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Item 2. Management’s Discussion and Analysis

2024-02-02 compared with 2023-11-02 · 108 added, 96 removed, 325 unchanged (39% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the second quarter and first six months of fiscal 2024 and our financial condition as of September 30, 2023.

The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the third quarter and first nine months of fiscal 2024 and our financial condition as of December 31, 2023.

The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes.

3 unchanged sentences

• Critical Accounting Estimates

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the second quarters and first six months of fiscal 2024 and fiscal 2023.

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the third quarters and first nine months of fiscal 2024 and fiscal 2023.

References are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

6 unchanged sentences

Our customers include commercial businesses of many sizes and in many industries and public sector clients.

Key metrics for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 are included below.

Key metrics for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 are included below.

We have presented organic revenue and diluted earnings per share on a non-GAAP basis.

1 unchanged sentence

• Revenues of $3.4 billion, down 4.7% compared to prior year period, and down 4.5% on an organic basis;

• Diluted earnings per share of $0.49, compared to $0.12 in the second quarter of fiscal 2023;

adjusted diluted earnings per share of $0.70, compared to $0.75 in the second quarter of fiscal 2023, a decrease of 6.7%;

• Fiscal 2024 operating cash flow of $375 million, less capital expenditures of $359 million, resulted in free cash flow of $16 million;

• Returned $214 million to shareholders through share repurchases in the second quarter of fiscal 2024.

Results of Operations for the Second Quarter and First Six Months of Fiscal 2024 and Fiscal 2023

• Diluted earnings per share of $0.81, compared to $0.25 in the third quarter of fiscal 2023;

adjusted diluted earnings per share of $0.87, compared to $0.95 in the third quarter of fiscal 2023, a decrease of 8.4%;

• For the first nine months of fiscal 2024, operating cash flow of $1,081 million, less capital expenditures of $480 million, resulted in free cash flow of $601 million;

• Returned $252 million to shareholders through share repurchases in the third quarter of fiscal 2024.

Results of Operations for the Third Quarter and First Nine Months of Fiscal 2024 and Fiscal 2023

Our revenue by geography and operating segment are provided below:

Three Months Ended Three Months Ended

(in millions) September 30, 2023 September 30, 2022 Percentage Change Constant Currency

September 30, 2023 (1)

(in millions) December 31, 2023 December 31, 2022 Percentage Change Constant Currency

December 31, 2023 (1)

Percentage Change in Constant Currency (1)

10 unchanged sentences

Total Revenues $ 3,399 $ 3,566 (4.7) % $ 3,337 (6.4) %

Six Months Ended Six Months Ended

(in millions) September 30, 2023 September 30, 2022 Percentage Change Constant Currency

September 30, 2023 (1)

Nine Months Ended Nine Months Ended

(in millions) December 31, 2023 December 31, 2022 Percentage Change Constant Currency

December 31, 2023 (1)

Percentage Change in Constant Currency (1)

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

For the second quarter of fiscal 2024, our total revenue was $3.4 billion, a decrease of $130 million or 3.6%, compared to the same period a year ago.

For the third quarter of fiscal 2024, our total revenue was $3.4 billion, a decrease of $167 million or 4.7%, compared to the same period a year ago.

The 4.7% decrease against the comparative period includes a 1.7% favorable foreign currency exchange rate impact, a 1.9% decline in revenue from the disposition of certain businesses, and a 4.5% decline in organic revenue.

1 unchanged sentence

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

For the first six months of fiscal 2024, our total revenue was $6.9 billion, a decrease of $391 million or 5.4%, as compared to the same period a year ago.

For the first nine months of fiscal 2024, our total revenue was $10.3 billion, a decrease of $558 million or 5.1%, as compared to the same period a year ago.

The 5.1% decrease against the comparative period includes a 1.0% favorable foreign currency exchange rate impact, a 2.2% decline in revenue from the disposition of certain businesses, and a 3.9% decline in organic revenue.

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Global Business Services

For the second quarter of fiscal 2024, GBS revenue was $1.7 billion, a decrease of $4 million or 0.2%, as compared to the same period a year ago.

The 0.2% decrease against the comparative period includes a 4.2% 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 and a 1.6% favorable foreign currency exchange rate impact.

For the first six months of fiscal 2024, GBS revenue was $3.4 billion, a decrease of $59 million or 1.7%, as compared to the same period a year ago.

For the third quarter of fiscal 2024, GBS revenue was $1.7 billion, a decrease of $42 million or 2.4%, as compared to the same period a year ago.

The 2.4% decrease against the comparative period includes a 4.1% decline in revenue from the disposition of certain businesses, partially offset by 0.3% organic revenue growth and a 1.4% favorable foreign currency exchange rate impact.

For the first nine months of fiscal 2024, GBS revenue was $5.1 billion, a decrease of $101 million or 1.9%, as compared to the same period a year ago.

The 1.9% decrease against the comparative period includes a 4.6% decline in revenue from the disposition of certain businesses, partially offset by 2.0% organic revenue growth from additional services provided to new and existing customers, and a 0.7% favorable foreign currency exchange rate impact.

Global Infrastructure Services

For the second quarter of fiscal 2024, our GIS revenue was $1.7 billion, a decrease of $126 million or 6.8%, as compared to the same period a year ago.

For the third quarter of fiscal 2024, our GIS revenue was $1.7 billion, a decrease of $125 million or 6.8%, as compared to the same period a year ago.

The 6.8% decrease against the comparative period includes a 8.9% decline in organic revenue from project completions and lower resale revenue, partially offset by a 2.1% favorable foreign currency exchange rate impact.

For the first six months of fiscal 2024, our GIS revenue was $3.5 billion, a decrease of $332 million or 8.7%, as compared to the same period a year ago.

For the first nine months of fiscal 2024, our GIS revenue was $5.2 billion, a decrease of $457 million or 8.1%, as compared to the same period a year ago.

The 8.1% decrease against the comparative period includes a 9.3% decline in organic revenue from project completions and lower resale revenue, partially offset by a 1.2% favorable foreign currency exchange rate impact.

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Dollar Amount Dollar Amount

Three Months Ended September 30, Change Six Months Ended September 30, Change

Three Months Ended December 31,

Change Nine Months Ended December 31,

(in millions) 2023 2022 Dollar Percent 2023 2022 Dollar Percent

5 unchanged sentences

Interest income (56) (41) (15) 36.6 % (158) (89) (69) 77.5 %

Loss on disposition of businesses 2 32 (30) (93.8) % 7 3 4 133.3 %

(Gain) loss on disposition of businesses (103) 9 (112) NM (1)

(96) 12 (108) NM (1)

Other income, net (48) (98) 50 (51.0) % (188) (270) 82 (30.4) %

Total Costs and Expenses $ 3,187 $ 3,464 $ (277) (8.0) % $ 9,863 $ 10,561 $ (698) (6.6) %

(1) NM - Calculation is not meaningful

Costs of Services

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), were $2.6 billion and $5.4 billion for the second quarter and first six months of fiscal 2024, respectively, a decrease of $142 million and $353 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in expense against both comparative periods was primarily due to a decrease in costs from lower revenue levels and a reduction in professional services and contractor-related expenses from our cost optimization efforts, partially offset by an unfavorable foreign currency exchange rate impact of $52 million and $29 million, respectively, for the second quarter and first six months of fiscal 2024.

Gross margin (Revenues less COS as a percentage of revenue) was 23.4% and 22.2% for the second quarter and first six months of fiscal 2024, respectively, an increase of 1.2% and 0.6% against the comparative period.

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), were $2.6 billion and $8.0 billion for the third quarter and first nine months of fiscal 2024, respectively, a decrease of $163 million and $516 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in expenses against both comparative periods was primarily due to a decrease in costs from lower revenue levels and a reduction in professional services and contractor-related expenses from our cost optimization efforts, partially offset by a $9 million severance expense in the third quarter of fiscal 2024 related to the departure of the Company’s prior Chief Executive Officer and an unfavorable foreign currency exchange rate impact of $45 million and $74 million, respectively, for the third quarter and first nine months of fiscal 2024.

Gross margin (Revenues less COS as a percentage of revenue) was 22.4% and 22.3% for the third quarter and first nine months of fiscal 2024, respectively, an increase of 0.9% and 0.8% against the comparative period.

Selling, General and Administrative

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $328 million and $655 million for the second quarter and first six months of fiscal 2024, respectively, an increase of $4 million and a decrease of $18 million, respectively, as compared to the same periods of the prior fiscal year.

The $4 million increase in expense for the second quarter of fiscal 2024 was primarily due to an increase in professional services and other vendor-related expenses, partially offset by reductions in payroll related expenses.

The $18 million decrease in expense for the first six months of fiscal 2024 was primarily due to reductions in payroll related expenses, partially offset by an increase in professional services and other vendor-related expenses.

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $294 million and $949 million for the third quarter and first nine months of fiscal 2024, respectively, a decrease of $21 million and $39 million, respectively, as compared to the same periods of the prior fiscal year.

For the third quarter of fiscal 2024, the $21 million decrease in expenses against the comparative period was primarily due to an $11 million charge for merger-related indemnification expenses and a $9 million expense for an arbitration loss in the third quarter of fiscal 2023, and a reduction in professional services and other vendor-related expenses in the third quarter of fiscal 2024, partially offset by a $7 million unfavorable foreign currency exchange rate impact.

For the first nine months of fiscal 2024, the $39 million decrease in expenses against the comparative period was primarily due to a $9 million expense for an arbitration loss and an $8 million expense for the SEC Matter in the first nine months of fiscal 2023, lower merger related indemnification expenses, lower transaction, separation and integration-related (“TSI”) costs, and reduced professional services and other vendor-related expenses in the first nine months of fiscal 2024, partially offset by a $7 million unfavorable foreign currency exchange rate impact.

Depreciation and Amortization

Depreciation expense was $112 million and $225 million for the second quarter and first six months of fiscal 2024, respectively, a decrease of $17 million and $42 million, respectively, as compared to the same periods of the prior fiscal year.

Depreciation expense was $105 million and $330 million for the third quarter and first nine months of fiscal 2024, respectively, a decrease of $18 million and $60 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in depreciation expense against both comparative periods was primarily due to lower average net property and equipment balances.

Amortization expense was $249 million and $480 million for the second quarter and first six months of fiscal 2024, respectively, a decrease of $2 million and $22 million, respectively, as compared to the same periods of the prior fiscal year.

Amortization expense was $245 million and $725 million for the third quarter and first nine months of fiscal 2024, respectively, a decrease of $7 million and $29 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in amortization expense against both comparative periods was primarily due to lower software amortization.

Restructuring Costs

During fiscal 2024, management approved global cost savings initiatives designed to better align our facility and data center requirements.

During the second quarter and first six months of fiscal 2024, total restructuring costs recorded, net of reversals, were $35 million and $55 million, respectively, a decrease of $18 million and $31 million, respectively, as compared to the same periods of the prior fiscal year.

During fiscal 2024, management approved global cost savings initiatives designed to better align our workforce, facility and data center requirements.

During the third quarter and first nine months of fiscal 2024, total restructuring costs recorded, net of reversals, were $36 million and $91 million, respectively, a decrease of $13 million and $44 million, respectively, as compared to the same periods of the prior fiscal year.

See Note 12 – “Restructuring Costs” for additional information about our restructuring actions.

Interest Expense and Interest Income

Net interest expense (interest expense less interest income) was $25 million and $42 million for the second quarter and first six months of fiscal 2024, respectively, an increase of $9 million as compared to both periods of the prior fiscal year.

The increase in net interest expense against both comparative periods was primarily due to higher interest rates globally that increased interest expense from securitization and commercial paper, partially offset by higher income from cash deposits.

Loss on Disposition of Businesses

During the first six months of fiscal 2024 and fiscal 2023, the Company sold insignificant businesses that resulted in a loss of $7 million and $3 million, respectively.

Net interest expense (interest expense less interest income) was $22 million and $64 million for the third quarter and first nine months of fiscal 2024, respectively, an increase of $7 million and $16 million as compared to both periods of the prior fiscal year.

(Gain) Loss on Disposition of Businesses

During the first nine months of fiscal 2024 and fiscal 2023, the Company sold insignificant businesses and made adjustments to estimated amounts from prior years’ dispositions that resulted in a gain of $96 million and loss of $12 million, respectively.

Other Income, Net

Other 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.

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Non-service cost components of net periodic pension income $ (35) $ (60) $ (108) $ (187)

Foreign currency gain

Foreign currency loss (gain)

5 (8) (4) (11)

Gain on sale of assets (14) (28) (41) (72)

Other (gain) loss

(4) (2) (35) —

Total $ (48) $ (98) $ (188) $ (270)

Other income, net, was $76 million for the second quarter of fiscal 2024, an increase of $8 million against the comparative period.

Other income, net, was $140 million for the first six months of fiscal 2024, a decrease of $32 million against the comparative period.

Other income, net, was $48 million for the third quarter of fiscal 2024, a decrease of $50 million against the comparative period.

Other income, net, was $188 million for the first nine months of fiscal 2024, a decrease of $82 million against the comparative period.

The change against the comparative period was primarily due to:

• net periodic pension income decreased by $25 million and $79 million primarily due to changes in expected returns on assets and other actuarial assumptions.

• foreign currency gains were immaterially different and increased by $6 million, 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.

• foreign currency gains decreased by $13 million and $7 million 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 decrease in gains from sales of assets of $14 million and $31 million;

• an increase in other gains of $2 million and $35 million, primarily from the sale of a strategic investment in the second quarter of fiscal 2024.

Our effective tax rate (“ETR”) was 22.7% and 48.1% for the three months ended September 30, 2023 and September 30, 2022, respectively, and 31.6% and 25.6% for the six months ended September 30, 2023 and September 30, 2022, respectively.

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

Our effective tax rate (“ETR”) was 34.0% and 40.2% for the three months ended December 31, 2023 and December 31, 2022, respectively, and 32.8% and 30.9% for the nine months ended December 31, 2023 and December 31, 2022, respectively.

For the three months ended December 31, 2023, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, and the foreign tax credit.

For the nine months ended December 31, 2023, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, a decrease in valuation allowances on deferred tax assets, and the foreign tax credit.

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

tax on foreign income, and the tax impact of business divestitures.

For the six months ended September 30, 2022, the primary drivers of the ETR were the global mix of income, tax impact of business divestitures, U.S.

tax on foreign income, and a decrease in unrecognized tax benefits due to income tax audit settlements and statute of limitation expirations.

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.

Net loss attributable to non-controlling interest

The net loss attributable to non-controlling interest, net of tax, was $16 million and $10 million for the third quarter and first nine months of fiscal 2024, respectively, a change of $18 million and $14 million as compared to both periods of the prior fiscal year.

The change against both comparative periods is primarily due to an adjustment to prior period amounts recognized in the third quarter of fiscal 2024.

Earnings Per Share

Diluted EPS for the second quarter and first six months of fiscal 2024 was $0.49 and $0.65, respectively, an increase of $0.37 and $0.10, respectively, as compared to the same periods of the prior fiscal year.

Diluted EPS for the third quarter and first nine months of fiscal 2024 was $0.81 and $1.43, respectively, an increase of $0.56 and $0.63, respectively, as compared to the same periods of the prior fiscal year.

The increase in diluted EPS against both comparative periods was primarily due to increases in net income attributable to DXC common stockholders and lower weighted average share counts from the Company’s share repurchases.

Diluted EPS for the second quarter of fiscal 2024 includes $0.13 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.34 per share of amortization of acquired intangible assets, $(0.11) per share of net gains on dispositions, $0.01 per share of impairment losses, and $(0.17) per share of tax adjustments.

Diluted EPS for the first six months of fiscal 2024 includes $0.20 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.66 per share of amortization of acquired intangible assets, $(0.09) per share of net gains on dispositions, $0.04 per share of impairment losses, and $(0.15) per share of tax adjustments.

Diluted EPS for the third quarter of fiscal 2024 includes $0.16 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.39 per share of amortization of acquired intangible assets, $(0.49) per share of net gains on dispositions, $0.01 per share of merger related indemnification costs, and $(0.03) per share of tax adjustments.

Diluted EPS for the first nine months of fiscal 2024 includes $0.36 per share of restructuring costs, $0.02 per share of transaction, separation and integration-related costs, $1.05 per share of amortization of acquired intangible assets, $(0.55) per share of net gains on dispositions, $0.01 per share of merger related indemnification costs, $0.04 per share of impairment losses, and $(0.18) per share of tax adjustments.

Non-GAAP Financial Measures

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Dollar Amount Dollar Amount

Three Months Ended September 30, Change Six Months Ended September 30, Change

Three Months Ended December 31,

Change Nine Months Ended December 31,

(in millions) 2023 2022 Dollar Percent 2023 2022 Dollar Percent

10 unchanged sentences

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

• Merger related indemnification – in fiscal 2024, represents the Company’s current estimate of potential liability to HPE for a tax related indemnification;

and in fiscal 2023, represents the Company’s estimate of potential liability to HPE for indemnification following the outcome of the Oracle v.

HPE litigation in June 2022.

• Merger related indemnification – in fiscal 2024, primarily represents the Company’s current estimate of potential liability to HPE for a tax related indemnification;

and in fiscal 2023, represents the Company’s then current estimate of potential liability to HPE for indemnification on the Forsyth v.

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

HPE litigation.

These obligations are related to the HPES merger.

1 unchanged sentence

• 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 a loss arising from an arbitration decision in the third quarter of fiscal 2023.

• Impairment losses – non-cash charges associated with the permanent reduction in the value of the Company’s assets (e.g., impairment of goodwill and other long-term assets including fixed assets and impairments to deferred tax assets for discrete changes in valuation allowances).

2 unchanged sentences

Income tax expense of all other (non-discrete) non-GAAP adjustments is based on the difference in the GAAP annual effective tax rate (AETR) and overall non-GAAP provision (consistent with the GAAP methodology).

(1) During the first six months of fiscal 2024, the Company sold insignificant businesses and a strategic investment that resulted in a net gain of $28 million.

During the first six months of fiscal 2023, the Company sold insignificant businesses that resulted in a net loss of $3 million.

(2) Impairment losses on dispositions for the second quarter and first six months of fiscal 2024 include a $2 million and a $5 million, respectively, of charges associated with certain strategic investments accounted for within Other income, net.

Impairment losses on dispositions for the first quarter of fiscal 2024 included $4 million of Net income attributable to non-controlling interest, net of tax.

(1) During the first nine months of fiscal 2024, the Company sold insignificant businesses and a strategic investment and made adjustments to estimated amounts from prior years’ dispositions that resulted in a net gain of $132 million.

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

(2) Impairment losses on dispositions for the first nine months of fiscal 2024 include $5 million of charges associated with certain strategic investments accounted for within Other income, net.

Impairment losses on dispositions for the first nine months of fiscal 2024 included $4 million of Net income attributable to non-controlling interest, net of tax.

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

Three Months Ended September 30, 2023

Three Months Ended December 31, 2023

(in millions, except per-share amounts) As

3 unchanged sentences

Integration-Related Costs Amortization

Assets Merger Related Indemnification Gains and Losses on Dispositions Impairment Losses Tax Adjustment Non-GAAP

Assets Merger Related Indemnification Gains and Losses on Dispositions Tax Adjustment Non-GAAP

Income before income taxes $ 212 $ 36 $ 2 $ 88 $ 2 $ (104) $ — $ 236

1 unchanged sentence

Net income 140 31 2 75 2 (94) (5) 151

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

net loss attributable to non-controlling interest, net of tax

(16) — — — — — — (16)

Net income attributable to DXC common stockholders $ 156 $ 31 $ 2 $ 75 $ 2 $ (94) $ (5) $ 167

5 unchanged sentences

Diluted EPS 191.93 191.93 191.93 191.93 191.93 191.93 191.93 191.93

Six Months Ended September 30, 2023

Nine Months Ended December 31, 2023

(in millions, except per-share amounts) As

8 unchanged sentences

Net income 281 73 5 213 3 (112) 4 (37) 430

net income attributable to non-controlling interest, net of tax 6 — — — — — (4) — 2

net loss attributable to non-controlling interest, net of tax

(10) — — — — — (4) — (14)

Net income attributable to DXC common stockholders $ 291 $ 73 $ 5 $ 213 $ 3 $ (112) $ 8 $ (37) $ 444

5 unchanged sentences

Diluted EPS 203.55 203.55 203.55 203.55 203.55 203.55 203.55 203.55 203.55

Three Months Ended September 30, 2022

Three Months Ended December 31, 2022

(in millions, except per-share amounts) As

2 unchanged sentences

Integration-Related Costs Amortization

Assets SEC Matter Gains and Losses on Dispositions Pension and OPEB Actuarial and Settlement Gains and Losses Non-GAAP

Assets Merger Related Indemnification and Arbitration Loss Gains and Losses on Dispositions Impairment Losses Non-GAAP

Income before income taxes $ 102 $ 49 $ 6 $ 100 $ 20 9 $ 8 $ 294

$ 54 $ 53 $ 4 $ 101 $ 8 32 $ 1 $ 253

Income tax expense 41 10 1 20 4 (7) 1 70

26 10 1 18 1 22 — 78

28 43 3 83 7 10 1 175

Net income 61 39 5 80 16 16 7 224

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

Net income attributable to DXC common stockholders $ 59 $ 39 $ 5 $ 80 $ 16 $ 16 $ 7 $ 222

$ 27 $ 43 $ 3 $ 83 $ 7 $ 10 $ 1 $ 174

Effective Tax Rate 40.2 % 23.8 %

4 unchanged sentences

Diluted EPS 233.00 233.00 233.00 233.00 233.00 233.00 233.00 233.00

Six Months Ended September 30, 2022

Nine Months Ended December 31, 2022

(in millions, except per-share amounts) As

3 unchanged sentences

Integration-Related Costs Amortization

Assets Merger Related indemnification SEC Matter Gains and Losses on Dispositions Pension and OPEB Actuarial and Settlement Gains and Losses Non-GAAP

Assets Merger Related Indemnification, Arbitration Loss, and SEC Matter Gains and Losses on Dispositions Impairment Losses Pension and OPEB Actuarial and Settlement Gains and Losses Non-GAAP

Income before income taxes $ 278 $ 135 $ 12 $ 305 $ 38 $ 12 $ 8 $ 1 $ 789

10 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Total revenue growth

22 unchanged sentences

(8.9) % (7.4) % (9.3) % (6.8) %

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

Three Months Ended Six Months Ended

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

Reconciliations of net income to adjusted EBIT are as follows:

Three Months Ended Nine Months Ended

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

Net income $ 140 $ 61 $ 281 $ 192

10 unchanged sentences

(104) 9 (132) 12

Arbitration loss

Impairment losses

3 unchanged sentences

Cash and Cash Equivalents and Cash Flows

As of September 30, 2023, our cash and cash equivalents (“cash”) were $1.4 billion, of which $0.7 billion was held outside of the U.S.

As of December 31, 2023, our cash and cash equivalents (“cash”) were $1.7 billion, of which $1.0 billion was held outside of the U.S.

As of March 31, 2023, our cash was $1.9 billion, of which $0.7 billion was held outside of the U.S.

10 unchanged sentences

The following table summarizes our cash flow activity:

Six Months Ended

(in millions) September 30, 2023 September 30, 2022 Change

Nine Months Ended

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

Net cash provided by (used in):

8 unchanged sentences

Operating cash flow

Net cash provided by operating activities during the first six months of fiscal 2024 of $375 million was flat as compared to the first six months of the prior fiscal year.

Operating cash flow against the comparative period included:

Net cash provided by operating activities was $1,081 million and $1,000 million, respectively, during the first nine months of fiscal 2024 and fiscal 2023, reflecting a year-over-year increase of $81 million.

The increase was primarily due to:

• a $272 million favorable change in working capital primarily from improvements in our cash conversion cycle;

partially offset by

• a decrease in net income, net of adjustments of $191 million.

• offset by a $154 million favorable change in working capital.

The following table contains certain key working capital metrics:

Three Months Ended

September 30, 2023 September 30, 2022

December 31, 2023 December 31, 2022

Days of sales outstanding in accounts receivable 65 69

2 unchanged sentences

Investing cash flow

Net cash used in investing activities was $284 million and $193 million, respectively, during the first six months of fiscal 2024 and fiscal 2023, reflecting a year-over-year change of $91 million.

Net cash used in investing activities was $367 million and $299 million, respectively, during the first nine months of fiscal 2024 and fiscal 2023, reflecting a year-over-year change of $68 million.

The change against the comparative period was primarily due to:

1 unchanged sentence

• a decrease in cash flows from other net investing activities of $4 million;

• partially offset by an $11 million decrease in capital expenditures.

partially offset by

• a $52 million decrease in capital expenditures.

Financing cash flow

Net cash used in financing activities was $521 million and $513 million, respectively, during the first six months of fiscal 2024 and fiscal 2023, reflecting a year-over-year change of $8 million.

Net cash used in financing activities was $877 million and $693 million, respectively, during the first nine months of fiscal 2024 and fiscal 2023, reflecting a year-over-year change of $184 million.

The change against the comparative period was primarily due to:

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The following table summarizes our total debt:

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

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

Short-term debt and current maturities of long-term debt $ 661 $ 500

1 unchanged sentence

Total debt $ 4,541 $ 4,400

The $63 million increase in total debt during the first six months of fiscal 2024 was primarily attributable to the increase in borrowings of commercial paper partially offset by decreases in finance leases and borrowings for asset financing attributable to payments exceeding additions and a favorable foreign currency exchange rate of U.S.

dollar against the Euro.

We were in compliance with all financial covenants associated with our borrowings as of September 30, 2023 and September 30, 2022.

The $141 million increase in total debt during the first nine months of fiscal 2024 was primarily attributable to the increase in borrowings of commercial paper and unfavorable foreign currency exchange rate of U.S.

dollar against the Euro, partially offset by decreases in finance leases and borrowings for asset financing attributable to payments exceeding additions.

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

Our credit ratings are as follows:

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

Our total liquidity of $4.4 billion as of September 30, 2023, includes $1.4 billion of cash and cash equivalents and $3.0 billion of available borrowings under our revolving credit facility.

Our total liquidity of $4.9 billion as of December 31, 2023, includes $1.7 billion of cash and cash equivalents and $3.2 billion of available borrowings under our revolving credit facility.

On November 1, 2023, the Company extended the term and increased its available borrowings under our revolving credit facility to $3.2 billion.

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For further information see “Cash Commitments” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

For our minimum purchase cash commitments as of September 30, 2023, in connection with our long-term purchase agreements with certain software, hardware, telecommunication, and other service providers, see Note 19 – “Commitments and Contingencies.”

For our minimum purchase cash commitments as of December 31, 2023, in connection with our long-term purchase agreements with certain software, hardware, telecommunication, and other service providers, see Note 19 – “Commitments and Contingencies.”

Critical Accounting Estimates

6 unchanged sentences

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

During the three months ended September 30, 2023, there were no changes to our critical accounting policies and estimates from those described in our fiscal 2023 Annual Report on Form 10-K except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

During the three months ended December 31, 2023, there were no changes to our critical accounting policies and estimates from those described in our fiscal 2023 Annual Report on Form 10-K except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

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 2. Management’s Discussion and Analysis