Kyndryl Holdings, Inc. · NYSE:KD
Kyndryl — Q4 FY2022 Earnings Presentation
36 slides from Kyndryl's earnings presentation, May 5, 2022
Slide 1: Quarter Ended March 31, 2022 Earnings
Quarter Ended March 31, 2022 Earnings May 5, 2022
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, Chairman and Chief Executive Officer
Martin Schroeter Chairman and Chief Executive Officer
Slide 4: Key highlights
Key highlights Performance Looking ahead Future objectives Quarterly results Providing outlook Reaffirming in line with guidance for fiscal year* medium-term goals beginning April 2022 Alliances Advanced Delivery Accounts Announced major Quality, cost benefiting Strengthening partnerships with key f
Slide 5: Our independence unlocks a large and growing addressable market
Our independence unlocks a large and growing addressable market Becoming independent changed Kyndryl’s mission Our capabilities differentiate us End-to-end perspective through six global practices $510B Applications, Data & AI Unparalleled data and IP assets Cloud Services Security & Resiliency Broa
Slide 6: Strong signings growth creates path to profitable revenue growth in calendar year 2025
Strong signings growth creates path to profitable revenue growth in calendar year 2025 Year-over-year Growth in Signings (in constant currency) 27% January – March 2022 Double-digit signings growth projected 2019 2020 20211 Fiscal year beginning (2%) April 20222 (17%) (28%) Pre-spin Post-spin We’re
Slide 7: Three major initiatives driving our progress
Three major initiatives driving our progress Alliances Advanced Delivery Accounts Driving signings, certifications Transforming service Addressing elements of and revenues with our new delivery through upskilling the business with ecosystem partners and and automation substandard margins capabilitie
Slide 8: Global strategic alliances with leading technology providers
Global strategic alliances with leading technology providers Prior Priorannouncements announcements Recently announced partnerships • Strategic partnership bringing • Global network and edge computing • Global partnership to help together expertise, skills and global alliance aimed at helping enterp
Slide 9: Expanding relationships, signing new customers
Expanding relationships, signing new customers • Supporting the company’s core banking system • Supporting the digital transformation of • Advancing the bank’s digital transformation consolidation onto one platform and the Manpower’s infrastructure and applications in with an agile and secure enviro
Slide 10: Fiscal year 2023 milestones for our three major initiatives
Fiscal year 2023 milestones for our three major initiatives Alliances Advanced Delivery Accounts • ~$1 billion in signings tied to • Redeploy people to serve new • Deliver $75 million of in-year benefit hyperscalers, virtually all incremental sources of revenue and enter fiscal year ’24 with a $200
Slide 11: Progress on our three major initiatives in the March quarter
Progress on our three major initiatives in the March quarter Alliances Advanced Delivery Accounts Major partnerships with key Quality, cost benefiting from Began to strengthen existing technology providers incremental automation relationships $1B+ 900+ $6M Hyperscaler pipeline Kyndryls redeployed Pr
Slide 12: Executing on our strategic objectives
Executing on our strategic objectives Pre-November 2021 spin Recent progress Medium-term Limited partnerships with hyperscalers, Major hyperscaler alliances, new Extensive, integrated IT ecosystem ISVs and systems integrators partnerships 20% employees with cloud-related 50% employees with cloud-rel
Slide 13: David Wyshner, Chief Financial Officer
David Wyshner Chief Financial Officer 13
Slide 14: Financial overview
Financial overview Quarterly results Balance sheet, liquidity Outlook and free cash flow 14
Slide 15: Quarter ended March 31, 2022 financial highlights
Quarter ended March 31, 2022 financial highlights ($ in millions) Quarter Ended Quarter Ended March 31, 20211 March 31, 2022 Quarterly revenue by segment Signings $2,607 $3,149 ($ in millions) Growth, in constant currency 27% Strategic Markets United States Revenue $4,709 $4,431 $978 $1,169 Growth,
Slide 16: Quarter ended March 31, 2022 adjusted free cash flow
Quarter ended March 31, 2022 adjusted free cash flow ($ in millions) Adjusted Adjusted pretax income free cash flow See appendix for reconciliation of non-GAAP metrics 16
Slide 17: Quarter ended March 31, 2022 balance sheet and cash flow metrics
Quarter ended March 31, 2022 balance sheet and cash flow metrics $5.3B $2.1B $189M Available liquidity1 Cash Cash flow from operations $3.2B $1.1B $136M Debt Net debt Adjusted free cash flow We’re on a solid financial footing to execute our strategy 1 Consists of $2.1 billion of cash and $3.2 billio
Slide 18: 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 Advisory services growth, and revenues through our new delivery through upskilling and business with subst
Slide 19: Outlook
Outlook Outlook for fiscal year beginning April 2022 • In constant currency Signings Double-digit growth • Compared to calendar 2021 pro forma signings • (4)% to (3)% constant-currency decline versus pro forma revenue for the twelve Revenues $16.5B – $16.7B months ended March 2022 • (6)% to (4)% con
Slide 20: Transforming focus accounts into high-value "blueprint" accounts
Transforming focus accounts into high-value “blueprint” accounts Accounts initiative: ~0% average ~$800M medium-term annual Focus gross margin pretax profit opportunity accounts ~$8B / ~40% “Blueprint” accounts ~$10B / ~60% Mid-20s average gross margin Substantial existing value Revenue1 We have sub
Slide 21: Our strategies will help us deliver revenue and profit growth in the medium term
Our strategies will help us deliver revenue and profit growth in the medium term Revenue growth Growth Return to practices revenue Advisory & growth 2021 0% implementation services Accounts Medium-term (5%) Alliances Margin expansion Growth practices Advisory & implementation High-teens services EBI
Slide 22: Martin Schroeter, Chairman and Chief Executive Officer
Martin Schroeter Chairman and Chief Executive Officer
Slide 23: Investment highlights
Investment highlights Separation more than doubles our addressable market from $240 billion pre-spin to $510 billion by 2024, with market growth driven by numerous interrelated tailwinds World leader in designing, building, managing and modernizing mission-critical information systems spanning t
Slide 24: kyndryl
kyndryl
Slide 25: Appendix
Appendix Accolades ESG commitment Our services and revenue mix Financial metrics Definitions and Reconciliation of rationale for non-GAAP metrics non-GAAP metrics 25
Slide 26: Recent accolades highlight strong performance and customer satisfaction
Recent accolades highlight strong performance and customer satisfaction Best Partnership Leader in cognitive & self-healing Kyndryl Security & (Kyndryl and Microsoft), 2021 IT infrastructure management, 2021 Resiliency named a Market Leader in Cybersecurity Services 2022 RadarView report Systems Int
Slide 27: Strong commitment to ESG principles
Strong commitment to ESG principles Environment Social Governance • Establish Kyndryl’s baseline, systems and • Execute human capital strategy to attract, retain • Establish Board oversight of ESG issues and processes to track and validate environmental and motivate our workforce commit to maintaini
Slide 28: Our services
Our services Practice Overview Medium-term revenue growth opportunity Cloud Delivering seamless, integrated, multicloud management in Single-digit growth driven by hyperscaler partnerships a hybrid model Applications, Providing full application platform hosting and expert Double-digit growth Data &
Slide 29: Our revenues by global practice and industry
Our revenues by global practice and industry Communications Applications, Data & AI Technology 8% 33% 33% 5% Cloud Digital Workplace Services 9% 7% Public 11% Financial 46% Revenue mix 9% Network & Edge Revenue mix Services by practice by industry 12% 13% Industrials 33% Security & Resiliency 14% Co
Slide 30: Quarter ended March 31, 2022 adjusted pretax income and adjusted EBITDA
Quarter ended March 31, 2022 adjusted pretax income and adjusted EBITDA ($ in millions) Pretax Adjusted Adjusted income (loss) 1 pretax 2 3 EBITDA as reported income 1Effects of amortization of intangible assets, stock-based compensation, pension costs other than pension servicing costs and multi-em
Slide 31: 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), transa
Slide 32: Reconciliation of non-GAAP metrics
Reconciliation of non-GAAP metrics ($ in millions) Reconciliation of net income to adjusted pretax income (loss) and adjusted EBITDA Three Months Ended March 31, 2022 Net income (loss) (GAAP) ($229) Plus: Provision for income taxes 40 Pretax income (loss) ($189) Non-operating adjustments (before tax
Slide 33: Reconciliation of non-GAAP metrics (continued)
Reconciliation of non-GAAP metrics (continued) ($ in millions) Reconciliation of net income to pro forma pretax income (loss) and pro forma adjusted EBITDA Three Months Ended March 31, 2021 Net income (loss) (GAAP) ($494) Plus: Provision for income taxes 91 Pretax income (loss) ($403) Non-operating
Slide 34: Reconciliation of non-GAAP metrics (continued)
Reconciliation of non-GAAP metrics (continued) ($ in millions) Reconciliation of historical revenue to pro forma revenue Three Months Ended March 31, Year-over-year 2022 2021 Change Historical revenue (GAAP) $4,431 $4,771 (7%) Pro forma adjustments1 - (63) Pro forma revenue $4,431 $4,709 (6%) Pro fo
Slide 35: Reconciliation of non-GAAP metrics (continued)
Reconciliation of non-GAAP metrics (continued) ($ in millions) Reconciliation of historical cash flow from operations to pro forma adjusted free cash flow Year Ended December 31, 2021 Historical cash flow from operations (GAAP) ($119) Plus: Workforce rebalancing payments 370 Plus: Pro forma adjustme
Slide 36: Reconciliation of non-GAAP metrics (continued)
Reconciliation of non-GAAP metrics (continued) Reconciliation of signings to pro forma signings (in billions) Three Months Ended March 31, Year-over-year 2022 2021 Change Historical signings $3.1 $2.5 26% Pro forma adjustments1 - 0.1 Pro forma signings $3.1 $2.6 21% Pro forma signings in constant cu