IBM
RELEASES SECOND-QUARTER RESULTS
Solid
Software and Consulting Revenue Growth; Strong Gross Profit Margin
Expansion
ARMONK, N.Y., July
20, 2023 --
IBM (NYSE: IBM)
today announced second-quarter 2023 earnings results.
"Organizations
are using our hybrid cloud and AI technology, and our consulting
capabilities, to transform their operations," said Arvind Krishna, IBM chairman and chief executive
officer. "We continue to respond to the needs of our clients who
seek trusted, enterprise AI solutions, and we are particularly
excited about the response to the recently launched watsonx AI
platform. Finally, we remain confident in our revenue and free cash
flow growth expectations for the full year."
Second-Quarter
Highlights
-
Revenue
-
Revenue of
$15.5 billion, down 0.4 percent, up
0.4 percent at constant currency
-
Software
revenue up 7 percent, up 8 percent at constant currency
-
Consulting
revenue up 4 percent, up 6 percent at constant currency
-
Infrastructure
revenue down 15 percent, down 14 percent at constant
currency
-
Profit
Margin
-
Gross
Profit Margin: GAAP: 54.9 percent, up 160 basis points; Operating
(Non-GAAP): 55.9 percent, up 140 basis points
-
Pre-Tax
Income Margin: GAAP: 12.9 percent, up 180 basis points; Operating
(Non-GAAP): 15.5 percent, down 70 basis points
-
Cash
Flow
-
Year to
date net cash from operating activities of $6.4 billion, up $1.8
billion; free cash flow of $3.4
billion, up $0.1
billion
|
SECOND QUARTER
2023 INCOME STATEMENT SUMMARY
|
|
|
Results
include YTY impact from gains on the 2Q22 sale of healthcare
software assets*
|
|
|
Revenue
|
|
Gross
Profit
|
|
|
Gross
Profit
Margin
|
|
Pre-tax
Income*
|
|
Pre-tax
Income
Margin*
|
|
Net
Income*
|
|
Diluted
Earnings
Per
Share*
|
GAAP
from
Continuing
Operations
|
$
15.5
B
|
|
|
$
8.5
B
|
|
|
54.9
|
%
|
|
$
2.0
B
|
|
|
12.9
|
%
|
|
$
1.6
B
|
|
|
$
1.72
|
|
Year/Year
|
(0.4)
|
%**
|
|
3
|
%
|
|
1.6
|
Pts
|
|
16
|
%
|
|
1.8
|
Pts
|
|
8
|
%
|
|
7
|
%
|
Operating
(Non-GAAP)
|
|
|
|
$
8.7
B
|
|
|
55.9
|
%
|
|
$
2.4
B
|
|
|
15.5
|
%
|
|
$
2.0
B
|
|
|
$
2.18
|
|
Year/Year
|
|
|
|
2
|
%
|
|
1.4
|
Pts
|
|
(5)
|
%
|
|
(0.7)
|
Pts
|
|
(5)
|
%
|
|
(6)
|
%
|
* Results
include the YTY impact from the gains on the 2Q22 sale of
healthcare software assets.
GAAP:
Pre-Tax Income (17 pts); Pre-Tax
Income
Margin (1.4
pts); Net
Income (15 pts); EPS
(15 pts).
Operating
(Non-GAAP):
Pre-Tax
Income (9 pts); Pre-Tax Income Margin (1.4
pts); Net
Income (9 pts); EPS (9 pts).
|
** 0.4% at
constant currency
|
"In the
quarter, revenue performance was led by our growth vectors of
software and consulting, and we continued to expand our gross
profit margin, driven by our improving portfolio mix and
productivity initiatives," said James
Kavanaugh, IBM senior vice president and chief financial
officer. "This year we have leveraged our strong cash position to
invest for growth, announcing seven acquisitions to bolster our
hybrid cloud and AI strategy, while continuing to return value to
shareholders through dividends."
Segment
Results for Second Quarter
-
Software
— revenues
of $6.6 billion, up 7.2 percent, up
7.5 percent at constant currency:
-
Hybrid
Platform & Solutions up 6 percent, up 7 percent at constant
currency:
--
Red Hat up
11 percent
--
Automation
up 1 percent, up 2 percent at constant currency
--
Data &
AI up 10 percent, up 11 percent at constant currency
--
Security
down 2 percent, down 1 percent at constant currency
-
Transaction
Processing up 9 percent, up 10 percent at constant
currency
-
Consulting
— revenues
of $5.0 billion, up 4.3 percent, up
5.9 percent at constant currency:
-
Business
Transformation up 3 percent, up 5 percent at constant
currency
-
Technology
Consulting up 4 percent, up 5 percent at constant
currency
-
Application
Operations up 6 percent, up 8 percent at constant
currency
-
Infrastructure
— revenues
of $3.6 billion, down 14.6 percent,
down 13.8 percent at constant currency:
-
Hybrid
Infrastructure down 18 percent:
--
IBM z
Systems down 30 percent
--
Distributed
Infrastructure down 6 percent
-
Infrastructure
Support down 8 percent, down 6 percent at constant
currency
-
Financing
— revenues
of $0.2 billion, up 26.2 percent, up
27.1 percent at constant currency
Cash
Flow and Balance Sheet
In the
second quarter, the company generated net cash from operating
activities of $2.6 billion, up
$1.3 billion year to year. Net cash
from operating activities excluding IBM Financing receivables was
$2.6 billion. IBM's free cash flow
was $2.1 billion, flat year to year.
The company returned $1.5 billion to
shareholders in dividends in the second quarter.
For the
first six months of the year, the company generated net cash from
operating activities of $6.4 billion,
up $1.8 billion year to year. Net
cash from operating activities excluding IBM Financing receivables
was $4.4 billion. IBM's free cash
flow was $3.4 billion, up
$0.1 billion year to year.
IBM ended
the second quarter with $16.3 billion
of cash and marketable securities, up $7.5
billion from year-end 2022. Debt, including IBM Financing
debt of $10.6 billion, totaled
$57.5 billion, up $6.5 billion since the end of 2022.
Full-Year
2023 Expectations
-
Revenue:
The company continues to expect constant currency revenue growth of
three percent to five percent. At current foreign exchange rates,
currency is expected to be neutral to revenue growth.
-
Free cash
flow: The company continues to expect about $10.5 billion in free cash flow, up more than
$1 billion year to year.
Forward-Looking
and Cautionary Statements
Except for
the historical information and discussions contained herein,
statements contained in this release may constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on the
company's current assumptions regarding future business and
financial performance. These statements involve a number of risks,
uncertainties and other factors that could cause actual results to
differ materially, including, but not limited to, the following: a
downturn in economic environment and client spending budgets; a
failure of the company's innovation initiatives; damage to the
company's reputation; risks from investing in growth opportunities;
failure of the company's intellectual property portfolio to prevent
competitive offerings and the failure of the company to obtain
necessary licenses; the company's ability to successfully manage
acquisitions, alliances and dispositions, including integration
challenges, failure to achieve objectives, the assumption of
liabilities and higher debt levels; fluctuations in financial
results; impact of local legal, economic, political, health and
other conditions; the company's failure to meet growth and
productivity objectives; ineffective internal controls; the
company's use of accounting estimates; impairment of the company's
goodwill or amortizable intangible assets; the company's ability to
attract and retain key employees and its reliance on critical
skills; impacts of relationships with critical suppliers; product
quality issues; impacts of business with government clients;
reliance on third party distribution channels and ecosystems;
cybersecurity and data privacy considerations; adverse effects
related to climate change and environmental matters; tax matters;
legal proceedings and investigatory risks; the company's pension
plans; currency fluctuations and customer financing risks; impact
of changes in market liquidity conditions and customer credit risk
on receivables; potential failure of the separation of Kyndryl
Holdings, Inc. to qualify for tax-free treatment; risk factors
related to IBM securities; and other risks, uncertainties and
factors discussed in the company's Form 10-Qs, Form 10-K and in the
company's other filings with the U.S. Securities and Exchange
Commission or in materials incorporated therein by reference. Any
forward-looking statement in this release speaks only as of the
date on which it is made. Except as required by law, the company
assumes no obligation to update or revise any forward-looking
statements.
Presentation
of Information in this Press Release
In an
effort to provide investors with additional information regarding
the company's results as determined by generally accepted
accounting principles (GAAP), the company has also disclosed in
this press release the following non-GAAP information, which
management believes provides useful information to
investors:
IBM
results —
-
adjusting
for currency (i.e., at constant currency);
-
presenting
operating (non-GAAP) earnings per share amounts and related income
statement items;
-
free cash
flow;
-
cash from
operating activities excluding IBM Financing
receivables.
The
rationale for management's use of these non-GAAP measures is
included in Exhibit 99.2 in the Form 8-K that includes this press
release and is being submitted today to the SEC.
Conference
Call and Webcast
IBM's
regular quarterly earnings conference call is scheduled to begin at
5:00 p.m. EDT, today. The Webcast may
be accessed via a link at https://www.ibm.com/investor/events/earnings-2q23. Presentation
charts will be available shortly before the Webcast.
Financial
Results Below (certain
amounts may not add due to use of rounded numbers; percentages
presented are calculated from the underlying whole-dollar
amounts).
Contact:
IBM
Sarah Meron, 347-891-1770
sarah.meron@ibm.com
Tim Davidson, 914-844-7847
tfdavids@us.ibm.com
INTERNATIONAL
BUSINESS MACHINES CORPORATION
COMPARATIVE
FINANCIAL RESULTS
(Unaudited;
Dollars in millions except per share amounts)
|
|
|
Three
Months Ended
June
30,
|
|
|
Six
Months Ended
June
30,
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
REVENUE
BY SEGMENT
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
$
6,608
|
|
|
$
6,166
|
|
|
$
12,529
|
|
|
$
11,938
|
|
Consulting
|
5,013
|
|
|
4,809
|
|
|
9,975
|
|
|
9,637
|
|
Infrastructure
|
3,618
|
|
|
4,235
|
|
|
6,716
|
|
|
7,453
|
|
Financing
|
185
|
|
|
146
|
|
|
380
|
|
|
300
|
|
Other
|
51
|
|
|
180
|
|
|
126
|
|
|
404
|
|
TOTAL
REVENUE
|
15,475
|
|
|
15,535
|
|
|
29,727
|
|
|
29,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
8,501
|
|
|
8,290
|
|
|
16,010
|
|
|
15,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT MARGIN
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
79.3
|
%
|
|
79.2
|
%
|
|
79.4
|
%
|
|
79.0
|
%
|
Consulting
|
25.9
|
%
|
|
24.2
|
%
|
|
25.6
|
%
|
|
24.3
|
%
|
Infrastructure
|
55.8
|
%
|
|
53.8
|
%
|
|
53.9
|
%
|
|
52.4
|
%
|
Financing
|
49.2
|
%
|
|
35.3
|
%
|
|
46.5
|
%
|
|
36.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
GROSS PROFIT MARGIN
|
54.9
|
%
|
|
53.4
|
%
|
|
53.9
|
%
|
|
52.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE
AND OTHER INCOME
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
4,900
|
|
|
4,855
|
|
|
9,754
|
|
|
9,452
|
|
R,D&E
|
1,687
|
|
|
1,673
|
|
|
3,342
|
|
|
3,352
|
|
Intellectual
property and custom development income
|
(248)
|
|
|
(176)
|
|
|
(428)
|
|
|
(297)
|
|
Other
(income) and expense
|
(261)
|
|
|
(81)
|
|
|
(506)
|
|
|
166
|
|
Interest
expense
|
423
|
|
|
297
|
|
|
790
|
|
|
607
|
|
TOTAL
EXPENSE AND OTHER INCOME
|
6,501
|
|
|
6,568
|
|
|
12,952
|
|
|
13,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM CONTINUING OPERATIONS
BEFORE
INCOME TAXES
|
2,000
|
|
|
1,722
|
|
|
3,058
|
|
|
2,345
|
|
Pre-tax
margin
|
12.9
|
%
|
|
11.1
|
%
|
|
10.3
|
%
|
|
7.9
|
%
|
Provision
for/(Benefit from) income taxes
|
419
|
|
|
257
|
|
|
543
|
|
|
218
|
|
Effective
tax rate
|
21.0
|
%
|
|
14.9
|
%
|
|
17.8
|
%
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM CONTINUING OPERATIONS
|
$
1,581
|
|
|
$
1,465
|
|
|
$
2,515
|
|
|
$
2,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
from discontinued operations, net of taxes
|
2
|
|
|
(73)
|
|
|
(4)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
$
1,583
|
|
|
$
1,392
|
|
|
$
2,511
|
|
|
$
2,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS/(LOSS)
PER SHARE OF COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
Dilution
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
$
1.72
|
|
|
$
1.61
|
|
|
$
2.74
|
|
|
$
2.34
|
|
Discontinued
Operations
|
$
0.00
|
|
|
$
(0.08)
|
|
|
$
0.00
|
|
|
$
0.00
|
|
TOTAL
|
$
1.72
|
|
|
$
1.53
|
|
|
$
2.73
|
|
|
$
2.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
$
1.74
|
|
|
$
1.62
|
|
|
$
2.77
|
|
|
$
2.36
|
|
Discontinued
Operations
|
$
0.00
|
|
|
$
(0.08)
|
|
|
$
0.00
|
|
|
$
0.00
|
|
TOTAL
|
$
1.74
|
|
|
$
1.54
|
|
|
$
2.76
|
|
|
$
2.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING (M's)
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
Dilution
|
919.5
|
|
|
910.7
|
|
|
918.6
|
|
|
910.0
|
|
Basic
|
909.9
|
|
|
901.5
|
|
|
908.7
|
|
|
900.4
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
(Dollars
in Millions)
|
|
At
June
30,
2023
|
|
At
December
31,
2022
|
ASSETS:
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and
cash equivalents
|
|
$
9,394
|
|
$
7,886
|
Restricted
cash
|
|
31
|
|
103
|
Marketable
securities
|
|
6,904
|
|
852
|
Notes and
accounts receivable - trade, net
|
|
5,673
|
|
6,541
|
Short-term
financing receivables, net
|
|
6,429
|
|
7,790
|
Other
accounts receivable, net
|
|
838
|
|
817
|
Inventories
|
|
1,501
|
|
1,552
|
Deferred
costs
|
|
957
|
|
967
|
Prepaid
expenses and other current assets
|
|
2,730
|
|
2,611
|
Total
Current Assets
|
|
34,458
|
|
29,118
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
5,443
|
|
5,334
|
Operating
right-of-use assets, net
|
|
2,653
|
|
2,878
|
Long-term
financing receivables, net
|
|
5,221
|
|
5,806
|
Prepaid
pension assets
|
|
8,735
|
|
8,236
|
Deferred
costs
|
|
897
|
|
866
|
Deferred
taxes
|
|
6,340
|
|
6,256
|
Goodwill
|
|
56,385
|
|
55,949
|
Intangibles,
net
|
|
10,496
|
|
11,184
|
Investments
and sundry assets
|
|
1,585
|
|
1,617
|
Total
Assets
|
|
$
132,213
|
|
$
127,243
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Taxes
|
|
$
1,606
|
|
$
2,196
|
Short-term
debt
|
|
6,785
|
|
4,760
|
Accounts
payable
|
|
3,732
|
|
4,051
|
Deferred
income
|
|
12,712
|
|
12,032
|
Operating
lease liabilities
|
|
842
|
|
874
|
Other
liabilities
|
|
6,836
|
|
7,592
|
Total
Current Liabilities
|
|
32,513
|
|
31,505
|
|
|
|
|
|
Long-term
debt
|
|
50,691
|
|
46,189
|
Retirement
related obligations
|
|
9,385
|
|
9,596
|
Deferred
income
|
|
3,264
|
|
3,499
|
Operating
lease liabilities
|
|
1,986
|
|
2,190
|
Other
liabilities
|
|
12,103
|
|
12,243
|
Total
Liabilities
|
|
109,942
|
|
105,222
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
IBM
Stockholders' Equity:
|
|
|
|
|
Common
stock
|
|
58,963
|
|
58,343
|
Retained
earnings
|
|
149,318
|
|
149,825
|
Treasury
stock — at cost
|
|
(169,581)
|
|
(169,484)
|
Accumulated
other comprehensive income/(loss)
|
|
(16,499)
|
|
(16,740)
|
Total
IBM Stockholders' Equity
|
|
22,201
|
|
21,944
|
|
|
|
|
|
Noncontrolling
interests
|
|
70
|
|
77
|
Total
Equity
|
|
22,271
|
|
22,021
|
|
|
|
|
|
Total
Liabilities and Equity
|
|
$
132,213
|
|
$
127,243
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CASH
FLOW ANALYSIS
(Unaudited)
|
|
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
|
Trailing
Twelve
Months
Ended
June
30,
|
(Dollars
in Millions)
|
|
2023
|
|
2022*
|
|
2023
|
|
2022*
|
|
2023
|
Net
Cash from Operations per GAAP
|
|
$
2,638
|
|
$
1,321
|
|
$
6,412
|
|
$
4,569
|
|
$
12,278
|
|
|
|
|
|
|
|
|
|
|
|
Less:
change in IBM Financing receivables
|
|
50
|
|
(1,264)
|
|
2,028
|
|
367
|
|
944
|
Capital
Expenditures, net
|
|
(487)
|
|
(494)
|
|
(944)
|
|
(871)
|
|
(1,933)
|
|
|
|
|
|
|
|
|
|
|
|
Free
Cash Flow
|
|
2,101
|
|
2,091
|
|
3,441
|
|
3,331
|
|
9,402
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
(334)
|
|
(260)
|
|
(356)
|
|
(958)
|
|
(1,747)
|
Divestitures
|
|
6
|
|
1,207
|
|
6
|
|
1,268
|
|
10
|
Dividends
|
|
(1,510)
|
|
(1,488)
|
|
(3,007)
|
|
(2,963)
|
|
(5,992)
|
Non-Financing
Debt
|
|
(1,178)
|
|
(2,934)
|
|
8,514
|
|
1,740
|
|
8,683
|
Other
(includes IBM Financing net receivables and debt)
|
|
(347)
|
|
(1,607)
|
|
(1,109)
|
|
(2,197)
|
|
(1,805)
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Cash, Cash Equivalents, Restricted Cash
and
Short-term Marketable Securities
|
|
$
(1,263)
|
|
$
(2,991)
|
|
$
7,489
|
|
$
221
|
|
$
8,551
|
____________________
|
*
Includes
immaterial cash flows from discontinued operations.
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CASH
FLOW
(Unaudited)
|
|
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
(Dollars
in Millions)
|
|
2023
|
|
2022*
|
|
2023
|
|
2022*
|
Net
Income from Operations
|
|
$
1,583
|
|
$
1,392
|
|
$
2,511
|
|
$
2,125
|
Depreciation/Amortization
of Intangibles
|
|
1,076
|
|
1,245
|
|
2,150
|
|
2,501
|
Stock-based
Compensation
|
|
288
|
|
254
|
|
556
|
|
488
|
Working
Capital / Other
|
|
(359)
|
|
(307)
|
|
(832)
|
|
(912)
|
IBM
Financing A/R
|
|
50
|
|
(1,264)
|
|
2,028
|
|
367
|
Net
Cash Provided by Operating Activities
|
|
$
2,638
|
|
$
1,321
|
|
$
6,412
|
|
$
4,569
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures, net of payments & proceeds
|
|
(487)
|
|
(494)
|
|
(944)
|
|
(871)
|
Divestitures,
net of cash transferred
|
|
6
|
|
1,207
|
|
6
|
|
1,268
|
Acquisitions,
net of cash acquired
|
|
(334)
|
|
(260)
|
|
(356)
|
|
(958)
|
Marketable
Securities / Other Investments, net
|
|
822
|
|
(281)
|
|
(6,659)
|
|
(625)
|
Net
Cash Provided by/(Used in) Investing Activities
|
|
$
7
|
|
$
172
|
|
$
(7,953)
|
|
$
(1,186)
|
|
|
|
|
|
|
|
|
|
Debt, net
of payments & proceeds
|
|
(1,135)
|
|
(2,514)
|
|
6,169
|
|
434
|
Dividends
|
|
(1,510)
|
|
(1,488)
|
|
(3,007)
|
|
(2,963)
|
Financing -
Other
|
|
(86)
|
|
(195)
|
|
(185)
|
|
(290)
|
Net
Cash Provided by/(Used in) Financing Activities
|
|
$
(2,731)
|
|
$
(4,197)
|
|
$
2,978
|
|
$
(2,819)
|
|
|
|
|
|
|
|
|
|
Effect of
Exchange Rate changes on Cash
|
|
(25)
|
|
(262)
|
|
(1)
|
|
(267)
|
Net
Change in Cash, Cash Equivalents and Restricted
Cash
|
|
$
(110)
|
|
$
(2,965)
|
|
$
1,436
|
|
$
297
|
____________________
|
*
Includes
immaterial cash flows from discontinued operations.
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
SEGMENT
DATA
(Unaudited)
|
|
|
|
Three
Months Ended June 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
6,608
|
|
|
$
5,013
|
|
|
$
3,618
|
|
|
$
185
|
|
Pre-tax
Income from Continuing Operations*
|
|
$
1,504
|
|
|
$
446
|
|
|
$
633
|
|
|
$
64
|
|
Pre-tax
Margin*
|
|
22.8
|
%
|
|
8.9
|
%
|
|
17.5
|
%
|
|
34.9
|
%
|
Change
YTY Revenue
|
|
7.2
|
%
|
|
4.3
|
%
|
|
(14.6)
|
%
|
|
26.2
|
%
|
Change
YTY Revenue - Constant Currency
|
|
7.5
|
%
|
|
5.9
|
%
|
|
(13.8)
|
%
|
|
27.1
|
%
|
|
|
|
|
Three
Months Ended June 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
6,166
|
|
|
$
4,809
|
|
|
$
4,235
|
|
|
$
146
|
|
Pre-tax
Income from Continuing Operations
|
|
$
1,375
|
|
|
$
343
|
|
|
$
757
|
|
|
$
102
|
|
Pre-tax
Margin
|
|
22.3
|
%
|
|
7.1
|
%
|
|
17.9
|
%
|
|
69.7
|
%
|
____________________
|
*
The second
quarter 2023 pre-tax charge of approximately $0.12 billion for
stranded costs related to portfolio actions is not included in the
measure of segment
pre-tax
income, consistent with the company's management system.
|
|
|
|
|
Six
Months Ended June 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
12,529
|
|
|
$
9,975
|
|
|
$
6,716
|
|
|
$
380
|
|
Pre-tax
Income from Continuing Operations*
|
|
$
2,668
|
|
|
$
828
|
|
|
$
849
|
|
|
$
165
|
|
Pre-tax
Margin*
|
|
21.3
|
%
|
|
8.3
|
%
|
|
12.6
|
%
|
|
43.3
|
%
|
Change
YTY Revenue
|
|
5.0
|
%
|
|
3.5
|
%
|
|
(9.9)
|
%
|
|
26.8
|
%
|
Change
YTY Revenue - Constant Currency
|
|
6.6
|
%
|
|
7.0
|
%
|
|
(7.8)
|
%
|
|
29.1
|
%
|
|
|
|
Six
Months Ended June 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
11,938
|
|
|
$
9,637
|
|
|
$
7,453
|
|
|
$
300
|
|
Pre-tax
Income from Continuing Operations
|
|
$
2,509
|
|
|
$
691
|
|
|
$
956
|
|
|
$
186
|
|
Pre-tax
Margin
|
|
21.0
|
%
|
|
7.2
|
%
|
|
12.8
|
%
|
|
62.0
|
%
|
____________________
|
*
The
year-to-date 2023 pre-tax charge of approximately $0.38 billion for
stranded costs related to portfolio actions is not included in the
measure of segment
pre-tax
income, consistent with the company's management system.
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
U.S.
GAAP TO OPERATING (Non-GAAP) RESULTS
RECONCILIATION
(Unaudited;
Dollars in millions except per share amounts)
|
|
|
Three
Months Ended June 30, 2023
|
|
|
Continuing
Operations
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments (1)
|
|
|
Retirement-
Related
Adjustments (2)
|
|
|
Tax
Reform
Impacts
|
|
|
Kyndryl-
Related
Impacts (3)
|
|
|
Operating
(Non-GAAP)
|
|
Gross
Profit
|
$ 8,501
|
|
|
$ 150
|
|
|
$ —
|
|
|
$ —
|
|
|
$ —
|
|
|
$ 8,650
|
|
Gross
Profit Margin
|
54.9
|
%
|
|
1.0
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
55.9
|
%
|
S,G&A
|
$ 4,900
|
|
|
$
(245)
|
|
|
$ —
|
|
|
$ —
|
|
|
$
—
|
|
|
$ 4,655
|
|
Other
(Income) & Expense
|
(261)
|
|
|
0
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(262)
|
|
Total
Expense & Other
(Income)
|
6,501
|
|
|
(246)
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
6,254
|
|
Pre-tax
Income from
Continuing
Operations
|
2,000
|
|
|
395
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2,396
|
|
Pre-tax
Income Margin from
Continuing
Operations
|
12.9
|
%
|
|
2.6
|
pts.
|
|
0.0
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
15.5
|
%
|
Provision
for/(Benefit from)
Income
Taxes (4)
|
$ 419
|
|
|
$ 87
|
|
|
$
(3)
|
|
|
$
(110)
|
|
|
$ —
|
|
|
$ 393
|
|
Effective
Tax Rate
|
21.0
|
%
|
|
0.2
|
pts.
|
|
(0.2)
|
pts.
|
|
(4.6)
|
pts.
|
|
—
|
pts.
|
|
16.4
|
%
|
Income from
Continuing
Operations
|
$
1,581
|
|
|
$
308
|
|
|
$ 5
|
|
|
$
110
|
|
|
$ —
|
|
|
$
2,003
|
|
Income
Margin from
Continuing
Operations
|
10.2
|
%
|
|
2.0
|
pts.
|
|
0.0
|
pts.
|
|
0.7
|
pts.
|
|
—
|
pts.
|
|
12.9
|
%
|
Diluted
Earnings Per Share:
Continuing
Operations
|
$ 1.72
|
|
|
$
0.34
|
|
|
$
0.00
|
|
|
$
0.12
|
|
|
$ —
|
|
|
$
2.18
|
|
|
|
Three
Months Ended June 30, 2022
|
|
|
Continuing
Operations
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments (1)
|
|
|
Retirement-
Related
Adjustments (2)
|
|
|
Tax
Reform
Impacts
|
|
|
Kyndryl-
Related
Impacts (3)
|
|
|
Operating
(Non-GAAP)
|
|
Gross
Profit
|
$
8,290
|
|
|
$
180
|
|
|
$ —
|
|
|
$ —
|
|
|
$ —
|
|
|
$
8,470
|
|
Gross
Profit Margin
|
53.4
|
%
|
|
1.2
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
54.5
|
%
|
S,G&A
|
$
4,855
|
|
|
$
(279)
|
|
|
$ —
|
|
|
$ —
|
|
|
$
0
|
|
|
$
4,576
|
|
Other
(Income) & Expense
|
(81)
|
|
|
(1)
|
|
|
(192)
|
|
|
—
|
|
|
(145)
|
|
|
(418)
|
|
Total
Expense & Other
(Income)
|
6,568
|
|
|
(280)
|
|
|
(192)
|
|
|
—
|
|
|
(145)
|
|
|
5,952
|
|
Pre-tax
Income from
Continuing
Operations
|
1,722
|
|
|
460
|
|
|
192
|
|
|
—
|
|
|
145
|
|
|
2,518
|
|
Pre-tax
Income Margin from
Continuing
Operations
|
11.1
|
%
|
|
3.0
|
pts.
|
|
1.2
|
pts.
|
|
—
|
pts.
|
|
0.9
|
pts.
|
|
16.2
|
%
|
Provision
for/(Benefit from)
Income
Taxes (4)
|
$ 257
|
|
|
$
115
|
|
|
$
46
|
|
|
$
(4)
|
|
|
$
—
|
|
|
$
413
|
|
Effective
Tax Rate
|
14.9
|
%
|
|
1.8
|
pts.
|
|
0.7
|
pts.
|
|
(0.2)
|
pts.
|
|
(0.9)
|
pts.
|
|
16.4
|
%
|
Income from
Continuing
Operations
|
$
1,465
|
|
|
$
345
|
|
|
$
146
|
|
|
$ 4
|
|
|
$
145
|
|
|
$
2,105
|
|
Income
Margin from
Continuing
Operations
|
9.4
|
%
|
|
2.2
|
pts.
|
|
0.9
|
pts.
|
|
0.0
|
pts.
|
|
0.9
|
pts.
|
|
13.5
|
%
|
Diluted
Earnings Per Share:
Continuing
Operations
|
$ 1.61
|
|
|
$
0.38
|
|
|
$
0.16
|
|
|
$
0.00
|
|
|
$
0.16
|
|
|
$
2.31
|
|
____________________
|
(1)
|
Includes
amortization of purchased intangible assets, in process R&D,
transaction costs, applicable restructuring and related expenses,
tax charges related to acquisition
integration
and pre-closing charges, such as financing costs.
|
(2)
|
Includes
amortization of prior service costs, interest cost, expected return
on plan assets, amortized actuarial gains/losses, the impacts of
any plan curtailments/settlements
and pension
insolvency costs and other costs.
|
(3)
|
Primarily
relates to fair value changes in shares of Kyndryl common stock
that were retained by IBM and the related cash-settled
swap.
|
(4)
|
Tax impact
on operating (non-GAAP) pre-tax income from continuing operations
is calculated under the same accounting principles applied to the
As Reported pre-tax
income
under ASC 740, which employs an annual effective tax rate method to
the results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
U.S.
GAAP TO OPERATING (Non-GAAP) RESULTS
RECONCILIATION
(Unaudited;
Dollars in millions except per share amounts)
|
|
|
Six
Months Ended June 30, 2023
|
|
|
Continuing
Operations
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments (1)
|
|
|
Retirement-
Related
Adjustments (2)
|
|
|
Tax
Reform
Impacts
|
|
|
Kyndryl-
Related
Impacts (3)
|
|
|
Operating
(Non-GAAP)
|
|
Gross
Profit
|
$ 16,010
|
|
|
$ 298
|
|
|
$ —
|
|
|
$ —
|
|
|
$ —
|
|
|
$
16,308
|
|
Gross
Profit Margin
|
53.9
|
%
|
|
1.0
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
54.9
|
%
|
S,G&A
|
$ 9,754
|
|
|
$ (491)
|
|
|
$ —
|
|
|
$ —
|
|
|
$ —
|
|
|
$ 9,263
|
|
Other
(Income) & Expense
|
(506)
|
|
|
(2)
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(504)
|
|
Total
Expense & Other
(Income)
|
12,952
|
|
|
(493)
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
12,463
|
|
Pre-tax
Income from
Continuing
Operations
|
3,058
|
|
|
791
|
|
|
(4)
|
|
|
—
|
|
|
—
|
|
|
3,845
|
|
Pre-tax
Income Margin from
Continuing
Operations
|
10.3
|
%
|
|
2.7
|
pts.
|
|
0.0
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
12.9
|
%
|
Provision
for/(Benefit from)
Income
Taxes (4)
|
$ 543
|
|
|
$ 178
|
|
|
$
(14)
|
|
|
$
(115)
|
|
|
$ —
|
|
|
$ 593
|
|
Effective
Tax Rate
|
17.8
|
%
|
|
1.0
|
pts.
|
|
(0.3)
|
pts.
|
|
(3.0)
|
pts.
|
|
—
|
pts.
|
|
15.4
|
%
|
Income from
Continuing
Operations
|
$
2,515
|
|
|
$ 613
|
|
|
$
10
|
|
|
$
115
|
|
|
$ —
|
|
|
$
3,252
|
|
Income
Margin from
Continuing
Operations
|
8.5
|
%
|
|
2.1
|
pts.
|
|
0.0
|
pts.
|
|
0.4
|
pts.
|
|
—
|
pts.
|
|
10.9
|
%
|
Diluted
Earnings Per Share:
Continuing
Operations
|
$ 2.74
|
|
|
$ 0.67
|
|
|
$
0.01
|
|
|
$
0.13
|
|
|
$ —
|
|
|
$
3.54
|
|
|
|
Six
Months Ended June 30, 2022
|
|
|
Continuing
Operations
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments (1)
|
|
|
Retirement-
Related
Adjustments (2)
|
|
|
Tax
Reform
Impacts
|
|
|
Kyndryl-
Related
Impacts (3)
|
|
|
Operating
(Non-GAAP)
|
|
Gross
Profit
|
$
15,625
|
|
|
$ 361
|
|
|
$
—
|
|
|
$ —
|
|
|
$ —
|
|
|
$
15,986
|
|
Gross
Profit Margin
|
52.6
|
%
|
|
1.2
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
53.8
|
%
|
S,G&A
|
$
9,452
|
|
|
$ (565)
|
|
|
$
—
|
|
|
$ —
|
|
|
$
0
|
|
|
$
8,887
|
|
Other
(Income) & Expense
|
166
|
|
|
(1)
|
|
|
(394)
|
|
|
—
|
|
|
(367)
|
|
|
(596)
|
|
Total
Expense & Other
(Income)
|
13,280
|
|
|
(566)
|
|
|
(394)
|
|
|
—
|
|
|
(367)
|
|
|
11,953
|
|
Pre-tax
Income from
Continuing
Operations
|
2,345
|
|
|
928
|
|
|
394
|
|
|
—
|
|
|
367
|
|
|
4,033
|
|
Pre-tax
Income Margin from
Continuing
Operations
|
7.9
|
%
|
|
3.1
|
pts.
|
|
1.3
|
pts.
|
|
—
|
pts.
|
|
1.2
|
pts.
|
|
13.6
|
%
|
Provision
for/(Benefit from)
Income
Taxes (4)
|
$ 218
|
|
|
$ 224
|
|
|
$
104
|
|
|
$
112
|
|
|
$ —
|
|
|
$ 657
|
|
Effective
Tax Rate
|
9.3
|
%
|
|
3.4
|
pts.
|
|
1.7
|
pts.
|
|
2.8
|
pts.
|
|
(0.8)
|
pts.
|
|
16.3
|
%
|
Income from
Continuing
Operations
|
$
2,127
|
|
|
$ 704
|
|
|
$
290
|
|
|
$
(112)
|
|
|
$
367
|
|
|
$
3,376
|
|
Income
Margin from
Continuing
Operations
|
7.2
|
%
|
|
2.4
|
pts.
|
|
1.0
|
pts.
|
|
(0.4)
|
pts.
|
|
1.2
|
pts.
|
|
11.4
|
%
|
Diluted
Earnings Per Share:
Continuing
Operations
|
$ 2.34
|
|
|
$ 0.77
|
|
|
$
0.32
|
|
|
$
(0.12)
|
|
|
$
0.40
|
|
|
$
3.71
|
|
____________________
|
(1)
|
Includes
amortization of purchased intangible assets, in process R&D,
transaction costs, applicable restructuring and related expenses,
tax charges related to acquisition
integration
and pre-closing charges, such as financing costs.
|
(2)
|
Includes
amortization of prior service costs, interest cost, expected return
on plan assets, amortized actuarial gains/losses, the impacts of
any plan curtailments/settlements and
pension
insolvency costs and other costs.
|
(3)
|
Primarily
relates to fair value changes in shares of Kyndryl
common stock that were retained by IBM and the related cash-settled
swap.
|
(4)
|
Tax impact
on operating (non-GAAP) pre-tax income from continuing operations
is calculated under the same accounting principles applied to the
As Reported pre-tax
income
under ASC 740, which employs an annual effective tax rate method to
the results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|