Revenue Performance Led by Consulting and
Software; Solid Cash Generation
Highlights
Third Quarter:
- Revenue of $17.6 billion, up 0.3 percent (down 0.2 percent
adjusting for divested businesses and currency) - Cloud &
Cognitive Software up 3 percent (up 2 percent adjusting for
currency) - Global Business Services up 12 percent (up 11 percent
adjusting for currency)
- Revenue, up 2.5 percent (up 1.9 percent adjusting for divested
businesses and currency), normalized to exclude Kyndryl to be
separated in November
- Net cash from operating activities of $16.1 billion and
adjusted free cash flow of $11.1 billion, both up $0.3 billion over
last 12 months
- Total cloud revenue over last 12 months of $27.8 billion, up 14
percent (up 11 percent adjusting for divested businesses and
currency) - Cloud & Cognitive Software cloud revenue up 31
percent (up 28 percent adjusting for currency) - Global Business
Services cloud revenue up 30 percent (up 27 percent adjusting for
currency)
- Red Hat revenue up 17 percent, normalized for historical
comparability
- Debt reduced by $7.0 billion since year-end 2020
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.”
THIRD QUARTER 2021
All GAAP results include the
impact of Kyndryl separation costs*
Pre-tax
Gross
Diluted
Net
Pre-tax
Income
Profit
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
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
“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)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
REVENUE
Cloud & Cognitive Software
$
5,692
$
5,553
$
17,227
$
16,540
Global Business Services
4,427
3,965
13,002
11,992
Global Technology Services
6,154
6,462
18,866
19,245
Systems
1,107
1,257
4,251
4,477
Global Financing
220
273
702
837
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
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
%
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
%
EXPENSE AND OTHER INCOME
S,G&A
4,860
4,647
15,368
15,849
R,D&E
1,621
1,515
4,907
4,722
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
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
Income/(Loss) from discontinued
operations, net of taxes
—
(1
)
(1
)
(2
)
NET INCOME
$
1,130
$
1,698
$
3,410
$
4,234
EARNINGS/(LOSS) PER SHARE OF COMMON
STOCK
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)
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211020006053/en/
IBM Sarah Meron, 347-891-1770 sarah.meron@ibm.com Tim Davidson,
914-844-7847 tfdavids@us.ibm.com
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