Kyndryl (KD) - 2025 Q4 - Annual Results

Company Overview & Strategic Highlights This section outlines Kyndryl's strong strategic execution, Q4 revenue growth, and expanded capabilities, reinforcing confidence in achieving FY2028 goals Introduction and CEO Commentary Kyndryl announced Q4 and full-year FY2025 results, with CEO Martin Schroeter emphasizing strong strategic execution, Q4 constant currency revenue growth, and expanded capabilities across cloud, modernization, AI, and security - FY2025 marked a year of strong strategic execution, with Q4 constant currency revenue growth and expanded capabilities in cloud, modernization, applications, AI, and security, further differentiating services through Kyndryl Bridge[3] - The outlook for FY2026 free cash flow, profit, and constant currency revenue growth strengthens confidence in achieving FY2028 targets, with ongoing share repurchase plans demonstrating commitment to shareholder returns[4] About Kyndryl Kyndryl is a leading global provider of mission-critical enterprise technology services, offering consulting, implementation, and management to thousands of clients in over 60 countries - Kyndryl (NYSE: KD) is a leading provider of mission-critical enterprise technology services, offering consulting, implementation, and management to thousands of clients in over 60 countries, making it the world's largest IT infrastructure services provider[16] Fiscal Year 2025 Financial Results This section details Kyndryl's financial performance for Q4 and full-year FY2025, highlighting revenue, profitability, and operational achievements Fourth Quarter Ended March 31, 2025 Kyndryl reported Q4 FY2025 revenue of $3.8 billion, a 1.3% constant currency increase, with significant profitability improvements including $118 million pretax income and $0.28 diluted EPS Q4 FY25 Financial Performance | Metric | Q4 FY25 (Reported) | Q4 FY24 (Reported) | YoY Change (Reported) | YoY Change (Constant Currency) | | :--------------------------- | :------------------ | :------------------ | :-------------------- | :----------------------------- | | Revenues | $3.8 billion | $3.85 billion | -1% | +1.3% | | Pretax Income (Loss) | $118 million | ($4 million) | N/A | N/A | | Net Income (Loss) | $68 million | ($45 million) | N/A | N/A | | Diluted EPS | $0.28 | ($0.20) | N/A | N/A | | Cash Flow from Operations | $581 million | $145 million | +300.7% | N/A | | Adjusted Pretax Income | $185 million | $30 million | +510% | N/A | | Adjusted Net Income | $126 million | ($2 million) | N/A | N/A | | Adjusted Diluted EPS | $0.52 | ($0.01) | N/A | N/A | | Adjusted EBITDA | $698 million | $566 million | +23% | N/A | | Adjusted Free Cash Flow | $335 million | ($20 million) | N/A | N/A | Full Year Ended March 31, 2025 For full-year FY2025, Kyndryl's revenue was $15.1 billion, a 4% constant currency decrease, but achieved a significant turnaround with $435 million pretax income and $1.05 diluted EPS FY25 Financial Performance | Metric | FY25 (Reported) | FY24 (Reported) | YoY Change (Reported) | YoY Change (Constant Currency) | | :--------------------------- | :------------------ | :------------------ | :-------------------- | :----------------------------- | | Revenues | $15.1 billion | $16.052 billion | -6% | -4% | | Pretax Income (Loss) | $435 million | ($168 million) | N/A | N/A | | Net Income (Loss) | $252 million | ($340 million) | N/A | N/A | | Diluted EPS | $1.05 | ($1.48) | N/A | N/A | | Cash Flow from Operations | $942 million | $454 million | +107.5% | N/A | | Adjusted Pretax Income | $482 million | $165 million | +192% | N/A | | Adjusted Net Income | $285 million | ($25 million) | N/A | N/A | | Adjusted Diluted EPS | $1.19 | ($0.11) | N/A | N/A | | Adjusted EBITDA | $2.5 billion | $2.367 billion | +6% | N/A | | Adjusted Free Cash Flow | $446 million | $291 million | +53.3% | N/A | Key Operational Achievements In FY2025, Kyndryl achieved record signings of $18.2 billion, a 46% increase, driven by its 'Three-A Initiative' and strong Kyndryl Consult growth FY25 Operational Metrics | Metric | FY25 | YoY Change | | :-------------------------------- | :---------- | :---------- | | Total Signings | $18.2 billion | +46% | | Hyperscaler Alliance Revenue | $1.2 billion | >2x | | Kyndryl Bridge Annualized Savings | ~$775 million | N/A | | Accounts Initiative Annualized Benefits | $900 million | N/A | | Kyndryl Consult Revenue Growth | N/A | +26% | | Kyndryl Consult Signings Growth | N/A | +47% | - The company's global signings growth included a record 55 contracts exceeding $50 million[10] - At the end of FY2025, the company held $1.8 billion in cash, $3.2 billion in debt, and a net debt balance of $1.4 billion[17] - The company repurchased 1.8 million shares of common stock for $64 million in Q4, part of the $300 million share repurchase program authorized in November 2024[17] Fiscal Year 2026 Outlook This section provides Kyndryl's financial projections for FY2026, including expected revenue growth, adjusted pretax income, EBITDA margin, and free cash flow Financial Projections Kyndryl anticipates 1% constant currency revenue growth for FY2026, with adjusted pretax income of at least $725 million, an adjusted EBITDA margin of approximately 18%, and adjusted free cash flow of around $550 million FY26 Financial Outlook | Metric | FY26 Outlook | YoY Change (vs FY25) | | :--------------------------- | :------------------ | :-------------------- | | Constant-Currency Revenue Growth | +1% | N/A | | Adjusted Pretax Income | At least $725 million | At least +$243 million | | Adjusted EBITDA Margin | ~18% | ~+130 basis points | | Adjusted Free Cash Flow | ~$550 million | N/A | Supplemental Information This section provides details on the earnings webcast, forward-looking statements, and contact information for investors and media Earnings Webcast Information Kyndryl's Q4 earnings call is scheduled for May 8, 2025, at 8:30 AM ET, accessible via the investor relations website with slides and a 12-month replay available - Kyndryl's Q4 earnings conference call is scheduled for May 8, 2025, at 8:30 AM ET, accessible via the investor relations website (investors.kyndryl.com), with presentation slides available before and a 12-month replay afterward[15] Forward-Looking and Cautionary Statements This press release contains forward-looking statements subject to risks and uncertainties, including customer attraction, competition, technology, and economic conditions, with no obligation to update - This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, with all statements not historical facts being forward-looking[18] - The company's actual business, financial condition, or operating results may differ materially from forward-looking statements due to various risks and uncertainties, including failure to attract new customers, competition, technological developments, and economic conditions[19] - Except as required by law, the company undertakes no obligation to update or revise any forward-looking statements[20] Investor and Media Contacts Contact email addresses are provided for investor relations and media inquiries - Investor contact: investors@kyndryl.com[23] - Media contact: press@kyndryl.com[23] Financial Tables (GAAP) This section presents Kyndryl's GAAP financial statements, including consolidated income statements, segment results, balance sheet information, and cash flow statements Consolidated Income Statement The consolidated income statement provides GAAP financial results for the three months and full year ended March 31, 2025, and the corresponding periods in 2024, detailing revenues, costs, expenses, and net income Consolidated Income Statement (GAAP, in millions) | Metric (GAAP) | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Revenues | $3,800 | $3,850 | $15,057 | $16,052 | | Cost of services | $2,975 | $3,134 | $11,914 | $13,189 | | Selling, general and administrative expenses | $640 | $714 | $2,591 | $2,773 | | Income (loss) before income taxes | $118 | ($4) | $435 | ($168) | | Net income (loss) | $68 | ($45) | $252 | ($340) | | Diluted earnings (loss) per share | $0.28 | ($0.20) | $1.05 | ($1.48) | Segment Results and Selected Balance Sheet Information This section presents quarterly and full-year revenues and adjusted EBITDA by geographic segment, along with key balance sheet data including cash and equivalents and total debt Segment Revenue (Q4 FY25, in millions) | Segment Revenue (Q4 FY25) | Amount ($M) | YoY Growth (Reported) | YoY Growth (Constant Currency) | | :------------------------ | :---------- | :-------------------- | :----------------------------- | | United States | $969 | (2%) | (2%) | | Japan | $605 | 4% | 6% | | Principal Markets | $1,273 | (6%) | (3%) | | Strategic Markets | $953 | 3% | 8% | | Total Revenue | $3,800 | (1%) | 1% | Segment Adjusted EBITDA (Q4 FY25, in millions) | Segment Adjusted EBITDA (Q4 FY25) | Amount ($M) | | :------------------------------- | :---------- | | United States | $228 | | Japan | $102 | | Principal Markets | $231 | | Strategic Markets | $161 | | Corporate and other | ($24) | | Total Adjusted EBITDA | $698 | Balance Sheet Data (March 31, 2025, in millions) | Balance Sheet Data (March 31, 2025) | Amount ($M) | | :---------------------------------- | :---------- | | Cash and equivalents | $1,786 | | Debt (short-term and long-term) | $3,172 | Consolidated Statement of Cash Flows The consolidated statement of cash flows details cash flows from operating, investing, and financing activities for FY2025 and FY2024, showing a significant increase in net cash from operating activities in FY2025 Cash Flow Metrics (GAAP, in millions) | Cash Flow Metric (GAAP) | FY25 ($M) | FY24 ($M) | | :-------------------------------- | :-------- | :-------- | | Net cash provided by operating activities | $942 | $454 | | Net cash used in investing activities | ($404) | ($553) | | Net cash used in financing activities | ($286) | ($170) | | Net change in cash, cash equivalents and restricted cash | $235 | ($306) | | Cash, cash equivalents and restricted cash at end of period | $1,789 | $1,554 | Non-GAAP Financial Measures & Reconciliations This section defines Kyndryl's non-GAAP financial metrics and provides detailed reconciliations to their most directly comparable GAAP measures Non-GAAP Metric Definitions This section defines Kyndryl's non-GAAP financial metrics, including constant currency performance, Adjusted EBITDA, Adjusted Pretax Income, Adjusted Net Income, Adjusted EPS, Adjusted Free Cash Flow, and Signings - The company provides non-GAAP financial measures to supplement GAAP metrics, enhancing investor visibility into management decisions and their impact on operational performance, and for executive compensation program evaluation[34] - Constant currency information is calculated by translating current period revenues at prior period exchange rates to compare performance across periods, excluding foreign exchange fluctuations[35] - Adjusted free cash flow is defined as cash flow from operating activities (GAAP) plus transaction-related payments, lease termination-related charges, workforce rebalancing payments incurred prior to March 31, 2024, and significant litigation payments (collectively, Adjusted Operating Cash Flow), less net capital expenditures[40] - Signings are defined by Kyndryl as an initial estimate of the value of client contractual commitments, involving judgment regarding agreement type, duration, and termination fees or liquidation costs[41] Reconciliation Tables This section provides detailed reconciliation tables for GAAP net income (loss) to Adjusted Pretax Income, Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS, along with cash flow and signings reconciliations GAAP to Non-GAAP Reconciliation (in millions, except EPS) | Reconciliation Metric | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Net income (loss) (GAAP) | $68 | ($45) | $252 | ($340) | | Pretax income (loss) (GAAP) | $118 | ($4) | $435 | ($168) | | Adjusted pretax income (non-GAAP) | $185 | $30 | $482 | $165 | | Adjusted EBITDA (non-GAAP) | $698 | $566 | $2,516 | $2,367 | | Adjusted net income (loss) (non-GAAP) | $126 | ($2) | $285 | ($25) | | Adjusted earnings (loss) per share (non-GAAP) | $0.52 | ($0.01) | $1.19 | ($0.11) | Cash Flow Reconciliation (in millions) | Cash Flow Reconciliation | Q4 FY25 ($M) | Q4 FY24 ($M) | FY25 ($M) | FY24 ($M) | | :------------------------------------ | :----------- | :----------- | :---------- | :---------- | | Cash flows from operating activities (GAAP) | $581 | $145 | $942 | $454 | | Adjusted operating cash flow (non-GAAP) | $563 | $179 | $968 | $804 | | Adjusted free cash flow (non-GAAP) | $335 | ($20) | $446 | $291 | Signings (in billions) | Signings (in billions) | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :--------------------- | :------ | :------ | :----- | :----- | | Signings | $5.5 | $3.6 | $18.2 | $12.5 |