Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Q4 2023 Earnings Presentation
28 slides from Kyndryl's earnings presentation, May 17, 2023
Slide 1: Fourth Quarter 2023 Earnings
Fourth Quarter 2023 Earnings May 17, 2023
Slide 2: Speakers
Speakers Lori Chaitman, Global Head of Investor Relations Martin Schroeter, Chairman and Chief Executive Officer David Wyshner, Chief Financial Officer 2
Slide 3: 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 4: Highlights
Highlights Solidifying our leadership position in infrastructure services Quarterly and full-year results demonstrate significant progress Alliances, Advanced Delivery and Accounts initiatives delivering substantial benefits Projecting margin expansion for fiscal year ending March 2024 On track towa
Slide 5: Executed successfully on our three-A initiatives in fiscal 2023
Executed successfully on our three-A initiatives in fiscal 2023 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
Slide 6: Expecting additional benefits from our three-A's in fiscal 2024
Expecting 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 with
Slide 7: Executing on our strategy
Executing on our strategy Post-spin priorities Fiscal 2023 accomplishments Medium-term objectives Form alliances with cloud hyperscalers Solidified leadership position in Building a high-value and top-tier technology providers1 IT services technology services company Delivered solid financial result
Slide 8: Financial overview
Financial overview Solid quarterly results show continuing progress Robust balance sheet, strong liquidity and positive adjusted free cash flow Projecting margin expansion in fiscal 2024 8
Slide 9: Fiscal fourth quarter 2023 financial highlights
Fiscal fourth quarter 2023 financial highlights Quarterly revenue by segment ($ in millions) ($ in millions) Quarter Ended Quarter Ended March 31, 2023 March 31, 2022 Strategic Markets United States Revenue $4,255 $4,431 $966 Growth, in constant currency 1% (3%) $1,145 Adjusted EBITDA $476 $536 Adju
Slide 10: Fiscal year 2023 financial highlights
Fiscal year 2023 financial highlights Fiscal year revenue by segment ($ in millions) ($ in millions) Year Ended Year Ended March 31, 2023 March 31, 2022 Strategic Markets United States Revenue $17,026 $18,317 $3,840 Growth, in constant currency 0% (5%) $4,726 Adjusted EBITDA $1,975 $2,195 Adjusted E
Slide 11: Fiscal 2023 cash flow and balance sheet metrics
Fiscal 2023 cash flow and balance sheet metrics Adjusted free cash flow Balance sheet and cash flow metrics ($ in millions) $5.0B $1.8B Available liquidity1 Cash $3.2B $1.4B Debt Net debt Adjusted Adjusted $781M pretax income free cash flow 2 Cash flow from operations We’re on a solid financial foot
Slide 12: 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 13: Five 'patterns' developing to strengthen focus accounts
Five ‘patterns’ developing to strengthen focus accounts Mid-contract actions Leverage new alliances and Kyndryl Consult capabilities to expand high-value 1 Expanding scope services Remove unprofitable elements, including low-margin third-party content that our 2 Removing scope customers can procure
Slide 14: Fiscal 2024 outlook
Fiscal 2024 outlook Revenue (8%) – (6%) growth in constant currency, Pre-spin dynamics: to $16.0 – $16.4B based on recent exchange rates • ~(3) points due to weak initial backlog Post-spin strategy to drive profitable growth: • (5) to (6) points due to targeted actions to reduce focus accounts and r
Slide 15: Transforming focus accounts into higher-value 'blueprint' accounts
Transforming focus accounts into higher-value ‘blueprint’ accounts Revenue 1 Starting Fiscal 2023 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 increasing
Slide 16: 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% ~ 24% Supports our ~ 7% medium-term margin target ~ 20% ~ 4% March September March March September March 2022 2022 2023 2022
Slide 17: Investment highlights
Investment highlights Independence doubled our addressable market from $240 billion pre-spin to $530 billion by 2025, with market growth driven by numerous interrelated tailwinds World leader in designing, building, managing and modernizing mission-critical information systems Competitive adva
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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 “Strong Performer” rating in The Forrester Market Leader: Cybersecurity 2022 Leader in Managed (SD) WAN in Wave™: Cloud Migration And Managed Services 2022 RadarView report Network Software Defined Solutions and Service Partners In China, Q4 2022 Services
Slide 21: Customer signings, expanding relationships
Customer signings, expanding relationships Kyndryl extended its relationship with Honda India The Port of Barcelona, one of Europe’s main Northern Trust expanded its long-term relationship and Honda Motor Europe to modernize, migrate and logistics hubs, commissioned Kyndryl to with Kyndryl to mainta
Slide 22: Strong commitment to ESG principles
Strong commitment to ESG principles Environment Social Governance • Announced Kyndryl's commitment to Net Zero • Increased Kyndryl Inclusion Networks (KINs) to • Completed global ethics and cybersecurity & data emissions by 2040 and reducing all-scope support Black, Hispanic, LGBTQ+, People with pri
Slide 23: Our services
Our services Diversified sources Practice Overview Revenue Signings of revenue Delivering seamless, integrated, multicloud management 33% 34% Cloud in a hybrid model Communications Financial services Delivering full line of cybersecurity, business continuity and Technology 8% Security & 13% 13% disa
Slide 24: Our strategies will drive revenue and profit growth in the medium term
Our strategies will drive revenue and profit growth in the medium term Growth practices Advisory High-teens services EBITDA margin drives pretax Accounts margin expansion Advanced Delivery 2021 0% Higher software Alliances Medium-term costs, etc. Adjusted pretax margin Box sizes not drawn to scale;
Slide 25: Fiscal fourth quarter 2023 adjusted pretax income and adjusted EBITDA
Fiscal fourth quarter 2023 adjusted pretax income and adjusted EBITDA ($ in millions) $28 Pretax Adjusted Adjusted income (loss) 1 pretax 2 3 EBITDA as reported income 1 Effects of amortization of acquired intangible assets, stock-based compensation, pension costs other than pension servicing costs
Slide 26: Fiscal 2023 adjusted pretax income and adjusted EBITDA
Fiscal 2023 adjusted pretax income and adjusted EBITDA ($ in millions) Pretax Adjusted Adjusted income (loss) 1 pretax 2 3 EBITDA as reported income 1 Effects of amortization of acquired intangible assets, stock-based compensation, pension costs other than pension servicing costs and multi-employer
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: Reconciliation of non-GAAP metrics
Reconciliation of non-GAAP metrics ($ in millions) Reconciliation of net income (loss) Year Ended Three Months Ended Year Ended Three Months Ended Reconciliation of cash flow from operations to Year Ended to adjusted pretax income (loss) March 31, 2023 March 31, 2023 March 31, 2022 March 31, 2022 ad