Kyndryl (US:KD)2024-05-08 18:45Financial Data and Key Metrics Changes - Revenue for the fourth quarter totaled $3.8 billion, reflecting a 9% decline in constant currency, primarily due to the intentional exit from low-margin revenue streams [26][29] - Adjusted EBITDA grew 20% to $2.4 billion for the fiscal year, with adjusted pretax income increasing by $382 million year-over-year to $165 million [28][60] - The company generated adjusted free cash flow of $291 million in fiscal year 2024, with a cash balance of $1.6 billion at year-end [64][65] Business Line Data and Key Metrics Changes - Kyndryl Consult revenue grew by 15% year-over-year in constant currency, contributing significantly to overall growth [59][107] - Hyperscaler-related revenue reached $500 million for the fiscal year, tripling from the previous year [35][70] - Total signings grew by 3% year-over-year in constant currency, with a notable 30% growth in Consult signings [27][28] Market Data and Key Metrics Changes - The company expects hyperscaler-related revenue to approach $1 billion in fiscal 2025, doubling the previous year's level [70] - The demand for Kyndryl's services is driven by trends in AI adoption, cloud migration, and cybersecurity, which are expected to continue [19][24] Company Strategy and Development Direction - The company is focusing on expanding its higher-margin post-spin signings, with expectations that by fiscal 2026, two-thirds of revenue will come from these signings [12][49] - Kyndryl is leveraging its Kyndryl Bridge platform to enhance service delivery and customer engagement, with over 1,200 customers currently using the platform [18][54] - The strategic initiatives, referred to as the "3As," are aimed at driving cost savings and improving profitability, with expectations of significant benefits in the coming years [37][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to revenue growth in the fourth quarter of fiscal 2025, citing strong performance in Consult and hyperscaler relationships [16][49] - The company anticipates adjusted pretax income of at least $435 million for fiscal 2025, reflecting a year-over-year increase of over $270 million [22][99] - Management highlighted the importance of AI and data architecture in driving future growth, positioning Kyndryl as both a beneficiary and enabler of AI [54][106] Other Important Information - The company has a strong liquidity position with $4.7 billion available at fiscal year-end, allowing for continued investment in growth initiatives [65][66] - Kyndryl's focus on operational excellence and collaboration is expected to enhance its competitive position in the IT services market [24][43] Q&A Session Summary Question: What is driving the significant growth in Kyndryl Consult? - Management noted that the non-discretionary nature of Consult services and the focus on optimizing systems for customers are key drivers of growth [122][123] Question: How does Kyndryl plan to achieve revenue growth in Q4 FY '25? - Management indicated that the elimination of low-margin revenue streams and the focus on higher-margin services provide confidence in achieving revenue growth [138][139] Question: What are the expectations for the advanced delivery initiative? - The advanced delivery initiative is expected to generate significant cost savings, with an increase in annualized savings projected to reach $800 million [37][70]