KYNDRYL REPORTS FIRST QUARTER FISCAL 2025 RESULTS•

Revenues for the quarter ended June 30, 2024 total $3.74 billion, pretax income is$64 million, and net income is $11 million•

Adjusted EBITDA is $556 million, adjusted pretax income is $92 million, andadjusted net income is $31 million•

Kyndryl Consult continues to gain momentum with double-digit revenue growth in
the quarter and over the last twelve months•

Raises adjusted earnings outlook for fiscal year 2025 and reaffirms constantcurrency revenue outlook with revenue growth in the fourth quarter

NEW YORK, July 31, 2024 – Kyndryl Holdings, Inc. (NYSE: KD), the world’s largest IT
infrastructure services provider, today released financial results for the quarter ended June 30,
2024, the first quarter of its 2025 fiscal year.
“Kyndryl continued its momentum and delivered another strong set of results in the first quarter,
led by significant increases in Kyndryl Consult and hyperscaler-related revenues. Our expertisein running and transforming mission-critical technology differentiates us in the markets we serve.
This uniquely positions Kyndryl at the center of secular trends shaping the evolution of IT,” said
Kyndryl Chairman and Chief Executive Officer Martin Schroeter.
“Going forward, we’ll continue to execute our strategy and drive meaningful financial progress,
and we remain on track to deliver top-line growth in the fourth quarter of this fiscal year.”
Results for the Fiscal First Quarter Ended June 30, 2024
For the first quarter, Kyndryl reported revenues of $3.74 billion, a year-over-year decline of 11%
and 8% in constant currency. The year-over-year revenue decline reflects the Company’s
progress in reducing inherited no-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 $64 million and net income of $11 million, or $0.05 per diluted share,in the quarter, compared to a net loss of $141 million, or ($0.62) per diluted share, in the prioryear period. Cash flow used in operations was $48 million in this seasonally weak quarter for
cash flow.
Adjusted pretax income was $92 million, a 96% increase compared to adjusted pretax income of$47 million in the prior-year period, reflecting growing contributions from Kyndryl’s three-A
initiatives – Alliances, Advanced Delivery and Accounts. First quarter results also included thecontractually required increase in IBM software costs, workforce rebalancing charges andunfavorable currency movements year-over-year, fully offset by a vendor credit (related to the
Accounts initiative) and a reduction in depreciation expense due to the previously announced
extension of the useful lives of the Company’s hardware assets; these items in aggregate offset
each other.

In the quarter, adjusted EBITDA was $556 million, and adjusted free cash flow was ($116)
million. Both figures reflect workforce rebalancing actions implemented in the quarter.
“In the quarter, we continued to expand our adjusted pretax income margins year-over-year,
driven by strong execution on our three-A initiatives and another quarter of double-digit growthin Kyndryl Consult. And importantly, we’ve delivered growth in total signings over the last twelve
months with new contracts having solid projected margins. This is positioning us for future
revenue, margin and profit growth,” said Kyndryl Chief Financial Officer David Wyshner.
Recent Developments•

Alliances initiative – In the first quarter, Kyndryl recognized $210 million in revenue tied
to cloud hyperscaler alliances, progressing well toward the Company’s hyperscaler
revenue target of nearly $1 billion in fiscal year 2025.

•

Advanced Delivery initiative – The AI-enabled Kyndryl Bridge operating platform isfurther enhancing the world-class technology services the Company provides andcreating additional revenue opportunities. It has also helped Kyndryl free up more than
10,500 delivery professionals. This has generated annualized savings of approximately$650 million as of quarter-end, tracking toward the Company’s $750 million fiscal 2025
year-end goal.

•

Accounts initiative – Kyndryl continued to address elements of contracts with
substandard margins, bringing the total impact from this initiative to $725 million ofannualized benefits, on track to achieve the Company’s $850 million fiscal 2025 yearend objective.

•

Strong projected margin on recent signings – In the quarter, projected pretax income
margins associated with total signings were in the high-single-digit range, which aligns
with levels achieved throughout fiscal 2023 and fiscal 2024 and reflects the Company’s
focus on margin expansion.

•

Double-digit growth in Kyndryl Consult – In the first quarter, Kyndryl Consult
revenues grew 10% year-over-year and 14% in constant currency. Kyndryl Consult
signings grew 49% year-over-year in constant currency in the first quarter, and havegrown 31% year-over-year in constant currency over the last twelve months.

•

Other – In April, an appeals court overturned a judgment against IBM in litigation
brought by BMC Software for which IBM might have sought indemnification from
Kyndryl. All costs and benefits, including any reserve reversals, related to this litigation
are included in the Company’s reported results and excluded from its adjusted results.

Raising Fiscal Year 2025 Outlook
Kyndryl is raising its adjusted earnings outlook for its fiscal year 2025, which runs from April 2024
to March 2025:•

Adjusted EBITDA margin of at least 16.3% compared to its prior outlook of at least
16.2%. This represents a year-over-year increase of at least 160 basis points.
2

•

Adjusted pretax income of at least $460 million compared to its prior outlook of at least$435 million. This represents a year-over-year increase of at least $295 million.

Kyndryl is reaffirming its outlook for constant-currency revenue growth of (2%) to (4%), whichreflects actions by Kyndryl to reduce certain inherited zero-margin and low-margin revenue
streams. Based on recent exchange rates, the Company’s outlook again implies fiscal 2025
revenue of $15.2 to $15.5 billion. The Company continues to expect to deliver year-over-year
constant-currency revenue growth in the fourth quarter of the fiscal year, and the Company
continues to expect to generate adjusted free cash flow of approximately $300 million in fiscal
year 2025.
Forecasted amounts are based on currency exchange rates as of July 2024.
Earnings Webcast
Kyndryl’s earnings call for the first fiscal quarter is scheduled to begin at 8:30 a.m. ET on August 1,
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 August 1, 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 ofenterprise customers in more than 60 countries. The Company designs, builds, manages andmodernizes 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 factincluded 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(which does not assume any acquisitions or divestitures), are forward-looking statements. Suchforward-looking statements often contain words such as “aim,” “anticipate,” “believe,”“contemplate,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “opportunity,” “plan,”“position,” “predict,” “project,” “should,” “seek,” “target,” “will,” “would” and other similar words orexpressions 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 materiallyfrom those suggested by forward-looking statements as a result of risks and uncertainties which
include, among others: failure to attract new customers, retain existing customers or sell additional
services to customers; failure to meet growth and productivity objectives; competition; impacts ofrelationships with critical suppliers and partners; failure to address and adapt to technologicaldevelopments and trends; inability to attract and retain key personnel and other skilled employees;
3impact of economic, political, public health and other conditions; damage to the Company’s
reputation; inability to accurately estimate the cost of services and the timeline for completion ofcontracts; service delivery issues; the Company’s ability to successfully manage acquisitions anddispositions, 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 theCompany to obtain, retain and extend necessary licenses; the impairment of our goodwill or longlived assets; risks relating to cybersecurity, data governance and privacy; risks relating to noncompliance with legal and regulatory requirements; adverse effects from tax matters andenvironmental 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; theimpact of currency fluctuations; risks related to the Company’s spin-off from IBM; 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, 2024, 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 releasebecause the Company is unable to predict with reasonable certainty some individual componentsof 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 Chaitmanlori.chaitman@kyndryl.com
Media Contact:
Ed Barbini
edward.barbini@kyndryl.com

4

Table 1
KYNDRYL HOLDINGS, INC.
CONSOLIDATED INCOME STATEMENT(in millions, except per share amounts)

Revenues$

Cost of services
Selling, general and administrative expenses
Workforce rebalancing charges
Transaction-related costs
Interest expense
Other expense
Total costs and expenses$

Income (loss) before income taxes
Provision for income taxes
Net income (loss)

$

$

$

Earnings per share data
Basic earnings (loss) per share
Diluted earnings (loss) per share$

Weighted-average basic shares outstanding
Weighted-average diluted shares outstanding

Three Months Ended June 30,
2024
2023
3,739
$
2,934
657
36
20
28
—
3,675

$

64
53
11

$

0.05
0.05

$

230.5
235.8

5

$

$

4,193
3,449
720
58
42
29
5
4,302
(109)
32
(141)

(0.62)(0.62)
227.9
227.9

Table 2
SEGMENT RESULTS
AND SELECTED BALANCE SHEET INFORMATION(dollars in millions)Three Months Ended June 30,
Segment Results
Revenue
United StatesJapan
Principal Markets1
Strategic Markets1
Total revenue
Adjusted EBITDA2
United StatesJapan
Principal Markets
Strategic Markets
Corporate and other3
Total adjusted EBITDA

Balance Sheet Data
Cash and equivalents
Debt (short-term and long-term)

2024
$

$
$

$

$

2023
986
569
1,315
869
3,739

$

133
83
241
120
(21)
556

$

June 30,
2024
1,269
3,239

$

$

$

1,164
610
1,391
1,027
4,193

Year-over-Year GrowthAs
Constant
Reported
Currency
(15%)
(7%)
(5%)
(15%)
(11%)

(15%)
6%
(5%)
(14%)
(8%)

236
100
151
149
(24)
612

March 31,
2024
1,553
3,238

Principal Markets is comprised of Kyndryl’s operations in 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. Kyndryl’s operations inAustralia/New Zealand transitioned from Principal Markets to Strategic Markets in the quarter ended June 30, 2024; historical segment
information has been updated to reflect this change.
22024 amounts include workforce rebalancing charges of $15 million in United States, $1 million in Japan, $5 million in Principal
Markets, and $15 million in Strategic Markets.
3
Represents net amounts not allocated to segments.
1

6

Table 3
KYNDRYL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS(dollars in millions)Three Months Ended June 30,
2024
2023
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization
Depreciation of property, equipment and capitalized software
Depreciation of right-of-use assets
Amortization of transition costs and prepaid software
Amortization of capitalized contract costs
Amortization of acquisition-related intangible assets
Stock-based compensation
Deferred taxes
Net (gain) loss on asset sales and other
Change in operating assets and liabilities:
Deferred costs (excluding amortization)
Right-of-use assets and liabilities (excluding depreciation)
Workforce rebalancing liabilities
Receivables
Accounts payable
Taxes
Other assets and other liabilities
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Capital expenditures
Proceeds from disposition of property and equipment
Acquisitions and divestitures, net of cash acquired
Other investing activities, net
Net cash used in investing activities

$

$

$

11

$

(141)

127
70
310
107
7
24
17
27

210
91
325
138
8
22
26
29

(363)
(65)
7
163
(122)
(9)
(358)
(48)

(418)
(103)
(23)
53
(143)
(25)
(222)
(173)

$

(122)
24
(46)
(22)
(166)

$

$

$

(38)
(7)
(6)
(51)

$

(30)
(7)
(1)
(38)

Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net change in cash, cash equivalents and restricted cash

$
$

(17)
(281)

$
$

(15)
(339)

Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period

$
$

1,554
1,273

$
$

1,860
1,521

Supplemental data
Income taxes paid, net of refunds received
Interest paid on debt

$
$

54
40

$
$

65
46

$

Cash flows from financing activities:
Debt repayments
Common stock repurchases for tax withholdings
Other financing activities, net
Net cash provided by (used in) financing activities

$

7

$

(100)
6
—
(19)
(113)

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 toprovide 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 (loss) is defined as pretax income (loss) excluding transaction-related costs and benefits,charges related to ceasing to use leased / fixed assets, charges related to lease terminations, pension costs other thanpension servicing costs and multi-employer plan costs, stock-based compensation expense, amortization of acquisitionrelated intangible assets, workforce rebalancing charges incurred prior to March 31, 2024, impairment expense,
significant litigation costs and benefits, and currency impacts of highly inflationary countries. The Company’s fiscal year
2025 outlook for adjusted pretax income includes approximately $100 million of anticipated workforce rebalancing
charges. 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 andamortization (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 andbenefits, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation
expense, workforce rebalancing charges incurred prior to March 31, 2024, impairment expense, significant litigation costs
and benefits, and currency impacts of highly inflationary countries. The Company’s fiscal year 2025 outlook for adjusted
EBITDA includes approximately $100 million of anticipated workforce rebalancing charges. 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 byrevenue.
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 sharesused to calculate diluted earnings (loss) per share (GAAP) when the inclusion of dilutive shares has an anti-dilutive effectfor 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, payments related to workforce rebalancing charges incurred prior to
March 31, 2024, 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 incurand service debt. We believe adjusted free cash flow is a useful supplemental financial measure to aid investors inassessing 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. The
calculation involves estimates and judgments to gauge the extent of a customer’s commitment. We calculate this basedon 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 timingof signing a small number of larger outsourcing contracts, as well as the length of those contracts. The conversion ofsignings 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.

8

Reconciliation of net income (loss) toadjusted pretax income (loss), adjusted EBITDA,
adjusted net income (loss) and adjusted EPS(in millions, except per share amounts)
Net income (loss) (GAAP)
Provision for income taxes
Pretax income (loss) (GAAP)1
Workforce rebalancing charges incurred prior to March 31, 2024
Charges related to ceasing to use leased/fixed assets and leaseterminations
Transaction-related costs
Stock-based compensation expense
Amortization of acquisition-related intangible assets
Other adjustments2
Adjusted pretax income (non-GAAP)Interest expense
Depreciation of property, equipment and capitalized software
Amortization of transition costs and prepaid software
Adjusted EBITDA (non-GAAP)Net income (loss) margin
Adjusted EBITDA margin

$
$

$

$

Adjusted pretax income (non-GAAP)
Provision for income taxes (GAAP)Tax effect of non-GAAP adjustments
Adjusted net income (non-GAAP)
Diluted weighted average shares outstanding$

Diluted earnings (loss) per share (GAAP)
Adjusted earnings per share (non-GAAP)$$$

Three Months Ended June 30,
2024
2023
11 $
53
64 $
—
9
20
24
7
(32)
92
28
127
310
556
0.3%
14.9%

$

$

92
(53)
(8)
31
235.8

$

0.05
0.13

$
$

$

(141)
32
(109)
58
10
42
22
8
16
47
29
210
325
612
(3.4%)
14.6%
47
(32)
(15)
0
227.9
(0.62)
0.00

1

Includes lower depreciation expenses resulting from the change of useful life of information technology equipment effective April 1,
2024 (a net year-over-year benefit of $60 million)
2
Other adjustments represent pension costs other than pension servicing costs and multi-employer plan costs, significant litigation costs
and benefits, and currency impacts of highly inflationary countries.
Reconciliation of cash flow from operations
to adjusted free cash flow (in millions)
Cash flows from operating activities (GAAP)
Plus: Transaction-related payments (benefits)
Plus: Workforce rebalancing payments related to charges incurred prior
to March 31, 2024
Plus: Significant litigation payments
Plus: Payments related to lease terminations
Less: Net capital expenditures
Adjusted free cash flow (non-GAAP)

Signings (in billions)
Signings1
1

$

$

$

Three Months Ended June 30,
2024
2023
(48)
$
5
21
4
—
(98)
(116)

$

Three Months Ended June 30,
2024
2023
3.1
$

(173)
42
79
33
7
(94)
(106)

2.8

Signings for the quarter ended June 30, 2024 increased by 11%, and 14% in constant currency, compared to the quarter ended June30, 2023.

9