DXC Technology Co 10-Q

ITEM 1. FINANCIAL STATEMENTS Index to Condensed Consolidated Financial Statements Page Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 202 4 and September 30, 202 3 (unaudited) 2 Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended September 30, 2024 and September 30, 2023 (unaudited) 3 Condensed Consolidated Balance Sheets as of September 30, 202 4 and March 31, 202 4 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 202 4 and September 30, 202 3 (unaudited) 5 Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended September 30, 202 4 and September 30, 202 3 (unaudited) 6 Notes to Condensed Consolidated Financial Statements (unaudited) Note 1–Summary of Significant Accounting Policies 8 Note 2 –Earnings Per Share 10 Note 3 –Receivables 11 Note 4 –Leases 11 Note 5 –Derivative Instruments 14 Note 6 –Intangible Assets 16 Note 7 –Goodwill 17 Note 8 –Debt 18 Note 9 –Revenue 19 Note 1 0 –Restructuring Costs 20 Note 1 1 –Pension and Other Benefit Plans 21 Note 1 2 –Income Taxes 21 Note 1 3 –Stockholders’ Equity 23 Note 1 4 –Stock Incentive Plans 23 Note 1 5 –Cash Flows 24 Note 1 6 –Segment Information 25 Note 1 7 –Commitments and Contingencies 27 1 DXC TECHNOLOGY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Six Months Ended (in millions, except per-share amounts) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Revenues $ 3,241 $ 3,436 $ 6,477 $ 6,882 Costs of services (excludes depreciation and amortization and restructuring costs) 2,427 2,633 4,953 5,352 Selling, general and administrative (excludes depreciation and amortization and restructuring costs) 353 328 654 655 Depreciation and amortization 329 361 655 705 Restructuring costs 42 35 81 55 Interest expense 69 78 141 144 Interest income ( 51 ) ( 53 ) ( 102 ) ( 102 ) Loss on disposition of businesses — 2 — 7 Other income, net ( 21 ) ( 76 ) ( 66 ) ( 140 ) Total costs and expenses 3,148 3,308 6,316 6,676 Income before income taxes 93 128 161 206 Income tax expense 48 29 91 65 Net income 45 99 70 141 Less: net income attributable to non-controlling interest, net of tax 3 — 2 6 Net income attributable to DXC common stockholders $ 42 $ 99 $ 68 $ 135 Income per common share: Basic $ 0.23 $ 0.49 $ 0.38 $ 0.66 Diluted $ 0.23 $ 0.49 $ 0.37 $ 0.65 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 DXC TECHNOLOGY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) 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 Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments, net of tax (1) 79 ( 40 ) 82 ( 6 ) Cash flow hedges adjustments, net of tax (2) ( 14 ) 4 ( 11 ) 7 Pension and other post-retirement benefit plans, net of tax: Amortization of prior service cost, net of tax (3) ( 1 ) — ( 2 ) ( 2 ) Pension and other post-retirement benefit plans, net of tax ( 1 ) — ( 2 ) ( 2 ) Other comprehensive income (loss), net of taxes 64 ( 36 ) 69 ( 1 ) Comprehensive income 109 63 139 140 Less: comprehensive income (loss) attributable to non-controlling interest 3 ( 1 ) 2 5 Comprehensive income attributable to DXC common stockholders $ 106 $ 64 $ 137 $ 135 (1) Tax (benefit) expense related to foreign currency translation adjustments was $( 7 ) and $( 6 ) for the three and six months ended September 30, 2024, respectively, and $ 2 and $ 2 for the three and six months ended September 30, 2023, respectively. (2) Tax (benefit) expense related to cash flow hedges adjustments was $( 4 ) and $( 3 ) for the three and six months ended September 30, 2024, respectively, and $ 1 and $ 2 for the three and six months ended September 30, 2023, respectively. (3) Tax benefit related to amortization of prior service costs was $ 1 and $ 1 for the three and six months ended September 30, 2024, respectively, and $ 1 and $ 1 for the three and six months ended September 30, 2023, respectively. The accompanying notes are an integral part of these condensed consolidated financial statements. 3 DXC TECHNOLOGY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) As of (in millions, except per-share and share amounts) September 30, 2024 March 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 1,245 $ 1,224 Receivables and contract assets, net of allowance of $ 39 and $ 35 3,104 3,253 Prepaid expenses 550 512 Other current assets 100 146 Assets held for sale 8 — Total current assets 5,007 5,135 Intangible assets, net of accumulated amortization of $ 6,023 and $ 5,792 1,981 2,130 Operating right-of-use assets, net 632 731 Goodwill 541 532 Deferred income taxes, net 908 804 Property and equipment, net of accumulated depreciation of $ 3,550 and $ 3,515 1,455 1,671 Other assets 2,961 2,857 Assets held for sale - non-current 19 11 Total Assets $ 13,504 $ 13,871 LIABILITIES and EQUITY Current liabilities: Short-term debt and current maturities of long-term debt 226 271 Accounts payable 708 846 Accrued payroll and related costs 592 558 Current operating lease liabilities 250 282 Accrued expenses and other current liabilities 1,346 1,437 Deferred revenue and advance contract payments 703 866 Income taxes payable 172 134 Liabilities related to assets held for sale 7 — Total current liabilities 4,004 4,394 Long-term debt, net of current maturities 3,825 3,818 Non-current deferred revenue 645 671 Non-current operating lease liabilities 420 497 Non-current income tax liabilities and deferred tax liabilities 562 556 Other long-term liabilities 812 869 Total Liabilities 10,268 10,805 Commitments and contingencies DXC stockholders’ equity: Preferred stock, par value $ 0.01 per share, 1,000,000 shares authorized, none issued as of September 30, 2024 and March 31, 2024 — — Common stock, par value $ 0.01 per share, 750,000,000 shares authorized, 186,520,916 issued as of September 30, 2024 and 183,430,878 issued as of March 31, 2024 2 2 Additional paid-in capital 7,647 7,599 Accumulated deficit ( 3,771 ) ( 3,839 ) Accumulated other comprehensive loss ( 663 ) ( 732 ) Treasury stock, at cost, 5,528,105 and 4,591,340 shares as of September 30, 2024 and March 31, 2024 ( 234 ) ( 219 ) Total DXC stockholders’ equity 2,981 2,811 Non-controlling interest in subsidiaries 255 255 Total Equity 3,236 3,066 Total Liabilities and Equity $ 13,504 $ 13,871 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 DXC TECHNOLOGY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended (in millions) September 30, 2024 September 30, 2023 Cash flows from operating activities: Net income $ 70 $ 141 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 668 719 Operating right-of-use expense 160 181 Share-based compensation 48 47 Deferred taxes ( 95 ) ( 102 ) Loss (gain) on dispositions 23 ( 39 ) Provision for losses on accounts receivable 10 2 Unrealized foreign currency exchange (gain) loss ( 2 ) 22 Impairment losses and contract write-offs 9 14 Other non-cash charges, net 3 — Changes in assets and liabilities: Decrease in assets 133 223 Decrease in operating lease liability ( 160 ) ( 181 ) Decrease in other liabilities ( 434 ) ( 652 ) Net cash provided by operating activities 433 375 Cash flows from investing activities: Purchases of property and equipment ( 89 ) ( 108 ) Payments for transition and transformation contract costs ( 73 ) ( 110 ) Software purchased and developed ( 178 ) ( 141 ) Proceeds from sale of assets 70 65 Other investing activities, net 12 10 Net cash used in investing activities ( 258 ) ( 284 ) Cash flows from financing activities: Borrowings of commercial paper 367 1,098 Repayments of commercial paper ( 369 ) ( 841 ) Payments on finance leases and borrowings for asset financing ( 165 ) ( 231 ) Taxes paid related to net share settlements of share-based compensation awards ( 18 ) ( 34 ) Repurchase of common stock ( 2 ) ( 505 ) Other financing activities, net ( 2 ) ( 8 ) Net cash used in financing activities ( 189 ) ( 521 ) Effect of exchange rate changes on cash and cash equivalents 38 ( 16 ) Net increase (decrease) in cash and cash equivalents including cash classified within current assets held for sale 24 ( 446 ) Cash classified within current assets held for sale ( 3 ) — Net increase (decrease) in cash and cash equivalents 21 ( 446 ) Cash and cash equivalents at beginning of year 1,224 1,858 Cash and cash equivalents at end of period $ 1,245 $ 1,412 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 DXC TECHNOLOGY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited) Three Months Ended September 30, 2024 (in millions, except shares in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock (1) Total DXC Equity Non- Controlling Interest Total Equity Shares Amount Balance at June 30, 2024 186,267 $ 2 $ 7,622 $ ( 3,814 ) $ ( 727 ) $ ( 233 ) $ 2,850 $ 253 $ 3,103 Net Income 42 42 3 45 Other comprehensive income 64 64 64 Share-based compensation expense 25 25 25 Acquisition of treasury stock ( 1 ) ( 1 ) ( 1 ) Stock option exercises and other common stock transactions 254 — — Non-controlling interest distributions and other 1 1 ( 1 ) — Balance at September 30, 2024 186,521 $ 2 $ 7,647 $ ( 3,771 ) $ ( 663 ) $ ( 234 ) $ 2,981 $ 255 $ 3,236 Three Months Ended September 30, 2023 (in millions, except shares in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Total DXC Equity Non- Controlling Interest Total Equity Shares Amount Balance at June 30, 2023 210,584 $ 2 $ 8,677 $ ( 4,445 ) $ ( 739 ) $ ( 217 ) $ 3,278 $ 325 $ 3,603 Net income 99 99 99 Other comprehensive loss ( 35 ) ( 35 ) ( 1 ) ( 36 ) Share-based compensation expense 23 23 23 Acquisition of treasury stock ( 1 ) ( 1 ) ( 1 ) Share repurchase program (2) ( 9,958 ) ( 420 ) 204 ( 216 ) ( 216 ) Stock option exercises and other common stock transactions 164 — — Non-controlling interest distributions and other ( 1 ) ( 1 ) $ ( 4 ) ( 5 ) Balance at September 30, 2023 200,790 $ 2 $ 8,280 $ ( 4,143 ) $ ( 774 ) $ ( 218 ) $ 3,147 $ 320 $ 3,467 6 Six Months Ended September 30, 2024 (in millions, except shares in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock (1) Total DXC Equity Non- Controlling Interest Total Equity Shares Amount Balance at March 31, 2024 183,431 $ 2 $ 7,599 $ ( 3,839 ) $ ( 732 ) $ ( 219 ) $ 2,811 $ 255 $ 3,066 Net income 68 68 2 70 Other comprehensive income 69 69 69 Share-based compensation expense 48 48 48 Acquisition of treasury stock ( 15 ) ( 15 ) ( 15 ) Stock option exercises and other common stock transactions 3,090 — — Non-controlling interest distributions and other — ( 2 ) ( 2 ) Balance at September 30, 2024 186,521 $ 2 $ 7,647 $ ( 3,771 ) $ ( 663 ) $ ( 234 ) $ 2,981 $ 255 $ 3,236 Six Months Ended September 30, 2023 (in millions, except shares in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Total DXC Equity Non- Controlling Interest Total Equity Shares Amount Balance at March 31, 2023 218,058 $ 2 $ 9,121 $ ( 4,665 ) $ ( 774 ) $ ( 187 ) $ 3,497 $ 323 $ 3,820 Net income 135 135 6 141 Other comprehensive loss — ( 1 ) ( 1 ) Share-based compensation expense 45 45 45 Acquisition of treasury stock ( 31 ) ( 31 ) ( 31 ) Share repurchase program (2) ( 20,934 ) ( 886 ) 388 ( 498 ) ( 498 ) Stock option exercises and other common stock transactions 3,666 — — Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 8 ) ( 9 ) Balance at September 30, 2023 200,790 $ 2 $ 8,280 $ ( 4,143 ) $ ( 774 ) $ ( 218 ) $ 3,147 $ 320 $ 3,467 (1) 5,528,105 treasury shares as of September 30, 2024. (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. 7 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1 – Summary of Significant Accounting Policies Business 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. Many of 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 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. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Other investments are accounted for by the cost method. 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 income attributable to non-controlling interests are presented separately in the statements of comprehensive income. All intercompany transactions and balances have been eliminated. The financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports and accounting principles generally accepted in the United States (“GAAP”). Certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules. 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, 2024 (“fiscal 2024”). 8 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 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. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. Estimates are used for, but are not limited to, contracts accounted for using the percentage-of-completion method, cash flows used in the evaluation of impairment of goodwill and other long-lived assets, reserves for uncertain tax positions, valuation allowances on deferred tax assets, loss accruals for litigation, and obligations related to our pension plans. In the opinion of the Company’s management, the accompanying financial statements contain all adjustments necessary, including those of a normal recurring nature, to fairly present the financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. Recent Accounting Pronouncements During fiscal 2024, the following Accounting Standards Updates (“ASUs”) were issued by the Financial Accounting Standards Board but have not yet been adopted by DXC: Date Issued and ASU DXC Effective Date Description Impact November 2023 ASU 2023-07, “Improvements to Reportable Segment Disclosures” Fiscal 2025 This update requires disclosure of significant segment expenses used by the Chief Operating Decision Maker (“CODM”) to assess performance and allocate resources, disclose the title and position of the CODM and modifies other segment disclosures and the frequency thereof. Early adoption of this update is permitted. The Company is in the process of assessing the impacts and method of adoption. This ASU will impact the Company’s segment disclosures, but not its consolidated financial statements. December 2023 ASU 2023-09, “Improvements to Income Tax Disclosures” Fiscal 2026 The update requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. Early adoption of this update is permitted. The Company is in the process of assessing the impacts and method of adoption. This ASU will impact our income tax disclosures, but not its consolidated financial statements. Other recently issued ASUs that have not yet been adopted are not expected to have a material effect on DXC’s condensed consolidated financial statements. 9 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 2 – Earnings per Share Basic earnings per share (“EPS”) is computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the incremental shares issuable upon the assumed exercise of stock options and equity awards. The following table reflects the calculation of basic and diluted EPS: Three Months Ended Six Months Ended (in millions, except per-share amounts) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Net income attributable to DXC common stockholders: $ 42 $ 99 $ 68 $ 135 Common share information: Weighted average common shares outstanding for basic EPS 180.93 201.72 180.30 205.90 Dilutive effect of stock options and equity awards 2.95 1.34 3.71 3.00 Weighted average common shares outstanding for diluted EPS 183.88 203.06 184.01 208.90 Earnings per share: Basic $ 0.23 $ 0.49 $ 0.38 $ 0.66 Diluted $ 0.23 $ 0.49 $ 0.37 $ 0.65 Certain share-based equity awards were excluded from the computation of dilutive EPS because inclusion of these awards would have had an anti-dilutive effect. The number of awards excluded were as follows: Three Months Ended Six Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Stock Options 906,745 960,455 917,260 924,990 Restricted Stock Units 1,700,549 1,556,542 1,742,251 1,480,781 Performance Stock Units 107,406 1,700,588 114,745 35,604 10 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 3 – Receivables Allowance for Doubtful Accounts The following table presents the change in balance for the allowance for doubtful accounts: As of (in millions) September 30, 2024 March 31, 2024 Beginning balance $ 35 $ 47 Provisions for losses on accounts receivable 10 — Other adjustments to allowance and write-offs ( 6 ) ( 12 ) Ending balance $ 39 $ 35 Receivables Facility The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified, 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 26, 2024 extending the termination date to July 25, 2025. As of September 30, 2024, 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. 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. Note 4 – Leases 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 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 Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Operating lease cost $ 80 $ 91 $ 160 $ 181 Short-term lease cost 6 9 12 16 Variable lease cost 13 16 26 31 Sublease income ( 5 ) ( 6 ) ( 10 ) ( 10 ) Total operating costs $ 94 $ 110 $ 188 $ 218 11 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. Six Months Ended (in millions) September 30, 2024 September 30, 2023 Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows $ 160 $ 181 ROU assets obtained in exchange for operating lease liabilities (1) $ 72 $ 95 (1) Net of $ 332 million and $ 557 million in lease modifications and terminations during the first six months of fiscal 2025 and 2024, respectively. See Note 15 – “Cash Flows” for further information on non-cash activities affecting cash flows. The following table presents operating lease balances: As of (in millions) Balance Sheet Line Item September 30, 2024 March 31, 2024 ROU operating lease assets Operating right-of-use assets, net $ 632 $ 731 Operating lease liabilities Current operating lease liabilities $ 250 $ 282 Operating lease liabilities Non-current operating lease liabilities 420 497 Total operating lease liabilities $ 670 $ 779 The weighted-average operating lease term was 3.7 years and 3.9 years as of September 30, 2024 and March 31, 2024, respectively. The weighted-average operating lease discount rate was 4.7 % and 4.6 % as of September 30, 2024 and March 31, 2024, respectively. The following maturity analysis presents expected undiscounted cash payments for operating leases as of September 30, 2024: Fiscal Year (in millions) Remainder of 2025 2026 2027 2028 2029 Thereafter Total Operating lease payments $ 150 $ 219 $ 139 $ 109 $ 67 $ 43 $ 727 Less: imputed interest ( 57 ) Total operating lease liabilities $ 670 12 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Finance Leases The components of finance lease expense were as follows: Three Months Ended Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Amortization of right-of-use assets $ 24 $ 37 $ 49 $ 79 Interest on lease liabilities 3 3 7 7 Total finance lease expense $ 27 $ 40 $ 56 $ 86 The following table provides supplemental cash flow information related to the Company’s finance leases: (in millions) Six Months Ended September 30, 2024 Six Months Ended September 30, 2023 Interest paid for finance lease liabilities – Operating cash flows $ 7 $ 7 Cash paid for amounts included in the measurement of finance lease obligations – financing cash flows 105 124 Total cash paid in the measurement of finance lease obligations $ 112 $ 131 Capital expenditures through finance lease obligations (1) $ 17 $ 41 (1) See Note 15 – ”Cash Flows” for further information on non-cash activities affecting cash flows. The following table presents finance lease balances: As of (in millions) Balance Sheet Line Item September 30, 2024 March 31, 2024 ROU finance lease assets Property and Equipment, net $ 205 $ 264 Finance lease Short-term debt and current maturities of long-term debt $ 158 $ 178 Finance lease Long-term debt, net of current maturities 207 242 Total finance lease liabilities (1) $ 365 $ 420 (1) See Note 8 – “Debt” for further information on finance lease liabilities. The weighted-average finance lease term was 2.9 years as of both September 30, 2024 and March 31, 2024. The weighted-average finance lease discount rate was 5.1 % and 4.3 % as of September 30, 2024 and March 31, 2024, respectively. The following maturity analysis presents expected undiscounted cash payments for finance leases as of September 30, 2024: Fiscal Year (in millions) Remainder of 2025 2026 2027 2028 2029 Thereafter Total Finance lease payments $ 88 $ 138 $ 93 $ 48 $ 17 $ 4 $ 388 Less: imputed interest ( 23 ) Total finance lease liabilities $ 365 13 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 5 – Derivative Instruments In the normal course of business, the Company is exposed to interest rate and foreign exchange rate fluctuations. As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them. The Company does not use derivative instruments for trading or any speculative purposes. 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 Euro and Indian Rupee-denominated obligations and forecasted transactions. The notional amounts of foreign currency forward contracts designated as cash flow hedges as of September 30, 2024 and March 31, 2024 were $ 721 million and $ 885 million, respectively. As of September 30, 2024, the related forecasted transactions extend through August 2026. During the three and six months ended September 30, 2024 and September 30, 2023, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. See Note 13 - “Stockholders’ Equity” for changes in accumulated other comprehensive loss, net of taxes, related to the Company’s derivatives designated for hedge accounting. As of September 30, 2024, $ 9 million 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. Derivatives Not Designated for Hedge Accounting The derivative instruments not designated as hedges for purposes of hedge accounting include certain short-term foreign currency forward contracts. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates. Foreign currency forward contracts The Company manages the exposure to fluctuations in foreign currencies by using primarily 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 September 30, 2024 and March 31, 2024 were $ 1.7 billion and $ 1.5 billion, respectively. 14 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents the foreign currency (gain) loss to Other income, net: For the Three Months Ended For the Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Foreign currency remeasurement (1) $ ( 25 ) $ 25 $ ( 18 ) $ 21 Undesignated foreign currency forward contracts (2) 25 ( 26 ) 19 ( 30 ) Total - Foreign currency (gain) loss $ — $ ( 1 ) $ 1 $ ( 9 ) (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. Other Risks for Derivative Instruments The Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty’s obligations exceed the obligations of the Company with that counterparty. 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 September 30, 2024, there were four counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 2 million. The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes, it is the Company’s policy not to offset derivative assets and liabilities despite the existence of enforceable master netting arrangements. The potential effect of such netting arrangements on the Company’s balance sheets is not material for the periods presented. Non-Derivative Financial Instruments Designated for Hedge Accounting The Company applies hedge accounting for foreign currency-denominated debt used to manage foreign currency exposures on its net investments in certain non-U.S. operations. To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged. Net Investment Hedges DXC seeks to reduce the impact of fluctuations in foreign exchange rates on its net investments in certain non-U.S. operations with foreign currency-denominated debt. For foreign currency-denominated debt designated as a hedge, the effectiveness of the hedge is assessed based on changes in spot rates. For qualifying net investment hedges, all gains or losses on the hedging instruments are included in currency translation. Gains or losses on individual net investments in non-U.S. operations are reclassified to earnings from accumulated other comprehensive income (loss) when such net investments are sold or substantially liquidated. As of September 30, 2024 and March 31, 2024, DXC had $ 725 million and $ 702 million, respectively, of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries. For the three and six months ended September 30, 2024, the pre-tax loss on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income was $ 29 million and $ 24 million, respectively. 15 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6 – Intangible Assets Intangible assets consisted of the following: As of September 30, 2024 As of March 31, 2024 (in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Software $ 3,747 $ 3,075 $ 672 $ 3,721 $ 3,070 $ 651 Customer related intangible assets 3,959 2,810 1,149 3,892 2,588 1,304 Other intangible assets 298 138 160 309 134 175 Total intangible assets $ 8,004 $ 6,023 $ 1,981 $ 7,922 $ 5,792 $ 2,130 The components of amortization expense were as follows: Three Months Ended Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Intangible asset amortization $ 187 $ 195 $ 366 $ 378 Transition and transformation contract cost amortization (1) 48 54 101 102 Total amortization expense $ 235 $ 249 $ 467 $ 480 (1) Transaction and transformation contract costs are included within other assets on the balance sheets. Estimated future amortization related to intangible assets as of September 30, 2024 is as follows: Fiscal Year (in millions) Remainder of 2025 $ 379 2026 674 2027 477 2028 199 2029 90 Thereafter 162 Total $ 1,981 16 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 7 – Goodwill The following table summarizes the changes in the carrying amount of goodwill, by segment, as of September 30, 2024. (in millions) GBS GIS Total Balance as of March 31, 2024, net $ 532 $ — $ 532 Assets held for sale ( 3 ) — ( 3 ) Foreign currency translation 12 — 12 Balance as of September 30, 2024, net $ 541 $ — $ 541 Goodwill, gross 5,031 5,066 10,097 Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 ) Balance as of September 30, 2024, net $ 541 $ — $ 541 The foreign currency translation amount reflects the impact of currency movements on non-U.S. dollar-denominated goodwill balances. Goodwill Impairment Analyses The Company tests goodwill for impairment on an annual basis, as of the first day of the second fiscal quarter, and between annual tests if circumstances change, or if an event occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For the Company’s annual goodwill impairment assessment as of July 1, 2024, the Company chose to perform a quantitative goodwill impairment test. This quantitative test concluded that the fair value of the Company’s GBS reporting unit exceeded its carrying amount and, thereby, the goodwill balance for GBS is not impaired. As of September 30, 2024, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount and require goodwill to be tested for impairment. The Company determined that there have been no such indicators and therefore, it was unnecessary to perform an interim goodwill impairment test as of September 30, 2024. 17 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 8 – Debt The following is a summary of the Company’s debt: (in millions) Interest Rates Fiscal Year Maturities 9/30/2024 (1) 3/31/2024 (1) Short-term debt and current maturities of long-term debt Current maturities of long-term debt Various 2025 - 2026 68 93 Current maturities of finance lease liabilities 0.46 % - 14.59 % 2025 - 2026 158 178 Short-term debt and current maturities of long-term debt $ 226 $ 271 Long-term debt, net of current maturities € 650 million Senior notes 1.75 % 2026 725 700 $ 700 million Senior notes 1.80 % 2027 697 697 € 750 million Senior notes 0.45 % 2028 834 806 $ 650 million Senior notes 2.375 % 2029 646 646 € 600 million Senior notes 0.95 % 2032 665 643 Finance lease liabilities 0.46 % - 14.59 % 2025 - 2035 365 420 Borrowings for assets acquired under long-term financing 0.00 % - 9.78 % 2025 - 2029 119 177 Long-term debt 4,051 4,089 Less: current maturities 226 271 Long-term debt, net of current maturities $ 3,825 $ 3,818 (1) The carrying amounts of the senior notes as of September 30, 2024 and March 31, 2024, include the remaining principal outstanding of $ 3,582 million and $ 3,509 million, respectively, net of total unamortized debt discounts and premiums, and deferred debt issuance costs of $ 15 million and $ 17 million, respectively. Fair Value of Debt The estimated fair value of the Company’s long-term debt, excluding finance lease liabilities, was $ 3.4 billion and $ 3.3 billion as of September 30, 2024 and March 31, 2024, respectively, compared with carrying value of $ 3.7 billion and $ 3.7 billion as of September 30, 2024 and March 31, 2024, respectively. Long-term debt excluding finance lease liabilities are classified as Level 1 or Level 2 within the fair value hierarchy. 18 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 9 – Revenue Revenue Recognition 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 Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 United States $ 889 $ 1,002 $ 1,786 $ 2,004 United Kingdom 451 460 899 925 Other Europe 1,035 1,051 2,065 2,115 Australia 309 330 608 672 Other International 557 593 1,119 1,166 Total Revenues $ 3,241 $ 3,436 $ 6,477 $ 6,882 The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 16 – “Segment Information” for the Company’s segment disclosures. Remaining Performance Obligations As of September 30, 2024, approximately $ 16.4 billion of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 26 % of these remaining performance obligations in fiscal 2025, 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: As of (in millions) Balance Sheet Line Item September 30, 2024 March 31, 2024 Trade receivables, net Receivables and contract assets, net of allowance for doubtful accounts $ 2,117 $ 2,195 Contract assets Receivables and contract assets, net of allowance for doubtful accounts $ 394 $ 362 Contract liabilities Deferred revenue and advance contract payments and Non-current deferred revenue $ 1,348 $ 1,537 Change in contract liabilities were as follows: Six Months Ended (in millions) September 30, 2024 September 30, 2023 Balance, beginning of period $ 1,537 $ 1,842 Deferred revenue 737 873 Recognition of deferred revenue ( 879 ) ( 1,085 ) Currency translation adjustment 39 ( 23 ) Other ( 86 ) ( 29 ) Balance, end of period $ 1,348 $ 1,578 19 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 10 – Restructuring Costs The composition of restructuring liabilities by financial statement line item is as follows: As of (in millions) September 30, 2024 March 31, 2024 Accrued expenses and other current liabilities $ 35 $ 40 Other long-term liabilities 6 11 Total $ 41 $ 51 Summary of Restructuring Plans Fiscal 2025 Plan During fiscal 2025, management approved global cost savings initiatives designed to better align the Company’s workforce, facility and data center requirements (the “Fiscal 2025 Plan”). Restructuring Liability Reconciliations by Plan Restructuring Liability as of March 31, 2024 Costs Expensed, Net of Reversals Costs Not Affecting Restructuring Liability (1) Cash Paid Other (2) Restructuring Liability as of September 30, 2024 Fiscal 2025 Plan Workforce Reductions $ — $ 42 $ — $ ( 28 ) $ — $ 14 Facilities Costs — 23 ( 17 ) ( 5 ) ( 1 ) — — 65 ( 17 ) ( 33 ) ( 1 ) 14 Fiscal 2024 Plan Workforce Reductions $ 8 $ — $ — $ ( 6 ) $ ( 1 ) $ 1 Facilities Costs 2 10 ( 1 ) ( 10 ) — 1 10 10 ( 1 ) ( 16 ) ( 1 ) 2 Other Prior Year and Acquired Plans Workforce Reductions $ 40 $ ( 2 ) $ — $ ( 14 ) $ — $ 24 Facilities Costs 1 8 ( 3 ) ( 6 ) 1 1 41 6 ( 3 ) ( 20 ) 1 25 Total $ 51 $ 81 $ ( 21 ) $ ( 69 ) $ ( 1 ) $ 41 (1) Pension benefit augmentations recorded as pension liabilities, asset impairments and restructuring costs associated with right-of-use assets. (2) Foreign currency translation adjustments. Restructuring costs for the six months ended September 30, 2024 includes $ 8 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. 20 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 11 – Pension and Other Benefit Plans Defined Benefit Plans The components of net periodic pension income were: Three Months Ended Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Service cost $ 13 $ 15 $ 26 $ 30 Interest cost 76 77 150 156 Expected return on assets ( 115 ) ( 112 ) ( 228 ) ( 226 ) Amortization of prior service costs ( 1 ) ( 1 ) ( 2 ) ( 3 ) Net periodic pension income $ ( 27 ) $ ( 21 ) $ ( 54 ) $ ( 43 ) The service cost component of net periodic pension income is presented in costs of services and selling, general and administrative and the other components of net periodic pension income are presented in other income, net. Note 12 – Income Taxes The Company’s 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. The majority of our global unremitted foreign earnings have been taxed or would be exempt from U.S. tax upon repatriation. Such earnings and the majority of current foreign earnings are not indefinitely reinvested. The following earnings are considered indefinitely reinvested: approximately $ 497 million that could be subject to U.S. federal tax when repatriated to the U.S. under section 1.245A-5(b) of the final Treasury regulations; and approximately $ 424 million of earnings in foreign subsidiaries. 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 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 $ 15 million tax indemnification receivable related to uncertain tax positions, a $ 52 million tax indemnification receivable related to other tax payables, and a $ 99 million tax indemnification payable related to other tax receivables. 21 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) In connection with the spin-off of the Company’s former U.S. public sector business (the “USPS Separation”), the Company entered into a tax matters agreement with Perspecta Inc. (including its successors and permitted assigns, “Perspecta”). The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Perspecta is liable to the Company for income tax receivables related to pre-spin-off periods. Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the Company is indemnified by HPE pursuant to the tax matters agreement between the Company and HPE. 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 $ 15 million tax indemnification receivable from Perspecta related to other tax receivables and a $ 4 million tax indemnification payable to Perspecta related to income tax and other tax payables. 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. The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal 2009 through the tax year ended October 31, 2018. With respect to CSC’s fiscal 2009 through 2017 federal tax returns, the Company participated in settlement negotiations with the IRS Office of Appeals. The IRS examined several issues for these tax years that resulted in various audit adjustments. 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, foreign exchange losses, and a third-party financing transaction in previous years. As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in the U.S. Tax Court, these matters are not fully reserved and would result in incremental federal and state tax expense of approximately $ 527 million (including estimated interest and penalties) for the unreserved portion of these items and cash tax payments of approximately $ 602 million 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. Tax Court. During 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. Tax Court matters to be resolved in the next 12 months. During fiscal 2024, the Company determined there were inadvertent omissions on previously filed tax returns related to gain recognition agreements and certain related tax forms and disclosures. The Company notified the IRS promptly and filed for relief under Treas. Reg. Sec. 1.367(a)-8(p) to correct the issue. The Company’s fiscal years 2009, 2010, and 2013 are in the U.S. Tax Court, and consequently these years will remain open until such proceedings have concluded. The statute of limitations on assessments related to a refund claim for fiscal year 2012 is open through February 28, 2025. The Company has agreed to extend the statute of limitations for fiscal and tax return years 2014 through 2021 to December 31, 2025. The Company expects to reach resolution for fiscal and tax return years 2009 through 2011 no earlier than fiscal year 2026. The Company expects to reach resolution for fiscal and tax return years 2012 and 2013 no earlier than fiscal year 2028. The Company expects to reach resolution for fiscal and tax return years 2014 through 2021 no earlier than fiscal year 2026. 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. 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 $ 62 million. 22 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 13 – Stockholders’ Equity Share Repurchase Program During the first six months of fiscal 2025, there were no share repurchases under our Share Repurchase Program. The details of shares repurchased during the six months ended September 30, 2023 are shown below: Fiscal 2024 Fiscal Period Number of Shares Repurchased Average Price Per Share Amount (in millions) 1st Quarter 10,975,643 $ 25.53 $ 280 2nd Quarter 9,958,585 $ 21.50 214 Total 20,934,228 $ 23.61 $ 494 Accumulated Other Comprehensive Loss The following table shows the changes in accumulated other comprehensive loss, net of taxes: (in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss Balance at March 31, 2024 $ ( 939 ) $ — $ 207 $ ( 732 ) Other comprehensive income before reclassifications 82 ( 12 ) — 70 Amounts reclassified from accumulated other comprehensive loss — 1 ( 2 ) ( 1 ) Balance at September 30, 2024 $ ( 857 ) $ ( 11 ) $ 205 $ ( 663 ) (in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss Balance at March 31, 2023 $ ( 985 ) $ ( 7 ) $ 218 $ ( 774 ) Other comprehensive loss before reclassifications ( 5 ) 5 — — Amounts reclassified from accumulated other comprehensive loss — 2 ( 2 ) — Balance at September 30, 2023 $ ( 990 ) $ — $ 216 $ ( 774 ) Note 14 – Stock Incentive Plans Restricted Stock Units and Performance-Based Restricted Stock Units Restricted stock units (“RSUs”) represent the right to receive one share of DXC common stock upon a future settlement date, subject to vesting and other terms and conditions of the award, plus any dividend equivalents accrued during the award period. The Company also grants performance-based restricted stock units (“PSUs”), which generally vest at the end of a three-year period. The number of PSUs that ultimately vest is dependent upon the Company’s achievement of certain specified market- and performance-based criteria over the three-year vesting period. The fair value of RSUs and PSUs is based on the Company’s common stock closing price on the grant date. For PSUs with a market-based condition, DXC uses a Monte Carlo simulation model to value the grants. 23 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Employee Equity Plan Director Equity Plan Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Outstanding as of March 31, 2024 8,311,293 $ 33.97 213,755 $ 26.82 Granted 6,947,544 $ 21.73 131,238 $ 19.42 Settled ( 2,968,681 ) $ 50.19 ( 143,976 ) $ 20.34 Canceled/Forfeited ( 1,827,215 ) $ 26.43 — $ — Outstanding as of September 30, 2024 10,462,941 $ 22.52 201,017 $ 26.63 Share-Based Compensation Three Months Ended Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Total share-based compensation cost $ 25 $ 24 $ 48 $ 47 Related income tax benefit $ 4 $ 4 $ 7 $ 7 Note 15 – Cash Flows Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows: Six Months Ended (in millions) September 30, 2024 September 30, 2023 Cash paid for: Interest $ 137 $ 135 Taxes on income, net of refunds (1) $ 215 $ 235 Non-cash activities: Operating: ROU assets obtained in exchange for lease, net (2) $ 72 $ 95 Assets acquired under long-term financing $ — $ 4 Investing: Capital expenditures in accounts payable and accrued expenses $ 7 $ 96 Capital expenditures through finance lease obligations $ 17 $ 41 Assets acquired under long-term financing $ — $ 27 Financing: Shares repurchased but not settled in cash (3) $ — $ 9 (1) Income tax refunds were $ 33 million and $ 18 million for the six months ended September 30, 2024 and September 30, 2023, respectively. (2) Net of $ 332 million and $ 557 million in lease modifications and terminations during the first six months of fiscal 2025 and 2024, 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. 24 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 16 – Segment Information DXC has a matrix form of organization and is managed in several different and overlapping groupings including services, industries and geographic regions. As a result, and in accordance with accounting standards, operating segments are organized by the type of services provided. DXC's chief operating decision maker ("CODM"), the chief executive officer, obtains, reviews, and manages the Company’s financial performance based on these segments. The CODM uses these results, in part, to evaluate the performance of, and allocate resources to, each of the segments. Global Business Services (“GBS”) provides innovative technology solutions that help our customers address key business challenges and accelerate transformations tailored to each customer’s industry and specific objectives. Global Infrastructure Services (“GIS”) provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for customers. Segment Measures The following table summarizes operating results regularly provided to the CODM by reportable segment and a reconciliation to the financial statements: (in millions) GBS GIS Total Reportable Segments All Other Totals Three Months Ended September 30, 2024 Revenues $ 1,677 $ 1,564 $ 3,241 $ — $ 3,241 Segment profit $ 214 $ 129 $ 343 $ ( 64 ) $ 279 Depreciation and amortization (1) $ 40 $ 177 $ 217 $ 23 $ 240 Three Months Ended September 30, 2023 Revenues $ 1,709 $ 1,727 $ 3,436 $ — $ 3,436 Segment profit $ 213 $ 101 $ 314 $ ( 63 ) $ 251 Depreciation and amortization (1) $ 49 $ 197 $ 246 $ 26 $ 272 (in millions) GBS GIS Total Reportable Segments All Other Totals Six Months Ended September 30, 2024 Revenues $ 3,350 $ 3,127 $ 6,477 $ — $ 6,477 Segment profit $ 395 $ 243 $ 638 $ ( 135 ) $ 503 Depreciation and amortization (1) $ 80 $ 352 $ 432 $ 47 $ 479 Six Months Ended September 30, 2023 Revenues $ 3,412 $ 3,470 $ 6,882 $ — $ 6,882 Segment profit $ 405 $ 189 $ 594 $ ( 125 ) $ 469 Depreciation and amortization (1) $ 94 $ 381 $ 475 $ 52 $ 527 (1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $ 89 million and $ 89 million for the three months ended September 30, 2024 and 2023, respectively, and $ 176 million and $ 178 million for the six months ended September 30, 2024 and 2023, respectively. 25 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Reconciliation of Reportable Segment Profit to Consolidated Total The Company's management uses segment profit as the measure for assessing performance of its segments. Segment profit is defined as segment revenues less cost of services, segment selling, general and administrative, depreciation and amortization, and other income (excluding the movement in foreign currency exchange rates on DXC's foreign currency denominated assets and liabilities and the related economic hedges). 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 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 Six Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Profit Total profit for reportable segments $ 343 $ 314 $ 638 $ 594 All other loss ( 64 ) ( 63 ) ( 135 ) ( 125 ) Subtotal $ 279 $ 251 $ 503 $ 469 Interest income 51 53 102 102 Interest expense ( 69 ) ( 78 ) ( 141 ) ( 144 ) Restructuring costs ( 42 ) ( 35 ) ( 81 ) ( 55 ) Transaction, separation and integration-related costs ( 15 ) ( 3 ) ( 22 ) ( 4 ) Amortization of acquired intangible assets ( 89 ) ( 89 ) ( 176 ) ( 178 ) Merger related indemnification — ( 2 ) — ( 13 ) Gains on dispositions 5 33 5 28 (Losses) gains on real estate and facility sales ( 27 ) — ( 29 ) 6 Impairment losses — ( 2 ) — ( 5 ) Income before income taxes $ 93 $ 128 $ 161 $ 206 Management does not use total assets by segment to evaluate segment performance or allocate resources. As a result, assets are not tracked by segment and therefore, total assets by segment are not disclosed. 26 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 17 – Commitments and Contingencies Commitments Minimum purchase commitments as of September 30, 2024 were as follows: Fiscal year Minimum Purchase Commitment (in millions) Remainder of 2025 $ 255 2026 604 2027 222 2028 82 2029 30 Thereafter 5 Total $ 1,198 Contingencies Securities Litigation: On August 20, 2019, a purported class action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara, against the Company, directors of the Company, and a former officer of the Company, among other defendants. The action asserts claims under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, and is premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the Company’s prospects and expected performance. The putative class of plaintiffs includes former shareholders of Computer Sciences Corporation (“CSC”) who exchanged their CSC shares for 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. 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. The federal action was dismissed with prejudice in December 2021. Thereafter, the state court lifted the stay and entered an order permitting additional briefing by the parties. In March 2022, Plaintiffs filed an amended complaint, which the Company moved to dismiss. In August 2022, the Court granted the Company’s motion to dismiss, but permitted Plaintiffs to amend and refile their complaint. In September 2022, Plaintiffs filed a second amended complaint, which the Company moved to dismiss. In January 2023, the Court issued an order denying the Company’s motion to dismiss the second amended complaint. In March 2023, the Court entered a scheduling order setting a trial date for September 2025. The trial date has since been extended to May 2026. In May 2024, the Court entered an order granting Plaintiffs’ motion for class certification. In July 2024, notice was provided to potential class members. The case is otherwise in discovery. On August 2, 2024, a purported class action lawsuit was filed in the United States District Court for the Eastern District of Virginia against the Company and certain of its current and former officers. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and is premised on allegedly false and/or misleading statements regarding the Company’s transformation journey. The putative class of plaintiffs includes investors who acquired DXC stock during the period of May 26, 2021 to May 16, 2024. On August 29, 2024, a shareholder derivative suit was filed in the United States District Court for the Eastern District of Virginia against the Company’s Board of Directors and certain of its current and former officers. The complaint alleges a breach of fiduciary duties arising from the claims asserted in the August 2024 securities class action lawsuit. The derivative suit has been temporarily stayed, pending further developments in the August 2024 securities class action lawsuit. On September 27, 2024, a shareholder derivative suit was filed in the District Court of the State of Nevada, Clark County against the Company’s Board of Directors and certain of its current and former officers. The complaint alleges a breach of fiduciary duties arising from the claims asserted in the August 2024 securities class action lawsuit. The derivative suit has been temporarily stayed, pending further developments in the August 2024 securities class action lawsuit. 27 DXC TECHNOLOGY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The Company believes that the lawsuits described above are without merit and intends to vigorously defend all claims asserted. 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, which are currently being contested in the U.S. Tax Court. For more detail, see Note 12 – “Income Taxes” for further information. TCS Litigation: In April 2019, the Company filed a lawsuit against Tata Consultancy Services Limited (“TCS”) and Tata America International Corporation alleging misappropriation of certain of the Company’s trade secrets. In November 2023, a trial was held in the United States District Court for the Northern District of Texas, and a jury found TCS liable for misappropriating the Company’s trade secrets and awarded the Company $ 70 million in compensatory damages and $ 140 million in punitive damages, for a total award of $ 210 million. In June 2024, the Court entered a final order in the case, affirming the jury’s verdict in the Company’s favor and revising the monetary award to $ 56 million in compensatory damages and $ 112 million in punitive damages. The Court also awarded the Company $ 26 million in prejudgment interest, post-judgment interest at an annual rate of 4.824 %, and its attorney’s fees and costs, in an amount to be determined in a later order. The total award to the Company is $ 194 million, plus its attorney’s fees and costs. The Court also issued a permanent injunction enjoining TCS from, among other things, possessing, accessing, or using any of the Company’s trade secrets that were at issue in the case, and appointing a monitor to confirm, among other things, that TCS does not do so. In August 2024, TCS filed a Notice of Appeal to the U.S. Court of Appeals for the Fifth Circuit. The Company has not recognized any portion of the award in its financial statements and will continue to monitor the progress of the case. 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. Some of these disputes involve or may involve litigation. The financial statements reflect the treatment of claims and contingencies based on management’s view of the expected outcome. DXC consults with outside legal counsel on issues related to litigation and regulatory compliance and seeks input from other experts and advisors with respect to matters in the ordinary course of business. Although the outcome of these and other matters cannot be predicted with certainty, and the impact of the final resolution of these and other matters on the Company’s results of operations in a particular subsequent reporting period could be material and adverse, management does not believe based on information currently available to the Company, that the resolution of any of the matters currently pending against the Company will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due. 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. 28 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS All statements and assumptions contained in this Quarterly Report on Form 10-Q and in the documents incorporated by reference that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” Forward-looking statements often include words such as “anticipates,” “believes,” “estimates,” “expects,” “forecast,” “goal,” “intends,” “objective,” “plans,” “projects,” “strategy,” “target,” and “will” and words and terms of similar substance in discussions of future operating or financial performance. These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved. Forward-looking statements include, among other things, statements with respect to our future financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, divestitures, competitive position, growth opportunities, share repurchases, dividend payments, plans and objectives of management and other matters. 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. Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to: • our inability to succeed in our strategic objectives; • the risk of liability, reputational damages or adverse impact to business due to service interruptions, from security breaches, cyber-attacks, other security incidents or disclosure of confidential information or personal data; • compliance or failure to comply with obligations arising under new or existing laws, regulations , and customer contracts relating to the privacy, security and handling of personal data; • our product and service quality issues; • 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 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; • difficulty in understanding the changes to our business model by financial or industry analysts or our failure to meet our publicly announced financial guidance; • public health crises such as the COVID-19 pandemic; • our indebtedness and potential material adverse effect on our financial condition and results of operations; • the competitive pressures faced by our business; • our inability to accurately estimate the cost of services, and the completion timeline of contracts; • failure by us or third party partners to deliver on commitments or otherwise breach obligations to our customers; • 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 attract and retain 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, the possibility of reduced spending by customers in the areas we serve, the uncertainty related to 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; • our inadvertent infringement of third-party intellectual property rights or infringement of our intellectual property rights by third parties; • our inability to procure third-party licenses required for the operation of our products and service offerings; • risks associated with disruption of our supply chain; • our inability to maintain effective disclosure controls and internal control over financial reporting; 29 • potential losses due to asset impairment charges; • our inability to pay dividends or repurchase shares of our common stock; • pending investigations, claims and disputes and any adverse impact on our profitability and liquidity; • 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; • financial difficulties of our customers and our inability to collect receivables; • our inability to maintain and grow our customer relationships over time and to comply with customer contracts or government contracting regulations or requirements; • our inability to succeed in our strategic transactions; • 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; • risks following the spin-off of our former U.S. Public Sector business (the “USPS”) and its related mergers with Vencore Holding Corp. and KeyPoint Government Solutions in June 2018 to form Perspecta Inc. (including its successors and permitted assigns, “Perspecta”) (collectively the “USPS Separation and Mergers”); • volatility of the price of our securities, which is subject to market and other conditions; and • the other factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 and subsequent SEC filings, including Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q. No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law. 30