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 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
	PART I – FINANCIAL INFORMATION
1.	Financial Statements (unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
3.	Quantitative and Qualitative Disclosures About Market Risk	55
4.	Controls and Procedures	55
	PART II – OTHER INFORMATION
1.	Legal Proceedings	56
1A.	Risk Factors	56
2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
3.	Defaults Upon Senior Securities	57
4.	Mine Safety Disclosures	57
5.	Other Information	57
6.	Exhibits	57

PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements

	Page
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)	2
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)	3
Condensed Consolidated Balance Sheets as of December 31, 2022 and March 31, 2022 (unaudited)	4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)	5
Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended December 31, 2022 and December 31, 2021 (unaudited)	6
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1–Summary of Significant Accounting Policies	8
Note 2–Divestitures	10
Note 3–Earnings Per Share	12
Note 4–Receivables	13
Note 5–Leases	13
Note 6–Fair Value	16
Note 7–Derivative Instruments	17
Note 8–Intangible Assets	19
Note 9–Goodwill	20
Note 10–Debt	21
Note 11–Revenue	22
Note 12–Restructuring Costs	23
Note 13–Pension and Other Benefit Plans	24
Note 14–Income Taxes	24
Note 15–Stockholders’ Equity	26
Note 16–Stock Incentive Plans	27
Note 17–Cash Flows	28
Note 18–Segment Information	29
Note 19–Commitments and Contingencies	32

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