Kyndryl (KD) - 2025 Q1 - Quarterly Report

Revenue and Financial Performance - Revenue for the three months ended June 30, 2024 was $3.7 billion, a decline of 11$3.739 billion, a decrease of 11% compared to $4.193 billion in the same period in 2023[114] - United States revenue decreased 15$986 million, driven by efforts to reduce low-margin revenues[108] - Japan revenue decreased 7% to $569 million, with a 6$1.3 billion, but adjusted EBITDA increased 60% to $241 million[111] - Strategic Markets revenue decreased 15$869 million, with adjusted EBITDA declining 20% to $120 million[112] Net Income and Adjusted EBITDA - Net income improved to$11 million, a $152 million increase from the prior-year period[103] - Adjusted EBITDA for the three months ended June 30, 2024 was$556 million, a decline of 9% compared to the prior-year period[106] - Corporate and other had an adjusted EBITDA loss of $21 million, compared to a loss of$24 million in the prior-year period[113] Cost Management and Efficiency - Cost of services decreased to 78.5% of revenue in Q2 2024 from 82.3% in Q2 2023, driven by lower depreciation expenses and increased operating efficiencies[114] - Workforce rebalancing charges were $36 million in Q2 2024, a decrease of 38$58 million in Q2 2023[114][116] - The company expects workforce rebalancing and site-rationalization activities to reduce costs by over $200 million in fiscal year 2026[117] Cash Flow and Financial Position - Net cash used in operating activities improved to$48 million in Q2 2024 from $173 million in Q2 2023, driven by increased net income and better receivables collection[124] - Total assets decreased by$427 million to $10.2 billion as of June 30, 2024, primarily due to a$284 million decrease in cash and cash equivalents[121] - Gross proceeds from receivables sold to third parties were $0.8 billion in Q2 2024, down from$1.2 billion in Q2 2023[134] Debt and Financing - The company completed a $500 million senior unsecured notes offering in February 2024 with a 6.35$3.15 billion remains undrawn as of June 30, 2024, with the agreement expiring in October 2026[131] - The company initiated a supplier financing program with a third-party financial institution, offering suppliers early payment at a discounted amount, with average invoice terms of 90 to 120 days[135] - The company's obligations under the supplier financing program are recognized as accounts payable, with immaterial outstanding obligations as of June 30, 2024, and March 31, 2024[135] Risks and Challenges - Forward-looking statements in the report include risks such as failure to attract or retain customers, competition, and impacts from economic, political, and public health conditions[137] - Risks related to cybersecurity, data governance, and privacy are highlighted as potential challenges for the company[137] - The company faces risks from currency fluctuations, pension plans, and changes in market liquidity conditions[138] - Legal proceedings, tax matters, and environmental issues are identified as additional risks[138] - The company's ability to manage acquisitions and dispositions, including integration challenges and higher debt levels, is a noted risk[137] - Risks related to the company's spin-off from IBM and deficiencies in information technology controls are mentioned[138] Accounting and Reporting - No changes were made to the company's critical accounting policies and estimates as described in the Annual Report on Form 10-K for the fiscal year ended March 31, 2024[136] - The company routinely posts material information on its corporate and Investor Relations websites, which is not incorporated into SEC filings[140] Business Development and Signings - Total signings increased by 11% to $3.1 billion in Q2 2024 compared to$2.8 billion in Q2 2023[127]