Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Q3 2023 Earnings Presentation
31 slides from Kyndryl's earnings presentation, Feb 8, 2023
Slide 1: Fiscal Third Quarter 2023 Earnings
Fiscal Third Quarter 2023 Earnings February 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: Martin Schroeter
Martin Schroeter Chairman and Chief Executive Officer
Slide 4: Key highlights
Key highlights Performance Looking ahead Future objectives Quarterly results Raising revenue outlook On track toward our demonstrate progress for fiscal year 2023* medium-term goals Alliances Advanced Delivery Accounts Partnerships creating Quality, cost benefiting Enhancing existing new business fr
Slide 5: Building on our position as the world's leading IT infrastructure services provider
Building on our position as the world’s leading IT infrastructure services provider Mission-critical services Diversified sources Transforming our business mix of revenue through our six practices World’s largest IT Practice Revenue Signings infrastructure services provider Communications Cloud 33%
Slide 6: Progress on our three major initiatives
Progress on our three major initiatives 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 substandard margins ~$7
Slide 7: Three-A's creating value for customers and driving our business performance
Three-A’s creating value for customers and driving our business performance 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 aut
Slide 8: IT trends driving customer demand
IT trends driving customer demand Resiliency and Companies embracing cyber security a top distributed cloud concern – not just a approaches and cloud technology risk networking Evolution of AI and Mainframe continues need for greater data to play critical role in optimization1 hybrid cloud strategie
Slide 9: Advancing Kyndryl's strategy through global alliances with leading providers
Advancing Kyndryl’s strategy through global alliances with leading providers Early Throughout Pre-spin Post-spin Now 2022 2022 IBM “captive” Expand into cloud Form alliances with Skill-building Customer engagement hyperscalers top-tier technology and signings providers* 31,900 +98% +100% 16,100 2021
Slide 10: Engaging customers with new innovations and technical expertise
Engaging customers with new innovations and technical expertise Design-led co-creation An open integration platform Business outcomes-led consulting Redefining how we engage and co- Giving our customers real-time insights Providing our customers access to create with customers on new innovative into
Slide 11: Executing on our strategic objectives
Executing on our strategic objectives Pre-November 2021 spin Recent progress Medium-term Limited partnerships with hyperscalers, Major hyperscaler alliances, new Extensive, integrated IT ecosystem ISVs and systems integrators partnerships Reached 31,900 hyperscaler 20% employees with cloud-related 5
Slide 12: David Wyshner
David Wyshner Chief Financial Officer
Slide 13: Financial overview
Financial overview Quarterly results Balance sheet, liquidity Outlook and free cash flow 13
Slide 14: Fiscal third quarter 2023 financial highlights
Fiscal third quarter 2023 financial highlights ($ in millions) Pro Forma Quarterly revenue by segment Quarter Ended Quarter Ended Quarter Ended ($ in millions) Dec. 31, 2022 Sept. 30, 2022 Dec. 31, 2021 Revenue $4,303 $4,179 $4,579 Strategic Markets United States Growth, in constant currency1 2% 2%
Slide 15: Fiscal 2023 year-to-date cash flow and balance sheet metrics
Fiscal 2023 year-to-date cash flow and balance sheet metrics Adjusted free cash flow Balance sheet and cash flow metrics ($ in millions) ($ in millions) $5.2B $2.0B Available liquidity1 Cash $3.2B $1.2B Debt Net debt Adjusted Adjusted $769M pretax income free cash flow 2 Cash flow from operations We
Slide 16: Fiscal 2023 outlook
Fiscal 2023 outlook Based on In constant year-to-date currency exchange rates Revenue growth (vs. LTM)1 (0.5%) – 0.5% (8%) – (7%) • One-half point increase in our constant-currency revenue growth compared to our prior outlook • $1.3 billion or 7+ points of unfavorable currency effects year-over-year
Slide 17: 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 18: Transforming focus accounts into high-value 'blueprint' accounts
Transforming focus accounts into high-value ‘blueprint’ accounts Revenue1 Starting Fiscal 2023 point signings1 Low to mid-20s Focus accounts ~0% average Focus projected driving substantial gross margin accounts gross margin margin accretion ~$8B / ~40% ‘Blueprint’ accounts ~$10B / ~60% Mid-20s Margi
Slide 19: Investment highlights
Investment highlights Separation more than doubles our addressable market from $240 billion pre-spin to $510 billion by 2024, with market growth driven by numerous interrelated tailwinds World leader in designing, building, managing and modernizing mission-critical information systems spanning t
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Slide 21: 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 21
Slide 22: Customer signings, expanding relationships
Customer signings, expanding relationships Kyndryl expanded its relationship with multinational BT Group expanded its long-term partnership Banorte, a leading financial institution in Mexico, is automaker Stellantis to manage core IT infrastructure with Kyndryl to transition mainframe collaborating
Slide 23: 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 24: Strong commitment to ESG principles
Strong commitment to ESG principles Environment Social Governance • Announced Kyndryl's commitment to Net Zero • Launched Kyndryl Inclusion Networks (KINs) to • Launched ethics training globally for all emissions by 2040 and reducing all-scope support Black, Hispanic, LGBTQ+, People with employees e
Slide 25: Our services
Our services Practice Overview Medium-term revenue growth opportunity Delivering seamless, integrated, multicloud management in Cloud a hybrid model Single-digit growth driven by hyperscaler partnerships Delivering full line of cybersecurity, business continuity and Security & disaster recovery serv
Slide 26: 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 27: Fiscal third quarter 2023 adjusted pretax income and adjusted EBITDA
Fiscal third quarter 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 intangible assets, stock-based compensation, pension costs other than pension servicing costs and multi-empl
Slide 28: Fiscal 2023 year-to-date adjusted pretax income and adjusted EBITDA
Fiscal 2023 year-to-date adjusted pretax income and adjusted EBITDA ($ in millions) Pretax Adjusted Adjusted 1 2 3 income (loss) pretax EBITDA as reported income 1 Effects of amortization of intangible assets, stock-based compensation, pension costs other than pension servicing costs and multi-emplo
Slide 29: 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 capitalized contract costs), charge
Slide 30: Reconciliation of non-GAAP metrics
Reconciliation of non-GAAP metrics ($ in millions) Reconciliation of net income (loss) Nine Months Ended Three Months Ended Three Months Ended Reconciliation of net income (loss) to pro forma Three Months Ended to adjusted pretax income (loss) December 31, 2022 December 31, 2022 September 30, 2022 p
Slide 31: Reconciliation of non-GAAP metrics (continued)
Reconciliation of non-GAAP metrics (continued) ($ in millions) Reconciliation of historical revenue Three Months Ended to pro forma revenue December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 Historical revenue (GAAP) 4,303 $4,179 $4,2