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 June 30, 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 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

229,876,830 shares of common stock, par value $0.01 per share, were outstanding on July 25, 2022.

TABLE OF CONTENTS

Item		Page
	PART I – FINANCIAL INFORMATION
1.	Financial Statements (unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
3.	Quantitative and Qualitative Disclosures About Market Risk	44
4.	Controls and Procedures	44
	PART II – OTHER INFORMATION
1.	Legal Proceedings	44
1A.	Risk Factors	44
2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
3.	Defaults Upon Senior Securities	45
4.	Mine Safety Disclosures	45
5.	Other Information	45
6.	Exhibits	46

PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements

	Page
Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2022 and June 30, 2021 (unaudited)	2
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended June 30, 2022 and June 30, 2021 (unaudited)	3
Condensed Consolidated Balance Sheets as of June 30, 2022 and March 31, 2022 (unaudited)	4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2022 and June 30, 2021 (unaudited)	5
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended June 30, 2022 and June 30, 2021 (unaudited)	6
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1–Summary of Significant Accounting Policies	7
Note 2–Divestitures	8
Note 3–Earnings Per Share	9
Note 4–Receivables	10
Note 5–Leases	10
Note 6–Fair Value	13
Note 7–Derivative Instruments	13
Note 8–Intangible Assets	16
Note 9–Goodwill	17
Note 10–Debt	18
Note 11–Revenue	19
Note 12–Restructuring Costs	20
Note 13–Pension and Other Benefit Plans	21
Note 14–Income Taxes	21
Note 15–Stockholders’ Equity	22
Note 16–Stock Incentive Plans	23
Note 17–Cash Flows	24
Note 18–Segment Information	24
Note 19–Commitments and Contingencies	26

1

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

	Three Months Ended
(in millions, except per-share amounts)	June 30, 2022		June 30, 2021
Revenues	$	3,707	$	4,141
Costs of services (excludes depreciation and amortization and restructuring costs)	2,930		3,255
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)	349		383
Depreciation and amortization	389		422
Restructuring costs	33		67
Interest expense	37		62
Interest income	(20)		(20)
Debt extinguishment costs	—		28
Gain on disposition of businesses	(29)		(377)
Other income, net	(104)		(103)
Total costs and expenses	3,585		3,717
Income before income taxes	122		424
Income tax expense	19		142
Net income	103		282
Less: net income attributable to non-controlling interest, net of tax	1		4
Net income attributable to DXC common stockholders	$	102	$	278
Income per common share:
Basic	$	0.44	$	1.09
Diluted	$	0.43	$	1.07

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
(in millions)			June 30, 2022		June 30, 2021
Net income			$	103	$	282
Other comprehensive loss, net of taxes:
	Foreign currency translation adjustments, net of tax expense (benefit) of $5 and $(2)		(176)		(112)
	Cash flow hedges adjustments, net of tax benefit of $1 and $0		—		(1)
	Pension and other post-retirement benefit plans, net of tax:
		Amortization of prior service cost, net of tax benefit of $4 and $0	(2)		(2)
	Pension and other post-retirement benefit plans, net of tax		(2)		(2)
Other comprehensive loss, net of taxes			(178)		(115)
Comprehensive (loss) income			(75)		167
	Less: comprehensive income attributable to non-controlling interest		1		13
Comprehensive (loss) income attributable to DXC common stockholders			$	(76)	$	154

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)	June 30, 2022		March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	2,209	$	2,672
Receivables and contract assets, net of allowance of $46 and $55	3,693		3,854
Prepaid expenses	666		617
Other current assets	270		268
Assets held for sale	10		35
Total current assets	6,848		7,446
Intangible assets, net of accumulated amortization of $5,186 and $5,124	3,117		3,378
Operating right-of-use assets, net	1,025		1,133
Goodwill	582		617
Deferred income taxes, net	210		221
Property and equipment, net of accumulated depreciation of $3,917 and $3,998	2,212		2,412
Other assets	4,602		4,850
Assets held for sale - non-current	51		82
Total Assets	$	18,647	$	20,139
LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	904		900
Accounts payable	795		840
Accrued payroll and related costs	610		570
Current operating lease liabilities	346		388
Accrued expenses and other current liabilities	2,479		2,882
Deferred revenue and advance contract payments	938		1,053
Income taxes payable	181		197
Liabilities related to assets held for sale	4		23
Total current liabilities	6,257		6,853
Long-term debt, net of current maturities	3,874		4,065
Non-current deferred revenue	806		862
Non-current operating lease liabilities	742		815
Non-current income tax liabilities and deferred tax liabilities	919		994
Other long-term liabilities	1,000		1,136
Liabilities related to assets held for sale - non-current	—		39
Total Liabilities	13,598		14,764
Commitments and contingencies
DXC stockholders’ equity:
Preferred stock, par value $0.01 per share; authorized 1,000,000 shares; none issued as of June 30, 2022 and March 31, 2022	—		—
Common stock, par value $0.01 per share; authorized 750,000,000 shares; issued 232,994,878 as of June 30, 2022 and 240,508,348 as of March 31, 2022	2		3
Additional paid-in capital	9,708		10,057
Accumulated deficit	(4,239)		(4,450)
Accumulated other comprehensive loss	(563)		(385)
Treasury stock, at cost, 3,160,188 and 2,878,079 shares as of June 30, 2022 and March 31, 2022	(183)		(173)
Total DXC stockholders’ equity	4,725		5,052
Non-controlling interest in subsidiaries	324		323
Total Equity	5,049		5,375
Total Liabilities and Equity	$	18,647	$	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)

	Three Months Ended
(in millions)	June 30, 2022		June 30, 2021
Cash flows from operating activities:
Net income	$	103	$	282
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	398		427
Operating right-of-use expense	106		130
Share-based compensation	28		25
Deferred taxes	(38)		(25)
Gain on dispositions	(62)		(414)
Provision for losses on accounts receivable	2		(3)
Unrealized foreign currency exchange loss (gain)	46		(8)
Debt extinguishment costs	—		28
Other non-cash charges, net	3		3
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
(Increase) decrease in assets	(69)		26
Decrease in operating lease liability	(106)		(130)
Decrease in other liabilities	(248)		(370)
Net cash provided by (used in) operating activities	163		(29)
Cash flows from investing activities:
Purchases of property and equipment	(68)		(98)
Payments for transition and transformation contract costs	(57)		(55)
Software purchased and developed	(50)		(122)
Business dispositions, net of cash sold	(36)		513
Proceeds from sale of assets	14		67
Other investing activities, net	5		6
Net cash (used in) provided by investing activities	(192)		311
Cash flows from financing activities:
Borrowings of commercial paper	292		216
Repayments of commercial paper	(239)		(194)
Borrowings on long-term debt	—		19
Principal payments on long-term debt	—		(352)
Payments on finance leases and borrowings for asset financing	(159)		(494)
Proceeds from stock options and other common stock transactions	1		9
Taxes paid related to net share settlements of share-based compensation awards	(12)		(11)
Payments for debt extinguishment costs	—		(28)
Repurchase of common stock and advance payment for accelerated share repurchase	(272)		(48)
Other financing activities, net	(5)		17
Net cash used in financing activities	(394)		(866)
Effect of exchange rate changes on cash and cash equivalents	(50)		13
Net decrease in cash and cash equivalents including cash classified within current assets held for sale	(473)		(571)
Cash classified within current assets held for sale	10		63
Net decrease in cash and cash equivalents	(463)		(508)
Cash and cash equivalents at beginning of year	2,672		2,968
Cash and cash equivalents at end of period	$	2,209	$	2,460

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 June 30, 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						102						102		1		103
Other comprehensive loss								(178)				(178)				(178)
Share-based compensation expense				24								24				24
Acquisition of treasury stock										(10)		(10)				(10)
Share repurchase program	(8,851)	(1)		(374)		109						(266)				(266)
Stock option exercises and other common stock transactions	1,338			1								1				1
Balance at June 30, 2022	232,995	$	2	$	9,708	$	(4,239)	$	(563)	$	(183)	$	4,725	$	324	$	5,049
	Three Months Ended June 30, 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						278						278		4		282
Other comprehensive loss								(124)				(124)		9		(115)
Share-based compensation expense				18								18				18
Acquisition of treasury stock										(10)		(10)				(10)
Share repurchase program	(1,750)			(74)		7						(67)				(67)
Stock option exercises and other common stock transactions	1,378			8								8				8
Non-controlling interest distributions and other						1						1		(39)		(38)
Balance at June 30, 2021	256,681	$	3	$	10,713	$	(5,045)	$	(426)	$	(168)	$	5,077	$	309	$	5,386

    (1) 3,160,188 treasury shares as of June 30, 2022.

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

6

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 income,” (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

The accompanying financial statements include the accounts of DXC, its consolidated subsidiaries, and those business entities in which DXC maintains a controlling interest. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Other investments are accounted for by the cost method. Non-controlling interests are presented as a separate component within equity in the balance sheets. Net earnings attributable to the non-controlling interests are presented separately in the statements of operations and comprehensive income attributable to non-controlling interests are presented separately in the statements of comprehensive income. All intercompany transactions and balances have been eliminated. 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”).

7

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. The severity, magnitude and duration, as well as the economic consequences of the ongoing coronavirus disease 2019 (“COVID-19”) crisis, are uncertain, rapidly changing and difficult to predict. Therefore, accounting estimates and assumptions may change over time in response to the COVID-19 crisis and may change materially in future periods. 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 June 30, 2022 are not expected to have a material effect on DXC’s condensed consolidated financial statements.

Note 2 – Divestitures

Fiscal 2023 Divestitures

During the first quarter of fiscal 2023, the Company sold insignificant businesses that resulted in a gain of $38 million. During the first quarter of fiscal 2023, the Company also classified certain insignificant businesses as held for sale and recognized a loss of $9 million.

Planned FDB Sale

During the third quarter of fiscal 2022, a subsidiary of DXC entered into a purchase agreement to sell (the "FDB Sale") its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ") for €300 million (approximately $314 million as of June 30, 2022), subject to certain adjustments. The closing of the transaction is subject to certain conditions, including receipt of certain regulatory consents. Until these regulatory constraints are satisfied, FDB continues to be reported within ongoing operations. At June 30, 2022, FDB held approximately $566 million in cash which primarily related to customer deposit liabilities.

8

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Fiscal 2022 Divestitures

HPS Sale

On April 1, 2021, DXC completed the sale of its HPS Business to Dedalus for €468 million (approximately $551 million), which included €10 million (approximately $12 million) related to future services to be provided by the Company. The HPS Sale resulted in a pre-tax gain on sale of $341 million, net of closing costs, for the three months ended June 30, 2021. The pre-tax gain on sale was further adjusted during subsequent quarters of fiscal 2022 resulting in a final pre-tax gain on sale of $331 million for fiscal 2022.

Other Divestitures

During the first quarter of fiscal 2022, the Company also sold some 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.

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
(in millions, except per-share amounts)	June 30, 2022		June 30, 2021
Net income attributable to DXC common shareholders:	$	102	$	278
Common share information:
Weighted average common shares outstanding for basic EPS	232.48		254.67
Dilutive effect of stock options and equity awards	4.90		5.65
Weighted average common shares outstanding for diluted EPS	237.38		260.32
Earnings per share:
Basic	$	0.44	$	1.09
Diluted	$	0.43	$	1.07

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
	June 30, 2022	June 30, 2021
Stock Options	480,727	529,216
Restricted Stock Units	1,542,055	759,922
Performance Stock Units	234,731	393,802

9

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)	June 30, 2022		March 31, 2022
Beginning balance	$	55	$	91
Provisions for losses on accounts receivable	2		5
Other adjustments to allowance and write offs	(11)		(41)
Ending balance	$	46	$	55

Receivables Facility

The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of June 30, 2022, the “Receivables Facility”) with certain unaffiliated financial institutions for the sale of commercial accounts receivable in the United States.

As of June 30, 2022, the total availability under the Receivables Facility was $371 million, and the amount sold to the Purchasers was $400 million, which was derecognized from the Company’s balance sheet. As of June 30, 2022, the Company recorded a $29 million liability within accounts payable because the amount of cash proceeds received by the Company under the Receivables Facility was more than the total availability. The Receivables Facility was amended on July 29, 2022 extending the termination date to July 28, 2023.

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:

(in millions)	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Operating lease cost	$	106	$	130
Short-term lease cost	8		11
Variable lease cost	22		18
Sublease income	(4)		(9)
Total operating costs	$	132	$	150

10

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.

(in millions)	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows	$	106	$	130
ROU assets obtained in exchange for operating lease liabilities(1)	$	55	$	52

(1) Net of $338 million and $242 million in lease modifications and terminations for the three months ended June 30, 2022 and June 30, 2021, 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	June 30, 2022		March 31, 2022
ROU operating lease assets	Operating right-of-use assets, net	$	1,025	$	1,133
Operating lease liabilities	Current operating lease liabilities	$	346	$	388
Operating lease liabilities	Non-current operating lease liabilities	742		815
Total operating lease liabilities		$	1,088	$	1,203

The weighted-average operating lease term was 4.2 years and 4.4 years as of June 30, 2022 and March 31, 2022, respectively. The weighted-average operating lease discount rate was 3.4% and 3.3% as of June 30, 2022 and March 31, 2022, respectively.

The following maturity analysis presents expected undiscounted cash payments for operating leases as of June 30, 2022:

	Fiscal Year
(in millions)	Remainder of 2023		2024		2025		2026		2027		Thereafter		Total
Operating lease payments	$	286	$	304	$	232	$	141	$	68	$	150	$	1,181
Less: imputed interest													(93)
Total operating lease liabilities													$	1,088

11

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Finance Leases

The components of finance lease expense were as follows:

(in millions)	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Amortization of right-of-use assets	$	61	$	87
Interest on lease liabilities	5		9
Total finance lease cost	$	66	$	96

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

(in millions)	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Interest paid for finance lease liabilities – Operating cash flows	$	5	$	9
Cash paid for amounts included in the measurement of finance lease obligations – financing cash flows	96		170
Total cash paid in the measurement of finance lease obligations	$	101	$	179
Capital expenditures through finance lease obligations(1)	$	26	$	71

(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	June 30, 2022		March 31, 2022
ROU finance lease assets	Property and Equipment, net	$	534	$	602
Finance lease	Short-term debt and current maturities of long-term debt	$	267	$	289
Finance lease	Long-term debt, net of current maturities	321		354
Total finance lease liabilities(1)		$	588	$	643

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

The weighted-average finance lease term was 2.8 years as of June 30, 2022 and March 31, 2022, respectively. The weighted-average finance lease discount rate was 2.9% as of June 30, 2022 and March 31, 2022, respectively.

The following maturity analysis presents expected undiscounted cash payments for finance leases as of June 30, 2022:

	Fiscal Year
(in millions)	Remainder of 2023		2024		2025		2026		2027		Thereafter		Total
Finance lease payments	$	217	$	196	$	116	$	58	$	26	$	1	$	614
Less: imputed interest													(26)
Total finance lease liabilities													$	588

12

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 derivative assets and liabilities. 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)	June 30, 2022
Assets:	Fair Value		Level 1		Level 2		Level 3
Money market funds and money market deposit accounts	$	10	$	10	$	—	$	—
Time deposits(1)	46		46		—		—
Other securities(2)	46		—		44		2
Total assets	$	102	$	56	$	44	$	2
Liabilities:
Contingent consideration	$	2	$	—	$	—	$	2
Total liabilities	$	2	$	—	$	—	$	2

	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 $50 million and $53 million, and accumulated (losses) of $(6) million and $(4) million, as of June 30, 2022 and March 31, 2022, respectively. (Loss) gain included in other income, net in the Company’s statements of operations was $(2) million and $1 million for the three months ended June 30, 2022 and June 30, 2021, respectively.

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.

13

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 June 30, 2022 and March 31, 2022 were $787 million and $727 million, respectively. As of June 30, 2022, the related forecasted transactions extend through June 2024.

For the three months ended June 30, 2022 and June 30, 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 months ended June 30, 2022 and June 30, 2021, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of June 30, 2022, $14 million of the existing amount of gain 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 and income before income taxes

During the three months ended June 30, 2022, the pre-tax gain on derivatives designated for hedge accounting recognized in other comprehensive loss was $2 million and income before income taxes was $4 million. During the three months ended June 30, 2021, the pre-tax gain (loss) on derivatives designated for hedge accounting was not material.

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 June 30, 2022 and March 31, 2022 were $1.7 billion and $2.1 billion, respectively.

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

		For the Three Months Ended
(in millions)	Statement of Operations Line Item	June 30, 2022		June 30, 2021
Foreign currency forward contracts	Other income (expense), net	$	38	$	(35)

14

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:

	Derivative Assets
		As of
(in millions)	Balance Sheet Line Item	June 30, 2022		March 31, 2022
Derivatives designated for hedge accounting:
Foreign currency forward contracts	Other current assets	$	20	$	18
Derivatives not designated for hedge accounting:
Foreign currency forward contracts	Other current assets	$	25	$	9

	Derivative Liabilities
		As of
(in millions)	Balance Sheet Line Item	June 30, 2022		March 31, 2022
Derivatives designated for hedge accounting:
Foreign currency forward contracts	Accrued expenses and other current liabilities	$	5	$	—
Derivatives not designated for hedge accounting:
Foreign currency forward contracts	Accrued expenses and other current liabilities	$	16	$	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 June 30, 2022, there were eleven counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $27 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.

15

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 when such net investments are sold or substantially liquidated.

As of June 30, 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 months ended June 30, 2022, the pre-tax impact of gain on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive loss was $17 million. 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.

Note 8 – Intangible Assets

Intangible assets consisted of the following:

	As of June 30, 2022
(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Software	$	4,025	$	3,071	$	954
Customer related intangible assets	3,985		2,016		1,969
Other intangible assets	293		99		194
Total intangible assets	$	8,303	$	5,186	$	3,117

	As of March 31, 2022
(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Software	$	4,063	$	3,039	$	1,024
Customer related intangible assets	4,148		1,995		2,153
Other intangible assets	291		90		201
Total intangible assets	$	8,502	$	5,124	$	3,378

16

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The components of amortization expense were as follows:

	Three Months Ended
(in millions)	June 30, 2022		June 30, 2021
Intangible assets amortization	$	199	$	215
Transition and transformation contract cost amortization(1)	52		49
Total amortization expense	$	251	$	264

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

Estimated future amortization related to intangible assets as of June 30, 2022 is as follows:

Fiscal Year	(in millions)
Remainder of 2023	$	600
2024	$	666
2025	$	564
2026	$	520
2027	$	383
Thereafter	$	384

Note 9 – Goodwill

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of June 30, 2022.

(in millions)	GBS		GIS		Total
Balance as of March 31, 2022, net	$	617	$	—	$	617
Divestitures	(9)		—		(9)
Assets held for sale	(3)		—		(3)
Foreign currency translation	(23)		—		(23)
Balance as of June 30, 2022, net	$	582	$	—	$	582
Goodwill, gross	5,072		5,066		10,138
Accumulated impairment losses	(4,490)		(5,066)		(9,556)
Balance as of June 30, 2022, net	$	582	$	—	$	582

The adjustments for divestitures and assets held for sale are described in Note 2 - "Divestitures." The foreign currency translation amount reflects the impact of currency movements on non-U.S. dollar-denominated goodwill balances.

17

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 10 –