Kyndryl's Shift from Adjusted to Reported Free Cash Flow Preceded an Accounting Investigation into Cash Management
(NYSE: KD)
NEW YORK, Feb. 11, 2026 /PRNewswire/ -- Levi & Korsinsky, LLP is investigating Kyndryl Holdings, Inc. (NYSE: KD) following the company's February 9, 2026 announcement that it is reviewing its cash management procedures and related disclosures as part of an internal accounting investigation. Investors who held KD shares and incurred losses may obtain more information about their rights.
A key element of the investigation concerns Kyndryl's cash-flow disclosures. SEC regulations require that when a company presents non-GAAP financial measures such as "adjusted free cash flow," it must reconcile those figures to the nearest GAAP equivalent and explain why the non-GAAP measure is useful to investors. Regulation G and Item 10(e) of Regulation S-K govern these disclosures and require that non-GAAP presentations not be misleading.
During the Q1 FY2026 earnings call on August 5, 2025, CFO David Wyshner announced a notable change in Kyndryl's reporting approach: "Our cash-flow adjustments have become immaterial spin-related costs have subsided. So we're now highlighting free cash flow rather than adjusted free cash flow." This transition from adjusted to reported free cash flow was presented as a sign of financial maturity – the implication being that the gap between GAAP and non-GAAP cash metrics had narrowed to the point of insignificance.
However, the February 9, 2026 disclosure revealed that Kyndryl was reviewing the very cash management procedures underlying these metrics. The company expects to report "material weaknesses" in its internal controls and "is developing a remediation plan" to deal with the fallout. If the cash-flow adjustments that Kyndryl characterized as "immaterial" were, in fact, material or subject to internal-control deficiencies, the transition announcement may have created a misleading impression of the company's financial reporting integrity.
On the Q2 FY2026 earnings call (November 5, 2025), Wyshner further stated: "We generated free cash flow of $22 million in the second quarter… Our cash balance at September 30 was $1.3 billion… Net leverage was below 1x … and we ended the quarter well within our target range at 0.7x." He also guided: "We're forecasting roughly 100% conversion of adjusted pretax income less cash taxes into free cash flow." These figures are now subject to review under the internal accounting investigation.
The gap between the company's presentation of clean, maturing cash-flow metrics and the subsequent disclosure of a cash-management accounting probe is significant. If the investigation determines that prior cash-flow figures were misstated, the entire framework upon which investors evaluated Kyndryl's capital-allocation strategy – including the $400 million increase to the share-repurchase program – would have been based on unreliable data.
Levi & Korsinsky, LLP is a nationally recognized firm with offices in New York, California, Connecticut, and Washington, D.C. that prosecutes securities, merger, and consumer class actions on behalf of investors and consumers; more information is available at www.zlk.com.
CONTACT:
Joseph E. Levi, Esq.
Levi & Korsinsky, LLP
33 Whitehall Street, 27th Floor
New York, NY 10004
Tel: (212) 363-7500
Fax: (212) 363-7171
Email: [email protected]
www.zlk.com
SOURCE Levi & Korsinsky, LLP
Share this article