Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Q1 2024 Earnings Presentation
24 slides from Kyndryl's earnings presentation, Aug 8, 2023
Slide 1: First Quarter 2024 Earnings
First Quarter 2024 Earnings August 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,” “plan,” “forecast,” “esti
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 quarter results demonstrate a strong, fast start to our fiscal year Alliances, Advanced Delivery and Accounts initiatives delivering greater benefits Raising profit outlook for current fiscal year (ending March 2024) Extending our leadership position as the largest provider of IT in
Slide 5: Successfully transforming our business
Successfully transforming our business Faster profit recovery Adjusted pretax income / margin • Raising fiscal 2024 outlook High single • Annual losses, measured on an digits adjusted pretax basis, are behind us • Relentless execution of three-A’s strategy On track for revenue growth At least in cal
Slide 6: 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 7: Financial overview
Financial overview Solid quarterly results show continuing progress Robust balance sheet and strong liquidity Raising profit outlook for current fiscal year (ending March 2024) 7
Slide 8: Fiscal first quarter 2024 financial highlights
Fiscal first quarter 2024 financial highlights Quarterly revenue by segment ($ in millions) ($ in millions) Quarter ended Quarter ended June 30, 2023 June 30, 2022 Strategic Markets United States Revenue $4,193 $4,288 $935 Growth, in constant currency (1%) (3%) $1,164 Adjusted EBITDA $612 $491 Adjus
Slide 9: Strong balance sheet metrics; seasonal dynamics affecting cash flow
Strong balance sheet metrics; seasonal dynamics affecting cash flow Adjusted free cash flow Balance sheet and cash flow metrics ($ in millions) $4.7B $1.5B Available liquidity1 Cash $3.3B $1.8B Debt Net debt ($173M) Cash flow from operations Adjusted Adjusted pretax income free cash flow 3 2 We’re e
Slide 10: Projected margins on signings up meaningfully, supporting medium-term goals
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% ~ 9% ~ 25% ~ 8% Supports our medium-term ~ 23% ~ 6% margin target June December June June December June 2022 2022 2023 2022 2022
Slide 11: 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 12: Raising our fiscal 2024 earnings outlook
Raising our fiscal 2024 earnings outlook Fiscal 2024 outlook Comments Approximately 14%, up approximately 240 bps Adjusted EBITDA margin Increases from May outlook of 12% – 13% year-over-year At least $100 million, up at least $317 million Increases from May outlook of (1%) – 0% adjusted Adjusted pr
Slide 13: 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 14: Investment highlights
Investment highlights World leader in designing, building, managing and modernizing mission-critical information systems Independence doubled our addressable market from $240 billion pre-spin to $530 billion by 2025, with market growth driven by numerous interrelated tailwinds Competitive adva
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Slide 16: Appendix
Appendix Accolades and ESG commitment Our services and recognition revenue mix Financial metrics Definitions and Reconciliation of rationale for non-GAAP metrics non-GAAP metrics 16
Slide 17: Recent accolades and industry recognition
Recent accolades and industry recognition 2022 Leader in Mainframe Services & Solution Market Leader: Cybersecurity A “Strong Performer” rating in The Forrester Provider in U.S. and Europe Services 2022 RadarView report Wave™: Cloud Migration And Managed Service Partners in China, Q4 2022 Innovator:
Slide 18: Strong commitment to ESG principles
Strong commitment to ESG principles Environment Social Governance • Committed to Net Zero emissions by 2040 and • Increased Kyndryl Inclusion Networks (KINs) to • Completed global ethics and cybersecurity & data reducing all-scope emissions at least 50% by support Black, Hispanic, Asian American & p
Slide 19: Our services
Our services Diversified sources Practice Overview Revenue of revenue Delivering seamless, integrated, multicloud management in a 34% Cloud hybrid model Communications Financial services Delivering full line of cybersecurity, business continuity and disaster Technology 8% Security & 14% recovery ser
Slide 20: Fiscal first quarter 2024 adjusted pretax income and adjusted EBITDA
Fiscal first quarter 2024 adjusted pretax income and adjusted EBITDA ($ in millions) Pretax Workforce Adjusted Adjusted income (loss) rebalancing 1 pretax 2 3 EBITDA as reported income 1 Effects of amortization of acquisition-related intangible assets, stock-based compensation, pension costs other t
Slide 21: Fiscal first quarter 2024 adjusted EBITDA and adjusted free cash flow
Fiscal first quarter 2024 adjusted EBITDA and adjusted free cash flow ($ in millions) Adjusted Adjusted 3 EBITDA 1 2 free cash flow 1 Net capital expenditures compares to depreciation of $210M 2 Deferred costs represent net change of prepaid software and transition costs net of amortization of $325M
Slide 22: Reconciliation of non-GAAP metrics
Reconciliation of non-GAAP metrics (in millions, except per-share amounts) Reconciliation of net income (loss) Three months ended Three months ended Reconciliation of adjusted pretax income (loss) Three months ended Three months ended to adjusted pretax income (loss) June 30, 2023 June 30, 2022 to a
Slide 23: 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 24: 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