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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-09 · 180 added, 100 removed, 229 unchanged (55% 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 first quarter of fiscal 2025 and our financial condition as of June 30, 2024.

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 2025 and our financial condition as of September 30, 2024.

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

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• Critical Accounting Estimates

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the first quarters of fiscal 2025 and fiscal 2024.

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 2025 and fiscal 2024.

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 first quarter of fiscal 2025 compared to the first quarter of fiscal 2024 are included below.

Key profitability metrics for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 as well as year to date cash flow comparisons are included below.

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

For more information see “Non-GAAP Financial Measures.”

• Revenues of $3.2 billion, down 6.1% compared to the same period a year ago, and down 4.4% on an organic basis;

• Diluted earnings per share of $0.14, compared to $0.17 in the same period a year ago;

adjusted diluted earnings per share of $0.74, compared to $0.63 in the same period a year ago;

• For the first quarter of fiscal 2025, operating cash flow of $238 million, less capital expenditures of $193 million, resulted in positive free cash flow of $45 million, compared to negative free cash flow of $75 million in the same period a year ago.

Results of Operations for the Three Months Ended June 30, 2024 and the Three Months Ended June 30, 2023

• Revenues of $3.2 billion, down 5.7% compared to prior year period, and down 5.6% on an organic basis;

• Diluted earnings per share of $0.23, compared to $0.49 in the second quarter of fiscal 2024;

adjusted diluted earnings per share of $0.93, compared to $0.70 in the second quarter of fiscal 2024, an increase of 32.9%;

• Fiscal 2025 operating cash flow of $433 million, less capital expenditures of $340 million, resulted in free cash flow of $93 million, compared to free cash flow of $16 million in the same period a year ago.

Results of Operations for the Second Quarter and First Six Months of Fiscal 2025 and Fiscal 2024

Revenues across operating segments and geographies are provided below:

Three Months Ended Three Months Ended

(in millions) June 30, 2024 June 30, 2023 Percentage Change Constant Currency

June 30, 2024 (1)

(in millions) September 30, 2024 September 30, 2023 Percentage Change Constant Currency

September 30, 2024 (1)

Percentage Change in Constant Currency (1)

1 unchanged sentence

United States $ 889 $ 1,002 (11.3) % $ 889 (11.3) %

United Kingdom

451 460 (2.0) % 439 (4.6) %

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Total Revenues $ 3,241 $ 3,436 (5.7) % $ 3,240 (5.7) %

Reportable Segments

Operating Segments

GBS $ 1,677 $ 1,709 (1.9) % $ 1,679 (1.8) %

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Total Revenues $ 3,241 $ 3,436 (5.7) % $ 3,240 (5.7) %

Six Months Ended Six Months Ended

(in millions) September 30, 2024 September 30, 2023 Percentage Change Constant Currency

September 30, 2024 (1)

Percentage Change in Constant Currency (1)

Geographic Market

United States $ 1,786 $ 2,004 (10.9) % $ 1,786 (10.9) %

899 925 (2.8) % 884 (4.4) %

Other Europe 2,065 2,115 (2.4) % 2,064 (2.4) %

Australia 608 672 (9.5) % 604 (10.1) %

Other International 1,119 1,166 (4.0) % 1,187 1.8 %

Total Revenues $ 6,477 $ 6,882 (5.9) % $ 6,525 (5.2) %

Operating Segments

GBS $ 3,350 $ 3,412 (1.8) % $ 3,382 (0.9) %

GIS 3,127 3,470 (9.9) % 3,143 (9.4) %

Total Revenues $ 6,477 $ 6,882 (5.9) % $ 6,525 (5.2) %

(1) Constant currency revenues are a non-GAAP measure calculated by translating current period activity into U.S.

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

For the first quarter of fiscal 2025, our total revenue was $3.2 billion, a decrease of $0.2 billion or 6.1%, compared to the same period a year ago.

For the second quarter of fiscal 2025, our total revenue was $3.2 billion, a decrease of $195 million or 5.7%, compared to the same period a year ago.

For the first six months of fiscal 2025, our total revenue was $6.5 billion, a decrease of $405 million or 5.9%, as compared to the same period a year ago.

The 5.9% decrease against the comparative period includes a 0.7% unfavorable foreign currency exchange rate impact, a 0.2% decline in revenue from the disposition of certain businesses, and a 5.0% decline in organic revenue.

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Global Business Services

For the first quarter of fiscal 2025, GBS revenue was $1.7 billion, a decrease of $30 million or 1.8% compared to the same period a year ago.

The 1.8% decrease against the comparative period includes a 1.8% unfavorable foreign currency exchange rate impact and a 0.5% decline in revenue from the disposition of certain businesses, partially offset by 0.5% organic revenue growth from additional services provided to new and existing customers.

GBS accounts for 51.7% of total revenue, an increase of 230 basis points against the comparative period.

For the second quarter of fiscal 2025, GBS revenue was $1.7 billion, a decrease of $32 million or 1.9%, as compared to the same period a year ago.

The 1.9% decrease against the comparative period includes a 1.6% decline in organic revenue, a 0.2% decline in revenue from the disposition of certain businesses, and a 0.1% unfavorable foreign currency exchange rate impact.

For the first six months of fiscal 2025, GBS revenue was $3.4 billion, a decrease of $62 million or 1.8%, as compared to the same period a year ago.

The 1.8% decrease against the comparative period includes a 0.6% decline in organic revenue, 0.3% decline in revenue from the disposition of certain businesses, and a 0.9% unfavorable foreign currency exchange rate impact.

Global Infrastructure Services

For the first quarter of fiscal 2025, GIS revenue was $1.6 billion, a decrease of $180 million or 10.3% compared to the same period a year ago.

The 10.3% decrease against the comparative period includes a 1.0% unfavorable foreign currency exchange rate impact and a 9.3% decline in organic revenue from project completions, early terminations, and lower resale revenue.

For the second quarter of fiscal 2025, our GIS revenue was $1.6 billion, a decrease of $163 million or 9.4%, as compared to the same period a year ago.

The 9.4% decrease against the comparative period includes a 9.6% decline in organic revenue from project completions and lower resale revenue, partially offset by a 0.2% favorable foreign currency exchange rate impact.

For the first six months of fiscal 2025, our GIS revenue was $3.1 billion, a decrease of $343 million or 9.9%, as compared to the same period a year ago.

The 9.9% decrease against the comparative period includes a 9.4% decline in organic revenue from project completions and lower resale revenue and a 0.5% unfavorable foreign currency exchange rate impact.

Costs and Expenses

Our total costs and expenses are provided below:

Dollar Amount

Three Months Ended June 30, Change

(in millions)

2024 2023 Dollar Percent

Costs of services (excludes depreciation and amortization and restructuring costs) $ 2,526 $ 2,719 $ (193) (7.1) %

Selling, general and administrative (excludes depreciation and amortization and restructuring costs) 301 327 (26) (8.0) %

Dollar Amount Dollar Amount

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

(in millions) 2024 2023 Dollar Percent 2024 2023 Dollar Percent

Costs of services $ 2,427 $ 2,633 $ (206) (7.8) % $ 4,953 $ 5,352 $ (399) (7.5) %

Selling, general and administrative 353 328 25 7.6 % 654 655 (1) (0.2) %

Depreciation and amortization 329 361 (32) (8.9) % 655 705 (50) (7.1) %

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Costs of Services

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), were $2.5 billion for the first quarter of fiscal 2025, a decrease of $193 million compared to the same period a year ago.

The $193 million decrease was primarily due to a decrease in costs from lower revenue levels, a reduction in professional services and contractor-related expenses from our cost optimization efforts, and a favorable foreign currency exchange rate impact.

Gross margin (Revenues less COS as a percentage of revenue) was 21.9% and 21.1% for the first quarters of fiscal 2025 and 2024, respectively.

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), were $2.4 billion and $5.0 billion for the second quarter and first six months of fiscal 2025, respectively, a decrease of $206 million and $399 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.

Gross margin (Revenues less COS as a percentage of revenue) was 25.1% and 23.5% for the second quarter and first six months of fiscal 2025, respectively, an increase of 1.7% and 1.3% against the comparative period.

Selling, General and Administrative

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $301 million for the first quarter of fiscal 2025, a decrease of $26 million compared to the same period a year ago.

During this quarter, SG&A as a percentage of revenues was 9.3%, a decrease of 20 basis points from the prior year period.

The $26 million decrease in SG&A expenses was primarily driven by lower payroll and related expenses, and lower merger-related indemnification expenses, partially offset by higher transaction, separation and integration-related (“TSI”) costs.

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $353 million and $654 million for the second quarter and first six months of fiscal 2025, respectively, an increase of $25 million and a decrease of $1 million, respectively, as compared to the same periods of the prior fiscal year.

The $25 million increase in expense for the second quarter of fiscal 2025 was primarily due to an increase in higher transaction, separation and integration-related (“TSI”) costs and an alignment of business development expenses from COS in support of the offering model, partially offset by a gain from a legal settlement in the second quarter of fiscal 2025 and reductions in payroll related expenses.

The $1 million decrease in expense for the first six months of fiscal 2025 was primarily due to a reduction in payroll related expenses, lower merger-related indemnification expenses, and a gain from a legal settlement in the second quarter of fiscal 2025, partially offset by higher TSI costs and an alignment of business development expenses from COS in support of the offering model.

Depreciation and Amortization

Depreciation expense was $94 million for the first quarter of fiscal 2025, a decrease of $19 million compared to the same period a year ago.

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

Amortization expense was $232 million for the first quarter of fiscal 2025, consistent with the prior year period.

Depreciation expense was $94 million and $188 million for the second quarter and first six months of fiscal 2025, respectively, a decrease of $18 million and $37 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 $235 million and $467 million for the second quarter and first six months of fiscal 2025, respectively, a decrease of $14 million and $13 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 2025, management approved global cost savings initiatives designed to better align our workforce, facility and data center requirements.

Total restructuring costs recorded, net of reversals, was $39 million for the first quarter of fiscal 2025, an increase of $19 million compared to the same period a year ago.

During fiscal 2025, 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 2025, total restructuring costs recorded, net of reversals, were $42 million and $81 million, respectively, an increase of $7 million and $26 million, respectively, as compared to the same periods of the prior fiscal year.

See Note 10 – “Restructuring Costs” for additional information about our restructuring actions.

Interest Expense and Interest Income

Net interest expense (interest expense less interest income) was $21 million for the first quarter of fiscal 2025, an increase of $4 million as compared to the same period a year ago primarily due to lower net interest income from lower levels of global cash balances.

Net interest expense (interest expense less interest income) was $18 million and $39 million for the second quarter and first six months of fiscal 2025, respectively, a decrease of $7 million and $3 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in net interest expense against both comparative periods was primarily due to decreased interest expense from lower levels of asset financing and commercial paper liabilities, partially offset by lower net income from cash deposits.

Loss on Disposition of Businesses

During the first quarter of fiscal 2024, the Company sold insignificant businesses that resulted in a loss of $5 million.

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

Other Income, Net

Other income, net comprises non-service cost components of net periodic pension income, pension and other post-retirement benefit (“OPEB”) actuarial and settlement losses (gains), movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, gains on sales of assets, and other miscellaneous gains and losses.

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, losses (gains) on real estate and facility sales, and other miscellaneous gains and losses.

The following table summarizes components of other income, net.

The components of other income, net for the first quarters of fiscal 2025 and 2024 were as follows:

Three Months Ended

(in millions) June 30, 2024 June 30, 2023 Dollar Change

The components of other income, net were as follows:

Three Months Ended Six Months Ended

(in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Non-service cost components of net periodic pension income $ (40) $ (36) $ (80) $ (73)

Foreign currency loss (gain)

(Gain) loss on sales of assets

Other loss (gain)

Foreign currency (gain) loss

Loss (gain) on real estate and facility sales

(8) (39) (16) (52)

Total $ (21) $ (76) $ (66) $ (140)

Other income, net, was $45 million and $64 million during the first quarters of fiscal 2025 and fiscal 2024, respectively, a change of $19 million compared to the same period a year ago that was primarily due to:

• a $3 million increase in net periodic pension income, primarily due to changes in expected returns on assets and other actuarial assumptions;

• a $9 million increase in foreign currency losses, 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 $15 million decrease in gains from sales of assets, partially offset by a $2 million reduction in other losses.

Our effective tax rate (“ETR”) was 63.2% and 46.2% for the first quarter of fiscal 2025 and the first quarter of fiscal 2024, respectively.

For the first quarter of fiscal 2025, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, a reduction in a deferred tax asset for stock based compensation, and a decrease in a deferred tax liability for estimated taxes associated with the repatriation of foreign earnings.

For the first quarter of fiscal 2024, 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.

Other income, net, was $21 million for the second quarter of fiscal 2025, a decrease of $55 million against the comparative period.

Other income, net, was $66 million for the first six months of fiscal 2025, a decrease of $74 million against the comparative period.

The change against the comparative period was primarily due to:

• net periodic pension income increased by $4 million and $7 million primarily due to changes in expected returns on assets and other actuarial assumptions.

• foreign currency gains for the six months ended decreased by $10 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.

• net losses on real estate and facility sales increased by $27 million and $35 million;

• a decrease in other gains of $31 million and $36 million, primarily from the sale of a strategic investment in the second quarter of fiscal 2024.

Our effective tax rate (“ETR”) was 51.6% and 22.7% for the three months ended September 30, 2024, and September 30, 2023, respectively, and 56.5% and 31.6% for the six months ended September 30, 2024, and September 30, 2023, respectively.

For the three months ended September 30, 2024, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, the foreign tax credit, and an increase in interest receivables due from tax authorities.

For the six months ended September 30, 2024, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, the foreign tax credit, an increase in interest receivables due from tax authorities, and a decrease in a deferred tax asset for stock based compensation.

For the three and six months ended September 30, 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.

Earnings Per Share

Diluted EPS for the first quarter of fiscal 2025 was $0.14, compared to $0.17 in the first quarter of fiscal 2024.

The decrease in earnings per share was primarily due to a decrease of $10 million in net income attributable to DXC common stockholders, partially offset by a lower weighted average common shares outstanding.

Diluted EPS for the first quarter of fiscal 2025 includes $0.17 per share of restructuring costs, $0.03 per share of transaction, separation and integration-related costs, and $0.39 per share of amortization of acquired intangible assets.

Diluted EPS for the first quarter of fiscal 2024 includes $0.07 per share of restructuring costs, $0.32 per share of amortization of acquired intangible assets, $0.02 per share of net losses on dispositions, $0.03 per share of impairment losses, and $0.01 per share of tax adjustments.

Diluted EPS for the second quarter and first six months of fiscal 2025 was $0.23 and $0.37, respectively, a decrease of $0.26 and $0.28, respectively, as compared to the same periods of the prior fiscal year.

The decrease in diluted EPS against both comparative periods was primarily due to decreases in net income attributable to DXC common stockholders, partially offset by lower weighted average share counts from the Company’s share repurchases.

Diluted EPS for the second quarter of fiscal 2025 includes $0.18 per share of restructuring costs, $0.07 per share of transaction, separation and integration-related costs, $0.38 per share of amortization of acquired intangible assets, $(0.03) per share of merger related indemnification costs, $(0.03) per share of gains on dispositions, $0.11 per share of net losses on real estate and facility sales, and $0.03 per share of tax adjustments.

Diluted EPS for the first six months of fiscal 2025 includes $0.35 per share of restructuring costs, $0.10 per share of transaction, separation and integration-related costs, $0.77 per share of amortization of acquired intangible assets, $(0.03) per share of merger related indemnification costs, $(0.03) per share of gains on dispositions, $0.12 per share of net losses on real estate and facility sales, and $0.03 per share of tax adjustments.

Non-GAAP Financial Measures

1 unchanged sentence

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

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

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

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

Dollar Amount

Three Months Ended June 30, Change

(in millions) 2024 2023 Dollar Percent

Dollar Amount Dollar Amount

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

(in millions) 2024 2023 Dollar Percent 2024 2023 Dollar Percent

Income before income taxes

$ 93 $ 128 $ (35) (27.3) % $ 161 $ 206 $ (45) (21.8) %

Non-GAAP income before income taxes $ 261 $ 226 $ 35 15.5 % $ 464 $ 427 $ 37 8.7 %

Net income $ 25 $ 42 $ (17) (40.5) %

$ 45 $ 99 $ (54) (54.5) % $ 70 $ 141 $ (71) (50.4) %

Adjusted EBIT $ 279 $ 251 $ 28 11.2 % $ 503 $ 469 $ 34 7.2 %

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

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

• Merger related indemnification – in fiscal 2025, represents the Company’s current net estimate to HPE for a tax related indemnification;

in fiscal 2024, represents the Company’s then current estimate of potential liability to HPE for a tax related indemnification.

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

• Gains and losses on real estate and facility sales – gains and losses related to dispositions of real property.

• 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).

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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) Starting in the fiscal quarter ended September 30, 2024, the Company’s reported non-GAAP financial results reflect an adjustment for gains and losses on real estate and facilities dispositions, which the Company’s current management believes are not reflective of the core operating performance of our business.

For comparability purposes, historical non-GAAP financial measures set forth herein have been recast to reflect this change, which included gains on dispositions of real property of approximately $6 million during the six months ended September 30, 2023.

For the fiscal years ended March 31, 2024 and March 31, 2023, the Company had gains on dispositions of real property of approximately $7 million and $21 million, respectively.

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

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

(in millions, except per-share amounts) As

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Integration-Related Costs Amortization

Assets Non-GAAP

Assets Merger Related Indemnification (Gains) and Losses on Dispositions (Gains) and Losses on Real Estate and Facility Sales Tax Adjustment Non-GAAP

Income before income taxes $ 93 $ 42 $ 15 $ 89 $ — $ (5) $ 27 $ — $ 261

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Net income 45 33 12 69 (5) (6) 21 5 174

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

(1) — — — (1)

net income attributable to non-controlling interest, net of tax 3 — — — — — — — 3

Net income attributable to DXC common stockholders $ 42 $ 33 $ 12 $ 69 $ (5) $ (6) $ 21 $ 5 $ 171

5 unchanged sentences

Diluted EPS 183.88 183.88 183.88 183.88 183.88 183.88 183.88 183.88 183.88

Three Months Ended June 30, 2023

Six Months Ended September 30, 2024

(in millions, except per-share amounts) As

3 unchanged sentences

Integration-Related Costs Amortization

Assets Merger Related

Indemnification Gains and

Dispositions Impairment Losses Tax

Adjustments Non-GAAP

Assets Merger Related Indemnification (Gains) and Losses on Dispositions (Gains) and Losses on Real Estate and Facility Sales Tax Adjustment Non-GAAP

Income before income taxes $ 161 $ 81 $ 22 $ 176 $ — $ (5) $ 29 $ — $ 464

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Diluted EPS 184.01 184.01 184.01 184.01 184.01 184.01 184.01 184.01 184.01

Three Months Ended September 30, 2023

(in millions, except per-share amounts) As

Reported Restructuring costs Transaction,

Separation and

Integration-Related Costs Amortization

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

Income before income taxes $ 128 $ 35 $ 3 $ 89 $ 2 (33) $ 2 $ — $ 226

Income tax expense 29 8 1 19 1 (10) — 35 83

Net income 99 27 2 70 1 (23) 2 (35) 143

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

Net income attributable to DXC common stockholders $ 99 $ 27 $ 2 $ 70 $ 1 $ (23) $ 2 $ (35) $ 143

Effective Tax Rate 22.7 % 36.7 %

Basic EPS $ 0.49 $ 0.13 $ 0.01 $ 0.35 $ 0.00 $ (0.11) $ 0.01 $ (0.17) $ 0.71

Diluted EPS $ 0.49 $ 0.13 $ 0.01 $ 0.34 $ 0.00 $ (0.11) $ 0.01 $ (0.17) $ 0.70

Weighted average common shares outstanding for:

Basic EPS 201.72 201.72 201.72 201.72 201.72 201.72 201.72 201.72 201.72

Diluted EPS 203.06 203.06 203.06 203.06 203.06 203.06 203.06 203.06 203.06

Six Months Ended September 30, 2023

(in millions, except per-share amounts) As

Reported Restructuring

Costs Transaction,

Separation and

Integration-Related Costs Amortization

Assets Merger Related indemnification (Gains) and Losses on Dispositions (Gains) and Losses on Real Estate and Facility Sales Impairment Losses Tax adjustment Non-GAAP

Income before income taxes $ 206 $ 55 $ 4 $ 178 $ 13 $ (28) $ (6) $ 5 $ — $ 427

Income tax expense 65 13 1 40 12 (10) (2) 1 32 152

Net income 141 42 3 138 1 (18) (4) 4 (32) 275

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

Net income attributable to DXC common stockholders $ 135 $ 42 $ 3 $ 138 $ 1 $ (18) $ (4) $ 8 $ (32) $ 273

Effective Tax Rate 31.6 % 35.6 %

Basic EPS $ 0.66 $ 0.20 $ 0.01 $ 0.67 $ 0.00 $ (0.09) $ (0.02) $ 0.04 $ (0.16) $ 1.33

Diluted EPS $ 0.65 $ 0.20 $ 0.01 $ 0.66 $ 0.00 $ (0.09) $ (0.02) $ 0.04 $ (0.15) $ 1.31

Weighted average common shares outstanding for:

Basic EPS 205.90 205.90 205.90 205.90 205.90 205.90 205.90 205.90 205.90 205.90

Diluted EPS 208.90 208.90 208.90 208.90 208.90 208.90 208.90 208.90 208.90 208.90

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

Three Months Ended

June 30, 2024 June 30, 2023

Three Months Ended Six Months Ended

(in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Total revenue growth

(5.7) % (3.6) % (5.9) % (5.4) %

Foreign currency

— % (2.0) % 0.7 % (0.5) %

Acquisition and divestitures

0.1 % 2.0 % 0.2 % 2.3 %

Organic revenue growth

(5.6) % (3.6) % (5.0) % (3.6) %

GBS revenue growth

(1.9) % (0.2) % (1.8) % (1.7) %

Foreign currency

0.1 % (1.6) % 0.9 % (0.3) %

Acquisition and divestitures

0.2 % 4.2 % 0.3 % 4.8 %

GBS organic revenue growth

(1.6) % 2.4 % (0.6) % 2.8 %

GIS revenue growth

(9.4) % (6.8) % (9.9) % (8.7) %

Foreign currency

(0.2) % (2.3) % 0.5 % (0.8) %

Acquisition and divestitures

— % — % — % — %

GIS organic revenue growth

(9.6) % (9.1) % (9.4) % (9.5) %

Reconciliations of net income to adjusted EBIT are as follows:

Three Months Ended

(in millions) June 30, 2024 June 30, 2023

Three Months Ended Six Months Ended

(in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Net income $ 45 $ 99 $ 70 $ 141

2 unchanged sentences

Interest expense 69 78 141 144

EBIT 111 153 200 248

Restructuring costs 42 35 81 55

2 unchanged sentences

Merger related indemnification — 2 — 13

Loss on disposition of businesses

Gains on dispositions

(5) (33) (5) (28)

Losses (gains) on real estate and facility sales

Impairment losses

2 unchanged sentences

Cash and Cash Equivalents and Cash Flows

As of June 30, 2024, our cash and cash equivalents (“cash”) were $1.3 billion, of which $0.7 billion was held outside of the U.S.

As of September 30, 2024, our cash and cash equivalents (“cash”) were $1.2 billion, of which $0.6 billion was held outside of the U.S.

As of March 31, 2024, our cash was $1.2 billion, of which $0.6 billion was held outside of the U.S.

10 unchanged sentences

The following table summarizes our cash flow activity:

Three Months Ended

(in millions) June 30, 2024 June 30, 2023 Change

Six Months Ended

(in millions) September 30, 2024 September 30, 2023 Change

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 38 (16) 54

Cash classified within current assets held for sale (3) — (3)

Net increase (decrease) in cash and cash equivalents $ 21 $ (446) $ 467

2 unchanged sentences

Operating cash flow

Net cash provided by operating activities was $238 million and $127 million, respectively, during the first quarters of fiscal 2025 and fiscal 2024, reflecting a year-over-year increase of $111 million.

The increase was primarily due to:

• a $162 million favorable change in working capital during the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024 primarily from improvements in our cash conversion cycle, partially offset by

Net cash provided by operating activities was $433 million and $375 million, respectively, during the first six months of fiscal 2025 and fiscal 2024, reflecting a year-over year increase of $58 million.

Operating cash flow against the comparative period included:

• a $149 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 $91 million.

1 unchanged sentence

Three Months Ended

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

Days of sales outstanding in accounts receivable 71 65

2 unchanged sentences

Investing cash flow

Net cash used in investing activities was $188 million and $199 million, respectively, during the first quarters of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $11 million.

The change was primarily due to:

• a $9 million decrease in capital expenditures, and

• a $7 million decrease in cash outflows from business dispositions, partially offset by

• a $5 million decrease in cash inflows from other net investing activities.

Net cash used in investing activities was $258 million and $284 million, respectively, during the first six months of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $26 million.

The change against the comparative period was primarily due to:

• a $19 million decrease in capital expenditures;

• an increase in proceeds from sales of assets of $5 million;

• an increase in cash inflows from other net investing activities of $2 million.

Financing cash flow

Net cash provided by (used in) financing activities was $41 million and $(210) million, respectively, during the first quarters of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $251 million.

The change was primarily due to:

• a $299 million decrease in cash outflows from no share repurchase activity during the first quarter of fiscal 2025 and a decrease in related taxes paid on net share settlements, and

• a $40 million decrease in payments on capital leases and borrowings for asset financings, as the Company continues reducing the volume of these financing arrangements, partially offset by

• a $90 million decrease in cash inflows from commercial paper borrowings, net of repayments.

Net cash used in financing activities was $189 million and $521 million, respectively, during the first six months of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $332 million.

The change against the comparative period was primarily due to:

• a $519 million decrease in cash used for share repurchase activity and related taxes paid on net share settlements;

• a $66 million decrease in payments on capital leases and borrowings for asset financing, as the Company continues reducing the volume of these financing arrangements;

partially offset by

• a $253 million decrease in cash inflows from commercial paper borrowings, net of repayments and other financing activities.

Debt Financing

The following table summarizes our total debt:

(in millions) June 30, 2024 March 31, 2024 Change

(in millions) September 30, 2024 March 31, 2024

Short-term debt and current maturities of long-term debt $ 226 $ 271

1 unchanged sentence

Total debt $ 4,051 $ 4,089

The $58 million increase in total debt during the first quarter of fiscal 2025 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.

The $38 million decrease in total debt during the first six months of fiscal 2025 was primarily attributable to the decreases in finance leases and borrowings for asset financing attributable to payments exceeding additions, partially offset by an unfavorable 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 June 30, 2024 and June 30, 2023.

We were in compliance with all financial covenants associated with our borrowings as of September 30, 2024.

Our credit ratings are as follows:

Rating Agency Long Term Ratings Short Term Ratings Outlook

Fitch BBB F-2 Stable

Fitch BBB F-2 Negative

Moody’s Baa2 P-2 Negative

8 unchanged sentences

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 $4.5 billion as of June 30, 2024, includes $1.3 billion of cash and cash equivalents and $3.2 billion of available borrowings under our revolving credit facility.

Our total liquidity of $4.4 billion as of September 30, 2024, includes $1.2 billion of cash and cash equivalents and $3.2 billion of available borrowings under our revolving credit facility.

On November 1, 2024, the Company extended the term of our revolving credit facility to November 1, 2029 .

Share Repurchases

18 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 June 30, 2024, there were no changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

During the three months ended September 30, 2024, there were no changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 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