- Revenues for the quarter ended March
31, 2022 total $4.4 billion,
net loss is $229 million, pretax loss
is $189 million, and adjusted pretax
loss is $51 million
- Delivers early progress on its Alliances, Advanced Delivery
and Accounts initiatives
- Issues outlook for the fiscal year beginning April 2022
NEW YORK,
May 4, 2022 /PRNewswire/
-- Kyndryl Holdings, Inc. (NYSE: KD), the world's largest IT
infrastructure services provider, today released
financial results for the quarter
ended March 31, 2022.
"In Kyndryl's first full quarter as an independent company,
we've expanded our technology ecosystem and invested in our people
to better serve our customers and drive toward profitable revenue
growth," said Kyndryl Chairman and Chief Executive Officer
Martin Schroeter.
"I'm enthusiastic about our momentum. We're making meaningful
progress on our three key initiatives – Alliances, Advanced
Delivery and Accounts – which focus on expanding our relationships
with key technology partners, transforming our service delivery
through upskilling and automation, and proactively addressing
existing accounts with substandard margins. We'll continue
executing on this strategy to drive shareholder value."
Results for the Quarter Ended March
31, 2022
For the quarter ended March 31,
2022, Kyndryl reported revenues of $4.4 billion, which represented a year-over-year
decline of 7%, or 3% in constant currency. Compared to prior-year
pro forma revenues, revenues declined 6%, or 2% in constant
currency. Signings totaled $3.1
billion, an increase of 27% in constant currency, compared
to pro forma signings in first quarter 2021. Signings for advisory
& implementation services grew 50% in constant currency
compared to pro forma signings in first quarter 2021.
The Company reported a pretax loss of $189 million and a net loss of $229 million, or $1.02 per diluted share, in the quarter, compared
to a net loss of $494 million in the
prior-year period.
Kyndryl reported an adjusted pretax loss of $51 million, compared to a pro forma adjusted
pretax loss of $64 million in the
prior-year period. Currency movements had a $34 million negative year-over-year impact on
adjusted pretax income. The Company generated adjusted EBITDA of
$536 million, compared to
$605 million pro forma adjusted
EBITDA in the prior-year period, primarily driven by a $51 million negative impact from currency
movements.
Cash flow from operations was $189
million, and adjusted free cash flow was $136 million.
"Our results include the initial benefits of our freedom of
action as an independent company," said Kyndryl Chief Financial
Officer David Wyshner. "I'm
especially encouraged by the support this quarter from our
Alliances, Advanced Delivery and Accounts initiatives, which over
the next three to five years will each contribute hundreds of
millions of dollars to our pretax income."
Recent Developments
- Progress on our initiatives – In the quarter, the
Company began marketing cloud-related services tied to hyperscaler
alliances, completed its first signings and built a pipeline of
more than $1 billion of signings
opportunities. As part of the Advanced Delivery initiative, the
Company redeployed over 900 delivery professionals to serve new
revenue streams and backfill attrition, generating annualized
savings of roughly $46 million. In
its Accounts initiative, the Company began to address accounts with
substandard margins, resulting in $26
million of annualized benefits.
- Global strategic partnerships – The Company continued to
sign significant strategic partnerships, including with Amazon Web
Services as a premier global alliance partner. Through this
hyperscaler partnership, Kyndryl is providing solutions for
enterprise customers and offering state-of-the-art customer
solutions and services through the AWS Cloud Center of Excellence.
This partnership is in addition to Kyndryl's alliances with
Microsoft Azure and Google Cloud, signed in late 2021.
The Company has also announced strategic alliances in direct
support of its practice areas, including:
-
- An extended collaboration with SAP, leveraging SAP's Business
Technology Platform and Kyndryl's deep expertise in artificial
intelligence, data and cyber resiliency services to enable a
cost-effective path to the cloud for customers
- A network and edge computing alliance with Nokia to provide LTE
and 5G solutions for customers
- A partnership with Cloudera to help customers enable and drive
hybrid cloud, multicloud and edge computing data initiatives
- An expanded relationship with Lenovo to develop and deliver
scalable hybrid cloud solutions and edge computing
implementations
- An alliance with Pure Storage to deliver application and
infrastructure modernization, automation, multi-cloud management
and containerization solutions
- An expanded global alliance with Dell Technologies to help
customers use data optimization, infrastructure management services
and a cyber resiliency solution to protect their critical business
needs
- Technology certifications – The Company further
increased its cloud-related capabilities, with Kyndryl having more
than 17,500 hyperscaler certifications among its employees at the
end of the quarter, a 10% increase from year-end.
- Change in fiscal year – As previously announced, Kyndryl
changed its fiscal year-end from December 31
to March 31, effective for the fiscal year that began
April 1, 2022 and ends March 31, 2023. This change moves Kyndryl's
year-end away from the holiday season and many of its customers'
year-ends, which the Company believes will be better for its
customers and customer relationships.
- Transaction-related costs – The Company's
reported results reflect $58 million
of transaction-related costs associated with its spin-off,
including systems migration and rebranding costs.
Outlook
Kyndryl is providing the following outlook for its fiscal year
beginning April 1, 2022 and ending
March 31, 2023:
- Double-digit constant-currency signings growth compared to pro
forma signings in calendar year 2021
- Revenue of $16.5 to $16.7 billion, which includes an approximately
$1.0 billion or six-percentage-point
negative currency impact. This represents a decline of (4)% to (3)%
in constant currency compared to pro forma revenue for the twelve
months ended March 31, 2022
- Adjusted EBITDA margin of 13% to 14%, reflecting currency
headwinds and spin-off-related impacts on amortization, as
discussed below
- Adjusted pretax margin of 0% to 1%, consistent with calendar
year 2021 pro forma results
These projected amounts compare to signings of $13.5 billion, pro forma signings of $13.9 billion, revenue of $18.7 billion, pro forma revenue of $18.5 billion, pretax loss of $1.9 billion, net loss of $2.3 billion, adjusted EBITDA of $2.0 billion, pro forma adjusted EBITDA of
$2.7 billion and pro forma adjusted
pretax income of $114 million in the
year ended December 31, 2021.
Based on recent exchange rates, currency movements are
negatively impacting fiscal 2023 revenue by approximately
$1.0 billion, adjusted EBITDA by
approximately $200 million or 30
basis points, and adjusted pretax income by approximately
$100 million or 60 basis points
compared to calendar year 2021. Forecasted EBITDA also reflects a
60-basis-point negative impact from certain software being expensed
rather than capitalized and amortized.
Forecasted amounts are based on currency exchange rates as of
April 2022. A reconciliation of
forward-looking non-GAAP financial information is not included in
this release because the individual components of such
reconciliation are not currently available without unreasonable
effort. For the same reason, we are unable to address the probable
significance of the unavailable information, which could be
material to future results.
Earnings Conference Call and Webcast
Kyndryl's earnings call for the quarter ended March 31, 2022 is scheduled to begin at
8:30 a.m. ET on May 5, 2022. The live webcast can be accessed by
visiting
https://investors.kyndryl.com/events-and-presentations/events/ on
Kyndryl's investor relations website or by dialing 866-831-8713
(from the U.S.) or 203-518-9797 (from all other locations), and
providing conference ID KD0505. A slide presentation will be made
available on the same website shortly before the call on
May 5, 2022. Following the event,
replays will be available via webcast for twelve months
at https://investors.kyndryl.com/events-and-presentations/events/ and
by telephone for two days by dialing 800-839-6975 (from the U.S.)
or 402-220-6061 (from all other locations).
About Kyndryl
Kyndryl (NYSE: KD) is the world's largest IT infrastructure
services provider. The Company designs, builds, manages and
modernizes the complex, mission-critical information systems that
the world depends on every day. Kyndryl's nearly 90,000 employees
serve over 4,000 customers in more than 100 countries around
the world, including 75 percent of the Fortune 100 companies. For
more information, visit www.kyndryl.com
Forward-Looking and Cautionary Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact
included in this press release, including statements concerning the
Company's plans, objectives, goals, beliefs, business strategies,
future events, business condition, results of operations, financial
position, business outlook and business trends and other
non-historical statements, including without limitation the
information presented in the "Outlook" section of this press
release, are forward-looking statements. Such forward-looking
statements often contain words such as "will," "anticipate,"
"predict," "project," "contemplate," "plan," "forecast,"
"estimate," "expect," "intend," "target," "may," "should," "would,"
"could," "seek," "aim" and other similar words or expressions or
the negative thereof or other variations thereon. Forward-looking
statements are based on the Company's current assumptions and
beliefs regarding future business and financial performance.
The Company's actual business, financial condition or results of
operations may differ materially from those suggested by
forward-looking statements as a result of risks and uncertainties
which include, among others, risks related to the Company's recent
spin-off from IBM, failure to attract new customers, retain
existing customers or sell additional services to customers;
technological developments and the Company's response to such
developments; failure to meet growth and productivity objectives;
competition; impacts of relationships with critical suppliers;
inability to attract and retain key personnel and other skilled
employees; impact of local legal, economic, political, health and
other conditions, including the COVID-19 pandemic; a downturn in
economic environment and customer spending budgets; damage to the
Company's reputation; inability to accurately estimate the cost of
services and the timeline for completion of contracts; service
delivery issues; the Company's ability to successfully manage
acquisitions, alliances and dispositions, including integration
challenges, failure to achieve objectives, the assumption of
liabilities, and higher debt levels; the impact of our business
with government customers; failure of the Company's intellectual
property rights to prevent competitive offerings and the failure of
the Company to obtain necessary licenses; risks relating to
cybersecurity and data privacy; adverse effects from tax matters
and environmental matters; legal proceedings and investigatory
risks; impact of changes in market liquidity conditions and
customer credit risk on receivables; the Company's pension plans;
the impact of foreign currency fluctuations; and risks related to
the Company's common stock and the securities market.
Additional risks and uncertainties include, among others, those
risks and uncertainties described in the "Risk Factors" section of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, and may be further
updated from time to time in the Company's periodic filings with
the Securities and Exchange Commission. Any forward-looking
statement in this press release speaks only as of the date on which
it is made. Except as required by law, the Company assumes no
obligation to update or revise any forward-looking statements.
In this release, certain amounts may not add due to the use of
rounded numbers; percentages presented are calculated based on the
underlying amounts.
Non-GAAP Financial Measures
In an effort to provide investors with additional information
regarding its results, the Company has provided certain metrics
that are not calculated based on generally accepted accounting
principles (GAAP), such as constant-currency results, adjusted
EBITDA, adjusted pretax income, adjusted free cash flow, pro forma
adjusted EBITDA and pro forma adjusted pretax income. Such non-GAAP
metrics are intended to supplement GAAP metrics, but not to replace
them. The Company's non-GAAP metrics may not be comparable to
similarly titled metrics used by other companies. Definitions of
non-GAAP metrics and reconciliations of non-GAAP metrics for
historical periods to GAAP metrics are included in the tables in
this release.
Pro Forma Financial Information
This press release also includes certain pro forma financial
information. The pro forma adjustments assume that the Company's
spin-off from IBM and related transactions occurred as of
January 1, 2020. The pro forma
financial information is unaudited and is presented for
illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would have occurred if
the relevant transactions had been consummated on the date
indicated, nor is it indicative of future operating results. The
pro forma financial information presented includes adjustments that
would not be included in the pro forma financial statements
contained in a registration statement filed with the Securities and
Exchange Commission that contain pro forma information prepared in
accordance with Regulation S-X under the Securities Act of
1933.
Investor Contact:
Lori Chaitman
lori.chaitman@kyndryl.com
Media Contact:
Ed Barbini
edward.barbini@kyndryl.com
Table
1
KYNDRYL HOLDINGS,
INC.
CONSOLIDATED
INCOME STATEMENT
(in millions,
except per share amounts)
|
|
|
|
Three Months Ended
March 31,
|
|
|
2022
|
|
2021
|
Revenues1
|
|
$
|
4,431
|
|
$
|
4,771
|
|
|
|
|
|
|
|
Cost of
services2
|
|
$
|
3,824
|
|
$
|
4,318
|
Selling, general and
administrative
expenses
|
|
|
690
|
|
|
714
|
Workforce rebalancing
charges
|
|
|
—
|
|
|
52
|
Transaction-related
costs
|
|
|
58
|
|
|
55
|
Interest
expense
|
|
|
21
|
|
|
14
|
Other
expense
|
|
|
27
|
|
|
22
|
Total costs and
expenses
|
|
$
|
4,620
|
|
$
|
5,175
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
$
|
(189)
|
|
$
|
(403)
|
Provision for
income taxes
|
|
$
|
40
|
|
$
|
91
|
Net income
(loss)
|
|
$
|
(229)
|
|
$
|
(494)
|
|
|
|
|
|
|
|
Earnings per share
data
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
$
|
(1.02)
|
|
$
|
(2.20)
|
Diluted earnings
(loss) per share
|
|
|
(1.02)
|
|
|
(2.20)
|
|
|
|
|
|
|
|
Basic shares
outstanding
|
|
|
224.4
|
|
|
224.1
|
Diluted shares
outstanding
|
|
|
224.4
|
|
|
224.1
|
____________________
|
1
|
Total revenue
includes related party revenue for the three months ended March 31:
$236 million in 2022, $154 million in 2021.
|
2
|
Cost of services
includes related party cost for the three months ended March 31:
$924 million in 2022, $1,006 million in 2021.
|
Table
2
TRANSITION PERIOD
SEGMENT RESULTS
AND SELECTED
BALANCE SHEET INFORMATION
(dollars in
millions)
|
|
|
|
Three Months Ended
March 31,
|
|
Year-over-Year
Growth
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
As
|
|
|
Constant
|
|
Segment
Results
|
|
2022
|
|
2021
|
|
2021
|
|
Reported
|
|
|
Currency
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
1,169
|
|
$
|
1,228
|
|
$
|
1,219
|
|
(5)
|
%
|
|
(5)
|
%
|
Japan
|
|
|
706
|
|
|
763
|
|
|
780
|
|
(7)
|
%
|
|
1
|
%
|
Principal
Markets1
|
|
|
1,579
|
|
|
1,825
|
|
|
1,704
|
|
(14)
|
%
|
|
(9)
|
%
|
Strategic
Markets1
|
|
|
978
|
|
|
955
|
|
|
1,006
|
|
2
|
%
|
|
6
|
%
|
Total
revenue
|
|
$
|
4,431
|
|
$
|
4,771
|
|
$
|
4,709
|
|
(7)
|
%
|
|
(3)
|
%
|
Adjusted
EBITDA2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
248
|
|
$
|
180
|
|
$
|
238
|
|
|
|
|
|
|
Japan
|
|
|
154
|
|
|
123
|
|
|
156
|
|
|
|
|
|
|
Principal
Markets
|
|
|
98
|
|
|
52
|
|
|
175
|
|
|
|
|
|
|
Strategic
Markets
|
|
|
92
|
|
|
96
|
|
|
73
|
|
|
|
|
|
|
Corporate and
other3
|
|
|
(56)
|
|
|
(40)
|
|
|
(36)
|
|
|
|
|
|
|
Total adjusted
EBITDA
|
|
$
|
536
|
|
$
|
410
|
|
$
|
605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Data
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Cash and
equivalents
|
|
$
|
2,134
|
|
$
|
2,223
|
|
|
|
|
|
|
|
|
|
Debt (short-term and
long-term)
|
|
|
3,223
|
|
|
3,233
|
|
|
|
|
|
|
|
|
|
____________________
|
1
|
Principal Markets is
comprised of Kyndryl's operations in Australia/New Zealand, Canada,
France, Germany, India, Italy, Spain/Portugal and the United
Kingdom/Ireland. Strategic Markets is comprised of Kyndryl's
operations in all other geographic locations.
|
2
|
During the three
months ended March 31, 2022, the Company refined certain
allocations methodologies related to its measure of segment
adjusted EBITDA and has accordingly recast the prior-period
information to reflect these updates. The Company plans to provide
historically recast segment adjusted EBITDA data for the annual and
quarterly periods of 2020 and 2021 following the filing of our
transition report on Form 10-QT.
|
3
|
Represents net
amounts not allocated to segments.
|
Table
3
KYNDRYL HOLDINGS,
INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
(dollars in
millions)
|
|
|
|
Three Months Ended
March 31,
|
|
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(229)
|
|
$
|
(494)
|
Adjustments to
reconcile net income (loss) to cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
246
|
|
|
339
|
Depreciation of
right-of-use assets
|
|
|
103
|
|
|
99
|
Amortization of
transition costs and prepaid software
|
|
|
319
|
|
|
323
|
Amortization of
capitalized contract costs
|
|
|
136
|
|
|
160
|
Amortization of
intangible assets
|
|
|
7
|
|
|
7
|
Stock-based
compensation
|
|
|
31
|
|
|
16
|
Deferred
taxes
|
|
|
(10)
|
|
|
17
|
Net (gain) loss on
asset sales and other
|
|
|
12
|
|
|
(1)
|
Change in operating
assets and liabilities:
|
|
|
|
|
|
|
Deferred costs
(excluding amortization)
|
|
|
(672)
|
|
|
(548)
|
Right-of-use assets
and liabilities (excluding depreciation)
|
|
|
(117)
|
|
|
(118)
|
Workforce rebalancing
liabilities
|
|
|
(73)
|
|
|
(138)
|
Receivables
|
|
|
(31)
|
|
|
(138)
|
Accounts
payable
|
|
|
384
|
|
|
(99)
|
Taxes (including items
settled with former Parent in prior-year period)
|
|
|
(66)
|
|
|
74
|
Other assets and other
liabilities
|
|
|
151
|
|
|
172
|
Net cash provided
by (used in) operating activities
|
|
$
|
189
|
|
$
|
(328)
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Payments for property
and equipment
|
|
$
|
(180)
|
|
$
|
(180)
|
Proceeds from
disposition of property and equipment
|
|
|
9
|
|
|
93
|
Other investing
activities, net
|
|
|
(53)
|
|
|
(13)
|
Net cash used in
investing activities
|
|
$
|
(225)
|
|
$
|
(100)
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Debt
repayments
|
|
$
|
(28)
|
|
$
|
(17)
|
Net transfers from
Parent
|
|
|
—
|
|
|
460
|
Short-term borrowings
(repayments), net
|
|
|
(2)
|
|
|
—
|
Common stock
repurchases for tax withholdings
|
|
|
(3)
|
|
|
—
|
Other financing
activities, net
|
|
|
(10)
|
|
|
—
|
Net cash provided
by financing activities
|
|
$
|
(43)
|
|
$
|
443
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
$
|
(7)
|
|
$
|
(3)
|
Net change in cash,
cash equivalents and restricted cash
|
|
$
|
(86)
|
|
$
|
13
|
|
|
|
|
|
|
|
Cash, cash
equivalents and restricted cash at January 1
|
|
$
|
2,240
|
|
$
|
38
|
Cash, cash
equivalents and restricted cash at March 31
|
|
$
|
2,154
|
|
$
|
50
|
|
|
|
|
|
|
|
Supplemental
data
|
|
|
|
|
|
|
Income taxes paid,
net of refunds received
|
|
$
|
47
|
|
$
|
—
|
Interest paid on
debt
|
|
$
|
3
|
|
$
|
—
|
Table 4
NON-GAAP METRIC DEFINITIONS
AND RECONCILIATIONS
(dollars in millions, except
signings)
We report our financial results in accordance with GAAP. We also
present certain non-GAAP financial measures to provide useful
supplemental information to investors. We provide these non-GAAP
financial measures as we believe it improves visibility to
management decisions and their impacts on operational performance;
enables better comparison to peer companies; and allows us to
provide a long-term strategic view of the business going
forward.
Constant-currency information compares results between
periods as if exchange rates had remained constant period over
period. We define constant-currency revenues as total revenues
excluding the impact of foreign exchange rate movements and use it
to determine the constant-currency revenue growth on a
year-over-year basis. Constant-currency revenues are calculated by
translating current period revenues using corresponding
prior-period exchange rates.
Adjusted pretax income is defined as pretax income
excluding transaction-related costs, pension costs other than
pension servicing costs and multi-employer plan costs, stock-based
compensation, amortization of intangible assets, workforce
rebalancing charges, impairment expense, significant litigation
costs and foreign currency impacts of highly inflationary
countries. Adjusted pretax margin is calculated by dividing
adjusted pretax income, as defined above, by revenue.
Pro forma adjusted pretax income is adjusted pretax
income, further adjusted for excess cost allocations from our
former Parent, incremental costs to support independence and
growth, other adjustments related to post-Separation commercial
pricing agreements with IBM, the portion of the IBM business that
was conveyed to Kyndryl and ongoing effects of the
Separation-related transactions. Pro forma adjusted pretax margin
is calculated by dividing pro forma adjusted pretax income, as
defined above, by pro forma revenue.
Management uses adjusted pretax income, pro forma adjusted
pretax income, adjusted pretax margin and pro forma pretax margin
to evaluate our performance. Management also uses these metrics
when publicly providing our business outlook. We believe adjusted
pretax income, pro forma adjusted pretax income, adjusted pretax
margin and pro forma adjusted pretax margin are helpful
supplemental metrics for investors in evaluating our operating
performance because they can be used by investors to measure a
company's operating performance without regard to items excluded
from the calculation of such measure, which can vary substantially
from company to company. Adjusted pretax income, pro forma adjusted
pretax income, adjusted pretax margin and pro forma adjusted pretax
margin eliminate the impact of expenses that do not relate to core
business performance. These measures are financial measures that
are not recognized under U.S. GAAP and should not be considered as
an alternative to net income (loss) or other measures of financial
performance or liquidity derived in accordance with U.S. GAAP.
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), transaction-related costs, pension
costs other than pension servicing costs and multi-employer plan
costs, stock-based compensation, workforce rebalancing charges,
impairment expense, significant litigation costs, and foreign
currency impacts of highly inflationary countries.
Pro forma adjusted EBITDA is adjusted EBITDA, further
adjusted for excess cost allocations from our former Parent,
incremental costs to support independence and growth, other
adjustments related to post-Separation commercial pricing
agreements with IBM, the portion of the IBM business that was
conveyed to Kyndryl and ongoing effects of Separation-related
transactions.
Adjusted EBITDA margin is calculated by dividing adjusted
EBITDA, as defined above, by revenue. Pro forma adjusted EBITDA
margin is calculated by dividing pro forma adjusted EBITDA, as
defined above, by pro forma revenue.
Management uses adjusted EBITDA, pro forma adjusted EBITDA,
adjusted EBITDA margin and pro forma adjusted EBITDA margin to
evaluate our performance. Management also uses these metrics when
publicly providing our business outlook. We believe they are a
helpful supplemental measure to assist investors in evaluating our
operating results as they exclude certain items whose fluctuation
from period to period do not necessarily correspond to changes in
the operations of our business. Adjusted EBITDA, pro forma adjusted
EBITDA, adjusted EBITDA margin and pro forma adjusted EBITDA margin
are financial measures that are not recognized under U.S. GAAP and
should not be considered as an alternative to net income (loss) or
other measures of financial performance or liquidity derived in
accordance with U.S. GAAP.
Adjusted free cash flow is defined as cash flow from
operations after adding back transaction-related costs and
workforce rebalancing payments less net capital expenditures.
Management uses adjusted free cash flow as a measure to evaluate
its operating results, plan strategic investments and assess our
ability and need to incur and service debt. We believe adjusted
free cash flow is a useful supplemental financial measure to aid
investors in assessing our ability to pursue business opportunities
and investments and to service our debt. Adjusted free cash flow is
a financial measure that is not recognized under U.S. GAAP and
should not be considered as an alternative to cash flows from
operations or liquidity derived in accordance with U.S. GAAP.
Signings are defined by Kyndryl as an initial estimate of
the value of a customer's commitment under a contract. We calculate
this based on various considerations including the type and
duration of the agreement as well as the presence of termination
charges or wind-down costs. Contract extensions and increases in
scope are treated as signings only to the extent of the incremental
new value. Signings can vary over time due to a variety of factors
including, but not limited to, the timing of signing a small number
of larger outsourcing contracts. The conversion of signings into
revenue may vary based on the types of services and solutions,
customer decisions and other factors, which may include, but are
not limited to, macroeconomic environment or external events. Pro
forma signings reflect the portion of the IBM business that was
conveyed to Kyndryl and the ongoing effects of the
Separation-related transactions. Management believes that the
estimated value of signings provide insight into the Company's
potential future revenue, and management uses signings as a tool to
monitor the performance of the business including the business'
ability to attract new customers and sell additional scope into our
existing customer base, as well as views signings as useful
decision-making information for investors.
Reconciliation of GAAP revenue to pro forma revenue
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
March
31,
|
|
Year-over-Year
|
|
|
2022
|
|
2021
|
|
Change
|
Revenue as reported
(GAAP)
|
|
$
|
4,431
|
|
$
|
4,771
|
|
(7)
|
%
|
Pro forma
adjustments1
|
|
|
—
|
|
|
(63)
|
|
|
|
Pro forma
revenue
|
|
$
|
4,431
|
|
$
|
4,709
|
|
(6)
|
%
|
Revenue growth in
constant currency
|
|
|
|
|
|
|
|
(3)
|
%
|
Pro forma revenue
growth in constant currency
|
|
|
|
|
|
|
|
(2)
|
%
|
|
|
|
|
|
|
Year
Ended
|
|
|
December
31,
|
|
|
2021
|
Revenue as reported
(GAAP)
|
|
$
|
18,657
|
Pro forma
adjustments1
|
|
|
(134)
|
Pro forma
revenue
|
|
$
|
18,523
|
____________________
|
1
|
Adjustments to
reflect the portion of the IBM business that was conveyed to
Kyndryl and the ongoing effects of the Separation-related
transactions.
|
Reconciliation of net income (loss) to adjusted pretax income
(loss) and adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Year
Ended
|
|
|
2022
|
|
2021
|
|
December 31,
2021
|
Net income (loss)
(GAAP)
|
|
$
|
(229)
|
|
$
|
(494)
|
|
$
|
(2,319)
|
Provision for income
taxes
|
|
|
40
|
|
|
91
|
|
|
397
|
Workforce rebalancing
charges
|
|
|
—
|
|
|
52
|
|
|
39
|
Transaction-related
costs
|
|
|
58
|
|
|
55
|
|
|
627
|
Stock-based
compensation expense
|
|
|
31
|
|
|
16
|
|
|
71
|
Goodwill
impairment
|
|
|
—
|
|
|
—
|
|
|
469
|
Amortization of
intangible assets
|
|
|
7
|
|
|
7
|
|
|
37
|
Other
adjustments1
|
|
|
43
|
|
|
7
|
|
|
88
|
Adjusted pretax
income (loss)
|
|
$
|
(51)
|
|
$
|
(266)
|
|
$
|
(591)
|
Interest
expense
|
|
|
21
|
|
|
14
|
|
|
64
|
Depreciation
expense
|
|
|
246
|
|
|
339
|
|
|
1,300
|
Amortization
expense
|
|
|
319
|
|
|
323
|
|
|
1,278
|
Adjusted EBITDA
(non-GAAP)
|
|
$
|
536
|
|
$
|
410
|
|
$
|
2,049
|
____________________
|
1
|
Adjustments to
reflect pension costs other than pension servicing costs and
multi-employer plan costs, significant litigation costs and foreign
currency impacts of highly inflationary countries.
|
Reconciliation of net income (loss) to pro forma adjusted
pretax income and pro forma adjusted EBITDA
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
March 31,
2021
|
|
December 31,
2021
|
Net income (loss)
(GAAP)
|
|
$
|
(494)
|
|
$
|
(2,319)
|
Provision for income
taxes
|
|
|
91
|
|
|
397
|
Workforce rebalancing
charges
|
|
|
52
|
|
|
39
|
Transaction-related
costs
|
|
|
55
|
|
|
627
|
Stock-based
compensation expense
|
|
|
16
|
|
|
71
|
Goodwill
impairment
|
|
|
—
|
|
|
469
|
Amortization of
intangible assets
|
|
|
7
|
|
|
11
|
Excess cost allocations
from IBM
|
|
|
154
|
|
|
493
|
Effects of
post-Separation commercial agreements with IBM
|
|
118
|
|
|
416
|
Incremental costs to
support independence and growth
|
|
|
(94)
|
|
|
(274)
|
Pro forma and other
adjustments1
|
|
|
32
|
|
|
185
|
Pro forma adjusted
pretax income (loss)
|
|
$
|
(64)
|
|
$
|
114
|
Interest
expense
|
|
|
20
|
|
|
76
|
Depreciation
expense
|
|
|
327
|
|
|
1,262
|
Amortization
expense
|
|
|
323
|
|
|
1,278
|
Pro forma adjusted
EBITDA
|
|
$
|
605
|
|
$
|
2,730
|
____________________
|
1
|
Pro forma and other
adjustments represent pension costs other than pension servicing
costs and multi-employer plan costs, significant litigation costs,
foreign currency impacts of highly inflationary countries,
post-Separation commercial pricing arrangements with IBM, the
portion of the IBM business that was conveyed to Kyndryl and the
ongoing effects of the Separation-related transactions.
|
Reconciliation of cash flow from operations to adjusted free
cash flow
|
|
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2022
|
Cash flow from
operations (GAAP)
|
|
$
|
189
|
Plus: Workforce
rebalancing payments
|
|
|
49
|
Plus:
Transaction-related costs
|
|
|
70
|
Less: Net capital
expenditures
|
|
|
(171)
|
Adjusted free cash
flow
|
|
$
|
136
|
Reconciliation of signings to pro forma signings (in
billions)
|
|
|
|
|
|
Year
Ended
|
|
|
December
31,
|
|
|
2021
|
Historical
signings
|
|
$
|
13.5
|
Pro forma
adjustments1
|
|
|
0.4
|
Pro forma
signings
|
|
$
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
currency
|
|
|
|
|
|
|
|
27%
|
____________________
|
1
|
Adjustments to
reflect the portion of the IBM business that was conveyed to
Kyndryl and the ongoing effects of the Separation-related
transactions.
|
View original
content:https://www.prnewswire.com/news-releases/kyndryl-reports-quarterly-results-301540056.html
SOURCE Kyndryl