Kyndryl at Bank of America Conference: Strategic Growth Focus

On Tuesday, 03 June 2025, Kyndryl Holdings Inc. (NYSE:KD) participated in the Bank of America Global Technology Conference 2025. The company’s CFO, David Weisner, outlined Kyndryl’s strategic initiatives and financial projections, emphasizing resilience against macroeconomic volatility. While the company projected strong growth, challenges such as pre-wired cost increases with IBM were acknowledged.

Key Takeaways

• Kyndryl projects adjusted pre-tax income of $725 million or more for fiscal year 2026, increasing by $240 million from the previous year.
• The consulting business is expected to grow from 20% to 25% of total revenue, with a 26% growth rate.
• Kyndryl aims for over $1 billion in free cash flow annually by fiscal year 2028.
• The company is nearing the end of a $200 million annual cost increase tied to IBM software procurement.
• Strategic focus on cloud migration, cybersecurity, AI, and SAP-related ERP implementations.

Financial Results

• Fiscal Year 2026: Adjusted pre-tax income is projected at $725 million or more, with adjusted free cash flow expected around $550 million.
• Fiscal Year 2028: Targets include over $1 billion in free cash flow and adjusted pre-tax income more than doubling to $1.2 billion.
• Revenue Growth: Anticipated to progress toward mid-single digits by fiscal year 2028.
• Share Repurchase: Over $60 million of stock repurchased in the most recent quarter.
• Revenue Visibility: 75%-80% of fiscal year 2026 revenue is expected from existing contracts.

Operational Updates

• Three A’s Strategy: Focus on alliances with major tech firms, advanced delivery, and improving account profitability.
• Consulting Business: Grew from 10% to 20% of total revenue, projected to reach 25% or more, with double-digit growth.
• Large Deal Wins: 26 deals exceeding $100 million in total contract value in the past year.
• IBM Relationship: Annual software procurement of $2 billion; nearing the end of pre-wired cost increases.

Future Outlook

• Revenue Growth: Positive growth expected despite macroeconomic challenges.
• Free Cash Flow Allocation: Supports shareholder returns through share repurchase.
• Consulting Contribution: Expected to remain a double-digit growth driver in the intermediate term.

Q&A Highlights

• Client Relationships: Kyndryl’s mission-critical services provide insulation from macroeconomic pressures.
• Diversification: Broad-based growth across geographies, verticals, and practices.
• Market Position: Emphasis on efficiency, optimization, and resilience in response to macro conditions.

For more detailed insights, please refer to the full transcript below.

Full transcript - Bank of America Global Technology Conference 2025:

Tyler, Services Team, BofA: Thank you all for joining us today. I am services team here at BofA. I’m joined by David Weisner, CFO of Kindredl, and what I assume will be a very productive and exciting half hour session. So, David, thank you very much for joining us.

David Weisner, CFO, Kindrel: Oh, Tyler, thanks very much for for having me, for having us here at the the BofA conference. Great. So you’ve been

Tyler, Services Team, BofA: with Kindrel since the IBM spin in in 2021. So maybe it might be helpful just to start by giving us your perspective on the major changes you’ve seen, you know, has gone through over that period. How would you describe how Kinrel has been shaped by yourself? And Martin, the investment community got an update a few months ago at the recent Investor Day, but just any color there would be helpful to start.

David Weisner, CFO, Kindrel: Sure. Let me start with who we are and what we do at Kinrel. We’re a leading provider, the leading provider of mission critical technology services related to infrastructure, really focused on designing and modernizing and managing some of the world’s most complex IT environments. And in terms of what’s changed for us as an independent company, I’d say that there are definitely a few things. The first has been our three A’s strategy and how we identified that strategy and implemented over time, driving real progress in alliances that we have with other technology providers so that we can provide a broader range of technology services, leveraging our legacy with IBM, but also having partnerships with Microsoft and Google’s and AWS’s and Dell’s and SAP’s and Cisco’s and others so that we can provide a broader range of IT services to customers.

The second of the three A’s was advanced delivery, efficiency in how we provide our services and in providing a even better quality of service at the same time, we drove optimization and cost savings. And the third A is our accounts initiative, really making progress on the profitability of the 40% of our revenues at the time of spin that weren’t contributing to our profits. And those have been strategically some of the big changes for us. On top of that, we’ve also looked to drive a cultural transformation in our organization, building on the strong points of our, the culture associated with our former parent, but adding to that a focus on being flat and fast and focused in how we do things, how we operate and how we go to market being really restless to drive progress for ourselves and for our customers. And then the third thing, the most recent important change for us has been our return to growth, our pivot to revenue growth in the most recent quarter delivering positive constant currency revenue growth and our outlook for this year as well to have positive revenue growth.

And so I see those as being the key changes for us and really the key sources of our progress. That’s great to hear.

Tyler, Services Team, BofA: The positive revenue growth is something obviously we’d love to see, particularly given the macro environment that we’re in right now. So I think it’d be remiss if I don’t lead with that. The volatility in the market has been pretty well known. Can you just set the scene for us, help us understand how this period is compared to prior cycles? How does Kindle differentiate itself in the market?

And what is enterprise clients partnering with

David Weisner, CFO, Kindrel: Kindle on? Yeah. So given the mission critical nature of our services, we’re significantly insulated from the macro, probably not immune to it, but very significantly insulated there. And I think our results, the strong growth we’ve had in consult, doubling of hyperscaler related revenue, the return to overall revenue growth really reflects specific growth opportunities that we’re taking advantage of as an independent company because of the role we play in our customers technology estates. And those opportunities have been so much greater that they kind of dwarf the impact that the macro has on us.

And you could see that in the 26% revenue growth, the 49%, forty six %, forty seven % signings growth that we had in Kinsult last year. And those sorts of numbers indicate how substantial the Kimbrel specific opportunities are for us. And then in terms of specifically what within that, what are the key themes that are driving growth, things that, as you say, customers are turning to us for. I put cloud migration continues to be high on that list. Modernization is a really important topic.

Cybersecurity continues to generate a significant amount of demand. We see AI related topics, including optimization, data foundations to help enable AI solutions is a hot topic. ERP related work is getting a fair amount of attention, particularly related to SAP. And I think, and then a theme that runs across a lot of work we do is our ability to provide end to end solutions. Customers really value that ability to solve things and operate things end to end rather than having a niche provider here and a niche provider there.

Our ability to bring technologies together and provide end to end solutions, I think,

Tyler, Services Team, BofA: is really helpful as well. So it sounds like the the sticky customer relationships that you have, the more mission critical work that you’re engaging with clients on sort of protects any of that downside pressure potentially from the broader macro, it seems like.

David Weisner, CFO, Kindrel: It absolutely does. What we do is inherently sticky. It’s it’s mission critical, it’s non discretionary. So that’s a source of insulation. And then on top of that, when, you know, if and when we see noise in the macro environment, we have a second layer of insulation associated with the fact that a lot of the things that we talk to customers about regularly become even more top of mind, how to be more efficient, how to optimize, how to be secure and resilient.

I think in a risk off environment, those issues, those topics become more top of mind. They get more attention. And as I said, that becomes an additional driver of how protected from what’s going on in the macro. And are those client conversations you’re having, do they vary by end market?

Tyler, Services Team, BofA: I know Qutal is incredibly well diversified when it comes to both geographic revenue growth and then also from a service mix. So just what are

David Weisner, CFO, Kindrel: you hearing from that type of level? Yeah, they do differ by end market. And at the same time, as you pointed out, we tend to be highly diversified. So the starting point I would say is the fact that mission critical is mission critical regardless of geography or vertical. And so that tends to be pretty consistent.

And we see some common themes among geographies and verticals, that there’s more tech being used to drive business outcomes. It’s a long term trend. It obviously is continuing. There’s more tech, there’s more cloud folks, tech estates, and there’s more security needs, security and resiliency, or each our own form of more cowbell, right? More tech, more cloud, more security.

And then the differences that we see among, you know, among some of the verticals that we operate in, one that I’d call it is financial services where regulatory change can have a significant impact on what people are looking at. And we certainly have seen that in Europe in particular. Security issues are getting additional attention as well. And when you have something like the power, large scale power outage in Spain, people start thinking about resiliency and realizing what some of the risks are, some of the issues around retail players in The U. K.

Are creating additional needs there. And so what we see are different issues sort of bubbling to the surface at different times for different industries and in different geographies. Interesting. So that’s very helpful.

Tyler, Services Team, BofA: So you recently provided your fiscal twenty six guidance, because you’re on the March cycle. On the 4Q call a few weeks ago, it was encouraging to see positive revenue growth. We briefly discussed that earlier. How should we be thinking about this growth as we move through fiscal twenty six? Are there certain conditions you need to see in the market to achieve that target?

Is it more blocking and tackling?

David Weisner, CFO, Kindrel: Yeah, I’d put it in the more blocking and tackling side of things. Given the nature of our business and the insulation from the macro that we have, our outlook should be pretty relevant, pretty applicable across a broad range of macro conditions this year. A substantial amount of our revenue comes from contracts that are in place at the beginning of our fiscal year, which was in April. About 75% to 80% of our revenue this year will come from those in place contracts already with only about 20% to 25% of revenue coming from in year signings. And so that gives us visibility there.

It reduces our exposure and creates a situation where, again, it’s a pretty broad range macro conditions that will allow us to achieve the numbers that we put out there, which are numbers that we’re really excited about, $725,000,000 or more of adjusted pretax income, will be an increase of $240,000,000 or more from the prior year. And we see that translating into $550,000,000 ish of adjusted free cash flow, really reflecting pre tax income minus cash taxes converting at a % to free cash flow. And with north of $05,000,000,000 of free cash flow, certainly allow us to that will certainly support and enable the capital returns to shareholders that we started with our share repurchase authorization announced in November and buying back more than $60,000,000 of stock in

Tyler, Services Team, BofA: the most recent quarter. Interesting. So in addition to the solid fiscal twenty six numbers in November, you set out some pretty lofty, but achievable medium term targets. It might be helpful just to remind us sort of what those targets are. And then if you can elaborate at all on the visibility you have, the line of

David Weisner, CFO, Kindrel: sight you have into achieving those targets. Absolutely. It’s of my favorite things to talk about because we were able in November to be differentiatingly clear about our outlook for fiscal year twenty twenty eight, which sounds like it’s a long way off, but actually for us starts just twenty two months from now. And what we laid out, referred to as our triple double single with cash flow growing to more than a billion dollars a year in fiscal twenty twenty eight. Our adjusted pre tax income more than doubling to $1,200,000,000 or more in fiscal twenty eight.

And to achieve that, those cash flows and that earnings growth, we really only need revenue to progress toward the mid single digits in fiscal twenty eight. So to your point, we feel really good about the achievability of this and the fact that those numbers represent a substantial a substantial step up from where we were in fiscal twenty five and even relative to the growth we’re forecasting for fiscal twenty six. So we’re really excited about the trajectory that we’re on. And I certainly hope that having gone out with kind of a three year out guide, people will also look at what we what we said three years ago about where we’d be now. And the fact that we very much delivered and over delivered on that.

And I hope that gives people comfort in the visibility that we have and the ability of our team to execute to continue doing we said we would do.

Tyler, Services Team, BofA: Yeah. So one trend that we’ve seen fairly consistently over the past several quarters, speaking of execution, has been the success of large deal wins that Kendall signed, signing ’26, if I’m supposed be right, with a TCV over $100,000,000 in fiscal twenty twenty five. Can you just walk us through what the competitive set looks like on those deals? What extent pricing is a factor on those deals? How does the margin profile on those compared to

David Weisner, CFO, Kindrel: the company average? Anybody want take that? Sure. Yeah. I think we’ve been successful.

We’ve been signing large deals and more large deals because we’re really good at what we do. We’re a leader in our space. As I mentioned, we’ve got technology alliances that allow us to be an objective end to end services provider. And that really is helping to drive the growth we’re seeing large signings. We had 26 deals with a total contract value of $100,000,000 last year versus 15 in the year before.

So real growth there. And I think it’s driven by the quality of service that we’re able to provide to our customers. It’s driven by the innovation that we’re bringing services as a leader in this space, we’re able to invest in that and really drive new and better ways of working. It’s driven by the trust our customers have in our ability to deliver to do for them what we say we’re going to do. And I think our track record and our incumbency are really helpful as well.

The substantial majority of our large signings come from existing customers of ours, but we also had a couple of hundred million dollar plus signings that were new logos for us as well. And that’s part of how we’re supplementing our share of wallet growth with new logo growth. And when you look at all these signings, matters, we need to be competitive, but I don’t view us as looking to win necessarily because we’re the lowest cost, lowest price provider. I look for us to win because we do mission critical work really well. And you want your mission critical, customers want their mission critical work done by somebody they can really count on.

And that’s the, that to me is the biggest driver of us winning and how we compete. Now whether we’re a point or two or three more or less expensive than someone else out there.

Tyler, Services Team, BofA: So in addition to the large deal wins that you’ve signed, signings trends more generally speaking have been pretty healthy. I mean, we’ve now seen, I think it’s three consecutive quarters with LTM book to bill above one. That’s great to see. Can you maybe just discuss sort of the mix of what the new deals contribute to that versus just renewals, what the ramp timing looks like on those deals? Just as we look through into calendar twenty five, calendar ’20 ’6, I’m just trying to get a good sense of

David Weisner, CFO, Kindrel: the We’re really excited to be delivering a to bill above one. That’s an important metric for us. And when we look at the signings, they have been really broad based across geographies, across verticals, across practices, our six practices, and also in terms of consult versus managed services, seeing really strong growth there as well. And I think the growth in consult is a really important part of our story, delivering, as I mentioned, 40 plus percent growth in consult signings, having that translate into 26% revenue growth in an environment where no one else in this space is putting up numbers like that.

And it points to the fact that we’re really helping customers address modernization and security needs that they have and increasingly helping them think about AI as well, particularly data architecture and data foundation work associated with enabling AI solutions for our customers. And I think that’s going to continue to be an important area for us. So I’m glad

Tyler, Services Team, BofA: you brought up Consult because I did want to touch on it. It’s one of your fastest growing areas of the business. The team’s been able to take share in a very competitive market, consistently putting up double digit growth. Can you just walk us through how Consult wins in the market and how we should be thinking about the Consult contribution, both to the company’s overall growth profile and the margin dynamics there?

David Weisner, CFO, Kindrel: Yeah. So working backward a little bit there, it has been a big source of growth. It’s grown from being about 10% of our business. It’s been to 20% this most recent year on its way to 25% plus. So I think we’re, it has been a driver of growth and will continue to be a driver of growth for us.

When we look back, we were under penetrated and under represented in this space and the opportunity we’re taking it. One of the opportunities we’re taking advantage of with our customers is things that we would have, should have, could have been doing for them, but for the fact that we were a captive subsidiary of a single technology provider. And having expanded our alliances, having built our capabilities, having invested in this space, we’re really well positioned to be providing advisory capabilities to our customers really related to their infrastructure, how to optimize it, how to modernize it, how to use it and set it up to meet business needs. And then after doing advisory work, we can do implementation work, which also falls under consult. And then we do the managed services work that comes out of that as well.

And what’s interesting is that with our Kindred Bridge operating platform, which is AI enabled itself, We see in our customers’ infrastructures where the challenges are, where the risks are, where the opportunities are to operate more efficiently or to have, to address various risks. And that gives rise to us being able to talk to our customers about where they should invest. Almost everyone out there, particularly large organizations have so much tech debt that this becomes like a flywheel or a cycle of as the, as an incumbent provider running their infrastructure, we have visibility to so many of these issues. We can identify what the biggest opportunities and the biggest pain points are, talk customers about that, advise them on what to do, implement it, run it, and then repeat this cycle again with what’s the biggest next remaining pain point that needs to be addressed. And I see that being a, not just a short term and mid term opportunity, but a long term opportunity as well.

Because very few folks are actually spending enough each year to reduce tech debt. You know, this cycle of addressing, you know, issues and challenges and opportunities in a large tech estate just continues to be a kind of self filling bucket, if you will.

Tyler, Services Team, BofA: Sure. So Consult twenty now coming to like 25% of total revenue. Is there a target that you have in mind as to what you think the optimal Kindred structure would look like with Consult or is it just? Yeah.

David Weisner, CFO, Kindrel: Think managed services running infrastructures is going to continue to be a very significant substantial portion of what we do. But the, I think the given the progress from 10% to 20% of our revenues coming from Consult already, we feel really good about the trajectory to get to 25% plus. I wouldn’t, I don’t see a situation where it’s, you know, where somehow, you know, it’s becoming like half of what we do, but the opportunity for it to be north of 25% as we continue to build out our capabilities and our track record is absolutely there. And how should we think about consult growth with respect to

Tyler, Services Team, BofA: the mid single digit medium term outlook?

David Weisner, CFO, Kindrel: Yeah. So we see consult continuing for the intermediate term to be a double digit grower. And so at 20 to 25% of our revenue, that creates the opportunity for it to be contributing two or three, maybe even four points of growth to that. And what that, the corollary or the algebra associated with that is really that we can get to mid single digit growth with managed services being a 2% or 3% grower. I think there is upside beyond that, but we don’t need heroic growth in managed services to achieve the targets we’ve laid out for revenue growth and earnings growth and margin expansion and free cash flow growth.

And that’s really exciting. We’ll look to grow revenue as quickly and rapidly as we can. But I think it’s really important that the fiscal twenty twenty targets that we’ve laid out, don’t require growth that’s way out of line with what portions of our business, particularly consult and hyperscaler related work have been contributing.

Tyler, Services Team, BofA: So within that seventy five percent, that’s the matter services component. How are you thinking about the service level growth profile of the business? Are you expecting, obviously data and AI should probably be one of the larger, faster growing businesses, but just when we’re sort of decompartmentalizing the components within managed services, because it’s such a key integral component of Kindle, How should

David Weisner, CFO, Kindrel: we be thinking about that? Yeah. So the three or four pieces that I would highlight apps data, our practices apps, data and AI, that’s about managing applications and architecting data, establishing data foundations to enable AI. I see that as a those areas are significant growth areas for us. Security and resiliency is going to continue to be a hot topic.

And I see that continuing for the foreseeable future. And as a result, that’s a meaningful growth opportunity for us. Cloud, cloud migration, cloud optimization related work and just the role that cloud is playing in our company’s infrastructures that will continue to represent a growth opportunity for us as well. So those are key elements among our practices. And then as we talked about, Consult is going to continue to be a driver our practices.

Even in areas like core enterprise and mainframe related work,

Tyler, Services Team, BofA: we see opportunities for consult to be a driver of growth. So do we need to see meaningful growth in the core mainframe component of the business to reach the mid single digit or is that?

David Weisner, CFO, Kindrel: We don’t. We view managed services and cores probably kind of a stable ish business, but there are consult growth opportunities associated with that. And so I would expect the growth in that area to come from more consult related work. And given our position as far and away the largest operators, largest managers of mainframes in the world with half of the outsourced managed mainframes are ours, that the role we can play in consulting there and our ability to learn really quickly from what we’re doing in one or two places and applying that to other geographies, other customers, other verticals, or even across a vertical becomes really powerful. Yeah, that’s interesting.

So you

Tyler, Services Team, BofA: can apply the consulting business on top of core, on top of the matter services component. That seems to be interesting.

David Weisner, CFO, Kindrel: Absolutely. And this is where our leadership position and our incumbency position in so many large enterprises combine to be a really powerful tool, again, really powerful lever for us to drive growth. Yeah, that’s great.

Tyler, Services Team, BofA: And I know we’re running short on time, so I want to briefly touch on the IBM relationship. It’s been hot topic for the last couple of months for sure. I think you did a nice job on the earnings call sort of clarifying IBM as it relates to software costs, but it might be helpful just to gain a little bit more color on what those costs were, what the sizing of it is and how we should be thinking about that IBM relationship on a go forward basis.

David Weisner, CFO, Kindrel: Yeah, IBM is an important partner of ours and that’s been true since our spinoff. And what we, one of the biggest elements of the vendor relationship we have with IBM is that we procure roughly $2,000,000,000 of software from our former parent each year. And the construct is as a with that is that for the last several years, our annual costs were increasing $200,000,000 a year under the construct that was put in place at the time of the spin. We’re nearing the end of that now. We have our last three fiscal quarters of it this year.

So there’s $150,000,000 pre wired Kindrel specific increase that we have to overcome this year, similar to the last few years. But this year is the end of it. And after that, the only price increases we’ll face are the ones that IBM introduces to its customers broadly. And over the last few years, we’ve put more and more protections in place in our customer contracts. So it really reduces our exposure to that.

And we won’t be facing that same headwind going forward, which

Tyler, Services Team, BofA: is exciting. Yeah, so don’t expect to step up in costs as we go forward. It’s sort of stay as she That’s right. Great. Well, I appreciate it.

Thank you very much for taking the time. I know we’re out. So thanks a lot, everyone, for joining us. And thanks again, David. Thanks for having us.

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