At a glance

  • Kyndryl on Tuesday disclosed a material weakness in its internal control over financial reporting when it announced the filing of its delayed 10-Q, which covers the third quarter of fiscal 2026 ended December 31, 2025. The company also noted it was not restating financial results for the current period or any prior period.
  • The filing comes about a week after it announced a delay in submitting its quarterly report. The New York-based enterprise technology company previously said it would delay its quarterly report for the period ended December 31 due to a review of its cash management practices. As CFO Dive previously reported, the company said in a February 9 filing with the U.S. Securities and Exchange Commission that it expected to report material weaknesses in the current period, fiscal 2025 ended March 31, and the first two quarters of fiscal 2026.
  • In Tuesday's press release and filings, which include results for the current period and amendments for the fiscal year and quarters ended June 30 and September 30, respectively, Kyndryl disclosed a material weakness in internal control over financial reporting involving disclosure practices, "including issues related to cash management practices involving certain inter-quarter deferred vendor payments."

Deep dive

The enterprise technology provider also detailed a remediation plan to address the weaknesses, which will be led by interim CFO Harsh Chugh and interim corporate controller Bhavna Doegar. According to company filings, Chugh and Doegar were both appointed to their interim roles last week, along with Mark Ringes as interim general counsel, after Kyndryl's former CFO David Wyshner and former general counsel Edward Sebold resigned immediately.

Under their interim leadership, Kyndryl expects to make several changes to its internal controls as part of its remediation plan.

Such changes include: updating training on disclosure controls and internal controls and Sarbanes-Oxley Act reporting requirements; enhancing the responsibilities of its disclosure committee, including providing additional training on duties; and strengthening "controls, policies, procedures, and training related to the company's whistleblower hotline, including the evaluation and escalation to the company's audit committee of certain reports submitted through the hotline and certain other available reporting channels," according to the filing.

Kyndryl, which was spun off from IBM, said in Tuesday's press release announcing its quarterly filing that its "financial position remains strong. Kyndryl's global team remains focused on delivering mission-critical services to our clients and achieving our multi-year performance goals."

During the company's earnings call last week, CEO and Chairman Martin Schroeter reiterated that the company remains on track to meet its 2028 goals, which include generating more than $1 billion in adjusted free cash flow, CFO Dive previously reported.

In a separate filing, Kyndryl also reported updates to compensation arrangements related to the interim appointments of Chugh and Doegar. The company said in the amendment that Chugh, as interim CFO, will receive a one-time grant of restricted stock units valued at $500,000, vesting six months after the grant date, along with supplemental cash payments of $35,000 per month.

Meanwhile, Doegar, as interim corporate controller, will receive restricted stock units with a grant-date fair value of $864,000, vesting three years after the grant date.