What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-02-05 compared with 2024-11-08 · 87 added, 79 removed, 330 unchanged (33% of the section changed)

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

The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the second quarter and first six months of fiscal 2025 and our financial condition as of September 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 third quarter and first nine months of fiscal 2025 and our financial condition as of December 31, 2024.

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

3 unchanged sentences

• Critical Accounting Estimates

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

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

Key profitability metrics for the third quarter of fiscal 2025 compared to the third 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.

1 unchanged sentence

• Revenues of $3.2 billion, down 5.1% compared to prior year period, and down 4.2% 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%;

• Diluted earnings per share of $0.31, compared to $0.81 in the third quarter of fiscal 2024;

adjusted diluted earnings per share of $0.92, compared to $0.86 in the third quarter of fiscal 2024, an increase of 7.0%;

• Fiscal 2025 operating cash flow of $1,083 million, less capital expenditures of $507 million, resulted in free cash flow of $576 million, compared to free cash flow of $601 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

Results of Operations for the Third Quarter and First Nine Months of Fiscal 2025 and Fiscal 2024

Revenues across operating segments and geographies are provided below:

Three Months Ended Three Months Ended

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

September 30, 2024 (1)

(in millions) December 31, 2024 December 31, 2023 Percentage Change Constant Currency

December 31, 2024 (1)

Percentage Change in Constant Currency (1)

10 unchanged sentences

Total Revenues $ 3,225 $ 3,399 (5.1) % $ 3,250 (4.4) %

Six Months Ended Six Months Ended

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

September 30, 2024 (1)

Nine Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 Percentage Change Constant Currency

December 31, 2024 (1)

Percentage Change in Constant Currency (1)

14 unchanged sentences

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

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.

For the third quarter of fiscal 2025, our total revenue was $3.2 billion, a decrease of $174 million or 5.1%, compared to the same period a year ago.

The 5.1% 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 4.2% decline in organic revenue.

1 unchanged sentence

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

For the first nine months of fiscal 2025, our total revenue was $9.7 billion, a decrease of $579 million or 5.6%, as compared to the same period a year ago.

The 5.6% 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 4.7% decline in organic revenue.

For the discussion of risks associated with our foreign operations, see Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.

Global Business Services

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.

For the third quarter of fiscal 2025, GBS revenue was $1.67 billion, a decrease of $30 million or 1.8%, as compared to the same period a year ago.

The 1.8% decrease against the comparative period includes a 0.5% decline in organic revenue, a 0.4% decline in revenue from the disposition of certain businesses, and a 0.9% 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.

For the first nine months of fiscal 2025, GBS revenue was $5.0 billion, a decrease of $92 million or 1.8%, as compared to the same period a year ago.

The 1.8% decrease against the comparative period includes a 0.5% decline in organic revenue, 0.4% decline in revenue from the disposition of certain businesses, and a 0.9% unfavorable foreign currency exchange rate impact.

Global Infrastructure Services

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.

For the third quarter of fiscal 2025, GIS revenue was $1.56 billion, a decrease of $144 million or 8.5%, as compared to the same period a year ago.

The 8.5% decrease against the comparative period includes a 7.8% decline in organic revenue from project completions and lower resale revenue and a 0.7% unfavorable foreign currency exchange rate impact.

For the first nine months of fiscal 2025, GIS revenue was $4.7 billion, a decrease of $487 million or 9.4%, as compared to the same period a year ago.

The 9.4% decrease against the comparative period includes a 8.9% decline in organic revenue from project completions and lower resale revenue and a 0.5% unfavorable foreign currency exchange rate impact.

Costs and Expenses

1 unchanged sentence

Dollar Amount Dollar Amount

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

Three Months Ended December 31,

Change Nine Months Ended December 31,

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

5 unchanged sentences

Interest income (51) (56) 5 (8.9) % (153) (158) 5 (3.2) %

Loss on disposition of businesses — 2 (2) (100.0) % — 7 (7) (100.0) %

Gain on disposition of businesses (7) (103) 96 (93.2) % (7) (96) 89 (92.7) %

Other income, net (28) (48) 20 (41.7) % (94) (188) 94 (50.0) %

1 unchanged sentence

Costs of Services

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.

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), were $2.4 billion and $7.4 billion for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $220 million and $619 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.

Gross margin (Revenues less COS as a percentage of revenue) was 25.1% and 24.0% for the third quarter and first nine months of fiscal 2025, respectively, an increase of 2.7% and 1.7% against the comparative period.

Selling, General and Administrative

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.

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $335 million and $989 million for the third quarter and first nine months of fiscal 2025, respectively, an increase of $41 million and $40 million, respectively, as compared to the same periods of the prior fiscal year.

The $41 million increase in expense for the third quarter of fiscal 2025 was primarily due to an alignment of business development expenses from COS in support of the offering model and an increase in professional services and other vendor-related expenses, partially offset by reductions in payroll related expenses.

The $40 million increase in expense for the first nine months of fiscal 2025 was primarily due to an alignment of business development expenses from COS in support of the offering model and an increase in transaction, separation and integration-related (“TSI”) costs, partially offset by lower merger-related indemnification expenses and a gain from a legal settlement in fiscal 2025.

Depreciation and Amortization

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.

Depreciation expense was $87 million and $275 million for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $18 million and $55 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.

Amortization expense was $233 million and $700 million for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $12 million and $25 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.

1 unchanged sentence

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.

During the third quarter and first nine months of fiscal 2025, total restructuring costs recorded, net of reversals, were $43 million and $124 million, respectively, an increase of $7 million and $33 million, respectively, as compared to the same periods of the prior fiscal year.

See Note 11 – “Restructuring Costs” for additional information about our restructuring actions.

Interest Expense and Interest Income

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

Net interest expense (interest expense less interest income) was $15 million and $54 million for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $7 million and $10 million, respectively, as compared to the same periods of the prior fiscal year.

Gain on Disposition of Businesses

During the first nine months of fiscal 2025 and fiscal 2024, the Company sold insignificant businesses and made adjustments to estimated amounts from prior years’ dispositions that resulted in a gain of $7 million and $96 million, respectively.

Other Income, Net

2 unchanged sentences

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

Non-service cost components of net periodic pension income $ (40) $ (35) $ (120) $ (108)

1 unchanged sentence

Loss (gain) on real estate and facility sales

Other loss (gain)

10 (16) (6) (68)

Total $ (28) $ (48) $ (94) $ (188)

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.

Other income, net, was $28 million for the third quarter of fiscal 2025, a decrease of $20 million against the comparative period.

Other income, net, was $94 million for the first nine months of fiscal 2025, a decrease of $94 million against the comparative period.

The change against the comparative period was primarily due to:

• net periodic pension income increased by $5 million and $12 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.

• foreign currency gains increased by $6 million and decreased by $4 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 $5 million and $40 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.

• a decrease in other gains of $26 million and $62 million, primarily from an impairment loss in the third quarter of fiscal 2025 and the sale of a strategic investment in the first nine months of fiscal 2024.

Our effective tax rate (“ETR”) was 51.9% and 34.0% for the three months ended December 31, 2024, and December 31, 2023, respectively, and 54.5% and 32.8% for the nine months ended December 31, 2024, and December 31, 2023, respectively.

For the three months ended December 31, 2024, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, and the foreign tax credit.

For the nine months ended December 31, 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.

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

tax on foreign income, and the foreign tax credit.

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

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

Earnings Per Share

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.

Diluted EPS for the third quarter and first nine months of fiscal 2025 was $0.31 and $0.68, respectively, a decrease of $0.50 and $0.75, 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.

Diluted EPS for the third quarter of fiscal 2025 includes $0.18 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.37 per share of amortization of acquired intangible assets, $0.05 per share of impairment losses, $(0.01) per share of gains on dispositions, $0.01 per share of net losses on real estate and facility sales, and $(0.01) per share of tax adjustments.

Diluted EPS for the first nine months of fiscal 2025 includes $0.54 per share of restructuring costs, $0.11 per share of transaction, separation and integration-related costs, $1.14 per share of amortization of acquired intangible assets, $(0.03) per share of merger related indemnification costs, $0.05 per share of impairment losses, $(0.04) per share of gains on dispositions, $0.13 per share of net losses on real estate and facility sales, and $0.02 per share of tax adjustments.

Non-GAAP Financial Measures

19 unchanged sentences

Free cash flow represents cash flow from operations, less capital expenditures.

Free cash flow is utilized by our management, investors, and analysts to evaluate cash available to pay debt, repurchase shares, and provide further investment in the business.

Free cash flow is utilized by our management, investors, and analysts to evaluate cash available for normal business operations, to pay debt, repurchase shares, and provide further investment in the business.

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

9 unchanged sentences

Dollar Amount Dollar Amount

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

Three Months Ended December 31,

Change Nine Months Ended December 31,

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

9 unchanged sentences

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

• 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.

• Merger related indemnification – in fiscal 2025 and fiscal 2024, represents the Company’s estimate of potential net liability to HPE for tax related indemnifications.

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

5 unchanged sentences

(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 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 $2 million and $8 million during the three and nine months ended December 31, 2023, respectively.

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 September 30, 2024

Three Months Ended December 31, 2024

(in millions, except per-share amounts) As

3 unchanged sentences

Integration-Related Costs Amortization

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

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

Income before income taxes $ 131 $ 43 $ 3 $ 87 $ 12 $ (8) $ 3 $ — $ 271

9 unchanged sentences

Diluted EPS 184.77 184.77 184.77 184.77 184.77 184.77 184.77 184.77 184.77

Six Months Ended September 30, 2024

Nine Months Ended December 31, 2024

(in millions, except per-share amounts) As

3 unchanged sentences

Integration-Related Costs Amortization

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

Assets Merger Related

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

Income before income taxes $ 292 $ 124 $ 25 $ 263 $ — $ 12 $ (13) $ 32 $ — $ 735

9 unchanged sentences

Diluted EPS 184.65 184.65 184.65 184.65 184.65 184.65 184.65 184.65 184.65 184.65

Three Months Ended September 30, 2023

Three Months Ended December 31, 2023

(in millions, except per-share amounts) As

2 unchanged sentences

Integration-Related Costs Amortization

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

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

Income before income taxes $ 212 $ 36 $ 2 $ 88 $ 2 (104) $ (2) $ — $ 234

1 unchanged sentence

Net income 140 31 2 75 2 (94) (1) (5) 150

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

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

(16) — — — — — — — (16)

Net income attributable to DXC common stockholders $ 156 $ 31 $ 2 $ 75 $ 2 $ (94) $ (1) $ (5) $ 166

5 unchanged sentences

Diluted EPS 191.93 191.93 191.93 191.93 191.93 191.93 191.93 191.93 191.93

Six Months Ended September 30, 2023

Nine Months Ended December 31, 2023

(in millions, except per-share amounts) As

7 unchanged sentences

Net income 281 73 5 213 3 (112) (5) 4 (37) 425

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

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

(10) — — — — — — (4) — (14)

Net income attributable to DXC common stockholders $ 291 $ 73 $ 5 $ 213 $ 3 $ (112) $ (5) $ 8 $ (37) $ 439

6 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

Total revenue growth

23 unchanged sentences

Reconciliations of net income to adjusted EBIT are as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

Net income $ 63 $ 140 $ 133 $ 281

14 unchanged sentences

Cash and Cash Equivalents and Cash Flows

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 December 31, 2024, our cash and cash equivalents (“cash”) were $1.7 billion, of which $0.9 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:

Six Months Ended

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

Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 Change

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 16 (4) 20

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

Net increase (decrease) in cash and cash equivalents $ 499 $ (167) $ 666

2 unchanged sentences

Operating cash flow

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.

Net cash provided by operating activities was $1,083 million and $1,081 million, respectively, during the first nine months of fiscal 2025 and fiscal 2024, reflecting a year-over year increase of $2 million.

Operating cash flow against the comparative period included:

4 unchanged sentences

Three Months Ended

September 30, 2024 September 30, 2023

December 31, 2024 December 31, 2023

Days of sales outstanding in accounts receivable 62 65

2 unchanged sentences

Investing cash flow

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.

Net cash used in investing activities was $343 million and $367 million, respectively, during the first nine months of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $24 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 $56 million;

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

partially offset by

• a $27 million increase in capital expenditures;

• a decrease in cash inflows from business dispositions of $5 million.

Financing cash flow

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.

Net cash used in financing activities was $257 million and $877 million, respectively, during the first nine months of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $620 million.

The change against the comparative period was primarily due to:

5 unchanged sentences

The following table summarizes our total debt:

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

(in millions) December 31, 2024 March 31, 2024

Short-term debt and current maturities of long-term debt $ 193 $ 271

1 unchanged sentence

Total debt $ 3,830 $ 4,089

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.

The $259 million decrease in total debt during the first nine months of fiscal 2025 was primarily attributable to the decreases in finance leases and borrowings for asset financing attributable to payments exceeding additions and a favorable foreign currency exchange rate of U.S.

dollar against the Euro.

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

We were in compliance with all financial covenants associated with our borrowings as of December 31, 2024.

Our credit ratings are as follows:

11 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 $4.4 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.

Our total liquidity of $4.9 billion as of December 31, 2024, includes $1.7 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 .

19 unchanged sentences

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

During the three months ended September 30, 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 December 31, 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