Tien-Tsin Huang: Okay. Very good. Just then my quick follow-up, just on the gross margins were very healthy ahead of what we had, do you feel like you’re in a good place from a delivery standpoint? I know different pockets of the world are seeing different issues with respect to tech labor. Do you feel like you’re in a good place? I know some of the workforce rebalancing is calming down here as well, but any updated thoughts there. Thank you.
Martin Schroeter: Yes. I mean, again, I’ll ask David for his comments as well. Look, our delivery remains world-class. Our delivery is the reason our customers are willing to take the journey with us into new spaces. It’s the reason they’re willing to engage with us and our alliance partners in new scope. And the team – our team has done a phenomenal job for the last 2.5 years and delivering every day and our focus around advanced delivery and our focus around Kyndryl Bridge has always been part of helping that. It has always been focused on delivering even higher quality, automating more so that our customers have a better experience. So I feel – touchwood, I feel like the role we play, which our teams take very seriously, the role we play in our customers’ mission-critical environments is the one that motivates them every day to get up and deliver great service, and I think we’re doing that.
David Wyshner: Yes. And I think that’s right. The gross margin improvement that we delivered last year is in the 300 basis point range. So we’re making a tremendous amount of progress there. And I feel really good about where we are from a delivery perspective for two reasons. Number one, through our advanced delivery initiative, we’ve driven a substantial amount of progress, reaching $575 million of annualized savings already, it shows the progress that we’ve made, and we continue to have opportunity to drive incremental efficiencies from where we are. And Tien-Tsin, that’s one of the reasons we’ve increased the ultimate goal for advanced delivery from the $600 million we had initially targeted to $800 million now. So it’s a sign that we’ve got more runway and more benefits still to be gained in this area.
Tien-Tsin Huang: Thank you.
Lori Chaitman: Thanks, Tien-Tsin. Operator, next question please.
Operator: Your next question comes from the line of Jamie Friedman with Susquehanna. Your line is open.
Jamie Friedman: Thank you for taking my question. I echo the congratulations. A lot of hard work here this year. I wanted to ask particularly about the accounts in the 3As is on Page 15. I’m just wondering, Martin and David, if I could get with perspective as to why that – because this is a key part of the investment thesis, why that seems to be performing better and faster with the $300 million of year-over-year earnings benefit. Why is that exceeding your expectations?
Martin Schroeter: Yes. So a few things. Thank you again. Thank you also for the nice comments. Look, when we began and laid out the strategy, the 3A is strategy and particularly on account focus, we felt very confident that our customers would engage and come with us on this journey because of the role we play in their environments because of the trust that we’ve built up over years and years and years. And the fact is we’re really good at what we do. So they love the engineering talent. They love the services we provide. So we were very confident in that. Now having said that, we also made a bunch of assumptions around the timing for these and what the ultimate landing spot would be as in how much content will come out, how much new scope will we get, what’s the quarter in which or the year in which some of these customers will all align to get to a new relationship and sort of reenergize these relationships.
And so we made a bunch of assumptions and the fact is that while we were confident going in with the basis for the strategy, we didn’t know how long it would take. We didn’t know what they would look like on the other side, and we didn’t know what ultimately the ins and outs, the puts and takes would be in these relationships. And what’s turned out is that they are as enthusiastic. Our customer base is as enthusiastic to work their way through these as we expected, and we’re just getting them done a bit faster. And I think that’s because I think that’s because we have invested heavily in new capabilities. So we show up with new ideas. We’ve invested heavily in innovation. So we show up with new tools, a new platform to help them get more insights and we put all of that into a context of a business outcome for them.
So it makes it easy to understand and easy to see why this will be better for us and obviously be better for them as well. And remember, all of this was in the context of how do we accelerate it from just its natural renewal periods, which extend well out into next 6, 7, 8 years. So we made a lot of assumptions. We’ve – the investments we’ve made in our people, in the ecosystem and in our IP and data are paying off and customers see the benefit to sort of resetting, if you will, these relationships, and they’re better off. And obviously, we’re better off.
Jamie Friedman: Okay. Thanks for that. And then for my follow-up, David, you were going kind of quick there, and there was something you said that I don’t actually see in the slides, but I’m sure it’s me, not you, but when you were talking about the 575 is, I may have missed it, I apologize, but I thought that you annualize the savings I thought related to re-skilling, but it doesn’t seem to be in the transcript. How are you annualizing the 575?
David Wyshner: Yes. So the $575 million is the benefit that we’re getting from advanced delivery compared to where we – compared to where we started. So in fiscal ’23, at the end of fiscal ’23, we were at a $275 million run rate from advanced delivery. And by the end of fiscal ’24, we had increased it by $300 million to a $575 million annual run rate and we expect that to continue to grow from there. So that’s really the key numbers, the key measure of our progress there that we point to.
Jamie Friedman: Got it. Okay. Thank you very much.
Lori Chaitman: Thanks, Jamie. Operator, next question please?
Operator: Your next question comes from the line of David Togut with Evercore ISI. Your line is open.
David Togut: Thank you, good morning. And thanks for taking my question. I apologize if this has been asked is there are several calls this morning, but the strength in demand for Kyndryl Consult was notable, particularly against the consulting industry environment, which has been under pressure. Of course, Kyndryl Consult is nondiscretionary and the weaknesses elsewhere, really more in discretionary related demand. But could you go a level deeper on demand drivers for Kyndryl Consult in particular, how durable those demand drivers are if we look to FY ’25 and beyond?
Martin Schroeter: Sure. Sure, David. Thank you. And thank you for the nice comments, and thank you for joining. Kyndryl Consult has come up, and we do recognize that the performance that we’re delivering and our view is not what you’re seeing in many other places. And I think the reasons for that, which I’m going to talk about, the reasons for that are enduring and in fact, can continue, I think, for a period of time. So at our heart, as we’ve been talking about, we’ve been investing quite heavily in our team skills. We’ve been investing heavily in building new capabilities. And we’ve been investing quite heavily in building out our IP and the use of our data around Kyndryl Bridge. And so as our teams engage with new capabilities, with innovation and with relevant business outcome oriented ideas for our customers to pursue in this environment, in any environment, which can be around, for instance, how to optimize their systems.
Everyone is interested in productivity in a macro environment like this, around resiliency, around how to get ready, for instance, for GenAI, et cetera, because of the role we play in their environments and the mission-critical nature of what we do, those investments are paying off. And we expect them to continue. And in fact, keep in mind that Kyndryl Bridge is only in about half of our customer base as we sit here today. So as we continue to build new capabilities with their alliance partners as we continue to invest in Kyndryl Bridge and bring new functionality and make more use of our data across a broader element, a broader piece of our customer base I see the enduring nature of why we’re outperforming, why we’re performing differently than what you see from others.
I think that continues.
David Wyshner: Yes. And when you think about some of the initiatives we’ve been pursuing to really see consult at the nexus of them. It’s an area of focus in and of itself, but Kyndryl Bridge gives rise to additional consult opportunities and consultative selling opportunities. The alliances we have are very helpful from a consult perspective. Our practices are driving progress there, particularly in areas like cloud migration and mainframe modernization and security and resiliency and obviously, apps-sated [ph] in AI and even regulatory changes like DORA, the Digital Operational Resilience Act and the EU is giving rise to additional needs for consult work on our behalf. So we really see that – we see consult benefiting from a number of different initiatives and actions we’ve taken and even some elements of the macro environment.
