Dive Brief:
- Kyndryl on Tuesday disclosed material weaknesses in its internal controls for financial reporting in announcing the filing of its delayed 10-Q for its fiscal third quarter for 2026— though it also noted it has not made any financial restatements for its current period or any previous periods.
- The filing comes approximately a week after the New York-based enterprise technology company announced its filing for the quarter ended Dec. 31 would be delayed as it undertook a review of its cash management practices. The business said in Feb. 9 filing with the Securities and Exchange Commission that it expected to report material weaknesses both for its current period, its fiscal 2025 ended Mar. 31, and the first two quarters of its fiscal 2026, CFO Dive previously reported.
- In its Tuesday press release and filings — which included results for its current period as well as amendments filed for its fiscal year and the quarters ended June 30 and Sept. 30, respectively — Kyndryl disclosed material weaknesses in its internal controls for financial reporting relating to disclosure practices, “including with respect to certain cash management practices regarding deferred vendor payments quarter to quarter.”
Dive Insight:
The enterprise technology provider also detailed a remediation plan to address those weaknesses to be led by its interim CFO, Harsh Chugh, and interim corporate controller, Bhavna Doegar. Both Chugh and Doegar were appointed to their interim positions last week, alongside Mark Ringes as interim general counsel, after Kyndryl’s former CFO, David Wyshner, and ex-general counsel Edward Sebold stepped down effective immediately, according to company filings.
Under their interim leadership, Kyndryl expects to make numerous changes to its internal controls as part of its remediation plan.
Such changes include: updated training on disclosure controls and internal controls regarding reporting and requirements under the Sarbanes-Oxley Act; enhancing the responsibilities of its disclosure committee to include providing incremental training on the responsibilities, and enhancing “controls, policies, procedures and training related to the Company’s reporting hotline, including related to the evaluation and escalation to the Company’s Audit Committee of certain reports made through the hotline and certain other available reporting channels,” according to the filing.
An IBM spinoff, Kyndryl’s “financial position remains strong,” the company said in its Tuesday release announcing its quarterly filing. “Kyndryl's global team remains laser-focused on delivering mission-critical services for customers and meeting its multi-year performance objectives.”
During the company’s earnings call last week, CEO and Chairman Martin Schroeter reiterated that the company remains on track to achieve its 2028 goals, which includes generating over $1 billion in adjusted free cash flow, CFO Dive previously reported.
In a separate filing, Kyndryl also reported updates to compensatory arrangements related to Chugh and Doegar’s interim appointments. As interim finance chief, Chugh will receive a one-time grant of restricted stock units with a value of $500,000, set to vest six months from the date of the grant, as well as a supplemental monthly cash payment of $35,000, the company said in the amendment.
Meanwhile, as interim controller Doegar will receive a grant of RSUs with a grant date fair value of $864,000, set to vest three years after the grant date.
