DXC 10-Q Quarterly Report Dec. 31, 2022 | Alphaminr
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DXC 10-Q Quarter ended Dec. 31, 2022

Balance Sheet
Cash Flow
Income Statement
Debt
DXC TECHNOLOGY CO
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dxc-20221231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________

Commission File No.: 001-38033
dxc-20221231_g1.jpg
DXC TECHNOLOGY COMPANY
(Exact name of registrant as specified in its charter)
Nevada
61-1800317
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
20408 Bashan Drive, Suite 231
Ashburn , Virginia 20147
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: ( 703 ) 972-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value per share DXC The New York Stock Exchange
1.750% Senior Notes Due 2026 DXC 26 The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x Accelerated Filer o
Non-accelerated Filer o Smaller reporting company
☐
Emerging growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes x No

227,682,482 shares of common stock, par value $0.01 per share, were outstanding on January 23, 2023.


TABLE OF CONTENTS

Item Page
1.
2.
3.
4.
1.
1A.
2.
3.
4.
5.
6.




PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements
Page



1

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended Nine Months Ended
(in millions, except per-share amounts) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Revenues $ 3,566 $ 4,089 $ 10,839 $ 12,257
Costs of services (excludes depreciation and amortization and restructuring costs) 2,799 3,179 8,504 9,522
Selling, general and administrative (excludes depreciation and amortization and restructuring costs) 315 340 988 1,093
Depreciation and amortization 375 424 1,144 1,294
Restructuring costs 49 36 135 248
Interest expense 56 38 137 161
Interest income ( 41 ) ( 15 ) ( 89 ) ( 51 )
Debt extinguishment costs — 2 — 311
Loss (gain) on disposition of businesses 9 4 12 ( 373 )
Other income, net ( 98 ) ( 85 ) ( 270 ) ( 290 )
Total costs and expenses 3,464 3,923 10,561 11,915
Income before income taxes 102 166 278 342
Income tax expense 41 64 86 145
Net income 61 102 192 197
Less: net income attributable to non-controlling interest, net of tax 2 4 4 9
Net income attributable to DXC common stockholders $ 59 $ 98 $ 188 $ 188
Income per common share:
Basic $ 0.26 $ 0.39 $ 0.82 $ 0.74
Diluted $ 0.25 $ 0.38 $ 0.80 $ 0.73


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




2


DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited)

Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Net income $ 61 $ 102 $ 192 $ 197
Other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments, net of tax (1)
10 99 ( 331 ) ( 75 )
Cash flow hedges adjustments, net of tax (2)
( 19 ) 1 ( 17 ) 9
Pension and other post-retirement benefit plans, net of tax:
Amortization of prior service cost, net of tax (3)
( 1 ) ( 2 ) ( 5 ) ( 6 )
Pension and other post-retirement benefit plans, net of tax ( 1 ) ( 2 ) ( 5 ) ( 6 )
Other comprehensive (loss) income, net of taxes ( 10 ) 98 ( 353 ) ( 72 )
Comprehensive (loss) income 51 200 ( 161 ) 125
Less: comprehensive (loss) income attributable to non-controlling interest 4 5 2 20
Comprehensive (loss) income attributable to DXC common stockholders $ 47 $ 195 $ ( 163 ) $ 105

(1) Tax (benefit) expense related to foreign currency translation adjustments was $( 5 ) and $ 4 for the three and nine months ended December 31, 2022, respectively, and $( 3 ) and $( 2 ) for the three and nine months ended December 31, 2021, respectively.
(2) Tax (benefit) expense related to cash flow hedges adjustments was $( 5 ) and $( 6 ) for the three and nine months ended December 31, 2022, respectively, and $ 1 and $ 3 for the three and nine months ended December 31, 2021, respectively.
(3) Tax benefit related to amortization of prior service costs was $ 0 and $ 4 for the three and nine months ended December 31, 2022, respectively. There was no tax benefit related to amortization of prior service costs for the three and nine months ended December 31, 2021, respectively.



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) December 31, 2022 March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents $ 2,091 $ 2,672
Receivables and contract assets, net of allowance of $ 46 and $ 55
3,454 3,854
Prepaid expenses 653 617
Other current assets 218 268
Assets held for sale 577 35
Total current assets 6,993 7,446
Intangible assets, net of accumulated amortization of $ 5,458 and $ 5,124
2,741 3,378
Operating right-of-use assets, net 954 1,133
Goodwill 535 617
Deferred income taxes, net 219 221
Property and equipment, net of accumulated depreciation of $ 4,067 and $ 3,998
2,044 2,412
Other assets 4,653 4,850
Assets held for sale - non-current 115 82
Total Assets $ 18,254 $ 20,139
LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt 873 900
Accounts payable 852 840
Accrued payroll and related costs 520 570
Current operating lease liabilities 320 388
Accrued expenses and other current liabilities 1,932 2,882
Deferred revenue and advance contract payments 969 1,053
Income taxes payable 166 197
Liabilities related to assets held for sale 538 23
Total current liabilities 6,170 6,853
Long-term debt, net of current maturities 3,850 4,065
Non-current deferred revenue 804 862
Non-current operating lease liabilities 691 815
Non-current income tax liabilities and deferred tax liabilities 784 994
Other long-term liabilities 992 1,136
Liabilities related to assets held for sale - non-current 11 39
Total Liabilities 13,302 14,764
Commitments and contingencies
DXC stockholders’ equity:
Preferred stock, par value $ 0.01 per share, 1,000,000 shares authorized, none issued as of December 31, 2022 and March 31, 2022
— —
Common stock, par value $ 0.01 per share, 750,000,000 shares authorized, 231,350,636 issued as of December 31, 2022 and 240,508,348 issued as of March 31, 2022
2 3
Additional paid-in capital 9,670 10,057
Accumulated deficit ( 4,123 ) ( 4,450 )
Accumulated other comprehensive loss ( 736 ) ( 385 )
Treasury stock, at cost, 3,278,690 and 2,878,079 shares as of December 31, 2022 and March 31, 2022
( 186 ) ( 173 )
Total DXC stockholders’ equity 4,627 5,052
Non-controlling interest in subsidiaries 325 323
Total Equity 4,952 5,375
Total Liabilities and Equity $ 18,254 $ 20,139

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended
(in millions) December 31, 2022 December 31, 2021
Cash flows from operating activities:
Net income $ 192 $ 197
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,169 1,309
Operating right-of-use expense 311 371
Pension & other post-employment benefits, actuarial & settlement losses — 7
Share-based compensation 81 77
Deferred taxes ( 170 ) 17
Gain on dispositions ( 43 ) ( 402 )
Unrealized foreign currency exchange loss (gain) 80 ( 20 )
Impairment losses and contract write-offs 31 21
Debt extinguishment costs — 311
Other non-cash charges, net ( 3 ) 2
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in assets 84 386
Decrease in operating lease liability ( 311 ) ( 371 )
Decrease in other liabilities ( 421 ) ( 675 )
Net cash provided by operating activities 1,000 1,230
Cash flows from investing activities:
Purchases of property and equipment ( 212 ) ( 217 )
Payments for transition and transformation contract costs ( 166 ) ( 152 )
Software purchased and developed ( 154 ) ( 211 )
Business dispositions 52 519
Proceeds from sale of assets 165 95
Short-term investing — 24
Other investing activities, net 16 35
Net cash (used in) provided by investing activities ( 299 ) 93
Cash flows from financing activities:
Borrowings of commercial paper 1,363 840
Repayments of commercial paper ( 1,312 ) ( 821 )
Borrowings on long-term debt — 19
Principal payments on long-term debt — ( 2,872 )
Payments on finance leases and borrowings for asset financing ( 399 ) ( 855 )
Proceeds from bond issuance — 2,918
Proceeds from stock options and other common stock transactions 1 12
Taxes paid related to net share settlements of share-based compensation awards ( 15 ) ( 15 )
Payments for debt extinguishment costs — ( 344 )
Repurchase of common stock ( 325 ) ( 352 )
Other financing activities, net ( 6 ) 10
Net cash used in financing activities ( 693 ) ( 1,460 )
Effect of exchange rate changes on cash and cash equivalents ( 95 ) 25
Net decrease in cash and cash equivalents including cash classified within current assets held for sale ( 87 ) ( 112 )
Change in cash classified within current assets held for sale ( 494 ) 63
Net decrease in cash and cash equivalents ( 581 ) ( 49 )
Cash and cash equivalents at beginning of year 2,672 2,968
Cash and cash equivalents at end of period $ 2,091 $ 2,919

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 December 31, 2022
(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 September 30, 2022 233,278 $ 2 $ 9,733 $ ( 4,211 ) $ ( 724 ) $ ( 185 ) $ 4,615 $ 321 $ 4,936
Net Income 59 59 2 61
Other comprehensive loss ( 12 ) ( 12 ) 2 ( 10 )
Share-based compensation expense 24 24 24
Acquisition of treasury stock ( 1 ) ( 1 ) ( 1 )
Share repurchase program ( 2,064 ) ( 87 ) 30 ( 57 ) ( 57 )
Stock option exercises and other common stock transactions 137 — —
Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 1 )
Balance at December 31, 2022 231,351 $ 2 $ 9,670 $ ( 4,123 ) $ ( 736 ) $ ( 186 ) $ 4,627 $ 325 $ 4,952
Three Months Ended December 31, 2021
(in millions, except
shares in thousands) 		Common Stock Additional
Paid-in Capital 		Accumulated Deficit Accumulated
Other
Comprehensive Loss 		Treasury Stock Total
DXC Equity 		Non-
Controlling Interest 		Total Equity
Shares Amount
Balance at September 30, 2021 255,003 $ 3 $ 10,646 $ ( 5,225 ) $ ( 482 ) $ ( 170 ) $ 4,772 $ 311 $ 5,083
Net income 98 98 4 102
Other comprehensive income 97 97 1 98
Share-based compensation expense 23 23 23
Acquisition of treasury stock ( 1 ) ( 1 ) ( 1 )
Share repurchase program ( 6,756 ) ( 286 ) 73 ( 213 ) ( 213 )
Stock option exercises and other common stock transactions 109 — —
Non-controlling interest distributions and other ( 4 ) ( 4 ) ( 1 ) ( 5 )
Balance at December 31, 2021 248,356 $ 3 $ 10,383 $ ( 5,058 ) $ ( 385 ) $ ( 171 ) $ 4,772 $ 315 $ 5,087
6

Nine Months Ended December 31, 2022
(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, 2022 240,508 $ 3 $ 10,057 $ ( 4,450 ) $ ( 385 ) $ ( 173 ) $ 5,052 $ 323 $ 5,375
Net income 188 188 4 192
Other comprehensive loss ( 351 ) ( 351 ) ( 2 ) ( 353 )
Share-based compensation expense 73 73 73
Acquisition of treasury stock ( 13 ) ( 13 ) ( 13 )
Share repurchase program ( 10,915 ) ( 1 ) ( 461 ) 139 ( 323 ) ( 323 )
Stock option exercises and other common stock transactions 1,758 1 1 1
Balance at December 31, 2022 231,351 $ 2 $ 9,670 $ ( 4,123 ) $ ( 736 ) $ ( 186 ) $ 4,627 $ 325 $ 4,952
Nine Months Ended December 31, 2021
(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, 2021 257,053 $ 3 $ 10,761 $ ( 5,331 ) $ ( 302 ) $ ( 158 ) $ 4,973 $ 335 $ 5,308
Net income 188 188 9 197
Other comprehensive loss ( 83 ) ( 83 ) 11 ( 72 )
Share-based compensation expense 63 63 63
Acquisition of treasury stock ( 13 ) ( 13 ) ( 13 )
Share repurchase program ( 10,618 ) ( 449 ) 86 ( 363 ) ( 363 )
Stock option exercises and other common stock transactions 1,921 11 11 11
Non-controlling interest distributions and other ( 3 ) ( 1 ) ( 4 ) ( 40 ) ( 44 )
Balance at December 31, 2021 248,356 $ 3 $ 10,383 $ ( 5,058 ) $ ( 385 ) $ ( 171 ) $ 4,772 $ 315 $ 5,087

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



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. With decades of driving innovation, the world’s largest companies and public sector organizations trust DXC to deploy services to drive new levels of performance, competitiveness and customer experience across their IT estates.

Basis of Presentation

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

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 (loss) income attributable to non-controlling interests are presented separately in the statements of comprehensive (loss) income. All intercompany transactions and balances have been eliminated. Certain amounts reported in the previous year have been reclassified to conform to the current year presentation.

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, 2022 (“fiscal 2022”).
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 reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period. The 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

Recently issued ASUs effective after December 31, 2022 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 – Divestitures

Fiscal 2023 Divestitures

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

FDB Assets Held for Sale

During the third quarter of fiscal 2022, DXC entered into a purchase agreement to sell its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ"). The closing of the transaction was subject to certain conditions, including receipt of certain regulatory consents. During the third quarter of fiscal 2023, DXC obtained regulatory consent for the FDB sale. As of December 31, 2022, the FDB Business met the requirements for presentation as assets held for sale under GAAP.

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

10
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Assets held for sale are reported at carrying value, which is less than fair value. FDB’s assets held for sale and related liabilities as of December 31, 2022 were as follows:

(in millions) December 31, 2022
Assets:
Cash and cash equivalents $ 509
Receivables and contract assets 67
Prepaid expenses 1
Total current assets held for sale 577
Intangible assets, net 45
Goodwill 48
Property and equipment, net 1
Other assets 12
Total non-current assets held for sale 106
Total assets held for sale $ 683
Liabilities:
Accounts payable $ 5
Accrued expenses and other current liabilities 532
Income Taxes Payable 1
Total current liabilities related to assets held for sale 538
Non-current income tax liabilities and deferred tax liabilities 7
Other long-term liabilities 4
Total long-term liabilities related to assets held for sale 11
Total liabilities related to assets held for sale $ 549

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

Fiscal 2022 Divestitures

HPS Sale

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

During the first nine months of fiscal 2022, the Company also sold certain insignificant businesses that resulted in a gain of $ 49 million. This was partially offset by $ 13 million in sales price adjustments related to prior year dispositions, which resulted from changes in estimated net working capital.


11
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 3 – 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 Nine Months Ended
(in millions, except per-share amounts) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Net income attributable to DXC common stockholders: $ 59 $ 98 $ 188 $ 188
Common share information:
Weighted average common shares outstanding for basic EPS 229.54 250.27 230.65 252.44
Dilutive effect of stock options and equity awards 3.46 4.55 3.73 5.15
Weighted average common shares outstanding for diluted EPS 233.00 254.82 234.38 257.59
Earnings per share:
Basic $ 0.26 $ 0.39 $ 0.82 $ 0.74
Diluted $ 0.25 $ 0.38 $ 0.80 $ 0.73

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 Nine Months Ended
December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Stock Options 467,554 507,424 474,591 518,052
Restricted Stock Units 2,490,526 112,314 2,146,455 204,459
Performance Stock Units 1,086,398 1,937,752 850,623 1,089,869

12
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 4 – Receivables

Allowance for Doubtful Accounts

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

As of
(in millions) December 31, 2022 March 31, 2022
Beginning balance $ 55 $ 91
Provisions for losses on accounts receivable 1 5
Other adjustments to allowance and write-offs ( 10 ) ( 41 )
Ending balance $ 46 $ 55

Receivables Facility

The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of December 31, 2022, the “Receivables Facility”) with certain unaffiliated financial institutions for the sale of commercial accounts receivable in the United States. The Receivables Facility was amended on July 29, 2022 extending the termination date to July 28, 2023.

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

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 5 – 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 10 years, and some of which include options to terminate the leases within one to three years .

Operating Leases

The components of operating lease expense were as follows:

Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Operating lease cost $ 97 $ 117 $ 311 $ 371
Short-term lease cost 9 9 28 32
Variable lease cost 17 17 56 50
Sublease income ( 5 ) ( 1 ) ( 15 ) ( 27 )
Total operating costs $ 118 $ 142 $ 380 $ 426

13
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.

Nine Months Ended
(in millions) December 31, 2022 December 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows
$ 311 $ 371
ROU assets obtained in exchange for operating lease liabilities (1)
$ 193 $ 130

(1) Net of $ 911 million and $ 792 million in lease modifications and terminations during the nine months of fiscal 2023 and 2022, respectively. See Note 17 – “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 December 31, 2022 March 31, 2022
ROU operating lease assets Operating right-of-use assets, net $ 954 $ 1,133
Operating lease liabilities Current operating lease liabilities $ 320 $ 388
Operating lease liabilities Non-current operating lease liabilities 691 815
Total operating lease liabilities $ 1,011 $ 1,203

The weighted-average operating lease term was 4.1 years and 4.4 years as of December 31, 2022 and March 31, 2022, respectively. The weighted-average operating lease discount rate was 3.7 % and 3.3 % as of December 31, 2022 and March 31, 2022, respectively.

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

Fiscal Year
(in millions)
Remainder of 2023
2024 2025 2026 2027
Thereafter
Total
Operating lease payments
$ 99 $ 325 $ 258 $ 169 $ 85 $ 159 $ 1,095
Less: imputed interest
( 84 )
Total operating lease liabilities
$ 1,011

14
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Finance Leases

The components of finance lease expense were as follows:

Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Amortization of right-of-use assets $ 50 $ 85 $ 166 $ 271
Interest on lease liabilities 4 6 13 22
Total finance lease expense $ 54 $ 91 $ 179 $ 293

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

Nine Months Ended
(in millions) December 31, 2022 December 31, 2021
Interest paid for finance lease liabilities – Operating cash flows
$ 13 $ 22
Cash paid for amounts included in the measurement of finance lease obligations – financing cash flows
244 403
Total cash paid in the measurement of finance lease obligations $ 257 $ 425
Capital expenditures through finance lease obligations (1)
$ 73 $ 180

(1) See Note 17 – ”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 December 31, 2022 March 31, 2022
ROU finance lease assets Property and Equipment, net $ 462 $ 602
Finance lease Short-term debt and current maturities of long-term debt $ 230 $ 289
Finance lease Long-term debt, net of current maturities 289 354
Total finance lease liabilities (1)
$ 519 $ 643

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

The weighted-average finance lease term was 2.8 years and 2.8 years as of December 31, 2022 and March 31, 2022, respectively. The weighted-average finance lease discount rate was 3.1 % and 2.9 % as of December 31, 2022 and March 31, 2022, respectively.

15
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Fiscal Year
(in millions)
Remainder of 2023
2024 2025 2026 2027
Thereafter
Total
Finance lease payments
$ 71 $ 216 $ 138 $ 76 $ 38 $ 6 $ 545
Less: imputed interest
( 26 )
Total finance lease liabilities
$ 519

Note 6 – Fair Value

Fair Value Measurements on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding pension assets and derivative assets and liabilities. See Note 7 – “Derivative Instruments” for information about the Company’s derivative instruments. Note 10 – “Debt” includes information about the estimated fair value of the Company’s long-term debt. There were no transfers between any of the levels during the periods presented.

Fair Value Hierarchy
(in millions) December 31, 2022
Assets: Fair Value Level 1 Level 2 Level 3
Money market funds and money market deposit accounts $ 28 $ 28 $ — $ —
Time deposits (1)
36 36 — —
Other securities (2)
46 — 44 2
Total assets $ 110 $ 64 $ 44 $ 2
Liabilities:
Contingent consideration $ 1 $ — $ — $ 1
Total liabilities $ 1 $ — $ — $ 1



March 31, 2022
Assets: Fair Value Level 1 Level 2 Level 3
Money market funds and money market deposit accounts $ 5 $ 5 $ — $ —
Time deposits (1)
51 51 — —
Other securities (2)
51 — 49 2
Total assets $ 107 $ 56 $ 49 $ 2
Liabilities:
Contingent consideration $ 8 $ — $ — $ 8
Total liabilities $ 8 $ — $ — $ 8

(1) Cost basis approximated fair value due to the short period of time to maturity.
(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $ 51 million and $ 53 million as of December 31, 2022 and March 31, 2022, respectively. For the periods presented, gains and losses are insignificant and are included in other income, net in the Company’s statements of operations .
16
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 7 – 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 Indian Rupee-denominated intercompany obligations and forecasted transactions. The notional amounts of foreign currency forward contracts designated as cash flow hedges as of December 31, 2022 and March 31, 2022 were $ 836 million and $ 727 million, respectively. As of December 31, 2022, the related forecasted transactions extend through December 2024.

For the three and nine months ended December 31, 2022 and December 31, 2021, respectively, the Company performed an assessment at the inception of the cash flow hedge transactions and determined that all critical terms of the hedging instruments and hedged items matched. The Company performs an assessment of critical terms on an on-going basis throughout the hedging period. During the three and nine months ended December 31, 2022 and December 31, 2021, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of December 31, 2022, $ 5 million of the existing amount of loss related to the cash flow hedge reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

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

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

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 short-term foreign currency forward contracts to hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted transactions. The net notional amounts of the foreign currency forward contracts outstanding as of December 31, 2022 and March 31, 2022 were $ 2.0 billion and $ 2.1 billion, respectively.

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

For the Three Months Ended For the Nine Months Ended
(in millions) Statement of Operations Line Item December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Foreign currency forward contracts Other (income) expense, net $ 52 $ ( 9 ) $ ( 27 ) $ 39

17
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Fair Value of Derivative Instruments

All derivative instruments are recorded at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables present the fair values of derivative instruments included in the balance sheets:

As of
(in millions) Balance Sheet Line Item December 31, 2022 March 31, 2022
Derivatives designated for hedge accounting:
Foreign currency forward contracts Other current assets $ 10 $ 18
Accrued expenses and other current liabilities $ 18 $ —
Derivatives not designated for hedge accounting:
Foreign currency forward contracts Other current assets $ 7 $ 9
Accrued expenses and other current liabilities $ 51 $ 15

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

Other Risks for Derivative Instruments

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

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 (loss) income when such net investments are sold or substantially liquidated.

As of December 31, 2022, DXC had $ 0.3 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries. For the three and nine months ended December 31, 2022, the pre-tax impact of gain (loss) on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive (loss) income was $( 22 ) million and $ 11 million, respectively. As of March 31, 2022, DXC had $ 0.3 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries .
18
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 8 – Intangible Assets

Intangible assets consisted of the following:

As of December 31, 2022 As of March 31, 2022
(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
Software $ 3,999 $ 3,198 $ 801 $ 4,063 $ 3,039 $ 1,024
Customer related 3,891 2,140 1,751 4,148 1,995 2,153
Other 309 120 189 291 90 201
Total intangible assets $ 8,199 $ 5,458 $ 2,741 $ 8,502 $ 5,124 $ 3,378


The components of amortization expense were as follows:

Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Intangible asset amortization $ 201 $ 212 $ 598 $ 649
Transition and transformation contract cost amortization (1)
51 56 156 166
Total amortization expense $ 252 $ 268 $ 754 $ 815

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

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

Fiscal Year (in millions)
Remainder of 2023 $ 232
2024 706
2025 591
2026 526
2027 383
Thereafter 303
Total $ 2,741

19
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 9 – Goodwill

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

(in millions) GBS GIS Total
Goodwill, gross $ 5,107 $ 5,066 $ 10,173
Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 )
Balance as of March 31, 2022, net $ 617 $ — $ 617
Divestitures ( 12 ) — ( 12 )
Assets held for sale ( 48 ) — ( 48 )
Foreign currency translation ( 22 ) — ( 22 )
Balance as of December 31, 2022, net $ 535 $ — $ 535
Goodwill, gross 5,025 5,066 10,091
Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 )
Balance as of December 31, 2022, net $ 535 $ — $ 535

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

On December 31, 2022, with the classification of the FDB Business as held for sale, $ 48 million in goodwill was transferred to assets held for sale on the balance sheet. See Note 2 – “Divestitures” for additional information.
20
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 10 – Debt

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

(in millions) Interest Rates Fiscal Year Maturities
12/31/2022 (1)
3/31/2022 (1)
Short-term debt and
current maturities of long-term debt
Commercial paper (2)
1.88 % - 2.49 %
2023 $ 401 $ 362
Current maturities of long-term debt Various 2023 - 2024 242 249
Current maturities of finance lease liabilities
0.30 % - 14.30 %
2023 - 2024 230 289
Short-term debt and current maturities of long-term debt $ 873 $ 900
Long-term debt, net of current maturities
€ 650 million Senior notes
1.75 % 2026 692 720
$ 700 million Senior notes
1.80 % 2027 695 694
€ 750 million Senior notes
0.45 % 2028 796 828
$ 650 million Senior notes
2.375 % 2029 645 644
€ 600 million Senior notes
0.95 % 2032 635 661
Finance lease liabilities
0.30 % - 14.30 %
2023 - 2028 519 643
Borrowings for assets acquired under long-term financing
0.00 % - 9.78 %
2023 - 2029 275 344
Mandatorily redeemable preferred stock outstanding 6.00 % 2023 64 63
Other borrowings Various 2023 - 2024 1 6
Long-term debt 4,322 4,603
Less: current maturities 472 538
Long-term debt, net of current maturities $ 3,850 $ 4,065

(1) The carrying amounts of the senior notes as of December 31, 2022 and March 31, 2022, include the remaining principal outstanding of $ 3,486 million and $ 3,575 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $( 23 ) million and $( 28 ) million respectively.
(2) At DXC’s option, DXC can borrow up to a maximum of € 1 billion or its equivalent in €, £, and $.

Term Loan

During the second quarter of fiscal 2023, the Company entered into a $ 500 million term loan credit agreement (the “USD Term Loan”) with certain unaffiliated financial institutions that matures on September 1, 2024, unless the Company exercises its option to extend for one year until September 1, 2025. The USD Term Loan is required to be drawn down by March 1, 2023. The Company did not draw on the USD Term Loan as of December 31, 2022.

Fair Value of Debt

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

21
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 11 – 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 Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
United States $ 1,054 $ 1,168 $ 3,278 $ 3,570
United Kingdom 469 578 1,394 1,749
Other Europe 1,119 1,319 3,321 3,878
Australia 343 376 1,105 1,172
Other International 581 648 1,741 1,888
Total Revenues $ 3,566 $ 4,089 $ 10,839 $ 12,257

The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 18 – “Segment Information” for the Company’s segment disclosures.

Remaining Performance Obligations

As of December 31, 2022, approximately $ 19.6 billion of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 13 % of these remaining performance obligations in fiscal 2023, 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) December 31, 2022 March 31, 2022
Trade receivables, net $ 2,364 $ 2,694
Contract assets $ 325 $ 371
Contract liabilities $ 1,773 $ 1,915

Changes in contract liabilities were as follows:
Nine Months Ended
(in millions) December 31, 2022 December 31, 2021
Balance, beginning of period $ 1,915 $ 1,701
Deferred revenue 1,699 2,287
Recognition of deferred revenue ( 1,725 ) ( 2,032 )
Currency translation adjustment ( 88 ) ( 22 )
Other ( 28 ) ( 51 )
Balance, end of period $ 1,773 $ 1,883
22
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 12 – Restructuring Costs

The composition of restructuring liabilities by financial statement line item is as follows:
As of
(in millions) December 31, 2022 March 31, 2022
Accrued expenses and other current liabilities $ 79 $ 113
Other long-term liabilities 24 39
Total $ 103 $ 152

Summary of Restructuring Plans

Fiscal 2023 Plan

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

Restructuring Liability Reconciliations by Plan
Restructuring Liability as of March 31, 2022 Costs Expensed, Net of Reversals
Costs Not Affecting Restructuring Liability (1)
Cash Paid
Other (2)
Restructuring Liability as of December 31, 2022
Fiscal 2023 Plan
Workforce Reductions $ — $ 85 $ — $ ( 50 ) $ — $ 35
Facilities Costs — 26 ( 17 ) ( 7 ) ( 1 ) 1
— 111 ( 17 ) ( 57 ) ( 1 ) 36
Fiscal 2022 Plan
Workforce Reductions $ 84 $ ( 1 ) $ — $ ( 48 ) $ ( 5 ) $ 30
Facilities Costs 1 27 ( 6 ) ( 22 ) 1 1
85 26 ( 6 ) ( 70 ) ( 4 ) 31
Other Prior Year and Acquired Plans
Workforce Reductions $ 64 $ ( 1 ) $ — $ ( 27 ) $ ( 3 ) $ 33
Facilities Costs 3 ( 1 ) — — 1 3
67 ( 2 ) — ( 27 ) ( 2 ) 36
Total $ 152 $ 135 $ ( 23 ) $ ( 154 ) $ ( 7 ) $ 103

(1) Pension benefit augmentations recorded as pension liabilities, asset impairments and restructuring costs associated with right-of-use assets.
(2) Foreign currency translation adjustments.

For the nine months ended December 31, 2022, $ 16 million of restructuring costs is related to amortization of the right-of-use asset and interest expense for leased facilities that we have vacated but are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.
23
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 13 – Pension and Other Benefit Plans

Defined Benefit Plans

The components of net periodic pension income were:
Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Service cost $ 18 $ 22 $ 55 $ 67
Interest cost 62 50 192 153
Expected return on assets ( 120 ) ( 139 ) ( 374 ) ( 432 )
Amortization of prior service costs ( 2 ) ( 2 ) ( 6 ) ( 6 )
Contractual termination benefit — ( 3 ) — ( 2 )
Recognition of actuarial loss — 7 1 7
Net periodic pension income $ ( 42 ) $ ( 65 ) $ ( 132 ) $ ( 213 )

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 14 – Income Taxes

The Company’s effective tax rate (“ETR”) was 40.2 % and 38.6 % for the three months ended December 31, 2022 and December 31, 2021, respectively, and 30.9 % and 42.4 % for the nine months ended December 31, 2022 and December 31, 2021, respectively. For the three months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, a decrease in the base erosion and anti-abuse tax, and an increase in unrecognized tax benefits primarily related to foreign tax credits. For the nine months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, a decrease in the base erosion and anti-abuse tax, and the tax impact of business divestitures. For the three months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, an increase in unrecognized tax benefits primarily related to deductions taken in prior tax returns and tax rate changes in non-U.S. jurisdictions. For the nine months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, gain on sale of HPS business, tax rate changes in non-U.S. jurisdictions and recording a valuation allowance on certain deferred tax assets in non-U.S. jurisdictions.

The majority of our global unremitted foreign earnings have been taxed or would be exempt from U.S. tax upon repatriation. Such earnings and all current foreign earnings are not indefinitely reinvested. The following earnings are considered indefinitely reinvested: approximately $ 475 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 our accumulated earnings in India as of March 31, 2021. A portion of these indefinitely reinvested earnings may be subject to foreign and U.S. state tax consequences when remitted. The Company will continue to evaluate its position based on its future strategy and cash needs.

In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $ 27 million tax indemnification receivable related to uncertain tax positions, a $ 60 million tax indemnification receivable related to other tax payables, and a $ 104 million tax indemnification payable related to other tax receivables.

24
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 $ 50 million tax indemnification receivable from Perspecta related to other tax payables and a $ 6 million tax indemnification payable to Perspecta related to income tax and other tax receivables.

In connection with the sale of the HPS business, the Company entered into a tax matters agreement with Dedalus. Pursuant to the tax matters agreement, the Company 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 and tax planning strategies in previous years. As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in U.S. Tax Court, these matters are not fully reserved and would result in a federal and state tax expense of approximately $ 472 million (including estimated interest and penalties) for the unreserved portion of these items and related cash cost if we do not prevail. 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. We do not expect the U.S. Tax Court matters to be resolved in the next 12 months.

The Company’s fiscal years 2009, 2010, 2011 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 years 2014 and 2015 through February 28, 2023 and fiscal and tax return years 2016 through 2020 to September 30, 2024. The statute of limitations is also open on assessments related to certain refund claims for fiscal years 2014 to 2017 through August 15, 2023.

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

The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions. Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future. For the three months ended December 31, 2022, the Company’s liability for uncertain tax positions increased by $ 16 million (excluding interest and penalties and related tax attributes) primarily due to the benefit of U.S. foreign tax credits. 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 $ 7 million.

25
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 15 – Stockholders’ Equity

Share Repurchases

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

Fiscal 2023 Fiscal 2022
Fiscal Period Number of Shares Repurchased Average Price Per Share Amount
(in millions) 		Number of Shares Repurchased Average Price Per Share Amount
(in millions)
1st Quarter 8,850,912 $ 30.09 $ 266 1,750,000 $ 38.52 $ 67
2nd Quarter — $ — — 2,112,212 $ 39.10 83
3rd Quarter 2,063,645 $ 27.41 57 6,755,555 $ 31.48 213
Total 10,914,557 $ 29.59 $ 323 10,617,767 $ 34.15 $ 363

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, 2022 $ ( 651 ) $ 10 $ 256 $ ( 385 )
Other comprehensive (loss) income before reclassifications ( 329 ) ( 7 ) — ( 336 )
Amounts reclassified from accumulated other comprehensive loss — ( 10 ) ( 5 ) ( 15 )
Balance at December 31, 2022 $ ( 980 ) $ ( 7 ) $ 251 $ ( 736 )

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss
Balance at March 31, 2021 $ ( 554 ) $ ( 1 ) $ 253 $ ( 302 )
Other comprehensive (loss) income before reclassifications — 12 — 12
Amounts reclassified from accumulated other comprehensive loss (1)
( 86 ) ( 3 ) ( 6 ) ( 95 )
Balance at December 31, 2021 $ ( 640 ) $ 8 $ 247 $ ( 385 )

(1) Includes net cumulative foreign currency translation losses of $ 86 million upon sale of foreign entities primarily related to the HPS business divestiture. See Note 2 – “Divestitures” for additional information.

26
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 16 – 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 over 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.

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, 2022 7,477,126 $ 35.89 156,722 $ 36.18
Granted 3,273,088 $ 38.65 58,500 $ 31.54
Settled ( 2,061,787 ) $ 33.65 ( 75,335 ) $ 32.62
Canceled/Forfeited ( 1,095,402 ) $ 38.72 — $ —
Outstanding as of December 31, 2022 7,593,025 $ 37.11 139,887 $ 36.15


Share-Based Compensation

Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Total share-based compensation cost $ 26 $ 26 $ 81 $ 77
Related income tax benefit $ 2 $ 4 $ 8 $ 11



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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 17 – Cash Flows

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

Nine Months Ended
(in millions) December 31, 2022 December 31, 2021
Cash paid for:
Interest $ 115 $ 177
Taxes on income, net of refunds (1)
$ 289 $ 326
Non-cash activities:
Operating:
ROU assets obtained in exchange for lease, net (2)
$ 193 $ 130
Assets acquired under long-term financing $ 74 $ 111
Investing:
Capital expenditures in accounts payable and accrued expenses $ 2 $ 60
Capital expenditures through finance lease obligations $ 73 $ 180
Assets acquired under long-term financing $ 6 $ 44
Financing:
Shares repurchased but not settled in cash $ 4 $ 11
(1) Income tax refunds were $ 56 million and $ 46 million for the nine months ended December 31, 2022 and December 31, 2021, respectively.
(2) Net of $ 911 million and $ 792 million in lease modifications and terminations during the first nine months of fiscal 2023 and 2022, respectively .
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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 18 – 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”)

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. GBS offerings include:

• Analytics and Engineering. Our portfolio of analytics services and extensive partner ecosystem help customers gain rapid insights, automate operations, and accelerate their transformation journeys. We provide software engineering, consulting, and data analytics solutions that enable businesses to run and manage their mission-critical functions, transform their operations, and develop new ways of doing business.
• Applications . We help simplify, modernize, and accelerate mission-critical applications that support business agility and growth through our Applications services. We are the engineers that enable our customers to take advantage of the latest digital platforms with both customized and pre-packaged applications, ensure resiliency, launch new products and enter new markets with minimal disruption. We help customers define, execute and manage their enterprise applications strategy.
• Insurance Software and Business Process Services. We partner with insurance clients, to modernize and run IT systems, provide proprietary modular insurance software and platforms, and operate the full spectrum of insurance business process services. We also help operate and continuously improve bank cards, payment and lending processes and operations, and customer experience operations. We administer 13 million insurance policies and contracts, and manage 250 million customer interactions each year across industries.

Global Infrastructure Services (“GIS”)

GIS provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for customers. GIS offerings include:

• Security. Our Security services help customers assess risk and proactively address all facets of the security environment, from threat intelligence to compliance. We leverage proven methodologies, intelligent automation and industry-leading partners to tailor security solutions to customers’ unique business needs. Our experts weave cyber resilience into IT security, operations and culture. Whether migrating to the cloud, protecting data with a Zero Trust strategy or managing a security operations center, our Security services enable our customers to focus on their business.
• Cloud Infrastructure and IT Outsourcing (“ITO”) . We enable customers to do Cloud Right™, making the right investments at the right time and on the right platforms. We orchestrate hybrid cloud and multicloud environments, ensuring private and public clouds, servers and mainframes operate effectively together. We provide companies with tailored plans for cloud migration and optimization to enable successful transformation. We leverage our deep expertise in legacy IT and drive innovation with reliable, secure, mission-critical IT Outsourcing services – from compute and data center, to storage and backup, to network, to mainframe and to business continuity – providing a clear path to modernization.
• Modern Workplace. Our Modern Workplace services put the employee experience first, helping them achieve new levels of productivity, engagement and collaboration while working seamlessly and securely on any device. Organizations are empowered to deliver a consumer-like experience, centralize IT management and support services, and improve the total cost of ownership.

29
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 December 31, 2022
Revenues $ 1,738 $ 1,828 $ 3,566 $ — $ 3,566
Segment profit $ 244 $ 123 $ 367 $ ( 58 ) $ 309
Depreciation and amortization (1)
$ 42 $ 209 $ 251 $ 24 $ 275
Three Months Ended December 31, 2021
Revenues $ 1,946 $ 2,143 $ 4,089 $ — $ 4,089
Segment profit $ 315 $ 102 $ 417 $ ( 62 ) $ 355
Depreciation and amortization (1)
$ 39 $ 252 $ 291 $ 27 $ 318
(in millions) GBS GIS Total Reportable Segments All Other Totals
Nine Months Ended December 31, 2022
Revenues $ 5,209 $ 5,630 $ 10,839 $ — $ 10,839
Segment profit $ 672 $ 364 $ 1,036 $ ( 199 ) $ 837
Depreciation and amortization (1)
$ 123 $ 643 $ 766 $ 73 $ 839
Nine Months Ended December 31, 2021
Revenues $ 5,706 $ 6,551 $ 12,257 $ — $ 12,257
Segment profit $ 885 $ 351 $ 1,236 $ ( 203 ) $ 1,033
Depreciation and amortization (1)
$ 130 $ 755 $ 885 $ 84 $ 969
(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $ 100 million and $ 106 million for the three months ended December 31, 2022 and 2021, respectively, and $ 305 million and $ 325 million for the nine months ended December 31, 2022 and 2021, respectively.

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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 OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation, and integration-related costs and amortization of acquired intangible assets.

Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Profit
Total profit for reportable segments $ 367 $ 417 $ 1,036 $ 1,236
All other loss ( 58 ) ( 62 ) ( 199 ) ( 203 )
Subtotal $ 309 $ 355 $ 837 $ 1,033
Interest income 41 15 89 51
Interest expense ( 56 ) ( 38 ) ( 137 ) ( 161 )
Restructuring costs ( 49 ) ( 36 ) ( 135 ) ( 248 )
Transaction, separation and integration-related costs
( 6 ) ( 11 ) ( 12 ) ( 23 )
Amortization of acquired intangible assets ( 100 ) ( 106 ) ( 305 ) ( 325 )
Merger related indemnification ( 11 ) — ( 21 ) —
SEC Matter — — ( 8 ) —
(Losses) gains on dispositions ( 9 ) ( 4 ) ( 12 ) 343
Arbitration loss ( 9 ) — ( 9 ) —
Impairment losses ( 8 ) — ( 8 ) ( 10 )
Debt extinguishment costs — ( 2 ) — ( 311 )
Pension and OPEB actuarial and settlement losses — ( 7 ) ( 1 ) ( 7 )
Income before income taxes $ 102 $ 166 $ 278 $ 342
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.
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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 19 – Commitments and Contingencies

Commitments

Minimum purchase commitments as of December 31, 2022 were as follows:
Fiscal year Minimum Purchase Commitment
(in millions)
Remainder of 2023 $ 159
2024 440
2025 271
2026 256
2027 27
Total $ 1,153
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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Contingencies

Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise: On August 18, 2016, this purported class and collective action was filed in the U.S. District Court for the Northern District of California, against HP and HPE alleging violations of the Federal Age Discrimination in Employment Act (“ADEA”) and California state law, in connection with workforce reductions that occurred in or after August 2012 in California, and in or after as early as December 2014 in other U.S. locations. Former business units of HPE now owned by the Company, and former business units of the Company now owned by Peraton (formerly Perspecta), may be proportionately liable for any recovery by plaintiffs in this matter.

In December 2020, Plaintiffs filed a motion for preliminary certification of the collective action, which Defendants opposed. In April 2021, the court granted Plaintiffs’ motion for preliminary certification and lifted the previously imposed stay of the action. In November 2021, notice was sent to putative members of the ADEA collectives regarding participation in the case. In February 2022, the notice period closed. The litigation is currently in discovery.

Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company: On March 22, 2016, Oracle filed a complaint against HPE in the U.S. District Court for the Northern District of California, alleging copyright infringement, interference with contract, intentional interference with prospective economic relations, and unfair competition. The litigation relates in part to former business units of HPE that are now owned by the Company. The Company may be required to indemnify HPE for a portion of any recovery by Oracle in the litigation related to these business units.

Oracle’s claims arise primarily out of HPE’s prior relationship with a third-party maintenance provider named Terix Computer Company, Inc. (“Terix”). Oracle claims that Terix infringed its copyrights while acting as HPE’s subcontractor for certain customers of HPE’s multivendor support business. Oracle claims that HPE is liable for vicarious and contributory infringement arising from the alleged actions of Terix and for direct infringement arising from HPE’s own alleged conduct.

On January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor. Oracle appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. In August 2020, the court granted Oracle’s appeal in part. The case was then remanded to the District Court for further proceedings.

In January 2021, the District Court entered a scheduling order that provided for summary judgment briefing to be completed by May 2021 and a trial date in November 2021. In June 2021, the Court issued a decision denying HPE’s motion for summary judgment and granting Oracle’s motion for summary judgment on various HPE defenses. I n November 2021, the court issued an order continuing the trial to May 2022.

A jury trial was held in May - June 2022, after which a jury awarded Oracle $ 30 million in damages. In September 2022, Oracle filed a motion seeking $ 27 million in attorneys’ fees and prejudgment interest. In November 2022, the Company entered into a settlement agreement with Oracle and HPE, resolving all matters in the litigation and the Company’s indemnification obligations to HPE. In January 2023, the Court entered an order dismissing the case with prejudice. The matter is now closed.

In re DXC Technology Company Securities Litigation: Previously disclosed securities litigation matters have been dismissed, with one case remaining, in the Superior Court of the State of California.

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

33
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The State of California action had been stayed pending the outcome of the substantially similar federal action filed in the United States District Court for the Northern District of California. 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. The Court has scheduled a case management conference in February 2023 to discuss how the matter will progress.

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

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

SEC Matter: In December 2019, the Company received a request for voluntary production of information in connection with an informal investigation by the U.S. Securities and Exchange Commission. The current focus of the investigation is the Company’s historical reporting related to its non-GAAP adjustment for “transaction, separation, and integration-related costs,” including whether the disclosure the Company previously used to describe the non-GAAP adjustment was sufficiently broad to cover certain expenses the Company included as transaction, separation, and integration-related costs. The non-GAAP costs at issue primarily consist of expenses associated with the business combination that formed DXC in 2017. The Company has cooperated fully with the SEC’s informal investigation, and the new management team appointed beginning in September of 2019 has proactively clarified and expanded the disclosure of the Company’s non-GAAP transaction, separation, and integration-related costs. In addition, the new management team significantly reduced the transaction, separation, and integration-related costs.

The Company intends to continue its voluntary cooperation with the SEC while seeking to resolve the matter. There can be no guarantee that any final resolution will be reached or, if one is reached, as to the timing or final terms of any such resolution. However, in the second quarter of the Company’s fiscal year 2023, the Company accrued $ 8 million, representing its current estimate of the settlement costs based on its ongoing discussions with the SEC.

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

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

• the uncertainty of the magnitude, duration, geographic reach of the COVID-19 crisis, its impact on the global economy and the impact of current and potential travel restrictions, stay-at-home orders, vaccine mandates and economic restrictions implemented to address the crisis;
• our inability to succeed in our strategic objectives;
• the risk of liability or damage to our reputation resulting from security incidents, including breaches, and cyber-attacks to our systems and networks and those of our business partners, insider threats, disclosure of sensitive data or failure to comply with data protection laws and regulations in a rapidly evolving regulatory environment; in each case, whether deliberate or accidental;
• our inability to develop and expand our service offerings to address emerging business demands and technological trends, including our inability to sell differentiated services amongst our offerings;
• our inability to compete in certain markets and expand our capacity in certain offshore locations and risks associated with such offshore locations such as Russia’s recent invasion of Ukraine;
• failure to maintain our credit rating and ability to manage working capital, refinance and raise additional capital for future needs;
• our indebtedness;
• the competitive pressures faced by our business;
• our inability to accurately estimate the cost of services, and the completion timeline of contracts;
• execution risks by us and our suppliers, customers, and partners;
• the risks associated with natural disasters;
• our inability to retain and hire key personnel and maintain relationships with key partners;
• the risks associated with prolonged periods of inflation or current macroeconomic conditions, including the current decline in economic growth rates in the United States and in other countries, including the possibility of reduced spending by customers in the areas we serve, the success of our cost-takeout efforts, continuing unfavorable foreign exchange rate movements, and our ability to close new deals in the event of an economic slowdown;
• the risks associated with our international operations, such as risks related to currency exchange rates and the withdrawal of U.K. from the European Union on January 31, 2020;
• our inability to comply with governmental regulations or the adoption of new laws or regulations, including social and environmental responsibility regulations, policies and provisions;
• our inability to achieve the expected benefits of our restructuring plans;
• inadvertent infringement of third-party intellectual property rights or our inability to protect our own intellectual property assets;
• 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 internal control over financial reporting;
35

• 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;
• 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 laws and any adverse impact on our effective tax rate;
• 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”), which was acquired by Peraton in May 2021; 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, 2022 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

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 2023 and our financial condition as of December 31, 2022. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes.

The MD&A is organized in the following sections:
• Background
• Results of Operations
• Liquidity and Capital Resources
• Critical Accounting Estimates

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the third quarter and first nine months of fiscal 2023 and fiscal 2022. References are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

Background

DXC 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. 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.

We generate revenue by offering a wide range of information technology services and solutions primarily in North America, Europe, Asia, and Australia. We operate through two segments: Global Business Services ("GBS") and Global Infrastructure Services ("GIS"). We market and sell our services directly to customers through our direct sales offices around the world. Our customers include commercial businesses of many sizes and in many industries and public sector clients.

Results of Operations

The following table sets forth certain financial data for the third quarter and first nine months of fiscal 2023 and fiscal 2022:
Three Months Ended Nine Months Ended
(In millions, except per-share amounts) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Revenues $ 3,566 $ 4,089 $ 10,839 $ 12,257
Income before income taxes 102 166 278 342
Income tax expense 41 64 86 145
Net income $ 61 $ 102 $ 192 $ 197
Diluted earnings per share $ 0.25 $ 0.38 $ 0.80 $ 0.73
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Revenues

Our revenues by geography and operating segment are provided below:

Three Months Ended Three Months Ended
(in millions) December 31, 2022 December 31, 2021 Percentage Change
Constant Currency
December 31, 2022 (1)
Percentage Change in Constant Currency (1)
Geographic Market
United States $ 1,054 $ 1,168 (9.8) % $ 1,054 (9.8) %
United Kingdom 469 578 (18.9) % 539 (6.7) %
Other Europe 1,119 1,319 (15.2) % 1,227 (7.0) %
Australia 343 376 (8.8) % 380 1.1 %
Other International 581 648 (10.3) % 635 (2.0) %
Total Revenues $ 3,566 $ 4,089 (12.8) % $ 3,835 (6.2) %
Operating Segments
GBS $ 1,738 $ 1,946 (10.7) % $ 1,863 (4.3) %
GIS 1,828 2,143 (14.7) % 1,972 (8.0) %
Total Revenues $ 3,566 $ 4,089 (12.8) % $ 3,835 (6.2) %

Nine Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 Percentage Change
Constant Currency
December 31, 2022 (1)
Percentage Change in Constant Currency (1)
Geographic Market
United States $ 3,278 $ 3,570 (8.2) % $ 3,278 (8.2) %
United Kingdom 1,394 1,749 (20.3) % 1,597 (8.7) %
Other Europe 3,321 3,878 (14.4) % 3,698 (4.6) %
Australia 1,105 1,172 (5.7) % 1,201 2.5 %
Other International 1,741 1,888 (7.8) % 1,876 (0.6) %
Total Revenues $ 10,839 $ 12,257 (11.6) % $ 11,650 (5.0) %
Operating Segments
GBS $ 5,209 $ 5,706 (8.7) % $ 5,584 (2.1) %
GIS 5,630 6,551 (14.1) % 6,066 (7.4) %
Total Revenues $ 10,839 $ 12,257 (11.6) % $ 11,650 (5.0) %

(1) Constant currency revenues are a non-GAAP measure calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This information is consistent with how management views our revenues and evaluates our operating performance and trends. For more information, see "Non-GAAP Financial Measures."
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For the third quarter of fiscal 2023, our total revenue was $3.6 billion, a decrease of $523 million or 12.8%, as compared to the same period a year ago. The 12.8% decrease against the comparative period includes a 6.6% unfavorable foreign currency exchange rate impact, a 2.4% decline in revenue from the disposition of certain businesses, and a 3.8% decline in organic revenue. Organic revenue growth is a non-GAAP measure. For more information, see "Non-GAAP Financial Measures."

For the first nine months of fiscal 2023, our total revenue was $10.8 billion, a decrease of $1,418 million or 11.6%, as compared to the same period a year ago. The 11.6% decrease against the comparative period includes a 6.6% unfavorable foreign currency exchange rate impact, a 2.4% decline in revenue from the disposition of certain businesses, and a 2.6% decline in organic revenue.

The unfavorable foreign currency exchange rate impact is primarily driven by the strengthening of the U.S. dollar against the British Pound, Euro, and Australian Dollar.

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, 2022.

Global Business Services

For the third quarter of fiscal 2023, GBS revenue was $1.7 billion, a decrease of $208 million or 10.7%, as compared to the same period a year ago. The 10.7% decrease against the comparative period includes a 6.4% unfavorable foreign currency exchange rate impact and a 4.5% decline in revenue from the disposition of certain businesses, partially offset by 0.2% organic revenue growth from additional services provided to new and existing customers.

For the first nine months of fiscal 2023, GBS revenue was $5.2 billion, a decrease of $497 million or 8.7%, as compared to the same period a year ago. The 8.7% decrease against the comparative period includes a 6.6% unfavorable foreign currency exchange rate impact and a 4.2% decline in revenue from the disposition of certain businesses, partially offset by 2.1% organic revenue growth from additional services provided to new and existing customers.

For the third quarter and first nine months of fiscal 2023, GBS contract awards were $2.1 billion and $5.5 billion, respectively, as compared to $2.5 billion and $6.6 billion, respectively, in the same periods in fiscal 2022.

Global Infrastructure Services

For the third quarter of fiscal 2023, our GIS revenue was $1.8 billion, a decrease of $315 million or 14.7%, as compared to the same period a year ago. The 14.7% decrease against the comparative period includes a 6.7% unfavorable foreign currency exchange rate impact, 0.6% decline in revenue from the disposition of certain businesses, and a 7.4% decline in organic revenue.

For the first nine months of fiscal 2023, our GIS revenue was $5.6 billion, a decrease of $921 million or 14.1%, as compared to the same period a year ago. The 14.1% decrease against the comparative period includes a 6.7% unfavorable foreign currency exchange rate impact, 0.6% decline in revenue from the disposition of certain businesses, and a 6.8% decline in organic revenue.

For the third quarter and first nine months of fiscal 2023, GIS contract awards were $2.7 billion and $5.5 billion, respectively, as compared to $2.5 billion and $6.7 billion, respectively, in the same periods in fiscal 2022.

39

Costs and Expenses

Our total costs and expenses are provided below:
Dollar Amount Dollar Amount
Three Months Ended December 31, Change Nine Months Ended December 31, Change
(in millions) 2022 2021 Dollar Percent 2022 2021 Dollar Percent
Costs of services $ 2,799 $ 3,179 $ (380) (12.0) % $ 8,504 $ 9,522 $ (1,018) (10.7) %
Selling, general and administrative 315 340 (25) (7.4) 988 1,093 (105) (9.6)
Depreciation and amortization 375 424 (49) (11.6) 1,144 1,294 (150) (11.6)
Restructuring costs 49 36 13 36.1 135 248 (113) (45.6)
Interest expense 56 38 18 47.4 137 161 (24) (14.9)
Interest income (41) (15) (26) 173.3 (89) (51) (38) 74.5
Debt extinguishment costs — 2 (2) (100.0) — 311 (311) (100.0)
Loss (gain) on disposition of businesses 9 4 5 125.0 12 (373) 385 (103.2)
Other income, net (98) (85) (13) 15.3 (270) (290) 20 (6.9)
Total Costs and Expenses $ 3,464 $ 3,923 $ (459) (11.7) % $ 10,561 $ 11,915 $ (1,354) (11.4) %


Costs of Services

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), were $2.8 billion and $8.5 billion for the third quarter and first nine months of fiscal 2023, respectively, a decrease of $380 million and $1,018 million, respectively, as compared to the same periods of the prior fiscal year.

For the third quarter of fiscal 2023, the $380 million decrease in expenses against the comparative period was primarily due to a favorable foreign currency exchange rate impact of $211 million, a decrease in payroll related expenses due to a combination of lower revenues and our cost optimization efforts, and lower spend on professional services and contractor-related expenses.

For the first nine months of fiscal 2023, the $1,018 million decrease in expenses against the comparative period was primarily due to a favorable foreign currency exchange rate impact of $643 million, a decrease in payroll related expenses due to a combination of lower revenues and our cost optimization efforts, and lower spend on professional services and contractor-related expenses.

In fiscal 2023, COS as a percentage of revenue increased against the comparative periods and was primarily driven by a decline in revenue exceeding the associated decline in payroll related expenses .

Selling, General and Administrative

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $315 million and $988 million for the third quarter and first nine months of fiscal 2023, respectively, a decrease of $25 million and $105 million, respectively, as compared to the same periods of the prior fiscal year.

For the third quarter of fiscal 2023, the $25 million decrease in expenses against the comparative period was primarily due to a favorable foreign currency exchange rate impact of $17 million and lower payroll related expenses, partially offset by an $11 million charge for merger-related indemnification expenses and $9 million for an arbitration loss.

For the first nine months of fiscal 2023, the $105 million decrease in expenses against the comparative period was primarily due to a favorable foreign currency exchange rate impact of $54 million, lower payroll related expenses, lower real estate costs and other professional and contractor-related expenses, partially offset by a $21 million charge for merger related indemnification expenses, $9 million for an arbitration loss, and $8 million for the SEC Matter.

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Depreciation and Amortization

Depreciation expense was $123 million and $390 million for the third quarter and first nine months of fiscal 2023, respectively, a decrease of $33 million and $89 million, respectively, as compared to the same periods of the prior fiscal year. The decreases in depreciation expense were primarily due to lower average net property and equipment balances and favorable foreign currency exchange rate impacts of $8 million and $25 million for the third quarter and first nine months of fiscal 2023, respectively.

Amortization expense was $252 million and $754 million for the third quarter and first nine months of fiscal 2023, respectively, a decrease of $16 million and $61 million, respectively, as compared to the same periods of the prior fiscal year. The decreases in amortization expense were primarily due to decreases in software amortization, a reduction in transition and transformation contract cost amortization due to contract completions, and favorable foreign currency exchange rate impacts of $12 million and $36 million for the third quarter and first nine months of fiscal 2023, respectively.

Restructuring Costs

Restructuring costs represent severance related to workforce optimization programs and expense associated with facilities and data center rationalization.

During fiscal 2023, management approved global cost savings initiatives designed to better align our workforce and facility structures. During the third quarter and first nine months of fiscal 2023, restructuring costs, net of reversals, were $49 million and $135 million, respectively. Restructuring costs increased $13 million during the third quarter of fiscal 2023 and decreased $113 million during the first nine months of fiscal 2023, respectively, as compared to the same periods of the prior fiscal year.

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

Interest Expense and Interest Income

For the third quarter of fiscal 2023, interest expense was $56 million and interest income was $41 million, an increase of $18 million and $26 million, respectively, as compared to the same period of the prior fiscal year. The increases in interest expense and interest income against the comparative period were primarily due to the impact of rising global interest rates on our multicurrency cash pools and money market accounts.

For the first nine months of fiscal 2023, interest expense was $137 million and interest income was $89 million, a decrease of $24 million and increase of $38 million, respectively, as compared to the same period of the prior fiscal year. The decrease in interest expense against the comparative period was primarily due to a reduction in notes payable and term loans, the Company's refinancing of its high coupon debt in fiscal 2022, and decreases in interest expense from finance leases and borrowings for asset financing. Rising global interest rates on our multicurrency cash pools and money market accounts led to higher interest income against the comparative period.

Debt Extinguishment Costs

There were no debt extinguishment costs recorded for both the third quarter and first nine months of fiscal 2023.

Debt extinguishment costs were $2 million and $311 million for the third quarter and first nine months of fiscal 2022, respectively, for the partial and full redemption of term loans, senior notes, and extinguishment of debt associated with asset financing.

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Loss (gain) on Disposition of Businesses

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

During the first nine months of fiscal 2022, DXC sold its HPS business for approximately $551 million, resulting in a pre-tax gain on sale of $337 million, net of closing costs. DXC also sold certain insignificant businesses that resulted in a gain of $49 million. This was partially offset by $13 million in sales price adjustments related to prior year dispositions, which resulted from changes in estimated net working capital.

Other Income, Net

Other income, net comprises non-service cost components of net periodic pension income, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, equity earnings of unconsolidated affiliates and other miscellaneous gains and losses.

Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Non-service cost components of net periodic pension income $ (60) $ (87) $ (187) $ (280)
Foreign currency (gain) loss (8) 3 (11) 10
Gain on sales of assets (28) (4) (72) (62)
Other (gain) loss (2) 3 — 42
Total $ (98) $ (85) $ (270) $ (290)

Other income, net, increased by $13 million and decreased by $20 million for the third quarter and first nine months of fiscal 2023, respectively, as compared to the same periods of the prior fiscal year.

For the third quarter of fiscal 2023, the $13 million increase against the comparative period was primarily due to $24 million of additional gains from sales of assets, $11 million of favorable foreign currency hedge-related gains, and a $5 million increase in other gains, partially offset by a $27 million decrease in the non-service cost components of net periodic pension income attributable to changes in expected returns on assets and other actuarial assumptions.

For the first nine months of fiscal 2023, the $20 million decrease against the comparative period was primarily due to a $93 million decrease in the non-service cost components of net periodic pension income attributable to changes in expected returns on assets and other actuarial assumptions, partially offset by a $42 million change in other losses primarily from disposition of businesses in the comparative period, $21 million of favorable foreign currency gains, and $10 million of additional gains from sales of assets.

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Taxes

Our effective tax rate (“ETR”) was 40.2% and 38.6% for the three months ended December 31, 2022 and December 31, 2021, respectively, and 30.9% and 42.4% for the nine months ended December 31, 2022 and December 31, 2021, respectively. For the three months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, a decrease in the base erosion and anti-abuse tax, and an increase in unrecognized tax benefits primarily related to foreign tax credits. For the nine months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, a decrease in the base erosion and anti-abuse tax, and the tax impact of business divestitures. For the three months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, an increase in unrecognized tax benefits primarily related to deductions taken in prior tax returns and tax rate changes in non-U.S. jurisdictions. For the nine months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, gain on sale of HPS business, tax rate changes in non-U.S. jurisdictions and recording a valuation allowance on certain deferred tax assets in non-U.S. jurisdictions.

In the U.S., the Inflation Reduction Act (“Act”) was signed into law on August 16, 2022. We do not currently expect the Act to have a material impact on our Consolidated Financial Statements.
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Earnings Per Share

Diluted EPS for the third quarter and first nine months of fiscal 2023 was $0.25 and $0.80, respectively, a decrease of $0.13 and increase of $0.07, respectively, as compared to the same periods of the prior fiscal year.

For the third quarter of fiscal 2023, the decrease in diluted EPS against the comparative period was primarily due to the $39 million decrease in net income attributable to DXC common stockholders, partially offset by the decrease in the weighted average shares of common stock outstanding. Diluted EPS for the third quarter of fiscal 2023 includes $0.17 per share of restructuring costs, $0.02 per share of transaction, separation and integration-related costs, $0.34 per share of amortization of acquired intangible assets, $0.07 per share of merger related indemnification and arbitration loss costs, $0.03 per share of impairment losses, and $0.07 per share of net losses on dispositions.

For the first nine months of fiscal 2023, the increase in diluted EPS against the comparative period was primarily due to the decrease in the weighted average shares of common stock outstanding. Diluted EPS for the first nine months of fiscal 2023 includes $0.46 per share of restructuring costs, $0.04 per share of transaction, separation and integration-related costs, $1.04 per share of amortization of acquired intangible assets, $0.13 per share of merger related indemnification, arbitration loss, and SEC matter costs, $0.03 per share of impairment losses, and $0.05 per share of net gains on dispositions.

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Non-GAAP Financial Measures

We present non-GAAP financial measures of performance which are derived from the statements of operations of DXC. These non-GAAP financial measures include earnings before interest and taxes (“EBIT”), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, non-GAAP EPS, organic revenue growth, and constant currency revenues.

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

We believe constant currency revenues provides investors with useful supplemental information about our revenues after excluding the effect of currency exchange rate fluctuations for currencies other than U.S. Dollars in the periods presented. See below for a description of the methodology we use to present constant currency revenues.

One category of expenses excluded from adjusted EBIT, non-GAAP income before income tax, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, and non-GAAP EPS, incremental amortization of intangible assets acquired through business combinations, if included, may result in a significant difference in period over period amortization expense on a GAAP basis. We exclude amortization of certain acquired intangible assets as these non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Although DXC management excludes amortization of acquired intangible assets, primarily customer-related intangible assets, from its non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and support revenue generation. Any future transactions may result in a change to the acquired intangible asset balances and associated amortization expense.

Another category of expenses excluded from adjusted EBIT, non-GAAP income before income tax, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, and non-GAAP EPS is impairment losses, which, if included, may result in a significant difference in period over period expense on a GAAP basis. We exclude impairment losses as these non-cash amounts reflect generally an acceleration of what would be multiple periods of expense and are not expected to occur frequently. Further, assets such as goodwill may be significantly impacted by market conditions outside of management’s control.

Selected references are made to revenue growth on an “organic basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates and without the impacts of acquisitions and divestitures from “organic basis” financial results, thereby providing comparisons of operating performance from period to period of the business that we have owned during all periods presented. Organic revenue growth is calculated by dividing the year-over-year change in GAAP revenues attributed to organic growth by the GAAP revenues reported in the prior comparable period. This approach is used for all results where the functional currency is not the U.S. dollar. We believe organic revenue growth provides investors with useful supplemental information about our revenues after excluding the effect of currency exchange rate fluctuations for currencies other than U.S. dollars and the effects of acquisitions and divestitures in the periods presented.

There are limitations to the use of the non-GAAP financial measures presented in this report. One of the limitations is that they do not reflect complete financial results. We compensate for this limitation by providing a reconciliation between our non-GAAP financial measures and the respective most directly comparable financial measure calculated and presented in accordance with GAAP. Additionally, other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes between companies. Selected references are made on a “constant currency basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period. Financial results on a “constant currency basis” are non-GAAP measures calculated by translating current period activity into U.S. Dollars using the comparable prior period’s currency conversion rates. This approach is used for all results where the functional currency is not the U.S. Dollar. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenues.”

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

Dollar Amount Dollar Amount
Three Months Ended December 31, Change Nine Months Ended December 31, Change
(in millions) 2022 2021 Dollar Percent 2022 2021 Dollar Percent
Income before income taxes $ 102 $ 166 $ (64) (38.6) % $ 278 $ 342 $ (64) (18.7) %
Non-GAAP income before income taxes $ 294 $ 332 $ (38) (11.4) % $ 789 $ 923 $ (134) (14.5) %
Net income $ 61 $ 102 $ (41) (40.2) % $ 192 $ 197 $ (5) (2.5) %
Adjusted EBIT $ 309 $ 355 $ (46) (13.0) % $ 837 $ 1,033 $ (196) (19.0) %





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Reconciliation of Non-GAAP Financial Measures

Our non-GAAP adjustments include:
• Restructuring costs – includes costs, net of reversals, related to workforce and real estate optimization and other similar charges.
• Transaction, separation and integration-related (“TSI”) costs – includes costs related to integration, planning, financing and advisory fees and other similar charges associated with mergers, acquisitions, strategic investments, joint ventures, and dispositions and other similar transactions. (1)
• Amortization of acquired intangible assets – includes amortization of intangible assets acquired through business combinations.
• Pension and OPEB actuarial and settlement gains and losses – pension and OPEB actuarial mark to market adjustments and settlement gains and losses.
• Merger related indemnification – represents the Company’s current estimate of potential liability to HPE for indemnification on the Forsyth v. HP Inc. and HPE litigation, and the Company’s final liability to HPE on the Oracle v. HPE litigation; both obligations pursuant to HPES merger. (2)
• SEC Matter - represents the Company’s current estimate of potential liability related to a previously disclosed investigation into its historical determination and disclosure of certain “transaction, separation, and integration-related costs” as part of the Company’s non-GAAP adjustments. (3)
• Gains and losses on dispositions – gains and losses related to dispositions of businesses, strategic assets and interests in less than wholly-owned entities. (4)
• Arbitration loss - reflects a loss arising from an arbitration decision in the third quarter of fiscal 2023.
• Impairment losses – impairment losses on assets classified as long-term on the balance sheet. (5)
• Debt extinguishment costs – costs associated with early retirement, redemption, repayment or repurchase of debt and debt-like items including any breakage, make-whole premium, prepayment penalty or similar costs as well as solicitation and other legal and advisory expenses. (6)
• Tax adjustments – discrete tax adjustments to impair or recognize certain deferred tax assets, adjustments for changes in tax legislation and the impact of merger and divestitures. Income tax expense of all other (non-discrete) non-GAAP adjustments is based on the difference in the GAAP annual effective tax rate (AETR) and overall non-GAAP provision (consistent with the GAAP methodology). (7)

(1) TSI-Related costs include fees and other internal and external expenses associated with legal, accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential acquisitions, dispositions and strategic investments, whether or not announced or consummated.

The TSI-Related costs for the third quarter of fiscal 2023 include $6 million of costs incurred in connection with activities related to acquisitions and divestitures.

The TSI-Related costs for the first nine months of fiscal 2023 include $12 million of costs incurred in connection with activities related to acquisitions and divestitures.

The TSI-Related costs for the third quarter of fiscal 2022 include $10 million of costs incurred in connection with activities related to acquisitions and divestitures; and $1 million of expenses related to integration projects from the HPES merger.

The TSI-Related costs for the first nine months of fiscal 2022 include $13 million of costs to execute the strategic alternatives; $4 million of legal costs; a $14 million credit towards the Peraton Arbitration settlement; $5 million in expenses related to integration projects resulting from the HPES merger (including costs associated with continuing efforts to separate certain IT systems); and $15 million of costs incurred in connection with activities related to other acquisitions and divestitures.

(2) See Note 19 – “Commitments and Contingencies,” Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company; and Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise .

(3) See Note 19 – “Commitments and Contingencies,” SEC Matter .

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(4) Gains and losses on dispositions for the first nine months of fiscal 2023 include a net loss of $12 million on dispositions related to certain insignificant businesses.

Gains and losses on dispositions for the first nine months of fiscal 2022 include a $337 million gain on sale of the HPS business, gains of $19 million on other dispositions partially offset by $13 million of adjustments relating to the sale of the HHS business.

(5) Impairment losses on dispositions for the first nine months of fiscal 2023 include an $8 million impairment charge for customer related intangible assets.

Impairment losses on dispositions for the first nine months of fiscal 2022 include a $10 million impairment charge of undeployed assets related to TSI-related capitalized costs.

(6) Debt extinguishment costs were $2 million and $311 million for the third quarter and first nine months of fiscal 2022, respectively, for the partial and full redemption of term loans, senior notes, and extinguishment of debt associated with asset financing.

(7) Tax adjustment for the first nine months of fiscal 2022 reflects net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

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

Three Months Ended December 31, 2022
(in millions, except per-share amounts) As
Reported 		Restructuring
Costs 		Transaction,
Separation and
Integration-Related Costs 		Amortization
of Acquired
Intangible
Assets 		Merger Related Indemnification and Arbitration Loss Gains and Losses on Dispositions Impairment Losses Non-GAAP
Results
Income before income taxes $ 102 $ 49 $ 6 $ 100 $ 20 $ 9 $ 8 $ 294
Income tax expense (benefit) 41 10 1 20 4 (7) 1 70
Net income 61 39 5 80 16 16 7 224
Less: net income attributable to non-controlling interest, net of tax 2 — — — — — — 2
Net income attributable to DXC common stockholders $ 59 $ 39 $ 5 $ 80 $ 16 $ 16 $ 7 $ 222
Effective Tax Rate 40.2 % 23.8 %
Basic EPS $ 0.26 $ 0.17 $ 0.02 $ 0.35 $ 0.07 $ 0.07 $ 0.03 $ 0.97
Diluted EPS $ 0.25 $ 0.17 $ 0.02 $ 0.34 $ 0.07 $ 0.07 $ 0.03 $ 0.95
Weighted average common shares outstanding for:
Basic EPS 229.54 229.54 229.54 229.54 229.54 229.54 229.54 229.54
Diluted EPS 233.00 233.00 233.00 233.00 233.00 233.00 233.00 233.00

Nine Months Ended December 31, 2022
(in millions, except per-share amounts) As
Reported 		Restructuring
Costs 		Transaction,
Separation and
Integration-Related Costs 		Amortization
of Acquired
Intangible
Assets 		Merger Related Indemnification, Arbitration Loss, and SEC Matter Gains and
Losses on
Dispositions 		Impairment Losses Pension and OPEB Actuarial and Settlement Gains and Losses Non-GAAP
Results
Income before income taxes $ 278 $ 135 $ 12 $ 305 $ 38 $ 12 $ 8 $ 1 $ 789
Income tax expense 86 28 2 62 7 24 1 — 210
Net income (loss) 192 107 10 243 31 (12) 7 1 579
Less: net income attributable to non-controlling interest, net of tax 4 — — — — — — — 4
Net income (loss) attributable to DXC common stockholders $ 188 $ 107 $ 10 $ 243 $ 31 $ (12) $ 7 $ 1 $ 575
Effective Tax Rate 30.9 % 26.6 %
Basic EPS $ 0.82 $ 0.46 $ 0.04 $ 1.05 $ 0.13 $ (0.05) $ 0.03 $ 0.00 $ 2.49
Diluted EPS $ 0.80 $ 0.46 $ 0.04 $ 1.04 $ 0.13 $ (0.05) $ 0.03 $ 0.00 $ 2.45
Weighted average common shares outstanding for:
Basic EPS 230.65 230.65 230.65 230.65 230.65 230.65 230.65 230.65 230.65
Diluted EPS 234.38 234.38 234.38 234.38 234.38 234.38 234.38 234.38 234.38



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Three Months Ended December 31, 2021
(in millions, except per-share amounts) As
Reported 		Restructuring
Costs 		Transaction,
Separation and
Integration-Related Costs 		Amortization
of Acquired
Intangible
Assets 		Gains and Losses on Dispositions Debt
Extinguishment
Costs 		Pension and OPEB Actuarial and Settlement Losses Tax Adjustment Non-GAAP
Results
Income before income taxes $ 166 $ 36 $ 11 $ 106 $ 4 2 7 $ 332
Income tax expense 64 4 1 13 — — 1 10 93
Net income 102 32 10 93 4 2 6 (10) 239
Less: net income attributable to non-controlling interest, net of tax 4 — — — — 4
Net income attributable to DXC common stockholders $ 98 $ 32 $ 10 $ 93 $ 4 $ 2 $ 6 $ (10) $ 235
Effective Tax Rate 38.6 % 28.0 %
Basic EPS $ 0.39 $ 0.13 $ 0.04 $ 0.37 $ 0.02 $ 0.01 $ 0.02 $ (0.04) $ 0.94
Diluted EPS $ 0.38 $ 0.13 $ 0.04 $ 0.36 $ 0.02 $ 0.01 $ 0.02 $ (0.04) $ 0.92
Weighted average common shares outstanding for:
Basic EPS 250.27 250.27 250.27 250.27 250.27 250.27 250.27 250.27 250.27
Diluted EPS 254.82 254.82 254.82 254.82 254.82 254.82 254.82 254.82 254.82

Nine Months Ended December 31, 2021
(in millions, except per-share amounts) As
Reported 		Restructuring
Costs 		Transaction,
Separation and
Integration-Related Costs 		Amortization
of Acquired
Intangible
Assets 		Gains and
Losses on
Dispositions 		Impairment Losses Debt
Extinguishment
Costs 		Pension and OPEB Actuarial and Settlement Losses Tax Adjustment Non-GAAP
Results
Income before income taxes $ 342 $ 248 $ 23 $ 325 $ (343) $ 10 $ 311 $ 7 — $ 923
Income tax expense 145 48 6 63 (91) 2 73 1 (18) 229
Net income 197 200 17 262 (252) 8 238 6 18 694
Less: net income attributable to non-controlling interest, net of tax 9 — — — — — — — — 9
Net income attributable to DXC common stockholders $ 188 $ 200 $ 17 $ 262 $ (252) $ 8 $ 238 $ 6 $ 18 $ 685
Effective Tax Rate 42.4 % 24.8 %
Basic EPS $ 0.74 $ 0.79 $ 0.07 $ 1.04 $ (1.00) $ 0.03 $ 0.94 $ 0.02 $ 0.07 $ 2.71
Diluted EPS $ 0.73 $ 0.78 $ 0.07 $ 1.02 $ (0.98) $ 0.03 $ 0.92 $ 0.02 $ 0.07 $ 2.66
Weighted average common shares outstanding for:
Basic EPS 252.44 252.44 252.44 252.44 252.44 252.44 252.44 252.44 252.44 252.44
Diluted EPS 257.59 257.59 257.59 257.59 257.59 257.59 257.59 257.59 257.59 257.59

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Reconciliations of revenue growth to organic revenue growth are as follows:
Three Months Ended Nine Months Ended
December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Total revenue growth (12.8) % (4.6) % (11.6) % (8.1) %
Foreign currency 6.6 % 1.0 % 6.6 % (2.1) %
Acquisitions and divestitures 2.4 % 2.2 % 2.4 % 7.6 %
Organic revenue growth (3.8) % (1.4) % (2.6) % (2.6) %
GBS revenue growth (10.7) % 1.3 % (8.7) % (10.0) %
Foreign currency 6.4 % 1.3 % 6.6 % (1.5) %
Acquisitions and divestitures 4.5 % 4.4 % 4.2 % 15.5 %
GBS organic revenue growth 0.2 % 7.0 % 2.1 % 4.0 %
GIS revenue growth (14.7) % (9.5) % (14.1) % (6.5) %
Foreign currency 6.7 % 0.9 % 6.7 % (2.5) %
Acquisitions and divestitures 0.6 % 0.3 % 0.6 % 0.5 %
GIS organic revenue growth (7.4) % (8.3) % (6.8) % (8.5) %

Reconciliations of net income to adjusted EBIT are as follows:
Three Months Ended Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Net income $ 61 $ 102 $ 192 $ 197
Income tax expense 41 64 86 145
Interest income (41) (15) (89) (51)
Interest expense 56 38 137 161
EBIT 117 189 326 452
Restructuring costs 49 36 135 248
Transaction, separation and integration-related costs 6 11 12 23
Amortization of acquired intangible assets 100 106 305 325
Merger related indemnification 11 — 21 —
SEC Matter — — 8 —
Losses (gains) on dispositions 9 4 12 (343)
Arbitration loss 9 — 9 —
Impairment losses 8 — 8 10
Debt extinguishment costs — 2 — 311
Pension and OPEB actuarial and settlement losses — 7 1 7
Adjusted EBIT $ 309 $ 355 $ 837 $ 1,033

51

Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of December 31, 2022, our cash and cash equivalents (“cash”) were $2.1 billion, of which $0.6 billion was held outside of the U.S. As of March 31, 2022, our cash was $2.7 billion, of which $1.3 billion was held outside of the U.S. We maintain various multi-currency, multi-entity, cross-border, physical and notional cash pool arrangements with various counterparties to manage liquidity efficiently that enable participating subsidiaries to draw on the Company’s pooled resources to meet liquidity needs.

A significant portion of the cash held by our foreign subsidiaries is not expected to be impacted by U.S. federal income tax upon repatriation. However, a portion of this cash may still be subject to foreign and U.S. state income tax consequences upon future remittance. Therefore, if additional funds held outside the U.S. are needed for our operations in the U.S., we plan to repatriate these funds not designated as indefinitely reinvested.

We have $0.1 billion in cash held by foreign subsidiaries used for local operations that is subject to country-specific limitations which may restrict or result in increased costs in the repatriation of these funds. In addition, other practical considerations may limit our use of consolidated cash. This includes cash of $0.2 billion held by majority owned consolidated subsidiaries where third-parties or public shareholders hold minority interests.

The following table summarizes our cash flow activity:
Nine Months Ended
(in millions) December 31, 2022 December 31, 2021 Change
Net cash provided by (used in):
Operating activities $ 1,000 $ 1,230 $ (230)
Investing activities (299) 93 (392)
Financing activities (693) (1,460) 767
Effect of exchange rate changes on cash and cash equivalents (95) 25 (120)
Cash classified within current assets held for sale (494) 63 (557)
Net decrease in cash and cash equivalents $ (581) $ (49) $ (532)
Cash and cash equivalents at beginning of year 2,672 2,968
Cash and cash equivalents at the end of period $ 2,091 $ 2,919

Operating cash flow

Net cash provided by operating activities during the first nine months of fiscal 2023 was $1,000 million as compared to $1,230 million during the comparable period of the prior fiscal year. The decrease of $230 million was primarily due to a decrease in net income, net of adjustments of $242 million, partially offset by a $12 million favorable change in working capital due to lower working capital outflows during the first nine months of fiscal 2023.

The following table contains certain key working capital metrics:
Three Months Ended
December 31, 2022 December 31, 2021
Days of sales outstanding in accounts receivable 69 65
Days of purchases outstanding in accounts payable (54) (40)
Cash conversion cycle 15 25

52

Investing cash flow

Net cash (used in) provided by investing activities during the first nine months of fiscal 2023 was $(299) million as compared to $93 million during the comparable period of the prior fiscal year. The change of $392 million was primarily due to a decrease in cash from business dispositions of $467 million and proceeds from short-term investing of $24 million incurred only in the comparable period of fiscal 2022. This was partially offset by an increase in proceeds from sale of assets of $70 million and a decrease in capital expenditures of $48 million.

Financing cash flow

Net cash used in financing activities during the first nine months of fiscal 2023 was $693 million as compared to $1,460 million during the comparable period of the prior fiscal year. The $767 million decrease was primarily due to a decrease in payments on capital leases and borrowings for asset financing of $456 million, payments for debt extinguishment cost of $344 million incurred only in the comparable period of fiscal 2022, an increase in commercial paper borrowings, net of repayments of $32 million, and a decrease in share repurchases of $27 million. This was partially offset by borrowings on long term debt, net of repayments of $65 million incurred only in the comparable period of fiscal 2022.

Cash classified within current assets held for sale

As of December 31, 2022, $0.5 billion of cash related to the FDB Business was reclassified as assets held for sale. The FDB Business was subsequently sold on January 3, 2023. See Note 2 – “Divestitures” for more information.

Capital Resources

See Note 19 – “Commitments and Contingencies” for disclosure of certain commitments. The anticipated sources of funds to fulfill such commitments are listed below and under the “Liquidity” subheading.

The following table summarizes our total debt:
As of
(in millions) December 31, 2022 March 31, 2022
Short-term debt and current maturities of long-term debt $ 873 $ 900
Long-term debt, net of current maturities 3,850 4,065
Total debt $ 4,723 $ 4,965

For the first nine months of fiscal 2023, approximately 60% of our total debt balance was denominated in foreign currencies. In fiscal 2023, the $0.2 billion decrease in total debt was primarily due to a favorable foreign currency exchange rate impact and decreases in finance lease liabilities and borrowings for asset financing, partially offset by an increase in commercial paper borrowings.

We were in compliance with all financial covenants associated with our borrowings as of December 31, 2022 and December 31, 2021.

Our credit ratings are as follows:

Rating Agency Long Term Ratings Short Term Ratings Outlook
Fitch BBB F-2 Stable
Moody’s Baa2 P-2 Stable
S&P BBB- - Stable

For information on the risks of ratings downgrades, see Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
53


Liquidity

We expect our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our normal operating requirements for the next 12 months. We expect to continue using cash generated by operations as a primary source of liquidity; however, should we require funds greater than that generated from our operations to fund discretionary investment activities, such as business acquisitions, we have the ability to raise capital through borrowing under our revolving credit facility, issuance of capital market debt instruments such as commercial paper, term loans, and bonds. In addition, we currently utilize, and will further utilize our cross-currency cash pool for liquidity needs. However, there is no guarantee that we will be able to obtain debt financing, if required, on terms and conditions acceptable to us, if at all, in the future.

Our exposure to operational liquidity risk is primarily from long-term contracts which require significant investment of cash during the initial phases of the contracts. 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 $5.6 billion as of December 31, 2022, includes $2.1 billion of cash and cash equivalents, $3.0 billion of available borrowings under our revolving credit facility, and $500 million of available borrowings under our term loan credit agreement.

Share Repurchases

See Note 15 – “Stockholders’ Equity”

Dividends

To maintain our financial flexibility, we continue to suspend payment of quarterly dividends for fiscal 2023.

Off-Balance Sheet Arrangements

In the normal course of business, we are party to arrangements that include guarantees, the receivables securitization facility and certain other financial instruments with off-balance sheet risk, such as letters of credit and surety bonds. We also use performance letters of credit to support various risk management insurance policies. No liabilities related to these arrangements are reflected in our condensed consolidated balance sheets. There have been no material changes to our off-balance-sheet arrangements reported under Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, other than as disclosed in Note 4 – “Receivables” and Note 19 – “Commitments and Contingencies”.

Contractual Obligations

There have been no material changes, outside the ordinary course of business, to our contractual obligations since March 31, 2022. For further information see “Contractual Obligations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

For our minimum purchase commitments as of December 31, 2022, in connection with our long-term purchase agreements with certain software, hardware, telecommunication, and other service providers, see Note 19 – “Commitments and Contingencies.”

54

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. These estimates may change in the future if underlying assumptions or factors change. Accordingly, actual results could differ materially from our estimates under different assumptions, judgments or conditions. We consider the following policies to be critical because of their complexity and the high degree of judgment involved in implementing them: revenue recognition, income taxes, business combinations, defined benefit plans and valuation of assets. 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 December 31, 2022, there were no changes to our critical accounting policies and estimates from those described in our fiscal 2022 Annual Report on Form 10-K except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting DXC, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022. Our exposure to market risk has not changed materially since March 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

55

PART II


ITEM 1. LEGAL PROCEEDINGS

See Note 19 – “Commitments and Contingencies” to the financial statements under the caption “Contingencies” for information regarding legal proceedings in which we are involved.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, which may materially and adversely affect our business, financial condition, and results of operations, and the actual outcome of matters as to which forward-looking statements are made in this Quarterly Report on Form 10-Q. In such case, the trading price for DXC common stock could decline, and you could lose all or part of your investment. Past performance may not be a reliable indicator of future financial performance and historical trends should not be used to anticipate results or trends in future periods. Future performance and historical trends may be adversely affected by the aforementioned risks, and other variables and risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect our business, financial condition, and results of operations or the price of our common stock in the future. There have been no material changes to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities
None during the period covered by this report.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

The following table provides information on a monthly basis for the quarter ended December 31, 2022, with respect to the Company’s purchase of equity securities:

Period Total Number
of Shares
Purchased 		Average Price
Paid Per Share 		Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans or Programs 		Approximate
Dollar Value
of Shares that
May Yet be Purchased
Under the Plans or Programs
October 1, 2022 to October 31, 2022 — $— — $887,691,440
November 1, 2022 to November 30, 2022 587,898 $28.90 587,898 $870,701,986
December 1, 2022 to December 31, 2022 1,475,747 $26.82 1,475,747 $831,128,011

On April 3, 2017, DXC announced the establishment of a share repurchase plan approved by the Board of Directors with an initial authorization of $2.0 billion for future repurchases of outstanding shares of DXC common stock. On November 8, 2018, DXC’s Board of Directors approved an incremental $2.0 billion share repurchase. An expiration date has not been established for this repurchase plan. On February 2, 2022, we announced our intention to repurchase incrementally up to $1.0 billion of our outstanding shares of common stock in the open market. An expiration date has not been established for this repurchase plan.
56


Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act, as well as, to the extent applicable, other federal and state securities laws and other legal requirements. The timing, volume, and nature of share repurchases pursuant to the share repurchase plan are at the discretion of management and may be suspended or discontinued at any time.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.



ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.



ITEM 5. OTHER INFORMATION

None.



ITEM 6. EXHIBITS

Exhibit
Number
Description of Exhibit
3.2
10.1*
31.1*
31.2*
32.1**
32.2**
101.INS Interactive Data Files
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation
101.LAB XBRL Taxonomy Extension Labels
101.PRE XBRL Taxonomy Extension Presentation
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith
** Furnished herewith
57


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DXC TECHNOLOGY COMPANY
Dated: February 1, 2023 By: /s/ Christopher A. Voci
Name: Christopher A. Voci
Title: Senior Vice President, Corporate Controller and
Principal Accounting Officer

58
TABLE OF CONTENTS
Part IItem 1. Financial StatementsNote 1 Summary Of Significant Accounting PoliciesNote 2 DivestituresNote 3 Earnings Per ShareNote 4 ReceivablesNote 5 LeasesNote 6 Fair ValueNote 7 Derivative InstrumentsNote 8 Intangible AssetsNote 9 GoodwillNote 10 DebtNote 11 RevenueNote 12 Restructuring CostsNote 13 Pension and Other Benefit PlansNote 14 Income TaxesNote 15 Stockholders EquityNote 16 Stock Incentive PlansNote 17 Cash FlowsNote 18 Segment InformationNote 19 Commitments and ContingenciesItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart IIItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits

Exhibits

3.2 Amended and Restated Bylaws of DXC Technology Company, effective November 3, 2022 (incorporated by reference to Exhibit 3.2. to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (filed November 4, 2022) (file no. 001-38033)) 10.1* FourteenthAmendment to the Receivables Purchase Agreement dated as ofDecember 21,2022, among DXC Receivables LLC (f/k/a CSC Receivables LLC), as Seller, DXC Technology Company, as Servicer, PNC Bank, National Association, as Administrative Agent, and the persons from time to time party thereto as Purchasers and Group Agents 31.1* Section 302 Certification of the Chief Executive Officer 31.2* Section 302 Certification of the Chief Financial Officer 32.1** Section 906 Certification of Chief Executive Officer 32.2** Section 906 Certification of Chief Financial Officer