On July 31, 2024, Kyndryl Holdings Inc (KD, Financial) released its 8-K filing detailing the financial results for the first quarter of its fiscal year 2025, ending June 30, 2024. Kyndryl Holdings Inc is a technology services and infrastructure services provider company, offering advisory, implementation, and managed services across various technology domains to help customers manage and modernize enterprise IT environments.
Performance Overview
For the first quarter, Kyndryl Holdings Inc (KD, Financial) reported revenues of $3.74 billion, reflecting an 11% year-over-year decline and an 8% decline in constant currency. This revenue figure fell short of the analyst estimate of $3.79 billion. The decline is attributed to the company's strategic efforts to reduce inherited no-margin and low-margin third-party content in customer contracts, particularly in the United States and Strategic Markets segments.
The company reported a net income of $11 million, or $0.05 per diluted share, compared to a net loss of $141 million, or ($0.62) per diluted share, in the prior-year period. This result also fell short of the analyst estimate of $0.10 earnings per share.
Financial Achievements and Challenges
Despite the revenue decline, Kyndryl Holdings Inc (KD, Financial) achieved significant financial milestones. The company reported a pretax income of $64 million, a notable improvement from the prior year's pretax loss of $109 million. Adjusted pretax income surged by 96% to $92 million, driven by contributions from Kyndryl’s three-A initiatives – Alliances, Advanced Delivery, and Accounts.
“Kyndryl continued its momentum and delivered another strong set of results in the first quarter, led by significant increases in Kyndryl Consult and hyperscaler-related revenues. Our expertise in running and transforming mission-critical technology differentiates us in the markets we serve,” said Kyndryl Chairman and Chief Executive Officer Martin Schroeter.
However, the company faced challenges, including workforce rebalancing charges and unfavorable currency movements, which were offset by a vendor credit and a reduction in depreciation expense due to the extension of the useful lives of the company’s hardware assets.
Key Financial Metrics
| Metric | Q1 FY2025 | Q1 FY2024 |
|---|---|---|
| Revenue | $3.74 billion | $4.19 billion |
| Net Income | $11 million | ($141 million) |
| Adjusted EBITDA | $556 million | $612 million |
| Adjusted Free Cash Flow | ($116 million) | ($106 million) |
Adjusted EBITDA for the quarter was $556 million, reflecting a slight decrease from $612 million in the prior-year period. Adjusted free cash flow was negative at $116 million, impacted by workforce rebalancing actions.
Segment Performance
The United States segment reported a revenue decline of 15% year-over-year, while the Japan segment saw a 7% decline. Principal Markets and Strategic Markets segments also experienced revenue declines of 5% and 15%, respectively.
Outlook and Future Prospects
Kyndryl Holdings Inc (KD, Financial) has raised its adjusted earnings outlook for fiscal year 2025, reaffirming its outlook for constant-currency revenue growth of (2%) to (4%). The company expects to deliver year-over-year constant-currency revenue growth in the fourth quarter of the fiscal year and aims to generate adjusted free cash flow of approximately $300 million for fiscal year 2025.
“In the quarter, we continued to expand our adjusted pretax income margins year-over-year, driven by strong execution on our three-A initiatives and another quarter of double-digit growth in Kyndryl Consult. And importantly, we’ve delivered growth in total signings over the last twelve months with new contracts having solid projected margins,” said Kyndryl Chief Financial Officer David Wyshner.
For more detailed insights and the complete financial report, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Kyndryl Holdings Inc for further details.
