KD 2025Q1

Good day, and thank you for standing by. Welcome to the Kyndryl Fiscal First Quarter 2025 Earnings Conference Call. 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. Please go ahead.

Good morning, everyone, and welcome to Kyndryl's earnings call for the first fiscal quarter ended June 30, 2024. Before we begin, I'd like to remind you that our remarks today will include forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These forward-looking statements speak only to our expectations as of today. For more details on some of these risks, please see the Risk Factors section of our annual report on Form 10-K for the year ended March 31, 2024. In today's remarks, we'll also refer to certain non-GAAP financial metrics. Corresponding GAAP metrics and a reconciliation of non-GAAP metrics to GAAP metrics for historical periods are provided in the presentation materials for today's event, which are available on our website at investors.kyndryl.com. With me here are Kyndryl's Chairman and Chief Executive Officer, Martin Schroeter; and Kyndryl's Chief Financial Officer, David Wyshner. Following our prepared remarks, we'll hold a Q&A session. I'd now like to turn the call over to Martin. Martin?

Thank you, Lori, and thanks to each of you for joining us. On today's call, I'll update you on our continued progress and execution to drive our growth strategy. David will then review our recent financial results and our increased fiscal 2025 earnings outlook. We delivered another strong quarter and are off to a fast start to fiscal 2025. Signings were up 14% in the quarter in constant currency, and they're up 7% over the last 12 months, and the projected pretax margin on these signings is in the high single digits. In the first quarter, pretax earnings were up significantly year-over-year, and we remain on track to deliver significant cash flow this year. Our performance was once again powered by strong growth in Kyndryl Consult and hyperscaler-related revenue, as well as our ability to drive efficiency through automation and deliver innovation through Kyndryl Bridge, our AI-powered open integration platform. As we progress through the fiscal year, we'll continue to execute our growth strategy, drive substantial financial progress, and focus on returning to top-line growth in the fourth quarter. There's a reason we're winning, why we're succeeding at such a rapid pace. Our expertise in both running and transforming IT estates is differentiating us in the markets we serve and uniquely positions us at the center of the secular trends that are shaping the evolution of IT. These trends, the adoption of artificial intelligence, cloud migration and management, increasingly hybrid environments, technology skill shortages, and cybersecurity are driving demand for our services, fueling our growth and further cementing our trusted relationships with our customers. For example, we're working with travel, transportation, and other customers to apply new AI and Generative AI technologies to drive business outcomes through our data architecture capabilities. With Kyndryl's Bridge, we're helping healthcare, manufacturing, and other customers intelligently prioritize infrastructure needs and address previously hidden risks. Through our hyperscaler alliances and mainframe modernization skills, we're helping financial services, communications, and other customers migrate, manage, and optimize their hybrid IT estates across multiple cloud platforms, ensuring the right workload is on the right platform. And through our global network of security operations hubs and end-to-end security services, we're helping customers in media, public, and other sectors protect, detect, and address cyber threats. As a result, we're seeing growing demand for Kyndryl Consult services, all powered by our unique and impactful combination of run and transform capabilities. In fact, I want to highlight the importance of Kyndryl Consult. Our advisory services have been consistently growing in the double digits and accounted for 17% of our revenue in the quarter. We recognize that the strength we're delivering in Kyndryl Consult stands out in the current environment and we believe the reasons for our exceptionalism are enduring. Our global team of consultants, data architects, and engineers have deep domain knowledge on the mission-critical systems underpinning our customers' operations. This expertise is built on decades of experience with some of the world's most complex technology environments. Pairing our central consult skills and expertise with the IP and data in Kyndryl Bridge, our consult teams engage with customers to share actionable insights that can produce meaningful business outcomes. We're helping customers understand how to optimize their hybrid IT systems, how to measure and address their tech debt, how to structure their data so they can embrace AI and Gen AI, how to enhance security and resiliency, how to manage regulatory change, and how to modernize business processes and related application infrastructures to streamline operations and drive productivity gains. So as our customer strategies and IT evolve, we're in the IT trenches with them, delivering capabilities they need based on our end-to-end understanding of their technology estate. And now doing so with the objectivity and broad alliances that come as a market-leading independent company. Customers want to engage with our technology consultants because of the role Kyndryl plays in their environment. The mission-critical nature of what we do and the deep technology expertise and industry knowledge Kyndryl Consult can bring to bear. We're also seeing increased demand for our services as a result of greater cyber regulation, especially in the EU. For all these reasons, Kyndryl Consult is a $2.5 billion revenue stream for us with a significant runway for growth. This revenue stream is valuable, both because of the margins directly associated with it and because of the ongoing managed services work that accompanies so many IT modernization assignments. Kyndryl Consult will continue to grow as we further expand our relationships with our alliance partners like Microsoft, Google, AWS, and most recently, SAP. Last week, we announced that we're now a RISE with SAP delivery partner, which will unlock new consult opportunities across our practices. And more generally, Kyndryl Consult, like our hyperscaler alliances, underscores that where we focus on growth, we deliver. Another key driver of our success is Kyndryl Bridge, the industry-leading operating platform we introduced in 2022, built on our IP and experience managing complex, large-scale hybrid mission-critical technology estates. Customers are faced with complexity everywhere, technical, organizational, and operational, and they must work in new ways to gain observability and data insights across their entire IT environment. With Kyndryl Bridge, we give our customers unprecedented observability across their full IT estate regardless of how complex it might be. This is a powerful value proposition that allows us not only to fortify how we run our customers' IT environments but also to proactively identify ways in which we can transform their infrastructure to deliver the digital business outcomes they need. Since we launched Kyndryl Bridge, we've expanded our capabilities to include services such as delivering AI-infused operational insights, security operations as a platform, application modernization, and regulatory compliance. With Bridge, we're delivering more than 110 million automations per month, ranging from security patches to version upgrades to configuration changes to best practice implementations. This drives speed, reliability, and productivity of IT operations and powers business outcomes for our customers. To date, by avoiding major incidents and reducing planned maintenance costs, we provided customers with productivity benefits totaling nearly $3 billion a year, with more to come. For example, by using Kyndryl Bridge, a leading automotive manufacturer in Japan has seen a reduced number of incidents, faster recovery time, and lower labor costs as it shifts its way of working to more proactive data-driven operations. Separately, by implementing Kyndryl Bridge for a global advertising firm, we significantly increased our customers' productivity and enhanced their creative team's IT experience. Through automated remediation, we also reduced their disruptions by more than 30% and have cut the occurrence of more severe incidents in half. And 13 days ago, when one vendor's cybersecurity update shut down servers around the world, Kyndryl Bridge allowed us to deliver accelerated recovery to hundreds of impacted customers. We rapidly engaged thousands of Kyndryl technical experts around the world to manage the recovery end-to-end for our customers. And with our real-time observability into which applications and servers were affected worldwide, our experts were able to act immediately and recover systems according to our customers' priorities. And with Kyndryl Bridge and our knowledge of our customers' tech infrastructures, we were able to address most of the 45,000 enterprise servers that were impacted in every mission-critical application within 24 hours of the outage. On a more routine level, Kyndryl Bridge is a natural source of Kyndryl Consult opportunities for us. Bridge differentiates us by providing data-driven insights into customers' IT environments. For example, Bridge and Consult come together in our discussions with CIOs and CTOs on AI readiness, data architecture, security, and resiliency. And with Bridge as a single source of truth, we are uniquely positioned to discuss how to architect data so they could be responsibly exposed to AI platforms, how to maintain resiliency features, and how to ensure data remains secure. Kyndryl Bridge is therefore the foundation for our recently announced partnership with NVIDIA. Our customers want us to have NVIDIA's tools accessible through Kyndryl Bridge to help them accelerate their adoption of AI and meet growing regulatory requirements. So we're excited about the opportunities ahead as we combine our expertise with Kyndryl Bridge insights and Kyndryl Consult outcomes. The investments we've made in capabilities and innovation directly aligned with our customers' top IT priorities and make us an even more essential services provider to them. And they're driving growth with apps, data and AI, hyperscaler, and security and resiliency signings, all of which have grown double digits over the past year. As we've highlighted before, this fiscal year, half of our revenue is coming from post-spin signings that have higher margins. And in fiscal 2026, it will be roughly two-thirds. This inflection point when our P&L is largely determined by our post-spin signings will dramatically strengthen our earnings and growth profile. Our updated forecast for fiscal 2025 is for adjusted pretax income of at least $460 million, reflecting a year-over-year increase of at least $295 million. As David will explain in more detail, the margins at which we're signing contracts and the other actions we're taking to grow our profitability have us on a path to deliver high single-digit adjusted pretax margins by fiscal 2027, and yes, the math associated with that is ultimately a $1 billion or more of adjusted pretax income with strong conversion of our earnings into cash flow. And importantly, fiscal 2025 is the year that we're pivoting to growth. As we approach the second half of this fiscal year, our purposeful efforts to shed low to no margin components of revenue will be largely behind us. As I mentioned, we expect to deliver strong growth in Consult. We're also on track to generate nearly $1 billion in hyperscale-related revenue, and we're seeing more and more opportunities through Kyndryl Bridge to increase our share of wallet with existing customers. There is a growing demand for cloud migration, cloud management and optimization, security and resiliency, and data and AI services. Ultimately, we expect to gain overall market share as more enterprises look to Kyndryl for their mission-critical IT needs. We're not only helping organizations run their infrastructure in their business; we're also helping our customers transform and build capabilities on new platforms, allowing them to leverage existing and new technology to drive business outcomes and differentiate Kyndryl in the process. With Kyndryl Bridge, Consult, and our practices, we have executed powerfully throughout our business. We're delivering sophisticated, optimized multi-vendor solutions to customers to help them address critical needs and major opportunities. We're delivering managed services more efficiently than ever, and as a result, we're showing up differently for our customers and seizing opportunities that are unique to Kyndryl. In light of all these opportunities, we're planning to host our first post-spin Investor Day in New York on November 21. This will be an in-person and live webcast event, so please save the date and stay tuned for more details. Now with that, I'll hand over to David to take you through our results and our outlook.

Thanks, Martin, and hello, everyone. Today, I'd like to discuss our first quarter results, our continued progress on our 3A's initiatives, the solid margins at which we're signing customer contracts, and our increased outlook for fiscal year 2025. The punch line is that we're off to a strong start. Our first quarter results reflect strong operational execution and continued progress on our key initiatives. In the quarter, revenue totaled $3.7 billion, an 8% decline in constant currency. The year-over-year decline was anticipated and primarily driven by our intentional exit from negative, low, and no-margin revenue streams within ongoing customer relationships, not by macro factors. It's also sequentially one point stronger than the year-over-year decline we reported last quarter and about one point better than we had expected. Currency headwinds impacted our reported revenue by $100 million year-over-year. As Martin highlighted, we continued to gain momentum in higher-margin advisory services. Kyndryl Consult revenues grew 14% year-over-year in constant currency, which underscores how we're growing our share in this higher value-add space. Kyndryl Consult signings grew even faster, up 49% in constant currency. Total signings grew 14% year-over-year in constant currency in Q1, our third consecutive quarter of signings growth, which were strongest in our core enterprise apps, data and AI, and security and resiliency practices. Our first quarter adjusted EBITDA was $556 million, and our adjusted EBITDA margin increased by 30 basis points year-over-year to 14.9%. Adjusted pretax income grew 96% to $92 million. Our financial progress continues to reflect 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 first quarter results also include a number of puts and takes, and I want to make sure our operational progress is clear. Our $92 million of adjusted pretax income reflects the workforce rebalancing charges we incurred, the increase in IBM software cost that was structured into our spin-off, and currency headwinds. Mitigating these were a vendor credit related to a focused account and a benefit from the change in the useful life of our equipment that we discussed on our last earnings call. Beyond these five items that in aggregate offset each other, our underlying operations delivered a year-over-year increase of more than $40 million in adjusted pretax income, primarily reflecting our execution and progress on our 3A's initiatives. The 3A's have helped us strategically transform our business. They've galvanized our people around initiatives that are game changers for us and for our customers, and they've delivered huge financial benefits. Through our alliances, we generated $210 million in hyperscaler-related revenue in the first quarter. This puts us on track to deliver nearly $1 billion of hyperscaler-related revenue this year, double our fiscal 2024 total. 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. It's a win-win for Kyndryl and our customers. To date, we've been able to free up more than 10,500 delivery professionals to address new revenue opportunities and backfill attrition. This is worth roughly a cumulative $650 million a year to us, representing a $75 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 first quarter, we increased a cumulative annualized profit from our focused accounts by $125 million to $725 million. As we pivot to growth this year and the 3A's become a regular part of our operating model, they remain an important source of margin expansion and value creation for us. So as encouraged as I am by the earnings growth we've delivered, I'm even more enthusiastic about how we continue to position Kyndryl for future revenue, margin, and profit growth. The June quarter was a continuation of us signing business with healthy margins. Throughout fiscal 2024 and now into the early part of fiscal 2025, 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 towards 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 $13 billion of signings over the last 12 months, we've added over $3 billion of projected gross profit to our backlog. Over the same period of time, we've reported gross profit of $2.9 billion. This means we've been adding more gross profit to our backlog than our contracted book of business has been producing in our P&L. Having a gross profit book-to-bill ratio above 1 at 1.1 is a measure of how we're growing what matters most: the expected future profit from committed contracts. And we've been doing this consistently over the last 2-plus years. Turning to our cash flow and balance sheet. As expected, our first quarter was a seasonal user of cash due to annual software and incentive payments, and our adjusted free cash flow was negative $116 million in the quarter. Our gross capital expenditures were $122 million, and we received $24 million of proceeds from asset dispositions. We've 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 in the appendix. Importantly, our use of cash in the first quarter doesn't change our expectation of generating roughly $300 million of positive adjusted free cash flow this year. Our financial position remains strong. Our cash balance at June 30 was $1.3 billion. Our cash, combined with available debt capacity under committed borrowing facilities, gave us nearly $4.5 billion of liquidity at quarter end. Our debt maturities are well laddered from late 2026 to 2041. We had no borrowings outstanding under our revolving credit facility, and our net debt at quarter end was $2 billion. As a result, our net leverage sits well within our target range. We are rated investment grade by Moody's, Fitch, and S&P. On capital allocation, our top priorities continue to be to maintain strong liquidity, remain investment grade, and reinvest in our business. As our earnings increase, they'll drive meaningful free cash flow growth. As a result, over time, we'll be in a position to consider regularly returning capital to shareholders, all while remaining investment grade. Our target has been to keep net leverage below 1x adjusted EBITDA, and we ended the quarter at 0.86x. In terms of M&A, we do not need acquisitions to execute our growth strategy, so we will continue to be very selective, focusing on small tuck-in acquisitions like Skytap that complement our existing expertise and opportunities. As we've said previously, our core financial goals are to continue to expand our margins, grow our earnings, inflect our revenues back to growth as the year progresses, and generate free cash flow. Our outlook for fiscal 2025 continues to be for revenue to decline 2% to 4% in constant currency. This implies revenues of $15.2 billion to $15.5 billion. We still have a quarter to go until we lap when our most significant actions to step away from low to no-margin revenues took effect. So we expect our year-over-year revenue declines will be lower in the back half of the year and as we return to revenue growth in the fourth quarter. We've increased our outlook for adjusted EBITDA margin and adjusted pretax income to reflect the strong performance we delivered in Q1. Our outlook for adjusted EBITDA margin increases to at least 16.3%, and our outlook for adjusted pretax income increases to at least $460 million. Looking at the second quarter, in particular, our year-over-year constant currency revenue decline will be similar to Q1 and our adjusted pretax income should be slightly higher than the $25 million we reported in last year's second quarter. Included in our pretax guidance for Q2 is approximately $40 million of workforce rebalancing charges. On the topic of cash flow for the year as a whole, we project $700 million of net capital expenditures, a similar amount of depreciation expense, and $150 million in cash taxes. This translates to the roughly $300 million in adjusted free cash flow in fiscal 2025 that I mentioned earlier. Over the medium term, we remain committed to delivering significant margin expansion in 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. To wrap up, our business model centers around providing mission-critical services to large complex organizations that rely on our technology experts and insights to operate and advance their businesses. Our leading market position in IT infrastructure services and the mission-critical nature of what we do distinguish us from other providers of tech services. Our service levels and customer satisfaction scores make it clear that we serve our customers extremely well. Our fiscal first quarter results demonstrate continued operational execution that's putting us on pace to achieve our fiscal year 2025 targets. With that, Martin and I would be pleased to take your questions.

Thank you, Martin. Are you ready for your first question?

You bet.

Our first question comes from the line of Tien-Tsin Huang with JPMorgan.

Thank you. Good morning. Good results here. Just on the signings side, I wanted to ask about the trend or if there are any interesting observations on the mix of renewal versus new work or even new logos. I know there's good progress in building quality gross profit, but just curious if the composition is changing at all? And are there any signs of delays in some of the backlog converting?

Thank you, Tien-Tsin, for your kind words. Regarding our composition, we are experiencing a consistently solid growth rate in Kyndryl Consult. The signings indicate an increased focus on our advisory services, while the management run side of our business remains substantial. We are seeing strong demand from the Consult segment, marking the third consecutive quarter of total signings growth. As we approach the fourth quarter, we are growing more confident about the trajectory of our overall signings profile. While there are factors that may reduce the overall scope of signings from our focus accounts, we are simultaneously expanding our scope in labor and elements vital to our business model. This expansion indicates that the value and propositions we offer to our clients are proving to be quite impactful. And then finally, again, as I mentioned earlier, we've had three good quarters of overall growth, even stronger in Consult. But as we sit here, we just had a great July, so I think it's likely we're going to have a fourth quarter coming up of good growth in total signings as well.

It's great to hear about July. I wanted to follow up on what David mentioned regarding not needing to make deals to achieve your targets and focusing on smaller acquisitions. I'm curious about your willingness to consider larger acquisitions, especially given the current phase of the transformation of the 3A's, even if they are opportunistic. I would appreciate any thoughts on this.

Well, David's here, but I'm going to jump in as well. And certainly, David made some comments in his prepared remarks around that we don't need to do acquisitions. Look, the whole business, as we've talked about for a number of years, is focused on delivering the financial performance that we laid out 2.5 years ago, as I mentioned. When you do the math in fiscal '27, that's $1 billion of adjusted PTI. We put on the table this year another big step toward that profit. That's what this whole business is working on. We are focused on delivering the return to revenue growth in the fourth quarter. We're focused on delivering nearly a $300 million improvement in adjusted PTI this year, again, on our way to $1 billion in total. As we've said before, we are focused on our balance sheet in the form of making sure we maintain investment grade and make sure we have the right liquidity to support the business. I believe our statements align with our actions. Specifically, we acquired Skytap, which serves as a strong example of the small acquisitions we pursue to meet our customers' needs. Skytap is a valuable partner for us, and it fits well within our brand's capabilities. This acquisition is also in line with the financial goals we established 2.5 years ago as we strive towards fiscal '27. This is the direction Kyndryl is pursuing.

Yes. The comments I made, we made about not needing any acquisition are exactly what we meant.

Next question, please.

Our next question comes from the line of Ian Zaffino with Oppenheimer & Co.

Just kind of wanted to get your sense of growing confidence in the margins? What is basically giving you confidence in that? And maybe just kind of the components, whether how much is from advanced delivery, all the other initiatives, you can maybe help us understand.

Yes, sure. Thank you, and thanks for joining the call this morning. I'll start, and then, obviously, I'll ask David to make some comments as well. Look, the confidence that we get in our margin profile is really probably best displayed in the charts we shared during our prepared remarks, and we've shared this chart very consistently. You can see since spin, that we have consistently delivered margins that will put us into that high single-digit pretax margin range as more and more of our P&L is determined by our post-spin signings versus the signings that we were spun out with. Since the spin, we have consistently added to the backlog every quarter, achieving high single-digit growth. Currently, we have an equal balance of inherited backlog and newly created backlog, which is a crucial point for our overall profit and loss. Looking ahead to next year, we expect that about two-thirds of our profit and loss will be influenced by post-spin contracts. The backlog performance, as David indicated in his prepared remarks, shows that our gross profit dollar book-to-bill is strong, maintaining a consistent margin profile while delivering positive gross results. The gross profit dollar book-to-bill is greater than 1. And now we're getting back to, as I mentioned earlier, three quarters of signings growth with likely a fourth quarter we feel pretty good about the next quarter as well. So we're seeing not only profit book-to-bill growth, we're seeing consistent value capture in what's going in the backlog, and now we're getting back to revenue growth. So the confidence, I think, comes from the data.

I completely agree. It's the data and the execution that we've had over the last few years since we became an independent company. You're seeing the growth in Consult signings and Consult revenues as part of it, and the growth in hyperscaler-related revenue is part of it as well. And as I mentioned on the call, those are great examples of how we're able to grow and really succeed in the areas that we focus on for growth. Martin mentioned the signings growth that we've had now for quarters, a strong July that we had. That's another example. The execution on our 3A's consistently over the last couple of years and the tremendous impact that the 3A's are having are also examples of what gives us confidence going forward. The last one I'd mention on that is what we referred to as our did versus bid results, how our contracts perform relative to where we price them, and that has tended to be strong and consistently strong for us. So the fact that we're signing business with high projected single-digit margins gives us a lot of confidence that we'll be able to deliver those sorts of margins from those contracts.

Okay, great. I just want to follow up on something similar. I think I heard a $1 billion pretax income figure mentioned. Is that new information? You've hinted at it, but we're not quite at that $1 billion figure yet. Is this a new development? Do we have more confidence in that number? How should we look at this?

Yes. So one, it's not new. When we talked about the 3A's already 2.5 years ago, we laid out a path to get there. We were talking about exactly this data. And we've been consistently reaffirming, if you will, that the data supports that trajectory and the time frames we originally laid out. So certainly not new. And as we trundle through quarter after quarter, and we keep delivering and the team keeps executing on the 3A's, and we see the momentum we're capturing and the value we're capturing in Kyndryl Consult. Then we add to that some of the newer things. So as you saw, we're in the early stages. We created what I think is going to be quite a meaningful partnership with NVIDIA. You just saw us do something with SAP and their RISE platform, which is going to represent another big opportunity for us. So all of the data continues to support what we laid out 2.5 years ago and what we've continued to talk about, which was in that medium term, which is now only a couple of years away, fiscal '27 in the medium term, this business, very stable business, but it will get back to good rates of growth, and then we'll deliver $1 billion of adjusted PTI.

Okay. Great. Yes, because the Street is just not there yet. So glad to hear that you're looking for something better than the Street. So I'll let me jump on.

Our next question comes from David Togut with Evercore ISI.

Martin and David. Martin, could you speak to the kind of detailed underlying drivers of the 49% constant currency growth in Kyndryl Consult bookings in Q1, sort of underlying drivers and sustainability? And then I'll ask my follow-up upfront of David, which is the signaling of capital returns over time. Do you need to get to the $1 billion in pretax income in FY '27 to start returning capital? Or could that happen before then?

I believe David asked me first, so I will go first if that's alright. Kyndryl Consult's performance is unique compared to others in the market. There is a reason we are succeeding, which is rooted in our expertise in what we call run and transform—this is what our customers require. They understand the need to revamp their IT systems, but it must occur while they continue their operations. We are in a strong position due to our skills and capabilities, along with the significant investments we've made to help our customers progress into the future. To that, we've invested quite heavily to take those skills and supplement them with much more industry-standard skills. And so now you have not only the group of engineers who understand your systems, but now they are contemporary and relevant in a much broader industry context. Plus, we've invested heavily in Kyndryl Bridge, which gives insights. We're generating, as we said in our prepared remarks, we're generating over 3 million insights per month to help our customers, which is saving them money. So you take the engineering and the trust we started with, you invest heavily in the people so that they have the most contemporary skills. You invest in joining the ecosystem that really matters to our customer base. You invest heavily in innovation so that you show up with new ideas and with insights that customers cannot get anywhere else. It's not surprising to me that Kyndryl is now at the center of the significant trends that our customers are enthusiastic about, such as AI and cloud innovations, while also addressing challenges like skill shortages, regulatory requirements, security issues, and the need for resilience. We began with strong talent that our customers trust to manage their most critical workloads, and we have made significant investments in our people and innovation. We've also integrated into the ecosystem that is essential for our customers, which is why we find ourselves at the core of the trends they are navigating. Everyone is trying to figure out digital transformation, and customers have conveyed that they can solve their challenges with technology. This includes reaching new customers, serving existing customers more efficiently, gaining insights about their customers, and optimizing their operations. All of this transformation relies on technology, necessitating that infrastructure plays a crucial role in this journey.

Yes. And leveraging our capabilities and as Martin said, investing in our capabilities in Consult has been a big part of our strategy. Like Martin said, when you got a job to do, you've got to do it well. You have to give the other fellow help. For us, that really means investing in Consult and being in a position where we can lead and win and compete very effectively in this space, and that's showing up in the 49% signings growth you saw this last quarter in the consistent double-digit growth we're delivering in Consult.

Operator, we're going to have Martin say a couple of closing words, but I think that closes out our queue.

Perfect. I'm showing no further questions at this time. I would now like to turn it back to Martin for closing remarks.

Yes. Thanks, operator, and thanks, everybody, for joining us again today. Hopefully, you can get a sense, and you can hear how enthusiastic we are about the strong start to the fiscal year. I also want to add and share the gratitude with the whole Kyndryl team for their hard work, contributions, and efforts, including, by the way, the tremendous job that the Kyndryl team did in recovering our customers from the CrowdStrike incident. It was just a phenomenal display of engineering prowess and urgency in support of important customers. Look, we're in a tremendous position in our third year as an independent company. Our unique run and transform approach is absolutely resonating with and adding a lot of value to our customers because it supports their continuous innovation while maintaining their operational excellence. We, as a firm, are capitalizing on the many opportunities we have to drive profitable growth. You see that not only in the data but you see that in the things that are going to affect the data in the future. As I mentioned earlier, the recent enhanced partnership with SAP will be a big part of how we bring value in the future and NVIDIA would be another one, all now announced but not yet part of the data, but the data looks great. It looks great in progress so far. David and I are looking forward to getting together with the investors, with our analyst community at our upcoming investor conference, as we said, our first Investor Day on November 21, and in the meantime, thank you again for joining us, and we'll talk to you again in the quarter. Thanks, everybody.

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