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What changed in Kyndryl Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Kyndryl Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+345 added−412 removedSource: 10-K (2024-05-30) vs 10-K (2023-05-26)

Top changes in Kyndryl Holdings, Inc.'s 2024 10-K

345 paragraphs added · 412 removed · 270 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

84 edited+14 added−17 removed71 unchanged
Biggest changeThe Company makes available free of charge on its website or provides a link on its website to the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after those reports are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).
Biggest changeThe Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, proxy statements and amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are also available free of charge on the Company’s internet website at www.kyndryl.com as soon as reasonably practicable after those documents are electronically filed with or furnished to the SEC. 13 Table of Contents We routinely post on or make accessible through our corporate website at www.kyndryl.com and Investor Relations website at https;//investors.kyndryl.com information that may be material or of interest to our investors, including news and materials regarding our financial performance, business developments, investor events and other important information regarding the Company.
This trend has expanded in recent years as organizations look to further their digital capabilities and new technologies proliferate. While customers seek to transform, skills availability often represents a challenge, with lack of skills often being an impediment to transformation of the IT environment. ● Ongoing migration to the cloud .
This trend has expanded in recent years as organizations look to further their digital capabilities and new technologies proliferate. While customers seek to transform, skills availability often represents a challenge, with lack of skills often being an impediment to transformation of the IT environment. ● Ongoing migration to cloud.
We proactively source talent both internally and externally with advanced capabilities to ensure the right talent, at the right time, in the right place ● Developing: Providing employees with transparency to understand the skills, capabilities and experiences essential to our growth and their progression over their career by ensuring access to resources specifically designed to advance critical skills and competencies ● Retaining: Communicating our strategy and building our Kyndryl culture; establishing programs that are focused on rewarding value creation, recognizing performance and driving accountability balanced with workplace flexibility, well-being, continuous learning and a diverse, inclusive and equitable environment We are committed to building the technical careers of the future and have made investments in training and skills to ensure our people are relevant, experienced and technically positioned to serve our customers on their most complex challenges.
We proactively source talent both internally and externally with advanced capabilities to ensure that we have the right talent, at the right time, in the right place ● Developing: Providing employees with transparency to understand the skills, capabilities and experiences essential to our growth and their progression over their career by ensuring access to resources specifically designed to advance critical skills and competencies ● Retaining: Communicating our strategy and building our Kyndryl culture; establishing programs that are focused on rewarding value creation; recognizing performance; and driving accountability balanced with workplace flexibility, well-being, continuous learning and a diverse, inclusive and equitable environment We are committed to building the technical careers of the future and have made investments in training and skills to enable our people to be relevant, experienced and technically positioned to serve our customers on their most complex challenges.
Our services include enterprise mobility solutions that provide users with the ability to work seamlessly across environments and locations. ● Security & Resiliency Services: We provide comprehensive enterprise cybersecurity services for chief information security officers and chief risk officers, including insights, protection, detection, response and recovery to support the security of our customers’ hybrid IT estates, data and operations.
Our services include enterprise mobility solutions that provide users with the ability to work seamlessly across environments and locations. ● Security & Resiliency Services: We provide comprehensive enterprise cybersecurity services for chief information security officers (“CISOs”) and chief risk officers, including insights, protection, detection, response and recovery to support the security of our customers’ hybrid IT estates, data and operations.
In parallel, we are extending our operating paradigms and governance and compliance models to this broader set of technologies to integrate and provide end-to-end capabilities for our customers as they digitize and evolve their environments. 7 Table of Contents ● Digitally consumable services models .
In parallel, we are extending our operating, governance and compliance models to this broader set of technologies to integrate and provide end-to-end capabilities for our customers as they digitize and evolve their environments. 7 Table of Contents ● Digitally consumable services models .
We offer services across domains such as cloud services, core enterprise and zCloud services, applications, data and artificial intelligence services, digital workplace services, security and resiliency services and network and edge services as we continue to support our customers through technological change.
We offer services across domains such as cloud services, core enterprise and zCloud services, applications, data and artificial intelligence (“AI”) services, digital workplace services, security and resiliency services and network and edge services as we continue to support our customers through technological change.
On November 3, 2021, the Separation was achieved through the Parent’s pro rata distribution of 80.1% of the shares of common stock of Kyndryl to holders of the Parent’s common stock as of the close of business on the record date of October 25, 2021.
On November 3, 2021, the Separation was achieved through the former Parent’s pro rata distribution of 80.1% of the shares of common stock of Kyndryl to holders of the former Parent’s common stock as of the close of business on the record date of October 25, 2021.
Kyndryl’s stock began trading as an 3 Table of Contents independent company on November 4, 2021, and IBM disposed of its 19.9% retained interest in Kyndryl common stock in the year following the Spin-off. Our Industry and Market Opportunity We participate in an industry that provides services for the technology environments that power customers’ businesses.
Kyndryl’s stock began trading 3 Table of Contents as an independent company on November 4, 2021, and IBM disposed of its 19.9% retained interest in Kyndryl common stock in the year following the Spin-off. Our Industry and Market Opportunity We operate in an industry that provides services for the technology environments that power customers’ businesses.
Modernization of the technology environment : Based on a relationship spanning almost two decades, we partnered with a large European bank to help launch a 10-year transformational program to increase operational agility and efficiency by optimizing the customer’s critical infrastructure, reducing complexity, migrating to hybrid cloud and reducing operational costs.
Modernization of the technology environment : Based on a relationship spanning almost two decades, we partnered with a large European bank to help launch a ten-year transformational program to increase operational agility and efficiency by optimizing the customer’s critical infrastructure, reducing complexity, migrating to hybrid cloud and reducing operational costs.
Keinan, 58, was appointed our Group President in March 2021. Since September 2020, Mr. Keinan has served as a venture partner at Pitango Venture Capital, focusing on scaling the success of growth stage technology companies, and as an advisor to Sumitomo Corporation. Prior to that, Mr.
Keinan, 59, was appointed our Group President in March 2021. Since September 2020, Mr. Keinan has served as a venture partner at Pitango Venture Capital, focusing on scaling the success of growth stage technology companies, and as an advisor to Sumitomo Corporation. Prior to that, Mr.
Keinan received his MBA from University of Miami Herbert Business School and his Bachelor of Science in Computer Science and Electrical Engineering from Rensselaer Polytechnic Institute. Maryjo Charbonnier. Ms. Charbonnier, 53, was appointed our Chief Human Resources Officer in July 2021. From January 2015 until her appointment, Ms.
Keinan received his MBA from University of Miami Herbert Business School and his Bachelor of Science in Computer Science and Electrical Engineering from Rensselaer Polytechnic Institute. Maryjo Charbonnier. Ms. Charbonnier, 54, was appointed our Chief Human Resources Officer in July 2021. From January 2015 until her appointment, Ms.
Khurana, 50, was appointed our Controller in May 2021 and to the additional office of Vice President in November 2021. Since July 2020, Mr. Khurana had been serving as Chief Financial Officer of IBM’s Global Business Services unit. Prior to assuming this role, Mr.
Khurana, 51, was appointed our Controller in May 2021 and to the additional office of Vice President in November 2021. Since July 2020, Mr. Khurana had been serving as Chief Financial Officer of IBM’s Global Business Services unit. Prior to assuming this role, Mr.
These service providers include incumbents that have expanded their offerings to migration and management of cloud-based environments; companies that utilize labor-based models and leverage talent pools primarily in lower-cost 11 Table of Contents countries that have grown to offer a broad range of services with a worldwide presence; and advisory-focused system integrators specializing in bringing together disparate technology environments so that they function as one.
These service providers include incumbents that have expanded their offerings to migration and management of cloud-based environments; companies that utilize labor-based models and leverage talent pools primarily in lower-cost countries that have grown to offer a broad range of services with a worldwide presence; and advisory-focused system integrators specializing in bringing together disparate technology environments so that they function as one.
Our services are differentiated based on our expertise, quality of service, innovation, and intellectual property and data around IT patterns across customers in the following domains: ● Cloud Services: We design, build and provide managed services for our customers’ multicloud environments.
Our services are differentiated based on our expertise, quality of service, innovation, and intellectual property and data around IT patterns across customers in the following domains: ● Cloud Services: We design, build and provide managed services for our customers’ multi-cloud environments.
Our services enable us to modernize and manage cloud and on-premises environments as “one” for our customers, enabling them to scale seamlessly. To deliver these services, we rely on our team of skilled practitioners, consisting of approximately 90,000 professionals.
Our services enable us to modernize and manage cloud and on-premises environments as “one” for our customers, enabling them to scale seamlessly. To deliver these services, we rely on our team of skilled practitioners, consisting of approximately 80,000 professionals.
With respect to governance matters, Kyndryl also leverages industry best practices to govern its quality management system, processes and tools to ensure operations meet the standards of compliance and responsible business practices that clients and partners expect.
With respect to governance matters, Kyndryl also leverages industry best practices to govern its quality management system, processes and tools to enable operations to meet the standards of compliance and responsible business practices that clients and partners expect.
Since our Spin-off, we have announced business alliances with Microsoft, Amazon Web Services, Google Cloud, SAP, Dell, Cisco and Nokia, among others. We continue to expand the cloud-related capabilities we offer to customers and are growing the number of our hyperscale cloud provider certifications. • Advanced Delivery initiative – Transforming service delivery through upskilling and automation.
Since our Spin-off, we have announced business alliances with Microsoft, Amazon Web Services, Google Cloud, SAP, Dell, Cisco, Cloudflare and ServiceNow among others. We continue to expand the cloud-related capabilities we offer to customers and are growing the number of our hyperscale cloud provider certifications. ● Advanced Delivery initiative – Transforming service delivery through upskilling and automation.
Companies will benefit from selecting service providers that have greater insight into their environments and needs, which advantages partners like Kyndryl who have industry-leading scale and long-standing customer relationships. 9 Table of Contents Through decades of collaboration with customers, we have developed deep relationships as we supported the technology environments that advanced their business agendas.
Companies will benefit from selecting service providers that have greater insight into their environments and needs, which advantages partners like Kyndryl who have industry-leading scale and long-standing customer relationships. Through decades of collaboration with customers, we have developed deep relationships as we supported the technology environments that advanced their business agendas.
The extension of public cloud services to multiple environments in different locations has given rise to distributed cloud and migration of workload to these infrastructures that have a greater fit for purpose. ● Rapid data growth. As economies have evolved digitally, significantly increasing data volume, management of this data has become much more complex.
The extension of cloud services to multiple environments in different locations has given rise to distributed cloud and migration of workloads to these infrastructures that have a greater fit for purpose. ● Rapid data growth. As economies have evolved digitally, significantly increasing data volume, management of this data has become much more complex.
Kyndryl’s Spin-off In November 2021, our former parent company, International Business Machines Corporation (“IBM” or “Parent”) effected the spin-off (the “Separation” or the “Spin-off”) of the infrastructure services unit (the “Kyndryl Businesses”) of its Global Technology Services (“GTS”) segment through the distribution of shares of Kyndryl’s common stock to IBM stockholders (the “Distribution”).
Kyndryl’s Spin-off In November 2021, our former parent company, International Business Machines Corporation (“IBM”, “Parent” or “former Parent”) effected the spin-off (the “Separation” or the “Spin-off”) of the infrastructure services unit (the “Kyndryl Businesses”) of its Global Technology Services segment through the distribution of shares of Kyndryl’s common stock to IBM stockholders (the “Distribution”).
Building on our history of collaboration with this customer, we are working to accelerate their digital transformation. We are helping our customer build foundational capabilities for their digital journey, powered by data, analytics and artificial intelligence and machine learning integrated into core business processes and connected through a flexible and secure network.
Building on our history of collaboration with this customer, we are working to accelerate their digital transformation. We are helping our customer build foundational capabilities for their digital journey, powered by data, analytics and AI and machine learning integrated into core business processes and connected through a flexible and secure network.
Our increased use of automation and artificial intelligence within our delivery operations helps to reduce costs across the entire organization. • Accounts initiative – Addressing elements of our business with substandard margins. We are working to transform the profitability of certain revenue streams that represent a meaningful portion of our business.
Our increased use of automation and AI within our delivery operations helps to reduce costs across the entire organization. ● Accounts initiative – Addressing elements of our business with substandard margins. We are working to transform the profitability of certain revenue streams that represent a meaningful portion of our business.
From August 2006 to June 2017, Mr. Wyshner served as the Chief Financial Officer of Avis Budget Group and also served as Avis Budget Group’s president from January 2016 to June 2017. Mr. Wyshner received his MBA from the Wharton School of the University of Pennsylvania and his Bachelor of Arts in applied mathematics from Yale University. Elly Keinan. Mr.
From August 2006 to June 2017, Mr. Wyshner served as the Chief Financial Officer of Avis Budget Group and also served as Avis Budget Group’s president from January 2016 to June 2017. Mr. Wyshner received his MBA from the Wharton School of the University of Pennsylvania and his BA in applied mathematics from Yale University. Elly Keinan. Mr.
The customer’s transformation has brought business benefits, from new products and services that are brought to market faster, to an increase in sales through online channels.
The customer’s transformation has produced clear business benefits, from new products and services that are brought to market faster, to an increase in sales through online channels.
We help enterprises optimize their use of hyperscale cloud providers in a unified environment, seamlessly integrating services delivered by independent software vendors (“ISVs”), large public cloud providers, internal platforms and other technologies (e.g., internet of things (“IoT”)). ● Core Enterprise & zCloud Services: We establish and operate modern technology infrastructure on behalf of enterprise customers to enable their current and future growth and profitability objectives, whether they want to modernize their existing infrastructure, integrate their existing infrastructure with hyperscale cloud providers, or migrate to a new platform.
We help enterprises optimize their use of hyperscale cloud providers in a unified environment, seamlessly integrating services delivered by independent software vendors (“ISVs”), large public cloud providers, internal platforms and other technologies. ● Core Enterprise & zCloud Services: We establish and operate modern technology infrastructure on behalf of enterprise customers to enable their current and future growth and profitability objectives, whether they want to modernize their existing infrastructure, integrate their existing infrastructure with hyperscale cloud providers, or migrate to a new platform.
At Kyndryl, we aim to be: ● Restless to power the future; eager to learn and innovate 12 Table of Contents ● Empathetic role models; serving with trust and transparency ● Focused on shared success to achieve both business results and key human capital goals – driving a deep analytic understanding of people, technology and customer challenges ● Fast, agile change leaders with courage to be bold and judgment to manage risk ● Dedicated to building empowered, inclusive and accountable teams; recruiting, retaining and developing diverse talent that enhances performance and capabilities We are committed to fostering an environment that supports new ways of working and accelerated career progression promoting innovation throughout our organization.
At Kyndryl, we aim to be: ● Restless to power the future; eager to learn and innovate ● Empathetic role models; serving with trust and transparency ● Focused on shared success to achieve both business results and key human capital goals – driving a deep analytic understanding of people, technology and customer challenges 12 Table of Contents ● Fast, agile change leaders with courage to be bold and judgment to manage risk ● Dedicated to building empowered, inclusive and accountable teams; recruiting, retaining and developing diverse talent that enhances performance and capabilities We support new ways of working and accelerated career progression promoting innovation throughout our organization.
Mr. Schroeter, 58, was appointed our Chief Executive Officer in January 2021 and was appointed as Chairman of the Board in October 2021 in connection with the Spin-off. Previously, Mr.
Schroeter, 59, was appointed our Chief Executive Officer in January 2021 and was appointed as Chairman of the Board in October 2021 in connection with the Spin-off. Previously, Mr.
Our purpose is to design, build and manage secure and responsive private, public and multicloud environments to serve our customers’ needs and accelerate their digital transformations. We provide engineering talent, operating solutions and insights derived from our knowledge and data around IT systems.
Our purpose is to design, build and manage secure and responsive private, public and multi-cloud environments to serve our customers’ needs and accelerate their digital transformations. We provide engineering talent, operating solutions and insights derived from our knowledge and data around IT systems.
Our expanded use of automation and other technology tools allows us to further strengthen the quality of services we deliver to our customers and to redeploy professionals in our organization to serve new revenue streams and backfill attrition as they arise.
Our expanded use of automation and other technology tools allows us to further strengthen the quality of services we deliver to our customers, drive efficiency in our operations, and redeploy professionals in our organization to serve new revenue streams and backfill attrition as they arise.
Human Capital Resources Employees As of March 31, 2023, we had approximately 90,000 employees in more than 60 countries. Approximately 91% of our employees work outside the U.S., with workforce hubs in India, Poland, Brazil, Japan, Czechia and Hungary. Our people advance the vital systems that power human progress.
Human Capital Resources Employees As of March 31, 2024, we had approximately 80,000 employees in more than 60 countries. Approximately 90% of our employees work outside the U.S., with workforce hubs in India, Poland, Brazil, Japan, Czechia and Hungary. Our people advance the vital systems that power human progress.
We also maintain a Code of Conduct for directors, executive officers and employees which summarize our policies addressing anti-harassment; anti-discrimination; retaliation prevention; physical and cybersecurity; confidentiality and data privacy; and prevention of fraud, waste and abuse.
We also maintain a Code of Conduct for directors, executive officers and employees which summarizes our policies addressing anti-harassment, anti-discrimination, retaliation prevention, physical security and cybersecurity, confidentiality and data privacy, and prevention of fraud, waste and abuse.
We offer a range of high-value capabilities including cloud services and security & resiliency services, providing us with a sustainable competitive advantage when helping customers transform their technology environments.
We offer a range of high-value capabilities including cloud services and security and resiliency services, providing us with a sustainable competitive advantage when helping customers transform 6 Table of Contents their technology environments.
Our depth of experience implementing and operating complex architectures across technology sets has yielded valuable experience and intellectual property. We have more than 3,000 patents that relate to various areas of running complex technology environments, including patents related to multicloud management, orchestration, integrated monitoring, issue triage and resolution and other areas that enable quality of service.
Our depth of experience implementing and operating complex architectures across technology sets has yielded valuable experience and intellectual property. We have more than 3,300 patents that relate to various areas of running complex technology environments, including patents related to multi-cloud management, orchestration, integrated monitoring, issue triage and resolution and other areas that enable quality of service.
Our Kyndryl Way is founded on our Vision to become an “employer of choice” and is founded on our commitment to advancing what’s next for ourselves and our customers. Our people are at the center of designing, building and managing the technology environments that the world depends on every day.
Our Kyndryl Way is founded on our Vision to become an “employer of choice” and is founded on our aim to advance what’s next for ourselves and our customers. Our people are at the center of designing, building and managing the technology environments that the world depends on every day.
We apply a mix of skilled practitioners, intelligent automation and modern service management principles of Site Reliability Engineering, artificial intelligence for IT operations (“AIOps”), Infrastructure as Code and DevOps.
We apply a mix of skilled practitioners, intelligent automation and modern service management principles of Site Reliability Engineering, AI for IT operations (“AIOps”), Infrastructure as Code and DevOps.
Our long-standing position as an informed and trusted partner, with decades-long relationships and leading capabilities, provides us with the knowledge and expertise to help existing and new customers realize their future. The market for these services is large and dynamic.
Our long-standing position as an informed and trusted partner, with decades-long relationships and leading capabilities, provides us with the knowledge and expertise to help existing and new customers realize their future. The markets for these services are large and dynamic.
Sebold was a partner at Jones Day in the firm’s Cleveland and Houston offices. Mr. Sebold serves on the board of the Pro Bono Partnership. Mr. Sebold received his JD from University of Michigan and his Bachelor of Arts in economics from John Carroll University. Vineet Khurana. Mr.
Prior to joining IBM in 2012, Mr. Sebold was a partner at Jones Day in the firm’s Cleveland and Houston offices. Mr. Sebold serves on the board of the Pro Bono Partnership. Mr. Sebold received his JD from University of Michigan and his Bachelor of Arts in economics from John Carroll University. Vineet Khurana. Mr.
This is all underpinned by our ability to integrate and operate mission-critical technology at scale using deep engineering expertise and intellectual property. Our approach has enabled us to reach significant scale, with $17.0 billion in revenue in fiscal year 2023, which ended March 31, 2023.
This is all underpinned by our ability to integrate and operate mission-critical technology at scale using deep engineering expertise and intellectual property. Our approach has enabled us to reach significant scale, with $16.1 billion in revenue in fiscal year 2024, which ended March 31, 2024.
In fiscal 2024, we intend to accelerate our transformation through our three-A’s, continue growing Kyndryl Consult, and optimize our costs and expenses in all areas of our business, from service delivery to corporate functions.
In fiscal 2025, we intend to continue accelerating our transformation through our three-A’s initiatives, continue growing Kyndryl Consult and optimize our costs and expenses in all areas of our business, from service delivery to corporate functions.
Kyndryl Consult, which represented 12% of our revenue for the year ended March 31, 2023, represents a range of advisory and implementation services that we provide to customers, across all six of our practices and all of our geographic segments.
Kyndryl Consult, which represented approximately 15 percent of our revenue for the year ended March 31, 2024, represents a range of advisory and implementation services that we provide to customers, across all six of our practices and all of our geographic segments.
Our strategy and assessment services help evaluate customers’ network needs for their multicloud environments, while our network transformation and managed services allow customers to realize benefits of the latest software-defined 5 Table of Contents network technologies and wireless technologies.
Our strategy and assessment services help evaluate customers’ network needs for their multi-cloud environments, while our network transformation and managed services allow customers to realize benefits of the latest software-defined network technologies and wireless technologies.
In order to leverage advanced capabilities such as artificial intelligence and machine learning, enterprises need to address data privacy, compliance, security, multicloud data management and data governance across physical and virtual layers of the IT estate. ● Increasing need for secure systems.
In order to leverage advanced capabilities such as AI, generative AI and machine learning, enterprises additionally need to address data privacy, compliance, security, multi-cloud data management and data governance across physical and virtual layers of the IT estate. ● Increasing need for secure systems.
We support chief digital officers, chief information officers (“CIOs”) and chief technology officers (“CTOs”) in governing the vast quantities of enterprise data across internal and external sources to drive their digital strategies, transactions and business objectives, while maintaining security, ethical standards and compliance with country-specific data protection regulations (e.g., GDPR, HIPAA and PCI).
We support chief digital officers, chief information officers (“CIOs”) and chief technology officers (“CTOs”) in governing the vast quantities of enterprise data across internal and external sources to drive their digital strategies, transactions and business objectives and to enable the implementation of AI and generative AI tools, while maintaining security, ethical standards and compliance with country-specific data protection regulations.
We support a range of enterprise infrastructure, including private clouds, mainframe environments, distributed computing, enterprise networks and storage environments. ● Application, Data and Artificial Intelligence Services: We provide end-to-end enterprise data services, including data transformation, data architecture and management, data governance and compliance and data migration.
We support a range of enterprise architectures, including mainframe environments, distributed computing, enterprise networks and storage environments. ● Application, Data & AI Services: We provide end-to-end enterprise data services, including data transformation, data architecture and management, data governance and compliance and data migration.
As companies adopt new technologies for improved business performance and innovation, they often face challenges in complexity to integrate these new technologies with their existing IT estates. As a result, the required skills, integration burden and cost in end-to-end operational management often increases.
As companies adopt new technologies, such as AI and generative AI, for improved productivity, customer experience, operational agility, business performance and innovation, they often face challenges in complexity to integrate these new technologies with their existing IT estates. As a result, the required skills, integration burden and cost in end-to-end operational management often 4 Table of Contents increases.
We attract, develop and retain talent in a competitive and dynamic environment. We are focused on optimizing the employee experience at Kyndryl through: ● Attracting: Elevating the Kyndryl brand and creating a candidate experience where diversity, equity and inclusion are at the forefront of the hiring process.
We are focused on optimizing the employee experience at Kyndryl through: ● Attracting: Elevating the Kyndryl brand and creating a candidate experience where diversity, equity and inclusion are at the forefront of the hiring process.
These capabilities allow us to execute with secure and compliant operating and delivery models at scale, driving high-quality performance and customer satisfaction. We realize high-quality performance across thousands of service-level agreements and consistently achieve top-tier customer satisfaction and advocacy. ● We deliver insights at scale, supported by unique automation capabilities, end-to-end orchestration of processes and application of AI .
We realize high-quality performance across thousands of service-level agreements and consistently achieve top-tier customer satisfaction and advocacy. ● We deliver insights at scale, supported by unique automation capabilities, end-to-end orchestration of processes and application of AI .
Companies continue to migrate workloads to the cloud, adopting new capabilities for flexibility, workload portability and management. Public cloud is an increasingly critical component of enterprise IT strategy. These transitions are often complex, with companies frequently seeking assistance from service providers.
Companies continue to move workloads to the cloud, adopting new capabilities for flexibility, workload portability and management. Public cloud is an increasingly critical component of enterprise IT strategy, and hybrid and multi-cloud technologies offer flexibility to achieve security, performance and cost savings needed for critical workloads. These transitions are often complex, with companies frequently seeking assistance from service providers.
We are the trusted advisor and partner to thousands of customers worldwide, in technology-intensive and often highly regulated environments, managing mission-critical technology environments across a wide range of industries. ● Nearly 50 percent of our revenue is derived from companies in the financial services industry, where we serve hundreds of global, multinational and regional banks, insurance companies, mutual fund complexes, credit card and transaction processors and providers of other financial services.
We are the trusted advisor and partner to thousands of customers worldwide, in technology-intensive and often highly regulated environments, managing mission-critical technology environments across a wide range of industries. ● Nearly 50 percent of our revenue is derived from companies in the financial services industry, where we serve hundreds of global, multinational and regional banks, insurance companies, mutual fund complexes, credit card and transaction processors and providers of other financial services. ● Approximately 20 percent of our revenue is generated from technology, media and telecom companies. ● Nearly 15 percent of our revenue is from retail and travel companies. ● More than 10 percent of our revenue is generated from the industrial sector, which includes some of the largest automotive manufacturers in the world.
From March 2012 until his appointment as our General Counsel, Mr. Sebold served as Assistant General Counsel at IBM, leading several global legal functions at IBM, including teams that worked with services, IBM's Watson Health, litigation and mergers and acquisitions. Prior to joining IBM in 2012, Mr.
Sebold, 59, was appointed our General Counsel and Secretary in October 2021 in connection with the Spin-off. From March 2012 until his appointment as our General Counsel, Mr. Sebold served as Assistant General Counsel at IBM, leading several global legal functions at IBM, including teams that worked with services, IBM's Watson Health, litigation and mergers and acquisitions.
This will support our customer’s ability to fully exploit digital technologies and realize business benefit. Digitization for flexibility : Our customer, a large Japanese transportation company, was engaged in a technology-driven transformation to establish a flexible IT environment using hybrid cloud that evolves with changing business needs.
Digitization for flexibility : Our customer, a large Japanese transportation company, was engaged in a technology-driven transformation to establish a flexible IT environment using hybrid cloud that evolves with changing business needs.
For example, we are recognized leaders in the use of automation and operational AI in the delivery of our services, with over 45,000,000 automated actions per month in the IT environments we manage, enabling greater quality and efficiency for us and our customers.
For example, we are recognized leaders in the use of automation and operational AI in the delivery of our services, executing more than 100 million automated actions per month in the IT environments we manage, which enables greater quality and efficiency for us and our customers.
Sales and Marketing Our customer engagement and brand positioning is focused on deepening our existing customer relationships, attracting and winning new customers and creating an ecosystem built on go-to-market relationships with leading cloud and other technology providers, advisors and integrators to offer best-in-class advisory, implementation and managed services tailored to each existing and new customer’s environment and requirements.
Our work helps support our customer’s efforts to become one of the most valued and preferred transportation companies in the world. 10 Table of Contents Sales and Marketing Our customer engagement and brand positioning are focused on deepening our existing customer relationships, attracting and winning new customers and creating an ecosystem built on go-to-market relationships with leading cloud and other technology providers, advisors and integrators to offer best-in-class advisory, implementation and managed services tailored to each existing and new customer’s environment and requirements.
Charbonnier was an HR executive in a variety of leadership roles at PepsiCo, including Vice President for Talent Sustainability for PepsiCo Foods Americas. Ms. Charbonnier received her MBA from Southern Methodist University and her undergraduate degree from Catholic University. Edward Sebold. Mr. Sebold, 58, was appointed our General Counsel and Secretary in October 2021 in connection with the Spin-off.
Charbonnier was an HR executive in a variety of leadership roles at PepsiCo, including Vice President for Talent Sustainability for PepsiCo Foods Americas. Ms. Charbonnier received her MBA from Southern Methodist University and her undergraduate degree from Catholic University. 14 Table of Contents Edward Sebold. Mr.
In fiscal year 2023, our top five customers accounted for approximately 12% of our revenue. As companies engage in their digital journeys, they often face a key impediment because of the skills and expertise needed to realize their transformations.
Our revenues are concentrated in the industries mentioned above, but our revenues are diversified across a broad set of customers. In fiscal year 2024, our top five customers accounted for approximately 10% of our revenue. As companies engage in their digital journeys, they often face a key impediment because of the skills and expertise needed to realize their transformations.
As part of this collaboration, Kyndryl will deliver and support evolving IT capabilities via a built-for-purpose dedicated command center. Enabled by Kyndryl managed services experts, the command center will focus on providing the highest levels of quality and reliability to support our customer in delivering the highest levels of safe patient care.
Enabled by Kyndryl-managed services experts, the command center will focus on providing the highest levels of quality and reliability to support our customer in delivering the highest levels of safe patient care.
Earlier in his career, Mr. Schroeter served as General Manager of IBM global financing, managing a total asset base in excess of $37 billion, and had served numerous roles in Japan, the United States and Australia. Previously, Mr. Schroeter served as a director of the American Australian Association. Mr.
Earlier in his career, Mr. Schroeter served as General Manager of IBM global financing, managing a total asset base in excess of $37 billion, and had served numerous roles in Japan, the United States and Australia. Mr. Schroeter received his MBA from Carnegie Mellon University and his undergraduate degree from Temple University. David Wyshner. Mr.
Health, Safety and Well-Being We have a clear commitment to the health, safety and well-being of our employees. We have an experienced Health and Safety team comprised of medical doctors, nurses, industrial hygiene, safety and workforce health experts.
We have an experienced Health and Safety team comprised of medical doctors, nurses, industrial hygiene, safety and workforce health experts.
Our employees, whom we call Kyndryls, have earned more than 245,000 badges through our learning platform which provides access to curriculum that spans strategic skills, cloud, AI, analytics, design thinking, quantum computing and security.
Our employees, whom we call Kyndryls, have earned certifications through our learning platform and alliance partners, which provide access to curriculums that span strategic skills, cloud, AI, analytics, design thinking, quantum computing and security.
These capabilities uniquely position us as both a leading partner and competitor within the same market. Intellectual Property We are committed to developing leading-edge ideas and technologies and see innovation as a source of competitive advantage. We have more than 3,000 patents that are related to our business model.
Intellectual Property We are focused on developing leading-edge ideas and technologies and see innovation as a source of competitive advantage. We have more than 3,300 patents that are related to our business model.
In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Investor Email Alerts” section under the “Resources” section at https://investors.kyndryl.com.
You may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Investor Email Alerts” section under the “Resources” section at https://investors.kyndryl.com. We encourage investors, media, our customers, consumers, business partners and others interested in our Company to review the information we provide through these channels.
Examples include: Implementation of hybrid cloud and automation tools : Kyndryl recently announced a five-year deal with a US healthcare services company to provide mission-critical IT managed services and accelerate its digital transformation with the aim of enhancing the patient and caregiver experience. Under this new agreement, our customer will use Kyndryl Bridge to integrate AIOps and automation capabilities.
Examples include: Implementation of hybrid cloud and automation tools : Kyndryl executed a five-year contract with a U.S. healthcare services company to provide mission-critical IT managed services and accelerate its digital transformation with the aim of enhancing the patient and caregiver experience.
We position ourselves uniquely, leveraging a core strength in governance and management of complex IT infrastructure environments, delivered through a global footprint. Our services support customers’ digital transformations, as we help accelerate their journeys by providing instrumented and engineered technology environments. We offer choice with consistency through an operating paradigm and management model built from our experiences with complex technologies.
Our services support customers’ digital transformations, as we help accelerate their journeys by providing instrumented and engineered technology environments. We offer choice with consistency through an operating paradigm and management model built from our experiences with complex technologies. These capabilities uniquely position us as both a leading partner and competitor within the same market.
Many of these companies offer a mix of advisory, implementation and managed services across infrastructure, application and business processes. Examples include Atos, DXC, Fujitsu, Infosys, Tata Consultancy Services and Wipro, among others.
Many of these companies offer a mix of advisory, implementation and managed services across infrastructure, application and business processes.
We expect these initiatives to propel us toward profitable growth and enable us to deliver more value to customers and shareholders. Our Environmental, Social and Governance (“ESG”) strategy is at the heart of Kyndryl’s purpose to power human progress.
We expect these initiatives to propel us toward profitable growth and enable us to deliver more value to customers and stockholders. Our corporate citizenship strategy is at the heart of Kyndryl’s purpose to power human progress. We aim to create a sustainable and inclusive future by driving sustainable business practices, and positive social impact at scale.
Importantly, our culture of customer service excellence – especially in times of crisis, from pandemics to natural disasters, cyber-attacks and power outages – carries on from our heritage through our people.
Our global, high-quality service delivery is underpinned by experienced and highly-trained practitioners who deliver our capabilities to our customers on a daily basis. Importantly, our culture of customer service excellence – especially in times of crisis, from pandemics to natural disasters, cyber-attacks and power outages – carries on from our heritage through our people.
Our Services We provide advisory, implementation and managed services in and across a range of technology domains to help our customers manage and modernize enterprise IT environments in support of their business and transformation objectives.
As generative AI is disrupting businesses at an accelerated pace, adopting new technologies requires a well-designed IT environment orchestrated to effectively realize business objectives. Our Services We provide advisory, implementation and managed services in and across a range of technology domains to help our customers manage and modernize enterprise IT environments in support of their business and transformation objectives.
This team has implemented a health and safety management system that ensures compliance with all local health and safety regulations, minimizes workplace health and safety risks, and provides for safe and healthy workplaces so our employees can do their best work. 13 Table of Contents Company Website, Social Media and Availability of Securities and Exchange Commission Filings ​ The Company’s internet website is www.kyndryl.com .
This team has implemented a health and safety management system that monitors our locations for compliance with all local health and safety regulations, minimizes workplace health and safety risks, and provides for safe and healthy workplaces so our employees can do their best work.
We will continue to invest in our teams to be at the heart of technological change for our customers. Talent and Culture; Inclusion, Diversity and Equity (“ID&E”) Our business is centered around our people, and our talent strategy revolves around our ability to best serve our customers through ongoing investment in talent and skill development.
Talent and Culture; Inclusion, Diversity and Equity Our business is centered around our people, and our talent strategy revolves around our ability to best serve our customers through ongoing investment in talent and skill development. We attract, develop and retain talent in a competitive and dynamic environment.
Wyshner served as the Chief Financial Officer at XPO Logistics, Inc., where he led all financial functions for the global transportation and contract logistics company that 14 Table of Contents manages supply chains for customers worldwide. Prior to that, Mr.
Wyshner, 57, was appointed our Chief Financial Officer in September 2021. From March 2020 until his appointment as our Chief Financial Officer, Mr. Wyshner served as the Chief Financial Officer at XPO Logistics, Inc., where he led all financial functions for the global transportation and contract logistics company. Prior to that, Mr.
We expect to see enterprises continue to increase their investments in cybersecurity as cyber threats pose substantial operational, financial and reputational risk. Enterprises seek service providers that can deploy the expertise and resources needed to manage their growing cybersecurity needs with an efficient and comprehensive approach. 4 Table of Contents ● Accelerating pace of technological advancement.
Enterprises seek service providers that can deploy the expertise and resources needed to manage their growing cybersecurity needs with an efficient and comprehensive view of their IT environment. ● Accelerating pace of technological advancement.
Our multicloud management capabilities are differentiated by our ability to 6 Table of Contents deliver an integrated view of our customers’ diverse technology environments and to provide our services and solutions digitally. We offer integrated services between the cloud and on-premises environments. ● We offer an integrated ecosystem to help customers adopt and run increasingly heterogeneous sets of technologies .
Our multi-cloud management capabilities are differentiated by our ability to deliver an integrated view of our customers’ diverse technology environments and to provide our services and solutions digitally.
These relationships bring value to our customers through broader access to best-in-class solutions that are tailored for their unique technology environments and digital journeys. We have several key partnerships, including with Microsoft, Google, AWS, SAP, VMware, Cisco, Dell Technologies, Oracle and Nokia, that accelerate broader market participation, joint solution development and investment in skills and certification enhancements for Kyndryl.
We have several key partnerships, including with Microsoft, Google, Amazon Web Services, SAP, VMware, Cisco, Dell Technologies, Oracle, Cloudflare and ServiceNow that accelerate broader market participation, joint solution development and investment in skills and certification enhancements for Kyndryl.
Our robust ecosystem of strategic alliances and partners, including large public cloud providers, application-oriented system integrators, independent software vendors and other players in the technology stack provides leading technologies and capabilities for our customers. We offer leading services, together with our ecosystem’s solutions, for all levels of customer environment complexity and integration.
Our robust ecosystem of strategic global alliances and technology partners, including large public cloud providers, independent software vendors and other players in the technology stack, allows us to provide industry-leading technologies and capabilities for our customers.
Through our collaboration, we created an integrated infrastructure to meet our customer’s current and future needs by modernizing its on-premises, off-premises and network environments as well as its management platform. We deployed software-defined networks across the environment and automation to realize improved quality and business continuity.
We worked with the customer to build an integrated private and public cloud with the same virtualization architecture and a management capability that unifies operations and evolves with the business. Through our collaboration, we created an integrated infrastructure to meet our customer’s current and future needs by modernizing its on-premises, off-premises and network environments as well as its management platform.
We continue to expand our certifications and accreditations each year through consistent investment in skill development around emerging technologies and key areas for growth. We offer comprehensive market-competitive rewards and benefits programs including health benefits, mental health support and Employee Assistance Plans, retirement savings benefits, paid time off and recognition programs, among others.
We will continue to invest in our teams to be at the heart of technological change for our customers. We offer comprehensive market-competitive rewards and benefits programs including health benefits, mental health support and employee assistance plans, retirement savings benefits, paid time off and recognition programs, among others.
The basis of competition involves multiple factors, with key elements including quality of service, technical skills and capabilities, industry knowledge and experience, financial value, ability to innovate, intellectual property and methods, contracting flexibility and speed of execution. Long-standing partnerships and knowledge of the customers’ technology environment often enable service providers to better address requirements and future needs.
Examples include Atos, DXC, Fujitsu, HCL, Infosys, Tata Consultancy Services and Wipro, among others. 11 Table of Contents The basis of competition involves multiple factors, with key elements including quality of service, technical skills and capabilities, industry knowledge and experience, financial value, ability to innovate, intellectual property and methods, contracting flexibility and speed of execution.
Growth in this market is driven by services that are aligned to customers’ transformations, including public cloud managed services (expected compound annual growth of 11% from 2022 to 2025), data services (expected compound annual growth of 11% from 2022 to 2025), security services (expected compound annual growth of 12% from 2022 to 2025), intelligent automation services (expected compound annual growth of 55% from 2022 to 2025) and managed services for edge environments (expected compound annual growth of 56% from 2022 to 2025).
We estimate that these markets, which are a subset of the total IT services market, collectively represent a $586 billion opportunity in calendar year 2024. Growth in this market is driven by services that are aligned to customers’ transformations, including public cloud managed services, data services, security services, intelligent automation services and managed services for edge environments.
Our decades-long collaboration with customers provides us with the insights to realize distinctive performance that supports their digital transformation. We deliver unique value by providing intellectual property derived from insights at scale, deploying mission-critical expertise and leveraging a broad ecosystem – while building and strengthening partnerships to enhance the customer experience.
We deliver unique value by providing intellectual property derived from insights at scale, deploying mission-critical expertise and leveraging a broad ecosystem – while building and strengthening partnerships to enhance the customer experience. We position ourselves uniquely, leveraging a core strength in governance and management of complex IT infrastructure environments, delivered through a global footprint.
Beyond our environmental commitments, Kyndryl is focused on building a diverse workforce and an inclusive and equitable culture. Kyndryl has published our human rights policy and modern slavery statement and launched the Kyndryl Trust Center, which makes our key policy positions publicly available.
Beyond our environmental commitments, Kyndryl is focused on building a diverse workforce and an inclusive and equitable culture. Our approach to our workplace consists of empowering employees to advance their careers through ongoing training and upskilling. Kyndryl has published its human rights and modern slavery statement and launched the Kyndryl Foundation, which delivers philanthropic grants for community development programs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf the Distribution were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Internal Revenue Code of 1986 (the “Code”), each stockholder that is subject to U.S. federal income tax who received our common stock in the Distribution would generally be treated as having received a distribution in an amount equal to the fair market value of our common stock received, which would generally result in: (i) a taxable dividend to such stockholder to the extent of that such stockholder’s pro rata share of IBM’s current or accumulated earnings and profits; (ii) a reduction in such stockholder’s basis (but not below zero) in IBM common stock to the extent the amount received exceeds the stockholder’s share of IBM’s earnings and profits; and (iii) taxable gain from the exchange of IBM common stock to the extent the amount received exceeded the sum of such stockholder’s share of IBM’s earnings and profits and such stockholder’s basis in its IBM common stock.
Biggest changeAdditionally, large changes in currency exchange rates relative to our functional currencies can increase the costs of our services to customers relative to local competitors, thereby causing us to lose existing or potential customers to these local competitors. ​ Risks Relating to our Spin-off from IBM ​ If the Spin-off were determined not to qualify as tax-free for U.S. federal income tax purposes, we could have an indemnification obligation to IBM, which could adversely affect our business, financial condition and results of operations. ​ If the Distribution were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Internal Revenue Code of 1986 (the “Code”), each stockholder that is subject to U.S. federal income tax who received our common stock in the Distribution would generally be treated as having received a distribution in an amount equal to the fair market value of our common stock received, which would generally result in: (i) a taxable dividend to such stockholder to the extent of that such stockholder’s pro rata share of IBM’s current or accumulated earnings and profits; (ii) a reduction in such stockholder’s basis (but not below zero) in IBM common stock to the extent the amount received exceeds the stockholder’s share of IBM’s earnings and profits; and (iii) taxable gain from the exchange of IBM common stock to the extent the amount received exceeded the sum of such stockholder’s share of IBM’s earnings and profits and such stockholder’s basis in its IBM common stock. ​ If, as a result of any of our representations being untrue or our covenants being breached, the Spin-off were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, we could be required to indemnify IBM for the resulting taxes and related expenses.
Cybersecurity attacks or other security incidents relating to our systems or those of our third-party vendors could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss or destruction of Company, customer or other third-party data or systems; theft or import or export of sensitive, regulated or confidential data including personal information and intellectual property; the loss of access to critical data or systems through ransomware, destructive attacks or other means; and business delays, service or system disruptions or denials of service.
Cybersecurity attacks or other security incidents relating to our systems or those of our vendors could result in, for example, one or more of the following: unauthorized access to, disclosure, modification, misuse, loss or destruction of Company, customer or other third-party data or systems; theft or import or export of sensitive, regulated or confidential data including personal information and intellectual property; the loss of access to critical data or systems through ransomware, destructive attacks or other means; and business delays, service or system disruptions or denials of service.
If the Distribution were taxable to IBM due to such a 50% or greater change in ownership of our stock, IBM would recognize gain equal to the excess of the fair market value on the Distribution Date of our common stock distributed to IBM stockholders over IBM’s tax basis in our common stock, and we generally would be required to indemnify IBM for the tax on such gain and related expenses.
If the Distribution were taxable to IBM due to such a 50% or greater change in ownership of our stock, IBM would recognize a gain equal to the excess of the fair market value on the Distribution Date of our common stock distributed to IBM stockholders over IBM’s tax basis in our common stock, and we generally would be required to indemnify IBM for the tax on such gain and related expenses.
There are numerous and evolving risks relating to cybersecurity and data privacy, including risks originating from intentional acts of criminal hackers, nation states and hacktivists; from intentional and unintentional acts of customers, business partners, vendors, employees, contractors, competitors and other third parties; and from errors and omissions in processes or technologies, as well as the risks associated with an increase in the number of customers, business partners, vendors, employees, contractors and other third parties working remotely.
There are numerous and evolving risks relating to cybersecurity, data governance and privacy, including risks originating from intentional acts of criminal hackers, nation states and hacktivists; from intentional and unintentional acts of customers, business partners, vendors, employees, contractors, competitors and other third parties; and from errors and omissions in processes or technologies, as well as the risks associated with an increase in the number of customers, business partners, vendors, employees, contractors and other third parties working remotely.
We are at risk of security breaches not only of our own services, systems and networks, but also those of customers, business partners, vendors, employees, contractors and other third parties. Cyber threats are continually evolving, making it challenging to defend against certain threats and vulnerabilities that can persist undetected over extended periods of time.
We are at risk of security breaches not only of our own services, systems and networks, but also those of customers, business partners, vendors, employees, contractors and other third parties. ​ Cyber threats are continually evolving, making it more challenging to defend against certain threats and vulnerabilities that can persist undetected over extended periods of time.
Such changes may result in limitations on existing or future business operations in certain markets, and violations of such laws and regulations could result in significant fines, penalties and enforcement actions. Tax matters could impact our results of operations and financial condition. We are subject to income taxes in both the United States and numerous foreign jurisdictions.
Such changes may result in limitations on existing or future business operations in certain markets, and violations of such laws and regulations could result in significant fines, penalties and enforcement actions. ​ Tax matters could impact our results of operations and financial condition. ​ We are subject to income taxes and withholding taxes in both the United States and numerous foreign jurisdictions.
The risks and challenges we face in connection with our strategies include expanding our professional services capability, expanding in geographies where we currently have a small presence and ensuring that our services remain competitive in a rapidly changing technological environment. We may invest significantly in key strategic areas to drive long-term revenue growth and share gains.
The risks and challenges we face in connection with our strategies include expanding our professional services capability, expanding in areas where we currently have a small presence and ensuring that our services remain competitive in a rapidly changing technological environment. We may invest significantly in key strategic areas to drive long-term revenue growth and share gains.
Furthermore, if we fail to accurately estimate our costs or the time required to complete a contract, the profitability of our contracts may be materially and adversely affected. Service delivery issues could adversely impact our business and operating results. We have customer agreements in place that include certain service-level commitments.
Furthermore, if we fail to accurately estimate the effort, costs or time required to complete a contract, the profitability of our contracts may be materially and adversely affected. ​ Service delivery issues could adversely impact our business and operating results. ​ We have customer agreements in place that include certain service-level commitments.
Although, to date, we have not experienced a cybersecurity incident that has had a material adverse effect on us and we continuously take significant steps to mitigate cybersecurity risk across a range of functions, such measures cannot eliminate the risk entirely or provide absolute security.
Although, to date, we have not experienced a cybersecurity incident that has had a material adverse effect on us and we continuously take steps to mitigate cybersecurity risk across a range of functions, such measures cannot eliminate the risk entirely or provide absolute security.
Further, changes in the business condition (financial or otherwise) of these suppliers or partners could subject us to losses and affect our ability to bring our offerings to market.
Further, changes in the business condition (financial or otherwise) of our suppliers or partners could subject us to losses and affect our ability to bring our offerings to market.
In addition, any widespread outbreak of an illness, pandemic or other local or global health issue, natural disasters including those that could be related to climate change impacts, or uncertain political climates, international hostilities, or any terrorist activities, could adversely affect customer demand, our operations and supply chain, and our ability to source and deliver solutions to our customers.
In addition, any widespread outbreak of an illness, pandemic or other local or global health issue, natural disasters including those that could be related to climate change impacts, or uncertain political climates, international hostilities, geopolitical conflict or any terrorist activities, could adversely affect customer demand, our operations and supply chain, and our ability to source and deliver solutions to our customers.
The global nature of our operations, including jurisdictions where legal systems may be less developed or understood by us, business practices and standards which deviate from international standards, and the diverse nature of our operations across a number of regulated industries, further increase the difficulty of compliance. Additionally, certain laws and regulations including the U.S.
The global nature of our operations, including jurisdictions where legal systems may be less developed or understood by us, business practices and standards which deviate from international standards, and the diverse nature of our operations across a number of regulated industries, further increases the difficulty of compliance. Additionally, certain laws and regulations including the U.S.
Our provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not 21 Table of Contents limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact our results of operations and financial condition in future periods.
Our provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof, which could adversely impact our results of operations and financial condition in future periods.
If we cannot obtain licenses to third party intellectual property on commercially reasonable terms, or if we must obtain alternative or substitute technology or redesign services, our business may be adversely affected.
If we cannot obtain, renew or extend licenses to third-party intellectual property on commercially reasonable terms, or if we must obtain alternative or substitute technology or redesign services, our business may be adversely affected.
The related risks include our failure to achieve strategic objectives, our failure to achieve anticipated revenue improvements and cost savings, our failure to retain key strategic relationships of acquired companies, our 18 Table of Contents failure to retain key personnel and our assumption of liabilities related to litigation or other legal proceedings involving the businesses in such transactions, as well as our failure to close planned transactions.
The related risks include our failure to achieve strategic objectives, our failure to achieve anticipated revenue improvements and cost savings, our failure to retain key strategic relationships of acquired companies, our failure to retain key personnel and our assumption of liabilities related to litigation or other legal proceedings involving the businesses in such transactions, as well as our failure to close planned transactions.
Further, international trade disputes could create uncertainty. Tariffs and international trade sanctions resulting from these disputes could affect our ability to move goods and services across borders, or could impose added costs to those activities. Measures taken to date by us to mitigate these impacts could be made less effective should trade sanctions or tariffs change.
Tariffs and international trade sanctions resulting from these disputes could affect our ability to move goods and services across borders, or could impose added costs to those activities. Measures taken to date by us to mitigate these impacts could be made less effective should trade sanctions or tariffs change.
In addition, revenues from some of our contracts are recognized using the percentage-of-completion method, which requires estimates of total costs at completion, fees earned on the contract, or both. This estimation process, particularly due to the technical nature of the services being performed and the long-term nature of certain contracts, is complex and involves significant judgment.
In addition, revenues from a small portion of our contracts are recognized using the percentage-of-completion method, which requires estimates of total costs at completion, fees earned on the contract, or both. This estimation process, particularly due to the technical nature of the services being performed and the long-term nature of certain contracts, is complex and involves significant judgment.
Further, we may be impacted directly or indirectly by the development and enforcement of laws and regulations in the U.S. and globally that are specifically targeted at the technology and services sectors.
Further, we and the services we provide to customers may be impacted directly or indirectly by the development and enforcement of laws and regulations in the U.S. and globally that are specifically targeted at the technology and services sectors.
If we are unable to find partners to develop cutting-edge innovations in a highly competitive and rapidly evolving environment or are unable to implement and integrate such innovations with sufficient speed and versatility, we could fail in our ongoing efforts to maintain and increase our revenue and profit margins.
If we are unable to find partners to develop cutting-edge innovations in a highly competitive and rapidly 15 Table of Contents evolving environment or are unable to implement and integrate such innovations with sufficient speed and versatility, we could fail in our ongoing efforts to maintain and increase our revenue and profit margins.
While we continue to monitor for, identify, investigate, respond to, remediate and develop plans to quickly recover from cybersecurity incidents, notwithstanding our efforts, we may be subject to a cybersecurity incident in the future that has a material adverse impact. 20 Table of Contents As we are a global enterprise, the regulatory environment with regard to cybersecurity and data privacy issues to which we are subject is increasingly complex and will continue to impact our business, including through increased risk, increased compliance costs, and expanded or otherwise altered compliance obligations.
While we continue to monitor for, identify, investigate, respond to, remediate and develop plans to quickly recover from cybersecurity incidents, notwithstanding our efforts, we may experience a cybersecurity incident in the future that may have a material adverse impact on the Company. ​ 20 Table of Contents As we are a global enterprise, the regulatory environment with regard to cybersecurity, data governance and privacy issues to which we are subject is increasingly complex and will continue to impact our business, including through increased risk, increased compliance costs, and expanded or otherwise altered compliance obligations.
We may be required to record non-cash impairment charges during any period in which we determine that our goodwill or long-lived assets are impaired, which could adversely affect our results of operations. As of March 31, 2023, our goodwill balance was $812 million, which represented 7% of total consolidated assets.
We may be required to record non-cash impairment charges during any period in which we determine that our goodwill or long-lived assets are impaired, which could adversely affect our results of operations. As of March 31, 2024, our goodwill balance was $805 million, which represented 8% of total consolidated assets.
If a court were to find the exclusive choice of forum provision contained in our Amended and Restated Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
If a court were to find the exclusive choice of forum provision contained in our Amended and Restated Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. Item 1B. Unresolved Staff Comments . None. ​
The enactment and expansion of cybersecurity and data privacy laws and regulations around the globe, including an increased focus on international data transfer mechanisms; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity; the potential for damages, fines and penalties; and the potential regulation of new and emerging technologies, such as artificial intelligence, will continue to result in increased compliance costs and increased risks.
The enactment and expansion of cybersecurity, data governance and privacy laws and regulations around the globe, including an increased focus on international data transfer mechanisms and supply chain management; the lack of harmonization of such laws and regulations; the increase in associated litigation and enforcement activity; the potential for damages, fines and penalties; and the potential regulation of emerging and new technologies, such as AI and generative AI, will continue to result in increased compliance costs and increased risks.
Our results of operations also could be affected by economic and political changes in those countries and by macroeconomic changes, including recessions, inflation, currency fluctuations between the U.S. dollar and non-U.S. currencies and adverse changes in trade relationships among those countries.
Our results of operations could be affected by economic and political changes in those countries and by macroeconomic changes, including recessions, inflation, currency fluctuations between the U.S. dollar and non-U.S. currencies and adverse changes in trade relationships among those countries. Further, international trade disputes could create uncertainty.
Bribery Act 2010 could make us responsible for acts of our employees, subcontractors, vendors, agents, alliance or joint venture partners, the companies we may acquire and their employees, subcontractors, vendors and agents, and other third parties with which we associate if they take actions that violate applicable anti-corruption laws or regulations (whether or not we participated or knew about the actions leading to the violations).
Bribery Act 2010 could make us responsible for acts of our employees, subcontractors, vendors, agents, alliance or joint venture partners, the companies we may acquire and their employees, subcontractors, vendors and agents, and other third parties with which we associate if they take actions that violate applicable anti-corruption laws or regulations (whether or not we participated or knew about the actions leading to the violations). ​ Compliance with diverse legal requirements is costly and time-consuming and requires significant resources.
In addition, if we or our stockholders were to engage in transactions that resulted in a 50% or greater change by vote or value in the ownership of our stock during the four-year period beginning on the date that begins two years before the date of the Distribution, the Distribution would generally be taxable to IBM, but not to its stockholders, under Section 355(e) of the Code, unless it were established that such transactions and the Distribution were not part of a plan or series of related transactions.
Any such indemnification obligation could adversely affect our business, financial condition and results of operations. ​ In addition, if we or our stockholders engaged in transactions that resulted in a 50% or greater change by vote or value in the ownership of our stock during the four-year period beginning on the date that begins two years before the date of the Distribution, the Distribution would generally be taxable to IBM, but not to its stockholders, under Section 355(e) of the Code, unless it were established that such transactions and the Distribution were not part of a plan or series of related transactions.
In addition, the fast-paced, evolving, pervasive, and sophisticated nature of certain cyber threats and vulnerabilities, as well as the scale and complexity of our business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on us or our customers.
In addition, the fast-paced, evolving, pervasive and sophisticated nature of certain cyber threats and vulnerabilities, including increased risks posed by generative AI, and the scale and complexity of our business and infrastructure, make it possible that certain threats or vulnerabilities will be undetected or unmitigated in time to prevent or minimize the impact of an attack on us or our customers.
Our competitors include incumbents that have expanded their offerings to migration and management of cloud-based environments; companies that use labor-based models and leverage talent pools primarily in lower-cost countries that have grown to offer a broad range of services with a worldwide presence; and advisory-focused system integrators specializing in bringing together disparate technology environments.
Competition in the markets in which we operate may adversely impact our results of operations. ​ Our competitors include incumbents that have expanded their offerings to migration and management of cloud-based environments; companies that use labor-based models and leverage talent pools primarily in lower-cost countries that have grown to offer a broad range of services with a worldwide presence; and advisory-focused system integrators specializing in bringing together disparate technology environments.
Further, we rely on third-party intellectual property rights, open-source software, and other third-party software in providing some of our services and solutions, and there can be no assurances that we will be able to obtain from third parties the licenses we need in the future.
Further, we rely on third-party intellectual property rights, open-source software and other third-party software in providing some of our services and solutions, and there can be no assurances that we will be able to obtain from third parties the licenses we need in the future or retain all of these intellectual property rights upon renewal, expiration or termination of such licenses.
In such cases, we have, and may in the future, rebalance our workforce, including reducing the rate of new hires and increasing involuntary terminations, which actions could negatively impact employee engagement and attrition. Due to our global presence, our business and operations could be adversely impacted by local legal, economic, political, health and other conditions.
In such cases, we have, and may in the future, rebalance our workforce, including reducing the rate of new hires and increasing involuntary terminations, which actions could negatively impact employee engagement and retention. ​ Due to our global presence, our business and operations could be adversely impacted by economic, political, public health and other conditions. ​ We are a globally integrated company and have operations worldwide.
Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government, which may also adversely impact our income taxes. In addition, it is likely that our tax returns could be examined by taxing authorities in the jurisdictions in which we do business.
Local country, state, provincial or municipal taxation may also be subject to review and potential override by regional, federal, national or similar forms of government, which may also adversely impact our income taxes. In addition, we are subject to periodic examinations of our domestic and foreign tax returns by taxing authorities in the jurisdictions in which we do business.
The cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant. In our industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for us and our customers.
In our industry, security vulnerabilities are increasingly discovered, publicized and exploited across a broad range of hardware, software or other infrastructure, elevating the risk of attacks and the potential cost of response and remediation for us and our customers.
Additionally, the failure of our suppliers and partners to deliver products and services in sufficient quantities, in a timely manner, and in compliance with all applicable laws and regulations could adversely affect our business. Any defective products or inadequate services received from suppliers or partners could reduce the reliability of our services and harm our reputation.
Additionally, the failure of our suppliers and partners to deliver products and services in sufficient quantities, in a timely manner, and in compliance with all applicable laws and regulations could adversely affect our business.
Compliance with diverse legal requirements is costly and time-consuming and requires significant resources. Violations of one or more of these regulations in the conduct of our business could result in significant fines, and penalties, disgorgement of profits, enforcement actions or criminal sanctions against us and/or our employees, prohibitions on doing business, unfavorable publicity and damage to our reputation.
Violations of one or more of these regulations in the conduct of our business could result in significant fines and penalties, disgorgement of profits, enforcement actions or criminal sanctions against us and/or our employees, contractors or agents, prohibitions on doing business, unfavorable publicity and damage to our reputation.
Moreover, to the extent we are unable to retain and sell additional services to existing customers, including as part of our initiative to address existing accounts that have substandard margins, our revenue and results of operations may decrease.
We may incur higher customer acquisition or retention costs as we seek to grow our customer base and expand our markets. Moreover, to the extent we are unable to retain and sell additional services to existing customers, including as part of our initiative to address existing accounts that have substandard margins, our revenue and results of operations may decrease.
These and other provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a 25 Table of Contents threatened acquisition or change in control, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price.
In addition, we are subject to Section 203 of the Delaware General Corporation Law (“DGCL”), which could have the effect of delaying or preventing a change of control that some stockholders may favor. ​ These and other provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price.
As we expand our customer base and the scope of our offerings, both within the United States and globally, we may be further impacted by additional regulatory or other risks, including compliance with U.S. and foreign data privacy requirements, data localization requirements, labor relations laws, enforcement of intellectual property protection laws, laws relating to anti-corruption, anti-competition regulations, corporate taxation, import, export and trade restrictions on technology and services.
As we expand our customer base and the scope of our offerings, both within the U.S. and globally, we may be further impacted by additional regulatory or other risks, including compliance with laws relating to corporate taxation, import, export and trade restrictions on technology and services.
The loss of business from any of our major customers, whether by the cancellation of existing contracts, the failure to obtain new business or lower overall demand for our services, could adversely impact our revenue and results of operations. We may not meet our growth and productivity objectives.
The loss of business from any of our major customers, whether by the cancellation of existing contracts, the failure to obtain new business or lower overall demand for our services, could adversely impact our revenue and results of operations. ​ We may not meet our growth and productivity objectives. ​ Our goals for profitability and growth rely upon a number of assumptions, including our ability to make successful investments to grow and further develop our business and simplify our operations.
Additionally, changes in laws and regulations, including expanding export controls and sanctions resulting from geopolitical developments, could impact our business, including imposing limits on where we can conduct operations, parties with whom we can conduct business, and the nature of work that can be performed.
Such changes may result in contracts being terminated or work being transferred on-shore, resulting in greater costs to us. 21 Table of Contents Additionally, changes in laws and regulations, including expanding export controls and sanctions resulting from geopolitical developments, could impact our business, including imposing limits on where we can conduct operations, parties with whom we can conduct business, and the nature of work that can be performed.
Our competitiveness is based on factors including quality of services, technical skills and capabilities, industry knowledge and experience, financial value, ability to innovate, intellectual property and methods, contracting flexibility, and speed of execution. If we are unable to compete based on such factors, our results of operations and business prospects could be harmed.
Our competitiveness is based on factors including quality of services, technical skills and capabilities, industry knowledge and experience, financial value, ability to innovate, intellectual property and methods, contracting flexibility, and speed of execution.
Due to the varying degrees of development of the legal systems of the countries in which we operate, local laws may not be well developed or provide sufficiently clear guidance and may be insufficient to protect our rights.
Due to the varying degrees of development of the legal systems of the countries in which we operate, local laws may not be well developed or provide sufficiently clear guidance and may be insufficient to protect our rights. ​ Changes in laws and regulations could also mandate significant and costly changes to the way we implement our services or could impose additional taxes on our services.
In addition, we have labor and product supply agreements where the currency in which our costs are denominated differs from the currency of the customer contract.
In addition, we have labor and product supply agreements where the currency in which our costs are denominated differs from the currency of the customer contract. Our hedging strategies may not fully mitigate our currency risk or may prove disadvantageous.
This competition may decrease our revenue and place downward pressure on operating margins in our industry, particularly for contract extensions or renewals. As a result, we may not be able to maintain our current revenue and operating margins, or achieve favorable operating margins, for contracts extended or renewed in the future.
As a result, we may not be able to maintain our current revenue and operating margins, or achieve favorable operating margins, for contracts extended or renewed in the future.
See Note 10 – Intangible Assets Including Goodwill to our financial statements included elsewhere in this report for additional information about our goodwill impairment. 19 Table of Contents Risks Relating to Cybersecurity and Data Privacy Cybersecurity and privacy considerations could adversely impact our business.
See Note 10 – Intangible Assets Including Goodwill to our financial statements included elsewhere in this report for additional information about our goodwill impairment. ​ 19 Table of Contents Risks Relating to Cybersecurity, Data Governance and Privacy ​ Cybersecurity, data governance and privacy considerations could adversely impact our business. ​ We maintain information, including confidential and proprietary information, in digital form regarding our business and the business of our customers, business partners, vendors, employees, contractors and other third parties.
In addition, in a period of an extended financial market downturn, we could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact our financial flexibility. Further, our results could be negatively impacted by premiums for mandatory pension insolvency insurance coverage outside the United States.
As a result, our financial results in any period could be negatively impacted. In addition, in a period of an extended financial market downturn, we could be required to provide incremental pension plan funding with resulting liquidity risk which could negatively impact our financial flexibility.
Our Amended and Restated Certificate of Incorporation provides, in all cases to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, the Court of Chancery located within the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder to us or our stockholders, any action asserting a claim arising pursuant to the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery located in the State of Delaware or any action asserting a claim governed by the internal affairs doctrine or any other action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL, or any action asserting a claim arising under the DGCL, our Amended and Restated Certificate of Incorporation or our Amended and Restated By-Laws.
These provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that the Board determines is not in our and our stockholders’ best interests. ​ 25 Table of Contents Our Amended and Restated Certificate of Incorporation provides that certain courts in the State of Delaware or the federal district courts of the United States will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. ​ Our Amended and Restated Certificate of Incorporation provides, in all cases to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, the Court of Chancery located within the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder to us or our stockholders, any action asserting a claim arising pursuant to the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery located in the State of Delaware or any action asserting a claim governed by the internal affairs doctrine or any other action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL, or any action asserting a claim arising under the DGCL, our Amended and Restated Certificate of Incorporation or our Amended and Restated By-Laws.
These investments may adversely affect our near-term revenue growth and results of operations, and we cannot guarantee that they will ultimately be successful. Customer adoption rates and viable economic models are less certain in highly competitive segments. Additionally, emerging business and delivery models may unfavorably impact demand and profitability for our solutions or services.
These investments may adversely affect our near-term revenue growth and results of operations, and we cannot guarantee that they will ultimately be successful or produce any or all of the long-term benefits that we expect. Additionally, emerging business and delivery models may unfavorably impact demand and profitability for our solutions or services.
Additionally, if we become aware of information related to the creditworthiness of a major customer, or if future actual default rates on receivables in general differ from those currently anticipated, we may have to adjust our allowance for credit losses, which could affect our net income in the period the adjustments are made.
Additionally, if we become aware of information related to the creditworthiness of a major customer, or if future actual default rates on receivables in general differ from those currently anticipated, we may have to adjust our allowance for credit losses, which could affect our net income in the period the adjustments are made. ​ Our results of operations and financial condition could be negatively impacted by our pension plans. ​ Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of our pension trust assets and our future estimated pension liabilities.
Any failure to attract, integrate, motivate and retain these employees could harm our business. Alternatively, from time to time, we may have more people than we need in certain skill sets, geographies or compensation levels.
Further, as global opportunities and industry demand shift, realignment, training and scaling of skilled resources may not be sufficiently rapid or successful. Any failure to attract, integrate, motivate and retain these employees could harm our business. Alternatively, from time to time, we may have more people than we need in certain skill sets, geographies or compensation levels.
In the event of such actions, we, our customers and other third parties could be exposed to liability, litigation, and regulatory or other government action, as well as the loss of existing or potential customers, damage to brand and reputation, damage to our competitive position, and other financial loss.
In the event of such actions, we, our customers and other third parties could be exposed to liability (whether contractual or otherwise), litigation, and regulatory or other government inquiries, enforcement actions, fines or penalties, as well as the loss of existing or potential customers, negative publicity, damage to brand and reputation, damage to our competitive position and other financial loss. ​ The cost and operational consequences of responding to cybersecurity incidents and implementing remediation measures could be significant.
We are required under accounting principles generally accepted in the United States of America (“GAAP”) to review our goodwill for impairment at least annually, and to review goodwill and long-lived assets when events or changes in circumstances indicate the carrying value may not be recoverable.
Even if we have an agreement providing for third parties to indemnify us for the foregoing claims, the indemnifying parties may be unwilling or unable to fulfill their contractual obligations. ​ We may be required to record impairment charges to future earnings if our goodwill or long-lived assets become impaired. ​ We are required under accounting principles generally accepted in the United States of America (“GAAP”) to review our goodwill for impairment at least annually, and to review goodwill and long-lived assets when events or changes in circumstances indicate the carrying value may not be recoverable.
Since the Spin-off, certain contractual disputes have arisen between us and IBM. We and IBM have commenced arbitration proceedings related to certain of these matters.
These agreements also govern our relationship with IBM following the Spin-off. We rely on IBM to satisfy its performance obligations under these agreements. Since the Spin-off, certain contractual disputes have arisen between us and IBM. We and IBM have commenced arbitration proceedings related to certain of these matters.
Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our services or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions.
Moreover, a reduction in our rating to below certain levels could potentially cause certain customers to reduce or cease to do business with us, which would adversely impact our financial performance. ​ The commercial and credit environment may adversely affect our access to capital. ​ Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our services or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions.
Although we have arrangements with some of our executive officers designed to promote retention, our employment relationships are generally at-will, and key employees may leave us. We intend to continue to hire additional highly qualified personnel but may not be able to attract, assimilate or retain similarly qualified personnel in the future.
Although we have arrangements with some of our executive officers designed to promote retention, our employment relationships are generally at-will, and key employees may leave us.
We believe that we have adopted appropriate risk management and compliance programs. Legal and compliance risks, however, will continue to exist, and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time. We could incur costs for regulated environmental matters.
Legal and compliance risks, however, will continue to exist, and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, may arise from time to time. ​ We could incur costs for regulated environmental matters. ​ We are subject to various federal, state, local and foreign laws and regulations concerning the discharge of materials into the environment or otherwise related to environmental protection.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and, to the fullest extent permitted by law, to have consented to the provisions of our Amended and Restated Certificate of Incorporation described above.
Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. ​ Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and, to the fullest extent permitted by law, to have consented to the provisions of our Amended and Restated Certificate of Incorporation described above.
We derive a significant percentage of our revenues and costs from our affiliates operating in non-U.S. dollar currency environments, and results from these affiliates are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity.
Premium increases could be significant due to the level of insolvencies of unrelated companies in the country at issue. ​ 23 Table of Contents We are exposed to currency risk that can adversely impact our revenue and business. ​ We derive a significant percentage of our revenues and costs in non-U.S. dollar currency environments, and our results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity.
If the outcome of those arbitrations is unfavorable to Kyndryl, if a mutually acceptable commercial resolution cannot be found, or if we or IBM are or remain otherwise unable or unwilling to satisfy our or its respective obligations under these agreements, including indemnification obligations, our business, results of operations and financial condition could be adversely affected.
If the outcome of those arbitrations is unfavorable to Kyndryl, if a mutually acceptable commercial resolution cannot be found, if the terms of any resolution of these matters are unfavorable to us, or if IBM is unable or unwilling to satisfy its respective obligations under these agreements, including indemnification obligations, our business, results of operations and financial condition could be adversely affected. ​ Risks Relating to Our Common Stock and the Securities Market ​ Certain provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws and Delaware law may discourage takeovers and limit the power of our stockholders. ​ Several provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws and Delaware law may discourage, delay or prevent a merger or acquisition.
Our reputation may be susceptible to damage by events such as significant disputes with customers, internal control deficiencies, delivery failures, cybersecurity incidents, government investigations or legal proceedings or actions of current or former customers, directors, employees, competitors, vendors, alliance partners or joint venture partners.
While some customers have accelerated their digital transformation and increased their expenditures, the short-term priorities of other customers continue to be focused on operational stability, flexibility and cash preservation, and as such, we may experience some disruptions in transactional performance. ​ Damage to our reputation could adversely impact our business. ​ Our reputation may be susceptible to damage by events such as significant disputes with customers, internal control deficiencies, delivery failures, cybersecurity incidents, government investigations or legal proceedings or actions of current or former customers, directors, employees, competitors, vendors, alliance partners or joint venture partners.
While we regularly assess the likelihood of adverse outcomes resulting from these examinations in order to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes from these examinations will not have an adverse effect on the Company’s provision for income taxes and cash flows.
While we regularly assess the likelihood of adverse outcomes resulting from these examinations in order to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes from these examinations will not have an adverse effect on the Company’s provision for income taxes and cash flows. ​ We are subject to legal proceedings and investigatory risks. ​ As a multinational company with customers and employees around the world, we are or may become involved as a party and/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of our business.
Examples of such risks include: the availability and cost of resources and related technologies; the availability of suppliers that can meet our standards; and our ability to manage natural disasters that could impact our employees, customers and businesses. Governments are implementing local, national and international regulations, taxes and mechanisms to manage cyber, workforce, environmental and human rights risks.
Examples of such risks include but are not limited to: the availability and cost of resources and related technologies; the availability of suppliers and partners that can meet our standards; reliance on third-party performance and data; and our ability to manage geopolitical disruptions and natural disasters that could impact our employees, customers and businesses.
If our goodwill or net intangible assets become impaired, we may be required to record a charge to our income statement. We could be adversely impacted by our business with government customers. Our customers include numerous governmental entities within and outside the United States, including foreign governments and U.S. state and local entities.
If we do acquire other companies, we may not realize all the economic benefit from those acquisitions, which could cause an impairment of goodwill or intangible assets. ​ 18 Table of Contents We could be adversely impacted by our business with government customers. ​ Our customers include numerous governmental entities within and outside the United States, including foreign governments and U.S. state and local entities.
Our ability to maintain or increase our revenues and profit may be impacted by a number of factors, including our ability to attract new customers, retain existing customers and sell additional, comparable or, in the case of accounts with substandard margins, services with greater gross margins to our customers.
Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, that could adversely affect our business, reputation, financial condition, results of operations, cash flows and the trading price of our common stock. ​ Risks Relating to Our Business ​ An inability to attract new customers, retain existing customers and sell additional services to customers could adversely impact our revenue and results of operations. ​ Our ability to maintain or increase our revenues and profit may be impacted by a number of factors, including our ability to attract new customers, retain existing customers and sell additional, comparable or, in the case of accounts with substandard margins, services with greater gross margins to our customers.
Among other things, such partners may in the future decide to compete with us, form exclusive or more favorable arrangements with our competitors or otherwise reduce our access to their products, impairing our ability to provide the services and solutions 16 Table of Contents demanded by customers.
There can be no assurance that we will be able to maintain such relationships or that the financial terms of our relationships will remain affordable. Among other things, such partners may in the future decide to compete with us, form exclusive or more favorable arrangements with our competitors or otherwise reduce our access to their products or services.
If we fail to gain a positive reputation as leader in our field, or if our brand image is tarnished by negative perceptions, our ability to attract and retain customers and talent could be impacted.
If we fail to gain a positive reputation as leader in our field, or if our brand image is tarnished by negative perceptions, our ability to attract and retain customers and talent could be impacted. ​ 17 Table of Contents If we are unable to accurately estimate the cost of services and the timeline for completion of contracts, the profitability of our contracts may be materially and adversely affected. ​ Our commercial contracts are typically awarded on a competitive or “sole-source” basis.
We are subject to numerous, evolving, and sometimes conflicting, legal regimes on matters as diverse as anticorruption, import/export controls, content requirements, cybersecurity and data privacy, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, ESG initiatives, anti-competition, anti-money-laundering, wage-and-hour standards, employment and labor relations and human rights.
Any additional costs and penalties associated with increased compliance, enforcement and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market. ​ Risks Relating to Laws and Regulations ​ Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business. ​ We are subject to numerous, evolving, and sometimes conflicting, legal regimes on matters as diverse as anticorruption, import/export controls, content requirements, cybersecurity, data governance and privacy, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, anti-money-laundering, wage-and-hour standards, employment and labor relations, environmental, human rights, machine learning and AI.
We maintain information, including confidential and proprietary information, in digital form regarding our business and the business of our customers, business partners, vendors, employees, contractors and other third parties. We also rely on third-party vendors to provide certain digital services in connection with our business.
We also rely on third-party vendors to provide certain digital services in connection with our business.
Our intellectual property rights may not prevent competitors from independently developing services similar to or duplicative of ours, nor can there be any assurance that the resources invested by us to protect our intellectual property will be sufficient or that our intellectual property portfolio will adequately deter misappropriation or improper use of our technology.
Also, compliance violations in one state or locality could result in suspension or debarment as a governmental contractor, could incur civil and criminal fines and penalties, or could impact our ability to compete for new contracts, which could negatively impact our competitive position, results of operations, financial results and reputation. ​ Intellectual property matters could adversely impact our business. ​ Our intellectual property rights may not prevent competitors from independently developing services similar to or duplicative of ours, nor can there be any assurance that the resources invested by us to protect our intellectual property will be sufficient or that our intellectual property portfolio will adequately deter misappropriation or improper use of our technology.
Any future lowering of our ratings, outlook or watch likely would make it more difficult or more expensive for us to obtain additional debt financing. Moreover, a reduction in our rating to below certain levels could cause certain customers to reduce or cease to do business with us, which would adversely impact our financial performance.
Any future lowering of our ratings, outlook or watch likely would make it more difficult or more expensive for us to refinance or obtain additional debt financing.
Our inability to retain skilled employees could intensify the adverse impact of a shortage of critical skills. Changing demographics and labor workforce trends also may result in a shortage of or insufficient knowledge and skills. Further, as global opportunities and industry demand shift, realignment, training and scaling of skilled resources may not be sufficiently rapid or successful.
Skilled and experienced personnel in the areas where we compete often are in high demand, and competition for their talents is often intense. Our inability to retain skilled employees could intensify the adverse impact of a shortage of critical skills. Changing demographics and labor workforce trends also may result in a shortage of or insufficient knowledge and skills.
In addition, we may be the target of aggressive and opportunistic enforcement of patents by third parties, including patent assertion entities and non-practicing entities.
As we expand our use of AI, there may be uncertainty regarding intellectual property ownership and license rights of AI algorithms and content generated by AI, and we may become subject to similar claims of infringement. In addition, we may be the target of aggressive and opportunistic enforcement of patents by third parties, including patent assertion entities and non-practicing entities.
In addition, IBM may obtain indemnity from us for judgments against it relating to events that occurred prior to the Separation pursuant to agreements put in place in connection with the Separation. The risks associated with such legal proceedings are described in more detail in Note 13 – Commitments and Contingencies in the financial statements elsewhere in this report.
In addition, our former Parent may obtain, or may seek to obtain, indemnity from us for judgments against it relating to events that occurred prior to the Separation pursuant to agreements put in place in connection with the Separation.
Our earnings and cash flows, as well as our access to funding, could be negatively impacted by changes in market liquidity conditions.
As a result, our financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. Our earnings and cash flows, as well as our access to funding, could be negatively impacted by changes in market liquidity conditions.
Volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets. These conditions may adversely affect our credit ratings. Our financial performance could be adversely impacted by changes in market liquidity conditions and by customer credit risk on receivables.
Volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets.
Some of our agreements with these customers may be subject to periodic funding approval. Funding reductions or delays could adversely impact public sector demand for our services. Also, government contracts tend to have additional requirements beyond commercial contracts and, for example, may contain provisions providing for higher liability limits for certain losses and non-performance.
Also, government contracts are generally subject to extensive and evolving procurement regulations and tend to have additional requirements beyond commercial contracts and, for example, may contain provisions providing for higher liability limits for certain losses and non-performance.
If we are unable to attract and retain key personnel and other skilled employees, our business could be harmed. If any of our key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience.
If we do not sufficiently invest in new technologies and adapt to industry developments, if we are unable to commercialize them in our services and solutions, evolve, expand and scale them with sufficient speed and versatility, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our results of operations and our ability to develop and maintain a competitive advantage and to execute on our growth strategy could be negatively affected. ​ If we are unable to attract and retain key personnel and other skilled employees, our business could be harmed. ​ If any of our key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience.
Our failure to meet our commitments could also result in customer dissatisfaction or loss and have an adverse effect on our business, financial condition and results of operations. Risks from acquisitions, alliances and dispositions include integration challenges, failure to achieve objectives, the assumption of liabilities and higher debt levels.
Any of these factors could adversely affect our ability to perform and subject us to additional liabilities, which could have an adverse effect on our relationships with customers and on our results of operations. ​ Risks from acquisitions and dispositions include integration challenges, failure to achieve objectives, the assumption of liabilities and higher debt levels. ​ We may decide to make acquisitions and dispositions in furtherance of our strategy.
In addition, companies with whom we have alliances also may acquire or form alliances with competitors, which could reduce their business with us. If we are unable to effectively manage these complicated relationships with alliance peers, our business and results of operations could be adversely affected. Our business could be adversely impacted by our relationships with critical suppliers and partners.
If we are unable to effectively manage these complicated relationships with alliance peers, our business and results of operations could be adversely affected. ​ Our business could be adversely impacted if we do not successfully manage and/or develop our relationships with critical suppliers and partners. ​ Our business employs a wide variety of products and services from a number of suppliers and partners around the world.
Such transactions may require us to secure financing, and our indebtedness may limit the availability of financing to us or the favorability of the terms of available financing. If we do acquire other companies, we may not realize all the economic benefit from those acquisitions, which could cause an impairment of goodwill or intangible assets.
Such transactions may require us to secure financing, and our indebtedness may limit the availability of financing to us or the favorability of the terms of available financing.
Our customer base includes many worldwide enterprises, from small and medium businesses to the world’s largest organizations and governments, with a significant portion of our revenue coming from global customers across many sectors. As a result, our financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity.
These conditions may adversely affect our credit ratings. ​ Our financial performance could be adversely impacted by changes in market liquidity conditions and by customer credit risk on receivables. ​ Our customer base includes many worldwide enterprises, from the world’s largest organizations and governments to smaller businesses, with a significant portion of our revenue coming from global customers across many sectors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our existing properties are in good condition and are suitable for the conduct of our business. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States* ​ Japan ​ Principal Markets ​ Strategic Markets ​ Total ​ ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ ​ Locations ​ (in millions) ​ Locations ​ (in millions) ​ Locations ​ (in millions) ​ Locations ​ (in millions) ​ Locations ​ (in millions) Leased ​ 30 ​ 3.3 ​ 48 ​ 1.1 ​ 136 ​ 5.4 ​ 145 ​ 3.2 ​ 359 ​ 13.0 Owned ​ 3 ​ 3.1 ​ — ​ — ​ 8 ​ 0.9 ​ 5 ​ 0.8 ​ 16 ​ 4.7 Total ​ 33 ​ 6.4 ​ 48 ​ 1.1 ​ 144 ​ 6.3 ​ 150 ​ 4.0 ​ 375 ​ 17.7 * United States includes our principal executive offices not allocated to the Unites States segment, including our global headquarters located in New York, New York.
Biggest changeBelow is a summary of the Company’s active properties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States* ​ Japan ​ Principal Markets ​ Strategic Markets ​ Total ​ ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ Number of ​ Square Feet ​ ​ Locations ​ (in millions) ​ Locations ​ (in millions) ​ Locations ​ (in millions) ​ Locations ​ (in millions) ​ Locations ​ (in millions) Leased ​ 31 ​ 1.2 ​ 46 ​ 1.1 ​ 136 ​ 3.9 ​ 135 ​ 2.4 ​ 348 ​ 8.6 Owned ​ 3 ​ 3.1 ​ — ​ — ​ 8 ​ 0.9 ​ 5 ​ 0.8 ​ 16 ​ 4.7 Total ​ 34 ​ 4.3 ​ 46 ​ 1.1 ​ 144 ​ 4.8 ​ 140 ​ 3.2 ​ 364 ​ 13.3 * United States includes our principal executive offices not allocated to the Unites States segment, including our global headquarters located in New York, New York.
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Item 2. Properties: As of March 31, 2023, we owned or leased approximately 17.7 million square feet of space worldwide, a summary of which is provided below.
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Item 2. Properties. As of March 31, 2024, we owned or leased approximately 13.3 million square feet of space worldwide, which excludes certain under-utilized spaces that we inherited from our former Parent at Separation and exited in fiscal years 2023 and 2024. Refer to Note 9 – Leases for more information.
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The Company will continue to evaluate space requirements and identify opportunities to improve operating efficiencies.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 27 ​ ​ PART II ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. (Reserved) 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 28 ​ ​ PART II ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. (Reserved) 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities: Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol KD. ​ As of May 19, 2023, there were approximately 272,362 record holders of our common stock.
Biggest changeItem 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol KD. ​ As of May 23, 2024, there were approximately 255,904 stockholders of record of our common stock.
Future dividends, if any, and the timing of declaration of any such dividends, will be at the discretion of our Board of Directors and will depend upon many factors including, but not limited to, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements and in any preferred stock, business prospects and other factors that our Board of Directors deems relevant. 27 Table of Contents Stock Performance Graph ​ The following graphs compare the cumulative total return of holders of our common stock with the cumulative total return of the S&P 400 Midcap index and S&P IT Sector index. ​ The graph below tracks the performance of a $100 investment in our common stock and in each index from November 4, 2021, the date our stock commenced regular-way trading on the NYSE, to March 31, 2023. ​ ​ 28 Table of Contents The graph below tracks the performance of a $100 investment in our common stock and in each index from April 1, 2022, the beginning of our fiscal year, to March 31, 2023. ​ ​
Future dividends, if any, and the timing of declaration of any such dividends, will be at the discretion of our Board of Directors and will depend upon many factors including, but not limited to, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements and in any preferred stock, business prospects and other factors that our Board of Directors deems relevant. 28 Table of Contents Stock Performance Graph ​ The following graphs compare the cumulative total return of holders of our common stock with the cumulative total return of the S&P 400 Midcap Index and S&P IT Sector Index. ​ The graph below tracks the performance of a $100 investment in our common stock and in each index from November 4, 2021, the date our stock commenced regular-way trading on the NYSE, to March 31, 2024. ​ ​ 29 Table of Contents The graph below tracks the performance of a $100 investment in our common stock and in each index from April 1, 2023, the beginning of our fiscal year, to March 31, 2024. ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

89 edited+33 added−71 removed48 unchanged
Biggest changeAt March 31, 2023, we had short-term (April 2023 through March 2024), mid-term (April 2024 through March 2026) and long-term (April 2026 onward) purchase commitments in the amount of $0.7 billion, $1.0 billion and $1.1 billion, respectively. 43 Table of Contents Other Information Signings ​ The following table presents the Company’s signings for the year ended March 31, 2023, the twelve months ended March 31, 2022, and the year ended December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ Months ​ ​ ​ ​ ​ Year Ended ​ Ended ​ Year Ended ​ ​ March 31, ​ March 31, ​ December 31, (Dollars in billions) 2023 2022 2021 Total signings ​ $ 12.2 ​ $ 14.2 ​ $ 13.5 ​ The following table presents the total contract value for the Company’s signings greater than $100 million for new and existing customers for the year ended March 31, 2023, the twelve months ended March 31, 2022 and the year ended December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ Months ​ ​ ​ ​ ​ Year Ended ​ Ended ​ Year Ended ​ ​ March 31, ​ March 31, ​ December 31, (Dollars in billions) ​ 2023 2022 2021 New customers ​ $ 0.2 ​ $ 0.6 ​ $ 0.8 Existing customers ​ $ 2.6 ​ $ 4.2 ​ $ 3.4 ​ Signings decreased by $2.0 billion, or 14%, for the year ended March 31, 2023 compared to the twelve months ended March 31, 2022, in part due to a 6-point negative currency impact on signings.
Biggest changeOther Information Signings ​ The following table presents the Company’s signings for the years ended March 31, 2024 and 2023, and the twelve months ended March 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ Months ​ ​ ​ ​ ​ ​ Ended ​ ​ Year Ended March 31, ​ March 31, (Dollars in billions) 2024 2023 2022 Total signings ​ $ 12.5 ​ $ 12.2 ​ $ 14.2 ​ Signings increased by $332 million, or 3%, in the year ended March 31, 2024, compared to the prior year.
The Company is in compliance with its debt covenants. Transfers of Financial Assets The Company has entered into agreements with third-party financial institutions to sell certain financial assets (primarily trade receivables) without recourse. The Company determined these are true sales.
The Company is in compliance with its debt covenants. Transfers of Financial Assets The Company has entered into agreements with third-party financial institutions to sell certain financial assets (primarily trade receivables) without recourse. The Company has determined these are true sales.
Current income tax liabilities including amounts for unrecognized tax benefits related to our activities included in IBM’s income tax returns were deemed to be immediately settled with IBM through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net transfers from Parent in the financing activities section in the Consolidated Statement of Cash Flows.
Income tax liabilities, including amounts for unrecognized tax benefits related to our activities included in IBM’s income tax returns, were deemed to be immediately settled with IBM through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net transfers from Parent in the financing activities section in the Consolidated Statement of Cash Flows.
Current income tax liabilities including amounts for unrecognized tax benefits related to our activities included in IBM’s income tax returns were deemed to be immediately settled with IBM through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net transfers from Parent in the financing activities section in the Consolidated Statement of Cash Flows.
Income tax liabilities including amounts for unrecognized tax benefits related to our activities included in IBM’s income tax returns were deemed to be immediately settled with IBM through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net transfers from Parent in the financing activities section in the Consolidated Statement of Cash Flows.
Prior to the Separation, the Company recorded deferred tax assets for stock-based compensation awards that result in tax deductions in the consolidated financial statements calculated using the separate return basis based on the amount of compensation cost recognized and the relevant statutory tax rates.
Prior to the Separation, the Company recorded deferred tax assets for stock-based compensation awards that result in tax deductions in the consolidated financial statements calculated using the separate return basis, the amount of compensation cost recognized and the relevant statutory tax rates.
To the extent the outlook for long-term returns changes such that management changes its expected long-term return on plan assets assumption, a 25-basis-point increase or decrease in the expected long-term return on plan assets assumption would not have a material estimated decrease or increase on the following year’s pretax net periodic benefit cost (based upon plan assets at March 31, 2023 and expected contributions and benefit payments for fiscal 2024).
To the extent the outlook for long-term returns changes such that management changes its expected long-term return on plan assets assumption, a 25-basis-point increase or decrease in the expected long-term return on plan assets assumption would not have a material estimated decrease or increase on the following year’s pretax net periodic benefit cost (based upon plan assets at March 31, 2024 and expected contributions and benefit payments for fiscal 2025).
The Notes were offered and sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons in reliance on Regulation S of the Securities Act.
The Initial Notes were offered and sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons in reliance on Regulation S of the Securities Act.
Changes in the discount rate assumptions would impact the actuarial (gain)/loss amortization and interest cost components of the net periodic benefit cost calculation and the projected benefit obligation (PBO).
Changes in the discount rate assumptions would impact the actuarial (gain)/loss amortization, service cost and interest cost components of the net periodic benefit cost calculation and the projected benefit obligation (PBO).
We do not have retained interests in assets transferred to unconsolidated entities or other material off-balance sheet interests or instruments. At March 31, 2023, the Company’s material future contractual obligations were primarily related to leases, debt and pension liabilities.
We do not have retained interests in assets transferred to unconsolidated entities or other material off-balance sheet interests or instruments. At March 31, 2024, the Company’s material future contractual obligations were primarily related to leases, debt and pension liabilities.
Signings also declined as a result of an increased focus on higher-margin services, which tend to be shorter in length and therefore smaller in value than historical agreements. 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.
Signings also declined as a result of an increased focus on higher-margin services, which tend to be shorter in length and therefore smaller in value than historical agreements. 41 Table of Contents 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.
Senior Unsecured Notes In October 2021, in preparation for our Spin-off, we completed the offering of $2.4 billion in aggregate principal amount of senior unsecured fixed-rate notes as follows: $700 million aggregate principal amount of 2.05% Senior Notes due 2026, $500 million aggregate principal amount of 2.70% Senior Notes due 2028, $650 million aggregate principal amount of 3.15% Senior Notes due 2031 and $550 million aggregate principal amount of 4.10% Senior Notes due 2041 (the “Notes”).
Senior Unsecured Notes In October 2021, in preparation for our Spin-off, we completed the offering of $2.4 billion in aggregate principal amount of senior unsecured fixed-rate notes as follows: $700 million aggregate principal amount of 2.05% Senior Notes due 2026, $500 million aggregate principal amount of 2.70% Senior Notes due 2028, $650 million aggregate principal amount of 3.15% Senior Notes due 2031 and $550 million aggregate principal amount of 4.10% Senior Notes due 2041 (the “Initial Notes”).
In addition, we identified certain leased and owned assets that were inherited from IBM as a result of the Separation that we determined will no longer provide any economic benefit to Kyndryl. As a result, we disposed of these assets through abandonment or early termination.
In addition, we identified certain leased and owned assets that were inherited from IBM as a result of the Separation that we determined will no longer provide any economic benefit to Kyndryl. As a result, we disposed of these assets through 37 Table of Contents abandonment or early termination.
We believe that adjusted EBITDA is a helpful supplemental measure to assist investors in evaluating our operating results as it excludes certain items whose fluctuation from period to period does not necessarily correspond to changes in the operations of our business.
We believe that adjusted EBITDA is a helpful supplemental measure to assist 33 Table of Contents investors in evaluating our operating results as it excludes certain items whose fluctuation from period to period does not necessarily correspond to changes in the operations of our business.
We use an income-based approach where fair value is determined using a discounted cash flow model that requires significant judgment with respect to revenue and growth rates, based upon annual budgets and long-term strategic plans. Fair value estimates employed in our annual impairment review of goodwill involve using various assumptions.
If a quantitative test is required, we use an income-based approach where fair value is determined using a discounted cash flow model that requires significant judgment with respect to revenue and growth rates, based upon annual budgets and long-term strategic plans. Fair value estimates employed in our annual impairment review of goodwill involve using various assumptions.
For all of these estimates, it should be noted that future events rarely develop exactly as forecasted and estimates require regular review and adjustment. 44 Table of Contents Revenue Recognition Application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates.
For all of these estimates, it should be noted that future events rarely develop exactly as forecasted and estimates require regular review and adjustment. Revenue Recognition Application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates.
At March 31, 2023, March 31, 2022 and December 31, 2021, we had no such off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
At March 31, 2024 and March 31, 2023, we had no such off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
A 25-basis-point increase or decrease in the discount rate would result in an approximate corresponding decrease or increase, respectively, of approximately $42 million in the Plans’ estimated PBO and accumulated postretirement benefit obligation (APBO) based upon March 31, 2023 data. 45 Table of Contents The expected long-term return on plan assets assumption is used in calculating the net periodic benefit cost.
A 25-basis-point increase or decrease in the discount rate would result in an approximate corresponding decrease or increase, respectively, of approximately $42 million in the Plans’ estimated PBO and accumulated postretirement benefit obligation (APBO) based upon March 31, 2024 data. The expected long-term return on plan assets assumption is used in calculating the net periodic benefit cost.
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.
Such forward-looking statements often contain words such as “aim,” “anticipate,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “opportunity,” “plan,” “position,” “predict,” “project,” “should,” “seek,” “target,” “will,” “would,” 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 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 and partners; ● inability to attract and retain key personnel and other skilled employees; ● impact of local legal, economic, political, health and other conditions; ● 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; ● the impairment of our goodwill or long-lived assets; ● risks relating to cybersecurity and data privacy; ● risks relating to non-compliance with legal and regulatory requirements; ● adverse effects from tax matters and environmental matters; ● legal proceedings and investigatory risks and potential indemnification obligations; ● impact of changes in market liquidity conditions and customer credit risk on receivables; ● the Company’s pension plans; ● the impact of 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 this report, as such factors may be updated from time to time in the Company’s periodic filings with the SEC.
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: ​ ● failure to attract new customers, retain existing customers or sell additional services to customers; ● failure to meet growth and productivity objectives; ● competition; ● impacts of relationships with critical suppliers and partners; ● failure to address and adapt to technological developments and trends; ● inability to attract and retain key personnel and other skilled employees; ● impact of economic, political, public health and other conditions; ● 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 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, retain and extend necessary licenses; ● the impairment of our goodwill or long-lived assets; ● risks relating to cybersecurity, data governance and privacy; ● risks relating to non-compliance with legal and regulatory requirements; ● adverse effects from tax matters and environmental matters; ● legal proceedings and investigatory risks and potential indemnification obligations; ● impact of changes in market liquidity conditions and customer credit risk on receivables; ● the Company’s pension plans; ● the impact of currency fluctuations; ● risks related to the Company’s spin-off from IBM; ● risks related to deficiencies identified in our information technology general control; 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 this report, as such factors may be updated from time to time in the Company’s subsequent filings with the SEC.
In addition, the Credit Agreements include customary events of default and affirmative and negative covenants as well as a maintenance covenant that will require that the ratio of our indebtedness for borrowed money to consolidated EBITDA (as defined in the Credit Agreements) for any period of four consecutive fiscal quarters be no greater than 3.50 to 1.00.
In addition, it includes customary events of default and affirmative and negative covenants as well as a maintenance covenant that will require that the ratio of our indebtedness for borrowed money to consolidated EBITDA (as defined in the Revolving Credit Agreement) for any period of four consecutive fiscal quarters be no greater than 3.50 to 1.00.
Certain of these commitments were allocated to the Company as part of the Separation from its former Parent. The Company has determined that these commitments may exceed the Company’s needs over the next four to six years.
Certain of these commitments were allocated to the Company as part of the Separation from its former Parent. The Company has determined that these commitments may exceed the Company’s needs over the next two to three years.
Adjusted EBITDA is a non-GAAP measure and defined as net income (loss) excluding net interest expense, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of capitalized contract costs), charges related to ceasing to use leased/fixed assets, charges related to lease terminations, transaction-related costs, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, workforce rebalancing charges, impairment expense, significant litigation costs and foreign currency impacts of highly inflationary countries.
Adjusted EBITDA is a non-GAAP measure and defined as net income (loss) excluding income taxes, interest expense, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of capitalized contract costs), charges related to ceasing to use leased/fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension expenses other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, workforce rebalancing charges incurred prior to March 31, 2024, impairment expense, significant litigation costs and currency impacts of highly inflationary countries.
For additional information, see Note 19 – Workforce Rebalancing and Site-Rationalization Charges in the accompanying Consolidated Financial Statements. ​ Income Taxes The Company’s consolidated provision for income taxes and effective tax rate were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months ​ ​ ​ ​ ​ ​ Year Ended ​ Ended March ​ Year Ended ​ ​ March 31, ​ 31, 2022 ​ December 31, (Dollars in millions) 2023 (unaudited) 2021 Provision for income taxes ​ $ 524 ​ ​ $ 350 ​ ​ $ 402 ​ Effective tax rate ​ ​ (61.6) % ​ ​ (20.7) % ​ ​ (21.1) % ​ In the year ended March 31, 2023, the twelve months ended March 31, 2022 and the year ended December 31, 2021, we recorded income tax expense of $524 million, $350 million and $402 million, respectively, on pretax book losses, which resulted in negative effective tax rates.
For additional information, see Note 19 – Workforce Rebalancing and Site-Rationalization Charges in the accompanying Consolidated Financial Statements. ​ Income Taxes The Company’s consolidated provision for income taxes and effective tax rate were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months ​ ​ Year Ended ​ Year Ended ​ Ended March ​ ​ March 31, ​ March 31, ​ 31, 2022 (Dollars in millions) 2024 2023 (unaudited) Provision for income taxes ​ $ 172 ​ ​ $ 524 ​ ​ $ 350 ​ Effective tax rate ​ ​ (102.2) % ​ ​ (61.6) % ​ ​ (20.7) % ​ In the years ended March 31, 2024 and 2023, and the twelve months ended March 31, 2022, we recorded income tax expense of $172 million, $524 million and $350 million, respectively, on pretax losses, which resulted in negative effective tax rates.
The initial term of this agreement was 18 months, and the agreement automatically resets to a term of 18 months after every six months, unless one of the parties elects not to extend.
The initial term of this agreement was 18 months, and the agreement automatically resets to a term of 18 months after every six months, unless either party elects not to extend.
Management expects that these workforce rebalancing activities will reduce future payroll costs, rent expenses and depreciation of property and equipment by approximately $200 million in fiscal year 2024. There can be no guarantee that we will achieve our expected cost savings.
Management expects that these workforce rebalancing and site-rationalization activities will reduce payroll costs, rent expenses and depreciation of property and equipment by approximately $400 million in fiscal year 2025. There can be no guarantee that we will achieve our expected cost savings.
Corporate and other had an adjusted EBITDA loss of $154 million in the year ended December 31, 2021 compared to a loss of $153 million in the prior year. 36 Table of Contents Costs and Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ended ​ Months Ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ Percent of Revenue ​ Change (Dollars in millions) 2023 ​ 2022 (unaudited) 2023 ​ 2022 2023 vs. 2022 Revenue ​ $ 17,026 ​ $ 18,317 ​ 100.0 % ​ 100.0 % ​ (7) % Cost of services ​ ​ 14,498 ​ ​ 16,057 ​ 85.2 % ​ 87.7 % (10) % Selling, general and administrative expenses ​ ​ 2,914 ​ ​ 2,752 ​ 17.1 % ​ 15.0 % 6 % Workforce rebalancing charges (benefits) ​ 71 ​ (13) 0.4 % ​ (0.1) % NM ​ Transaction-related costs ​ ​ 264 ​ ​ 630 ​ 1.5 % ​ 3.4 % ​ (58) % Impairment expense ​ ​ — ​ ​ 469 ​ — ​ ​ 2.6 % ​ (100) % Interest expense ​ 94 ​ 71 0.5 % ​ 0.4 % 31 % Other expense ​ 35 ​ 40 0.2 % ​ 0.2 % (12) % Income (loss) before income taxes ​ $ (851) ​ $ (1,689) ​ ​ ​ ​ ​ NM – not meaningful ​ Cost of services was 85.2% of revenue in the year ended March 31, 2023, compared to 87.7% in the twelve months ended March 31, 2022, primarily driven by progress on our key initiatives and lower costs from our post-Separation commercial agreements with IBM, offset in part by certain site-rationalization activities.
Interest expense was 0.8% of revenue in the year ended March 31, 2024 compared to 0.5% in the prior year due to higher interest rates in fiscal 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ended ​ Months Ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ Percent of Revenue ​ Change (Dollars in millions) 2023 ​ 2022 (unaudited) 2023 ​ 2022 2023 vs. 2022 Revenue ​ $ 17,026 ​ $ 18,317 ​ 100.0 % ​ 100.0 % ​ (7) % Cost of services ​ ​ 14,498 ​ ​ 16,057 ​ 85.2 % ​ 87.7 % (10) % Selling, general and administrative expenses ​ ​ 2,914 ​ ​ 2,752 ​ 17.1 % ​ 15.0 % 6 % Workforce rebalancing charges ​ 71 ​ (13) 0.4 % ​ (0.1) % NM ​ Transaction-related costs ​ ​ 264 ​ ​ 630 ​ 1.5 % ​ 3.4 % ​ (58) % Impairment expense ​ — ​ 469 — ​ ​ 2.6 % ​ (100) % Interest expense ​ 94 ​ 71 0.5 % ​ 0.4 % 31 % Other expense ​ 35 ​ 40 0.2 % ​ 0.2 % (12) % Income (loss) before income taxes ​ $ (851) ​ $ (1,689) ​ ​ ​ ​ ​ NM – not meaningful ​ Cost of services was 85.2% of revenue in the year ended March 31, 2023, compared to 87.7% in the twelve months ended March 31, 2022, primarily driven by progress on our key initiatives and lower costs from our post-Separation commercial agreements with IBM, offset in part by certain site-rationalization activities.
A hypothetical 200-basis-point increase in the discount rate or decline in revenue growth, combined with no other changes to other inputs and assumptions used in the analysis, would not result in a potential impairment for the Canada reporting unit.
A hypothetical 100-basis-point increase in the discount rate or a hypothetical 100-basis-point decline in revenue growth rate, combined with no other changes to other inputs and assumptions used in the analysis, would not result in a potential impairment.
Our 2021 income tax expense was primarily related to taxes on foreign operations generating taxable income, uncertain tax positions and tax charges related to the transfer of Kyndryl’s operations from Parent in contemplation of the Company’s Separation from IBM. ​ The effective tax rate for the year ended March 31, 2023 was lower compared to the twelve months ended March 31, 2022 primarily due to increases in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized.
Our income tax expense for the twelve months ended March 31, 2022 was primarily related to taxes on foreign operations, uncertain tax positions, tax charges related to the transfer of Kyndryl’s operations from Parent in contemplation of the Company’s separation from IBM and the establishment of valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized. ​ The effective tax rate for the year ended March 31, 2024 was lower (more negative) compared to the year ended March 31, 2023 primarily due to the Company’s pretax loss being significantly lower in fiscal year 2024.
If the average discount rate assumption for the non-U.S. defined benefit pension plans had increased or decreased by 25-basis-points from 3.57 percent on March 31, 2023, this would not result in a material change to pretax income recognized in fiscal 2024.
If the average discount rate assumption for the non-U.S. defined benefit pension plans had increased or decreased by 25-basis-points from 3.30% on March 31, 2024, this would not result in a material change to pretax net periodic benefit cost recognized in fiscal 2025.
We provide these non-GAAP financial measures as we believe it improves visibility to underlying results and the impact of management decisions on operational performance and enables better comparison to peer companies. ​ Revenue growth in constant currency is a non-GAAP measure that eliminates the effects of exchange rate fluctuations when translating from foreign currencies to the United States dollar.
We provide these non-GAAP financial measures as we believe they enhance visibility to underlying results and the impact of management decisions on operational performance, enables better comparison to peer companies and allows us to provide a long-term strategic view of the business going forward. ​ Revenue growth in constant currency is a non-GAAP measure that eliminates the effects of exchange rate fluctuations when translating from foreign currencies to the United States dollar.
Corporate and Other ​ Corporate and other generated an adjusted EBITDA loss of $77 million in the year ended March 31, 2023, compared to a loss of $170 million in the twelve months ended March 31, 2022.
Corporate and Other ​ Corporate and other generated an adjusted EBITDA loss of $95 million in the year ended March 31, 2024, compared to a loss of $77 million in the year ended March 31, 2023.
These valuations require the use of management’s assumptions, which would not reflect unanticipated events and circumstances that may occur. Assumptions used to perform a recoverability test are consistent with those used for goodwill impairment; see “Valuation of Goodwill” for further detail.
Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management’s assumptions, which would not reflect unanticipated events and circumstances that may occur. Assumptions used to perform a recoverability test are consistent with those used for goodwill impairment; see “Valuation of Goodwill” for further detail.
The estimation of cost at completion is complex and requires us to make judgments and estimates. Other significant judgments include determining whether we are acting as the principal in a transaction and whether separate contracts should be combined and considered part of one arrangement.
The estimation of future costs, which is updated as the project progresses, is complex and requires us to make judgments. Other significant judgments include determining whether we are acting as the principal in a transaction and whether separate contracts should be combined and considered part of one arrangement.
Valuation of Goodwill We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable by first assessing qualitative factors to determine if it is more likely than not that fair value is less than carrying value.
Valuation of Goodwill We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable by first assessing qualitative factors to determine if it is more likely than not that fair value is less than carrying value. 44 Table of Contents We assess qualitative factors in each of our reporting units that carry goodwill including relevant events and circumstances that affect the fair value of reporting units.
In assessing the need for a valuation allowance, management considers all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies and actions.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, management considers all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies and actions.
GAAP basis compared to the corresponding period in the prior year. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes. ​ The following table provides a reconciliation of U.S.
Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes. ​ The following table provides a reconciliation of U.S.
Total equity at March 31, 2023 of $1.5 billion decreased $1.2 billion from March 31, 2022 due to comprehensive loss in the period. Overall pension funded status as of March 31, 2023 was 74% of estimated pension benefit obligation, an increase from 68% at March 31, 2022.
Total equity of $1.1 billion at March 31, 2024 decreased $340 million from March 31, 2023, principally due to our comprehensive loss in the period. Overall pension funded status as of March 31, 2024 was 75% of estimated pension benefit obligation, an increase from 74% at March 31, 2023.
GAAP, see “⸺Segment Results.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ December 31, (Dollars in millions) 2023 2022 2021 Assets ​ $ 11,464 ​ $ 13,442 ​ $ 13,213 Liabilities ​ ​ 10,002 ​ ​ 10,730 ​ ​ 10,446 Equity ​ ​ 1,462 ​ ​ 2,711 ​ ​ 2,767 ​ Organization of Information Kyndryl Holdings, Inc. was formed as a wholly-owned subsidiary of IBM in September 2021 to hold the operations of the managed infrastructure services unit of IBM’s Global Technology Services segment.
GAAP, see “⸺Segment Results.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, (Dollars in millions) 2024 2023 Assets ​ $ 10,590 ​ $ 11,464 Liabilities ​ ​ 9,468 ​ ​ 10,002 Equity ​ ​ 1,122 ​ ​ 1,462 ​ Organization of Information Kyndryl Holdings, Inc. was formed as a wholly-owned subsidiary of IBM in September 2021 to hold the operations of the infrastructure services unit of IBM’s Global Technology Services segment.
Any forward-looking statement in this report 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. ​
Any forward-looking statement in this report 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, whether as a result of new information, future events or otherwise. ​ 46 Table of Contents
The Company also filed certain separate foreign income tax returns. For purposes of the historical periods presented on a “carve-out” basis, the income tax provisions have been calculated using the separate return basis, as if we filed separate tax returns. Post-Separation, the income tax provisions are calculated based on Kyndryl’s operating footprint, as well as tax return elections and assertions.
The Company also filed certain separate foreign income tax returns. For purposes of the historical periods presented on a “carve-out” basis, the income tax provisions have been calculated using the separate return basis, as if we filed separate tax returns.
Post-Separation, the differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company’s income tax return are recorded as a benefit or expense to the provision for income taxes in the Consolidated Income Statement. 46 Table of Contents Valuation of Assets The application of valuation and impairment accounting requires the use of significant estimates and assumptions.
Post-Separation, the differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company’s income tax return are recorded as a benefit or expense to the provision for income taxes in the Consolidated Income Statement.
Strategic Markets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ Year Ended ​ Months Ended ​ ​ March 31, ​ March 31, (Dollars in millions) 2023 ​ 2022 (unaudited) Revenue ​ $ 3,840 ​ ​ $ 3,867 ​ Revenue year-over-year change ​ ​ (1) % ​ ​ (2) % Revenue growth in constant currency ​ ​ 6 % ​ ​ (2) % Adjusted EBITDA ​ ​ 436 ​ ​ ​ 535 ​ Adjusted EBITDA year-over-year change ​ ​ (19) % ​ ​ ​ ​ ​ For the year ended March 31, 2023, Strategic Markets revenue of $3.8 billion decreased 1 percent compared to the twelve months ended March 31, 2022 driven by a seven-point headwind from currency exchange rates, primarily the Euro, partially offset by signings of incremental business, including increased Kyndryl Consult revenues.
For the year ended March 31, 2023, Strategic Markets revenue of $3.8 billion decreased 1 percent compared to the twelve months ended March 31, 2022 driven by a seven-point headwind from currency exchange rates, primarily the Euro, partially offset by signings of incremental business, including increased Kyndryl Consult revenues.
The Company is presenting unaudited results of operations for the twelve months ended March 31, 2022 because management believes this comparison will be helpful to a reader’s understanding of our fiscal year 2023 results. Results for the twelve months ended March 31, 2022 were derived from our quarterly consolidated financial statements as previously reported.
The Company is presenting results of operations for the year ended March 31, 2023 and unaudited results of operations for the twelve months ended March 31, 2022 because management believes this comparison will be helpful to a reader’s understanding of our fiscal year 2024 results.
All significant intercompany transactions between IBM and Kyndryl prior to the Separation were included within Net Parent investment on the accompanying Consolidated Financial Statements. Prior to the Separation, our operations were included in the consolidated U.S. federal and certain state and local and foreign income tax returns filed by IBM, where applicable.
All significant transactions and accounts between Kyndryl entities were eliminated. Prior to the Separation, our operations were included in the consolidated U.S. federal and certain state and local and foreign income tax returns filed by IBM, where applicable.
Corporate and other had an adjusted EBITDA loss of $56 million in the three months ended March 31, 2022 (transition period), compared to a loss of $40 million in the prior-year quarter. The improvements were driven by lower executive expenses incurred by Kyndryl post-Separation compared to corporate expenses allocated by the former Parent in prior-year periods.
Corporate and other generated an adjusted EBITDA loss of $77 million in the year ended March 31, 2023, compared to a loss of $170 million in the twelve months ended March 31, 2022, driven by lower executive expenses incurred by Kyndryl post-Separation compared to corporate expenses allocated by the former Parent in the prior-year period.
After the Separation on November 3, 2021, the Company’s financial statements for the periods from November 4, 2021, through March 31, 2023, are consolidated financial statements based on our reported results as a standalone company. All significant transactions and accounts between Kyndryl entities were eliminated.
All significant intercompany transactions between IBM and Kyndryl prior to the Separation were included within Net Parent investment on the accompanying Consolidated Financial Statements. After the Separation on November 3, 2021, the Company’s financial statements for the periods from November 4, 2021, through March 31, 2024, are consolidated financial statements based on our reported results as a standalone company.
The fees associated with the transfers of receivables were $47 million for the year ended March 31, 2023, and $11 million for the twelve months ended March 31, 2022. ​ Off-Balance Sheet Arrangements and Contractual Obligations From time to time, we may enter into (i) off-balance sheet arrangements as defined by SEC Financial Reporting Release 67 (FRR-67), “Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations” or (ii) purchase commitments, which we expect to use in the ordinary course of business.
The obligations outstanding under this program at March 31, 2024 were immaterial. ​ Off-Balance Sheet Arrangements and Contractual Obligations From time to time, we may enter into (i) off-balance sheet arrangements as defined by SEC Financial Reporting Release 67 (FRR-67), “Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations” or (ii) purchase commitments, which we expect to use in the ordinary course of business.
Segment revenue and revenue growth in constant currency exclude any transactions between the segments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Months Ended ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ December 31, ​ Year-over-Year Change (Dollars in millions) 2023 ​ 2022 (unaudited) ​ 2021 ​ 2020 ​ 2023 vs. 2022 ​ 2021 vs. 2020 Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 4,726 ​ ​ $ 4,745 ​ ​ $ 4,805 ​ ​ $ 5,084 ​ ​ (0) % ​ (5) % Japan ​ ​ 2,502 ​ ​ ​ 2,866 ​ ​ ​ 2,923 ​ ​ ​ 3,042 ​ ​ (13) % ​ (4) % Principal Markets ​ ​ 5,957 ​ ​ ​ 6,838 ​ ​ ​ 7,085 ​ ​ ​ 7,187 ​ ​ (13) % ​ (1) % Strategic Markets ​ ​ 3,840 ​ ​ ​ 3,867 ​ ​ ​ 3,844 ​ ​ ​ 4,040 ​ ​ (1) % ​ (5) % Total revenue ​ $ 17,026 ​ ​ $ 18,317 ​ ​ $ 18,657 ​ ​ $ 19,352 ​ ​ (7) % ​ (4) % Revenue growth in constant currency (1) ​ ​ 0 % ​ ​ (5) % ​ ​ (5) % ​ ​ (5) % ​ ​ ​ ​ ​ ​ Adjusted EBITDA (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 839 ​ ​ $ 910 ​ ​ $ 842 ​ ​ $ 940 ​ ​ (8) % ​ (10) % Japan ​ ​ 407 ​ ​ ​ 532 ​ ​ ​ 501 ​ ​ ​ 534 ​ ​ (23) % ​ (6) % Principal Markets ​ ​ 371 ​ ​ ​ 387 ​ ​ ​ 341 ​ ​ ​ 375 ​ ​ (4) % ​ (9) % Strategic Markets ​ ​ 436 ​ ​ ​ 535 ​ ​ ​ 540 ​ ​ ​ 488 ​ ​ (19) % ​ 11 % Corporate and other (2) ​ ​ (77) ​ ​ ​ (170) ​ ​ ​ (154) ​ ​ ​ (153) ​ ​ NM ​ ​ NM ​ Total adjusted EBITDA (1) ​ $ 1,975 ​ ​ $ 2,195 ​ ​ $ 2,069 ​ ​ $ 2,185 ​ ​ (10) % ​ (5) % NM – not meaningful (1) Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics.
Segment revenue and revenue growth in constant currency exclude any transactions between the segments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Months Ended ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ March 31, ​ Year-over-Year Change (Dollars in millions) 2024 ​ 2023 ​ 2022 (unaudited) ​ 2024 vs. 2023 ​ 2023 vs. 2022 Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 4,295 ​ ​ $ 4,726 ​ ​ $ 4,745 ​ ​ (9) % ​ (0) % Japan ​ ​ 2,344 ​ ​ ​ 2,502 ​ ​ ​ 2,866 ​ ​ (6) % ​ (13) % Principal Markets ​ ​ 5,823 ​ ​ ​ 5,957 ​ ​ ​ 6,838 ​ ​ (2) % ​ (13) % Strategic Markets ​ ​ 3,590 ​ ​ ​ 3,840 ​ ​ ​ 3,867 ​ ​ (7) % ​ (1) % Total revenue ​ $ 16,052 ​ ​ $ 17,026 ​ ​ $ 18,317 ​ ​ (6) % ​ (7) % Revenue growth in constant currency (1) ​ ​ (6) % ​ ​ 0 % ​ ​ (5) % ​ ​ ​ ​ ​ ​ Adjusted EBITDA (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 781 ​ ​ $ 839 ​ ​ $ 910 ​ ​ (7) % ​ (8) % Japan ​ ​ 361 ​ ​ ​ 407 ​ ​ ​ 532 ​ ​ (11) % ​ (23) % Principal Markets ​ ​ 740 ​ ​ ​ 371 ​ ​ ​ 387 ​ ​ 99 % ​ (4) % Strategic Markets ​ ​ 579 ​ ​ ​ 436 ​ ​ ​ 535 ​ ​ 33 % ​ (19) % Corporate and other (2) ​ ​ (95) ​ ​ ​ (77) ​ ​ ​ (170) ​ ​ NM ​ ​ NM ​ Total adjusted EBITDA (1) ​ $ 2,367 ​ ​ $ 1,975 ​ ​ $ 2,195 ​ ​ 20 % ​ (10) % NM – not meaningful (1) Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics.
Cash Flow Our cash flows from operating, investing and financing activities are summarized in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ Year Ended ​ Months Ended ​ Year Ended ​ ​ March 31, ​ March 31, ​ December 31, (Dollars in millions) ​ 2023 2022 (unaudited) 2021 Net cash provided by (used in): ​ ​ ​ ​ ​ Operating activities ​ $ 781 ​ $ 398 ​ $ (119) Investing activities ​ (835) ​ (697) ​ (572) Financing activities ​ (141) ​ 2,429 ​ 2,915 Effect of exchange rate changes on cash, cash equivalents and restricted cash ​ (100) ​ (26) ​ (22) Net change in cash, cash equivalents and restricted cash ​ $ (294) ​ $ 2,104 ​ $ 2,203 ​ Net cash provided by operating activities was $781 million for the year ended March 31, 2023, compared to net cash provided by operating activities of $398 million for the twelve months ended March 31, 2022.
Cash Flow Our cash flows from operating, investing and financing activities are summarized in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, (Dollars in millions) 2024 2023 Net cash provided by (used in): ​ ​ Operating activities ​ $ 454 ​ $ 781 Investing activities ​ (553) ​ (835) Financing activities ​ (170) ​ (141) Effect of exchange rate changes on cash, cash equivalents and restricted cash ​ (37) ​ (100) Net change in cash, cash equivalents and restricted cash ​ $ (306) ​ $ (294) ​ Net cash provided by operating activities was $454 million for the year ended March 31, 2024, compared to net cash provided by operating activities of $781 million for the year ended March 31, 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations: Overview ​ In January 2022, the Company changed its fiscal year-end to March 31 from December 31.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . Overview ​ In January 2022, the Company changed its fiscal year-end to March 31 from December 31. Included below are selected results and year-over-year comparisons for the years ended March 31, 2024 and 2023, and the twelve months ended March 31, 2022 (unaudited).
The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included elsewhere in this report.
Results for the twelve months ended March 31, 2022 were derived from our quarterly consolidated financial statements as previously reported. The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included elsewhere in this report.
Net loss of $1.4 billion improved by $665 million versus the prior twelve-month period, primarily driven by lower impairment expense, lower transaction-related costs, and lower cost of services as a percentage of revenue, reflecting our progress on our key initiatives. See Part I. Item 1, “Business – Our Strategies” for additional information on our key initiatives.
Net loss of $1.4 billion improved by $665 million versus the prior twelve-month period, primarily driven by lower impairment expense, lower transaction-related costs, and lower cost of services as a percentage of revenue, reflecting our progress on our key initiatives. Basis of Presentation We prepare our consolidated financial statements in accordance with U.S.
Other expense was 0.2% of revenue in 2021 compared to 0.1% in 2020. ​ Transaction-related Charges ​ The Company classifies certain expenses related to the Separation, acquisitions and divestitures (if any) as “transaction-related costs” in the Consolidated Income Statement.
Other expense was 0.2% of revenue in the year ended March 31, 2023 compared to 0.2% in the twelve months ended March 31, 2022. ​ Transaction-Related Costs (Benefits) ​ The Company classifies certain expenses and benefits related to the Separation, acquisitions and divestitures (if any) as “transaction-related costs (benefits)” in the Consolidated Income Statement.
Transaction-related costs include expenditures incurred to prepare for and execute the Separation and establish Kyndryl as a standalone business, such as employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand, legal, accounting, consulting and other professional services costs required to prepare for and execute the Separation. ​ Workforce Rebalancing and Site-Rationalization Charges ​ During the year ended March 31, 2023, management initiated certain actions to reduce the Company’s overall cost structure and increase our operating efficiency.
Transaction-related costs include employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand, legal, accounting, consulting and other professional service costs required, pre-Separation and post-Separation, to prepare for and execute the Separation, costs and benefits resulting from settlements with our former Parent associated with pre-Separation and Separation-related matters, and other costs related to contract and supplier novation and integration. ​ Workforce Rebalancing and Site-Rationalization Charges ​ During the year ended March 31, 2023, management initiated certain actions to reduce the Company’s overall cost structure and increase our operating efficiency, which continued through the fiscal year ended March 31, 2024.
GAAP net income (loss) to adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ Ended ​ Months Ended ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ Year Ended December 31, (Dollars in millions) 2023 2022 (unaudited) 2021 2020 Net income (loss) ​ $ (1,374) ​ $ (2,039) ​ $ (2,304) ​ $ (2,007) Provision for income taxes ​ ​ 524 ​ ​ 350 ​ ​ 402 ​ ​ 247 Workforce rebalancing charges (benefits) ​ ​ 71 ​ ​ (13) ​ ​ 39 ​ ​ 918 Charges related to ceasing to use leased/fixed assets and lease terminations ​ ​ 80 ​ ​ — ​ ​ — ​ ​ — Transaction-related costs ​ ​ 264 ​ ​ 630 ​ ​ 627 ​ ​ 21 Stock-based compensation expense ​ ​ 113 ​ ​ 86 ​ ​ 71 ​ ​ 64 Impairment expense ​ ​ — ​ ​ 469 ​ ​ 469 ​ ​ — Interest expense ​ ​ 94 ​ ​ 71 ​ ​ 64 ​ ​ 63 Depreciation of property, equipment and capitalized software ​ ​ 900 ​ ​ 1,206 ​ ​ 1,300 ​ ​ 1,445 Amortization expense ​ ​ 1,245 ​ ​ 1,310 ​ ​ 1,314 ​ ​ 1,408 Other adjustments* ​ ​ 59 ​ ​ 124 ​ ​ 88 ​ ​ 27 Adjusted EBITDA (non-GAAP) ​ $ 1,975 ​ $ 2,195 ​ $ 2,069 ​ $ 2,185 * Other adjustments represent pension expense other than pension servicing costs and multi-employer plan costs, significant litigation costs and currency impacts of highly inflationary countries. ​ United States ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ Year Ended ​ Months Ended ​ ​ March 31, ​ March 31, (Dollars in millions) 2023 ​ 2022 (unaudited) Revenue ​ $ 4,726 ​ ​ $ 4,745 ​ Revenue year-over-year change ​ ​ (0) % ​ ​ (6) % Adjusted EBITDA ​ ​ 839 ​ ​ ​ 910 ​ Adjusted EBITDA year-over-year change ​ ​ (8) % ​ ​ ​ ​ ​ For the year ended March 31, 2023, United States revenue of $4.7 billion was unchanged compared to the twelve months ended March 31, 2022.
GAAP net income (loss) to adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ Months Ended ​ ​ Year Ended March 31, ​ March 31, (Dollars in millions) 2024 2023 2022 (unaudited) Net income (loss) ​ $ (340) ​ $ (1,374) ​ $ (2,039) Provision for (benefit from) income taxes ​ ​ 172 ​ ​ 524 ​ ​ 350 Interest expense ​ ​ 122 ​ ​ 94 ​ ​ 71 Depreciation of property, equipment and capitalized software ​ ​ 834 ​ ​ 900 ​ ​ 1,206 Amortization expense ​ ​ 1,287 ​ ​ 1,245 ​ ​ 1,310 Workforce rebalancing charges ​ ​ 138 ​ ​ 71 ​ ​ (13) Charges related to ceasing to use leased/fixed assets and lease terminations ​ ​ 39 ​ ​ 80 ​ ​ — Transaction-related costs (benefits) ​ ​ (46) ​ ​ 264 ​ ​ 630 Stock-based compensation expense ​ ​ 95 ​ ​ 113 ​ ​ 86 Impairment expense ​ ​ — ​ ​ — ​ ​ 469 Other adjustments* ​ ​ 68 ​ ​ 59 ​ ​ 124 Adjusted EBITDA (non-GAAP) ​ $ 2,367 ​ $ 1,975 ​ $ 2,195 * Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs, currency impacts of highly inflationary countries, and an adjustment to reduce amortization expense for the amount already included in transaction-related costs (benefits) above. ​ United States ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, (Dollars in millions) 2024 ​ 2023 Revenue ​ $ 4,295 ​ ​ $ 4,726 ​ Revenue year-over-year change ​ ​ (9) % ​ ​ (0) % Adjusted EBITDA ​ ​ 781 ​ ​ ​ 839 ​ Adjusted EBITDA year-over-year change ​ ​ (7) % ​ ​ ​ ​ ​ For the year ended March 31, 2024, United States revenue of $4.3 billion decreased 9 percent compared to the year ended March 31, 2023, driven by the Company’s efforts to reduce certain low-margin revenues.
The Company performs ongoing profitability analyses of its design-and-build services contracts accounted for using a cost-to-cost measure of progress to determine whether the latest estimates of revenues, costs and profits require updating. If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately.
The Company performs ongoing profitability analyses of its design-and-build services contracts accounted for using a cost-to-cost measure of progress to determine whether the latest estimates of revenues, costs and profits require updating.
Capitalization of Contract Costs In connection with services arrangements, we incur and capitalize direct costs for transition and setup activities performed at the inception of these long-term contracts that are necessary to enable us to perform under the terms of the arrangement. These costs are capitalized and are amortized on a straight-line basis over the expected period of benefit.
Key factors reviewed to estimate the future costs to complete each contract are future labor costs, product costs and expected productivity efficiencies. 42 Table of Contents Capitalization of Contract Costs In connection with services arrangements, we incur and capitalize direct costs for transition and setup activities performed at the inception of these long-term contracts that are necessary to enable us to perform under the terms of the arrangement.
Such estimates require judgment and assumptions, and actual future cash flows could differ from these estimates. A significant change in an estimate or assumption on one or more contracts could have a material effect on our results of operations.
A significant change in an estimate or assumption on one or more contracts could have a material effect on our results of operations.
Impairment testing for assets, other than goodwill, requires the allocation of cash flows to those assets or group of assets and if required, an estimate of fair value for the assets or group of assets. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.
Valuation of Assets The application of valuation and impairment accounting requires the use of significant estimates and assumptions. Impairment testing for assets, other than goodwill, requires the allocation of cash flows to those assets or group of assets and if required, an estimate of fair value for the assets or group of assets.
We perform periodic reviews to assess the recoverability of deferred contract transition and setup costs. To assess recoverability, undiscounted estimated cash flows of the contract are projected over its remaining life and compared to the carrying amount of contract-related assets, including the unamortized deferred cost balance.
To assess recoverability, undiscounted estimated cash flows of the contract are projected over its remaining life and compared to the carrying amount of contract-related assets, including the unamortized deferred cost balance. Such estimates require judgment and assumptions, and actual future cash flows could differ from these estimates.
Principal Markets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ Year Ended ​ Months Ended ​ ​ March 31, ​ March 31, (Dollars in millions) 2023 ​ 2022 (unaudited) Revenue ​ $ 5,957 ​ ​ $ 6,838 ​ Revenue year-over-year change ​ ​ (13) % ​ ​ (5) % Revenue growth in constant currency ​ ​ (4) % ​ ​ (7) % Adjusted EBITDA ​ ​ 371 ​ ​ ​ 387 ​ Adjusted EBITDA year-over-year change ​ ​ (4) % ​ ​ ​ ​ ​ For the year ended March 31, 2023, Principal Markets revenue of $6.0 billion decreased 13 percent compared to the twelve months ended March 31, 2022.
Principal Markets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, (Dollars in millions) 2024 ​ 2023 Revenue ​ $ 5,823 ​ ​ $ 5,957 ​ Revenue year-over-year change ​ ​ (2) % ​ ​ (13) % Revenue growth in constant currency ​ ​ (4) % ​ ​ (4) % Adjusted EBITDA ​ ​ 740 ​ ​ ​ 371 ​ Adjusted EBITDA year-over-year change ​ ​ 99 % ​ ​ ​ ​ ​ For the year ended March 31, 2024, Principal Markets revenue of $5.8 billion decreased 2 percent compared to the year ended March 31, 2023, including a favorable currency exchange rate impact of two points.
Post-Separation, liabilities related to unrecognized tax benefits for which the Company is liable are reported within the Consolidated Balance Sheet based upon tax authorities’ ability to assert the Company may be the primary obligor for historical taxes, among other factors. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets.
Post-Separation, our income tax provisions are calculated based on Kyndryl’s operating footprint, as well as our tax return elections and assertions. Liabilities related to unrecognized tax benefits for which the Company is liable are reported within the Consolidated Balance Sheet based upon tax authorities’ ability to assert the Company may be the primary obligor for historical taxes, among other factors.
Percentages presented are calculated from the underlying whole-dollar amounts. 32 Table of Contents Segment Results The following table presents our reportable segments’ revenue and adjusted EBITDA for the year ended March 31, 2023, the twelve months ended March 31, 2022, and the years ended December 31, 2021 and 2020.
Segment Results The following table presents our reportable segments’ revenue and adjusted EBITDA for the years ended March 31, 2024 and 2023, and the twelve months ended March 31, 2022.
The accompanying financial statements through the Separation date reflect allocations of certain IBM corporate, infrastructure and shared services expenses, including centralized research, legal, human resources, payroll, finance and accounting, employee benefits, real estate, insurance, information technology, telecommunications, treasury and other expenses.
Prior to November 3, 2021, the accompanying financial statements of Kyndryl were derived from the consolidated financial statements and accounting records of the former Parent as if the Company operated on a standalone basis during this period and reflect allocations of certain IBM corporate, infrastructure and shared services expenses, including centralized research, legal, human resources, payroll, finance and accounting, employee benefits, real estate, insurance, information technology, telecommunications, treasury and other expenses.
Capital expenditures consist of payments for property and equipment, and purchased and internally-developed software. Net cash used by financing activities totaled $141 million for the year ended March 31, 2023, compared to net cash provided by financing activities of $2.4 billion for the twelve months ended March 31, 2022.
Net cash used by investing activities was $553 million for the year ended March 31, 2024, compared to a net cash use of $835 million for the year ended March 31, 2023 due to lower capital expenditures and the sale of certain fixed assets. Capital expenditures consist of payments for property and equipment, and purchased and internally-developed software.
Adjusted EBITDA decreased $16 million from the prior twelve-month period, due to unfavorable currency exchange rates, partially offset by progress on our key initiatives. For the three months ended March 31, 2022 (transition period), Principal Markets revenue of $1.6 billion decreased 14 percent as compared to the prior-year quarter.
Adjusted EBITDA decreased $16 million from the prior twelve-month period, due to unfavorable currency exchange rates, partially offset by progress on our key initiatives. 35 Table of Contents Strategic Markets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, (Dollars in millions) 2024 ​ 2023 Revenue ​ $ 3,590 ​ ​ $ 3,840 ​ Revenue year-over-year change ​ ​ (7) % ​ ​ (1) % Revenue growth in constant currency ​ ​ (10) % ​ ​ 6 % Adjusted EBITDA ​ ​ 579 ​ ​ ​ 436 ​ Adjusted EBITDA year-over-year change ​ ​ 33 % ​ ​ ​ ​ ​ For the year ended March 31, 2024, Strategic Markets revenue of $3.6 billion decreased 7 percent compared to the year ended March 31, 2023, including a favorable currency exchange rate impact of three points.
The Notes are subject to customary affirmative covenants, negative covenants and events of default for financings of this type and are redeemable at our option in a customary manner. ​ In connection with the issuance of the Notes, we entered into a registration rights agreement with the initial purchasers of the Notes, pursuant to which we completed a registered offering to exchange each series of Notes for new notes with substantially identical terms during the quarter ended September 30, 2022. ​ Term Loan and Revolving Credit Facility ​ In October 2021, we entered into a $500 million three-year variable rate term loan credit agreement (the “Term Loan Credit Agreement”).
The 2034 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness. ​ The Initial Notes and the 2034 Notes are subject to customary affirmative covenants, negative covenants and events of default for financings of this type and are redeemable at our option in a customary manner. ​ Term Loan and Revolving Credit Facility ​ In October 2021, we entered into a $500 million three-year variable rate term loan credit agreement (the “Term Loan Credit Agreement”), which was scheduled to mature in November 2024.
The carrying value of the financial asset sold is derecognized, and a net gain or loss on the sale is recognized, at the time of the transfer.
The carrying value of the financial asset sold is derecognized, and a net gain or loss on the sale is recognized, at the time of the transfer. The first agreement, which was executed in November 2021 and subsequently amended, enabled us to sell certain of our trade receivables to the counterparty.
During the year ended March 31, 2023, the Company recognized $55 million in workforce rebalancing charges (excluding individual terminations outside of this Company-wide workforce rebalancing program) and $80 million in charges related to ceasing to use leased and owned fixed assets and lease termination charges. ​ 38 Table of Contents Management expects total future charges for this program to be approximately $135 million, consisting of $95 million in workforce rebalancing charges and $40 million in charges related to ceasing to use leased and owned fixed assets and lease termination charges.
During the year ended March 31, 2024, the Company recognized $135 million in workforce rebalancing charges (excluding individual terminations outside of this Company-wide workforce rebalancing program) and $39 million in charges related to ceasing to use leased and owned fixed assets and lease termination charges. ​ Total cash outlays for this program are expected to be approximately $300 million, of which approximately $210 million has been paid through March 31, 2024 (including approximately $40 million of contractual payments toward leased assets we have ceased to use) and approximately $60 million is expected to be paid in fiscal year 2025.
We refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, revised and updated as set forth on Exhibit 99.1 to the 8-K/A, as the “2021 Form 10-K”. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Months Ended ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ March 31, ​ Year Ended ​ Year Ended ​ ​ March 31, ​ 2022 ​ December 31, ​ December 31, (Dollars in millions) ​ 2023 ​ (unaudited) ​ 2021 ​ 2020 Revenue ​ $ 17,026 ​ ​ $ 18,317 ​ ​ $ 18,657 ​ ​ $ 19,352 ​ Revenue growth (GAAP) ​ ​ (7) % ​ ​ (5) % ​ ​ (4) % ​ ​ (5) % Revenue growth in constant currency (1) ​ ​ 0 % ​ ​ (5) % ​ ​ (5) % ​ ​ (5) % Net income (loss) ​ $ (1,374) ​ ​ $ (2,039) ​ ​ $ (2,304) ​ ​ $ (2,007) ​ Adjusted EBITDA (1) ​ $ 1,975 ​ ​ $ 2,195 ​ ​ $ 2,069 ​ ​ $ 2,185 ​ (1) Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics.
For further information on (i) the comparisons between the year ended March 31, 2023 and the twelve months ended March 31, 2022 not covered in the “Segment Results” below, (ii) the comparison between the three months ended March 31, 2023 and the three months ended March 31, 2022 (the 2022 transition period) and (iii) the year ended December 31, 2021, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (the “2023 Form 10-K”). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Months Ended ​ ​ ​ ​ ​ ​ March 31, ​ ​ Year Ended March 31, ​ 2022 (Dollars in millions) ​ 2024 ​ 2023 ​ (unaudited) Revenue ​ $ 16,052 ​ ​ $ 17,026 ​ ​ $ 18,317 ​ Revenue growth (GAAP) ​ ​ (6) % ​ ​ (7) % ​ ​ (5) % Revenue growth in constant currency (1) ​ ​ (6) % ​ ​ 0 % ​ ​ (5) % Net income (loss) ​ $ (340) ​ ​ $ (1,374) ​ ​ $ (2,039) ​ Adjusted EBITDA (1) ​ $ 2,367 ​ ​ $ 1,975 ​ ​ $ 2,195 ​ (1) Revenue growth in constant currency and adjusted EBITDA are non-GAAP financial metrics.
Income Taxes Prior to the Separation, our operations were included in the consolidated U.S. federal and certain state and local and foreign income tax returns filed by IBM. The Company also filed certain separate foreign income tax returns.
For additional information on our pension plans and the development of these assumptions, see Note 16 – Retirement-Related Benefits to our consolidated financial statements. 43 Table of Contents Income Taxes Prior to the Separation, our operations were included in the consolidated U.S. federal and certain state and local and foreign income tax returns filed by IBM.
Adjusted EBITDA decreased $71 million from the prior twelve-month period, primarily driven by certain software agreements moving from prepaid and amortized agreements to monthly subscription agreements as well as investments made to support being an independent company, partially offset by progress on our key initiatives.
Adjusted EBITDA decreased $71 million from the prior twelve-month period, primarily driven by certain software agreements moving from prepaid and amortized agreements to monthly subscription agreements as well as investments made to support being an independent company, partially offset by progress on our key initiatives. 34 Table of Contents Japan ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, (Dollars in millions) 2024 ​ 2023 Revenue ​ $ 2,344 ​ ​ $ 2,502 ​ Revenue year-over-year change ​ ​ (6) % ​ ​ (13) % Revenue growth in constant currency ​ ​ 0 % ​ ​ 5 % Adjusted EBITDA ​ ​ 361 ​ ​ ​ 407 ​ Adjusted EBITDA year-over-year change ​ ​ (11) % ​ ​ ​ ​ ​ For the year ended March 31, 2024, Japan revenue of $2.3 billion decreased 6 percent compared to the year ended March 31, 2023 , driven primarily by an unfavorable currency exchange rate impact of six points.
Our income tax expense for the twelve months ended March 31, 2022 was primarily related to taxes on foreign operations, uncertain tax positions, tax charges related to the transfer of Kyndryl’s operations from Parent in contemplation of the Company’s separation from IBM and the establishment of valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized.
The effective tax rate for the year ended March 31, 2023 was lower compared to the twelve months ended March 31, 2022 primarily due to increases in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized.
In fiscal year 2023, we saw continuing demand for information technology services, despite declining economic growth, increased geopolitical tensions, lingering effects of the COVID-19 pandemic, inflationary pressures and government efforts to stem inflation.
Following the Separation, Kyndryl became an independent, publicly-traded company and the world’s leading IT infrastructure services provider. ​ Financial Performance Summary Macro Dynamics In fiscal year 2024, we saw continuing demand for information technology services, despite concerns about economic growth, increased geopolitical tensions, inflationary pressures and government efforts to stem inflation.
Actual results in any given year can differ from actuarial assumptions because of economic and other factors. For additional information on our pension plans and the development of these assumptions, see Note 16 – Retirement-Related Benefits to our consolidated financial statements.
Actual results in any given year can differ from actuarial assumptions because of economic and other factors.
The initial term of this agreement is 12 months. ​ The net proceeds from these arrangements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows. Gross proceeds from receivables sold to third parties under the aforementioned programs were $3.1 billion for the year ended March 31, 2023.
Gross proceeds from receivables sold to third parties under the aforementioned programs were $3.6 billion for the year ended March 31, 2024 and $3.1 billion for the year ended March 31, 2023.
Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.
Post-Separation, the income tax provisions are calculated based on Kyndryl’s operating footprint, as well as our tax return elections and assertions. 32 Table of Contents Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts.
In addition, we utilize a combination of online training, educational tools, videos and other awareness initiatives to foster a culture of security awareness and responsibility among our workforce. ​ 48 Table of Contents Cautionary Note Regarding Forward-Looking Statements ​ This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 .
Cautionary Note Regarding Forward-Looking Statements ​ This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 .
For the three months ended March 31, 2022 (transition period), Japan revenue of $706 million decreased 7 percent as compared to the prior-year quarter.
For the year ended March 31, 2023, Principal Markets revenue of $6.0 billion decreased 13 percent compared to the twelve months ended March 31, 2022.
The Revolving Credit Agreement expires, unless extended, in October 2026, and the Term Loan Credit Agreement matures, unless extended, in November 2024. Interest rates on borrowings under the Credit Agreements are based on prevailing market interest rates, plus a margin, as further described in the Credit Agreements.
Interest rates on borrowings under the Revolving Credit Agreement will be based on prevailing market interest rates, plus a margin, as further described in the Revolving Credit Agreement. ​ The total facility fees recorded by the Company for the Revolving Credit Agreement were $5 million for the years ended March 31, 2024 and 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCurrency Exchange Rate Risk A hypothetical 10 percent adverse change in the levels of currency exchange rates relative to the U.S. dollar, with all other variables held constant, would result in a $220 million and a $180 million impact in the fair value of our financial instruments at March 31, 2023 and 2022, respectively. 50 Table of Contents
Biggest changeA hypothetical 10 percent adverse change in the levels of interest rates would not be material to our consolidated results of operations or cash flow. 47 Table of Contents Currency Exchange Rate Risk A hypothetical 10 percent adverse change in the levels of currency exchange rates relative to the U.S. dollar, with all other variables held constant, would result in a $154 million and a $220 million impact in the fair value of our financial instruments, primarily our cash, debt and derivatives, at March 31, 2024 and 2023, respectively. ​ 48 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk: Currency Rate Fluctuations Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our financial results and financial position. At March 31, 2023, currency changes resulted in assets and liabilities denominated in local currencies being translated into fewer dollars than the prior year.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . Currency Rate Fluctuations Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our financial results and financial position. At March 31, 2024, currency changes resulted in assets and liabilities denominated in local currencies being translated into fewer dollars than the prior year.
The discount rates used for the present value computations were selected based on market interest and foreign currency exchange rates in effect at March 31, 2023 and 2022. The differences in this comparison are the hypothetical losses associated with each type of risk.
The discount rates used for the present value computations were selected based on market interest and foreign currency exchange rates in effect at March 31, 2024 and 2023. The differences in this comparison are the hypothetical losses associated with each type of risk.
A hypothetical 10 percent adverse change in the levels of interest rates, with all other variables held constant, would result in a $12 million and a $17 million impact in the fair value of our financial instruments at March 31, 2023 and 2022, respectively.
A hypothetical 10 percent adverse change in the levels of interest rates, with all other variables held constant, would result in a $22 million and a $12 million impact in the fair value of our financial instruments at March 31, 2024 and 2023, respectively.
The results of the sensitivity analysis at March 31, 2023 and 2022 are as follows: Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to our fixed and variable-rate debts (See Note 11 – Borrowings in the accompanying Consolidated Financial Statements ).
The results of the sensitivity analysis at March 31, 2024 and 2023 are as follows: Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to our fixed-rate and variable-rate debt obligations (See Note 11 – Borrowings in the accompanying Consolidated Financial Statements ).
To meet disclosure requirements, we perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our financial assets. The financial instruments that are included in the sensitivity analysis are comprised of our cash and cash equivalents and short-term and long-term debt.
To meet disclosure requirements, we perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our financial assets. The financial instruments that are included in the sensitivity analysis are comprised of our cash and cash equivalents, debt obligations, and derivative instruments.
Based on the currency rate movements in the year ended March 31, 2023, total revenue decreased 7 percent as reported and was unchanged in constant currency versus the twelve months ended March 31, 2022. For non-U.S. subsidiaries and branches that operate in U.S. dollars or whose economic environment is highly inflationary, translation adjustments are reflected in results of operations.
Based on the currency rate movements in the year ended March 31, 2024, total revenue decreased 6 percent as reported and 6 percent in constant currency versus the year ended March 31, 2023. For non-U.S. subsidiaries and branches that operate in U.S. dollars or whose economic environment is highly inflationary, translation adjustments are reflected in results of operations.
At December 31, 2021, currency changes resulted in assets and 49 Table of Contents liabilities denominated in local currencies being translated into more dollars than the prior year. During periods of sustained movements in currency, the marketplace and competition adjust to the changing rates.
At March 31, 2023, currency changes resulted in assets and liabilities denominated in local currencies being translated into fewer dollars than the prior year. During periods of sustained movements in currency, the marketplace and competition adjust to the changing rates.
Removed
A hypothetical 10 percent adverse change in the levels of interest rates would not be material to our consolidated results of operations or cash flow.

Other KD 10-K year-over-year comparisons