DXC Technology Co 10-Q for FY2024 Q3

DXC Technology Co (DXC)

10-Q 2024-02-02 For: 2023-12-31

Added on April 07, 2026

About this 10-Q

DXC Technology Co filed this 10-Q on February 2, 2024, covering the quarter ended December 31, 2023 (FY2024 Q3).

Headline figures

Quarter ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.4B; down 4.7% from $3.57B a year earlier
Net income: $156M; up 164.4% from net income of $59M a year earlier
Diluted EPS: $0.81; up 224.0% from $0.25 a year earlier

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Item		Page
	PART I – FINANCIAL INFORMATION

1.	Financial Statements (unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
3.	Quantitative and Qualitative Disclosures About Market Risk	49
4.	Controls and Procedures	49

	PART II – OTHER INFORMATION

1.	Legal Proceedings	50
1A.	Risk Factors	50
2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
3.	Defaults Upon Senior Securities	51
4.	Mine Safety Disclosures	51
5.	Other Information	51
6.	Exhibits	52



			Page
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2023 and December 31, 2022 (unaudited)			2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended December 31, 2023 and December 31, 2022 (unaudited)			3

Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023 (unaudited)			4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2023 and December 31, 2022 (unaudited)			5

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended December 31, 2023 and December 31, 2022 (unaudited)			6

Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1–Summary of Significant Accounting Policies			8
Note 2–Divestitures			9
Note 3–Earnings Per Share			9
Note 4–Receivables			10
Note 5–Leases			10
Note 6–Fair Value			13
Note 7–Derivative Instruments			14
Note 8–Intangible Assets			17
Note 9–Goodwill			18
Note 10–Debt			19
Note 11–Revenue			20
Note 12–Restructuring Costs			21
Note 13–Pension and Other Benefit Plans			22
Note 14–Income Taxes			22
Note 15–Stockholders’ Equity			24
Note 16–Stock Incentive Plans			24
Note 17–Cash Flows			25
Note 18–Segment Information			26
Note 19–Commitments and Contingencies			29


	Three Months Ended				Nine Months Ended
(in millions, except per-share amounts)	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022

Revenues	$	3,399	$	3,566	$	10,281	$	10,839

Costs of services (excludes depreciation and amortization and restructuring costs)	2,636		2,799		7,988		8,504
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)	294		315		949		988
Depreciation and amortization	350		375		1,055		1,144
Restructuring costs	36		49		91		135
Interest expense	78		56		222		137
Interest income	(56)		(41)		(158)		(89)
(Gain) loss on disposition of businesses	(103)		9		(96)		12
Other income, net	(48)		(98)		(188)		(270)
Total costs and expenses	3,187		3,464		9,863		10,561

Income before income taxes	212		102		418		278
Income tax expense	72		41		137		86
Net income	140		61		281		192
Less: net (loss) income attributable to non-controlling interest, net of tax	(16)		2		(10)		4
Net income attributable to DXC common stockholders	$	156	$	59	$	291	$	188

Income per common share:
Basic	$	0.82	$	0.26	$	1.45	$	0.82
Diluted	$	0.81	$	0.25	$	1.43	$	0.80


			Three Months Ended				Nine Months Ended
(in millions)			December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Net income			$	140	$	61	$	281	$	192
Other comprehensive income (loss), net of taxes:
	Foreign currency translation adjustments, net of tax (1)		37		10		31		(331)
	Cash flow hedges adjustments, net of tax (2)		(4)		(19)		3		(17)

	Pension and other post-retirement benefit plans, net of tax:
		Prior service cost, net of tax(3)	(7)		—		(7)		—
		Amortization of prior service cost, net of tax (4)	(1)		(1)		(3)		(5)
	Pension and other post-retirement benefit plans, net of tax		(8)		(1)		(10)		(5)
Other comprehensive income (loss), net of taxes			25		(10)		24		(353)
Comprehensive income (loss)			165		51		305		(161)
	Less: comprehensive (loss) income attributable to non-controlling interest		(23)		4		(18)		2
Comprehensive income (loss) attributable to DXC common stockholders			$	188	$	47	$	323	$	(163)


	As of
(in millions, except per-share and share amounts)	December 31, 2023		March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,691	$	1,858
Receivables and contract assets, net of allowance of $43 and $47	3,132		3,441
Prepaid expenses	555		565
Other current assets	153		255
Assets held for sale	—		5
Total current assets	5,531		6,124
Intangible assets, net of accumulated amortization of $5,749 and $5,670	2,314		2,569
Operating right-of-use assets, net	784		909
Goodwill	541		539
Deferred income taxes, net	622		460
Property and equipment, net of accumulated depreciation of $3,836 and $4,111	1,780		1,979
Other assets	3,318		3,247
Assets held for sale - non-current	2		18
Total Assets	$	14,892	$	15,845
LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	661		500
Accounts payable	870		782
Accrued payroll and related costs	552		569
Current operating lease liabilities	295		317
Accrued expenses and other current liabilities	1,596		1,836
Deferred revenue and advance contract payments	846		1,054
Income taxes payable	141		120
Liabilities related to assets held for sale	—		9
Total current liabilities	4,961		5,187
Long-term debt, net of current maturities	3,880		3,900
Non-current deferred revenue	698		788
Non-current operating lease liabilities	542		648
Non-current income tax liabilities and deferred tax liabilities	564		587
Other long-term liabilities	881		912
Liabilities related to assets held for sale - non-current	—		3
Total Liabilities	11,526		12,025
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, 2023 and March 31, 2023	—		—
Common stock, par value $0.01 per share, 750,000,000 shares authorized, 189,468,954 issued as of December 31, 2023 and 218,058,482 issued as of March 31, 2023	2		2
Additional paid-in capital	7,827		9,121
Accumulated deficit	(3,762)		(4,665)
Accumulated other comprehensive loss	(742)		(774)
Treasury stock, at cost, 4,544,643 and 3,333,592 shares as of December 31, 2023 and March 31, 2023	(218)		(187)
Total DXC stockholders’ equity	3,107		3,497
Non-controlling interest in subsidiaries	259		323
Total Equity	3,366		3,820
Total Liabilities and Equity	$	14,892	$	15,845


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


DXC TECHNOLOGY COMPANY
(Exact name of registrant as specified in its charter)


	Three Months Ended December 31, 2023
(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, 2023	200,790	$	2	$	8,280	$	(4,143)	$	(774)	$	(218)	$	3,147	$	320	$	3,467
Net Income						156						156		(16)		140
Other comprehensive income								32				32		(7)		25
Share-based compensation expense				26								26				26

Share repurchase program(2)	(11,341)			(479)		224						(255)				(255)
Stock option exercises and other common stock transactions	20											—				—
Non-controlling interest distributions and other						1						1		(38)		(37)

Balance at December 31, 2023	189,469	$	2	$	7,827	$	(3,762)	$	(742)	$	(218)	$	3,107	$	259	$	3,366


	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		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


	Nine Months Ended December 31, 2023
(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, 2023	218,058	$	2	$	9,121	$	(4,665)	$	(774)	$	(187)	$	3,497	$	323	$	3,820
Net income						291						291		(10)		281
Other comprehensive income								32				32		(8)		24
Share-based compensation expense				71								71				71
Acquisition of treasury stock										(31)		(31)				(31)
Share repurchase program(2)	(32,275)			(1,365)		612						(753)				(753)
Stock option exercises and other common stock transactions	3,686											—				—
Non-controlling interest distributions and other												—		(46)		(46)

Balance at December 31, 2023	189,469	$	2	$	7,827	$	(3,762)	$	(742)	$	(218)	$	3,107	$	259	$	3,366


	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		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
Non-controlling interest distributions and other						—						—				—
Balance at December 31, 2022	231,351	$	2	$	9,670	$	(4,123)	$	(736)	$	(186)	$	4,627	$	325	$	4,952


Date Issued and ASU	DXC Effective Date	Description	Impact
November 2023 ASU 2023-07, “Improvements to Reportable Segment Disclosures”	Fiscal 2025	This update requires disclosure of significant segment expenses used by the Chief Operating Decision Maker (“CODM”) to assess performance and allocate resources, disclose the title and position of the CODM and modifies other segment disclosures and the frequency thereof. Early adoption of this update is permitted.	The Company is in the process of assessing the impacts and method of adoption. This ASU will impact the Company’s segment disclosures, but not its consolidated financial statements.
December 2023 ASU 2023-09, “Improvements to Income Tax Disclosures”	Fiscal 2026	The update requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. Early adoption of this update is permitted.	The Company is in the process of assessing the impacts and method of adoption. This ASU will impact our income tax disclosures, but not its consolidated financial statements.


		As of
(in millions)	Balance Sheet Line Item	December 31, 2023		March 31, 2023
ROU operating lease assets	Operating right-of-use assets, net	$	784	$	909

Operating lease liabilities	Current operating lease liabilities	$	295	$	317
Operating lease liabilities	Non-current operating lease liabilities	542		648
Total operating lease liabilities		$	837	$	965


	Fiscal Year
(in millions)	Remainder of 2024		2025		2026		2027		2028		Thereafter		Total
Operating lease payments	$	87	$	298	$	205	$	122	$	95	$	104	$	911
Less: imputed interest													(74)
Total operating lease liabilities													$	837


	Fair Value Hierarchy
(in millions)	December 31, 2023
Assets:	Fair Value		Level 1		Level 2		Level 3
Money market funds and money market deposit accounts	$	25	$	25	$	—	$	—
Time deposits(1)	177		177		—		—
Other securities(2)	51		—		49		2
Total assets	$	253	$	202	$	49	$	2


	For the Three Months Ended				For the Nine Months Ended
(in millions)	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022

Foreign currency remeasurement (1)	$	(17)	$	(60)	$	4	$	16
Undesignated foreign currency forward contracts (2)	22		52		(8)		(27)
Total - Foreign currency loss (gain)	$	5	$	(8)	$	(4)	$	(11)


	As of December 31, 2023						As of March 31, 2023
(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Software	$	3,828	$	3,102	$	726	$	4,009	$	3,290	$	719
Customer related intangible assets	3,924		2,522		1,402		3,927		2,260		1,667
Other intangible assets	311		125		186		303		120		183
Total intangible assets	$	8,063	$	5,749	$	2,314	$	8,239	$	5,670	$	2,569


(in millions)	Interest Rates	Fiscal Year Maturities	12/31/2023(1)		3/31/2023(1)
Short-term debt and current maturities of long-term debt
Commercial paper(2)	4.47% - 4.50%	2024	$	363	$	109
Current maturities of long-term debt	Various	2024 - 2025	105		176
Current maturities of finance lease liabilities	0.00% - 14.59%	2024 - 2025	193		215
Short-term debt and current maturities of long-term debt			$	661	$	500

Long-term debt, net of current maturities

€650 million Senior notes	1.75%	2026	717		704
$700 million Senior notes	1.80%	2027	696		696
€750 million Senior notes	0.45%	2028	824		810
$650 million Senior notes	2.375%	2029	646		645
€600 million Senior notes	0.95%	2032	658		646
Finance lease liabilities	0.00% - 14.59%	2024 - 2029	453		502
Borrowings for assets acquired under long-term financing	0.00% - 9.78%	2024 - 2029	184		285



Other borrowings	Various	2024	—		3
Long-term debt			4,178		4,291
Less: current maturities			298		391
Long-term debt, net of current maturities			$	3,880	$	3,900


(in millions)	GBS		GIS		Total


Balance as of March 31, 2023, net	$	539	$	—	$	539


Divestitures	(3)		—		(3)

Foreign currency translation	5		—		5
Balance as of December 31, 2023, net	$	541	$	—	$	541

Goodwill, gross	5,031		5,066		10,097
Accumulated impairment losses	(4,490)		(5,066)		(9,556)
Balance as of December 31, 2023, net	$	541	$	—	$	541


	Restructuring Liability as of March 31, 2023		Costs Expensed, Net of Reversals		Costs Not Affecting Restructuring Liability(1)		Cash Paid		Other(2)		Restructuring Liability as of December 31, 2023
Fiscal 2024 Plan
Workforce Reductions	$	—	$	15	$	—	$	(11)	$	—	$	4
Facilities Costs	—		44		(33)		(5)		(1)		5
	—		59		(33)		(16)		(1)		9
Fiscal 2023 Plan
Workforce Reductions	$	79	$	3	$	—	$	(53)	$	1	$	30
Facilities Costs	1		21		(11)		(11)		—		—
	80		24		(11)		(64)		1		30
Other Prior Year and Acquired Plans
Workforce Reductions	$	45	$	(1)	$	—	$	(18)	$	—	$	26
Facilities Costs	2		9		(1)		(9)		—		1
	47		8		(1)		(27)		—		27
Total	$	127	$	91	$	(45)	$	(107)	$	—	$	66


	Fiscal 2024					Fiscal 2023
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	10,975,643	$	25.53	$	280	8,850,912	$	30.09	$	266
2nd Quarter	9,958,585	$	21.50	214		—	$	—	—
3rd Quarter	11,340,699	$	22.18	$	252	2,063,645	$	27.41	$	57
Total	32,274,927	$	23.11	$	746	10,914,557	$	29.59	$	323


(in millions)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Pension and Other Post-retirement Benefit Plans		Accumulated Other Comprehensive Loss
Balance at March 31, 2023	$	(985)	$	(7)	$	218	$	(774)
Other comprehensive income before reclassifications	39		(3)		—		36
Amounts reclassified from accumulated other comprehensive loss	—		6		(10)		(4)
Balance at December 31, 2023	$	(946)	$	(4)	$	208	$	(742)


	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, 2023	7,449,379	$	37.11	147,487	$	35.80
Granted	5,644,307	$	24.97	124,000	$	19.35

Settled	(3,936,052)	$	23.54	(69,189)	$	31.68
Canceled/Forfeited	(984,638)	$	41.39	—	$	—
Outstanding as of December 31, 2023	8,172,996	$	34.45	202,298	$	27.13


(in millions)	GBS		GIS		Total Reportable Segments		All Other		Totals
Three Months Ended December 31, 2023
Revenues	$	1,696	$	1,703	$	3,399	$	—	$	3,399
Segment profit	$	202	$	121	$	323	$	(65)	$	258
Depreciation and amortization(1)	$	45	$	191	$	236	$	26	$	262

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


Fiscal year	Minimum Purchase Commitment
(in millions)
Remainder of 2024	$	231
2025	618
2026	539
2027	119
2028	75
Thereafter	23
Total	$	1,605


	Dollar Amount								Dollar Amount
	Three Months Ended December 31,				Change				Nine Months Ended December 31,				Change
(in millions)	2023		2022		Dollar		Percent		2023		2022		Dollar		Percent
Costs of services	$	2,636	$	2,799	$	(163)	(5.8)	%	$	7,988	$	8,504	$	(516)	(6.1)	%
Selling, general and administrative	294		315		(21)		(6.7)	%	949		988		(39)		(3.9)	%
Depreciation and amortization	350		375		(25)		(6.7)	%	1,055		1,144		(89)		(7.8)	%
Restructuring costs	36		49		(13)		(26.5)	%	91		135		(44)		(32.6)	%
Interest expense	78		56		22		39.3	%	222		137		85		62.0	%
Interest income	(56)		(41)		(15)		36.6	%	(158)		(89)		(69)		77.5	%
(Gain) loss on disposition of businesses	(103)		9		(112)		NM(1)		(96)		12		(108)		NM(1)
Other income, net	(48)		(98)		50		(51.0)	%	(188)		(270)		82		(30.4)	%
Total Costs and Expenses	$	3,187	$	3,464	$	(277)	(8.0)	%	$	9,863	$	10,561	$	(698)	(6.6)	%


	Three Months Ended December 31, 2023
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration-Related Costs		Amortization of Acquired Intangible Assets		Merger Related Indemnification		Gains and Losses on Dispositions		Tax Adjustment		Non-GAAP Results
Income before income taxes	$	212		$	36	$	2	$	88	$	2	$	(104)	$	—	$	236
Income tax expense	72			5		—		13		—		(10)		5		85
Net income	140			31		2		75		2		(94)		(5)		151
Less: net loss attributable to non-controlling interest, net of tax	(16)			—		—		—		—		—		—		(16)
Net income attributable to DXC common stockholders	$	156		$	31	$	2	$	75	$	2	$	(94)	$	(5)	$	167

Effective Tax Rate	34.0		%													36.0		%

Basic EPS	$	0.82		$	0.16	$	0.01	$	0.39	$	0.01	$	(0.49)	$	(0.03)	$	0.88
Diluted EPS	$	0.81		$	0.16	$	0.01	$	0.39	$	0.01	$	(0.49)	$	(0.03)	$	0.87

Weighted average common shares outstanding for:
Basic EPS	190.31			190.31		190.31		190.31		190.31		190.31		190.31		190.31
Diluted EPS	191.93			191.93		191.93		191.93		191.93		191.93		191.93		191.93


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, 2023 to October 31, 2023	4,218,080	$20.86	4,218,080	$893,027,020
November 1, 2023 to November 30, 2023	3,747,244	$22.42	3,747,244	$809,028,066
December 1, 2023 to December 31, 2023	3,375,375	$23.57	3,375,375	$729,471,267


Exhibit Number			Description of Exhibit


10.1*^			Offer letter with Raul Fernandez, dated December 29, 2023

10.2			First Incremental Assumption Agreement dated as of November 1, 2023, which supplements that certain Revolving Credit Agreement dated as of November 1, 2021 among DXC Technology Company, the lenders from time to time party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.3 to DXC Technology Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (filed November 2, 2022) (file no. 001-38033))

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
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)


			DXC TECHNOLOGY COMPANY

Dated:	February 1, 2024	By:	/s/ Christopher A. Voci
		Name:	Christopher A. Voci
		Title:	Senior Vice President, Corporate Controller and Principal Accounting Officer


Dated:	February 1, 2024	/s/ Raul Fernandez
		Raul Fernandez President and Chief Executive Officer



Dated:	February 1, 2024	/s/ Rob Del Bene
		Rob Del Bene Executive Vice President and Chief Financial Officer