Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Q3 2024 Earnings Presentation
27 slides from Kyndryl's earnings presentation, Feb 7, 2024
Slide 1: Third Quarter 2024 Earnings
Third Quarter 2024 Earnings February 7, 2024
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: Compelling market position
Compelling market position Results reflect accelerated progress and strong execution Alliances, Advanced Delivery and Accounts initiatives driving significant margin expansion Raising outlook for current fiscal year Kyndryl’s independence and secular IT trends are fueling our long-term growth We des
Slide 5: Building a strong track record of successful execution
Building a strong track record of successful execution Signings Earnings Cash flow Progress on Growing, with projected Expect adjusted pretax income to Adjusted free cash flow of our financials pretax margins of 8% to 9% be up more than $360M in FY24 $311M year-to-date Progress on Kyndryl Consult Ky
Slide 6: Customers rely on Kyndryl to address secular IT trends
Customers rely on Kyndryl to address secular IT trends Cloud migration Artificial intelligence • Rapidly growing our hyperscaler-related revenue, • 11% year-over-year1 growth in Applications, Data and growing share in managing public cloud & AI signings • Exceptional expertise in putting ‘the right
Slide 7: Our evolving business mix is driving increased profitability and free cash flow
Our evolving business mix is driving increased profitability and free cash flow Mix of post-spin signings in our revenue1 Adjusted pretax income / margin High-single- digit margins 1% 5% 20% 33% Post-spin 50% signings 67% (higher- 85% margin) 99% 95% 80% 67% 50% Pre-spin At least 33% signings $150M
Slide 8: Financial highlights
Financial highlights Solid quarterly results demonstrate continuing progress Alliances, Advanced Delivery and Accounts initiatives delivering greater benefits Robust balance sheet, strong liquidity and positive adjusted free cash flow Raising outlook for current fiscal year 8
Slide 9: Fiscal third quarter 2024 financial highlights
Fiscal third quarter 2024 financial highlights Quarterly revenue by segment ($ in millions) ($ in millions) Quarter ended Quarter ended Dec. 31, 2023 Dec. 31, 2022 Strategic Markets United States Revenue $3,936 $4,303 $877 Growth, in constant currency (10%) 2% $1,032 Adjusted EBITDA $615 $580 Adjust
Slide 10: Accelerating progress on our three-A's in fiscal 2024
Accelerating progress on our three-A’s in fiscal 2024 Alliances Advanced Delivery Accounts Driving signings, certifications and revenues with Transforming service delivery through Addressing elements of the business our new ecosystem partners and capabilities upskilling and automation with substanda
Slide 11: Positive cash flow from operations and strong balance sheet metrics
Positive cash flow from operations and strong balance sheet metrics Adjusted free cash flow Balance sheet and cash flow metrics ($ in millions, three months ended December 31) $4.8B $1.7B Available liquidity1 Cash $3.3B $1.6B Debt Net debt $436M Cash flow from operations Adjusted Working capital, Ad
Slide 12: Projected margins on signings up meaningfully, supporting medium-term goals
Projected margins on signings up meaningfully, supporting medium-term goals Gross margin Gross profit book-to-bill1 Pretax margin expected on post-spin signings expected on post-spin signings 26% 26% 1.13x 1.18x 1.14x 9% 9% 25% 8% Supports our high-single-digit margin target December June December D
Slide 13: Over the medium term, our initiatives will contribute to profit growth
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 14: Raising our fiscal 2024 outlook
Raising our fiscal 2024 outlook Fiscal 2024 outlook Comments At least $150 million, up more than $360 Increase from November outlook of at least Adjusted pretax income million year-over-year $140 million At least 14.5%, at least 290 bps year-over- Increase from November outlook of Adjusted EBITDA ma
Slide 15: 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 17: Appendix
Appendix Accolades and Corporate Our services and recognition citizenship revenue mix Financial metrics Definitions and Reconciliation of rationale for non-GAAP metrics non-GAAP metrics 17
Slide 18: Recent accolades and industry recognition
Recent accolades and industry recognition Kyndryl named a Leader in the IDC 2023 A Leader in Advanced Digital Kyndryl named a Leader in the July 2023 MarketScape: Worldwide Managed Public Workplace Services including Build Services Gartner® Magic Quadrant for Managed Cloud Services 2023 Vendor Asses
Slide 19: Strong commitment to corporate citizenship
Strong commitment to corporate citizenship 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 support Bl
Slide 20: 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 & 14% recovery ser
Slide 21: 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 Focus accounts ~0% average Low to mid-20s Focus driving substantial gross margin gross margin accounts margin accretion ~$8B / ~40% ‘Blueprint’ accounts ~$10B / ~60% Margins incre
Slide 22: Gross profit book-to-bill
Gross profit book-to-bill Twelve months ended ($ in billions) December 31, 2023 Projected gross margin on signings ~ 26% Total signings $12.5 Projected gross profit on signings (“book”) $3.27 Reported gross profit (“bill”) $2.80 Gross profit book-to-bill ratio 1.17x (projected gross profit on signin
Slide 23: Fiscal third quarter 2024 adjusted pretax income and adjusted EBITDA
Fiscal third quarter 2024 adjusted pretax income and adjusted EBITDA ($ in millions) Pretax Pretax Adjusted Adjusted income income (loss) 1 pretax 2 3 EBITDA as as reported reported income 1 Effects of amortization of acquisition-related intangible assets, stock-based compensation, pension costs oth
Slide 24: Fiscal 2024 adjusted EBITDA and adjusted free cash flow
Fiscal 2024 adjusted EBITDA and adjusted free cash flow ($ in millions) Third quarter Year-to-date Adjusted Net capital Deferred Interest Cash taxes Working Adjusted Adjusted Net capital Deferred Interest Cash taxes Working Adjusted EBITDA expenditures 1 costs 2 paid paid capital & other free cash f
Slide 25: Reconciliation of non-GAAP metrics
Reconciliation of non-GAAP metrics (in millions, except per-share amounts) Reconciliation of adjusted pretax income (loss) Three months Three months ended ended to adjusted net income (loss) and adjusted EPS Dec. 31, 2023 Dec. 31, 2022 Adjusted pretax income (loss) (non-GAAP) $63 ($4) Provision for
Slide 26: 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 27: 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