What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-05-30 compared with 2024-05-30 · 316 added, 478 removed, 1214 unchanged (40% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Income Statement for the Years Ended March 31, 2024 and 2023, and December 31, 2021 and the Three Months Ended March 31, 2022

Consolidated Statement of Comprehensive Income (Loss) for the Years Ended March 31, 2024 and 2023, and December 31, 2021 and the Three Months Ended March 31, 2022

Consolidated Income Statement for the Years Ended March 31, 2025, 2024 and 2023

Consolidated Statement of Comprehensive Income (Loss) for the Years Ended March 31, 2025, 2024 and 2023

Consolidated Balance Sheet as of March 31, 2025 and 2024

Consolidated Statement of Cash Flows for the Years Ended March 31, 2024 and 2023, and December 31, 2021 and the Three Months Ended March 31, 2022

Consolidated Statement of Equity for the Years Ended March 31, 2024 and 2023, and December 31, 2021 and the Three Months Ended March 31, 2022

Consolidated Statement of Cash Flows for the Years Ended March 31, 2025, 2024 and 2023

Consolidated Statement of Equity for the Years Ended March 31, 2025, 2024 and 2023

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheet of Kyndryl Holdings, Inc.

and its subsidiaries (the “Company”) as of March 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive income (loss), of equity and of cash flows for each of the two years in the period ended March 31, 2024, for the three months ended March 31, 2022 and for the year ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of March 31, 2025 and 2024, and the related consolidated statements of income, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended March 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of March 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2024, for the three months ended March 31, 2022 and for the year ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to certain information technology general controls, specifically ineffective (i) user access and segregation of duty controls that restrict user and privileged access to appropriate personnel;

(ii) program development and change management controls;

and (iii) certain computer operations controls.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness referred to above is described in Management's Report on Internal Control over Financial Reporting appearing under Item 9A.

We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2025 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management’s report referred to above.

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of

internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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The principal consideration for our determination that performing procedures relating to revenue recognition for certain services is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.

As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified that impacted the procedures performed related to revenue recognition.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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These procedures also included, among others (i) evaluating the Company’s accounting policies related to the recognition of revenue for services;

(ii) testing the completeness, accuracy, and

occurrence of revenue recognized for a sample of certain services revenue transactions by obtaining and inspecting source documents such as master services agreements, individual statements of work, invoices, and cash receipts;

(ii) testing revenue recognized for a sample of certain services revenue transactions by obtaining and inspecting source documents such as master services agreements, individual statements of work, invoices, and cash receipts;

and (iii) confirming, on a sample basis, outstanding customer invoice balances as of year-end and, for confirmations not returned, obtaining and inspecting source documents, such as invoices and subsequent cash receipts, where applicable.

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Transaction-related costs (benefits)

Impairment expense

Interest expense

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Weighted-average diluted shares outstanding

* Including related-party revenue of $ 287 for the year ended March 31, 2023, $ 236 for the three months ended March 31, 2022, and $ 704 for the year ended December 31, 2021

** Including related-party cost of service of $ 1,382 for the year ended March 31, 2023, $ 924 for the three months ended March 31, 2022, and $ 3,979 for the year ended December 31, 2021

* Including related-party revenue of $ 287 for the year ended March 31, 2023

† Including related-party cost of service of $ 1,382 for the year ended March 31, 2023

The accompanying notes are an integral part of the financial statements.

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Foreign currency translation adjustments

Unrealized losses on net investment hedges

Unrealized gains (losses) on net investment hedges

Total foreign currency translation adjustments

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Amortization of acquisition-related intangible assets

Goodwill impairment

Stock-based compensation

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Accounts payable

Taxes (including items settled with former Parent in 2021 period)

Other assets and other liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities:

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Proceeds from disposition of property and equipment

Acquisitions and divestitures, net of cash acquired

Other investing activities, net

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Proceeds from issuance of debt, net of debt issuance costs

Net transfers (to) from Parent

Common stock repurchases

Common stock repurchases for tax withholdings

Other financing activities, net

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

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Income (Loss)

Equity - January 1, 2021

Net income (loss)

Other comprehensive income (loss), net of tax

Issuance of common stock and reclassification of net transfers from Parent

Common stock issued under employee plans

Purchases of treasury stock

Changes in non-controlling interests

Equity - December 31, 2021

Equity - March 31, 2022

Net income (loss)

Other comprehensive income (loss), net of tax

Common stock issued under employee plans

Activity related to employee stock plans

Purchases of treasury stock

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Other comprehensive income (loss), net of tax

Common stock issued under employee plans

Activity related to employee stock plans

Purchases of treasury stock

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Other comprehensive income (loss), net of tax

Common stock issued under employee plans

Activity related to employee stock plans

Purchases of treasury stock

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SIGNIFICANT ACCOUNTING POLICIES

Kyndryl’s Spin-off

Kyndryl Holdings, Inc.

(“we”, “the Company” or “Kyndryl”) is a leading technology services company and the largest IT infrastructure services provider in the world, serving thousands of enterprise customers whose operations span over 100 countries.

Prior to November 3, 2021, the Company was wholly owned by International Business Machines Corporation (“IBM”, “Parent” or “former Parent”).

In November 2021, our former Parent effected the spin-off (the “Separation” or the “Spin-off”) of the infrastructure services unit of its Global Technology Services segment through the distribution of shares of Kyndryl’s common stock representing 80.1 % of total shares outstanding to IBM stockholders.

Kyndryl’s stock began trading 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.

In connection with the Separation, the Company entered into several agreements with IBM governing the relationship of the parties following the Separation.

(“we”, “the Company” or “Kyndryl”) is a leading provider of mission-critical enterprise technology services offering advisory, implementation and managed service capabilities to thousands of customers in more than 60 countries.

As the world’s largest IT infrastructure services provider, the Company designs, builds, manages and modernizes the complex information systems that the world depends on every day.

Description of Business

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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 global team of skilled practitioners, consisting of approximately 80,000 professionals.

To deliver these services, we rely on our global team of skilled practitioners.

Kyndryl’s History

Prior to November 3, 2021, the Company was wholly owned by International Business Machines Corporation (“IBM” or “former Parent”).

In November 2021, our former Parent effected the spin-off (the “Separation” or the “Spin-off”) of the infrastructure services unit of its Global Technology Services segment through the distribution to IBM stockholders of shares of Kyndryl’s common stock representing 80.1 % of total shares outstanding.

Kyndryl’s stock began trading 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.

In connection with the Separation, the Company entered into several agreements with IBM governing the relationship of the parties following the Separation.

Basis of Presentation

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

The financial statements and footnotes for the period from January 1 through November 3, 2021 (the “pre-Separation period”) reflect allocations of certain IBM corporate, infrastructure and shared services expenses using a variety of allocation methodologies that are appropriate for the type of allocated expense.

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.

For the periods subsequent to November 3, 2021, the financial statements are presented on a consolidated basis as the Company became a standalone public company.

The income tax provision included in these consolidated financial statements for the pre-Separation period was calculated using the separate return basis, as if Kyndryl filed separate tax returns.

The calculation of income taxes on a hypothetical separate return basis requires a considerable amount of judgment and use of both estimates and allocations;

pre-Separation current and deferred taxes may not be reflective of the actual tax balances subsequent to the Separation.

Current income tax liabilities including amounts for unrecognized tax benefits related to Kyndryl’s activities included in the Parent’s income tax returns were assumed to be immediately settled with Parent through the Net Parent investment account in the Consolidated Balance Sheet and reflected in Net transfers from Parent in the Consolidated Statement of Cash Flows during these periods.

Transition Period

In January 2022, the Board of Directors of Kyndryl approved a change to the fiscal year-end of the Company from December 31 to March 31.

The Company’s 2023 fiscal year began on April 1, 2022 and ended March 31, 2023, and the Company’s 2024 fiscal year began on April 1, 2023 and ended March 31, 2024.

The Company filed a Transition Report on Form 10-QT for the period of January 1 to March 31, 2022 (the “Transition Period”) with the U.S.

Securities and Exchange Commission (“SEC”) on May 13, 2022.

Principles of Consolidation

For the pre-Separation period, the accompanying financial statements were derived from the consolidated financial statements and accounting records of the former Parent as if the Company operated on a standalone basis and were prepared in accordance with U.S.

GAAP and pursuant to the rules and regulations of the SEC.

Historically, the Company consisted of the managed infrastructure services unit of IBM’s Global Technology Services segment and did not operate as a separate standalone company.

All significant intercompany transactions during the pre-Separation period between Kyndryl and IBM have been included in the consolidated financial statements.

Intercompany transactions between Kyndryl and IBM were considered to be effectively settled in the consolidated financial statements at the time the transaction was recorded.

After the Separation on November 3, 2021, the Company’s consolidated financial statements are based on our reported results as a standalone company.

All significant transactions and intercompany accounts between Kyndryl entities were eliminated.

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revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, the depreciable and amortizable lives of long-lived assets, loss contingencies, allowance for credit losses, deferred transition costs and other matters.

Estimates were also used in determining the allocation of costs and expenses from IBM for the pre-Separation period.

These estimates are based on management’s knowledge of current events, historical experience and actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances.

Actual results may be different from these estimates.

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Contract assets are generally classified as current and are recorded on a net basis with deferred income (i.e., contract liabilities) at the contract level.

Refer to Note 3 – Revenue Recognition for contract assets for the periods presented.

The Company’s rights to consideration are presented separately depending on whether those rights are conditional or unconditional.

total conditional contract assets of $ 30 million at March 31, 2024 and 2023 are included in prepaid expenses and other current assets in the Consolidated Balance Sheet.

Total unconditional contract assets (“unbilled accounts receivable”) of $ 377 million and $ 384 million at March 31, 2024 and 2023, respectively, are included in accounts receivable in the Consolidated Balance Sheet.

Conditional contract assets are included in prepaid expenses and other current assets in the Consolidated Balance Sheet.

Unconditional contract assets (“unbilled accounts receivable”) are included in accounts receivable in the Consolidated Balance Sheet.

Refer to Note 3 – Revenue Recognition for contract assets for the periods presented.

Additionally, in determining the transaction price, the Company would adjust the promised amount of consideration for the effects of the time value of money if the billing terms are not standard and the timing of payments agreed to by the parties to the contract provide the client or the Company with a significant benefit of financing, in which case the contract contains a significant financing component.

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In outsourcing, other managed services, application management and other cloud-based services arrangements, the Company determines whether the services performed during the initial phases of the arrangement, such as setup activities, are distinct.

In most cases, the arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service).

In most cases, the arrangement is a single performance obligation comprised of a series of distinct

services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service).

The Company applies a measure of progress (typically time-based) to any fixed consideration and allocates variable consideration to the distinct periods of service based on usage.

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If the carrying amount is deemed not recoverable, an impairment loss is recognized.

Refer to Note 3 – Revenue Recognition for the amount of deferred costs to fulfill a contract at March 31, 2024 and 2023.

Refer to Note 3 – Revenue Recognition for the deferred costs to fulfill contracts for the periods presented.

In situations in which an outsourcing contract is terminated, the terms of the contract may require the client to reimburse the Company for the recovery of unbilled accounts receivable, unamortized deferred contract costs and additional costs incurred by the Company to transition the services.

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For contracts shorter than one year, the Company has elected the practical expedient to recognize sales commissions as incurred.

Additionally, some commission programs are

not subject to capitalization as the revenue for services is paid over time and the commission expense is paid and recognized as the related revenue is recognized.

Additionally, some commission programs are not subject to capitalization as the revenue for services is received over time and the commission expense is paid and recognized as the related revenue is recognized.

Refer to Note 3 – Revenue Recognition for capitalized costs to obtain contracts for the periods presented.

Expense and Other (Income)

Expense and other income within the Company’s financial statements through the Separation reflect allocations to the Company by IBM based on direct usage, with the remainder allocated on a pro-rata basis of gross profit, headcount, assets or other measures the Company has determined as reasonable.

Expense and other income within the Company’s consolidated financial statements for the periods from November 4, 2021 onward is based on our reported results as a standalone company.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expense is charged to income as incurred, except for certain sales commissions, which are capitalized and amortized.

Selling, general and administrative expense (“SG&A”) is charged to income as incurred, except for certain sales commissions, which are capitalized and amortized.

For further information regarding capitalizing sales commissions, see “Incremental Costs of Obtaining a Contract” above.

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In addition, general and administrative expense includes other operating items such as allowance for credit losses, amortization of certain intangible assets and research, development and engineering (“RD&E”) costs.

Total RD&E costs were $ 58 million, $ 79 million, $ 23 million, and $ 63 million for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period), and the year ended December 31, 2021, respectively.

Total RD&E costs were $ 49 million, $ 58 million, and $ 79 million for the years ended March 31, 2025, 2024 and 2023, respectively.

Advertising and promotional costs are expensed as incurred.

Advertising and promotional expense, which includes media, agency and promotional expense directly incurred by the Company was $ 115 million, $ 136 million, $ 54 million, and $ 56 million for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period), and the year ended December 31, 2021, respectively.

Advertising and promotional expense, which includes media, agency and promotional expense directly incurred by the Company was $ 83 million, $ 115 million, and $ 136 million for the years ended March 31, 2025, 2024 and 2023, respectively.

Costs related to the initial establishment of the Kyndryl brand are recorded in Transaction-related costs in the Consolidated Income Statement.

All other advertising and promotional costs are recorded in SG&A expense in the Consolidated Income Statement.

All other advertising and promotional costs are recorded in SG&A in the Consolidated Income Statement.

Other Expense

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Defined Benefit Pension and Nonpension Postretirement Benefit Plans

Prior to the Separation, the defined benefit plans and nonpension postretirement benefit plans in which certain Kyndryl employees participated were sponsored by IBM.

During this period, the Consolidated Income Statement reflected a proportional allocation of net period benefit cost based on headcount associated with the Company.

For defined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO), which represents the actuarial present value of benefits expected to be paid upon retirement based on employee services already rendered and estimated future compensation levels.

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Overfunded plans, in which the fair value of plan assets exceeds the benefit obligation, are aggregated, and recorded in pension assets in the Consolidated Balance Sheet.

Underfunded plans, in which the benefit obligation

exceeds the fair value of plan assets, are aggregated and the noncurrent portion of this excess is recorded in retirement and nonpension postretirement benefit obligations in the Consolidated Balance Sheet.

Underfunded plans, in which the benefit obligation exceeds the fair value of plan assets, are aggregated and the noncurrent portion of this excess is recorded in retirement and nonpension postretirement benefit obligations in the Consolidated Balance Sheet.

The current portion of the benefit obligation in excess of the fair value of plan assets represents the actuarial present value of benefits payable in the next twelve months, measured on a plan-by-plan basis.

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Defined Contribution Plans

Prior to the Separation, the Parent offered various defined contribution plans for U.S.

Prior to the Separation, the former Parent offered various defined contribution plans for U.S.

In September 2021, in preparation for the Separation, Kyndryl established standalone defined contribution plans, and employees identified as Kyndryl employees were enrolled into these plans.

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The fair value of market-conditioned stock units is determined on the date of grant using a Monte Carlo simulation model which estimates the probability of satisfying market conditions.

The fair value of the performance-conditioned stock units is determined on the grant date based on Kyndryl’s stock price and subsequently adjusted based on the probability of attainment.

The fair value of the performance-conditioned stock units is determined on the grant date based on Kyndryl’s stock price and subsequently adjusted based upon the probability of attainment.

The fair value of stock options is determined on the grant date using a Black-Scholes model.

Stock-based compensation cost is recorded in Cost of services and SG&A in the Consolidated Income Statement based on the employees’ respective functions.

Prior to the Separation, the Company participated in various IBM stock-based compensation plans, including incentive compensation plans.

All awards granted under the plans were based on IBM’s common shares and, as such, were reflected in the former Parent’s Consolidated Statement of Stockholders’ Equity.

For the pre-Separation period, stock-based compensation cost is based on the awards and terms previously granted by the former Parent to employees who exclusively supported Kyndryl operations.

At the time of Kyndryl’s Spin-off, each outstanding IBM RSU and PSU held by a Kyndryl employee was converted into a Kyndryl RSU.

The equity award exchange ratio was determined as the closing per share price of IBM shares on the last trading day prior to the Spin-off divided by the opening price of Kyndryl common stock on the first trading day following the Spin-off.

Stock-based compensation cost is recorded in Cost of services and SG&A in the Consolidated Income Statement based upon the employees’ respective functions.

The Company records deferred tax assets for awards that result in tax deductions in the consolidated financial statements calculated based on the amount of compensation cost recognized and the relevant statutory tax rates.

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Derivative Financial Instruments

Prior to the third quarter of 2021, Kyndryl did not independently execute derivative financial instruments to manage its foreign currency risk and instead participated in a centralized foreign currency hedging program administered by IBM.

The hedging activity allocated to Kyndryl was for the management of the Company’s forecasted foreign currency expenses.

After the Separation, the Company started using derivative financial instruments to manage foreign currency risk.

The Company does not use derivative financial instruments for trading or speculative purposes.

Derivative financial instruments that qualify for hedge accounting are designated as either cash flow hedges or net investment hedges.

Additionally, the Company may enter into derivative contracts that economically hedge certain risks, even when hedge accounting does not apply, or the Company elects not to apply hedge accounting.

Derivatives are recognized in the Consolidated Balance Sheet at fair value on a gross basis as either assets or liabilities and classified as current or noncurrent based upon whether the maturity of the instrument is less than or greater than twelve months.

The Company may enter into derivative contracts that economically hedge certain risks, even when hedge accounting does not apply, or the Company elects not to apply hedge accounting.

The Company does not use derivative financial instruments for trading or speculative purposes.

Derivatives are recognized in the Consolidated Balance Sheet at fair value on a gross basis as either assets or liabilities and classified as current or noncurrent based upon the timing of the instrument’s expected cash flows.

Changes in the fair value of derivatives designated as cash flow hedges are recorded, net of applicable taxes, in OCI and subsequently reclassified into the same income statement line item as the hedged exposure when the underlying hedged item is recognized in earnings.

Derivatives designated as net investment hedges are accounted for using the spot method, with changes in the fair value of the derivatives attributable to changes in spot rates recorded within foreign currency translation (“CTA”) as a component of other comprehensive income (loss) and remaining there until the hedged net investments are sold or substantially liquidated.

Derivatives designated as net investment hedges are accounted for using the spot method, with changes in the fair value of the derivatives attributable to changes in spot rates recorded within foreign currency translation adjustments (“CTA”) as a component of other comprehensive income (loss) and remaining there until the hedged net investments are sold or substantially liquidated.

The changes in the fair value of the derivatives that are attributable to changes in the difference between the forward rate and spot rate are excluded from the assessment of hedge effectiveness.

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The cash flows associated with derivatives designated as cash flow hedges are reported as cash flows from operating activities in the Consolidated Statement of Cash Flows.

Cash flows from derivatives designated as net

investment hedges are reported as cash flows from investing activities in the Consolidated Statement of Cash Flows, except for cash flows from the periodic interest settlements of cross-currency interest rate swaps designated as net investment hedges, which are reported as cash flows from operating activities in the Consolidated Statement of Cash Flows.

Cash flows from derivatives designated as net investment hedges are reported as cash flows from investing activities in the Consolidated Statement of Cash Flows, except for cash flows from the periodic interest settlements of cross-currency interest rate swaps designated as net investment hedges, which are reported as cash flows from operating activities in the Consolidated Statement of Cash Flows.

Cash flows from derivatives not designated as hedges are reported as cash flows from investing activities in the Consolidated Statement of Cash Flows.

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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.

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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.

Gross proceeds from receivables sold to third parties and the financing division of our former Parent were $ 3.6 billion, $ 3.1 billion, $ 485 million, and $ 2.5 billion for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022, and the year ended December 31, 2021, respectively.

The fees associated with the transfers of receivables were $ 49 million for the year ended March 31, 2024, $ 47 million for the year ended March 31, 2023, $ 7 million for the three months ended March 31, 2022, and no t material for the year ended December 31, 2021.

Gross proceeds from receivables sold to third parties were $ 3.2 billion, $ 3.6 billion, and $ 3.1 billion for the years ended March 31, 2025, 2024 and 2023, respectively.

The fees associated with the transfers of receivables were $ 38 million, $ 49 million, and $ 47 million for the years ended March 31, 2025, 2024 and 2023, respectively.

Fair Value Measurement

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● Level 3 — Unobservable inputs for the asset or liability.

Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation.

The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments.

The level of an asset or liability within the fair value hierarchy is determined based on the lowest level of any input that is significant to the fair value measurement.

The determination of fair value considers various factors including yield curves and time value underlying the financial instruments.

For derivatives and debt securities, the Company uses a discounted cash flow analysis using discount rates commensurate with the duration of the instrument.

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● Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument.

● Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value.

● Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing liabilities measured at fair value.

The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s credit risk as observed in the credit default swap market.

Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are recorded at fair value or at cost, as appropriate, in the period they are initially recognized, and such fair value may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that the asset may be impaired.

Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are recorded at fair value or at cost, as appropriate, in the period they are initially recognized, and such balances may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that the asset may be impaired.

The impairment models used for non-financial assets depend on the type of asset.

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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 March 31, 2024 were immaterial.

When procuring goods or services, the Company determines whether an arrangement contains a lease at its inception.

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The Company recognized right-of-use (“ROU”) assets and associated lease liabilities in the Consolidated Balance Sheet for leases with a term of more than twelve months when a majority percentage of utilization was attributed to the Company.

The lease liabilities recognized pre-Separation were measured at the lease commencement date and determined using the present value of the lease payments not yet paid and the former Parent’s incremental borrowing rate, since they were negotiated by the former Parent prior to Separation.

Any new or modified leases entered into after the Separation are measured at Kyndryl’s incremental borrowing rate, as the interest rate implicit in the lease is generally not determinable in transactions where the Company is the lessee.

As an implicit rate of return is not readily determinable in transactions where the Company is the lessee, an incremental borrowing rate is used in determining the present value of lease payments, calculated based on information available at the lease commencement date.

The ROU asset equals the lease liability adjusted for any initial direct costs, prepaid rent and lease incentives.

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Goodwill recorded in an acquisition is assigned to applicable reporting units based on expected revenues or expected cash flows.

Goodwill inherited from the former Parent pre-Separation represents the historical goodwill balances in IBM’s managed infrastructure services business arising from acquisitions specific to the Company.

Goodwill inherited from the former Parent pre-Separation represents the historical goodwill balances in the former Parent’s managed infrastructure services business arising from acquisitions specific to the Company.

Identifiable intangible assets with finite lives are amortized on a straight-line basis over their useful lives, which approximates the pattern that the assets’ economic benefits are expected to be consumed over time.

Amortization of completed technology is recorded in cost of services, and amortization of all other intangible assets is recorded in SG&A expense.

Amortization of completed technology is recorded in cost of services, and amortization of all other intangible assets is recorded in SG&A in the Consolidated Income Statement.

All costs related to internally developed computer software during the preliminary project stage and post-implementation operation stage are expensed as incurred.

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The impairment test is based on undiscounted cash flows and, if impaired, the asset is written down to fair value based on either discounted cash flows or appraised values.

tested for impairment at least annually and whenever changes in circumstances indicate an impairment may exist.

Goodwill is tested for impairment at least annually and whenever changes in circumstances indicate an impairment may exist.

The goodwill impairment test is performed at the reporting unit level, which aligns with our operating segments.

Impairment charges related to long-lived assets, intangible assets and goodwill, if any, are recorded as impairment expense in the Consolidated Income Statement.

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 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

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

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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 will be effective beginning April 1, 2024 and applied on a prospective basis to these assets on the Company’s balance sheet as of March 31, 2024, as well as future asset purchases.

Based on the net carrying value of information technology equipment, in the Company’s Consolidated Balance Sheet as of March 31, 2024, the Company estimates this change will decrease non-cash depreciation expense for fiscal year 2025 by approximately $ 180 million.

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.

We compute depreciation expense on a straight-line method over the estimated useful lives of the assets as follows:

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* Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term, rarely exceeding 10 years .

** Extended to six years effective April 1, 2024.

† Extended from five to six years effective April 1, 2024.

Environmental

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When a cleanup program becomes likely and it is probable that the Company will incur cleanup costs and those costs can be reasonably estimated, the Company accrues remediation costs for known environmental liabilities.

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 our former Parent.

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 the Company filed separate tax returns.

The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if the Company were a separate taxpayer and a standalone enterprise for the periods presented.

Tax attributes have been reported based on the hypothetical separate return basis results for the periods presented in the Company’s financial statements.

The calculation of income taxes on a hypothetical separate return basis requires a considerable amount of judgment and use of both estimates and allocations;

pre-Separation current and deferred taxes may not be reflective of the actual tax balances subsequent to the Separation.

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

Prior to the Separation, 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.

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.

Income tax provisions are calculated based on Kyndryl’s operating footprint, as well as 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.

Income tax expense is based on reported income before income taxes.

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Benefits from tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement.

The noncurrent portion of tax liabilities is included in other liabilities in the Consolidated Balance Sheet.

The noncurrent portion of tax liabilities is included in other noncurrent liabilities in the Consolidated Balance Sheet.

To the extent that new information becomes available which causes the Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact income tax expense in the period in which such determination is made.

Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense.

Net Loss per Share

Net loss per share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period.

The calculation of basic and diluted earnings per share for the pre-Separation period was based on the number of shares outstanding on November 4, 2021.

Refer to Note 6 – Net Loss per Share for a reconciliation as well as Note 15 – Stock-based Compensation for further discussion on awards.

Earnings per Share

Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period.

Diluted earnings per share is computed using the weighted average shares of common stock outstanding during the period and potentially dilutive securities, including restricted stock units, performance-conditioned awards, market-conditioned awards, and stock options using the treasury stock method.

Refer to Note 6 – Earnings per Share for a reconciliation as well as Note 16 – Stock-based Compensation for further discussion on awards.

ACCOUNTING PRONOUNCEMENTS

Standards Implemented

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (“LIBOR”) would cease being published.

The FASB issued temporary, optional expedients related to the accounting for contract modifications and hedging transactions as a result of markets transitioning from the use of LIBOR and other interbank offered rates to alternative reference rates.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , deferring the sunset date of Topic 848 to December 31, 2024.

In June 2023, the Company modified its contracts that use LIBOR, transitioning from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

The use of SOFR became effective in modified contracts beginning on July 1, 2023.

The change of reference rate did not result in any material impact to the Company’s consolidated financial statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations , which amended its guidance related to supplier finance programs.

The amended guidance requires additional disclosures surrounding the use of supplier finance programs to purchase goods or services, including disclosing the key terms of the programs, the amount of obligations outstanding at the end of the reporting period, and a roll-forward of those obligations.

The new guidance, except the roll-forward information, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The requirement to present roll-forward information is effective for fiscal years beginning after December 15, 2023.

The Company adopted the guidance at the beginning of fiscal year 2024.

The guidance did not have a material impact to the Company’s consolidated financial statements or disclosures, as the Company did not have material supplier finance programs.

For additional information, see Note 1 – Significant Accounting Policies.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses.

The guidance should be applied retrospectively, effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted the guidance for the fiscal year ended March 31, 2025.

For additional information, see Note 4 – Segments.

Recent Pronouncements

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842) – Common-Control Arrangements .

This guidance amends the accounting for leasehold improvements in common-control arrangements by requiring a lessee in a common-control arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease.

This guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted.

The Company has evaluated the impact of the amended guidance and concluded that the guidance does not have a material impact on the Company’s consolidated financial statements.

In August 2023, the FASB issued ASU 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement , which requires a joint venture to measure all contributions received upon its formation at fair value.

This guidance should be applied prospectively, effective for all newly-formed joint venture entities with a formation date on or after January 1, 2025.

Early adoption is permitted.

The Company has evaluated the impact of the guidance and does not expect it to have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses.

The guidance should be applied retrospectively, effective for

fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on the disclosures in its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures , which is intended to enhance the transparency and usefulness of income tax disclosures through improved reporting related to the rate reconciliation and income taxes paid.

The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company has elected not to early adopt this ASU and is currently evaluating the impact of this guidance on the disclosures in its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses , which is intended to improve the usefulness of expense information contained in public entity income statements through the disaggregation of relevant expense captions in the notes to the financial statements.

The guidance should be applied prospectively, effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on the disclosures in its consolidated financial statements.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810):

Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity , which amends the guidance for determining the accounting acquirer in certain transactions.

The guidance should be applied prospectively, effective for the fiscal years beginning after December 15, 2026 and interim reporting periods within fiscal years beginning after December 15, 2026, with early adoption permitted.

The Company has evaluated the impact of the guidance and does not expect it to have a material impact on the Company’s consolidated financial statements.

REVENUE RECOGNITION

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Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods

For the year ended March 31, 2024, revenue increased by $ 31 million for performance obligations satisfied (or partially satisfied) in previous periods, mainly due to changes in estimates on contracts with cost-to-cost measures of progress.

For the year ended March 31, 2025, revenue increased by $ 59 million for performance obligations satisfied (or partially satisfied) in previous periods, mainly due to changes in estimates.

Contract Balances

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The amount of revenue recognized during the year ended March 31, 2025 that was included within the deferred income balance at March 31, 2024 was $ 754 million.

The following table provides roll-forwards of the accounts receivable allowance for expected credit losses for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period), and the year ended December 31, 2021:

The following table provides roll-forwards of the accounts receivable allowance for expected credit losses for the years ended March 31, 2025, 2024 and 2023:

Year Ended March 31,

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Major Clients

No single client represented more than 10 percent of the Company’s total revenue during the years ended March 31, 2024 and 2023 and the three months ended March 31, 2022 (transition period).

Other than transactions with the former Parent, no single client represented 10 percent or more of the Company’s total revenue in the year ended December 31, 2021.

Other than receivables with the former Parent, no single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2024 and 2023, respectively.

No single client represented more than 10 percent of the Company’s total revenue during the years ended March 31, 2025, 2024 and 2023.

No single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2025.

Other than receivables with the former Parent, no single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2024.

Deferred Costs

Costs to acquire and fulfill customer contracts are deferred and amortized over the contract period or expected customer relationship life.

The expected customer relationship period is determined based on the average customer relationship period, including expected renewals, for each offering type and ranges from three to six years .

For contracts with an estimated amortization period of less than one year, we elected the practical expedient to expense incremental costs immediately.

The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at March 31, 2025 and 2024:

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The amount of total deferred costs amortized during the year ended March 31, 2024 was $ 1.8 billion, composed of $ 335 million of amortization of deferred transition costs, $ 921 million of amortization of prepaid software and $ 531 million of amortization of capitalized contract costs.

The amount of total

deferred costs amortized during the three months ended March 31, 2022 (transition period) was $ 455 million, composed of $ 112 million of amortization of deferred transition costs, $ 207 million of amortization of prepaid software and $ 136 million of amortization of capitalized contract costs.

The amount of total deferred costs amortized during the year ended December 31, 2021 was $ 1.8 billion, composed of $ 403 million of amortization of deferred transition costs, $ 874 million of amortization of prepaid software and $ 563 million of amortization of capitalized contract costs.

The amount of total deferred costs amortized during the year ended March 31, 2023 was $ 1.7 billion, composed of $ 342 million of amortization of deferred transition costs, $ 857 million of amortization of prepaid software and $ 472 million of amortization of capitalized contract costs.

There were no material impairment losses incurred in any period.

Refer to Note 1 – Significant Accounting Policies for additional information on deferred costs to fulfill a contract and capitalized costs of obtaining a contract.

Our reportable segments correspond to how the chief operating decision maker (“CODM”) reviews performance and allocates resources.

Our reportable segments correspond to how the chief operating decision maker (“CODM”), our chief executive officer, reviews performance and allocates resources.

Our four reportable segments consist of the following:

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Principal Markets:

This reportable segment represents the aggregation of our operations in Australia / New Zealand, Canada, France, Germany, India, Italy, Spain / Portugal, and the United Kingdom / Ireland.

This reportable segment represents the aggregation of our operations in Canada, France, Germany, India, Italy, Spain / Portugal, and the United Kingdom / Ireland.

Strategic Markets:

This reportable segment is comprised of our operations in all other countries in which we operate.

The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA.

Adjusted EBITDA is 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 and owned 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.

The use of revenue and adjusted EBITDA aligns with how the CODM assesses performance and allocates resources for the Company’s 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.

The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA , which allows our CODM to evaluate operating results excluding certain items whose fluctuation from period to period do not necessarily correspond to changes in the operations of our business.

inflationary countries.

The CODM reviews budget-to-actual variances of revenue and adjusted EBITDA to assess performance and allocate resources to the segments.

Our geographic markets frequently work together to sell and implement certain contracts.

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Currency fluctuations also tend to affect our geographic markets differently, depending on the geographic concentrations and locations of their businesses.

The following table reflects the results of the Company’s segments:

The following tables reflect the results of the Company’s segments:

Year Ended March 31, 2025

(Dollars in millions)

United States

Principal Markets

Strategic Markets

Total revenue

Cost of service, excluding depreciation and amortization *

Selling, general and administrative expenses, excluding depreciation and amortization *

Segment adjusted EBITDA

United States

Principal Markets

Strategic Markets

Total segment adjusted EBITDA

Year Ended March 31, 2024

(Dollars in millions)

Cost of service, excluding depreciation and amortization *

Selling, general and administrative expenses, excluding depreciation and amortization *

Segment adjusted EBITDA

Year Ended March 31, 2023

(Dollars in millions)

Cost of service, excluding depreciation and amortization *

Selling, general and administrative expenses, excluding depreciation and amortization *

Segment adjusted EBITDA

* Cost of service, excluding depreciation and amortization and selling, general and administrative expenses, excluding depreciation and

amortization are both used in calculating segment adjusted EBITDA and exclude depreciation of property, equipment and capitalized software

and amortization of transition costs and prepaid software.

† Other items include workforce rebalancing charges incurred subsequent to March 31, 2024 and other expense .

The following table reconciles segment adjusted EBITDA to consolidated pretax income (loss):

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Segment adjusted EBITDA

Workforce rebalancing charges

Workforce rebalancing charges incurred prior to March 31, 2024

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

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Stock-based compensation expense

Impairment expense

Interest expense

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Pretax income (loss)

* 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.

Segment Assets and Other Items

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* Includes corporate and other.

For the period prior to the Separation, income taxes have been calculated as if we filed income tax returns for the Company on a standalone basis, although the Company’s operations historically have been included in the income tax returns of its former Parent.

Income (loss) before income taxes by geography was as follows:

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Impact of foreign operations

Separation-related transactions

Goodwill impairment

Basis adjustment

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Effective tax rate

* Includes intercompany prepayment of 0.5 % in 2021.

The provision for income taxes for the year ended March 31, 2025 was $ 184 million as compared to $ 172 million for the year ended March 31, 2024.

The decrease in income tax expense was primarily driven by valuation allowances established in fiscal year 2023, changes in uncertain tax positions during fiscal year 2024 as a result of audit settlements and statute of limitations lapsing, offset by increases in taxes on foreign operations.

The provision for income taxes for the year ended March 31, 2023 was $ 524 million compared to $ 402 million for the year ended December 31, 2021.

The increase in income tax expense was primarily driven by the changes in valuation allowances, offset by tax charges in 2021 related to the transfer of Kyndryl’s operations that were considered a one-time item from Separation.

The increase in income tax expense was primarily driven by an increase in pretax book income.

The provision for income taxes for the year ended March 31, 2024 was $ 172 million as compared to $ 524 million for the year ended March 31, 2023.

The decrease in income tax expense was primarily driven by valuation allowances established in fiscal year 2023, changes in uncertain tax positions during fiscal year 2024 as a result of audit settlements and statutes of limitations lapsing, offset by increases in taxes on foreign operations.

The Company’s effective tax rate for the year ended March 31, 2025 was higher than the Company’s statutory tax rate primarily due to the Company’s pretax income in fiscal year 2025, compared to a pretax loss in fiscal year 2024.

The Company’s effective tax rate for the year ended March 31, 2024 was lower (more negative) than the Company’s statutory tax rate primarily due to the Company’s pretax loss being significantly lower in fiscal year 2024 and current year losses not benefitted due to the existing valuation allowances.

The Company’s effective tax rate for the year ended March 31, 2023 was lower than the Company’s statutory tax rate primarily due to changes in valuation allowances, taxes on foreign operations and uncertain tax positions.

The Company’s effective tax rate for the three months ended March 31, 2022 was lower than the Company’s statutory tax rate primarily due to tax effects of cross-border tax laws, undistributed foreign earnings, taxes on foreign operations, uncertain tax positions and the establishment of valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized.

The Company’s effective tax rate for 2021 was lower than the statutory tax rate primarily due to changes in valuation allowances, losses in certain jurisdictions that cannot be benefited from and tax charges related to the transfer of Kyndryl’s operations from IBM that were deemed to be immediately settled with IBM through the Net Parent Investment account.

The Organization for Economic Cooperation and Development (“OECD”) is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%.

While many jurisdictions in which the Company operates have adopted the relevant legislation effective for tax years beginning on or after January 1, 2024, the legislation did not result in a material change to the Company’s income tax provision for the year ended March 31, 2024.

The Organization for Economic Cooperation and Development’s Pillar Two rules, effective beginning in fiscal year 2025, did not significantly affect the Company’s tax rate or cash flows for the year ending March 31, 2025.

The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows:

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Allowance for credit losses

Fixed assets and depreciation

Goodwill and intangible assets

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Fixed assets and depreciation

Goodwill and intangible assets

Leases and right-of-use assets

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As of March 31, 2025, the Company had tax-affected U.S.

and foreign net operating loss deferred tax assets of $ 441 million and $ 66 million, respectively.

and foreign net operating loss/credit carryforwards deferred tax assets of $ 520 million and $ 75 million, respectively.

As of March 31, 2024, the Company had tax-affected U.S.

and foreign net

operating loss deferred tax assets of $ 412 million and $ 118 million, respectively.

and foreign net operating loss/credit carryforwards deferred tax assets of $ 441 million and $ 66 million, respectively.

If not utilized, the U.S.

state net operating loss carryforwards will begin to expire in 2026, and foreign net operating loss carryforwards will begin to expire in 2026.

federal net operating loss can be carried forward indefinitely.

state and foreign net operating loss carryforwards will begin to expire in 2026.

federal net operating losses incurred post 2017 can be carried forward indefinitely.

Certain of our acquired U.S.

net operating losses and general business credits are subject to limitations under IRC Section 382 and will begin to expire in 2029.

The valuation allowances as of March 31, 2025 and 2024 were $ 749 million and $ 748 million, respectively.

The increase in valuation allowances from March 31, 2024 to March 31, 2025 was $ 1 million.

The increase in valuation allowance is primarily a result of current year net operating losses generated in the U.S.

that are not supported by the reversal of taxable temporary differences and changes in judgment associated with the realizability of deferred tax assets in certain foreign jurisdictions.

For purposes of the historical periods presented on a “carve-out” basis, the Company’s income tax provisions were calculated using the separate return basis, as if the Company filed separate tax returns.

Prior to Separation, the Company’s operations were included in the consolidated U.S.

federal and certain state, local and foreign income tax returns filed by its former Parent.

Post-Separation, certain net operating losses and tax credit carryforwards that were included for purposes of the historical periods presented on a “carve-out” basis available to be utilized by its former Parent are not available for future utilization by the Company and were settled through Net Parent investment immediately prior to the Separation.

As of March 31, 2024, based on all available evidence, management concluded that no other valuation allowance was necessary to reduce the deferred tax assets remaining post-Separation since estimated future taxable income is expected to be sufficient to utilize these assets prior to their expiration.

The change in valuation allowances primarily reflects an increase in the U.S.

due to current-year tax credit carryforwards generated and the impact of purchase accounting related to acquired net operating losses, which are not more likely than not to be realized.

This increase was partially offset by the release and reduction in the valuation allowance for certain foreign jurisdictions resulting from the reversal of deductible temporary differences.

Estimates of future taxable income could change, perhaps materially, which may require us to revise our assessment of the recoverability of the deferred tax asset at that time.

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Reductions for tax positions of prior years (including impacts due to a lapse of statute)

Settlements (closed out to Net Parent investment)

Balance at end of period

With limited exceptions, the Company is generally subject to income tax audits for tax years subsequent to September 1, 2021, or post-Separation, including in the U.S., Germany, Japan and Spain.

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The Company had $ 4 million for interest and penalties accrued at March 31, 2024.

Pursuant to the terms of the Separation, the Company identified certain tax refunds related to estimated tax payments and refundable value-added taxes for which we are required to reimburse our former Parent as the refunds are received, as well as certain tax benefits related to net operating losses that were transferred to the Company for which we are required to pay to our former Parent as the tax benefits are realized.

As of March 31, 2024, the Company estimated the amount of our obligations to our former Parent related to these tax refunds and tax benefits to be approximately $ 13

million, where $ 4 million is recorded in other accrued expenses and liabilities expected to be paid within one year, and $ 9 million is recorded in other liabilities expected to be paid beyond the one-year period.

The Company also estimated the amount of our former Parent’s indemnification obligations to the Company related to income tax liabilities attributable to tax periods (or portions thereof) ending on or before November 3, 2021, to be approximately $ 27 million, which is recorded in prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet.

At March 31, 2024, the Company’s undistributed earnings from non-U.S.

Pursuant to the terms of the Separation, there were certain tax refunds related to estimated tax payments and refundable value-added taxes for which we would have been required to reimburse our former Parent as the refunds were received, as well as certain tax benefits related to net operating losses that were transferred to the Company for which we would have been required to pay to our former Parent as the tax benefits were realized.

In addition, our former Parent had obligations to indemnify the Company for tax liabilities attributable to tax periods (or portions thereof) ending on or before November 3, 2021.

During fiscal year 2025, an agreement was executed with our former Parent that resolved both parties’ obligations related to the Separation.

The agreement did not have a material impact on the Company’s financial statements.

As of March 31, 2025, the Company’s undistributed earnings from certain non-U.S.

subsidiaries were not indefinitely reinvested.

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and undistributed earnings to the extent the foreign earnings are not restricted by local laws and can be accessed in a cost-effective manner.

NET LOSS PER SHARE

EARNINGS PER SHARE

We did no t declare any stock dividends in the periods presented.

The following table provides the computation of basic and diluted earnings per share of common stock for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period), and the year ended December 31, 2021.

The following table provides the computation of basic and diluted earnings per share of common stock for the years ended March 31, 2025, 2024 and 2023.

Year Ended March 31,

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Net income (loss) on which basic and diluted earnings per share is calculated

Number of shares on which basic and diluted earnings per share is calculated

Number of shares on which basic earnings (loss) per share is calculated

Dilutive effect of stock options and equity awards

Number of shares on which diluted earnings (loss) per share is calculated

Basic earnings (loss) per share

Diluted earnings (loss) per share

For the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period), and the year ended December 31, 2021, the Company’s basic and diluted weighted-average shares outstanding were the same.

The following securities were not included in the computation of diluted net loss per share because they would have been anti-dilutive:

For the years ended March 31, 2024 and 2023, the number of shares on which basic and diluted earnings (loss) per share is calculated was the same as a result of the net loss incurred in the period.

The following securities were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive:

Year Ended March 31,

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Foreign exchange contracts

The gross balances of derivative assets, including accrued interest, are contained within prepaid expenses and other current assets, and the gross balances of derivative liabilities are contained within other accrued expenses and liabilities, or other noncurrent liabilities in the Consolidated Balance Sheet.

The gross balances of derivative assets, including accrued interest, are contained within prepaid expenses and other current assets and other noncurrent assets, and the gross balances of derivative liabilities are contained within other accrued expenses and liabilities, or other noncurrent liabilities in the Consolidated Balance Sheet.

The Company may enter into master netting agreements with certain counterparties that allow for netting of exposures.

There was no netting of derivative assets against liabilities in the Consolidated Balance Sheet at March 31, 2024 and 2023.

There was no netting

of derivative assets against liabilities in the Consolidated Balance Sheet at March 31, 2025 and 2024.

The Company manages counterparty risk by seeking counterparties of high credit quality and by monitoring credit ratings, credit spreads and other relevant public information about its counterparties.

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Cross-currency Swap Contracts

Total Notional Amount

Foreign Exchange Contracts

Cross-currency Swap Contracts

Total Notional Amount

Derivatives designated as hedging instruments

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The Company has foreign exchange derivative financial instruments designated as cash flow hedges to manage the volatility of cash flows that relate to operating expenses denominated in certain currencies.

Through the pre-Separation period, derivatives designated as cash flow hedges were deemed to be associated with the Company’s operations and were allocated to the Company’s Consolidated Income Statement based on its pro-rata share of the underlying items hedged, where applicable, with the remainder allocated on a pro-rata basis of revenue.

For additional information, see Note 1 – Significant Accounting Policies.

The maximum remaining length of time over which the Company has hedged its exposures is approximately one year .

At March 31, 2025, the maximum remaining length of time over which the Company has hedged its exposures is approximately one year .

At March 31, 2025 and 2024, the weighted-average remaining maturity of these instruments was approximately 0.5 years.

At March 31, 2024 and 2023, in connection with cash flow hedges of foreign currency cost transactions, the Company had unrealized gains of $ 2 million and $ 1 million (each before taxes), respectively, in AOCI.

The Company estimates that $ 2 million (before taxes) of deferred net gains on derivatives in AOCI at March 31, 2024 will be reclassified to net income within the next twelve months, providing an offsetting economic impact against the underlying anticipated transactions.

At March 31, 2025 and 2024, in connection with cash flow hedges of foreign currency cost transactions, the Company had unrealized losses of $ 1 million and unrealized gains of $ 2 million (each before taxes), respectively, in AOCI.

The Company estimates that $ 1 million (before taxes) of deferred net losses on derivatives in AOCI at March 31, 2025 will be reclassified to net income within the next twelve months, providing an offsetting economic impact against the underlying anticipated transactions.

Net Investment Hedges

The Company has entered into and designated cross-currency interest rate swap contracts as net investment hedges to mitigate foreign exchange exposure related net investments.

The Company has entered into and designated cross-currency interest rate swap contracts and currency forward contracts as net investment hedges to mitigate foreign exchange exposure related to net investments.

Under the terms of the cross-currency swaps, the Company makes fixed-rate payments in foreign currencies and receives fixed-rate amounts in U.S.

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dollars and pay foreign currencies at exchange rates which are determined at contract inception.

At March 31, 2024, the remaining maturity of these instruments was approximately 10 years .

At March 31, 2024, the Company had unrealized losses of $ 11 million (before taxes) in AOCI related to net investment hedges.

There were no net investment hedges in fiscal year 2023.

Under the terms of the currency forward contracts, the Company commits to sell the local currency of certain subsidiaries in exchange for U.S.

dollars at specified forward rates.

At March 31, 2025, the maximum remaining length of time over which the Company has hedged its exposure is approximately nine years .

At March 31, 2025 and 2024, the weighted-average remaining maturity of these instruments was approximately three and ten years , respectively.

At March 31, 2025 and 2024, the Company had unrealized losses of $ 6 million and unrealized losses of $ 11 million (each before taxes), respectively, in AOCI related to net investment hedges.

Derivatives Not Designated as Hedging Instruments

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and Other Comprehensive Income

Year Ended March 31,

(Dollars in millions)

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Cross-currency swaps

Consolidated Income Statement line item

Foreign exchange contracts

Gain (Loss) Recognized in Consolidated Income Statement

and Other Comprehensive Income

Amounts Excluded from

Reclassified from AOCI

Effectiveness Testing

Income Statement

Year Ended March 31,

(Dollars in millions)

Derivative instruments in cash flow hedges:

Foreign exchange contracts

Cost of services

Derivative instruments in net investment hedges:

Cross-currency swaps

Interest expenses

* Pre-Separation, the effects of hedging activity were allocated from the former Parent directly to the Company’s Consolidated Income Statement, resulting in no gain (loss) either recognized in other comprehensive income or reclassified from accumulated other comprehensive income.

For the year ended March 31, 2024, the Company recognized a gain of $ 1 million in interest expense on components excluded from the assessment of the hedge effectiveness for net investment hedges.

There were no net investment hedges in the year ended March 31, 2023, the three months ended March 31, 2022 and the year ended December 31, 2021.

For the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 and the year ended December 31, 2021, there were no gains or losses excluded from the assessment of hedge effectiveness for cash flow hedges, or associated with an underlying exposure that did not or was not expected to occur;

nor are there any anticipated in the normal course of business.

Foreign exchange contracts

Interest expenses

For the years ended March 31, 2025, 2024 and 2023, there were no gains or losses excluded from the assessment of hedge effectiveness for cash flow hedges, or associated with an underlying exposure that did not or was

not expected to occur, nor are there any anticipated in the normal course of business.

There were no net investment hedges in the year ended March 31, 2023.

The effects of derivatives not designated as hedging instruments on the Consolidated Income Statement are as follows:

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Income Statement

Year Ended March 31,

(Dollars in millions)

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Foreign exchange contracts

Other expense

Other expense (income)

PROPERTY AND EQUIPMENT

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The unpaid property and equipment balance included in accounts payable and accrued expenses was $ 45 million and $ 29 million at March 31, 2025 and 2024, respectively.

Depreciation of property and equipment was $ 801 million, $ 900 million, $ 246 million, and $ 1.3 billion for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (the transition period) and the year ended December 31, 2021, respectively.

Additionally, as part of the site-rationalization program, the Company recognized $ 21 million and $ 7 million of accelerated depreciation related to ceasing to use certain owned fixed assets for the years ended March 31, 2024 and 2023, respectively.

Depreciation of property and equipment was $ 618 million, $ 801 million, and $ 900 million for the years ended March 31, 2025, 2024 and 2023, respectively.

Additionally, as part of the site-rationalization program, the Company recognized $ 8 million, $ 21 million and $ 7 million of accelerated depreciation related to ceasing to use certain owned fixed assets for the years ended March 31, 2025, 2024 and 2023, respectively.

Refer to Note 19 – Workforce Rebalancing and Site-Rationalization Charges for additional details.

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Total lease costs

For pre-Separation periods, the Company’s components of lease costs reflected in the Consolidated Income Statement are based on an allocation of its former Parent’s lease costs, depending on the type of lease.

Finance lease costs relating to assets specifically utilized by the Company were fully allocated to the Company.

The real estate lease costs were allocated based on the percentage of space utilized by the Company.

The remaining lease costs were allocated to the Company based on headcount.

During the fiscal years of 2025, 2024 and 2023, we identified and ceased use of certain operating right-of-use assets that were inherited from the former Parent at Separation.

We determined that we will no longer receive economic benefits from these leased properties and do not have the intent or practical ability to sublease or sell them.

Accordingly, we recorded accelerated depreciation in the amount of $ 14 million and $ 69 million (representing the remaining carrying value of the identified right-of-use assets, not included in the operating lease costs in the table above) for the years ended March 31, 2024 and 2023, respectively.

Accordingly, we recorded accelerated depreciation in the amount of $ 39 million, $ 14 million and $ 69 million (representing the remaining carrying value of the identified right-of-use assets, not included in the operating lease costs in the table above) for the years ended March 31, 2025, 2024 and 2023, respectively.

Refer to Note 19 – Workforce Rebalancing and Site-Rationalization Charges for details of this program.

The Company had no sale and leaseback transactions for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 and the year ended December 31, 2021.

The Company had no sale and leaseback transactions for the years ended March 31, 2025, 2024 and 2023.

The following table presents supplemental information relating to the cash flows arising from lease transactions.

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(Dollars in millions)

Right-of-use assets – Property and equipment

Right-of-use assets – Property and equipment, net

Lease liabilities:

Current – Current portion of long-term debt

Noncurrent – Long-term debt

ACQUISITIONS AND DIVESTITURES

Acquisition of Skytap

In April 2024, the Company completed the acquisition of Skytap, Inc.

(“Skytap”), a leading specialized workload services provider, by acquiring all outstanding equity interests of Skytap in exchange for cash consideration.

The acquisition of Skytap was accounted for as a business combination in accordance with ASC 805, Business

Combinations .

Our financial statements for the year ended March 31, 2025 reflect the assets, liabilities, operating results and cash flows of Skytap, commencing from the acquisition date.

The Company acquired Skytap for cash consideration of approximately $ 45 million, net of cash acquired of $ 4 million.

Costs associated with this acquisition were immaterial.

Pro forma financial information has not been presented, as revenue and expenses related to the acquisition do not have a material impact on the Company’s Consolidated Financial Statements.

The acquisition of Skytap expands the Company’s hybrid cloud services portfolio.

The final purchase price allocation resulted in approximately $ 43 million in intangible assets, primarily consisting of $ 13 million in completed technologies and $ 30 million in customer relationships with estimated useful lives of five and eight years , respectively, assets transferred of $ 24 million (inclusive of cash acquired of $ 4 million), liabilities assumed of $ 29 million, and goodwill of $ 11 million, primarily attributable to synergies expected to arise from this acquisition.

We do not expect the goodwill to be deductible for income tax purposes.

Since the completion of the acquisition, the Company has made immaterial adjustments to the preliminary purchase price allocation impacting the valuation of goodwill and assets transferred.

Disposal of the Securities Industry Services (“SIS”) Platform in Canada

During the three months ended December 31, 2024, the Company completed the sale of its transaction processing platform for securities brokerage industry services in Canada (which is a component of the Company’s Principal Markets segment), for approximately $ 185 million in cash.

In connection with the sale, the Company recognized a $ 145 million pretax gain, which was recorded within transaction-related costs (benefits) on the Consolidated Income Statement.

This disposition is not accounted for as discontinued operations as it does not meet the relevant criteria.

The carrying value of the net assets sold was not material.

INTANGIBLE ASSETS INCLUDING GOODWILL

Business Combinations

In February 2022, the Company completed two transactions that were considered business combinations.

Our financial statements for the three months ended March 31, 2022 reflect the assets, liabilities, operating results and cash flows of both business combinations commencing from the acquisition date.

These transactions consisted of an immaterial acquisition in our Strategic Markets segment and a transfer of a majority interest ( 51 % ) of a managed infrastructure services joint venture in Japan (the “Exa transaction”) from our former Parent.

The Company completed the Exa transaction for consideration of $ 48 million, net of cash acquired of $ 59 million.

The non-controlling interest associated with the Exa transaction represents the fair value of the joint venture pro-rated by the non-controlling shareholder’s percentage of ownership ( 49 % ).

Intangible Assets

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There was no impairment of identifiable intangible assets recorded in the periods reported.

The net carrying amount of intangible assets increased by $ 17 million during the year ended March 31, 2024, primarily due to additions of capitalized software, partially offset by amortization and retirements.

The aggregate intangible asset amortization expense was $ 63 million, $ 46 million, $ 7 million and $ 37 million for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 and year ended December 31, 2021, respectively.

The aggregate amortization expense in fiscal year 2024 included amortization of capitalized software of $ 33 million, which was reported in “Depreciation of property, equipment and capitalized software” on the Consolidated Statement of Cash Flows.

The net carrying amount of intangible assets increased by $ 29 million during the year ended March 31, 2025, primarily due to additions of capitalized software, partially offset by amortization.

The aggregate intangible asset amortization expense was $ 72 million, $ 63 million, and $ 46 million for the years ended March 31, 2025, 2024 and 2023, respectively.

Aggregate amortization expense in fiscal year 2025 included amortization of capitalized software of $ 42 million, which was reported in “Depreciation of property, equipment and capitalized software” on the Consolidated Statement of Cash Flows.

During the year ended March 31, 2025, the Company retired approximately $ 75 million of fully amortized intangible assets, primarily related to customer relationships.

The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet was estimated to be the following at March 31, 2025:

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The following table presents a roll-forward of goodwill balances by segment for the years ended March 31, 2025 and 2024:

United States

Principal Markets

Strategic Markets

Primarily driven by foreign currency translation.

(Dollars in millions)

Balance as of March 31, 2023

Translation Adjustments

Balance as of March 31, 2024

Acquisitions and (Divestitures)*

Translation Adjustments

Balance as of March 31, 2025

Represents the goodwill acquired as part of the purchase of Skytap and the removal of goodwill related to the divestiture of the SIS platform using the relative fair value approach.

See Note 10 – Acquisitions and Divestitures for additional details.

As discussed in Note 4 – Segments, Kyndryl’s operations in Australia/New Zealand transitioned from the Principal Markets segment to the Strategic Markets segment in the quarter ended June 30, 2024.

As a result, the Company reallocated the goodwill associated with Australia/New Zealand from the Principal Markets segment to the Strategic Markets segment.

The Company also performed a qualitative impairment test immediately before and after the change in reporting units and determined that it is not more likely than not that the fair value of the reporting units is less than their carrying amounts, including goodwill.

Accordingly, the Company concluded that the goodwill related to those reporting units was not impaired.

Management reviews 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.

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 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 estimates were discount rates, expected revenue growth and projected EBITDA margins used in determining the fair value of the reporting units.

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.

There were no goodwill impairment losses recorded for the year ended March 31, 2024.

We prepared our impairment test as of January 1, 2024.

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

Future developments related to macroeconomic factors, including increases to the discount rate used, or changes to other inputs and assumptions, including revenue growth, could reduce the fair value of this and/or other reporting units and lead to impairment.

Cumulatively, the Company has recorded $ 469 million in goodwill impairment charges within its former EMEA ($ 293 million) and current United States ($ 176 million) reporting units.

We conducted an impairment assessment as of January 1, 2025.

After evaluating and weighing all relevant qualitative factors, the Company concluded that it is unlikely that the fair value of any of its reporting units is less than its carrying amount as of the date of the assessment.

Accordingly, there were no goodwill impairment losses recorded for the year ended March 31, 2025.

Cumulatively, the Company has recorded $ 469 million in goodwill impairment charges within its former EMEA ($ 293 million) and current United States ($ 176 million) reporting units, all of which occurred immediately following the Separation.

The following table presents the components of our debt:

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Interest Rate

Unsecured floating-rate term loan

Commercial loan agreement

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Unsecured senior notes due 2041

Finance lease and other obligations

Finance lease obligations

Unamortized discount

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Total long-term debt

* Including the cross-currency swaps that the Company entered into subsequent to the issuance of the unsecured senior notes due 2034, the effective interest rate on such notes was approximately 3.84 % for the quarter ended March 31,2024.

For more information, see Note 7 – Financial Assets and Liabilities.

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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.

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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.

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Loan Agreement

In the second quarter of 2021, our former Parent entered into a $ 140 million loan agreement with a bank to finance a purchase of software licenses on behalf of Kyndryl.

The loan was transferred to Kyndryl in conjunction with the Separation and is included in the Company’s consolidated financial statements.

The carrying amount of the loan approximates fair value.

If measured at fair value in the consolidated financial statements, the loan would be classified as Level 2 in the fair value hierarchy.

The amortizing loan contains covenants, primarily for compliance with the scheduled payments in the loan agreement.

The commercial loan agreement contains covenants, primarily for compliance with the scheduled payments in the loan agreement.

Failure to comply with the loan covenants could constitute an event of default and result in the immediate repayment of the principal and interest on the loan.

The Company is in compliance with all of the loan covenants and is expected to maintain a credit rating at or above the level outlined in the loan agreement.

The carrying amount of the loan approximates fair value and is classified as Level 2 in the fair value hierarchy.

OTHER LIABILITIES

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In response to changing business needs, the Company has taken workforce rebalancing actions to increase productivity, enhance cost-competitiveness and rebalance skills.

The workforce rebalancing liabilities at March 31, 2024 include liabilities inherited from our former Parent plus new actions taken by Kyndryl during the fiscal year.

The workforce rebalancing liabilities at March 31, 2025 and 2024 include liabilities inherited from our former Parent plus new actions taken by Kyndryl during the fiscal year.

Refer to Note 19 – Workforce Rebalancing and Site-Rationalization Charges for details.

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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 .

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At March 31, 2025, we had short-term (April 2025 through March 2026), mid-term (April 2026 through March 2028) and long-term (April 2028 onward) purchase commitments in the amount of $ 0.2 billion, $ 0.6 billion and $ 0.1 billion, respectively.

During the year ended March 31, 2025, contractual commitments decreased due to satisfaction of existing commitments outpacing new additions.

As a Fortune 500 company with customers and employees around the world, Kyndryl is subject to, or could become subject to, either as plaintiff or defendant, a variety of contingencies, including claims, demands and suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business.

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However, IBM appealed the judgment, and in April 2024, the court of appeals overturned the judgment against IBM.

In March 2025, the United States Supreme Court denied a request by BMC to review the court of appeals’ ruling.

Accordingly, we do not expect to have any liability related to this judgment.

Separately, certain contractual disputes have arisen between Kyndryl and IBM following the Separation.

IBM and Kyndryl have commenced arbitration proceedings related to certain of these matters.

The Company anticipates that certain of these matters will be concluded in fiscal year 2025, while others are in preliminary stages.

Kyndryl intends to vigorously pursue its interests and defenses in these matters, including asserting its own claims in arbitration if necessary.

The following tables present reclassifications and taxes related to items of other comprehensive income (loss) for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 (transition period) and the year ended December 31, 2021:

Over the course of this fiscal year, Kyndryl and IBM have resolved most of these matters, with certain of these matters resulting in a credit recorded in cost of services in the three months ended June 30, 2024, and other matters being resolved during the period largely in line with the Company’s accruals with no net cash outlays required by Kyndryl.

The following tables present reclassifications and taxes related to items of other comprehensive income (loss) for the years ended March 31, 2025, 2024 and 2023:

(Dollars in millions)

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Foreign currency translation adjustments

Unrealized losses on net investment hedges

Unrealized gains (losses) on net investment hedges

Total foreign currency translation adjustments

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Curtailments and settlements

Amortization of prior service (credits) costs

Amortization of net (gains) losses

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Other comprehensive income (loss)

* These AOCI components are included in the computation of net periodic benefit cost.

Refer to Note 16 – Retirement-Related Benefits for additional information.

(Dollars in millions)

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Foreign currency translation adjustments:

Foreign currency translation adjustments

Unrealized losses on net investment hedges

Total foreign currency translation adjustments

Unrealized gains (losses) on cash flow hedges:

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Other comprehensive income (loss)

* These AOCI components are included in the computation of net periodic benefit cost.

Refer to Note 16 – Retirement-Related Benefits for additional information.

(Dollars in millions)

Tax (Expense)

For the three months ended March 31, 2022:

Foreign currency translation adjustments

Unrealized gains (losses) on cash flow hedges:

Unrealized gains (losses) arising during the period

Reclassification of (gains) losses to net income

Total unrealized gains (losses) on cash flow hedges

Retirement-related benefit plans*:

Net gains (losses) arising during the period

Curtailments and settlements

Amortization of net (gains) losses

Total retirement-related benefit plans

Other comprehensive income (loss)

* These AOCI components are included in the computation of net periodic benefit cost.

Refer to Note 16 – Retirement-Related Benefits for additional information.

(Dollars in millions)

Tax (Expense)

For the year ended December 31, 2021:

For the year ended March 31, 2023

Foreign currency translation adjustments

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Curtailments and settlements

Amortization of prior service (credits) costs

Amortization of net (gains) losses

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Other comprehensive income (loss)

* These AOCI components are included in the computation of net periodic benefit cost.

Refer to Note 16 – Retirement-Related Benefits for additional information.

The following table presents the components of accumulated other comprehensive income (loss), net of taxes:

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Income (Loss)

December 31, 2020

Net transfers from Parent

Other comprehensive income (loss)

December 31, 2021

March 31, 2022

Other comprehensive income (loss)

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March 31, 2025

Foreign currency translation adjustments are presented gross.

Foreign currency translation adjustments are presented gross except for any associated hedges, which are presented net of tax.

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 (the “Share Repurchase Program”).

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.

STOCK-BASED COMPENSATION

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(in millions)

Nonvested balance at December 31, 2021

Nonvested balance at March 31, 2022

Awards granted

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The Company used the following assumptions in the Monte-Carlo simulation pricing model to estimate the grant-date fair values of the market-conditioned stock units granted within each of the following fiscal years.

No market-conditioned stock units were granted for the transition quarter ended March 31, 2022.

Year Ended March 31,

Market-conditioned Stock Units:

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4.57 % - 5.38 %

0.26 % - 0.92 %

Dividend yield

* Based on the average unadjusted three-year historic volatility across a group of peer companies.

Prior to the Separation, the weighted-average grant-date fair value of RSUs and PSUs granted by our former Parent was $ 126.01 for the pre-Separation period in the year ended December 31, 2021, which was derived from our former Parent’s stock price at their grant dates.

On the Separation date, such awards were converted to Kyndryl awards, resulting in a weighted-average grant-date fair value of $ 28.78 per share.

* Based on the average three-year historic volatility across a group of peer companies.

Stock Options

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(in millions)

Outstanding balance at December 31, 2021

Outstanding balance at March 31, 2022

Awards exercised

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Options vested and exercisable at March 31, 2025

The Company used the following assumptions in the Black-Scholes option pricing model to estimate the fair value of the employee stock options granted in the year ended December 31, 2021.

No stock options were granted in any other periods presented.

Employee Stock Options:

Fair value of common stock per share

Expected term (in years)*

Expected volatility**

Risk-free interest rate

Dividend yield

* The Company utilized the simplified method to estimate the weighted-average option term due to a lack of relevant historical data.

** Based on the average unadjusted historic volatility of common shares across a group of peer companies.

RETIREMENT-RELATED BENEFITS

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These plans are accounted for as defined benefit pension plans for purposes of the consolidated financial statements.

Accordingly, the net benefit plan obligations and the related benefit plan expenses of those plans have been recorded in the Company’s consolidated financial statements.

Accordingly, the net benefit obligations, plan assets and the related benefit plan expenses of those plans have been recorded in the Company’s consolidated financial statements.

The following tables present the components of net periodic pension cost for the defined benefit pension plans recognized in the Consolidated Income Statement.

Year Ended March 31,

(Dollars in millions)

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The following table presents the changes in net benefit obligation and plan assets for the defined benefit pension plans.

Year Ended March 31,

(Dollars in millions)

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Plans with plan assets in excess of PBO

The following table presents the pretax net loss and prior service costs (credits) recognized in OCI and the changes in pretax net loss and prior service costs (credits) as well as Separation-related transfers from Parent recognized in AOCI for the defined benefit pension plans.

The following table presents the pretax net loss and prior service costs (credits) recognized in OCI and the changes in pretax net loss and prior service costs (credits) recognized in AOCI for the defined benefit pension plans.

Year Ended March 31,

(Dollars in millions)

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The following table presents the weighted-average assumptions used to measure the net periodic pension cost and the year-end benefit obligations for the defined benefit pension plans.

Year Ended March 31,

Weighted-average assumptions used to measure:

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The weighted-average target allocation for the defined benefit plans is 28 % equity securities, 46 % fixed-income securities, 6 % real estate, 14 % insurance contracts and 6 % other investments.

Typically the responsibility

for determining the target allocation and managing the investments lies with a plan governing board that may include up to 50 percent of members elected by employees and retirees.

Typically the responsibility for determining the target allocation and managing the investments lies with a plan governing board that may include up to 50 percent of members elected by employees and retirees.

Generally, these defined benefit plans do not invest in illiquid assets, and their use of derivatives is mainly for currency hedging, interest rate risk management, credit exposure and alternative investment strategies.

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Over-the-counter derivatives are valued using pricing models.

These models require a variety of inputs, yield curves, credit curves, measures of volatility and foreign exchange rates.

These models require a variety of inputs, yield curves, credit curves,

measures of volatility and foreign exchange rates.

Derivative assets are classified as Level 1 or Level 2 depending on availability of quoted market prices.

5 unchanged sentences

From time to time, the Company contributes additional amounts as it deems appropriate.

The Company contributed $ 14 million, $ 27 million, $ 2 million, and $ 25 million to the defined benefit pension plans during the years ended March 31, 2024 and 2023, the three months ended March 31, 2022, and the year ended December 31, 2021, respectively.

Additionally, the Company made direct payments of $ 46 million, $ 37 million, $ 11 million, and $ 33 million to participants of the defined benefit pension plans during the years ended March 31, 2024 and 2023, the three months ended March 31, 2022, and the year ended December 31, 2021, respectively.

The Company contributed $ 17 million, $ 14 million, and $ 27 million to the defined benefit pension plans during the years ended March 31, 2025, 2024 and 2023, respectively.

Additionally, the Company made direct payments of $ 44 million, $ 46 million, and $ 37 million to participants of the defined benefit pension plans during the years ended March 31, 2025, 2024 and 2023, respectively.

The Company estimates contributions to its defined benefit pension plans in fiscal year 2026 to be approximately $ 12 million.

9 unchanged sentences

The Company sponsors defined contribution retirement plans for certain eligible employees.

The Company’s contribution expense associated with employer matching benefits was $ 140 million, $ 142 million, $ 35 million, and $ 165 million for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

The Company’s contribution expense associated with employer matching benefits was $ 131 million, $ 140 million, and $ 142 million, for the years ended March 31, 2025, 2024 and 2023, respectively.

Nonpension Postretirement Benefit Plans and Multi-Employer Plans

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Additionally, the components resulting in a change in benefit obligation and the activity recognized in AOCI related to the nonpension postretirement benefit plans were not material for the periods presented.

The nonpension postretirement benefit plans had a noncurrent liability recorded in the retirement and nonpension postretirement benefit obligation Consolidated Balance Sheet of $ 10 million at March 31, 2024 and 2023.

The weighted-average discount rate used to measure the nonpension postretirement benefit plan obligation was 2.89 %, 3.02 %, 1.23 %, and 1.04 % for the years ended March 31, 2024 and 2023, the three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

The nonpension postretirement benefit plans had a noncurrent liability recorded in retirement and nonpension postretirement benefit obligation in the Consolidated Balance Sheet of $ 9 million at March 31, 2025 and $ 10 million at March 31, 2024.

The weighted-average discount rate used to measure the nonpension postretirement benefit plan obligation was 3.16 %, 2.89 % and 3.02 %, for the years ended March 31, 2025, 2024 and 2023, respectively.

There were no plan assets in the nonpension postretirement benefit plans for any period presented.

9 unchanged sentences

While IBM was a related party, Kyndryl provided various services to IBM, including those related to hosting data centers and servicing IBM’s information technology infrastructure, which are reported as revenue in the Company’s Consolidated Income Statement.

Related-party revenue generated from these services was $ 287 million, $ 236 million and $ 704 million for the year ended March 31, 2023, the three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

Related-party revenue generated from these services was $ 287 million for the year ended March 31, 2023.

No related-party revenue was recognized after August 2022.

During the year ended March 31, 2024, the Company reached an agreement to collect previously reserved receivables from our former Parent, which resulted in a gain recorded within transaction-related costs (benefits).

While IBM was a related party, Kyndryl utilized various IBM products and services, recognized as costs of services, in the fulfillment of services contracts.

Total cost of services recognized from these related-party transactions in the Company’s Consolidated Income Statement was $ 1.4 billion, $ 924 million and $ 4.0 billion for the year ended March 31, 2023, the three months ended March 31, 2022, and the year ended December 31, 2021, respectively.

Kyndryl utilizes various IBM products and services, recognized as costs of services, in the fulfillment of services contracts.

While IBM was a related party, total cost of services recognized from these related-party transactions in the Company’s Consolidated Income Statement was $ 1.4 billion for the year ended March 31, 2023.

No related-party cost of services was recognized after August 2022.

Capital Expenditures with Former Parent

Related-party capital expenditures for purchases of IBM hardware were reflected as payments for property and equipment within the investing section of the Company’s Consolidated Statement of Cash Flows in the amounts of $ 89 million, $ 25 million, and $ 299 million for the year ended March 31, 2023, the three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

Additionally, as part of the Separation, IBM committed to provide Kyndryl, at no cost, up to approximately $ 265 million of upgraded hardware over an expected two-year period.

The amounts committed by IBM are reflected within other assets (noncurrent) within the Consolidated Balance Sheet at March 31, 2023.

For the year ended March 31, 2024, $ 265 million of the upgraded hardware committed by IBM was delivered to Kyndryl.

Accordingly, such balance was transferred from other assets (noncurrent) to property and equipment on the Balance Sheet and recognized as non-cash investing activity.

The Company intends to recognize depreciation expense related to such equipment over its useful life in accordance with the Company’s depreciation policy, as described in Note 1 – Significant Accounting Policies.

Allocation of Corporate Expenses

Following the Separation, general corporate expenses from IBM are no longer allocated to Kyndryl;

therefore, no related amounts were reflected on the Company’s financial statements for the years ended March 31, 2024 and 2023 or the three months ended March 31, 2022.

Prior to the Separation, IBM allocated certain general corporate expenses that would have been incurred by Kyndryl had it been a separate, standalone company.

These allocated general corporate expenses from IBM were recorded in the historical Consolidated Income Statement, Consolidated Statement of Comprehensive Income (Loss) and Consolidated Statement of Cash Flows.

Allocations for management costs and corporate support services provided to Kyndryl for the year ended December 31, 2021 were $ 989 million, which consisted of $ 10 million of allocated other expense, $ 46 million of allocated interest expense and $ 932 million of allocated selling, general and administrative expense.

Allocated selling, general and administrative expense primarily represents expenses for corporate functions including, but not limited to, senior management, legal, human resources, finance and accounting, treasury, information technology and other shared services.

All such amounts were deemed to have been incurred and settled by Kyndryl in the period in which the costs were recorded and are included in the net Parent investment.

These costs were allocated based on direct usage as applicable, with the remainder allocated on a pro-rata basis of gross profit, headcount, assets or other measures.

Net Parent Investment

As a result of the Separation, net Parent investment in the Consolidated Balance Sheet and Consolidated Statement of Equity was fully settled on November 3, 2021.

As such, there was no balance in net Parent investment at December 31, 2021, March 31, 2022, March 31, 2023 and March 31, 2024, and there was no activity within the account during the three months ended March 31, 2022 and the years ended March 31, 2023 and 2024.

The total net effect of these settlement transactions was reflected as Net transfers (to) from Parent in the financing activities section in the Consolidated Statement of Cash Flows for the year ended December 31, 2021.

Prior to the Separation, net Parent investment in the historical Balance Sheet and Statement of Equity represented IBM’s historical investment in Kyndryl, the net effect of transactions with and allocations from IBM, and Kyndryl’s accumulated earnings.

Lease Guarantees

Kyndryl has lease agreements with third parties with an estimated aggregate lease liability of $ 79 million that were guaranteed by IBM as of March 31, 2023.

Lease agreements guaranteed by IBM were immaterial as of March 31, 2024.

TRANSITION PERIOD

We are presenting our consolidated financial statements for the three-month period ended March 31, 2022, as required.

The following tables provide certain unaudited comparative financial information for the same period of the prior year.

Three Months Ended March 31,

(In millions, except per share amounts)

2021 (unaudited)

Cost of services **

Selling, general and administrative expenses

Workforce rebalancing charges

Transaction-related costs

Interest expense

Other expenses

Total costs and expenses

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Weighted-average basic shares outstanding

Weighted-average diluted shares outstanding

* Including related-party revenue of $ 236 million and $ 154 million for the three months ended March 31, 2022 and 2021, respectively

** Including related-party cost of services of $ 924 million and $ 1,006 million for the three months ended March 31, 2022 and 2021, respectively

Three Months Ended March 31,

(Dollars in millions)

2021 (unaudited)

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Depreciation and amortization

Depreciation of property and equipment

Depreciation of right-of-use assets

Amortization of transition costs and prepaid software

Amortization of capitalized contract costs

Amortization of intangible assets

Stock-based compensation

Deferred taxes

Net (gain) loss on asset sales and other

Change in operating assets and liabilities:

Deferred costs (excluding amortization)

Right-of-use assets and liabilities (excluding depreciation)

Workforce rebalancing liabilities

Accounts payable

Taxes (including items settled with former Parent in prior-year period)

Other assets and other liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Payments for property and equipment

Proceeds from disposition of property and equipment

Other investing activities, net

Net cash used in investing activities

Cash flows from financing activities:

Debt repayments

Net transfers from Parent

Common stock repurchases for tax withholdings

Other financing activities, net

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net change in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at January 1

Cash, cash equivalents and restricted cash at March 31

Supplemental data

Income taxes paid, net of refunds received

Interest paid on debt

WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES

During the year ended March 31, 2023, the Company initiated actions to reduce our overall cost structure and increase our operating efficiency, which continued through the fiscal year ended March 31, 2024.

These actions resulted in workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and lease termination charges (collectively, the “charges”).

Total charges for this program through March 31, 2024 were $ 310 million, consisting of approximately 60 % for workforce rebalancing charges and approximately 40 % for charges related to ceasing to use leased and owned fixed assets and lease termination charges.

During the year ended March 31, 2025, the Company initiated actions to reduce our overall cost structure and increase our operating efficiency which continued through the end of the 2025 fiscal year.

These actions resulted in workforce rebalancing charges and charges related to ceasing to use leased and owned fixed assets (collectively, the “Fiscal 2025 Program”).

The total charges incurred related to the Fiscal 2025 Program were $ 162 million, consisting of $ 114 million in workforce rebalancing charges and $ 48 million in charges related to ceasing to use leased and owned

fixed assets.

The Company expects that these actions will reduce future payroll costs, rent expenses and depreciation of property and equipment.

We will continue to seek

opportunities to increase our operational efficiency and reduce costs, which may result in additional charges in future periods.

During the year ended March 31, 2023, the Company initiated actions to reduce our overall cost structure and increase our operating efficiency, which continued through the year ended March 31, 2024.

These actions resulted in workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and lease termination charges (collectively, the “Fiscal 2024 Program”).

The total charges incurred related to the Fiscal 2024 Program were $ 310 million, consisting of approximately 60 % for workforce rebalancing charges and approximately 40 % for charges related to ceasing to use leased and owned fixed assets and lease termination charges.

The Company expects that these actions will reduce future payroll costs, rent expenses and depreciation of property and equipment.

The following table presents the segment breakout of charges incurred during the years ended March 31, 2025, 2024 and 2023.

Costs Incurred

Costs Incurred to Date

Year Ended March 31,

(Dollars in millions)

March 31, 2024

March 31, 2023

United States

1 unchanged sentence

Strategic Markets *

Total charges by segment

Corporate charges not allocated to the segments

Corporate and other

Total charges

The following table presents the classification of workforce rebalancing and site-rationalization activity in the Consolidated Income Statement during the years ended March 31, 2024 and 2023.

Costs Incurred

* Kyndryl’s operations in Australia/New Zealand transitioned from Principal Markets to Strategic Markets in the quarter ended June 30, 2024;

historical segment information has been recast to reflect this change.

The following table presents the classification of workforce rebalancing and site-rationalization activities in the Consolidated Income Statement during the years ended March 31, 2025, 2024 and 2023.

Costs Incurred to Date

Year Ended March 31,

(Dollars in millions)

March 31, 2024

March 31, 2023

Cost of services

3 unchanged sentences

* Excludes $ 4 million liability adjustment related to workforce rebalancing actions taken by the former Parent prior to Separation.

The following table presents the components of and changes in our workforce rebalancing and site-rationalization charges accrual during the years ended March 31, 2024 and 2023.

The following table presents the components of and changes in our workforce rebalancing and site-rationalization charges liabilities during the years ended March 31, 2025, 2024 and 2023.

Ceasing to Use

2 unchanged sentences

Leased Assets

Fiscal 2024 Program

Balance at March 31, 2022

6 unchanged sentences

Balance at March 31, 2024

Prior-year movement excludes workforce rebalancing liabilities inherited from the former Parent of $ 57 million as of March 31, 2022, charges of $ 16 million related to one-off terminations, cash payments of $ 32 million, and ending balance of $ 42 million as of March 31, 2023.

Current-year movement excludes additional charges of $ 4 million, cash payments of $ 15 million and ending balance of $ 29 million related to actions initiated by the former Parent.

Cash payments

Non-cash adjustments

Balance at March 31, 2025

Fiscal 2025 Program

Balance at March 31, 2024

Cash payments

Non-cash adjustments

Balance at March 31, 2025

Balance at March 31, 2022 excludes workforce rebalancing liabilities inherited from the former Parent of $ 57 million, charges of $ 16 million related to one-off terminations and cash payments of $ 32 million.

Balance as of March 31, 2023 excludes workforce rebalancing liabilities inherited from the former Parent of $ 42 million, charges of $ 4 million related to one-off terminations, cash payments of $ 15 million and ending balance of $ 29 million as of March 31, 2024.

Current-year movement excludes cash payments of $ 14 million, non-cash adjustments of $ 1 million and ending balance of $ 16 million related to actions initiated by the former Parent.

Workforce rebalancing liabilities are recorded within Other Liabilities;

refer to Note 13 – Other Liabilities for further details.

SUBSEQUENT EVENTS

On April 26, 2024, the Company completed its acquisition of Skytap, Inc.

for $ 51 million of cash consideration, reflecting customary closing adjustments.

The acquisition will be accounted for using the acquisition method and the

results of the acquired business will be included in the Company’s results of operations from the acquisition date.

The purchase price allocation is subject to adjustments as we obtain additional information during the measurement period.

We are currently in the process of completing the accounting for this transaction and expect to have our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed in the first half of fiscal year 2025.

In May 2024, the Company entered into a definitive agreement to divest its Securities Industry Services (SIS) business for approximately $ 200 million.

The Company has determined the assets associated with the business to be held-for-sale as of the first quarter of our 2025 fiscal year.

Closing of the transaction is subject to customary closing conditions, including regulatory approval.

The Company is currently evaluating the accounting impact resulting from the disposal, which it expects to include in its financial results in the first quarter of 2025.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .

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 8. Financial Statements and Supplementary Data