Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Q3 2021 Earnings Presentation
21 slides from Kyndryl's earnings presentation, Nov 22, 2021
Slide 1: Third Quarter Update November 2021
We design, build, manage and modernize the mission - critical technology systems that the world depends on every day. Third Quarter Update November 2021
Slide 2: Disclaimers
2 Disclaimers Forward - looking statements This presentation contains “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 19 95. Such forward - looking statements often contain words such as “will,” “anticipate,” “predict,” “project,” “plan,” “forecas
Slide 3: Successful spin-off
3 • Distribution of Kyndryl shares completed on November 3; IBM shareholders received one Kyndryl share for every five IBM shares owned of record as of the close of business on October 25 • Kyndryl shares began trading on November 4 on the New York Stock Exchange under the ticker “KD” • Kyndryl join
Slide 4: Investment highlights
4 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 x World leader in designing, building, managing and modernizing mission - critical information systems spanni
Slide 5: Our Services
5 Our Services Cloud Delivering seamless, integrated, multicloud management in a hybrid model Core Enterprise & zCloud Providing secure, unified and fault - tolerant mainframe services for our customers’ core infrastructure Digital Workplace Enhances user experience and work location flexibility by
Slide 6: Third quarter and year-to-date 2021 results (as reported)
6 Third quarter and year - to - date 2021 results (as reported, $ in millions) 3Q’20 3Q’21 YTD Sept.’21 Revenue $4,856 $4,579 $14,102 Growth % n/a (6%) (2%) Pretax income (loss) ($170) ($469) ($1,191) Pretax margin (4%) (10%) (8%) Net income (loss) ($238) ($692) ($1,579) Net income (loss) margin (5%
Slide 7: Third quarter and year-to-date 2021 pro forma results
7 Third quarter and year - to - date 2021 pro forma results ($ in millions) 3Q’20 3Q’21 YTD Sept.’21 Pro forma revenue $4,794 $4,528 $13,943 Growth, in constant currency * n/a (6%) (5%) Pro forma adjusted EBITDA * $710 $714 $2,062 Pro forma adjusted EBITDA margin * 14.8% 15.8% 14.8% Pro forma adjust
Slide 8: Third quarter 2021 pro forma adjusted EBITDA
8 Third quarter 2021 pro forma adjusted EBITDA ($ in millions) P retax income (loss) a s reported Pro forma adjusted EBITDA Pro forma adjusted pretax income *Effects of commercial arrangements with IBM, pension, stock - based compensation, workforce rebalancing and other See appendix for reconciliat
Slide 9: September 2021 year-to-date pro forma adjusted EBITDA
9 September 2021 year - to - date p ro forma adjusted EBITDA ($ in millions) P retax income (loss) a s reported Pro forma adjusted EBITDA Pro forma adjusted pretax income *Effects of commercial arrangements with IBM, pension, stock - based compensation, workforce rebalancing and other See appendix f
Slide 10: September 2021 year-to-date pro forma adjusted free cash flow
10 September 2021 year - to - date pro forma adjusted free cash flow ($ in millions) Pro forma adjusted pretax income Pro forma adjusted free cash flow See appendix for reconciliation of non - GAAP metrics
Slide 11: 2021 pro forma outlook
11 2021 pro forma outlook YTD Sept.’21 Implied 4Q’21 + 2021 Guidance + Pro forma revenue $13.9 $4.5 – 4.7 $18.5 – 18.7 Growth, in constant currency * (5%) (7%) – (3%) (6%) – (5%) Pro forma adjusted EBITDA * $2.1 $0.7 – 0.8 $2.8 – 2.9 Pro forma adjusted EBITDA margin * 14.8% 15.6% – 18.5% 15.0% – 15.
Slide 12: Focus on maintaining investment-grade balance sheet
$5.2B Available liquidity 1 $ 2.0 B Post - spin cash balance 1 $0.7B Pro forma cash flow from operations 2 (nine months ended September 30) $ 3.2 B Pro forma debt 3 $ 0.3 B Pro forma adjusted free cash flow 2 (nine months ended September 30) 0.4x Net leverage 4 1 Consists of $2.0 billion of expected
Slide 13: Recent developments: Microsoft strategic partnership
13 • On November 12, Microsoft and Kyndryl jointly announced a landmark global strategic partnership in service of enterprise customers The companies will together bring to market state - of - the - art solutions built on the Microsoft Cloud Will accelerate hybrid cloud adoption, modernize applicati
Slide 14: Pivot to growth
Current Near - Term Medium - Term Pivot to growth 20% of employees have cloud - related certifications Extensive training of employees, leveraging new partnerships 50% of employees have cloud - related certifications Limited share in applications, security, cloud and data services Expanded training
Slide 15: Appendix
Appendix 15
Slide 16: Appendix
16 • Definitions and rationale for non - GAAP metrics • Reconciliation of non - GAAP metrics • Signings Appendix Some columns and rows in these materials, including the supplemental exhibits, may not add due to the use of rounded figures
Slide 17: Metric definitions: EBITDA and pro forma adjusted EBITDA
Metric Definition Pro forma adjusted EBITDA and pro forma adjusted EBITDA margin Adjusted EBITDA is defined as net income (loss) excluding net interest expense, depreciation and amortization, early extingui shm ent of debt charges, workforce rebalancing and restructuring charges, transaction - relat
Slide 18: Pro forma revenue reconciliation
1 Adjustments to exclude certain IBM MIS agreements that will not transfer to Kyndryl plus signings related to cloud and securi ty contracts transferring to Kyndryl 2 Constant - currency information compares results between periods as if exchange rates had remained constant period over period. We de
Slide 19: Reconciliation of net income to pro forma pretax income and adjusted EBITDA
Reconciliation of net income to pro forma pretax income and pro forma adjusted EBITDA 3Q’20 3Q’21 YTD Sept. ’21 Historical net income (loss) (GAAP) ($238) ($692) ($1,579) Plus: Provision for income taxes 68 223 389 Income (loss) before income taxes ($170) ($469) ($1,191) Net income (loss) margin (3.
Slide 20: Reconciliation of depreciation and interest expense to pro forma
3Q’21 YTD Sept.’21 Depreciation $335 $1,005 Pro forma adjustments 1 (13) (38) Pro forma depreciation $322 $968 Interest expense $17 $46 Pro forma adjustments 2 3 12 Pro forma interest expense $20 $59 20 Numbers may not add due to rounding 1 Adjustments to exclude depreciation related to assets in su
Slide 21: Reconciliation of historical signings to pro forma signings
3Q’20 3Q’21 YTD Sept.’20 YTD Sept.’21 Historical signings $4.0 $2.8 $12.1 $9.1 Pro forma adjustments 1 0.3 0.1 1.1 0.4 Pro forma signings $4.3 $2.9 $13.2 $9.5 1 Adjustments to exclude certain IBM MIS agreements that will not transfer to Kyndryl plus signings related to cloud and securi ty contracts