Good afternoon, everyone. My name is Oona Polizzi and I'm Kyndryl's Global Head of Corporate Affairs. We want to welcome you and thank you for joining us today to hear about the opportunities ahead for Kyndryl as we prepare to become an independent publicly traded company. Before we begin, I would like to remind everyone that our remarks today will include forward looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied.
And these statements speak only to our expectations as of today. For more details on some of these risks, Please see the Risk Factors section of the company's information statement included as Exhibit 99.1 to the company's registration statement, Form 10. In today's remarks, we will also refer to certain non GAAP financial measures. Corresponding GAAP measures and a reconciliation of non GAAP measures to GAAP measures are provided The presentation materials for today's event, which are available on our website at investors. Kyndryl.com.
The information contained in this presentation is provided as of the date of this presentation and is subject to change without notice. The information contained in this presentation may be updated, completed, revised and amended and such information may change materially in the future. I am pleased to be here with our CEO, Martin Schroeder Group President, Eli Keenan and our CFO, David Weichner. They will lead today's discussions about Kyndryl's business address bull market, competitive advantages, growth prospects and financial profile. Following the prepared remarks, We will hold a Q and A session with all three executives as well as our CTO, Antoine Chiguri.
If you are interested in asking a question, please submit through the WebEx chat at any point during this presentation. Please include your full name and company. We will get to as many as time allows. Today's presentation materials are available on our Investor Relations website. I would now like to turn it over to our CEO, Martin Schroeder.
Martin?
Thanks, Oona, and hello to each of you and thank you for joining our first Kyndryl Investor Meeting. I'd like to step back and start with the very basics of who we are and what we do. Kyndryl is a true IT service With a customer centered culture, customers are our North Star. We help our customers design, manage and modernize the Technology systems that the world depends on every day. And as you'd expect from a true services company, at the core of our business is our people And our customer relationships.
We have 90,000 employees who represent the best global talent in the industry. And I know they're the best because that's what my customers tell me over and over. They've done more IT transformation and automation engagements than anyone. He invented how the industry does it. These are people with experience in addressing critical technology challenges, with deep experience in working with hybrid IT And multi cloud environments, as well as working with new and emerging technologies like edge and 5 gs.
Last year, our people earned more than 140,000 credits Strategic skills including cloud, AI, analytics and security to name a few. And the continued development of our people, our human capital, Broadening their skills even further is one of our highest priorities. Now let's turn to what we do every day with our customers and our partners. First of all, when you look at our customer base, we support the operations of more than 4,000 customers around the globe, including approximately 75 Our customers make 45% of the world's passenger cars. They account for 50% of hypermarket retail sales, manage nearly half of the world's mobile collections.
Our large banking customers represent over 60% of total assets managed. Kyndryl's take great pride in working with our customers to power their critical systems, which in turn powers the global digital economy. We do this through a super strong portfolio of IT services That are now aligned across 6 global practice areas. These are contemporary services aimed at capturing the opportunity associated with Customers' digital transformations. We have cloud services where we help support our customers' transition to cloud environments As well as modernizing existing clouds.
Our core enterprise and Z cloud services offer customers secure, reliable, High volume computing mainframe capabilities. Digital workplace services helps customers to enhance the end user experience To enable flexible work locations and optimized device management. This practice has been particularly important during the pandemic. With our application data and AI services, we help our customers improve business outcomes through data management and AI infused operations. We also provide a range of services from ERP to industry and enterprise unique applications.
Through our network and edge services, we provide unified network services for cloud and data center connectivity and enable compute power at the edge. And finally, we have leading security and resiliency services in the areas of cybersecurity, business continuity and disaster recovery, helping customers Constantly adapt to new threats and regulatory standards. So we have tremendous capabilities in both traditional infrastructure services And in newer technologies. And across those 6 global practice areas, we engage with customers in advisory, implementation and managed services. As you can see on the slide, we have industry recognized leadership standings across the portfolio.
So what our portfolio allows us to do, We can be both the integrator and the innovator for our customers. We're known for integrating tools and vendors in the data center and we'll still do that. But as an independent company, we're going to ramp up our focus on innovation, going after new market opportunity And using our experience and our IP to the benefit of our customers. Now to help bring to life the scope and the scale of the capabilities That we really bring to bear for our customers, I'll share some key stats. First is our global scale.
We have operations in 63 countries, which allows us to serve customers domestically and globally based on their requirements. We manage the vast majority of mainframes on the planet With 6,000,000,000,000 instructions processed each second. We provide 2,000,000 terabytes of storage. We manage 750,000 virtual servers And 270,000 network devices. And we also manage over 25,000 SAP and Oracle systems.
So we have a lot of scale, But we also have vitality. We apply our data, our IP and automation to run our customer systems better. 9,000,000 automated actions per month results in greater quality and efficiency for us and for our customers. And 4,000,000 backup jobs completed daily means more secure and resilient systems. Now I'd like to turn to what's driving the work and the types of challenges we're helping our customers address.
I think we all appreciate that digital transformation in every industry Has been accelerated by the global pandemic. IDC estimates 65% of global GDP will be digitized by next year. And digitization is Fundamental driver of our business. But many companies are playing catch up with half of all companies just beginning their digital journeys. A third of the CEOs are planning to increase their cybersecurity investments by double digits.
And among top performing companies, 62% of the CEOs identify IT infrastructure as their biggest challenge. But increasing complexity of IT infrastructure and a lack of Skills are real barriers to transformation. This is where Kyndryl's core strengths come in. Kyndryl helps customers solve these issues by driving transformation and agility, By maintaining business continuity and reducing operational risk, by increasing their operational efficiency, By enabling workload portability and orchestration and by capitalizing on the pace of technology change. So with that as the backdrop of who we are And what we do with our customers, one of our primary objectives today is to make a compelling case for why Kyndryl is an attractive investment.
So this overview slide, I'll come back to at the very end, but this is sort of our agenda for the rest of the meeting. These are the primary areas that we believe Kyndryl will be will make Kyndryl an attractive investment. I'm going to take the first and second points, Expanded addressable market and our market position. Eli Keenan will cover our sustainable competitive advantages and he'll share stories about why customers select to be their long term partner. And I'll talk a little bit about an area that has really resonated with our customers, our ability to expand our ecosystem of partners.
And then David will go deeper on our financials. And I'll come back before the Q and A to talk a little bit about our new focused growth arena culture and our world class leadership team. But before we move on, I want to call out this last bullet on ESG. I don't want it to get lost because it is critically important. We're developing a holistic ESG platform and a strategy which will be overseen by a dedicated team.
On the environmental front, we We'll continue to expand on IBM's renewable energy objectives. We will establish our own targets for renewable electricity and for reductions in greenhouse gas emissions. We'll also invest in technologies to drive reductions for our customers. On the social front, we intend to make a positive impact on society Through our operations and our practices, we will work towards diversity and inclusion across all dimensions of our company, our leadership team, our employees and our board. And we'll work to maintain best practices in human capital management and user and data privacy, and we'll be a responsible corporate citizen.
With regard to governance, our compensation systems will be structured to align management's incentives with those of our shareholders. We will operate in a way that is ethical and in full compliance with all applicable laws and regulations. And we're coming out of the gate with a diverse and highly experienced Board of Directors. Over time, we'll ensure that that remains the case. And I am extremely proud of the board that we've been able to assemble.
As Chairman, I'll be joined by 9 leaders in business and academia, people with a global perspective on business and how to build a company with a new and vibrant customer Our lead independent director is Stephen Hester. Until June, he was the CEO for RSA Insurance Group And before that, the CEO of Royal Bank of Scotland. He's currently an independent director for Easyjet and he'll assume the role as Chairman of Easyjet in December. Our board members have diverse backgrounds in finance and healthcare, manufacturing and distribution and even a university president with a PhD in theoretical physics. Each of these leaders knows what it's like to establish something that's lasting, something that's important to customers, something that succeeds when customers are successful And something that is a culture of collaboration, mutual responsibility and excellence.
Now let's move to our next point on our investment thesis. Our separation more than doubles our addressable market from $240,000,000,000 pre spin to $510,000,000,000 by 2024 And it's driven by several tailwinds that we'll capitalize on. First, there is greater demand for digital transformation services given that about 65% of GDP will be digitized by 2022. This will create an even greater need for services that Kyndryl can provide to support enterprises With IT modernization. 2nd, 85% of the world's largest organizations continue to migrate applications to the cloud And consistently seek to partner with external service providers like Kyndryl as these transitions become more complex.
3rd, there's been an explosion in data and analytics. It's estimated the enterprises create and capture 64 zettabytes of data in 2020 alone. The sheer volume of data creates complexities for organizations that need to crunch that data for actionable insights. 4th, there's an urgent and obvious need to make information and technology systems more secure. The need to increase investment in cybersecurity is top of mind for CEOs Who are increasingly concerned about cyber threats to their operations and their growth prospects.
And lastly, the accelerating pace of companies adopting new technologies Like automation and AI and machine learning is rising, expected to continue as companies look to integrate new technologies into their existing IT estates. So looking ahead, Kyndryl's scale and ability to design, build and modernize mission critical technology systems Provides a huge opportunity to extend our leadership position in the markets we operate in. And because of our mission critical expertise And the customer relationships and trust we've earned, we are well positioned to capitalize on these tailwinds and provide these higher value services That will power our customers' digital transformations. So let me show you how these tailwinds combined with an independent Kyndryl translates to a much larger total addressable market for Slide shows you where we see the extra lift and opportunity after we separate from IBM. Pre spin, Kyndryl was geared mostly around a market focused on more traditional services.
Approximately $240,000,000,000 of opportunity consisting of areas such as infrastructure, network And digital workplace services and anchored by an IBM ecosystem. Separation enables us to participate more fully in an expanded market In areas of transformation services that are aligned to customers' digital journeys. The opportunity here is estimated to be $415,000,000,000 today And projected to grow to $510,000,000,000 in 2024. With approximately $175,000,000,000 in unlocked for us on day 1 of the spin. Not to say it is instantly available to us, we have a lot of work to do to build the skills and the capabilities, But the addressable market gets much larger when we are independent.
The areas of expanded opportunity include cloud, data security, Intelligent automation, these are projected to grow faster than our historical business mix and given their importance to customers' transformation journeys Really high value opportunities. And as I described earlier, we're building global practices that are linked to these opportunities areas. Global practices such as cloud, applications data and AI, security and resiliency and network and edge. Just to give you a bit more context with two examples, cloud services. Previously cloud services were infrastructure services tied to the IBM public cloud And IBM's ecosystem.
As an independent Kyndryl, we have the ability to work with the bigger ecosystem, unlocking more opportunity to participate across platforms. So the market didn't change, but what we're able to do changes. Data services is another good example. Previously, data services meant we managed Databases and spinning disks, hard drives and storage. Where we'll go as an independent company is higher value data engineering services, Curation, orchestration, things like that.
And like data services, over the next several years, we will increasingly shift our focus to higher growth, Higher value service offerings that will power our customers' digital transformations such as edge. Now moving to the next area of our investment thesis. Our leadership position in designing, managing and modernizing these mission critical information systems. So on launch day, We are the world's largest IT infrastructure services provider. We have unmatched intellectual capital and IP, More than 3,000 patents issued, 800 patents pending and 200 more already submitted.
We have world class expertise with 90,000 employees We have an average of 10 years of industry experience and we have global scale with state of the art delivery operations around the world, A presence in 63 countries and 459 data centers under our management. This is our launching point And it's not a position that we take for granted. Every day, we know that we need to deliver for our customers. Every day, we earn and keep their trust. So if I had to summarize Kyndryl, who we are, what we do and why we're special, this is what I would tell you.
At the center of everything we do is our customers And our team. We're now organized around the services our customers need as they transform digitally. Again, our new integrated portfolio is aligned to 6 global practices: Cloud services, core enterprise and zcloud, digital workplace services, applications, data and AI services, security and resiliency And network and edge. We offer advisory, implementation and managed services across technology infrastructures to help our customers Accelerate their unique digital transformation journeys to overcome persistent business and IT challenges and to deliver better results against There are strategic objectives like the need to increase operational efficiencies to reduce costs and improve their productivity, Like the need to reduce risk and maintain business continuity in the face of constantly changing and unpredictable markets. Their need to drive transformation and agility Deliver on their consumers' expectations, to enable workload portability to optimize technology usability, costs and benefits And capitalize on the pace of technology change to deepen their competitive differentiation now and into the future.
Taken together, the new independent Kyndryl has a flywheel model for growth. Our differentiation starts with our leadership in designing, building, Modernizing and operating systems at scale and our expert people have won the trust of our 4,000 customers who rely on us to manage their most mission critical systems. Our blue chip customer base has made us attractive to a broad ecosystem of strategic partners and is an ecosystem that we will And by investing in key relationships after separation. In turn, these partnerships enhance our expertise and our experience and they broaden our customer base, Allowing us to gain new input, new IP, new insights that inform our customer capabilities. And it reinforces our recognized leadership Continuing and giving more momentum to the cycle, creating a flywheel for growth.
I'll turn the meeting over to Eli Keenan to talk about our competitive advantages, Customer stories and our broader ecosystem of partners. Eli?
Hello, everyone. I would like to start with Kyndryl's competitive advantage. Our competitive advantage stems from the mission critical expertise of our people and our operational data and intellectual property, including our service management codified processes. In addition, in the later sections of the presentation, I'll discuss how as we combine these factors With our new freedom to engage a broader ecosystem, our new operating agility and how, when we apply them at scale Across our customer base, we can return this business to growth. So first, let's start with our people and their mission critical expertise.
Kyndryl's success is grounded in our ability to attract, develop and retain talent. As you would expect, our employees have deep Base of technical eminence with a mix that is skewed towards supporting on premise mission critical environments. These skills are the toughest to master in our industry. As Martin said earlier, our employees have done More IT transformation and automation engagements than anyone. They invented the way the industry does this.
As we spin, what sets us apart is our ability to extend our deep mission critical capabilities to more contemporary digital environments. And we've already started on this journey. On the left hand side of the slide, you will see that 96% of our employees are developing new Skills each year. We've completed nearly 3,000,000 hours of training in the first half of this year. And we secured nearly 250,000 badges, which are certified levels of skill achievement With more than half in cloud, agile and analytics, we've doubled our cloud certifications for platforms like AWS, Azure, GCP and others over the last 12 months alone.
And we have 19 customer innovation centers across the globe, which reflects our scale. We execute a global and local standardized delivery model with co creation innovation labs And industry centers of excellence to bring our expertise to our customers. The outcomes of these investments And our mission critical capabilities include very strong customer advocacy with NPS in the 60s Across multiple touch points, this puts us in the top quartile when benchmarked against peers. It's important to note that we've been able to consistently improve our NPS over the past couple of years and during the spin process. We have a disciplined approach to capture customer feedback and act on their input.
In addition, we manage over 31,000 Service level agreements, achieving an attainment of 99.8%. Finally, Kyndryl is recognized for our strong service management And integration capabilities by IP analysts. Several were mentioned by Martin earlier, for example, IDC, HFS, etcetera. Our operational data and intellectual property are also key differentiators. Starting at the bottom of this slide, to give you a sense of our scale, we add 2 to 4 terabytes to our data lake daily.
Our scale as the largest infrastructure services provider gives us a natural advantage. We're able to identify advanced operational IT patterns That generates new insights that form the basis of our customer value. In addition, we have 3,000 issued patents, 800 pending, 200 being filed. With over 60% in data and AI, Cloud and network, intelligent automation and security. Our scale that I mentioned earlier And applied AI allows us to learn faster and take our learnings and apply them to our platform to further benefit our customers.
To give you an example, the service that we manage generate millions of alerts per month, with a subset representing incidents that require intervention to make sure our customers' systems are up and running. From this subset, these incidents, we identify patterns that can be addressed proactively before they occur in our delivery environment through automation and without manual intervention. Ultimately, these patterns enable us to draw out new IP to better support and shape our customers' digital experiences. Through this, Kyndryl is able to offer our customers very high quality delivery with continuous improvements for their mission critical environments. Now as Martin said, customers are our North Star, guiding everything From our culture to our operating model, we are honored to have over 4,000 blue chip companies, including 75% Of the Fortune 100, over half of the Fortune 500 as Kyndryl customers.
As I mentioned, we have over 4,000 customers across all geographies and all major industries. Our top 10 customers represent only 15% of our revenue, meaning we don't have concentration risk. Our relationships typically span multiple years. Notably, our average contract term for managed services It's 3 to 5 years, and our average managed services customer relationship is more than a decade and growing. These long term relationships are constantly transforming as our customers' priorities evolve.
These relationships and the mission critical nature of our services provide the annuity base of our business. With our new freedom to operate in a much broader set of ecosystems, We will be able to expand these important customer relationships. Said another way, the opportunity to engage with customers Well, we have very long term relationships and multiyear contracts with expanded services can provide the basis for returning our business to growth. David will provide more perspective on this later. Now a customer example of what we do may be helpful here.
This is a top European bank and leading financial services provider. We originally signed a contract In 2011, covering all aspects of the bank's IT environment. This includes mainframe, distributed computing, storage, Networking, security, end to end services, etcetera. This included core banking, Bank operations, customer accounts, application processing and more. In fact, this mainframe environment At approximately 150,000 MIPs, that's millions of instructions per second, is one of the largest managed mainframe assets in the world.
Over time, this relationship grew with the addition of public cloud management. Recently, the customer announced That it would re platform critical workloads on public cloud. This represented an expansion of our partnership To help integrate the bank's new hybrid cloud model and manage the hybrid environment, we've extended our mission critical footprint to encompass newer Contemporary digital environments that align with the customer's transformation. Here's another example Of a customer with whom we've had a long term relationship. We've had the honor to serve 1 of the world's leading material sciences Companies, a Fortune 500 business over the past 16 years.
Our work evolved from The original multiyear outsource agreement where we manage the customer's servers, storage, networking and disaster recovery, all with security as an intrinsic part of the solution. This included the infrastructure for manufacturing and production systems, supply chain systems And collaboration systems. Over time, we were able to expand into service desk and deploy more variable consumption based model to match their needs. Recently, the customer embarked on a digital transformation with the goals to improve their customer experience And drive service improvements and increase service delivery, increase speed of service delivery. This required a partner who had the experience to accelerate their digital transformation with a deep understanding of their current environment And it could bridge across to their future digital environment to deliver integrated end to end capabilities.
The customer selected Kyndryl as their primary partner for their IT infrastructure. There are 3 important elements to this new work: Network transformation, platform management and endpoint management. We provide a hybrid IT environment, which includes Azure workload management. We're also deploying new software defined networking capabilities, 5 gs, and a transformed security architecture. And as we did with many other customers during the early days of the pandemic, moved over 40,000 of their employees to a remote model while maintaining critical operations in production facilities without disruption.
Both of these customer examples highlight 3 important points. First, our ability to build long term relationships Given the nature of the mission critical work we do. 2nd, our ability to help our customers innovate and transform over time. And third, our ability to expand relationships given our new freedom to operate with multiple ecosystems. So let me talk about our freedom to operate and invest that I've mentioned a couple of times now.
This is one of the key design points behind the spin, And we're excited to capitalize on it going forward. There are tremendous opportunities ahead for Kyndryl. You will see on this chart where we've been As IBM's infrastructure services business within Global Technology Services, or GTS, and where we're going as an independent Kyndryl, A key element of our growth thesis comes from expanding beyond an IBM centric ecosystem, Accessing areas of the market where we've been previously underrepresented. Our strategy is evolving to one that is centered on broader engagement in multiple ecosystems, where we focus on services that align to our customers' digital transformation. For instance, relative to our total addressable market, our TAM, we'll now be able to fully participate in the market for both traditional And transformational services, a market that is twice as large as the one we've been oriented around as a division within IBM.
And in areas that are higher value and faster growing versus our historical business mix. On growth trajectory, As part of IBM, we're tied to the growth associated with IBM technology. As Kyndryl will pivot to a broader set A fast growing transformational services and build partnerships that will result in growth more in line with the market. On services offerings, We will expand from our foundation of our mission critical infrastructure services from traditional environments to services aligned to digital transformation. On partner alignment, in the past, we were focused on IBM centric partners.
As Kyndryl, we're tapping into multiple established and growing ecosystems With an expanded portfolio of technologies, our ecosystem will include hyperscalers, systems integrators, Independent software and hardware providers and next generation technology firms. And IBM will continue to be an important partner for us. On investment, organically our focus in the past has been on IBM technology. For example, investments For services around the IBM Cloud, investments to deploy Red Hat Ansible automation in our delivery service. Future, we will focus our investments to strengthen our services business, focusing on the best technology choices for our customers.
On inorganic, our last acquisitions were more than 5 years ago. As an independent company, We'll have a platform to pursue new M and A that are a good fit for our strategic and capital allocation framework. Lastly, on capital intensity, over time Kyndryl will also become less capital intensive as public cloud becomes a bigger portion of the solutions that we provide. Overall, independence offers us New freedom across all these categories to enhance and reshape our strategy in ways that will be favorable to our long term trajectory. To realize these benefits as an independent company, we've built an operating model based on 3 design principles: Customers at the core.
Our principles are speed through simplification, effectiveness through integration, through agility. What I mean by speed through simplification is that we've substantially simplified by removing 2 thirds Of the decision nodes compared to when this was an IBM division and removing 1 to 2 management layers associated over 70% of our revenue. We've empowered our country presidents and our managing partners who lead our largest customer relationships with greater delegation. As a result of these actions, our customers will see a dramatic increase in the speed of our decision making and responsiveness. 2nd, effectiveness through integration means, as Martin talked about earlier, we've established 6 global practices focused on managed services.
They are cloud, core enterprise and Z cloud, application data and AI, digital workplace services, Security and resiliency and network and edge. We've integrated 13 service lines, which include delivery and engineering With 15 offering management teams to form these 6 practices. We also established An advisory and implementation services business. This business has a project orientation and is also organized across the 6 practices. This model enables us to engage with our customers across a wide continuum of capabilities, starting with advisory, Implementation and managed services.
Finally, by innovation through agility, I mean We're focusing our portfolio on modular offerings with composable capabilities versus single tower technology offerings. We also continue to adopt agile ways of working, deploying customer centric squads and new capability oriented guilds aligned to accelerate our innovation. I began my presentation today by saying that our competitive advantage stems from the mission critical expertise of our people And our operational data and intellectual property. And that when you bring these factors together with our new freedom to engage robotics systems, Our new operating agility and how when we apply them at scale across our customer base, we can return this business to growth. We believe this strongly.
We're excited about the new opportunity that independence brings. Thank you very much. And now I will turn it over to David, who will provide the financial perspective on Kyndryl's business. David?
Thanks, Heli, and good afternoon, everyone. Today, I'd like to discuss the logistics associated with our spin off, Our financial profile, our recent results and outlook, our game plan for revenue growth and margin expansion And our approach to liquidity and capital allocation. At the risk of spoiling the punch line, here's a key takeaway. Kyndryl will become an independent company next month in a position of strength. We have $19,000,000,000 in annual revenue, Longstanding customer relationships that produce recurring revenue streams, adjusted EBITDA margins of roughly 15% And investment grade credit ratings.
Let me address some of these topics in more detail, starting with the specifics around our spin. Kyndryl's stock will be distributed to IBM shareholders after the market close on November 3rd and our stock will begin regular way Trading on November 4th. IBM shareholders will receive 1 share of Kyndryl common stock for every 5 shares of IBM they hold. IBM will temporarily retain 19.9% of our stock. The distribution is expected to be tax Free to shareholders for U.
S. Federal tax purposes and we'll have about 224,000,000 shares outstanding. Our stock will trade on the New York Stock Exchange under the ticker KD. We're a unicorn of sorts. On our first day of trading, we'll have $19,000,000,000 in annual revenue, a mid teens adjusted EBITDA margin and a history of generating significant cash Our investment grade balance sheet provides more than $5,000,000,000 in available liquidity, including $2,000,000,000 of cash And we have no debt maturities until late 2024.
New companies like us don't come along every day. And we're enthusiastic about becoming an independent public company with a strong financial position. Our revenues are diversified along a number of different axes. We are a truly global operator with more than 60% of our revenue coming from outside the United States. We generate significant revenues from advisory and implementation services, From digital transformation services and from traditional managed infrastructure services, our customers span a wide range of sectors From financial services to industrials, from telecom to travel and transportation and from corporations to government organizations.
They tend to be some of the largest enterprises in the world and our biggest customer represents only 2% of our top line. We generated $19,100,000,000 of revenue in 2020. Because of the multi year customer contracts under which we operate, We begin each year with a substantial majority of our revenues already under contract and we expect that will continue to be the case. No, it's not easy to understand our financial profile from the pro form a statements included in our Form 10. While those statements show a pre tax loss of $1,800,000,000 last year, they include more than $600,000,000 of transaction costs Related to our spin, nearly $900,000,000 of workforce rebalancing costs and $591,000,000 of excess cost allocations from IBM.
Adjusting solely for these items takes our pre tax income to positive. Further, to calculate our adjusted EBITDA, we add back $1,400,000,000 of depreciation expense And $1,400,000,000 of amortization expense, dollars 77,000,000 of pro form a interest expense And $152,000,000 of other adjustments. We've also incorporated into our numbers an estimated $375,000,000 of incremental costs We expect to incur in the future to support our technology and growth objectives as an independent company. The total of these adjustments brings our pro form a 2020 adjusted EBITDA to $2,900,000,000 This represents a 15% margin on our revenue. Our adjusted EBITDA in 2020 translated into about $67,000,000 of pro form a pre tax income due to our depreciation, amortization and interest expense.
Our free cash flow though significantly exceeded our pre tax income. Net CapEx was about $450,000,000 less Then depreciation, reflecting our ongoing transition to an asset lighter operating model. And working capital contributed to cash flow as well, Primarily due to timing differences in our favor. As a result, we generated pro form a adjusted free cash flow of nearly $800,000,000 With the majority of this year behind us, we're able to see that in many ways, 2021 has looked a lot like 2020 from a financial perspective. Operating as a captive subsidiary of IBM, revenue is again down mid single digits in constant currency.
Our adjusted EBITDA will again be just north of 15%. Our pre tax income will be modestly positive And our net capital expenditures are declining. I wanted to provide both years side by side so that you can see our jumping off point As we become an independent company, our plan is to provide guidance for 2022 early next year after we've completed our separation and our annual budgeting process. More generally, as we look at our 2020 results In 2021 outlook, we appreciate that we're a $19,000,000,000 company, that we have a mid teens adjusted EBITDA margin, That we're adjusted pro form a pretax positive that we have an investment grade balance sheet, which I'll discuss in a few minutes. We also understand that as a subsidiary of a larger company operating with a constrained technology ecosystem, Our top line has been declining and our margins haven't been where we need them to be going forward.
In that context, Our principal financial objectives over the next few years are clear. We'll look to stabilize and then grow our revenues. We'll work to expand our margins and believe we have opportunities to do that. Our primary use of cash flow will be to reinvest in our business Since we believe reinvestment will help drive growth and value creation, we will be steadfast in maintaining an investment grade credit profile. As Martin and Ellie discussed, the competitive advantages associated with our people, our data and IP And our long standing customer relationships position us as a leader in our industry.
Our separation into an independent company Will give us a new freedom to expand our ecosystem of strategic partners and increase the range of solutions we can provide to customers. Our strategies combined with these attributes and opportunities are intended to drive revenue growth and margin expansion. 1st and foremost, we will deploy our resources, financial and otherwise, to further our growth. Our investment in sales capabilities and in broader skill sets will support profitable revenue growth. We'll increase the portion of our business coming from higher margin advisory and implementation services, ideally in ways that also provide a long managed Services tail.
We will take advantage of the swelling demand for data application, cybersecurity and resiliency services. We'll focus on growing our share of wallet with existing customers aided by both our deep knowledge of their needs and our expanding tech ecosystem. 2nd, we will re optimize our business, adjusting our revenues and pricing as appropriate to strengthen our margins, Even sometimes exiting contracts where returns are insufficient. We'll continue to look at the structure of our workforce To ensure that we are serving customers not only well, but also cost effectively. And third, we expect to transform our business model over time.
As we've said, a major part of this is our expanding tech ecosystem, which gives us access to a much larger and profitable addressable market. It will drive costs down both for us and our customers through intelligent automation. And we'll continue to transition These strategies are rich in opportunity and demanding of effort. They will take time to implement and to bear fruit. We are enthusiastic about tackling them and realistic about how long it takes to change trajectory in a business like ours.
We're expanding capabilities takes time, selling cycles are long and new business ramp ups don't happen overnight. As we look at the task and opportunities in front of us, we see 2025 as the year when we expect to show positive revenue growth. To achieve this, we'll hit the ground running as an independent company and we'll look to make progress in the near term. On this slide, we've laid out a number of milestones that are important to our transformation. They relate to Cloud certifications among our team, our plans to dramatically expand our strategic partnerships and technology ecosystem, Our expected growth in service sectors where demand is booming, our continued focus on environmental sustainability, Changes in our mix of business and the opportunity for automation to drive cost efficiencies.
Perhaps most importantly, We see our adjusted EBITDA margins growing from the mid teens to the high teens with even greater drop through to pre tax income As our asset intensity and hence our depreciation expense declines. I can't emphasize enough how enthusiastic The Kyndryl team is to tackle the challenges and opportunities in front of us. The last thing I want to touch on are some key financial attributes. Our liquidity position is extremely strong With access to an undrawn $3,000,000,000 revolving credit facility in addition to our cash balance, we also have the ability to generate cash From operations, the starting point for our capital structure is roughly $3,000,000,000 of debt with maturities well laddered from 2024 To 2,041, we will also have roughly $2,000,000,000 of cash. As a result, our net debt will be only $1,200,000,000 And our net leverage will be well within our targeted range of less than 1 times adjusted EBITDA.
Our credit profile has been rated investment grade by both agencies. We're happy about that, but our preference would be to be a notch or 2 higher. As we think about capital allocation, our top priorities are maintaining strong liquidity, retaining investment grade ratings and reinvesting in our business. We expect to consider M and A opportunities when they make sense, But we feel good about our existing portfolio of operations and don't view any area as urgently needing to be bolstered by an acquisition. Also to the extent that we look at strategic transactions, it will be with an eye on ensuring that our approach enables us to remain investment grade.
In light of the needs we see to reinvest in our business to support revenue growth and margin expansion And in light of our desire to strengthen our credit profile over time, we don't anticipate having excess cash available to distribute to shareholders In the near term. Therefore, we don't anticipate paying a common stock dividend or repurchasing shares in our early days. In closing, let me reiterate that we will separate from IBM in a solid financial position With a large revenue base and mid teens EBITDA margin and with opportunities to spur revenue growth and margin expansion that we are ready and eager to tackle. With that, let me turn things back to Martin.
Thanks, David. Now for the last point on our investment thesis, we have a focused growth oriented culture Led by a highly experienced executive team. I am very proud to be a part of this leadership team that we've been able to assemble. It was really important to our customers and to our employees that we struck the right balance of bringing in leaders from IBM with deep customer knowledge And bringing in leaders from the outside who have tremendous industry expertise and experiences. We have IBM veterans like Nell, Gonzalo, Harish, Stephen, Lee, Jamie, Ed, Mark and Maria with decades at the company.
Then we have people like Mary Jo, Our CHRO. Mary Jo most recently served as CHRO at Wolters Kluwer and before that CHRO at Broadridge. We have Antoine Chiguri, Our CTO, he's going to join us for the Q and A. He was a venture partner at Ridgeline. Previously, he was the CIO at State Street.
And we have Vic. Vic is the founding member of our advisory practice and he previously served as CIO for Verizon Enterprise Solutions and EMC. Paul Savile was at Lumin Technologies. Oona came from GE and David came from XPO Logistics and before that he was CFO at Wyndham Hotels. And then in the middle, we have people like Eli, great hybrid.
Eli is a longtime IBMer who went to be a venture partner of Patango Venture Capital. Same for Michael Bradshaw, our CIO, came to Kyndryl from NBCUniversal, where he was leading the organization's global IT operations. Harsh is our COO. He's a long time IBMer, went to be the CFO of PlanSource. And Chris Lovejoy just announced she is joining Kyndryl from Nichola Sekaki went from IBM to the shipping and logistics company, CMA CGM Group.
I could talk for days about the team. They're a phenomenal team with complementary expertise and they're very, very strong. This is absolutely the right team to bring us to the future. And they are embodying the culture that we are building together with all Kyndryls. A true services culture that's restless, continuously anticipating and learning and innovating, that's empathetic, serving with Trust and transparency and is devoted to our customers.
It's also a growth oriented culture. Each of us, our 90,000 people feel accountable and responsible for driving growth. So we've covered a lot of ground and we want to get to your questions. So I'll close with our summary slide on why we believe Kyndryl is a good investment. First, as an independent company, we'll be able to address a bigger market in a way we couldn't as part of IBM.
2nd, we are the world leader in designing, building, managing and modernizing mission critical information systems. We have sustainable competitive advantages Stemming from the quality of our people, the data we have and our IP and customer relationships. The separation from IBM will unlock new growth opportunities As we'll be free to expand our ecosystem of partners, we start with $19,000,000,000 in annual revenue, about 15% adjusted EBITDA margins And an investment grade credit rating. And we have a new focused growth oriented culture with the right leadership team to move us forward And the support of a world class Board of Directors. So with that, thank you.
And now we'll take your questions. And as a reminder, if you're interested in asking a question, Please submit it through the WebEx chat, but include your full name and your company name. We'll compile all the questions and we'll get to as many as time allows. Okay. We have our first question from Tien tsin Huang.
Tien tsin, by the way, thank you for calling in. Tien tsin, I know Tien tsin from prior roles. Tien tsin is From JPMorgan, one of the most highly respected services analysts out there. So thank you, Tien Tsin. And Tien Tsin's question is, what's the investment and time Acquired both organic and inorganic to fully capture the $175,000,000,000 market unlocked by the spin.
How much of that can you capture today without re skilling or investing and what will drive enterprises to transition that work to Kyndryl? So really good question, Tien Tsin. So hopefully, I I mean, I know I took like 1 or 2 prepositions out, but hopefully I captured what you were thinking. So I think Tien Tsin, I think about it this way from a priority standpoint. Our investments when we talk about investments at the top of the list, top of the list is our investments in our people To expand their skill base.
So remember where we are today and we talked a little bit about this in the prepared remarks. We have a Skill base that is very strong and mission critical. And now we're going to take that skill base and take mission critical into all of these other ecosystem partners So top of the list for us, when David and you heard David say it earlier, we are going to primarily reinvest in this business. Top of the list for us is our labor pool, our skill base to enhance their skills in the Kinds of capabilities that our customers are asking us for. Secondly, and we talked a little bit about this as well in the prepared remarks, We have a platform we're building that allows our customers to better understand their environments that we can bring our IP and make our data real and actually help reduce our customers' environmental risk and actually help reduce our customers' operating risk.
So that takes investment. And those 2 combined is what I've said in the past has been around we are integrators and innovators. So those are the top two list on the top two things that we'll invest in. Thirdly, look, this is a business that requires capital. Now I'll let the world decide if we're very capital intensive or moderately.
In our space, We are a bit more capital intensive than other capital light models. David sort of got into this a little bit during his prepared remarks. Now we think there's an opportunity for us to move into an asset light model, asset lighter model. It's going to take a little bit of time, but we are going to kind of keep Feeding that capital, fixed capital part of the business because we need it to grow, we need it to keep our commitments to our customers, but we do expect that will come down. And then on the inorganic question, look, I'd say a couple of things.
1, when we look at the portfolio, we feel really good about capabilities we have, we feel really good about the practices that we've created. And we don't see holes per se. In fact, we're working now on Stitching them all together, so we show up even better for our customers. So we don't see holes. We don't see an obvious need to fill a hole there, but We do feel as though we have some capacity in our balance sheet.
Now we are always going to stay focused on investment grade. As David said, the Primary mission of our cash flow is to reinvest it. Obviously, we'll use some to make sure we can keep our investment grade rating, maybe even improve it a little bit, but We are completely focused on investment grade. So the sort of the high level summary, Tien Tsin, and again, I really do appreciate the question. It's really good.
High level is our people, skills, capabilities, how we integrate and what we can integrate for our customers. 2nd is our own innovation, our Platform, 3rd is the capital we need. And again, if there's something opportunistic we do inorganically, we feel like we have the capability to do that. Let me move to the next question. Martin, At a high level, can you detail your investment priorities to unlock the potential?
So let me I'm going to ask My colleague, Ellie, to talk about it, because when we think about it, when we think about the investments, I think we think about them sort of from a practices standpoint. And not surprisingly, when we sit down with customers, there are like there are 3 discussions they want to have. They want to have a discussion around cloud, they want to have a discussion around data and they want to have a discussion around security. But let me just turn it over to Eli, let him talk a little bit About our investment priorities within those practices.
Right. So I mean the first priority is obviously our people, where at the end of the day, people business. We have already started to take those deep core mission critical skills that I talked about in the prepared remarks And modernize our capabilities. In fact, we've in the past 12 months doubled the capability that we have in terms of Cloud, security, data certifications and skills in that area. We'll invest in new partnerships, You know, tapping into a broader set of ecosystems.
And then finally, we'll also invest To, in our platform, in areas like intelligent automation, which allows us to take the data That we generate every day, I talked about that in the prepared remarks as well, 2,000,000,000,000 to 4,000,000,000,000 terabytes of data daily Coming out of how we monitor and run and operate our customers' mission critical systems. So investment in that intelligent automation built on the data that we generate. Martin, if you'd like, Perhaps Antoine can also comment a bit about the platform, which I think is a critical part of this.
Sure. And I'll probably just key off of Ellie's last comment too on just the information that we glean. It's not only the information that we get as a part of normal operations. It's the patterns that we start to develop from it and it's the tools we start to engrain in our clients' operations to Proactively help support their environment. So one of the core opportunities we look to advantage is around that reliability and availability.
It's not only key within core business operations, it's actually key to help our clients keep pace with change. So how do we help de risk their change environment, How they approach cloud, cloud adoption or even trying to rewrite their applications from a cloud native standpoint. So exposing that capability is Upfront for us on the platform. And the other two areas that are very, very important and very core to the strategy is 1, the partner ecosystem. So how do we further integrate our partners' tools and capabilities, so our clients directly do not have to navigate that difficulty Within that and I think we all know depending on our exposure to what's happening in the transformation market, the maturity is exponential.
And the maturity is actually more in the service provider side and the solution side. And on occasion, I often go back to say on the promising side. We're definitely building our capabilities to support that decision, but uncertainty. So how do we help give the facts, the operations and the reliability to support that change in the client? And the last area, which is near and dear to my heart and I hopefully our clients as well, and I actually know it's our clients as well, It's around opening up our platform to them.
So actually further enabling their operations and their tools and capabilities In a very different way than they've been used to dealing with us in the past.
Good. Terrific. Thank you for that. We have next question is from David Voigt. Hope I'm pronouncing that right, David.
I don't think I've met you David, but David is from UBS. David says thank you for hosting the event today. Thank you, Dave. Can you update or share with us conversations you have had with your customer base as the spin has progressed and what has been the feedback Yes, this look David, this is a really good question. I spent a lot of time with our customers, Ellie and Antoine do as well.
I'll ask I'll leave a comment, but look at the heart this won't surprise you, at the heart of this is a real excitement from our customers. Look, the strategy that we laid out, what we've talked about, right, if I shorthand it to invest to build capabilities And engage in a broader part of the ecosystem, if you just shorthand it to those two things, our customers are really, really excited about that. And they know that, they know that this business has been under invested in. So they're appreciative that we can bring capabilities and remember how they see us. They see us as the trusted provider Of running their mission critical systems.
So they're really excited about the idea that this business is now going to get investment to build new capabilities. And they're really excited about our ability now to operate, to expand the ecosystem With which we engage. Look, many of them have made cloud decisions already. Many of them are working with Azure and Google Cloud and AWS. And so They've been asking us, can you please help us?
You heard some of the statistics from Ellie, maybe I'll ask Ellie to cover some of it again. Look, we have cloud skills Across that, we just don't have enough. We have a lot of IBM Cloud skills, we have a lot of Red Hat Cloud skills. That was the mission that this business was on. It was to help Those other elements of IBM, we just we have some Google Cloud skills, we have Microsoft Azure Cloud skills, we've built a lot more this year, but we just don't have enough.
So our customers are very excited about our ability to now invest and to expand the ecosystem in which we play. I mean, I kind of said, I don't know if you have anything to add.
Look, I would add that, I mean, first of all, we've got very, very high NPS Scores, as I mentioned in the prepared remarks, we're in the top quartile, very good SLA achievement. They see our independence as an advantage for them. We're no longer connected to one of their big suppliers, But now we can work with several of their technology platform providers and take our expertise, take this expertise that they highly value And now apply it towards that broader ecosystem, the multiple stacks of technology that they use every day. We can sit on their side of the table as they work with all those partners To help improve their quality, reduce their risk, reduce their cost, be more agile in their own operation, be more responsive to their customers. So the feedback has been very, very positive.
Thank you. Thank you. I'm going to do a follow-up from Tien Tsin. Again, so and Tien Tsin's question is, can you comment on the importance of pursuing the higher investment grade rating? Is it important to clients?
And would you consider leverage to do acquisitions or capital returns? So a couple of things. Look, I think we've got a great balance sheet. I think IBM spun us out with a really strong balance sheet, but it was absolutely critical to our customers that we have an investment grade balance sheet. And we know that and they know that we know that.
So we are completely focused on maintaining the investment grade balance sheet. Now as I said, I do feel like we have some capacity in that balance sheet if we wanted to do something to maybe to accelerate The skills enhancements we're building or if you want to do something, Antoine found something that would Does it really fit nicely inside of the platform we're building? I think we have the capacity to do a few things. But like I said, we don't really see any holes there right now. So yes, investment grade is really important to our customers and it's really important to us.
And we do feel like we have a little bit of capacity here if we wanted to do something Inorganically on the acquisition side and capital returns, look, we're focused on reinvesting. That really is the key to getting us back to growth. And we think that getting to growth is a really important story. We think that's part of what makes this such a promising opportunity is the ability To invest, so we can take advantage of the much bigger market in which we play. And we talked about I talked about in our prepared remarks, we do see the market that starts now, but that's what we're focused on.
So and that's the right time for us to really generate some significant returns on those investments before we start thinking about Capital returns. So that's what our focus is. And the short answer to your question, Tien Tsin, is yes, our customers really think investment grade is Important too, but it's a great question. So thank you. One more question here on can you detail the linkages that remain with IBM?
Does it limit your capability to operate or invest in especially in the context of IBM's retained interest? Yes, this is an interesting question. So IBM as was in the Form 10 has announced That they are going to retain 19.9% for a temporary time. I think they've announced that they're going to do a debt for equity swap As they manage their capital structure, for us and they've announced by the way, there's no board seat, no operational influence. They're not even going to vote their shares.
The share votes will just follow The Kyndryl share base in terms of their voting. So that's not even a distraction for us at this point. And I've talked to a lot of customers and they see it They see it similarly. Look, there are 2 big linkages from an IBM and a Kyndryl standpoint. Not surprising in a spin Of this magnitude, this complexity and in a spin from a company that ran as an integrated unit, we have transition service agreements with IBM.
We have TSAs, very common in a spin situation. We have 2 years to work our way off the TSAs And we've got people thinking now about how do we go build a platform, how do we get the most modern platform that we can find. So it really Supports the mission we're on really enhances our ability to operate and allows us to show up in front of our customers in a much more robust and much more Agile and responsive way. Ellie talked a little bit about that from an operating model, but obviously you need systems, you need a platform to bring all of that to life. So That's in play.
The other big element and quite frankly, it's much more substantial than the TSAs are the is the commercial arrangement between the two firms. So there and that's two way, right? So we will do some services. We'll perform some services for IBM. They'll be a big important customer for us.
And obviously, Because we are managing so much of the IBM estate that exists in the world, we are a big customer for them. I have told all of our customers, all of our customers, particularly because we have so many joint dual customers, right, IBM and Kyndryl customers. I've told them all, You should expect that IBM and Kyndryl will work together really well to solve your problems. I think that's what they've Come to expect when we were a division and I've told them they should expect it and I expect it. And I've talked to Arvind Krishna quite a bit about this and he and I both agree, we will work together well.
And the commercials are part of that, obviously, as again, as They're well. And the commercials are part of that, obviously, as again, as a big customer, a big important customer to IBM, I The relationship to be quite good. But yes, we will be a very substantial customer to IBM and they will be a substantial customer to us. And that runs sort of across the board. So we buy a lot of their hardware.
We buy a lot of their software. We resell their Cloud that will continue. We resell some of their maintenance services that will continue. And it even goes all the way through to research. We will engage with IBM Research, So make sure we have access to the labs, which we have enjoyed as a division.
So the commercial arrangement is quite far reaching. It's quite substantial. It's important to us. It's important to them. And again, we will show up in front of customers and make sure that we're solving their problems together.
So We have one more question on free cash flow from Rich Peterson. He didn't say his where he's from. What does free cash flow look like going forward? And then it's versus then it converts to you. So I guess I'll look at like a free cash flow realization, I think is Sort of the essence of the question.
Maybe David, I'll ask you to tackle this one.
Sure. When we look at our free cash flow last year in 2020, We generated almost $800,000,000 of free cash flow and I would say there are 3 or 4 key components of that. The first would be our net income. And then relative to that, we tend to have a little bit stronger Cash flow because as I mentioned, our CapEx is running below depreciation expense. So we have a bit of a pickup there.
And then stock based compensation is an add back as well. And then in 2020, we also had a working capital benefit, working capital worked in Our favor. And so those were the things that drove our cash flow in 2020. Looking ahead, I think working capital will be more of a neutral than anything else. And as a result, I really look The sources of free cash flow being our net income plus the difference, the extent to which CapEx is less than depreciation, which has certainly been running in the several $100,000,000 a year range And then a modest add back associated with stock based compensation.
Those would be the 3 drivers as you reconcile, say, from net income to free cash flow.
Great. Excellent. Thank you. We have a question from Moshe Katri. Moshe, I do know you as well.
Moshe is from Wedbush. Hello Moshe, thank you for calling in and Thank you for the question. Moises' question is, can you provide color on executive compensation, pegged to revenue growth, profitability? Thanks. So again, thank you.
Thank you. I guess I'd say it this way. We haven't had a board. This is obviously a Board issue, we have a comp committee, you've seen our board, world class. We are going to be bringing with the we're working with The comp consultant who sit in support of the board to formulate a comp system.
Let me talk a little bit about The principles and we talked a little bit about this in ESG. We have we do have a commitment to really strong ESG principles. We believe Tying executive comp to the outcomes that matter to shareholders is absolutely the right thing to do. And what you should expect is that we ultimately Work with the comp consultant, our comp committee to get something that looks exactly that kind of fits that bill. What is it that's going to generate returns for the shareholders and how do we make sure that management is linked and tied to that?
Now, Right now, as you know, we have both problems. We have a revenue growth problem and we have a profitability problem and we think we can work on both of those simultaneously. So from my perspective, again, we'll have a lot more work to do as we get our board together and we engage with a comp consultant. But our commitment to the principles of a really good governance structure around comp is absolutely intact. So thank you Moshe.
We have a question from David Grossman, who I know as well. David, nice. Thank you For the question, David from Stifel, Nicholas by the way. So he's got a multipart question, at least it's typed in as a multipart But that's okay. So David says, talk a little bit about the mechanics of returning to growth, specifically help us understand the current headwinds in the legacy base and How long they will persist?
And then is the capital intensity a legacy from the IBM Association? How long will it take to bring that number down to industry averages? Okay, good, David. Really, really good questions. I'm going to ask David to join in here on both of these in a second.
But let me first set up the sort of the answer contextualize the answer around the mechanics of returning to growth. And you know this business really well, David, because you've covered IBM for a long time. You have quite a few in your universe that sort of fit in this space. This is very much and we talked a little bit about this, David talked a little bit about this. This is very much a business where it's backlog driven.
So we will start next year. We will start 2022, calendar year 2022 and we'll know about 85% of we're going to attain, obviously, we have an opportunity to work around the open 15% and what we get signed and etcetera. But we start with about 85% of what we will ultimately book in revenue for the year. We also when you follow that along, 2 years out, we know about 2 thirds of that. At the end of this year, we will start with what we ultimately will book in revenue Two thirds of that and then the 3rd year out is about half.
So what we're focused on David obviously and getting this back to revenue growth is And you know the mechanics, so I won't explain them. But the investments, as we said, start now, the skills build now, The ecosystem in which we participate starts to expand now, which means the marketplace starts to expand. And for us, that means, excuse me, even though We know so much about our revenue streams going forward. It gives us an opportunity now to start to influence those out years. And David, like I said, I'm going to ask David to comment in a second.
At a mechanics level, I guess the other thing I'd go is from that high level, because David Phil, in the middle, I'm going to go right down to sort of a customer level. What happens in a customer as we expand our capabilities and we expand our ecosystem Is that the business that we're doing, the cap maybe it's called cash we're freeing up at the moment driving productivity for our customers, That's getting reinvested by customers. And right now, a lot of that because of the ecosystem and the capabilities we have is going elsewhere. It is our intent to capture that, Right. So the spending that's getting freed up and allowing customers to do new things, to move new things to the cloud, because as I said, many of them made cloud choices, That's really the pool of funding we're going after.
So let me again, I think I'm I feel like I'm explaining to a guy who knows this as well as anybody on the planet, but let me just stop there and have Maybe David comment if I've left something out or Ed, you didn't want to add.
I think that's exactly right. And in particular, we really want to emphasize the extent To which our separation, our becoming an independent company, our not being as tethered to the IBM ecosystem Unlocks a new freedom for us to expand the ecosystem, as Martin said, and to change The revenue trajectory for our business going forward and we're really excited about that and the plans To do it are very significant. As I mentioned during some of my remarks, we're going to invest in the sales capabilities and the skills To support operating and serving our customers on that broader ecosystem, We expect to grow the advisory and implementation services component of our business in a way It really drives both value to customers and a managed services tail from that work. We have opportunities to grow in practices that are smaller for us now, but have the potential to be really large, whether Related to data or applications or edge and cybersecurity and resiliency practices are going to be a big opportunity for us going Forward, all representing growth areas. And as Martin said, we can expand the share of wallet with our existing customers.
And with respect to that, the opportunity there is that our customers are already dependent on us for Mission critical work, we know their systems and their infrastructure really well, the challenges they face, the opportunities in front of them. And now we can bring this larger solution set there and all of this helps drive just a different set of revenue opportunities for us. And then on top of that, we'll have an overlay of pricing optimization and portfolio As we look to switch our mix over time to increasingly profitable areas, increasingly profitable contracts And a mix of business, where we're fully participating in the faster growing elements of the market. And that's really how the revenue trajectory becomes different for us as an independent company Then what it was for our business when it was constrained to a narrower ecosystem.
Perfect. Thank you, David. Okay. We got a 3 part question from Tony Sakanagi. Tony, who is also, I think he's still number 1 in his space, Is that Bernstein?
Hello, Tony. Hello, Tony. Thank you for listening and thank you for the questions. I'm going to read kind of all three of them, then I'll kind of come back to them. So question 1, Kyndryl's gross margins are much lower than peers even outside Europe, that's in quotes in Permian, sorry.
And why is that and do you see any improvement? Sounds like your EBITDA improvement is largely driven by reduced capital intensity. So a couple of things when and I'll ask David to comment on this. I'll go through the other questions as well in a second, but I'll ask David to comment on margins because I think we see opportunity a number of ways of how we get kind of EBITDA improvement Over the medium term, look, our gross margins relative to the what I'll call the best in the industry, they are we do lag gross margins that are the best in the industry. We look a lot like quite frankly the other asset heavy kind of business models.
So we think that we have an opportunity Across a broad range of things, such as automation, such as reduced capital intensity, such as moving into higher value work Where we can improve our margins, but that's over time. So I think there are multiple opportunities on gross margins. I have 2 more questions from Tony. Do you want to add to that or you're good?
I will. Just to say, yes, business mix represents an opportunity there. And it is While we're similar to in margin to some of the more asset intensive Players that are out there, the gap that exists versus some other players, To us, it indicates the real opportunity to both be growing revenues over the intermediate term and to be expanding margins. So in some ways, I think the glass half full read here is that this represents a real opportunity for us. We I don't think we have to choose between sacrificing margins to get growth.
Our game plan, our strategy and our expectation Is to be able to make progress on both of those.
Thank you. So question part 2, Tony still on Tony Sakanagi's question. How much in cash What expense do you expect in Q4 and in 20222023? Wow, we're really going out on this one, Tony. So a few things.
And David mentioned that in the Q1 of next year that we will host an Investor Day, another event and we'll talk a lot more about what 2022 Like we'll talk a lot more about what the sort of the mile markers or the path to make sure that you can see how much Progress we're making. But I already I can already tell you that in 2022, our cash restructuring expense Is really minimal because there is a and I'm sure you would have seen Tony in the Form 10, there's an employee matters agreement That sort of limits or sort of constrains how what we can do in the areas that would typically drive our restructuring expense. So if by restructuring you mean sort of labor side of that, then that's covered in employee matters agreement and that would drive 0. Now we also know that we're going to do our own set of Testing across the balance sheet. I'll ask David if he has anything he wanted to comment on.
But there's a whole new set of tests We will now do across customers, across countries as we change our reporting dynamics across asset utilization. Those are typically not cash. And I think that was the nature of your question was cash. So those are not typically cash, but those are still that the employee matters agreement doesn't get covered by those, but the employee matters agreement essentially says, people stay in their jobs. Okay, I'll shorthand it that way.
Anything on Because it was about cash. Yes.
I would just add that our People, assets are so critical to what we do. And that is the starting point for us And our ability to provide services to our customers. And what we see as being the important thing for us to do is actually to Best in our people and in the skills that they have. And as Ellie mentioned, we're already doing a lot of that as
And then part 3 from I still again to still from Tony, do you Signings to grow in 2022 or 2023. So look, as I said, Tony, we're going to come back in the Q1. We'll talk more about 2022. But I will, from a dynamics perspective and you have your models are probably better than or certainly as good or better than almost everybody's. As David said, as Ellie said, we're investing pretty heavily now and that's the right thing for us to do.
David identified that 2025 becomes an important pivotal year for us. But we know that if we're going to To that or when we get to that, I mean, it's going to have to start, at least from a signings perspective, it's going to start pretty soon. So we'll come back on 2022 And be more specific in the Q1, but yes, we're going to have to start this place, we have to start turning around in terms of the things That customers are willing to do in the form of, in this case of signings, fairly quickly here. We got a question. I'm going to go to the next question.
A question received this over email. It's from Kathy Lloyd. This is a very specific one, David, so get ready. Kathy Lloyd from Poplar Forest Capital. David identified $2,100,000,000 in 1x costs in the bridge, One time costs in the bridge to adjusted EBITDA in 2020.
What portion of those one time items might take time to run off? Sounded like both David and Martin expect OpEx investments to offset depreciation runoff over the next 2 ish years. You got the question?
Sure. Yes. When we look at the key items that were in there, a part of it is the workforce rebalancing charge That we took in 2020 and substantially all the cash associated with that has gone out already. So that's already taken care of. Similarly tied to our spin related costs, most of those costs Have been incurred already.
We will have some costs that go beyond the spin date, particularly tied To employee retention programs that were put in place and a few other spin related costs. Those are the biggest sources of The gaps were the items that were there. And I view most of those costs as being having been incurred and The cash outlays having taken place already.
Okay. Thank you. So, this is the last question I have. We'll if more come in here, but as a follow-up from Moshe at Wedbush. And that is looking at your revenue run rate, which Portion in your view will be subject to revenue cannibalization as service delivery continues shifting to cloud and automation.
So maybe I'll ask Ellie to comment as well, if I leave something out, I mean, you may say I actually got it right. So we'll see. But look, let's so Here's how I think about it. And I talked a little bit about this when I gave my customer example and how what are the dynamics of how you get back to In the spaces in which we sat and the capabilities we had, another way to think, we were the funding source For our customers, we saved the money, we delivered productivity to them and they reinvested to move to the cloud. We would automate some things, they would reinvest that money, but we didn't have the ecosystem, we didn't have the capabilities Of where they were going, so that money didn't show up in what is now Kyndryl.
Automation, and Moshe used the word automation. Automation, we As kind of a win across the board given the play we're running, given the strategy we have and I would describe it as It's certainly a win for our customers because they get some savings obviously, but more importantly, they get reduced operational risk. And again, this is kind of hearts and lungs for them. So reducing operational risk on the mission critical workloads they have is really important to them. So it's a win for customers.
It's certainly a win for our teams, for our employees, because it allows us now To take the people who know our customers so well, who know their environment so well, it gives us a chance to enhance their skill set and then Keep them in the account doing new things, doing more things. And this is at the heart of why we go from being just a funding source to being a funding and reinvestment source As we build those capabilities and as we build as we participate in a broader ecosystem. So our employees get to participate in this in a really profound way. They get a whole set of enhanced skills around already their mission critical trustworthiness, if you will. And then from the firm, from our firm's Perspective, look, it does allow us to operate more efficiently.
It does allow us To reduce our own risk, because automated tasks Are less risky for us. So I think Moshe, your question on where do we see sort of the Where do we see the revenues drying up? It is really this dynamic of as we invest in capabilities for it, as we put automation in place, We hand obviously, we hand a lot of the savings to our customers. That's fine. What it really does is it enables us to enhance the skill of our teams, put them back in That they know so well, where they're trusted with a new set of skills in a broader ecosystem and we get to get the then the savings essentially we're creating for them already.
So Hopefully that kind of gets at the point. Look, we're out of we ran out of questions. So maybe that's good. I don't know, hopefully. Let me look, let me just wrap up with sort of a kind of my point of view on what we wanted to get done here and what The message we wanted to make sure you left with, Kyndryl is different.
It's ours to prove, but Kyndryl is different. And We're different really for a few reasons that are really important. 1st and foremost, the mission is different. The mission Kyndryl has now is different. And it sort of describes why we worked with our customers to pick the strategy we picked.
But with that different mission, we can have a different strategy And the strategy aligns with what our customers are doing. Its strategy aligns with all the long arc trends that each of you I'm sure sees and experiences today. So the mission is different. Our ability to invest, the capital allocated to this business is different. IBM didn't invest in the business.
Arvind covered this when they announced the spin over a year ago already. So our ability to invest, our ability to create new capabilities and our ability to build And operate in a broader ecosystem is different. And then finally, the people are different. I took you through the leadership team Here, we have a really good mix of people who come from inside this business, who know the customers well, who know the business well and know where we are, Along with a really talented, really strong team from outside at the senior leadership level, people with new ideas And people who will bring new perspectives to how this business is run, all of whom are supported by a world class board Overseeing the strategy and the execution and the path that we think we can create a lot of value. So again, At the shortest hand version I can give you of this is Kyndryl is different.
It is ours to prove, but we will prove it and it's Different because the mission is different, the investment is different and the people running the place are different enough. So thank you for joining. We really appreciate your time. As I said, we will have another investor event in the Q1. And between now and then, we're also going to be working on obviously the Q4 and you'll see more from us With all the things we talked about today and we'll share progress on the enhanced skilling of our people, we'll share progress on a broader ecosystem