Q2 2026 Kyndryl Holdings Inc Earnings Call

November 5, 2025

So the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will then hear an automated message advisory. Your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand the conference.

To your first speaker today Laurie treatment.

Good morning, everyone and welcome to Kindred earnings calls the second fiscal quarter ended September 32025.

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 as forward looking statements speak only to our expectations as of today.

Speaker #1: Good day and thank you for standing by . Welcome to the second quarter 2020 Earnings Conference Call . At this time , all participants are in a listen only mode .

Speaker #1: After the speaker's presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .

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 31 2025.

Speaker #1: You will then hear an automated message advising your hand is raised . To withdraw your question , please press star one one again .

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 events, which are available on our website at investors Dot Kendall Dot com.

Speaker #1: Please be advised that today's conference is being recorded . I would now like to hand the conference over to your first speaker today , Lori Chaitman .

Speaker #2: Good morning , everyone , and welcome to Kindred's earnings call for the second fiscal quarter ended September 30th , 2025 . Before we begin , I'd like to remind you that our remarks today include forward looking statements .

With me for today's call are Kendall's, Chairman and Chief Executive Officer, Martin Schroeter, and Kindles, Chief Financial Officer, David Weisner.

Speaker #2: 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 .

Following our prepared remarks, we will hold a Q&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.

Speaker #2: 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 , 2025 .

In the second quarter and first half of the year, we delivered margin expansion a substantial increase in earnings and strong growth in both control consults and Hyperscale are related revenue streams.

Speaker #2: 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 .

Our trailing 12 months revenue book to Bill remains above one illustrating the quality of our recent signings supporting our future revenue growth will.

We're reaffirming our outlook for fiscal year 2026, and.

We're pleased that our internal cash generation and balance sheet strength position us to increase our share repurchase program by $400 million.

Reflecting our confidence in achieving our fiscal 2028 objectives.

Speaker #2: With me for today's call are Kendall's chairman and Chief Executive Martin Schroeter and Kendall's chief Financial Officer , David Wyshner . Following our prepared remarks , we will hold a Q&A session .

Xenon revenue, even though we successfully signed most of the deals that have slipped out of Q1, our revenue for the quarter again came in about $100 million below what we were targeting we expected a strong September to drive a sequential uptick in our year over year revenue comp that didn't fully materialize.

Speaker #2: I'd now like to turn the call over to Martin . Martin .

Speaker #2: I'd now like to turn the call over to Officer ,

Speaker #3: thanks to each of you for joining us in the second quarter . And first half of the year . We delivered margin expansion a substantial increase in earnings and strong growth in both Kindle Consult and Hyperscaler related revenue streams .

The underlying dynamics are that our growth drivers like Kindle consult in Hyperscale are related revenue are working well and resonate with customers.

We're increasingly working to expand scope and our contract renewals, which has led to longer sales cycles. Since these large complex deals often involve replacing incumbents or transitioning in sourced work to control with.

Speaker #3: Our trailing 12 month revenue book to bill remains above one , illustrating the quality of our recent signings supporting our future revenue growth .

Speaker #3: We're reaffirming our outlook for fiscal year 2026 , and we're pleased that our internal cash generation and balance sheet strength position us to increase our share repurchase program by $400 million , reflecting our confidence in achieving our fiscal 2028 objectives .

We still expect these expanded scope deals to close before our fiscal year end.

And third our focus on margin expansion as a revenue headwind for us because we've taken low margin hardware and software content out of our customer relationships.

Speaker #3: Focusing on revenue . Even though we successfully signed most of the deals that had slipped out of Q1 , and revenue for the quarter again came in about 100 million below what we were targeting .

We estimate that this was roughly a four point drag on revenue growth in Q2.

Without which our constant currency revenue growth would've been positive you can see the benefit of this strategy and our earnings.

Speaker #3: We expected a strong September to drive a sequential uptick in our year over year revenue comp that didn't fully materialize . The underlying dynamics are that our growth drivers , like Kyndryl , consult and Hyperscaler related revenue are working well and resonating with customers .

We entered the third quarter with a record pipeline that supports second half signings growth and our full year book to bill ratio above one.

As a result, we're confident we will deliver revenue growth in the back half of this year as we are redoubling, our efforts to expand our services footprint throughout our customer base.

Speaker #3: We're increasingly working to expand scope in our contract renewals , which has led to longer sales cycles since these large , complex deals often involve replacing incumbents or transitioning insourced work to Kindle , we still expect these expanded scope deals to close before our fiscal year end .

David will walk you through more details on these points, but I want you to keep in mind the following.

We're entering the second half of the year with a larger revenue contribution from our committed backlog, including less of a headwind from having removed hardware and software content.

Speaker #3: And third , our focus on margin expansion is a revenue headwind for us because we've taken low margin hardware and software content out of our customer relationships .

We have incremental growth opportunities from kindred consult in the Hyperscale.

And customer demand is driven by it modernization AI and cyber security.

Speaker #3: We estimate that this was roughly a four point drag on revenue growth in Q2 , without which our constant currency revenue growth would have been positive .

We are also operating with a clear long term mindset, all fully aligned with our triple double single fiscal year 2008 objectives and.

Speaker #3: You can see the benefit of this strategy in our earnings . We enter the third quarter with a record pipeline that supports second half signings , growth and a full year book to bill ratio above one .

And we remain on track to achieve them.

In fact, they represent the culmination of the strategy, we've been executing powerfully over the last four years.

Speaker #3: As a result , we're confident we'll deliver revenue growth in the back half of this year as we're redoubling our efforts to expand our services footprint throughout our customer base .

With our accounts initiative, we focus on removing unprofitable content and fixing unprofitable relationships.

During this process, we kept adding more gross profit to our backlog even as we were shrinking our revenues.

Speaker #3: David will walk you through more details on these points , but I want you to keep in mind the following . We're entering the second half of the year with a larger revenue contribution from our committed backlog , including less of a headwind from having removed hardware and software content .

We also began investing in kimball console capabilities in their alliances driving scope expansion with existing customers and our ability to add new logos.

You've seen the growth in clinical consult and in Hyperscale or related revenue streams. As a result of these investments and that momentum is continuing.

Speaker #3: We have incremental growth opportunities from Kindle Consult and the hyperscalers and customer demand is driven by it modernization , AI and cybersecurity . We're also operating with a clear long term mindset , all aligned with our triple double single fiscal year 28 objectives .

We then turned our attention to signings growth, which drove our last 12 months revenue book to Bill ratio above one a level we've maintained for five consecutive quarters now.

And this has brought us to a spot where over the last 12 months, we're generating constant currency revenue growth aside from the estimate effects of removing hardware and software content.

Speaker #3: And we remain on track to achieve them . In fact , they represent the culmination of the strategy we've been executing powerfully over the last four years with our accounts initiative , we focused on removing unprofitable content and fixing unprofitable relationships .

And the next step is for the content removal headwind to dissipate and the consultant hyperscale of growth to continue so that we're routinely delivering total constant currency revenue growth.

Speaker #3: During this process , we kept adding more gross profit to our backlog even as we were shrinking our revenues . We also began investing in Kindle Consult capabilities in our alliances , fully driving scope expansion with existing customers and our ability to add new logos .

It's in this context that we believe the strategy. We deployed is working despite the near term revenue pressures, we faced in the first half and we're well positioned to deliver growth in the second half on our way to our triple double single fiscal year 2008 objectives.

Speaker #3: You've seen the growth in Kindle Consult and in Hyperscaler related revenue streams . As a result of these investments , and that momentum is continuing .

On today's call I'll provide a deeper dive into the multiple growth drivers available to us including infrastructure modernization.

Speaker #3: We then turned our attention to signings , growth , which drove our last 12 months revenue book to bill ratio above one . A level we've maintained for five consecutive quarters now , and this has brought us to a spot where over the last 12 months , we're generating constant currency revenue growth .

Also discuss how agenda guy will both be an operational and a go to market tailwind for general.

Before diving into the near term opportunities, let me first highlight areas, where we're already seeing profitable revenue growth.

Amongst signings our fastest growing practices have been apps data and AI and digital workplace, our strongest geographies have been Canada, Spain, India, and Latin America, and the projected pre tax margin on our total signings continues to be in the high single digits.

Speaker #3: Aside from the estimated effects of removing hardware and software content , and the next step is for the content removal headwind to dissipate and the consultant hyperscaler growth to continue so that we're routinely delivering total constant currency revenue growth .

Speaker #3: It's in this context that we believe the strategy we deployed is working despite the near-term revenue pressures we faced in the first half , and we're well positioned to deliver growth in the second half .

Consult revenue has increased 32% in constant currency over the last 12 months and is now running at an annual pace of $3 4 billion.

And our hyperscale or related revenues have doubled since last year.

Speaker #3: On our way to our triple double single fiscal year 28 objectives . On today's call , provide a deeper dive into the multiple growth drivers available to us , including infrastructure modernization .

Our initial $1 8 billion fiscal 2026 target.

Our excellence in service delivery is foundational to our growth strategy.

Speaker #3: I'll also discuss how Agentic AI will both be an operational and a go to market tailwind for Kyndryl before diving into the near term opportunities , let me first highlight areas where we're already seeing profitable revenue growth among signings .

Our innovative and outcome based approach to managing modernizing and optimizing complex technology of states drive significant value for our customers and fuel share of wallet growth opportunities.

Simply put customers entrust us with more work because they appreciate the quality of what we already do for them.

Speaker #3: Our fastest growing practices have been apps , data , and AI , and digital workplace . Our strongest geographies have been Canada , Spain , India and Latin America , and the projected pre-tax margin on our total signings continues to be in the high single digits .

We deliver our mission critical services through Kindle bridge, our AI powered operating platform.

With Kindle bridge, our delivery teams and our customers run on a single open platform for monitoring managing and securing their Tia state end to end with an unprecedented level of real time observe ability.

Speaker #3: Consult revenue has increased 32% in constant currency over the last 12 months , and is now running at an annual pace of $3.4 billion .

Digital bridge now performance more than a $186 million automation and generates 15 million actionable insights each month, making tangible and evermore indispensable enable the enabler of mission critical services.

Speaker #3: An hour . Hyperscaler related revenues have doubled since last year , and we're tracking above our initial 1.8 billion fiscal 2026 target . Our excellence in service delivery is foundational to our growth strategy .

And we have more than 100 partners integrated on the platform, including Cisco and video Oracle SAP and service now providing real time observer ability that spans applications databases networks mainframes and clouds across multiple technology vendors.

Speaker #3: Our innovative and outcome based approach to managing , modernizing , and optimizing complex technology estates drive significant value for our customers and fuels .

Speaker #3: Share of wallet growth opportunities . Simply put , customers entrust us with more work because they appreciate the quality of what we already do for them .

As a result digital bridge combined with our knowledge of our customers' infrastructure dramatically reduces risk and enhances security it set the guardrails and accelerates problem solving.

Speaker #3: We deliver our mission critical services through Kyndryl Bridge , our AI powered operating platform with Kyndryl Bridge . Our delivery teams and our customers run on a single open platform for monitoring , managing and securing their IT estate end to end with an unprecedented level of real time observed ability , bridge now performs more than 186 million automations and generates 15 million actionable insights each month , making Kyndryl an ever more indispensable and enabler of mission critical services .

It has solidified our reputation as the gold standard for infrastructure services to key driver of our top tier customer satisfaction and of how we're able to regularly win new scope during contract renewals.

So a key driver of the $875 million of annual savings that are advanced delivery initiatives has generated.

Our capabilities position kindred the hardest secular trends like AI cyber security risks cloud migration modernizing complex hybrid it environments and industry wide skill gaps.

Speaker #3: And we have more than 100 partners integrated on the platform , including Cisco and Oracle , SAP and ServiceNow , providing real time observability that spans applications , databases , networks , mainframes , and clouds across multiple technology vendors .

Our alignment with these trends is allowing us to drive future growth in multiple ways through expanded partnerships with our alliance partners.

Speaker #3: As a result , Kyndryl bridge combined with our knowledge of our customers infrastructure , dramatically reduces risk . It enhances security . It sets guardrails and accelerates problem solving .

Scope expansions and new customer wins through mission critical.

Expertise through.

Through incremental clinical consulting engagements that leverage our technology first mindset by uncovering new opportunities with insights from <unk> Bridge and our recently launched <unk> AI framework and by capitalizing on the widespread enterprise need for infrastructure modernization that spans all six of our global practices.

Speaker #3: It has solidified our reputation as the gold standard for infrastructure services . It's a key driver of our top tier customer satisfaction and of how we're able to regularly win new scope during contract renewals .

Speaker #3: It's also a key driver of the $875 million of annual savings that are advanced delivery initiative is generating our capabilities , position Kyndryl the hardest secular trends like AI , cybersecurity risks , cloud migration , modernizing complex hybrid IT environments , and industry wide skill gaps .

I want to double click on one of our growth vectors infrastructure modernization, our expertise in modernizing mission critical systems and our deep rooted customer relationships are key drivers behind the double digit growth, we're achieving in <unk> consult and the additional managed services scope, we regularly take up.

As AI adoption accelerates large enterprises are under increasing pressure to address tech debt and modernize their mission critical systems. We hear this from our customers every day.

Speaker #3: Our alignment with these trends is allowing us to drive future growth in multiple ways through expanded partnerships with our alliance partners , through scope expansions , and new customer wins through mission critical infrastructure expertise , through incremental consulting engagements that leverage our technology first mindset by uncovering new opportunities with insights from Kyndryl Bridge and our recently launched Agentic AI framework .

And modernization now extends far beyond just updating front end applications organizations need to transform it environments to meet the rigorous demand of AI driven operations addressing evolving cyber threats, maintaining regulatory compliance and leveraging new technologies.

Speaker #3: And by capitalizing on the widespread enterprise need for infrastructure modernization that spans all six of our global practices , I want to double click on one of our growth vectors infrastructure modernization .

Our experience in innovative solutions uniquely position us to help customers manage tech debt and deploy AI at scale.

We know that nearly half of it systems are at or near end of life and all of this tech that represents a substantial opportunity for us, especially since most organizations use third party providers for modernization.

Speaker #3: Our expertise in modernizing mission critical systems , and our deep rooted customer relationships are key drivers behind the double digit growth we're achieving in Kyndryl , and the additional managed services scope we regularly take on as AI adoption accelerates large enterprises are under increasing pressure to address tech debt and modernize their mission critical systems .

In fact, our annual mainframe modernization survey showed that enterprises that have modernized their mainframe applications or migrated selective workloads to other platforms are realizing a two to three fold return on their investment.

Speaker #3: We hear this from our customers every day and modernization now extends far beyond just updating front end applications . Organizations need to transform IT environments to meet the rigorous demand of AI driven operations .

This underscores the tangible value of it modernization and driving operational efficiency and business growth.

<unk> is a trusted services partner, then only runs but also transforms and sustains our customers most vital assets.

Speaker #3: Addressing evolving cyber threats , maintaining regulatory compliance , and leveraging new technologies . Our experience and innovative solutions uniquely position us to help customers manage tech , debt and deploy AI at scale .

Relatedly, we're both using AI in our own operations and enabling customers to deploy AI in their businesses.

For starters, our service delivery to control bridge features advanced AI leveraging machine learning digital bridge proactively identifies risks before they impact operations AI.

Speaker #3: We know that nearly half of IT systems are at or near end of life , and all this tech debt represents a substantial opportunity for us , especially since most organizations use third party providers for modernization .

AI driven recommendations empower our teams to <unk>.

<unk> issues in real time, while our intelligent AI agent streamline knowledge discovery and accelerate incident response building greater efficiency and resilience across the it environments we manage.

Speaker #3: In fact , our annual mainframe modernization survey showed that enterprises that have modernized their mainframe applications or migrated selected workloads to other platforms are realizing a 2 to 3 fold return on their investment .

Our customers also need help with their own efforts to build and deploy AI agents using open source tools.

Speaker #3: This underscores the tangible value of IT modernization in driving operational efficiency and business growth. Tendrils, the trusted services partner, not only runs but also transforms and sustains our customers.

By combining our infrastructure first mindset with our deep systems expertise, we've created that dynamic agenda AI framework for our customers.

Our framework incorporates a distinctive design process specialized tools and an innovative engagement methodologies that blends agents within complex it environments to drive business process innovation and productivity.

Speaker #3: Most vital . IT assets . Relatedly , we're both using AI in our own operations and enabling customers to deploy AI in their businesses .

Speaker #3: For starters , our service delivery through Kyndryl Bridge features advanced AI leveraging machine learning schedule , Bridge proactively identifies risks before they impact operations .

The Kindle ingestion agents uses company documents procedures and data and goals to develop a comprehensive organizational process map.

Speaker #3: AI driven recommendations empower our teams to resolve issues in real time . While our intelligent AI agents streamline knowledge discovery and accelerate incident response , building greater efficiency and resilience across the IT environments , we manage , our customers also need help with their own efforts to build deploy AI agents using open source tools .

And with this as context, the frameworks agent build their capabilities allow the organization to design test and launch AI agents to streamline workflows in accordance with relevant security and compliance standards in other words, we help enterprises turn AI ambition into scalable transformation.

And the demand runways clear is roughly 25% of our signings already contain AI related content.

Speaker #3: By combining our infrastructure first mindset with our deep systems expertise , we've created a dynamic agentic AI framework for our customers . Our framework incorporates a distinctive design process , specialized tools , and an innovative engagement methodology that blends agents within complex IT environments to drive business process innovation and productivity .

We're working with insurance companies banks manufacturers healthcare providers and government agencies to deploy AI agents to streamline processes deliver real time analysis and exports expedite decision making.

Our agenda framework will help accelerate our customer's AI adoption and drive incremental opportunities for us going forward.

Speaker #3: The Kyndryl Ingestion agents uses company documents , procedures , and data , and goals to develop a comprehensive organizational process . Map , and with this as context , the frameworks Agent Builder capabilities allow the organization to design , test and launch AI agents to streamline workflows in accordance with relevant security and compliance standards .

So look at one example of how we're driving growth with a long standing customer in the APAC region, we identified an opportunity to leverage our strong relationship to expand the scope of our work to the customers' operations in the Americas.

Building on the trust we've earned through consistent delivery excellence over many years, we successfully displaced an incumbent service provider in the U S and one the assignment to manage the customer's mission critical it estate globally.

Speaker #3: In other words , we help enterprises turn AI ambition into scalable transformation and the demand runway is clear as roughly 25% of our signings already contain AI related content .

Under our new contract will be modernizing our customers' environment to enable global synergies and AI enablement, while enhancing security and reliability.

Speaker #3: We're working with insurance companies , banks , manufacturers , healthcare providers and government agencies to deploy AI agents to streamline processes , deliver real time analysis and expedite decision making .

This modernization will migrate virtualized workloads to the AWS cloud and the entire tech stack will be supported by automation and observe ability from our <unk> platform.

Speaker #3: Our Agentic framework will help accelerate our customers AI adoption and drive incremental opportunities for us going forward . To look at one example of how we're driving growth with a long standing customer in the APAC region , we identified an opportunity to leverage our strong relationship to expand the scope of our work to the customers operations in the Americas .

And importantly, this expansion will drive an increase in our revenues from this account of more than 25%.

Expanding and winning new scope in our accounts is a key factor behind our positive financial trajectory in fiscal 2026 and beyond.

As a reminder, by fiscal 2028, which for US begins less than 17 months from now we expect to deliver more than $1 billion in adjusted free cash flow, we expect to deliver more than $1 2 billion and an adjusted pre tax income and achieving these earnings and cash flow targets only requires us to reach the mid single digit revenue growth that will progress toward by 2028.

Speaker #3: Building on the trust we've earned through consistent delivery excellence over many years , we successfully displaced an incumbent service provider in the US and won the assignment to manage the customers mission critical .

Speaker #3: IT estate globally . Under our new contract , will be modernizing our customers environment to enable global synergies and AI enablement . While enhancing security and reliability .

With strong conversion of earnings to free cash flow, we're optimizing our capital allocation by investing in organic growth opportunities deploying more capital to shareholders through our increased share repurchase program and occasionally pursuing tuck in acquisitions. In fact, we just announced that we've agreed to acquire mid sized cloud services provider in Europe.

Speaker #3: This modernization will migrate virtualized workloads to the AWS cloud and the entire tech stack will be supported by automation and observability . From our Kyndryl bridge platform .

Speaker #3: And importantly , this expansion will drive an increase in our revenues from this account of more than 25% . Expanding and winning new scope in our accounts is a key factor behind our positive financial trajectory .

Importantly, our fiscal 2026 outlook is consistent with our expected growth trajectory from fiscal $2025 to fiscal 2028.

Speaker #3: In fiscal 2026 and beyond . As a reminder , by fiscal 2028 , which for us begins less than 17 months from now , we expect to deliver more than a billion in adjusted free cash flow .

As David will discuss will continue to expect to generate approximately $550 million of free cash flow. This year to grow our adjusted pre tax earnings by more than 50% and to deliver 1% full year constant currency revenue growth keep.

Speaker #3: We expect to deliver more than 1.2 billion in adjusted pre-tax income , and achieving these earnings and cash flow targets only requires us to reach the mid-single digit revenue growth that will progress toward by 2028 , with strong conversion of our earnings to free cash flow , we're optimizing our capital allocation by investing in organic growth opportunities , deploying more capital to shareholders through our increased share repurchase program , and occasionally pursuing tuck in acquisitions .

Keep in mind, two thirds of our P&L. This year will come from our higher margin post spin signings. The first time that a significant majority of our revenues coming from contracts that we signed as independent <unk>.

As we've discussed before the investments we've made in our expanded capabilities and partnerships are opening new doors for us in terms of increase share of wallet and our ability to win new logos.

We've won 450, new logos over the last four years and Theres more opportunity in the market today, and we have a robust pipeline of deals in the works as a result, I am enthusiastic about our ability to pivot to a second half that we expect will be demonstrably stronger than our first.

Speaker #3: In fact , we just announced that we've agreed to acquire mid-size cloud services provider in Europe . Importantly , our fiscal 2026 outlook is consistent with our expected growth trajectory from fiscal 2025 to fiscal 2028 .

Speaker #3: As David will discuss , we'll continue to expect to generate approximately 550 million in free cash flow this year to grow our adjusted pre-tax earnings by more than 50% .

And with that I'd like to pass the call over to David David.

Thanks, Martin and Hello, everyone today, I'd like to discuss our second quarter results, the solid margins at which we're signing customer contracts and our outlook for fiscal year 2026.

Speaker #3: And to deliver 1% full year , constant currency revenue growth . Keep in mind , two thirds of our PNL this year will come from our higher margin post spin signings , the first time that a significant majority of our revenue is coming from contracts that we signed as independent , Kyndryl .

In the quarter revenue totaled $3 7 billion.

Down 1% from the prior year quarter on a reported basis and three 7% in constant currency.

Speaker #3: As we've discussed before , the investments we've made in our expanded capabilities and partnerships are opening new doors for us in terms of increased share of wallet and our ability to win new logos .

We continued to gain momentum and higher margin advisory services Kindred consult revenues grew 25% year over year in constant currency, which underscores how we are expanding our share in this higher value add space.

Speaker #3: We've won 450 new logos over the last four years , and there's more opportunity in the market today . And we have a robust pipeline of deals in the works as a result .

Our <unk> signings as expected dip year over year, primarily because of the exceptionally strong Q2, we had last year.

Speaker #3: I'm enthusiastic about our ability to pivot to a second half that we expect will be demonstrably stronger than our first . And with that , I'd like to pass the call over to David .

That said, our last 12 months signings total of $15 6 billion.

Speaker #3: David . Thanks , Martin .

Speaker #4: And hello everyone. Today, I'd like to discuss our second quarter results, the solid margins at which we're signing customer contracts, and our outlook for fiscal year 2026.

With 104% of our last 12 months revenue, giving us a book to bill ratio above one.

As Martin mentioned, we continue to see particularly strong signings growth in our applications data and AI and digital workplace practices, reflecting strong demand for services in these domains.

Speaker #4: In the quarter , revenue totaled $3.7 billion , down 1% from the prior year quarter . On a reported basis . And 3.7% in constant currency .

Earnings in the quarter were solid as more and more of our revenues coming from higher margin postpaid signings.

Speaker #4: We continued to gain momentum in higher margin advisory services , Kyndryl consult revenues grew 25% year over year in constant currency , which underscores how we're expanding our share in this higher value add space .

Our adjusted EBITDA increased 15% year over year to $641 million and their adjusted EBITDA margin was 17, 2% up 250 basis points year over year.

Speaker #4: Our Q2 signings , as expected , dipped year over year , primarily because of the exceptionally strong Q2 we had last year . That said , our last 12 months signings total of $15.6 billion was 104% of our last 12 months revenue , giving us a book to bill ratio above one .

Adjusted pre tax income grew 171% to $123 million and our adjusted pre tax margin increased 210 basis points year over year.

Our <unk> initiatives continue to be an important source of margin expansion and value creation for us and remain integral parts of our operational and go to market approach.

Speaker #4: As Martin mentioned , we continue to see . Particularly strong signings growth in our applications , data and AI . And digital workplace practices , reflecting strong demand for services in these domains .

Through our alliances we generated $440 million in hyper scaler related revenue in the second quarter.

This puts us on track to exceed the 50% growth in hyper scaler related revenue that we targeted at the beginning of the year.

And the other alliances from Cisco Dell and HP to data breaks rubric and Palo Alto networks are also fueling our ability to offer cutting edge hybrid solutions to our customers.

Through our advanced delivery initiative powered by Kimbro Bridge, we continue to drive automation through either delivery operations incorporate more technology into our offerings reduce our costs and increase our already strong service levels. It's a win win for <unk> and our customers.

We've been able to free up thousands of delivery professionals and this is where it's roughly accumulative $875 million a year to us representing a $50 million increase in our annual run rate this past quarter.

Our accounts initiative continues to remediate elements of contracts, we inherited with substandard margins in the second quarter, we increased the cumulative annualized profit from our focus accounts by $25 million.

To $950 million.

I can't emphasize enough with an important source of sustainable value creation. This has been for us.

In short our strategic progress is driving our earnings growth.

Turning to our cash flow and balance sheet, we generated free cash flow of $22 million in the second quarter, our net capital expenditures were $125 million.

Working capital was a use of cash in the quarter driven by the timing of receivables and vendor payments that we expect to reverse in the back half of the year.

We've provided a bridge from our adjusted pre tax income to our free cash flow as well as a bridge from our adjusted EBITDA to our free cash flow in the appendix.

Under the share repurchase authorization, we announced last November we bought back two 9 million shares of our common stock in the quarter, one 2% of our outstanding shares at a cost of $89 million.

And yesterday, we announced a $400 million increase in our share repurchase program.

The expansion of our buyback capacity reflects the confidence we have in our earnings trajectory and cash flow growth as well as our commitment to distributing cash to shareholders.

Our financial position remains strong our cash balance at September 30 was $1 3 billion.

Our debt maturities are well lathered from late 2026 to 2041, and we had no borrowings outstanding under our revolving credit facility.

Our target has been to keep net leverage below one times adjusted EBITDA and we ended the quarter well within our target range at 0.7 times were rated investment grade by Moody's Fitch and S&P.

On capital allocation, our top priorities are to maintain strong liquidity remain investment grade reinvest in our business, including through tuck in acquisitions and regularly buy back stock.

I remain enthusiastic about how kindred is poised for future profitable growth by maintaining an LTM book to bill ratio above one and commanding attractive margins on our signings.

The September quarter was a continuation of us winning business with healthy margins.

Throughout fiscal 2023, 24, and 25 and now into the first half of fiscal 2026, we've signed contracts with projected gross margins in the mid twenties and projected pre tax margins in the high single digits.

Therefore, as our business mix increasingly shifts towards more post spin contracts.

Continue to see a significant margin expansion in our reported results.

We've again included a gross profit book to Bill chart illustrates how we've been creating and capturing value in our business.

With an average projected gross margin of 26% on our $15 $6 billion of signings over the last 12 months, we've added nearly $4 billion of projected gross profit to our backlog.

I remain enthusiastic about how Kindle is poised for future profitable growth, by maintaining an LTM book to Bill ratio above 1 and commanding attractive margins on our signings.

Over the same period of time, we've reported gross profit of $3 2 billion.

The September quarter was a continuation of us winning business with healthy margins.

Fiscal 2023, 24, and 25 and now into the first half of fiscal 2026, we've signed contracts with projected gross margins in the mid twenties and projected pre tax margins in the high single digits.

This means we've been adding more gross profit to our backlog and our contracted book of business has been producing in our P&L.

Having a gross profit book to bill ratio above one at one two over the last 12 months demonstrates how we are growing what matters. Most the expected future profit from committed contracts.

Therefore, as our business mix increasingly shifts towards more postpaid contracts.

We continue to see a significant margin expansion in our reported results.

It also highlights the quality of our post spin signings 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.

We've again included a gross profit book to Bill chart illustrates how we've been creating and capturing value in our business within.

With an average projected gross margin of 26% on our $15 $6 billion of signings over the last 12 months, we've added nearly $4 billion of projected gross profit to our backlog.

As we've said previously our core financial goals are to grow our revenues expand our margins increase our earnings and generate free cash flow.

Over the same period of time, we've reported gross profit of $3 2 billion.

Our outlook for adjusted pre tax income this year continues to be at least $725 million. This means growing our adjusted pre tax income by at least 50% and increasing our adjusted pre tax margin by roughly 150 basis points year over year.

This means we've been adding more gross profit to our backlog and our contracted book of business has been producing in our P&L.

Having a gross profit book to bill ratio above one at one two over the last 12 months demonstrates how we are growing what matters. Most the expected future profit from committed contracts.

As a reminder, it also means we're calling for a third straight year of substantial margin expansion and it keeps us right on track to generate high single digit adjusted pre tax margins in fiscal 2027 in fiscal 2028.

We continue to estimate that our adjusted EBITDA margin in fiscal 2026 will be approximately 18% an increase of roughly 130 basis points versus fiscal 2025.

As we've said previously our core financial goals are to grow our revenues expand our margins increase our earnings and generate free cash flow.

We also continue to see opportunities to drive efficiencies in our operations, both through advanced delivery and in SG&A functions. In fact, our enterprise services head count is down 8% from where it was a year ago.

On the topic of cash flow for the year as a whole we're forecasting roughly 100% conversion of adjusted pre tax income life's cash taxes into free cash flow.

With cash taxes of roughly $175 million this implies free cash flow of approximately $550 million.

We continue to estimate that our adjusted EBITDA margin in fiscal 2026 will be approximately 18% an increase of roughly 130 basis points versus fiscal 2025.

Our outlook for constant currency revenue growth in fiscal 2026 continues to be positive, 1%, which implies revenue growth of 4% to 5% in the second half.

We're redoubling our efforts to drive this growth by aggressively seizing the multiple avenues for growth that Martin described earlier.

We also continue to see opportunities to drive efficiencies in our operations through advanced delivery and in SG&A functions. In fact, our enterprise services head count is down 8% from where it was a year ago.

Our plan for stronger second half growth is straightforward Rev.

Revenues from our opening backlog of already signed contracts for the second half or one point stronger than our opening backlog was for the first half.

On the topic of cash flow for the year as a whole we're forecasting roughly 100% conversion of adjusted pre tax income life's cash taxes into free cash flow with.

We've anniversaried, our divestiture of a small business last year, which helps our second half growth compared to the first half by the better part of a point.

With cash taxes of roughly $175 million this implies free cash flow of approximately $550 million.

We've invested in incremental kindred consult resources, so that consult revenue, which is now a larger portion of our revenue base.

Our outlook for constant currency revenue growth in fiscal 2026 continues to be positive, 1%, which implies revenue growth of 4% to 5% in the second half.

<unk> to grow well into the double digits contributing an incremental two points of growth.

We're growing hyper scaler related revenue more than we initially planned as we increasingly market solutions to customers hand in hand, with our alliance partners producing a two point benefit in the second half compared to the <unk> and.

We're redoubling our efforts to drive this growth by aggressively seizing the multiple avenues for growth at Martin described earlier.

Our plan for stronger second half growth is straightforward.

And the larger pipeline of deals we have for the second half is adding incremental revenue both because it's larger and because of our emphasis on building additional scope into our customer relationships. This will also contribute approximately two points of incremental growth.

Revenues from our opening backlog of already signed contracts for the second half or one point stronger than our opening backlog was for the first half.

We've anniversaried, our divestiture of a small business last year, which helps our second half growth compared to the first half by the better part of a point.

A key theme that runs throughout these growth vectors is that enterprises needs for it modernization their desire to invest in AI and their concerns around cyber security are all driving incremental demand for our mission critical expertise and services.

We've invested in incremental kindred consult resources, so that consult revenue, which is now a larger portion of our revenue base.

<unk> to grow well into the double digits contributing an incremental two points of growth.

We're growing hyperscale related revenue more than we initially planned as we increasingly market solutions to customers hand in hand, with our alliance partners producing a two point benefit in the second half compared to the first.

Looking at the third quarter in particular, we expect to deliver positive constant currency revenue growth and for our adjusted pre tax income to be 15% to 25% higher than the $160 million, we reported in last year's third quarter.

In addition, we remain committed to delivering significant margin expansion and generating free cash flow growth over the medium term.

We have a solid game plan to drive our strategic progress and this gameplay and starts with the steps we've already taken to expand our technology alliances realize the numerous growth opportunities available to us manage our costs and earn a return on all of our revenues.

Sometimes investors wanted to confirm that favorable math thats associated with our forecast to more than double our adjusted pre tax income from fiscal 2025 to fiscal 2028 combined with our share repurchase program.

And the answer is yes, with our income tax expense projected to be in the 25% range. Our forecast implies that we will generate adjusted earnings in the fiscal year. After next of roughly $4 per share.

In addition, we remain committed to delivering significant margin expansion and generating free cash flow growth over the medium term we.

To wrap up we are well positioned for success as a leading provider of mission critical enterprise technology services driving thought leadership in our space deliver.

Delivering modern hybrid it solutions.

Growing our kindred consoled presence rapidly.

Achieving top tier service levels and customer satisfaction scores.

Sometimes investors want to confirm that favorable math, that's associated with our forecast to more than double our adjusted pre tax income from fiscal 2025 to fiscal 2028 combined with our share repurchase program.

And operating at the heart of secular trends that will fuel customer demand for our services for the foreseeable future.

So let me end by again thanking the tens of thousands of kindred <unk> around the world who are powering our progress.

With that Martin and I would be pleased to take your questions.

At this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please stand by while we compile the Q&A roster.

To wrap up we are well positioned for success as a leading provider of mission critical enterprise technology services driving thought leadership in our space deliver.

Delivering modern hybrid it solutions.

Martin are you ready for questions, yes, Thank you operator.

Growing our team drove consoled presence rapidly.

We achieved top tier service levels and customer satisfaction scores.

Our first question comes from Jamie Friedman of Susquehanna.

Operating at the heart of secular trends that will fuel customer demand for our services for the foreseeable future.

Hi, good morning.

Congratulations on a strong quarter I wanted to ask something about the capital allocation opportunities for the company to $725 million of adjusted pre tax income as your target for the year, and then free cash flow of $550 million.

So let me end by again thanking the tens of thousands of kindred <unk> around the world who are powering our progress.

With that Martin and I would be pleased to take your questions.

So.

It gives you a lot of optionality on the capital allocation, which is attractive to the investment thesis. So just trying to figure out from your perspective.

What the priorities are from the capital allocation side sure. Thanks, Thanks, Jamie So and thank you for.

Thank you for joining this morning and for the nice.

Martin are you ready for questions, yes, Thank you operator.

For the nice comment I'd say, a few things obviously, we're investing in our in our business in the form of Capex and we will continue to do that and we're also investing in new capabilities and accelerating our capabilities and you saw that in the this morning in the form of our now.

Our first question comes from Jamie Friedman of Susquehanna.

Hi, good morning.

Now pending acquisition of cells entity in the Netherlands.

And then outside of that obviously, because we do see very strong cash flow growth, we see an opportunity to return capital to shareholders. We started.

So.

It gives you a lot of optionality on the capital allocation, which is attractive to the investment thesis. So just trying to figure out from your perspective.

Last year with a $300 million share repurchase and then we followed that up this year with an increase approval.

What the priorities are from the capital allocation side sure. Thanks, Thanks, Jamie So and thank you for.

Approval from the board for a $400 million share repurchase. So so I think going forward. We have those same opportunities will continue to invest in the business will.

Thank you for joining this morning and for the nice.

For the nice comment I'd say, a few things obviously, we're investing in our business in the form of Capex and we will continue to do that and we're also investing in new capabilities and accelerating our capabilities and you saw that in this morning and in the form of our now.

We will continue to accelerate.

Our lead in certain areas, where we see opportunities in the form of tuck in acquisitions, and we'll continue to return capital to shareholders.

And then just for my follow up wanted to ask about AI I know you had some comments last night and in your prepared remarks about AI I think that there was some reference to 25% of the workloads, maybe thats the wrong word, but the number might be right.

Now pending acquisition of salt entity in the Netherlands.

And then outside of that obviously, because we do see very strong cash flow growth, we see an opportunity to return capital to shareholders. We started.

Are informed.

Delivered through AI, So Martin a high level perspective on how AI.

Last year with a $300 million share repurchase and then we followed that up this year with an increase approval.

How AI may inform the competitive position and mind share of kindred going forward, Yes, I think thanks, Jamie So just to make sure we have the sort of the number of clear in year ahead, we said in our prepared remarks. This morning about 25% of our signings have AI related content all all right.

Approval from the board for a $400 million share repurchase. So so I think going forward. We have those same opportunities will continue to invest in the business we.

We will continue to accelerate.

Our lead in certain areas, where we see opportunities in the form of tuck in acquisitions, and we'll continue to return capital to shareholders.

And for US, we do AI related work primarily in.

In our cloud practice, and our digital workplace practice, and obviously in our apps data NII practice and our AI related work.

And then just for my follow up wanted to ask about I know you had some comments last night and in your prepared remarks about AI I think that there was some reference to 25% of the workloads, maybe thats the wrong word, but the number might be right.

Is focused on.

On data architecture and data migration services that allow.

Our customers AI models to operate.

Are informed.

We have in digital workplace services, obviously, an AI enabled solutions that our customers are consuming and then we.

Delivered through AI.

So Martin a high level perspective on how AI.

<unk>.

We also do obviously cloud migration work to enable our customers to adopt AI and then finally, we have.

How AI may inform the competitive position and mind share of kindred going forward, Yes, I think thanks, Jamie So just to make sure we have the sort of the number of clear in year ahead, we said in our prepared remarks. This morning that about 25% of our signings have AI related content.

Agenda development agenda, AI development that our customers.

That our customers are starting to consume now and that gets them ready for AI that helps modernize their infrastructure. So that they can turn their AI pilots into into scaled.

All ready and for US we do AI related work primarily in.

In our cloud practice, and our digital workplace practice, and obviously in our apps data NII practice and our AI related work.

Yes.

Components of how they run their how they run their business. So so it's focused on those practices and the other thing I'd say is it's pretty it's pretty broad based we worked with insurance companies and banks and manufacturers and healthcare providers and government agencies as well on deploying agents now because theyre really trying to transfer.

Is focused on.

On data architecture and data migration services that allow.

Our customers AI models to operate.

We have in digital workplace services, obviously, an AI enabled solutions that our customers are consuming and then we.

We're also do obviously cloud migration work to enable our customers to adopt AI and then finally, we have some.

They're there.

To transform their business processes.

Obviously these are very complex as states and Thats why tendril bridge is such an important part of this because it gives them the data they need and the visibility they need to how their business processes are working and that again extends our lead and our competitive advantage in these mission critical mission critical workflows. So.

Agenda development agenda, AI development that our customers.

That our customers are starting to consume now and that gets them.

Ready for AI that helps modernize their infrastructure so that they can turn their AI pilots into into scaled.

Yes about 25% of our signings now have that form of AI related content.

Yes.

Components of how they run their how they run their business. So so it's focused on those practices and the other thing I'd say is it's pretty it's pretty broad based we work with insurance companies and banks and manufacturers and healthcare providers and government agencies as well on deploying agents now because theyre really trying to transform.

Thank you Martin I'll drop back in the queue.

Thanks, Operator next question please.

Our next question comes from James Faucette at Morgan Stanley.

Hi, good morning, guys.

For doing the first one on <unk>.

On your Opex and in acquisitions.

From there they are trying to transform their business processes.

You've been pretty clear that you plan to do some tuck in acquisitions, but can you give a little more color on.

And obviously these are very complex it states and Thats why Central bridge is such an important part of this because it gives them the data they need and the visibility they need to how their business processes are working and that again extends our lead and our competitive advantage in these mission critical mission critical workflows.

On the kinds of things that Youre looking for and maybe give us a sense of what those valuations look like and how should we think about allocation to capex and on acquisitions versus buybacks do you have a targeted level or range that we should be thinking about.

So, yes about 25% of our signings now have that form of AI related content.

Sure. Thank you.

And thanks for thanks for joining.

Thank you Martin I'll drop back in the queue.

When we when we when I think about the two acquisitions, we've done so far.

Thanks, Operator next question please.

Our next question comes from James Faucette at Morgan Stanley.

I would say that they have sort of common characteristics.

Hi, Good morning, guys. Thanks for joining us this morning.

First and foremost they are very much in they are very much part of.

On your Opex and in acquisitions.

Very much part of what we do today right. We are the world's largest infrastructure services provider our acquisition a couple of years ago was focused on moving power architecture onto Microsoft cloud very.

<unk> been pretty clear that you plan to do some tuck in acquisitions, but can you give a little more color.

On the kinds of things that Youre looking for and maybe give us a sense of what those valuations look like and how should we think about allocation to capex and.

Squarely in the middle of.

How we operate and it will it gave us the.

And acquisitions versus buybacks do you have a target as level or range that we should be thinking about.

The technology and the IP, we needed to help accelerate our customers move to the cloud so everything everything about that is what we do today. It was just a way to accelerate self entity today is is again.

Sure. Thank you.

And thanks for thanks for joining.

When we when we when I think about the two acquisitions, we've done so far.

It's a managed.

I would say that they have sort of <unk>.

Private cloud sort of a structure where.

Common characteristics.

In all over the World and we see this in our surveys all over the world people are worried about sensitive workloads about about regulatory requirements.

First and foremost they are very much in they are very much part of.

Very much part of what we do today, we are the world's largest infrastructure services provider our acquisition a couple of years ago was focused on on moving power architecture onto Microsoft cloud.

Cloud sovereignty and so what this allows us to do is again what.

What we already do we advise we implement we manage clouds on behalf of our customers both private and hybrid and this is now another step into the sovereign world for us and in Europe. So so they all have this consistency around around what we do today is again inside.

<unk> squarely in the middle of how.

How we operate and it will it gave us the.

They're accelerating.

What we're already doing or allowing us to move into a very specific part of the market in this case against sovereign and sovereign cloud in Europe and this is about look it's about the right size for us.

It is managed.

It's a managed.

Private cloud sort of a structure where.

In all over the World and we see this in our surveys all over the world people are worried about sensitive workloads about about regulatory requirements.

It was 100 million euros Youll youll see that in the Q later today with $100 million purchase price.

At a reasonable kind of kind of a multiple so so we would expect it would close probably.

Cloud sovereignty and so what this allows us to do is again what.

What we already do we advise we implement we manage clouds on behalf of our customers both private and hybrid and this is now another step into the sovereign world for us.

Our fiscal year first half next calendar year some time.

And again, we're not we're not looking to change who we are we're trying to stay we will stay focused on on on mission critical infrastructure services with regard to other capital allocation and how to think about it I think the two data points now that you have that we've we've given everybody.

In Europe. So so they all have this consistency around around what we do today, it's again, it's either accelerating.

For instance on share repurchase or are starting to form a pattern that doesn't mean that that doesn't mean that we can't do something differently. If the if the market changes, but we do view our stock is a pretty good does a very good value here. So last year, a $300 million. It was it was sort of what I'll call.

It was 100 million euros Youll youll see that in the Q later today with 100 billion Euro purchase price.

At a reasonable kind of a kind of a multiple so so we would expect it would close probably.

Trailing the cash flow generation of the business. This year at $400 million again, it's trailing the cash flow of our business. So as we grow.

Late in our fiscal year first half next calendar year some time.

We have opportunities to continue to increase that but we'll do it more on a trailing basis. So we can keep the flexibility that we need within the business we keep to.

The strong balance sheet, we have et cetera, et cetera, or I'll ask David if he has anything you wanted to add to that.

Sorry, Martin when we in terms of capital expenditures in particular.

The two data points now that you have that we've we've given everybody on for instance on share repurchase or are starting to form a pattern that doesn't mean that that doesn't mean that we can't do something differently. If the market changes, but we do view our stock is a pretty good does a very good value here, so last year at $300 million. It was.

We expect those to be around 45% of our revenues over time, the substantial majority of that is to support our customers' infrastructure and it needs call. It 3% to four point side of that four to five and the remaining point is really related to our needs as a as of course.

It was sort of what I'll call up.

Trailing the cash flow generation of the business. This year at $400 million again, it's trailing the cash flow of our business. So as we grow.

Our Asian with more than 70000.

Employees around the world. So that's how we get to a 4% 5% of revenue number when we think about our free cash flow, it's actually calculated after our capital expenditures so those.

Obviously have opportunities to continue to increase that but we'll do it more on a trailing basis. So we keep the flexibility that we need within the business we keep.

Those cap.

Those capex or if you will funded by before.

Our strong balance sheet, we have et cetera, et cetera, or I'll ask David if he has anything you wanted to add to that.

Before we get to free is a free cash flow that can be deployed elsewhere and as Martin was saying I think about us being able to pursue both.

Sorry, Martin when we in terms of capital expenditures in particular.

We expect those to be around 45% of our revenues over time, the substantial majority of that is to support our customers' infrastructure and it needs call it 3% to four points out of that four to five.

Both share repurchases and tuck in acquisitions, its not an either or for us and you can see that in our announcements yesterday and today, where we announced both the.

Share repurchase authorization, increasing and the tuck in acquisition of self entity.

And the remaining point is really related to our needs.

As a corporation with more than 70000.

That's great and then just quickly can you give a quick comment our summary of how you are funding customer.

Please around the world. So that's how we get to that 4% to 5% of revenue number when we think about our free cash flow, it's actually calculated after our capital expenditures so those.

Decision cycles right now do they seeing about normal or are there any movement in those sales cycles.

Those cap.

Those capex or if you will funded by <unk>.

They seem fairly they seem normal to me I think what we are experiencing is not that they are changing it's just that as we move to add new scope as we add new customers.

Before we get to free is a free cash flow that can be deployed elsewhere and as Martin was saying I think about us being able to pursue both.

Both share repurchases and tuck in acquisitions, its not an either or for us and you can see that in our announcements yesterday and today, we announced both the.

Tendency given what we do in the mission critical nature of what we do there is a tendency to be cautious and theres a tendency to make sure that everything is right. Because these have to go well that's true whether it's a new customer and is true. If you are just adding new scope.

Share repurchase authorization, increasing and the tuck in acquisition of self entity.

We obviously have renewals that we're doing but.

The substantial majority of cases, there is new content coming in we had an example in our in our prepared remarks. This morning that shows how we grow within our accounts. So so I don't see any difference in decision, making from our customer standpoint, but I do see that because of.

That's great and then just quickly can you give a quick comment our summary of how you are funding.

Customer decision cycles right now do they seeing about normal or are there any movement in those sales cycles.

Because of what.

They seem fairly they seem normal to me I think what we're experiencing is not that they are changing it's just that as we move to add new scope as we add new customers.

How we're growing and the new capabilities, we're bringing in there is there is a.

There is a just.

Just as the.

A consistent level of care because.

Because they have to go well these mission critical these mission critical.

There is a tendency given what we do in the mission critical nature of what we do there is a tendency to be cautious and theres a tendency to make sure that everything is right. Because these have to go well that's true whether it's a new customer and is true. If you are just adding new scope. We obviously have renewals that we're doing but.

Relationships has to be perfect all the time.

Thanks.

Next question please.

Our next question comes from Tien Tsin Huang at Jpmorgan.

Tien Tsin your line is open.

Sorry can you hear me now Hello, Yes, hi.

Thank you sorry about that just on the just thinking about the revenue I. Appreciate the second half discussion Martin you said demonstrably stronger second half, but just thinking about the $100 million in revenue below expectations and with the September month deal slippage. The revenue conversion then doesn't that push output greater risk in the second half relative to what.

Because of what.

How we're growing and the new capabilities, we're bringing in there is there is a there is a.

The consistent level of care.

You thought in the beginning of the year or is that being made up for with some of the incremental consulting resources that you also discussed in the.

Because they have to go well these mission critical these mission critical.

In the prepared remarks, yes. Thanks, Thanks, Tien Tsin look there there.

Relationships has to be perfect all the time.

Thanks.

There are I think some things we obviously, we know as we sit here today and we tried to lay this out David at the tail end of his remarks, we know that.

Next question please.

Our next question comes from Tien Tsin Huang at Jpmorgan.

Tien Tsin your line is open.

We enter the second half.

Sorry can you hear me now Hello, Yes, hi.

The contracted backlog that is in a better position and we also know that we wrap on a divestiture. We did last year, so theyre starting point.

Sorry about that.

Just thinking about the revenue I appreciate the second half discussion Martin you said demonstrably stronger second half, but just thinking about the $100 million in revenue below expectations and with the September month of deal slippage. The revenue conversion then doesn't that push output greater risk in the second half relative to what you thought at the beginning of the year or.

Excuse me in the second half is a couple of points stronger than than what the first half was right. So we know that there is there is.

There is certainty around around that we also know that the demand profile in our consult business and our investments in our capacity.

Or is that being made up for with some of the incremental consulting resources that you also discussed in the.

<unk> deliver an acceleration.

In the second half and Thats fairly.

In the prepared remarks, yes. Thanks, Thanks, Tien Tsin look there they are.

It's fairly evenly split.

There are I think some things we obviously, we know as we sit here today and we tried to lay this out David at the tail end of his remarks, we know that.

In the third and fourth quarter and our momentum in the Hyperscale business.

Hyperscale or related business. So there's real momentum here, it's supported by what we see in our customers' cloud growth.

We enter the second half with the contracted backlog that is in a better position and we also know that we wrap on a divestiture. We did last year, so theyre starting point.

And we see that continuing as well and then the last piece is and maybe this is part of what you are trying to really really get to yes, we have a stronger pipeline than we had in yes. The content within that pipeline has a slightly nearer term.

Excuse me in the second half is a couple of points stronger than than what the first half was right. So we know that there is there is.

There is certainty around around that we also know that the demand profile in our consult business and our investments in their capacity.

<unk> element to it because of the way these deals are shaped in constructed and because of what's what's in them. So.

<unk> deliver an acceleration in the second half and that's that's fairly.

Could they could move as we've always said, we're better at predicting the year in which something signs than the quarter in which something signs.

It's fairly evenly split.

And we don't need to sign all of them, obviously to deliver but my experience is that these.

In the third and fourth quarter and our momentum in the Hyperscale business.

For Hyperscale or related business. So there's real momentum here, it's supported by what we see in our customers' cloud growth.

The renewals the scope expansion all these deals.

Could they can shift quarter to quarter, theyre, not likely to shift year to year to year. So so with what we know again.

Second half starting point is.

There is an improvement from from the first half the investments and the demand and our ability to meet the demand we see in consult drives an improvement the hyperscale or related businesses do have a lot of momentum.

And continue to have a lot of momentum and then the deals we're working on just have stronger near term content. So.

<unk> element to it because of the way these deals are shaped in constructed and because of what's what's in them. So.

I feel I feel good about how we start the second half.

Could they could move as we've always said we are better at predicting the year in which something signs than the quarter in which something signs.

Understood. That's helpful. Thank you.

Our next question comes from Ian Zaffino at Oppenheimer.

And we don't need to sign all of them, obviously to deliver but my experience is that these.

Hi, Thank you very much.

On the pipeline.

The renewals the scope expansion all these deals.

Very strong here.

Maybe tell us what verticals or geographies have been particularly strong.

Could they can shift quarter to quarter, they are not likely to shift year to year to year. So so with what we know again.

Also when we talk about like expanded scope our content can you maybe give US an example or two.

Second half starting point as a as an improvement from from the first half the investments and the demand and our ability to meet the demand we see in consult drives an improvement the hyperscale or related businesses do have a lot of momentum.

About that and also in the pipeline what sort of confidence that this is going to close.

Converting thanks.

Sure I'll start with the verticals and then we'll go.

And continue to have a lot of momentum and then the deals we're working on just have stronger near term content. So.

An example on the on the verticals I would say retail and travel and TM TMT technology immediate.

I feel I feel good about how we start the second half.

Understood. That's helpful. Thank you.

And telecommunications have been the strongest for us.

Our next question comes from Ian Zaffino at Oppenheimer.

Financial services has been.

Okay and in terms of levels of activity and perhaps not too surprisingly given.

Hi, Thank you very much.

Just on the pipeline.

Strong here.

Certainty out there in the market I would say industrials and the public sector have been they have.

Maybe tell us what verticals or geographies have been particularly strong.

Also when we talk about like expanded scope our content can you maybe give US an example or two.

Have been probably a little bit on the lighter side among our verticals.

And then in terms of the examples I think the.

About that and also in the pipeline what sort of the confidence that this is going to close and be.

There are.

A number of them there is when we talked about the financial services firm example, that we walk through where we're actually doing multiple things. The first is that we're expanding what we do in new or different geography.

Convert it thanks.

Sure I'll start with the verticals and then we'll go.

An example on the on the verticals I would say retail and travel and TM TMT technology media and telecommunications have been the strongest for us.

A multinational firm the second is that we're taking on additional work.

The most typical form that's going to take for US is a situation, where we were running it.

<unk> services has been.

Okay and in terms of levels of activity and and perhaps not too surprisingly given uncertainty out there in the market I would say industrials and the public sector had been they.

Historical or legacy elements of infrastructure wins.

One's that we often have have been involved in for multiple years and now with the freedom of action, we have as an independent company, we're expanding into areas.

It had been publicly a little bit on the lighter side among our verticals.

That are beyond that hyperscale are related activity being tops on the list, it's hybrid additional cyber security content being common.

And then in terms of the examples I think the.

There are.

A number of them there is when we talked about the financial services firm example, that we walked through where we're actually doing multiple things.

We're doing often more network.

<unk> activity.

For our customers as well.

First is that we're expanding what we do in new or different geography.

The pitch associated with this is really about us being an end to end solution provider, which is something that customers really value in there.

For a multinational firm the second is that we're taking on additional work.

The most typical form thats going to take for US is a situation, where we were running it.

In their provider of mission critical it services.

Historical or legacy elements of the infrastructure.

Does it reduces the number of I guess potential air gaps in Fingerpointing that is that can exist in it.

<unk> that we often have have been involved in for multiple years and now with the freedom of action, we have as an independent company, we're expanding into areas.

<unk> efficiency, a drives faster problem solving it drives accountability and it plays to our strengths in terms of our ability to.

Or that are beyond that hyperscale are related activity being tops on the list, it's hybrid additional cyber security content being common.

Convene OLED all of these capabilities in one spot in a way that really provides great great outcomes for our customers and what we're seeing is.

We're doing often more network.

<unk> activity.

Really strong customer satisfaction in even stronger service level achievement.

For our customers as well.

As we expand the range of services that we're providing the customers. So we view the strategic thrust that we have building additional scope.

The pitch associated with this is really about us being an end to end solution provider, which is something that customers really value in there.

Into our customer relationships is a real win win.

In their provider of mission critical it services.

Does it reduces the number of I guess potential air gaps in Fingerpointing that is that can exist in it.

It's key to us growing our revenues, but it also helps us providing.

Even better quality and scope and scale of services to our customers.

Rides efficiency, a drives faster problem solving it drives accountability and it plays to our strengths in terms of our ability to.

In a way that helps them meet their business objectives.

Thank you Dave.

Thank you operator, I think the queue is empty so I do want to thank everybody for joining us today is as you can see our strategy is driving results, it's creating new growth opportunities for us we are seeing consistent progress across.

Convene all the all of these capabilities in one spot in a way that really provides great great outcomes for our customers and what we're seeing is.

Really strong customer satisfaction in even stronger service level achievement.

Across our business and consult in Hyperscale and work that we've spent a fair bit of time on today, but also in modernization and our AI work.

As we expand the range of services that we're providing the customers. So we view the strategic thrust that we have building additional scope.

We have a disciplined approach we are certainly managing for the long team for the long term and we are confident in our ability to achieve our financial group financial goals.

Into our customer relationships is a real win win.

It's key to us growing our revenues, but it also helps us providing.

<unk> driving driving revenue growth expanding margins, increasing earnings and generating strong free cash flow and creating lasting value for our customers and for our shareholders and of course for the <unk> around the world as well. So thank you everybody for joining.

Even better quality and scope and scale of services to our customers.

In a way that helps them meet their business objectives.

Thank you Dave.

Thank you operator, I think the queue is empty so I do want to thank everybody for joining us today is as you can see our strategy is driving results is creating new growth opportunities for us we are seeing consistent progress across across our business and consult in hyperscale and work that we've spent.

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

Fair bit of time on today, but also in modernization and our AI work.

We have a disciplined approach we are certainly managing for the long team for the long term and we are confident in our ability to achieve our financial group financial goals.

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

Okay.

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[music].

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