IBM
RELEASES THIRD-QUARTER RESULTS
Accelerated Software revenue growth, expanded gross
profit margin, and strong free cash flow
ARMONK, N.Y.,
Oct. 23, 2024 --
IBM (NYSE: IBM) today announced third-quarter 2024 earnings
results.
"Our third-quarter performance was led by double-digit
growth in Software, including a re-acceleration in Red Hat. We
continue to see great momentum in AI as our models are trusted,
fit-for-purpose, and lower cost, with performance leadership. Our
generative AI book of business now stands at more than $3 billion, up more than $1 billion quarter to quarter," said Arvind Krishna, IBM chairman, president and
chief executive officer. "Heading into the final quarter of 2024,
we expect fourth-quarter constant currency revenue growth to be
consistent with the third quarter, with continued strength in
Software. We are confident in our ability to deliver more than
$12 billion in free cash flow for the
year, driven by continued expansion of our operating
margins."
Third-Quarter Highlights
-
Revenue
- Revenue of $15.0 billion, up 1
percent, up 2 percent at constant currency
- Software revenue up 10 percent
- Consulting revenue flat
- Infrastructure revenue down 7 percent
-
Profit
- Gross Profit Margin: GAAP: 56.3 percent, up 190 basis
points; Operating (Non-GAAP):
57.5 percent, up 210 basis points
- Cash
Flow
- Year to date, net cash from operating activities of
$9.1 billion; free cash flow of
$6.6 billion
|
THIRD-QUARTER
2024 INCOME STATEMENT SUMMARY
|
|
|
GAAP
results include impact of one-time, non-cash pension settlement
charge (1)
|
|
|
|
Revenue
|
|
Gross
Profit
|
|
|
Gross
Profit
Margin
|
|
|
Pre-tax
Income/
(Loss)
(1)
|
|
Pre-tax
Income
Margin
(1)
|
|
Net
Income/
(Loss)
(1)
|
|
Diluted
Earnings/
(Loss)
Per
Share
(1)
|
|
GAAP
from
Continuing
Operations
|
$
15.0 B
|
|
|
$
8.4 B
|
|
|
56.3
|
%
|
|
$ (0.8)
B
|
|
|
(5.4)
|
%
|
|
$
(0.3) B
|
|
|
$
(0.34)
|
|
|
Year/Year
|
1
|
%(2)
|
|
5
|
%
|
|
1.9
|
Pts
|
|
NM
|
|
|
-18.1
|
Pts
|
|
NM
|
|
|
NM
|
|
|
Operating
(Non-GAAP)
|
|
|
|
$
8.6 B
|
|
|
57.5
|
%
|
|
$
2.5 B
|
|
|
16.6
|
%
|
|
$
2.2 B
|
|
|
$
2.30
|
|
|
Year/Year
|
|
|
|
5
|
%
|
|
2.1
|
Pts
|
|
8
|
%
|
|
1.0
|
Pts
|
|
6
|
%
|
|
5
|
%
|
|
(1)
2024 GAAP results include the impact of a one-time, non-cash,
pension settlement charge of $2.7 billion ($2.0 billion
net of tax) related
to the transfer of a portion of the company's
U.S. defined benefit pension obligations and related plan assets to
a third-party insurer,
announced in September 2024.
|
|
(2) 2% at
constant currency.
|
"Our investments are paying off in Software as we've
repositioned our portfolio in recent years. In the third quarter,
Software delivered broad-based growth and now represents nearly 45
percent of our total revenue. Our ongoing focus on product mix,
coupled with our productivity initiatives enables us to continue to
drive operating leverage in our underlying profit performance,"
said James Kavanaugh, IBM senior
vice president and chief financial officer. "With our strong cash
generation, we are well-positioned to continue investing for growth
while returning value to shareholders through dividends."
Segment Results for Third Quarter
-
Software — revenues of $6.5
billion, up 9.7 percent, up 9.6 percent at constant
currency:
- Hybrid Platform & Solutions up 10 percent
-- Red Hat up 14 percent
-- Automation up 13 percent
-- Data & AI up 5 percent
-- Security down 1 percent
- Transaction Processing up 9 percent
-
Consulting — revenues of $5.2
billion, down 0.5 percent, down 0.2 percent at constant
currency:
- Business Transformation up 2 percent
- Technology Consulting down 4 percent
- Application Operations down 1 percent
-
Infrastructure — revenues of $3.0
billion, down 7.0 percent, down 6.7 percent at constant
currency:
- Hybrid Infrastructure down 9 percent
-- IBM Z down 19 percent
-- Distributed Infrastructure down 3
percent
- Infrastructure Support down 4 percent, down 3 percent at
constant currency
-
Financing — revenues of $0.2
billion, down 2.5 percent, down 1.3 percent at constant
currency
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from
operating activities of $2.9 billion,
down $0.2 billion year to year. IBM's
free cash flow was $2.1 billion, up
$0.4 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 $9.1
billion, down $0.4 billion
year to year. IBM's free cash flow was $6.6
billion, up $1.5 billion year
to year.
IBM ended the third quarter with $13.7
billion of cash, restricted cash and marketable securities,
up $0.3 billion from year-end 2023.
Debt, including IBM Financing debt of $10.4
billion, totaled $56.6
billion, flat year to date.
Expectations
-
Revenue: The company expects fourth-quarter constant currency
revenue growth consistent with the third quarter. At current
foreign exchange rates, currency is expected to be about a
half-point headwind to revenue growth in the quarter
- Free
cash flow: The company continues to expect more than $12 billion in free cash flow for the full
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.
Statements in this communication regarding the strategic
acquisition that are forward-looking may include projections as to
closing date for the transaction, the extent of, and the time
necessary to obtain, the regulatory approvals required for the
transaction, the anticipated benefits of the transaction, the
impact of the transaction on IBM's business, the synergies from the
transaction, and the combined company's future operating
results.
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
For generative AI, book of business includes Software
transactional revenue, SaaS Annual Contract Value and Consulting
signings. The generative AI book of business is further defined
within Exhibit 99.2 in the Form 8-K that includes 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;
-
adjusted EBITDA.
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-3q24. 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,
|
|
|
|
2024
|
|
|
2023
(1)
|
|
|
2024
|
|
|
2023
(1)
|
|
|
REVENUE BY
SEGMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
$
6,524
|
|
|
$
5,947
|
|
|
$
19,162
|
|
|
$
17,832
|
|
|
Consulting
|
5,152
|
|
|
5,178
|
|
|
15,517
|
|
|
15,601
|
|
|
Infrastructure
|
3,042
|
|
|
3,272
|
|
|
9,764
|
|
|
9,988
|
|
|
Financing
|
181
|
|
|
186
|
|
|
543
|
|
|
566
|
|
|
Other
|
68
|
|
|
170
|
|
|
214
|
|
|
491
|
|
|
TOTAL
REVENUE
|
14,968
|
|
|
14,752
|
|
|
45,199
|
|
|
44,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
8,420
|
|
|
8,023
|
|
|
25,112
|
|
|
24,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT MARGIN
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
83.2
|
%
|
|
82.3
|
%
|
|
83.1
|
%
|
|
82.3
|
%
|
|
Consulting
|
28.4
|
%
|
|
27.6
|
%
|
|
26.7
|
%
|
|
26.3
|
%
|
|
Infrastructure
|
55.0
|
%
|
|
53.7
|
%
|
|
55.3
|
%
|
|
54.0
|
%
|
|
Financing
|
47.2
|
%
|
|
49.7
|
%
|
|
48.2
|
%
|
|
47.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL GROSS
PROFIT MARGIN
|
56.3
|
%
|
|
54.4
|
%
|
|
55.6
|
%
|
|
54.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE AND
OTHER INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A
|
4,911
|
|
|
4,458
|
|
|
14,823
|
|
|
14,212
|
|
|
R,D&E
|
1,876
|
|
|
1,685
|
|
|
5,512
|
|
|
5,027
|
|
|
Intellectual
property and custom development income
|
(238)
|
|
|
(190)
|
|
|
(696)
|
|
|
(618)
|
|
|
Other
(income) and expense
|
2,244
|
|
|
(215)
|
|
|
1,694
|
|
|
(721)
|
|
|
Interest
expense
|
429
|
|
|
412
|
|
|
1,288
|
|
|
1,202
|
|
|
TOTAL
EXPENSE AND OTHER INCOME
|
9,222
|
|
|
6,150
|
|
|
22,621
|
|
|
19,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME/(LOSS)
FROM CONTINUING OPERATIONS
BEFORE
INCOME TAXES
|
(802)
|
|
|
1,873
|
|
|
2,491
|
|
|
4,931
|
|
|
Pre-tax
margin
|
(5.4)
|
%
|
|
12.7
|
%
|
|
5.5
|
%
|
|
11.1
|
%
|
|
Provision
for/(Benefit from) income taxes
|
(485)
|
|
|
159
|
|
|
(597)
|
|
|
702
|
|
|
Effective tax
rate
|
60.4
|
%
|
|
8.5
|
%
|
|
(24.0)
|
%
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME/(LOSS)
FROM CONTINUING OPERATIONS
|
$
(317)
|
|
|
$
1,714
|
|
|
$
3,088
|
|
|
$
4,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/
(loss) from discontinued operations, net of taxes
|
(13)
|
|
|
(10)
|
|
|
21
|
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) (2)
|
$
(330)
|
|
|
$
1,704
|
|
|
$
3,109
|
|
|
$
4,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS/(LOSS)
PER SHARE OF COMMON STOCK (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
Dilution
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
$
(0.34)
|
|
|
$
1.86
|
|
|
$
3.30
|
|
|
$
4.59
|
|
|
Discontinued
Operations
|
$
(0.01)
|
|
|
$
(0.01)
|
|
|
$
0.02
|
|
|
$
(0.02)
|
|
|
TOTAL
|
$
(0.36)
|
|
|
$
1.84
|
|
|
$
3.32
|
|
|
$
4.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
$
(0.34)
|
|
|
$
1.88
|
|
|
$
3.36
|
|
|
$
4.65
|
|
|
Discontinued
Operations
|
$
(0.01)
|
|
|
$
(0.01)
|
|
|
$
0.02
|
|
|
$
(0.02)
|
|
|
TOTAL
|
$
(0.36)
|
|
|
$
1.87
|
|
|
$
3.38
|
|
|
$
4.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING
(M's)
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming
Dilution
|
923.6
|
|
|
923.7
|
|
|
935.4
|
|
|
920.3
|
|
|
Basic
|
923.6
|
|
|
912.8
|
|
|
920.3
|
|
|
910.1
|
|
|
____________________
|
|
(1) Recast to
reflect January 2024 segment changes.
|
|
(2) 2024
includes the impact of a one-time, non-cash, pension settlement
charge of $2.7 billion ($2.0 billion net of tax).
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
|
|
(Dollars in
Millions)
|
|
At
September
30,
2024
|
|
At
December
31,
2023
|
|
ASSETS:
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
13,197
|
|
$
13,068
|
|
Restricted
cash
|
|
17
|
|
21
|
|
Marketable
securities
|
|
505
|
|
373
|
|
Notes
and accounts receivable - trade, net
|
|
5,390
|
|
7,214
|
|
Short-term
financing receivables, net
|
|
5,765
|
|
6,793
|
|
Other
accounts receivable, net
|
|
928
|
|
640
|
|
Inventories
|
|
1,367
|
|
1,161
|
|
Deferred
costs
|
|
966
|
|
998
|
|
Prepaid
expenses and other current assets
|
|
2,408
|
|
2,639
|
|
Total
Current Assets
|
|
30,543
|
|
32,908
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
5,614
|
|
5,501
|
|
Operating
right-of-use assets, net
|
|
3,355
|
|
3,220
|
|
Long-term financing
receivables, net
|
|
4,931
|
|
5,766
|
|
Prepaid
pension assets
|
|
7,975
|
|
7,506
|
|
Deferred
costs
|
|
788
|
|
842
|
|
Deferred
taxes
|
|
6,943
|
|
6,656
|
|
Goodwill
|
|
61,092
|
|
60,178
|
|
Intangibles,
net
|
|
11,090
|
|
11,036
|
|
Investments and
sundry assets
|
|
2,009
|
|
1,626
|
|
Total
Assets
|
|
$
134,339
|
|
$
135,241
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Taxes
|
|
$
1,584
|
|
$
2,270
|
|
Short-term
debt
|
|
3,599
|
|
6,426
|
|
Accounts
payable
|
|
3,274
|
|
4,132
|
|
Deferred
income
|
|
12,882
|
|
13,451
|
|
Operating lease
liabilities
|
|
790
|
|
820
|
|
Other
liabilities
|
|
6,725
|
|
7,022
|
|
Total
Current Liabilities
|
|
28,853
|
|
34,122
|
|
|
|
|
|
|
|
Long-term
debt
|
|
52,980
|
|
50,121
|
|
Retirement-related
obligations
|
|
10,366
|
|
10,808
|
|
Deferred
income
|
|
3,666
|
|
3,533
|
|
Operating lease
liabilities
|
|
2,757
|
|
2,568
|
|
Other
liabilities
|
|
11,186
|
|
11,475
|
|
Total
Liabilities
|
|
109,809
|
|
112,628
|
|
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
|
IBM
Stockholders' Equity:
|
|
|
|
|
|
Common
stock
|
|
61,013
|
|
59,643
|
|
Retained
earnings
|
|
149,789
|
|
151,276
|
|
Treasury stock - at
cost
|
|
(169,935)
|
|
(169,624)
|
|
Accumulated other
comprehensive income/(loss)
|
|
(16,418)
|
|
(18,761)
|
|
Total IBM
Stockholders' Equity
|
|
24,448
|
|
22,533
|
|
|
|
|
|
|
|
Noncontrolling
interests
|
|
82
|
|
80
|
|
Total
Equity
|
|
24,530
|
|
22,613
|
|
|
|
|
|
|
|
Total
Liabilities and Equity
|
|
$
134,339
|
|
$
135,241
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CASH FLOW
ANALYSIS
(Unaudited)
|
|
|
|
|
|
Three
Months Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
(Dollars in
Millions)
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Net Cash
from Operations per GAAP
|
|
$
2,881
|
|
$
3,055
|
|
$
9,115
|
|
$
9,468
|
|
|
|
|
|
|
|
|
|
|
|
Less:
change in IBM Financing receivables
|
|
873
|
|
1,092
|
|
1,824
|
|
3,119
|
|
Capital
Expenditures, net
|
|
55
|
|
(282)
|
|
(705)
|
|
(1,226)
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow
|
|
2,064
|
|
1,682
|
|
6,586
|
|
5,123
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
(2,513)
|
|
(4,589)
|
|
(2,748)
|
|
(4,945)
|
|
Divestitures
|
|
2
|
|
(10)
|
|
705
|
|
(4)
|
|
Dividends
|
|
(1,542)
|
|
(1,515)
|
|
(4,601)
|
|
(4,522)
|
|
Non-Financing
Debt
|
|
(383)
|
|
(942)
|
|
693
|
|
7,572
|
|
Other
(includes IBM Financing net receivables and debt)
|
|
131
|
|
41
|
|
(379)
|
|
(1,068)
|
|
|
|
|
|
|
|
|
|
|
|
Change in
Cash, Cash Equivalents, Restricted Cash and
Short-term
Marketable
Securities
|
|
$
(2,241)
|
|
$
(5,333)
|
|
$
257
|
|
$
2,156
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
CASH
FLOW
(Unaudited)
|
|
|
|
|
|
Three
Months Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
(Dollars in
Millions)
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Net
Income/(loss) from Operations
|
|
$
(330)
|
|
$
1,704
|
|
$
3,109
|
|
$
4,214
|
|
Pension
Settlement Charge
|
|
2,725
|
|
-
|
|
2,725
|
|
-
|
|
Depreciation/Amortization
of Intangibles (1)
|
|
1,268
|
|
1,093
|
|
3,555
|
|
3,243
|
|
Stock-based
Compensation
|
|
330
|
|
286
|
|
966
|
|
843
|
|
Operating assets
and liabilities/Other, net (2)
|
|
(1,984)
|
|
(1,119)
|
|
(3,063)
|
|
(1,952)
|
|
IBM
Financing A/R
|
|
873
|
|
1,092
|
|
1,824
|
|
3,119
|
|
Net Cash
Provided by Operating Activities
|
|
$
2,881
|
|
$
3,055
|
|
$
9,115
|
|
$
9,468
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures, net of payments & proceeds
(3)
|
|
55
|
|
(282)
|
|
(705)
|
|
(1,226)
|
|
Divestitures, net
of cash transferred
|
|
2
|
|
(10)
|
|
705
|
|
(4)
|
|
Acquisitions, net
of cash acquired
|
|
(2,513)
|
|
(4,589)
|
|
(2,748)
|
|
(4,945)
|
|
Marketable
Securities / Other Investments, net
|
|
869
|
|
2,927
|
|
(810)
|
|
(3,732)
|
|
Net Cash
Provided by/(Used in) Investing Activities
|
|
$
(1,587)
|
|
$
(1,953)
|
|
$
(3,558)
|
|
$
(9,906)
|
|
|
|
|
|
|
|
|
|
|
|
Debt,
net of payments & proceeds
|
|
(1,259)
|
|
(1,550)
|
|
(777)
|
|
4,619
|
|
Dividends
|
|
(1,542)
|
|
(1,515)
|
|
(4,601)
|
|
(4,522)
|
|
Financing -
Other
|
|
35
|
|
(67)
|
|
(26)
|
|
(252)
|
|
Net Cash
Provided by/(Used in) Financing Activities
|
|
$
(2,766)
|
|
$
(3,132)
|
|
$
(5,403)
|
|
$
(154)
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Exchange Rate changes on Cash
|
|
207
|
|
(119)
|
|
(29)
|
|
(120)
|
|
Net Change
in Cash, Cash Equivalents and Restricted Cash
|
|
$
(1,264)
|
|
$
(2,149)
|
|
$
125
|
|
$
(713)
|
|
____________________
|
|
(1) Includes
operating lease right-of-use assets amortization.
|
|
(2) Includes
a $0.7 billion tax effect associated with the one-time,
non-cash pension settlement charge in the third-quarter
2024.
|
|
(3) 2024
includes proceeds of $0.4 billion from the sale of
certain QRadar SaaS assets.
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
GAAP NET
INCOME TO ADJUSTED EBITDA RECONCILIATION
(Unaudited)
|
|
|
|
|
|
Three
Months Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
(Dollars in
Billions)
|
|
2024
|
|
2023
|
|
Yr/Yr
|
|
2024
|
|
2023
|
|
Yr/Yr
|
|
Net
Income/(Loss) as reported (GAAP) (1)
|
|
$
(0.3)
|
|
$
1.7
|
|
$
(2.0)
|
|
$
3.1
|
|
$
4.2
|
|
$
(1.1)
|
|
Less:
Income/(loss) from discontinued operations, net of tax
|
|
0.0
|
|
0.0
|
|
0.0
|
|
0.0
|
|
0.0
|
|
0.0
|
|
Income/(Loss) from
continuing operations
|
|
(0.3)
|
|
1.7
|
|
(2.0)
|
|
3.1
|
|
4.2
|
|
(1.1)
|
|
Provision
for/(Benefit from) income taxes from continuing ops.
|
|
(0.5)
|
|
0.2
|
|
(0.6)
|
|
(0.6)
|
|
0.7
|
|
(1.3)
|
|
Pre-tax
income/(loss) from continuing operations (GAAP)
|
|
(0.8)
|
|
1.9
|
|
(2.7)
|
|
2.5
|
|
4.9
|
|
(2.4)
|
|
Non-operating
adjustments (before tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
charges (2)
|
|
0.5
|
|
0.4
|
|
0.1
|
|
1.5
|
|
1.2
|
|
0.2
|
|
Non-operating
retirement-related costs/(income) (1)
|
|
2.8
|
|
0.0
|
|
2.8
|
|
3.0
|
|
0.0
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(non-GAAP) pre-tax income/(loss) from continuing
ops.
|
|
2.5
|
|
2.3
|
|
0.2
|
|
6.9
|
|
6.1
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest expense
|
|
0.3
|
|
0.3
|
|
0.0
|
|
0.7
|
|
0.7
|
|
0.0
|
|
Depreciation/Amortization
of non-acquired intangible assets
|
|
0.7
|
|
0.7
|
|
0.0
|
|
2.1
|
|
2.0
|
|
0.1
|
|
Stock-based
compensation
|
|
0.3
|
|
0.3
|
|
0.0
|
|
1.0
|
|
0.8
|
|
0.1
|
|
Workforce
rebalancing charges
|
|
0.3
|
|
0.0
|
|
0.3
|
|
0.7
|
|
0.4
|
|
0.3
|
|
Corporate (gains)
and charges (3)
|
|
(0.4)
|
|
0.0
|
|
(0.3)
|
|
(0.6)
|
|
0.0
|
|
(0.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
3.8
|
|
$
3.5
|
|
$
0.2
|
|
$
10.8
|
|
$
10.1
|
|
$
0.8
|
|
____________________
|
|
(1) 2024
includes the impact of a one-time, non-cash pension settlement
charge of $2.7 billion ($2.0 billion net of tax).
|
|
(2)
Primarily consists of amortization of acquired intangible
assets.
|
|
(3) Corporate
(gains) and charges primarily consists of unique corporate actions
such as gains on divestitures and asset sales (e.g., certain
QRadar SaaS
assets).
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
SEGMENT
DATA
(Unaudited)
|
|
|
|
|
|
Three
Months Ended September 30, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
|
Revenue
|
|
$
6,524
|
|
|
$
5,152
|
|
|
$
3,042
|
|
|
$
181
|
|
|
Segment
Profit
|
|
$
1,969
|
|
|
$
559
|
|
|
$
422
|
|
|
$
86
|
|
|
Segment
Profit Margin
|
|
30.2
|
%
|
|
10.9
|
%
|
|
13.9
|
%
|
|
47.5
|
%
|
|
Change YTY
Revenue
|
|
9.7
|
%
|
|
(0.5)
|
%
|
|
(7.0)
|
%
|
|
(2.5)
|
%
|
|
Change YTY
Revenue - Constant Currency
|
|
9.6
|
%
|
|
(0.2)
|
%
|
|
(6.7)
|
%
|
|
(1.3)
|
%
|
|
|
|
Three
Months Ended September 30, 2023 (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
|
Revenue
|
|
$
5,947
|
|
|
$
5,178
|
|
|
$
3,272
|
|
|
$
186
|
|
|
Segment
Profit
|
|
$
1,722
|
|
|
$
566
|
|
|
$
490
|
|
|
$
91
|
|
|
Segment
Profit Margin
|
|
29.0
|
%
|
|
10.9
|
%
|
|
15.0
|
%
|
|
49.2
|
%
|
|
__________________
|
|
(1)
Recast to reflect January 2024 segment changes.
|
|
|
|
Nine Months
Ended September 30, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
|
Revenue
|
|
$
19,162
|
|
|
$
15,517
|
|
|
$
9,764
|
|
|
$
543
|
|
|
Segment
Profit
|
|
$
5,582
|
|
|
$
1,447
|
|
|
$
1,387
|
|
|
$
254
|
|
|
Segment
Profit Margin
|
|
29.1
|
%
|
|
9.3
|
%
|
|
14.2
|
%
|
|
46.9
|
%
|
|
Change YTY
Revenue
|
|
7.5
|
%
|
|
(0.5)
|
%
|
|
(2.3)
|
%
|
|
(4.1)
|
%
|
|
Change YTY
Revenue - Constant Currency
|
|
8.0
|
%
|
|
1.1
|
%
|
|
(1.2)
|
%
|
|
(3.1)
|
%
|
|
|
|
Nine Months
Ended September 30, 2023 (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
Millions)
|
|
Software
|
|
|
Consulting
|
|
|
Infrastructure
|
|
|
Financing
|
|
|
Revenue
|
|
$
17,832
|
|
|
$
15,601
|
|
|
$
9,988
|
|
|
$
566
|
|
|
Segment
Profit
|
|
$
4,850
|
|
|
$
1,476
|
|
|
$
1,529
|
|
|
$
256
|
|
|
Segment
Profit Margin
|
|
27.2
|
%
|
|
9.5
|
%
|
|
15.3
|
%
|
|
45.2
|
%
|
|
____________________
|
|
(1)
Recast to reflect January 2024 segment
changes.
|
|
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, 2024
|
|
|
|
Continuing
Operations
|
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments
(1)
|
|
|
Retirement-
Related
Adjustments
(2)
|
|
|
Tax
Reform
Impacts
|
|
|
Operating
(Non-GAAP)
|
|
|
Gross
Profit
|
$
8,420
|
|
|
$
192
|
|
|
$
—
|
|
|
$
—
|
|
|
$
8,612
|
|
|
Gross
Profit Margin
|
56.3
|
%
|
|
1.3
|
pts
|
|
—
|
pts
|
|
—
|
pts
|
|
57.5
|
%
|
|
S,G&A
|
$
4,911
|
|
|
$
(300)
|
|
|
$
—
|
|
|
$
—
|
|
|
$
4,611
|
|
|
Other
(Income) & Expense
|
2,244
|
|
|
—
|
|
|
(2,797)
|
|
|
—
|
|
|
(553)
|
|
|
Total
Expense & Other (Income)
|
9,222
|
|
|
(300)
|
|
|
(2,797)
|
|
|
—
|
|
|
6,125
|
|
|
Pre-tax
Income/(Loss) from Continuing Operations
|
(802)
|
|
|
492
|
|
|
2,797
|
|
|
—
|
|
|
2,487
|
|
|
Pre-tax
Income Margin from Continuing Operations
|
(5.4)
|
%
|
|
3.3
|
pts
|
|
18.7
|
pts
|
|
—
|
pts
|
|
16.6
|
%
|
|
Provision
for/(Benefit from) Income Taxes (3)
|
$
(485)
|
|
|
$
119
|
|
|
$
700
|
|
|
$
(2)
|
|
|
$
332
|
|
|
Effective Tax
Rate
|
60.4
|
%
|
|
(7.2)
|
pts
|
|
(39.8)
|
pts
|
|
(0.1)
|
pts
|
|
13.4
|
%
|
|
Income/(Loss) from
Continuing Operations
|
$
(317)
|
|
|
$
373
|
|
|
$
2,097
|
|
|
$
2
|
|
|
$
2,155
|
|
|
Income
Margin from Continuing Operations
|
(2.1)
|
%
|
|
2.5
|
pts
|
|
14.0
|
pts
|
|
0.0
|
pts
|
|
14.4
|
%
|
|
Diluted
Earnings/(Loss) Per Share: Continuing
Operations (4)
|
$
(0.34)
|
|
|
$
0.40
|
|
|
$
2.27
|
|
|
$
0.00
|
|
|
$
2.30
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2023
|
|
|
|
Continuing
Operations
|
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments
(1)
|
|
|
Retirement-
Related
Adjustments
(2)
|
|
|
Tax
Reform
Impacts
|
|
|
Operating
(Non-GAAP)
|
|
|
Gross
Profit
|
$
8,023
|
|
|
$
162
|
|
|
$
—
|
|
|
$
—
|
|
|
$
8,185
|
|
|
Gross
Profit Margin
|
54.4
|
%
|
|
1.1
|
pts
|
|
—
|
pts
|
|
—
|
pts
|
|
55.5
|
%
|
|
S,G&A
|
$
4,458
|
|
|
$
(277)
|
|
|
$
—
|
|
|
$
—
|
|
|
$
4,181
|
|
|
Other
(Income) & Expense
|
(215)
|
|
|
0
|
|
|
12
|
|
|
—
|
|
|
(203)
|
|
|
Total
Expense & Other (Income)
|
6,150
|
|
|
(277)
|
|
|
12
|
|
|
—
|
|
|
5,885
|
|
|
Pre-tax
Income/(Loss) 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
|
|
15.6
|
%
|
|
Provision
for/(Benefit from) Income Taxes (3)
|
$
159
|
|
|
$
99
|
|
|
$
(14)
|
|
|
$
24
|
|
|
$
268
|
|
|
Effective Tax
Rate
|
8.5
|
%
|
|
2.7
|
pts
|
|
(0.5)
|
pts
|
|
1.0
|
pts
|
|
11.7
|
%
|
|
Income/(Loss) 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
|
|
13.8
|
%
|
|
Diluted
Earnings/(Loss) Per Share: Continuing
Operations
|
$
1.86
|
|
|
$
0.37
|
|
|
$
0.00
|
|
|
$
(0.03)
|
|
|
$
2.20
|
|
|
____________________
|
|
(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. 2024 also includes the impact of
a one-time, non-cash, pre-tax pension settlement charge of
$2.7 billion ($2.0 billion net of tax).
|
|
(3)
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.
|
|
(4)
Operating (non-GAAP) earnings per share was calculated using
938.4 million shares, which includes 14.9 million dilutive
potential shares under our stock-based compensation plans and
contingently issuable shares. Due to the GAAP net loss for the
three months ended September 30, 2024, these 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 $(0.04) 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, 2024
|
|
|
|
Continuing
Operations
|
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments
(1)
|
|
|
Retirement-
Related
Adjustments
(2)
|
|
|
Tax
Reform
Impacts
(3)
|
|
|
Operating
(Non-GAAP)
|
|
|
Gross
Profit
|
$
25,112
|
|
|
$
533
|
|
|
$
—
|
|
|
$
—
|
|
|
$
25,645
|
|
|
Gross
Profit Margin
|
55.6
|
%
|
|
1.2
|
pts
|
|
—
|
pts
|
|
—
|
pts
|
|
56.7
|
%
|
|
S,G&A
|
$
14,823
|
|
|
$
(854)
|
|
|
$
—
|
|
|
$
—
|
|
|
$
13,969
|
|
|
Other
(Income) & Expense
|
1,694
|
|
|
(68)
|
|
|
(2,991)
|
|
|
—
|
|
|
(1,364)
|
|
|
Total
Expense & Other (Income)
|
22,621
|
|
|
(922)
|
|
|
(2,991)
|
|
|
—
|
|
|
18,709
|
|
|
Pre-tax
Income/(Loss) from Continuing Operations
|
2,491
|
|
|
1,454
|
|
|
2,991
|
|
|
—
|
|
|
6,936
|
|
|
Pre-tax
Income Margin from Continuing Operations
|
5.5
|
%
|
|
3.2
|
pts
|
|
6.6
|
pts
|
|
—
|
pts
|
|
15.3
|
%
|
|
Provision
for/(Benefit from) Income Taxes (4)
|
$
(597)
|
|
|
$
374
|
|
|
$
731
|
|
|
$
434
|
|
|
$
942
|
|
|
Effective Tax
Rate
|
(24.0)
|
%
|
|
10.4
|
pts
|
|
20.9
|
pts
|
|
6.3
|
pts
|
|
13.6
|
%
|
|
Income/(Loss) from
Continuing Operations
|
$
3,088
|
|
|
$
1,081
|
|
|
$
2,259
|
|
|
$
(434)
|
|
|
$
5,994
|
|
|
Income
Margin from Continuing Operations
|
6.8
|
%
|
|
2.4
|
pts
|
|
5.0
|
pts
|
|
(1.0)
|
pts
|
|
13.3
|
%
|
|
Diluted
Earnings/(Loss) Per Share: Continuing
Operations
|
$
3.30
|
|
|
$
1.16
|
|
|
$
2.42
|
|
|
$
(0.46)
|
|
|
$
6.41
|
|
|
|
|
|
|
|
Nine Months
Ended September 30, 2023
|
|
|
|
Continuing
Operations
|
|
|
|
GAAP
|
|
|
Acquisition-
Related
Adjustments
(1)
|
|
|
Retirement-
Related
Adjustments
(2)
|
|
|
Tax
Reform
Impacts
|
|
|
Operating
(Non-GAAP)
|
|
|
Gross
Profit
|
$
24,033
|
|
|
$
460
|
|
|
$
—
|
|
|
$
—
|
|
|
$
24,492
|
|
|
Gross
Profit Margin
|
54.0
|
%
|
|
1.0
|
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
|
|
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
|
|
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
|
|
11.9
|
%
|
|
Diluted
Earnings Per Share: Continuing
Operations
|
$
4.59
|
|
|
$
1.04
|
|
|
$
0.01
|
|
|
$
0.10
|
|
|
$
5.74
|
|
|
____________________
|
|
(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. 2024 also includes a
loss of $68 million on foreign exchange derivative contracts
entered into by the company prior to the acquisition
of StreamSets and webMethods from Software
AG.
|
|
(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. 2024 also includes the impact of
a one-time, non-cash, pre-tax pension settlement charge of
$2.7 billion ($2.0 billion net of tax).
|
|
(3)
2024 includes a net benefit from discrete tax
events.
|
|
(4) Tax
impact on operating (non-GAAP) pre-tax income from continuing
operations is calculated under the same accounting principles
applied to the As Reported pre-tax income under ASC 740, which
employs an annual effective tax rate method to the
results.
|
|
INTERNATIONAL
BUSINESS MACHINES CORPORATION
GAAP
OPERATING CASH FLOW TO ADJUSTED EBITDA
RECONCILIATION
(Unaudited)
|
|
|
|
|
|
Three
Months Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
(Dollars in
Billions)
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Net Cash
Provided by Operating Activities
|
|
$
2.9
|
|
$
3.1
|
|
$
9.1
|
|
$
9.5
|
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Net
interest expense
|
|
0.3
|
|
0.3
|
|
0.7
|
|
0.7
|
|
Provision
for/(Benefit from) income taxes from continuing
operations
|
|
(0.5)
|
|
0.2
|
|
(0.6)
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
Less
change in:
|
|
|
|
|
|
|
|
|
|
Financing
receivables
|
|
0.9
|
|
1.1
|
|
1.8
|
|
3.1
|
|
Other
assets and liabilities/other, net (1)
|
|
(2.0)
|
|
(1.2)
|
|
(3.5)
|
|
(2.3)
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
3.8
|
|
$
3.5
|
|
$
10.8
|
|
$
10.1
|
|
____________________
|
|
(1)
Other assets and liabilities/other, net mainly consists of
operating assets and liabilities/Other, net in the Cash Flow chart,
workforce
rebalancing charges, non-operating
impacts and corporate (gains) and charges.
|
SOURCE: IBM