DEF: Kyndryl Holdings Reports Strong Fiscal 2025 Performance and Strategic Progress Ahead of Annual Stockholders Meeting

Kyndryl Holdings, Inc. announced robust fiscal year 2025 financial results, including a return to constant-currency revenue growth in the fourth quarter, significant increases in Adjusted EBITDA and Total Signings, and strong shareholder returns, as it prepares for its 2025 Annual Meeting of Stockholders.

Summary

• Kyndryl's 2025 Annual Meeting of Stockholders will be held virtually on July 31, 2025, at 1:00 p.m. Eastern Daylight Time, with the record date set for June 3, 2025.
• Stockholders will vote on the election of three director nominees for a one-year term, an advisory, non-binding vote on named executive officer compensation, and the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm for fiscal year ending March 31, 2026.
• For fiscal year 2025, Kyndryl reported $15.1 billion in revenue, a 6% decline overall and 4% in constant currency, but achieved a significant milestone with a return to constant-currency revenue growth in the fourth quarter.
• The company maintained a strong balance sheet with $1.8 billion in cash and $4.9 billion in available liquidity, and returned $94 million to stockholders through share repurchases.
• Kyndryl exceeded all strategic objectives in its 'Three A's' initiatives: Alliances (exceeded cloud hyperscaler revenue goal), Advanced Delivery (exceeded cost savings through automation), and Accounts (exceeded profit growth goal by addressing substandard margins).
• Fiscal 2025 annual cash bonuses for Named Executive Officers (NEOs) were based on revenue, Adjusted EBITDA, and corporate citizenship goals, resulting in a weighted payout of 118.4% of target.
• Adjusted EBITDA for fiscal 2025 was $2.6 billion, exceeding the target of $2.5 billion, and Adjusted Operating Cash Flow increased 20% year-over-year to $968 million.
• Total signings for fiscal 2025 increased 46% year-over-year to $18.2 billion.
• The 2023-2025 long-term equity incentive (PSU) awards paid out at 110% of target, driven by 110% attainment for Adjusted Operating Cash Flow, 34% for Signings, and 200% for Relative TSR (97th percentile).
• Launch PSUs, granted in December 2021, vested 50% as the share price reached 1.25x the initial share price ($24.17) in July 2024.
• The company achieved key corporate citizenship objectives, including annual emission reduction goals validated by SBTi, global certifications for its Environmental and Energy Management System, 2.3 million hours of employee learning, and increased employee engagement above industry average for the third consecutive year.
• Kyndryl's Total Shareholder Return (TSR) over the last three years was 150%, placing it in the highest decile of companies in the S&P MidCap 400 Index.

Sentiment

Score: 8

Explanation: The document presents a highly positive outlook, emphasizing strong financial performance, successful execution of strategic initiatives, and significant shareholder value creation. The company exceeded key financial targets (Adjusted EBITDA, Adjusted Operating Cash Flow, Total Signings) and achieved a critical return to constant-currency revenue growth. Corporate governance and compensation practices are highlighted as robust and aligned with shareholder interests, contributing to an overall very favorable sentiment.

Positives

• Achieved a return to constant-currency revenue growth in the fourth quarter of fiscal 2025, a significant milestone.
• Exceeded all strategic objectives in its 'Three A's' initiatives (Alliances, Advanced Delivery, Accounts) for fiscal 2025.
• Reported a strong balance sheet with $1.8 billion in cash and $4.9 billion in available liquidity.
• Returned $94 million to stockholders through share repurchases.
• Adjusted EBITDA increased 6% year-over-year to $2.5 billion, exceeding the target of $2.5 billion.
• Adjusted Operating Cash Flow increased 20% year-over-year to $968 million.
• Total signings increased 46% year-over-year to $18.2 billion, reflecting significant and broad-based growth.
• Fiscal 2025 annual cash bonus payout for NEOs was 118.4% of target, indicating strong performance against set goals.
• The 2023-2025 PSU awards paid out at 110% of target, with Relative TSR achieving the 97th percentile (200% payout).
• The company's Total Shareholder Return (TSR) over the last three years was 150%, placing it in the highest decile of the S&P MidCap 400 Index.
• Achieved annual emission reduction goals, aligned with 2040 net-zero and 2030 near-term SBTi targets.
• Obtained global certifications for its Environmental and Energy Management System.
• Employees completed 2.3 million hours of learning in fiscal 2025, demonstrating investment in workforce development.
• Employee engagement score increased and was above industry average for the third consecutive year.
• Achieved 100% completion rate for the Kyndryl Code of Conduct training course by eligible employees.
• Advanced AI strategy and responsible AI principles by implementing a robust AI governance model.
• High stockholder support for executive compensation, with approximately 96% of votes in favor in 2024.

Negatives

• Fiscal 2025 revenue declined 6% overall and 4% in constant currency, despite a return to growth in the fourth quarter.
• Signings attainment for the 2023-2025 PSU award was 34% of target, indicating a significant miss on this specific metric, although attributed to strategic actions to reduce low-margin revenue streams.

Risks

• Cybersecurity risks, which Kyndryl addresses for customers and oversees at the Board level.
• Technology skills shortages, identified as a challenge Kyndryl helps customers address.
• Market volatility, mentioned in the context of the company's Total Shareholder Return performance.
• Risks arising from compensation structure, which the Compensation and Human Capital Committee assesses and has determined are not reasonably likely to have a material adverse effect.
• Forward-looking statements are subject to numerous and evolving risks and uncertainties that may not be able to predict or assess.

Future Outlook

Kyndryl is well-positioned to continue executing its multi-year growth strategy, focusing on sustainable revenue growth, further margin expansion, and strong free cash flow generation. The company plans to revise its long-term incentive plan design for fiscal 2026, shifting the primary performance metric for PSUs to cumulative three-year adjusted operating cash flow, with relative TSR as a payout modifier, and discontinuing the cumulative signings measure to simplify the plan and align with its evolving growth focus.

Management Comments

• "We look forward to capitalizing on the opportunities ahead and delivering exceptional value to our customers and our stockholders." Martin Schroeter, Chairman and Chief Executive Officer.
• "Our global scale and our expertise in mission-critical work positions Kyndryl as a vital and trusted partner for our customers current and future technology needs—specifically, addressing cloud migration, hybrid IT environments, technology skills shortages, cybersecurity risks, and the adoption of artificial intelligence." Martin Schroeter, Chairman and Chief Executive Officer.
• "We finished the fiscal year strong, positioning the Company well to continue to execute on our multi-year growth strategy." Company Management (implied from the context of performance highlights).

Industry Context

Kyndryl operates as the world's largest IT infrastructure services provider, offering advisory, implementation, and managed service capabilities across over 60 countries. The company is strategically addressing critical industry needs such as cloud migration, hybrid IT environments, technology skills shortages, cybersecurity risks, and the adoption of artificial intelligence. Its 'Three A's' initiatives (Alliances, Advanced Delivery, Accounts) and offerings like Kyndryl Consult and Kyndryl Bridge reflect its adaptation to evolving market demands and its competitive positioning against a peer group of leading technology and services companies like Accenture, Cognizant, and Salesforce.

Comparison to Industry Standards

• Kyndryl's employee engagement score increased and was above the industry average for the third consecutive year.
• The company's Total Shareholder Return (TSR) performance over the last three years was 150%, placing it in the highest decile of the companies in the S&P MidCap 400 Index.
• The peer group used for executive compensation comparisons includes industry leaders such as Accenture plc, Cognizant Technology Solutions Corporation, Jacobs Solutions Inc., Aon plc, DXC Technology Company, Leidos Holdings, Inc., Automatic Data Processing, Inc., Fidelity National Information Services, Inc., Marsh & McLennan Companies, Inc., Booz Allen Hamilton Holding Corporation, Fiserv, Inc., Salesforce, Inc., Cisco Systems, Inc., Hewlett Packard Enterprise Company, and Science Applications International Corporation.
• Relative TSR performance for PSU awards is benchmarked against the companies in the S&P MidCap 400 Index.

Corporate Governance

Related Party Transactions

• Since April 1, 2024, there have been no related person transactions or pending related person transactions that required disclosure.

Stakeholder Impact

• **Shareholders**: Directly impacted by $94 million in share repurchases, a 150% Total Shareholder Return over three years (highest decile in S&P MidCap 400), and executive compensation aligned with shareholder value creation. Enhanced governance practices like majority voting and proxy access increase shareholder influence.
• **Employees**: Benefit from a focus on attracting, retaining, and developing a highly skilled workforce through 'The Kyndryl Way' culture. Fiscal 2025 saw 2.3 million hours of learning and the launch of 'Kyndryl Be Well' well-being offering. Employee engagement scores are consistently above industry average.
• **Customers**: Positioned to benefit from Kyndryl's expertise in mission-critical IT services, addressing key needs like cloud migration, hybrid IT, cybersecurity, and AI adoption. New innovations like business outcomes-led consulting and an open integration digital business platform aim to enhance customer value.
• **Suppliers**: Subject to the progressive application of the Responsible Business Alliance Code of Conduct, with efforts to educate the supplier network on net-zero goals, promoting responsible business practices across the supply chain.
• **Communities**: Benefit from Kyndryl's corporate citizenship initiatives, including the Kyndryl Foundation awarding 12 grants across 11 countries to support cybersecurity and AI skilling for economic advancement.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on July 31, 2025, for voting on director elections, executive compensation, and auditor ratification.
• Continue the phased elimination of the staggered board structure, with full declassification expected by the conclusion of the 2027 Annual Meeting.
• The Compensation and Human Capital Committee will continue its annual review of the executive compensation program.
• The Nominating and Governance Committee and the Board will conduct an annual review of director compensation.
• The Audit Committee will annually review PwC's independence and performance as the independent registered public accounting firm.
• Continue executing the multi-year growth strategy, focusing on sustainable revenue growth, margin expansion, and strong free cash flow generation.
• Implement fiscal 2026 long-term incentive design changes, shifting PSU performance metrics to cumulative three-year adjusted operating cash flow with relative TSR as a payout modifier.

Key Dates

Recommendation

Keywords

Kyndryl, Proxy Statement, SEC Filing, Corporate Governance, Executive Compensation, Financial Performance, IT Infrastructure Services, Cloud Migration, Hybrid IT, Cybersecurity, Artificial Intelligence, Shareholder Meeting, Director Election, Auditor Ratification, Adjusted EBITDA, Revenue, Cash Flow, Total Signings, Share Repurchases, ESG, Corporate Citizenship, Risk Management, Total Shareholder Return