Deferred taxes 22 55
Net (gain) loss on asset sales and
other (108) (6)
Change in operating assets and
liabilities:
Deferred costs (excluding
amortization) (1,273) (1,023)
Right-of-use assets and
liabilities (excluding
depreciation) (212) (269)
Workforce rebalancing liabilities (22) (28)
Receivables 177 (13)
Accounts payable (265) (339)
Taxes (39) (33)
Other assets and other
liabilities (183) (90)
-------------- -------------
Net cash provided by operating
activities $ 361 $ 309
-------------- -------------
Cash flows from investing
activities:
Capital expenditures $ (365) $ (449)
Proceeds from disposition of
property and equipment 70 134
Acquisitions and divestitures, net
of cash acquired 137 --
Other investing activities, net (42) (35)
-------------- -------------
Net cash used in investing
activities $ (199) $ (350)
-------------- -------------
Cash flows from financing
activities:
Debt repayments $ (108) $ (103)
Common stock repurchases (30) --
Common stock repurchases for tax
withholdings (32) (19)
Other financing activities, net (2) (1)
-------------- -------------
Net cash used in financing
activities $ (172) $ (123)
-------------- -------------
Effect of exchange rate changes on
cash, cash equivalents and
restricted cash $ (39) $ (5)
-------------- -------------
Net change in cash, cash equivalents
and restricted cash $ (49) $ (169)
Cash, cash equivalents and
restricted cash at beginning of
period $ 1,554 $ 1,860
-------------- -------------
Cash, cash equivalents and
restricted cash at end of period $ 1,505 $ 1,691
============== =============
Supplemental data
Income taxes paid, net of refunds
received $ 123 $ 140
Interest paid on debt $ 100 $ 108
Net cash provided by operating activities was $260 million in the three months
ended December 31, 2024 and $101 million in the six months ended September 30,
2024.
Table 4
NON-GAAP METRIC DEFINITIONS AND RECONCILIATIONS
(dollars in millions, except signings)
We report our financial results in accordance with GAAP. We also present certain non-GAAP financial measures to provide useful supplemental information to investors. We provide these non-GAAP financial measures as we believe it enhances investors' visibility to management decisions and their impacts on operational performance; enables better comparison to peer companies; and allows us to provide a long-term strategic view of the business going forward.
Constant-currency information compares results between periods as if exchange rates had remained constant period over period. We define constant-currency revenues as total revenues excluding the impact of foreign exchange rate movements and use it to determine the constant-currency revenue growth on a year-over-year basis. Constant-currency revenues are calculated by translating current period revenues using corresponding prior-period exchange rates.
Adjusted pretax income is defined as pretax income excluding transaction-related costs and benefits, charges related to ceasing to use leased / fixed assets, charges related to lease terminations, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, amortization of acquisition-related intangible assets, workforce rebalancing charges incurred prior to March 31, 2024, impairment expense, significant litigation costs and benefits, and currency impacts of highly inflationary countries. The Company's fiscal year 2025 outlook for adjusted pretax income includes approximately $100 million of anticipated workforce rebalancing charges. Adjusted pretax margin is calculated by dividing adjusted pretax income by revenue.
Adjusted EBITDA is defined as net income (loss) excluding net interest expense, income taxes, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of capitalized contract costs), charges related to ceasing to use leased / fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, workforce rebalancing charges incurred prior to March 31, 2024, impairment expense, significant litigation costs and benefits, and currency impacts of highly inflationary countries. The Company's fiscal year 2025 outlook for adjusted EBITDA includes approximately $100 million of anticipated workforce rebalancing charges. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue.
Adjusted net income is defined as adjusted pretax income less the reported provision for income taxes, minus or plus the tax effect of the non-GAAP adjustments made to calculate adjusted pretax income, and excluding exceptional items impacting the reported provision for income taxes. Adjusted net margin is calculated by dividing adjusted net income by revenue.
Adjusted earnings per share (EPS) is defined as adjusted net income divided by diluted weighted average shares outstanding to reflect shares that are dilutive or anti-dilutive based on the amount of adjusted net income. The weighted average common shares outstanding used to calculate adjusted earnings (loss) per share will differ from such shares used to calculate diluted earnings (loss) per share (GAAP) when the inclusion of dilutive shares has an anti-dilutive effect for one calculation but not for the other.
Adjusted free cash flow is defined as cash flows from operating activities (GAAP) after adding back transaction-related payments, charges related to lease terminations, payments related to workforce rebalancing charges incurred prior to March 31, 2024, and significant litigation payments, less net capital expenditures. Management uses adjusted free cash flow as a measure to evaluate its operating results, plan strategic investments and assess our ability and need to incur and service debt. We believe adjusted free cash flow is a useful supplemental financial measure to aid investors in assessing our ability to pursue business opportunities and investments and to service our debt. Adjusted free cash flow is a financial measure that is not recognized under U.S. GAAP and should not be considered as an alternative to cash flows from operations or liquidity derived in accordance with U.S. GAAP.
Signings are defined by Kyndryl as an initial estimate of the value of a customer's commitment under a contract. The calculation involves estimates and judgments to gauge the extent of a customer's commitment. We calculate this based on various considerations including the type and duration of the agreement as well as the presence of termination charges or wind-down costs. Contract extensions and increases in scope are treated as signings only to the extent of the incremental new value. Signings can vary over time due to a variety of factors including, but not limited to, the timing of signing a small number of larger outsourcing contracts, as well as the length of those contracts. The conversion of signings into revenue may vary based on the types of services and solutions, customer decisions and other factors, which may include, but are not limited to, macroeconomic environment or external events. Management uses signings as a tool to monitor the performance of the business including the business' ability to attract new customers and sell additional scope into our existing customer base.
Reconciliation of net
income (loss)
to adjusted pretax
income,
adjusted EBITDA,
adjusted net Three Months Ended Nine Months Ended
income (loss) and
adjusted EPS December 31, December 31,
-------------------- --------------------
(in millions, except
per share amounts) 2024 2023 2024 2023
--------------------- ---------- -------- ---------- --------
Net income (loss)
(GAAP) $ 215 $ (12) $ 183 $ (295)
Provision for income
taxes 43 65 134 131
------ ------- ------ -------
Pretax income (loss)
(GAAP) $ 258 $ 53 $ 317 $ (165)
Workforce rebalancing
charges incurred
prior to March 31,
2024 -- 19 -- 115
Charges related to
ceasing to use
leased/fixed assets
and lease
terminations 9 14 29 24
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