Kyndryl flags weakness in financial reporting procedures, shuffles senior executives

Feb 9 (Reuters) – Software provider Kyndryl on Monday delayed the filing of its quarterly report for the October-December period, citing material weaknesses in its financial reporting procedures, sending its shares tumbling 55% in premarket trading. The company said the weaknesses span multiple periods including its full fiscal year ended March 2025 and the first two quarters of fiscal 2026. Kyndryl was IBM's infrastructure services business until its spinoff in November 2021. Since then, the company, which provides software and services to help businesses run day-to-day operations and integrate artificial intelligence, has been restructuring several no-margin contracts inherited from IBM as part of a broader restructuring effort. Separately, the company announced the departure of its finance chief David Wyshner and the stepping down of Vineet Khurana as global controller. A corporate controller is typically the chief accountant of a company. Kyndryl appointed Harsh Chugh as its interim CFO and Bhavna Doegar as interim corporate controller, effective immediately. When asked whether changes in management were linked to its review of financial reporting, the company declined to comment. In its statement, the company said investors should no longer rely on its assessment of internal controls over financial reporting or on its auditor PricewaterhouseCoopers' opinion on those mechanisms in the company's fiscal 2025 annual report. PricewaterhouseCoopers did not immediately respond to Reuters' request for comment. However, the company added it currently does not expect an impact to its balance sheets, income statements, statements of cash flows or equity statements. Kyndryl said its audit committee began reviewing cash management practices, related disclosures and internal controls following voluntary document requests from the U.S. Securities and Exchange Commission's enforcement division. New York-based Kyndryl on Monday also cut its fiscal 2026 outlook for constant-currency revenue to fall 2% to 3% from a prior forecast of 1% growth. For the quarter ended December, the company posted a 3% rise in revenue to $3.86 billion, thanks to sales tied to cloud hyperscaler deals. (Reporting by Harshita Mary Varghese in Bengaluru; Editing by Shilpi Majumdar and Leroy Leo)

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