- Revenues for the quarter ended March 31, 2024, total $3.8 billion, pretax loss is $4 million, net loss is $45 million, adjusted EBITDA is $566 million and adjusted pretax income is $30 million
- Fiscal year 2024 revenues total $16.1 billion, pretax loss is $168 million, net loss is $340 million, adjusted EBITDA is $2.4 billion and adjusted pretax income is $165 million
- Company expects to return to positive constant-currency revenue growth in the fourth quarter and provides outlook for at least $435 million of adjusted pretax income in fiscal year 2025
NEW YORK, May 7, 2024 – Kyndryl Holdings, Inc. (NYSE: KD), the world’s largest IT infrastructure services provider, today released financial results for the quarter ended March 31, 2024, the fourth quarter of its 2024 fiscal year.
“Fiscal 2024 was a year of acceleration and achievement for Kyndryl, driven by contributions from employees around the world. As we start our new fiscal year, we have pivoted from transformation to growth. Our strategic progress, our strong growth in Kyndryl Consult and our expansion of our Kyndryl Bridge operating platform solidify our leadership position in mission-critical IT services, while also driving meaningful financial progress,” said Kyndryl Chairman and Chief Executive Officer Martin Schroeter.
“Going forward, we’ll continue to execute our strategy to fuel earnings growth, and we’re now targeting an earlier return to revenue growth, in the fourth quarter of this fiscal year.”
Results for the Fiscal Fourth Quarter Ended March 31, 2024
For the fourth quarter, Kyndryl reported revenues of $3.8 billion, a year-over-year decline of 10% and 9% in constant currency. The year-over-year revenue decline reflects the Company’s progress in reducing inherited no-margin and low-margin third-party content in customer contracts, particularly in its United States and Strategic Markets segments. The Company reported a pretax loss of $4 million and a net loss of $45 million, or ($0.20) per diluted share, in the quarter, compared to a net loss of $737 million, or ($3.24) per diluted share, in the prior-year period.
Adjusted pretax income was $30 million, an increase of $91 million compared to an adjusted pretax loss of $61 million in the prior-year period. Adjusted EBITDA of $566 million increased 19% compared to $476 million in the prior-year period, primarily driven by contributions from the Company’s three-A initiatives – Alliances, Advanced Delivery and Accounts – partially offset by a software cost increase of $50 million. Currency movements had essentially no year-over-year impact on earnings.
Results for the Fiscal Year Ended March 31, 2024
For the fiscal year ended March 31, 2024, Kyndryl reported revenues of $16.1 billion, a decline of 6% and 6% in constant currency, compared to the year ended March 31, 2023. The year-over-year revenue decline reflects the Company’s progress in reducing inherited no-margin and low-margin third-party content in customer contracts, particularly in its United States and Strategic Markets segments. The Company reported a pretax loss of $168 million and a net loss of $340 million, or ($1.48) per diluted share, in the year, compared to a net loss of $1.4 billion, or ($6.06) per diluted share, in the prior year. Cash flow from operations was $454 million.
Adjusted pretax income was $165 million in fiscal 2024, compared to an adjusted pretax loss of $217 million in the year ended March 31, 2023. Adjusted EBITDA of $2.4 billion increased 20% compared to $2.0 billion in the prior-year period, primarily driven by contributions from the Company’s Alliances, Advanced Delivery and Accounts initiatives, partially offset by a software cost increase of $200 million. Currency movements had essentially no year-over-year impact on earnings. Adjusted free cash flow was $291 million in fiscal year 2024.
“In our fiscal year 2024, we delivered adjusted EBITDA growth and adjusted pretax income growth that demonstrate the potential our business has to expand margins and generate cash flow. We continue to drive progress with strong execution on our three-A initiatives, growth in Kyndryl Consult, and our ongoing commitment to sign contracts that will generate attractive margins,” said Kyndryl Chief Financial Officer David Wyshner.
Recent Developments
- Alliances initiative – In fiscal year 2024, Kyndryl recognized more than $500 million in revenue tied to cloud hyperscaler alliances, triple the prior-year amount and exceeding the full-year target the Company raised to $400 million in February.
- Advanced Delivery initiative – The AI-enabled Kyndryl Bridge operating platform, which more than 1,200 customers are using, is further enhancing the world-class technology services the Company provides. It has also helped Kyndryl redeploy more than 9,500 delivery professionals to drive efficiency. This has generated annualized savings of approximately $575 million as of year-end, surpassing the year-end target that the Company raised to $550 million in November.
- Accounts initiative – Kyndryl continued to address elements of contracts with substandard margins, bringing the total impact from this initiative to $600 million of annualized benefits, which exceeds the fiscal 2024 year-end objective for annualized savings that the Company raised in November to $500 million.
- Strong projected margin on recent signings – The Company has substantially increased the projected pretax margins associated with its signings. Throughout fiscal 2023 and 2024, such margins have been in the high-single-digit range, which is approximately ten percentage points above its fiscal 2023 adjusted pretax margin.
- Double-digit growth in Kyndryl Consult – In the fourth quarter, Kyndryl Consult revenues grew 13% year-over-year and 15% in constant currency. For fiscal year 2024, Kyndryl Consult revenues grew 15% year-over-year and 16% in constant currency, and Kyndryl Consult signings grew 18% year-over-year and 18% in constant currency, including year-over-year growth of 26% and 30% in constant currency, in the fourth quarter.
Fiscal Year 2025 Outlook
Kyndryl is providing the following outlook for its fiscal year 2025, which runs from April 2024 to March 2025:
- Revenue growth of (2%) to (4%) in constant currency compared to revenue of $16.1 billion in fiscal 2024, which reflects actions by Kyndryl to reduce certain inherited zero-margin and low-margin revenue streams. Based on recent exchange rates, the Company’s outlook implies fiscal 2025 revenue of $15.2 to $15.5 billion. The Company now expects to deliver year-over-year constant-currency revenue growth in the fourth quarter of the fiscal year.
- Adjusted EBITDA margin of at least 16.2%, an increase of at least 150 basis points compared to 14.7% in fiscal 2024, reflecting incremental benefits from the three-A initiatives.
- Adjusted pretax income of at least $435 million, an increase of at least $270 million compared to $165 million in fiscal 2024.
- Conversion of adjusted pretax income (less cash taxes) to adjusted free cash flow of roughly 100%.
Forecasted amounts are based on currency exchange rates as of May 2024.
Earnings Webcast
Kyndryl’s earnings call for the fourth fiscal quarter is scheduled to begin at 8:30 a.m. ET on May 8, 2024. The live webcast can be accessed by visiting investors.kyndryl.com on Kyndryl’s investor relations website. A slide presentation will be made available on Kyndryl’s investor relations website before the call on May 8, 2024. Following the event, a replay will be available via webcast for twelve months at investors.kyndryl.com.
About Kyndryl
Kyndryl (NYSE: KD) is the world’s largest IT infrastructure services provider, serving thousands of enterprise customers in more than 60 countries. The Company designs, builds, manages and modernizes the complex, mission-critical information systems that the world depends on every day. For more information, visit www.kyndryl.com.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements concerning the Company’s plans, objectives, goals, beliefs, business strategies, future events, business condition, results of operations, financial position, business outlook and business trends and other non-historical statements, including without limitation the information presented in the “Outlook” section of this press release (which does not assume any acquisitions or divestitures), are forward-looking statements. Such forward-looking statements often contain words such as “will,” “anticipate,” “predict,” “project,” “plan,” “forecast,” “future,” “estimate,” “expect,” “intend,” “target,” “may,” “should,” “would,” “could,” “outlook,” “goal,” “objective,” “seek,” “aim,” “believe” and other similar words or expressions or the negative thereof or other variations thereon. Forward-looking statements are based on the Company’s current assumptions and beliefs regarding future business and financial performance.
The Company’s actual business, financial condition or results of operations may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others: risks related to the Company’s spin-off from IBM; failure to attract new customers, retain existing customers or sell additional services to customers; technological developments and the Company’s response to such developments; failure to meet growth and productivity objectives; competition; impacts of relationships with critical suppliers and partners; inability to attract, retain and/or manage key personnel and other skilled employees; the impact of local legal, economic, political, health and other conditions; a downturn in economic environment and customer spending budgets; damage to the Company’s reputation; inability to accurately estimate the cost of services and the timeline for completion of contracts; its implementation of a new enterprise resource planning system and other systems and processes; service delivery issues; the Company’s ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; the impact of our business with government customers; failure of the Company’s intellectual property rights to prevent competitive offerings and the failure of the Company to obtain necessary licenses; the impairment of our goodwill or long-lived assets; risks relating to cybersecurity and data privacy; risks relating to non-compliance with legal and regulatory requirements; adverse effects from tax matters and environmental matters; legal proceedings and investigatory risks; the impact of changes in market liquidity conditions and customer credit risk on receivables; the Company’s pension plans; the impact of currency fluctuations; and risks related to the Company’s common stock and the securities market.
Additional risks and uncertainties include, among others, those risks and uncertainties described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023, and may be further updated from time to time in the Company’s subsequent filings with the Securities and Exchange Commission. Any forward-looking statement in this press release speaks only as of the date on which it is made. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
In this release, certain amounts may not add due to the use of rounded numbers; percentages presented are calculated based on the underlying amounts.
Non-GAAP Financial Measures
In an effort to provide investors with additional information regarding its results, the Company has provided certain metrics that are not calculated based on generally accepted accounting principles (GAAP), such as constant-currency results, adjusted EBITDA, adjusted pretax income, adjusted net income, adjusted EPS, adjusted EBITDA margin, adjusted pretax margin, adjusted net margin and adjusted free cash flow. Such non-GAAP metrics are intended to supplement GAAP metrics, but not to replace them. The Company’s non-GAAP metrics may not be comparable to similarly titled metrics used by other companies. Definitions of non-GAAP metrics and reconciliations of non-GAAP metrics for historical periods to GAAP metrics are included in the tables in this release. Any workforce rebalancing charges the Company incurs after April 1, 2024 will be included in calculating adjusted earnings metrics.
A reconciliation of forward-looking non-GAAP financial information is not included in this release because the Company is unable to predict with reasonable certainty some individual components of such reconciliation without unreasonable effort. These items are uncertain, depend on various factors and could have a material impact on future results computed in accordance with GAAP.
Investor Contact:
Lori Chaitman
lori.chaitman@kyndryl.com
Media Contact:
Ed Barbini
edward.barbini@kyndryl.com
