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SEGMENTS
6 Months Ended
Sep. 30, 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: This reportable segment is comprised of Kyndryl’s operations in the United States.

Japan: This reportable segment is comprised of Kyndryl’s operations in Japan.

Principal Markets: This reportable segment represents the aggregation of our operations in Australia / New Zealand, Canada, France, Germany, India, Italy, Spain / Portugal, and the United Kingdom / Ireland.

Strategic Markets: This reportable segment is comprised of our operations in all other countries in which we operate.

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, 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 September 30,

Six Months Ended September 30,

(Dollars in millions)

    

2023

    

2022

    

2023

    

2022

Revenue

United States

$

1,108

$

1,149

$

2,272

$

2,317

Japan

569

614

1,180

1,249

Principal Markets

1,465

1,472

2,949

2,988

Strategic Markets

930

944

1,865

1,914

Total revenue

$

4,073

$

4,179

$

8,266

$

8,467

Segment adjusted EBITDA

United States

$

176

$

167

$

412

$

367

Japan

84

113

184

228

Principal Markets

185

57

352

157

Strategic Markets

150

111

283

207

Total segment adjusted EBITDA

$

596

$

448

$

1,232

$

959

The following table reconciles segment adjusted EBITDA to consolidated pretax income (loss):

Three Months Ended September 30,

Six Months Ended September 30,

(Dollars in millions)

    

2023

    

2022

    

2023

    

2022

Segment adjusted EBITDA

$

596

$

448

$

1,232

$

959

Workforce rebalancing charges

(39)

(3)

(97)

(6)

Charges related to ceasing to use leased/fixed assets and lease terminations

(10)

Transaction-related costs

(48)

(68)

(89)

(171)

Stock-based compensation expense

(25)

(28)

(48)

(54)

Interest expense

(31)

(19)

(61)

(38)

Depreciation of property, equipment and capitalized software

(220)

(221)

(431)

(449)

Amortization expense

(313)

(301)

(646)

(609)

Corporate expense not allocated to the segments

(21)

(20)

(45)

(40)

Other adjustments*

(7)

(9)

(23)

(18)

Pretax income (loss)

$

(109)

$

(219)

$

(218)

$

(425)

*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 above.