Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Investor Day (November 2024)
86 slides from Kyndryl's investor day presentation, Nov 21, 2024
Slide 1: Investor Day
Investor Day November 21, 2024
Slide 2: Welcome
Welcome Lori Chaitman, Global Head of Investor Relations 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 “aim,” “anticipate,” “believe,” “contemplate,” “could,” “estimate,” “
Slide 4: Investor Day agenda
Investor Day agenda Time Topic Speaker 9:00 – 10:40 Welcome Lori Chaitman, Global Head of Investor Relations Driving growth Martin Schroeter, Chairman and CEO Kyndryl's growth opportunities Elly Keinan, Group President ▸ Kyndryl Bridge Jamie Rutledge, Global Head of Delivery ▸ Kyndryl Consult Ismail
Slide 5: Driving growth
Driving growth Martin Schroeter, Chairman and CEO 5
Slide 6: What you will hear from us today
What you will hear from us today 1 Strong execution 2 Leveraging our leadership 3 Accelerating our progress 4 Initiating capital returns Exceeding expectations Capitalizing on investments Now driving revenue growth Significant free cash flow on 3A’s initiatives in IT infrastructure services and marg
Slide 7: Driving growth: recognized market leadership
Driving growth Recognized market leadership The right strategy, executed ahead of pace Succeeding in large, attractive markets Entering a new era of profitable growth 7
Slide 8: Who we are
Who we are We design, build, manage and modernize the mission-critical technology systems that the world depends on every day 8
Slide 9: World's leading provider of IT infrastructure services
World’s leading provider of IT infrastructure services Most Fortune 100 60%+ companies are Kyndryl of world’s managed customers mainframes run by Kyndryl 95%+ 60+ 77K+ customer retention and countries technology certifications more than ten years’ among our delivery team, average relationship a 50%
Slide 10: Driving growth: right strategy, executed ahead of pace
Driving growth Recognized market leadership The right strategy, executed ahead of pace Succeeding in large, attractive markets Entering a new era of profitable growth 10
Slide 11: Expanded into a broader technology ecosystem through global alliances
es nc lia Al Expanded into a Hyperscaler-related broader technology ecosystem revenue through global alliances ~$1B Formed impactful relationships with hyperscalers and top-tier technology providers $500M Our customer relationships and mission-critical expertise make Kyndryl a sought-after partner $
Slide 12: Modernizing delivery with automation and AI
er d iv c e D van y Ad el Modernizing delivery with Advanced Delivery automation and AI cumulative annualized savings Transformed our service delivery through $750M upskilling, automation and AI-enabled Kyndryl Bridge $575M Freeing up employees to serve new revenue streams and backfill attrition $27
Slide 13: Addressing accounts with substandard margins
ts un co Ac Addressing accounts with Accounts substandard margins cumulative annualized profit $850M Re-imagining customer relationships to drive mutual benefits $600M Adjusting scope and driving efficiency $210M Reshaping customer contracts and strengthening our profitability with higher-value serv
Slide 14: Unlocking new advisory opportunities with Kyndryl Consult
Unlocking new Kyndryl Consult advisory opportunities revenue with Kyndryl Consult 17% CAGR ~$2.8B Consistently growing double-digits $2.4B Powered by our impactful combination of ‘run’ and ‘transform’ capabilities $2.0B Now represents 19% of revenue FY23 FY24 FY25E 14
Slide 15: Kyndryl Bridge accelerating value with AI and business outcomes
Deployed Kyndryl Bridge Accelerating value with to our largest AI and business outcomes enterprise customers AI-powered operating platform leveraging our unparalleled IP and operational data ~$3B in annual savings for customers Expanding observability that reduces operational risk and drives product
Slide 16: Driving growth: succeeding in large, attractive markets
Driving growth Recognized market leadership The right strategy, executed ahead of pace Succeeding in large, attractive markets Entering a new era of profitable growth 16
Slide 17: Powerful secular trends are driving our long-term growth
Powerful secular trends are driving our long-term growth Modernizing Artificial Cloud Cybersecurity Industry-wide complex intelligence migration risks skills shortages environments We operate at the nexus of these trends 17
Slide 18: Our practices align with secular IT trends
Our practices align with secular IT trends Practice % of revenues Solutions delivered Cloud 34% • Integrated, multicloud management in a hybrid model Core Enterprise 31% • Secure, unified, fault-tolerant mainframe services for core infrastructure Security & Resiliency 14% • Full-line cybersecurity,
Slide 19: Positioned in large and growing addressable market
Positioned in large and growing addressable market Three-year estimated CAGR and market opportunity by practice area Total IT services $575B+ addressable market Double- $120B digit $130B $200B Annual growth All of our existing $300B customers Security & Apps, Resiliency Data & AI Cloud $45B $60B Our
Slide 20: Driving growth: entering a new era of profitable growth
Driving growth Recognized market leadership The right strategy, executed ahead of pace Succeeding in large, attractive markets Entering a new era of profitable growth 20
Slide 21: Our business model is a self-reinforcing growth flywheel
Recognized leader in designing, building, modernizing and operating systems at scale Our business model is a Harvest IP and insights self-reinforcing to develop and manage state-of-the-art IT Growth Customers entrust us with their mission- flywheel, critical systems solutions driving growth Build an
Slide 22: Entering a new era of profitable growth
Entering a new era of profitable growth Mission-critical Kyndryl Margins and Capital services Consult free cash flow allocation Providing foundation Continue to drive Generate high-single-digit Initiate capital returns to for growth double-digit growth adjusted pretax margins shareholders with stron
Slide 23: kyndrvl.
kyndrvl.
Slide 24: Kyndryl's growth opportunities
Kyndryl’s growth opportunities Elly Keinan, Group President 24
Slide 25: Kyndryl's growth opportunities
Kyndryl’s growth opportunities We have unmatched advantages Customers need Kyndryl Our opportunities to accelerate growth 25
Slide 26: Global leader with scale, geographic and industry diversification
We are the global leader with scale, geographic and industry diversification Technology, media Public Financial services Retail, travel and logistics Industrials and telecom and healthcare We run and modernize mission-critical systems for the world’s largest enterprises 26
Slide 27: Modernizing hybrid IT estates
Customers are asking Kyndryl to help them … See across increasingly complex We’ve invested in innovation hybrid IT environments that’s delivering insights Execute We’ve built new capabilities turning insights based on our insights and into business value expertise Balance We’ve leveraged our Moderni
Slide 28: Expertise and scale generate actionable insights no one else has
Our expertise and scale generate precise actionable insights no one else has Our single global delivery platform We apply best practices to enables us to see patterns from . . . run and transform IT estates Core operations 1,200+ Optimization customers deployed Resiliency and security on AI-enabled
Slide 29: Kyndryl delivers differentiated value
Kyndryl delivers differentiated value Our expertise + 1.6TB of operational data ingested daily + Kyndryl is uniquely positioned for growth in our fastest-growing markets 29
Slide 30: Kyndryl delivers differentiated value
Kyndryl delivers differentiated value Our 160M expertise automations monthly + + 1.6TB 12M of operational data actionable ingested daily insights monthly + + Kyndryl is uniquely positioned for growth in our fastest-growing markets 30
Slide 31: Kyndryl delivers differentiated value
Kyndryl delivers differentiated value Our 160M expertise automations monthly + + Targeting the largest secular IT trends … 1.6TB 12M Apps, of operational data actionable Data & ingested daily insights monthly • Cloud AI • Security + + • AI Kyndryl is uniquely positioned for growth in our fastest-gro
Slide 32: Modernizing hybrid IT estates
Poised for accelerated growth Jamie Rutledge Global Head of Delivery Gaining insights at scale Ismail Amla Global Head of Kyndryl Consult Turning insights into business value Modernizing hybrid IT estates Petra Goude Leveraging excellence in IT services Global Practice Leader 32
Slide 33: Kyndryl Bridge
Kyndryl Bridge Jamie Rutledge, Global Head of Delivery 33
Slide 34: Kyndryl Bridge
Kyndryl Bridge Customers need Kyndryl Investing in innovation A differentiated approach Unlocking new opportunities for growth 34
Slide 35: Customers need Kyndryl
Customers need Kyndryl 92% 64% Only 8% of organizations say of CEOs are concerned their IT is of IT incidents are resolved enterprise-wide observability outdated or close to end-of-life by automation, which is far via an integrated platform is below what is possible a must-have Companies need real-t
Slide 36: Investing in innovation
Investing in innovation Technology leadership and industry Expertise knowledge Operational data World's largest provider of mission-critical Proprietary infrastructure services insights for our customers and Artificial intelligence and machine ourselves AI learning Kyndryl Bridge orchestrates insigh
Slide 37: Kyndryl Bridge creates powerful ways of working
Kyndryl Bridge creates Driving value for Kyndryl powerful ways of working and our customers Automations (per month) 160M 12M AI-generated insights per month Net Promoter Score increase 9M +11 pts (since Kyndryl Bridge launched in September 2022) At spin Sept. 2024 37
Slide 38: Adding value when large European bank completes acquisition
Example: Adding value when large European bank completes acquisition Kyndryl optimized the merged bank’s IT systems . . . 0.19 ü Serving 40% more customers ü With only a 10% increase in IT spend Service experience 0.19 good < 0.8 top-tier < 0.4 Kyndryl Bridge mitigated risks, increased quality, and
Slide 39: A differentiated approach
A differentiated approach IT data from used to identify patterns and assess their driving decision multiple sources . . . and anomalies . . . implications real-time . . . making and actions Kyndryl Bridge continuously initiates complex decisions and services 39
Slide 40: Kyndryl Bridge unlocks new opportunities
Kyndryl Bridge unlocks new opportunities • Service insights identify opportunities and recommend actions to Advanced increase quality, reduce data risk and enhance experience delivery • Automates tasks that free up Kyndryls to meet customer needs, serve new revenue streams and backfill attrition • P
Slide 41: Kyndryl Consult
Kyndryl Consult Ismail Amla, Global Head of Kyndryl Consult 41
Slide 42: Kyndryl Consult
Kyndryl Consult Customers need Kyndryl Delivering valuable capabilities A differentiated approach A large market opportunity 42
Slide 43: Customers need Kyndryl
Customers need Kyndryl Only 29% 63% 77% of business leaders feel of business leaders need of organizational skills gaps ready for external IT risks advice on enhancing alignment are solved only with the help of IT investments with business of external firms objectives Companies need trusted advisors
Slide 44: Kyndryl Consult is delivering valuable capabilities
Kyndryl Consult is delivering Kyndryl Consult valuable capabilities signings AI-enabled Kyndryl Bridge is identifying incremental growth opportunities for Consult 30%+ CAGR ~$3.5B Fielding a growing team of highly-respected consultants, with thousands of tech certifications and extensive mission-cri
Slide 45: Powering IT transformation for a global energy company
Our differentiated approach . . . powering IT transformation for a global energy company Run hybrid IT estate With modern intelligent technologies Innovative IT partner Drive operational simplification, best practices, efficiency and quality Scope expansion Initial scope Assess security & resiliency
Slide 46: A large market opportunity
A large market opportunity Kyndryl Consult addressable market Kyndryl Consult revenue growth outpacing the market Total IT consulting FY25E – FY28E CAGR $275B+ services addressable Kyndryl market Above-market, double-digit growth Driven by cloud migration, cybersecurity, data, apps and AI readiness
Slide 47: Kyndryl Consult is a differentiated, high-growth business
Kyndryl Consult is a differentiated, high-growth business Our vision Our future Become the Consult partner Continued above-market, of choice that maximizes double-digit revenue customers’ returns on past and growth over next future technology investments three years 47
Slide 48: Modernization
Modernization Petra Goude, Global Practice Leader 48
Slide 49: Modernizing hybrid IT estates
Modernizing hybrid IT estates Customers need Kyndryl Leveraging excellence in mission-critical services A differentiated approach A large market opportunity 49
Slide 50: Customers need Kyndryl
Customers need Kyndryl 94% 89% 44% of business leaders say IT of enterprises with mainframes of servers, storage, networks modernization is a top say that mainframes remain and operating systems are priority for their companies essential to their hybrid IT approaching or at end of life and will miti
Slide 51: Leveraging our eminence in IT services to drive growth
We’re leveraging our Total eminence in IT services signings to drive growth 20% 55K Kyndryl delivery practitioners with CAGR deep technical engineering expertise and $16.0B decades of experience $12.2B Leveraging Kyndryl Bridge, which is creating unprecedented observability and driving new 1.05x cus
Slide 52: Longstanding healthcare customer expands Kyndryl scope and revenue
Our differentiated approach . . . longstanding healthcare customer expands Kyndryl scope and revenue Opportunity ahead Existing customer Hybrid cloud, applications and addressing tech debt Expanded recurring services Modernizing end-to-end hybrid IT environment, powered by Kyndryl Bridge Kyndryl Con
Slide 53: Winning a new financial services customer
Our differentiated approach . . . winning a new financial services customer seeking mission-critical capabilities Opportunity ahead App modernization and genAI, New customer hybrid cloud and regulatory compliance Expanded scope Increased our advisory and mission-critical role Seamless transition 30%
Slide 54: A large market opportunity
A large market opportunity Managed services addressable market Our mission-critical services revenue returns to sustainable growth as we complete the exit from low-margin business Total managed $300B+ services addressable market Driven by cloud, ~5% cybersecurity, data architecture, applications and
Slide 55: Mission-critical services are core to our value proposition
Mission-critical services are core to our value proposition Our vision Our future Become the standard of care Creating a business model that for CIOs and boards in running delivers mid-single-digit and transforming mission-critical revenue growth longer-term hybrid IT estates 55
Slide 56: kyndrvl.
kyndrvl.
Slide 57: Focused on profitable growth
Focused on profitable growth David Wyshner, Chief Financial Officer 57
Slide 58: Customers seek our industry-leading capabilities
Customers seek our industry-leading capabilities Global scale Mission-critical expertise Broad technology alliances Operational data that drives learnings AI-enabled operating platform – Kyndryl Bridge Automation World-class intellectual property The advantages we offer differentiate Kyndryl in the
Slide 59: Measuring our success: Triple, Double, Single
Measuring our success TRIPLE DOUBLE SINGLE 59
Slide 60: Measuring our success
Measuring our success TRIPLE DOUBLE SINGLE 3x >2x Mid-single-digit Projected growth in Projected growth in Projected sustainable adjusted free cash flow adjusted pretax income annual revenue growth from FY25E to FY28E from FY25E to FY28E in FY28E and beyond Our industry-leading capabilities are driv
Slide 61: Focused on profitable growth: executing on our strategy
Focused on profitable growth Executing on our strategy Recurring, diversified revenue streams Entering a new era of profitable growth Now returning capital to shareholders 61
Slide 62: 3A's initiatives driving substantial margin expansion
3A’s initiatives driving Adjusted substantial margin expansion pretax income $460M+ Advanced Delivery generating $750M of annual pretax savings at FY25E year-end 3% Accounts contributing $850M to annual $165M margin pretax profit at FY25E year-end 1% FY23 margin Increasing adjusted pretax margins by
Slide 63: Building backlog value through higher-margin signings
Building backlog value through Pretax margin expected higher-margin signings on post-spin signings Signing contracts with projected gross 9% 9% 9% margins in the mid-20s Gross profit book-to-bill consistently above 1.0 Reshaping contracts with new scope and higher-value services, including Consult a
Slide 64: Alliances, Consult, practices and Kyndryl Bridge driving future growth
Alliances, Consult, practices Kyndryl’s revenue growth and Kyndryl Bridge driving trajectory future growth $1B in annual hyperscaler-related revenue Increasing share of wallet this fiscal year and gaining market share Year-over-year Kyndryl Consult generating ~$2.8B in growth in 4Q25 FY28E high-valu
Slide 65: Focused on profitable growth: recurring, diversified revenue streams
Focused on profitable growth Executing on our strategy Recurring, diversified revenue streams Entering a new era of profitable growth Now returning capital to shareholders 65
Slide 66: Diversified revenue sources
Diversified revenue sources Strategic Markets United States 24% 26% By segment 15% Japan 35% Principal Markets 66 Segment data reflects latest twelve months as of September 30, 2024
Slide 67: Diversified revenue sources
Diversified revenue sources Technology, media Strategic and telecom Markets United States 13% 24% 26% Public and 13% Financial healthcare 44% services By segment By industry 15% 15% Industrials Japan 35% 15% Principal Markets Retail, travel and other 67 Segment data reflects latest twelve months as
Slide 68: Diversified revenue sources
Diversified revenue sources Applications, Data & AI Digital Workplace 6% Network 7% Cloud & Edge 8% 34% By practice Security & 14% Resiliency 31% Core Enterprise 68 Data reflects latest twelve months as of September 30, 2024
Slide 69: Diversified revenue sources
Diversified revenue sources Applications, Data & AI Digital Workplace 6% Network 7% Cloud Mission-critical & Edge 83% services 8% 34% By service By practice Security & 14% type Resiliency 17% Kyndryl Consult 31% Core Enterprise 69 Data reflects latest twelve months as of September 30, 2024
Slide 70: Annuity-like revenue streams from multi-year contracts
Annuity-like revenue streams from multi-year contracts, long-term relationships Average Annual customer Book-to-bill contract length retention >1.0x 1.0x 0.8x 3-5 years 95%+ FY24 LTM FY25E+ Sept. 2024 80% to 85% of our revenue each year comes from our beginning-of-year backlog 70
Slide 71: Focused on profitable growth: entering a new era
Focused on profitable growth Executing on our strategy Recurring, diversified revenue streams Entering a new era of profitable growth Now returning capital to shareholders 71
Slide 72: A new era of profitable growth
A new era of profitable growth Kyndryl Customer Strong The Kyndryl Outstanding Bridge satisfaction balance sheet Way execution Our foundation Alliances Advanced Accounts Higher-margin Kyndryl initiative Delivery initiative signings Consult We have a clear, impactful, value-creating path in front of
Slide 73: A new era of profitable growth
A new era of profitable growth Low-20s High-single-digit Adjusted Investment- Capital adjusted adjusted pretax free cash flow grade rating returns Our EBITDA margin margin growth future Increase share New customer Sustained top- Market Accelerated of wallet wins line growth differentiation pace Kynd
Slide 74: Reaffirming our fiscal 2025 targets
Reaffirming our fiscal 2025 targets Adjusted Adjusted Adjusted Revenue EBITDA margin pretax income free cash flow (2%) - (4%) 16.3%+ $460M+ ~$300M growth in constant currency Up at least 160 bps Up at least $295M Driven by adjusted pretax versus FY24 versus FY24 income less cash taxes $15.2B - $15.5
Slide 75: Fully realize $2.4B of benefits from 3A's initiatives by fiscal 2028
We will fully realize $2.4B of benefits from our 3A’s initiatives by fiscal 2028 Advanced Plus Alliances Accounts Consult and practices Delivery growth, cost savings Signings Revenues * Cost savings Pretax income Medium-term annual $600M $800M $200M $400M pretax opportunity $800M $1B Positioned to e
Slide 76: Adjusted pretax earnings more than doubling to $1.2B+ in fiscal 2028
Adjusted pretax earnings more than doubling to $1.2B+ in fiscal 2028 Sources of our revenue Expanding adjusted pretax income and margin 10% >2x $1.2B+ Pre-spin signings 50% (lower- margin) High- single- 90% digit Post-spin $460M+ signings margin 50% (higher- 3% margin) margin FY25E FY28E FY25E FY28E
Slide 77: Cash flow more than tripling to ~$1B in fiscal 2028
Cash flow more than tripling to ~$1B in fiscal 2028 Near- and medium-term expectations Adjusted free cash flow 3x ~$1B • Highly predictable business model • Strong cash flow visibility • Capital returns to shareholders ~$300M • Investing to grow the business organically • Acquisitions limited to tuc
Slide 78: Kyndryl projected revenue trajectory
Kyndryl projected revenue trajectory wth celerating gro Ac Core, Network & Edge and Digital Workplace Cloud Security & Resiliency Applications, Data & AI Sustainable, $15.2-15.5B longer-term Positive mid-single-digit revenue revenue growth growth Double-digit Low to mid-single-digit in Q4 annual gro
Slide 79: Focused on profitable growth: returning capital to shareholders
Focused on profitable growth Executing on our strategy Recurring, diversified revenue streams Entering a new era of profitable growth Now returning capital to shareholders 79
Slide 80: Now returning capital to shareholders
Now returning capital to shareholders Maintaining investment-grade credit ratings $300M share repurchase authorization Target net leverage ratio below 1.0x Shareholder-centric capital allocation 80
Slide 81: How we will measure success: fiscal 2028 targets
How we will measure success: fiscal 2028 targets Adjusted Adjusted Revenue free cash flow pretax income ~$1B $1.2B+ Mid-single-digit Reflects ~100% of More than doubling growth in FY28E and beyond adjusted pretax income less versus FY25E cash taxes Cash taxes of $150M to $200M Delivering sustainable
Slide 82: How we will measure success: fiscal 2028 targets
How we will measure success: fiscal 2028 targets Adjusted Adjusted Revenue free cash flow pretax income ~$1B $1.2B+ Mid-single-digit Reflects ~100% of More than doubling growth in FY28E and beyond adjusted pretax income less versus FY25E cash taxes Cash taxes of $150M to $200M TRIPLE DOUBLE SINGLE D
Slide 83: What you have heard from us today
What you have heard from us today 1 Delivering results 2 Leveraging our leadership 3 Accelerating our progress 4 Initiating capital returns Exceeding expectations Capitalizing on investments Now driving revenue growth Substantial free cash flow on 3A’s initiatives in IT infrastructure services and m
Slide 84: kyndrvl.
kyndrvl.
Slide 85: Definitions and rationale for non-GAAP metrics
Definitions and rationale for non-GAAP metrics We present certain non-GAAP financial measures to provide useful supplemental information to investors. We provide these non-GAAP financial measures as we believe it enhances investors' visibility to management decisions and their impacts on operational
Slide 86: Reconciliation of non-GAAP metrics
Reconciliation of non-GAAP metrics ($ in millions) Twelve months Twelve months Reconciliation of net income (loss) ended ended to adjusted pretax income (loss) Mar. 31, 2024 Mar. 31, 2023 Net income (loss) (GAAP) ($340) ($1,374) Plus: Provision for income taxes 172 524 Pretax income (loss) (GAAP) ($