Fiscal Year 2024
Annual ReportKyndryl (NYSE: KD) is the world’s largest IT infrastructure services provider,r, 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.

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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-K(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2024or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________ to _______________________
001-40853(Commission file number)
Kyndryl Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware(State or other jurisdiction of incorporation or organization)

86-1185492(IRS employer identification number)

One Vanderbilt Avenue, 15th Floor
New York, New York
(Address of principal executive offices)

10017(Zip Code)212-896-2098(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class

Common stock, par value $0.01 per share

Trading symbol(s)Name of each exchange
on which registeredKD

New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒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 Actof 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 tosuch filing requirements for the past 90 days. Yes ☒ 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). Yes ☒ 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 ☒Non-accelerated filer ☐Accelerated filer ☐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 withany new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firmthat prepared or issued its audit report ☒If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant includedin the filing reflect the correction of an error to previously issued financial statements. ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $3.4 billion, based on the closing priceon September 29, 2023, the last day of business of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock
Exchange.
The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding at May 23, 2024 was 230,513,437.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s Proxy Statement relating to the registrant’s 2024 Annual
Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

IndexPage

PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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28
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 6. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . 31
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . 106
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . 108
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 108
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
PART IV
Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

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PART I
Item 1. Business.
Our Company
Kyndryl Holdings, Inc. (“we,” “Kyndryl” or the “Company”) is a leading technology services company and thelargest IT infrastructure services provider in the world, serving thousands of enterprise customers and with operations inover 60 countries. We have a long track record of helping enterprises navigate major technological changes, particularly
by enabling our customers to focus on the core aspects of their businesses during these shifts while trusting us with theirmost critical systems. Our purpose is to design, build and manage secure and responsive private, public and multi-cloudenvironments to serve our customers’ needs and accelerate their digital transformations.
We provide engineering talent, operating solutions and insights derived from our knowledge and data around IT
systems. This enables us to deliver advisory, implementation and managed services at scale across technology
infrastructures that allow our customers to de-risk and realize the full value of their digital transformations. We do thiswhile embracing new technologies and solutions and continually expanding our skills and capabilities, as we help
advance the vital systems that power progress for our customers. We deliver technology services capabilities, insights
and depth of expertise to modernize and manage IT environments based on our customers’ unique needs. We offer
services across domains such as cloud services, core enterprise and zCloud services, applications, data and artificial
intelligence (“AI”) services, digital workplace services, security and resiliency services and network and edge services as
we continue to support our customers through technological change. Our services enable us to modernize and manage
cloud and on-premises environments as “one” for our customers, enabling them to scale seamlessly.
To deliver these services, we rely on our team of skilled practitioners, consisting of approximately 80,000
professionals. Since our large and diversified customer base operates in multiple industries and geographies, we utilize a
flexible labor and delivery model with a balanced mix of global and local talent as needed to meet customer-specificneeds, regulatory requirements and data protection and labor laws. Our employees leverage their deep engineeringexpertise and extensive experience operating complex and heterogeneous technology environments to drive service
quality, intellectual property development and our long-term trusted customer relationships.
As described in “— Our Customers,” we have many customer relationships that are decades long, as we
provide high-quality, mission-critical services that are core to operations with customers that represent the backbones of
their respective industries. These customers entrust us to deliver the services they need and to manage their complex
environments so that they can achieve their business objectives.
We partner with a broad ecosystem, including a wide range of hyperscale cloud providers, system integrators,
independent software vendors and technology vendors from startups to market leaders. This enables us to serve ourcustomers with contemporary technology capabilities that best fit their needs and open new avenues for growth. This is
all underpinned by our ability to integrate and operate mission-critical technology at scale using deep engineeringexpertise and intellectual property.
Our approach has enabled us to reach significant scale, with $16.1 billion in revenue in fiscal year 2024, which
ended March 31, 2024. We are focused on driving revenue growth with sustainable margins by extending our leadershipin the markets in which we operate while investing in our capabilities and expanding our high-value, next-generation
services consistent with customer needs.
Kyndryl’s Spin-off
In November 2021, our former parent company, International Business Machines Corporation (“IBM”,“Parent” or “former Parent”) effected the spin-off (the “Separation” or the “Spin-off”) of the infrastructure services unit
(the “Kyndryl Businesses”) of its Global Technology Services segment through the distribution of shares of Kyndryl’s
common stock to IBM stockholders (the “Distribution”). On November 3, 2021, the Separation was achieved throughthe former Parent’s pro rata distribution of 80.1% of the shares of common stock of Kyndryl to holders of the former
Parent’s common stock as of the close of business on the record date of October 25, 2021. Kyndryl’s stock began trading3

as an independent company on November 4, 2021, and IBM disposed of its 19.9% retained interest in Kyndryl common
stock in the year following the Spin-off.
Our Industry and Market Opportunity
We operate in an industry that provides services for the technology environments that power customers’
businesses. These services span areas such as management of mission-critical systems across dedicated data centers andmultiple clouds. As customers advance their digital transformations, they are looking for partners that understand theirbusiness objectives and unique digital journeys and have the skills to engineer and operate the IT environments to enable
their transformations. Our long-standing position as an informed and trusted partner, with decades-long relationships andleading capabilities, provides us with the knowledge and expertise to help existing and new customers realize their
future.
The markets for these services are large and dynamic. We estimate that these markets, which are a subset of thetotal IT services market, collectively represent a $586 billion opportunity in calendar year 2024. Growth in this market isdriven by services that are aligned to customers’ transformations, including public cloud managed services, dataservices, security services, intelligent automation services and managed services for edge environments.
Several trends underpin the growth of our market, including:•Greater demand for digital transformation services. Companies continue to digitally transform to deliver
better customer experiences and compete more effectively, which drives the need for services to support
modernization of IT within the enterprise. This trend has expanded in recent years as organizations look tofurther their digital capabilities and new technologies proliferate. While customers seek to transform, skills
availability often represents a challenge, with lack of skills often being an impediment to transformation of the
IT environment.

•

Ongoing migration to cloud. Companies continue to move workloads to the cloud, adopting new capabilities
for flexibility, workload portability and management. Public cloud is an increasingly critical component ofenterprise IT strategy, and hybrid and multi-cloud technologies offer flexibility to achieve security,
performance and cost savings needed for critical workloads. These transitions are often complex, withcompanies frequently seeking assistance from service providers. The extension of cloud services to multiple
environments in different locations has given rise to distributed cloud and migration of workloads to theseinfrastructures that have a greater fit for purpose.

•

Rapid data growth. As economies have evolved digitally, significantly increasing data volume, management of
this data has become much more complex. The challenge for many organizations is how to collect, harness andgovern this data for insights, including by leveraging AI and generative AI, and realizing data readiness as adifferentiator. Generating AI insights at scale requires establishing data foundations, architectures andlarge-language model operations frameworks. In order to leverage advanced capabilities such as AI, generative
AI and machine learning, enterprises additionally need to address data privacy, compliance, security,
multi-cloud data management and data governance across physical and virtual layers of the IT estate.

•

Increasing need for secure systems. As technology environments become increasingly complex and online,
remote and distributed work environments persist, cybersecurity will remain of paramount importance asthreats proliferate. Breaches in security can have severe, lasting financial and reputational consequences on
businesses. In response, businesses continue to build out their cybersecurity efforts, using service providers toaugment their capabilities. Enterprises seek service providers that can deploy the expertise and resources
needed to manage their growing cybersecurity needs with an efficient and comprehensive view of their IT
environment.

•

Accelerating pace of technological advancement. As companies adopt new technologies, such as AI andgenerative AI, for improved productivity, customer experience, operational agility, business performance andinnovation, they often face challenges in complexity to integrate these new technologies with their existing IT
estates. As a result, the required skills, integration burden and cost in end-to-end operational management often

4increases. As generative AI is disrupting businesses at an accelerated pace, adopting new technologies requires
a well-designed IT environment orchestrated to effectively realize business objectives.
Our Services
We provide advisory, implementation and managed services in and across a range of technology domains to
help our customers manage and modernize enterprise IT environments in support of their business and transformation
objectives. Our services are differentiated based on our expertise, quality of service, innovation, and intellectual property
and data around IT patterns across customers in the following domains:•

Cloud Services: We design, build and provide managed services for our customers’ multi-cloud environments.
We apply a mix of skilled practitioners, intelligent automation and modern service management principles ofSite Reliability Engineering, AI for IT operations (“AIOps”), Infrastructure as Code and DevOps. We help
enterprises optimize their use of hyperscale cloud providers in a unified environment, seamlessly integrating
services delivered by independent software vendors (“ISVs”), large public cloud providers, internal platforms
and other technologies.

•

Core Enterprise & zCloud Services: We establish and operate modern technology infrastructure on behalf ofenterprise customers to enable their current and future growth and profitability objectives, whether they want tomodernize their existing infrastructure, integrate their existing infrastructure with hyperscale cloud providers, or
migrate to a new platform. We support a range of enterprise architectures, including mainframe environments,
distributed computing, enterprise networks and storage environments.

•

Application, Data & AI Services: We provide end-to-end enterprise data services, including datatransformation, data architecture and management, data governance and compliance and data migration. We
support chief digital officers, chief information officers (“CIOs”) and chief technology officers (“CTOs”) ingoverning the vast quantities of enterprise data across internal and external sources to drive their digitalstrategies, transactions and business objectives and to enable the implementation of AI and generative AI tools,
while maintaining security, ethical standards and compliance with country-specific data protection regulations.
We provide services to design, build, manage and automate the IT environments for enterprise applications as
they migrate to the cloud. Our services help CIOs and CTOs unlock the full value of leading third-party
enterprise resource planning systems (e.g., Oracle and SAP) and packaged applications through the use of AI
and software-defined technologies.

•

Digital Workplace Services: Our digital workplace services provide the technology infrastructure, mobility,
security and access solutions to support a global workforce that is constantly evolving. Our services include
enterprise mobility solutions that provide users with the ability to work seamlessly across environments andlocations.

•

Security & Resiliency Services: We provide comprehensive enterprise cybersecurity services for chief
information security officers (“CISOs”) and chief risk officers, including insights, protection, detection,
response and recovery to support the security of our customers’ hybrid IT estates, data and operations.
Concurrently, we provide resiliency services that include a mix of business continuity planning and cloud-based
disaster recovery capabilities (composed of experts, digital tools, automation and failover environments). These
services allow our customers to operate without issue or disruption in response to attacks, outages, natural
disasters and geopolitical events.

•

Network Services & Edge: We provide network and edge services to help customers meet their technologicaland commercial requirements for connectivity and compute across their digital environments. Our strategy andassessment services help evaluate customers’ network needs for their multi-cloud environments, while our
network transformation and managed services allow customers to realize benefits of the latest software-defined
network technologies and wireless technologies. We deliver these services with a proprietary framework andarchitecture coupled with proof of concepts to then implement and manage enterprise networks with theappropriate economics.

5

Our advisory and implementation services are branded as “Kyndryl Consult,” span all six of the practices
described above, and represented approximately 15 percent of our total revenue for the year ended March 31, 2024. In
the area of AI and generative AI, we both (i) apply AI and machine learning to deliver services through our Kyndryl
Bridge operating platform and (ii) enable our customers to deploy AI and generative AI solutions through our dataarchitecture, data governance, network and security services.
Our Competitive Strengths
We are the largest IT infrastructure services provider in the world. We are a recognized leader in many of theservices we provide. We are known for our technology integration and modernization expertise – advising, designing,building and managing complex technology environments. Our global, high-quality service delivery is underpinned byexperienced and highly-trained practitioners who deliver our capabilities to our customers on a daily basis. Importantly,
our culture of customer service excellence – especially in times of crisis, from pandemics to natural disasters,
cyber-attacks and power outages – carries on from our heritage through our people. Given our unique capabilities, scale,intellectual property and engineering talent, we are positioned to partner with enterprises for their future across a rangeof technologies, use cases and business strategies to help them maximize the return on their technology investments anddigital transformations.
Our competitive strengths stem from our intellectual property and data around IT patterns, our employees’
experience and knowledge, our mission-critical expertise and our broad ecosystem of partners:•

We are a leader in technology services. We are the largest provider of IT infrastructure services and arerecognized by research analysts as a leader in key service areas. Through our delivery capabilities, AI thataugments our people and underpins our Kyndryl Bridge operating platform, and scale, we provide
mission-critical services to a diversified customer base. We possess significant experience in virtually allindustries, gained through collaboration with customers over 30 years designing, building and managing
operating environments for their IT systems. Our highly skilled workforce provides the expertise (e.g.,
approximately 41,000 hyperscale cloud provider certifications) to securely and reliably handle many of themost complex issues. We also have unique intellectual property applicable to IT environments, as reflected byour portfolio of more than 3,300 patents.

•

We consistently deliver performance and reliability for complex environments. Our expert practitioners andtalented engineers provide services through modern ways of working, such as Agile and DevSecOps. Together
with our customers and partners, we co-create solutions to complex real-world business problems, leveraging
Kyndryl Vital, our design-led co-creation experience. Additionally, our unique intellectual property andindustry-leading technology platforms utilize contemporary approaches to IT operations to provide reliable andefficient solutions for each customer’s operating model. These capabilities allow us to execute with secure andcompliant operating and delivery models at scale, driving high-quality performance and customer satisfaction.
We realize high-quality performance across thousands of service-level agreements and consistently achieve
top-tier customer satisfaction and advocacy.

•

We deliver insights at scale, supported by unique automation capabilities, end-to-end orchestration ofprocesses and application of AI. Our ability to deliver superior outcomes for customers is driven by ourcapacity to leverage our data around IT patterns and insights, derived from multiple technology environments
across customer engagements. We apply machine learning, combined with our practitioner expertise, to derive
unique insights used to service customers, enhance our offerings and produce our next-generation services. For
example, we are recognized leaders in the use of automation and operational AI in the delivery of our services,
executing more than 100 million automated actions per month in the IT environments we manage, whichenables greater quality and efficiency for us and our customers. We leverage our operational AI approach andset of technologies, along with intellectual property that we apply and continually evolve to develop predictive
actions to prevent issues before they arise.

•

We are a recognized leader in managed services for cloud and on-premises environments and services suchas security and resiliency. We offer a range of high-value capabilities including cloud services and security andresiliency services, providing us with a sustainable competitive advantage when helping customers transform6

their technology environments. Our multi-cloud management capabilities are differentiated by our ability todeliver an integrated view of our customers’ diverse technology environments and to provide our services andsolutions digitally. We offer integrated services between the cloud and on-premises environments and manage
the world’s largest mainframe estate.
•

We offer an integrated ecosystem to help customers adopt and run increasingly heterogeneous sets oftechnologies. As customers pursue multiple cloud-based technology partners, applications and capabilities,
integration is increasingly critical for customers to manage and orchestrate the technology environments
required to run their businesses and achieve their broader objectives. We provide holistic services acrossthousands of diverse technologies, delivering end-to-end integration across public and private / on-premises
cloud platforms and other full-stack technology solutions. Our robust ecosystem of strategic global alliances
and technology partners, including large public cloud providers, independent software vendors and otherplayers in the technology stack, allows us to provide industry-leading technologies and capabilities for ourcustomers.

Our Strategies
Our strategy is centered on our ability to build and enrich trusted relationships with customers and technology
partners, differentiating Kyndryl through our proven ability to create and deploy scale-derived intellectual property,
provide mission-critical expertise across industries and partner with a broad ecosystem for contemporary capabilities thatbest suit customers’ needs. We have a strong and long-standing foundation developed by governing and managing
complex technology environments, including a range of third-party technologies (e.g., SAP, VMware, Red Hat, Dell andServiceNow). We regularly introduce new capabilities with a highly curated ecosystem of technology providers,
including strategic relationships with Microsoft, Google Cloud and Amazon Web Services announced since ourSpin-off. Through these alliances, we are developing more services to expand the role we play with existing customers
and to access new customers and markets.
We have a long track record of running customers’ technology environments, enabling them to focus on thecore aspects of their businesses. Given the nature of the work we do, we have a unique perspective on the operating
paradigms that enable the high-quality technology environments which our customers have come to rely on for theirmost critical systems. This position enables us to meet customers where they are in their unique digital transformations,work alongside our customers to take them where they want to be and in turn enable them to realize the full, at-scalevalue of that journey. Underpinning all of this are our intellectual property, mission-critical expertise across industries
and a broad ecosystem of technology alliances.
Our focus is centered on the following strategic tenets:•

Scale insights and intellectual property. We are investing to position ourselves at the forefront of developing
and innovating the services and operating paradigms for the evolution and integration of mission-criticaltechnology, further expanding our existing intellectual property in differentiated areas. Our depth of experience
implementing and operating complex architectures across technology sets has yielded valuable experience andintellectual property. We have more than 3,300 patents that relate to various areas of running complex
technology environments, including patents related to multi-cloud management, orchestration, integrated
monitoring, issue triage and resolution and other areas that enable quality of service. Our mission-criticalexpertise across all industries, augmented by our automation platforms that draw on our IP and data, is a key
differentiator in managing complex technology environments.

•

Diverse ecosystem. As an independent entity, we have embraced a broad ecosystem of strategic partnerships
with a wider set of technology and services companies. We are investing in an ecosystem of technology
providers and corresponding skill-sets that are increasingly relevant as enterprises digitize and transform theirbusiness models, building on our existing base of certifications across many market-leading technologies. In
parallel, we are extending our operating, governance and compliance models to this broader set of technologies
to integrate and provide end-to-end capabilities for our customers as they digitize and evolve theirenvironments.

7•

Digitally consumable services models. Looking ahead, we see opportunity to further expand in areas where wecan serve customers through consumption models that allow them to experience our services digitally. Thesemodels will combine our Kyndryl Bridge platform – an open integration platform that delivers IT solutions byleveraging Kyndryl’s core strengths, data-driven insights and expertise, to create an uninterrupted path between
a digital business and the technology that delivers it – with our technology governance and capabilities from ourecosystem partners for ease-of-use and scalability, tailored to the needs of specific customer segments.

To execute these strategies, our operating model increasingly reflects that of a flat, fast and focused services
company, centered around our customers’ success. We are pursuing an investment and co-investment strategy focusedon building and maintaining world-class teams, developing aligned intellectual property and automation, and leveraging
our ecosystem of technology alliance partners.
To accelerate our return to profitable growth, we are aggressively executing on our “three-A”
initiatives – Alliances, Advanced Delivery and Accounts. We believe our implementation of these strategic priorities
will enhance the services we provide to our customers and will make significant positive contributions to our financial
performance, both in the near term and over the next several years. Our global teams are leveraging our partnerships
with leading technology vendors, further strengthening the automation we deploy in delivering our services, andaddressing elements of our business with substandard margins as follows:•

Alliances initiative – Driving signings, certifications and revenues with our new ecosystem partners andcapabilities. We leverage our relationships with key hyperscale cloud providers and other leading technology
vendors to expand our cloud and other offerings in the market, and the range of technology solutions we canoffer to, and implement for, our customers. Since our Spin-off, we have announced business alliances with
Microsoft, Amazon Web Services, Google Cloud, SAP, Dell, Cisco, Cloudflare and ServiceNow among others.
We continue to expand the cloud-related capabilities we offer to customers and are growing the number of ourhyperscale cloud provider certifications.

•

Advanced Delivery initiative – Transforming service delivery through upskilling and automation. Our expanded
use of automation and other technology tools allows us to further strengthen the quality of services we deliver
to our customers, drive efficiency in our operations, and redeploy professionals in our organization to serve newrevenue streams and backfill attrition as they arise. Our increased use of automation and AI within our delivery
operations helps to reduce costs across the entire organization.

•

Accounts initiative – Addressing elements of our business with substandard margins. We are working totransform the profitability of certain revenue streams that represent a meaningful portion of our business. For
instance, we frequently expand the scope of customer relationships by adding higher-value services andleveraging our new ecosystem partners’ capabilities. When necessary, we reduce scope by removing, or not
renewing, unprofitable elements of a contract. We reduce costs by applying our Advanced Delivery tools andprocesses to replace labor-intensive and/or customized services with automated and/or more standardized
solutions. When managed-services contracts are renegotiated and renewed, we adjust pricing and other terms toenhance our margins. Given the mission-critical nature of our services and our long-standing relationships, weare experiencing an openness among our customers to find solutions. On the rare occasion when no other
resolution is available for a situation with an unsustainable margin profile, we will allow a contract to end
without renewing it, and we will optimize the cost to serve until expiration.

In fiscal 2025, we intend to continue accelerating our transformation through our three-A’s initiatives, continue
growing Kyndryl Consult and optimize our costs and expenses in all areas of our business, from service delivery tocorporate functions. Kyndryl Consult, which represented approximately 15 percent of our revenue for the year ended
March 31, 2024, represents a range of advisory and implementation services that we provide to customers, across all sixof our practices and all of our geographic segments. We expect these initiatives to propel us toward profitable growthand enable us to deliver more value to customers and stockholders.
Our corporate citizenship strategy is at the heart of Kyndryl’s purpose to power human progress. We aim tocreate a sustainable and inclusive future by driving sustainable business practices, and positive social impact at scale. As

8an independent company, Kyndryl is embracing environmental stewardship, fostering social inclusivity and promoting
good governance practices.
In September 2023, Kyndryl published its inaugural Corporate Citizenship Report outlining ourcommitments. This includes achieving net zero greenhouse gas emissions by 2040 and a 50% reduction in global
emissions including our value chain by 2030 aligned with the Science Based Targets initiative. The commitment
reinforces Kyndryl’s dedication to operating responsibly as it built the foundation of the program globally.
Beyond our environmental commitments, Kyndryl is focused on building a diverse workforce and an inclusive
and equitable culture. Our approach to our workplace consists of empowering employees to advance their careers
through ongoing training and upskilling. Kyndryl has published its human rights and modern slavery statement andlaunched the Kyndryl Foundation, which delivers philanthropic grants for community development programs.
With respect to governance matters, Kyndryl also leverages industry best practices to govern its quality
management system, processes and tools to enable operations to meet the standards of compliance and responsible
business practices that clients and partners expect. We also maintain a Code of Conduct for directors, executive officers
and employees which summarizes our policies addressing anti-harassment, anti-discrimination, retaliation prevention,
physical security and cybersecurity, confidentiality and data privacy, and prevention of fraud, waste and abuse.
Our Customers
Our customer relationships across a broad range of industries demonstrate the deep level of trust that we haveearned and the role we play as a partner that provides technical expertise, insight and intellectual property to solve
customer challenges. We are the trusted advisor and partner to thousands of customers worldwide, in technologyintensive and often highly regulated environments, managing mission-critical technology environments across a wide
range of industries.
•

Nearly 50 percent of our revenue is derived from companies in the financial services industry, where we serve
hundreds of global, multinational and regional banks, insurance companies, mutual fund complexes, credit cardand transaction processors and providers of other financial services.

•

Approximately 20 percent of our revenue is generated from technology, media and telecom companies.

•

Nearly 15 percent of our revenue is from retail and travel companies.

•

More than 10 percent of our revenue is generated from the industrial sector, which includes some of the largest
automotive manufacturers in the world.

Our revenues are concentrated in the industries mentioned above, but our revenues are diversified across a
broad set of customers. In fiscal year 2024, our top five customers accounted for approximately 10% of our revenue.
As companies engage in their digital journeys, they often face a key impediment because of the skills andexpertise needed to realize their transformations. This, in part, is brought on by the increasing complexity of enterpriseenvironments, the incorporation of new technologies and the deployment of different operating models. While many
companies have strengthened their technology teams, they have also encountered difficulties in sourcing the breadth ofexpertise needed for their environments and leveraged service providers to address their needs. Companies will benefit
from selecting service providers that have greater insight into their environments and needs, which advantages partners
like Kyndryl who have industry-leading scale and long-standing customer relationships.
Through decades of collaboration with customers, we have developed deep relationships as we supported thetechnology environments that advanced their business agendas. Examples include:
Implementation of hybrid cloud and automation tools: Kyndryl executed a five-year contract with a U.S.
healthcare services company to provide mission-critical IT managed services and accelerate its digital transformation
with the aim of enhancing the patient and caregiver experience. Under this agreement, our customer will use Kyndryl

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Bridge to integrate AIOps and automation capabilities. As part of this collaboration, Kyndryl will deliver and support
evolving IT capabilities via a built-for-purpose dedicated command center. Enabled by Kyndryl-managed services
experts, the command center will focus on providing the highest levels of quality and reliability to support our customer
in delivering the highest levels of safe patient care. Our customer will also tap into Kyndryl’s broad set of technologies
and skills, including Kyndryl Consult and its global strategic partnership with Microsoft, to migrate critical workloads,
resulting in a more modern and resilient hybrid cloud infrastructure.
Complex mainframe transformation, moving applications to the cloud: We extended our partnership with aleading telecommunications provider in the UK to collaborate on a cutting-edge program to move a number of its critical
mainframe applications to the cloud. The ten-year partnership, which draws on our hyperscale cloud provider
capabilities and partner ecosystem, will allow the customer to reduce mainframe operating costs and energy
consumption. In moving to the cloud, our customer’s mainframe applications will become more digital with application
programming interfaces and micro-services capabilities, to help integrate the value of data across its systems and drive
innovation through automation. Migrating from mainframes to cloud extends the usefulness and lifespan of theseapplications in a modern, micro-services led, cloud-centric way and helps to unlock intelligent data insights within these
key applications.
Large-scale transformation to cloud: We partnered with a large, European financial institution to help it
migrate from a predominantly on-premises, classic infrastructure environment to a cloud-based infrastructure, utilizing
both private and public clouds. We provided the expertise and support to navigate this digital transformation while
maintaining and improving quality of service as we moved over 1,000 applications. We also deployed a new Kubernetes
container-based environment and management capabilities to increase workload portability and flexibility. This work
enabled the customer’s platform to run with increased digital agility and efficiency, embedding strong data security
within the new cloud-based infrastructure and providing alignment to the existing infrastructure environment. The
customer’s transformation has produced clear business benefits, from new products and services that are brought tomarket faster, to an increase in sales through online channels.
Modernization of the technology environment: Based on a relationship spanning almost two decades, wepartnered with a large European bank to help launch a ten-year transformational program to increase operational agility
and efficiency by optimizing the customer’s critical infrastructure, reducing complexity, migrating to hybrid cloud andreducing operational costs. We reduced IT infrastructure complexity by redesigning critical infrastructure architecture,including networks, storage, virtualization and data backup for improved efficiency, enabled ‘scalable’ hybrid cloud byimplementing and updating existing systems to a hybrid cloud solution supported by Red Hat and transformed legacy IT
services by modernizing tools and the operating model for deployment of IT services. The customer will benefit frommodern IT infrastructure including cloud and mainframes that supports their core banking services and treasury
functions.
Digital transformation across the enterprise: We collaborated with a large material sciences company in North
America to support their mission-critical IT infrastructure globally, providing integrated management for environmentsthat include hybrid cloud infrastructure, network, security and end-user services. Building on our history of collaboration
with this customer, we are working to accelerate their digital transformation. We are helping our customer build
foundational capabilities for their digital journey, powered by data, analytics and AI and machine learning integrated
into core business processes and connected through a flexible and secure network.
Digitization for flexibility: Our customer, a large Japanese transportation company, was engaged in atechnology-driven transformation to establish a flexible IT environment using hybrid cloud that evolves with changing
business needs. We worked with the customer to build an integrated private and public cloud with the same
virtualization architecture and a management capability that unifies operations and evolves with the business. Throughour collaboration, we created an integrated infrastructure to meet our customer’s current and future needs bymodernizing its on-premises, off-premises and network environments as well as its management platform. We deployedsoftware-defined networks across the environment and automation to realize improved quality and business continuity.
Our work helps support our customer’s efforts to become one of the most valued and preferred transportation companies
in the world.

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Sales and Marketing
Our customer engagement and brand positioning are focused on deepening our existing customer relationships,
attracting and winning new customers and creating an ecosystem built on go-to-market relationships with leading cloudand other technology providers, advisors and integrators to offer best-in-class advisory, implementation and managed
services tailored to each existing and new customer’s environment and requirements.
Customer-centric account approach. We have dedicated account coverage teams within our global operating
structure. The teams leverage our intellectual capital and tools underpinned by insights and proven practices derived
from operating at scale. Senior account leaders orchestrate the teams and have end-to-end accountability from sale todelivery for customers. They tailor the full suite of our services to customers’ needs to deliver value and businessoutcomes across a wide range of technology environments. Account leaders are supported by dedicated, multidisciplinary technical sales and delivery teams, consulting teams, as well as by shared services teams, to support aneffective and efficient engagement. This account coverage model ensures consistent and reliable delivery of services forour existing relationships over the lifetime of current and renewal contracts. In addition, the model supports the potential
expansion of existing relationships based on our deep industry perspective and expertise and knowledge of customers’
unique needs. Finally, this account-based model seeks to build and expand existing relationships with line-of-businessbuyers, as they have become critical decision makers working alongside our customers.
Customer growth and new customer acquisition. In line with our customer-centric approach, we are focusedon co-creating and innovating with customers to advance and deepen our relationships. We leverage our broad base ofexpertise, capabilities and partners to prototype, test and develop innovative solutions across various approaches andtechnologies. Additionally, we offer Kyndryl Consult capabilities in advisory, implementation and transformation
services to help customers enhance and evolve their technology environments. We deploy our talent, thought leadership,
proven practices, intellectual capital and partnership ecosystem as part of our project engagements to mature them into
longer-tail managed services opportunities. In addition, we attract and develop new customers across the globe via
account-based marketing, insights derived from operating at scale and direct sales teams with years of sector-specificexperience and proven practices to generate unique insights for customers. As we gain new customers, we apply our
account coverage model to expand our relationships and footprint over time.
Partnership and alliance ecosystem. We are continuing to enhance and develop strategic partnerships withcompanies in the ecosystems most relevant to our customers’ digital transformations. This includes building new routes
to market across these ecosystems to serve as a multiplier, enabling us to expand business via partners such as public
cloud providers, ISVs, technology providers (ranging from established, scaled players to growth-stage start-ups), system
integrators, business consulting firms and business services providers. These relationships bring value to our customers
through broader access to best-in-class solutions that are tailored for their unique technology environments and digitaljourneys. We have several key partnerships, including with Microsoft, Google, Amazon Web Services, SAP, VMware,
Cisco, Dell Technologies, Oracle, Cloudflare and ServiceNow that accelerate broader market participation, joint solution
development and investment in skills and certification enhancements for Kyndryl. We have established dedicated teams
to support our key alliance partners and will continue to co-create and co-market with them to deliver value to ourmutual customers, driving differentiation in the market with industry-leading technology and Kyndryl services.
Our Competition
We compete in a market for technology services along with many other providers, ranging from small, highly
specialized companies that serve a limited number of customers to large, multi-service enterprises with many clients.
These service providers include incumbents that have expanded their offerings to migration and management ofcloud-based environments; companies that utilize labor-based models and leverage talent pools primarily in lower-cost
countries that have grown to offer a broad range of services with a worldwide presence; and advisory-focused system
integrators specializing in bringing together disparate technology environments so that they function as one. Many ofthese companies offer a mix of advisory, implementation and managed services across infrastructure, application andbusiness processes. Examples include Atos, DXC, Fujitsu, HCL, Infosys, Tata Consultancy Services and Wipro, among
others.

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The basis of competition involves multiple factors, with key elements including quality of service, technicalskills and capabilities, industry knowledge and experience, financial value, ability to innovate, intellectual property andmethods, contracting flexibility and speed of execution. Long-standing partnerships and knowledge of the customers’
technology environment often enable service providers to better address requirements and future needs. Our
decades-long collaboration with customers provides us with the insights to realize distinctive performance that supports
their digital transformation. We deliver unique value by providing intellectual property derived from insights at scale,
deploying mission-critical expertise and leveraging a broad ecosystem – while building and strengthening partnerships toenhance the customer experience.
We position ourselves uniquely, leveraging a core strength in governance and management of complex IT
infrastructure environments, delivered through a global footprint. Our services support customers’ digitaltransformations, as we help accelerate their journeys by providing instrumented and engineered technology
environments. We offer choice with consistency through an operating paradigm and management model built from ourexperiences with complex technologies. These capabilities uniquely position us as both a leading partner and competitor
within the same market.
Intellectual Property
We are focused on developing leading-edge ideas and technologies and see innovation as a source ofcompetitive advantage. We have more than 3,300 patents that are related to our business model. A key pillar of ourstrategy is continuing to invest in knowledge and intellectual property to support extending our services to a broader
ecosystem of technology providers and customer challenges and solutions. Our decades of experiences working with ourcustomers has generated operational insights, creating intellectual property that we leverage for the benefit of ourcustomers and deploy at scale. We rely on intellectual property protections in the countries in which we operate, alongwith contractual restrictions, to establish and protect our offerings and services and other applicable rights. In addition,
we license third-party software along with other technologies that are used in the provision of or incorporated into someelements of our services. We possess a significant intellectual property portfolio, which we believe is important to our
success. However, we believe our business as a whole is not materially dependent on any particular intellectual property
right or any particular group of patents, trademarks, copyrights or licenses.
Additionally, we own or have rights to various trademarks, logos, service marks and trade names that are usedin the operation of our business. We also own or have the rights to copyrights that protect the content of our products andother proprietary materials.
Human Capital Resources
Employees
As of March 31, 2024, we had approximately 80,000 employees in more than 60 countries. Approximately 90%
of our employees work outside the U.S., with workforce hubs in India, Poland, Brazil, Japan, Czechia and Hungary.
Our people advance the vital systems that power human progress. Our global workforce is highly skilled,reflective of the work we do for our customers’ digital transformations and in support of their mission-criticaloperations. Kyndryl professionals bring deep industry and technical expertise along with a passion for continuous
learning. Our employees, whom we call Kyndryls, have earned certifications through our learning platform and alliancepartners, which provide access to curriculums that span strategic skills, cloud, AI, analytics, design thinking, quantum
computing and security. At Kyndryl, we aim to be:•

Restless to power the future; eager to learn and innovate•

Empathetic role models; serving with trust and transparency•

Focused on shared success to achieve both business results and key human capital goals – driving a deep
analytic understanding of people, technology and customer challenges

12•

Fast, agile change leaders with courage to be bold and judgment to manage risk•

Dedicated to building empowered, inclusive and accountable teams; recruiting, retaining and developing
diverse talent that enhances performance and capabilities

We support new ways of working and accelerated career progression promoting innovation throughout ourorganization. Our Kyndryl Way is founded on our Vision to become an “employer of choice” and is founded on our aim
to advance what’s next for ourselves and our customers.
Our people are at the center of designing, building and managing the technology environments that the world
depends on every day. We will continue to invest in our teams to be at the heart of technological change for ourcustomers. We offer comprehensive market-competitive rewards and benefits programs including health benefits, mental
health support and employee assistance plans, retirement savings benefits, paid time off and recognition programs,
among others.
Talent and Culture; Inclusion, Diversity and Equity
Our business is centered around our people, and our talent strategy revolves around our ability to best serve ourcustomers through ongoing investment in talent and skill development. We attract, develop and retain talent in acompetitive and dynamic environment. We are focused on optimizing the employee experience at Kyndryl through:•Attracting: Elevating the Kyndryl brand and creating a candidate experience where diversity, equity andinclusion are at the forefront of the hiring process. We proactively source talent both internally and externallywith advanced capabilities to ensure that we have the right talent, at the right time, in the right place•

Developing: Providing employees with transparency to understand the skills, capabilities and experiences
essential to our growth and their progression over their career by ensuring access to resources specificallydesigned to advance critical skills and competencies•

Retaining: Communicating our strategy and building our Kyndryl culture; establishing programs that arefocused on rewarding value creation; recognizing performance; and driving accountability balanced withworkplace flexibility, well-being, continuous learning and a diverse, inclusive and equitable environment

We are committed to building the technical careers of the future and have made investments in training andskills to enable our people to be relevant, experienced and technically positioned to serve our customers on their mostcomplex challenges. We continue to expand our certifications and accreditations each year through consistent investment
in skill development around emerging technologies and key areas for growth.
Health, Safety and Well-Being
Protecting the health, safety and well-being of our employees is a top priority. We have an experienced Healthand Safety team comprised of medical doctors, nurses, industrial hygiene, safety and workforce health experts. This
team has implemented a health and safety management system that monitors our locations for compliance with all local
health and safety regulations, minimizes workplace health and safety risks, and provides for safe and healthy workplaces
so our employees can do their best work.
Available Information
We are required to file annual, quarterly and current reports, proxy statements and other information with the
U.S. Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains reports, proxy andinformation statements and other information regarding issuers that file electronically with the SEC at
http://www.sec.gov. The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, proxy statements and amendments to those documents filed or furnished pursuant to Section 13(a)or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are also available free of charge on the
Company’s internet website at www.kyndryl.com as soon as reasonably practicable after those documents areelectronically filed with or furnished to the SEC.

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We routinely post on or make accessible through our corporate website at www.kyndryl.com and Investor
Relations website at https;//investors.kyndryl.com information that may be material or of interest to our investors,
including news and materials regarding our financial performance, business developments, investor events and otherimportant information regarding the Company. You may automatically receive email alerts and other information about
the Company when you enroll your email address by visiting the “Investor Email Alerts” section under the “Resources”
section at https://investors.kyndryl.com. We encourage investors, media, our customers, consumers, business partners
and others interested in our Company to review the information we provide through these channels. The information
contained on the websites referenced above is not, and shall not be deemed to be, incorporated into this filing or any of
our other filings with the SEC.
Executive Officers of the Registrant:
Our executive officers as of the date hereof are as follows:
Martin Schroeter. Mr. Schroeter, 59, was appointed our Chief Executive Officer in January 2021 and was
appointed as Chairman of the Board in October 2021 in connection with the Spin-off. Previously, Mr. Schroeter servedin a variety of business line and finance executive positions at IBM, including Senior Vice President of Global Markets
from 2018 until 2020, responsible for IBM’s global sales, customer relationships and satisfaction and worldwide
geographic operations and overseeing IBM’s marketing and communication functions and building IBM’s brand andreputation globally, and Senior Vice President and Chief Financial Officer from 2014 until 2017, leading IBM’s financefunction. Earlier in his career, Mr. Schroeter served as General Manager of IBM global financing, managing a total asset
base in excess of $37 billion, and had served numerous roles in Japan, the United States and Australia. Mr. Schroeter
received his MBA from Carnegie Mellon University and his undergraduate degree from Temple University.
David Wyshner. Mr. Wyshner, 57, was appointed our Chief Financial Officer in September 2021. From
March 2020 until his appointment as our Chief Financial Officer, Mr. Wyshner served as the Chief Financial Officer at
XPO Logistics, Inc., where he led all financial functions for the global transportation and contract logistics company.
Prior to that, Mr. Wyshner served as the Chief Financial Officer at Wyndham Hotels & Resorts, Inc. from May 2018 to
December 2019, and as its senior advisor from December 2019 to March 2020. He served as Executive Vice President
and Chief Financial Officer of Wyndham Worldwide Corporation, from which Wyndham Hotels was spun-off, from
August 2017 to May 2018. From August 2006 to June 2017, Mr. Wyshner served as the Chief Financial Officer of Avis
Budget Group and also served as Avis Budget Group’s president from January 2016 to June 2017. Mr. Wyshnerreceived his MBA from the Wharton School of the University of Pennsylvania and his BA in applied mathematics fromYale University.
Elly Keinan. Mr. Keinan, 59, was appointed our Group President in March 2021. Since September 2020,
Mr. Keinan has served as a venture partner at Pitango Venture Capital, focusing on scaling the success of growth stage
technology companies, and as an advisor to Sumitomo Corporation. Prior to that, Mr. Keinan served a variety of
executive roles at IBM from July 1987 to June 2020, including General Manager of IBM North America and Chairmanof IBM Japan, and held top leadership roles in Latin America and Europe. Mr. Keinan currently serves on the boards ofCellebrite, Ottopia and United Way of New York City. Mr. Keinan received his MBA from University of Miami HerbertBusiness School and his Bachelor of Science in Computer Science and Electrical Engineering from Rensselaer
Polytechnic Institute.
Maryjo Charbonnier. Ms. Charbonnier, 54, was appointed our Chief Human Resources Officer in July
2021. From January 2015 until her appointment, Ms. Charbonnier served as the Chief Human Resources Officer at
Wolters Kluwer, where she was responsible for the design and implementation of all human resources strategies, policies
and processes. Prior to that, Ms. Charbonnier served as the Chief Human Resources Officer at Broadridge Financial
Solutions from August 2008 to December 2014. From August 1995 to August 2008, Ms. Charbonnier was an HR
executive in a variety of leadership roles at PepsiCo, including Vice President for Talent Sustainability for PepsiCo
Foods Americas. Ms. Charbonnier received her MBA from Southern Methodist University and her undergraduate degreefrom Catholic University.

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Edward Sebold. Mr. Sebold, 59, was appointed our General Counsel and Secretary in October 2021 inconnection with the Spin-off. From March 2012 until his appointment as our General Counsel, Mr. Sebold served as
Assistant General Counsel at IBM, leading several global legal functions at IBM, including teams that worked withservices, IBM's Watson Health, litigation and mergers and acquisitions. Prior to joining IBM in 2012, Mr. Sebold was apartner at Jones Day in the firm’s Cleveland and Houston offices. Mr. Sebold serves on the board of the Pro Bono
Partnership. Mr. Sebold received his JD from University of Michigan and his Bachelor of Arts in economics from John
Carroll University.
Vineet Khurana. Mr. Khurana, 51, was appointed our Controller in May 2021 and to the additional office ofVice President in November 2021. Since July 2020, Mr. Khurana had been serving as Chief Financial Officer of IBM’s
Global Business Services unit. Prior to assuming this role, Mr. Khurana was the Chief Financial Officer of IBM Europe
from March 2018 through July 2020 and the Vice President and Chief Financial Officer of IBM United Kingdom andIreland from July 2016 until March 2018. Earlier in his IBM tenure, Mr. Khurana held roles of increasing responsibility
spanning IBM’s financial strategy and IBM’s Global Financing division. Mr. Khurana also serves as an External
Governor and a member of the Infrastructure and Finance Committee of the University of Portsmouth, United Kingdom.
Mr. Khurana received his MBA from University of Warwick, United Kingdom and his undergraduate degree in
Chemical Engineering from Manipal Institute of Technology, India.
Item 1A. Risk Factors.
Our operations and financial results are subject to various risks and uncertainties, including but not limited tothose described below, that could adversely affect our business, reputation, financial condition, results of operations,cash flows and the trading price of our common stock.
Risks Relating to Our Business
An inability to attract new customers, retain existing customers and sell additional services to customers could
adversely impact our revenue and results of operations.
Our ability to maintain or increase our revenues and profit may be impacted by a number of factors, including
our ability to attract new customers, retain existing customers and sell additional, comparable or, in the case of accounts
with substandard margins, services with greater gross margins to our customers. We may incur higher customer
acquisition or retention costs as we seek to grow our customer base and expand our markets. Moreover, to the extent weare unable to retain and sell additional services to existing customers, including as part of our initiative to address
existing accounts that have substandard margins, our revenue and results of operations may decrease. Our customer
contracts typically have an average duration of over five years and, unless terminated, may be renewed or automaticallyextended on a month-to-month basis. Our customers have no obligation to renew their services after their initial contract
periods expire, and any termination fees associated with an early termination may not be sufficient to recover our costs
associated with such contracts. The loss of business from any of our major customers, whether by the cancellation ofexisting contracts, the failure to obtain new business or lower overall demand for our services, could adversely impact
our revenue and results of operations.
We may not meet our growth and productivity objectives.
Our goals for profitability and growth rely upon a number of assumptions, including our ability to makesuccessful investments to grow and further develop our business and simplify our operations. The risks and challenges
we face in connection with our strategies include expanding our professional services capability, expanding in areas
where we currently have a small presence and ensuring that our services remain competitive in a rapidly changing
technological environment. We may invest significantly in key strategic areas to drive long-term revenue growth andshare gains. These investments may adversely affect our near-term revenue growth and results of operations, and wecannot guarantee that they will ultimately be successful or produce any or all of the long-term benefits that we expect.
Additionally, emerging business and delivery models may unfavorably impact demand and profitability for our solutions
or services. If we are unable to find partners to develop cutting-edge innovations in a highly competitive and rapidly

15

evolving environment or are unable to implement and integrate such innovations with sufficient speed and versatility, we
could fail in our ongoing efforts to maintain and increase our revenue and profit margins.
Competition in the markets in which we operate may adversely impact our results of operations.
Our competitors include incumbents that have expanded their offerings to migration and management ofcloud-based environments; companies that use labor-based models and leverage talent pools primarily in lower-cost
countries that have grown to offer a broad range of services with a worldwide presence; and advisory-focused system
integrators specializing in bringing together disparate technology environments. Our competitiveness is based on factors
including quality of services, technical skills and capabilities, industry knowledge and experience, financial value, ability
to innovate, intellectual property and methods, contracting flexibility, and speed of execution. If we are unable tocompete based on such factors, our results of operations and business prospects could be harmed.
This competition may decrease our revenue and place downward pressure on operating margins in our industry,
particularly for contract extensions or renewals. As a result, we may not be able to maintain our current revenue andoperating margins, or achieve favorable operating margins, for contracts extended or renewed in the future. If we fail tocreate and sustain an efficient and effective cost structure that scales with revenues during periods with declining
revenues, our margins and results of operations may be adversely affected.
Companies with whom we have alliances in certain areas are or may become competitors in other areas. In
addition, companies with whom we have alliances also may acquire or form alliances with competitors, which could
reduce their business with us. If we are unable to effectively manage these complicated relationships with alliance peers,
our business and results of operations could be adversely affected.
Our business could be adversely impacted if we do not successfully manage and/or develop our relationships withcritical suppliers and partners.
Our business employs a wide variety of products and services from a number of suppliers and partners aroundthe world. Our relationships with them are critical to our ability to provide many of our services and solutions, and ourrelationships with alliance partners allow us to enter new markets and take advantage of existing ecosystems built andsustained by our alliance partners. There can be no assurance that we will be able to maintain such relationships or thatthe financial terms of our relationships will remain affordable. Among other things, such partners may in the future
decide to compete with us, form exclusive or more favorable arrangements with our competitors or otherwise reduce ouraccess to their products or services. If we are not able to maintain, or realize the expected benefits from, our relationships
for any reason, we may be less competitive, and our ability to offer attractive services and solutions to address the needs
and demands of our customers and our results of operations could be adversely affected. Further, changes in the businesscondition (financial or otherwise) of our suppliers or partners could subject us to losses and affect our ability to bring ourofferings to market. Additionally, the failure of our suppliers and partners to deliver products and services in sufficientquantities, in a timely manner, and in compliance with all applicable laws and regulations could adversely affect ourbusiness. Any defective products or inadequate services received from suppliers or partners could reduce the reliabilityof our services and harm our reputation.
If we are not able to continue addressing and adapting to technological developments and trends that serve customer
demands, our growth plans, market share and financial performance could be negatively affected.
Our growth strategy depends in part on our ability to continue to develop and implement services and solutions
that anticipate and respond to rapid and continuing changes in technology, offerings and industry standards to serve theevolving demands of our customers. If we fail to respond successfully to technology challenges and customer demands
in a timely or cost-effective manner or fail to effectively leverage new technologies into our services and solutions, or if
our competitors or other third parties respond to such challenges more quickly or successfully than we do, the demandfor our services and solutions may diminish. We have made and expect to continue to make investments in newtechnologies, including in AI and generative AI. We sometimes dedicate a significant amount of resources to ourdevelopment efforts before knowing to what extent our investments will result in services and solutions the market will
accept. In addition, investments in technology systems may not deliver the benefits or perform as expected, or may be

16

replaced or become obsolete more quickly than expected, which could result in operational difficulties or additionalcosts. If we do not sufficiently invest in new technologies and adapt to industry developments, if we are unable tocommercialize them in our services and solutions, evolve, expand and scale them with sufficient speed and versatility, or
if we do not make the right strategic investments to respond to these developments and successfully drive innovation,
our results of operations and our ability to develop and maintain a competitive advantage and to execute on our growthstrategy could be negatively affected.
If we are unable to attract and retain key personnel and other skilled employees, our business could be harmed.
If any of our key employees were to leave, we could face substantial difficulty in hiring qualified successors
and could experience a loss in productivity while any successor obtains the necessary training and experience. Although
we have arrangements with some of our executive officers designed to promote retention, our employment relationships
are generally at-will, and key employees may leave us. We intend to continue to hire additional highly qualified
personnel but may not be able to attract, assimilate or retain similarly qualified personnel in the future.
In addition, much of our future success depends on the continued service, availability and integrity of skilledemployees, including technical, sales and staff resources. Skilled and experienced personnel in the areas where wecompete often are in high demand, and competition for their talents is often intense. Our inability to retain skilledemployees could intensify the adverse impact of a shortage of critical skills. Changing demographics and labor
workforce trends also may result in a shortage of or insufficient knowledge and skills. Further, as global opportunities
and industry demand shift, realignment, training and scaling of skilled resources may not be sufficiently rapid or
successful. Any failure to attract, integrate, motivate and retain these employees could harm our business. Alternatively,from time to time, we may have more people than we need in certain skill sets, geographies or compensation levels. In
such cases, we have, and may in the future, rebalance our workforce, including reducing the rate of new hires andincreasing involuntary terminations, which actions could negatively impact employee engagement and retention.
Due to our global presence, our business and operations could be adversely impacted by economic, political, publichealth and other conditions.
We are a globally integrated company and have operations worldwide. Our results of operations could be
affected by economic and political changes in those countries and by macroeconomic changes, including recessions,inflation, currency fluctuations between the U.S. dollar and non-U.S. currencies and adverse changes in traderelationships among those countries. Further, international trade disputes could create uncertainty. Tariffs andinternational trade sanctions resulting from these disputes could affect our ability to move goods and services acrossborders, or could impose added costs to those activities. Measures taken to date by us to mitigate these impacts could bemade less effective should trade sanctions or tariffs change. In addition, any widespread outbreak of an illness, pandemicor other local or global health issue, natural disasters including those that could be related to climate change impacts, or
uncertain political climates, international hostilities, geopolitical conflict or any terrorist activities, could adversely affectcustomer demand, our operations and supply chain, and our ability to source and deliver solutions to our customers. For
example, the COVID-19 pandemic created significant volatility, uncertainty and economic disruption. In the current
macroeconomic environment, customers continue to balance short-term challenges and opportunities for transformation.
While some customers have accelerated their digital transformation and increased their expenditures, the short-term
priorities of other customers continue to be focused on operational stability, flexibility and cash preservation, and assuch, we may experience some disruptions in transactional performance.
Damage to our reputation could adversely impact our business.
Our reputation may be susceptible to damage by events such as significant disputes with customers, internal
control deficiencies, delivery failures, cybersecurity incidents, government investigations or legal proceedings or actionsof current or former customers, directors, employees, competitors, vendors, alliance partners or joint venture partners. If
we fail to gain a positive reputation as leader in our field, or if our brand image is tarnished by negative perceptions, ourability to attract and retain customers and talent could be impacted.

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If we are unable to accurately estimate the cost of services and the timeline for completion of contracts, theprofitability of our contracts may be materially and adversely affected.
Our commercial contracts are typically awarded on a competitive or “sole-source” basis. Our bids are priced
upon, among other items, the expected cost to provide the services. We are dependent on our internal forecasts andpredictions about our projects and the marketplace, and, to generate an acceptable return on our investment in thesecontracts, we must be able to accurately estimate our costs to provide the services required by the contract and tocomplete the contracts in a timely manner. We face a number of risks when pricing our contracts, as many of our
projects entail the coordination of operations and workforces in multiple locations and utilizing workforces withdifferent skill sets and competencies across geographically diverse service locations. In addition, revenues from a small
portion of our contracts are recognized using the percentage-of-completion method, which requires estimates of total
costs at completion, fees earned on the contract, or both. This estimation process, particularly due to the technical natureof the services being performed and the long-term nature of certain contracts, is complex and involves significant
judgment. Adjustments to original estimates are often required as work progresses, experience is gained and additional
information becomes known, even though the scope of the work required under the contract may not change. Moreover,as inflation can increase both our labor and non-labor input costs, the profitability of our contracts could be negatively
impacted if we are unable to adjust our pricing or costs to take inflation into account. Furthermore, if we fail toaccurately estimate the effort, costs or time required to complete a contract, the profitability of our contracts may bematerially and adversely affected.
Service delivery issues could adversely impact our business and operating results.
We have customer agreements in place that include certain service-level commitments. If we are unable to meetsuch commitments, we may be contractually obligated to pay penalties or provide these customers with service credits
for a portion of the service fees paid by our customers. However, we cannot be assured that our customers will accept
these penalties or credits in lieu of other legal remedies that may be available to them. Our failure to meet ourcommitments could also result in customer dissatisfaction or loss and have an adverse effect on our business, reputation,
financial condition and results of operations.
In addition, as we work on projects to advance the digital transformations of our customers’ businesses, thescale and complexity of these IT transformation projects present risks in management and execution. Our profitability
depends on the ability of subcontractors, vendors and service providers to deliver their products and services in a timely
manner, at the anticipated cost, and in accordance with the project requirements, as well as on our effective oversight of
their performance. Certain customer work requires the use of unique and complex structures and alliances, some ofwhich require us to assume responsibility for the performance of third parties whom we do not control. Any of thesefactors could adversely affect our ability to perform and subject us to additional liabilities, which could have an adverse
effect on our relationships with customers and on our results of operations.
Risks from acquisitions and dispositions include integration challenges, failure to achieve objectives, the assumptionof liabilities and higher debt levels.
We may decide to make acquisitions and dispositions in furtherance of our strategy. Such transactions canpresent significant challenges and risks, and there can be no assurances that we will identify or manage such transactions
successfully or that strategic opportunities will be available to us on acceptable terms or at all. The related risks include
our failure to achieve strategic objectives, our failure to achieve anticipated revenue improvements and cost savings, ourfailure to retain key strategic relationships of acquired companies, our failure to retain key personnel and our assumptionof liabilities related to litigation or other legal proceedings involving the businesses in such transactions, as well as our
failure to close planned transactions. Such transactions may require us to secure financing, and our indebtedness may
limit the availability of financing to us or the favorability of the terms of available financing. If we do acquire othercompanies, we may not realize all the economic benefit from those acquisitions, which could cause an impairment of
goodwill or intangible assets.

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We could be adversely impacted by our business with government customers.
Our customers include numerous governmental entities within and outside the United States, including foreign
governments and U.S. state and local entities. Some of our agreements with these customers are subject to periodic
funding approval or other government budgetary issues. Funding reductions or delays could adversely impact public
sector demand for our services and can result in payment delays, payment reductions or contract terminations, any ofwhich would have an adverse effect on our business, financial condition, results of operations and/or cash flows. Also,
government contracts are generally subject to extensive and evolving procurement regulations and tend to haveadditional requirements beyond commercial contracts and, for example, may contain provisions providing for higher
liability limits for certain losses and non-performance. Also, compliance violations in one state or locality could result insuspension or debarment as a governmental contractor, could incur civil and criminal fines and penalties, or could
impact our ability to compete for new contracts, which could negatively impact our competitive position, results ofoperations, financial results and reputation.
Intellectual property matters could adversely impact our business.
Our intellectual property rights may not prevent competitors from independently developing services similar toor duplicative of ours, nor can there be any assurance that the resources invested by us to protect our intellectual property
will be sufficient or that our intellectual property portfolio will adequately deter misappropriation or improper use of ourtechnology. Our ability to protect our intellectual property could also be impacted by changes to existing laws, legal
principles and regulations governing intellectual property. Further, we rely on third-party intellectual property rights,
open-source software and other third-party software in providing some of our services and solutions, and there can be noassurances that we will be able to obtain from third parties the licenses we need in the future or retain all of these
intellectual property rights upon renewal, expiration or termination of such licenses. If we cannot obtain, renew or
extend licenses to third-party intellectual property on commercially reasonable terms, or if we must obtain alternative or
substitute technology or redesign services, our business may be adversely affected. Additionally, we cannot be sure that
our services and solutions, or the solutions of others that we offer to our customers, do not infringe on the intellectual
property rights of third parties (including competitors as well as non-practicing holders of intellectual property assets),and these third parties could claim that we, our customers or parties indemnified by us are infringing upon theirintellectual property rights. As we expand our use of AI, there may be uncertainty regarding intellectual property
ownership and license rights of AI algorithms and content generated by AI, and we may become subject to similar
claims of infringement. In addition, we may be the target of aggressive and opportunistic enforcement of patents by third
parties, including patent assertion entities and non-practicing entities. These claims, even if we believe they have no
merit, could subject us to a temporary or permanent injunction or damages, harm our reputation, divert management
attention and resources and cause us to incur substantial costs or prevent us from offering some services or solutions in
the future. Even if we have an agreement providing for third parties to indemnify us for the foregoing claims, theindemnifying parties may be unwilling or unable to fulfill their contractual obligations.
We may be required to record impairment charges to future earnings if our goodwill or long-lived assets become
impaired.
We are required under accounting principles generally accepted in the United States of America (“GAAP”) to
review our goodwill for impairment at least annually, and to review goodwill and long-lived assets when events orchanges in circumstances indicate the carrying value may not be recoverable. Some factors that may be considered
events or changes in circumstances that would require our long-lived assets and/or goodwill to be reviewed for
impairment include a sustained decline in stock price, a substantial decline in business performance or otherentity-specific events such as changes in business management and strategy. We may be required to record non-cash
impairment charges during any period in which we determine that our goodwill or long-lived assets are impaired, which
could adversely affect our results of operations. As of March 31, 2024, our goodwill balance was $805 million, which
represented 8% of total consolidated assets. See Note 10 – Intangible Assets Including Goodwill to our financial
statements included elsewhere in this report for additional information about our goodwill impairment.

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Risks Relating to Cybersecurity, Data Governance and Privacy
Cybersecurity, data governance and privacy considerations could adversely impact our business.
We maintain information, including confidential and proprietary information, in digital form regarding ourbusiness and the business of our customers, business partners, vendors, employees, contractors and other third parties.
We also rely on third-party vendors to provide certain digital services in connection with our business. There are
numerous and evolving risks relating to cybersecurity, data governance and privacy, including risks originating from
intentional acts of criminal hackers, nation states and hacktivists; from intentional and unintentional acts of customers,
business partners, vendors, employees, contractors, competitors and other third parties; and from errors and omissions inprocesses or technologies, as well as the risks associated with an increase in the number of customers, business partners,
vendors, employees, contractors and other third parties working remotely. Computer hackers and others routinely attack
the security of technology products, services, systems and networks using a wide variety of methods, including
ransomware or other malicious software and attempts to exploit vulnerabilities in hardware, software and infrastructure.
Attacks also include social engineering to fraudulently induce customers, business partners, vendors, employees,
contractors and other third parties to disclose information, transfer funds or unwittingly provide access to systems ordata. We are at risk of security breaches not only of our own services, systems and networks, but also those ofcustomers, business partners, vendors, employees, contractors and other third parties.
Cyber threats are continually evolving, making it more challenging to defend against certain threats andvulnerabilities that can persist undetected over extended periods of time. Our services, systems and networks, including
cloud-based systems and other third-party systems and technologies that we maintain on behalf of our customers, may be
used in critical Company, customer or third-party operations, and involve the storage, processing and transmission ofsensitive data, including proprietary or confidential data, regulated data, personal information and intellectual property of
employees, customers and others. These services, systems and networks are also used by customers in heavily regulatedindustries, including those in the financial services, healthcare, critical infrastructure and government sectors.
Cybersecurity attacks or other security incidents relating to our systems or those of our vendors could result in, forexample, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss or destruction ofCompany, customer or other third-party data or systems; theft or import or export of sensitive, regulated or confidential
data including personal information and intellectual property; the loss of access to critical data or systems throughransomware, destructive attacks or other means; and business delays, service or system disruptions or denials of service.
In the event of such actions, we, our customers and other third parties could be exposed to liability (whether contractualor otherwise), litigation, and regulatory or other government inquiries, enforcement actions, fines or penalties, as well as
the loss of existing or potential customers, negative publicity, damage to brand and reputation, damage to ourcompetitive position and other financial loss.
The cost and operational consequences of responding to cybersecurity incidents and implementing remediation
measures could be significant. In our industry, security vulnerabilities are increasingly discovered, publicized andexploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and thepotential cost of response and remediation for us and our customers. In addition, the fast-paced, evolving, pervasive andsophisticated nature of certain cyber threats and vulnerabilities, including increased risks posed by generative AI, and thescale and complexity of our business and infrastructure, make it possible that certain threats or vulnerabilities will beundetected or unmitigated in time to prevent or minimize the impact of an attack on us or our customers. Cybersecurity
risk to us and our customers also depends on factors such as the actions, practices and investments of customers,
business partners, vendors, employees, contractors and other third parties. Cybersecurity attacks or other catastrophic
events resulting in disruptions to or failures in power, information technology, communication systems or other criticalinfrastructure could result in interruptions or delays to Company, customer or other third-party operations or services,financial loss, injury or death to persons or property, potential liability, and damage to brand and reputation. Although, todate, we have not experienced a cybersecurity incident that has had a material adverse effect on us and we continuously
take steps to mitigate cybersecurity risk across a range of functions, such measures cannot eliminate the risk entirely orprovide absolute security. While we continue to monitor for, identify, investigate, respond to, remediate and develop
plans to quickly recover from cybersecurity incidents, notwithstanding our efforts, we may experience a cybersecurity
incident in the future that may have a material adverse impact on the Company.

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As we are a global enterprise, the regulatory environment with regard to cybersecurity, data governance andprivacy issues to which we are subject is increasingly complex and will continue to impact our business, including
through increased risk, increased compliance costs, and expanded or otherwise altered compliance obligations. As ourreliance on data grows, the potential impact of regulations on our business, risks and reputation will grow accordingly.
The enactment and expansion of cybersecurity, data governance and privacy laws and regulations around the globe,
including an increased focus on international data transfer mechanisms and supply chain management; the lack ofharmonization of such laws and regulations; the increase in associated litigation and enforcement activity; the potential
for damages, fines and penalties; and the potential regulation of emerging and new technologies, such as AI andgenerative AI, will continue to result in increased compliance costs and increased risks. Any additional costs andpenalties associated with increased compliance, enforcement and risk reduction could make certain offerings lessprofitable or increase the difficulty of bringing certain offerings to market.
Risks Relating to Laws and Regulations
Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, andviolation of these regulations could harm our business.
We are subject to numerous, evolving, and sometimes conflicting, legal regimes on matters as diverse as
anticorruption, import/export controls, content requirements, cybersecurity, data governance and privacy, trade
restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation,
anti-competition, anti-money-laundering, wage-and-hour standards, employment and labor relations, environmental,
human rights, machine learning and AI. Further, we and the services we provide to customers may be impacted directly
or indirectly by the development and enforcement of laws and regulations in the U.S. and globally that are specificallytargeted at the technology and services sectors. As we expand our customer base and the scope of our offerings, bothwithin the U.S. and globally, we may be further impacted by additional regulatory or other risks, including compliancewith laws relating to corporate taxation, import, export and trade restrictions on technology and services. The global
nature of our operations, including jurisdictions where legal systems may be less developed or understood by us,
business practices and standards which deviate from international standards, and the diverse nature of our operations
across a number of regulated industries, further increases the difficulty of compliance. Additionally, certain laws andregulations including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010 could make us responsible
for acts of our employees, subcontractors, vendors, agents, alliance or joint venture partners, the companies we may
acquire and their employees, subcontractors, vendors and agents, and other third parties with which we associate if theytake actions that violate applicable anti-corruption laws or regulations (whether or not we participated or knew about theactions leading to the violations).
Compliance with diverse legal requirements is costly and time-consuming and requires significant resources.
New and changing laws can also adversely affect the Company’s business by limiting the Company’s ability to offer aservice or feature to customers, imposing changes to the design of the Company’s products and services, impacting
customer demand for the Company’s products and services, and requiring changes to the Company’s supply chain andbusiness. New and changing laws and regulations can also create uncertainty about how such laws and regulations will
be interpreted and applied. Violations of one or more of these regulations in the conduct of our business could result insignificant fines and penalties, disgorgement of profits, enforcement actions or criminal sanctions against us and/or our
employees, contractors or agents, prohibitions on doing business, unfavorable publicity and damage to our reputation.
Violations of these regulations in connection with the performance of our obligations to our customers also could resultin liability for significant monetary damages and restrictions on our ability to effectively carry out our contractual
obligations and thereby expose us to potential claims from our customers. Due to the varying degrees of development of
the legal systems of the countries in which we operate, local laws may not be well developed or provide sufficiently
clear guidance and may be insufficient to protect our rights.
Changes in laws and regulations could also mandate significant and costly changes to the way we implement
our services or could impose additional taxes on our services. For example, changes in laws and regulations to limit
using off-shore resources in connection with our work or to penalize companies that use off-shore resources, which havebeen proposed from time to time in various jurisdictions, could adversely affect our results of operations. Such changes
may result in contracts being terminated or work being transferred on-shore, resulting in greater costs to us.

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Additionally, changes in laws and regulations, including expanding export controls and sanctions resulting fromgeopolitical developments, could impact our business, including imposing limits on where we can conduct operations,parties with whom we can conduct business, and the nature of work that can be performed. Such changes may result in
limitations on existing or future business operations in certain markets, and violations of such laws and regulations could
result in significant fines, penalties and enforcement actions.
Tax matters could impact our results of operations and financial condition.
We are subject to income taxes and withholding taxes in both the United States and numerous foreign
jurisdictions. We calculate and provide for taxes in each tax jurisdiction in which we operate. Tax accounting often
involves complex matters and requires our judgment to determine our worldwide provision for income taxes and othertax liabilities. Our provision for income taxes and cash tax liability in the future could be adversely affected bynumerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower
statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation ofdeferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof,
which could adversely impact our results of operations and financial condition in future periods. The Organization for
Economic Cooperation and Development (the “OECD”) continues to issue guidelines that are different, in somerespects, than long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain
parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact our income taxes. Local
country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal,national or similar forms of government, which may also adversely impact our income taxes. In addition, we are subject
to periodic examinations of our domestic and foreign tax returns by taxing authorities in the jurisdictions in which we dobusiness. While we regularly assess the likelihood of adverse outcomes resulting from these examinations in order todetermine the adequacy of our provision for income taxes, there can be no assurance that the outcomes from these
examinations will not have an adverse effect on the Company’s provision for income taxes and cash flows.
We are subject to legal proceedings and investigatory risks.
As a multinational company with customers and employees around the world, we are or may become involved
as a party and/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedingsthat arise from time to time in the ordinary course of our business. In addition, our former Parent may obtain, or may
seek to obtain, indemnity from us for judgments against it relating to events that occurred prior to the Separation
pursuant to agreements put in place in connection with the Separation. The risks associated with such legal proceedings
are described in more detail in Note 13 – Commitments and Contingencies in the financial statements elsewhere in thisreport. We believe that we have adopted appropriate risk management and compliance programs. Legal and compliancerisks, however, will continue to exist, and additional legal proceedings and other contingencies, the outcome of whichcannot be predicted with certainty, may arise from time to time.
We could incur costs for regulated environmental matters.
We are subject to various federal, state, local and foreign laws and regulations concerning the discharge ofmaterials into the environment or otherwise related to environmental protection. We could incur costs, including cleanup
costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if wewere to violate or become liable under environmental laws and regulations. In addition, if we were to violate or become
liable under these laws and regulations our reputation could be harmed, which could have a negative impact on demandfor our products and services.
Expectations relating to environmental, social and governance considerations could expose us to potential liabilities,
increased costs and reputational harm.
There has been an increasing focus by governments, regulators, investors, employees, customers and otherstakeholders on environmental, social and governance considerations relating to businesses. This includes climatechange and carbon emissions, human rights, diversity, equity and inclusion, responsible supply chain management,
ethics, cybersecurity and privacy concerns. We have established and publicly announced certain goals, commitments and22

initiatives that reflect our current plans and aspirations on corporate citizenship matters, which are based on available
data and estimates and are not guarantees that we will be able to achieve them. The implementation of these goals,
commitments and initiatives is subject to numerous risks, many of which are beyond our control. Examples of such risks
include but are not limited to: the availability and cost of resources and related technologies; the availability of suppliers
and partners that can meet our standards; reliance on third-party performance and data; and our ability to manage
geopolitical disruptions and natural disasters that could impact our employees, customers and businesses. Our failure, or
perceived failure, to achieve our corporate citizenship and other related goals and commitments, maintain our practices,adhere to our public statements, comply with existing and new laws and regulations or meet evolving and varied
stakeholder expectations and standards could adversely affect our reputation, our financial condition and our ability to
attract and retain customers and talent, and expose us to increased scrutiny from the investment community, enforcement
authorities and others.
Risks Relating to Financing and Capital Markets Activities
A lowering or withdrawal of the ratings, outlook or watch assigned to our debt securities by rating agencies may
increase our future borrowing costs, reduce our access to capital and adversely impact our financial performance.
Any rating, outlook or watch assigned could be lowered or withdrawn entirely by a rating agency if, in thatrating agency’s judgment, current or future circumstances relating to the basis of the rating, outlook or watch, such as
adverse changes to our business, so warrant. Any future lowering of our ratings, outlook or watch likely would make it
more difficult or more expensive for us to refinance or obtain additional debt financing. Moreover, a reduction in ourrating to below certain levels could potentially cause certain customers to reduce or cease to do business with us, which
would adversely impact our financial performance.
The commercial and credit environment may adversely affect our access to capital.
Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely
affected if there is a material decline in the demand for our services or in the solvency of our customers or suppliers or if
there are other significantly unfavorable changes in economic conditions. Volatility in the world financial markets could
increase borrowing costs or affect our ability to access the capital markets. These conditions may adversely affect ourcredit ratings.
Our financial performance could be adversely impacted by changes in market liquidity conditions and by customer
credit risk on receivables.
Our customer base includes many worldwide enterprises, from the world’s largest organizations andgovernments to smaller businesses, with a significant portion of our revenue coming from global customers across many
sectors. As a result, our financial performance is exposed to a wide variety of industry sector dynamics worldwide,
including sudden shifts in regional or global economic activity. Our earnings and cash flows, as well as our access tofunding, could be negatively impacted by changes in market liquidity conditions. Additionally, if we become aware of
information related to the creditworthiness of a major customer, or if future actual default rates on receivables in generaldiffer from those currently anticipated, we may have to adjust our allowance for credit losses, which could affect our net
income in the period the adjustments are made.
Our results of operations and financial condition could be negatively impacted by our pension plans.
Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on thevalue of our pension trust assets and our future estimated pension liabilities. As a result, our financial results in any
period could be negatively impacted. In addition, in a period of an extended financial market downturn, we could be
required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact our
financial flexibility. Further, our results could be negatively impacted by premiums for mandatory pension insolvency
insurance coverage outside the United States. Premium increases could be significant due to the level of insolvencies of
unrelated companies in the country at issue.

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We are exposed to currency risk that can adversely impact our revenue and business.
We derive a significant percentage of our revenues and costs in non-U.S. dollar currency environments, and our
results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts
in regional or global economic activity. Fluctuations in foreign currency exchange rates can have adverse effects on ourrevenues, income from operations and net income when items denominated in other currencies are translated orremeasured into U.S. dollars for presentation of our consolidated financial statements. In addition, we have labor andproduct supply agreements where the currency in which our costs are denominated differs from the currency of thecustomer contract. Our hedging strategies may not fully mitigate our currency risk or may prove disadvantageous.
Additionally, large changes in currency exchange rates relative to our functional currencies can increase the costs of ourservices to customers relative to local competitors, thereby causing us to lose existing or potential customers to these
local competitors.
Risks Relating to our Spin-off from IBM
If the Spin-off were determined not to qualify as tax-free for U.S. federal income tax purposes, we could have an
indemnification obligation to IBM, which could adversely affect our business, financial condition and results ofoperations.
If the Distribution were determined not to qualify for non-recognition of gain or loss under Section 355 andrelated provisions of the Internal Revenue Code of 1986 (the “Code”), each stockholder that is subject to U.S. federal
income tax who received our common stock in the Distribution would generally be treated as having received a
distribution in an amount equal to the fair market value of our common stock received, which would generally result in:(i) a taxable dividend to such stockholder to the extent of that such stockholder’s pro rata share of IBM’s current oraccumulated earnings and profits; (ii) a reduction in such stockholder’s basis (but not below zero) in IBM common stock
to the extent the amount received exceeds the stockholder’s share of IBM’s earnings and profits; and (iii) taxable gainfrom the exchange of IBM common stock to the extent the amount received exceeded the sum of such stockholder’sshare of IBM’s earnings and profits and such stockholder’s basis in its IBM common stock.
If, as a result of any of our representations being untrue or our covenants being breached, the Spin-off were
determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, we
could be required to indemnify IBM for the resulting taxes and related expenses. Those amounts could be material. Anysuch indemnification obligation could adversely affect our business, financial condition and results of operations.
In addition, if we or our stockholders engaged in transactions that resulted in a 50% or greater change by voteor value in the ownership of our stock during the four-year period beginning on the date that begins two years before thedate of the Distribution, the Distribution would generally be taxable to IBM, but not to its stockholders, under Section
355(e) of the Code, unless it were established that such transactions and the Distribution were not part of a plan or seriesof related transactions. If the Distribution were taxable to IBM due to such a 50% or greater change in ownership of ourstock, IBM would recognize a gain equal to the excess of the fair market value on the Distribution Date of our common
stock distributed to IBM stockholders over IBM’s tax basis in our common stock, and we generally would be required toindemnify IBM for the tax on such gain and related expenses. Those amounts could be material. Any suchindemnification obligation could adversely affect our business, financial condition and results of operations.
We may experience difficulties as we continue to integrate and update our new enterprise resource planning (“ERP”)
system, and we have identified deficiencies in our internal control related to the information technology generalcontrols in our new ERP environment, which, if not remediated appropriately or timely, could result in adverse
effects to the Company.
During the fiscal year ended March 31, 2024, we implemented a new enterprise resource planning system(“ERP”), which replaced the financial and administrative systems that were provided by IBM following the Spin-off. As
discussed in Part II, Item 9A, in the course of preparing this Annual Report on Form 10-K, management identified
certain control deficiencies associated with the Company’s current year implementation of our ERP in the area of our
information technology general control (“ITGCs”) related to (i) user access and segregation of duty controls that restrict24

user and privileged access to appropriate personnel; (ii) program development and change management controls; and(iii) certain computer operations controls that, when aggregated, are considered to be a material weakness, as that term isdefined in the relevant standards. While the Company has found no evidence that the deficiencies gave rise to systems
changes that were improper or impacted our financial statements for the fiscal year ended March 31, 2024, management
is implementing remedial measures with additional controls and procedures to address the deficiencies. To the extent
management is unable to remediate the identified issue timely, our ability to record, process and report financial
information accurately, and to prepare financial statements within required time periods, could be adversely affected,
which could subject us to litigation or investigations requiring management resources and other expenses, and could
negatively affect investor confidence. As we continue to integrate and update our ERP, we may experience delays,
increased costs, the diversion of management’s attention from day-to-day business operations and other difficulties.
Extended delays could also introduce operational and business risk, including cybersecurity risks, business operations
risks and other complications.
We continue to face a number of risks related to our separation from IBM, which could adversely affect our business,
results of operations and financial condition.
In connection with the Separation, we and IBM entered into various transaction agreements related to theSpin-off. These agreements also govern our relationship with IBM following the Spin-off. We rely on IBM to satisfy its
performance obligations under these agreements. Since the Spin-off, certain contractual disputes have arisen between us
and IBM. We and IBM have commenced arbitration proceedings related to certain of these matters. If the outcome ofthose arbitrations is unfavorable to Kyndryl, if a mutually acceptable commercial resolution cannot be found, if the termsof any resolution of these matters are unfavorable to us, or if IBM is unable or unwilling to satisfy its respective
obligations under these agreements, including indemnification obligations, our business, results of operations andfinancial condition could be adversely affected.
Risks Relating to Our Common Stock and the Securities Market
Certain provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws
and Delaware law may discourage takeovers and limit the power of our stockholders.
Several provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws
and Delaware law may discourage, delay or prevent a merger or acquisition. These include, among others, provisions
that (i) provide for staggered terms for directors on our Board for a period following the Spin-off; (ii) establish advancenotice requirements for stockholder nominations and proposals; (iii) provide for the removal of directors only for cause
during the time the Board is classified; (iv) limit the ability of stockholders to call special meetings or act by writtenconsent; and (v) provide the Board the right to issue shares of preferred stock without stockholder approval. In addition,
we are subject to Section 203 of the Delaware General Corporation Law (“DGCL”), which could have the effect ofdelaying or preventing a change of control that some stockholders may favor.
These and other provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated
By-Laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or athreatened acquisition or change in control, including unsolicited takeover attempts, even though the transaction may
offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market
price. Our Board believes these provisions will protect our stockholders from coercive or otherwise unfair takeovertactics by requiring potential acquirers to negotiate with the Board and by providing the Board with more time to assess
any acquisition proposal. These provisions will apply even if the offer may be considered beneficial by somestockholders and could delay or prevent an acquisition that the Board determines is not in our and our stockholders’ bestinterests.

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Our Amended and Restated Certificate of Incorporation provides that certain courts in the State of Delaware or thefederal district courts of the United States will be the sole and exclusive forum for substantially all disputes between
us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with us or our directors, officers or employees.
Our Amended and Restated Certificate of Incorporation provides, in all cases to the fullest extent permitted bylaw, unless we consent in writing to the selection of an alternative forum, the Court of Chancery located within the Stateof Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any
action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder tous or our stockholders, any action asserting a claim arising pursuant to the DGCL or as to which the DGCL confers
jurisdiction on the Court of Chancery located in the State of Delaware or any action asserting a claim governed by theinternal affairs doctrine or any other action asserting an “internal corporate claim” as that term is defined in Section 115
of the DGCL, or any action asserting a claim arising under the DGCL, our Amended and Restated Certificate ofIncorporation or our Amended and Restated By-Laws. However, if the Court of Chancery within the State of Delaware
does not have jurisdiction, the action may be brought in the United States District Court for the District of Delaware. The
exclusive forum provision provides that it will not apply to claims arising under the Securities Act, the Exchange Act orother federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction. Unless weconsent in writing to the selection of an alternative forum, the federal district courts of the United States of America shallbe the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will bedeemed to have notice of and, to the fullest extent permitted by law, to have consented to the provisions of our Amended
and Restated Certificate of Incorporation described above. The choice of forum provision may limit a stockholder’sability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, other
employees or stockholders, which may discourage such lawsuits against us and our directors, officers, other employees
or stockholders. However, the enforceability of similar forum provisions in other companies’ certificates ofincorporation has been challenged in legal proceedings. If a court were to find the exclusive choice of forum provisioncontained in our Amended and Restated Certificate of Incorporation to be inapplicable or unenforceable in an action, we
may incur additional costs associated with resolving such action in other jurisdictions.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk Management and Strategy
We recognize the critical importance of cybersecurity in upholding the safety and security of our systems,
services and data and maintaining the trust of our customers. Cybersecurity risk management is an important part of, andis integrated into, the Company’s overall enterprise risk management program. We maintain a cybersecurity risk
management program that is designed to identify, assess, manage and mitigate cybersecurity risks and provides aframework for responding to cybersecurity threats and incidents. We continually assess and enhance our cybersecurity
risk management program and our cybersecurity posture to protect the confidentiality, integrity and availability of theCompany’s infrastructure, resources and information and the information that our customers entrust to us.
We designed a multi-faceted risk-management approach based on the National Institute of Standards andTechnology (NIST) Cybersecurity Framework and informed by other industry standards and industry-recognizedpractices to identify and address cybersecurity risks. Our key cybersecurity processes include the following:•Risk-based, layered controls – We regularly assess and adjust our technical controls and methods to identify,
respond to and mitigate emerging cybersecurity risks and use a layered approach with overlapping controls to
defend against cybersecurity attacks and threats to our networks, end-user devices, servers, applications, dataand cloud solutions and the data that our customers entrust to us.

26•

Cybersecurity incident response plan and testing – We have a global incident response process and a dedicatedteam responsible for monitoring, detecting and responding to cybersecurity threats and attacks, whether external
or internal, coordinating across multiple functions, periodically testing our protocols and regularly
communicating and providing reports to our CISO.

•

Information sharing and collaboration – We utilize threat intelligence and security information collected fromvarious sources, including but not limited to partners, suppliers, governments and information sharing andanalysis centers, to identify, protect against, detect and respond to potential cybersecurity threats and events.

•

Training and awareness – We use a combination of online training, including mandatory annual cybersecurity
and privacy courses, educational tools, videos and other ongoing awareness initiatives, including phishing
simulation exercises, throughout the year to foster a culture of security awareness and responsibility among ourworkforce.

•

Third-party supplier risk assessments – Recognizing that our suppliers can be subject to cybersecurity
incidents which may impact us and our customers, our procurement process includes security and risk
assessments to identify and evaluate risk associated with certain key suppliers, including reviewing relevantcybersecurity certifications and third-party audit results, assessing technical and organizational controls andevaluating their risk profile.

We periodically engage third-party security consultants to conduct evaluations of our cybersecurity controls andprocedures, including through penetration testing, third-party audits or consulting on best practices to address newchallenges. These evaluations include testing the design and operational effectiveness of our cybersecurity controls andprocedures. Our internal audit function conducts additional reviews and assessments of our cybersecurity controls andprocedures. Certain results of such assessments and reviews are reported to the Audit Committee and the Board of
Directors as appropriate. We use the findings from these efforts to improve our practices, procedures, and technologies.
Cybersecurity Risk Oversight and Governance
Our Board of Directors is responsible for the overall oversight of our enterprise risk management. The Audit
Committee semi-annually reviews the Company’s enterprise risk management framework, including enterprise risk
management processes, and assists the Board of Directors in its oversight over certain key areas of risks, including
overseeing cybersecurity, data governance and privacy risk and regularly reporting on such matters to the Board. The
Audit Committee and full Board of Directors receive periodic updates from our CISO about Kyndryl’s cybersecurity
policies and practices, cybersecurity developments, trends, risks, notable incidents, mitigation strategies, maturity
initiatives and other developments throughout the year, as well as periodic updates from our CIO, Security & Resiliency
global practice leader and other senior leaders on cybersecurity-related matters.
Our information security program is led by our CISO, who reports to the CIO. Our CISO organization
collaborates closely with key stakeholders across the businesses, including our Security & Resiliency and other global
practice organizations, in developing and implementing our cybersecurity strategy, policy, operations, threat detection
and incident response and remediation. Our information security teams that support these efforts are comprised ofcybersecurity professionals with many years of experience in cybersecurity across multiple sectors, including heavily
regulated industries such as financial services and defense, and many of them hold relevant industry certifications.
Under our global incident response process, cybersecurity incidents are assessed and classified by severity, andsignificant incidents are escalated as appropriate to senior executive leadership. In addition, we have a risk-based
escalation process outside of our regular reporting process to promptly notify the Board of Directors in the event of any
material cybersecurity incident impacting the Company.
Based on the information we have as of the date of this Form 10-K, we do not believe that any cybersecurity
incident experienced by the Company has materially affected or is reasonably likely to materially affect Kyndryl,
including our business strategy, results of operations or financial condition. For additional information aboutcybersecurity risks, see Item 1A. “Risk Factors.”

27

Item 2. Properties.
As of March 31, 2024, we owned or leased approximately 13.3 million square feet of space worldwide, which
excludes certain under-utilized spaces that we inherited from our former Parent at Separation and exited in fiscal years
2023 and 2024. Refer to Note 9 – Leases for more information. The Company will continue to evaluate spacerequirements and identify opportunities to improve operating efficiencies. Below is a summary of the Company’s active
properties.
United States*Japan
Principal Markets
Strategic Markets
Total
Number of Square Feet Number of Square Feet Number of Square Feet Number of Square Feet Number of Square Feet
Locations (in millions) Locations (in millions) Locations (in millions) Locations (in millions) Locations (in millions)Leased .
Owned .
Total . . .
∗

31
3
34

1.2
3.1
4.3

46
—
46

1.1
—
1.1

136
8
144

3.9
0.9
4.8

135
5
140

2.4
0.8
3.2

348
16
364

8.6
4.7
13.3

United States includes our principal executive offices not allocated to the Unites States segment, including our global headquarters located in
New York, New York.

Item 3. Legal Proceedings.
Refer to Note 13 – Commitments and Contingencies to the consolidated financial statements included
elsewhere in this Form 10-K.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities.
Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol KD.
As of May 23, 2024, there were approximately 255,904 stockholders of record of our common stock. This is
not the actual number of beneficial owners of the Company’s common stock as some shares are held in “street name” bybrokers and others on behalf of individual owners.
Since the Separation, we have not paid cash dividends on our common stock. Future dividends, if any, and thetiming of declaration of any such dividends, will be at the discretion of our Board of Directors and will depend upon
many factors including, but not limited to, our results of operations, financial condition, level of indebtedness, capitalrequirements, contractual restrictions, restrictions in our debt agreements and in any preferred stock, business prospects
and other factors that our Board of Directors deems relevant.

28

Stock Performance Graph
The following graphs compare the cumulative total return of holders of our common stock with the cumulative
total return of the S&P 400 Midcap Index and S&P IT Sector Index.
The graph below tracks the performance of a $100 investment in our common stock and in each index from
November 4, 2021, the date our stock commenced regular-way trading on the NYSE, to March 31, 2024.

Kyndryl Holdings, Inc
S&P400 MidCap Index
S&P 400 IT Sector GICS Level 1 Index

11/04/2021
100.00100.00100.0012/31/2021
68.61
98.68
96.43

29

3/31/2022
49.73
93.53
88.54

3/31/2023
55.95
87.23
87.34

3/31/2024
82.49
105.77115.59

The graph below tracks the performance of a $100 investment in our common stock and in each index from
April 1, 2023, the beginning of our fiscal year, to March 31, 2024.
Stock Performance Graph
180

160

140

120

100

80

60

40

20

4/01/2023

6/30/2023

9/30/2023

Kyndryl Holdings, Inc

Kyndryl Holdings, Inc
S&P400 MidCap Index
S&P 400 IT Sector GICS Level 1 Index

S&P400 MidCap Index

4/01/2023 3/31/2024
100.00147.43100.00121.31100.00133.17Item 6. [Reserved]30

12/31/2023

S&P 400 IT Sector GICS Level 1 Index

3/31/2024

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
In January 2022, the Company changed its fiscal year-end to March 31 from December 31. Included below areselected results and year-over-year comparisons for the years ended March 31, 2024 and 2023, and the twelve months
ended March 31, 2022 (unaudited). The Company is presenting results of operations for the year ended March 31, 2023
and unaudited results of operations for the twelve months ended March 31, 2022 because management believes thiscomparison will be helpful to a reader’s understanding of our fiscal year 2024 results. Results for the twelve months
ended March 31, 2022 were derived from our quarterly consolidated financial statements as previously reported. The
following discussion and analysis of our financial condition and results of operations should be read together with our
audited consolidated financial statements and related notes included elsewhere in this report. For further information on(i) the comparisons between the year ended March 31, 2023 and the twelve months ended March 31, 2022 not covered in
the “Segment Results” below, (ii) the comparison between the three months ended March 31, 2023 and the three months
ended March 31, 2022 (the 2022 transition period) and (iii) the year ended December 31, 2021, refer to “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form
10-K for the fiscal year ended March 31, 2023 (the “2023 Form 10-K”).

Year Ended March 31,
2024
2023

(Dollars in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue growth (GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue growth in constant currency(1) . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)TwelveMonths Ended
March 31,2022
(unaudited)$$$

16,052
(6)%
(6)%
(340)
2,367

$
$
$

17,026(7)%
0%(1,374)
1,975

$
$
$

18,317(5)%(5)%(2,039)2,195

Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics. For definitions of these metrics and areconciliation of adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP,
see “⸺Segment Results.”
March 31,2024

(Dollars in millions)

Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,5909,468
1,122

March 31,2023$

11,46410,002
1,462

Organization of Information
Kyndryl Holdings, Inc. was formed as a wholly-owned subsidiary of IBM in September 2021 to hold theoperations of the infrastructure services unit of IBM’s Global Technology Services segment. On November 3, 2021,
Kyndryl separated from IBM through a spin-off that was tax-free for U.S. federal tax purposes. Following the
Separation, Kyndryl became an independent, publicly-traded company and the world’s leading IT infrastructure services
provider.
Financial Performance Summary
Macro Dynamics
In fiscal year 2024, we saw continuing demand for information technology services, despite concerns about
economic growth, increased geopolitical tensions, inflationary pressures and government efforts to stem inflation.
Although government efforts to stem inflation are expected to suppress economic growth, most economists, including
the International Monetary Fund, continue to expect positive global macroeconomic growth in calendar year 2024.

31

Fiscal 2024 Financial Performance
For the year ended March 31, 2024, we reported $16.1 billion in revenue, a decline of 6 percent compared to theyear ended March 31, 2023. The revenue decline was largely attributable to actions the Company has taken to reduce
unprofitable and low-margin components of its customer relationships. United States revenue declined 9 percent, Japanrevenue declined 6 percent, Principal Markets revenue declined 2 percent and Strategic Markets revenue decreased 7
percent, compared to the year ended March 31, 2023. Net loss of $340 million improved by $1.0 billion versus theprior-year period driven by progress on our key initiatives to drive operating efficiencies, increased margins and reduced
transaction-related costs tied to our Separation.
Fiscal 2023 Financial Performance
For the year ended March 31, 2023, we reported $17.0 billion in revenue, a decline of 7 percent when comparedto the twelve months ended March 31, 2022, primarily driven by a seven-point negative impact from currency. Among
our segments, United States revenue was unchanged, Japan revenue declined 13 percent, Principal Markets revenue
declined 13 percent, and Strategic Markets revenue decreased 1 percent compared to the prior twelve-month period, withthe declines primarily due to currency movements. Net loss of $1.4 billion improved by $665 million versus the prior
twelve-month period, primarily driven by lower impairment expense, lower transaction-related costs, and lower cost ofservices as a percentage of revenue, reflecting our progress on our key initiatives.
Basis of Presentation
We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to makeestimates and assumptions that impact the amounts reported and disclosed in our consolidated financial statements andthe accompanying notes. We prepared these estimates based on the most current and best available information, but
actual results could differ materially from these estimates and assumptions.
Prior to November 3, 2021, the accompanying financial statements of Kyndryl were derived from theconsolidated financial statements and accounting records of the former Parent as if the Company operated on astandalone basis during this period and reflect allocations of certain IBM corporate, infrastructure and shared services
expenses, including centralized research, legal, human resources, payroll, finance and accounting, employee benefits,
real estate, insurance, information technology, telecommunications, treasury and other expenses. Where possible, thesecharges were allocated based on direct usage, with the remainder allocated on a pro rata basis of headcount, gross profit,
asset or other allocation methodologies that are considered to be a reasonable reflection of the utilization of services
provided or the benefit received by Kyndryl during the periods presented. The accompanying financial statements
through the Separation date may not be indicative of the Company’s future performance and do not necessarily reflect
what the financial position, results of operations and cash flows would have been had it operated as an independentcompany during the periods presented. All significant intercompany transactions between IBM and Kyndryl prior to the
Separation were included within Net Parent investment on the accompanying Consolidated Financial Statements.
After the Separation on November 3, 2021, the Company’s financial statements for the periods from November
4, 2021, through March 31, 2024, are consolidated financial statements based on our reported results as a standalonecompany. All significant transactions and accounts between Kyndryl entities were eliminated.
Prior to the Separation, our operations were included in the consolidated U.S. federal and certain state and local
and foreign income tax returns filed by IBM, where applicable. Income tax liabilities, including amounts forunrecognized tax benefits related to our activities included in IBM’s income tax returns, were deemed to be immediately
settled with IBM through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net
transfers from Parent in the financing activities section in the Consolidated Statement of Cash Flows. The Company also
filed certain separate foreign income tax returns. For purposes of the historical periods presented on a “carve-out” basis,the income tax provisions have been calculated using the separate return basis, as if we filed separate tax returns.
Post-Separation, the income tax provisions are calculated based on Kyndryl’s operating footprint, as well as our
tax return elections and assertions.

32Within the financial statements and tables presented, certain columns and rows may not add due to the use ofrounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar
amounts.
Segment Results
The following table presents our reportable segments’ revenue and adjusted EBITDA for the years ended
March 31, 2024 and 2023, and the twelve months ended March 31, 2022. Segment revenue and revenue growth inconstant currency exclude any transactions between the segments.

Year Ended March 31,
2024
2023

(Dollars in millions)

Revenue
United States . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Markets . . . . . . . . . . . . . . . . . . . .
Strategic Markets . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . .
Revenue growth in constantcurrency(1) . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA(1)United States . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Markets . . . . . . . . . . . . . . . . . . . .
Strategic Markets . . . . . . . . . . . . . . . . . . . .
Corporate and other(2) . . . . . . . . . . . . . . . . .
Total adjusted EBITDA(1) . . . . . . . . . . .

$

4,295
2,344
5,823
3,590
$ 16,052

$

4,726
2,502
5,957
3,840
$ 17,026

(6)%
$

$

781
361
740
579
(95)
2,367

TwelveMonths Ended
March 31,2022 (unaudited)

$

$

0%
$

$

839
407
371
436
(77)
1,975

4,745
2,866
6,838
3,867
18,317Year-over-Year Change
2024 vs. 2023 2023 vs. 2022

(9)%
(6)%
(2)%
(7)%
(6)%

(0)%
(13)%
(13)%
(1)%
(7)%

(7)%
(11)%
99 %
33 %
NM
20 %

(8)%
(23)%
(4)%
(19)%
NM
(10)%

(5)%
$

$

910
532
387
535
(170)
2,195

NM – not meaningful(1) Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics. See the information below for definitions of these
metrics and a reconciliation of adjusted EBITDA to net income (loss).
(2) Represents net amounts not allocated to segments

We report our financial results in accordance with U.S. 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 they enhance visibility to underlying results and the impact of management decisions on operational
performance, enables better comparison to peer companies and allows us to provide a long-term strategic view of thebusiness going forward.
Revenue growth in constant currency is a non-GAAP measure that eliminates the effects of exchange rate
fluctuations when translating from foreign currencies to the United States dollar. It is calculated by using the averageexchange rates that existed for the same period of the prior year. Constant-currency measures are provided so thatrevenue can be viewed without the effect of fluctuations in currency exchange rates, which is consistent with howmanagement evaluates our revenue results and trends.
Additionally, management uses adjusted EBITDA to evaluate our performance. Adjusted EBITDA is a
non-GAAP measure and defined as net income (loss) excluding income taxes, interest expense, 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 and benefits, pension
expenses 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 currency
impacts of highly inflationary countries. We believe that adjusted EBITDA is a helpful supplemental measure to assist

33

investors in evaluating our operating results as it excludes certain items whose fluctuation from period to period does notnecessarily correspond to changes in the operations of our business.
These disclosures are provided in addition to and not as a substitute for the percentage change in revenue andprofit or loss measures on a U.S. GAAP basis compared to the corresponding period in the prior year. Other companies
may calculate and define similarly labeled items differently, which may limit the usefulness of this measure forcomparative purposes.
The following table provides a reconciliation of U.S. GAAP net income (loss) to adjusted EBITDA:

Year Ended March 31,
2024
2023

(Dollars in millions)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of property, equipment and capitalized software . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workforce rebalancing charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges related to ceasing to use leased/fixed assets and lease terminations. . .
Transaction-related costs (benefits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other adjustments* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗$TwelveMonths Ended
March 31,2022 (unaudited)(340) $ (1,374) $
172
524
122
94
834
900
1,287
1,245
138
71
39
80
(46)
264
95
113
—
—
68
59
$ 2,367 $ 1,975 $(2,039)
350
71
1,206
1,310
(13)
—
630
86
469
124
2,195

Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs,
currency impacts of highly inflationary countries, and an adjustment to reduce amortization expense for the amount already included intransaction-related costs (benefits) above.

United States
Year Ended March 31,
2024
2023

(Dollars in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

4,295
(9)%
781
(7)%

$

4,726
(0)%
839

For the year ended March 31, 2024, United States revenue of $4.3 billion decreased 9 percent compared to theyear ended March 31, 2023, driven by the Company’s efforts to reduce certain low-margin revenues. Adjusted EBITDA
decreased $58 million from the prior year, primarily driven by an increase in software costs of $67 million resulting
from an amendment of the contract with a software provider that re-allocated costs among our segments, partially offset
by increased operating efficiencies and higher margins on recent signings.
For the year ended March 31, 2023, United States revenue of $4.7 billion was unchanged compared to thetwelve months ended March 31, 2022. Adjusted EBITDA decreased $71 million from the prior twelve-month period,
primarily driven by certain software agreements moving from prepaid and amortized agreements to monthly subscription
agreements as well as investments made to support being an independent company, partially offset by progress on our
key initiatives.

34

JapanYear Ended March 31,
2024
2023

(Dollars in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue growth in constant currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

2,344
(6)%
0%
361
(11)%

$

2,502
(13)%
5%
407

For the year ended March 31, 2024, Japan revenue of $2.3 billion decreased 6 percent compared to the year
ended March 31, 2023, driven primarily by an unfavorable currency exchange rate impact of six points. Adjusted
EBITDA decreased $46 million from the prior year, primarily driven by unfavorable currency movements that impacted
both non-yen-denominated costs and the translation of earnings into U.S. dollars.
For the year ended March 31, 2023, Japan revenue of $2.5 billion decreased 13 percent compared to the twelve
months ended March 31, 2022. Revenue decreased due to an unfavorable currency exchange rate impact of 18 points,
partially offset by recent signings of incremental business, including increased Kyndryl Consult revenues. Adjusted
EBITDA decreased $125 million from the prior twelve-month period, primarily driven by unfavorable currency impacts,
partially offset by lower costs from our post-Separation commercial agreements with IBM and progress on our key
initiatives.
Principal Markets
Year Ended March 31,
2024
2023

(Dollars in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue growth in constant currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

5,823
(2)%
(4)%
740
99 %

$

5,957
(13)%
(4)%
371

For the year ended March 31, 2024, Principal Markets revenue of $5.8 billion decreased 2 percent compared to
the year ended March 31, 2023, including a favorable currency exchange rate impact of two points. The revenue decline
was largely attributable to actions the Company has taken to reduce low-margin components of its customer
relationships. Adjusted EBITDA increased $369 million from the prior year, primarily due to increased operating
efficiencies, higher margins on recent signings and a decrease in software costs of $80 million resulting from anamendment of the contract with a software provider that re-allocated costs among our segments.
For the year ended March 31, 2023, Principal Markets revenue of $6.0 billion decreased 13 percent compared tothe twelve months ended March 31, 2022. Revenue decreased due to certain joint ventures not transferring to us inconnection with the Separation as well as an unfavorable currency exchange rate impact of nine points, primarily driven
by the strengthening of the U.S. dollar against the Euro and British pound. Adjusted EBITDA decreased $16 million
from the prior twelve-month period, due to unfavorable currency exchange rates, partially offset by progress on our key
initiatives.

35

Strategic Markets
Year Ended March 31,
2024
2023

(Dollars in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue growth in constant currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA year-over-year change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

3,590
(7)%
(10)%
579
33 %

$

3,840
(1)%
6%
436

For the year ended March 31, 2024, Strategic Markets revenue of $3.6 billion decreased 7 percent compared to
the year ended March 31, 2023, including a favorable currency exchange rate impact of three points. The revenue
decline was largely attributable to actions the Company has taken to reduce low-margin components of its customer
relationships. Adjusted EBITDA increased $143 million from the prior year, primarily due to increased operating
efficiencies and higher margins on recent signings, partially offset by an increase in software costs of $23 million
resulting from an amendment of the contract with a software provider that re-allocated costs among our segments.
For the year ended March 31, 2023, Strategic Markets revenue of $3.8 billion decreased 1 percent compared tothe twelve months ended March 31, 2022 driven by a seven-point headwind from currency exchange rates, primarily theEuro, partially offset by signings of incremental business, including increased Kyndryl Consult revenues. Adjusted
EBITDA decreased $99 million from the prior twelve-month period, since the majority of Strategic Markets countries
were not charged for IBM software pre-Separation and software cost allocations began post-Separation, partially offset
by progress on our key initiatives.
Corporate and Other
Corporate and other generated an adjusted EBITDA loss of $95 million in the year ended March 31, 2024,
compared to a loss of $77 million in the year ended March 31, 2023. Corporate and other generated an adjusted EBITDA
loss of $77 million in the year ended March 31, 2023, compared to a loss of $170 million in the twelve months ended
March 31, 2022, driven by lower executive expenses incurred by Kyndryl post-Separation compared to corporate
expenses allocated by the former Parent in the prior-year period.
Costs and Expenses(Dollars in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . .
Workforce rebalancing charges . . . . . . . . . . . . . . .
Transaction-related costs (benefits) . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . .

Year Ended March 31,
2024
2023

$ 16,052 $ 17,026
13,18914,498
2,773
2,914
138
71
264
(46)
122
94
45
35
(851)
$
(168) $

Percent of Revenue
2024
2023

100.0 %
82.2 %
17.3 %
0.9 %(0.3)%
0.8 %0.3 %100.0 %
85.2 %
17.1 %
0.4 %
1.5 %
0.5 %
0.2 %

Change2024 vs. 2023

(6)%
(9)%
(5)%
95 %
NM
30 %
27 %

NM – not meaningful

Cost of services was 82.2% of revenue in the year ended March 31, 2024, compared to 85.2% in the year ended
March 31, 2023, driven by increased operating efficiencies, higher margins on recent signings and actions the Company
has taken to reduce low-margin components of its customer relationships. Selling, general and administrative expenses
were 17.3% of revenue in the year ended March 31, 2024 compared to 17.1% in the year ended March 31, 2023, driven
by lower revenue, partially offset by reduced expenses. Workforce rebalancing charges were 0.9% of revenue in the year
ended March 31, 2024 versus 0.4% of revenue in the prior-year period, due to increased workforce rebalancing actions
taken in fiscal 2024. Transaction-related costs (benefits) were (0.3)% of revenue in the year ended March 31, 2024
compared to 1.5% in the prior-year, driven by reduced rebranding and employee-retention costs and the favorable

36

resolution of certain pre-Separation and Separation-related matters with our former Parent. Interest expense was 0.8% ofrevenue in the year ended March 31, 2024 compared to 0.5% in the prior year due to higher interest rates in fiscal 2024.

(Dollars in millions)

Year
Ended
March 31,2023

TwelveMonths Ended
March 31,2022 (unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . .
Workforce rebalancing charges . . . . . . . . . . . . . . .
Transaction-related costs . . . . . . . . . . . . . . . . . . . .
Impairment expense . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . .

$ 17,026 $
14,498
2,914
71
264
—
94
35
$
(851) $

18,317
16,057
2,752
(13)
630
469
71
40
(1,689)Percent of Revenue
2023
2022

100.0 %
85.2 %
17.1 %
0.4 %
1.5 %
—
0.5 %
0.2 %

100.0 %
87.7 %
15.0 %(0.1)%
3.4 %
2.6 %
0.4 %
0.2 %

Change2023 vs. 2022

(7)%
(10)%
6%
NM
(58)%
(100)%31 %(12)%

NM – not meaningful

Cost of services was 85.2% of revenue in the year ended March 31, 2023, compared to 87.7% in the twelve
months ended March 31, 2022, primarily driven by progress on our key initiatives and lower costs from our postSeparation commercial agreements with IBM, offset in part by certain site-rationalization activities. Selling, general andadministrative expenses were 17.1% of revenue in the year ended March 31, 2023 compared to 15.0% in the twelve
months ended March 31, 2022, driven by expenses associated with operating as an independent public company, theimpact of currency on revenue compared to our U.S. dollar-denominated expenses, and certain site-rationalization
activities. Workforce rebalancing charges arise from cost-reduction actions to enhance productivity andcost-competitiveness and to rebalance skills that result in payments to employees terminated in the ongoing course ofbusiness. Workforce rebalancing charges were 0.4% of revenue in fiscal 2023 compared to (0.1)% in the twelve months
ended March 31, 2022, due to a workforce reduction in the fourth quarter of 2023. Transaction-related costs were 1.5%of revenue in the year ended March 31, 2023 compared to 3.4% in the twelve months ended March 31, 2022, primarily
driven by higher employee-retention expense and pre-spin consultancy expense incurred in the prior year. Impairment
expense was zero in the year ended March 31, 2023 compared to 2.6% of revenue in the twelve months ended March
31, 2022, driven by an impairment of goodwill in the former EMEA and Americas segments in the quarter ended
December 31, 2021. Interest expense was 0.5% of revenue in the year ended March 31, 2023 compared to 0.4% in the
twelve months ended March 31, 2022, due to our average debt balance having been lower prior to the Separation. Other
expense was 0.2% of revenue in the year ended March 31, 2023 compared to 0.2% in the twelve months ended
March 31, 2022.
Transaction-Related Costs (Benefits)
The Company classifies certain expenses and benefits related to the Separation, acquisitions and divestitures (ifany) as “transaction-related costs (benefits)” in the Consolidated Income Statement. Transaction-related costs include
employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand, legal,
accounting, consulting and other professional service costs required, pre-Separation and post-Separation, to prepare forand execute the Separation, costs and benefits resulting from settlements with our former Parent associated with
pre-Separation and Separation-related matters, and other costs related to contract and supplier novation and integration.
Workforce Rebalancing and Site-Rationalization Charges
During the year ended March 31, 2023, management initiated certain actions to reduce the Company’s overall
cost structure and increase our operating efficiency, which continued through the fiscal year ended March 31, 2024.
These actions include workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets,
and charges related to lease terminations. Workforce rebalancing charges arise from cost-reduction actions to enhance
productivity and cost-competitiveness and to rebalance skills that result in payments to the terminated employees. In
addition, we identified certain leased and owned assets that were inherited from IBM as a result of the Separation that wedetermined will no longer provide any economic benefit to Kyndryl. As a result, we disposed of these assets through37

abandonment or early termination. During the year ended March 31, 2024, the Company recognized $135 million in
workforce rebalancing charges (excluding individual terminations outside of this Company-wide workforce rebalancing
program) and $39 million in charges related to ceasing to use leased and owned fixed assets and lease termination
charges.
Total cash outlays for this program are expected to be approximately $300 million, of which approximately$210 million has been paid through March 31, 2024 (including approximately $40 million of contractual payments
toward leased assets we have ceased to use) and approximately $60 million is expected to be paid in fiscal year 2025.
Management expects that these workforce rebalancing and site-rationalization activities will reduce payroll costs, rent
expenses and depreciation of property and equipment by approximately $400 million in fiscal year 2025. There can be
no guarantee that we will achieve our expected cost savings. The Company will continue to seek opportunities toimprove operational efficiency and reduce costs, which may result in additional charges in future periods. For additional
information, see Note 19 – Workforce Rebalancing and Site-Rationalization Charges in the accompanying Consolidated
Financial Statements.
Income Taxes
The Company’s consolidated provision for income taxes and effective tax rate were as follows:Year Ended
March 31,2024

(Dollars in millions)

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$172(102.2)%

Year Ended
March 31,
2023

$

524
(61.6)%

Twelve Months
Ended March
31, 2022(unaudited)$350(20.7)%In the years ended March 31, 2024 and 2023, and the twelve months ended March 31, 2022, we recorded
income tax expense of $172 million, $524 million and $350 million, respectively, on pretax losses, which resulted innegative effective tax rates. Our income tax expense for the year ended March 31, 2024 was primarily related to taxes on
foreign operations and uncertain tax positions. Our income tax expense for the year ended March 31, 2023 was primarily
related to the increases in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely
than not to be realized, taxes on foreign operations and uncertain tax positions. Our income tax expense for the twelve
months ended March 31, 2022 was primarily related to taxes on foreign operations, uncertain tax positions, tax charges
related to the transfer of Kyndryl’s operations from Parent in contemplation of the Company’s separation from IBM andthe establishment of valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than
not to be realized.
The effective tax rate for the year ended March 31, 2024 was lower (more negative) compared to the year ended
March 31, 2023 primarily due to the Company’s pretax loss being significantly lower in fiscal year 2024. The effective
tax rate for the year ended March 31, 2023 was lower compared to the twelve months ended March 31, 2022 primarily
due to increases in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than
not to be realized. For more information, see Note 5 – Taxes in the accompanying Consolidated Financial Statements.
Financial Position
Dynamics
Total assets of $10.6 billion at March 31, 2024 decreased by $873 million (and decreased by $737 million
adjusted for currency) from March 31, 2023, primarily driven by: a decrease in cash and cash equivalents of $295
million mainly due to our net loss in the period; a decrease in deferred costs of $236 million due to amortization
outpacing additions; and a decrease in fixed assets of $105 million due to depreciation outpacing new capital
expenditures.
Total liabilities of $9.5 billion at March 31, 2024 decreased by $533 million (and decreased by $384 million
adjusted for currency) from March 31, 2023, primarily as a result of: a decrease in accounts payable of $366 million due

38

to lower costs and the timing of payments; a decrease in other liabilities (non-current) of $118 million due in part to thedecrease of deferred taxes; and a decrease in other accrued expenses and liabilities (current) of $102 million due in partto workforce rebalancing payments and partially offset by an increase in accrued contract costs of $142 million due tothe timing of vendors’ billings.
Total equity of $1.1 billion at March 31, 2024 decreased $340 million from March 31, 2023, principally due toour comprehensive loss in the period.
Overall pension funded status as of March 31, 2024 was 75% of estimated pension benefit obligation, an
increase from 74% at March 31, 2023.
Cash Flow
Our cash flows from operating, investing and financing activities are summarized in the table below.
Year Ended March 31,
2024
2023

(Dollars in millions)

Net cash provided by (used in):Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash equivalents and restricted cash . . . . . . . . .
Net change in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

454 $
(553)
(170)
(37)
(306) $

781
(835)
(141)
(100)
(294)

Net cash provided by operating activities was $454 million for the year ended March 31, 2024, compared to net
cash provided by operating activities of $781 million for the year ended March 31, 2023. This change was driven bylower cash from working capital, partially offset by our reduced net loss.
Net cash used by investing activities was $553 million for the year ended March 31, 2024, compared to a net
cash use of $835 million for the year ended March 31, 2023 due to lower capital expenditures and the sale of certain
fixed assets. Capital expenditures consist of payments for property and equipment, and purchased andinternally-developed software.
Net cash used by financing activities totaled $170 million for the year ended March 31, 2024, compared to net
cash used by financing activities of $141 million for the year ended March 31, 2023 mainly driven by higher repaymentsof finance lease obligations.
Liquidity and Capital Resources
We believe that our existing cash and cash equivalents and the Revolving Credit Agreement entered into in
October 2021 will be sufficient to meet our anticipated cash needs for at least the next twelve months.
Senior Unsecured Notes
In October 2021, in preparation for our Spin-off, we completed the offering of $2.4 billion in aggregate
principal amount of senior unsecured fixed-rate notes as follows: $700 million aggregate principal amount of 2.05%
Senior Notes due 2026, $500 million aggregate principal amount of 2.70% Senior Notes due 2028, $650 million
aggregate principal amount of 3.15% Senior Notes due 2031 and $550 million aggregate principal amount of 4.10%
Senior Notes due 2041 (the “Initial Notes”). The Initial Notes were offered and sold to qualified institutional buyers inreliance on Rule 144A under the Securities Act and to non-U.S. persons in reliance on Regulation S of the Securities
Act. In connection with the issuance of the Initial Notes, we entered into a registration rights agreement with thepurchasers of the Initial Notes, pursuant to which we completed a registered offering to exchange each series of Initial
Notes for new notes with substantially identical terms during the quarter ended September 30, 2022.

39

In February 2024, we completed a registered offering of $500 million in aggregate principal amount of 6.35%
senior unsecured notes due 2034 (the “2034 Notes”). We received proceeds of $494 million, net of debt issuance costs
and discounts, which were capitalized as a reduction to the carrying value of debt and are being amortized as interest
expense over the term of the notes. The 2034 Notes are the Company’s senior unsecured obligations and rank equally inright of payment with all of the Company’s other existing and future senior unsecured indebtedness.
The Initial Notes and the 2034 Notes are subject to customary affirmative covenants, negative covenants andevents of default for financings of this type and are redeemable at our option in a customary manner.
Term Loan and Revolving Credit Facility
In October 2021, we entered into a $500 million three-year variable rate term loan credit agreement (the “TermLoan Credit Agreement”), which was scheduled to mature in November 2024. In November 2021, we drew down thefull $500 million available under the Term Loan Credit Agreement. The interest rate on this term loan was equal toone-month U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus a margin of 1.125%. In June 2023, we amended
the Term Loan Credit Agreement by replacing LIBOR with the Secured Overnight Financing Rate (“SOFR”). The first
repricing date using SOFR was in July 2023. In February 2024, the Company used the net proceeds from the offering of
the 2034 Notes, together with cash on hand, to prepay the full amount outstanding under the Term Loan Credit
Agreement, at no penalty.
In October 2021, we entered into a $3.15 billion multi-currency revolving credit agreement (the “Revolving
Credit Agreement”), which expires, unless extended, in October 2026. The Revolving Credit Agreement was amended inJune 2023, replacing LIBOR with SOFR. Interest rates on borrowings under the Revolving Credit Agreement will bebased on prevailing market interest rates, plus a margin, as further described in the Revolving Credit Agreement.
The total facility fees recorded by the Company for the Revolving Credit Agreement were $5 million for theyears ended March 31, 2024 and 2023. Facility fees were immaterial for the three months ended March 31, 2022 and theyear ended December 31, 2021. As of March 31, 2024, there has been no drawdown on the Revolving Credit
Agreement.
The Revolving Credit Agreement includes certain customary mandatory prepayment provisions. In addition, it
includes customary events of default and affirmative and negative covenants as well as a maintenance covenant that will
require that the ratio of our indebtedness for borrowed money to consolidated EBITDA (as defined in the Revolving
Credit Agreement) for any period of four consecutive fiscal quarters be no greater than 3.50 to 1.00. The Company is incompliance with its debt covenants.
Transfers of Financial Assets
The Company has entered into agreements with third-party financial institutions to sell certain financial assets(primarily trade receivables) without recourse. The Company has determined these are true sales. The carrying value ofthe financial asset sold is derecognized, and a net gain or loss on the sale is recognized, at the time of the transfer. The
first agreement, which was executed in November 2021 and subsequently amended, enabled us to sell certain of ourtrade receivables to the counterparty. The initial term of this agreement was 18 months, and the agreement automatically
resets to a term of 18 months after every six months, unless either party elects not to extend. The second agreement was
executed in June 2022 with a separate third-party financial institution and renews automatically on its anniversary date.
The net proceeds from these arrangements are reflected as cash provided by operating activities in theConsolidated Statement of Cash Flows. Gross proceeds from receivables sold to third parties under the aforementioned
programs were $3.6 billion for the year ended March 31, 2024 and $3.1 billion for the year ended March 31, 2023. The
fees associated with the transfers of receivables were $49 million for the year ended March 31, 2024 and $47 million forthe year ended March 31, 2023.

40

Supplier Financing Program
In the year ended March 31, 2024, the Company initiated a supplier financing program with a third-party
financial institution under which the Company agrees to pay the financial institution the stated amounts of invoices fromparticipating suppliers on the originally invoiced due date, which have an average term of 90 to 120 days. The financial
institution offers earlier payment of the invoices at the sole discretion of the supplier for a discounted amount. The
Company does not provide secured legal assets or other forms of guarantees under the arrangements. The Company is
not a party to the arrangement between its suppliers and the financial institution. The Company or the financial
institution may terminate the agreement upon at least 180 days notice. The Company’s obligations under this program
continue to be recognized as accounts payable in the Consolidated Balance Sheet. The obligations outstanding under thisprogram at March 31, 2024 were immaterial.
Off-Balance Sheet Arrangements and Contractual Obligations
From time to time, we may enter into (i) off-balance sheet arrangements as defined by SEC Financial Reporting
Release 67 (FRR-67), “Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements
and Aggregate Contractual Obligations” or (ii) purchase commitments, which we expect to use in the ordinary course ofbusiness.
At March 31, 2024 and March 31, 2023, we had no such off-balance sheet arrangements that have, or arereasonably likely to have, a material current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We do not have retainedinterests in assets transferred to unconsolidated entities or other material off-balance sheet interests or instruments.
At March 31, 2024, the Company’s material future contractual obligations were primarily related to leases, debt
and pension liabilities. See Note 9 – Leases, Note 11 – Borrowings, Note 12 – Other Liabilities andNote 16 – Retirement-Related Benefits of Notes to the Company’s consolidated financial statements. Additionally, theCompany has contractual commitments that are noncancellable with certain software, hardware and cloud partners usedin the delivery of services to customers. Certain of these commitments were allocated to the Company as part of the
Separation from its former Parent. The Company has determined that these commitments may exceed the Company’s
needs over the next two to three years. If the Company is unable to satisfy, reduce or amend its contractual
commitments, it will record the future charges for any payments related to excess commitments as cost of services. At
March 31, 2024, we had short-term (April 2024 through March 2025), mid-term (April 2025 through March 2027) andlong-term (April 2027 onward) purchase commitments in the amount of $0.6 billion, $0.4 billion and $0.4 billion,
respectively.
Other Information
Signings
The following table presents the Company’s signings for the years ended March 31, 2024 and 2023, and thetwelve months ended March 31, 2022.
TwelveMonthsEnded
March 31,2022

Year Ended March 31,
2024
2023

(Dollars in billions)

Total signings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

12.5

$

12.2

$

14.2

Signings increased by $332 million, or 3%, in the year ended March 31, 2024, compared to the prior year.
Signings decreased by $2.0 billion, or 14%, for the year ended March 31, 2023 compared to the twelve months ended
March 31, 2022, in part due to a six-point negative currency impact on signings. Signings also declined as a result of anincreased focus on higher-margin services, which tend to be shorter in length and therefore smaller in value thanhistorical agreements.

41

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. There are no third-party standards or
requirements governing the calculation of signings. We define signings as an initial estimate of the value of a customer’scommitment under a contract. The calculation involves estimates and judgments to gauge the extent of a customer’scommitment, including the type and duration of the agreement and 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 numberof larger outsourcing contracts as well as the length of those 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 notlimited to, the macroeconomic environment or external events.
Critical Accounting Estimates
The application of U.S. GAAP requires us to make estimates and assumptions about certain items and future
events that directly affect our reported financial condition. The accounting estimates and assumptions discussed in thissection are those that we consider to be the most critical to our financial statements. Our significant accounting policies
are described in Note 1 – Significant Accounting Policies to our consolidated financial statements.
A quantitative sensitivity analysis is provided where that information is reasonably available, can be reliably
estimated and provides material information to investors. The amounts used to assess sensitivity (e.g., 1 percent, 10
percent, etc.) are included to allow users of this report to understand a general effect of changes in the estimates and do
not represent management’s predictions of variability. For all of these estimates, it should be noted that future events
rarely develop exactly as forecasted and estimates require regular review and adjustment.
Revenue Recognition
Application of GAAP related to the measurement and recognition of revenue requires us to make judgments
and estimates. Specifically, complex arrangements with nonstandard terms and conditions may require significant
contract interpretation to determine the appropriate accounting, including whether promised goods and services specified
in an arrangement are separate performance obligations. In certain arrangements, revenue is recognized based onprogress toward completion of the performance obligation using a cost-to-cost measure of progress. The estimation of
future costs, which is updated as the project progresses, is complex and requires us to make judgments. Other significant
judgments include determining whether we are acting as the principal in a transaction and whether separate contracts
should be combined and considered part of one arrangement.
Revenue recognition is also impacted by our ability to determine when a contract is probable of collection andto estimate variable consideration, including, for example, rebates, price concessions, service-level penalties andperformance bonuses. We consider various factors when making these judgments, including a review of specifictransactions, historical experience and market and economic conditions. Evaluations are conducted each quarter to assess
the adequacy of the estimates.
Costs to Complete Service Contracts
During the contractual period, revenue, cost and profits may be impacted by estimates of the ultimate
profitability of each contract, especially contracts for which we use cost-to-cost method to measure progress. The
Company performs ongoing profitability analyses of its design-and-build services contracts accounted for using a
cost-to-cost measure of progress to determine whether the latest estimates of revenues, costs and profits require
updating. If at any time these estimates indicate that the contract will be unprofitable on a gross-margin basis, the entire
estimated loss for the remainder of the contract is recorded immediately. For other types of services contracts, any losses
are recorded as incurred. Key factors reviewed to estimate the future costs to complete each contract are future laborcosts, product costs and expected productivity efficiencies.

42Capitalization of Contract Costs
In connection with services arrangements, we incur and capitalize direct costs for transition and setup activities
performed at the inception of these long-term contracts that are necessary to enable us to perform under the terms of thearrangement. These costs are capitalized and are amortized on a straight-line basis over the expected period of benefit.
We perform periodic reviews to assess the recoverability of deferred contract transition and setup costs. To assess
recoverability, undiscounted estimated cash flows of the contract are projected over its remaining life and compared tothe carrying amount of contract-related assets, including the unamortized deferred cost balance. Such estimates require
judgment and assumptions, and actual future cash flows could differ from these estimates. A significant change in an
estimate or assumption on one or more contracts could have a material effect on our results of operations.
Retirement-related Benefit Plan Assumptions
For Company-sponsored and co-sponsored defined benefit pension plans, the measurement of the benefit
obligation to plan participants and net periodic benefit cost requires the use of certain assumptions, including, among
others, estimates of discount rates and expected return on plan assets.
Changes in the discount rate assumptions would impact the actuarial (gain)/loss amortization, service cost andinterest cost components of the net periodic benefit cost calculation and the projected benefit obligation (PBO). If theaverage discount rate assumption for the non-U.S. defined benefit pension plans had increased or decreased by
25-basis-points from 3.30% on March 31, 2024, this would not result in a material change to pretax net periodic benefit
cost recognized in fiscal 2025. Further changes in the discount rate assumptions would impact the PBO which, in turn,
may impact our funding decisions if the PBO exceeds plan assets. A 25-basis-point increase or decrease in the discountrate would result in an approximate corresponding decrease or increase, respectively, of approximately $42 million in
the Plans’ estimated PBO and accumulated postretirement benefit obligation (APBO) based upon March 31, 2024 data.
The expected long-term return on plan assets assumption is used in calculating the net periodic benefit cost.
Expected returns on plan assets are calculated based on the market-related value of plan assets, which recognizeschanges in the fair value of plan assets systematically over a five-year period in the expected return on plan assets line in
net periodic benefit cost. The differences between the actual return on plan assets and the expected long-term return onplan assets are recognized over five years in the expected return on plan assets line in net periodic benefit cost and also
as a component of actuarial (gains)/losses, which are recognized over the service lives or life expectancy of theparticipants, depending on the plan, provided such amounts exceed thresholds which are based upon the benefit
obligation or the value of plan assets, as provided by accounting standards.
To the extent the outlook for long-term returns changes such that management changes its expected long-term
return on plan assets assumption, a 25-basis-point increase or decrease in the expected long-term return on plan assets
assumption would not have a material estimated decrease or increase on the following year’s pretax net periodic benefit
cost (based upon plan assets at March 31, 2024 and expected contributions and benefit payments for fiscal 2025).
We may voluntarily make contributions or be required, by law, to make contributions to our pension plans.
Actual results that differ from the estimates may result in more or less future funding into the pension plans than isplanned by management. Impacts of these types of changes on our pension plans would vary depending upon the statusof each respective plan.
In addition to the above, we evaluate other pension assumptions involving demographic factors, such as
retirement age and mortality and update these assumptions to reflect experience and expectations for the future. Actual
results in any given year can differ from actuarial assumptions because of economic and other factors.
For additional information on our pension plans and the development of these assumptions, seeNote 16 – Retirement-Related Benefits to our consolidated financial statements.

43

Income Taxes
Prior to the Separation, our operations were included in the consolidated U.S. federal and certain state and local
and foreign income tax returns filed by IBM. The Company also filed certain separate foreign income tax returns.
Income tax liabilities including amounts for unrecognized tax benefits related to our activities included in IBM’s income
tax returns were deemed to be immediately settled with IBM through the Net Parent investment account in theConsolidated Balance Sheet and reflected in Net transfers from Parent in the financing activities section in theConsolidated Statement of Cash Flows. For purposes of the financial statements presented on a “carve-out” basis, theincome tax provisions were calculated as if we filed separate tax returns and include transactions related to our
Separation attributed to us, even if the related tax liabilities were our former Parent’s responsibility.
Prior to the Separation, the Company recorded deferred tax assets for stock-based compensation awards that
result in tax deductions in the consolidated financial statements calculated using the separate return basis, the amount ofcompensation cost recognized and the relevant statutory tax rates. Post-Separation, the differences between the deferred
tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company’s income
tax return are recorded as a benefit or expense to the provision for income taxes in the Consolidated Income Statement.
Post-Separation, our income tax provisions are calculated based on Kyndryl’s operating footprint, as well as our
tax return elections and assertions. Liabilities related to unrecognized tax benefits for which the Company is liable arereported within the Consolidated Balance Sheet based upon tax authorities’ ability to assert the Company may be theprimary obligor for historical taxes, among other factors. Significant judgment is required in determining any valuation
allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, management considers
all available evidence for each jurisdiction including past operating results, estimates of future taxable income and thefeasibility of ongoing tax planning strategies and actions. In the event that we change our determination as to the amountof deferred tax assets that can be realized, we will adjust the valuation allowance with a corresponding impact to income
tax expense in the period in which such determination is made.
Valuation of Assets
The application of valuation and impairment accounting requires the use of significant estimates andassumptions. Impairment testing for assets, other than goodwill, requires the allocation of cash flows to those assets orgroup of assets and if required, an estimate of fair value for the assets or group of assets. Our estimates are based uponassumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require
the use of management’s assumptions, which would not reflect unanticipated events and circumstances that may occur.
Assumptions used to perform a recoverability test are consistent with those used for goodwill impairment; see“Valuation of Goodwill” for further detail.
Valuation of Goodwill
We review goodwill for impairment annually and whenever events or changes in circumstances indicate thecarrying value of goodwill may not be recoverable by first assessing qualitative factors to determine if it is more likely
than not that fair value is less than carrying value.

44

We assess qualitative factors in each of our reporting units that carry goodwill including relevant events andcircumstances that affect the fair value of reporting units. Examples include, but are not limited to, macroeconomic,
industry and market conditions, as well as other individual factors such as:•

A significant adverse shift in the operating environment of the reporting unit such as unanticipated competition;•

Significant pending litigation;•

A loss of key personnel;•

A more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be soldor otherwise disposed of; and•An adverse action or assessment by a regulator.

We assess these qualitative factors to determine whether it is necessary to perform the quantitative goodwill
impairment test. This quantitative test is required only if we conclude that it is more likely than not that a reporting unit’s
fair value is less than its carrying amount.
If a quantitative test is required, we use an income-based approach where fair value is determined using a
discounted cash flow model that requires significant judgment with respect to revenue and growth rates, based upon
annual budgets and long-term strategic plans. Fair value estimates employed in our annual impairment review ofgoodwill involve using various assumptions. Assumptions critical to our fair value were discount rates used indetermining the fair value of the reporting unit, expected revenue growth and projected EBITDA margins. These andother assumptions are impacted by economic conditions and expectations of management and may change based on
different facts and circumstances. We believe the assumptions used to estimate future cash flows are reasonable, butthere can be no assurance that the expected cash flows will be realized. The use of different assumptions would increaseor decrease discounted cash flows or earnings projections and therefore, could change impairment determinations.
In conjunction with our annual review of goodwill for impairment, we prepared qualitative and quantitative
valuation analysis as of January 1, 2024. For the reporting units subject to quantitative tests, we determined that their fairvalues exceeded their book values by over 100%. We also performed a sensitivity analysis on the calculation of fairvalue using discounted cash flows. A hypothetical 100-basis-point increase in the discount rate or a hypothetical 100basis-point decline in revenue growth rate, combined with no other changes to other inputs and assumptions used in theanalysis, would not result in a potential impairment. See Note 10 – Intangible Assets Including Goodwill for further
discussion.
Loss Contingencies
We are currently involved in various claims and legal proceedings. At least quarterly, we review the status ofeach significant matter and assess our potential financial exposure. If the potential loss from any claim or legal
proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimatedloss. Significant judgment is required in both the determination of probability and the determination as to whether an
exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best
information available at the time. As additional information becomes available, we reassess the potential liability related
to our pending claims and litigation and may revise our estimates. These revisions in the estimates of the potential
liabilities could have a material impact on our results of operations and financial position.
Change in Accounting Estimate
In March 2024, we completed our assessment of the useful lives of our property, plant and equipment. Based on
our usage experience and data analysis, we determined we should increase the estimated useful lives of our information
technology equipment from five to six years. This change in accounting estimate will be effective beginning April 1,

45

2024 and applied on a prospective basis to the assets on our balance sheet as of March 31, 2024, as well as future asset
purchases. Based on the carrying value of information technology equipment included in property, plant and equipment,
net in our Consolidated Balance Sheet as of March 31, 2024, we estimate this change will decrease non-cash
depreciation expense in fiscal year 2025 by approximately $180 million.
Cautionary Note Regarding Forward-Looking Statements
This report 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 report, including statements
concerning the Company’s plans, objectives, goals, beliefs, business strategies, future events, business condition, resultsof operations, financial position, business outlook and business trends and other non-historical statements in this report
are forward-looking statements. Such forward-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 or expressions or the negative
thereof or other variations thereon. Forward-looking statements are based on the Company’s current assumptions andbeliefs 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 anduncertainties 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 of relationships with critical suppliers and partners;
failure to address and adapt to technological developments and trends;
inability to attract and retain key personnel and other skilled employees;
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 of contracts;
service delivery issues;
the Company’s ability to successfully manage acquisitions 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 theCompany to obtain, retain and extend necessary licenses;
the impairment of our goodwill or long-lived assets;risks relating to cybersecurity, data governance and privacy;risks relating to non-compliance with legal and regulatory requirements;
adverse effects from tax matters and environmental matters;
legal proceedings and investigatory risks and potential indemnification obligations;
impact of changes in market liquidity conditions and customer credit risk on receivables;
the Company’s pension plans;
the impact of currency fluctuations;risks related to the Company’s spin-off from IBM;risks related to deficiencies identified in our information technology general control; andrisks 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 this report, as such factors may be updated from time to time in the Company’s subsequent filings
with the SEC. Any forward-looking statement in this report 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 aresult of new information, future events or otherwise.

46

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Currency Rate Fluctuations
Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our financial results and financial
position. At March 31, 2024, currency changes resulted in assets and liabilities denominated in local currencies beingtranslated into fewer dollars than the prior year. At March 31, 2023, currency changes resulted in assets and liabilities
denominated in local currencies being translated into fewer dollars than the prior year. During periods of sustained
movements in currency, the marketplace and competition adjust to the changing rates. Large changes in currency
exchange rates relative to our functional currencies could increase the costs of our services to customers relative to local
competitors, thereby causing us to lose existing or potential customers. Currency movements impacted our year-to-year
revenue growth. Based on the currency rate movements in the year ended March 31, 2024, total revenue decreased
6 percent as reported and 6 percent in constant currency versus the year ended March 31, 2023. For non-U.S.
subsidiaries and branches that operate in U.S. dollars or whose economic environment is highly inflationary, translation
adjustments are reflected in results of operations. Generally, we manage currency risk in these entities by linking prices
and contracts to U.S. dollars.
Market Risk
In the normal course of business, our financial position is routinely subject to a variety of risks. In addition to
the market risk associated with non-U.S. dollar denominated assets and liabilities, another example of risk is thecollectability of accounts receivable. We regularly assess these risks and have established policies and business practices
to protect against the adverse effects of these and other potential exposures. As a result, we do not anticipate any
material losses from these risks.
To meet disclosure requirements, we perform a sensitivity analysis to determine the effects that market risk
exposures may have on the fair values of our financial assets. The financial instruments that are included in thesensitivity analysis are comprised of our cash and cash equivalents, debt obligations, and derivative instruments.
To perform the sensitivity analysis, we assess the risk of loss in fair values from the effect of hypotheticalchanges in interest rates and currency exchange rates on market-sensitive instruments. The market values for interest andcurrency exchange risk are computed based on the present value of future cash flows as affected by the changes in rates
that are attributable to the market risk being measured. The discount rates used for the present value computations wereselected based on market interest and foreign currency exchange rates in effect at March 31, 2024 and 2023. The
differences in this comparison are the hypothetical losses associated with each type of risk.
Information provided by the sensitivity analysis does not necessarily represent the actual changes in fair valuethat we would incur under normal market conditions because, due to practical limitations, all variables other than thespecific market risk factor are held constant. In addition, the results of the model are constrained by the fact that certain
items are specifically excluded from the analysis, while the financial instruments relating to the financing or hedging of
those items are included by definition.
The results of the sensitivity analysis at March 31, 2024 and 2023 are as follows:
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our fixed-rate and variable-rate
debt obligations (See Note 11 – Borrowings in the accompanying Consolidated Financial Statements). A hypothetical
10 percent adverse change in the levels of interest rates, with all other variables held constant, would result in a $22
million and a $12 million impact in the fair value of our financial instruments at March 31, 2024 and 2023, respectively.
A hypothetical 10 percent adverse change in the levels of interest rates would not be material to our consolidated resultsof operations or cash flow.

47

Currency Exchange Rate Risk
A hypothetical 10 percent adverse change in the levels of currency exchange rates relative to the U.S. dollar,
with all other variables held constant, would result in a $154 million and a $220 million impact in the fair value of our
financial instruments, primarily our cash, debt and derivatives, at March 31, 2024 and 2023, respectively.

48

Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements
Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Income Statement for the Years Ended March 31, 2024 and 2023, and December 31, 2021 andthe Three Months Ended March 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Comprehensive Income (Loss) for the Years Ended March 31, 2024 and 2023, andDecember 31, 2021 and the Three Months Ended March 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet as of March 31, 2024 and 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows for the Years Ended March 31, 2024 and 2023, and December 31, 2021
and the Three Months Ended March 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Equity for the Years Ended March 31, 2024 and 2023, and December 31, 2021 andthe Three Months Ended March 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

50
53
54
55
56
57
58

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Kyndryl Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheet of Kyndryl Holdings, Inc. and its subsidiaries (the“Company”) as of March 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive
income (loss), of equity and of cash flows for each of the two years in the period ended March 31, 2024, for the threemonths ended March 31, 2022 and for the year ended December 31, 2021, including the related notes (collectively
referred to as the “consolidated financial statements”). We also have audited the Company’s internal control overfinancial reporting as of March 31, 2024, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows foreach of the two years in the period ended March 31, 2024, for the three months ended March 31, 2022 and for the year
ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial
reporting as of March 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued
by the COSO because a material weakness in internal control over financial reporting existed as of that date related tocertain information technology general controls, specifically ineffective (i) user access and segregation of duty controlsthat restrict user and privileged access to appropriate personnel; (ii) program development and change management
controls; and (iii) certain computer operations controls.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, suchthat there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be
prevented or detected on a timely basis. The material weakness referred to above is described in Management's Reporton Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness indetermining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial
statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does
not affect our opinion on those consolidated financial statements.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in management’s report referred to above. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws andthe applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement, whether due to error or fraud, and whether effective internal control over financial reporting wasmaintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of50

internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating thedesign and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonablebasis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i) relates toaccounts or disclosures that are material to the consolidated financial statements and (ii) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Revenue Recognition for Certain Services
As described in Notes 1 and 3 to the consolidated financial statements, the Company recorded total revenues of$16,052 million for the year ended March 31, 2024, of which a majority relates to services that are single performanceobligations comprised of a series of distinct services. The Company offers services such as cloud managed services,
application hosting and modernization, security and resiliency services, enterprise infrastructure services, digital
workplace services, network services and distributed cloud services to support its customers through technologicalchange. Revenue is recognized when, or as, control of a promised service transfers to a client, in an amount that reflects
the consideration to which management expects to be entitled in exchange for transferring those services. If theconsideration promised in a contract includes a variable amount, management estimates the amount to which it expects
to be entitled using either the expected value or most likely amount method.
The principal consideration for our determination that performing procedures relating to revenue recognition for certain
services is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s
revenue recognition. As described in the “Opinions on the Financial Statements and Internal Control over Financial
Reporting” section, a material weakness was identified that impacted the procedures performed related to revenue
recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming ouroverall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the revenue recognition process. These procedures also included, among others (i) evaluating the Company’s
accounting policies related to the recognition of revenue for services; (ii) testing the completeness, accuracy, and51

occurrence of revenue recognized for a sample of certain services revenue transactions by obtaining and inspecting
source documents such as master services agreements, individual statements of work, invoices, and cash receipts; and(iii) confirming, on a sample basis, outstanding customer invoice balances as of year-end and, for confirmations not
returned, obtaining and inspecting source documents, such as invoices and subsequent cash receipts, where applicable.
/s/ PricewaterhouseCoopers LLP
New York, New YorkMay 30, 2024
We have served as the Company’s auditor since 2020.

52

KYNDRYL HOLDINGS, INC.
CONSOLIDATED INCOME STATEMENT(In millions, except per share amounts)

Year Ended March 31,
2024
2023

Notes

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

Revenues * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3$ 16,052$ 17,026

$

4,431

$

18,657

Cost of services ** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . .
Workforce rebalancing charges . . . . . . . . . . . . . . . . . . . . .
Transaction-related costs (benefits) . . . . . . . . . . . . . . . . . .
Impairment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . .

3$ 13,189 $ 14,498
2,773
2,914
138
71
(46)
264
—
—
122
94
45
35
$ 16,221 $ 17,876

$

3,824
690
—
58
—
21
27
4,620

$

$

16,550
2,776
39
627
469
64
35
20,56019
10
11

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

$

5

$
$
$

(168) $
(851) $
172 $524 $(340) $ (1,374) $(189) $
40 $(229) $

(1,903)402(2,304)

Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . .

6$(1.48) $(1.48)(6.06) $(6.06)(1.02) $(1.02)(10.28)(10.28)Weighted-average basic shares outstanding . . . . . . . . . . .
Weighted-average diluted shares outstanding . . . . . . . . . .

6

229.2
229.2

226.7
226.7

224.4
224.4

224.1
224.1

*

Including related-party revenue of $287 for the year ended March 31, 2023, $236 for the three months ended
March 31, 2022, and $704 for the year ended December 31, 2021** Including related-party cost of service of $1,382 for the year ended March 31, 2023, $924 for the three months
ended March 31, 2022, and $3,979 for the year ended December 31, 2021
The accompanying notes are an integral part of the financial statements.

53

KYNDRYL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)(Dollars in millions)Year Ended March 31,
2024
2023

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . .
Unrealized losses on net investment hedges. . . . . . . . . . . . . . . . .
Total foreign currency translation adjustments. . . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period . . . . . . . . . . .
Reclassification of (gains) losses to net income . . . . . . . . . . . . . .
Total unrealized gains (losses) on cash flow hedges . . . . . . . . . . .
Retirement-related benefit plans:
Prior service costs (credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) arising during the period . . . . . . . . . . . . . . . . .
Curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service (credits) costs . . . . . . . . . . . . . . . .
Amortization of net (gains) losses. . . . . . . . . . . . . . . . . . . . . . . . .
Total retirement-related benefit plans . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), before tax . . . . . . . . . . . . . .
Income tax (expense) benefit related to items of othercomprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . .
Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .

$$Three Months
Ended
March 31,2022(340) $ (1,374) $(229) $

(2,304)

(36)
(11)
(47)

(186)
—
(186)

(51)
—
(51)

194
—
194

22
(21)
1

(4)
2
(3)

1
(1)
—

4
(1)
3

(3)
(56)
10
1
5
(42)
(88)

4
175
10
1
40
229
40

—
136
4
—
16
156
105

1
72
3
—
51
127
324

(50)
54
(175) $

(33)
292
(2,013)

6
(14)
(82)
27
(423) $ (1,347) $The accompanying notes are an integral part of the financial statements.

54

Year Ended
December 31,
2021

KYNDRYL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET(In millions, except per share amounts)
March 31,
Notes
Assets:Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable (net of allowances for credit losses of $22 at March 31, 2024 and $32 atMarch 31, 2023). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs (current portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating right-of-use assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs (noncurrent portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value-added tax and income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income (current portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities (current portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued contract costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement and nonpension postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income (noncurrent portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities (noncurrent portion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity:Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, par value $0.01 per share, and additional paid-in capital(shares authorized: 1,000.0; shares issued: March 31, 2024 – 233.7, March 31, 2023 – 229.6) . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost (shares: March 31, 2024 – 3.3, March 31, 2023 – 1.9) . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity before non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

3
$
8
9
3
5
10
10
16

$

$

$
11
3
9
12
$
11
16
3
9
12

$

$

1,553
1
1,599
1,081
514
4,747
2,674
864
920
220
805
188
105
67
10,590

2023
$

$
$

$

1,408
327
126
609
825
285
487
521
4,589

$

3,112
500
314
622
332
9,468

$

$

$

1,847
12
1,523
1,070
510
4,963
2,779
964
1,166
248
812
171
94
267
11,464

1,774
347
110
533
820
316
346
624
4,868
3,111
504
362
707
450
10,00213
14

The accompanying notes are an integral part of the financial statements.

55

2024

$

$
$
$

4,524
(2,319)(45)(1,145)
1,015
107
1,122
10,590

$

$
$
$

4,428
(1,978)(23)(1,062)
1,365
97
1,462
11,464

KYNDRYL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS(Dollars in millions)Year Ended March 31,
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 . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 (including items settled with former Parent in 2021 period) . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$
$
$

Three Months
EndedYear Ended
March 31,
December 31,
2022
2021

(340) $

(1,374) $(229) $

(2,304)

834
319
1,256
531
30
—
95
(13)
43

900
428
1,199
472
46
—
113
285
6

246
103
319
136
7
—
31
(10)
12

1,300
327
1,278
563
37
469
71
(401)
11

(1,569)
(335)
(38)
11
(305)
(2)
(63)
454 $

(1,592)
(361)
41
664
282
90
(415)
781 $

(672)
(117)
(73)
(31)
384
(66)
151
189 $

(1,618)(374)(341)(1,076)
125
994
822
(119)

(651) $
138(40)(553) $(865) $
237(835) $

(180) $
9(53)(225) $

(752)
194
(14)
(572)

(118) $
—
—
(19)
(4)
(141) $

(28) $——(3)(12)(43) $

(91)
3,038
(30)
(1)
—
2,915

(7) $
(86) $(22)
2,203

Cash flows from financing activities:
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of debt, net of debt issuance costs . . . . . . . . . . . . . . . . . . . .
Net transfers (to) from Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock repurchases for tax withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . .

$(644) $
494
—
(22)
2
(170) $

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

$$(37) $(306) $

(100) $
(294) $

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

$
$

1,860
1,554

$
$

2,154
1,860

$
$

2,240
2,154

$
$

38
2,240

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

$
$

191
118

$
$

167
98

$
$

47
3

$
$

12
2

$

The accompanying notes are an integral part of the financial statements.

56

KYNDRYL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EQUITY(In millions)

Equity - January 1, 2021 . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), netof tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock and reclassificationof net transfers from Parent . . . . . . . . . . . .
Common stock issued under employee plans .
Purchases of treasury stock . . . . . . . . . . . . . .
Changes in non-controlling interests . . . . . . .
Equity - December 31, 2021 . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), netof tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued under employee plans .
Purchases of treasury stock . . . . . . . . . . . . . .
Changes in non-controlling interests . . . . . . .
Equity - March 31, 2022 . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), netof tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued under employee plans .
Purchases of treasury stock . . . . . . . . . . . . . .
Changes in non-controlling interests . . . . . . .
Equity – March 31, 2023 . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), netof tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued under employee plans .
Purchases of treasury stock . . . . . . . . . . . . . .
Changes in non-controlling interests . . . . . . .
Equity – March 31, 2024 . . . . . . . . . . . . . . .

Common StockandAccumulated
Additional
Net
Other
NonPaid-In Capital
ParentComprehensive Treasury Accumulated Controlling Total
Shares Amount Investment Income (Loss)
Stock
DeficitInterests
Equity— $— $6,023 $
(1,096) $— $— $58 $ 4,985(1,929)(375)(2,304)

224.1
0.1
0.0

4,271
13

(4,095)

292

292

(339)

(375) $
(229)

(163)
13
(1)
(56)
(56)
3 $ 2,767(229)(605) $
(1,374)

54
31
(3)
91
91
94 $ 2,711(1,374)(1,978) $
(340)

27
113
(19)
4
4
97 $ 1,462(340)(2,319) $

(82)
95
(22)
10
10
107 $ 1,122(1)224.2 $ 4,284 $— $(1,143) $

(1) $

54
0.5
(0.2)

31
(3)

224.5 $ 4,315 $— $(1,089) $

(4) $

27
4.8
(1.7)

113
(19)

227.7 $ 4,428 $— $(1,062) $(23) $

(82)
4.1
(1.4)

95
(22)

230.4 $ 4,524 $— $(1,145) $(45) $

The accompanying notes are an integral part of the financial statements.

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Kyndryl’s Spin-off
Kyndryl Holdings, Inc. (“we”, “the Company” or “Kyndryl”) is a leading technology services company and thelargest IT infrastructure services provider in the world, serving thousands of enterprise customers whose operations spanover 100 countries. Prior to November 3, 2021, the Company was wholly owned by International Business Machines
Corporation (“IBM”, “Parent” or “former Parent”).
In November 2021, our former Parent effected the spin-off (the “Separation” or the “Spin-off”) of theinfrastructure services unit of its Global Technology Services segment through the distribution of shares of Kyndryl’s
common stock representing 80.1% of total shares outstanding to IBM stockholders. Kyndryl’s stock began trading as anindependent company on November 4, 2021, and IBM disposed of its 19.9% retained interest in Kyndryl common stockin the year following the Spin-off. In connection with the Separation, the Company entered into several agreements withIBM governing the relationship of the parties following the Separation.
Description of Business
Our purpose is to design, build and manage secure and responsive private, public and multi-cloud environments
to serve our customers’ needs and accelerate their digital transformations. We have a long track record of helping
enterprises navigate major technological changes, particularly by enabling our customers to focus on the core aspects of
their businesses during these shifts while trusting us with their most critical systems.
We provide engineering talent, operating solutions and insights derived from our knowledge and data around IT
systems. This enables us to deliver advisory, implementation and managed services at scale across technology
infrastructures that allow our customers to de-risk and realize the full value of their digital transformations. We do thiswhile embracing new technologies and solutions and continually expanding our skills and capabilities, as we help
advance the vital systems that power progress for our customers. We deliver technology services capabilities, insights
and depth of expertise to modernize and manage IT environments based on our customers’ unique needs. We offer
services across domains such as cloud services, core enterprise and zCloud services, applications, data and artificial
intelligence services, digital workplace services, security and resiliency services and network and edge services as we
continue to support our customers through technological change. Our services enable us to modernize and manage cloudand on-premises environments as “one” for our customers, enabling them to scale seamlessly. To deliver these services,
we rely on our global team of skilled practitioners, consisting of approximately 80,000 professionals.
Basis of Presentation
We prepare our consolidated financial statements in accordance with Generally Accepted Accounting Principles
in the United States (“U.S. GAAP”), which requires us to make estimates and assumptions that impact the amounts
reported and disclosed in our consolidated financial statements and the accompanying notes. We prepared theseestimates based on the most current and best available information, but actual results could differ materially from theseestimates and assumptions.
The financial statements and footnotes for the period from January 1 through November 3, 2021 (the “preSeparation period”) reflect allocations of certain IBM corporate, infrastructure and shared services expenses using avariety of allocation methodologies that are appropriate for the type of allocated expense. Where possible, these charges
were allocated based on direct usage, with the remainder allocated on a pro rata basis of headcount, gross profit, asset orother allocation methodologies that are considered to be a reasonable reflection of the utilization of services provided or
the benefit received by Kyndryl during the periods presented.
For the periods subsequent to November 3, 2021, the financial statements are presented on a consolidated basis
as the Company became a standalone public company.

58

The income tax provision included in these consolidated financial statements for the pre-Separation period was
calculated using the separate return basis, as if Kyndryl filed separate tax returns. The calculation of income taxes on ahypothetical separate return basis requires a considerable amount of judgment and use of both estimates and allocations;pre-Separation current and deferred taxes may not be reflective of the actual tax balances subsequent to the Separation.
Current income tax liabilities including amounts for unrecognized tax benefits related to Kyndryl’s activities included in
the Parent’s income tax returns were assumed to be immediately settled with Parent through the Net Parent investment
account in the Consolidated Balance Sheet and reflected in Net transfers from Parent in the Consolidated Statement of
Cash Flows during these periods.
Transition Period
In January 2022, the Board of Directors of Kyndryl approved a change to the fiscal year-end of the Company
from December 31 to March 31. The Company’s 2023 fiscal year began on April 1, 2022 and ended March 31, 2023,
and the Company’s 2024 fiscal year began on April 1, 2023 and ended March 31, 2024. The Company filed a Transition
Report on Form 10-QT for the period of January 1 to March 31, 2022 (the “Transition Period”) with the U.S. Securities
and Exchange Commission (“SEC”) on May 13, 2022.
Principles of Consolidation
For the pre-Separation period, the accompanying financial statements were derived from the consolidated
financial statements and accounting records of the former Parent as if the Company operated on a standalone basis andwere prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC. Historically, theCompany consisted of the managed infrastructure services unit of IBM’s Global Technology Services segment and did
not operate as a separate standalone company. All significant intercompany transactions during the pre-Separation period
between Kyndryl and IBM have been included in the consolidated financial statements. Intercompany transactions
between Kyndryl and IBM were considered to be effectively settled in the consolidated financial statements at the time
the transaction was recorded.
After the Separation on November 3, 2021, the Company’s consolidated financial statements are based on ourreported results as a standalone company. All significant transactions and intercompany accounts between Kyndryl
entities were eliminated.
Within the financial statements and tables presented, certain columns and rows may not add due to the use ofrounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar
amounts. Certain items have been recast to conform to current-period presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimatesand assumptions that affect amounts that are reported in the consolidated financial statements and accompanying
disclosures. Estimates are used in determining the following, among others: revenue, costs to complete service contracts,
income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, the depreciable andamortizable lives of long-lived assets, loss contingencies, allowance for credit losses, deferred transition costs and othermatters. Estimates were also used in determining the allocation of costs and expenses from IBM for the pre-Separation
period. These estimates are based on management’s knowledge of current events, historical experience and actions that
the Company may undertake in the future and on various other assumptions that are believed to be reasonable under thecircumstances. Actual results may be different from these estimates.
Revenue
The Company accounts for a contract with a client when it has written approval, the contract is committed, therights of the parties, including payment terms, are identified, the contract has commercial substance and consideration isprobable of collection.

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Revenue is recognized when, or as, control of a promised service or product transfers to a client, in an amountthat reflects the consideration to which the Company expects to be entitled in exchange for transferring those products orservices. If the consideration promised in a contract includes a variable amount, the Company estimates the amount towhich it expects to be entitled using either the expected value or most likely amount method. The Company’s contracts
may include terms that could cause variability in the transaction price, including, for example, rebates, volume discounts,
service-level penalties and performance bonuses or other forms of variable consideration. In certain rare circumstances,
if we grant the customer the right to return a product and receive a full or partial credit or refund of any consideration
paid, the Company (i) recognizes revenue for the transferred products in the amount of consideration to which it expects
to be entitled, (ii) records a refund liability and (iii) recognizes an asset for its right to recover products from customers
on settling the refund liability.
The Company only includes estimated amounts in the transaction price to the extent it is probable that asignificant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variableconsideration is resolved. The Company may not be able to reliably estimate variable consideration in certain long-termarrangements due to uncertainties that are not expected to be resolved for a long period of time or when the Company’s
experience with similar types of contracts is limited. Changes in estimates of variable consideration are included in
Note 3 – Revenue Recognition.
The Company’s standard billing terms are that payment is due upon receipt of invoice, payable within 30 days.
Invoices are generally issued as services are rendered and/or as control transfers, either at monthly or quarterly intervals
or upon achievement of contractual milestones. In some services contracts, the Company bills the client prior torecognizing revenue from performing the services. In these cases, deferred income is presented in the Consolidated
Balance Sheet. In other services contracts, the Company performs the services prior to billing the client. When the
Company performs services prior to billing the client, the right to consideration is typically subject to milestonecompletion or client acceptance, and the amount is recorded as a contract asset. Contract assets are generally classified
as current and are recorded on a net basis with deferred income (i.e., contract liabilities) at the contract level. Refer toNote 3 – Revenue Recognition for contract assets for the periods presented.
The Company’s rights to consideration are presented separately depending on whether those rights areconditional or unconditional; total conditional contract assets of $30 million at March 31, 2024 and 2023 are included in
prepaid expenses and other current assets in the Consolidated Balance Sheet. Total unconditional contract assets(“unbilled accounts receivable”) of $377 million and $384 million at March 31, 2024 and 2023, respectively, areincluded in accounts receivable in the Consolidated Balance Sheet.
Additionally, in determining the transaction price, the Company would adjust the promised amount ofconsideration for the effects of the time value of money if the billing terms are not standard and the timing of payments
agreed to by the parties to the contract provide the client or the Company with a significant benefit of financing, inwhich case the contract contains a significant financing component. As a practical expedient, the Company does notaccount for significant financing components if the period between when the Company transfers the promised product orservice to the client and when the client pays for that product or service will be one year or less.
The Company may include subcontractor services or original equipment manufacturer (OEM) hardware and/or
OEM software components in certain integrated services arrangements. In these types of arrangements, revenue fromsales of OEM hardware and/or OEM software components or services is recorded net of costs when the Company isacting as an agent between the client and the vendor and gross when the Company is the principal for the transaction. To
determine whether the Company is an agent or principal, the Company considers whether it obtains control of the
products or services before they are transferred to the customer. In making this evaluation, several factors are
considered, most notably whether the Company has primary responsibility for fulfillment to the client, as well as
inventory risk and pricing discretion.
The Company reports revenue net of any revenue-based taxes assessed by governmental authorities that are
imposed on and concurrent with specific revenue-producing transactions.

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Performance Obligations
The Company’s capabilities as an infrastructure services company include offerings that often encompass
multiple types of services and may integrate various OEM hardware and/or OEM software components. When an
arrangement contains multiple separate performance obligations, revenue follows the specific revenue recognition
policies for each performance obligation, depending on the type of offering. The Company determines if the products orservices are distinct and allocates the consideration to each separate performance obligation on a relative standalone
selling price basis. When products and services are not distinct, the Company determines an appropriate measure of
progress based on the nature of its overall promise for the single performance obligation.
The revenue policies below are applied to each performance obligation, as applicable.
Standalone Selling Price
The Company allocates the transaction price to each performance obligation on a relative standalone selling
price basis. The standalone selling price (SSP) is the price at which the Company would sell a promised product orservice separately to a client. The Company establishes SSP based on management’s estimated selling price orobservable prices of products or services sold separately in comparable circumstances to similar clients. For OEM
hardware and/or OEM software components, the Company is able to establish SSP based on the cost from the vendor.
The Company reassesses SSP ranges on a periodic basis or when facts and circumstances change.
In certain instances, the Company may not be able to establish an SSP range based on observable prices and theCompany estimates SSP. The Company estimates SSP by considering multiple factors including, but not limited to,
overall market conditions, including geographic or regional specific factors, competitive positioning, competitor actions,internal costs, profit objectives and pricing practices. Estimating SSP is a formal process that includes review andapproval by the Company’s management.
Nature of Products and Services
The Company delivers transformation and secure cloud services capabilities, insights and depth of expertise tomodernize and manage IT environments based on its customers’ needs. The Company offers services such as cloud
managed services, application hosting and modernization, security and resiliency services, enterprise infrastructureservices, digital workplace services, network services and distributed cloud services to support its customers throughtechnological change. Many of these services can be delivered entirely or partially through cloud or as-a-service delivery
models. The Company’s services are provided on a time-and-material basis, as a fixed-price contract or as a fixed-priceper-measure-of-output contract, and the contract terms range from less than one year to over 10 years. The Company
typically satisfies the performance obligation and recognizes revenue over time in services arrangements because theclient simultaneously receives and consumes the benefits provided as the Company performs the services.
In outsourcing, other managed services, application management and other cloud-based services arrangements,
the Company determines whether the services performed during the initial phases of the arrangement, such as setup
activities, are distinct. In most cases, the arrangement is a single performance obligation comprised of a series of distinct
services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The
Company applies a measure of progress (typically time-based) to any fixed consideration and allocates variableconsideration to the distinct periods of service based on usage. As a result, revenue is generally recognized over theperiod the services are provided on a usage basis. This results in revenue recognition that corresponds with the value tothe client of the services transferred to date relative to the remaining services promised.
Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or
direct expenses are incurred. Revenue from as-a-service type contracts is recognized either on a straight-line basis or on
a usage basis, depending on the terms of the arrangement (such as whether the Company is standing ready to perform orwhether the contract has usage-based metrics). If an as-a-service contract includes setup activities, those promises in thearrangement are evaluated to determine if they are distinct.

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In design and build arrangements, revenue is recognized based on progress toward completion of theperformance obligation using a cost-to-cost measure of progress (e.g., labor costs incurred to date as a percentage of thetotal estimated labor costs to fulfill the contract). The estimation of cost at completion is complex, subject to many
variables and requires significant judgment. Changes in original estimates are reflected in revenue on a cumulative
catch-up basis in the period in which the circumstances that gave rise to the revision become known by the Company.
Refer to Note 3 – Revenue Recognition for the amount of revenue recognized in the reporting period on a cumulative
catch-up basis (i.e., from performance obligations satisfied, or partially satisfied, in previous periods).
The Company performs ongoing profitability analyses of its design and build services contracts accounted forusing a cost-to-cost measure of progress to determine whether the latest estimates of revenues, costs and profits require
updating. If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for theremainder of the contract is recorded immediately. For other types of services contracts, any losses are recorded as
incurred.
The Company’s services offerings may include the integration and/or sale of OEM hardware and/or software
components. Contracts that include hardware and/or software components are evaluated to determine if they are separate
performance obligations as discussed in “Performance Obligations” above. For distinct OEM hardware sales, revenue isrecognized when control has transferred to the customer, which typically occurs when the hardware has been shipped tothe client, risk of loss has transferred to the client and the Company has a present right to payment for the hardware.
Cost of Services
Recurring operating costs for services contracts are recognized as incurred. Certain eligible, nonrecurring costs(i.e., setup costs) incurred in the initial phases of outsourcing contracts and other cloud-based services contracts, arecapitalized when the costs relate directly to the contract, the costs generate or enhance resources of the Company thatwill be used in satisfying the performance obligation in the future and the costs are expected to be recovered. These costs
consist of transition and setup costs related to the installation of systems and processes and other deferred fulfillment
costs, including, for example, prepaid assets used in services contracts (i.e., prepaid software or prepaid maintenance).
Capitalized costs are amortized on a straight-line basis over the expected period of benefit, which approximates thepattern of transfer to the client of the services to which the asset relates and includes anticipated contract renewals or
extensions. Additionally, fixed assets associated with these contracts are capitalized and depreciated on a straight-line
basis over the expected useful life of the asset and recorded in cost of sales. If an asset is contract-specific and cannot be
repurposed, then the depreciation period is the shorter of the useful life of the asset or the contract term. The Company
performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. If the carrying
amount is deemed not recoverable, an impairment loss is recognized. Refer to Note 3 – Revenue Recognition for theamount of deferred costs to fulfill a contract at March 31, 2024 and 2023.
In situations in which an outsourcing contract is terminated, the terms of the contract may require the client toreimburse the Company for the recovery of unbilled accounts receivable, unamortized deferred contract costs andadditional costs incurred by the Company to transition the services.
Incremental Costs of Obtaining a Contract
Incremental costs of obtaining a contract (e.g., sales commissions) are capitalized and amortized on astraight-line basis, which approximates the pattern that the assets’ economic benefits are expected to be consumed, overthe expected customer relationship period if the Company expects to recover those costs. The expected customer
relationship period is determined based on the average customer relationship period, including expected renewals, foreach offering type and ranges from three to six years. Expected renewal periods are only included in the expectedcustomer relationship period if commission amounts paid upon renewal are not commensurate with amounts paid on theinitial contract. Incremental costs of obtaining a contract include only those costs the Company incurs to obtain acontract that it would not have incurred if the contract had not been obtained. The Company has determined that certain
commissions programs meet the requirements to be capitalized. For contracts shorter than one year, the Company has
elected the practical expedient to recognize sales commissions as incurred. Additionally, some commission programs are62not subject to capitalization as the revenue for services is paid over time and the commission expense is paid andrecognized as the related revenue is recognized.
Expense and Other (Income)Expense and other income within the Company’s financial statements through the Separation reflect allocations
to the Company by IBM based on direct usage, with the remainder allocated on a pro-rata basis of gross profit,
headcount, assets or other measures the Company has determined as reasonable. Expense and other income within the
Company’s consolidated financial statements for the periods from November 4, 2021 onward is based on our reported
results as a standalone company.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expense is charged to income as incurred, except for certain salescommissions, which are capitalized and amortized. For further information regarding capitalizing sales commissions, see“Incremental Costs of Obtaining a Contract” above. Expenses of promoting and selling services are classified as selling
expense and, in addition to sales commissions, include such items as compensation, advertising and travel. General andadministrative expense includes such items as compensation, legal costs, office supplies, non-income taxes, insurance
and office rental. In addition, general and administrative expense includes other operating items such as allowance for
credit losses, amortization of certain intangible assets and research, development and engineering (“RD&E”) costs. Total
RD&E costs were $58 million, $79 million, $23 million, and $63 million for the years ended March 31, 2024 and 2023,
the three months ended March 31, 2022 (transition period), and the year ended December 31, 2021, respectively.
Advertising and promotional costs are expensed as incurred. Advertising and promotional expense, which
includes media, agency and promotional expense directly incurred by the Company was $115 million, $136 million,$54 million, and $56 million for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022
(transition period), and the year ended December 31, 2021, respectively. Costs related to the initial establishment of theKyndryl brand are recorded in Transaction-related costs in the Consolidated Income Statement. All other advertising andpromotional costs are recorded in SG&A expense in the Consolidated Income Statement.
Other Expense
Other expense primarily consists of (income) and expense related to certain components of retirement-related
costs, including interest costs, expected return on plan assets, amortization of prior service costs (credits), curtailments
and settlements and other net periodic benefit costs. Also included are gains and losses from foreign currencytransactions.
Defined Benefit Pension and Nonpension Postretirement Benefit Plans
Prior to the Separation, the defined benefit plans and nonpension postretirement benefit plans in which certain
Kyndryl employees participated were sponsored by IBM. During this period, the Consolidated Income Statement
reflected a proportional allocation of net period benefit cost based on headcount associated with the Company.
For defined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO), which
represents the actuarial present value of benefits expected to be paid upon retirement based on employee services alreadyrendered and estimated future compensation levels. For nonpension postretirement benefit plans, the benefit obligation isthe accumulated postretirement benefit obligation (APBO), which represents the actuarial present value of
postretirement benefits attributed to employee services already rendered. The fair value of plan assets represents thecurrent market value of assets held for the benefit of participants. For co-sponsored plans, the fair value of plan assets
based on Company contributions, distributions and market returns and the benefit obligation attributed to employees of
the Company are allocated to Kyndryl.
Overfunded plans, in which the fair value of plan assets exceeds the benefit obligation, are aggregated, andrecorded in pension assets in the Consolidated Balance Sheet. Underfunded plans, in which the benefit obligation

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exceeds the fair value of plan assets, are aggregated and the noncurrent portion of this excess is recorded in retirement
and nonpension postretirement benefit obligations in the Consolidated Balance Sheet. The current portion of the benefit
obligation in excess of the fair value of plan assets represents the actuarial present value of benefits payable in the next
twelve months, measured on a plan-by-plan basis. The current portion of this obligation is recorded in accrued
compensation and benefits in the Consolidated Balance Sheet.
Net periodic benefit cost of defined benefit pension and nonpension postretirement benefit plans is recorded in
the Consolidated Income Statement and includes service cost, interest cost, expected return on plan assets, amortizationof prior service costs (credits) and actuarial (gains) losses previously recognized as a component of other comprehensive
income (loss) (OCI). The service cost component of net benefit cost is recorded in Cost of services and SG&A in theConsolidated Income Statement (unless eligible for capitalization) based on the employees’ respective functions. The
other components of net benefit cost are presented separately from service cost within other expense in the Consolidated
Income Statement.
Actuarial (gains) losses and prior service costs (credits) are recognized as a component of OCI in theConsolidated Statement of Comprehensive Income (Loss) as they arise. Those actuarial (gains) losses and prior service
costs (credits) are subsequently recognized as a component of net periodic benefit cost pursuant to the recognition andamortization provisions of applicable accounting guidance. Actuarial (gains) losses arise as a result of differences
between actual experience and assumptions or as a result of changes in actuarial assumptions. Prior service costs(credits) represent the cost of benefit changes attributable to prior service granted in plan amendments.
The measurement of benefit obligations and net periodic benefit cost is based on estimates and assumptions
approved by the Company’s management. These valuations reflect the terms of the plans and use participant-specificinformation such as compensation, age and years of service, as well as certain assumptions, including estimates of
discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates.
The Company participates in non-U.S. multi-employer pension plans and makes required contributions to thoseplans, which are recorded in Cost of services and SG&A in the Consolidated Income Statement based on the employees’
respective functions.
Defined Contribution Plans
Prior to the Separation, the Parent offered various defined contribution plans for U.S. and non-U.S. employees.
In September 2021, in preparation for the Separation, Kyndryl established standalone defined contribution plans, andemployees identified as Kyndryl employees were enrolled into these plans. Contribution expense associated with
employer matching benefits is recorded when the employee renders service to the Company. The charge is recorded in
Cost of services and SG&A in the Consolidated Income Statement based on the employees’ respective functions.
Stock-Based Compensation
Stock-based compensation expense represents the cost related to stock-based awards granted to employees
under Kyndryl’s stock-based compensation plan (the “Kyndryl Plan”). The Company establishes stock-based
compensation values at the grant date, based on the estimated fair value of the award and recognizes the cost on astraight-line basis (net of actual forfeitures) over the requisite employee service period. Kyndryl grants the Company’s
employees Restricted Stock Units (RSUs), market-conditioned stock units, performance-conditioned stock units andstock options. RSUs are stock units granted to employees that entitle the holder to shares of Kyndryl common stock as
the award vests, typically over a one- to four-year period. Market-conditioned stock units are granted to employees withvesting conditions based on the Company’s achievement of a market condition and are cliff vested at the end of thethree-year service period. Performance-conditioned stock units are granted to employees with vesting conditions basedon the attainment of operational targets (e.g., signings and free cash flows) and are cliff vested at the end of the threeyear performance period. Stock options are vested over a one- to four-year period and have a ten-year contractual term.
As of March 31, 2024, 47.9 million shares of common stock have been approved to be granted to employees under theKyndryl Plan. Dividend equivalents are not paid on the stock-based awards described above.

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The fair value of the RSUs is determined on the grant date based on Kyndryl’s stock price, adjusted for the
exclusion of dividend equivalents where applicable. The fair value of market-conditioned stock units is determined on
the date of grant using a Monte Carlo simulation model which estimates the probability of satisfying market conditions.
The fair value of the performance-conditioned stock units is determined on the grant date based on Kyndryl’s stock priceand subsequently adjusted based on the probability of attainment. The fair value of stock options is determined on the
grant date using a Black-Scholes model. Stock-based compensation cost is recorded in Cost of services and SG&A in theConsolidated Income Statement based on the employees’ respective functions.
Prior to the Separation, the Company participated in various IBM stock-based compensation plans, including
incentive compensation plans. All awards granted under the plans were based on IBM’s common shares and, as such,
were reflected in the former Parent’s Consolidated Statement of Stockholders’ Equity. For the pre-Separation period,
stock-based compensation cost is based on the awards and terms previously granted by the former Parent to employees
who exclusively supported Kyndryl operations. At the time of Kyndryl’s Spin-off, each outstanding IBM RSU and PSU
held by a Kyndryl employee was converted into a Kyndryl RSU. The equity award exchange ratio was determined as theclosing per share price of IBM shares on the last trading day prior to the Spin-off divided by the opening price ofKyndryl common stock on the first trading day following the Spin-off.
The Company records deferred tax assets for awards that result in tax deductions in the consolidated financial
statements calculated based on the amount of compensation cost recognized and the relevant statutory tax rates. The
differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction
reported on the income tax return are recorded as a benefit or expense to the provision for income taxes in theConsolidated Income Statement.
Derivative Financial Instruments
Prior to the third quarter of 2021, Kyndryl did not independently execute derivative financial instruments tomanage its foreign currency risk and instead participated in a centralized foreign currency hedging program administeredby IBM. The hedging activity allocated to Kyndryl was for the management of the Company’s forecasted foreign
currency expenses.
After the Separation, the Company started using derivative financial instruments to manage foreign currency
risk. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial
instruments that qualify for hedge accounting are designated as either cash flow hedges or net investment hedges.
Additionally, the Company may enter into derivative contracts that economically hedge certain risks, even when hedge
accounting does not apply, or the Company elects not to apply hedge accounting.
Derivatives are recognized in the Consolidated Balance Sheet at fair value on a gross basis as either assets or
liabilities and classified as current or noncurrent based upon whether the maturity of the instrument is less than or greaterthan twelve months.
Changes in the fair value of derivatives designated as cash flow hedges are recorded, net of applicable taxes, in
OCI and subsequently reclassified into the same income statement line item as the hedged exposure when the underlying
hedged item is recognized in earnings. Derivatives designated as net investment hedges are accounted for using the spot
method, with changes in the fair value of the derivatives attributable to changes in spot rates recorded within foreign
currency translation (“CTA”) as a component of other comprehensive income (loss) and remaining there until thehedged net investments are sold or substantially liquidated. The changes in the fair value of the derivatives that are
attributable to changes in the difference between the forward rate and spot rate are excluded from the assessment ofhedge effectiveness. The changes in fair value that are attributable to the excluded components are initially recorded in
CTA and then recognized in interest expense on the Consolidated Income Statement over the life of the derivative
instruments. Changes in fair value of derivatives not designated as hedges are reported in other expense in theConsolidated Income Statement. See Note 7 – Financial Assets and Liabilities for further information.
The cash flows associated with derivatives designated as cash flow hedges are reported as cash flows fromoperating activities in the Consolidated Statement of Cash Flows. Cash flows from derivatives designated as net

65investment hedges are reported as cash flows from investing activities in the Consolidated Statement of Cash Flows,
except for cash flows from the periodic interest settlements of cross-currency interest rate swaps designated as net
investment hedges, which are reported as cash flows from operating activities in the Consolidated Statement of Cash
Flows. Cash flows from derivatives not designated as hedges are reported as cash flows from investing activities in theConsolidated Statement of Cash Flows.
Translation of Non-U.S. Currency Amounts
Assets and liabilities of non-U.S. subsidiaries that have a local functional currency are translated to U.S. dollars
at year-end exchange rates. Translation adjustments are recorded in OCI. Income and expense items are translated atweighted-average rates of exchange prevailing during the year.
Property and equipment, deferred income and other non-monetary assets and liabilities of non-U.S. subsidiaries
and branches that operate in U.S. dollars are translated at the approximate exchange rates prevailing when the Company
acquired the assets or liabilities. All other assets and liabilities denominated in a currency other than U.S. dollars aretranslated at year-end exchange rates with the transaction gain or loss recognized in other expense. Income and expense
items are translated at the weighted-average rates of exchange prevailing during the year. These translation gains andlosses are included in net income for the period in which exchange rates change.
Cash and Cash Equivalents
All highly liquid investments with an original maturity of three months or less on the date of purchase areconsidered to be cash equivalents.
Accounts Receivable and Allowance for Current Expected Credit Losses
The Company classifies the right to consideration in exchange for products or services transferred to a client as
a receivable. Receivables are recorded concurrent with billing and delivery of a service to customers. An allowance foruncollectible receivables and contract assets, if needed, is estimated based on specific customer situations, current andfuture expected economic conditions and past experiences of losses, as well as an assessment of potential recoverabilityof the balance due.
Receivable losses are charged against the allowance in the period in which the receivable is deemed
uncollectible. Subsequent recoveries, if any, are credited to the allowance. Write-offs of receivables and associatedreserves occur to the extent that the customer is no longer in operation and/or there is no reasonable expectation of
additional collections or repossession.
Transfers of Financial Assets
The Company has entered into agreements with third-party financial institutions to sell certain financial assets(primarily trade receivables) without recourse. The Company has determined these are true sales. The carrying value ofthe financial asset sold is derecognized, and a net gain or loss on the sale is recognized, at the time of the transfer. The
first agreement, which was executed in November 2021 and subsequently amended, enabled us to sell certain of ourtrade receivables to the counterparty. The initial term of this agreement was 18 months, and the agreement automatically
resets to a term of 18 months after every six months, unless either party elects not to extend. The second agreement was
executed in June 2022 with a separate third-party financial institution and renews automatically on its anniversary date.
The net proceeds from these arrangements are reflected as cash provided by operating activities in theConsolidated Statement of Cash Flows. Gross proceeds from receivables sold to third parties and the financing divisionof our former Parent were $3.6 billion, $3.1 billion, $485 million, and $2.5 billion for the years ended March 31, 2024
and 2023, the three months ended March 31, 2022, and the year ended December 31, 2021, respectively. The fees
associated with the transfers of receivables were $49 million for the year ended March 31, 2024, $47 million for the year
ended March 31, 2023, $7 million for the three months ended March 31, 2022, and not material for the year ended
December 31, 2021.

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Fair Value Measurement
In determining the fair value of its financial instruments, the Company uses methods and assumptions that are
based on market conditions and risks existing at each balance sheet date. All methods of assessing fair value result in a
general approximation of value, and such value may never actually be realized.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The Company classifies certain assets andliabilities based on the following fair value hierarchy:•

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that can beaccessed at the measurement date;•

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly; and•Level 3 — Unobservable inputs for the asset or liability.

Items valued using internally generated models are classified according to the lowest level input or value driverthat is significant to the valuation. The determination of fair value considers various factors including interest rate yield
curves and time value underlying the financial instruments. For derivatives and debt securities, the Company uses a
discounted cash flow analysis using discount rates commensurate with the duration of the instrument.
In determining the fair value of financial instruments, the Company considers certain market valuation
adjustments to the “base valuations” using the methodologies described below for several parameters that market
participants would consider in determining fair value:•Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual
credit risk of a counterparty as observed in the credit default swap market to determine the true fair value ofsuch an instrument.

•

Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities
measured at fair value. The methodology is consistent with that applied in developing counterparty credit
risk adjustments, but incorporates the Company’s credit risk as observed in the credit default swap market.

Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill
and intangible assets are recorded at fair value or at cost, as appropriate, in the period they are initially recognized, andsuch fair value may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that theasset may be impaired. The impairment models used for non-financial assets depend on the type of asset. The fair value
measurements, in such instances, would be classified in Level 3 of the fair value hierarchy.
Supplier Financing Program
In the year ended March 31, 2024, the Company initiated a supplier financing program with a third-party
financial institution under which the Company agrees to pay the financial institution the stated amounts of invoices fromparticipating suppliers on the originally invoiced due date, which have an average term of 90 to 120 days. The financial
institution offers earlier payment of the invoices at the sole discretion of the supplier for a discounted amount. The
Company does not provide secured legal assets or other forms of guarantees under the arrangements. The Company is
not a party to the arrangement between its suppliers and the financial institution. The Company or the financial
institution may terminate the agreement upon at least 180 days notice. The Company’s obligations under this program
continue to be recognized as accounts payable in the Consolidated Balance Sheet. The obligations outstanding under thisprogram at March 31, 2024 were immaterial.

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Leases
When procuring goods or services, the Company determines whether an arrangement contains a lease at its
inception. As part of that evaluation, the Company considers whether there is an implicitly or explicitly identified asset
in the arrangement and whether the Company, as the lessee, has the right to control the use of that asset. Leases areclassified as either finance leases or operating leases.
The Company recognized right-of-use (“ROU”) assets and associated lease liabilities in the Consolidated
Balance Sheet for leases with a term of more than twelve months when a majority percentage of utilization was
attributed to the Company. The lease liabilities recognized pre-Separation were measured at the lease commencement
date and determined using the present value of the lease payments not yet paid and the former Parent’s incremental
borrowing rate, since they were negotiated by the former Parent prior to Separation. Any new or modified leases enteredinto after the Separation are measured at Kyndryl’s incremental borrowing rate, as the interest rate implicit in the lease isgenerally not determinable in transactions where the Company is the lessee. The ROU asset equals the lease liability
adjusted for any initial direct costs, prepaid rent and lease incentives. The Company’s variable lease payments generally
relate to payments tied to various indexes, non-lease components and payments above a contractual minimum fixedamount.
Operating leases are included in operating right-of-use assets net, operating lease liabilities (current andnon-current) in the Consolidated Balance Sheet. Finance leases are included in property and equipment, current portionof long-term debt and long-term debt in the Consolidated Balance Sheet. The lease term includes options to extend or
terminate the lease when it is reasonably certain that the Company will exercise that option.
The Company made a policy election to not recognize leases with a lease term of twelve months or less in theConsolidated Balance Sheet.
For all asset classes, the Company has elected the lessee practical expedient to combine lease and non-lease
components (e.g., maintenance services) and account for the combined unit as a single lease component. A significant
portion of the Company’s lease portfolio is real estate leases, which are mainly accounted for as operating leases and areprimarily used for corporate offices and data centers. The average term of the real estate leases is approximately five
years. The Company also has equipment leases, such as for IT equipment and vehicles, which have lease terms that
range from two to five years. For certain of these operating and finance leases, the Company applies a portfolio approachto account for the lease assets and lease liabilities.
Intangible Assets Including Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets, including the amountassigned to identifiable intangible assets. The primary drivers that generate goodwill are the value of synergies between
the acquired entities and the Company and the acquired assembled workforce, neither of which qualifies as a separately
identifiable intangible asset. Goodwill recorded in an acquisition is assigned to applicable reporting units based on
expected revenues or expected cash flows. Goodwill inherited from the former Parent pre-Separation represents thehistorical goodwill balances in IBM’s managed infrastructure services business arising from acquisitions specific to theCompany. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their useful lives,
which approximates the pattern that the assets’ economic benefits are expected to be consumed over time. Amortizationof completed technology is recorded in cost of services, and amortization of all other intangible assets is recorded in
SG&A expense. All costs related to internally developed computer software during the preliminary project stage andpost-implementation operation stage are expensed as incurred. Costs incurred during application development stage arecapitalized and included in intangibles and amortized over the estimated useful life of the software.
Impairment
Long-lived assets, other than goodwill, are tested for impairment whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable. The impairment test is based on undiscounted cash flows and,if impaired, the asset is written down to fair value based on either discounted cash flows or appraised values. Goodwill is68tested for impairment at least annually and whenever changes in circumstances indicate an impairment may exist. The
goodwill impairment test is performed at the reporting unit level, which aligns with our operating segments. Impairment
charges related to long-lived assets, intangible assets and goodwill, if any, are recorded as impairment expense in theConsolidated Income Statement.
Transaction-Related Costs (Benefits)
The Company classifies certain expenses and benefits related to the Separation, acquisitions and divestitures (ifany) as “transaction-related costs (benefits)” in the Consolidated Income Statement. Transaction-related costs include
employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand, legal,
accounting, consulting and other professional service costs required to prepare for and execute the Separation, costs andbenefits resulting from settlements with our former Parent associated with pre-Separation and Separation-related matters,
and other costs related to contract and supplier novation and integration.
Workforce Rebalancing and Site-Rationalization Charges
The Company has incurred workforce rebalancing charges, charges related to ceasing to use leased and owned
fixed assets and charges related to lease terminations. We record a liability for employee termination benefits either
when it is probable that an employee is entitled to it and the amount of the benefits can be reasonably estimated or whenmanagement has communicated the termination plan to employees. Workforce rebalancing charges are recorded as aseparate line on the Consolidated Income Statement. Charges related to ceasing to use leased assets and owned fixed
assets and charges related to lease terminations are recognized as cost of services or selling, general and administrative
expenses based on our classification policy for each category. Refer to Note 19 – Workforce Rebalancing and SiteRationalization Charges for details of this program.
Property and Equipment
Property and equipment are recorded at cost, or in the case of acquired property and equipment, at fair value atthe date of the acquisition. Expenditures for repairs and maintenance costs are expensed as incurred, whereas
expenditures that extend the life or increase the functionality of the asset are capitalized as additions to property andequipment. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed
from the accounts, and any resulting gain or loss is included in the determination of net income or loss.
In March 2024, the Company completed its assessment of the useful lives of its information technology
equipment. Based on our usage experience and data analysis, the Company determined it should increase the estimateduseful lives of its information technology equipment from five to six years. This change in accounting estimate will beeffective beginning April 1, 2024 and applied on a prospective basis to these assets on the Company’s balance sheet asof March 31, 2024, as well as future asset purchases. Based on the net carrying value of information technology
equipment, in the Company’s Consolidated Balance Sheet as of March 31, 2024, the Company estimates this change will
decrease non-cash depreciation expense for fiscal year 2025 by approximately $180 million.
We compute depreciation expense on a straight-line method over the estimated useful lives of the assets asfollows:
Classification

Estimated Useful Life

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information technology equipment (acquired as used) . . . . . . . . . . . . . . . .
Information technology equipment (acquired as new)** . . . . . . . . . . . . . .

30 to 50 years
20 years
Estimated useful life or term of lease
2 to 20 years
1.5 to 3 years
5 years* Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term, rarely exceeding 10 years.
** Extended to six years effective April 1, 2024.

69

Environmental
The costs of internal environmental protection programs that are preventative in nature are expensed as
incurred. When a cleanup program becomes likely and it is probable that the Company will incur cleanup costs and thosecosts can be reasonably estimated, the Company accrues remediation costs for known environmental liabilities.
Income Taxes
Prior to the Separation, our operations were included in the consolidated U.S. federal and certain state and local
and foreign income tax returns filed by our former Parent. The Company also filed certain separate foreign income tax
returns. For purposes of the historical periods presented on a “carve-out” basis, the income tax provisions have been
calculated using the separate return basis, as if the Company filed separate tax returns. The separate return method
applies the accounting guidance for income taxes to the standalone financial statements as if the Company were aseparate taxpayer and a standalone enterprise for the periods presented. Tax attributes have been reported based on the
hypothetical separate return basis results for the periods presented in the Company’s financial statements. The
calculation of income taxes on a hypothetical separate return basis requires a considerable amount of judgment and useof both estimates and allocations; pre-Separation current and deferred taxes may not be reflective of the actual tax
balances subsequent to the Separation.
Post-Separation, the income tax provisions are calculated based on Kyndryl’s operating footprint, as well as tax
return elections and assertions. Prior to the Separation, current income tax liabilities including amounts for unrecognizedtax benefits related to our activities included in IBM’s income tax returns were deemed to be immediately settled withIBM through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net transfers from
Parent in the financing activities section in the Consolidated Statement of Cash Flows. Post-Separation, liabilities related
to unrecognized tax benefits for which the Company is liable are reported within the Consolidated Balance Sheet based
upon tax authorities’ ability to assert the Company may be the primary obligor for historical taxes, among other factors.
Income tax expense is based on reported income before income taxes. Deferred income taxes reflect the tax
effect of temporary differences between asset and liability amounts that are recognized for financial reporting purposes
and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently
enacted tax laws. U.S. tax reform introduced Global Intangible Low-Taxed Income (“GILTI”), which subjects a U.S.
shareholder to current tax on income earned by certain foreign subsidiaries. GAAP allows companies to either (i)recognize deferred taxes for temporary differences that are expected to reverse as GILTI in future years or (ii) accountfor taxes on GILTI as period costs in the year the tax is incurred. The Company has elected to recognize GILTI impact inthe specific period in which it occurs.
Valuation allowances are recognized to reduce deferred tax assets to the amount that will more likely than not
be realized. In assessing the need for a valuation allowance, management considers all available evidence for eachjurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax
planning strategies and actions. When there is a change in the determination as to the amount of deferred tax assets thatcan be realized, the valuation allowance is adjusted with a corresponding impact to provision for income taxes in the
period in which such determination is made.
The Company recognizes additional tax liabilities when the Company believes that certain positions may not be
fully sustained upon review by tax authorities. Benefits from tax positions are measured at the largest amount of benefit
that is greater than 50 percent likely of being realized upon settlement. The noncurrent portion of tax liabilities is
included in other liabilities in the Consolidated Balance Sheet. To the extent that new information becomes available
which causes the Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax
liabilities will impact income tax expense in the period in which such determination is made. Interest and penalties, ifany, related to accrued liabilities for potential tax assessments are included in income tax expense.

70

Net Loss per Share
Net loss per share is computed by dividing net loss for the period by the weighted-average number of commonshares outstanding during the period. The calculation of basic and diluted earnings per share for the pre-Separation
period was based on the number of shares outstanding on November 4, 2021. Refer to Note 6 – Net Loss per Share for areconciliation as well as Note 15 – Stock-based Compensation for further discussion on awards.
NOTE 2. ACCOUNTING PRONOUNCEMENTS
Standards Implemented
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update(“ASU”) 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on
Financial Reporting, which included a sunset provision within Topic 848 based on expectations of when the London
Interbank Offered Rate (“LIBOR”) would cease being published. The FASB issued temporary, optional expedients
related to the accounting for contract modifications and hedging transactions as a result of markets transitioning from theuse of LIBOR and other interbank offered rates to alternative reference rates. In December 2022, the FASB issued ASU
2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, deferring the sunset date of
Topic 848 to December 31, 2024. In June 2023, the Company modified its contracts that use LIBOR, transitioning from
LIBOR to the Secured Overnight Financing Rate (“SOFR”). The use of SOFR became effective in modified contracts
beginning on July 1, 2023. The change of reference rate did not result in any material impact to the Company’s
consolidated financial statements.
In September 2022, the FASB issued ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 40550): Disclosure of Supplier Finance Program Obligations, which amended its guidance related to supplier financeprograms. The amended guidance requires additional disclosures surrounding the use of supplier finance programs topurchase goods or services, including disclosing the key terms of the programs, the amount of obligations outstanding at
the end of the reporting period, and a roll-forward of those obligations. The new guidance, except the roll-forward
information, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. The requirement to present roll-forward information is effective for fiscal years beginning after December 15,
2023. The Company adopted the guidance at the beginning of fiscal year 2024. The guidance did not have a material
impact to the Company’s consolidated financial statements or disclosures, as the Company did not have material supplierfinance programs. For additional information, see Note 1 – Significant Accounting Policies.
Recent Pronouncements
In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842) – Common-Control Arrangements. This
guidance amends the accounting for leasehold improvements in common-control arrangements by requiring a lessee in acommon-control arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to thecommon-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset
through a lease. This guidance is effective for fiscal years beginning after December 15, 2023, including interim periods
within those fiscal years. Early adoption is permitted. The Company has evaluated the impact of the amended guidanceand concluded that the guidance does not have a material impact on the Company’s consolidated financial statements.
In August 2023, the FASB issued ASU 2023-05, Business Combinations – Joint Venture Formations (Subtopic
805-60): Recognition and Initial Measurement, which requires a joint venture to measure all contributions received uponits formation at fair value. This guidance should be applied prospectively, effective for all newly-formed joint venture
entities with a formation date on or after January 1, 2025. Early adoption is permitted. The Company has evaluated theimpact of the guidance and does not expect it to have a material impact on the Company’s consolidated financial
statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements toReportable Segment Disclosures, which is intended to improve reportable segment disclosures, primarily throughenhanced disclosures about significant segment expenses. The guidance should be applied retrospectively, effective for71fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15,
2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the disclosuresin its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax
Disclosures, which is intended to enhance the transparency and usefulness of income tax disclosures through improved
reporting related to the rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning
after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of thisguidance on the disclosures in its consolidated financial statements.
NOTE 3. REVENUE RECOGNITION
Disaggregation of Revenue
The Company views its segment results to be the best view of disaggregated revenue. Refer to Note 4 –Segments.
Remaining Performance Obligations
The remaining performance obligation (“RPO”) represents the aggregate amount of contractual deliverables yet
to be recognized as revenue at the end of the reporting period. It is intended to be a statement of overall work undercontract that has not yet been performed and does not include contracts in which the customer is not committed. The
customer is not considered committed when it is able to terminate for convenience without payment of a substantive
penalty. The RPO also includes estimates of variable consideration. RPO estimates are subject to change and are affectedby several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments forrevenue that has not materialized and adjustments for currency.
At March 31, 2024, the aggregate amount of RPO related to customer contracts that are unsatisfied or partiallyunsatisfied was $33.1 billion. Approximately 59 percent of the amount is expected to be recognized as revenue in thenext two years, approximately 34 percent in the subsequent three years, and the balance thereafter.
Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods
For the year ended March 31, 2024, revenue increased by $31 million for performance obligations satisfied (orpartially satisfied) in previous periods, mainly due to changes in estimates on contracts with cost-to-cost measures ofprogress.
Contract Balances
The following table provides information about accounts receivable, contract assets and deferred income
balances:
At March 31,
2024
2023

(Dollars in millions)

Accounts receivable (net of allowances for credit losses of $22 at March 31, 2024
and $32 at March 31, 2023) * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract assets ** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income (noncurrent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*
**

$

1,599
30
825
314

$

1,523
30
820
362

Including unbilled receivable balances of $377 million at March 31, 2024 and $384 million at March 31, 2023.
Contract assets represent services performed by the Company prior to billing the client, which give the Company the right to consideration that is
typically subject to milestone completion or client acceptance. They are included within prepaid expenses and other current assets in theConsolidated Balance Sheet.

72

The amount of revenue recognized during the year ended March 31, 2024 that was included within the deferredincome balance at March 31, 2023 was $794 million.
The following table provides roll-forwards of the accounts receivable allowance for expected credit losses forthe years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period), and the year
ended December 31, 2021:

Year Ended March 31,
2024
2023

(Dollars in millions)

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions (releases) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*

$

$

32
4
(4)
(9)
22

$

$

44
6
(13)
(5)
32

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

$

$

44
6
(4)
(2)
44

$

91
(23)
(5)
(19)
44

$

Primarily represents translation adjustments.

The contract assets allowance for expected credit losses was not material in any of the periods presented.
Major Clients
No single client represented more than 10 percent of the Company’s total revenue during the years ended
March 31, 2024 and 2023 and the three months ended March 31, 2022 (transition period). Other than transactions withthe former Parent, no single client represented 10 percent or more of the Company’s total revenue in the year ended
December 31, 2021. Other than receivables with the former Parent, no single client represented more than 10 percent of
the Company’s total accounts receivable balance as of March 31, 2024 and 2023, respectively.
Deferred Costs
Costs to acquire and fulfill customer contracts are deferred and amortized over the contract period or expectedcustomer relationship life. The expected customer relationship period is determined based on the average customer
relationship period, including expected renewals, for each offering type and ranges from three to six years. For contracts
with an estimated amortization period of less than one year, we elected the practical expedient to expense incremental
costs immediately.
The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at March 31,
2024 and 2023:
At March 31,(Dollars in millions)2024

Deferred transition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid software costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized costs to fulfill contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized costs to obtain contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred costs * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*

$

$

753
770
212
265
2,000

2023

$

$

856
782
285
313
2,236

Of the total deferred costs, $1,081 million was current and $920 million was noncurrent at March 31, 2024, and $1,070 million was current and$1,166 million was noncurrent at March 31, 2023.

The amount of total deferred costs amortized during the year ended March 31, 2024 was $1.8 billion, composedof $335 million of amortization of deferred transition costs, $921 million of amortization of prepaid software and $531
million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended
March 31, 2023 was $1.7 billion, composed of $342 million of amortization of deferred transition costs, $857 million ofamortization of prepaid software and $472 million of amortization of capitalized contract costs. The amount of total

73

deferred costs amortized during the three months ended March 31, 2022 (transition period) was $455 million, composedof $112 million of amortization of deferred transition costs, $207 million of amortization of prepaid software and $136
million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended
December 31, 2021 was $1.8 billion, composed of $403 million of amortization of deferred transition costs, $874 millionof amortization of prepaid software and $563 million of amortization of capitalized contract costs. There were nomaterial impairment losses incurred in any period. Refer to Note 1 – Significant Accounting Policies for additional
information on deferred costs to fulfill a contract and capitalized costs of obtaining a contract.
NOTE 4. SEGMENTS
Our reportable segments correspond to how the chief operating decision maker (“CODM”) reviews
performance and allocates resources. Our four reportable segments consist of the following:
United States: This reportable segment is comprised of Kyndryl’s operations in the United States.
Japan: This reportable segment is comprised of Kyndryl’s operations in Japan.
Principal Markets: This reportable segment represents the aggregation of our operations in Australia / New
Zealand, Canada, France, Germany, India, Italy, Spain / Portugal, and the United Kingdom / Ireland.
Strategic Markets: This reportable segment is comprised of our operations in all other countries in which we
operate.
The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA. Adjusted
EBITDA is defined as net income (loss) excluding income taxes, interest expense, depreciation and amortization(excluding depreciation of right-of-use assets and amortization of capitalized contract costs), charges related to ceasing
to use leased and owned fixed assets, charges related to lease terminations, transaction-related costs and benefits,pension expenses 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, andcurrency impacts of highly inflationary countries. The use of revenue and adjusted EBITDA aligns with how the CODM
assesses performance and allocates resources for the Company’s segments.
Our geographic markets frequently work together to sell and implement certain contracts. The resulting
revenues and costs from these contracts may be apportioned among the participating geographic markets. The economic
environment and its effects on the industries served by our geographic markets affect revenues and operating expenses
within our geographic markets to differing degrees. Currency fluctuations also tend to affect our geographic markets
differently, depending on the geographic concentrations and locations of their businesses.

74

The following table reflects the results of the Company’s segments:
Year Ended
December 31,
2021

4,726
2,502
5,957
3,840
17,026

$

1,169
706
1,579
978
4,431

$

839
407
371
436
2,052

$

248
154
98
92
592

$

Year Ended March 31,
2024
2023

(Dollars in millions)

Revenue
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment adjusted EBITDA
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total segment adjusted EBITDA . . . . . . . . . . . . . . . .

Three Months
Ended
March 31,
2022

$

$
$

$

4,295
2,344
5,823
3,590
16,052

$

781
361
740
579
2,461

$

$

$

$

$

$

$

4,805
2,923
7,085
3,844
18,657
842
501
341
540
2,223

The following table reconciles segment adjusted EBITDA to consolidated pretax income (loss):Year Ended March 31,
2024
2023

(Dollars in millions)

Segment adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . .
Workforce rebalancing charges . . . . . . . . . . . . . . . . . . .
Charges related to ceasing to use leased/fixed
assets and lease terminations. . . . . . . . . . . . . . . . . . . .
Transaction-related (costs) benefits . . . . . . . . . . . . . . . .
Stock-based compensation expense. . . . . . . . . . . . . . . .
Impairment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of property, equipment andcapitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate expense not allocated to the segments . . . . .
Other adjustments* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pretax income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*

$

$

2,461
(138)

$

2,052
(71)

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

$

$

592
—

2,223
(39)

(39)
46
(95)
—
(122)

(80)
(264)
(113)
—
(94)

—
(58)
(31)
—
(21)

—
(627)
(71)
(469)
(64)

(834)
(1,287)
(95)
(68)
(168)

(900)
(1,245)
(77)
(59)
(851)

(246)
(326)
(56)
(43)
(189)

(1,300)(1,314)(154)(88)(1,903)$$$

Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs,
currency impacts of highly inflationary countries, and an adjustment to reduce amortization expense for the amount already included intransaction-related (costs) benefits above.

Segment Assets and Other Items
The Company does not allocate assets to the above reportable segments for our CODM’s review.

75

Geographic Information
The following tables provide information for those countries that represent 10 percent or more of the specificcategory. Refer to Note 8 – Property and Equipment and Note 9 – Leases for more information on allocation
methodologies.

Year Ended March 31,
2024
2023

(Dollars in millions)

Revenue*
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗

$

4,295
2,344
9,413
16,052

$

$
$

4,726
2,502
9,797
17,026

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

$

$

1,169
706
2,556
4,431

$

$

4,805
2,923
10,93018,657

Revenues are attributed to countries based on the location of the client and exclude certain allocations.
At March 31,(Dollars in millions)2024

Property and equipment, net
United States * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating right-of-use assets, net
United States * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating right-of-use assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*

$
$
$

$

2023

951
1,724
2,674

$

113
73
135
95
448
864

$

922
1,857
2,779

$

124
110
149
64
517
964

$

Includes corporate and other.

NOTE 5. TAXESFor the period prior to the Separation, income taxes have been calculated as if we filed income tax returns for
the Company on a standalone basis, although the Company’s operations historically have been included in the income
tax returns of its former Parent.
Income (loss) before income taxes by geography was as follows:Year Ended March 31,
2024
2023

(Dollars in millions)

Income (loss) before income taxes:
U.S. operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income (loss) before income taxes . . . . . . . . . . .

$

(678)
510
(168)

$

76

$
$

(1,543)692(851)

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

$

$

$

(255)
66
(189)

$

(1,765)(138)(1,903)

The components of the provision for income taxes by taxing jurisdiction were as follows:$$

U.S. state and local:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$$Non-U.S.:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total provision for income taxes . . . . . . . . . . . . . . . . .

Year Ended
December 31,
2021

—
(19)
(19)

$

—
(43)
(43)

$

2
(4)
(2)

$

—
(10)
(10)

$

236
308
545
524

$

51
42
93
40

$

Year Ended March 31,
2024
2023

(Dollars in millions)

U.S. federal:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Three Months
Ended
March 31,
2022

$
$
$

39
(10)
29

$

2
1
3

$

142
(2)
140
172

$

$

$

$
$

$

$

$
$

17
(73)
(56)

$

—
(5)
(5)

$

790
(327)
463
402

$
$

A reconciliation of the statutory U.S. federal tax rate to the Company’s effective tax rate from continuing
operations was as follows:Year Ended March 31,
2024
2023

Statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax differential on foreign income . . . . . . . . . . . . . . . . . . . . .
State and local taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves for uncertain tax positions . . . . . . . . . . . . . . . . . . . .
Global Intangible Low-Taxed Income (GILTI) . . . . . . . . . . .
Undistributed foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of foreign operations. . . . . . . . . . . . . . . . . . . . . . . . . . .
Separation-related transactions . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basis adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return to provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*21.0 %(17.4)%
17.8 %(67.7)%(7.8)%—%
2.2 %(43.6)%—%—%(6.2)%
28.7 %(19.3)%(8.6)%(1.4)%(102.2)%21.0 %(3.9)%
5.7 %(72.0)%(6.5)%(2.0)%
1.5 %(8.6)%
—%
—%
—%
4.7 %
0.3 %
(2.0)%—%(61.6)%

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

21.0 %(1.1)%
5.6 %(30.8)%(5.4)%(4.4)%(3.4)%
2.5 %
—%
—%
—%
—%
(4.4)%(0.6)%—%(21.0)%

21.0 %(8.6)%
3.0 %(16.1)%(8.3)%—%(0.6)%(4.7)%(2.6)%(4.0)%—%—%—%—%(0.2)%(21.1)%

Includes intercompany prepayment of 0.5% in 2021.

The provision for income taxes for the year ended March 31, 2024 was $172 million as compared to $524
million for the year ended March 31, 2023. The decrease in income tax expense was primarily driven by valuation
allowances established in fiscal year 2023, changes in uncertain tax positions during fiscal year 2024 as a result of audit
settlements and statute of limitations lapsing, offset by increases in taxes on foreign operations. The provision forincome taxes for the year ended March 31, 2023 was $524 million compared to $402 million for the year ended
December 31, 2021. The increase in income tax expense was primarily driven by the changes in valuation allowances,offset by tax charges in 2021 related to the transfer of Kyndryl’s operations that were considered a one-time item from
Separation.

77

The Company’s effective tax rate for the year ended March 31, 2024 was lower (more negative) than the
Company’s statutory tax rate primarily due to the Company’s pretax loss being significantly lower in fiscal year 2024
and current year losses not benefitted due to the existing valuation allowances. The Company’s effective tax rate for theyear ended March 31, 2023 was lower than the Company’s statutory tax rate primarily due to changes in valuation
allowances, taxes on foreign operations and uncertain tax positions. The Company’s effective tax rate for the threemonths ended March 31, 2022 was lower than the Company’s statutory tax rate primarily due to tax effects of crossborder tax laws, undistributed foreign earnings, taxes on foreign operations, uncertain tax positions and theestablishment of valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not
to be realized. The Company’s effective tax rate for 2021 was lower than the statutory tax rate primarily due to changes
in valuation allowances, losses in certain jurisdictions that cannot be benefited from and tax charges related to thetransfer of Kyndryl’s operations from IBM that were deemed to be immediately settled with IBM through the Net Parent
Investment account.
The Organization for Economic Cooperation and Development (“OECD”) is coordinating negotiations among
more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies,
including the implementation of a minimum global effective tax rate of 15%. While many jurisdictions in which theCompany operates have adopted the relevant legislation effective for tax years beginning on or after January 1, 2024, thelegislation did not result in a material change to the Company’s income tax provision for the year ended March 31, 2024.
The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as
follows:
March 31,
(Dollars in millions)2024

Deferred tax assets
Retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based and other compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. tax loss/credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax loss/credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workforce rebalancing charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limitation on deductibility of interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities
Fixed assets and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leases and right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred transition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$
$
$

$

2023

121 $
308
90
441
65
66
12
—
59
15
79
94
57
1,406 $
(748)
657 $

115
280
36
412
47
118
28
—
34
25
35
61
124
1,314
(620)
694

34
—
294
16
131
4
16
494

7
—
267
19
135
30
87
544

$

$

As of March 31, 2024, the Company had tax-affected U.S. and foreign net operating loss deferred tax assets of$441 million and $66 million, respectively. As of March 31, 2023, the Company had tax-affected U.S. and foreign net

78

operating loss deferred tax assets of $412 million and $118 million, respectively. If not utilized, the U.S. state net
operating loss carryforwards will begin to expire in 2026, and foreign net operating loss carryforwards will begin to
expire in 2026. The U.S. federal net operating loss can be carried forward indefinitely.
The valuation allowances as of March 31, 2024 and 2023 were $748 million and $620 million, respectively.
The increase in valuation allowances from March 31, 2023 to March 31, 2024 was $128 million. The increase invaluation allowance is primarily a result of current year net operating losses generated in the U.S. that are not supportedby the reversal of taxable temporary differences and changes in judgment associated with the realizability of deferred tax
assets in certain foreign jurisdictions. For purposes of the historical periods presented on a “carve-out” basis, theCompany’s income tax provisions were calculated using the separate return basis, as if the Company filed separate tax
returns. Prior to Separation, the Company’s operations were included in the consolidated U.S. federal and certain state,
local and foreign income tax returns filed by its former Parent. Post-Separation, certain net operating losses and tax
credit carryforwards that were included for purposes of the historical periods presented on a “carve-out” basis available
to be utilized by its former Parent are not available for future utilization by the Company and were settled through Net
Parent investment immediately prior to the Separation. As of March 31, 2024, based on all available evidence,
management concluded that no other valuation allowance was necessary to reduce the deferred tax assets remaining
post-Separation since estimated future taxable income is expected to be sufficient to utilize these assets prior to their
expiration. Estimates of future taxable income could change, perhaps materially, which may require us to revise ourassessment of the recoverability of the deferred tax asset at that time.
A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:Year Ended March 31,
2024
2023

(Dollars in millions)

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years (including
impacts due to a lapse of statute) . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements (closed out to Net Parent investment) . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

104
36
—

$

55
46
3

(32)
—
108 $

—
—
104

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

$

$

18
479
—

(1)
—
55 $

—
(453)
44

$

44
12
—

Post-Separation, liabilities related to unrecognized tax benefits for which the Company is liable are reported
within the Consolidated Balance Sheet based upon tax authorities’ ability to assert the Company may be the primaryobligor for historical taxes, among other factors.
With limited exceptions, the Company is generally subject to income tax audits for tax years subsequent to
September 1, 2021, or post-Separation, including in the U.S., Germany, Japan and Spain. Pursuant to the terms of the
Separation, any tax liabilities attributable to the tax period (or portion thereof) ending on or before November 3, 2021,
are generally not the Company’s liability. As of March 31, 2024, the Company is not aware of any material open income
tax audits that would result in a liability owed by the Company. The Company does not expect a significant increase or
decrease in unrecognized tax benefits within the next twelve months. The net amount of $108 million unrecognized tax
benefits, if recognized, would favorably affect the Company’s effective tax rate. Interest and penalties related to income
tax liabilities are included in income tax expense. During the year ended March 31, 2024, the Company recognized $4
million in interest expense and penalties. The Company had $6 million for interest and penalties accrued at March 31,
2023.
Pursuant to the terms of the Separation, the Company identified certain tax refunds related to estimated tax
payments and refundable value-added taxes for which we are required to reimburse our former Parent as the refunds arereceived, as well as certain tax benefits related to net operating losses that were transferred to the Company for which weare required to pay to our former Parent as the tax benefits are realized. As of March 31, 2024, the Company estimatedthe amount of our obligations to our former Parent related to these tax refunds and tax benefits to be approximately $1379

million, where $4 million is recorded in other accrued expenses and liabilities expected to be paid within one year, and$9 million is recorded in other liabilities expected to be paid beyond the one-year period. The Company also estimatedthe amount of our former Parent’s indemnification obligations to the Company related to income tax liabilities
attributable to tax periods (or portions thereof) ending on or before November 3, 2021, to be approximately $27 million,
which is recorded in prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet.
At March 31, 2024, the Company’s undistributed earnings from non-U.S. subsidiaries were not indefinitely
reinvested. Accordingly, the Company recorded a deferred tax liability of $15 million for the estimated taxes associatedwith the repatriation of these earnings. The Company intends to repatriate certain foreign earnings that have been taxed
in the U.S. and undistributed earnings to the extent the foreign earnings are not restricted by local laws and can beaccessed in a cost-effective manner.
NOTE 6. NET LOSS PER SHARE
We did not declare any stock dividends in the periods presented. The following table provides the computationof basic and diluted earnings per share of common stock for the years ended March 31, 2024 and 2023, the three months
ended March 31, 2022 (transition period), and the year ended December 31, 2021.

Year Ended March 31,
2024
2023

(In millions, except per share amounts)

Net income (loss) on which basic and diluted
earnings per share is calculated . . . . . . . . . . . . . . . . . .
Number of shares on which basic and diluted
earnings per share is calculated . . . . . . . . . . . . . . . . . . .

Three Months
Ended
March 31,2022$

Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . .

Year Ended
December 31,
2021(340) $

(1,374) $(229) $

(2,304)

229.2

226.7

224.4

224.1

(1.48)(1.48)(6.06)(6.06)(1.02)(1.02)(10.28)(10.28)For the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period), andthe year ended December 31, 2021, the Company’s basic and diluted weighted-average shares outstanding were thesame. The following securities were not included in the computation of diluted net loss per share because they would
have been anti-dilutive:

Year Ended March 31,
2024
2023

(In millions)Nonvested restricted stock units . . . . . . . . . . . . . . . . . . . .
Nonvested performance-conditioned stock units . . . . . . .
Nonvested market-conditioned stock units . . . . . . . . . . . .
Stock options issued and outstanding . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.8
3.0
2.7
3.6
18.1

80

9.4
2.3
2.3
3.7
17.7

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

9.8
—
1.8
3.8
15.5

10.2
—
1.8
3.8
15.8

NOTE 7. FINANCIAL ASSETS AND LIABILITIESFinancial Assets and Liabilities Measured at Fair Value
The following table presents the Company’s financial assets and financial liabilities that are measured at fairvalue on a recurring basis at March 31, 2024 and 2023.

(Dollars in millions)

Derivatives designated as
hedging instruments:
Foreign exchange contracts . . . . . . . . .
Cross-currency swap contracts . . . . . .
Derivatives not designated as
hedging instruments:
Foreign exchange contracts . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value
Hierarchy
Level

2
2

Assets$At March 31, 2024
Liabilities Fair Value

2
1

2

2
5

$

$

$

1
11
6
18

$

$

Assets

1 $
(9)

4
—

(4)
(13) $

11
15

At March 31, 2023
Liabilities Fair Value

$

$

3
—
5
9

$

1
—

$

6
6

The gross balances of derivative assets, including accrued interest, are contained within prepaid expenses andother current assets, and the gross balances of derivative liabilities are contained within other accrued expenses andliabilities, or other noncurrent liabilities in the Consolidated Balance Sheet. The Company may enter into master netting
agreements with certain counterparties that allow for netting of exposures. There was no netting of derivative assets
against liabilities in the Consolidated Balance Sheet at March 31, 2024 and 2023. The Company manages counterparty
risk by seeking counterparties of high credit quality and by monitoring credit ratings, credit spreads and other relevantpublic information about its counterparties. The Company does not anticipate nonperformance by any of thecounterparties.
Financial Assets and Liabilities Not Measured at Fair Value
Accounts receivable are financial assets with carrying values that approximate fair value. Accounts payable,
other accrued expenses and short-term debt are financial liabilities with carrying values that approximate fair value. If
measured at fair value in the consolidated financial statements, these financial instruments would be classified as Level 3
in the fair value hierarchy, except for short-term debt, which would be classified as Level 2.
The Company also has time deposits that have maturities of 90 days or less, and their carrying values
approximate fair value. They are measured for impairment on a recurring basis by comparing their fair value with theiramortized cost basis. There were no impairments of financial assets recognized for any of the periods presented. Thebalance of these time deposits with maturities of 90 days or less contained within cash and cash equivalents in theConsolidated Balance Sheet at March 31, 2024 and 2023 was $828 million and $814 million, respectively. If measured
at fair value in the consolidated financial statements, time deposits with maturities of 90 days or less would be
categorized as Level 2 in the fair value hierarchy.
The fair value of our outstanding debt (excluding finance lease obligations) is based on various methodologies,
including quoted prices in active markets for identical debt instruments, which is a Level 1 measurement, or calculated
fair value using an expected present value technique that uses rates currently available to the Company for debt in active
markets with similar terms and remaining maturities, which is a Level 2 measurement. See Note 11 – Borrowings for
additional information. Our outstanding debt (excluding finance lease obligations) had a carrying value of $2.9 billion
and $3.0 billion as of March 31, 2024 and 2023, respectively. The debt had an estimated fair value of $2.6 billion and$2.5 billion as of March 31, 2024 and 2023, respectively.

81

Derivative Financial Instruments
The following table summarizes the notional amounts of the Company’s outstanding derivatives:
At March 31, 2024
Foreign
Cross-currency
Exchange
Swap
Contracts
Contracts(Dollars in millions)

Derivatives designated as hedging instruments
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment hedges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives not designated as hedging instruments . . . . .

$
$

281
—
1,624

$
$

—
500
—

At March 31, 2023
Foreign
Cross-currency
Exchange
Swap
Contracts
Contracts

$
$

283
—
1,506

$
$

—
—
—

The notional amounts of derivative instruments do not necessarily represent the amounts exchanged by theCompany with third parties and are not necessarily a direct measure of the financial exposure.
Derivatives Designated as Hedging Instruments
Cash Flow Hedges
The Company has foreign exchange derivative financial instruments designated as cash flow hedges to manage
the volatility of cash flows that relate to operating expenses denominated in certain currencies. Through the preSeparation period, derivatives designated as cash flow hedges were deemed to be associated with the Company’s
operations and were allocated to the Company’s Consolidated Income Statement based on its pro-rata share of theunderlying items hedged, where applicable, with the remainder allocated on a pro-rata basis of revenue. For additional
information, see Note 1 – Significant Accounting Policies.
The maximum remaining length of time over which the Company has hedged its exposures is approximately
one year. At March 31, 2024 and 2023, the weighted-average remaining maturity of these instruments wasapproximately 0.5 years. At March 31, 2024 and 2023, in connection with cash flow hedges of foreign currency costtransactions, the Company had unrealized gains of $2 million and $1 million (each before taxes), respectively, in AOCI.
The Company estimates that $2 million (before taxes) of deferred net gains on derivatives in AOCI at March 31, 2024
will be reclassified to net income within the next twelve months, providing an offsetting economic impact against theunderlying anticipated transactions.
Net Investment Hedges
The Company has entered into and designated cross-currency interest rate swap contracts as net investment
hedges to mitigate foreign exchange exposure related net investments. Under the terms of the cross-currency swaps, theCompany makes fixed-rate payments in foreign currencies and receives fixed-rate amounts in U.S. dollars, with theexchange of the underlying notional amounts at maturity whereby the Company will receive U.S. dollars and pay foreign
currencies at exchange rates which are determined at contract inception. At March 31, 2024, the remaining maturity ofthese instruments was approximately 10 years. At March 31, 2024, the Company had unrealized losses of $11 million(before taxes) in AOCI related to net investment hedges. There were no net investment hedges in fiscal year 2023.
Derivatives Not Designated as Hedging Instruments
The Company enters into currency forward and swap contracts to hedge exposures related to assets andliabilities across its subsidiaries. The terms of these contracts are generally less than one year.

82

The Effect of Derivative Instruments in the Consolidated Income Statement
The effects of derivatives designated as hedging instruments on the Consolidated Income Statement and Other
Comprehensive Income are as follows:
Gain (Loss) Recognized in Consolidated Income Statement
and Other Comprehensive Income
ThreeYear EndedYear Ended
Months EndedYear Ended
March 31,
March 31,
March 31,
December 31,
2024
2023
2022
2021

(Dollars in millions)

Derivative instruments in cash flow hedges:
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments in net investment hedges:
Cross-currency swaps ** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Income Statement line item
Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expenses ** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗
**

$

22

$
$

(11) $
11 $

$

21
1
23

$

$

Recognized in OCI *
(4) $

1

$

4

— $
(4) $

—
1

$
$

—
4

$

1
—
1

Reclassified from AOCI *
(2) $
1
—
—
$
(2) $
1
$

$

Pre-Separation, the effects of hedging activity were allocated from the former Parent directly to the Company’s Consolidated Income Statement,
resulting in no gain (loss) either recognized in other comprehensive income or reclassified from accumulated other comprehensive income.
For the year ended March 31, 2024, the Company recognized a gain of $1 million in interest expense on components excluded from theassessment of the hedge effectiveness for net investment hedges. There were no net investment hedges in the year ended March 31, 2023, thethree months ended March 31, 2022 and the year ended December 31, 2021.

For the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 and the year ended
December 31, 2021, there were no gains or losses excluded from the assessment of hedge effectiveness for cash flow
hedges, or associated with an underlying exposure that did not or was not expected to occur; nor are there any
anticipated in the normal course of business.
The effects of derivatives not designated as hedging instruments on the Consolidated Income Statement are as
follows:(Dollars in millions)

Gain (Loss) Recognized in Consolidated Income Statement
Three
Consolidated
Year EndedYear Ended Months Ended
Income Statement
March 31,
March 31,
March 31,
Line Item
2024
2023
2022

Derivative instruments not designated as hedging instruments:
Foreign exchange contracts . . . . . . . . . Other expense
Total . . . . . . . . . . . . . . . . . . . . . . . . . .

83

$
$

(48) $(48) $

20
20$$

Year Ended
December 31,
2021

(1) $
(1) $

4
4

NOTE 8. PROPERTY AND EQUIPMENT
The following table presents the balances of property and equipment by type:
At March 31,(Dollars in millions)2024

Information technology equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

2023

6,374
2,502
354
70
9,300
(6,626)
2,674

$
$

$

6,912
2,665
370
70
10,016(7,237)2,779$$

The unpaid property and equipment balance included in accounts payable and accrued expenses was $29
million and $62 million at March 31, 2024 and 2023, respectively. Depreciation of property and equipment was $801
million, $900 million, $246 million, and $1.3 billion for the years ended March 31, 2024 and 2023, the three months
ended March 31, 2022 (the transition period) and the year ended December 31, 2021, respectively. Additionally, as partof the site-rationalization program, the Company recognized $21 million and $7 million of accelerated depreciation
related to ceasing to use certain owned fixed assets for the years ended March 31, 2024 and 2023, respectively. Refer toNote 19 – Workforce Rebalancing and Site-Rationalization Charges for additional details.
NOTE 9. LEASESThe following table presents the various components of lease costs:

Year Ended March 31,
2024
2023

(Dollars in millions)

Finance lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term lease costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

112
388
4
135
(11)
629

$

$

$

85
434
7
108
(9)
625

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

$

$

$

21
111
4
16
(1)
150

$

69
354
7
73
(5)
498

For pre-Separation periods, the Company’s components of lease costs reflected in the Consolidated Income
Statement are based on an allocation of its former Parent’s lease costs, depending on the type of lease. Finance lease
costs relating to assets specifically utilized by the Company were fully allocated to the Company. The real estate lease
costs were allocated based on the percentage of space utilized by the Company. The remaining lease costs were allocatedto the Company based on headcount.
During the fiscal years of 2024 and 2023, we identified and ceased use of certain operating right-of-use assetsthat were inherited from the former Parent at Separation. We determined that we will no longer receive economic
benefits from these leased properties and do not have the intent or practical ability to sublease or sell them. Accordingly,
we recorded accelerated depreciation in the amount of $14 million and $69 million (representing the remaining carrying
value of the identified right-of-use assets, not included in the operating lease costs in the table above) for the years ended
March 31, 2024 and 2023, respectively. Refer to Note 19 – Workforce Rebalancing and Site-Rationalization Charges fordetails of this program.
The Company had no sale and leaseback transactions for the years ended March 31, 2024 and 2023, the threemonths ended March 31, 2022 and the year ended December 31, 2021.

84

The following table presents supplemental information relating to the cash flows arising from leasetransactions. Cash payments related to variable lease costs and short-term leases are not included in the measurement ofoperating and finance lease liabilities and, as such, are excluded from the amounts below.

Year Ended March 31,
2024
2023

(Dollars in millions)

Cash paid for amounts included in the measurementof lease liabilities:
Operating cash outflows for finance leases . . . . . . . . . . .
Financing cash outflows for finance leases . . . . . . . . . . .
Operating cash outflows for operating leases . . . . . . . . .
Right-of-use assets obtained in exchange for new
finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets obtained in exchange for new
operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . .

$

14
116
387

$

5
83
417

Three Months
Ended
March 31,2022

Year Ended
December 31,
2021

$

$

1
20
118

3
70
327

212

111

19

86

291

175

67

562

The following table presents the weighted-average lease term and discount rate for finance and operating leases:
At March 31,

Finance leases
Weighted-average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases
Weighted-average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024

2023

3.8 years
5.58 %

3.5 years
3.36 %

4.8 years
5.15 %

4.7 years
4.38 %

The following table presents a maturity analysis of expected undiscounted cash flows for operating and financeleases on an annual basis for the next five years and thereafter.
(Dollars in millions)

Finance leases . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . .
*

2025

$ 121
$ 337

Year Ending March 31,
2026
2027
2028

$ 102
$ 281

$ 63
$ 169

$
$

2029

38
97

$
$

31
70

ImputedInterest*

Thereafter
—
$

$

Total

$ (67) $ 289$ (191) $ 907

143

Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.

The following table presents the total amount of finance leases recognized in the Consolidated Balance Sheet:
At March 31,(Dollars in millions)

2024

Right-of-use assets – Property and equipment . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85

$

2023

309
95
193

$

245
82
160

NOTE 10. INTANGIBLE ASSETS INCLUDING GOODWILLBusiness Combinations
In February 2022, the Company completed two transactions that were considered business combinations. Ourfinancial statements for the three months ended March 31, 2022 reflect the assets, liabilities, operating results and cash
flows of both business combinations commencing from the acquisition date. These transactions consisted of animmaterial acquisition in our Strategic Markets segment and a transfer of a majority interest (51%) of a managed
infrastructure services joint venture in Japan (the “Exa transaction”) from our former Parent. The Company completed
the Exa transaction for consideration of $48 million, net of cash acquired of $59 million. The non-controlling interest
associated with the Exa transaction represents the fair value of the joint venture pro-rated by the non-controllingshareholder’s percentage of ownership (49%).
Intangible Assets
The following tables present the Company’s intangible asset balances by major asset class:(Dollars in millions)

Capitalized software . . . . . . . . . . .
Customer relationships* . . . . . . . .
Completed technology . . . . . . . . .
Patents and trademarks* . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .

At March 31, 2024
Gross Carrying Accumulated Net Carrying
AmountAmortization
Amount

At March 31, 2023
Gross Carrying Accumulated Net Carrying
AmountAmortization
Amount

$

$

$

172
152
—
14
339

$

$

(48) $(96)—(6)(150) $

125
56
—
8
188

83
232
20
18
353

$

$

(15) $
(141)
(20)
(6)
(182) $

$

68
91
—
13
171

* Amounts include effects from foreign currency translation.

There was no impairment of identifiable intangible assets recorded in the periods reported. The net carrying
amount of intangible assets increased by $17 million during the year ended March 31, 2024, primarily due to additionsof capitalized software, partially offset by amortization and retirements. The aggregate intangible asset amortization
expense was $63 million, $46 million, $7 million and $37 million for the years ended March 31, 2024 and 2023, thethree months ended March 31, 2022 and year ended December 31, 2021, respectively. The aggregate amortization
expense in fiscal year 2024 included amortization of capitalized software of $33 million, which was reported in“Depreciation of property, equipment and capitalized software” on the Consolidated Statement of Cash Flows.
The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance
Sheet was estimated to be the following at March 31, 2024:
Capitalized
Software(Dollars in millions)Year ending March 31:
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . .

$Customer
Relationships

46
45
34
—
—
—

86

$

21
18
15
1
1
—

Patents andTrademarks

$

3
3
2
—
—
—

Total

$

71
65
51
1
1
—

Goodwill
The following table presents a roll-forward of goodwill balances by segment for the years ended March 31,
2024 and 2023:(Dollars inmillions)
Segment

Japan. . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . .
Principal Markets . . . . . . . . . .
Strategic Markets. . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . .
*Additions
and
Other
Adjustments*

Balance at
March 31,
2022

$

$

506
—
142
176
823

$

(11) $———(11) $$

Additions
and
Other
Adjustments*

Balance at
March 31,
2023

495
—
142
176
812

$

$

(7) $
—
(1)
—
(7) $

Balance at
March 31,
2024

488
—
141
176
805

Primarily driven by foreign currency translation.

Management reviews goodwill for impairment annually and whenever events or changes in circumstancesindicate the carrying value of goodwill may not be recoverable by first assessing qualitative factors to determine if it ismore likely than not that fair value is less than carrying value.
We use an income-based approach where fair value is determined using a discounted cash flow model that
requires significant judgment with respect to revenue growth rates, based upon annual budgets and long-term strategicplans. Fair value estimates employed in our annual impairment review of goodwill involve using various assumptions.
Assumptions critical to our fair value estimates were discount rates, expected revenue growth and projected EBITDA
margins used in determining the fair value of the reporting units. These and other assumptions are impacted by economic
conditions and expectations of management and may change based on different facts and circumstances. We believe theassumptions used to estimate future cash flows are reasonable, but there can be no assurance that the expected cash
flows will be realized. The use of different assumptions would increase or decrease discounted cash flows or earnings
projections and therefore could change impairment determinations.
There were no goodwill impairment losses recorded for the year ended March 31, 2024. We prepared our
impairment test as of January 1, 2024. For the reporting units subject to quantitative tests, we concluded that their fairvalues exceeded carrying values by over 100%. Future developments related to macroeconomic factors, including
increases to the discount rate used, or changes to other inputs and assumptions, including revenue growth, could reduce
the fair value of this and/or other reporting units and lead to impairment. Cumulatively, the Company has recorded $469
million in goodwill impairment charges within its former EMEA ($293 million) and current United States ($176 million)
reporting units.

87

NOTE 11. BORROWINGSDebt
The following table presents the components of our debt:
At March 31,(Dollars in millions)Interest Rate

Maturity

Unsecured floating-rate term loan . . . . . . . . . . . . .
Commercial loan agreement . . . . . . . . . . . . . . . . .
Unsecured senior notes due 2026 . . . . . . . . . . . . . .
Unsecured senior notes due 2028 . . . . . . . . . . . . . .
Unsecured senior notes due 2031 . . . . . . . . . . . . . .
Unsecured senior notes due 2034 . . . . . . . . . . . . . .
Unsecured senior notes due 2041 . . . . . . . . . . . . . .
Finance lease and other obligations . . . . . . . . . . .

—
3.00%
2.05%
2.70%
3.15%
6.35% *
4.10%
5.57% **—
July 2026
October 2026
October 2028
October 2031
February 2034
October 2041
2024-2029

2024

$

$
Less: Unamortized discount . . . . . . . . . . . . . . . . . .
Less: Unamortized debt issuance costs . . . . . . . . .
Less: Current portion of long-term debt . . . . . . . .
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . .

$

—
68
700
500
650
500
550
291
3,259
5
16
126
3,112

2023

$

500
96
700
500
650
—
550
242
3,238
5
13
110
3,111

$

$

*

Including the cross-currency swaps that the Company entered into subsequent to the issuance of the unsecured senior notes due 2034, the effective
interest rate on such notes was approximately 3.84% for the quarter ended March 31,2024. For more information, see Note 7 – Financial Assets
and Liabilities.
** Weighted-average discount rate

Contractual obligations of long-term debt outstanding at March 31, 2024, exclusive of finance lease obligations,were as follows:(Dollars in millions)*

Principal

Year ending March 31:
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

29
29
710
—
500
1,700
2,968

* Contractual obligations approximate scheduled repayments.

Senior Unsecured Notes
In October 2021, in preparation for our Spin-off, we completed the offering of $2.4 billion in aggregate
principal amount of senior unsecured fixed-rate notes as follows: $700 million aggregate principal amount of 2.05%
Senior Notes due 2026, $500 million aggregate principal amount of 2.70% Senior Notes due 2028, $650 million
aggregate principal amount of 3.15% Senior Notes due 2031 and $550 million aggregate principal amount of 4.10%
Senior Notes due 2041 (the “Initial Notes”). The Initial Notes were offered and sold to qualified institutional buyers inreliance on Rule 144A under the Securities Act and to non-U.S. persons in reliance on Regulation S of the Securities
Act. In connection with the issuance of the Initial Notes, we entered into a registration rights agreement with thepurchasers of the Initial Notes, pursuant to which we completed a registered offering to exchange each series of Initial
Notes for new notes with substantially identical terms during the quarter ended September 30, 2022.

88

In February 2024, we completed a registered offering of $500 million in aggregate principal amount of 6.35%
senior unsecured notes due 2034 (the “2034 Notes”). We received proceeds of $494 million, net of debt issuance costs
and discounts, which were capitalized as a reduction to the carrying value of debt and are being amortized as interest
expense over the term of the notes. The 2034 Notes are the Company’s senior unsecured obligations and rank equally inright of payment with all of the Company’s other existing and future senior unsecured indebtedness. If measured at fairvalue in the consolidated financial statements, all of the Company’s senior unsecured notes would be classified as Level
1 in the fair value hierarchy.
The Initial Notes and the 2034 Notes are subject to customary affirmative covenants, negative covenants andevents of default for financings of this type and are redeemable at our option in a customary manner.
Term Loan and Revolving Credit Facility
In October 2021, we entered into a $500 million three-year variable rate term loan credit agreement (the “TermLoan Credit Agreement”), which was scheduled to mature in November 2024. In November 2021, we drew down thefull $500 million available under the Term Loan Credit Agreement. The interest rate on this term loan was equal to onemonth U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus a margin of 1.125%. In June 2023, we amended theTerm Loan Credit Agreement by replacing LIBOR with the Secured Overnight Financing Rate (“SOFR”). The first
repricing date using SOFR was in July 2023. In February 2024, the Company used the net proceeds from the offering of
the 2034 Notes, together with cash on hand, to prepay the full amount outstanding under the Term Loan Credit
Agreement, at no penalty.
In October 2021, we entered into a $3.15 billion multi-currency revolving credit agreement (the “Revolving
Credit Agreement”), which expires, unless extended, in October 2026. The Revolving Credit Agreement was amended inJune 2023, replacing LIBOR with SOFR. Interest rates on borrowings under the Revolving Credit Agreement will bebased on prevailing market interest rates, plus a margin, as further described in the Revolving Credit Agreement.
The total facility fees recorded by the Company for the Revolving Credit Agreement were $5 million for theyears ended March 31, 2024 and 2023. Facility fees were immaterial for the three months ended March 31, 2022 and theyear ended December 31, 2021. As of March 31, 2024, there has been no drawdown on the Revolving Credit
Agreement.
The Revolving Credit Agreement includes certain customary mandatory prepayment provisions. In addition, it
includes customary events of default and affirmative and negative covenants as well as a maintenance covenant that will
require that the ratio of our indebtedness for borrowed money to consolidated EBITDA (as defined in the Revolving
Credit Agreement) for any period of four consecutive fiscal quarters be no greater than 3.50 to 1.00. The Company is incompliance with its debt covenants.
Loan Agreement
In the second quarter of 2021, our former Parent entered into a $140 million loan agreement with a bank tofinance a purchase of software licenses on behalf of Kyndryl. The loan was transferred to Kyndryl in conjunction with
the Separation and is included in the Company’s consolidated financial statements. The carrying amount of the loan
approximates fair value. If measured at fair value in the consolidated financial statements, the loan would be classified as
Level 2 in the fair value hierarchy.
The amortizing loan contains covenants, primarily for compliance with the scheduled payments in the loan
agreement. Failure to comply with the loan covenants could constitute an event of default and result in the immediate
repayment of the principal and interest on the loan. The Company is in compliance with all of the loan covenants and is
expected to maintain a credit rating at or above the level outlined in the loan agreement.

89

NOTE 12. OTHER LIABILITIESThe following table provides the components of other liabilities at March 31, 2024 and 2023.
At March 31,(Dollars in millions)2024

Workforce rebalancing (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workforce rebalancing (noncurrent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$

$

2023

45
476
521
12
55
90
174
332

$
$
$

$

75
549
624
21
98
85
246
450

In response to changing business needs, the Company has taken workforce rebalancing actions to increase
productivity, enhance cost-competitiveness and rebalance skills. The workforce rebalancing liabilities at March 31, 2024
include liabilities inherited from our former Parent plus new actions taken by Kyndryl during the fiscal year. Refer toNote 19 – Workforce Rebalancing and Site-Rationalization Charges for details.
Pursuant to the terms of the Separation, the Company may be required to reimburse our former Parent for
certain tax refunds we receive and to indemnify our former Parent for certain tax payments. For more information, seeNote 5 – Taxes.
NOTE 13. COMMITMENTS AND CONTINGENCIESThe Company guarantees certain loans and financial commitments. The maximum potential future payment
under these financial guarantees and the fair value of these guarantees recognized in the Consolidated Balance Sheet atMarch 31, 2024 and 2023 were not material. Additionally, the Company has contractual commitments that arenoncancellable with certain software, hardware and cloud partners used in the delivery of services to customers. Certainof these commitments were allocated to the Company as part of the Separation from its former Parent. The Company has
determined that these commitments may exceed the Company’s needs over the next two to three years. If the Company
is unable to satisfy, reduce or amend its contractual commitments, it will record the future charges for any payments
related to excess commitments as cost of services. At March 31, 2024, we had short-term (April 2024 through March
2025), mid-term (April 2025 through March 2027) and long-term (April 2027 onward) purchase commitments in theamount of $0.6 billion, $0.4 billion and $0.4 billion, respectively.
As a Fortune 500 company with customers and employees around the world, Kyndryl is subject to, or could
become subject to, either as plaintiff or defendant, a variety of contingencies, including claims, demands and suits,investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. Given the
rapidly evolving external landscape of cybersecurity, privacy and data protection laws, regulations and threat actors, theCompany or its clients could become subject to actions or proceedings in various jurisdictions. Also, as is typical forcompanies of Kyndryl’s scope and scale, the Company is subject to, or could become subject to, actions and proceedings
in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested
employment decisions, country-specific labor and employment laws, and the Company’s benefit plans), as well as
actions with respect to contracts, securities, foreign operations, competition law and environmental matters. These
actions may be commenced by a number of different parties, including competitors, clients, employees, government andregulatory agencies, stockholders and representatives of the locations in which the Company does business. Some of theactions to which the Company is, or may become, party may involve particularly complex technical issues, and someactions may raise novel questions under the laws of the various jurisdictions in which these matters arise. Additionally,
the Company is, or may be, a party to agreements pursuant to which it may be obligated to indemnify the other party
with respect to certain matters.

90

The Company records a provision with respect to a claim, suit, investigation or proceeding when it is probablethat a liability has been incurred and the amount of the loss can be reasonably estimated. In accordance with the relevant
accounting guidance, the Company provides disclosures of matters for which the likelihood of material loss is at least
reasonably possible. In addition, the Company may also disclose matters based on its consideration of other matters andqualitative factors.
The Company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are madewith respect to recording or adjusting provisions and disclosing reasonably possible losses or range of losses(individually or in the aggregate) to reflect the impact and status of settlement discussions, discovery, procedural andsubstantive rulings, reviews by counsel and other information pertinent to a particular matter.
Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding
could reasonably have a material effect on the Company’s business, financial condition, results of operations or cash
flows will depend on a number of variables, including the timing and amount of such losses or damages; the structure
and type of any such remedies; the significance of the impact any such losses, damages or remedies may have in the
consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to
additional factors. While the Company will continue to defend itself vigorously, it is possible that the Company’sbusiness, financial condition, results of operations or cash flows could be affected in any particular period by the
resolution of one or more of these matters.
In July 2017, BMC Software, Inc. (“BMC”) filed suit against IBM in the U.S. Court for the Southern District ofTexas in a dispute involving various aspects of IBM’s business, including its managed infrastructure business. BMC
alleged IBM’s removal of BMC software from one of its client’s sites at the client’s request constituted breach ofcontract, fraudulent inducement and trade secret misappropriation. In May 2022, the trial court entered a judgment
against IBM and awarded BMC $717 million in direct damages and $717 million in punitive damages, plus interest, forwhich IBM might have tried to seek an indemnity from the Company. However, IBM appealed the judgment, and in
April 2024, the court of appeals overturned the judgment against IBM. Accordingly, we do not expect to have any
liability related to this judgment.
Separately, certain contractual disputes have arisen between Kyndryl and IBM following the Separation. IBM
and Kyndryl have commenced arbitration proceedings related to certain of these matters. The Company anticipates thatcertain of these matters will be concluded in fiscal year 2025, while others are in preliminary stages. Kyndryl intends tovigorously pursue its interests and defenses in these matters, including asserting its own claims in arbitration if
necessary.

91

NOTE 14. EQUITY
The following tables present reclassifications and taxes related to items of other comprehensive income (loss)
for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period) and the year
ended December 31, 2021:(Dollars in millions)
For the year ended March 31, 2024

PretaxAmountForeign currency translation adjustments:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses on net investment hedges . . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . .
Reclassification of (gains) losses to net income . . . . . . . . . . . . . . . . . . . . . . .
Total unrealized gains (losses) on cash flow hedges . . . . . . . . . . . . . . . . . . . .
Retirement-related benefit plans*:
Prior service (credits) costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service (credits) costs. . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total retirement-related benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗

$
$
$
$
$

$
$

(36)
(11)
(47)

$

22
(21)
1

$

(3)
(56)
10
1
5
(42)
(88)

$

$

$

$
$

—
—
—

Net-of-Tax
Amount

$

(36)
(11)
(47)

$

(1)
—
(1)

$

1
10
(2)
(0)
(2)
7
6

$

21
(21)
—

$

(2)
(45)
8
1
3
(36)
(82)

$
$

These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 16 – Retirement-Related Benefits for
additional information.

(Dollars in millions)
For the year ended March 31, 2023

PretaxAmountForeign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . .
Reclassification of (gains) losses to net income . . . . . . . . . . . . . . . . . . . . . . .
Total unrealized gains (losses) on cash flow hedges . . . . . . . . . . . . . . . . . . . .
Retirement-related benefit plans*:
Prior service (credits) costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service (credits) costs. . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total retirement-related benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗Tax (Expense)
BenefitTax (Expense)
Benefit

Net-of-Tax
Amount

$

(186)

$

—

$

(186)

$

(4)
2
(3)

$

—
—
—

$

(4)
2
(2)

4
175
10
1
40
229
40

$

—
—
(2)
—
(11)
(14)
(14)

$

$
$

$
$

$

$
$

$

$
$

These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 16 – Retirement-Related Benefits for
additional information.

92

3
175
8
1
29
215
27

(Dollars in millions)
For the three months ended March 31, 2022:

PretaxAmountForeign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . .
Reclassification of (gains) losses to net income . . . . . . . . . . . . . . . . . . . . . . .
Total unrealized gains (losses) on cash flow hedges . . . . . . . . . . . . . . . . . . . .
Retirement-related benefit plans*:
Net gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total retirement-related benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗

$

(51)

$

1
(1)
—

$
$
$

$

—

$

—
—
—

$
$
$

(45)
(1)
(4)
(50)
(50)

Net-of-Tax
Amount

$

(51)

$

1
(1)
—

$

91
3
12
105
54

$
$

These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 16 – Retirement-Related Benefits for
additional information.

(Dollars in millions)
For the year ended December 31, 2021:

PretaxAmountForeign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedges
Unrealized gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . .
Reclassification of (gains) losses to net income . . . . . . . . . . . . . . . . . . . . . . .
Total unrealized gains (losses) on cash flow hedges . . . . . . . . . . . . . . . . . . . .
Retirement-related benefit plans*:
Prior service (credits) costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total retirement-related benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗

136
4
16
156
105

Tax (Expense)
Benefit

$

194

$

4
(1)
3

$

1
72
3
51
127
324

$
$

Tax (Expense)
Benefit

$

—

$

—
—
—

$

$
$

(2)
(17)
(1)
(13)
(33)
(33)

Net-of-Tax
Amount

$

194

$

4
(1)
3

$

(1)
54
2
38
94
292

$
$

These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 16 – Retirement-Related Benefits for
additional information.

The following table presents the components of accumulated other comprehensive income (loss), net of taxes:(Dollars in millions)

December 31, 2020 . . . . . . . . . . . . . . . . . . . . .
Net transfers from Parent . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . .
December 31, 2021 . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . .
March 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . .
March 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . .
March 31, 2024 . . . . . . . . . . . . . . . . . . . . . . . .
*Net Unrealized
Foreign Currency
Gains (Losses)
Translation
on Cash Flow Hedges
Adjustments*

Net Change inAccumulated Other
Retirement-Related
Comprehensive
Benefit Plans
Income (Loss)

$

$

— $
—
3
3 $
—
3 $
(2)
— $
—
— $

$
$
$
$

Foreign currency translation adjustments are presented gross.

93

(878)
—
194
(684)
(51)
(735)
(186)
(921)
(47)
(967)

$
$
$
$

(218)
(339)
94
(463)
105
(357)
215
(142)
(36)
(178)

$

$
$
$
$

(1,096)(339)
292(1,143)54(1,089)27(1,062)(82)(1,145)NOTE 15. STOCK-BASED COMPENSATION
Stock-based incentive awards are granted to employees under the terms of Kyndryl’s employment and theKyndryl Plan (see Note 1 – Significant Accounting Policies). Awards under the Kyndryl Plan principally include
Restricted Stock Units (RSUs), market-conditioned and performance-conditioned stock units and stock options. RSUs
and stock options generally vest based on continued passage of time. Market-conditioned and performance-conditioned
stock units are cliff-vested at the end of the performance period if the market or performance conditions have beensatisfied.
The following table summarizes stock-based compensation cost, which is included in net income (loss).

Year Ended March 31,
2024
2023

(Dollars in millions)

Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expense . . . . . . . . . . . . . . . . . .
Pretax stock-based compensation expense . . . . . . . . . . . . . . . . . . .
Income tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation cost, net of tax . . . . . . . . . . . . . . . . . . .

$
$
$

16 $
78
95 $
(5)
90 $

Three Months
Ended
March 31,
2022

21 $
92
113 $
(5)
108 $

Year Ended
December 31,
2021

7 $
24
31 $
(5)
26 $

28
44
71
(13)
58

The Company’s total unrecognized compensation cost related to non-vested awards at March 31, 2024 was$137 million and is expected to be recognized over a weighted-average period of approximately 2.1 years. Capitalized
stock-based compensation cost was not material during any period presented.
Stock Units
The following table summarizes the activity related to Kyndryl’s RSUs, market-conditioned stock units andperformance-conditioned stock units:
RSUs
WeightedAverage
NumberGrant-Dateof Units
Fair Value(in millions) (per share)

Nonvested balance at December 31, 2021 . . . . .
Awards granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards vested . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards canceled/forfeited . . . . . . . . . . . . . . . . .
Nonvested balance at March 31, 2022 . . . . . . . .
Awards granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards vested . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards canceled/forfeited . . . . . . . . . . . . . . . . .
Nonvested balance at March 31, 2023 . . . . . . . .
Awards granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards vested . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards canceled/forfeited . . . . . . . . . . . . . . . . .
Nonvested balance at March 31, 2024 . . . . . . . .
∗10.2 $
0.4
(0.5)
(0.2)
9.8 $
5.0 $
(4.9)
(0.5)
9.4 $
3.1 $
(4.0)
(0.4)
8.0 $

26.82
17.61
28.04
28.44
26.36
10.80
26.09
23.09
18.43
13.52
21.92
17.43
15.33

Market-Conditioned
Stock Units
WeightedAverage
NumberGrant-Dateof Units
Fair Value(in millions) (per share)

1.8 $
—
—
—
1.8 $
0.7 $
—
(0.2)
2.3 $
0.6 $
—
(0.1)
2.9 $

15.14
—
—
—
15.14
12.51
—
14.46
14.40
14.10
—
14.43
14.32

Performance-Conditioned
Stock Units*
WeightedAverage
NumberGrant-Dateof Units
Fair Value(in millions) (per share)

— $
—
—
—
— $
2.5 $
—
(0.1)
2.3 $
2.0 $
—
(0.1)
4.3 $

The grant-date fair value of performance-conditioned stock units issued was determined using the stock price at the grant date.

94

—
—
—
—
—
10.62
—
10.62
10.62
13.37
—
11.85
12.28

The Company used the following assumptions in the Monte-Carlo simulation pricing model to estimate thegrant-date fair values of the market-conditioned stock units granted within each of the following fiscal years. No marketconditioned stock units were granted for the transition quarter ended March 31, 2022.
Year Ended
March 31,2023

Market-conditioned Stock Units:

March 31,2024

Share price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13.5539%
4.57% - 5.38%
0%∗$10.89
39%
2.85%
0%

December 31,
2021$18.3135%
0.26% - 0.92%
0%Based on the average unadjusted three-year historic volatility across a group of peer companies.

Prior to the Separation, the weighted-average grant-date fair value of RSUs and PSUs granted by our former
Parent was $126.01 for the pre-Separation period in the year ended December 31, 2021, which was derived from ourformer Parent’s stock price at their grant dates. On the Separation date, such awards were converted to Kyndryl awards,
resulting in a weighted-average grant-date fair value of $28.78 per share.
Stock Options
The following table summarizes the activity related to Kyndryl’s stock options:
Stock Options

Numberof Units(in millions)

Outstanding balance at December 31, 2021 . . . . . . . . . . .
Awards exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding balance at March 31, 2022 . . . . . . . . . . . . . .
Awards exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding balance at March 31, 2023 . . . . . . . . . . . . . .
Awards exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding balance at March 31, 2024 . . . . . . . . . . . . . .
Options vested and exercisable at March 31, 2024 . . . . . .

WeightedWeightedAverage
Aggregate
Average
Grant Date
Intrinsic
Exercise Price Fair Value
Value(per share)(per share) (in millions)

3.8 $
—
—
3.8 $
—
(0.2)
3.7 $
(0.0)
(0.1)
3.5 $
1.9

95

17.76
—
—
17.76
—
17.78
17.76
17.30
17.78
17.77
17.76

$
$
$
$

6.54
—
—
6.54 $—
6.54
6.54 $
6.61
6.54
6.54 $
6.54

WeightedAverage
Remaining
ContractualTerm(in years)

—

10.0

—

9.7

—

8.7

14.2
7.8

7.3
6.9

The Company used the following assumptions in the Black-Scholes option pricing model to estimate the fairvalue of the employee stock options granted in the year ended December 31, 2021. No stock options were granted in any
other periods presented.
Year Ended
December 31,
2021

Employee Stock Options:

Fair value of common stock per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years)* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗**$17.78
6.25
34.5%
1.4%
0.0%

The Company utilized the simplified method to estimate the weighted-average option term due to a lack of relevant historical data.
Based on the average unadjusted historic volatility of common shares across a group of peer companies.

NOTE 16. RETIREMENT-RELATED BENEFITSDefined Benefit Pension Plans
The Company sponsors and co-sponsors defined benefit pension plans that cover certain non-U.S. employees
and retirees. The defined benefit pension plan benefits are based principally on employees’ years of service and/or
compensation levels at or near retirement. These plans are accounted for as defined benefit pension plans for purposes of
the consolidated financial statements. Accordingly, the net benefit plan obligations and the related benefit plan expensesof those plans have been recorded in the Company’s consolidated financial statements.
The following tables present the components of net periodic pension cost for the defined benefit pension plans
recognized in the Consolidated Income Statement.
Year Ended
March 31,2024

(Dollars in millions)

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets* . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs (credits)* . . . . . . . .
Recognized actuarial losses* . . . . . . . . . . . . . . . . . . . . .
Curtailments and settlements* . . . . . . . . . . . . . . . . . . . .
Total net periodic pension cost . . . . . . . . . . . . . . . . . . . .
*

$

38
55
(60)
1
4
13
51

$

Year Ended
March 31,
2023

$

$

44
32
(43)
1
40
10
84

Three
Months Ended
March 31,2022

Year Ended
December 31,
2021

$

$

$

These components of net periodic pension cost are included in other expense in the Consolidated Income Statement.

96

14
6
(10)
—
16
4
30

$

81
11
(30)
—
51
2
115

The following table presents the changes in net benefit obligation and plan assets for the defined benefit
pension plans.
Year
Ended
March 31,2024

(Dollars in millions)

Change in benefit obligation
Benefit obligation at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial losses (gains)* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid from trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business combination/divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amendments, curtailments, settlements and other . . . . . . . . . . . . . . . . . .
Benefit obligation at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets
Fair value of plan assets at beginning of period . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets assumed from former Parent** . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid from trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business combination/divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of period. . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*
**

$

Year
Ended
March 31,
2023

1,659
38
55
3
83
(24)
(38)
(23)
(23)
(61)
1,670
1,583

$
$
$

1,226
87
14
27
3
(24)
(18)
(18)
(49)
1,248
(422)

$
$

$

2,024
44
32
4
(299)
(15)
(37)
—
(66)
(29)
1,659
1,574

$
$
$

1,383
(88)
27
—
4
(15)
—
(40)
(44)
1,226
(433)

$
$

The year-over-year change was primarily driven by lower inflation rates and demographic factors.
Due to the separation of a pension plan that used to be co-sponsored by Kyndryl and the former Parent.

The following table presents the amounts recorded in the Consolidated Balance Sheet for the defined benefit
pension plans.
At March 31,
2024(Dollars in millions)Noncurrent assets – pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities – accrued compensation and benefits . . . . . . . . . . . . . .
Noncurrent liabilities – retirement and nonpension
postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$At March 31,
2023

105
(40)
(487)
(422)

$

$

94
(38)
(489)
(433)

$

The following table presents information for defined benefit pension plans with accumulated benefit obligations(ABO) or projected benefit obligations (PBO) in excess of plan assets.

(Dollars in millions)Plans with PBO in excess of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plans with ABO in excess of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plans with plan assets in excess of PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97

At March 31, 2024
BenefitPlan
Obligation
AssetsAt March 31, 2023
BenefitPlan
Obligation Assets

$

$

714
712
957

$ 187
186
1,061

953
630
706

$ 426
171
800

The following table presents the pretax net loss and prior service costs (credits) recognized in OCI and thechanges in pretax net loss and prior service costs (credits) as well as Separation-related transfers from Parent recognizedin AOCI for the defined benefit pension plans.
Year
Ended
March 31,2024

(Dollars in millions)

Net loss (gain) at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net loss included in net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss (gain) at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service costs (credits) at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period prior service costs (credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization for prior service costs (credits) included in net periodic benefit cost . . . . . . . .
Prior service costs (credits) at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amounts recognized in accumulated other comprehensive loss (income) * . . . . . . . . .
*

$

$

$
$

253
57
(10)
(4)
296
8
(2)
(1)
4
301

Year
Ended
March 31,
2023

$

$

$
$

474
(172)
(10)
(39)
253
9
—
(1)
8
261

See Note 14 – Equity for the total change in AOCI and the Consolidated Statement of Comprehensive Income for the components of net periodic
benefit cost, which includes components related to nonpension postretirement benefit plans as well as the related tax effects, recognized in OCI
for the retirement-related benefit plans.

The following table presents the weighted-average assumptions used to measure the net periodic pension cost
and the year-end benefit obligations for the defined benefit pension plans.

Weighted-average assumptions used to measure:
Net periodic pension cost
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term returns on plan assets . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligations
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . .
Interest crediting rate – cash balance plans . . . . . . . . . . . . . . .

Year Ended
March 31,2024

Year Ended
March 31,
2023

Three
Months Ended
March 31,2022

Year Ended
December 31,
2021

3.57 %
4.69 %
2.85 %

1.88 %
3.33 %
2.54 %

1.19 %
3.00 %
2.30 %

0.62 %
3.00 %
2.22 %

3.30 %
2.84 %
1.65 %

3.57 %
2.85 %
1.52 %

1.88 %
2.54 %
1.52 %

1.19 %
2.30 %
1.43 %

In certain countries, a hypothetical portfolio of high-quality corporate bonds is used to construct a yield curve.
Projected cash flows from the Company’s expected benefit obligation payments are matched to the yield curve to derive
discounts. In other countries where the markets for high-quality long-term bonds are not as well developed, a portfolio of
long-term government bonds is used as a base and a credit spread is added to simulate corporate bond yields at thesematurities in the jurisdiction of each plan. This is the benchmark for developing the respective discount rates.
In developing the expected long-term rate of return on assets, the Company considers the long-term
expectations for future returns. The use of expected returns may result in pension income that is greater or less than theactual return of those plan assets in a given year. Over time, however, the expected rate of return is expected toapproximate the actual long-term results, leading to a pattern of income or loss recognition that more closely matches thepattern of services provided by the employees.
The investment objective of the defined benefit plans is to generate returns that will enable the plan to meet its
future obligations. The weighted-average target allocation for the defined benefit plans is 27% equity securities, 46%
fixed-income securities, 6% real estate, 15% insurance contracts and 6% other investments. Typically the responsibility

98

for determining the target allocation and managing the investments lies with a plan governing board that may include up
to 50 percent of members elected by employees and retirees. Generally, these defined benefit plans do not invest in
illiquid assets, and their use of derivatives is mainly for currency hedging, interest rate risk management, credit exposureand alternative investment strategies.
The following table presents the Company’s defined benefit pension plans’ asset classes and their associatedfair value at March 31, 2024 and 2023.
(Dollars in millions)

EquityEquity securities . . . . . . . . . . . . . . . . . . . . . .
Fixed income
Government and related (1) . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts . . . . . . . . . . . . . . . . . . . . .
Cash and short-term investments (2) . . . . . . . .
Derivative assets (3) . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments measured at net asset
value using NAV as a practical
expedient (4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . .
(1)
(2)
(3)
(4)

Level 1At March 31, 2024
Level 2 Level 3

Total

$

— $

— $

— $

—

$

—
112
—
21
—
189
3
1
—
5
3 $ 327 $

—
—
—
—
—
— $

$

—
—
3 $ 327 $Level 1At March 31, 2023
Level 2 Level 3

Total

$

— $

— $

— $

—

112
21
189
3
5
329

$

—
107
—
20
—
191
3
—
—
5
3 $ 322 $

—
—
—
—
—
— $

107
20
191
3
5
326

—
919
— $ 1,248$——
3 $ 322 $—901— $ 1,226

Includes debt issued by national, state and local governments and agencies.
Includes cash, cash equivalents and short-term marketable securities.
Includes forward contracts, interest rate swaps, exchange traded and other over-the-counter derivatives.
Investments measured at fair value using the net asset value (NAV) per share (or its equivalent), as a practical expedient. These investments
include commingled funds, hedge funds, common collective trusts, private equity partnerships and real estate partnerships.

Approximately 55 percent of plan assets are held in plans which are co-sponsored by the Company and theformer Parent. The allocation of the fair value of co-sponsored plan assets is based on the initial pension assets assumed
in connection with establishment of certain Kyndryl legal entities, Company contributions, distributions and market
returns.
Defined benefit pension plan assets are recognized and measured at fair value. Because of the inherent
uncertainty of valuations, these fair value measurements may not necessarily reflect the amounts the Company could
realize in current market transactions. The following is a description of the valuation techniques used to measure plan
assets at fair value. There were no changes in valuation techniques during the periods presented.
Equity securities and mutual funds: Equity securities are valued at the closing price reported on the stock
exchange on which the individual securities are traded. Mutual funds are typically valued based on quoted market prices.
These assets are generally classified as Level 1.
Fixed income: Fixed-income securities, other than insurance contracts, are typically valued using the closing
price reported on the major market on which the individual securities are traded, if available. Assets fair-valued using
this methodology are generally classified as Level 2. If market prices are unavailable, the fair value is estimated using
pricing models or quoted prices of securities with similar characteristics.
Insurance contracts: Fair value is based on the expected value of the insurance benefits of the insurance
contracts. The insurance benefits are assessed using the same interest rate and mortality table used to determine theliability. These assets are generally classified as Level 2.

99Cash and short-term investments: Cash includes money market accounts that are valued at their cost plus
interest on a daily basis, which approximates fair value. Short-term investments represent securities with original
maturities of one year or less. These assets are generally classified as Level 1.
Derivatives assets: Exchange-traded derivatives are valued at the closing price reported on the exchange on
which the individual securities are traded. Forward contracts are valued using a mid-close price. Over-the-counter
derivatives are valued using pricing models. These models require a variety of inputs, yield curves, credit curves,
measures of volatility and foreign exchange rates. Derivative assets are classified as Level 1 or Level 2 depending on
availability of quoted market prices.
Investments measured at net asset value: Certain investments are measured at fair value using the net asset
value (“NAV”) per share (or its equivalent) as a practical expedient. These investments, which may include commingled
funds, hedge funds, common collective trusts, private equity partnerships and real estate partnerships, are typicallyvalued using the NAV provided by the administrator of the fund. The NAV is based on the value of the underlying assets
owned by the fund, minus liabilities multiplied by the plan’s ownership of the investment.
It is the Company’s general practice to fund amounts for pensions sufficient to meet the minimum requirements
set forth in applicable employee benefits laws and local tax laws. From time to time, the Company contributes additionalamounts as it deems appropriate. The Company contributed $14 million, $27 million, $2 million, and $25 million to thedefined benefit pension plans during the years ended March 31, 2024 and 2023, the three months ended March 31, 2022,
and the year ended December 31, 2021, respectively. Additionally, the Company made direct payments of $46 million,$37 million, $11 million, and $33 million to participants of the defined benefit pension plans during the years ended
March 31, 2024 and 2023, the three months ended March 31, 2022, and the year ended December 31, 2021, respectively.
The Company estimates contributions to its defined benefit pension plans in fiscal year 2025 to beapproximately $16 million. This amount generally represents legally mandated minimum contributions. Financial market
performance in fiscal year 2025 could increase or decrease the legally mandated minimum contribution in certain
countries that require monthly or daily remeasurement of the funded status. The Company could also elect to contribute
more than the legally mandated amount based on market conditions or other factors.
The following table presents the total expected benefit payments to participants of the defined benefit pension
plans.
Expected
Benefit Payments(Dollars in millions)Fiscal year ending March 31,

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2030-2034 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

121
119
116
118
118
596

The fiscal year 2025 expected benefit payments not covered by the respective plan assets represent a componentof compensation and benefits, within current liabilities, in the Consolidated Balance Sheet.
Defined Contribution Retirement Plans
The Company sponsors defined contribution retirement plans for certain eligible employees. The Company’scontribution expense associated with employer matching benefits was $140 million, $142 million, $35 million, and $165
million for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 and the year ended
December 31, 2021, respectively.

100

Nonpension Postretirement Benefit Plans and Multi-Employer Plans
Certain Company employees participate in multi-employer defined benefit pension plans and post-retirement
health plans which are sponsored by third parties and include other participants as well as other nonpension
postretirement benefit plans that are sponsored by the Company. Accordingly, the Company does not record an asset or
liability to recognize the funded status of the multi-employer plans. However, the Company records service cost
attributable to its employees who participate in the multi-employer plans, as well as expense allocated for certain
corporate and shared functional employees. These amounts are included in the Consolidated Income Statement, and were
not material for any of the periods presented. The nonpension postretirement benefit plans provide a fixed monthly
dollar credit for retiree health care expense. The related expenses for these plans are included in the consolidated
financial statements, and were not material for any period presented.
Contributions to the nonpension postretirement benefit plans and the multi-employer plans and components of
net periodic benefit cost related to these plans and were not material for any period presented. Additionally, thecomponents resulting in a change in benefit obligation and the activity recognized in AOCI related to the nonpension
postretirement benefit plans were not material for the periods presented. The nonpension postretirement benefit plans
had a noncurrent liability recorded in the retirement and nonpension postretirement benefit obligation Consolidated
Balance Sheet of $10 million at March 31, 2024 and 2023. The weighted-average discount rate used to measure thenonpension postretirement benefit plan obligation was 2.89%, 3.02%, 1.23%, and 1.04% for the years ended March 31,
2024 and 2023, the three months ended March 31, 2022 and the year ended December 31, 2021, respectively. There
were no plan assets in the nonpension postretirement benefit plans for any period presented. As a result, the noncurrent
liability related to these plans represented the accumulated postretirement benefit obligation in excess of plan assets foreach period presented. Future expected benefit payments to participants of the nonpension postretirement benefit plans
are not expected to be material, and the Company expects contributions to the multi-employer and nonpension
postretirement benefits plans to be immaterial in fiscal year 2025.
NOTE 17. TRANSACTIONS WITH FORMER PARENT
Change in Beneficial Ownership
IBM transferred all of its 19.9% initially retained interest in Kyndryl common stock to a third-party financial
institution through exchange agreements in May and August 2022. IBM ceased to be a related party of Kyndryl inAugust 2022. Transactions related to former Parent after August 11, 2022 are no longer reported as related-party
activities. As a result, there was no related-party revenue or cost of services recognized subsequent to August 11, 2022.
Revenue and Purchases Related to Former Parent
While IBM was a related party, Kyndryl provided various services to IBM, including those related to hostingdata centers and servicing IBM’s information technology infrastructure, which are reported as revenue in the Company’s
Consolidated Income Statement. Related-party revenue generated from these services was $287 million, $236 million
and $704 million for the year ended March 31, 2023, the three months ended March 31, 2022 and the year ended
December 31, 2021, respectively. No related-party revenue was recognized after August 2022. During the year ended
March 31, 2024, the Company reached an agreement to collect previously reserved receivables from our former Parent,
which resulted in a gain recorded within transaction-related costs (benefits).
While IBM was a related party, Kyndryl utilized various IBM products and services, recognized as costs ofservices, in the fulfillment of services contracts. Total cost of services recognized from these related-party transactions in
the Company’s Consolidated Income Statement was $1.4 billion, $924 million and $4.0 billion for the year ended March
31, 2023, the three months ended March 31, 2022, and the year ended December 31, 2021, respectively. No related-party
cost of services was recognized after August 2022.

101Capital Expenditures with Former Parent
Related-party capital expenditures for purchases of IBM hardware were reflected as payments for property andequipment within the investing section of the Company’s Consolidated Statement of Cash Flows in the amounts of $89
million, $25 million, and $299 million for the year ended March 31, 2023, the three months ended March 31, 2022 andthe year ended December 31, 2021, respectively. Additionally, as part of the Separation, IBM committed to provide
Kyndryl, at no cost, up to approximately $265 million of upgraded hardware over an expected two-year period. The
amounts committed by IBM are reflected within other assets (noncurrent) within the Consolidated Balance Sheet atMarch 31, 2023. For the year ended March 31, 2024, $265 million of the upgraded hardware committed by IBM wasdelivered to Kyndryl. Accordingly, such balance was transferred from other assets (noncurrent) to property andequipment on the Balance Sheet and recognized as non-cash investing activity. The Company intends to recognize
depreciation expense related to such equipment over its useful life in accordance with the Company’s depreciation
policy, as described in Note 1 – Significant Accounting Policies.
Allocation of Corporate Expenses
Following the Separation, general corporate expenses from IBM are no longer allocated to Kyndryl; therefore,
no related amounts were reflected on the Company’s financial statements for the years ended March 31, 2024 and 2023
or the three months ended March 31, 2022.
Prior to the Separation, IBM allocated certain general corporate expenses that would have been incurred by
Kyndryl had it been a separate, standalone company. These allocated general corporate expenses from IBM wererecorded in the historical Consolidated Income Statement, Consolidated Statement of Comprehensive Income (Loss) andConsolidated Statement of Cash Flows. Allocations for management costs and corporate support services provided to
Kyndryl for the year ended December 31, 2021 were $989 million, which consisted of $10 million of allocated otherexpense, $46 million of allocated interest expense and $932 million of allocated selling, general and administrative
expense. Allocated selling, general and administrative expense primarily represents expenses for corporate functions
including, but not limited to, senior management, legal, human resources, finance and accounting, treasury, information
technology and other shared services. All such amounts were deemed to have been incurred and settled by Kyndryl in
the period in which the costs were recorded and are included in the net Parent investment. These costs were allocatedbased on direct usage as applicable, with the remainder allocated on a pro-rata basis of gross profit, headcount, assets orother measures.
Net Parent Investment
As a result of the Separation, net Parent investment in the Consolidated Balance Sheet and Consolidated
Statement of Equity was fully settled on November 3, 2021. As such, there was no balance in net Parent investment at
December 31, 2021, March 31, 2022, March 31, 2023 and March 31, 2024, and there was no activity within the accountduring the three months ended March 31, 2022 and the years ended March 31, 2023 and 2024. The total net effect ofthese settlement transactions was reflected as Net transfers (to) from Parent in the financing activities section in theConsolidated Statement of Cash Flows for the year ended December 31, 2021.
Prior to the Separation, net Parent investment in the historical Balance Sheet and Statement of Equity
represented IBM’s historical investment in Kyndryl, the net effect of transactions with and allocations from IBM, andKyndryl’s accumulated earnings.
Lease Guarantees
Kyndryl has lease agreements with third parties with an estimated aggregate lease liability of $79 million thatwere guaranteed by IBM as of March 31, 2023. Lease agreements guaranteed by IBM were immaterial as of March 31,
2024.

102

NOTE 18. TRANSITION PERIOD
We are presenting our consolidated financial statements for the three-month period ended March 31, 2022, as
required. The following tables provide certain unaudited comparative financial information for the same period of theprior year.
Three Months Ended March 31,
2022
2021 (unaudited)(In millions, except per share amounts)

Revenues * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

4,431

$

4,771

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

$

$

$

3,824
690
—
58
21
27
4,620

$

4,318
714
52
55
14
22
5,175

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

$$$(189) $
40 $(229) $

(403)
91
(494)

Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$$(1.02) $(1.02) $(2.20)(2.20)

224.4
224.4

224.1
224.1

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

* Including related-party revenue of $236 million and $154 million for the three months ended March 31, 2022 and 2021, respectively** Including related-party cost of services of $924 million and $1,006 million for the three months ended March 31, 2022 and 2021, respectively

103Three Months Ended March 31,
2022
2021 (unaudited)(Dollars in millions)

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 and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of transition costs and prepaid software . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of capitalized contract costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of 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 (including items settled with former Parent in prior-year period) . . . . . . . . . . . . . . .
Other assets and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Payments for property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(229)

$

(494)

246
103
319
136
7
31
(10)
12

339
99
323
160
7
16
17
(1)

(672)
(117)
(73)
(31)
384
(66)
151
189

(548)
(118)
(138)
(138)
(99)
74
172
(328)

$

(180)
9
(53)
(225)

$

$

$

(28)
—
(3)
(12)
(43)

$

(17)
460
—
—
443

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

$
$

(7)
(86)

$
$

(3)
13

Cash, cash equivalents and restricted cash at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

2,240
2,154

$
$

38
50

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

$
$

47
3

$
$

—
—

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

$

$

$
$

$

(180)
93
(13)
(100)

NOTE 19. WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES
During the year ended March 31, 2023, the Company initiated actions to reduce our overall cost structure andincrease our operating efficiency, which continued through the fiscal year ended March 31, 2024. These actions resulted
in workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and lease termination
charges (collectively, the “charges”). Total charges for this program through March 31, 2024 were $310 million,
consisting of approximately 60% for workforce rebalancing charges and approximately 40% for charges related toceasing to use leased and owned fixed assets and lease termination charges. The Company expects that these actions will
reduce future payroll costs, rent expenses and depreciation of property and equipment. We will continue to seek

104

opportunities to increase our operational efficiency and reduce costs, which may result in additional charges in future
periods.
The following table presents the segment breakout of charges incurred during the years ended March 31, 2024
and 2023.
Year Ended
March 31, 2024

(Dollars in millions)

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total charges by segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate charges not allocated to the segments . . . . . . . . . . .
Total charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

29
2
76
65
171
3
174

$
$

Year Ended
March 31, 2023$

Costs Incurred
to Date

14
2
63
47
125
10
135

$
$

$

43
4
139
112
297
13
310

$
$

The following table presents the classification of workforce rebalancing and site-rationalization activity in theConsolidated Income Statement during the years ended March 31, 2024 and 2023.
Year Ended
March 31, 2024

(Dollars in millions)

Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . .
Workforce rebalancing charges . . . . . . . . . . . . . . . . . . . . . . . . .
Total charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
∗$Year Ended
March 31, 2023

23
$
16
135 *
174
$

$

Costs Incurred
to Date

71
9
55
135

$
$

94
25
190
310

Excludes $4 million liability adjustment related to workforce rebalancing actions taken by the former Parent prior to Separation.

The following table presents the components of and changes in our workforce rebalancing and siterationalization charges accrual during the years ended March 31, 2024 and 2023.
Workforce
Rebalancing
Liabilities*(Dollars in millions)

Balance at March 31, 2022 . . . . . . . . . . .
Charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . .
Non-cash adjustments . . . . . . . . . . . . . . .
Balance at March 31, 2023 . . . . . . . . . . .
Charges (benefits) . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . .
Non-cash adjustments . . . . . . . . . . . . . . .
Balance at March 31, 2024 . . . . . . . . . . .
*

$

$

$

Liabilities
Related to
Ceasing to Use
Leased Assets

— $
55
—
—
55 $
135
(161)
(1)
28 $

Liabilities
Related toLease
Terminations

— $
69
—
(69)
— $
14
—
(14)
— $

Liabilities
Related to
Ceasing to Use
Fixed Assets

— $
4
(1)
—
3 $
(1)
(2)
—
— $

— $
7
—
(7)
— $
26
(5)
(21)
— $

Total

—
135
(1)
(76)
58
174
(168)
(36)
28

Prior-year movement excludes workforce rebalancing liabilities inherited from the former Parent of $57 million as of March 31, 2022, charges of$16 million related to one-off terminations, cash payments of $32 million, and ending balance of $42 million as of March 31, 2023. Current-year
movement excludes additional charges of $4 million, cash payments of $15 million and ending balance of $29 million related to actions initiatedby the former Parent. Workforce rebalancing liabilities are recorded within Other Liabilities; refer to Note 12 – Other Liabilities for further
details.

NOTE 20. SUBSEQUENT EVENTSOn April 26, 2024, the Company completed its acquisition of Skytap, Inc. for $51 million of cash consideration,reflecting customary closing adjustments. The acquisition will be accounted for using the acquisition method and the105results of the acquired business will be included in the Company’s results of operations from the acquisition date. The
purchase price allocation is subject to adjustments as we obtain additional information during the measurement period.
We are currently in the process of completing the accounting for this transaction and expect to have our preliminary
allocation of the purchase consideration to the assets acquired and liabilities assumed in the first half of fiscal year 2025.
In May 2024, the Company entered into a definitive agreement to divest its Securities Industry Services (SIS)
business for approximately $200 million. The Company has determined the assets associated with the business to beheld-for-sale as of the first quarter of our 2025 fiscal year. Closing of the transaction is subject to customary closing
conditions, including regulatory approval. The Company is currently evaluating the accounting impact resulting from thedisposal, which it expects to include in its financial results in the first quarter of 2025.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Company’s management evaluated, with the participation of the Chief Executive Officer and Chief
Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2024, the end of
the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer haveconcluded that the Company’s disclosure controls and procedures were not considered to be effective as of March 31,
2024 due to a material weakness in internal control over financial reporting (as such term is defined in Rule 12b-2 of the
Exchange Act) in the area of our information technology general controls (“ITGCs”). The deficiencies in ITGCs wererelated to access and program development and change management controls associated with the Company’s large-scalemigration in a compressed timeframe of its internal operating systems to a new enterprise resource planning system(“ERP”), which was required to replace the systems temporarily being made available to the Company by our former
parent following our Spin-off. These control deficiencies did not result in a misstatement to the annual or interim
consolidated financial statements previously filed or included in this Annual Report on Form 10-K.
Subsequent to the identification of the ITGC deficiencies and prior to the issuance of this Annual Report on
Form 10-K, the Company performed a lookback review of the users making changes to relevant systems and conducted
other supplemental procedures. As a result of these procedures we did not identify any material misstatements in ourconsolidated financial statements or disclosures in the fiscal year ended March 31, 2024.
Our management has concluded that the consolidated financial statements for the periods covered by andincluded in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results ofoperations and cash flows in conformity with GAAP.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting(as defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. Internal control over financial
reporting includes those policies and procedures that:••pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions anddispositions of our assets;
provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of management and our Board of Directors; and

106

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use ordisposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted anassessment of the effectiveness of our internal control over financial reporting as of March 31, 2024 based on the criteria
set forth in Internal Control – Integrated Framework (“2013 Framework”) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”).
In connection with our assessment of the effectiveness of internal control over financial reporting, management
identified certain control deficiencies associated with the Company’s new ERP environment in the area of ITGCs related
to (i) user access and segregation of duty controls that restrict user and privileged access to appropriate personnel; (ii)
program development and change management controls; and (iii) certain computer operations controls that, whenaggregated, are considered to be a material weakness which is defined in Rule 12b-2 of the Exchange Act as a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or
detected on a timely basis. Because of this, management has determined our internal control over financial reporting was
not effective as of March 31, 2024. These control deficiencies did not result in a misstatement to the annual or interim
consolidated financial statements previously filed or included in this Annual Report on Form 10-K.
Our consolidated financial statements included in this Annual Report on Form 10-K and the effectiveness of
our internal control over financial reporting as of March 31, 2024 have been audited by PricewaterhouseCoopers LLP,
an independent registered public accounting firm, as stated in their report included in this Annual Report on Form 10-K.
See “Report of Independent Registered Public Accounting Firm” on page 50.
Remediation Plan
Management has evaluated the deficiencies described above and has developed and is implementing a
remediation plan designed to strengthen our ITGC processes and controls associated with our new ERP environment.
This plan includes but is not limited to (i) implementing and/or formalizing additional controls across our information
technology environment, including user access and segregation of duty controls, program development and change
management controls, and certain computer operations controls, and (ii) training of relevant personnel on the design andoperation of any new or modified ITGCs. The remediation plan is subject to ongoing management review, as well as
oversight by the Audit Committee of our Board of Directors.
The Company expects to complete the implementation of its remediation plan during fiscal year 2025. We
believe our remediation plan will address the deficiencies described above; however, deficiencies will not be considered
fully remediated until the applicable controls operate for a sufficient period of time and management has concluded,
through testing, that these controls are operating effectively. We will continue to monitor the design and effectiveness ofthese and other processes, procedures and controls and make further changes as appropriate.
Changes in Internal Control over Financial Reporting
Other than the deficiencies and remediation activities described above, there has been no change in the
Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that
occurred during the Company’s last fiscal quarter ended March 31, 2024 that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.

107

Item 9B. Other Information.
During the three months ended March 31, 2024, none of the Company’s directors or executive officers adopted,
terminated or modified a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms
are defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information about our executive officers may be found under the caption “Information about our Executive
Officers” in Part I of this Form 10-K and is incorporated by reference in this Item 10. Other information called for bythis Item 10 will be included in the subsections titled “Proposal 1 - Election of Directors,” “Kyndryl Code of Conduct,”“Securities Trading Policy,” and “Committees of the Board” under the section entitled “Corporate Governance and
Board Matters” in our Proxy Statement for our 2024 Annual Meeting of Stockholders (our “2024 Proxy Statement”) andis incorporated herein by reference.
Item 11. Executive Compensation.
The information called for by this Item 11 will be included in the sections titled “Director Compensation” and“2024 Executive Compensation” in our 2024 Proxy Statement for our 2024 Annual Meeting of Stockholders and isincorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information called for by this Item 12 will be included in the sections titled “Equity Compensation Plan
Information” and “Stock Ownership Information” in our 2024 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information called for by this Item 13 will be included in the sections titled “Director Independence” and“Certain Relationships and Related Person Transactions” in our 2024 Proxy Statement and is incorporated herein byreference.
Item 14. Principal Accountant Fees and Services.
The information called for by this Item 14 will be included in the sections titled “Audit and Non-Audit Fees”
and “Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm” in our 2024 Proxy
Statement and is incorporated herein by reference.

108PART IV
Item 15. Exhibits, Financial Statement Schedules.
Exhibit Number
2.1
3.1
3.2
4.1
4.2
4.3
4.4

4.5
10.1

10.2

10.3

10.4

10.5

Description of Exhibit
Separation and Distribution Agreement, dated as of November 2, 2021, by and between International
Business Machines Corporation and the registrant was filed as Exhibit 2.1 to the registrant’s Current
Report on Form 8-K filed on November 4, 2021 and is hereby incorporated by reference.
Amended and Restated Certificate of Incorporation of the registrant was filed as Exhibit 3.1 to theregistrant’s Current Report on Form 8-K filed on November 4, 2021 and is hereby incorporated byreference.
Amended and Restated Bylaws of the registrant, effective January 25, 2023, was filed as Exhibit 3.1 tothe registrant’s Current Report on Form 8-K filed on January 27, 2023 and is hereby incorporated byreference.
Indenture, dated as of October 15, 2021, between Kyndryl Holdings, Inc. and The Bank of New York
Mellon Trust Company, N.A., as trustee, was filed as Exhibit 4.1 to the registrant’s Current Report on
Form 8-K filed on October 15, 2021 and is hereby incorporated by reference.
First Supplemental Indenture, dated as of October 15, 2021, between Kyndryl Holdings, Inc. and The
Bank of New York Mellon Trust Company, N.A., as trustee, was filed as Exhibit 4.2 to the registrant’s
Current Report on Form 8-K filed on October 15, 2021 and is hereby incorporated by reference.
Second Supplemental Indenture, dated as of February 15, 2024, between Kyndryl Holdings, Inc. and the
Bank of New York Mellon Trust Company, N.A., as trustee, was filed as Exhibit 4.1 to the registrant’s
Current Report on Form 8-K filed on February 20, 2024 and is hereby incorporated by reference.
Guarantee Agreement, dated as of October 15, 2021, among International Business Machines
Corporation, Kyndryl Holdings, Inc. and the Bank of New York Mellon Trust Company, N.A., as trustee,in favor of the holders of the notes was filed as Exhibit 4.3 to the registrant’s Annual Report on Form
10-K for the year ended December 31, 2021 filed on March 10, 2022 and is hereby incorporated byreference.
Description of the registrant’s securities registered under Section 12 of the Exchange Act (filed herewith).
Term Loan Credit Agreement, dated as of October 18, 2021, by and among Kyndryl Holdings, Inc., thelenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent, and the other financial
institutions party thereto, was filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on
October 22, 2021 and is hereby incorporated by reference.
Amendment No. 1 to Term Loan Credit Agreement dated as of June 21, 2023, among the Company, theLenders party thereto and JPMorgan Chase Bank N.A., as Administrative Agent, was filed as Exhibit 10.2
to the registrant’s Current Report on Form 8-K filed on June 23, 2023, and is hereby incorporated byreference.
Five-Year Revolving Credit Agreement, dated as of October 18, 2021, by and among Kyndryl Holdings,
Inc., the lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent, and the otherfinancial institutions party thereto, was filed as Exhibit 10.2 to the registrant’s Current Report on Form
8-K filed on October 22, 2021 and is hereby incorporated by reference.
Amendment No. 1 to Five-Year Revolving Credit Agreement, dated as of June 21, 2023, among theCompany, the Lenders party thereto and JPMorgan Chase Bank N.A., as Administrative Agent, was filed
as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on June 23, 2023 and is hereby
incorporated by reference.
Amended and Restated Receivables Purchase Agreement, dated as of October 28, 2021, among Kyndryl,Inc., Banco Santander S.A. and solely for the purposes of Section 13.19, Kyndryl Holdings, Inc., wasfiled as Exhibit 10.1 to the registrant’s current report on Form 8-K filed on November 1, 2021 and ishereby incorporated by reference.

109

10.6

10.7

10.8

10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17

10.18
10.19
10.20
10.21

First Amendment to Amended and Restated Receivables Purchase Agreement, dated as of January 26,
2022, among Kyndryl, Inc., Kyndryl Holdings, Inc. and Banco Santander S.A. was filed as Exhibit 10.4
to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 10,2022 and is hereby incorporated by reference.
Second Amendment to Amended and Restated Receivable Purchase Agreement, dated September 21,
2022, by and among Banco Santander S.A., Kyndryl, Inc. and Kyndryl Holdings, Inc. was filed as Exhibit
10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2022
filed on February 9, 2023 and is hereby incorporated by reference.
Third Amendment to Amended and Restated Receivable Purchase Agreement, dated as of December 21,
2022, by and among Banco Santander S.A., Kyndryl, Inc. and Kyndryl Holdings, Inc. was filed as Exhibit
10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2022
filed on February 9, 2023 and is hereby incorporated by reference.
Tax Matters Agreement, dated as of November 2, 2021, between International Business Machines
Corporation and Kyndryl Holdings, Inc. was filed as Exhibit 10.2 to the registrant’s Current Report on
Form 8-K filed on November 4, 2021 and is hereby incorporated by reference.
Employee Matters Agreement, dated as of November 2, 2021, between International Business Machines
Corporation and Kyndryl Holdings, Inc. was filed as Exhibit 10.3 to the registrant’s Current Report on
Form 8-K filed on November 4, 2021 and is hereby incorporated by reference.
Intellectual Property Agreement, dated as of November 2, 2021, between International Business
Machines Corporation and Kyndryl, Inc. was filed as Exhibit 10.4 to the registrant’s Current Report on
Form 8-K filed on November 4, 2021 and is hereby incorporated by reference.
Real Estate Matters Agreement, dated as of November 2, 2021, between International Business Machines
Corporation and Kyndryl Holdings, Inc. was filed as Exhibit 10.5 to the registrant’s Current Report on
Form 8-K filed on November 4, 2021 and is hereby incorporated by reference.
IBM International Client Relationship Agreement, dated as of November 2, 2021, between International
Business Machines Corporation and Kyndryl, Inc. was filed as Exhibit 10.6 to the registrant’s Current
Report on Form 8-K filed on November 4, 2021 and is hereby incorporated by reference.*
Master Subcontracting Framework Agreement, dated as of November 2, 2021, between International
Business Machines Corporation and Kyndryl, Inc. was filed as Exhibit 10.7 to the registrant’s Current
Report on Form 8-K filed on November 4, 2021 and is hereby incorporated by reference.*
Amended and Restated Kyndryl 2021 Long-Term Performance Plan was filed as Exhibit 4.3 to theregistrant’s Registration Statement on Form S-8 filed on July 29, 2022 and is hereby incorporated byreference.†
Amended and Restated Kyndryl 2021 Long-Term Performance Plan (LTPP) was filed as Exhibit 4.3 to
the Registrant’s Registration Statement on Form S-8 filed on July 31, 2023, and is hereby incorporated byreference.†
Forms of LTPP equity award agreements for (i) stock options, restricted stock, restricted stock units,
cash-settled restricted stock units and (ii) retention restricted stock unit awards was filed as Exhibit 10.10
to the registrant’s Current Report on Form 8-K filed on November 4, 2021 and is hereby incorporated byreference.†
Form of LTPP equity award agreement for performance share units was filed as Exhibit 10.11 to theregistrant’s Current Report on Form 8-K filed on November 4, 2021 and is hereby incorporated byreference.†
Form of Terms and Conditions of LTPP equity award agreements was filed as Exhibit 10.12 to theregistrant’s Current Report on Form 8-K filed on November 4, 2021 and is hereby incorporated byreference.†
Form of LTPP equity award agreement for directors was filed as Exhibit 10.25 to the registrant’s Annual
Report on Form 10-K for the year ended December 31, 2021 filed on March 10, 2022 and is hereby
incorporated by reference.†
Form of Terms and Conditions for LTPP equity award agreement for directors was filed as Exhibit 10.26
to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 10,2022 and is hereby incorporated by reference.†11010.22
10.23
10.24
10.25
10.26

10.27

10.28

10.29

10.30

10.31
10.32
10.33
10.34
10.35
19.1
21.1
23.1

Form of LTPP equity award agreement for performance share units (Fiscal 2023) was filed as Exhibit
10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022
filed on November 4, 2022 and is hereby incorporated by reference. †Form of LTPP equity award agreements for restricted stock units was filed as Exhibit 10.5 to theregistrants Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 filed on
November 8, 2023, and is hereby incorporated by reference.†
Form of LTPP equity award agreement for performance share units was filed as Exhibit 10.6 to theregistrants Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 filed on
November 8, 2023, and is hereby incorporated by reference.†
Kyndryl Excess Plan was filed as Exhibit 10.13 to the registrant’s Current Report on Form 8-K filed on
November 4, 2021 and is hereby incorporated by reference.†
Offer Letter by and between International Business Machines Corporation and Martin Schroeter, dated
January 2, 2021, the LTPP performance share unit award agreement, dated February 1, 2021, and therelated terms and conditions document, effective December 15, 2020, and the noncompetition agreement,
dated January 3, 2021, was filed as Exhibit 10.13 to the registrant’s Registration Statement on Form 10
filed on October 12, 2021 and is hereby incorporated by reference.†
Offer Letter by and between International Business Machines Corporation and David Wyshner, dated July23, 2021, and the noncompetition agreement, dated July 25, 2021, was filed as Exhibit 10.14 to theregistrant’s Registration Statement on Form 10 filed on October 12, 2021 and is hereby incorporated byreference.†
Offer Letter by and between International Business Machines Corporation and Elly Keinan, dated March
1, 2021, the LTPP performance share unit award agreement, dated April 1, 2021, and the related terms
and conditions document, effective March 1, 2021, the Executive Sign-on Repayment Agreement and thenoncompetition agreement, dated March 2, 2021, was filed as Exhibit 10.15 to the registrant’s
Registration Statement on Form 10 filed on October 12, 2021 and is hereby incorporated by reference.†
Offer Letter by and between International Business Machines Corporation and Maryjo Charbonnier, dated
May 28, 2021, the LTPP performance share unit award agreement, dated August 2, 2021, and the related
terms and conditions document, effective March 1, 2021, the LTPP retention restricted stock unit award
agreement, dated August 2, 2021, and the related terms and conditions document, effective June 1, 2020,
the Executive Sign-on Repayment Agreement and the noncompetition agreement, dated June 1, 2021, wasfiled as Exhibit 10.16 to the registrant’s Registration Statement on Form 10 filed on October 12, 2021 andis hereby incorporated by reference.†
LTPP performance share unit award agreement for Edward Sebold, dated May 3, 2021, and the related
terms and conditions document, effective May 1, 2021, and the noncompetition agreement, dated April
25, 2012, was filed as Exhibit 10.17 to the registrant’s Registration Statement on Form 10 filed on
October 12, 2021 and is hereby incorporated by reference.†
Kyndryl Executive Severance Plan and Executive Retirement Policy was filed as Exhibit 10.2 to theregistrant’s Current Report on Form 8-K filed on February 25, 2022 and is hereby incorporated byreference.†
Amendment to the Kyndryl Executive Severance Plan and Executive Retirement Policy was filed as
Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on August 1, 2022 and is hereby
incorporated by reference. †Amendment to the Kyndryl Executive Severance Plan and Executive Retirement Policy was filed as
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 31, 2023, and is hereby
incorporated by reference.†
Amendment to the Kyndryl Executive Severance Plan and Executive Retirement Policy was filed as
Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2023 filed on November 8, 2023, and is hereby incorporated by reference.†
Kyndryl Annual Incentive Plan for Executives was filed as Exhibit 10.1 to the registrant’s Current Reporton Form 8-K filed on February 25, 2022 and is hereby incorporated by reference. †Kyndryl Holdings, Inc. Securities Trading Policy (filed herewith).
Subsidiaries of the registrant (filed herewith).
Consent of PricewaterhouseCoopers LLP (filed herewith).

111

24.1
31.1

Power of attorney (filed herewith).
Certification of principal executive officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002
(filed herewith).
Certification of principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002
(filed herewith).
Certification of principal executive officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith).
Certification of principal financial officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith).
Kyndryl Financial Statement Clawback Policy (filed herewith).
XBRL Instance Document – the instance document does not appear on the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document.
XBRL Taxonomy Extension Schema Document.
XBRL Taxonomy Extension Calculation Linkbase Document.
XBRL Taxonomy Extension Definition Linkbase Document.
XBRL Taxonomy Extension Label Linkbase Document.
XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.

31.2
32.1
32.2
97.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE104* Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company
agrees to furnish supplementally an unredacted copy of the exhibit to the Commission upon its request.
† Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.
The agreements and other documents filed as exhibits to this report are not intended to provide factual
information or other disclosure other than with respect to the terms of the agreements or other documents themselves,
and you should not rely on them for that purpose. In particular, any representations and warranties made by theCompany in these agreements or other documents were made solely within the specific context of the relevant agreement
or document and do not apply in any other context or at any time other than the date they were made.
Item 16. Form 10-K Summary.
None.

112

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Kyndryl Holdings, Inc.
(Registrant)
Date: May 30, 2024
By: /s/ Martin J. Schroeter
Martin J. Schroeter
Chairman of the Board and Chief Executive Officer(Authorized Signatory)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
May 30, 2024

By/s/ Martin J. Schroeter
Martin J. Schroeter

Director, Chairman and Chief Executive Officer(Principal Executive Officer)

By/s/ David B. WyshnerDavid B. Wyshner

Chief Financial Officer(Principal Financial Officer)

May 30, 2024

By/s/ Vineet Khurana
Vineet Khurana

Senior Vice President and Global Controller(Principal Accounting Officer)

May 30, 2024

By*
Dominic J. Caruso

Director

May 30, 2024*
John D. Harris II

Director

May 30, 2024*
Stephen A.M. Hester

Director

May 30, 2024*
Shirley Ann Jackson

Director

May 30, 2024

Director

May 30, 2024

Denis MachuelDirector

May 30, 2024*
Rahul N. Merchant

Director

May 30, 2024

Jana Schreuder

Director

May 30, 2024*
Howard I. Ungerleider

Director

May 30, 2024

By
By
By
By

*
Janina Kugel

By
By

*

By
By
*By

*

/s/ Evan BarthEvan Barth, Attorney-in-fact

113

(This page has been left blank intentionally.)Corporate Information
BOARD OF DIRECTORSCORPORATE HEADQUARTERS

Martin Schroeter (Chairman)
Chairman and Chief Executive Officer
Kyndryl Holdings, Inc.

One Vanderbilt Avenue, 15th Floor
New York, New York 10017

Stephen A. M. Hester (Lead Independent Director)
ChairmaneasyJet plc
Chairman
Nordea Bank
Dominic J. Caruso
Retired Executive Vice President andChief Financial Officer
Johnson & Johnson
John D. Harris II
Former Vice President of Business Development
Raytheon Company
Former Chief Executive Officer
Raytheon International, Inc.
Shirley Ann Jackson
Retired President
Rensselaer Polytechnic InstituteJanina Kugel
Former Chief Human Resources Officer andmember of the Managing Board
Siemens AG
Denis MachuelChief Executive Officer
The Adecco Group
Rahul N. Merchant
Former Senior Executive Vice President andHead of Client Services and Technology
TIAA-CREF
Jana Schreuder
Retired Executive Vice President andChief Operating Officer
Northern Trust Corporation
Howard I. Ungerleider
Retired President and Chief Financial Officer
Dow Inc.

INVESTOR RELATIONS
Kyndryl Investor Relations
One Vanderbilt Avenue, 15th Floor
New York, New York 10017
212.896.2100

investors@kyndryl.com

STOCK LISTINGNYSE: KDINDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, New York 10017

REGISTRAR AND TRANSFER AGENT
Computershare Trust Company, N.A.
800.962.4284 | www.computershare.com

ANNUAL MEETING OF STOCKHOLDERS
Thursday, July 25, 2024
1:00 p.m. Eastern Daylight Timevirtualshareholdermeeting.com/KD2024

EXECUTIVE OFFICERS

Martin Schroeter, Chairman and Chief Executive Officer

David Wyshner, Chief Financial Officer
Elly Keinan, Group President

Edward Sebold, General Counsel and Secretary

Maryjo Charbonnier, Chief Human Resources Officer

Vineet Khurana, Senior Vice President and Global Controller

FORWARD-LOOKING STATEMENTS

This annual report 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 report, 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 nonhistorical statements in this report are forward-looking statements. Such forward-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 or expressions or the negative thereof or other variations thereon. Such statements are
based on management’s current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements. In particular, careful consideration should be given to cautionary statements madeunder the caption “Risk Factors” in this annual report. Any forward-looking statement in this report speaks only as of the date on which it is made.
Except as required by law, we assume no obligation to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
Kyndryl, the Kyndryl logo and kyndryl.com are trademarks of Kyndryl, Inc., registered in many jurisdictions worldwide.

Kyndryl. The Heart of Progress™.

One Vanderbilt Avenue
New York, New York 10017
w w w.kyndryl.com