Revenue growth led by Software and Consulting; Strong profit
and cash generation
ARMONK,
N.Y., Oct. 25, 2023 /PRNewswire/ -- IBM (NYSE:
IBM) today announced third-quarter 2023 earnings results.
"Technology remains a critical source of competitive
differentiation and progress for organizations around the world,"
said Arvind Krishna, IBM chairman
and chief executive officer. "Clients are increasingly adopting our
watsonx AI and data platform along with our hybrid cloud solutions
to unlock productivity and operational efficiency. This is helping
drive solid growth in our software and consulting businesses. As a
result, we remain confident in our revenue and free cash flow
growth expectations for the full year."
Third-Quarter Highlights
- Revenue
- Revenue of $14.8 billion, up
4.6 percent, up 3.5 percent at constant currency
- Software revenue up 8 percent, up 6 percent at constant
currency
- Consulting revenue up 6 percent, up 5 percent at constant
currency
- Infrastructure revenue down 2 percent, down 3 percent at
constant currency
- Profit Margin
- Gross Profit Margin: GAAP: 54.4 percent, up 1.7 points;
Operating (Non-GAAP): 55.5 percent, up 1.6 points
- Pre-Tax Income Margin: GAAP: 12.7 percent, up 44.6 points;
Operating (Non-GAAP): 15.6 percent, up 1.7 points
- Cash Flow
- Year to date net cash from operating activities of
$9.5 billion, up $3.0 billion; free cash flow of $5.1 billion, up $1.0
billion
|
THIRD QUARTER 2023 INCOME STATEMENT
SUMMARY
|
|
|
Revenue
|
|
Gross
Profit
|
|
|
Gross
Profit
Margin
|
|
|
Pre-tax
Income
|
|
Pre-tax
Income
Margin
|
|
Net
Income
|
|
Diluted
Earnings
Per Share
|
GAAP from
Continuing
Operations
|
$ 14.8 B
|
|
|
$ 8.0 B
|
|
|
54.4
|
%
|
|
$ 1.9 B
|
|
|
12.7
|
%
|
|
$ 1.7 B
|
|
|
$ 1.86
|
|
Year/Year
|
4.6
|
%*
|
|
8
|
%
|
|
1.7
|
Pts
|
|
NM
|
**
|
|
44.6
|
Pts**
|
|
NM
|
**
|
|
NM
|
**
|
Operating
(Non-GAAP)
|
|
|
|
$ 8.2 B
|
|
|
55.5
|
%
|
|
$ 2.3 B
|
|
|
15.6
|
%
|
|
$ 2.0 B
|
|
|
$ 2.20
|
|
Year/Year
|
|
|
|
8
|
%
|
|
1.6
|
Pts
|
|
17
|
%
|
|
1.7
|
Pts
|
|
23
|
%
|
|
22
|
%
|
*
3.5% at constant currency
|
** GAAP YTY
results include the impact of a one-time, non-cash pension
settlement charge related to the transfer of a portion of the
company's U.S. defined benefit pension obligations and related plan
assets to third-party insurers in third quarter
2022.
|
"Our continued focus on the fundamentals of our business is
driving solid revenue growth, profit margin expansion, and strong
cash generation," said James Kavanaugh, IBM senior vice
president and chief financial officer. "That cash generation has
enabled us to increase our investment in R&D and acquisitions,
strengthening our future AI and hybrid cloud capabilities, while
supporting continued shareholder returns through our dividend."
Segment Results for Third Quarter
- Software — revenues of $6.3
billion, up 7.8 percent, up 6.3 percent at constant
currency:
- Hybrid Platform & Solutions up 8 percent, up 7 percent
at constant currency:
-- Red Hat up 9 percent, up 8 percent at constant
currency
-- Automation up 14 percent, up 13 percent at
constant currency
-- Data & AI up 6 percent
-- Security down 2 percent, down 3 percent at
constant currency
- Transaction Processing up 7 percent, up 5 percent at
constant currency
- Consulting — revenues of $5.0
billion, up 5.6 percent, up 5.0 percent at constant
currency:
- Business Transformation up 6 percent, up 5 percent at constant
currency
- Technology Consulting up 2 percent, up 1 percent at constant
currency
- Application Operations up 7 percent
- Infrastructure — revenues of $3.3
billion, down 2.4 percent, down 3.2 percent at constant
currency:
- Hybrid Infrastructure up 1 percent, flat at constant
currency
-- IBM zSystems up 9 percent
-- Distributed Infrastructure down 4 percent,
down 6 percent at constant currency
- Infrastructure Support down 6 percent, down 7 percent at
constant currency
- Financing — revenues of $0.2
billion, up 6.9 percent, up 5.1 percent at constant
currency
Cash Flow and Balance Sheet
In the third quarter, the
company generated net cash from operating activities of
$3.1 billion, up $1.2 billion year to year. Net cash from
operating activities excluding IBM Financing receivables was
$2.0 billion. IBM's free cash flow
was $1.7 billion, up $0.9 billion year to year. The company returned
$1.5 billion to shareholders in
dividends in the third quarter.
For the first nine months of the year, the company generated net
cash from operating activities of $9.5
billion, up $3.0 billion year
to year. Net cash from operating activities excluding IBM Financing
receivables was $6.3 billion. IBM's
free cash flow was $5.1 billion, up
$1.0 billion year to year.
IBM ended the third quarter with $11.0
billion of cash and marketable securities, up $2.2 billion from year-end 2022. Debt, including
IBM Financing debt of $9.9 billion,
totaled $55.2 billion, up
$4.3 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 about a one-point
headwind 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;
- net 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. ET, today. The Webcast may be accessed
via a link at https://www.ibm.com/investor/events/earnings-3q23.
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
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
2023
|
|
|
2022*
|
|
|
2023
|
|
|
2022*
|
|
REVENUE BY SEGMENT
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
$
6,265
|
|
|
$
5,811
|
|
|
$
18,794
|
|
|
$
17,749
|
|
Consulting
|
4,963
|
|
|
4,700
|
|
|
14,938
|
|
|
14,337
|
|
Infrastructure
|
3,272
|
|
|
3,352
|
|
|
9,988
|
|
|
10,805
|
|
Financing
|
186
|
|
|
174
|
|
|
566
|
|
|
474
|
|
Other
|
67
|
|
|
70
|
|
|
192
|
|
|
475
|
|
TOTAL REVENUE
|
14,752
|
|
|
14,107
|
|
|
44,479
|
|
|
43,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
8,023
|
|
|
7,430
|
|
|
24,033
|
|
|
23,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT MARGIN
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
79.5
|
%
|
|
79.0
|
%
|
|
79.4
|
%
|
|
79.0
|
%
|
Consulting
|
27.4
|
%
|
|
26.0
|
%
|
|
26.2
|
%
|
|
24.8
|
%
|
Infrastructure
|
53.5
|
%
|
|
50.8
|
%
|
|
53.8
|
%
|
|
51.9
|
%
|
Financing
|
49.7
|
%
|
|
32.8
|
%
|
|
47.5
|
%
|
|
35.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL GROSS PROFIT MARGIN
|
54.4
|
%
|
|
52.7
|
%
|
|
54.0
|
%
|
|
52.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE AND OTHER INCOME
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
4,458
|
|
|
4,391
|
|
|
14,212
|
|
|
13,843
|
|
R,D&E
|
1,685
|
|
|
1,611
|
|
|
5,027
|
|
|
4,963
|
|
Intellectual property
and custom development income
|
(190)
|
|
|
(121)
|
|
|
(618)
|
|
|
(418)
|
|
Other (income) and
expense
|
(215)
|
|
|
5,755
|
|
|
(721)
|
|
|
5,921
|
|
Interest
expense
|
412
|
|
|
295
|
|
|
1,202
|
|
|
903
|
|
TOTAL EXPENSE AND OTHER INCOME
|
6,150
|
|
|
11,931
|
|
|
19,102
|
|
|
25,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME/(LOSS) FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES
|
1,873
|
|
|
(4,501)
|
|
|
4,931
|
|
|
(2,156)
|
|
Pre-tax
margin
|
12.7
|
%
|
|
(31.9)
|
%
|
|
11.1
|
%
|
|
(4.9)
|
%
|
Provision for/(Benefit
from) income taxes
|
159
|
|
|
(1,287)
|
|
|
702
|
|
|
(1,070)
|
|
Effective tax
rate
|
8.5
|
%
|
|
28.6
|
%
|
|
14.2
|
%
|
|
49.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME/(LOSS) FROM CONTINUING
OPERATIONS
|
$
1,714
|
|
|
$
(3,214)
|
|
|
$
4,229
|
|
|
$
(1,087)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from
discontinued operations, net of taxes
|
(10)
|
|
|
18
|
|
|
(15)
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS)
|
$
1,704
|
|
|
$
(3,196)
|
|
|
$
4,214
|
|
|
$
(1,071)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS/(LOSS) PER SHARE OF COMMON
STOCK
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
Dilution
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
$
1.86
|
|
|
$
(3.55)
|
|
|
$
4.59
|
|
|
$
(1.21)
|
|
Discontinued
Operations
|
$
(0.01)
|
|
|
$
0.02
|
|
|
$
(0.02)
|
|
|
$
0.02
|
|
TOTAL
|
$
1.84
|
|
|
$
(3.54)
|
|
|
$
4.58
|
|
|
$
(1.19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
$
1.88
|
|
|
$
(3.55)
|
|
|
$
4.65
|
|
|
$
(1.21)
|
|
Discontinued
Operations
|
$
(0.01)
|
|
|
$
0.02
|
|
|
$
(0.02)
|
|
|
$
0.02
|
|
TOTAL
|
$
1.87
|
|
|
$
(3.54)
|
|
|
$
4.63
|
|
|
$
(1.19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (M's)
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
Dilution
|
923.7
|
|
|
904.1
|
|
|
920.3
|
|
|
901.6
|
|
Basic
|
912.8
|
|
|
904.1
|
|
|
910.1
|
|
|
901.6
|
|
_________________________
|
* Includes a one-time,
non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4
billion net of tax).
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
(Dollars in Millions)
|
|
At
September 30,
2023
|
|
At
December 31,
2022
|
ASSETS:
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
7,257
|
|
$
7,886
|
Restricted
cash
|
|
19
|
|
103
|
Marketable
securities
|
|
3,721
|
|
852
|
Notes and accounts
receivable - trade, net
|
|
5,330
|
|
6,541
|
Short-term financing
receivables, net
|
|
5,625
|
|
7,790
|
Other accounts
receivable, net
|
|
842
|
|
817
|
Inventories
|
|
1,399
|
|
1,552
|
Deferred
costs
|
|
931
|
|
967
|
Prepaid expenses and
other current assets
|
|
2,582
|
|
2,611
|
Total Current Assets
|
|
27,705
|
|
29,118
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
5,369
|
|
5,334
|
Operating right-of-use
assets, net
|
|
3,112
|
|
2,878
|
Long-term financing
receivables, net
|
|
4,789
|
|
5,806
|
Prepaid pension
assets
|
|
8,901
|
|
8,236
|
Deferred
costs
|
|
822
|
|
866
|
Deferred
taxes
|
|
6,168
|
|
6,256
|
Goodwill
|
|
59,596
|
|
55,949
|
Intangibles,
net
|
|
11,278
|
|
11,184
|
Investments and sundry
assets
|
|
1,582
|
|
1,617
|
Total Assets
|
|
$
129,321
|
|
$
127,243
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Taxes
|
|
$
1,559
|
|
$
2,196
|
Short-term
debt
|
|
6,414
|
|
4,760
|
Accounts
payable
|
|
3,342
|
|
4,051
|
Deferred
income
|
|
11,917
|
|
12,032
|
Operating lease
liabilities
|
|
807
|
|
874
|
Other
liabilities
|
|
6,566
|
|
7,592
|
Total Current Liabilities
|
|
30,606
|
|
31,505
|
|
|
|
|
|
Long-term
debt
|
|
48,828
|
|
46,189
|
Retirement related
obligations
|
|
9,090
|
|
9,596
|
Deferred
income
|
|
3,085
|
|
3,499
|
Operating lease
liabilities
|
|
2,476
|
|
2,190
|
Other
liabilities
|
|
12,081
|
|
12,243
|
Total Liabilities
|
|
106,165
|
|
105,222
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
IBM Stockholders' Equity:
|
|
|
|
|
Common stock
|
|
59,313
|
|
58,343
|
Retained
earnings
|
|
149,506
|
|
149,825
|
Treasury stock — at
cost
|
|
(169,640)
|
|
(169,484)
|
Accumulated other
comprehensive income/(loss)
|
|
(16,098)
|
|
(16,740)
|
Total IBM Stockholders' Equity
|
|
23,081
|
|
21,944
|
|
|
|
|
|
Noncontrolling
interests
|
|
75
|
|
77
|
Total Equity
|
|
23,156
|
|
22,021
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
129,321
|
|
$
127,243
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CASH FLOW
ANALYSIS
(Unaudited)
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Trailing Twelve
Months Ended
September 30,
|
(Dollars in Millions)
|
|
2023
|
|
2022
|
|
2023
|
|
2022*
|
|
2023
|
Net Cash from Operations per
GAAP
|
|
$
3,055
|
|
$
1,901
|
|
$
9,468
|
|
$
6,470
|
|
$
13,432
|
|
|
|
|
|
|
|
|
|
|
|
Less: change in IBM
Financing receivables
|
|
1,092
|
|
704
|
|
3,119
|
|
1,071
|
|
1,331
|
Capital Expenditures,
net
|
|
(282)
|
|
(445)
|
|
(1,226)
|
|
(1,317)
|
|
(1,769)
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
1,682
|
|
752
|
|
5,123
|
|
4,082
|
|
10,332
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
(4,589)
|
|
(62)
|
|
(4,945)
|
|
(1,020)
|
|
(6,274)
|
Divestitures
|
|
(10)
|
|
3
|
|
(4)
|
|
1,271
|
|
(3)
|
Dividends
|
|
(1,515)
|
|
(1,491)
|
|
(4,522)
|
|
(4,454)
|
|
(6,016)
|
Non-Financing
Debt
|
|
(942)
|
|
2,946
|
|
7,572
|
|
4,686
|
|
4,795
|
Other (includes IBM
Financing net receivables and
debt)
|
|
41
|
|
(198)
|
|
(1,068)
|
|
(2,395)
|
|
(1,566)
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash, Cash Equivalents, Restricted Cash
and Short-term Marketable Securities
|
|
$
(5,333)
|
|
$
1,950
|
|
$
2,156
|
|
$
2,171
|
|
$
1,268
|
_________________________
|
* Includes
immaterial cash flows from discontinued operations.
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CASH
FLOW
(Unaudited)
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(Dollars in Millions)
|
|
2023
|
|
2022
|
|
2023
|
|
2022*
|
Net Income/(Loss) from
Operations
|
|
$
1,704
|
|
$
(3,196)
|
|
$
4,214
|
|
$
(1,071)
|
Pension Settlement
Charge
|
|
-
|
|
5,894
|
|
-
|
|
5,894
|
Depreciation/Amortization of Intangibles
|
|
1,093
|
|
1,163
|
|
3,243
|
|
3,665
|
Stock-based
Compensation
|
|
286
|
|
251
|
|
843
|
|
739
|
Working Capital /
Other
|
|
(1,119)
|
|
(2,914)
|
|
(1,952)
|
|
(3,827)
|
IBM Financing
A/R
|
|
1,092
|
|
704
|
|
3,119
|
|
1,071
|
Net Cash Provided by Operating
Activities
|
|
$
3,055
|
|
$
1,901
|
|
$
9,468
|
|
$
6,470
|
|
|
|
|
|
|
|
|
|
Capital Expenditures,
net of payments & proceeds
|
|
(282)
|
|
(445)
|
|
(1,226)
|
|
(1,317)
|
Divestitures, net of
cash transferred
|
|
(10)
|
|
3
|
|
(4)
|
|
1,271
|
Acquisitions, net of
cash acquired
|
|
(4,589)
|
|
(62)
|
|
(4,945)
|
|
(1,020)
|
Marketable Securities
/ Other Investments, net
|
|
2,927
|
|
(1,193)
|
|
(3,732)
|
|
(1,818)
|
Net Cash Provided by/(Used in) Investing
Activities
|
|
$
(1,953)
|
|
$
(1,697)
|
|
$
(9,906)
|
|
$
(2,883)
|
|
|
|
|
|
|
|
|
|
Debt, net of payments
& proceeds
|
|
(1,550)
|
|
2,138
|
|
4,619
|
|
2,572
|
Dividends
|
|
(1,515)
|
|
(1,491)
|
|
(4,522)
|
|
(4,454)
|
Financing -
Other
|
|
(67)
|
|
67
|
|
(252)
|
|
(223)
|
Net Cash Provided by/(Used in) Financing
Activities
|
|
$
(3,132)
|
|
$
714
|
|
$
(154)
|
|
$
(2,106)
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate
changes on Cash
|
|
(119)
|
|
(197)
|
|
(120)
|
|
(463)
|
Net Change in Cash, Cash Equivalents and
Restricted
Cash
|
|
$
(2,149)
|
|
$
721
|
|
$
(713)
|
|
$
1,018
|
_________________________
|
* Includes
immaterial cash flows from discontinued operations.
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
SEGMENT
DATA
(Unaudited)
|
|
|
|
Three Months Ended September 30,
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
6,265
|
|
|
$
4,963
|
|
|
$
3,272
|
|
|
$
186
|
|
Pre-tax Income from Continuing
Operations*
|
|
$
1,486
|
|
|
$
509
|
|
|
$
387
|
|
|
$
91
|
|
Pre-tax Margin*
|
|
23.7
|
%
|
|
10.2
|
%
|
|
11.8
|
%
|
|
49.2
|
%
|
Change YTY Revenue
|
|
7.8
|
%
|
|
5.6
|
%
|
|
(2.4)
|
%
|
|
6.9
|
%
|
Change YTY Revenue - Constant
Currency
|
|
6.3
|
%
|
|
5.0
|
%
|
|
(3.2)
|
%
|
|
5.1
|
%
|
|
|
|
|
Three Months Ended September 30,
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
5,811
|
|
|
$
4,700
|
|
|
$
3,352
|
|
|
$
174
|
|
Pre-tax Income from Continuing
Operations
|
|
$
1,306
|
|
|
$
462
|
|
|
$
280
|
|
|
$
79
|
|
Pre-tax Margin
|
|
22.5
|
%
|
|
9.8
|
%
|
|
8.3
|
%
|
|
45.4
|
%
|
_________________________
|
* The third
quarter 2023 pre-tax charge of approximately $0.03 billion for
workforce rebalancing is not included in the measure of
segment pre-tax income, consistent with the
company's management system.
|
|
|
|
Nine Months Ended September 30,
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
18,794
|
|
|
$
14,938
|
|
|
$
9,988
|
|
|
$
566
|
|
Pre-tax Income from Continuing
Operations*
|
|
$
4,154
|
|
|
$
1,336
|
|
|
$
1,236
|
|
|
$
256
|
|
Pre-tax Margin*
|
|
22.1
|
%
|
|
8.9
|
%
|
|
12.4
|
%
|
|
45.3
|
%
|
Change YTY Revenue
|
|
5.9
|
%
|
|
4.2
|
%
|
|
(7.6)
|
%
|
|
19.5
|
%
|
Change YTY Revenue - Constant
Currency
|
|
6.5
|
%
|
|
6.4
|
%
|
|
(6.4)
|
%
|
|
20.3
|
%
|
|
|
|
Nine Months Ended September 30,
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
Revenue
|
|
$
17,749
|
|
|
$
14,337
|
|
|
$
10,805
|
|
|
$
474
|
|
Pre-tax Income from Continuing
Operations
|
|
$
3,816
|
|
|
$
1,154
|
|
|
$
1,236
|
|
|
$
265
|
|
Pre-tax Margin
|
|
21.5
|
%
|
|
8.0
|
%
|
|
11.4
|
%
|
|
55.9
|
%
|
_________________________
|
* The
year-to-date 2023 pre-tax charge of approximately $0.41 billion for
workforce rebalancing 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 September 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
|
$
8,023
|
|
|
$
162
|
|
|
$
—
|
|
|
$
—
|
|
|
$
—
|
|
|
$
8,185
|
|
Gross Profit
Margin
|
54.4
|
%
|
|
1.1
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
55.5
|
%
|
S,G&A
|
$
4,458
|
|
|
$
(277)
|
|
|
$
—
|
|
|
$
—
|
|
|
$
—
|
|
|
$
4,181
|
|
Other (Income) &
Expense
|
(215)
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
(203)
|
|
Total Expense &
Other (Income)
|
6,150
|
|
|
(277)
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
5,885
|
|
Pre-tax Income from
Continuing Operations
|
1,873
|
|
|
438
|
|
|
(12)
|
|
|
—
|
|
|
—
|
|
|
2,299
|
|
Pre-tax Income Margin
from
Continuing Operations
|
12.7
|
%
|
|
3.0
|
pts.
|
|
(0.1)
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
15.6
|
%
|
Provision for/(Benefit
from)
Income Taxes (4)
|
$
159
|
|
|
$
99
|
|
|
$
(14)
|
|
|
$
24
|
|
|
$
—
|
|
|
$
268
|
|
Effective Tax
Rate
|
8.5
|
%
|
|
2.7
|
pts.
|
|
(0.5)
|
pts.
|
|
1.0
|
pts.
|
|
—
|
pts.
|
|
11.7
|
%
|
Income from
Continuing
Operations
|
$
1,714
|
|
|
$
340
|
|
|
$
1
|
|
|
$
(24)
|
|
|
$
—
|
|
|
$
2,031
|
|
Income Margin from
Continuing Operations
|
11.6
|
%
|
|
2.3
|
pts.
|
|
0.0
|
pts.
|
|
(0.2)
|
pts.
|
|
—
|
pts.
|
|
13.8
|
%
|
Diluted Earnings
Per Share:
Continuing Operations
|
$
1.86
|
|
|
$
0.37
|
|
|
$
0.00
|
|
|
$
(0.03)
|
|
|
$
—
|
|
|
$
2.20
|
|
|
|
Three Months Ended September 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
|
$
7,430
|
|
|
$
165
|
|
|
$
—
|
|
|
$
—
|
|
|
$
—
|
|
|
$
7,595
|
|
Gross Profit
Margin
|
52.7
|
%
|
|
1.2
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
53.8
|
%
|
S,G&A
|
$
4,391
|
|
|
$
(253)
|
|
|
$
—
|
|
|
$
—
|
|
|
$
0
|
|
|
$
4,138
|
|
Other (Income) &
Expense
|
5,755
|
|
|
(1)
|
|
|
(6,062)
|
|
|
—
|
|
|
14
|
|
|
(293)
|
|
Total Expense &
Other (Income)
|
11,931
|
|
|
(253)
|
|
|
(6,062)
|
|
|
—
|
|
|
14
|
|
|
5,630
|
|
Pre-tax Income/(Loss)
from
Continuing Operations
|
(4,501)
|
|
|
418
|
|
|
6,062
|
|
|
—
|
|
|
(14)
|
|
|
1,965
|
|
Pre-tax Income/(Loss)
Margin
from Continuing Operations
|
(31.9)
|
%
|
|
3.0
|
pts.
|
|
43.0
|
pts.
|
|
—
|
pts.
|
|
(0.1)
|
pts.
|
|
13.9
|
%
|
Provision for/(Benefit
from)
Income Taxes (4)
|
$
(1,287)
|
|
|
$
103
|
|
|
$
1,495
|
|
|
$
—
|
|
|
$
—
|
|
|
$
312
|
|
Effective Tax
Rate
|
28.6
|
%
|
|
(0.8)
|
pts.
|
|
(12.1)
|
pts.
|
|
—
|
pts.
|
|
0.2
|
pts.
|
|
15.9
|
%
|
Income/(Loss) from
Continuing
Operations
|
$
(3,214)
|
|
|
$
315
|
|
|
$
4,566
|
|
|
$
—
|
|
|
$
(14)
|
|
|
$
1,653
|
|
Income/(Loss) Margin
from
Continuing Operations
|
(22.8)
|
%
|
|
2.2
|
pts.
|
|
32.4
|
pts.
|
|
—
|
pts.
|
|
(0.1)
|
pts.
|
|
11.7
|
%
|
Diluted Earnings/(Loss)
Per
Share: Continuing Operations (5)
|
$
(3.55)
|
|
|
$
0.35
|
|
|
$
5.05
|
|
|
$
—
|
|
|
$
(0.02)
|
|
|
$
1.81
|
|
_________________________
|
(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.
2022 also includes a one-time, non-cash, pre-tax pension settlement
charge of $5.9 billion ($4.4 billion
net of tax).
|
(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.
|
(5)
|
Due to the GAAP net
loss for the three months ended September 30, 2022, dilutive
potential shares were excluded from the GAAP loss per share as the
effect would
have been antidilutive. The difference in share count resulted in
an additional ($0.02) reconciling item.
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
U.S. GAAP TO
OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars
in millions except per share amounts)
|
|
|
Nine Months Ended September 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
|
$
24,033
|
|
|
$
460
|
|
|
$
—
|
|
|
$
—
|
|
|
$
—
|
|
|
$
24,492
|
|
Gross Profit
Margin
|
54.0
|
%
|
|
1.0
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
55.1
|
%
|
S,G&A
|
$
14,212
|
|
|
$
(768)
|
|
|
$
—
|
|
|
$
—
|
|
|
$
—
|
|
|
$
13,444
|
|
Other (Income) &
Expense
|
(721)
|
|
|
(2)
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
(707)
|
|
Total Expense &
Other
(Income)
|
19,102
|
|
|
(770)
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
18,348
|
|
Pre-tax Income from
Continuing Operations
|
4,931
|
|
|
1,229
|
|
|
(16)
|
|
|
—
|
|
|
—
|
|
|
6,144
|
|
Pre-tax Income Margin
from
Continuing Operations
|
11.1
|
%
|
|
2.8
|
pts.
|
|
0.0
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
13.8
|
%
|
Provision for/(Benefit
from)
Income Taxes (4)
|
$
702
|
|
|
$
277
|
|
|
$
(27)
|
|
|
$
(91)
|
|
|
$
—
|
|
|
$
861
|
|
Effective Tax
Rate
|
14.2
|
%
|
|
1.7
|
pts.
|
|
(0.4)
|
pts.
|
|
(1.5)
|
pts.
|
|
—
|
pts.
|
|
14.0
|
%
|
Income from
Continuing
Operations
|
$
4,229
|
|
|
$
953
|
|
|
$
11
|
|
|
$
91
|
|
|
$
—
|
|
|
$
5,283
|
|
Income Margin from
Continuing Operations
|
9.5
|
%
|
|
2.1
|
pts.
|
|
0.0
|
pts.
|
|
0.2
|
pts.
|
|
—
|
pts.
|
|
11.9
|
%
|
Diluted Earnings Per
Share:
Continuing Operations
|
$
4.59
|
|
|
$
1.04
|
|
|
$
0.01
|
|
|
$ 0.10
|
|
|
$
—
|
|
|
$
5.74
|
|
|
|
Nine Months Ended September 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
|
$
23,055
|
|
|
$
526
|
|
|
$
—
|
|
|
$
—
|
|
|
$
—
|
|
|
$
23,582
|
|
Gross Profit
Margin
|
52.6
|
%
|
|
1.2
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
—
|
pts.
|
|
53.8
|
%
|
S,G&A
|
$
13,843
|
|
|
$
(818)
|
|
|
$
—
|
|
|
$
—
|
|
|
$
0
|
|
|
$
13,025
|
|
Other (Income) &
Expense
|
5,921
|
|
|
(2)
|
|
|
(6,455)
|
|
|
—
|
|
|
(353)
|
|
|
(889)
|
|
Total Expense &
Other (Income)
|
25,212
|
|
|
(820)
|
|
|
(6,455)
|
|
|
—
|
|
|
(353)
|
|
|
17,584
|
|
Pre-tax Income/(Loss)
from
Continuing Operations
|
(2,156)
|
|
|
1,346
|
|
|
6,455
|
|
|
—
|
|
|
353
|
|
|
5,998
|
|
Pre-tax Income/(Loss)
Margin
from Continuing Operations
|
(4.9)
|
%
|
|
3.1
|
pts.
|
|
14.7
|
pts.
|
|
—
|
pts.
|
|
0.8
|
pts.
|
|
13.7
|
%
|
Provision for/(Benefit
from)
Income Taxes (4)
|
$
(1,070)
|
|
|
$
327
|
|
|
$
1,599
|
|
|
$
112
|
|
|
$
—
|
|
|
$
969
|
|
Effective Tax
Rate
|
49.6
|
%
|
|
(5.7)
|
pts.
|
|
(26.7)
|
pts.
|
|
1.9
|
pts.
|
|
(2.9)
|
pts.
|
|
16.1
|
%
|
Income/(Loss) from
Continuing
Operations
|
$
(1,087)
|
|
|
$
1,019
|
|
|
$
4,856
|
|
|
$
(112)
|
|
|
$
353
|
|
|
$
5,029
|
|
Income/(Loss) Margin
from
Continuing Operations
|
(2.5)
|
%
|
|
2.3
|
pts.
|
|
11.1
|
pts.
|
|
(0.3)
|
pts.
|
|
0.8
|
pts.
|
|
11.5
|
%
|
Diluted Earnings/(Loss)
Per
Share: Continuing Operations (5)
|
$
(1.21)
|
|
|
$
1.13
|
|
|
$
5.39
|
|
|
$
(0.12)
|
|
|
$
0.39
|
|
|
$
5.52
|
|
_________________________
|
(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. 2022 also includes a
one-time, non-cash, pre-tax pension settlement charge of $5.9
billion ($4.4 billion net of tax).
|
(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.
|
(5)
|
Due to GAAP net loss
for the nine months ended September 30, 2022, dilutive potential
shares were excluded from the GAAP loss per share calculation as
the effect would
have been antidilutive. The difference in share count resulted in
an additional ($0.06) reconciling item.
|
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SOURCE IBM