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: 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 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.