Kyndryl (KD) Morgan Stanley Technology, Media & Telecom Conference summary

Growth strategy and financial objectives

• Targeting a 'triple, double, single' approach: tripling free cash flow, doubling profitability, and achieving single-digit revenue growth over the next few years.

• Free cash flow expected to triple, driven by improved tax position and doubling of profits without increasing cash tax payments.

• Profitability to double as a greater share of P&L comes from higher-margin, post-spin backlog contracts.

• Revenue growth to accelerate, aiming for mid-single-digit growth by fiscal year 2028, with a return to growth expected in Q4 FY2025.

• Growth underpinned by strong performance in Consult and Alliance businesses, with engineered revenue declines in prior years to improve profitability.

Business model evolution and backlog dynamics

• Backlog-based model provides strong visibility; by next fiscal year, over two-thirds of P&L will be from post-spin signings.

• More than 90% of P&L expected to be from new backlog within three years, reducing reliance on inherited contracts.

• Gross Profit Book-to-Bill metric above 1.3x, indicating strong future value creation.

• Historically, 80% of annual revenue is known at the start of the year, with this figure remaining high even as growth resumes.

Consult and innovation initiatives

• Consult business is growing at double-digit rates, driven by addressing customer needs in skill shortages, regulatory changes, and AI opportunities.

• Heavy investment in consulting skills, cloud certifications, and innovation platforms like Kyndryl Bridge.

• Kyndryl Bridge provides actionable insights, automation, and industry benchmarking, enhancing customer value and operational efficiency.

• Consult acts as a gateway for managed services contracts, leveraging deep infrastructure knowledge and practical problem-solving.