Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Q2 2024 Earnings Presentation
28 slides from Kyndryl's earnings presentation, Nov 8, 2023
Slide 1: Second Quarter 2024 Earnings
Second Quarter 2024 Earnings November 8, 2023
Slide 2: Disclaimers
Disclaimers Forward-looking statements This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements often contain words such as “will,” “anticipate,” “predict,” “project,” “contemplate,” “plan,” “f
Slide 3: Speakers
Speakers Lori Chaitman, Global Head of Investor Relations Martin Schroeter, Chairman and Chief Executive Officer David Wyshner, Chief Financial Officer 3
Slide 4: Highlights
Highlights First half results reflect accelerated progress and strong execution Alliances, Advanced Delivery and Accounts initiatives driving significant margin expansion Raising outlook for current fiscal year (ending March 2024) Customers rely on Kyndryl to harness secular IT trends, fueling our l
Slide 5: Hybrid IT estates create unique opportunities for Kyndryl
Hybrid IT estates create unique opportunities for Kyndryl . . . Our heritage 30+ years of mission-critical expertise serving complex enterprises Global capabilities to advise, co-create The leader in managing and implement solutions and modernizing complex, hybrid IT environments Open integration pl
Slide 6: Customers rely on Kyndryl to harness secular IT trends
. . . and customers rely on Kyndryl to harness secular IT trends Cloud migration Artificial intelligence • 38% year-over-year1 hyperscaler-related • 39% year-over-year1 growth in Applications, Data signings growth & AI signings • Unmatched expertise in putting ‘the right • Performing one billion aut
Slide 7: We're consistently capturing and building value
We’re consistently capturing and building value . . . Gross margin Gross profit book-to-bill1 expected on post-spin signings 26% 26% 24% 1.2x 1.1x 1.1x 1.1x 20% 1.0x March September March September December March June September 2022 2022 2023 2023 2022 2023 2023 2023 Six Months Ended Twelve Months E
Slide 8: Increase profitability and drive free cash flow
. . . to significantly increase profitability and drive free cash flow Mix of post-spin signings in our revenue1 Adjusted pretax income / margin High-single- digit margins 1% 5% 20% 33% 50% 67% (higher- 85% margin) 99% 95% 80% 67% 50% At least 33% $140M 15% (lower- margin) Calendar 1Q Fiscal Fiscal
Slide 9: Financial overview
Financial overview Solid quarterly results demonstrate continuing progress Alliances, Advanced Delivery and Accounts initiatives delivering greater benefits Robust balance sheet and strong liquidity Raising outlook for current fiscal year (ending March 2024) 9
Slide 10: Fiscal second quarter 2024 financial highlights
Fiscal second quarter 2024 financial highlights Quarterly revenue by segment ($ in millions) ($ in millions) Quarter ended Quarter ended Sept. 30, 2023 Sept. 30, 2022 Strategic Markets United States Revenue $4,073 $4,179 $930 Growth, in constant currency (5%) 1% $1,108 Adjusted EBITDA $574 $428 Adju
Slide 11: Delivering additional benefits from our three-A's in fiscal 2024
Delivering additional benefits from our three-A’s in fiscal 2024 Alliances Advanced Delivery Accounts Driving signings, certifications and revenues with Transforming service delivery through Addressing elements of the business our new ecosystem partners and capabilities upskilling and automation wit
Slide 12: Positive cash flow from operations and strong balance sheet metrics
Positive cash flow from operations and strong balance sheet metrics Adjusted free cash flow Balance sheet and cash flow metrics ($ in millions, three months ended September 30) $4.6B $1.4B Available liquidity1 Cash $212 $3.2B $1.8B ($107) Debt Net debt $69 $25 $46M Cash flow from operations Adjusted
Slide 13: Projected margins on signings up meaningfully
Projected margins on signings up meaningfully, supporting medium-term goals Gross margin Pretax margin expected on post-spin signings expected on post-spin signings 26% 26% 9% 9% Supports our 24% 7% medium-term margin target September March September September March September 2022 2023 2023 2022 202
Slide 14: Gross profit book-to-bill
Gross profit book-to-bill Twelve months ended ($ in billions) September 30, 2023 Projected gross margin on signings ~ 26% Total signings $12.0 Projected gross profit on signings (“book”) $3.12 Reported gross profit (“bill”) $2.75 Gross profit book-to-bill ratio 1.1x (projected gross profit on signin
Slide 15: Initiatives will contribute to profit growth over the medium term
Over the medium term, our initiatives will contribute to profit growth Alliances Advanced Accounts plus Delivery Driving signings, certifications Transforming service Addressing elements of the Consult growth, growth in and revenues through our new delivery through upskilling and business with subst
Slide 16: Raising our fiscal 2024 outlook
Raising our fiscal 2024 outlook Fiscal 2024 outlook Comments At least $140 million, up at least $357 million Adjusted pretax income Increase from August outlook of at least $100 million year-over-year Adjusted EBITDA margin Approximately 14.5%, up 290 bps year-over-year Increase from August outlook
Slide 17: Investment highlights
Investment highlights The world leader in designing, building, managing and modernizing mission-critical information systems Independence doubled our addressable market from $240 billion pre-spin to $530 billion by 2025, with market growth driven by numerous interrelated tailwinds Competitive ad
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Slide 19: Appendix
Appendix Accolades and ESG commitment Our services and recognition revenue mix Financial metrics Definitions and Reconciliation of rationale for non-GAAP metrics non-GAAP metrics 19
Slide 20: Recent accolades and industry recognition
Recent accolades and industry recognition A Major Contender and Star Performer: Market Leader: Cybersecurity A Leader: May 2023 Magic Quadrant™ for 2023 Digital Workplace Services PEAK Services 2022 RadarView report Managed Mobility Services, Global report Matrix™ Assessment in North America Kyndryl
Slide 21: Strong commitment to corporate citizenship principles
Strong commitment to corporate citizenship principles Environmental stewardship Social inclusivity Governance • Committed to Net Zero emissions by 2040 and • Increased Kyndryl Inclusion Networks (KINs) to • Published inaugural Corporate Citizenship Report reducing all-scope emissions at least 50% by
Slide 22: Our services
Our services Diversified sources Practice Overview Revenue of revenue Delivering seamless, integrated, multicloud management in a 34% Cloud hybrid model Communications Financial services Delivering full line of cybersecurity, business continuity and disaster Technology 8% Security & 13% recovery ser
Slide 23: Transforming focus accounts into higher-value 'blueprint' accounts
Transforming focus accounts into higher-value ‘blueprint’ accounts Revenue Starting Post-spin (at spin) 1 point signings 1 Focus accounts ~0% average Low to mid-20s Focus driving substantial gross margin gross margin accounts margin accretion ~$8B / ~40% ‘Blueprint’ accounts ~$10B / ~60% Margins inc
Slide 24: Fiscal second quarter 2024 adjusted pretax income and adjusted EBITDA
Fiscal second quarter 2024 adjusted pretax income and adjusted EBITDA ($ in millions) $212 $25 $47 Pretax Workforce Adjusted Adjusted income (loss) rebalancing 1 pretax 2 3 EBITDA as reported charges income 1 Effects of amortization of acquisition-related intangible assets, stock-based compensation,
Slide 25: Fiscal 2024 adjusted EBITDA and adjusted free cash flow
Fiscal 2024 adjusted EBITDA and adjusted free cash flow ($ in millions) Second quarter First half ($61) ($155) ($168) ($506) ($13) ($23) $574 $1,186 ($59) ($88) ($240) ($426) $69 ($37) Adjusted Net capital Deferred Interest Cash taxes Working Adjusted Adjusted Net capital Deferred Interest Cash taxe
Slide 26: Reconciliation of non-GAAP metrics
Reconciliation of non-GAAP metrics (in millions, except per-share amounts) Three months Three months Reconciliation of adjusted pretax income (loss) ended ended to adjusted net income (loss) and adjusted EPS Sept. 30, 2023 Sept. 30, 2022 Adjusted pretax income (loss) (non-GAAP) $25 ($102) Reconcilia
Slide 27: Definitions and rationale for non-GAAP metrics
Definitions and rationale for non-GAAP metrics Metric Definition Adjusted Adjusted EBITDA is defined as net income (loss) excluding net interest expense, income taxes, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of EBITDA and capitalized contract cos
Slide 28: Definitions and rationale for non-GAAP metrics (continued)
Definitions and rationale for non-GAAP metrics (continued) Metric Definition Constant- Constant-currency information compares results between periods as if exchange rates had remained constant period over period. We define constant-currency revenues as total revenues excluding currency the impact of