitures

On April 1, 2021, DXC completed the sale of its HPS Business to Dedalus for approximately $ 551 million, resulting in a pre-tax gain on sale of $ 337 million, net of closing costs for the nine months ended December 31, 2022.

During the first nine months of fiscal 2022, the Company also sold certain insignificant businesses that resulted in a gain of $ 49 million.

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

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

During the first quarters of fiscal 2024 and fiscal 2023, the Company sold insignificant businesses that resulted in a loss of $ 5 million and a gain of $ 38 million, respectively.

During the first quarter of fiscal 2023, the Company also classified certain insignificant businesses as held for sale and recognized a loss of $ 9 million.

Note 3 – Earnings per Share

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The following table reflects the calculation of basic and diluted EPS:

Three Months Ended Nine Months Ended

(in millions, except per-share amounts) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021

Net income attributable to DXC common stockholders:

$ 59 $ 98 $ 188 $ 188

Three Months Ended

(in millions, except per-share amounts)

June 30, 2023 June 30, 2022

Net income attributable to DXC common shareholders:

Common share information:

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The number of awards excluded were as follows:

Three Months Ended Nine Months Ended

December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021

Three Months Ended

June 30, 2023 June 30, 2022

Stock Options 918,608 480,727

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The following table presents the change in balance for the allowance for doubtful accounts:

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

(in millions) June 30, 2023 March 31, 2023

Beginning balance $ 47 $ 55

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Receivables Facility

The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of December 31, 2022, the “Receivables Facility”) with certain unaffiliated financial institutions for the sale of commercial accounts receivable in the United States.

The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of June 30, 2023, the “Receivables Facility”) with certain unaffiliated financial institutions (the “Purchasers”) for the sale of commercial accounts receivable in the United States up to a maximum amount of $ 400 million.

The Receivables Facility was amended on July 28, 2023, extending the termination date to July 26, 2024.

As of December 31, 2022, the total availability under the Receivables Facility was $ 400 million, and the amount sold to the Purchasers was $ 400 million, which was derecognized from the Company’s balance sheet.

As of June 30, 2023, the total availability under the Receivables Facility and the amount sold to the Purchasers was $ 380 million, which was derecognized from the Company’s balance sheet.

As of June 30, 2023, the Company recorded a liability of $ 20 million within accounts payable because the amount of cash proceeds received by the Company under the Receivables Facility was more than the total availability.

The fair value of the sold receivables approximated book value due to the short-term nature, and as a result, no gain or loss on sale of receivables was recorded.

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The Company has operating and finance leases for data centers, corporate offices, and certain equipment.

Its leases have remaining lease terms of one to 10 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within one to three years .

Its leases have remaining lease terms of one to nine years, some of which include options to extend the leases for up to ten years, and some of which include options to terminate the leases within one to three years .

Operating Leases

The components of operating lease expense were as follows:

Three Months Ended Nine Months Ended

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

(in millions) Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Operating lease cost $ 90 $ 106

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Cash payments made for variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and as such, are excluded from the supplemental cash flow information stated below.

Nine Months Ended

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

(in millions) Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows

ROU assets obtained in exchange for operating lease liabilities (1)

(1) Net of $ 911 million and $ 792 million in lease modifications and terminations during the nine months of fiscal 2023 and 2022, respectively.

(1) Net of $ 230 million and $ 338 million in lease modifications and terminations for the three months ended June 30, 2023 and June 30, 2022, respectively.

See Note 17 – “Cash Flows” for further information on non-cash activities affecting cash flows.

The following table presents operating lease balances:

(in millions) Balance Sheet Line Item December 31, 2022 March 31, 2022

(in millions) Balance Sheet Line Item June 30, 2023 March 31, 2023

ROU operating lease assets Operating right-of-use assets, net $ 849 $ 909

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Total operating lease liabilities $ 901 $ 965

The weighted-average operating lease term was 4.1 years and 4.4 years as of December 31, 2022 and March 31, 2022, respectively.

The weighted-average operating lease discount rate was 3.7 % and 3.3 % as of December 31, 2022 and March 31, 2022, respectively.

The following maturity analysis presents expected undiscounted cash payments for operating leases as of December 31, 2022:

The weighted-average operating lease term was 3.9 years and 3.9 years as of June 30, 2023 and March 31, 2023, respectively.

The weighted-average operating lease discount rate was 4.1 % and 3.9 % as of June 30, 2023 and March 31, 2023, respectively.

The following maturity analysis presents expected undiscounted cash payments for operating leases as of June 30, 2023:

(in millions)

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The components of finance lease expense were as follows:

Three Months Ended Nine Months Ended

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

(in millions) Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Amortization of right-of-use assets $ 42 $ 61

Interest on lease liabilities 4 5

Total finance lease expense $ 54 $ 91 $ 179 $ 293

Total finance lease cost $ 46 $ 66

The following table provides supplemental cash flow information related to the Company’s finance leases:

Nine Months Ended

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

(in millions) Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Interest paid for finance lease liabilities – Operating cash flows

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The following table presents finance lease balances:

(in millions) Balance Sheet Line Item December 31, 2022 March 31, 2022

(in millions) Balance Sheet Line Item June 30, 2023 March 31, 2023

ROU finance lease assets Property and Equipment, net $ 370 $ 424

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(1) See Note 10 – “Debt” for further information on finance lease liabilities.

The weighted-average finance lease term was 2.8 years and 2.8 years as of December 31, 2022 and March 31, 2022, respectively.

The weighted-average finance lease discount rate was 3.1 % and 2.9 % as of December 31, 2022 and March 31, 2022, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following maturity analysis presents expected undiscounted cash payments for finance leases as of December 31, 2022:

The weighted-average finance lease term was 2.8 years and 2.9 years as of June 30, 2023 and March 31, 2023, respectively.

The weighted-average finance lease discount rate was 3.5 % and 3.4 % as of June 30, 2023 and March 31, 2023, respectively.

The following maturity analysis presents expected undiscounted cash payments for finance leases as of June 30, 2023:

(in millions)

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Total finance lease liabilities

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 6 – Fair Value

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The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding pension assets and derivative assets and liabilities.

See Note 7 – “Derivative Instruments” for information about the Company’s derivative instruments.

See Note 7 – “Derivative Instruments” for information about derivative assets and liabilities.

Note 10 – “Debt” includes information about the estimated fair value of the Company’s long-term debt.

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Fair Value Hierarchy

(in millions) December 31, 2022

(in millions) As of June 30, 2023

Fair Value Level 1 Level 2 Level 3

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Total assets $ 175 $ 127 $ 46 $ 2

Contingent consideration $ 1 $ — $ — $ 1

Total liabilities $ 1 $ — $ — $ 1

March 31, 2022

As of March 31, 2023

Fair Value Level 1 Level 2 Level 3

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Contingent consideration (3)

$ 2 $ — $ — $ 2

Total liabilities $ 2 $ — $ — $ 2

(1) Cost basis approximated fair value due to the short period of time to maturity.

(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $ 51 million and $ 53 million as of December 31, 2022 and March 31, 2022, respectively.

(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $ 52 million as of both June 30, 2023 and March 31, 2023.

For the periods presented, gains and losses are insignificant and are included in other income, net in the Company’s statements of operations.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(3) As of June 30, 2023, the Company completed the payment for its contingent consideration obligation.

Note 7 – Derivative Instruments

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The Company does not use derivative instruments for trading or any speculative purposes.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Derivatives Designated for Hedge Accounting

Cash flow hedges

The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee-denominated intercompany obligations and forecasted transactions.

The notional amounts of foreign currency forward contracts designated as cash flow hedges as of December 31, 2022 and March 31, 2022 were $ 836 million and $ 727 million, respectively.

As of December 31, 2022, the related forecasted transactions extend through December 2024.

For the three and nine months ended December 31, 2022 and December 31, 2021, respectively, the Company performed an assessment at the inception of the cash flow hedge transactions and determined that all critical terms of the hedging instruments and hedged items matched.

The Company performs an assessment of critical terms on an on-going basis throughout the hedging period.

During the three and nine months ended December 31, 2022 and December 31, 2021, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur.

As of December 31, 2022, $ 5 million of the existing amount of loss related to the cash flow hedge reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

Amounts recognized in other comprehensive (loss) income and income before income taxes

During the three and nine months ended December 31, 2022, the pre-tax gain (loss) on derivatives designated for hedge accounting recognized in other comprehensive (loss) income was $( 23 ) million and $( 14 ) million, respectively, and recognized in income before income taxes was $ 1 million and $ 10 million, respectively.

The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Euro and Indian Rupee-denominated obligations and forecasted transactions.

The notional amounts of foreign currency forward contracts designated as cash flow hedges as of June 30, 2023 and March 31, 2023 were $ 893 million and $ 842 million, respectively.

As of June 30, 2023, the related forecasted transactions extend through June 2025.

During the three months ended June 30, 2023 and June 30, 2022, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur.

See Note 15 - Stockholders’ Equity for changes in accumulated other comprehensive loss, net of taxes, related to the Company’s derivatives designated for hedge accounting.

As of June 30, 2023, $ 7 million of loss related to cash flow hedges reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

Derivatives Not Designated for Hedge Accounting

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The Company manages the exposure to fluctuations in foreign currencies by using short-term foreign currency forward contracts to hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted transactions.

The net notional amounts of the foreign currency forward contracts outstanding as of December 31, 2022 and March 31, 2022 were $ 2.0 billion and $ 2.1 billion, respectively.

The following table presents the pretax amounts impacting income related to foreign currency forward contracts designated and non-designated for hedge accounting:

For the Three Months Ended For the Nine Months Ended

(in millions) Statement of Operations Line Item December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021

Foreign currency forward contracts Other (income) expense, net $ 52 $ ( 9 ) $ ( 27 ) $ 39

The net notional amounts of the foreign currency forward contracts outstanding as of June 30, 2023 and March 31, 2023 were $ 2.4 billion and $ 2.5 billion, respectively.

The following table presents the pretax foreign currency (gain) loss to Other income, net:

For the Three Months Ended

(in millions) June 30, 2023 June 30, 2022

Foreign currency remeasurement (1)

Undesignated foreign currency forward contracts (2)

Total - Foreign currency gain $ ( 8 ) $ ( 2 )

(1) Movements from exchange rates on the Company’s foreign currency-denominated assets and liabilities.

(2) Movements from hedges used to manage the Company’s foreign currency remeasurement exposure, and the associated costs of the hedging program.

DXC TECHNOLOGY COMPANY

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The following tables present the fair values of derivative instruments included in the balance sheets:

(in millions) Balance Sheet Line Item December 31, 2022 March 31, 2022

(in millions) Balance Sheet Line Item June 30, 2023 March 31, 2023

Derivatives designated for hedge accounting:

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Accrued expenses and other current liabilities $ 21 $ 16

The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points which are classified as Level 2 inputs.

Other Risks for Derivative Instruments

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To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties.

With respect to its foreign currency derivatives, as of December 31, 2022, there were 10 counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 1 million.

With respect to its foreign currency derivatives, as of June 30, 2023, there were six counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 7 million.

The Company also enters into enforceable master netting arrangements with some of its counterparties.

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Gains or losses on individual net investments in non-U.S.

operations are reclassified to earnings from accumulated other comprehensive (loss) income when such net investments are sold or substantially liquidated.

As of December 31, 2022, DXC had $ 0.3 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S.

subsidiaries.

For the three and nine months ended December 31, 2022, the pre-tax impact of gain (loss) on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive (loss) income was $( 22 ) million and $ 11 million, respectively.

As of March 31, 2022, DXC had $ 0.3 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S.

subsidiaries .

operations are reclassified to earnings from accumulated other comprehensive loss when such net investments are sold or substantially liquidated.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of June 30, 2023 and March 31, 2023, DXC had $ 273 million and $ 272 million, respectively, of foreign currency-denominated debt designated as hedges of net investments in non-U.S.

subsidiaries.

For the three months ended June 30, 2023, the pre-tax impact of loss on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income was $ 1 million.

Note 8 – Intangible Assets

Intangible assets consisted of the following:

As of December 31, 2022 As of March 31, 2022

As of June 30, 2023 As of March 31, 2023

(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value

Software $ 4,046 $ 3,366 $ 680 $ 4,009 $ 3,290 $ 719

Customer related 3,891 2,140 1,751 4,148 1,995 2,153

Other 309 120 189 291 90 201

Customer related intangible assets 3,940 2,353 1,587 3,927 2,260 1,667

Other intangible assets 304 130 174 303 120 183

Total intangible assets $ 8,290 $ 5,849 $ 2,441 $ 8,239 $ 5,670 $ 2,569

The components of amortization expense were as follows:

Three Months Ended Nine Months Ended

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

Intangible asset amortization $ 201 $ 212 $ 598 $ 649

Three Months Ended

(in millions) June 30, 2023 June 30, 2022

Intangible assets amortization $ 183 $ 199

Transition and transformation contract cost amortization (1)

51 56 156 166

Total amortization expense $ 231 $ 251

(1) Transition and transformation contract costs are included within other assets on the balance sheet.

Estimated future amortization related to intangible assets as of December 31, 2022 is as follows:

(1) Transaction and transformation contract costs are included within other assets on the balance sheets.

Estimated future amortization related to intangible assets as of June 30, 2023 is as follows:

Fiscal Year (in millions)

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Note 9 – Goodwill

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of December 31, 2022.

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of June 30, 2023.

(in millions) GBS GIS Total

Goodwill, gross $ 5,107 $ 5,066 $ 10,173

Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 )

Balance as of March 31, 2023, net $ 539 $ — $ 539

Divestitures ( 12 ) — ( 12 )

Assets held for sale ( 48 ) — ( 48 )

Foreign currency translation ( 22 ) — ( 22 )

Balance as of December 31, 2022, net $ 535 $ — $ 535

Balance as of June 30, 2023, net $ 539 $ — $ 539

Goodwill, gross 5,029 5,066 10,095

Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 )

Balance as of December 31, 2022, net $ 535 $ — $ 535

The foreign currency translation amount reflects the impact of currency movements on non-U.S.

dollar-denominated goodwill balances.

On December 31, 2022, with the classification of the FDB Business as held for sale, $ 48 million in goodwill was transferred to assets held for sale on the balance sheet.

See Note 2 – “Divestitures” for additional information.

Balance as of June 30, 2023, net $ 539 $ — $ 539

DXC TECHNOLOGY COMPANY

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The following is a summary of the Company’s debt:

(in millions) Interest Rates Fiscal Year Maturities 12/31/2022 (1)

3/31/2022 (1)

(in millions) Interest Rates Fiscal Year Maturities June 30, 2023 (1)

March 31, 2023 (1)

Short-term debt and

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$ 700 million Senior notes

1.80 % 2027 695 694

€ 750 million Senior notes

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2024 - 2029 248 285

Mandatorily redeemable preferred stock outstanding 6.00 % 2023 64 63

Other borrowings Various 2024 2 3

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Long-term debt, net of current maturities $ 3,891 $ 3,900

(1) The carrying amounts of the senior notes as of December 31, 2022 and March 31, 2022, include the remaining principal outstanding of $ 3,486 million and $ 3,575 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $( 23 ) million and $( 28 ) million respectively.

(1) The carrying amounts of the senior notes as of June 30, 2023 and March 31, 2023, include the remaining principal outstanding of $ 3,532 million and $ 3,523 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $ 21 million and $ 22 million, respectively.

(2) At DXC’s option, DXC can borrow up to a maximum of € 1 billion or its equivalent in €, £, and $.

During the second quarter of fiscal 2023, the Company entered into a $ 500 million term loan credit agreement (the “USD Term Loan”) with certain unaffiliated financial institutions that matures on September 1, 2024, unless the Company exercises its option to extend for one year until September 1, 2025.

The USD Term Loan is required to be drawn down by March 1, 2023.

The Company did not draw on the USD Term Loan as of December 31, 2022.

During the second quarter of fiscal 2023, the Company entered into a $ 500 million term loan credit agreement (as amended, the “USD Term Loan”) with certain unaffiliated financial institutions.

The USD Term Loan is required to be drawn down by September 1, 2023 or the facility will terminate.

The Company did not draw on the USD Term Loan as of June 30, 2023.

Fair Value of Debt

The estimated fair value of the Company’s long-term debt, excluding finance lease liabilities, was $ 3.3 billion and $ 3.7 billion as of December 31, 2022 and March 31, 2022, respectively, compared with carrying value of $ 3.8 billion and $ 4.0 billion as of December 31, 2022 and March 31, 2022, respectively.

The estimated fair value of the Company’s long-term debt, excluding finance lease liabilities, was $ 3.2 billion and $ 3.3 billion as of June 30, 2023 and March 31, 2023, respectively, compared with carrying value of $ 3.8 billion and $ 3.8 billion as of June 30, 2023 and March 31, 2023, respectively.

DXC TECHNOLOGY COMPANY

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The following table presents DXC’s revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services:

Three Months Ended Nine Months Ended

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

Three Months Ended

(in millions) June 30, 2023 June 30, 2022

United States $ 1,002 $ 1,131

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Remaining Performance Obligations

As of December 31, 2022, approximately $ 19.6 billion of revenue is expected to be recognized from remaining performance obligations.

As of June 30, 2023, approximately $ 19.4 billion of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 32 % of these remaining performance obligations in fiscal 2024, with the remainder of the balance recognized thereafter.

Contract Balances

The following table provides information about the balances of the Company’s trade receivables and contract assets and contract liabilities:

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

Trade receivables, net $ 2,364 $ 2,694

Contract assets $ 325 $ 371

Contract liabilities $ 1,773 $ 1,915

Changes in contract liabilities were as follows:

Nine Months Ended

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

The following table provides information about the balances of the Company’s trade receivables, contract assets and contract liabilities:

(in millions) Balance Sheet Line Item June 30, 2023 March 31, 2023

Trade receivables, net Receivables and contract assets, net of allowance for doubtful accounts $ 2,210 $ 2,269

Contract assets Receivables and contract assets, net of allowance for doubtful accounts $ 363 $ 366

Contract liabilities Deferred revenue and advance contract payments and Non-current deferred revenue $ 1,757 $ 1,842

Change in contract liabilities were as follows:

Three Months Ended

(in millions) June 30, 2023 June 30, 2022

Balance, beginning of period $ 1,842 $ 1,915

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Note 12 – Restructuring Costs

The composition of restructuring liabilities by financial statement line item is as follows:

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

The composition of restructuring liabilities by financial statement line items is as follows:

(in millions) June 30, 2023 March 31, 2023

Accrued expenses and other current liabilities $ 77 $ 105

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Fiscal 2024 Plan

During fiscal 2023, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2023 Plan”).

During fiscal 2024, management approved global cost savings initiatives designed to better align the Company’s facilities and data centers (the “Fiscal 2024 Plan ” ) .

Restructuring Liability Reconciliations by Plan

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Cash Paid Other (2)

Restructuring Liability as of December 31, 2022

Restructuring Liability as of June 30, 2023

Fiscal 2024 Plan

Workforce Reductions $ — $ 85 $ — $ ( 50 ) $ — $ 35

Facilities Costs — 7 ( 6 ) — — 1

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(2) Foreign currency translation adjustments.

For the nine months ended December 31, 2022, $ 16 million of restructuring costs is related to amortization of the right-of-use asset and interest expense for leased facilities that we have vacated but are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

Included in restructuring costs for the three months ended June 30, 2023 is $ 6 million related to amortization of the right-of-use asset and interest expense for leased facilities that have been vacated but are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

DXC TECHNOLOGY COMPANY

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The components of net periodic pension income were:

Three Months Ended Nine Months Ended

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

Three Months Ended

(in millions) June 30, 2023 June 30, 2022

Service cost $ 15 $ 19

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Expected return on assets ( 114 ) ( 132 )

Amortization of prior service costs ( 2 ) ( 2 ) ( 6 ) ( 6 )

Contractual termination benefit — ( 3 ) — ( 2 )

Recognition of actuarial loss — 7 1 7

Amortization of prior service credit ( 2 ) ( 2 )

Net periodic pension income $ ( 22 ) $ ( 48 )

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Note 14 – Income Taxes

The Company’s effective tax rate (“ETR”) was 40.2 % and 38.6 % for the three months ended December 31, 2022 and December 31, 2021, respectively, and 30.9 % and 42.4 % for the nine months ended December 31, 2022 and December 31, 2021, respectively.

For the three months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, a decrease in the base erosion and anti-abuse tax, and an increase in unrecognized tax benefits primarily related to foreign tax credits.

For the nine months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, a decrease in the base erosion and anti-abuse tax, and the tax impact of business divestitures.

For the three months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, an increase in unrecognized tax benefits primarily related to deductions taken in prior tax returns and tax rate changes in non-U.S.

jurisdictions.

For the nine months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, gain on sale of HPS business, tax rate changes in non-U.S.

jurisdictions and recording a valuation allowance on certain deferred tax assets in non-U.S.

jurisdictions.

The Company’s effective tax rate (“ETR”) was 46.2 % and 15.6 % for the three months ended June 30, 2023, and June 30, 2022, respectively.

For the three months ended June 30, 2023, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, and a decrease in uncertain tax positions due to an income tax audit settlement.

For the three months ended June 30, 2022, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income and base erosion payments, and a decrease in uncertain tax positions due to statute of limitation expirations.

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

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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 future strategy and cash needs.

In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE.

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

In connection with the merger of Computer Sciences Corporation (“CSC”) and the Enterprise Services business of Hewlett Packard Enterprise Company (the “HPES Merger”), the Company entered into a tax matters agreement with Hewlett Packard Enterprise Company (“HPE”).

HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company recorded a $ 27 million tax indemnification receivable related to uncertain tax positions, a $ 60 million tax indemnification receivable related to other tax payables, and a $ 104 million tax indemnification payable related to other tax receivables.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Pursuant to the tax matters agreement, the Company recorded a $ 16 million tax indemnification receivable related to uncertain tax positions, a $ 53 million tax indemnification receivable related to other tax payables, and an $ 89 million tax indemnification payable related to other tax receivables.

In connection with the spin-off of the Company’s former U.S.

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The Company remains liable to HPE for tax receivables transferred to Perspecta related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company recorded a $ 50 million tax indemnification receivable from Perspecta related to other tax payables and a $ 6 million tax indemnification payable to Perspecta related to income tax and other tax receivables.

In connection with the sale of the HPS business, the Company entered into a tax matters agreement with Dedalus.

Pursuant to the tax matters agreement, the Company recorded an $ 18 million tax indemnification receivable from Perspecta related to other tax payables and a $ 6 million tax indemnification payable to Perspecta related to income tax and other tax receivables.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In connection with the sale of its healthcare provider software business (“HPS”), the Company entered into a tax matters agreement with Dedalus.

Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of the HPS business.

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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 U.S.

Tax Court, these matters are not fully reserved and would result in a federal and state tax expense of approximately $ 472 million (including estimated interest and penalties) for the unreserved portion of these items and related cash cost if we do not prevail.

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 $ 483 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.

During the first quarter of fiscal 2024, some of these cases were dismissed, but the dismissals were procedural in nature only and do not impact the Company’s potential liability for the aforementioned fiscal years.

We do not expect the U.S.

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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 years 2014 and 2015 through February 28, 2023 and fiscal and tax return years 2016 through 2020 to September 30, 2024.

The statute of limitations is also open on assessments related to certain refund claims for fiscal years 2014 to 2017 through August 15, 2023.

The Company expects to reach resolution with regard to disagreed items for fiscal years 2009 through 2013 no earlier than fiscal 2025, to reach resolution for fiscal years 2014 and 2015 no earlier than fiscal 2024, and to reach resolution for fiscal years 2016 through 2020 no earlier than fiscal 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.

Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future.

For the three months ended December 31, 2022, the Company’s liability for uncertain tax positions increased by $ 16 million (excluding interest and penalties and related tax attributes) primarily due to the benefit of U.S.

foreign tax credits.

For the three months ended June 30, 2023, the Company’s liability for uncertain tax positions decreased by $ 3 million (excluding interest and penalties and related tax attributes) primarily due to statute of limitation expirations.

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 carryforwards, would be approximately $ 12 million.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 15 – Stockholders’ Equity

Share Repurchases

The details of shares repurchased during the nine months ended December 31, 2022 and December 31, 2021 are shown below:

The details of shares repurchased during the three months ended June 30, 2023 and June 30, 2022 are shown below:

Fiscal 2024 Fiscal 2023

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(in millions)

1st Quarter 8,850,912 $ 30.09 $ 266 1,750,000 $ 38.52 $ 67

2nd Quarter — $ — — 2,112,212 $ 39.10 83

3rd Quarter 2,063,645 $ 27.41 57 6,755,555 $ 31.48 213

Open market purchases 10,975,643 $ 25.53 $ 280 8,850,912 $ 30.09 $ 266

Total 10,975,643 $ 25.53 $ 280 8,850,912 $ 30.09 $ 266

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Accumulated Other Comprehensive Loss

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Balance at March 31, 2023 $ ( 985 ) $ ( 7 ) $ 218 $ ( 774 )

Other comprehensive (loss) income before reclassifications ( 329 ) ( 7 ) — ( 336 )

Other comprehensive income before reclassifications 34 3 — 37

Amounts reclassified from accumulated other comprehensive loss — — ( 2 ) ( 2 )

Balance at December 31, 2022 $ ( 980 ) $ ( 7 ) $ 251 $ ( 736 )

Balance at June 30, 2023 $ ( 951 ) $ ( 4 ) $ 216 $ ( 739 )

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss

Balance at March 31, 2022 $ ( 651 ) $ 10 $ 256 $ ( 385 )

Other comprehensive (loss) income before reclassifications — 12 — 12

Other comprehensive loss before reclassifications ( 176 ) 4 — ( 172 )

Amounts reclassified from accumulated other comprehensive loss — ( 4 ) ( 2 ) ( 6 )

( 86 ) ( 3 ) ( 6 ) ( 95 )

Balance at December 31, 2021 $ ( 640 ) $ 8 $ 247 $ ( 385 )

(1) Includes net cumulative foreign currency translation losses of $ 86 million upon sale of foreign entities primarily related to the HPS business divestiture.

See Note 2 – “Divestitures” for additional information.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Balance at June 30, 2022 $ ( 827 ) $ 10 $ 254 $ ( 563 )

Note 16 – Stock Incentive Plans

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Canceled/Forfeited ( 268,023 ) $ 46.32 — $ —

Outstanding as of December 31, 2022 7,593,025 $ 37.11 139,887 $ 36.15

Outstanding as of June 30, 2023 8,154,395 $ 35.85 147,487 $ 35.80

Share-Based Compensation

Three Months Ended Nine Months Ended

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

Three Months Ended

(in millions) June 30, 2023 June 30, 2022

Total share-based compensation cost $ 23 $ 28

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Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:

Nine Months Ended

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

Three Months Ended

(in millions) June 30, 2023 June 30, 2022

Cash paid for:

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ROU assets obtained in exchange for lease, net (2)

Assets acquired under long-term financing $ 74 $ 111

Prepaid assets acquired under long-term financing $ 4 $ 34

Capital expenditures in accounts payable and accrued expenses $ 3 $ 8

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Shares repurchased but not settled in cash (3)

(1) Income tax refunds were $ 56 million and $ 46 million for the nine months ended December 31, 2022 and December 31, 2021, respectively.

(2) Net of $ 911 million and $ 792 million in lease modifications and terminations during the first nine months of fiscal 2023 and 2022, respectively .

(1) Income tax refunds were $ 6 million and $ 13 million for the three months ended June 30, 2023 and June 30, 2022, respectively.

(2) Net of $ 230 million and $ 338 million in lease modifications and terminations for the three months ended June 30, 2023 and June 30, 2022, respectively.

(3) On August 16, 2022, the U.S.

government enacted the IRA into law.

The IRA imposes a 1% excise tax on share repurchases completed after December 31, 2022.

In our cash flow statement, we reflect the excise tax as a financing activity relating to the repurchase of common stock.

DXC TECHNOLOGY COMPANY

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We also help operate and continuously improve bank cards, payment and lending processes and operations, and customer experience operations.

We administer 13 million insurance policies and contracts, and manage 250 million customer interactions each year across industries.

Global Infrastructure Services (“GIS”)

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(in millions) GBS GIS Total Reportable Segments All Other Totals

Three Months Ended December 31, 2022

Revenues $ 1,738 $ 1,828 $ 3,566 $ — $ 3,566

Segment profit $ 244 $ 123 $ 367 $ ( 58 ) $ 309

Depreciation and amortization (1)

$ 42 $ 209 $ 251 $ 24 $ 275

Three Months Ended December 31, 2021

Revenues $ 1,946 $ 2,143 $ 4,089 $ — $ 4,089

Segment profit $ 315 $ 102 $ 417 $ ( 62 ) $ 355

Depreciation and amortization (1)

$ 39 $ 252 $ 291 $ 27 $ 318

(in millions) GBS GIS Total Reportable Segments All Other Totals

Nine Months Ended December 31, 2022

Three Months Ended June 30, 2023

Revenues $ 1,703 $ 1,743 $ 3,446 $ — $ 3,446

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$ 45 $ 184 $ 229 $ 26 $ 255

Nine Months Ended December 31, 2021

Three Months Ended June 30, 2022

Revenues $ 1,758 $ 1,949 $ 3,707 $ — $ 3,707

2 unchanged sentences

$ 41 $ 218 $ 259 $ 26 $ 285

(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $ 100 million and $ 106 million for the three months ended December 31, 2022 and 2021, respectively, and $ 305 million and $ 325 million for the nine months ended December 31, 2022 and 2021, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $ 89 million and $ 104 million for the

three months ended June 30, 2023 and June 30, 2022, respectively.

Reconciliation of Reportable Segment Profit to Consolidated Total

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The Company does not allocate to its segments certain operating expenses managed at the corporate level.

These unallocated costs generally include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation, and integration-related costs and amortization of acquired intangible assets.

Three Months Ended Nine Months Ended

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

These unallocated costs generally include certain corporate function costs, stock-based compensation expense, pension and other post-retirement benefit (“OPEB”) actuarial and settlement gains and losses, restructuring costs, transaction, separation, and integration-related costs and amortization of acquired intangible assets.

Three Months Ended

(in millions) June 30, 2023 June 30, 2022

Total profit for reportable segments $ 283 $ 337

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Restructuring costs ( 20 ) ( 33 )

Transaction, separation and integration-related costs

( 6 ) ( 11 ) ( 12 ) ( 23 )

Transaction, separation and integration-relation costs ( 1 ) ( 2 )

Amortization of acquired intangible assets ( 89 ) ( 104 )

Merger related indemnification ( 11 ) ( 10 )

SEC Matter — — ( 8 ) —

(Losses) gains on dispositions ( 9 ) ( 4 ) ( 12 ) 343

Arbitration loss ( 9 ) — ( 9 ) —

(Loss) gain on disposition of businesses ( 5 ) 29

Impairment losses ( 3 ) —

Debt extinguishment costs — ( 2 ) — ( 311 )

Pension and OPEB actuarial and settlement losses — ( 7 ) ( 1 ) ( 7 )

Income before income taxes $ 78 $ 122

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Note 19 – Commitments and Contingencies

Minimum purchase commitments as of December 31, 2022 were as follows:

Minimum purchase commitments as of June 30, 2023 were as follows:

Fiscal year Minimum Purchase Commitment (1)

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Total $ 1,066

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(1) Subsequent to June 30, 2023, the Company entered into minimum purchase commitments totaling approximately $ 250 million for additional purchased goods and services.

These minimum purchase commitments are not reflected in the table above.

Contingencies

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In February 2022, the notice period closed.

The litigation is currently in discovery.

Oracle America, Inc., et al.

Hewlett Packard Enterprise Company:

On March 22, 2016, Oracle filed a complaint against HPE in the U.S.

District Court for the Northern District of California, alleging copyright infringement, interference with contract, intentional interference with prospective economic relations, and unfair competition.

The litigation relates in part to former business units of HPE that are now owned by the Company.

The Company may be required to indemnify HPE for a portion of any recovery by Oracle in the litigation related to these business units.

Oracle’s claims arise primarily out of HPE’s prior relationship with a third-party maintenance provider named Terix Computer Company, Inc.

Oracle claims that Terix infringed its copyrights while acting as HPE’s subcontractor for certain customers of HPE’s multivendor support business.

Oracle claims that HPE is liable for vicarious and contributory infringement arising from the alleged actions of Terix and for direct infringement arising from HPE’s own alleged conduct.

On January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor.

Oracle appealed the judgment to the U.S.

Court of Appeals for the Ninth Circuit.

In August 2020, the court granted Oracle’s appeal in part.

The case was then remanded to the District Court for further proceedings.

In January 2021, the District Court entered a scheduling order that provided for summary judgment briefing to be completed by May 2021 and a trial date in November 2021.

In June 2021, the Court issued a decision denying HPE’s motion for summary judgment and granting Oracle’s motion for summary judgment on various HPE defenses.

I n November 2021, the court issued an order continuing the trial to May 2022.

A jury trial was held in May - June 2022, after which a jury awarded Oracle $ 30 million in damages.

In September 2022, Oracle filed a motion seeking $ 27 million in attorneys’ fees and prejudgment interest.

In November 2022, the Company entered into a settlement agreement with Oracle and HPE, resolving all matters in the litigation and the Company’s indemnification obligations to HPE.

In January 2023, the Court entered an order dismissing the case with prejudice.

The matter is now closed.

In re DXC Technology Company Securities Litigation:

The case is currently stayed.

Securities Litigation:

Previously disclosed securities litigation matters have been dismissed, with one case remaining, in the Superior Court of the State of California.

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The putative class of plaintiffs includes all persons who acquired shares of the Company’s common stock pursuant to the offering documents filed with the Securities and Exchange Commission in connection with the April 2017 transaction that formed DXC.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The State of California action had been stayed pending the outcome of the substantially similar federal action filed in the United States District Court for the Northern District of California.

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In January 2023, the Court issued an order denying the Company’s motion to dismiss the second amended complaint.

The Court has scheduled a case management conference in February 2023 to discuss how the matter will progress.

In March 2023, the Court entered a scheduling order setting a trial date for September 2025.

The case is now in discovery.

The Company believes that the final remaining lawsuit described above is also without merit, and intends to vigorously defend it.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Tax Examinations:

The Company is under IRS examination in the U.S.

on its federal income tax returns for certain fiscal years and is in disagreement with the IRS on certain tax positions.

on its federal income tax returns for certain fiscal years and is in disagreement with the IRS on certain tax positions, which are currently being contested in the U.S.

For more detail, see Note 14 – “Income Taxes” for further information.

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Securities and Exchange Commission.

The current focus of the investigation is the Company’s historical reporting related to its non-GAAP adjustment for “transaction, separation, and integration-related costs,” including whether the disclosure the Company previously used to describe the non-GAAP adjustment was sufficiently broad to cover certain expenses the Company included as transaction, separation, and integration-related costs.

The non-GAAP costs at issue primarily consist of expenses associated with the business combination that formed DXC in 2017.

The Company has cooperated fully with the SEC’s informal investigation, and the new management team appointed beginning in September of 2019 has proactively clarified and expanded the disclosure of the Company’s non-GAAP transaction, separation, and integration-related costs.

The primary focus of the investigation was the Company’s historical reporting related to its non-GAAP adjustment for “transaction, separation, and integration-related costs,” including whether the disclosure the Company previously used to describe the non-GAAP adjustment was sufficiently broad to cover certain expenses the Company included as transaction, separation, and integration-related costs.

The non-GAAP costs at issue primarily consisted of expenses associated with the business combination that formed DXC in 2017.

The Company cooperated fully with the SEC’s informal investigation, and the new management team appointed beginning in September of 2019 proactively clarified and expanded the disclosure of the Company’s non-GAAP transaction, separation, and integration-related costs.

In addition, the new management team significantly reduced the transaction, separation, and integration-related costs.

The Company intends to continue its voluntary cooperation with the SEC while seeking to resolve the matter.

There can be no guarantee that any final resolution will be reached or, if one is reached, as to the timing or final terms of any such resolution.

However, in the second quarter of the Company’s fiscal year 2023, the Company accrued $ 8 million, representing its current estimate of the settlement costs based on its ongoing discussions with the SEC.

In September 2022, the Company accrued $ 8 million, representing its estimate of the settlement costs based on its discussions with the SEC at that time.

In March 2023, the Company entered into an Offer of Settlement with the SEC and a Cease-and-Desist Order was entered.

The Company agreed to pay a civil penalty of $ 8 million and to implement certain remedial measures related to the Company’s non-GAAP policies and procedures within 120 days.

The Company has paid the civil penalty and has implemented the requisite remedial measures within the time provided.

This matter is now closed.

In August 2022, the Company submitted an initial notification of voluntary self-disclosure to the U.S.

Department of the Treasury, Office of Foreign Assets Control (“OFAC”) regarding potential violations of U.S.

sanctions on Russia.

The self-disclosure pertains to the Company’s sale of Luxoft’s Russia business to IBS Holding LLC in April 2022, as part of the Company’s exit from the Russian market following Russia’s invasion of Ukraine.

The Company has also submitted an initial notification of voluntary self-disclosure to the U.S.

Department of Commerce, Bureau of Industry and Security (“BIS”) regarding potential export control violations in connection with its exit from the Russian market.

The Company’s review of potential sanctions violations is ongoing, and the Company may make further disclosures to relevant agencies as its review continues.

In addition to the matters noted above, the Company is currently subject in the normal course of business to various claims and contingencies arising from, among other things, disputes with customers, vendors, employees, contract counterparties and other parties, as well as securities matters, environmental matters, matters concerning the licensing and use of intellectual property, and inquiries and investigations by regulatory authorities and government agencies.

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Unless otherwise noted, the Company is unable to determine at this time a reasonable estimate of a possible loss or range of losses associated with the foregoing disclosed contingent matters.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of our control.

Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by the coronavirus disease 2019 (“COVID-19”) crisis and the impact of varying private and governmental responses that affect our customers, employees, vendors and the economies and communities where they operate.

Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to:

• the uncertainty of the magnitude, duration, geographic reach of the COVID-19 crisis, its impact on the global economy and the impact of current and potential travel restrictions, stay-at-home orders, vaccine mandates and economic restrictions implemented to address the crisis;

• our inability to succeed in our strategic objectives;

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• our inability to develop and expand our service offerings to address emerging business demands and technological trends, including our inability to sell differentiated services amongst our offerings;

• our inability to compete in certain markets and expand our capacity in certain offshore locations and risks associated with such offshore locations such as Russia’s recent invasion of Ukraine;

• our inability to compete in certain markets and expand our capacity in certain offshore locations and risks associated with such offshore locations, such as the on-going conflict between Russia and Ukraine;

• failure to maintain our credit rating and ability to manage working capital, refinance and raise additional capital for future needs;

• public health crises such as the COVID-19 pandemic;

• our indebtedness;

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• execution risks by us and our suppliers, customers, and partners;

• the risks associated with natural disasters;

• the risks associated with climate change and natural disasters;

• increased scrutiny of, and evolving expectations for, sustainability and environmental, social and governance (“ESG”) initiatives;

• our inability to retain and hire key personnel and maintain relationships with key partners;

• the risks associated with prolonged periods of inflation or current macroeconomic conditions, including the current decline in economic growth rates in the United States and in other countries, including the possibility of reduced spending by customers in the areas we serve, the success of our cost-takeout efforts, continuing unfavorable foreign exchange rate movements, and our ability to close new deals in the event of an economic slowdown;

• the risks associated with our international operations, such as risks related to currency exchange rates and the withdrawal of U.K.

from the European Union on January 31, 2020;

• our inability to comply with governmental regulations or the adoption of new laws or regulations, including social and environmental responsibility regulations, policies and provisions;

• the risks associated with prolonged periods of inflation or current macroeconomic conditions, including the current decline in economic growth rates in the United States and in other countries, the possibility of reduced spending by customers in the areas we serve, the success of our cost-takeout efforts, continuing unfavorable foreign exchange rate movements, and our ability to close new deals in the event of an economic slowdown;

• the risks associated with our international operations, such as risks related to currency exchange rates;

• our inability to comply with existing and new laws and regulations, including social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands;

• our inability to achieve the expected benefits of our restructuring plans;

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• risks associated with disruption of our supply chain;

• our inability to maintain effective internal control over financial reporting;

• our inability to maintain effective disclosure controls and internal control over financial reporting;

• potential losses due to asset impairment charges;

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• disruptions in the credit markets, including disruptions that reduce our customers’ access to credit and increase the costs to our customers of obtaining credit;

• counterparty default risk in our hedging program;

• our failure to bid on projects effectively;

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• our inability to succeed in our strategic transactions;

• changes in tax laws and any adverse impact on our effective tax rate;

• changes in tax rates, tax laws, and the timing and outcome of tax examinations;

• risks following the merger of Computer Sciences Corporation (“CSC”) and Enterprise Services business of Hewlett Packard Enterprise Company’s (“HPES”) businesses, including anticipated tax treatment, unforeseen liabilities, and future capital expenditures;

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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-Q

Item 1. Financial Statements