And welcome to Kyndryl's earnings call for the fourth quarter and fiscal year ended 03/31/2025. Before we begin, I'd like to remind you that our remarks today 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 ks for the year ended 03/31/2024. Also, in today's remarks, we 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.kindryl.com. With me for today's call are Kyndryl's Chairman and Chief Executive Officer, Martin Schroeder. Kyndryl's Chief Financial Officer, David Weisner. Following our prepared remarks, we will hold a Q and A session. I'd now like to turn the call over to Martin. Martin?

Thank you, Laurie. And thanks to each of you for joining us.

Kyndryl has been an independent company for over three years now, and I am so proud of what our global team continues to accomplish. We've solidified our market leadership position in mission critical technology services, and we've been executing a powerful and highly effective strategy centered around building our capabilities, skills, partnerships and innovation to drive sustainable growth. With relentless focus and dedication to our customers, our people have propelled our success will continue to do so. So on today's call, we'll focus on how we'll accelerate our momentum going forward, But first, I want to share the highlights from fiscal twenty twenty five. Simply put, we had another great year. Signees were up 48% in constant currency to more than $18,000,000,000 Earnings increased $317,000,000 to $482,000,000 and adjusted pretax income We generated $446,000,000 in adjusted free cash flow a 53% increase from last year. And in the fourth quarter, we achieved a significant milestone by returning our top line to positive constant currency growth. Kyndryl Consult continued to deliver above market growth with revenue increasing more than 25% this year and Kyndryl Bridge continues to enhance the value we deliver to our customers through actionable insights. Our 3A initiatives have transformed our company company and we once again surpassed our full year targets for each of them.

Among our alliances, hyperscaler related revenue more than doubled this year to $1,200,000,000 We reached $775,000,000 in annual savings from advanced delivery and another $900,000,000 from our accounts initiative. As we enter a new fiscal year for Kyndryl, our three As have shifted from being initiatives that drove our turnaround to pillars of our profitable growth strategy. In fact, our fiscal twenty twenty five results not only exceeded the earnings cash flow in 3As projections we laid out at beginning of the year, they also approved the investment thesis for Kyndryl's evolution that we laid out three years ago. We are leaders in our space. We are important to our customers We can execute on our strategy that is unique to us We can grow we are profitable, and we generate cash. In fiscal twenty twenty six, we're expecting another year of substantial earnings and cash flow growth as well as positive constant currency revenue growth. And as I'll discuss in a few minutes, our outlook for this year is consistent with the financial objectives for fiscal twenty twenty eight that we laid out at our Investor Day last November. As many of you heard me say before, we are uniquely positioned to address the secular IT trends like cloud migration increasingly hybrid IT environments, cybersecurity risks, and the adoption of AI.

Our approach to designing, optimizing, running, and mission critical hybrid IT estates is driving increased demand for our services. This is reflected in the strong signings growth we delivered in fiscal twenty twenty five which brought our full year revenue book to bill to 1.2 and included consult signings growth that was right in line with our aggregate signings growth. We've previously highlighted how our freedom of action as an independent company has unlocked long term growth opportunities that were unique to Kyndryl and our signings growth in fiscal twenty twenty five is a powerful evidence of that. Moreover, having our revenue book to bill ratio above one foreshadows future revenue growth from committed contracts since our signings typically convert into revenue over a three to five year period. In fact, our signings growth has been significant and broad based across a range of geographies vertical markets, and our practices. We secured 55 contracts valued at over $50,000,000 in fiscal twenty twenty five, an increase from 40 such contracts in the prior year. These larger deals accounted for nearly 10,000,000,000 of total signings and span 22 countries, reflecting the important work we're doing for blue chip customers all around the world.

Nearly half of these contracts were over $100,000,000 In the fourth quarter alone, we signed a large deal that will generate $1,000,000,000 of revenue for us over the next six years with a financial services firm that we've been serving for a long time. Going forward, we'll be modernizing and transforming the firm's IT estate implementing AI technology at scale with Kyndryl Bridge, And at the same time, we'll continue supporting their core technology, providing security and resiliency and driving compliance with regulatory requirements. We also displaced an incumbent to win a new logo contract with a European fintech to build the new hybrid IT infrastructure platform and provide cloud migration cybersecurity, resiliency, and regulatory compliance services. And with one of our large online retail customers, we signed new scope and extended our contract for the next five years, We're now providing application management services and software engineering development to deliver innovation that complements the modernization work we were already doing supported by Kyndryl Bridge. What's key here is the pattern of leveraging our expanded capabilities partnerships, strong customer relationships, and great reputation to win more scope and higher value opportunities. In fact, under each of these three new contracts, we're providing hyperscaler related services.

This pattern highlights Kyndryl's position as a trusted advisor for IT services embrace for how we can help customers operate in the present, and for how we can help organizations modernize for the future. Our expanding scope not only strengthens our customers' technology operations, it also drives revenue and earnings growth for us. This share of wallet opportunity is so strategically important to us that I want to drill down for a moment into one more example. Another significant signing this quarter was in the healthcare sector. We've been partnering with this US healthcare provider for years and they were ready to invest in more innovation. So together with one of our hyperscaler partners and leveraging insights from Kyndryl Bridge, we're co developing a comprehensive solution designed to transform and optimize their IT environment. This entails cloud migration, system consolidation, data and application modernization all of which will enhance patient experience and practitioner efficacy. As we design, implement, and manage this new hybrid IT estate, we'll focus on optimization, agility, and ongoing innovation. And as a result of the increased scale and scope of services, our annual revenue with this customer will grow by 33% over the next five years.

The takeaway here is that Kyndryl, as a deeply trusted scaled services provider with differentiated capabilities across hybrid IT landscapes, can help large enterprises modernize in the cloud. And we can do this in ways that present significant growth opportunities for us. Kyndryl Consult has also been a key driver of our signing strength and our return to revenue growth. In fiscal twenty twenty five, Consult signings grew 50% in constant currency and accounted for 22% of our total signings. This is our third consecutive year of above market Kyndryl Consult signings growth and as I mentioned, we saw that convert into 29% constant currency revenue growth this year. Many of our customer engagements are focused on putting the right work on the right platform, cloud migration, optimization, addressing tech debt, and more recently, management services. With our expanded capabilities and heritage in mission critical systems and data management, we're very well positioned to build robust data foundations for the AI enabled future through project based consult engagements. We're also seeing demand in security and resiliency leveraging our capabilities in data discovery, data integrity, AI assessment and governance programs. These trends are driving double digit signings growth across all six of our practices.

And they will continue to be meaningful growth opportunities, especially since 95 of a company's are adopting AI, but nearly two thirds haven't yet implemented an AI governance framework. So because of our strong fiscal twenty twenty five results and expanding capabilities, we're entering our new fiscal year with a lot of momentum. And we're laser focused on driving profitable growth delivering value to our customers, The strategy we outlined three years ago continues to resonate and our competitive advantages are powering multiple avenues for our growth. Increasing scope with existing customers and winning new logos. Providing industry leading managed services and growing our Kyndryl Consult Advisory revenues and expanding our capabilities through our practices with our strategic alliances and with Kyndryl Bridge. Our position is a vital partner to our customers in both running and transforming their mission critical technology estates is very powerful And through our six global practices in Kyndryl Consult, we'll continue to build new capabilities and skills that our customers need to advance their business objectives. Our alliances with hyperscalers and leading technology providers are extensive and continually expanding. And our AI powered Kyndryl Bridge operating platform distinguishes us from our peers powers service excellence, and drives efficiency.

This combination of leading expertise, strategic alliances, and technological innovation opens new doors with existing customers and attracts new customers creating incremental growth opportunities for us and ensuring that we remain a critical part of our customers' IT evolution. And this combination is what will fuel our top line growth in fiscal twenty twenty six and beyond. I want to reiterate the targets we set for fiscal twenty twenty eight at our Investor Day in November, expect to deliver more than $1,000,000,000 in adjusted free cash flow. We expect to deliver more than $1.2 in adjusted pretax income. And to achieve these earnings and cash flow targets, we only need to reach mid single digit revenue growth that will progress toward by fiscal twenty twenty eight. With strong conversion of 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 returning capital to shareholders through our share repurchase program. It should be clear that the fiscal twenty twenty six outlook we published yesterday is consistent with the path we previously laid out for our growth from fiscal twenty twenty five to fiscal twenty twenty eight.

And as David will discuss in fiscal twenty twenty six, we expect to generate approximately $550,000,000 in adjusted free cash flow. We'll grow our pre tax earnings by more than $240,000,000 to at least $725,000,000 and will generate positive constant currency revenue growth. This fiscal year, two thirds of our P and L will be derived from our higher margin post spin signings, And while we understand that it's a challenging environment in which to provide guidance given the heightened macro uncertainty since our earnings call, let's remember though there are always reasons for companies to delay investment decisions. But the nature of our business, providing mission critical services under multiyear contracts, means that we are significantly insulated from, although not immune, to macro factors. And enterprise tech debt isn't going away because of potential tariffs or other geoeconomic factors. Our Q4 and fiscal twenty twenty five signings growth is a testament to the unique Kyndryl specific opportunities available to us. Our technology services are essential and nondiscretionary, and we provide efficiency, resiliency, and innovation to our customers. As a result, while we'll continue to monitor economic and geopolitical development carefully, our significant insulation for macro factors gives us confidence in the outlook we provided and in our longer term trajectory.

With that, I'd like to pass the call over to David. Thanks, Martin, and hello, everyone. Today, I'd like to discuss our fourth quarter results.

Our continued progress on our three A's initiatives, the solid margins at which we're signing customer contracts, our outlook for fiscal year twenty twenty six. Which began on April 1. We're proud of finishing strong in fiscal twenty twenty five, and we're enthusiastic about how our market leadership, strategy and capabilities have positioned Kyndryl for profitable growth in fiscal twenty twenty six, and beyond. Our fourth quarter results reflect strong operational execution and continued progress on our key initiatives. In the quarter, revenue totaled $3,800,000,000 a 1.3% year over year increase in constant currency. Returning to positive constant currency revenue growth is an important milestone for us. Key drivers of our growth were Kyndryl Consult, revenues grew 45% in the quarter. And hyperscaler related work where our revenues more than doubled. Our $5,500,000,000 of signings made Q4 our sixth consecutive quarter of signings growth. And brings our full year signings growth to 46%. Our strength continues to be broad based, across our practices and geographic segments, Kyndryl Consult signings growing at the same rate as our aggregate signings growth. Our fourth quarter adjusted EBITDA was $698,000,000 and our adjusted EBITDA margin was 18.4%. Up three seventy basis points year over year.

Adjusted pretax income was $185,000,000 six times what it was a year earlier. Our adjusted pretax margin increased four ten basis points year over year. Included in our $185,000,000 of adjusted pretax income, was $23,000,000 in workforce rebalancing charges and the contractually committed $50,000,000 year over year increase in IBM software costs that we've discussed on prior calls. As a result, our underlying operational momentum is even stronger than the $150,000,000 plus increase in adjusted pretax income we reported in Q4. Through our alliances we generated $378,000,000 in hyperscaler related revenue in the fourth quarter. Our $1,200,000,000 full year total was more than double the prior year level, and significantly exceeded our target of nearly $1,000,000,000 of hyperscaler related revenue. Through our advanced delivery initiative powered by Kyndryl Bridge, we continue to drive automation throughout our delivery operations. Incorporate more technology into our offerings, reduce our costs, and increase our already strong service levels. To date, we've been able to free up more than 13,000 delivery professionals to address new revenue opportunities and backfill attrition. This is now worth a cumulative $775,000,000 a year to us surpassing our fiscal 2025 target. Our accounts initiative continues to remediate elements of contract we inherited with substandard margins.

In the fourth quarter, we increased the cumulative annualized profit from our focus accounts by $75,000,000 to 900,000,000. This also topped our target for the year. The concepts underlying the three As continue to be an important source of margin expansion and value creation for us. And are now integral parts of our operational and go to market approach. We're more confident than ever that the benefits from our three A's initiatives will meet and ultimately exceed the targets we laid out in early twenty twenty two and raised in early twenty twenty four. For fiscal year twenty five as a whole, we generated $15,100,000,000 of revenue Our adjusted EBITDA was $2,500,000,000 and our adjusted pretax income was $482,000,000 representing a $317,000,000 or 192% increase from the prior year. We expanded our adjusted EBITDA margin by 200 basis points and our adjusted pretax margin by two twenty basis points year over year. Increases that represent continued progress on our path to high single digit adjusted pretax margins. Our financial progress reflects our strategic achievements, leveraging technology alliances, stepping away from empty calorie revenues, fixing focus accounts, growing the consult portion of our business, driving efficiency throughout our operations, and positioning Kyndryl to meet our customers future IT needs.

Our performance in fiscal twenty twenty five gives us strong momentum. As we move forward. In fact, we continue to position Kyndryl for future revenue, margin and profit growth, not only by growing signings this past quarter and year, but also by commanding attractive margins on our signings. Throughout fiscal twenty twenty five, just like fiscal twenty twenty three and '24, we signed contracts with projected gross margins in the mid-20s and projected pretax margins in the very high single digits. Therefore, as our business mix increasingly shifts toward more post spin contracts, you'll see significant margin expansion in our reported results. We've again included a gross profit book to bill chart that accentuates how we've been creating and capturing value in our business. With an average projected gross margin of 26%, on our $18,200,000,000 in signings over the last year, we've added over $4,500,000,000 of projected gross profit to our backlog. Over the same period of time, we've reported gross profit of $3,100,000,000. This means we've been adding significantly more gross profit to our backlog than our contracted book of business has been producing in our P and L. Having a gross profit book to bill ratio above one at 1.5 over the latest twelve months.

Is a key measure of how we're growing what matters most. The expected future profit from committed contracts. And with our gross profit book to bill ratio having been consistently above one, that means that we've been consistently growing our gross profit backlog over the last three years. Turning to our cash flow and balance sheet, Our adjusted free cash flow was $446,000,000 for the year, and our net capital expenditures were $522,000,000 We provided a bridge from our adjusted pretax income to our free cash flow as well as a bridge from our adjusted EBITDA to our free cash flow, the appendix. Under the share repurchase authorization we announced in late November, we bought back 1,800,000.0 shares of our common stock in the quarter, at a cost of $64,000,000 As of March 31, we have $2.00 $6,000,000 of repurchase capacity remaining under our share repurchase authorization. Our financial position remains strong. Our cash balance was $1,800,000,000. Our cash combined with available debt capacity under committed borrowing facilities gave us nearly $5,000,000,000 of liquidity at quarter end. Our debt maturities are well laddered from late twenty twenty six to 02/1941. We had no borrowings outstanding under our revolving credit facility, and our net debt at quarter end was only $1,400,000,000 Our target has been to keep net leverage below one times adjusted EBITDA and we ended the quarter well within our target range.

At 0.6 times. We are rated investment grade by Moody's, Fitch, and S and P. We continue to monitor economic and geopolitical development. Our direct exposure to US federal government spending is extremely limited, with less than half of 1% of our revenue coming from US government contracts. Our operations in China represent only about 1% of our revenue and our costs. And our direct exposure to various tariffs that had been proposed is quite limited. On capital allocation, our top priorities are to maintain strong liquidity, remain investment grade, reinvest in our business, and regularly return capital to shareholders. As we look ahead to fiscal twenty twenty six, our core financial goals are to continue to grow our revenues expand our margins, increase our earnings and generate free cash flow. Our outlook assumes that revenue will grow 1% in constant currency. Within that, we expect hyperscaler related revenue to reach $1,800,000,000 or more, a 50% year over year increase. We expect Kyndryl Consult revenue to again grow double digits, and we expect constant currency revenue growth each quarter to be about the full year rate. We estimate that our adjusted EBITDA margin in fiscal twenty twenty six will be approximately 18%, an increase of roughly 130 basis points versus fiscal twenty five.

And our outlook for adjusted pretax income is at least $725,000,000 This means growing our adjusted pretax income by at least $243,000,000 and increasing our adjusted pretax margin by at least 150 basis points year over year. That means we're calling for a third straight year of the strong roughly two point margin expansion we delivered in fiscal twenty twenty four, and fiscal twenty twenty five. And it keeps us right on track to generate high single digit adjusted pre tax margins in fiscal twenty twenty seven and fiscal twenty twenty eight. Exchange rates are currently expected to have a minimal impact on adjusted EBITDA and adjusted pretax income in fiscal 'twenty six compared to fiscal 'twenty five. Also, this should be the last year in which we're talking about IBM software cost increases. Our fiscal twenty twenty six outlook includes the $150,000,000 Kyndryl specific IBM software cost increase that we've previously discussed. And going forward, we don't expect any outsized cost moves related to our former parent. For two reasons. First, beginning in January, it will be the annual inflationary increases that IBM poses on the entire market that determine our pricing. And second, we increasingly have provisions in our customer contracts that protect us.

We're excited to be putting this behind us. We continue to see opportunities to drive efficiencies in our operations, both through advanced delivery, and in SG and A functions. Looking at the first quarter in particular, expecting our adjusted pretax income to be 30% to 50% higher than the $92,000,000 we reported in last year's first quarter. On the topic of cash flow, for the year as a whole, we project roughly $675,000,000 of net capital expenditures in fiscal twenty twenty six, and about $675,000,000 of depreciation expense. We expect to pay roughly $175,000,000 in cash tax And we're forecasting roughly 100% conversion of adjusted pretax income less cash taxes into free cash flow. Implying adjusted free cash flow of approximately $550,000,000 From a timing perspective, and similar to last year, Q1 will be a significant user of cash due to annual software and incentive payments. In subsequent quarters will be more favorable. The difference between our adjusted free cash flow and GAAP cash from operating activities less net CapEx was only $25,000,000 in the last six months of fiscal twenty twenty five. And we expect the adjustments included in our calculation of cash flow to remain modest. Over the medium term, we remain committed to delivering significant margin expansion and generating free cash flow growth.

We have a solid game plan to drive our strategic progress And this game plan starts with the steps we've already taken to expand our technology alliances manage our costs, and earn a return on all of our revenues. So, in fiscal twenty twenty five, we said what we were going to do and we delivered that and more. This gives us financial momentum as we move into our fiscal twenty twenty six. Even more important though, is the momentum we have as a leading provider of mission critical technology services. Driving thought leadership in our space, growing our Kyndryl Consult presence rapidly, delivering modern hybrid IT solutions to our customers, and operating at the heart of secular trends that will fuel customer demand for our services for the foreseeable future. And over the medium term, we remain committed to delivering significant margin expansion and generating free cash flow growth. So let me end by again thanking the tens of thousands of Kyndryl's around the world who are powering our progress. With that, Martin and I would be pleased to take your questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you would need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Martin, are you ready for your first question?

Yes, sir. Thank you, operator.

Alright. One moment for our first question comes from Jamie Friedman. From Susquehanna. Please go ahead.

Hi. Good morning, and congratulations on year well done. So Martin, my first question is for you. I was wondering how you think of the accomplishments in '25 and your preliminary view of the positioning of the company mindshare and Technology in 2026. How does that set you up for the midterm cadence that you shared at the Analyst Day?

Yeah, good. Well, thank you, Jamie. Thanks for joining and thanks for the nice comments on the year we just finished. If I think back to three and a half years ago when we laid out, I think, a very clear strategy that was unique to us with very clear signposts on how to follow our progress. I think last year was reflection of another great step, another great example of execution on a strategy that will continue to carry us into the medium term. Look, medium term goals that we laid out, I think, are what we're all focused on. And this year, this fiscal year that we just guided towards is another good step toward that. But over the long term, what we've all been working on and what we've been talking about for three and a half years I think, again, it's really becoming evident now is [indiscernible] the power of this business model, given the role we play in our customers' environments, the visibility we have to the future is starting to become evident too. Three and half years ago, obviously, the world has changed. In three and a half years, the world will be different again.

But But we have been executing and delivering in pretty much exactly what we said we would get done. And I think the read through is that we do kind of control our own destiny here. Not that we're not affected by the outside world, but as long as we continue to invest in innovation, as long as we continue to invest in capabilities, then our ability to not only see the future, but to deliver that future to our investors should be quite evident as well over the last few years. And then I point to this team's strong execution. So we're in a great space with a great business model. We have control. We'll continue to invest. This is another big year of investment for us, which which means we control our own destiny through the midterm again. And this team has demonstrated an ability to execute. So I think we're very well positioned to deliver everything that we've talked about back in November and last year and the last quarter were evidence of how we've continued to do that.

And then for my follow-up, I'd be interested in your perspective on where you are with the journey with the focus accounts Are you closer to the the middle or the end at this point? And what have you learned from the kind of restructuring or the conversations at least, from those accounts that that you know, got you here since the separation three and a half years ago?

Yeah, yeah. Thanks, Jamie. So look, the view we had when we started this was that the work we do is really important, that we're really good at it. And if we could engage with our customer base, we could reimagine these relationships at quite frankly, an accelerated pace than than what we were faced with if we just looked at what the backlog had. And I think that's what we we've proven now because of the quality of what we bring the role we play in our customers' environments, our customers have been really willing provided we showed up with some innovation, with some new ideas, with some ways to address their challenges of the future, that they would be keen to and willing to reimagine how these relationships worked. And I think that's what my observation over the last three and half years, the teams have done an amazing job of of doing that and says a lot about the quality of the talent and the skills we have. It says a lot about our ability to to discern the future for our customers and and bring them on this journey with us. And it says a lot about us as an organization and our focus on the bottom line and capture the value we're creating.

So when we started this three and a half years ago, we said it would be worth 800,000,000 over the medium term. We've obviously exceeded that. But we are getting toward the end of this now from a focus account perspective. We're not through 100% of them. There is a long tail to this, but in terms of driving to getting us here, we are well through the I call it the substantial majority. Maybe David has a a more specific way to identify substantial majority, but we're probably three quarters of the way through through this from a revenue perspective. But again, I would go back to what does it prove? It proves that the work we do is valuable, the investments we've made are paying off, that our customers love what we do, and we are very much now part of their future, not just not just part of their past.

Yep, and we are about, I'd say 75% of the way through three of the way through on revenue. But we've already achieved 90% of our targeted savings. So with $900,000,000 of annualized benefits on the focus accounts, the target that started out at $800,000,000 is now a billion and I think we're well positioned to exceed that as we work through the remainder of the accounts. And drive not only margin improvement there, but also growth. In the top line.

Great. Thanks. Operator, can we move to the next question, please?

Thank you. Next question comes from Tien Tsin Huang. From JPMorgan. Please go ahead. Hi. Thanks. Congrats on the positive revenue growth milestone. Good to see that. I also like Martin some big discussions or going through some of the larger deals you guys won, which brings me to my question around book to bill. Do you think book to bill given some of the wins that you've had and the in the pipeline that you can still maintain this book to bill above one for the better part of fiscal twenty six. And I'm curious given some of the larger deals maybe what the duration of the backlog looks like. Is that changing just to think about ACV maybe improving underneath it? Thank you.

Yes. Thanks, Tien Tsin, and thanks for the nice also thanks for the nice comments on the quarter. Look, a couple of things. And you were one of the people and you know this business well, you were on this early and three and a half years ago, were talking about how does Kyndryl get back to growth You a book to bill north of one at etcetera, etcetera. You know this because you were at the heart of of the questions and doing the work. And as you said, well, if we're going to continue growth, which is what we see now and what we put on the table back in November over the medium term, that we do have to continue to [indiscernible] to have a book to bill north of one, and that's what we see over the medium term. In order to drive that continued growth. Now, one year of book to bill doesn't get us everything we need. And so we have to execute again, but the capabilities we've built, the innovation we've built, is showing up really well and it's driving the kind of performance that we saw, for instance, in our consult business where 50% signings growth in the year is driving 29% revenue growth, where where, for instance, from a standing start, from essentially nothing, built last year services around alliance activity, around our hyperscaler alliance activity that turned into more than a billion dollars of business per year.

And those will keep growing. So yes, the short answer is yes, we recognize and expect that we will continue to deliver a book to bill north of one We would, as we've always said, encourage everybody to look at this over a twelve month trailing basis because in any given quarter, could be phenomenal, it could be for whatever reason, it's just too short a period. But we feel good about the momentum we're seeing, the vectors of growth that we've been pointing to, and our ability to continue to drive a book to bill north of one.

Perfect. And just my follow-up within that was the ACV. Question. Because I think you guided to consult growing in the double digit. I know it was running very hot in '25, so I think that'll give you some short term lift in conversion, but then you have a lot of longer duration deals as well. Can you just talk about ACV and how the year will play out with Consult presumably growing a little bit slower and backlog conversion making up for it to get to that positive revenue growth for the year?

Sure. We do expect Consult to continue to grow top line double digits in fiscal twenty twenty six. So it'll continue to be a significant contributor to our growth. When we look at signings last year, a couple of points worth mentioning. First, overall, signings grew about 46%. Consult grew 47%. And that means managed services growth was right there as well with very strong growth. And so we're seeing a good balance in our growth between the two. Consult signings will tend to turn into revenue a little bit faster. Managed services contracts tend to be longer and we really like like what they do for our backlog because it's really committed revenue and and committed profitability that we're adding to our unrecorded balance sheet. And in terms of ACV what we saw was our average signing was probably a few months longer last year. So about 75% to 80% of our growth was was due to just additional activity And then 20% to 25% of our 46% growth was driven by having a longer longer duration on average. And we really the example that you mentioned highlights, we're very focused on growing ACV in individual accounts, growing revenue there.

And the opportunities that we have to expand scope in our relationships really end up being a big driver of of that ACV growth.

Thanks. Operator, next question, please.

Thank you. Our next question comes from Ian Zaffino.

From Oppenheimer. Please go ahead.

Hi. Great. Thank you very much. Very good quarter.

Wanted to ask on the guide and the revenue growth that you're expecting for the year. I would have expected, you know, with signings growth 46% or so, that might seem very conservative. Maybe kind of walk us through how you're kind of getting there. And I know that there are some legacy signings that are starting to fall off. Maybe the better question is, how do we think about revenues, maybe not just this current year, but subsequent years as some of those legacy signings roll off and I would imagine revenues would then accelerate, but help me understand that a little bit. Thanks.

Yes, sure. Thank you. And thanks for the nice also thanks for the nice comments on the year and the quarter. We just finished. I think there's a few things worth pointing out. One is as I talked about earlier, three and a half years ago, we were we were trying to prove to everybody that we could grow. What is really nice about your question, what's really nice about the position we're in now is now we're talking about [indiscernible] you be growing faster, which is quite frankly, it's just fabulous. Team's done a nice job of repositioning this business and executing a plan that got us to this point. So we're delighted. As you said, well, look, have a really good book to bill from last year. But the two prior years with our work on focused accounts and our intent to improve profitability first, we have to to, that's all in the backlog as well. So we wanted to make sure that everybody understood is that in this very strong profit improvement year, again, this very strong cash flow growth again, all consistent with what we laid out over the medium term back in November, that we're not relying on substantial revenue growth to get there, even though last year when we were still working on focused accounts, we had a two point year to year improvement in revenue growth right from down six to down four.

And now we're saying we're only really relying on on one. That's a big step up obviously in the improvement, but with now more and more of our P and L determined by what we've put in the backlog, what we've been able to shape and what is coming out into our P and L this year, it says that we have the things we relied on to to deliver growth in the fourth we are as David said, well, he talked a little bit about Consult earlier.

Those those vectors of growth will continue. So So yes, we said it in a specific way. Yes, that we control more of our own P and L from what we've put in. But this year, this fiscal year and the guide is what we're relying on to deliver And And we only only, I mean, I only keep coming back to only, we told everybody that in fiscal twenty eight, we'd get to kind of a mid single digit level and we're still well on track and this is consistent with that. But again, with this year's P and L being more than now half, two thirds of our P and L being determined by what we've put in, That's certainly it's accurate, it's factual, but our year is also determined not just by fiscal 'twenty five signings, it's determined by fiscal 'twenty four signings when we were still going through the account focus work in great earnest is determined by fiscal 'twenty three signings, which again, still going through account focus in great earnest. And obviously, even though two thirds or so is determined by our stuff, that means a third is what we inherited. So there's a lot of dynamics here that I think we wanted to make sure that our investors understood that another great year for profit improvement, even as we invest another great year for cash flow generation.

But we're not relying on a big swing back to revenue growth in order to deliver Okay, understood. And then as a follow-up, you know, it seems to give incredible amount of visibility just in the business and the way the state of the contracts work and like I said earlier, you're coming off this massive acceleration in the business So how are you then thinking about, I guess, allocation and maybe your tolerance or your appetite to get a little bit more aggressive on that side? Thanks.

Yes, thanks. So it's once again relative to where we started, it's great to be talking about how we're going to be allocating capital. And I we've continued to do two things. We've continued to look for opportunities to invest in our own business. We've done one acquisition which is working out really, really well. And I would say that we continue to look for tuck in acquisitions that can accelerate our position in the marketplace, that can maybe expand capabilities within things we're already doing. So So first and foremost, we'll look to invest in the business because we see so much opportunity. And the other thing, I'm really pleased that probably a little bit ahead of what everyone expected. Last November, the board approved the initiation of a share repurchase program, which we've been doing. And we see great value in the stock here. So we'll obviously continue to allocate capital to shareholders as well to return them their money. So we see opportunities in both continue to invest. This is a business model that great visibility to the future, so we have an ability to not only invest we have an ability to return capital. I think we'll continue to do both of those.

I think we have an opportunity to do both. Anything you would add, Dave? No.

No?

Okay.

There you go.

Alright. Great. Thanks for the color.

Thank you.

Great. Operator, next question, please.

Thank you. Our next question comes from Diviya Goyal. From Scotiabank. Please go ahead.

Good morning, everyone. Thanks a lot for all the color you provided. I actually wanted to go back and circle back on the accounts discussion that we had and maybe just get a little bit more clarity on the impact of macro on some of your strategic global accounts and trying to understand what are their key priorities, and could they be impacted given all the global uncertainties out there? And on I'll I'm also in line trying to understand what is what is the percentage of revenue that could be potentially exposed to macro uncertainties, if at all? Thank you.

Yeah. Thanks, Divya. So couple of things. Uncertainty seems to be the sort of the most commonly used word in the business press these days. I would say that for us, the good news is we're in the we're in the productivity business. We help drive productivity, create opportunities, optimize consolidate, deconsolidate if that's what our customers are trying to do. And so this environment tends to be a tailwind for us because our customers need help. In preparing their infrastructure for whatever macro environment they're envisioning. And that's true not only of macro, which as you know well, are we in this period of uncertainty two months, three months, or a year? We don't know. We know that always going to be preparing for the future they see. It's also true with regard to with regard to technology. And over the last twenty plus years, I think the world has observed that that no matter what the business problem is, technology is part of that answer. So if you're if you're trying to find new customers you're trying to create a better employee experience, if you're trying to get yourself ready for a new regulatory environment, or if you're trying to prepare for a new view of your own macro environment, Technology is a part of that and that's that's why it tends to be a tailwind for us because they need they need an infrastructure to execute that strategy, whatever it is.

That is secure and resilient and fit for purpose. So for us, I would say uncertainty tends to translate in all its forms, tends to translate [indiscernible] a bit of a tailwind. And then your second question, look, how much our business is subject to it We enter a year as is typical, we enter a year with 75% of our year under contract, right? So revenue that we already have for the year that that was represented in the guide is somewhere between 7075% booked. And so yes, we have to continue to execute on signing deals and converting those to revenue. Throughout the whole year in order to deliver the year. But we're very comfortable. We're very confident with the trends we're seeing, the role we play in our customers' environments, and the capabilities and innovation we're bringing that we'll continue to be able to execute that. And again, I'd go to the momentum we see in Consulta as good data point. The momentum we see in our hyperscaler alliance activity is a good data point, with other things now picking up. The work that we're doing with SAP and RISE is is an important addition this year.

So most of the majority of our year is this year is under backlog And we see really good demand trends given what we do and the role we play and the capabilities we have to deliver the year.

That's great. Just as a follow-up for doing this, discussion, [indiscernible] I wanted to get a little bit more color quickly on Kindle Bridge. Is it fair to assume that Kindle Bridge can provide some additional leverage in such uncertain macro conditions when global clients potentially pull back on new implementations or enhanced And could Kyndryl Bridge actually help the company uncover new opportunities here.

Yeah, Divya. The short answer is is yes. So among the many capabilities that Bridge has around observability and keeping your systems optimized and resilient, etcetera, etcetera. One of the things you can do is help uncover unused resources. And you can imagine in a big sprawling corporation how many, for instance, unused public cloud instances are out there because they were used for something and then and then they need it anymore, but somebody needs find that and identify it and then get it turned off. Among the many capabilities that Bridge brings to customers, is, as a very direct example, is an ability to uncover unused resources But there's also a whole host of of what we call actionable insights that we're delivering to our customers every month to help them optimize to help them get ahead of problems. Each of which is tied to one of their business outcomes. So yes, Bridge, it's not only the way we do our work, it's also providing a lot of actionable insights to our customers to help them optimize, to help them find savings in this case, to help them get ahead of challenges that they may have so that they can they can save money.

But [indiscernible] A, not only, but the A real cost in anybody's infrastructure, is both the planned downtime and quite frankly, the unplanned downtime. And we've been very public that we believe we saved customers across our portfolio billions of dollars just from the use of Bridge in managing better planned downtime and avoiding unplanned downtime. So there's real benefits here.

Yeah. And I just wanted to add on the macro uncertainty point that in the fourth quarter, our consult signings grew 37%. And that was obviously a period of time where there's a little bit more uncertainty. And I the growth we delivered in consult signings sort of highlights as a proof point how we're insulated to the macro environment and really executing on a series of opportunities that are unique and specific to us. Allowing us to perform really quite differently than overall market with growth in the 37% range last quarter.

Great, thank you. Operator, I think we have one more question in the queue.

Alright. Our next question comes from Tyler DuPont from Bank of America. Please go ahead.

Good good morning. Martin and David. Thanks for taking the questions. I want to start echoing the congratulations on the quarter. It's nice to see a return to positive constant currency growth, definitely moving in right direction there.

But I wanted to first ask about growth trends in the consult business. First, if you could maybe just discuss the go to market in consulting, if that's changed at all in recent quarters, given the solid growth that we've seen and the fact that this component keeps increasing as a percent of total, I think it's now around 25% as of 4Q.

How should we anticipate the growth there and any margin dynamics among those contracts compared to the company average worth mentioning?

Yes. Thanks, Tyler. Thanks for the nice comments. So two things. First on the revenue trajectory, and let me start with the mix because because while it is certainly, what you said is right, 25% of our revenue now, remember that while the numerator has been growing very very well and we've been executing well, numerator being the consult. The total we've been engineering at the client end because of the focus account activity. So that that that product is obviously grown faster and now that we're back to growth in total, I would expect while the numerator will continue to grow quite well, it won't be making the sort of the progress that we've seen when we started three point five years ago with it under 10% of our overall mix, now improving dramatically 2.5x to 25. But that progress will slow, notwithstanding that we continue to see great momentum in our consult signings and obviously that will convert to revenue. As David said well earlier, tends to be a bit faster than our managed service business. And then on margin profile, what we see is that the margins in consult tend to be a little bit higher, not dramatically, but there are accretive to the overall margin profile.

And that's part of why with faster growth, plus accretive to margins, part of why we're investing so heavily this year in our consult business. And that's all part of what we guided to profit. So while, again, we have another big step up in profit year to year, which we're delighted and excited about, that includes an acceleration, if you will, of our investments in our consult business. It includes a continuation of our investments in Kyndryl Bridge and includes continuation of our investments in our partnerships etcetera, etcetera, etcetera, but an acceleration in consults. So So yes, it's growing faster. It will continue to grow faster than the overall the mix won't move up as much because the total is now growing and it is accretive at the bottom line. Understood. That's helpful, Martin. And then just on margins, particularly from a bookings lens, again, nice to see signings maintain that nine ish percent adjusted PTI margin profile. But given the strength in bookings that you've seen over the past several quarters, have you given any thought to maybe flexing that pricing muscle a bit harder? Have we given it thought? Look, we want to get paid for the great work we do.

And teams have done a really nice job of of creating and quite frankly, capturing the value that we're helping our customers create. So I think it's a testament And the data shows the value of what we do our customers desire for us to to continue to be a big part and invest in their accounts. And this is a good spot for us a good spot for us to land. This is a number that we've been talking about for three and a half years. We always said that within the capabilities we have and the we're making that we can capture high single digit PTI margins. And this is the right place for us to be. So I feel great about great about the margin profile of what we're putting in. I feel great about what it says about how our customers think about us And as long as we continue to invest, and I laid out gave you a bit more color on investment, as long as we continue to invest, to bring new capabilities and to innovate, I think this is this is a good reflection of how we can get paid for what we're doing. [indiscernible] All right.

Operator, I think that's the end of the question. So let me just wrap up quickly. First, thanks everybody for joining and thanks for the questions. When I think about the year ahead, you could hear from our from our commentary from the data, it's all about profitable profitable growth for us. Our first three and a half years, we had to fix the business And we had to do that while we continue to support our existing customers with the best services in the world. And that's exactly what this team has done. We've invested in innovation. We invested in our capabilities. We invested in partnerships, all of which will continue to do and in fact accelerate And as a result, we're able now to engage differently with our customers, not just focused on meeting them where they are and what we can do for them today, but helping them achieve their business outcomes capturing new opportunities and obviously supporting their objectives so that we're part of their future as well. And all of that happens because of the tens of thousands of Kyndryls the world. Working together every day as a flat and fast and focused teams And they've they've really earned the right to win and they've earned the right to keep winning.

And that's that's what you'll see from us. So thanks again everybody for joining the call.

You for your participation in today's conference. This does conclude the program. You may now disconnect.