Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Dec. 31, 2023 | Jan. 31, 2024 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Dec. 31, 2023 | |
Entity File Number | 001-40853 | |
Entity Registrant Name | Kyndryl Holdings, Inc | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 86-1185492 | |
Entity Address, Address Line One | One Vanderbilt Avenue, 15th Floor | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10017 | |
City Area Code | 212 | |
Local Phone Number | 896-2098 | |
Title of 12(b) Security | Common stock, par value $0.01 per share | |
Trading Symbol | KD | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 230,103,348 | |
Entity Central Index Key | 0001867072 | |
Current Fiscal Year End Date | --03-31 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED INCOME STATEMENT - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
CONSOLIDATED INCOME STATEMENT | ||||
Revenues | $ 3,936 | $ 4,303 | $ 12,202 | $ 12,771 |
Cost of services | 3,184 | 3,596 | 10,055 | 10,886 |
Selling, general and administrative expenses | 705 | 731 | 2,059 | 2,131 |
Workforce rebalancing charges | 19 | 10 | 115 | 16 |
Transaction-related costs (benefits) | (77) | 48 | 12 | 218 |
Interest expense | 31 | 27 | 92 | 65 |
Other expense | 21 | 30 | 34 | 16 |
Total costs and expenses | 3,883 | 4,441 | 12,367 | 13,333 |
Income (loss) before income taxes | 53 | (138) | (165) | (563) |
Provision for (benefit from) income taxes | 65 | (32) | 131 | 74 |
Net income (loss) | $ (12) | $ (106) | $ (295) | $ (637) |
NET LOSS PER SHARE | ||||
Basic earnings (loss) per share (in dollars per share) | $ (0.05) | $ (0.47) | $ (1.29) | $ (2.81) |
Diluted earnings (loss) per share (in dollars per share) | $ (0.05) | $ (0.47) | $ (1.29) | $ (2.81) |
Weighted-average basic shares outstanding (in shares) | 229.6 | 227 | 228.9 | 226.4 |
Weighted-average diluted shares outstanding (in shares) | 229.6 | 227 | 228.9 | 226.4 |
CONSOLIDATED INCOME STATEMENT (
CONSOLIDATED INCOME STATEMENT (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Revenue | $ 3,936 | $ 4,303 | $ 12,202 | $ 12,771 |
Cost of services | $ 3,184 | $ 3,596 | $ 10,055 | 10,886 |
Related Party | ||||
Revenue | 287 | |||
Cost of services | $ 1,382 |
CONSOLIDATED STATEMENT OF COMPR
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) | ||||
Net income (loss) | $ (12) | $ (106) | $ (295) | $ (637) |
Other comprehensive income (loss), before tax: | ||||
Foreign currency translation adjustments | 183 | 260 | 58 | (229) |
Unrealized gains (losses) arising during the period | (5) | (4) | 21 | (9) |
Reclassification of (gains) losses to net income | (12) | 2 | (17) | 1 |
Total unrealized gains (losses) on cash flow hedges | (17) | (2) | 4 | (8) |
Retirement-related benefit plans: | ||||
Amortization of prior service (credits) costs | 1 | |||
Amortization of net (gains) losses | (1) | 10 | 2 | 30 |
Total retirement-related benefit plans | (1) | 10 | 3 | 30 |
Other comprehensive income (loss), before tax | 166 | 267 | 66 | (207) |
Income tax (expense) benefit related to items of other comprehensive income (loss) | 6 | (3) | 1 | (7) |
Other comprehensive income (loss), net of tax | 171 | 265 | 67 | (214) |
Total comprehensive income (loss) | $ 160 | $ 159 | $ (228) | $ (850) |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Dec. 31, 2023 | Mar. 31, 2023 |
Current assets: | ||
Cash and cash equivalents | $ 1,688 | $ 1,847 |
Restricted cash | 2 | 12 |
Accounts receivable (net of allowances for credit losses of $24 at December 31, 2023 and $32 at March 31, 2023) | 1,658 | 1,523 |
Deferred costs (current portion) | 924 | 1,070 |
Prepaid expenses and other current assets | 578 | 510 |
Total current assets | 4,851 | 4,963 |
Property and equipment, net | 2,806 | 2,779 |
Operating right-of-use assets, net | 915 | 964 |
Deferred costs (noncurrent portion) | 987 | 1,166 |
Deferred taxes | 208 | 248 |
Goodwill | 809 | 812 |
Intangible assets, net | 192 | 171 |
Pension assets | 105 | 94 |
Other noncurrent assets | 97 | 267 |
Total assets | 10,969 | 11,464 |
Current liabilities: | ||
Accounts payable | 1,477 | 1,774 |
Value-added tax and income tax liabilities | 332 | 347 |
Current portion of long-term debt | 628 | 110 |
Accrued compensation and benefits | 559 | 533 |
Deferred income (current portion) | 793 | 820 |
Operating lease liabilities (current portion) | 257 | 316 |
Accrued contract costs | 514 | 346 |
Other accrued expenses and liabilities | 593 | 624 |
Total current liabilities | 5,152 | 4,868 |
Long-term debt | 2,629 | 3,111 |
Retirement and nonpension postretirement benefit obligations | 493 | 504 |
Deferred income (noncurrent portion) | 326 | 362 |
Operating lease liabilities (noncurrent portion) | 700 | 707 |
Other noncurrent liabilities | 375 | 450 |
Total liabilities | 9,676 | 10,002 |
Commitments and contingencies | ||
Stockholders' equity | ||
Common stock, par value $0.01 per share, and additional paid-in capital (shares authorized: 1,000.0; shares issued: December 31, 2023 - 233.3, March 31, 2023 - 229.6) | 4,501 | 4,428 |
Accumulated deficit | (2,274) | (1,978) |
Treasury stock, at cost (shares: December 31, 2023 - 3.3, March 31, 2023 - 1.9) | (42) | (23) |
Accumulated other comprehensive income (loss) | (995) | (1,062) |
Total stockholders' equity before non-controlling interests | 1,189 | 1,365 |
Non-controlling interests | 104 | 97 |
Total equity | 1,293 | 1,462 |
Total liabilities and equity | $ 10,969 | $ 11,464 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) shares in Millions, $ in Millions | Dec. 31, 2023 | Mar. 31, 2023 |
CONSOLIDATED BALANCE SHEET | ||
Notes and accounts receivable - trade, allowances | $ 24 | $ 32 |
Common Stock, Par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, Shares authorized (in shares) | 1,000 | 1,000 |
Common Stock, Shares issued (in shares) | 233.3 | 229.6 |
Treasury Stock (in shares) | 3.3 | 1.9 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (295) | $ (637) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | ||
Depreciation of property, equipment and capitalized software | 639 | 681 |
Depreciation of right-of-use assets | 251 | 285 |
Amortization of transition costs and prepaid software | 946 | 909 |
Amortization of capitalized contract costs | 418 | 337 |
Amortization of acquisition-related intangible assets | 23 | 36 |
Stock-based compensation | 72 | 81 |
Deferred taxes | 55 | 5 |
Net (gain) loss on asset sales and other | (6) | (17) |
Change in operating assets and liabilities: | ||
Deferred costs (excluding amortization) | (1,023) | (1,063) |
Right-of-use assets and liabilities (excluding depreciation) | (269) | (275) |
Workforce rebalancing liabilities | (28) | (1) |
Receivables | (13) | 647 |
Accounts payable | (339) | 235 |
Taxes | (33) | (36) |
Other assets and other liabilities | (90) | (418) |
Net cash provided by operating activities | 309 | 769 |
Cash flows from investing activities: | ||
Capital expenditures | (449) | (711) |
Proceeds from disposition of property and equipment | 134 | 20 |
Other investing activities, net | (35) | (8) |
Net cash used in investing activities | (350) | (699) |
Cash flows from financing activities: | ||
Debt repayments | (103) | (83) |
Common stock repurchases for tax withholdings | (19) | (17) |
Other financing activities, net | (1) | |
Net cash provided by (used in) financing activities | (123) | (100) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (5) | (109) |
Net change in cash, cash equivalents and restricted cash | (169) | (138) |
Cash, cash equivalents and restricted cash at beginning of period | 1,860 | 2,154 |
Cash, cash equivalents and restricted cash at end of period | 1,691 | 2,016 |
Supplemental data | ||
Income taxes paid, net of refunds received | 140 | 109 |
Interest paid on debt | $ 108 | $ 89 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY - USD ($) shares in Millions, $ in Millions | Common Stock and Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Accumulated Deficit | Non-Controlling Interests | Total |
Balance at the beginning of the period at Mar. 31, 2022 | $ 4,315 | $ (1,089) | $ (4) | $ (605) | $ 94 | $ 2,711 |
Balance at the beginning of the period (in shares) at Mar. 31, 2022 | 224.5 | |||||
Equity | ||||||
Net income (loss) | (637) | (637) | ||||
Other comprehensive income (loss), net of tax | (214) | (214) | ||||
Common stock issued under employee plans | $ 81 | 81 | ||||
Common stock issued under employee plans (in shares) | 4.5 | |||||
Purchases of treasury stock | (17) | (17) | ||||
Purchases of treasury stock (in shares) | (1.5) | |||||
Changes in non-controlling interests | 5 | 5 | ||||
Balance at the end of the period at Dec. 31, 2022 | $ 4,397 | (1,303) | (21) | (1,241) | 99 | 1,930 |
Balance at the end of the period (in shares) at Dec. 31, 2022 | 227.5 | |||||
Balance at the beginning of the period at Sep. 30, 2022 | $ 4,370 | (1,567) | (17) | (1,136) | 96 | 1,746 |
Balance at the beginning of the period (in shares) at Sep. 30, 2022 | 226.8 | |||||
Equity | ||||||
Net income (loss) | (106) | (106) | ||||
Other comprehensive income (loss), net of tax | 265 | 265 | ||||
Common stock issued under employee plans | $ 27 | 27 | ||||
Common stock issued under employee plans (in shares) | 1.1 | |||||
Purchases of treasury stock | (4) | (4) | ||||
Purchases of treasury stock (in shares) | (0.4) | |||||
Changes in non-controlling interests | 2 | 2 | ||||
Balance at the end of the period at Dec. 31, 2022 | $ 4,397 | (1,303) | (21) | (1,241) | 99 | 1,930 |
Balance at the end of the period (in shares) at Dec. 31, 2022 | 227.5 | |||||
Balance at the beginning of the period at Mar. 31, 2023 | $ 4,428 | (1,062) | (23) | (1,978) | 97 | 1,462 |
Balance at the beginning of the period (in shares) at Mar. 31, 2023 | 227.7 | |||||
Equity | ||||||
Net income (loss) | (295) | (295) | ||||
Other comprehensive income (loss), net of tax | 67 | 67 | ||||
Common stock issued under employee plans | $ 72 | 72 | ||||
Common stock issued under employee plans (in shares) | 3.7 | |||||
Purchases of treasury stock | (19) | (19) | ||||
Purchases of treasury stock (in shares) | (1.4) | |||||
Changes in non-controlling interests | 7 | 7 | ||||
Balance at the end of the period at Dec. 31, 2023 | $ 4,501 | (995) | (42) | (2,274) | 104 | 1,293 |
Balance at the end of the period (in shares) at Dec. 31, 2023 | 230 | |||||
Balance at the beginning of the period at Sep. 30, 2023 | $ 4,476 | (1,167) | (35) | (2,262) | 100 | 1,113 |
Balance at the beginning of the period (in shares) at Sep. 30, 2023 | 229.5 | |||||
Equity | ||||||
Net income (loss) | (12) | (12) | ||||
Other comprehensive income (loss), net of tax | 171 | 171 | ||||
Common stock issued under employee plans | $ 25 | 25 | ||||
Common stock issued under employee plans (in shares) | 1.1 | |||||
Purchases of treasury stock | (7) | (7) | ||||
Purchases of treasury stock (in shares) | (0.5) | |||||
Changes in non-controlling interests | 4 | 4 | ||||
Balance at the end of the period at Dec. 31, 2023 | $ 4,501 | $ (995) | $ (42) | $ (2,274) | $ 104 | $ 1,293 |
Balance at the end of the period (in shares) at Dec. 31, 2023 | 230 |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Dec. 31, 2023 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Description of Business Kyndryl Holdings, Inc. (“we”, “the Company” or “Kyndryl”) is a leading technology services company and the largest IT infrastructure services provider in the world, serving as a partner to thousands of enterprise customers whose operations span over 100 countries. Prior to November 3, 2021, the Company was wholly owned by International Business Machines Corporation (“IBM” or “former Parent”). In November 2021, our former Parent effected the spin-off (the “Separation” or the “Spin-off”) of the infrastructure services unit of its Global Technology Services (“GTS”) segment through the distribution of shares of Kyndryl’s common stock to IBM stockholders. Kyndryl’s stock began trading as an independent company on November 4, 2021. In connection with the Separation, the Company entered into several agreements with IBM governing the relationship of the parties following the Separation. Basis of Presentation The accompanying Consolidated Financial Statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes the accompanying financial statements include all adjustments necessary to state fairly the Company’s financial position and its results of operations for all the periods presented. The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report for the fiscal year ended March 31, 2023. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Principles of Consolidation The accompanying financial statements are presented on a consolidated basis. All significant transactions and intercompany accounts between Kyndryl entities were eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts that are reported in the consolidated financial statements and accompanying disclosures. Estimates are used in determining the following, among others: revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, the depreciable and amortizable lives of long-lived assets, loss contingencies, allowance for credit losses and deferred transition costs. Actual results may differ from these estimates. The Company uses the estimated annual effective tax rate method in computing its interim tax provision in accordance with U.S. GAAP. The estimated annual effective tax rate is applied to the year-to-date ordinary income, exclusive of discrete items, to arrive at the reported interim tax provision. |
ACCOUNTING PRONOUNCEMENTS
ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Dec. 31, 2023 | |
ACCOUNTING PRONOUNCEMENTS | |
ACCOUNTING PRONOUNCEMENTS | NOTE 2. ACCOUNTING PRONOUNCEMENTS Recent Pronouncements In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 In September 2022, the FASB issued ASU 2022-04, which amended its guidance related to supplier finance programs. The amended guidance requires additional disclosures surrounding the use of supplier finance programs to purchase goods or services, including disclosing the key terms of the programs, the amount of obligations outstanding at the end of the reporting period, and a roll-forward of those obligations. The new guidance, except the roll-forward information, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The requirement to present roll-forward information is effective for fiscal years beginning after December 15, 2023. The Company adopted the guidance at the beginning of fiscal year 2024. The Company did not have any outstanding obligations under supplier finance programs in the periods presented. In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842) – Common-Control Arrangements In August 2023, the FASB issued ASU 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Dec. 31, 2023 | |
REVENUE RECOGNITION | |
REVENUE RECOGNITION | NOTE 3. REVENUE RECOGNITION Disaggregation of Revenue The Company views its segment results to be the best view of disaggregated revenue. Refer to Note 4 – Segments. Remaining Performance Obligations The remaining performance obligation (“RPO”) represents the aggregate amount of contractual deliverables yet to be recognized as revenue at the end of the reporting period. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts for which the customer is not committed. The customer is not considered committed when it is able to terminate for convenience without payment of a substantive penalty. The RPO also includes estimates of variable consideration. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency. At December 31, 2023, the aggregate amount of RPO related to customer contracts that are unsatisfied or partially unsatisfied was $34.5 billion. Approximately 59 percent of the amount is expected to be recognized as revenue in the next two years, approximately 34 percent in the subsequent three years, and the balance thereafter. During the three and nine months ended December 31, 2023, revenue was increased by $12 million and $24 million, respectively, and during the three and nine months ended December 31, 2022, revenue was decreased by $3 million and increased by $4 million, respectively, for performance obligations satisfied (or partially satisfied) in previous periods, mainly due to changes in estimates on contracts with cost-to-cost measures of progress. Contract Balances The following table provides information about accounts receivable, contract assets and deferred income balances: December 31, March 31, (Dollars in millions) 2023 2023 Accounts receivable (net of allowances for credit losses of $24 at December 31, 2023 and $32 at March 31, 2023) * $ 1,658 $ 1,523 Contract assets ** 31 30 Deferred income (current) 793 820 Deferred income (noncurrent) 326 362 * Including unbilled receivable balances of $329 million at December 31, 2023 and $384 million at March 31, 2023. ** Contract assets represent goods or services delivered by the Company, which give the Company the right to consideration that is typically subject to milestone completion or client acceptance and are included within prepaid expenses and other current assets in the Consolidated Balance Sheet. The amount of revenue recognized during the three and nine months ended December 31, 2023 that was included within the deferred income balance at the beginning of the period was $221 million and $501 million, respectively. The amount of revenue recognized during the three and nine months ended December 31, 2022 that was included within the deferred income balance at the beginning of the period was $249 million and $496 million, respectively. The following table provides roll-forwards of the accounts receivable allowance for credit losses for the nine months ended December 31, 2023 and 2022. Nine Months Ended December 31, (Dollars in millions) 2023 2022 Beginning balance $ 32 $ 44 Additions (releases) 2 5 Write-offs (6) (8) Other * (4) (6) Ending balance $ 24 $ 34 * Primarily driven by currency effects . The contract assets allowance for credit losses was not material in any of the periods presented. Major Clients No single client represented more than 10 percent of the Company’s total revenue during the three and nine months ended December 31, 2023 and 2022. Other than receivables due from our former Parent, no single client represented more than 10 percent of the Company’s total accounts receivable balance as of December 31, 2023 or March 31, 2023. Deferred Costs Costs to acquire and fulfill customer contracts are deferred and amortized over the contract period or expected customer relationship life. The expected customer relationship period is determined based on the average customer relationship period, including expected renewals, for each offering type and ranges from three The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at December 31, 2023 and March 31, 2023: December 31, March 31, (Dollars in millions) 2023 2023 Deferred transition costs $ 781 $ 856 Prepaid software costs 637 782 Capitalized costs to fulfill contracts 214 285 Capitalized costs to obtain contracts 279 313 Total deferred costs * $ 1,910 $ 2,236 * Of the total deferred costs, $924 million was current and $987 million was noncurrent at December 31, 2023, and $1,070 million was current and $1,166 million was noncurrent at March 31, 2023. The amount of total deferred costs amortized for the three months ended December 31, 2023 was $452 million, composed of $87 million of amortization of deferred transition costs, $227 million of amortization of prepaid software and $138 million of amortization of capitalized contract costs. The amount of total deferred costs amortized for the nine months ended December 31, 2023 was $1,364 million, composed of $259 million of amortization of deferred transition costs, $686 million of amortization of prepaid software and $418 million of amortization of capitalized contract costs. |
SEGMENTS
SEGMENTS | 9 Months Ended |
Dec. 31, 2023 | |
SEGMENTS | |
SEGMENTS | NOTE 4. SEGMENTS Our reportable segments correspond to how the chief operating decision maker (“CODM”) reviews performance and allocates resources. Our four reportable segments consist of the following: United States: Japan: Principal Markets: Strategic Markets: The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA. 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 and owned fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension expenses other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, workforce rebalancing charges, impairment expense, significant litigation costs, and currency impacts of highly inflationary countries. The use of revenue and adjusted EBITDA aligns with how the CODM assesses performance and allocates resources for the Company’s segments. Our geographic markets frequently work together to sell and implement certain contracts. The resulting revenues and costs from these contracts may be apportioned among the participating geographic markets. The economic environment and its effects on the industries served by our geographic markets affect revenues and operating expenses within our geographic markets to differing degrees. Currency fluctuations also tend to affect our geographic markets differently, depending on the geographic concentrations and locations of their businesses. The following table reflects the results of the Company’s segments: Three Months Ended December 31, Nine Months Ended December 31, (Dollars in millions) 2023 2022 2023 2022 Revenue United States $ 1,032 $ 1,265 $ 3,305 $ 3,581 Japan 581 606 1,761 1,855 Principal Markets 1,446 1,472 4,395 4,460 Strategic Markets 877 961 2,741 2,874 Total revenue $ 3,936 $ 4,303 $ 12,202 $ 12,771 Segment adjusted EBITDA United States $ 194 $ 271 $ 607 $ 639 Japan 94 90 278 318 Principal Markets 207 91 560 248 Strategic Markets 144 145 428 352 Total segment adjusted EBITDA $ 640 $ 597 $ 1,872 $ 1,556 The following table reconciles segment adjusted EBITDA to consolidated pretax income (loss): Three Months Ended December 31, Nine Months Ended December 31, (Dollars in millions) 2023 2022 2023 2022 Segment adjusted EBITDA $ 640 $ 597 $ 1,872 $ 1,556 Workforce rebalancing charges (19) (10) (115) (16) Charges related to ceasing to use leased/fixed assets and lease terminations (14) (10) (24) (10) Transaction-related (costs) benefits 77 (48) (12) (218) Stock-based compensation expense (25) (29) (72) (81) Interest expense (31) (27) (92) (65) Depreciation of property, equipment and capitalized software (207) (232) (639) (681) Amortization expense (322) (336) (968) (945) Corporate expense not allocated to the segments (25) (16) (71) (57) Other adjustments* (21) (27) (42) (45) Pretax income (loss) $ 53 $ (138) $ (165) $ (563) * Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs, currency impacts of highly inflationary countries, and an adjustment to reduce amortization expense for the amount already included in transaction-related (costs) benefits above . |
TAXES
TAXES | 9 Months Ended |
Dec. 31, 2023 | |
TAXES. | |
TAXES | NOTE 5. TAXES For the three months ended December 31, 2023, the Company’s effective tax rate was 122.6%, compared to 23.2% for the three months ended December 31, 2022. For the nine months ended December 31, 2023, the Company’s effective tax rate was (79.3%), compared to (13.1%) for the nine months ended December 31, 2022. The Company’s negative effective tax rates for the nine months ended December 31, 2023 and 2022 reflect a tax expense on a pretax book loss in those periods. The Company’s positive effective tax rate for the three months ended December 31, 2022 reflects tax benefits on a pretax loss resulting from return-to-provision adjustments recorded in that period. The Company’s effective tax rate for the three months ended December 31, 2023 was higher than the Company’s statutory tax rate primarily due to taxes on foreign operations, uncertain tax positions and valuation allowances recorded in certain jurisdictions against deferred tax assets that are not more likely than not to be realized. The Company’s effective tax rate for the nine months ended December 31, 2023 was lower than the Company’s statutory tax rate primarily due to taxes on foreign operations and valuation allowances recorded in certain jurisdictions against deferred tax assets that are not more likely than not to be realized. The Company’s effective tax rate for the three months ended December 31, 2022 differed from the Company’s statutory tax rate primarily due to a benefit recorded during the period resulting from return-to-provision adjustments related to the filing of certain income tax returns. The Company’s effective tax rate for the nine months ended December 31, 2022 was lower than the Company’s statutory tax rate primarily due to taxes on foreign operations and an increase in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized, partially offset by the benefit resulting from return-to-provision adjustments. |
NET LOSS PER SHARE
NET LOSS PER SHARE | 9 Months Ended |
Dec. 31, 2023 | |
NET LOSS PER SHARE | |
NET LOSS PER SHARE | NOTE 6. NET LOSS PER SHARE We did not declare any stock dividends in the periods presented. The following table provides the computation of basic and diluted earnings per share of common stock for the three and nine months ended December 31, 2023 and 2022. Three Months Ended December 31, Nine Months Ended December 31, (In millions, except per share amounts) 2023 2022 2023 2022 Net income (loss) on which basic and diluted earnings per share is calculated $ (12) $ (106) $ (295) $ (637) Number of shares on which basic and diluted earnings per share is calculated 229.6 227.0 228.9 226.4 Basic earnings (loss) per share $ (0.05) $ (0.47) $ (1.29) $ (2.81) Diluted earnings (loss) per share (0.05) (0.47) (1.29) (2.81) For the three and nine months ended December 31, 2023 and 2022, the Company’s basic and diluted weighted-average shares outstanding were the same. December 31, (In millions) 2023 2022 Nonvested restricted stock units 9.1 9.9 Nonvested performance-conditioned stock units 3.5 2.5 Nonvested market-conditioned stock units 2.9 2.4 Stock options issued and outstanding 3.6 3.7 Total 19.1 18.6 |
FINANCIAL ASSETS AND LIABILITIE
FINANCIAL ASSETS AND LIABILITIES | 9 Months Ended |
Dec. 31, 2023 | |
FINANCIAL ASSETS AND LIABILITIES | |
FINANCIAL ASSETS AND LIABILITIES | NOTE 7. FINANCIAL ASSETS AND LIABILITIES Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company classifies certain assets and liabilities based on the following fair value hierarchy: ● Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. ● Level 3 – Unobservable inputs for the asset or liability. The level of an asset or liability within the fair value hierarchy is determined based on the lowest level of any input that is significant to the fair value measurement. In determining the fair value of certain financial instruments, the Company considers certain market valuation adjustments to the “base valuations” using the methodologies described below for several parameters that market participants would consider in determining fair value: ● Counterparty credit risk adjustments are applied to certain financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument. ● Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing certain liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s credit risk as observed in the credit default swap market. Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are recorded at fair value or at cost, as appropriate, in the period they are initially recognized, and such balances may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that the asset may be impaired. The impairment models used for non-financial assets depend on the type of asset. The fair value measurements, in such instances, would be classified in Level 3 of the fair value hierarchy. We perform a qualitative assessment of asset impairments on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value is less than carrying value. There were no impairments of non-financial assets recognized for the three and nine months ended December 31, 2023 and 2022. Financial Assets and Liabilities Measured at Fair Value The following table presents the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at December 31, 2023 and March 31, 2023: Fair Value Hierarchy At December 31, 2023 At March 31, 2023 (Dollars in millions) Level Assets Liabilities Fair Value Assets Liabilities Fair Value Derivatives designated as hedging instruments: Foreign exchange contracts 2 $ 4 $ 2 $ 3 $ 4 $ 3 $ 1 Derivatives not designated as hedging instruments: Foreign exchange contracts 2 25 4 21 11 5 6 Total $ 29 $ 5 $ 24 $ 15 $ 9 $ 6 The gross balances of derivative assets are contained within prepaid expenses and other current assets, and the gross balances of derivative liabilities are contained within other accrued expenses and liabilities in the Consolidated Balance Sheet. The Company may enter into master netting agreements with certain counterparties that allow for netting of exposures. There was no netting of derivative assets against liabilities in the Consolidated Balance Sheet at December 31, 2023 and March 31, 2023. The Company manages counterparty risk by seeking counterparties of high credit quality and by monitoring credit ratings, credit spreads and other relevant public information about its counterparties. The Company does not anticipate nonperformance by any of the counterparties. Financial Assets and Liabilities Not Measured at Fair Value Accounts receivable are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt are financial liabilities with carrying values that approximate fair value. If measured at fair value in the consolidated financial statements, these financial assets and liabilities would be classified as Level 3 in the fair value hierarchy, except for short-term debt, which would be classified as Level 2. The Company also has time deposits that have maturities of 90 days or less, and their carrying values approximate fair value. They are measured for impairment on a recurring basis by comparing their fair value with their amortized cost basis. There were no impairments of financial assets recognized for any of the periods presented. The balances of these time deposits with maturities of 90 days or less contained within cash and cash equivalents in the Consolidated Balance Sheet at December 31, 2023 and March 31, 2023 were $709 million and $814 million, respectively. If measured at fair value in the consolidated financial statements, time deposits with maturities of 90 days or less would be categorized as Level 2 in the fair value hierarchy. The fair value of our outstanding debt (excluding finance lease obligations) is based on various methodologies, including quoted prices in active markets for identical debt instruments, which is a Level 1 measurement, and calculated fair value using an expected present value technique that uses rates currently available to the Company for debt in active markets with similar terms and remaining maturities, which is a Level 2 measurement. Our outstanding debt had a carrying value of $3.0 billion as of December 31, 2023 and March 31, 2023, and an estimated fair value of $2.6 billion as of December 31, 2023 and $2.5 billion as of March 31, 2023. Transfers of Financial Assets The Company has entered into agreements with third-party financial institutions to sell certain financial assets (primarily trade receivables) without recourse. The Company has determined these are true sales. The carrying value of the financial asset sold is derecognized, and a net gain or loss on the sale is recognized at the time of the transfer. The net proceeds from these agreements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows. Gross proceeds from receivables sold to third parties under this program were $846 million and $2.9 billion for the three and nine months ended December 31, 2023, respectively, and $930 million and $2.3 billion for the three and nine months ended December 31, 2022, respectively. The fees associated with the transfers of receivables were $11 million and $39 million for the three and nine months ended December 31, 2023, respectively, and $14 million and $34 million for the three and nine months ended December 31, 2022, respectively. Derivative Financial Instruments Derivatives Designated as Hedging Instruments The Company has foreign exchange derivative financial instruments designated as cash flow hedges to manage the volatility of cash flows that relate to operating expenses denominated in certain currencies. Changes in fair value of derivatives designated as cash flow hedges are recorded, net of applicable taxes, in other comprehensive income and subsequently reclassified into the same income statement line item as the hedged exposure when the underlying hedged item is recognized in earnings. The cash flows associated with derivatives designated as cash flow hedges are reported in cash flows from operating activities in the Consolidated Statement of Cash Flows. At December 31, 2023 and March 31, 2023, the total gross notional amount of foreign exchange contracts designated as cash flow hedges of forecasted foreign currency cost transactions was $281 million and $283 million, respectively. The notional amounts of derivative instruments do not necessarily represent the amounts exchanged by the Company with third parties and are not necessarily a direct measure of the financial exposure. The maximum remaining length of time over which the Company hedged its exposure is approximately one year. At December 31, 2023 and March 31, 2023, the weighted-average remaining maturity of these instruments was approximately 0.5 years. At December 31, 2023 and March 31, 2023, in connection with cash flow hedges of foreign currency cost transactions, the Company had net deferred gains of $5 million and $1 million (each before taxes), respectively, in accumulated other comprehensive income (“AOCI”). The Company estimates that $5 million (before taxes) of net deferred gains on derivatives in AOCI at December 31, 2023 will be reclassified to net income within the next twelve months, providing an offsetting economic impact against the underlying anticipated transactions. Derivatives Not Designated as Hedging Instruments The Company enters into currency forward and swap contracts to hedge exposures related to assets, liabilities and earnings across its subsidiaries. These contracts are not designated as hedging instruments, and therefore changes in fair value of these contracts are reported in earnings in other expense (income) in the Consolidated Income Statement. The gains and losses on these contracts generally offset the gains and losses in the underlying hedged exposures, which are also reported in other expense (income) in the Consolidated Income Statement. Cash flows from derivatives not designated as hedges are reported in cash flows from investing activities in the Consolidated Statement of Cash Flows. The terms of these swap contracts are generally less than one year. At December 31, 2023 and March 31, 2023, the total gross notional amount of derivative instruments in economic hedges of foreign currency exposure was $2.4 billion and $1.5 billion, respectively. The Effect of Derivative Instruments in the Consolidated Income Statement The effects of derivatives designated as hedging instruments on the Consolidated Income Statement and Other Comprehensive Income are as follows: Unrealized Gain (Loss) Consolidated Gain (Loss) Reclassified (Dollars in millions) Recognized in OCI Income Statement from AOCI to Income Three months ended December 31: 2023 2022 Line Item 2023 2022 Foreign exchange contracts $ (5) $ (4) Cost of services $ 12 $ (2) Total $ (5) $ (4) $ 12 $ (2) Unrealized Gain (Loss) Consolidated Gain (Loss) (Dollars in millions) Recognized in OCI Income Statement Reclassified from AOCI Nine months ended December 31: 2023 2022 Line Item 2023 2022 Foreign exchange contracts $ 21 $ (9) Cost of services $ 17 $ (1) Total $ 21 $ (9) $ 17 $ (1) For the three and nine months ended December 31, 2023 and 2022, there were no gains or losses excluded from the assessment of hedge effectiveness for cash flow hedges, or associated with an underlying exposure that did not or was not expected to occur, nor are there any anticipated in the normal course of business. The effects of derivatives not designated as hedging instruments on the Consolidated Income Statement are as follows: Consolidated Gain (Loss) (Dollars in millions) Income Statement Recognized on Derivatives Three months ended December 31: Line Item 2023 2022 Foreign exchange contracts Other expense (income) $ 36 $ 43 Total $ 36 $ 43 Consolidated Gain (Loss) (Dollars in millions) Income Statement Recognized on Derivatives Nine months ended December 31: Line Item 2023 2022 Foreign exchange contracts Other expense (income) $ (17) $ 27 Total $ (17) $ 27 |
INTANGIBLE ASSETS INCLUDING GOO
INTANGIBLE ASSETS INCLUDING GOODWILL | 9 Months Ended |
Dec. 31, 2023 | |
INTANGIBLE ASSETS INCLUDING GOODWILL | |
INTANGIBLE ASSETS INCLUDING GOODWILL | NOTE 8. INTANGIBLE ASSETS INCLUDING GOODWILL Intangible Assets The following table presents the Company’s intangible asset balances by major asset class. At December 31, 2023 At March 31, 2023 Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount Amount Amortization Amount Capitalized software $ 153 $ (37) $ 117 $ 83 $ (15) $ 68 Customer relationships* 226 (160) 66 232 (141) 91 Completed technology 20 (20) — 20 (20) — Patents and trademarks* 17 (8) 10 18 (6) 13 Total $ 417 $ (225) $ 192 $ 353 $ (182) $ 171 * Amounts include effects from currency translation. The net carrying amount of intangible assets increased by $21 million during the nine months ended December 31, 2023, primarily due to additions in capitalized software, partially offset by amortization and foreign currency translation. The aggregate intangible asset amortization expense was $17 million and $44 million for the three and nine months ended December 31, 2023, compared to $11 million and $36 million for the three and nine months ended December 31, 2022, respectively. This included amortization of capitalized software of $9 million and $21 million for the three and for the nine months ended December 31, 2023, which was reported in “Depreciation of property, equipment and capitalized software” on the Consolidated Statement of Cash Flows. The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet was estimated to be the following at December 31, 2023: Capitalized Customer Patents and (Dollars in millions) Software Relationships Trademarks Total Year ending March 31: 2024 (remaining three months) $ 10 $ 7 $ 1 $ 18 2025 40 22 3 66 2026 38 19 3 60 2027 28 16 3 47 2028 — 1 — 1 Thereafter — 1 — 1 Goodwill The changes in the goodwill balances by segment for the nine months ended December 31, 2023 were as follows: Additions and (Dollars in millions) Balance at Other Balance at Segment March 31, 2023 Adjustments* December 31, 2023 United States $ — $ — $ — Japan 495 (3) 492 Principal Markets 142 — 142 Strategic Markets 176 — 176 Total $ 812 $ (3) $ 809 * Primarily driven by foreign currency translation. There were no goodwill impairment losses recorded for the nine months ended December 31, 2023 and 2022. Management reviews goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable by first assessing qualitative factors to determine if it is more likely than not that fair value is less than carrying value. |
BORROWINGS
BORROWINGS | 9 Months Ended |
Dec. 31, 2023 | |
BORROWINGS | |
BORROWINGS | NOTE 9. BORROWINGS Debt The following table presents the components of our debt: December 31, March 31, (Dollars in millions) Interest Rate Maturity 2023 2023 Unsecured floating-rate term loan 6.58% * November 2024 $ 500 $ 500 Commercial loan agreement 3.00% July 2026 75 96 Unsecured senior notes due 2026 2.05% October 2026 700 700 Unsecured senior notes due 2028 2.70% October 2028 500 500 Unsecured senior notes due 2031 3.15% October 2031 650 650 Unsecured senior notes due 2041 4.10% October 2041 550 550 Finance lease obligations 5.38% ** 2024-2028 297 242 $ 3,272 $ 3,238 Less: Unamortized discount 4 5 Less: Unamortized debt issuance costs 12 13 Less: Current portion of debt 628 110 Total long-term debt $ 2,629 $ 3,111 * Floating rate calculated as of December 31, 2023, using a rate equal to one-month SOFR plus ** Represents the weighted-average interest rate. Contractual obligations of long-term debt outstanding at December 31, 2023, exclusive of finance lease obligations, are as follows: (Dollars in millions)* Principal Year ending March 31: 2024 (remaining three months) $ 7 2025 529 2026 29 2027 710 2028 — Thereafter 1,700 Total $ 2,975 * Contractual obligations approximate scheduled repayments. During the three and nine months ended December 31, 2023, the right-of-use assets obtained in exchange for new finance lease liabilities were $42 million and $192 million, respectively. During the three and nine months ended December 31, 2022, the right-of-use assets obtained in exchange for new finance lease liabilities were $21 million and $58 million, respectively. As of December 31, 2023, there were no borrowings under the Company’s revolving credit agreement. The Company is in compliance with its debt covenants in all periods presented. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Dec. 31, 2023 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | NOTE 10. COMMITMENTS AND CONTINGENCIES The Company guarantees certain loans and financial commitments. The maximum potential future payment under these financial guarantees and the fair value of these guarantees recognized in the Consolidated Balance Sheet at December 31, 2023 and March 31, 2023 were not material. Additionally, the Company has contractual commitments that are noncancellable with certain software, hardware and cloud partners used in the delivery of services to customers. During the three and nine months ended December 31, 2023, contractual commitments decreased due to satisfaction of existing commitments outpacing new additions. As a company with approximately 80,000 employees and with clients around the world, Kyndryl is subject to, or could become subject to, either as plaintiff or defendant, a variety of contingencies, including claims, demands and suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. Given the rapidly evolving external landscape of cybersecurity, privacy and data protection laws, regulations and threat actors, the Company or its clients could become subject to actions or proceedings in various jurisdictions. Also, as is typical for companies of Kyndryl’s scope and scale, the Company is subject to, or could become subject to, actions and proceedings in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested employment decisions, country-specific labor and employment laws, and the Company’s benefit plans), as well as actions with respect to contracts, securities, foreign operations, competition law and environmental matters. These actions may be commenced by a number of different parties, including competitors, clients, employees, government and regulatory agencies, stockholders and representatives of the locations in which the Company does business. Some of the actions to which the Company is, or may become, a party may involve particularly complex technical issues, and some actions may raise novel questions under the laws of the various jurisdictions in which these matters arise. Additionally, the Company is, or may be, a party to agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. The Company records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In accordance with the relevant accounting guidance, the Company provides disclosures of matters for which the likelihood of material loss is at least reasonably possible. In addition, the Company may also disclose matters based on its consideration of other matters and qualitative factors. The Company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are made with respect to recording or adjusting provisions and disclosing reasonably possible losses or range of losses (individually or in the aggregate) to reflect the impact and status of settlement discussions, discovery, procedural and substantive rulings, reviews by counsel and other information pertinent to a particular matter. Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the Company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including the timing and amount of such losses or damages; the structure and type of any such remedies; the significance of the impact any such losses, damages or remedies may have in the consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors. While the Company will continue to defend itself vigorously, it is possible that the Company’s business, financial condition, results of operations or cash flows could be affected in any particular period by the resolution of one or more of these matters. In July 2017, BMC Software, Inc. (“BMC”) filed suit against IBM in the U.S. Court for the Southern District of Texas in a dispute involving various aspects of IBM’s business, including its managed infrastructure business. BMC alleged IBM’s removal of BMC software from one of its client’s sites at the client’s request constituted breach of contract, fraudulent inducement and trade secret misappropriation. In May 2022, the trial court entered a judgment against IBM and awarded BMC $717 million in direct damages and $717 million in punitive damages, plus interest. IBM has appealed the judgment and is seeking a complete reversal on appeal. IBM may seek an indemnity from the Company in connection with this matter. Until there is a final and conclusive judgment in the case after all appeals and proceedings are concluded, until the amount of any applicable insurance is determined, and until a definitive assessment of Kyndryl’s indemnity obligations (if any) occurs, which in the aggregate will likely take several years, the amount of indemnity obligation (if any) that the Company may owe to IBM is indeterminate. Separately, certain contractual disputes have arisen between Kyndryl and IBM following the Separation. IBM and Kyndryl have commenced arbitration proceedings related to certain of these matters. The Company anticipates that some of these proceedings may conclude as early as the first half of calendar year 2024, while others are in preliminary stages. Kyndryl intends to vigorously pursue its interests and defenses in these matters, including asserting its own claims in arbitration if necessary. |
EQUITY
EQUITY | 9 Months Ended |
Dec. 31, 2023 | |
EQUITY | |
EQUITY | NOTE 11. EQUITY The following tables present reclassifications and taxes related to items of other comprehensive income (loss) for the three and nine months ended December 31, 2023 and 2022: Pretax Tax (Expense) Net-of-Tax (Dollars in millions) Amount Benefit Amount For the three months ended December 31, 2023: Foreign currency translation adjustments $ 183 $ — $ 183 Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ (5) $ 4 $ — Reclassification of (gains) losses to net income (12) — (12) Total unrealized gains (losses) on cash flow hedges $ (17) $ 4 $ (12) Retirement-related benefit plans*: Amortization of prior service (credits) costs $ — $ (1) $ (1) Amortization of net (gains) losses (1) 3 2 Total retirement-related benefit plans $ (1) $ 2 $ 1 Other comprehensive income (loss) $ 166 $ 6 $ 171 For the three months ended December 31, 2022: Foreign currency translation adjustments $ 260 $ — $ 260 Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ (4) $ — $ (4) Reclassification of (gains) losses to net income 2 — 2 Total unrealized gains (losses) on cash flow hedges $ (2) $ — $ (2) Retirement-related benefit plans – amortization of net (gains) losses* $ 10 $ (3) $ 7 Other comprehensive income (loss) $ 267 $ (3) $ 265 * These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 12 – Retirement-Related Benefits for additional information. Pretax Tax (Expense) Net-of-Tax (Dollars in millions) Amount Benefit Amount For the nine months ended December 31, 2023: Foreign currency translation adjustments $ 58 $ — $ 58 Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ 21 $ 1 $ 22 Reclassification of (gains) losses to net income (17) — (17) Total unrealized gains (losses) on cash flow hedges $ 4 $ 1 $ 5 Retirement-related benefit plans*: Amortization of prior service (credits) costs $ 1 $ (1) $ (1) Amortization of net (gains) losses 2 2 4 Total retirement-related benefit plans $ 3 $ 1 $ 4 Other comprehensive income (loss) $ 66 $ 1 $ 67 For the nine months ended December 31, 2022: Foreign currency translation adjustments $ (229) $ — $ (229) Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ (9) $ 2 $ (7) Reclassification of (gains) losses to net income 1 — 1 Total unrealized gains (losses) on cash flow hedges $ (8) $ 2 $ (6) Retirement-related benefit plans – amortization of net (gains) losses* $ 30 $ (9) $ 21 Other comprehensive income (loss) $ (207) $ (7) $ (214) * These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 12 – Retirement-Related Benefits for additional information. The following tables present the components of accumulated other comprehensive income (loss), net of taxes: Net Unrealized Foreign Net Change Accumulated Gain (Losses) Currency Retirement- Other on Cash Translation Related Comprehensive (Dollars in millions) Flow Hedges Adjustments* Benefit Plans Income (Loss) October 1, 2023 $ 17 $ (1,045) $ (139) $ (1,167) Other comprehensive income (loss) (12) 183 1 171 December 31, 2023 $ 5 $ (862) $ (138) $ (995) October 1, 2022 $ (1) $ (1,223) $ (343) $ (1,567) Other comprehensive income (loss) (2) 260 7 265 December 31, 2022 $ (3) $ (963) $ (336) $ (1,303) Net Unrealized Foreign Net Change Accumulated Gain (Losses) Currency Retirement- Other on Cash Translation Related Comprehensive (Dollars in millions) Flow Hedges Adjustments* Benefit Plans Income (Loss) April 1, 2023 $ — $ (921) $ (142) $ (1,062) Other comprehensive income (loss) 5 58 4 67 December 31, 2023 $ 5 $ (862) $ (138) $ (995) April 1, 2022 $ 3 $ (735) $ (357) $ (1,089) Other comprehensive income (loss) (6) (229) 21 (214) December 31, 2022 $ (3) $ (963) $ (336) $ (1,303) * Foreign currency translation adjustments are presented gross . |
RETIREMENT-RELATED BENEFITS
RETIREMENT-RELATED BENEFITS | 9 Months Ended |
Dec. 31, 2023 | |
RETIREMENT-RELATED BENEFITS | |
RETIREMENT-RELATED BENEFITS | NOTE 12. RETIREMENT-RELATED BENEFITS The following table presents the components of net periodic pension cost for the defined benefit pension plans recognized in the Consolidated Income Statement for the three and nine months ended December 31, 2023 and 2022. Three Months Ended December 31, Nine Months Ended December 31, (Dollars in millions) 2023 2022 2023 2022 Service cost $ 10 $ 12 $ 28 $ 36 Interest cost* 14 9 43 27 Expected return on plan assets* (15) (10) (46) (32) Amortization of prior service costs (credits)* — — 1 — Recognized actuarial losses (gains)* 1 10 3 30 Curtailments and settlements* 3 — 3 — Net periodic pension cost $ 14 $ 20 $ 33 $ 61 * These components of net periodic pension cost are included in other expense (income) in the Consolidated Income Statement. The components of net periodic benefit cost for the nonpension postretirement benefit plans and multi-employer plans recognized in the Consolidated Income Statement were not material for the periods presented. |
TRANSACTIONS WITH FORMER PARENT
TRANSACTIONS WITH FORMER PARENT | 9 Months Ended |
Dec. 31, 2023 | |
TRANSACTIONS WITH FORMER PARENT | |
TRANSACTIONS WITH FORMER PARENT | NOTE 13. TRANSACTIONS WITH FORMER PARENT Change in Beneficial Ownership IBM ceased to be a related party of Kyndryl in August 2022 after IBM transferred all of its 19.9% retained interest in Kyndryl common stock to a third-party financial institution through exchange agreements in May and August 2022. Transactions related to former Parent after August 11, 2022 are no longer reported as related-party activities. As a result, there was no related party revenue or cost of services recognized for the three and nine months ended December 31, 2023 and the three months ended December 31, 2022. Revenue and Purchases Related to Former Parent Kyndryl provides various services to IBM, including those related to hosting data centers and servicing IBM’s information technology infrastructure, which are reported as revenue in the Company’s Consolidated Income Statement. Related-party revenue generated from these services was $287 million for the nine months ended December 31, 2022. During the three months ended December 31, 2023, the Company reached an agreement to collect previously reserved receivables from our former Parent, which resulted in a gain recorded within transaction-related costs (benefits). Kyndryl utilizes various IBM products and services, recognized as costs of services, in the fulfillment of services contracts. Total cost of services recognized from these related-party transactions in the Company’s Consolidated Income Statement was $1,382 million for the nine months ended December 31, 2022. The related-party cost for this prior-year period includes outsourcing goods and services provided by the former Parent to Kyndryl’s customers post-Separation. Capital expenditures for purchases of IBM hardware were reflected as related-party payments for property and equipment within the investing section of the Company’s Consolidated Statement of Cash Flows in the amount of $89 million for the nine months ended December 31, 2022. Additionally, as part of the Separation, IBM committed to provide Kyndryl, at no cost, up to $265 million of upgraded hardware ordered over a two-year period. For the three and nine months ended December 31, 2023, $71 million and $181 million, respectively, of the upgraded hardware committed by IBM was delivered to Kyndryl. For the three and nine months ended December 31, 2022, $21 million and $41 million, respectively, of the upgraded hardware committed by IBM was delivered to Kyndryl. From the inception of the program to date, $265 million of upgraded hardware committed by IBM has been delivered to Kyndryl. The amounts committed by IBM were initially reflected within other assets (noncurrent) and subsequently reclassified to property and equipment within the Consolidated Balance Sheet. |
WORKFORCE REBALANCING AND SITE-
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES | 9 Months Ended |
Dec. 31, 2023 | |
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES. | |
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES | NOTE 14. WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES During the fiscal year ended March 31, 2023, the Company initiated actions to reduce our overall cost structure and increase our operating efficiency. These actions are anticipated to occur over several quarters and result in workforce rebalancing charges, charges related to ceasing to use leased and owned fixed assets, and lease termination charges (collectively, the “charges”). We expect the total charges to be incurred for this program to be approximately $300 million, consisting of approximately 65% for workforce rebalancing charges and approximately 35% for charges related to ceasing to use leased and owned fixed assets and lease termination charges. The Company expects that these actions will reduce future payroll costs, rent expenses and depreciation of property and equipment. We will continue to seek opportunities to increase our operational efficiency and reduce costs, which may result in additional charges in future periods. The following table presents the segment breakout of charges incurred during the three and nine months ended December 31, 2023 and during the full length of the program. Three Months Ended Nine Months Ended Costs Incurred (Dollars in millions) December 31, 2023 December 31, 2023 to Date United States $ 13 $ 28 $ 42 Japan — 2 4 Principal Markets 12 55 118 Strategic Markets 7 52 99 Corporate charges not allocated to the segments — 3 13 Total charges $ 33 $ 140 $ 275 The following table presents the classification of workforce rebalancing and site-rationalization activities in the Consolidated Income Statement during the three and nine months ended December 31, 2023 and during the full length of the program. Charges in the three and nine months ended December 31, 2022 were immaterial. Three Months Ended Nine Months Ended Costs Incurred (Dollars in millions) December 31, 2023 December 31, 2023 to Date Cost of services $ 14 $ 11 $ 82 Selling, general and administrative expenses 1 14 23 Workforce rebalancing charges 19 115 171 Total charges $ 33 $ 140 $ 275 The following table presents the components of and changes in our workforce rebalancing and site-rationalization charges liabilities during the nine months ended December 31, 2023. Liabilities Liabilities Liabilities Workforce Related to Related to Related to Rebalancing Ceasing to Use Lease Ceasing to Use (Dollars in millions) Liabilities* Leased Assets Terminations Fixed Assets Total Balance at March 31, 2023 $ 55 $ — $ 3 $ — $ 58 Charges / (benefits) 115 10 (1) 16 140 Cash payments (130) — (2) (6) (138) Non-cash adjustments (1) (10) — (10) (21) Balance at December 31, 2023 $ 39 $ — $ — $ — $ 39 * Excludes historical workforce rebalancing liabilities of $42 million as of March 31, 2023 and $29 million as of December 31, 2023 as well as $1 million of non-cash adjustments and $11 million cash paid for these historical workforce rebalancing liabilities for the nine months ended December 31, 2023 that were inherited from the former Parent. Workforce rebalancing liabilities are recorded within Other Liabilities on the Consolidated Balance Sheet . |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Dec. 31, 2023 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying Consolidated Financial Statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes the accompanying financial statements include all adjustments necessary to state fairly the Company’s financial position and its results of operations for all the periods presented. The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report for the fiscal year ended March 31, 2023. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. |
Principles of Consolidation | Principles of Consolidation The accompanying financial statements are presented on a consolidated basis. All significant transactions and intercompany accounts between Kyndryl entities were eliminated. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts that are reported in the consolidated financial statements and accompanying disclosures. Estimates are used in determining the following, among others: revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, the depreciable and amortizable lives of long-lived assets, loss contingencies, allowance for credit losses and deferred transition costs. Actual results may differ from these estimates. The Company uses the estimated annual effective tax rate method in computing its interim tax provision in accordance with U.S. GAAP. The estimated annual effective tax rate is applied to the year-to-date ordinary income, exclusive of discrete items, to arrive at the reported interim tax provision. |
Recent Pronouncements | Recent Pronouncements In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 In September 2022, the FASB issued ASU 2022-04, which amended its guidance related to supplier finance programs. The amended guidance requires additional disclosures surrounding the use of supplier finance programs to purchase goods or services, including disclosing the key terms of the programs, the amount of obligations outstanding at the end of the reporting period, and a roll-forward of those obligations. The new guidance, except the roll-forward information, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The requirement to present roll-forward information is effective for fiscal years beginning after December 15, 2023. The Company adopted the guidance at the beginning of fiscal year 2024. The Company did not have any outstanding obligations under supplier finance programs in the periods presented. In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842) – Common-Control Arrangements In August 2023, the FASB issued ASU 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures |
Segments | Our reportable segments correspond to how the chief operating decision maker (“CODM”) reviews performance and allocates resources. Our four reportable segments consist of the following: United States: Japan: Principal Markets: Strategic Markets: The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA. 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 and owned fixed assets, charges related to lease terminations, transaction-related costs and benefits, pension expenses other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, workforce rebalancing charges, impairment expense, significant litigation costs, and currency impacts of highly inflationary countries. The use of revenue and adjusted EBITDA aligns with how the CODM assesses performance and allocates resources for the Company’s segments. Our geographic markets frequently work together to sell and implement certain contracts. The resulting revenues and costs from these contracts may be apportioned among the participating geographic markets. The economic environment and its effects on the industries served by our geographic markets affect revenues and operating expenses within our geographic markets to differing degrees. Currency fluctuations also tend to affect our geographic markets differently, depending on the geographic concentrations and locations of their businesses. |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
REVENUE RECOGNITION | |
Schedule of reconciliation of contract balances | December 31, March 31, (Dollars in millions) 2023 2023 Accounts receivable (net of allowances for credit losses of $24 at December 31, 2023 and $32 at March 31, 2023) * $ 1,658 $ 1,523 Contract assets ** 31 30 Deferred income (current) 793 820 Deferred income (noncurrent) 326 362 * Including unbilled receivable balances of $329 million at December 31, 2023 and $384 million at March 31, 2023. ** Contract assets represent goods or services delivered by the Company, which give the Company the right to consideration that is typically subject to milestone completion or client acceptance and are included within prepaid expenses and other current assets in the Consolidated Balance Sheet. |
Schedule of notes and accounts receivable - trade allowance for credit losses | Nine Months Ended December 31, (Dollars in millions) 2023 2022 Beginning balance $ 32 $ 44 Additions (releases) 2 5 Write-offs (6) (8) Other * (4) (6) Ending balance $ 24 $ 34 * Primarily driven by currency effects . |
Schedule of capitalized costs to acquire and fulfill customer contracts | December 31, March 31, (Dollars in millions) 2023 2023 Deferred transition costs $ 781 $ 856 Prepaid software costs 637 782 Capitalized costs to fulfill contracts 214 285 Capitalized costs to obtain contracts 279 313 Total deferred costs * $ 1,910 $ 2,236 * Of the total deferred costs, $924 million was current and $987 million was noncurrent at December 31, 2023, and $1,070 million was current and $1,166 million was noncurrent at March 31, 2023. |
SEGMENTS (Tables)
SEGMENTS (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
SEGMENTS | |
Summary of results of segments | Three Months Ended December 31, Nine Months Ended December 31, (Dollars in millions) 2023 2022 2023 2022 Revenue United States $ 1,032 $ 1,265 $ 3,305 $ 3,581 Japan 581 606 1,761 1,855 Principal Markets 1,446 1,472 4,395 4,460 Strategic Markets 877 961 2,741 2,874 Total revenue $ 3,936 $ 4,303 $ 12,202 $ 12,771 Segment adjusted EBITDA United States $ 194 $ 271 $ 607 $ 639 Japan 94 90 278 318 Principal Markets 207 91 560 248 Strategic Markets 144 145 428 352 Total segment adjusted EBITDA $ 640 $ 597 $ 1,872 $ 1,556 |
Summary of reconciliation of adjusted EBITDA to consolidated pretax income (loss) | The following table reconciles segment adjusted EBITDA to consolidated pretax income (loss): Three Months Ended December 31, Nine Months Ended December 31, (Dollars in millions) 2023 2022 2023 2022 Segment adjusted EBITDA $ 640 $ 597 $ 1,872 $ 1,556 Workforce rebalancing charges (19) (10) (115) (16) Charges related to ceasing to use leased/fixed assets and lease terminations (14) (10) (24) (10) Transaction-related (costs) benefits 77 (48) (12) (218) Stock-based compensation expense (25) (29) (72) (81) Interest expense (31) (27) (92) (65) Depreciation of property, equipment and capitalized software (207) (232) (639) (681) Amortization expense (322) (336) (968) (945) Corporate expense not allocated to the segments (25) (16) (71) (57) Other adjustments* (21) (27) (42) (45) Pretax income (loss) $ 53 $ (138) $ (165) $ (563) * Other adjustments represent pension expenses other than pension servicing costs and multi-employer plan costs, significant litigation costs, currency impacts of highly inflationary countries, and an adjustment to reduce amortization expense for the amount already included in transaction-related (costs) benefits above . |
NET LOSS PER SHARE (Tables)
NET LOSS PER SHARE (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
NET LOSS PER SHARE | |
Schedule of computation of basic and diluted earnings per share of common stock | Three Months Ended December 31, Nine Months Ended December 31, (In millions, except per share amounts) 2023 2022 2023 2022 Net income (loss) on which basic and diluted earnings per share is calculated $ (12) $ (106) $ (295) $ (637) Number of shares on which basic and diluted earnings per share is calculated 229.6 227.0 228.9 226.4 Basic earnings (loss) per share $ (0.05) $ (0.47) $ (1.29) $ (2.81) Diluted earnings (loss) per share (0.05) (0.47) (1.29) (2.81) |
Schedule of anti dilutive securities were not included in the computation of diluted earnings (loss) per share | December 31, (In millions) 2023 2022 Nonvested restricted stock units 9.1 9.9 Nonvested performance-conditioned stock units 3.5 2.5 Nonvested market-conditioned stock units 2.9 2.4 Stock options issued and outstanding 3.6 3.7 Total 19.1 18.6 |
FINANCIAL ASSETS AND LIABILIT_2
FINANCIAL ASSETS AND LIABILITIES (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
FINANCIAL ASSETS AND LIABILITIES | |
Financial assets and financial liabilities measured at fair value on a recurring basis | Fair Value Hierarchy At December 31, 2023 At March 31, 2023 (Dollars in millions) Level Assets Liabilities Fair Value Assets Liabilities Fair Value Derivatives designated as hedging instruments: Foreign exchange contracts 2 $ 4 $ 2 $ 3 $ 4 $ 3 $ 1 Derivatives not designated as hedging instruments: Foreign exchange contracts 2 25 4 21 11 5 6 Total $ 29 $ 5 $ 24 $ 15 $ 9 $ 6 |
Effect of Derivative Instruments in the Consolidated Income Statement - Designated | Unrealized Gain (Loss) Consolidated Gain (Loss) Reclassified (Dollars in millions) Recognized in OCI Income Statement from AOCI to Income Three months ended December 31: 2023 2022 Line Item 2023 2022 Foreign exchange contracts $ (5) $ (4) Cost of services $ 12 $ (2) Total $ (5) $ (4) $ 12 $ (2) Unrealized Gain (Loss) Consolidated Gain (Loss) (Dollars in millions) Recognized in OCI Income Statement Reclassified from AOCI Nine months ended December 31: 2023 2022 Line Item 2023 2022 Foreign exchange contracts $ 21 $ (9) Cost of services $ 17 $ (1) Total $ 21 $ (9) $ 17 $ (1) |
Effect of Derivative Instruments in the Consolidated Income Statement- Non designated | Consolidated Gain (Loss) (Dollars in millions) Income Statement Recognized on Derivatives Three months ended December 31: Line Item 2023 2022 Foreign exchange contracts Other expense (income) $ 36 $ 43 Total $ 36 $ 43 Consolidated Gain (Loss) (Dollars in millions) Income Statement Recognized on Derivatives Nine months ended December 31: Line Item 2023 2022 Foreign exchange contracts Other expense (income) $ (17) $ 27 Total $ (17) $ 27 |
INTANGIBLE ASSETS INCLUDING G_2
INTANGIBLE ASSETS INCLUDING GOODWILL (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
INTANGIBLE ASSETS INCLUDING GOODWILL | |
Intangible asset balances by major asset class | At December 31, 2023 At March 31, 2023 Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount Amount Amortization Amount Capitalized software $ 153 $ (37) $ 117 $ 83 $ (15) $ 68 Customer relationships* 226 (160) 66 232 (141) 91 Completed technology 20 (20) — 20 (20) — Patents and trademarks* 17 (8) 10 18 (6) 13 Total $ 417 $ (225) $ 192 $ 353 $ (182) $ 171 * Amounts include effects from currency translation. |
Intangible assets, future amortization expense | Capitalized Customer Patents and (Dollars in millions) Software Relationships Trademarks Total Year ending March 31: 2024 (remaining three months) $ 10 $ 7 $ 1 $ 18 2025 40 22 3 66 2026 38 19 3 60 2027 28 16 3 47 2028 — 1 — 1 Thereafter — 1 — 1 |
Changes in goodwill balances by reportable segment | Additions and (Dollars in millions) Balance at Other Balance at Segment March 31, 2023 Adjustments* December 31, 2023 United States $ — $ — $ — Japan 495 (3) 492 Principal Markets 142 — 142 Strategic Markets 176 — 176 Total $ 812 $ (3) $ 809 * Primarily driven by foreign currency translation. |
BORROWINGS (Tables)
BORROWINGS (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
BORROWINGS | |
Summary of components of debt | December 31, March 31, (Dollars in millions) Interest Rate Maturity 2023 2023 Unsecured floating-rate term loan 6.58% * November 2024 $ 500 $ 500 Commercial loan agreement 3.00% July 2026 75 96 Unsecured senior notes due 2026 2.05% October 2026 700 700 Unsecured senior notes due 2028 2.70% October 2028 500 500 Unsecured senior notes due 2031 3.15% October 2031 650 650 Unsecured senior notes due 2041 4.10% October 2041 550 550 Finance lease obligations 5.38% ** 2024-2028 297 242 $ 3,272 $ 3,238 Less: Unamortized discount 4 5 Less: Unamortized debt issuance costs 12 13 Less: Current portion of debt 628 110 Total long-term debt $ 2,629 $ 3,111 * Floating rate calculated as of December 31, 2023, using a rate equal to one-month SOFR plus ** Represents the weighted-average interest rate. |
Schedule of contractual obligations of long-term debt outstanding | (Dollars in millions)* Principal Year ending March 31: 2024 (remaining three months) $ 7 2025 529 2026 29 2027 710 2028 — Thereafter 1,700 Total $ 2,975 * Contractual obligations approximate scheduled repayments. |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
EQUITY | |
Reclassifications and taxes related to items of other comprehensive income (loss) | Pretax Tax (Expense) Net-of-Tax (Dollars in millions) Amount Benefit Amount For the three months ended December 31, 2023: Foreign currency translation adjustments $ 183 $ — $ 183 Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ (5) $ 4 $ — Reclassification of (gains) losses to net income (12) — (12) Total unrealized gains (losses) on cash flow hedges $ (17) $ 4 $ (12) Retirement-related benefit plans*: Amortization of prior service (credits) costs $ — $ (1) $ (1) Amortization of net (gains) losses (1) 3 2 Total retirement-related benefit plans $ (1) $ 2 $ 1 Other comprehensive income (loss) $ 166 $ 6 $ 171 For the three months ended December 31, 2022: Foreign currency translation adjustments $ 260 $ — $ 260 Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ (4) $ — $ (4) Reclassification of (gains) losses to net income 2 — 2 Total unrealized gains (losses) on cash flow hedges $ (2) $ — $ (2) Retirement-related benefit plans – amortization of net (gains) losses* $ 10 $ (3) $ 7 Other comprehensive income (loss) $ 267 $ (3) $ 265 * These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 12 – Retirement-Related Benefits for additional information. Pretax Tax (Expense) Net-of-Tax (Dollars in millions) Amount Benefit Amount For the nine months ended December 31, 2023: Foreign currency translation adjustments $ 58 $ — $ 58 Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ 21 $ 1 $ 22 Reclassification of (gains) losses to net income (17) — (17) Total unrealized gains (losses) on cash flow hedges $ 4 $ 1 $ 5 Retirement-related benefit plans*: Amortization of prior service (credits) costs $ 1 $ (1) $ (1) Amortization of net (gains) losses 2 2 4 Total retirement-related benefit plans $ 3 $ 1 $ 4 Other comprehensive income (loss) $ 66 $ 1 $ 67 For the nine months ended December 31, 2022: Foreign currency translation adjustments $ (229) $ — $ (229) Unrealized gains (losses) on cash flow hedges: Unrealized gains (losses) arising during the period $ (9) $ 2 $ (7) Reclassification of (gains) losses to net income 1 — 1 Total unrealized gains (losses) on cash flow hedges $ (8) $ 2 $ (6) Retirement-related benefit plans – amortization of net (gains) losses* $ 30 $ (9) $ 21 Other comprehensive income (loss) $ (207) $ (7) $ (214) * These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 12 – Retirement-Related Benefits for additional information. |
Accumulated other comprehensive income (loss), net of taxes | Net Unrealized Foreign Net Change Accumulated Gain (Losses) Currency Retirement- Other on Cash Translation Related Comprehensive (Dollars in millions) Flow Hedges Adjustments* Benefit Plans Income (Loss) October 1, 2023 $ 17 $ (1,045) $ (139) $ (1,167) Other comprehensive income (loss) (12) 183 1 171 December 31, 2023 $ 5 $ (862) $ (138) $ (995) October 1, 2022 $ (1) $ (1,223) $ (343) $ (1,567) Other comprehensive income (loss) (2) 260 7 265 December 31, 2022 $ (3) $ (963) $ (336) $ (1,303) Net Unrealized Foreign Net Change Accumulated Gain (Losses) Currency Retirement- Other on Cash Translation Related Comprehensive (Dollars in millions) Flow Hedges Adjustments* Benefit Plans Income (Loss) April 1, 2023 $ — $ (921) $ (142) $ (1,062) Other comprehensive income (loss) 5 58 4 67 December 31, 2023 $ 5 $ (862) $ (138) $ (995) April 1, 2022 $ 3 $ (735) $ (357) $ (1,089) Other comprehensive income (loss) (6) (229) 21 (214) December 31, 2022 $ (3) $ (963) $ (336) $ (1,303) * Foreign currency translation adjustments are presented gross . |
RETIREMENT-RELATED BENEFITS (Ta
RETIREMENT-RELATED BENEFITS (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
RETIREMENT-RELATED BENEFITS | |
Components of net periodic pension cost for the defined benefit pension plans | Three Months Ended December 31, Nine Months Ended December 31, (Dollars in millions) 2023 2022 2023 2022 Service cost $ 10 $ 12 $ 28 $ 36 Interest cost* 14 9 43 27 Expected return on plan assets* (15) (10) (46) (32) Amortization of prior service costs (credits)* — — 1 — Recognized actuarial losses (gains)* 1 10 3 30 Curtailments and settlements* 3 — 3 — Net periodic pension cost $ 14 $ 20 $ 33 $ 61 * These components of net periodic pension cost are included in other expense (income) in the Consolidated Income Statement. |
WORKFORCE REBALANCING AND SIT_2
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES (Tables) | 9 Months Ended |
Dec. 31, 2023 | |
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES. | |
Schedule of segment breakout of charges | Three Months Ended Nine Months Ended Costs Incurred (Dollars in millions) December 31, 2023 December 31, 2023 to Date United States $ 13 $ 28 $ 42 Japan — 2 4 Principal Markets 12 55 118 Strategic Markets 7 52 99 Corporate charges not allocated to the segments — 3 13 Total charges $ 33 $ 140 $ 275 |
Summary of classification of workforce rebalancing and site-rationalization activities | Three Months Ended Nine Months Ended Costs Incurred (Dollars in millions) December 31, 2023 December 31, 2023 to Date Cost of services $ 14 $ 11 $ 82 Selling, general and administrative expenses 1 14 23 Workforce rebalancing charges 19 115 171 Total charges $ 33 $ 140 $ 275 |
Schedule of components of and changes in workforce rebalancing and site-rationalization charges | Liabilities Liabilities Liabilities Workforce Related to Related to Related to Rebalancing Ceasing to Use Lease Ceasing to Use (Dollars in millions) Liabilities* Leased Assets Terminations Fixed Assets Total Balance at March 31, 2023 $ 55 $ — $ 3 $ — $ 58 Charges / (benefits) 115 10 (1) 16 140 Cash payments (130) — (2) (6) (138) Non-cash adjustments (1) (10) — (10) (21) Balance at December 31, 2023 $ 39 $ — $ — $ — $ 39 * Excludes historical workforce rebalancing liabilities of $42 million as of March 31, 2023 and $29 million as of December 31, 2023 as well as $1 million of non-cash adjustments and $11 million cash paid for these historical workforce rebalancing liabilities for the nine months ended December 31, 2023 that were inherited from the former Parent. Workforce rebalancing liabilities are recorded within Other Liabilities on the Consolidated Balance Sheet . |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES - Kyndryl's Spin-off and Description of Business (Details) | Dec. 31, 2023 country |
Minimum | |
Number of countries | 100 |
REVENUE RECOGNITION - Remaining
REVENUE RECOGNITION - Remaining Performance Obligations (Details) $ in Billions | Dec. 31, 2023 USD ($) |
REVENUE RECOGNITION | |
Remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied | $ 34.5 |
REVENUE RECOGNITION - Remaini_2
REVENUE RECOGNITION - Remaining Performance Obligations, Expected Timing of Satisfaction (Details) | Dec. 31, 2023 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 59% |
Duration of expected recognition period for remaining performance obligation | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 34% |
Duration of expected recognition period for remaining performance obligation | 3 years |
REVENUE RECOGNITION - Performan
REVENUE RECOGNITION - Performance Obligations Satisfied or Partially Satisfied in Prior Periods (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
REVENUE RECOGNITION | ||||
Impact to revenue from performance obligations satisfied (or partially satisfied) in previous periods | $ 12 | $ (3) | $ 24 | $ 4 |
REVENUE RECOGNITION - Reconcili
REVENUE RECOGNITION - Reconciliation of Contract Balances (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2023 | |
Reconciliation of Contract Balances | |||||
Accounts receivable (net of allowances for credit losses of $24 at December 31, 2023 and $32 at March 31, 2023) | $ 1,658 | $ 1,658 | $ 1,523 | ||
Contract assets | 31 | 31 | 30 | ||
Deferred income (current) | 793 | 793 | 820 | ||
Deferred income (noncurrent) | 326 | 326 | 362 | ||
Accounts receivable, allowances | 24 | 24 | 32 | ||
Unbilled receivable | 329 | 329 | $ 384 | ||
Revenue recognized that was included in deferred income at the beginning of the period | $ 221 | $ 249 | $ 501 | $ 496 |
REVENUE RECOGNITION - Trade All
REVENUE RECOGNITION - Trade Allowance for Credit Losses (Details) - USD ($) $ in Millions | 9 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Roll forward of notes and accounts receivable - trade allowance for credit losses | ||
Allowance for Credit Loss, Beginning Balance | $ 32 | $ 44 |
Additions (releases) | 2 | 5 |
Write-offs | (6) | (8) |
Other | (4) | (6) |
Allowance for Credit Loss, Ending Balance | $ 24 | $ 34 |
REVENUE RECOGNITION - Major Cli
REVENUE RECOGNITION - Major Clients (Details) - client | Dec. 31, 2023 | Mar. 31, 2023 | Dec. 31, 2022 |
Revenue. | |||
Concentration Risk [Line Items] | |||
Concentration risk, major clients | 0 | 0 | |
Accounts Receivable. | |||
Concentration Risk [Line Items] | |||
Concentration risk, major clients | 0 | 0 |
REVENUE RECOGNITION - Deferred
REVENUE RECOGNITION - Deferred Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2023 | |
Deferred Contract Costs | ||||
Deferred costs | $ 1,910 | $ 1,910 | $ 2,236 | |
Deferred costs, current | 924 | 924 | 1,070 | |
Deferred costs, noncurrent | 987 | 987 | 1,166 | |
Total deferred costs amortized | 452 | 1,364 | ||
Amortization of deferred costs | 138 | 418 | $ 337 | |
Deferred transition costs | ||||
Deferred Contract Costs | ||||
Deferred costs | 781 | 781 | 856 | |
Total deferred costs amortized | 87 | 259 | ||
Prepaid software costs | ||||
Deferred Contract Costs | ||||
Deferred costs | 637 | 637 | 782 | |
Total deferred costs amortized | 227 | 686 | ||
Capitalized costs to fulfill contracts | ||||
Deferred Contract Costs | ||||
Deferred costs | 214 | 214 | 285 | |
Capitalized costs to obtain contracts | ||||
Deferred Contract Costs | ||||
Deferred costs | $ 279 | $ 279 | $ 313 | |
Minimum | ||||
Deferred Contract Costs | ||||
Term of contract with customer | 3 years | |||
Maximum | ||||
Deferred Contract Costs | ||||
Term of contract with customer | 6 years |
SEGMENTS (Details)
SEGMENTS (Details) | 9 Months Ended |
Dec. 31, 2023 segment | |
SEGMENTS | |
Number of reportable segments | 4 |
SEGMENTS - Results of segments
SEGMENTS - Results of segments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Segment Information | ||||
Revenues | $ 3,936 | $ 4,303 | $ 12,202 | $ 12,771 |
Segment adjusted EBITDA | 640 | 597 | 1,872 | 1,556 |
United States | ||||
Segment Information | ||||
Revenues | 1,032 | 1,265 | 3,305 | 3,581 |
Segment adjusted EBITDA | 194 | 271 | 607 | 639 |
Japan | ||||
Segment Information | ||||
Revenues | 581 | 606 | 1,761 | 1,855 |
Segment adjusted EBITDA | 94 | 90 | 278 | 318 |
Principal Markets | ||||
Segment Information | ||||
Revenues | 1,446 | 1,472 | 4,395 | 4,460 |
Segment adjusted EBITDA | 207 | 91 | 560 | 248 |
Strategic Markets | ||||
Segment Information | ||||
Revenues | 877 | 961 | 2,741 | 2,874 |
Segment adjusted EBITDA | $ 144 | $ 145 | $ 428 | $ 352 |
SEGMENTS - Reconciliation of co
SEGMENTS - Reconciliation of consolidated pretax income (loss) to segment adjusted EBITDA (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
SEGMENTS | ||||
Segment adjusted EBITDA | $ 640 | $ 597 | $ 1,872 | $ 1,556 |
Workforce rebalancing charges | (19) | (10) | (115) | (16) |
Charges related to ceasing to use leased / fixed assets and lease terminations | (14) | (10) | (24) | (10) |
Transaction-related (costs) benefits | 77 | (48) | (12) | (218) |
Stock-based compensation expense | (25) | (29) | (72) | (81) |
Interest expense | (31) | (27) | (92) | (65) |
Depreciation of property, equipment and capitalized software | (207) | (232) | (639) | (681) |
Amortization expense | (322) | (336) | (968) | (945) |
Corporate expense not allocated to the segments | (25) | (16) | (71) | (57) |
Other adjustments | (21) | (27) | (42) | (45) |
Income (loss) before income taxes | $ 53 | $ (138) | $ (165) | $ (563) |
TAXES (Details)
TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
TAXES. | ||||
Effective tax rate (as a percent) | 122.60% | 23.20% | (79.30%) | (13.10%) |
NET LOSS PER SHARE - Computatio
NET LOSS PER SHARE - Computation of basic and diluted earnings per share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
NET LOSS PER SHARE | ||||
Stock dividends declared | $ 0 | $ 0 | $ 0 | $ 0 |
Net income (loss) on which basic and diluted earnings per share is calculated | $ (12) | $ (106) | $ (295) | $ (637) |
Number of shares on which basic earnings per share is calculated | 229.6 | 227 | 228.9 | 226.4 |
Number of shares on which diluted earnings per share is calculated | 229.6 | 227 | 228.9 | 226.4 |
Basic earnings (loss) per share | $ (0.05) | $ (0.47) | $ (1.29) | $ (2.81) |
Diluted earnings (loss) per share | $ (0.05) | $ (0.47) | $ (1.29) | $ (2.81) |
NET LOSS PER SHARE - Anti dilut
NET LOSS PER SHARE - Anti dilutive securities (Details) - shares shares in Millions | 3 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Securities not included in the computation of diluted earnings (loss) per share | ||
Anti dilutive securities | 19.1 | 18.6 |
Restricted stock units | ||
Securities not included in the computation of diluted earnings (loss) per share | ||
Anti dilutive securities | 9.1 | 9.9 |
Performance-conditioned stock units | ||
Securities not included in the computation of diluted earnings (loss) per share | ||
Anti dilutive securities | 3.5 | 2.5 |
Market-conditioned stock units | ||
Securities not included in the computation of diluted earnings (loss) per share | ||
Anti dilutive securities | 2.9 | 2.4 |
Employee Stock Option | ||
Securities not included in the computation of diluted earnings (loss) per share | ||
Anti dilutive securities | 3.6 | 3.7 |
FINANCIAL ASSETS AND LIABILIT_3
FINANCIAL ASSETS AND LIABILITIES - Fair Value (Details) - USD ($) $ in Millions | Dec. 31, 2023 | Mar. 31, 2023 |
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Prepaid Expense and Other Assets, Current | Prepaid Expense and Other Assets, Current |
Derivative Liability, Statement of Financial Position [Extensible Enumeration] | Accrued Liabilities and Other Liabilities, Current | Accrued Liabilities and Other Liabilities, Current |
Foreign exchange contracts | Level 2 | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative assets | $ 29 | $ 15 |
Derivative liabilities | 5 | 9 |
Fair value, net | 24 | 6 |
Designated as hedging instruments | Foreign exchange contracts | Level 2 | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative assets | 4 | 4 |
Derivative liabilities | 2 | 3 |
Fair value, net | 3 | 1 |
Not designated as hedging instruments - economic hedges | Foreign exchange contracts | Level 2 | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative assets | 25 | 11 |
Derivative liabilities | 4 | 5 |
Fair value, net | $ 21 | $ 6 |
FINANCIAL ASSETS AND LIABILIT_4
FINANCIAL ASSETS AND LIABILITIES - Not Measured at Fair Value (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2023 | |
Financial assets and financial liabilities: | |||||
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Prepaid Expense and Other Assets, Current | Prepaid Expense and Other Assets, Current | Prepaid Expense and Other Assets, Current | ||
Derivative Liability, Statement of Financial Position [Extensible Enumeration] | Accrued Liabilities and Other Liabilities, Current | Accrued Liabilities and Other Liabilities, Current | Accrued Liabilities and Other Liabilities, Current | ||
Derivative assets impacted by netting arrangements | $ 0 | $ 0 | $ 0 | ||
Impairments of non-financial assets | 0 | $ 0 | 0 | $ 0 | |
Long-term debt | 3,000 | 3,000 | 3,000 | ||
Long-term debt, fair value | 2,600 | 2,600 | 2,500 | ||
Gross proceeds from third parties | 846 | 930 | 2,900 | 2,300 | |
Fees associated with the transfers of receivables | 11 | $ 14 | 39 | $ 34 | |
Time deposits | |||||
Financial assets and financial liabilities: | |||||
Impairments of non-financial assets | 0 | 0 | |||
Cash and cash equivalents | Time deposits | |||||
Financial assets and financial liabilities: | |||||
Available-for-sale debt securities | $ 709 | $ 709 | $ 814 |
FINANCIAL ASSETS AND LIABILIT_5
FINANCIAL ASSETS AND LIABILITIES - Foreign Exchange Risk (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Dec. 31, 2023 | Mar. 31, 2023 | |
Not designated as hedging instruments - economic hedges | Currency swaps | ||
Derivatives, Fair Value [Line Items] | ||
Notional amount | $ 2,400 | $ 1,500 |
Not designated as hedging instruments - economic hedges | Currency swaps | Maximum | ||
Derivatives, Fair Value [Line Items] | ||
Term of contract | 1 year | |
Derivative instruments in cash flow hedges | Designated as hedging instruments | Foreign exchange contracts | ||
Derivatives, Fair Value [Line Items] | ||
Net gains from derivatives | $ 5 | 1 |
Deferred net gains on derivatives reclassified to net income | 5 | |
Derivative instruments in cash flow hedges | Designated as hedging instruments | Foreign exchange forward contracts | ||
Derivatives, Fair Value [Line Items] | ||
Notional amount | $ 281 | $ 283 |
Maximum length of time hedged | 1 year | |
Weighted average remaining maturity | 6 months | 6 months |
FINANCIAL ASSETS AND LIABILIT_6
FINANCIAL ASSETS AND LIABILITIES - Gains and Losses (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing | $ 0 | $ 0 | $ 0 | $ 0 |
Designated as hedging instruments | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | (5) | (4) | 21 | (9) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | 12 | (2) | 17 | (1) |
Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net gains (loss) from derivatives | $ 36 | $ 43 | $ (17) | $ 27 |
Foreign exchange contracts | Designated as hedging instruments | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Cost of Revenue | Cost of Revenue | Cost of Revenue | Cost of Revenue |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | $ (5) | $ (4) | $ 21 | $ (9) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | 12 | (2) | 17 | (1) |
Foreign exchange contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net gains (loss) from derivatives | $ 36 | $ 43 | $ (17) | $ 27 |
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Other Income and Expense | Other Income and Expense | Other Income and Expense | Other Income and Expense |
INTANGIBLE ASSETS INCLUDING G_3
INTANGIBLE ASSETS INCLUDING GOODWILL - Intangible Assets by Class (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2023 | |
Intangible asset balances by major asset class | |||||
Gross Carrying Amount | $ 417 | $ 417 | $ 353 | ||
Accumulated Amortization | (225) | (225) | (182) | ||
Net Carrying Amount | 192 | 192 | 171 | ||
Intangible asset amortization expense | 17 | $ 11 | 44 | $ 36 | |
Net carrying amount of intangible assets increased | 21 | ||||
Capitalized software | |||||
Intangible asset balances by major asset class | |||||
Gross Carrying Amount | 153 | 153 | 83 | ||
Accumulated Amortization | (37) | (37) | (15) | ||
Net Carrying Amount | 117 | 117 | 68 | ||
Intangible asset amortization expense | 9 | 21 | |||
Customer relationships | |||||
Intangible asset balances by major asset class | |||||
Gross Carrying Amount | 226 | 226 | 232 | ||
Accumulated Amortization | (160) | (160) | (141) | ||
Net Carrying Amount | 66 | 66 | 91 | ||
Completed technology | |||||
Intangible asset balances by major asset class | |||||
Gross Carrying Amount | 20 | 20 | 20 | ||
Accumulated Amortization | (20) | (20) | (20) | ||
Patents and trademarks | |||||
Intangible asset balances by major asset class | |||||
Gross Carrying Amount | 17 | 17 | 18 | ||
Accumulated Amortization | (8) | (8) | (6) | ||
Net Carrying Amount | $ 10 | $ 10 | $ 13 |
INTANGIBLE ASSETS INCLUDING G_4
INTANGIBLE ASSETS INCLUDING GOODWILL - Future Amortization Expense (Details) $ in Millions | Dec. 31, 2023 USD ($) |
Future amortization expense, by year | |
2024 (remaining three months) | $ 18 |
2025 | 66 |
2026 | 60 |
2027 | 47 |
2028 | 1 |
Thereafter | 1 |
Capitalized software | |
Future amortization expense, by year | |
2024 (remaining three months) | 10 |
2025 | 40 |
2026 | 38 |
2027 | 28 |
Customer relationships | |
Future amortization expense, by year | |
2024 (remaining three months) | 7 |
2025 | 22 |
2026 | 19 |
2027 | 16 |
2028 | 1 |
Thereafter | 1 |
Patents and trademarks | |
Future amortization expense, by year | |
2024 (remaining three months) | 1 |
2025 | 3 |
2026 | 3 |
2027 | $ 3 |
INTANGIBLE ASSETS INCLUDING G_5
INTANGIBLE ASSETS INCLUDING GOODWILL - Goodwill by Segment (Details) - USD ($) $ in Millions | 9 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Changes in Goodwill Balances | ||
Beginning Balance | $ 812 | |
Impairment | 0 | $ 0 |
Additions and Other Adjustments | (3) | |
Ending Balance | 809 | |
Japan | ||
Changes in Goodwill Balances | ||
Beginning Balance | 495 | |
Additions and Other Adjustments | (3) | |
Ending Balance | 492 | |
Principal Markets | ||
Changes in Goodwill Balances | ||
Beginning Balance | 142 | |
Ending Balance | 142 | |
Strategic Markets | ||
Changes in Goodwill Balances | ||
Beginning Balance | 176 | |
Ending Balance | $ 176 |
BORROWINGS - Debt (Details)
BORROWINGS - Debt (Details) - USD ($) $ in Millions | Dec. 31, 2023 | Mar. 31, 2023 |
BORROWINGS | ||
Financing lease obligations | $ 297 | $ 242 |
Total | 3,272 | 3,238 |
Less: Unamortized discount | 4 | 5 |
Less: Unamortized debt issuance costs | 12 | 13 |
Less: Current portion of debt | 628 | 110 |
Total | $ 2,629 | 3,111 |
Finance lease obligations, interest rate (as a percent) | 5.38% | |
Unsecured floating-rate term loan | ||
BORROWINGS | ||
Long-term debt | $ 500 | 500 |
Debt instrument, weighted-average interest rate (as a percent) | 6.58% | |
Unsecured floating-rate term loan | SOFR | ||
BORROWINGS | ||
Debt instrument, weighted-average interest rate (as a percent) | 1.225% | |
Commercial loan agreement | ||
BORROWINGS | ||
Long-term debt | $ 75 | 96 |
Debt instrument, weighted-average interest rate (as a percent) | 3% | |
Unsecured senior notes due 2026 | ||
BORROWINGS | ||
Long-term debt | $ 700 | 700 |
Debt instrument, weighted-average interest rate (as a percent) | 2.05% | |
Unsecured senior notes due 2028 | ||
BORROWINGS | ||
Long-term debt | $ 500 | 500 |
Debt instrument, weighted-average interest rate (as a percent) | 2.70% | |
Unsecured senior notes due 2031 | ||
BORROWINGS | ||
Long-term debt | $ 650 | 650 |
Debt instrument, weighted-average interest rate (as a percent) | 3.15% | |
Unsecured senior notes due 2041 | ||
BORROWINGS | ||
Long-term debt | $ 550 | $ 550 |
Debt instrument, weighted-average interest rate (as a percent) | 4.10% |
BORROWINGS - Contractual obliga
BORROWINGS - Contractual obligations of long-term debt outstanding (Details) $ in Millions | Dec. 31, 2023 USD ($) |
Pre-swap annual contractual obligations of long-term debt outstanding | |
2024 (remaining three months) | $ 7 |
2025 | 529 |
2026 | 29 |
2027 | 710 |
Thereafter | 1,700 |
Total | $ 2,975 |
BORROWINGS - Additional Informa
BORROWINGS - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
BORROWINGS | ||||
Right-of-use assets obtained in exchange for new finance lease liabilities | $ 42 | $ 21 | $ 192 | $ 58 |
Revolving Credit Agreement | ||||
BORROWINGS | ||||
Borrowing credit facility | $ 0 | $ 0 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | 1 Months Ended | |
May 31, 2022 USD ($) | Dec. 31, 2023 employee | |
Loss Contingencies | ||
Number of employees | employee | 80,000 | |
BMC v. IBM | IBM | ||
Loss Contingencies | ||
Direct damages sought, value | $ 717 | |
Punitive damages sought, value | $ 717 |
EQUITY - Reclassifications and
EQUITY - Reclassifications and Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss) | ||||
Other comprehensive income (loss) | $ 171 | $ 265 | $ 67 | $ (214) |
Accumulated Other Comprehensive Income (Loss) | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss) | ||||
Other comprehensive income (loss), before tax amount | 166 | 267 | 66 | (207) |
Other comprehensive income (loss), tax (expense) benefit | 6 | (3) | 1 | (7) |
Other comprehensive income (loss) | 171 | 265 | 67 | (214) |
Foreign Currency Translation Adjustments | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss) | ||||
Other comprehensive income (loss), before tax amount | 183 | 260 | 58 | (229) |
Other comprehensive income (loss) | 183 | 260 | 58 | (229) |
Unrealized Gains (Losses) on Cash Flow Hedges | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss) | ||||
Unrealized gains (losses) arising during the period, before tax amount | (5) | (4) | 21 | (9) |
Unrealized gains (losses) arising during the period, tax (expense) benefit | 4 | 1 | 2 | |
Unrealized gains (losses) arising during the period, net of tax amount | (4) | 22 | (7) | |
Reclassification/amortization, before tax amount | (12) | 2 | (17) | 1 |
Reclassification/amortization, net of tax amount | (12) | 2 | (17) | 1 |
Other comprehensive income (loss), before tax amount | (17) | (2) | 4 | (8) |
Other comprehensive income (loss), tax (expense) benefit | 4 | 1 | 2 | |
Other comprehensive income (loss) | (12) | (2) | 5 | (6) |
Net Change Retirement-Related Benefit Plans | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss) | ||||
Other comprehensive income (loss), before tax amount | (1) | 10 | 3 | 30 |
Other comprehensive income (loss), tax (expense) benefit | 2 | (3) | 1 | (9) |
Other comprehensive income (loss) | 1 | $ 7 | 4 | $ 21 |
Retirement-Related Benefit Plans, Prior Service Costs (Credits) | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss) | ||||
Reclassification/amortization, before tax amount | 1 | |||
Reclassification/amortization, tax (expense) benefit | (1) | (1) | ||
Reclassification/amortization, net of tax amount | (1) | (1) | ||
Retirement-Related Benefit Plans, Net Gains (Losses) | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss) | ||||
Reclassification/amortization, before tax amount | (1) | 2 | ||
Reclassification/amortization, tax (expense) benefit | 3 | 2 | ||
Reclassification/amortization, net of tax amount | $ 2 | $ 4 |
EQUITY - AOCI Rollforward (Deta
EQUITY - AOCI Rollforward (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the beginning of the period | $ 1,113 | $ 1,746 | $ 1,462 | $ 2,711 |
Other comprehensive income (loss) | 171 | 265 | 67 | (214) |
Balance at the end of the period | 1,293 | 1,930 | 1,293 | 1,930 |
Accumulated Other Comprehensive Income (Loss) | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the beginning of the period | (1,167) | (1,567) | (1,062) | (1,089) |
Other comprehensive income (loss) | 171 | 265 | 67 | (214) |
Balance at the end of the period | (995) | (1,303) | (995) | (1,303) |
Unrealized Gains (Losses) on Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the beginning of the period | 17 | (1) | 3 | |
Other comprehensive income (loss) | (12) | (2) | 5 | (6) |
Balance at the end of the period | 5 | (3) | 5 | (3) |
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the beginning of the period | (1,045) | (1,223) | (921) | (735) |
Other comprehensive income (loss) | 183 | 260 | 58 | (229) |
Balance at the end of the period | (862) | (963) | (862) | (963) |
Net Change Retirement-Related Benefit Plans | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the beginning of the period | (139) | (343) | (142) | (357) |
Other comprehensive income (loss) | 1 | 7 | 4 | 21 |
Balance at the end of the period | $ (138) | $ (336) | $ (138) | $ (336) |
RETIREMENT-RELATED BENEFITS - N
RETIREMENT-RELATED BENEFITS - Net Periodic Pension Cost for Defined Benefit Pension Plans (Details) - Defined Benefit Pension Plans - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Cost/(Income) of Pension Plans | ||||
Service cost | $ 10 | $ 12 | $ 28 | $ 36 |
Interest cost | $ 14 | $ 9 | $ 43 | $ 27 |
Interest cost - income statement location | Other expense | Other expense | Other expense | Other expense |
Expected return on plan assets | $ (15) | $ (10) | $ (46) | $ (32) |
Expected return on plan assets - income statement location | Other expense | Other expense | Other expense | Other expense |
Amortization of prior service costs (credits) | $ 1 | |||
Amortization of prior service costs/(credits) - income statement location | Other expense | |||
Recognized actuarial losses (gains) | $ 1 | $ 10 | $ 3 | $ 30 |
Recognized actuarial losses (gains) - income statement location | Other expense | Other expense | Other expense | Other expense |
Curtailments and settlements | $ 3 | $ 3 | ||
Curtailments and settlements - income statement location | Other expense | Other expense | Other expense | Other expense |
Total net periodic pension cost | $ 14 | $ 20 | $ 33 | $ 61 |
TRANSACTIONS WITH FORMER PARE_2
TRANSACTIONS WITH FORMER PARENT - Related Party Revenue and Purchases (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 17 Months Ended | |||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Aug. 11, 2022 | |
Related Party Transaction [Line Items] | ||||||
Revenues | $ 3,936 | $ 4,303 | $ 12,202 | $ 12,771 | ||
Cost of services | 3,184 | 3,596 | 10,055 | 10,886 | ||
Payment for purchase of hardware from IBM | 449 | 711 | ||||
Related Party | ||||||
Related Party Transaction [Line Items] | ||||||
Revenues | 287 | |||||
Cost of services | 1,382 | |||||
IBM | ||||||
Related Party Transaction [Line Items] | ||||||
Ownership interest transferred | 19.90% | |||||
IBM | Hardware, software and services | ||||||
Related Party Transaction [Line Items] | ||||||
Payment for purchase of hardware from IBM | 89 | |||||
Due from related party | 265 | 265 | 265 | $ 265 | $ 265 | |
Upgraded hardware period | 2 years | |||||
Purchases from related party | $ 71 | $ 21 | $ 181 | $ 41 | $ 265 | |
Estimated useful lives (in years) | 5 years | 5 years | 5 years | |||
IBM | Related Party | ||||||
Related Party Transaction [Line Items] | ||||||
Revenues | 287 | |||||
Cost of services | $ 1,382 |
WORKFORCE REBALANCING AND SIT_3
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES (Details) $ in Millions | 3 Months Ended | 9 Months Ended | 21 Months Ended |
Dec. 31, 2023 USD ($) | Dec. 31, 2023 USD ($) | Dec. 31, 2023 USD ($) | |
RESTRUCTURING | |||
Charges | $ 33 | $ 140 | $ 275 |
Restructuring and related expected costs | $ 300 | 300 | $ 300 |
Workforce Rebalancing Charges | |||
RESTRUCTURING | |||
Charges | $ 115 | ||
Percentage of restructuring and related expected costs | 65% | 65% | 65% |
Liabilities Related to Ceasing to Use Leased Assets | |||
RESTRUCTURING | |||
Charges | $ 10 | ||
Percentage of restructuring and related expected costs | 35% | 35% | 35% |
Corporate, Non-Segment | |||
RESTRUCTURING | |||
Charges | $ 3 | $ 13 | |
United States. | Operating Segments | |||
RESTRUCTURING | |||
Charges | $ 13 | 28 | 42 |
Japan. | Operating Segments | |||
RESTRUCTURING | |||
Charges | 2 | 4 | |
Principal Markets | Operating Segments | |||
RESTRUCTURING | |||
Charges | 12 | 55 | 118 |
Strategic Markets | Operating Segments | |||
RESTRUCTURING | |||
Charges | $ 7 | $ 52 | $ 99 |
WORKFORCE REBALANCING AND SIT_4
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES - Classification of restructuring activity (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 21 Months Ended |
Dec. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2023 | |
RESTRUCTURING | |||
Charges | $ 33 | $ 140 | $ 275 |
Cost of services | |||
RESTRUCTURING | |||
Charges | 14 | 11 | 82 |
Selling, general and administrative expense. | |||
RESTRUCTURING | |||
Charges | 1 | 14 | 23 |
Workforce rebalancing charges | |||
RESTRUCTURING | |||
Charges | $ 19 | $ 115 | $ 171 |
WORKFORCE REBALANCING AND SIT_5
WORKFORCE REBALANCING AND SITE-RATIONALIZATION CHARGES - Rollforward (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 21 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2023 | Mar. 31, 2023 | |
RESTRUCTURING | ||||
Balance at beginning of period | $ 58 | |||
Charges | $ 33 | 140 | $ 275 | |
Cash payments | (138) | |||
Non-cash adjustments | (21) | |||
Balance at end of period | 39 | 39 | 39 | |
Workforce Rebalancing Charges | ||||
RESTRUCTURING | ||||
Balance at beginning of period | 55 | |||
Charges | 115 | |||
Cash payments | (130) | |||
Non-cash adjustments | (1) | |||
Balance at end of period | 39 | 39 | 39 | |
Historic workforce rebalancing liabilities | $ 29 | 29 | $ 29 | $ 42 |
Liabilities Related to Ceasing to Use Leased Assets | ||||
RESTRUCTURING | ||||
Charges | 10 | |||
Non-cash adjustments | (10) | |||
Liabilities Related to Lease Terminations | ||||
RESTRUCTURING | ||||
Balance at beginning of period | 3 | |||
Charges | (1) | |||
Cash payments | (2) | |||
Liabilities Related to Ceasing to Use Fixed Assets | ||||
RESTRUCTURING | ||||
Charges | 16 | |||
Cash payments | (6) | |||
Non-cash adjustments | (10) | |||
Workforce Rebalancing Liabilities Inherited from Former Parent | ||||
RESTRUCTURING | ||||
Cash payments | (11) | |||
Non-cash adjustments | $ 1 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Dec. 31, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Rule 10b5-1 Arrangement Modified | false |
Non-Rule 10b5-1 Arrangement Modified | false |