International Business Machines Corporation · NYSE:IBM
International Business Machines — Q2 2019 Earnings Presentation
26 slides from International Business Machines's earnings presentation, Jul 17, 2019
Slide 1: IBM 2Q 2019 Earnings
IBM 2Q 2019 Earnings July 17, 2019 ibm.com/investor 1
Slide 2: Forward Looking Statements and Non-GAAP Information
2 Certain comments made in this presentation may be characterized as forward looking under 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. Those statements by their na
Slide 3: Overview
3 2Q19 $19.2B $3.17 $12.7B Revenue Operating (non-GAAP) EPS Free Cash Flow Last 12 Months y Revenue growth in key high-value areas − Led by Cloud & Cognitive Software and Global Business Services y Strong margin performance with gross margin expansion of 100 basis points − Continued actions to optim
Slide 4: Key Financial Metrics
4 B/(W) P&L Highlights 2Q19 Yr/Yr Revenue $19.2 (1.6%) Cloud & Cognitive Software $5.6 5% Global Business Services $4.2 3% Global Technology Services $6.8 (4%) Systems $1.8 (18%) Pre-Tax Income - Operating $3.2 (6%) Net Income - Operating $2.8 Flat Earnings Per Share - Operating $3.17 3% Cash Highli
Slide 5: Cloud & Cognitive Software Segment
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing B/(W) Segment 2Q19* Yr/Yr* Revenue (External) $5.6 5% PTI $2.0 (1%) (6 pts) PTI Margin 32.0% (0.3 pts) (2 pts) Cloud Revenue Cloud $0.8 8% as-a-Service annual run rate $2.1 Transaction Processing Platforms +4% Yr/Yr Cognitive Applications +5% Yr/Yr 5 Clou
Slide 6: Global Business Services Segment
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing B/(W) Segment 2Q19* Yr/Yr* Revenue (External) $4.2 3% Gross Profit Margin (External) 26.0% (0.1 pts) PTI $0.3 (19%) (17 pts) PTI Margin 7.1% (1.7 pts) (2 pts) Cloud Revenue Cloud $1.2 17% as-a-Service annual run rate $1.7 Global Process Services +3% Yr/Yr
Slide 7: Global Technology Services Segment
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing B/(W) Segment 2Q19* Yr/Yr* Revenue (External) $6.8 (4%) Gross Profit Margin (External) 34.4% 1.2 pts PTI $0.2 (48%) (48 pts) PTI Margin 3.3% (2.7 pts) (3 pts) Cloud Revenue Cloud $2.0 5% as-a-Service annual run rate $7.4 7 Infrastructure & Cloud Services
Slide 8: Systems Segment
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing 8 Systems Segment y IBM Z and Storage performance reflects product cycle dynamics and challenging yr/yr compare y Power growth driven by continued strength in POWER9 y Margin performance reflects mix headwind from IBM Z mainframe cycle Systems Hardware (2
Slide 9: Cash Flow and Balance Sheet Highlights
9 Balance Sheet Jun 19 Dec 18 Jun 18 Cash & Marketable Securities $46.4 $12.2 $11.9 Global Financing Debt $25.0 $31.2 $31.1 Core (non-GF) Debt $48.1 $14.6 $14.4 Total Debt $73.0 $45.8 $45.5 Cash Flow 2Q19 Yr/Yr LTM Net Cash from Operations** $2.8 ($0.1) $15.6 Free Cash Flow** $2.4 $0.5 $12.7 Selecte
Slide 10: Summary
10 Summary y Revenue growth in key high-value areas y Strong margin performance and operating leverage y Positioned to lead in the next chapter of cloud y Full-year expectations to be updated in early August
Slide 11: ibm.com/investor
11 ibm.com/investor
Slide 12: Supplemental Materials
12 Supplemental Materials ● Currency – Impact on Revenue Growth ● Additional Revenue Information ● Additional Revenue, Gross Profit & Backlog Information ● Expense Summary ● Balance Sheet Summary ● Cash Flow Summary ● Cash Flow (ASC 230) ● Non-GAAP Supplemental Materials Some columns and rows in the
Slide 13: Currency – Impact on Revenue Growth
7/16/2019 Quarterly Averages per US $ 1Q19 Yr/Yr 2Q19 Yr/Yr Spot 3Q19 4Q19 FY19 Euro 0.88 (8%) 0.89 (6%) 0.89 (4%) (2%) (5%) Pound 0.77 (7%) 0.78 (6%) 0.81 (5%) (4%) (5%) Yen 110 (2%) 110 (1%) 108 3% 4% 1% Revenue Impact, Future @ 7/16/19 Spot (2.6 pts) ~(1 pts) 0 pts ~(2)Pts Prior View @ 4/15/19 Sp
Slide 14: Additional Revenue Information
14 B/(W) Cloud Revenue Revenue Yr/Yr Total Cloud - 2Q19 $4.8 5% as-a-Service annual run rate $11.5 7% Total Cloud - LTM $19.5 8% B/(W) Geography Revenue 2Q19 Yr/Yr Americas $8.8 (3%) Europe/ME/Africa $6.1 1% Asia Pacific $4.2 (2%) B/(W) Segment Revenue 2Q19 Yr/Yr Cloud & Cognitive Software $5.6 5% C
Slide 15: Additional Revenue, Gross Profit & Backlog Information
15 B B/(W) S Signings & Backlog* 2 2Q19 Yr/Yr S Signings $9.7 (14%) B Backlog $111.2 (4%) Backlog Yr/Yr @Actual (5%) B/(W) S Systems Revenue 2Q19 Yr/Yr S Systems Hardware Revenue $1.3 (23%) IBM Z (41%) Power 3% Storage (21%) Additional Revenue, Gross Profit & Backlog Information Growth rates @CC, $
Slide 16: Expense Summary
16 Expense Summary Supplemental Materials $ in billions *2Q19 charges for workforce rebalancing and unfavorable legal ruling **includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges ***represents the percentage change after excluding the impact of curr
Slide 17: Balance Sheet Summary
17 Jun 19 Dec 18 Jun 18 Cash & Marketable Securities $46.4 $12.2 $11.9 Core (non-GF) Assets* $79.0 $71.7 $72.5 Global Financing Assets $29.3 $39.5 $37.2 Total Assets $154.7 $123.4 $121.6 Other Liabilities $63.8 $60.6 $57.5 Core (non-GF) Debt* $48.1 $14.6 $14.4 Global Financing Debt $25.0 $31.2 $31.1
Slide 18: Cash Flow Summary
18 QTD B/(W) YTD B/(W) 2Q19 Yr/Yr 2Q19 Yr/Yr Net Cash from Operations $2.9 $0.6 $7.7 $0.8 Less: Global Financing Receivables $0.1 $0.7 $2.6 $0.8 Net Cash from Operations (excluding GF Receivables) $2.8 ($0.1) $5.1 $0.0 Net Capital Expenditures ($0.4) $0.6 ($1.0) $0.9 Free Cash Flow (excluding GF Rec
Slide 19: Cash Flow (ASC 230)
QTD QTD YTD YTD 2Q19 2Q18 2Q19 2Q18 Net Income from Operations $2.5 $2.4 $4.1 $4.1 Depreciation / Amortization of Intangibles $1.3 $1.1 $2.7 $2.2 Stock-based Compensation $0.1 $0.1 $0.2 $0.2 Working Capital / Other ($1.1) ($0.8) ($2.0) ($1.4) Global Financing A/R $0.1 ($0.6) $2.6 $1.8 Net Cash provi
Slide 20: Reconciliation of Operating Earnings Per Share
2019 Full-Year Expectations (as of second quarter 2019, prior to the completion of Red Hat acquisition) GAAP Diluted EPS at least $12.45 Operating EPS (Non-GAAP) at least $13.90 Adjustments Acquisition-Related Charges* $0.76 Non-Operating Retirement-Related Items $0.45 Tax Reform Enactment Impacts $
Slide 21: Reconciliation of Revenue Performance - 2Q 2019
21 GAAP @CC Global Technology Services (7%) (4%) Infrastructure & Cloud Services (7%) (4%) Technology Support Services (5%) (2%) Cloud 2% 5% Systems (19%) (18%) Systems Hardware (24%) (23%) IBM Z (42%) (41%) Power 1% 3% Storage (22%) (21%) Operating Systems Software 1% 3% Cloud (17%) (16%) Global Fi
Slide 22: Reconciliation of Revenue Performance - 2Q 2019 & Last 12 Months
22 GAAP @CC Americas (4%) (3%) Europe/ME/Africa (4%) 1% Asia Pacific (4%) (2%) 2Q19 Yr/Yr Reconciliation of Revenue Performance - 2Q 2019 & Last 12 Months Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Additional Revenue Information” and “2Q
Slide 23: Reconciliation of Expense Summary - 2Q 2019
23 Non-GAAP Operating GAAP Adjustments (Non-GAAP) SG&A Currency 3 pts 0 pts 3 pts Acquisitions 0 pts 0 pts 0 pts Base * (15 pts) 0 pts (15 pts) RD&E Currency 1 pts 0 pts 1 pts Acquisitions 0 pts 0 pts 0 pts Base * (4 pts) 0 pts (4 pts) Operating Expense & Other Income Currency 4 pts 0 pts 4 pts Acqu
Slide 24: Reconciliation of Free Cash Flow - Last 12 Months
24 12 Months Ended Jun 2019 Net Cash from Operating Activities per GAAP: $16.1 Less: change in Global Financing (GF) Receivables $0.5 Net Cash from Operating Activities (Excluding GF Receivables) $15.6 Capital Expenditures, Net ($2.9) Free Cash Flow (Excluding GF Receivables) $12.7 Reconciliation of
Slide 25: Reconciliation of Free Cash Flow Realization - Last 12 Months
25 LTM Excluding LTM Tax Reform* Free Cash Flow Realization 146% 118% Reconciliation of Free Cash Flow Realization - Last 12 Months Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Key Metrics”, “Cash Flow and Balance Sheet Highlights” and “2Q
Slide 26: ibm.com/investor
26 ibm.com/investor
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