International Business Machines Corporation · NYSE:IBM
International Business Machines — Q2 2017 Earnings Presentation
31 slides from International Business Machines's earnings presentation, Jul 18, 2017
Slide 1: 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 2: Overview
3 Overview Strong growth in strategic imperatives revenue, reflects organic performance Sequential improvement in gross margin Solid expense management Strong cash flow performance Maintain full-year expectations for earnings per share and free cash flow 2Q17 $19.3B $ 2.97 $10.8B Revenue Operating E
Slide 3: A Cognitive Solutions & Cloud Platform Company
4 A Cognitive Solutions & Cloud Platform Company Revenue growth rates @CC, $ in billions Overlap in Strategic Imperatives revenue primarily reflects solutions delivered via cloud Strategic imperatives revenue up 12% over last twelve months leverages IBM’s strong position in traditional IT Cloud reve
Slide 4: Key Financial Metrics
5 Key Financial Metrics Revenue growth rates @CC, $ in billions except for EPS B/(W) Gross margin decline reflects impact from mix and investment levels yr/yr dynamics improved vs. first quarter Expense better yr/yr driven by efficiency while continuing to invest in key areas Tax rate reflects 15% o
Slide 5: Cognitive Solutions Segment
6 Cognitive Solutions Segment Annuity content continues to grow, driven by SaaS Solutions Software includes growth in analytics Gross margin reflects investments and mix; sequential improvement in yr/yr performance Highlights Revenue growth rates @CC, $ in billions Strategic Imperatives Revenue with
Slide 6: Global Business Services Segment
7 Global Business Services Segment Second consecutive quarter of signings growth with strength in digital offerings Improved Consulting revenue trajectory as backlog stabilizes Decline in enterprise apps, shifting resources away from traditional areas Highlights Revenue growth rates @CC, $ in billio
Slide 7: Technology Services and Cloud Platforms Segment
8 Technology Services and Cloud Platforms Segment Infrastructure Services deceleration driven by acquisition wrap and shift away from lower value work Strong growth in cloud, analytics, mobile and security Gross margin reflects investment in cloud platforms; sequential improvement driven by service
Slide 8: Systems Segment
9 Systems Segment z Systems performance in quarter reflects cycle; new product introduction in 3Q Storage grew for second consecutive quarter, led by flash Gross margin expanded in z Systems and Storage; overall margin decline reflects mix Highlights Revenue growth rates @CC, $ in billions Strategic
Slide 9: Cash Flow and Balance Sheet Highlights
10 Cash Flow and Balance Sheet Highlights Strong collections performance contributed to free cash flow growth Free Cash Flow realization 94% over last 12 months Positioned to support business over the longer term Global Financing leverage reflects client and commercial financing entity established 1
Slide 10: Summary
11 Summary Strong performance in strategic imperatives, leveraging IBM’s position in traditional IT Sequential improvement in gross margin Continuing to invest while driving efficiency in spend base Maintain full-year 2017 expectations Operating EPS of at least $13.80 Free cash flow flat yr/yr
Slide 11: Summary
Summary + Strong performance in strategic imperatives, leveraging IBM's position in traditional IT + Sequential improvement in gross margin + Continuing to invest while driving efficiency in spend base + Maintain full-year 2017 expectations + Operating EPS of at least $13.80 + Free cash flow flat yr
Slide 12: Supplemental Materials
13 Supplemental Materials Currency – Impact on Revenue Growth Geographic Revenue Segment Revenue & Gross Profit Additional Revenue & Backlog Information Expense Summary Global Financing Portfolio Balance Sheet Summary Cash Flow Summary Cash Flow (ASC 230) Non-GAAP Supplemental Materials Some columns
Slide 13: Currency – Impact on Revenue Growth
14 Currency – Impact on Revenue Growth Supplemental Materials 7/17/17 Quarterly Averages per US $ 1Q17 Yr/Yr 2Q17 Yr/Yr Spot 3Q17 4Q17 FY17 Euro 0.94 (3%) 0.91 (3%) 0.87 3% 6% 1% Pound 0.81 (15%) 0.78 (12%) 0.77 (1%) 5% (5%) Yen 114 1% 111 (3%) 113 (10%) (3%) (4%) IBM Revenue Impact, Future @ 7/17/1
Slide 14: Geographic Revenue
15 Geographic Revenue Americas reflects decline in US (-5%), growth in Latin America and Canada E/ME/A weakness; declines in Germany and UK Asia Pacific improved sequentially, with growth in Japan (+1%) and India Revenue growth rates @CC, $ in billions Supplemental Materials Geography Revenue 2Q17 Y
Slide 15: Segment Revenue & Gross Profit
16 Segment Revenue & Gross Profit Revenue growth rates @CC, $ in billions *Total Software = Cognitive Solutions + Integration Software + Operating Systems Software **Global Technology Services = Infrastructure Services + Technical Support Services Supplemental Materials 2Q17 2Q17 Segment Revenue & G
Slide 16: Additional Revenue & Backlog Information
17 Additional Revenue & Backlog Information Growth rates @CC, $ in billions, Actual backlog calculated using June 30 currency spot rates Supplemental Materials 2Q17 Yr/Yr Signings $10.9 (14%) Services Backlog $118 (4%) Currency Impact Year to Year ($1) Currency Impact Quarter to Quarter $2 2Q17 Yr/Y
Slide 17: Expense Summary
18 Expense Summary Supplemental Materials $ in billions *includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges **represents the percentage change after excluding the impact of currency and acquisitions B/(W) Expense Metrics 2Q17 Yr/Yr Currency Acq.* B
Slide 18: Global Financing Portfolio
19 Global Financing Portfolio 2Q17 – $25.4B Net External Receivables Global Financing Metrics 2Q17 1Q17 2Q16 Identified Loss Rate 1.1% 1.4% 2.1% Anticipated Loss Rate 0.4% 0.4% 0.5% Reserve Coverage 1.5% 1.8% 2.6% Client Days Delinquent Outstanding 4.9 4.8 3.5 Commercial A/R > 30 days $31M $20M $25M
Slide 19: Balance Sheet Summary
20 Balance Sheet Summary *includes eliminations of inter-company activity **Global Financing leverage reflects client and commercial financing entity established in 1Q17 Supplemental Materials $ in billions Jun 17 Dec 16 Jun 16 Cash & Marketable Securities $12.3 $8.5 $10.6 Non-GF Assets* $74.1 $74.4
Slide 20: Cash Flow Summary
21 Cash Flow Summary Supplemental Materials $ in billions *Reclassified to reflect adoption of the FASB guidance on stock-based compensation **Revised classification of certain financing receivables for 2Q16 (QTD/YTD) decreasing Net Cash from Operations offset by Global Financing Receivables. No imp
Slide 21: Cash Flow (ASC 230)
22 Cash Flow (ASC 230) Supplemental Materials $ in billions *Reclassified to reflect adoption of the FASB guidance on stock-based compensation **Revised classification of certain financing receivables for 2Q16 (QTD/YTD) decreasing Net Cash provided by Operating Activities and Net Cash used in Invest
Slide 22: Reconciliation of Operating Earnings Per Share
Reconciliation of Operating Earnings Per Share 23 Non-GAAP Supplemental Materials *Includes acquisitions through June 30, 2017 The above reconciles the Non-GAAP financial information contained in the “Summary” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Compa
Slide 23: Reconciliation of Revenue Growth - 2Q 2017
Reconciliation of Revenue Growth - 2Q 2017 24 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Geographic Revenue” and “2Q17 Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form
Slide 24: Reconciliation of Revenue Growth - 2Q 2017
Reconciliation of Revenue Growth - 2Q 2017 25 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “A Cognitive Solutions & Cloud Platform Company” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form
Slide 25: Reconciliation of Revenue Growth - 2Q 2017
Reconciliation of Revenue Growth - 2Q 2017 26 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Segment Revenue & Gross Profit”, “Additional Revenue & Backlog Information”, “Cognitive Solutions Segment”, “Global Business Services Segment”, “Tec
Slide 26: Reconciliation of Expense Summary - 2Q 2017
Reconciliation of Expense Summary - 2Q 2017 27 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Expense Summary” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated July 18, 2017 for ad
Slide 27: Reconciliation of Software Revenue Growth - 2Q 2017
Reconciliation of Software Revenue Growth - 2Q 2017 28 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “2Q17 Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated July 1
Slide 28: Reconciliation of Debt-to-Capital Ratio
Reconciliation of Debt-to-Capital Ratio 29 Non-GAAP Supplemental Materials Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Cash Flow and Balance Sheet Highlights” and “Balance Sheet Summary” discussions in the company’s earnings presentation. See Exhi
Slide 29: Reconciliation of Free Cash Flow-Last 12 Months
Reconciliation of Free Cash Flow-Last 12 Months Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Overview”, “Key Financial Metrics” and “Cash Flow and Balance Sheet Highlights” discussions in the company’s earnings presentation. See Exhibit 99
Slide 30: Reconciliation of Free Cash Flow-Last 12 Months
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow-Last 12 Months 12 Months Ended Jun 2017 Net Cash from Operating Activities per GAAP: $15.5 Less: the change in Global Financing (GF) Receivables S14 Net Cash from Operating Activities (Excluding GF Receivables) $14.1 Capital Expenditur
Slide 31: ibm.com/investor
ibm.com/investor
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