International Business Machines Corporation · NYSE:IBM
International Business Machines — Q2 2021 Earnings Presentation
29 slides from International Business Machines's earnings presentation, Jul 19, 2021
Slide 1: IBM 2Q 2021 Earnings
IBM 2Q 2021 Earnings July 19, 2021 ibm.com/investor
Slide 2: Forward Looking Statements and Non-GAAP Information
Forward Looking Statements and Non-GAAP Information Certain comments made in this presentation may be In an effort to provide additional and useful information regarding characterized as forward looking under the Private Securities the company’s financial results and other financial information as L
Slide 3: Arvind Krishna and James Kavanaugh
Arvind Krishna Chairman and Chief Executive Officer James Kavanaugh SVP, Finance & Operations, Chief Financial Officer 3
Slide 4: CEO Perspective: 2Q21 Performance
performance in Global Business Services and clients infuse our AI-based technology offerings CEO Perspective “In the second quarter client adoption of our hybrid cloud platform contributed to strong 2Q21 Performance software and drove improved overall revenue growth. At the same time, we continued t
Slide 5: Hybrid Cloud & AI Progress
enhancing portfolio Hybrid Cloud & AI Progress Our Platform Approach SERVICES Accelerating client adoption of hybrid cloud & AI Partners SOFTWARE IBM Software Leveraging go-to-market changes and Cloud Paksexpanding partner ecosystem HYBRID CLOUD PLATFORM Delivering innovation and INFRASTRUCTURE IBM
Slide 6: Financial Highlights 2Q21
growth rates improved Cloud revenue growth Financial Highlights 2Q21 $18.7B $11.0B RevenueFree Cash Flow, Adjusted (LTM) “We expanded operating margins and grew profit dollars in the quarter, providing a key contribution to our cash performance. In the first half of the year we increased adjusted fr
Slide 7: Cloud & Cognitive Software
Cloud & Data Platforms growth led by yr/yr +2% yr/yr Segment Elements +8% yr/yr Strong renewal rates for subscription Processing (11%) yr/yr Cloud & Cognitive Software Revenue C&CS Cloud Revenue Growth $6.1B +25% Red Hat and Cloud Pak strength Cognitive Applications growth driven by Security and sup
Slide 8: Global Business Services
Revenue returns to pre-pandemic yr/yr +7% yr/yr Segment Elements +11% yr/yr driven by ecosystem and cloud Gross margin (-60 bps yr/yr) Process Global Business ServicesRevenueGBS Cloud Revenue Growth $4.3B +30% levels Continued momentum in Red Hat engagements Consulting double-digit growth Consulting
Slide 9: Systems
IBM Z, Storage and Power Segment Elements secure, scalable, reliable Operating Systems RevenueIBM Z Program Revenue $1.7B >100% impacted by product cycle (10%) yr/yr z15 vs. z14 dynamics Strong z15 program performance: Gross margin up in IBM Z and Power; segment yr/yr margin Systems Hardware reflect
Slide 10: Global Technology Services
Margin expansion reflects actions to yr/yr (4%) yr/yr Segment Elements activity Kyndryl separation remains on track (4%) yr/yr Technology Global Technology ServicesRevenueGross Margin Expansion $6.3B +110 bps improve profit profile Improved trends in client-based business volumes and project Strong
Slide 11: Summary
Summary Focus on hybrid cloud and AI strategy Continued progress in revenue trajectory; solid business model fundamentals Executing actions to accelerate change Maintaining expectations for full-year 2021 –Revenue growth based on mid-July spot rates –Adjusted free cash flow* of $11-12 billion *Adjus
Slide 12: ibm.com/investor
ibm.com/investor
Slide 13: Supplemental Materials
Supplemental Materials ● Revenue and P&L Highlights ● Cash Flow and Balance Sheet Highlights ● Currency – Impact on Revenue Growth ● Services Segments Details ● Software and Systems Segment Details ● Expense Summary ● Balance Sheet Summary ● Cash Flow Summary ● Cash Flow (ASC 230) ● Non-GAAP Supplem
Slide 14: Revenue and P&L Highlights
Revenue and P&L Highlights B/(W)B/(W) Revenue Highlights 2Q21 Yr/Yr* Operating P&L Highlights $ 2Q21 Yr/Yr Revenue$18.7 FlatGross Profit $9.2 4% Cloud $7.0 9% Expense $6.7 (2%) Cloud (LTM)$27.0 13% Pre-Tax Income $2.5 9% Net Income $2.1 8% B/(W) Earnings Per Share $2.33 7% Geography Revenue 2Q21 Yr/
Slide 15: Cash Flow and Balance Sheet Highlights
Cash Flow and Balance Sheet Highlights $ in billions *Non-GAAP financial measures; excludes financing receivables **Non-GAAP financial measures; excludes cash impacts incurred in the period related to structural actions initiated in 4Q20 and separation related costs Supplemental Materials 15 Cash Fl
Slide 16: Currency – Impact on Revenue Growth
Currency – Impact on Revenue Growth Revenue Impact, Future @ 7/16/21 Spot4 pts 0-1 pts ~(1 pts) 1-2 pts Prior View @ 4/16/21 Spot~3 pts ~1 pts (1)-0 pts 1-2 pts US$B Yr/Yr Revenue As Reported $18.7 3% Currency Impact $0.7 4 pts Revenue @CC (1%) Supplemental Materials 16 Quarterly Averages per US $ 1
Slide 17: Services Segments Details
Services Segments Details B/(W) B/(W) GBS Segment 2Q21 Yr/YrGTS Segment2Q21 Yr/Yr Revenue (External) $4.3 7% Revenue (External) $6.3 (4%) Consulting $2.2 11% Infrastructure & Cloud Services$4.8 (4%) Application Management$1.8 1% Technology Support Services$1.5 (4%) Global Process Services$0.3 25% Gr
Slide 18: Software and Systems Segment Details
Software and Systems Segment Details B/(W) B/(W) Cloud & Cognitive Software Segment 2Q21 Yr/Yr Systems Segment2Q21 Yr/Yr Revenue (External) $6.1 2% Revenue (External) $1.7 (10%) Cloud & Data Platforms $3.1 8% Systems Hardware $1.4 (10%) Cognitive Applications $1.4 8% IBM Z(13%) Transaction Processin
Slide 19: Expense Summary
Expense Summary $ in billions *includes acquisitions in the last twelve months net of non-operating acquisition-related charges and includes impact of divested businesses **represents the percentage change after excluding the impact of currency, acquisitions and divestitures Supplemental Materials 1
Slide 20: Balance Sheet Summary
Balance Sheet Summary Jun 21 Dec 20 Jun 20 Cash & Marketable Securities $8.2 $14.3 $14.3 Core (non-GF) Assets* $119.1 $118.5 $115.2 Global Financing Assets$19.5 $23.2 $24.7 Total Assets$146.8 $156.0 $154.2 Other Liabilities $69.6 $73.7 $68.8 Core (non-GF) Debt* $37.7 $40.4 $42.8 Global Financing Deb
Slide 21: Cash Flow Summary
Cash Flow Summary B/(W)YTDB/(W) 2Q21 Yr/Yr2Q21 Yr/Yr Net Cash from Operations$2.6 ($1.0) $7.5 ($0.5) Less: Global Financing Receivables$0.9 $0.3 $3.8$0.8 Net Cash from Operations (excluding GF Receivables)$1.7 ($1.3) $3.8 ($1.3) Net Capital Expenditures ($0.7) $0.0 ($1.2)$0.2 Free Cash Flow (excludi
Slide 22: Cash Flow (ASC 230)
Cash Flow (ASC 230) QTDQTDYTDYTD 2Q21 2Q20 2Q21 2Q20 Net Income from Operations$1.3 $1.4 $2.3 $2.5 Depreciation / Amortization of Intangibles$1.7 $1.7 $3.4 $3.3 Stock-based Compensation$0.2 $0.2 $0.5 $0.4 Working Capital / Other ($1.5) ($0.3) ($2.3) ($1.2) Global Financing A/R$0.9 $0.6 $3.8 $3.0 Net
Slide 23: Reconciliation of Revenue Performance - 2Q 2021
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 2Q 2021 2Q21 Yr/Yr2Q21 Yr/Yr GAAP @CC GAAP @CC Cloud & Cognitive Software 6% 2% Global Technology Services Flat (4%) Cloud & Data Platforms 12% 8% Infrastructure & Cloud Services Flat (4%) Cognitive Applications 12% 8% Technolog
Slide 24: Reconciliation of Revenue Performance - 2Q 2021
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 2Q 2021 2Q21 Yr/Yr GAAPDivest impact Currency impact Adjusted Total Revenue3% 0 pts (4 pts) (0%) Americas 4% 0 pts (1 pts) 3% Europe/ME/Africa 6% 0 pts (9 pts) (3%) Asia Pacific (2%) 0 pts (2 pts) (4%) Total Cloud13% 0 pts (4 pt
Slide 25: Reconciliation of Revenue for Red Hat, Normalized
Non-GAAP Supplemental Materials Reconciliation of Revenue for Red Hat, Normalized - 2Q 2021 2Q21 Yr/Yr Revenue, Normalized for Historical ComparabilityRed Hat Revenue GAAP growth rate*36% Impact from purchase accounting deferred revenue and intercompany adjustments ** (16 pts) Revenue growth rate, n
Slide 26: Reconciliation of Expense Summary - 2Q 2021
Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 2Q 2021 2Q21 Non-GAAPOperating GAAPAdjustments(Non-GAAP) SG&A Currency(3 pts) 0 pts (3 pts) Acquisitions/Divestitures0 pts 0 pts 0 pts Base*2 pts 3 pts 4 pts RD&E Currency(2 pts) 0 pts (2 pts) Acquisitions/Divestitures0 pts 0 pts 0
Slide 27: Reconciliation of Continuing Operations - 2Q 2021
Non-GAAP Supplemental Materials Reconciliation of Continuing Operations - 2Q 2021 2Q21 Acquisition-Retirement-Separation-Related Related Tax ReformRelated GAAPAdjustmentsAdjustmentsImpactsChargesAdjusted Gross Profit $9,004 $180 ——$58 $9,242 Gross Profit Margin48.0% 1.0 pts ——0.3 pts 49.3% SG&A 5,33
Slide 28: Reconciliation of Free Cash Flow
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow – YTD and Last 12 Months 12 Months YTDEnded Jun 2021 Jun 2021 Net Cash from Operating Activities per GAAP:$7.5 $17.7 Less: change in Global Financing (GF) Receivables$3.8 $5.1 Net Cash from Operating Activities (Excluding GF Receivable
Slide 29: ibm.com/investor
ibm.com/investor
International Business Machines — Q2 2021 Earnings Presentation on 6ix