Strong execution on 'three-A's' strategy
drives earnings growth
- Revenues for the quarter ended December 31, 2023 total $3.9 billion, pretax income is $53 million, and net loss is $12 million
- Adjusted EBITDA is $615
million, and adjusted pretax income is $63 million
- Raises full-year adjusted earnings outlook
NEW
YORK, Feb. 6, 2024 /PRNewswire/ -- Kyndryl
Holdings, Inc. (NYSE: KD), the world's largest IT infrastructure
services provider, today released
financial results for the quarter ended
December 31, 2023, the third quarter
of its 2024 fiscal year.
"Demand for our world-class IT services and our strong strategic
execution are driving Kyndryl's earnings growth. As we
harness secular trends in information technology through our
mission-critical expertise, we're meeting customer needs for
operational excellence and cybersecurity in complex, hybrid
environments," said Kyndryl Chairman and Chief Executive Officer
Martin Schroeter. "Our strong
and consistent execution is enabling us to again increase our
adjusted earnings outlook for the year and to remain on track for
revenue growth in calendar year 2025."
Results for the Fiscal Third Quarter Ended December 31, 2023
For the third quarter, Kyndryl reported revenues of $3.9 billion, a year-over-year decline of 9% and
10% in constant currency. The year-over-year revenue decline
reflects the Company's progress in reducing inherited zero-margin
and low-margin third-party content in customer contracts,
particularly in its United States
and Strategic Markets segments. The Company reported pretax
income of $53 million and net loss of
$12 million, or ($0.05) per diluted share, in the quarter,
compared to a net loss of $106
million, or ($0.47) per
diluted share, in the prior-year period. Income in the
quarter included a $58 million net
pretax benefit from transaction-related items and workforce
rebalancing charges. Cash flow from operations was
$436 million.
Adjusted pretax income was $63
million, an increase of $67
million compared to an adjusted pretax loss of $4 million in the prior-year period.
Adjusted EBITDA of $615 million
increased 6% compared to $580 million
in the prior-year period, primarily driven by contributions from
the Company's Alliances, Advanced Delivery and Accounts
initiatives, partially offset by a software cost increase of
$50 million. Currency movements
had essentially no year-over-year impact on earnings.
Adjusted free cash flow was $348
million.
"In our fiscal third quarter, we once again delivered adjusted
EBITDA and adjusted pretax income growth. Our three-A
initiatives and growth in Kyndryl Consult are fueling our progress,
and we continued to sign contracts with attractive margins," said
Kyndryl Chief Financial Officer David
Wyshner.
Recent Developments
- Alliances initiative – In the first nine months of its
fiscal year, Kyndryl recognized more than $300 million in revenue tied to cloud hyperscaler
alliances. This surpasses the Company's fiscal year 2024
hyperscaler revenue target of $300
million, and the Company is therefore raising its full-year
goal to $400 million.
- Advanced Delivery initiative – To date, Kyndryl has
redeployed more than 8,500 delivery professionals to serve new
revenue streams and backfill attrition. This has generated
annualized savings of approximately $500
million as of quarter-end. Automation and the Kyndryl Bridge
platform, powered by AI, are driving this progress, and the Company
is well on track to achieve its fiscal 2024 year-end objective for
annualized savings of $550
million.
- Accounts initiative – Kyndryl continued to
address elements of contracts with substandard margins, bringing
the total impact from this initiative to $475 million of annualized benefits. The Company
is well on track to achieve its fiscal 2024 year-end goal for
annualized savings of $500
million.
- Strong projected margin on recent signings – In
the quarter, projected pretax margins associated with total
signings were again in the high-single-digit range, which aligns
with levels achieved throughout fiscal 2023 and reflects the
Company's focus on margin expansion.
- Double-digit growth in Kyndryl Consult – In the quarter,
Kyndryl Consult revenues grew 12% year-over-year and 11% in
constant currency and were 15% of total revenue.
Raising Fiscal Year 2024 Outlook
Kyndryl is raising its fiscal 2024 outlook for adjusted pretax
income to at least $150 million and
raising its fiscal 2024 outlook for adjusted EBITDA margin to at
least 14.5%. The Company also continues to expect its
constant-currency revenue growth to be (6%) to (7%) and for its
fiscal 2024 adjusted free cash flow to be positive.
Earnings Webcast
Kyndryl's earnings call for the third fiscal quarter is
scheduled to begin at 8:30 a.m. ET on
February 7, 2024. The live
webcast can be accessed by visiting investors.kyndryl.com on
Kyndryl's investor relations website. A slide presentation
will be made available on Kyndryl's investor relations website
before the call on February 7,
2024. Following the event, a replay will be available via
webcast for twelve months at investors.kyndryl.com.
About Kyndryl
Kyndryl (NYSE: KD) is the world's largest IT infrastructure
services provider, serving thousands of enterprise customers in
more than 60 countries. The Company designs, builds, manages
and modernizes the complex, mission-critical information systems
that the world depends on every day. For more information, visit
www.kyndryl.com.
Forward-Looking and Cautionary Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact
included in this press release, including statements concerning the
Company's plans, objectives, goals, beliefs, business strategies,
future events, business condition, results of operations, financial
position, business outlook and business trends and other
non-historical statements, including without limitation the
information presented in the "Outlook" section of this press
release, are forward-looking statements. Such forward-looking
statements often contain words such as "will," "anticipate,"
"predict," "project," "plan," "forecast," "future," "estimate,"
"expect," "intend," "target," "may," "should," "would," "could,"
"outlook," "goal," "objective," "seek," "aim," "believe" and other
similar words or expressions or the negative thereof or other
variations thereon. Forward-looking statements are based on
the Company's current assumptions and beliefs regarding future
business and financial performance.
The Company's actual business, financial condition or results of
operations may differ materially from those suggested by
forward-looking statements as a result of risks and uncertainties
which include, among others: risks related to the Company's
spin-off from IBM; failure to attract new customers, retain
existing customers or sell additional services to customers;
technological developments and the Company's response to such
developments; failure to meet growth and productivity objectives;
competition; impacts of relationships with critical suppliers and
partners; inability to attract, retain and/or manage key personnel
and other skilled employees; the impact of local legal, economic,
political, health and other conditions; a downturn in economic
environment and customer spending budgets; damage to the Company's
reputation; inability to accurately estimate the cost of services
and the timeline for completion of contracts; its implementation of
a new enterprise resource planning system and other systems and
processes; service delivery issues; the Company's ability to
successfully manage acquisitions, alliances and dispositions,
including integration challenges, failure to achieve objectives,
the assumption of liabilities, and higher debt levels; the impact
of our business with government customers; failure of the Company's
intellectual property rights to prevent competitive offerings and
the failure of the Company to obtain necessary licenses; the
impairment of our goodwill or long-lived assets; risks relating to
cybersecurity and data privacy; risks relating to non-compliance
with legal and regulatory requirements; adverse effects from tax
matters and environmental matters; legal proceedings and
investigatory risks; the impact of changes in market liquidity
conditions and customer credit risk on receivables; the Company's
pension plans; the impact of currency fluctuations; and risks
related to the Company's common stock and the securities
market.
Additional risks and uncertainties include, among others, those
risks and uncertainties described in the "Risk Factors" section of
the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2023, and may be further
updated from time to time in the Company's subsequent filings with
the Securities and Exchange Commission. Any forward-looking
statement in this press release speaks only as of the date on which
it is made. Except as required by law, the Company assumes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
In this release, certain amounts may not add due to the use of
rounded numbers; percentages presented are calculated based on the
underlying amounts.
Non-GAAP Financial Measures
In an effort to provide investors with additional information
regarding its results, the Company has provided certain metrics
that are not calculated based on generally accepted accounting
principles (GAAP), such as constant-currency results, adjusted
EBITDA, adjusted pretax income, adjusted net income, adjusted EPS,
adjusted EBITDA margin, adjusted pretax margin, adjusted net margin
and adjusted free cash flow. Such non-GAAP metrics are
intended to supplement GAAP metrics, but not to replace them.
The Company's non-GAAP metrics may not be comparable to similarly
titled metrics used by other companies. Definitions of
non-GAAP metrics and reconciliations of non-GAAP metrics for
historical periods to GAAP metrics are included in the tables in
this release.
A reconciliation of forward-looking non-GAAP financial
information is not included in this release because the Company is
unable to predict with reasonable certainty some individual
components of such reconciliation without unreasonable
effort. These items are uncertain, depend on various factors
and could have a material impact on future results computed in
accordance with GAAP.
Investor Contact:
Lori Chaitman
lori.chaitman@kyndryl.com
Media Contact:
Ed Barbini
edward.barbini@kyndryl.com
Table
1
KYNDRYL HOLDINGS,
INC.
CONSOLIDATED INCOME
STATEMENT
(in millions, except
per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues
|
|
$
|
3,936
|
|
$
|
4,303
|
|
$
|
12,202
|
|
$
|
12,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
|
$
|
3,184
|
|
$
|
3,596
|
|
$
|
10,055
|
|
$
|
10,886
|
Selling, general and
administrative expenses
|
|
|
705
|
|
|
731
|
|
|
2,059
|
|
|
2,131
|
Workforce rebalancing
charges
|
|
|
19
|
|
|
10
|
|
|
115
|
|
|
16
|
Transaction-related
costs (benefits)
|
|
|
(77)
|
|
|
48
|
|
|
12
|
|
|
218
|
Interest
expense
|
|
|
31
|
|
|
27
|
|
|
92
|
|
|
65
|
Other
expense
|
|
|
21
|
|
|
30
|
|
|
34
|
|
|
16
|
Total costs and
expenses
|
|
$
|
3,883
|
|
$
|
4,441
|
|
$
|
12,367
|
|
$
|
13,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
$
|
53
|
|
$
|
(138)
|
|
$
|
(165)
|
|
$
|
(563)
|
Provision for
(benefit from) income taxes
|
|
|
65
|
|
|
(32)
|
|
|
131
|
|
|
74
|
Net income
(loss)
|
|
$
|
(12)
|
|
$
|
(106)
|
|
$
|
(295)
|
|
$
|
(637)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
data
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
$
|
(0.05)
|
|
$
|
(0.47)
|
|
$
|
(1.29)
|
|
$
|
(2.81)
|
Diluted earnings (loss)
per share
|
|
|
(0.05)
|
|
|
(0.47)
|
|
|
(1.29)
|
|
|
(2.81)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average basic
shares outstanding
|
|
|
229.6
|
|
|
227.0
|
|
|
228.9
|
|
|
226.4
|
Weighted-average
diluted shares outstanding
|
|
|
229.6
|
|
|
227.0
|
|
|
228.9
|
|
|
226.4
|
Table
2
SEGMENT
RESULTS
AND SELECTED BALANCE
SHEET INFORMATION
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year-over-Year
Growth
|
|
|
|
|
|
|
|
|
As
|
|
Constant
|
Segment
Results
|
|
2023
|
|
2022
|
|
Reported
|
|
Currency
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
1,032
|
|
$
|
1,265
|
|
(18 %)
|
|
(18 %)
|
Japan
|
|
|
581
|
|
|
606
|
|
(4 %)
|
|
0 %
|
Principal
Markets1
|
|
|
1,446
|
|
|
1,472
|
|
(2 %)
|
|
(5 %)
|
Strategic
Markets1
|
|
|
877
|
|
|
961
|
|
(9 %)
|
|
(13 %)
|
Total
revenue
|
|
$
|
3,936
|
|
$
|
4,303
|
|
(9 %)
|
|
(10 %)
|
Adjusted
EBITDA2
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
194
|
|
$
|
271
|
|
|
|
|
Japan
|
|
|
94
|
|
|
90
|
|
|
|
|
Principal
Markets
|
|
|
207
|
|
|
91
|
|
|
|
|
Strategic
Markets
|
|
|
144
|
|
|
145
|
|
|
|
|
Corporate and
other3
|
|
|
(25)
|
|
|
(16)
|
|
|
|
|
Total adjusted
EBITDA
|
|
$
|
615
|
|
$
|
580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
December 31,
|
|
Year-over-Year
Growth
|
|
|
|
|
|
|
As
|
|
Constant
|
Segment
Results
|
|
2023
|
|
2022
|
|
Reported
|
|
Currency
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
3,305
|
|
$
|
3,581
|
|
(8 %)
|
|
(8 %)
|
Japan
|
|
|
1,761
|
|
|
1,855
|
|
(5 %)
|
|
0 %
|
Principal
Markets1
|
|
|
4,395
|
|
|
4,460
|
|
(1 %)
|
|
(4 %)
|
Strategic
Markets1
|
|
|
2,741
|
|
|
2,874
|
|
(5 %)
|
|
(8 %)
|
Total
revenue
|
|
$
|
12,202
|
|
$
|
12,771
|
|
(4 %)
|
|
(5 %)
|
Adjusted
EBITDA2
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
607
|
|
$
|
639
|
|
|
|
|
Japan
|
|
|
278
|
|
|
318
|
|
|
|
|
Principal
Markets
|
|
|
560
|
|
|
248
|
|
|
|
|
Strategic
Markets
|
|
|
428
|
|
|
352
|
|
|
|
|
Corporate and
other3
|
|
|
(71)
|
|
|
(57)
|
|
|
|
|
Total adjusted
EBITDA
|
|
$
|
1,801
|
|
$
|
1,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
March
31,
|
|
|
|
|
Balance Sheet
Data
|
|
2023
|
|
2023
|
|
|
|
|
Cash and
equivalents
|
|
$
|
1,688
|
|
$
|
1,847
|
|
|
|
|
Debt (short-term and
long-term)
|
|
|
3,256
|
|
|
3,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Principal Markets is
comprised of Kyndryl's operations in Australia/New Zealand, Canada,
France, Germany, India, Italy, Spain/Portugal and the United
Kingdom/Ireland. Strategic Markets is comprised of Kyndryl's
operations in all other geographic locations.
|
2
|
In the three months
ended December 31, 2023, the Principal Markets and Japan segment
adjusted EBITDA includes lower software costs of $20 million and $3
million, respectively, and the United States and Strategic Markets
segment adjusted EBITDA includes higher software costs of $16
million and $7 million, respectively, when compared to the
prior-year period, due to a "zero-sum" amendment of the contract
with a software provider that re-allocated costs among our
segments. In the nine months ended December 31, 2023, the
Principal Markets and Japan segment adjusted EBITDA includes lower
software costs of $59 million and $9 million, respectively, and the
United States and Strategic Markets segment adjusted EBITDA
includes higher software costs of $48 million and $20 million,
respectively, when compared to the prior-year period, due to this
amendment.
|
3
|
Represents net amounts
not allocated to segments.
|
Table
3
KYNDRYL HOLDINGS,
INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
December 31,
|
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(295)
|
|
$
|
(637)
|
Adjustments to
reconcile net income (loss) to cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
|
|
|
|
Depreciation of
property, equipment and capitalized software
|
|
|
639
|
|
|
681
|
Depreciation of
right-of-use assets
|
|
|
251
|
|
|
285
|
Amortization of
transition costs and prepaid software
|
|
|
946
|
|
|
909
|
Amortization of
capitalized contract costs
|
|
|
418
|
|
|
337
|
Amortization of
acquisition-related intangible assets
|
|
|
23
|
|
|
36
|
Stock-based
compensation
|
|
|
72
|
|
|
81
|
Deferred
taxes
|
|
|
55
|
|
|
5
|
Net (gain) loss on
asset sales and other
|
|
|
(6)
|
|
|
(17)
|
Change in operating
assets and liabilities:
|
|
|
|
|
|
|
Deferred costs
(excluding amortization)
|
|
|
(1,023)
|
|
|
(1,063)
|
Right-of-use assets
and liabilities (excluding depreciation)
|
|
|
(269)
|
|
|
(275)
|
Workforce rebalancing
liabilities
|
|
|
(28)
|
|
|
(1)
|
Receivables
|
|
|
(13)
|
|
|
647
|
Accounts
payable
|
|
|
(339)
|
|
|
235
|
Taxes
|
|
|
(33)
|
|
|
(36)
|
Other assets and other
liabilities
|
|
|
(90)
|
|
|
(418)
|
Net cash provided by
operating activities
|
|
$
|
309
|
|
$
|
769
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
|
(449)
|
|
$
|
(711)
|
Proceeds from
disposition of property and equipment
|
|
|
134
|
|
|
20
|
Other investing
activities, net
|
|
|
(35)
|
|
|
(8)
|
Net cash used in
investing activities
|
|
$
|
(350)
|
|
$
|
(699)
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Debt
repayments
|
|
$
|
(103)
|
|
$
|
(83)
|
Common stock
repurchases for tax withholdings
|
|
|
(19)
|
|
|
(17)
|
Other financing
activities, net
|
|
|
(1)
|
|
|
—
|
Net cash provided by
(used in) financing activities
|
|
$
|
(123)
|
|
$
|
(100)
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash
|
|
$
|
(5)
|
|
$
|
(109)
|
Net change in cash,
cash equivalents and restricted cash
|
|
$
|
(169)
|
|
$
|
(138)
|
|
|
|
|
|
|
|
Cash, cash equivalents
and restricted cash at beginning of period
|
|
$
|
1,860
|
|
$
|
2,154
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
1,691
|
|
$
|
2,016
|
|
|
|
|
|
|
|
Supplemental
data
|
|
|
|
|
|
|
Income taxes paid, net
of refunds received
|
|
$
|
140
|
|
$
|
109
|
Interest paid on
debt
|
|
$
|
108
|
|
$
|
89
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) operating activities was $436 million in the three months
ended December 31, 2023 and ($127) million in the six months ended
September 30, 2023.
|
Table 4
NON-GAAP METRIC DEFINITIONS
AND RECONCILIATIONS
(dollars in millions, except
signings)
We report our financial results in accordance with GAAP.
We also present certain non-GAAP financial measures to provide
useful supplemental information to investors. We provide
these non-GAAP financial measures as we believe it enhances
investors' visibility to management decisions and their impacts on
operational performance; enables better comparison to peer
companies; and allows us to provide a long-term strategic view of
the business going forward.
Constant-currency information compares results between
periods as if exchange rates had remained constant period over
period. We define constant-currency revenues as total
revenues excluding the impact of foreign exchange rate movements
and use it to determine the constant-currency revenue growth on a
year-over-year basis. Constant-currency revenues are
calculated by translating current period revenues using
corresponding prior-period exchange rates.
Adjusted pretax income is defined as pretax income
excluding transaction-related costs and benefits, charges related
to ceasing to use leased / fixed assets, charges related to lease
terminations, pension expenses other than pension servicing costs
and multi-employer plan costs, stock-based compensation expense,
amortization of acquisition-related intangible assets, workforce
rebalancing charges, impairment expense, significant litigation
costs and currency impacts of highly inflationary countries.
Adjusted pretax margin is calculated by dividing adjusted pretax
income by revenue.
Adjusted EBITDA is defined as net income (loss) excluding
net interest expense, income taxes, depreciation and amortization
(excluding depreciation of right-of-use assets and amortization of
capitalized contract costs), charges related to ceasing to use
leased / fixed assets, charges related to lease terminations,
transaction-related costs and benefits, pension costs other than
pension servicing costs and multi-employer plan costs, stock-based
compensation expense, workforce rebalancing charges, impairment
expense, significant litigation costs, and foreign currency impacts
of highly inflationary countries. Adjusted EBITDA margin is
calculated by dividing adjusted EBITDA by revenue.
Adjusted net income is defined as adjusted pretax income
less the reported provision for income taxes, minus or plus the tax
effect of the non-GAAP adjustments made to calculate adjusted
pretax income, and excluding exceptional items impacting the
reported provision for income taxes. Adjusted net margin is
calculated by dividing adjusted net income by revenue.
Adjusted earnings per share (EPS) is defined as adjusted
net income divided by diluted weighted average shares outstanding
to reflect shares that are dilutive or anti-dilutive based on the
amount of adjusted net income. The weighted average
common shares outstanding used to calculate adjusted earnings
(loss) per share will differ from such shares used to calculate
diluted earnings (loss) per share (GAAP) when the inclusion of
dilutive shares has an anti-dilutive effect for one calculation but
not for the other.
Adjusted free cash flow is defined as cash flows from
operating activities (GAAP) after adding back transaction-related
payments, charges related to lease terminations, workforce
rebalancing payments and significant litigation payments, less net
capital expenditures. Management uses adjusted free cash flow
as a measure to evaluate its operating results, plan strategic
investments and assess our ability and need to incur and service
debt. We believe adjusted free cash flow is a useful
supplemental financial measure to aid investors in assessing our
ability to pursue business opportunities and investments and to
service our debt. Adjusted free cash flow is a financial
measure that is not recognized under U.S. GAAP and should not be
considered as an alternative to cash flows from operations or
liquidity derived in accordance with U.S. GAAP.
Signings are defined by Kyndryl as an initial estimate of
the value of a customer's commitment under a contract. We
calculate this based on various considerations including the type
and duration of the agreement as well as the presence of
termination charges or wind-down costs. Contract extensions
and increases in scope are treated as signings only to the extent
of the incremental new value. Signings can vary over time due
to a variety of factors including, but not limited to, the timing
of signing a small number of larger outsourcing contracts.
The conversion of signings into revenue may vary based on the types
of services and solutions, customer decisions and other factors,
which may include, but are not limited to, macroeconomic
environment or external events. Management uses signings as a
tool to monitor the performance of the business including the
business' ability to attract new customers and sell additional
scope into our existing customer base.
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
net income (loss) to
|
|
|
|
|
|
|
|
|
|
|
|
|
adjusted pretax
income (loss),
|
|
|
|
|
|
|
|
|
|
|
|
|
adjusted EBITDA,
adjusted net
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
income (loss) and
adjusted EPS
|
|
December
31,
|
|
December
31,
|
(in millions, except
per share amounts)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net income (loss)
(GAAP)
|
|
$
|
(12)
|
|
$
|
(106)
|
|
$
|
(295)
|
|
$
|
(637)
|
Provision for (benefit
from) income taxes
|
|
|
65
|
|
|
(32)
|
|
|
131
|
|
|
74
|
Pretax income (loss)
(GAAP)
|
|
$
|
53
|
|
$
|
(138)
|
|
$
|
(165)
|
|
$
|
(563)
|
Workforce rebalancing
charges
|
|
|
19
|
|
|
10
|
|
|
115
|
|
|
16
|
Charges related to
ceasing to use leased/fixed
assets and lease terminations
|
|
|
14
|
|
|
10
|
|
|
24
|
|
|
10
|
Transaction-related
costs (benefits)1
|
|
|
(77)
|
|
|
48
|
|
|
12
|
|
|
218
|
Stock-based
compensation expense
|
|
|
25
|
|
|
29
|
|
|
72
|
|
|
81
|
Amortization of
acquisition-related intangible
assets
|
|
|
8
|
|
|
11
|
|
|
23
|
|
|
36
|
Other
adjustments2
|
|
|
21
|
|
|
27
|
|
|
52
|
|
|
45
|
Adjusted pretax income
(loss) (non-GAAP)
|
|
$
|
63
|
|
$
|
(4)
|
|
$
|
135
|
|
$
|
(156)
|
Interest
expense
|
|
|
31
|
|
|
27
|
|
|
92
|
|
|
65
|
Depreciation of
property, equipment and
capitalized software3
|
|
|
207
|
|
|
232
|
|
|
629
|
|
|
681
|
Amortization of
transition costs and prepaid
software
|
|
|
314
|
|
|
325
|
|
|
946
|
|
|
909
|
Adjusted EBITDA
(non-GAAP)
|
|
$
|
615
|
|
$
|
580
|
|
$
|
1,801
|
|
$
|
1,499
|
Operating
margin4
|
|
|
2.7 %
|
|
|
(1.9) %
|
|
|
(0.3) %
|
|
|
(3.8) %
|
Adjusted EBITDA
margin
|
|
|
15.6 %
|
|
|
13.5 %
|
|
|
14.8 %
|
|
|
11.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted pretax income
(loss) (non-GAAP)
|
|
$
|
63
|
|
$
|
(4)
|
|
$
|
135
|
|
$
|
(156)
|
Provision for income
taxes (GAAP)
|
|
|
(65)
|
|
|
32
|
|
|
(131)
|
|
|
(74)
|
Tax effect of non-GAAP
adjustments
|
|
|
(8)
|
|
|
(11)
|
|
|
(27)
|
|
|
(22)
|
Adjusted net income
(loss) (non-GAAP)
|
|
$
|
(11)
|
|
$
|
17
|
|
$
|
(23)
|
|
$
|
(252)
|
Basic weighted average
shares outstanding5
|
|
|
229.6
|
|
|
227.0
|
|
|
228.9
|
|
|
226.4
|
Diluted weighted
average shares outstanding5
|
|
|
229.6
|
|
|
227.0
|
|
|
228.9
|
|
|
226.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share (GAAP)
|
|
$
|
(0.05)
|
|
$
|
(0.47)
|
|
$
|
(1.29)
|
|
$
|
(2.81)
|
Diluted earnings (loss)
per share (GAAP)
|
|
$
|
(0.05)
|
|
$
|
(0.47)
|
|
$
|
(1.29)
|
|
$
|
(2.81)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
(loss) per share (non-GAAP)
|
|
$
|
(0.05)
|
|
$
|
0.07
|
|
$
|
(0.10)
|
|
$
|
(1.11)
|
|
|
|
|
|
|
|
|
|
1
|
Kyndryl's reported
results for the fiscal third quarter reflect $25 million of
separation-related costs, primarily for systems migrations, which
were completed in November. This was offset by a $102 million
benefit related to an agreement to collect previously reserved
receivables from our former Parent.
|
2
|
Other adjustments
represent pension expenses other than pension servicing costs and
multi-employer plan costs, significant litigation costs, and
currency impacts of highly inflationary countries.
|
3
|
Amount for the nine
months ended December 31, 2023 excludes $10 million of expense that
is included in transaction-related costs and benefits.
|
4
|
Operating margin is
calculated by dividing net income (loss) less income taxes,
interest expense and other expense (income), by revenue.
|
5
|
For loss periods,
dilutive shares were not included in the calculation as inclusion
of such shares would have an anti-dilutive effect. See Non-GAAP
Metric Definitions, above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Reconciliation of
cash flow from operations
|
|
December
31,
|
|
December
31,
|
to adjusted free
cash flow (in millions)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Cash flows from
operating activities (GAAP)
|
|
$
|
436
|
|
$
|
278
|
|
$
|
309
|
|
$
|
769
|
Plus:
Transaction-related payments
|
|
|
29
|
|
|
172
|
|
|
113
|
|
|
307
|
Plus: Workforce
rebalancing payments
|
|
|
29
|
|
|
6
|
|
|
142
|
|
|
20
|
Plus: Significant
litigation payments
|
|
|
11
|
|
|
—
|
|
|
55
|
|
|
—
|
Plus: Payments related
to lease terminations
|
|
|
2
|
|
|
—
|
|
|
7
|
|
|
—
|
Less: Net capital
expenditures
|
|
|
(159)
|
|
|
(234)
|
|
|
(315)
|
|
|
(690)
|
Adjusted free cash flow
(non-GAAP)
|
|
$
|
348
|
|
$
|
223
|
|
$
|
311
|
|
$
|
407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
Fiscal
Year-to-date
|
Signings (in
billions)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
2024
|
|
2023
|
Signings1
|
|
$
|
3.7
|
|
$
|
3.2
|
|
$
|
8.9
|
|
$
|
8.6
|
|
$
|
9.5
|
|
$
|
9.1
|
|
|
|
|
|
|
|
|
|
1
|
Signings for the three
months ended December 31, 2023 increased by 15%, and 13% in
constant currency, compared to the three months ended December 31,
2022. Signings for the nine months ended December 31, 2023
increased by 3%, and 2% in constant currency, compared to the nine
months ended December 31, 2022. Fiscal year-to-date signings
are a preliminary estimate, are measured through January 31, and
increased 5%, and 4% in constant currency, compared to the
prior-year period.
|
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