Kyndryl Holdings, Inc.

Good day and thank you for standing by. Welcome to the Kindrel third quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during this session you will need to press star 1 1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lori Chapman, Head of Investor Relations. Ma'am, please go ahead.

Good morning, everyone, and welcome to Kindrel's earnings call for the third quarter ended December 31st, 2024. Before we begin, I'd like to remind you that our remarks today will include forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These forward-looking statements speak only to our expectations as of today. For more details on some of these risks, please see the risk factors section of our annual report on Form 10-K for the year ended March 31st, 2024. In today's remarks, we'll also refer to certain non-GAAP financial metrics, corresponding GAAP metrics and a reconciliation of non-GAAP metrics to GAAP metrics for historical periods are provided in the presentation materials for today's event, which are available on our website at investors.kindle.com. With me here are Kindle's Chairman and Chief Executive Officer, Martin Schroeder, and Kindle's Chief Financial Officer, David Weichner. Following our prepared remarks, we'll hold a Q&A session. I'd now like to turn the call over to Martin. Martin?

Thank you, Lori, and thanks to each of you for joining us. On today's call, I'll discuss our recent progress and execution, the momentum that our capabilities are generating for us in the marketplace, and the growth strategy we outlined at our investor day in November. David will then share more detail on our recent financial results and our increased fiscal 2025 earnings outlook. We delivered another strong quarter for signings, margins, and earnings growth. Signings grew year over year for the fifth consecutive quarter and are up 31% to $16.3 billion over the last 12 months. Adjusted pre-tax margins increased substantially compared to last year, and we generated more than $170 million of adjusted free cash flow in the quarter. Once again, our performance was led by double-digit revenue growth in Kindle Consult and demand for modernization, cloud security, and AI services. Hyperscaler-related revenue surpassed $300 million in the quarter, tracking ahead of our nearly $1 billion full-year target. Our three A's initiatives, alliances, accounts, and advanced delivery continue to generate incremental signings, revenue, and earnings. As David will discuss, the projected pre-tax margins on our signings continue to be in the high single digits, which is a leading indicator of our future earnings and cash flow trajectory. In short, it was another great quarter of strong execution by our team, driving substantial progress toward our near-term and longer-term goals. In addition, we began to buy back stock in the quarter under the share or purchase authorization we announced in November. As an independent company, we've leveraged our global scale and our expertise in mission-critical work and our global scale to be a vital and trusted partner for our customers' current and future technology needs. We've done this by investing in several key areas, capturing data about how complex IT systems and networks operate and using that data to drive learning. concentrating this world-class intellectual property in Kindrel Bridge, which is our innovation-rich AI-enabled operating platform, to drive insights, automation, optimization, and efficiency, and building alliances with leading technology providers that allows us to offer hybrid multi-vendor solutions to our customers. As a result, we're able to seize opportunities that emerge from a variety of reasons, whether they relate to modernization, complex cloud migration, cybersecurity incidents, regulatory changes, disruption to peer companies, or the integration of new technologies like GenAI. Existing and new customers continue to partner with Kindrel for our capabilities and for innovation, efficiency through automation, and actionable insights from Kindrel Bridge. For example, through our Skytap acquisition and our alliance with Microsoft Azure, we're seeing additional opportunities to deliver cloud migration services. We're able to bring our mainframe modernization and application services skills and hyperscaler alliances together to migrate, manage, optimize, and secure our customers' IT environments across multiple cloud platforms, including AWS and Google, in addition to Azure. Separately, we continue to collaborate with our enterprise software partners, including widely used platforms like Dynatrace, Oracle, Palo Alto Networks, Rubrik, and SAP to support our customers' IT needs. As a testament to the Kindrel way, we continue to achieve top-tier customer satisfaction scores. We've had annual customer retention in the upper 90s over the last three years, and we've added more than 300 new customers over that period. In fact, as many of you heard me say, we're uniquely positioned to address secular IT trends like cloud migration, increasingly hybrid IT environments, technology skill shortages, cybersecurity risks, and the adoption of artificial intelligence. And these trends are creating new opportunities for us. Over the last 12 months, Kindrel Consult revenues are up 18% and Kindrel Consult signings are up 45%. Consult is now a $3 billion revenue stream for us with above average margins and a runway for future growth. Many of you ask what role we play for our customers in AI. As the world's largest managed infrastructure services provider with 30 plus years managing complex mission critical systems, we operate at the center of our customers' AI investments with a distinctive perspective. Customers know that their AI is only going to be as good as their data, so we use our data expertise to support them in establishing a reliable digital foundation to enable AI at scale and capitalize on its benefits. We're collaborating with our customers and our alliance partners to address barriers to AI adoption, such as data privacy, security, governance, and skills. And we're facilitating successful deployment of AI at scale, including the development of secure and responsible AI governance models. We're also working with customers in multiple sectors on projects across the AI spectrum, including traditional AI, generative AI, and agentic AI, both in the cloud and on legacy platforms. As an example, in November, we announced the launch of a dedicated AI private cloud in Japan, leveraging the Dell AI factory with NVIDIA to provide a controlled, secure, and sovereign environment where enterprises can develop, test, and plan the implementation of AI-powered applications and solutions. and we're moving quickly to work with customers in other countries that want their own country-specific AI environments. Across virtually all industries, the modernization of IT systems is not a discretionary item, but front and center for CEOs and their boards in an increasingly digital world. In financial services, we're working with banks, insurance companies, and others to modernize IT estates, reduce operational risk, manage technical debt, enable the use of AI, and ensure compliance with regulatory changes such as DORA. In Latin America, for example, we recently announced a five-year, $500 million-plus contract with a leading bank where we're partnering with Microsoft to modernize the bank's IT systems and help consumers gain greater access to digital banking services. And in Japan, we've not only extended our mission-critical services contract with Taiju Life, a major life insurer, until December 2029, We'll now also support the operation of its next generation systems and promote IT modernization to strengthen the company's operations. In retail and travel, we're seeing increased demand to enable the use of AI and enhance customers' digital experiences, security, and data privacy. We're working with one of the largest vehicle rental companies in the world to modernize its digital platforms, enhance its booking and fleet management systems, and ensure a secure and resilient online payment experience for their consumers. In tech, media, and telecom, we're working with organizations to modernize their IT estates, enhance security and resiliency, and deploy new applications and services to consumers. In Spain, for example, a leading telecommunications firm announced that it signed a six-year agreement with Kindrel to modernize its core IT environment. This will enable mass Orange employees, collaborators, and customers to develop a new generation of applications and services on a flexible, secure platform. And in the UK, we're partnering with WPP to create a modern digital workplace that enhances creativity and connectivity across WPP's global network using hybrid cloud and AI technologies. We're also expanding our scope with industrial companies, particularly manufacturing, logistics, and energy firms. For example, we recently expanded our scope of work and significantly increased our annual revenue with a large aerospace and defense company. We've been managing their mission critical operations for more than a decade. Our delivery capabilities, service excellence, and strong partnerships were instrumental in allowing us to extend our existing relationship in several areas and displace an incumbent provider in several others. Under our now expanded contract, our Kindrel Consult team will develop and implement a new architecture designed to modernize resiliency and backup solutions and provide new cloud data security network and other services. With the integration of Kindrel Bridge, we're enabling automation and analytics and driving efficiencies in our customers' operations. An important benefit of our leadership and scale is our ability to bring new Kindrel perspectives and insights to our customers in the broader IT market. Insights from Kindrel Bridge are helping customers prioritize their IT investments every day. In addition, we recently published our inaugural Kindrel Readiness Report, which explored how businesses' IT and talent can help or hinder their progress. and how ready businesses are for future risks and opportunities. In December, we published a Japan-specific report with data and insights relevant to that market. And just this past quarter, we launched the Kindrel Institute, which provides a platform for Kindrel's thought leaders and external experts from industry, academia, and startups to offer new perspectives and research on major IT challenges. We're looking to amplify independent voices and convene diverse perspectives to drive an impactful dialogue on topics at the intersection of technology and business. And in December, we published our first articles on the theme of readiness as it relates to digital trade and AI. These are examples of how we compare Kindrel perspectives with what we're seeing in the market to offer valuable insights. As we've highlighted before, our evolving business mix, where we're focusing on higher value services for our customers, is driving increased profitability and fueling future top-line growth. We have confidence in our ability to continue to set ambitious goals and achieve them. And with that in mind, in November, we introduced our medium-term outlook with a triple-double-single mnemonic. We're projecting to triple our adjusted free cash flow in fiscal 2028 compared to fiscal 2025 to roughly $1 billion. We're projected to more than double our adjusted pretax income to at least $1.2 billion over that same time period. And we project that we only need revenue reach mid-single-digit annual growth in fiscal 2028 and beyond to deliver those goals. With strong conversion of our earnings to free cash flow, we'll balance our approach to capital allocation by investing in organic growth opportunities and occasional tuck-in acquisitions, and at the same time return capital to shareholders through our share repurchase program. Because of our recognized industry leadership, expertise, scale, and financial strength, customers trust us to manage their most mission-critical systems. And in the last three years, we've become an integral part of the broad IT ecosystem that is relevant to our customers. The mission-critical infrastructure services we provide are our foundation for sustained profitable growth. Our focus on IT infrastructure, our ability to leverage technologies from multiple sources, and the operational insights from Kindrel Bridge are what give us the credibility and access to move into more consulting engagements and expand our presence through customers' tech stacks. With our higher value service offerings, automation and AI, we're significantly expanding our margin profile with the goal of reaching high single digit adjusted pre-tax margins and converting those earnings into cash flow. And this framework gives us the flexibility to return capital to shareholders through our buyback program while maintaining the investment grade ratings that are important to our customers. We're enthusiastic about returning to revenue growth this quarter and closing out our fiscal year strong. At the same time, our focus is on taking the work we've done and the progress we've delivered to the next level, account by account, team by team, across delivery, Kindrel Consult, and our practices to deliver sustainable, profitable growth over time. We will continue to execute, delivering innovative services for our customers, growing our share of wallet with existing accounts, and, of course, winning new business as well. Now, with that, David will take you through our results and our outlook.