3rd Quarter Results


IBM RELEASES THIRD-QUARTER RESULTS

 

Revenue growth led by Software and Consulting; Strong profit and cash generation

ARMONK, N.Y., Oct. 25, 2023 -- 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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