Kyndryl (KD) investor relations material

Executive summary

• Revenue for the quarter ended June 30, 2026, was $3.6 billion, down 3% year-over-year, with U.S. revenue up 5% and declines in Japan, Principal, and Strategic Markets.

• Net loss was $55 million, or ($0.25) per diluted share, compared to net income of $56 million in the prior-year period, driven by higher workforce rebalancing charges, impairment expense, and increased SG&A, partially offset by lower taxes and a $40 million gain from a subsidiary sale.

• Adjusted EBITDA was $512 million, down from $647 million year-over-year, with a margin of 14.2%.

• Workforce rebalancing charges totaled $152 million in the quarter, impacting both reported and adjusted results.

• Strong signings momentum, with $3.9 billion signed in the quarter and $14.2 billion over the trailing twelve months.

Financial highlights

• Adjusted pretax loss was $37 million, compared to adjusted pretax income of $128 million in the prior-year period.

• Free cash flow was an outflow of $401 million in Q1, reflecting seasonal working capital dynamics and higher payments for renewals and subscriptions.

• Cash and cash equivalents at June 30, 2026, were $2.1 billion; net leverage ratio at 0.8x.

• Share repurchases totaled 5.0 million shares for $64 million in the quarter; $238 million capacity remains.

• Operating cash flow was $(310) million, primarily due to working capital timing, higher software payments, and lower billings and collections.

Outlook and guidance

• Fiscal 2027 outlook reaffirmed: adjusted pretax income of $600–$700 million, including workforce rebalancing charges.

• Free cash flow guidance for fiscal 2027 is $400–$500 million; revenue expected to be flat to down 2% in constant currency.

• Fiscal 2028 targets: over $1.2 billion in adjusted pre-tax income and $1 billion in free cash flow, achievable with low single-digit constant currency revenue growth.

• Second half 2027 revenue expected to be stronger than first half, driven by signings momentum.

• Adjusted EBITDA margin targeted at approximately 18.3%.