Kyndryl replaces financial leadership, cites weak reporting controls

Kyndryl has replaced its CFO, corporate controller, and general counsel, the company’s CEO Martin Schroeter announced during a conference call to discuss the company’s financial results on Monday.

It reported the departures of CFO David Wyshner and General Counsel Edward Sebold to the US Securities and Exchange Commission a few days prior, in an 8-K “Report of unscheduled material events or corporate event.”

Former COO Harsh Chugh was named as interim CFO, and deputy general counsel Mark Ringes as interim general counsel in Kyndryl’s Feb. 5 filing with the SEC. Chugh and Ringes were long-time IBM employees prior to Kyndryl’s spin-out in 2021.

The filing also named Bhavna Doegar as interim corporate controller, after global controller Vineet Khurana stepped down to take on the role of SVP, business operations. Doegar joined Kyndryl as SVP, finance and strategy, just two months ago, after holding a series of senior roles at Genpact.

While Kyndryl’s 8-K gave no reasons for the execs’ departures, a separate filing on Monday provided some clues, as the company said it was forced to delay filing its audited quarterly results.

Kyndryl “is reviewing its cash management practices, related disclosures (including regarding the drivers of the company’s adjusted free cash flow metric), the efficacy of the company’s internal control over financial reporting, and certain other matters,” it said.

When it does get around to filing its report for the quarter ended December 31, Kyndryl said, it anticipates reporting material weaknesses in its internal control over financial reporting for the full fiscal year ended march 31, and for the three subsequent quarters. These weaknesses “are expected to include, but may not be limited to, the effectiveness and strength of certain functions at the company, including with respect to controls related to information and communication and tone at the top.”

Cooperating with the SEC

The delay followed its receipt of requests for documentation requests from the SEC’s Division of Enforcement.

“Due to this review, the finalization of the quarterly report, including the company’s assessment of internal control over financial reporting, requires additional time to complete,” it said, noting that it anticipated no impact on its consolidated balance sheets, or consolidated statements of income cash flows, or equity.

Kyndryl is cooperating with the SEC, Schroeter said during the conference call.

Despite the anticipated delay in its formal filing with the SEC, the company presented results for the three months ending December 31, 2025, the third quarter of its 2026 fiscal year.

It reported revenue for the quarter of $3.9 billion, up 3% year on year, or flat at constant currency rates. Net income was $57 million, down from $215 million a year prior, when the company recorded what it described as “a significant transaction-related benefit” from the sale of Canadian business unit Securities Industry Services (SIS).

It’s been four years since Kyndryl split from IBM, but their relationship continues to weigh heavily on Kyndryl’s performance. “At the time of the spin-off, the commercial agreement that we inherited essentially put 40% of our revenue in a low- to no-margin position,” Schroeter said during the conference call. The company was spending $4 billion a year with IBM on services it then rebilled to its customers. Now that annual spend is down to $2 billon, but the sales relationship with IBM continues to drag Kyndryl’s annual growth down by around 3.5 percentage points, he said.

Kyndryl expects a year-on-year decline in revenue at constant currency of between 2% and 3% for its full fiscal year ending March 31, 2026, interim CFO Harsh Chugh said during the same conference call.

Schroeter blamed the forecast revenue decline on a number of factors, including headwinds from the evolving IBM relationship and customer concerns around AI and digital sovereignty. “AI is making customers rethink how their infrastructure should run, and the sovereignty discussions around the world are top of mind for everybody,” he said.

However, Schroeter said, “We are growing the core part that matters so much to us,” he said, referring to consulting and hyperscaler-related revenue, which for the most recent quarter rose 29% and 73% year on year respectively.