What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-05-30 compared with 2024-05-30 · 123 added, 148 removed, 310 unchanged (47% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations .

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 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.

Results for the twelve months ended March 31, 2022 were derived from our quarterly consolidated financial statements as previously reported.

Included below are selected results and year-over-year comparisons for the years ended March 31, 2025, 2024 and 2023.

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.

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”).

For further information on the comparisons between the years ended March 31, 2024 and 2023 not covered in the “Segment Results” below, 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, 2024 (the “2024 Form 10-K”).

Year Ended March 31,

7 unchanged sentences

GAAP, see “⸺Segment Results.”

In January 2022, the Company changed its fiscal year-end to March 31 from December 31.

The year-over-year comparison for the year ended March 31, 2023 and the results of operations for the twelve months ended March 31, 2022 were derived from our unaudited quarterly consolidated financial statements as previously reported.

(Dollars in millions)

7 unchanged sentences

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.

Although government efforts to stem inflation are expected to suppress economic growth, most economists, including the International Monetary Fund, continue to expect positive global macroeconomic growth in calendar year 2024.

In fiscal year 2025, we saw continuing demand for information technology services, despite concerns about economic growth, geopolitical tensions and inflationary pressures.

Most economists, including the International Monetary Fund, expect positive global macroeconomic growth to continue in calendar year 2025.

Global markets have experienced increased volatility in recent months, driven by geopolitical developments, concerns over the imposition of import tariffs by the United States, reactions from other nations and proposed U.S.

government spending reductions.

Increased economic uncertainty may impact the level of global macroeconomic activity.

Fiscal 2025 Financial Performance

For the year ended March 31, 2025, we reported $15.1 billion in revenue, a decline of 6 percent compared to the year ended March 31, 2024.

The revenue decline was largely attributable to actions the Company has taken to reduce

low-margin components of its customer relationships, as well as currency effects.

United States revenue declined 10 percent, Japan revenue increased 1 percent, Principal Markets revenue declined 5 percent and Strategic Markets revenue decreased 8 percent, compared to the year ended March 31, 2024.

Net income of $252 million improved by $592 million versus the prior year driven by progress on our key initiatives to drive operating efficiencies and increased margins, lower depreciation expense and a $138 million after-tax gain from the sale of our SIS platform in Canada.

Fiscal 2024 Financial Performance

For the year ended March 31, 2024, we reported $16.1 billion in revenue, a decline of 6 percent compared to the year ended March 31, 2023.

The revenue decline was largely attributable to actions the Company has taken to reduce unprofitable and low-margin components of its customer relationships.

1 unchanged sentence

Net loss of $340 million improved by $1.0 billion versus the prior-year period driven by progress on our key initiatives to drive operating efficiencies, increased margins and reduced transaction-related costs tied to our Separation.

Fiscal 2023 Financial Performance

For the year ended March 31, 2023, we reported $17.0 billion in revenue, a decline of 7 percent when compared to the twelve months ended March 31, 2022, primarily driven by a seven-point negative impact from currency.

Among our segments, United States revenue was unchanged, Japan revenue declined 13 percent, Principal Markets revenue declined 13 percent, and Strategic Markets revenue decreased 1 percent compared to the prior twelve-month period, with the declines primarily due to currency movements.

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

2 unchanged sentences

We prepared these estimates based on the most current and best available information, but actual results could differ materially from these estimates and assumptions.

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.

Where possible, these charges were allocated based on direct usage, with the remainder allocated on a pro rata basis of headcount, gross profit, asset or other allocation methodologies that are considered to be a reasonable reflection of the utilization of services provided or the benefit received by Kyndryl during the periods presented.

The accompanying financial statements through the Separation date may not be indicative of the Company’s future performance and do not necessarily reflect what the financial position, results of operations and cash flows would have been had it operated as an independent company during the periods presented.

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.

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.

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.

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 our tax return elections and assertions.

Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.

1 unchanged sentence

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 following table presents our reportable segments’ revenue and adjusted EBITDA for the years ended March 31, 2025, 2024 and 2023.

Segment revenue and revenue growth in constant currency exclude any transactions between the segments.

2 unchanged sentences

(Dollars in millions)

2022 (unaudited)

United States

13 unchanged sentences

(2) Represents net amounts not allocated to segments

The Company made a minor change to its geographic reportable segments effective June 1, 2024 to reflect how the Company manages its operations and measures business performance, transitioning the reporting and management of its operations in Australia/New Zealand from the Principal Markets segment to the Strategic Markets segment.

All historical segment information has been recast to reflect this change.

We report our financial results in accordance with U.S.

We also present certain non-GAAP financial measures to provide useful supplemental information to investors.

We provide these non-GAAP financial measures as we believe 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.

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, enable better comparison to peer companies and allow 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.

2 unchanged sentences

Additionally, management uses adjusted EBITDA to evaluate our performance.

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.

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 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.

These disclosures are provided in addition to and not as a substitute for the percentage change in revenue and profit or loss measures on a U.S.

5 unchanged sentences

(Dollars in millions)

2022 (unaudited)

Net income (loss)

Provision for (benefit from) income taxes

Provision for income taxes

Interest expense

1 unchanged sentence

Amortization expense

Workforce rebalancing charges

Workforce rebalancing charges incurred prior to March 31, 2024

Charges related to ceasing to use leased/fixed assets and lease terminations

1 unchanged sentence

Stock-based compensation expense

Impairment expense

Other adjustments*

Adjusted EBITDA (non-GAAP)

* 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.

* Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs and benefits, and currency impacts of highly inflationary countries.

For the year ended March 31, 2024, other adjustments also included an adjustment to reduce amortization expense for the amount already included in transaction-related costs (benefits) above.

United States

4 unchanged sentences

Adjusted EBITDA year-over-year change

For the year ended March 31, 2025, United States revenue of $3.9 billion decreased 10 percent compared to the year ended March 31, 2024, reflecting the Company’s efforts to reduce certain low-margin revenues and the expiration of other low-margin contracts entered into before the Spin-off.

Adjusted EBITDA decreased $56 million from the prior year, primarily driven by lower revenue and the impact of the inclusion of workforce rebalancing charges in adjusted EBITDA in fiscal 2025.

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.

Adjusted EBITDA decreased $58 million from the prior year, primarily driven by an increase in software costs of $67 million resulting from an amendment of the contract with a software provider that re-allocated costs among our segments, partially offset by increased operating efficiencies and higher margins on recent signings.

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.

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.

Year Ended March 31,

4 unchanged sentences

Adjusted EBITDA year-over-year change

For the year ended March 31, 2025, Japan revenue of $2.4 billion increased 1 percent, and increased 6 percent in constant currency, compared to the year ended March 31, 2024, primarily driven by expanding the scope of services we provide to our customers.

Adjusted EBITDA increased $29 million from the prior year, primarily driven by progress on our key initiatives.

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.

Adjusted EBITDA decreased $46 million from the prior year, primarily driven by unfavorable currency movements that impacted both non-yen-denominated costs and the translation of earnings into U.S.

For the year ended March 31, 2023, Japan revenue of $2.5 billion decreased 13 percent compared to the twelve months ended March 31, 2022.

Revenue decreased due to an unfavorable currency exchange rate impact of 18 points, partially offset by recent signings of incremental business, including increased Kyndryl Consult revenues.

Adjusted EBITDA decreased $125 million from the prior twelve-month period, primarily driven by unfavorable currency impacts, partially offset by lower costs from our post-Separation commercial agreements with IBM and progress on our key initiatives.

Principal Markets

5 unchanged sentences

Adjusted EBITDA year-over-year change

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.

For the year ended March 31, 2025, Principal Markets revenue of $5.2 billion decreased 5 percent compared to the year ended March 31, 2024, driven by actions the Company has taken to reduce low-margin components of its

customer relationships.

Adjusted EBITDA increased $209 million from the prior year, primarily due to increased operating efficiencies and higher margins on recent signings, as well as a vendor credit.

For the year ended March 31, 2024, Principal Markets revenue of $5.5 billion decreased 1 percent compared to the year ended March 31, 2023, including a favorable currency exchange rate impact of three points.

The revenue decline was largely attributable to actions the Company has taken to reduce low-margin components of its customer relationships.

Adjusted EBITDA increased $354 million from the prior year, primarily due to increased operating efficiencies, higher margins on recent signings and a decrease in software costs of $86 million resulting from an amendment of the contract with a software provider that re-allocated costs among our segments.

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.

Revenue decreased due to certain joint ventures not transferring to us in connection with the Separation as well as an unfavorable currency exchange rate impact of nine points, primarily driven by the strengthening of the U.S.

dollar against the Euro and British pound.

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.

Strategic Markets

5 unchanged sentences

Adjusted EBITDA year-over-year change

For the year ended March 31, 2025, Strategic Markets revenue of $3.6 billion decreased 8 percent compared to the year ended March 31, 2024.

The revenue decline was largely attributable to actions the Company has taken to reduce low-margin components of its customer relationships, as well as an unfavorable currency exchange rate impact of three points.

Adjusted EBITDA decreased $36 million from the prior year, primarily driven by the impact of the inclusion of workforce rebalancing charges in adjusted EBITDA in fiscal 2025, partially offset by progress on our key initiatives.

For the year ended March 31, 2024, Strategic Markets revenue of $3.9 billion decreased 7 percent compared to the year ended March 31, 2023, including a favorable currency exchange rate impact of three points.

1 unchanged sentence

Adjusted EBITDA increased $158 million from the prior year, primarily due to increased operating efficiencies and higher margins on recent signings, partially offset by an increase in software costs of $29 million resulting from an amendment of the contract with a software provider that re-allocated costs among our segments.

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.

Adjusted EBITDA decreased $99 million from the prior twelve-month period, since the majority of Strategic Markets countries were not charged for IBM software pre-Separation and software cost allocations began post-Separation, partially offset by progress on our key initiatives.

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.

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.

Corporate and other generated an adjusted EBITDA loss of $90 million in the year ended March 31, 2025, compared to a loss of $95 million in the year ended March 31, 2024, and a loss of $77 million in the year ended March 31, 2023.

Costs and Expenses

10 unchanged sentences

NM – not meaningful

Cost of services was 82.2% of revenue in the year ended March 31, 2024, compared to 85.2% in the year ended March 31, 2023, driven by increased operating efficiencies, higher margins on recent signings and actions the Company has taken to reduce low-margin components of its customer relationships.

Selling, general and administrative expenses were 17.3% of revenue in the year ended March 31, 2024 compared to 17.1% in the year ended March 31, 2023, driven by lower revenue, partially offset by reduced expenses.

Workforce rebalancing charges were 0.9% of revenue in the year ended March 31, 2024 versus 0.4% of revenue in the prior-year period, due to increased workforce rebalancing actions taken in fiscal 2024.

resolution of certain pre-Separation and Separation-related matters with our former Parent.

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.

Cost of services was 79.1% of revenue in the year ended March 31, 2025, compared to 82.2% in the year ended March 31, 2024, driven by lower depreciation expense, increased operating efficiencies, higher margins on recent signings, and a vendor credit.

Selling, general and administrative expenses were 17.2% of revenue in the year ended March 31, 2025, compared to 17.3% in the year ended March 31, 2024.

Transaction-related costs (benefits) were (0.8)% of revenue in the year ended March 31, 2025, primarily due to a $145 million pretax gain from the sale of the SIS platform in Canada, compared to transaction-related costs (benefits) of (0.3)% of revenue in the year ended March 31, 2024, which reflected an agreement that allowed us to collect previously reserved receivables from our former Parent.

Interest expense was 0.7% of revenue in the year ended March 31, 2025 compared to 0.8% in the year ended March 31, 2024.

Other expense was 0.2% of revenue in the year ended March 31, 2025, compared to 0.3% in the year ended March 31, 2024, driven by currency-related hedging gains recorded this year.

Year Ended March 31,

Percent of Revenue

(Dollars in millions)

2022 (unaudited)

Cost of services

1 unchanged sentence

Workforce rebalancing charges

Transaction-related costs

Impairment expense

Transaction-related costs (benefits)

Interest expense

2 unchanged sentences

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.

Selling, general and administrative expenses were 17.1% of revenue in the year ended March 31, 2023 compared to 15.0% in the twelve months ended March 31, 2022, driven by expenses associated with operating as an independent public company, the impact of currency on revenue compared to our U.S.

dollar-denominated expenses, and certain site-rationalization activities.

Workforce rebalancing charges arise from cost-reduction actions to enhance productivity and cost-competitiveness and to rebalance skills that result in payments to employees terminated in the ongoing course of business.

Workforce rebalancing charges were 0.4% of revenue in fiscal 2023 compared to (0.1)% in the twelve months ended March 31, 2022, due to a workforce reduction in the fourth quarter of 2023.

Transaction-related costs were 1.5% of revenue in the year ended March 31, 2023 compared to 3.4% in the twelve months ended March 31, 2022, primarily driven by higher employee-retention expense and pre-spin consultancy expense incurred in the prior year.

Impairment expense was zero in the year ended March 31, 2023 compared to 2.6% of revenue in the twelve months ended March 31, 2022, driven by an impairment of goodwill in the former EMEA and Americas segments in the quarter ended December 31, 2021.

Interest expense was 0.5% of revenue in the year ended March 31, 2023 compared to 0.4% in the twelve months ended March 31, 2022, due to our average debt balance having been lower prior to the Separation.

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 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.

Transaction-related costs (benefits) were (0.3)% of revenue in the year ended March 31, 2024 compared to 1.5% in the prior-year, driven by reduced rebranding and employee-retention costs and the favorable resolution of certain pre-Separation and Separation-related matters with our former Parent.

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.

Transaction-Related Costs

The Company classifies certain expenses and benefits related to the Separation, acquisitions and divestitures as “transaction-related costs (benefits)” in the Consolidated Income Statement.

Transaction-related costs include gains or losses, employee retention expenses, information technology costs, marketing expenses to establish the Kyndryl brand,

legal, accounting, consulting and other professional service costs, 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, associated with acquisitions, divestitures or 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, which continued through the fiscal year ended March 31, 2024.

These actions include workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and charges related to lease terminations.

Workforce rebalancing charges arise from cost-reduction actions to enhance productivity and cost-competitiveness and to rebalance skills that result in payments to the terminated employees.

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.

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.

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.

Fiscal 2025 Program

During the year ended March 31, 2025, management initiated actions to reduce the Company’s overall cost structure and increase our operating efficiency.

These actions resulted in workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and charges related to lease terminations.

During the year ended March 31, 2025, the Company recorded $114 million in workforce rebalancing charges and $48 million in charges related to ceasing to use leased and owned fixed assets, including lease termination charges.

Total cash outlays for this program are expected to be approximately $150 million, of which approximately $110 million has been paid through March 31, 2025, and the remainder is expected to be paid thereafter.

There can be no guarantee that we will achieve our expected cost savings.

1 unchanged sentence

For additional information, see Note 19 – Workforce Rebalancing and Site-Rationalization Charges in the accompanying Consolidated Financial Statements.

Fiscal 2024 Program

These actions resulted in workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and charges related to lease terminations.

Workforce rebalancing charges arise from cost-reduction actions to enhance productivity and cost-competitiveness and to rebalance skills that result in payments to the terminated employees.

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.

Total cash outlays for this program are expected to be $300 million, of which approximately $270 million has been paid through March 31, 2025 (including approximately $70 million of contractual payments toward leased assets we have ceased to use), and the remainder is expected to be paid thereafter.

Management estimates that these workforce rebalancing and site-rationalization activities reduced payroll costs, rent expenses and depreciation of property and equipment by approximately $400 million in fiscal year 2025.

The Company’s consolidated provision for income taxes and effective tax rate were as follows:

Twelve Months

Year Ended March 31,

(Dollars in millions)

1 unchanged sentence

Effective tax rate

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.

In the year ended March 31, 2025, we recorded income tax expense of $184 million.

In the years ended March 31, 2024 and 2023, we recorded income tax expense of $172 million and $524 million, respectively, on pretax losses,

which resulted in negative effective tax rates.

Our income tax expense for the year ended March 31, 2025, was primarily related to taxes on foreign operations and uncertain tax positions.

Our income tax expense for the year ended March 31, 2024 was primarily related to taxes on foreign operations and uncertain tax positions.

Our income tax expense for the year ended March 31, 2023 was primarily related to the increases in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized, taxes on foreign operations and uncertain tax positions.

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, 2025 was higher compared to the year ended March 31, 2024, primarily due to the Company’s pretax income in fiscal year 2025, compared to a pretax loss in 2024.

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.

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.

For more information, see Note 5 – Taxes in the accompanying Consolidated Financial Statements.

1 unchanged sentence

Total assets of $10.5 billion at March 31, 2025 decreased by $138 million (and decreased by $52 million adjusted for currency) from March 31, 2024, primarily driven by:

a decrease in cash and cash equivalents of $295 million mainly due to our net loss in the period;

a decrease in deferred costs of $236 million due to amortization outpacing additions;

and a decrease in fixed assets of $105 million due to depreciation outpacing new capital expenditures.

a decrease of $254 million in accounts receivable primarily due to lower past-due receivables;

a reduction in operating right-of-use assets, net, of $133 million due to amortization outpacing additions;

and a decrease in property and equipment, net, of $104 million due to depreciation outpacing net additions;

partially offset by an increase in cash and cash equivalents of $234 million mainly due to our net income in the period;

and an increase in other non-current assets of $95 million due to an increase in long-term prepaid assets.

Total liabilities of $9.1 billion at March 31, 2025 decreased by $347 million (and decreased by $305 million adjusted for currency) from March 31, 2024, primarily as a result of:

a decrease in accounts payable of $366 million due

to lower costs and the timing of payments;

a decrease in other liabilities (non-current) of $118 million due in part to the decrease of deferred taxes;

and a decrease in other accrued expenses and liabilities (current) of $102 million due in part to workforce rebalancing payments and partially offset by an increase in accrued contract costs of $142 million due to the timing of vendors’ billings.

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.

a decrease in operating lease liabilities of $121 million due to a reduction in right-of-use assets;

a decrease in long-term debt of $70 million due to lower finance lease obligations;

a decrease in accounts payable of $57 million due to lower costs;

and a decrease in accrued contract costs of $51 million due to lower volumes.

Total equity of $1.3 billion at March 31, 2025 increased by $209 million from March 31, 2024, principally due to our net income in the period, partially offset by $94 million of share repurchases under our Share Repurchase Program.

Overall pension funded status as of March 31, 2025 was 77% of estimated pension benefit obligation, an increase from 75% at March 31, 2024.

Among our funded pension plans, our funded status as of March 31, 2025 was 103%, an increase from 99% at March 31, 2024.

Our cash flows from operating, investing and financing activities are summarized in the table below.

7 unchanged sentences

Net change in cash, cash equivalents and restricted cash

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.

This change was driven by lower cash from working capital, partially offset by our reduced net loss.

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.

Net cash used by financing activities totaled $170 million for the year ended March 31, 2024, compared to net cash used by financing activities of $141 million for the year ended March 31, 2023 mainly driven by higher repayments of finance lease obligations.

Net cash provided by operating activities was $942 million for the year ended March 31, 2025, compared to net cash provided by operating activities of $454 million for the year ended March 31, 2024, mainly due to higher earnings.

Net cash used in investing activities was $404 million for the year ended March 31, 2025, compared to a net cash use of $553 million for the year ended March 31, 2024, due to the sale of our SIS platform in Canada partially offset by our acquisition of Skytap.

Net cash used in financing activities totaled $286 million for the year ended March 31, 2025, compared to net cash used by financing activities of $170 million for the year ended March 31, 2024, mainly due to share repurchases of $94 million under the Company’s share repurchase program.

Liquidity and Capital Resources

We believe that our existing cash and cash equivalents and the Revolving Credit Agreement entered into in October 2021 will be sufficient to meet our anticipated cash needs for at least the next twelve months.

We believe that our existing cash and cash equivalents and our revolving credit agreement will be sufficient to meet our anticipated cash needs for at least the next twelve months.

Senior Unsecured Notes

5 unchanged sentences

In February 2024, we completed a registered offering of $500 million in aggregate principal amount of 6.35% senior unsecured notes due 2034 (the “2034 Notes”).

We received proceeds of $494 million, net of debt issuance costs and discounts, which were capitalized as a reduction to the carrying value of debt and are being amortized as interest expense over the term of the notes.

We received proceeds of $494 million, net of debt issuance costs and discounts.

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.

In November 2021, we drew down the full $500 million available under the Term Loan Credit Agreement.

The interest rate on this term loan was equal to one-month U.S.

Dollar London Interbank Offered Rate (“LIBOR”) plus a margin of 1.125%.

In June 2023, we amended the Term Loan Credit Agreement by replacing LIBOR with the Secured Overnight Financing Rate (“SOFR”).

The first repricing date using SOFR was in July 2023.

In February 2024, the Company used the net proceeds from the offering of the 2034 Notes, together with cash on hand, to prepay the full amount outstanding under the Term Loan Credit Agreement, at no penalty.

Revolving Credit Agreement

In October 2021, we entered into a $3.15 billion multi-currency revolving credit agreement (the “Revolving Credit Agreement”), which expires, unless extended, in October 2026.

The Revolving Credit Agreement was amended in June 2023, replacing LIBOR with SOFR.

The Revolving Credit Agreement was amended in June 2023, replacing the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”).

In March 2025, we further amended the agreement, extending the maturity to March 2030.

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.

Facility fees were immaterial for the three months ended March 31, 2022 and the year ended December 31, 2021.

The total facility fees recorded by the Company for the Revolving Credit Agreement were $5 million and $5 million for the years ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, there has been no drawdown on the Revolving Credit Agreement.

3 unchanged sentences

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 entered into arrangements with third-party financial institutions to sell certain financial assets (primarily trade receivables) without recourse.

The Company has determined these are true sales.

2 unchanged sentences

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.

The second agreement was executed in June 2022 with a separate third-party financial institution and renews automatically on its anniversary date.

This agreement was further amended during the quarter ended September 30, 2024 to reduce the committed facility limit from $1 billion to $600 million and to add an incremental uncommitted facility limit of $200 million that is subject to the counterparty’s sole discretion to purchase such incremental amounts.

The second agreement was executed in June 2022 with a separate third-party financial institution and renews automatically on its anniversary date, unless either party elects not to extend.

The net proceeds from these arrangements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows.

8 unchanged sentences

The Company’s obligations under this program continue to be recognized as accounts payable in the Consolidated Balance Sheet.

The obligations outstanding under this program at March 31, 2024 were immaterial.

The obligations outstanding under this program at March 31, 2025 and 2024 were immaterial.

Share Repurchase Program

In November 2024, the Company’s Board of Directors authorized a share repurchase program of up to $300 million of the Company’s common stock.

Under the Share Repurchase Program, the Company may repurchase shares of its common stock from time to time in open market transactions and may also repurchase shares in accelerated share buyback programs, tender offers, privately negotiated transactions or by other means.

Repurchases may also be made under a Rule 10b5-1 trading plan.

The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors.

The program does not have a set expiration date and may be suspended, modified or discontinued at any time without prior notice.

During the year ended March 31, 2025, the Company repurchased 2.6 million shares of its common stock at an aggregate cost of $94 million under the Share Repurchase Program.

As of March 31, 2025, $206 million remained of our $300 million Share Repurchase Program authorization.

Off-Balance Sheet Arrangements and Contractual Obligations

5 unchanged sentences

Additionally, the Company has contractual commitments that are noncancellable with certain software, hardware and cloud partners used in the delivery of services to customers.

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.

2 unchanged sentences

Other Information

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.

The following table presents the Company’s signings for the years ended March 31, 2025, 2024 and 2023.

Year Ended March 31,

1 unchanged sentence

Total signings

Signings increased by $332 million, or 3%, in the year ended March 31, 2024, compared to the prior year.

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 six-point negative currency impact on signings.

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.

Signings increased $5.7 billion, or 46%, in the year ended March 31, 2025 compared to the year ended March 31, 2024, driven by growth in each of our four operating segments.

The Company’s global signings growth spanned a broad range of industries and included a record 55 contracts valued in excess of $50 million.

Signings increased by $332 million, or 3%, in the year ended March 31, 2024 compared to the year ended March 31, 2023.

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.

11 unchanged sentences

A quantitative sensitivity analysis is provided where that information is reasonably available, can be reliably estimated and provides material information to investors.

The amounts used to assess sensitivity (e.g., 1 percent, 10 percent, etc.) are included to allow users of this report to understand a general effect of changes in the estimates and do not represent management’s predictions of variability.

The amounts used to assess sensitivity (e.g., 10 percent, 25 basis points, etc.) are included to allow users of this report to understand a general effect of changes in the estimates and do not represent management’s predictions of variability.

For all of these estimates, it should be noted that future events rarely develop exactly as forecasted and estimates require regular review and adjustment.

27 unchanged sentences

Further changes in the discount rate assumptions would impact the PBO which, in turn, may impact our funding decisions if the PBO exceeds plan assets.

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.

A 25-basis-point increase or decrease in the discount rate would result in an approximate corresponding decrease or increase, respectively, of approximately $38 million in the Plans’ estimated PBO based upon March 31, 2025 data.

The expected long-term return on plan assets assumption is used in calculating the net periodic benefit cost.

8 unchanged sentences

For additional information on our pension plans and the development of these assumptions, see Note 17 – Retirement-Related Benefits to our 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.

The Company also filed certain separate foreign income tax returns.

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.

For purposes of the financial statements presented on a “carve-out” basis, the income tax provisions were calculated as if we filed separate tax returns and include transactions related to our Separation attributed to us, even if the related tax liabilities were our former Parent’s responsibility.

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.

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.

Post-Separation, our income tax provisions are calculated based on Kyndryl’s operating footprint, as well as our tax return elections and assertions.

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.

15 unchanged sentences

● Significant pending litigation;

● A loss of key personnel;

● A more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of;

● An adverse action or assessment by a regulator.

● A significant adverse action or assessment by a regulator.

We assess these qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.

This quantitative test is required only if we conclude that it is more likely than not that a reporting unit’s fair value is less than its carrying amount.

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.

Assumptions critical to our fair value were discount rates used in determining the fair value of the reporting unit, expected revenue growth and projected EBITDA margins.

These and other assumptions are impacted by economic conditions and expectations of management and may change based on different facts and circumstances.

We believe the assumptions used to estimate future cash flows are reasonable, but there can be no assurance that the expected cash flows will be realized.

The use of different assumptions would increase or decrease discounted cash flows or earnings projections and therefore, could change impairment determinations.

In conjunction with our annual review of goodwill for impairment, we prepared qualitative and quantitative valuation analysis as of January 1, 2024.

For the reporting units subject to quantitative tests, we determined that their fair values exceeded their book values by over 100%.

We also performed a sensitivity analysis on the calculation of fair value using discounted cash flows.

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.

In conjunction with our annual review of goodwill for impairment, we prepared qualitative analysis as of January 1, 2025.

Based on this analysis of the qualitative factors, quantitative tests were not required.

See Note 11 – Intangible Assets Including Goodwill for further discussion.

8 unchanged sentences

Change in Accounting Estimate

In March 2024, we completed our assessment of the useful lives of our property, plant and equipment.

Based on our usage experience and data analysis, we determined we should increase the estimated useful lives of our information technology equipment from five to six years.

This change in accounting estimate will be effective beginning April 1,

2024 and applied on a prospective basis to the assets on our balance sheet as of March 31, 2024, as well as future asset purchases.

Based on the carrying value of information technology equipment included in property, plant and equipment, net in our Consolidated Balance Sheet as of March 31, 2024, we estimate this change will decrease non-cash depreciation expense in fiscal year 2025 by approximately $180 million.

In March 2024, the Company completed its assessment of the useful lives of its information technology equipment.

Based on our usage experience and data analysis, the Company determined it should increase the estimated useful lives of its information technology equipment from five to six years.

This change in accounting estimate became effective on April 1, 2024.

Based on the carrying amount of information technology equipment included in property and equipment, net as of March 31, 2024, the effect of this change in estimate was a reduction in depreciation expense and an improvement of income before income taxes of approximately $180 million, or $0.80 before income taxes per basic share and $0.77 before income taxes per diluted share, for the year ended March 31, 2025.

Cautionary Note Regarding Forward-Looking Statements

1 unchanged sentence

All statements other than statements of historical fact included in this report, including statements concerning the Company’s plans, objectives, goals, beliefs, business strategies, future events, business condition, results of operations, financial position, business outlook and business trends and other non-historical statements in this report are forward-looking statements.

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.

Such forward-looking statements often contain words such as “aim,” “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “objectives,” “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.

1 unchanged sentence

● failure to attract new customers, retain existing customers or sell additional services to customers;

● failure to meet growth and productivity objectives;

● failure to meet growth and productivity objectives and maintain our capital allocation strategy;

● competition;

2 unchanged sentences

● inability to attract and retain key personnel and other skilled employees;

● impact of economic, political, public health and other conditions;

● impact of economic, geopolitical, public health and other conditions;

● damage to the Company’s reputation;

2 unchanged sentences

● 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;

● the impact of our business with foreign, state and local 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;

7 unchanged sentences

● 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;

● risks related to the Company’s common stock and the securities market .

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis