ARMONK, N.Y.--(BUSINESS WIRE)--IBM (NYSE: IBM) today announced third-quarter 2021 earnings results.
“With the separation of Kyndryl early next month, IBM takes the next step in our evolution as a platform-centric hybrid cloud and AI company," said Arvind Krishna, IBM chairman and chief executive officer. “We continue to make progress in our software and consulting businesses, which represent our higher growth opportunities. With our increased focus and agility to better serve clients, we are confident in achieving our medium-term objectives of mid-single digit revenue growth and strong free cash flow generation.”
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THIRD QUARTER 2021 |
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All GAAP results include the impact of Kyndryl separation costs* |
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Pre-tax |
Gross |
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Diluted |
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Net |
|
Pre-tax |
Income |
Profit |
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|
EPS |
|
Income |
|
Income |
Margin |
Margin |
|||||
GAAP from Continuing Operations |
|
$ |
1.25 |
|
$ |
1.1B |
|
$ |
1.3B |
7.5 |
% |
46.4 |
% |
|
Year/Year |
|
|
(34 |
)% |
|
(33 |
)% |
|
(28 |
)% |
(2.9 |
)Pts |
(1.6 |
)Pts |
|
|
|
|
|
|
|
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|||||
Operating (Non-GAAP) |
|
$ |
2.52 |
|
$ |
2.3B |
|
$ |
2.4B |
|
13.6 |
% |
48.0 |
% |
Year/Year |
|
|
(2 |
)% |
|
(1 |
)% |
|
(7 |
)% |
(1.0 |
)Pts |
(1.0 |
)Pts |
GAAP EPS results include impacts related to the amortization of purchased intangible assets and other acquisition-related charges, retirement-related charges, U.S. tax reform enactment impacts, and transaction costs associated with the Kyndryl separation. * Impact of Kyndryl separation costs for third quarter 2021 GAAP results: EPS ($0.56) per share; Net Income ($0.5B); Pre-tax Income ($0.3B); Pre-Tax Income Margin (1.6) points; Gross Profit Margin (0.6) points |
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“We again had solid cash generation for the quarter and over the last year, while maintaining a strong balance sheet and the liquidity to support our hybrid cloud and AI strategy,” said James Kavanaugh, IBM senior vice president and chief financial officer. "Our post-separation portfolio mix is shifted toward our growth vectors, with a higher-value recurring revenue stream and strong cash generation, allowing us to continue to invest in the business and provide attractive shareholder returns.”
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from operating activities of $2.7 billion. IBM’s free cash flow was $0.6 billion, which includes $0.6 billion of cash impacts from the company’s structural actions initiated in the fourth quarter of 2020 and the transaction costs associated with the separation of Kyndryl. IBM’s adjusted free cash flow, excluding these cash impacts, was $1.2 billion. The company returned $1.5 billion to shareholders in dividends.
Over the last 12 months, the company generated net cash from operating activities of $16.1 billion. IBM’s free cash flow for the last 12 months was $9.2 billion. The company’s adjusted free cash flow, excluding cash impacts of $1.8 billion for the structural actions and transaction separation costs, was $11.1 billion.
IBM ended the third quarter with $8.4 billion of cash on hand (includes marketable securities), down $5.9 billion from year-end 2020 reflecting acquisitions of $3.0 billion and debt reduction payments. Debt, including Global Financing debt of $15.9 billion, totaled $54.5 billion, down $7.0 billion since the end of 2020, and down $18.5 billion since closing the Red Hat acquisition.
Segment Results for Third Quarter
- Cloud & Cognitive Software (includes Cloud & Data Platforms, Cognitive Applications and Transaction Processing Platforms) —revenues of $5.7 billion, up 2.5 percent (up 1.9 percent adjusting for currency). Cloud & Data Platforms grew 10 percent (up 9 percent adjusting for currency), Cognitive Applications revenue was flat (down 1 percent adjusting for currency) and Transaction Processing Platforms declined 9 percent. Cloud revenue up 21 percent (up 20 percent adjusting for currency).
- Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $4.4 billion, up 11.6 percent (up 11.0 percent adjusting for currency), with growth in Consulting, up 17 percent (up 16 percent adjusting for currency), Application Management up 5 percent, and Global Process Services up 19 percent. Cloud revenue up 38 percent (up 37 percent adjusting for currency).
- Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.2 billion, down 4.8 percent (down 5.4 percent adjusting for currency). Infrastructure & Cloud Services declined 5 percent (down 6 percent adjusting for currency) and Technology Support Services declined 4 percent (down 5 percent adjusting for currency). Cloud revenue up 1 percent (flat adjusting for currency). Gross profit margin up 120 basis points.
- Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.1 billion, down 11.9 percent (down 12.4 percent adjusting for currency), driven by declines in IBM Z (down 33 percent) and Power systems down 24 percent (down 25 percent adjusting for currency). Storage Systems grew 11 percent. Cloud revenue down 42 percent (down 43 percent adjusting for currency).
- Global Financing (includes financing and used equipment sales) — revenues of $220 million, down 19.2 percent (down 19.8 percent adjusting for currency).
Year-To-Date 2021 Results
Revenues for the nine-month period ended September 30, 2021 totaled $54.1 billion, an increase of 1.6 percent year to year (down 1 percent adjusting for divested businesses and currency) compared with $53.3 billion for the first nine months of 2020. Net income was $3.4 billion, down 19 percent year to year, reflecting the impact of $0.7 billion of transaction costs associated with the Kyndryl separation. Diluted earnings per share was $3.77 compared with $4.72 per diluted share for the 2020 period, a decrease of 20 percent.
GAAP earnings per share results include a ($2.85) per-share impact for charges related to amortization of purchased intangible assets and other acquisition-related charges, retirement-related charges, U.S. tax reform enactment impacts, and transaction costs associated with the Kyndryl separation. The impact of the Kyndryl separation costs was ($0.76) per share.
Operating (non-GAAP) net income for the nine months ended September 30, 2021 was $6.0 billion compared with $5.9 billion in the prior-year period, an increase of 1.3 percent. Operating (non-GAAP) diluted earnings per share from continuing operations was $6.62 compared with $6.60 per diluted share for the 2020 period, flat 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 possibility that the proposed separation of the managed infrastructure services unit of the company’s Global Technology Services segment will not be completed within the anticipated time period or at all, the possibility of disruption or unanticipated costs in connection with the proposed separation or the possibility that the separation will not achieve its intended benefits; 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 from 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; 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);
- total revenue and cloud revenue adjusting for divested businesses and currency;
- total revenue normalized to exclude Kyndryl to be separated in November;
- Red Hat revenue normalized for historical comparability;
- presenting operating (non-GAAP) earnings per share amounts and related income statement items;
- free cash flow;
- adjusted free cash flow.
The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.
Conference Call and Webcast
IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EDT, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-3q21. 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).
INTERNATIONAL BUSINESS MACHINES CORPORATION COMPARATIVE FINANCIAL RESULTS (Unaudited; Dollars in millions except per share amounts) |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2021 |
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2020 |
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2021 |
|
2020 |
|
||||||||
REVENUE |
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|
|
|
|
|
|
|
|
|
|
|
|
||||
Cloud & Cognitive Software |
|
$ |
5,692 |
|
$ |
5,553 |
|
|
|
$ |
17,227 |
|
$ |
16,540 |
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||
Global Business Services |
|
|
4,427 |
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|
3,965 |
|
|
|
|
13,002 |
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|
11,992 |
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||
Global Technology Services |
|
|
6,154 |
|
|
6,462 |
|
|
|
|
18,866 |
|
|
19,245 |
|
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||
Systems |
|
|
1,107 |
|
|
1,257 |
|
|
|
|
4,251 |
|
|
4,477 |
|
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||
Global Financing |
|
|
220 |
|
|
273 |
|
|
|
|
702 |
|
|
837 |
|
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||
Other |
|
|
18 |
|
|
50 |
|
|
|
|
45 |
|
|
163 |
|
|
||
TOTAL REVENUE |
|
|
17,618 |
|
|
|
17,560 |
|
|
|
|
54,093 |
|
|
53,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
GROSS PROFIT |
|
|
8,171 |
|
|
8,430 |
|
|
|
|
25,379 |
|
|
25,052 |
|
|
||
|
|
|
|
|
|
|
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|
|
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|
||||||
GROSS PROFIT MARGIN |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cloud & Cognitive Software |
|
|
77.0 |
|
% |
|
77.1 |
|
% |
|
|
77.1 |
|
% |
|
76.6 |
|
% |
Global Business Services |
|
|
29.8 |
|
% |
|
32.9 |
|
% |
|
|
28.6 |
|
% |
|
29.5 |
|
% |
Global Technology Services |
|
|
36.2 |
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% |
|
35.0 |
|
% |
|
|
35.3 |
|
% |
|
34.4 |
|
% |
Systems |
|
|
41.3 |
|
% |
|
51.2 |
|
% |
|
|
51.3 |
|
% |
|
53.7 |
|
% |
Global Financing |
|
|
25.6 |
|
% |
|
37.5 |
|
% |
|
|
28.4 |
|
% |
|
39.0 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
TOTAL GROSS PROFIT MARGIN |
|
|
46.4 |
|
% |
|
48.0 |
|
% |
|
|
46.9 |
|
% |
|
47.0 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
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|
||||||
EXPENSE AND OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
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|
||||||
S,G&A |
|
|
4,860 |
|
|
4,647 |
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|
15,368 |
|
|
15,849 |
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||
R,D&E |
|
|
1,621 |
|
|
1,515 |
|
|
|
|
4,907 |
|
|
4,722 |
|
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||
Intellectual property and custom development income |
|
|
(153 |
) |
|
|
(134 |
) |
|
|
|
(435 |
) |
|
(453 |
) |
|
|
Other (income) and expense |
|
|
234 |
|
|
253 |
|
|
|
|
911 |
|
|
614 |
|
|
||
Interest expense |
|
|
291 |
|
|
323 |
|
|
|
|
852 |
|
|
971 |
|
|
||
TOTAL EXPENSE AND OTHER INCOME |
|
|
6,852 |
|
|
6,603 |
|
|
|
|
21,603 |
|
|
21,704 |
|
|
||
|
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|
|
|
|
|
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|
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INCOME/(LOSS) FROM CONTINUING OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
BEFORE INCOME TAXES |
|
|
1,319 |
|
|
1,827 |
|
|
|
|
3,776 |
|
|
3,348 |
|
|
||
Pre-tax margin |
|
|
7.5 |
|
% |
|
10.4 |
|
% |
|
|
7.0 |
|
% |
|
6.3 |
|
% |
Provision for/(Benefit from) income taxes |
|
|
188 |
|
|
128 |
|
|
|
|
365 |
|
|
(888 |
) |
|
||
Effective tax rate |
|
|
14.3 |
|
% |
|
7.0 |
|
% |
|
|
9.7 |
|
% |
|
(26.5 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
INCOME FROM CONTINUING OPERATIONS |
|
$ |
1,130 |
|
|
$ |
1,698 |
|
|
$ |
3,411 |
|
$ |
4,237 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
DISCONTINUED OPERATIONS |
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|
|
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|
|
|
|
|
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|
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Income/(Loss) from discontinued operations, net of taxes |
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
(2 |
) |
|
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|
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|
|
|
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|
|
|
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NET INCOME |
|
$ |
1,130 |
|
|
$ |
1,698 |
|
|
$ |
3,410 |
|
|
$ |
4,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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EARNINGS/(LOSS) PER SHARE OF COMMON STOCK |
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|
|
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|
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|
||||||
Assuming Dilution |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Continuing Operations |
|
$ |
1.25 |
|
|
$ |
1.89 |
|
|
$ |
3.77 |
|
$ |
4.72 |
|
|
||
Discontinued Operations |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
$ |
0.00 |
|
|
||
TOTAL |
|
$ |
1.25 |
|
|
$ |
1.89 |
|
|
$ |
3.77 |
|
$ |
4.72 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Continuing Operations |
|
$ |
1.26 |
|
|
$ |
1.90 |
|
|
$ |
3.81 |
|
$ |
4.76 |
|
|
||
Discontinued Operations |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
$ |
0.00 |
|
|
||
TOTAL |
|
$ |
1.26 |
|
|
$ |
1.90 |
|
|
$ |
3.81 |
|
$ |
4.76 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assuming Dilution |
|
|
906.0 |
|
|
|
897.3 |
|
|
|
904.0 |
|
|
895.8 |
|
|
||
Basic |
|
|
897.1 |
|
|
|
891.4 |
|
|
|
895.3 |
|
|
889.6 |
|
|
||
INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) |
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|
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|
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|
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||
|
|
At |
|
At |
||||
|
|
September 30, |
|
December 31, |
||||
(Dollars in Millions) |
|
2021 |
|
2020 |
||||
ASSETS: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Current Assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
7,455 |
|
|
$ |
13,212 |
|
Restricted cash |
|
|
352 |
|
|
|
463 |
|
Marketable securities |
|
|
600 |
|
|
|
600 |
|
Notes and accounts receivable - trade, net |
|
|
6,609 |
|
|
|
7,132 |
|
Short-term financing receivables, net |
|
|
7,161 |
|
|
|
10,892 |
|
Other accounts receivable, net |
|
|
899 |
|
|
|
714 |
|
Inventories |
|
|
1,891 |
|
|
|
1,839 |
|
Deferred costs |
|
|
2,046 |
|
|
|
2,107 |
|
Prepaid expenses and other current assets |
|
|
2,954 |
|
|
|
2,206 |
|
Total Current Assets |
|
|
29,967 |
|
|
|
39,165 |
|
|
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
9,138 |
|
|
|
10,040 |
|
Operating right-of-use assets, net |
|
|
4,253 |
|
|
|
4,686 |
|
Long-term financing receivables, net |
|
|
5,046 |
|
|
|
7,086 |
|
Prepaid pension assets |
|
|
8,197 |
|
|
|
7,610 |
|
Deferred costs |
|
|
2,248 |
|
|
|
2,449 |
|
Deferred taxes |
|
|
8,967 |
|
|
|
9,241 |
|
Goodwill |
|
|
61,378 |
|
|
|
59,617 |
|
Intangibles, net |
|
|
13,025 |
|
|
|
13,796 |
|
Investments and sundry assets |
|
|
1,996 |
|
|
|
2,282 |
|
Total Assets |
|
$ |
144,214 |
|
|
$ |
155,971 |
|
|
|
|
|
|
|
|
||
LIABILITIES: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Current Liabilities: |
|
|
|
|
|
|
||
Taxes |
|
$ |
2,159 |
|
|
$ |
3,301 |
|
Short-term debt |
|
|
7,575 |
|
|
|
7,183 |
|
Accounts payable |
|
|
4,248 |
|
|
|
4,908 |
|
Deferred income |
|
|
12,264 |
|
|
|
12,833 |
|
Operating lease liabilities |
|
|
1,285 |
|
|
|
1,357 |
|
Other liabilities |
|
|
8,300 |
|
|
|
10,287 |
|
Total Current Liabilities |
|
|
35,832 |
|
|
|
39,869 |
|
|
|
|
|
|
|
|
||
Long-term debt |
|
|
46,926 |
|
|
|
54,355 |
|
Retirement related obligations |
|
|
16,764 |
|
|
|
18,248 |
|
Deferred income |
|
|
3,965 |
|
|
|
4,301 |
|
Operating lease liabilities |
|
|
3,192 |
|
|
|
3,574 |
|
Other liabilities |
|
|
15,179 |
|
|
|
14,897 |
|
Total Liabilities |
|
|
121,858 |
|
|
|
135,244 |
|
|
|
|
|
|
|
|
||
EQUITY: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
IBM Stockholders’ Equity: |
|
|
|
|
|
|
||
Common stock |
|
|
57,189 |
|
|
|
56,556 |
|
Retained earnings |
|
|
161,747 |
|
|
|
162,717 |
|
Treasury stock — at cost |
|
|
(169,406 |
) |
|
|
(169,339 |
) |
Accumulated other comprehensive income/(loss) |
|
|
(27,302 |
) |
|
|
(29,337 |
) |
Total IBM Stockholders’ Equity |
|
|
22,228 |
|
|
|
20,597 |
|
|
|
|
|
|
|
|
||
Noncontrolling interests |
|
|
129 |
|
|
|
129 |
|
Total Equity |
|
|
22,357 |
|
|
|
20,727 |
|
|
|
|
|
|
|
|
||
Total Liabilities and Equity |
|
$ |
144,214 |
|
|
$ |
155,971 |
|
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trailing Twelve |
||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
Months Ended |
||||||||||||||
|
|
September 30, |
|
September 30, |
|
September 30, |
||||||||||||||
(Dollars in Millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
||||||||||
Net Cash Provided by Operating Activities per GAAP: |
|
$ |
2,713 |
|
|
$ |
4,286 |
|
|
$ |
10,252 |
|
|
$ |
12,337 |
|
|
$ |
16,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Less: Change in Global Financing (GF) Receivables |
|
|
1,472 |
|
|
|
2,353 |
|
|
|
5,235 |
|
|
|
5,324 |
|
|
|
4,260 |
|
Capital Expenditures, net |
|
|
(638 |
) |
|
|
(829 |
) |
|
|
(1,855 |
) |
|
|
(2,262 |
) |
|
|
(2,635 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Free Cash Flow |
|
|
603 |
|
|
|
1,104 |
|
|
|
3,162 |
|
|
|
4,751 |
|
|
|
9,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Structural actions initiated in 4Q20 & Separation charges (1) |
|
|
566 |
|
|
|
— |
|
|
|
1,792 |
|
|
|
— |
|
|
|
1,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Adjusted Free Cash Flow |
|
|
1,170 |
|
|
|
1,104 |
|
|
|
4,954 |
|
|
|
4,751 |
|
|
|
11,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Free Cash Flow |
|
|
603 |
|
|
|
1,104 |
|
|
|
3,162 |
|
|
|
4,751 |
|
|
|
9,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Acquisitions |
|
|
(152 |
) |
|
|
(17 |
) |
|
|
(3,018 |
) |
|
|
(37 |
) |
|
|
(3,317 |
) |
Divestitures |
|
|
51 |
|
|
|
(248 |
) |
|
|
26 |
|
|
|
510 |
|
|
|
19 |
|
Dividends |
|
|
(1,471 |
) |
|
|
(1,453 |
) |
|
|
(4,395 |
) |
|
|
(4,343 |
) |
|
|
(5,850 |
) |
Non-GF Debt |
|
|
1,187 |
|
|
|
1,019 |
|
|
|
(1,143 |
) |
|
|
4,977 |
|
|
|
(5,899 |
) |
Other (includes GF Net Receivables and GF Debt) |
|
|
22 |
|
|
|
1,098 |
|
|
|
(500 |
) |
|
|
886 |
|
|
|
(1,516 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities |
|
$ |
241 |
|
|
$ |
1,503 |
|
|
$ |
(5,868 |
) |
|
$ |
6,744 |
|
|
$ |
(7,347 |
) |
| _______________ | |
(1) |
Includes cash impacts incurred in the period related to structural actions initiated in 4Q20 and separation related costs. |
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
September 30, |
|
September 30, |
||||||||||||
(Dollars in Millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Net Income from Operations |
|
$ |
1,130 |
|
|
$ |
1,698 |
|
|
$ |
3,410 |
|
|
$ |
4,234 |
|
Depreciation/Amortization of Intangibles |
|
|
1,684 |
|
|
|
1,683 |
|
|
|
5,036 |
|
|
|
4,996 |
|
Stock-based Compensation |
|
|
262 |
|
|
|
222 |
|
|
|
719 |
|
|
|
658 |
|
Working Capital / Other |
|
|
(1,834 |
) |
|
|
(1,670 |
) |
|
|
(4,147 |
) |
|
|
(2,874 |
) |
Global Financing A/R |
|
|
1,472 |
|
|
|
2,353 |
|
|
|
5,235 |
|
|
|
5,324 |
|
Net Cash Provided by Operating Activities |
|
$ |
2,713 |
|
|
$ |
4,286 |
|
|
$ |
10,252 |
|
|
$ |
12,337 |
|
Capital Expenditures, net of payments & proceeds |
|
|
(638 |
) |
|
|
(829 |
) |
|
|
(1,855 |
) |
|
|
(2,262 |
) |
Divestitures, net of cash transferred |
|
|
51 |
|
|
|
(248 |
) |
|
|
26 |
|
|
|
510 |
|
Acquisitions, net of cash acquired |
|
|
(152 |
) |
|
|
(17 |
) |
|
|
(3,018 |
) |
|
|
(37 |
) |
Marketable Securities / Other Investments, net |
|
|
109 |
|
|
|
762 |
|
|
|
(453 |
) |
|
|
(680 |
) |
Net Cash Provided by/(Used in) Investing Activities |
|
$ |
(629 |
) |
|
$ |
(332 |
) |
|
$ |
(5,300 |
) |
|
$ |
(2,470 |
) |
Debt, net of payments & proceeds |
|
|
(287 |
) |
|
|
(252 |
) |
|
|
(6,086 |
) |
|
|
1,067 |
|
Dividends |
|
|
(1,471 |
) |
|
|
(1,453 |
) |
|
|
(4,395 |
) |
|
|
(4,343 |
) |
Common Stock Transactions - Other |
|
|
9 |
|
|
|
16 |
|
|
|
(181 |
) |
|
|
(152 |
) |
Net Cash Provided by/(Used in) Financing Activities |
|
$ |
(1,748 |
) |
|
$ |
(1,689 |
) |
|
$ |
(10,662 |
) |
|
$ |
(3,428 |
) |
Effect of Exchange Rate changes on Cash |
|
|
(94 |
) |
|
|
101 |
|
|
|
(159 |
) |
|
|
(200 |
) |
Net Change in Cash, Cash Equivalents and Restricted Cash |
|
$ |
241 |
|
|
$ |
2,366 |
|
|
$ |
(5,868 |
) |
|
$ |
6,239 |
|
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Three Months Ended September 30, 2021 |
|
||||||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
||||||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
|||||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
External |
|
$ |
5,692 |
|
$ |
4,427 |
|
$ |
6,154 |
|
|
$ |
1,107 |
|
|
$ |
220 |
|
|
Internal |
|
|
764 |
|
|
53 |
|
|
317 |
|
|
|
176 |
|
|
|
153 |
|
|
Total Segment Revenue |
|
$ |
6,456 |
|
$ |
4,480 |
|
$ |
6,471 |
|
|
$ |
1,283 |
|
|
$ |
373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Pre-tax Income/(Loss) from Continuing Operations |
|
|
1,675 |
|
|
587 |
|
|
383 |
|
|
|
(207 |
) |
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Pre-tax Margin |
|
|
25.9 |
% |
|
13.1 |
% |
|
5.9 |
|
% |
|
(16.1 |
) |
% |
|
55.1 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Change YTY Revenue - External |
|
|
2.5 |
% |
|
11.6 |
% |
|
(4.8 |
) |
% |
|
(11.9 |
) |
% |
|
(19.2 |
) |
% |
Change YTY Revenue - External @constant currency |
|
|
1.9 |
% |
|
11.0 |
% |
|
(5.4 |
) |
% |
|
(12.4 |
) |
% |
|
(19.8 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
||||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
||||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
|||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
5,553 |
|
$ |
3,965 |
|
$ |
6,462 |
|
$ |
1,257 |
|
|
$ |
273 |
|
Internal |
|
|
875 |
|
|
49 |
|
|
312 |
|
|
240 |
|
|
|
208 |
|
Total Segment Revenue |
|
$ |
6,428 |
|
$ |
4,014 |
|
$ |
6,774 |
|
$ |
1,497 |
|
|
$ |
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income/(Loss) from Continuing Operations |
|
|
1,834 |
|
|
570 |
|
|
399 |
|
|
(37 |
) |
|
|
196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Margin |
|
|
28.5 |
% |
|
14.2 |
% |
|
5.9 |
% |
|
(2.5 |
) |
% |
|
40.7 |
% |
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Nine Months Ended September 30, 2021 |
|
||||||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
||||||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
|||||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
External |
|
$ |
17,227 |
|
$ |
13,002 |
|
$ |
18,866 |
|
|
$ |
4,251 |
|
|
$ |
702 |
|
|
Internal |
|
|
2,322 |
|
|
166 |
|
|
956 |
|
|
|
606 |
|
|
|
581 |
|
|
Total Segment Revenue |
|
$ |
19,549 |
|
$ |
13,168 |
|
$ |
19,822 |
|
|
$ |
4,857 |
|
|
$ |
1,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Pre-tax Income/(Loss) from Continuing Operations |
|
|
4,822 |
|
|
1,349 |
|
|
903 |
|
|
|
(33 |
) |
|
|
618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Pre-tax Margin |
|
|
24.7 |
% |
|
10.2 |
% |
|
4.6 |
|
% |
|
(0.7 |
) |
% |
|
48.1 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Change YTY Revenue - External |
|
|
4.2 |
% |
|
8.4 |
% |
|
(2.0 |
) |
% |
|
(5.1 |
) |
% |
|
(16.2 |
) |
% |
Change YTY Revenue - External @constant currency |
|
|
1.7 |
% |
|
5.5 |
% |
|
(4.9 |
) |
% |
|
(7.0 |
) |
% |
|
(18.0 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
||||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
||||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
|||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
16,540 |
|
$ |
11,992 |
|
$ |
19,245 |
|
$ |
4,477 |
|
|
$ |
837 |
|
Internal |
|
|
2,431 |
|
|
150 |
|
|
911 |
|
|
628 |
|
|
|
660 |
|
Total Segment Revenue |
|
$ |
18,971 |
|
$ |
12,142 |
|
$ |
20,155 |
|
$ |
5,106 |
|
|
$ |
1,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income/(Loss) from Continuing Operations |
|
|
4,475 |
|
|
1,203 |
|
|
471 |
|
|
(7 |
) |
|
|
566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Margin |
|
|
23.6 |
% |
|
9.9 |
% |
|
2.3 |
% |
|
(0.1 |
) |
% |
|
37.8 |
% |
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, 2021 |
|
||||||||||||||||
|
|
Continuing Operations |
|
||||||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
Separation- |
|
|
|
|
||||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Related |
|
Operating |
|
|||||
|
|
GAAP |
|
Adjustments (1) |
|
Adjustments (2) |
|
Impacts |
|
Charges (4) |
|
(Non-GAAP) |
|
||||||
Gross Profit |
|
$ |
8,171 |
|
$ |
184 |
|
$ |
— |
|
$ |
— |
|
$ |
108 |
|
$ |
8,463 |
|
Gross Profit Margin |
|
|
46.4 |
% |
|
1.0 |
Pts |
|
— |
Pts |
|
— |
Pts |
|
0.6 |
Pts |
|
48.0 |
% |
S,G&A |
|
|
4,860 |
|
|
(293) |
|
|
— |
|
|
— |
|
|
(169) |
|
|
4,398 |
|
R,D&E |
|
|
1,621 |
|
|
— |
|
|
— |
|
|
— |
|
|
(1) |
|
|
1,620 |
|
Other (Income) & Expense |
|
|
234 |
|
|
(1) |
|
|
(328) |
|
|
— |
|
|
— |
|
|
(94) |
|
Interest Expense |
|
|
291 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
291 |
|
Total Expense & Other (Income) |
|
|
6,852 |
|
|
(294) |
|
|
(328) |
|
|
— |
|
|
(169) |
|
|
6,061 |
|
Pre-tax Income from Continuing Operations |
|
|
1,319 |
|
|
478 |
|
|
328 |
|
|
— |
|
|
277 |
|
|
2,402 |
|
Pre-tax Income Margin from Continuing Operations |
|
|
7.5 |
% |
|
2.7 |
Pts |
|
1.9 |
Pts |
|
— |
Pts |
|
1.6 |
Pts |
|
13.6 |
% |
Provision for/(Benefit from) Income Taxes (3) |
|
|
188 |
|
|
103 |
|
|
57 |
|
|
— |
|
|
(233) |
|
|
115 |
|
Effective Tax Rate |
|
|
14.3 |
% |
|
1.5 |
Pts |
|
0.4 |
Pts |
|
— |
Pts |
|
(11.4) |
Pts |
|
4.8 |
% |
Income from Continuing Operations |
|
|
1,130 |
|
|
375 |
|
|
271 |
|
|
— |
|
|
510 |
|
|
2,286 |
|
Income Margin from Continuing Operations |
|
|
6.4 |
% |
|
2.1 |
Pts |
|
1.5 |
Pts |
|
— |
Pts |
|
2.9 |
Pts |
|
13.0 |
% |
Diluted Earnings/(Loss) Per Share: Continuing Operations |
|
$ |
1.25 |
|
$ |
0.41 |
|
$ |
0.30 |
|
$ |
— |
|
$ |
0.56 |
|
$ |
2.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
||||||||||||||||
|
|
Continuing Operations |
|
||||||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
Separation- |
|
|
|
|
||||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Related |
|
Operating |
|
|||||
|
|
GAAP |
|
Adjustments (1) |
|
Adjustments (2) |
|
Impacts |
|
Charges (4) |
|
(Non-GAAP) |
|
||||||
Gross Profit |
|
$ |
8,430 |
|
$ |
180 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
8,610 |
|
Gross Profit Margin |
|
|
48.0 |
% |
|
1.0 |
Pts |
|
— |
Pts |
|
— |
Pts |
|
— |
Pts |
|
49.0 |
% |
S,G&A |
|
|
4,647 |
|
|
(279) |
|
|
— |
|
|
— |
|
|
— |
|
|
4,367 |
|
R,D&E |
|
|
1,515 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,515 |
|
Other (Income) & Expense |
|
|
253 |
|
|
(1) |
|
|
(291) |
|
|
— |
|
|
— |
|
|
(39) |
|
Interest Expense |
|
|
323 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
323 |
|
Total Expense & Other (Income) |
|
|
6,603 |
|
|
(280) |
|
|
(291) |
|
|
— |
|
|
— |
|
|
6,032 |
|
Pre-tax Income/(Loss) from Continuing Operations |
|
|
1,827 |
|
|
460 |
|
|
291 |
|
|
— |
|
|
— |
|
|
2,578 |
|
Pre-tax Income Margin from Continuing Operations |
|
|
10.4 |
% |
|
2.6 |
Pts |
|
1.7 |
Pts |
|
— |
Pts |
|
— |
Pts |
|
14.7 |
% |
Provision for/(Benefit from) Income Taxes (3) |
|
|
128 |
|
|
102 |
|
|
54 |
|
|
(21) |
|
|
— |
|
|
263 |
|
Effective Tax Rate |
|
|
7.0 |
% |
|
2.7 |
Pts |
|
1.3 |
Pts |
|
(0.8) |
Pts |
|
— |
Pts |
|
10.2 |
% |
Income from Continuing Operations |
|
|
1,698 |
|
|
358 |
|
|
237 |
|
|
21 |
|
|
— |
|
|
2,315 |
|
Income Margin from Continuing Operations |
|
|
9.7 |
% |
|
2.0 |
Pts |
|
1.4 |
Pts |
|
0.1 |
Pts |
|
— |
Pts |
|
13.2 |
% |
Diluted Earnings/(Loss) Per Share: Continuing Operations |
|
$ |
1.89 |
|
$ |
0.40 |
|
$ |
0.26 |
|
$ |
0.03 |
|
$ |
— |
|
$ |
2.58 |
|
| _______________ | |
(1)
|
Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. |
(2) |
Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. |
(3) |
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) |
Kyndryl separation charges primarily relate to transaction and third-party support costs, business separation and applicable employee retention fees, pension settlements and related tax separation charges. |
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, 2021 |
|
||||||||||||||||
|
|
Continuing Operations |
|
||||||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
Separation- |
|
|
|
|
||||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Related |
|
Operating |
|
|||||
|
|
GAAP |
|
Adjustments (1) |
|
Adjustments (2) |
|
Impacts |
|
Charges (4) |
|
(Non-GAAP) |
|
||||||
Gross Profit |
|
$ |
25,379 |
|
$ |
540 |
|
$ |
— |
|
$ |
— |
|
$ |
168 |
|
$ |
26,087 |
|
Gross Profit Margin |
|
|
46.9 |
% |
|
1.0 |
Pts |
|
— |
Pts |
|
— |
Pts |
|
0.3 |
Pts |
|
48.2 |
% |
S,G&A |
|
|
15,368 |
|
|
(884) |
|
|
— |
|
|
— |
|
|
(343) |
|
|
14,141 |
|
R,D&E |
|
|
4,907 |
|
|
— |
|
|
— |
|
|
— |
|
|
(1) |
|
|
4,906 |
|
Other (Income) & Expense |
|
|
911 |
|
|
(2) |
|
|
(998) |
|
|
— |
|
|
— |
|
|
(90) |
|
Interest Expense |
|
|
852 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
852 |
|
Total Expense & Other (Income) |
|
|
21,603 |
|
|
(886) |
|
|
(998) |
|
|
— |
|
|
(344) |
|
|
19,374 |
|
Pre-tax Income from Continuing Operations |
|
|
3,776 |
|
|
1,426 |
|
|
998 |
|
|
— |
|
|
513 |
|
|
6,713 |
|
Pre-tax Income Margin from Continuing Operations |
|
|
7.0 |
% |
|
2.6 |
Pts |
|
1.8 |
Pts |
|
— |
Pts |
|
0.9 |
Pts |
|
12.4 |
% |
Provision for/(Benefit from) Income Taxes (3) |
|
|
365 |
|
|
344 |
|
|
185 |
|
|
6 |
|
|
(174) |
|
|
725 |
|
Effective Tax Rate |
|
|
9.7 |
% |
|
3.1 |
Pts |
|
1.3 |
Pts |
|
0.1 |
Pts |
|
(3.3) |
Pts |
|
10.8 |
% |
Income from Continuing Operations |
|
|
3,411 |
|
|
1,082 |
|
|
813 |
|
|
(6) |
|
|
687 |
|
|
5,988 |
|
Income Margin from Continuing Operations |
|
|
6.3 |
% |
|
2.0 |
Pts |
|
1.5 |
Pts |
|
(0.0) |
Pts |
|
1.3 |
Pts |
|
11.1 |
% |
Diluted Earnings/(Loss) Per Share: Continuing Operations |
|
$ |
3.77 |
|
$ |
1.20 |
|
$ |
0.90 |
|
$ |
(0.01) |
|
$ |
0.76 |
|
$ |
6.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
||||||||||||||||
|
|
Continuing Operations |
|
||||||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
Separation- |
|
|
|
|
||||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Related |
|
Operating |
|
|||||
|
|
GAAP |
|
Adjustments (1) |
|
Adjustments (2) |
|
Impacts |
|
Charges (4) |
|
(Non-GAAP) |
|
||||||
Gross Profit |
|
$ |
25,052 |
|
$ |
556 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
25,608 |
|
Gross Profit Margin |
|
|
47.0 |
% |
|
1.0 |
Pts |
|
— |
Pts |
|
— |
Pts |
|
— |
Pts |
|
48.1 |
% |
S,G&A |
|
|
15,849 |
|
|
(849) |
|
|
— |
|
|
— |
|
|
— |
|
|
15,000 |
|
R,D&E |
|
|
4,722 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,722 |
|
Other (Income) & Expense |
|
|
614 |
|
|
(2) |
|
|
(829) |
|
|
— |
|
|
— |
|
|
(217) |
|
Interest Expense |
|
|
971 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
971 |
|
Total Expense & Other (Income) |
|
|
21,704 |
|
|
(851) |
|
|
(829) |
|
|
— |
|
|
— |
|
|
20,024 |
|
Pre-tax Income from Continuing Operations |
|
|
3,348 |
|
|
1,407 |
|
|
829 |
|
|
— |
|
|
— |
|
|
5,584 |
|
Pre-tax Income Margin from Continuing Operations |
|
|
6.3 |
% |
|
2.6 |
Pts |
|
1.6 |
Pts |
|
— |
Pts |
|
— |
Pts |
|
10.5 |
% |
Provision for/(Benefit from) Income Taxes (3) |
|
|
(888) |
|
|
312 |
|
|
119 |
|
|
128 |
|
|
— |
|
|
(329) |
|
Effective Tax Rate |
|
|
(26.5) |
% |
|
12.3 |
Pts |
|
6.1 |
Pts |
|
2.3 |
Pts |
|
— |
Pts |
|
(5.9) |
% |
Income from Continuing Operations |
|
|
4,237 |
|
|
1,095 |
|
|
710 |
|
|
(128) |
|
|
— |
|
|
5,913 |
|
Income Margin from Continuing Operations |
|
|
8.0 |
% |
|
2.1 |
Pts |
|
1.3 |
Pts |
|
(0.2) |
Pts |
|
— |
Pts |
|
11.1 |
% |
Diluted Earnings/(Loss) Per Share: Continuing Operations |
|
$ |
4.72 |
|
$ |
1.23 |
|
$ |
0.79 |
|
$ |
(0.14) |
|
$ |
— |
|
$ |
6.60 |
|
| _______________ | |
(1)
|
Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. |
(2) |
Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. |
(3) |
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) |
Kyndryl separation charges primarily relate to transaction and third-party support costs, business separation and applicable employee retention fees, pension settlements and related tax separation charges. |
INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts) |
|||||||||
|
|
|
|
|
|
|
|
Trailing |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Twelve Months Ended |
|
|
|
September 30, 2021 |
|
|
September 30, 2021 |
|
|
September 30, 2021 |
|
|
|
Change YTY |
|
|
Change YTY |
|
|
Change YTY |
|
Revenue Adjusting for Divested Businesses and Currency |
|
Total IBM |
|
|
Total IBM |
|
|
Cloud |
|
|
|
|
|
|
|
|
|
|
|
Revenue as reported |
|
0.3 |
% |
|
1.6 |
% |
|
13.6 |
% |
Impact from divested businesses |
|
0.0 |
Pts |
|
0.1 |
Pts |
|
0.3 |
Pts |
Currency impact |
|
(0.6) |
Pts |
|
(2.7) |
Pts |
|
(2.8) |
Pts |
Revenue adjusting for divested businesses and currency (non-GAAP) |
|
(0.2) |
% |
|
(1.0) |
% |
|
11.1 |
% |
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, 2021 |
|
Total IBM Revenue, Normalized to Exclude Kyndryl |
|
Change YTY |
|
|
|
|
|
Revenue as reported |
|
0.3 |
% |
Impact from Kyndryl (1) |
|
2.1 |
Pts |
Revenue normalized to exclude Kyndryl (non-GAAP) |
|
2.5 |
% |
Impact from divested businesses |
|
0.1 |
Pts |
Currency impact |
|
(0.7) |
Pts |
Revenue normalized to exclude Kyndryl, adjusted for divested businesses and currency (non-GAAP) |
|
1.9 |
% |
| _______________ | |
(1) |
Estimated as of September 30, 2021. |
|
|
Three Months Ended |
|
|
|
September 30, 2021 |
|
Red Hat Revenue, Normalized for Historical Comparability |
|
Change YTY |
|
|
|
|
|
Red Hat Revenue GAAP growth rate (1) |
|
23 |
% |
Impact from purchase accounting deferred revenue and intercompany adjustments (2) |
|
(6) |
Pts |
Red Hat revenue growth rate, normalized for historical comparability (non-GAAP) |
|
17 |
% |
Impact from currency |
|
(0) |
Pts |
Red Hat revenue growth rate, normalized for historical comparability and adjusting for currency (non-GAAP) |
|
17 |
% |
| _______________ | |
(1) |
Represents change in GAAP revenue as reported by IBM, which is included in the Cloud & Cognitive Software segment. |
(2) |
Represents change in the third-quarter 2021 impact of the deferred revenue purchase accounting adjustment and adjustments to add back revenue which was eliminated for sales between Red Hat and IBM. This line represents revenue that would have been recognized by Red Hat under GAAP if the acquisition had not occurred, but was not recognized by IBM due to purchase accounting and intercompany adjustments. |
