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.
|