34 slides from International Business Machines's earnings presentation, Apr 20, 2015
Slide 1: 1Q 2015 Earnings Presentation
1Q 2015 Earnings Presentation April!20,!2015! www.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 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 f
Slide 3: 1Q15 Summary
1Q15 Summary 1Q15 Yr/Yr Revenue ($B) $19.6 0%* Yr/Yr As Reported (12%) Operating (Non-GAAP) EPS $2.91 9% * Revenue growth rate @CC and excluding divested businesses ! Revenue performance improved to flat yr/yr • Strategic imperatives growth accelerated to >30% yr/yr • Core portfolio performance cons
Slide 4: Key Financial Metrics
Key Financial Metrics $ in Billions, except EPS P&L Highlights P&L Ratios B/(W) 1Q15 Yr/Yr (Operating) 1Q15 Yr/Yr Revenue $19.6 0% GP Margin 49.3% 0.8 pts PTI – Operating $3.6 3% PTI Margin 18.4% 2.7 pts NI – Operating $2.9 4% Tax Rate 20.0% 0.5 pts EPS – Operating $2.91 9% NI Margin 14.8% 2.2 pts R
Slide 5: Revenue by Geography
Revenue by Geography $ in Billions 1Q15 Yr/Yr Canada/!!!!! Americas $9.3 2% LA!!! Europe/ME/Africa 6.1 (2%) U.S.! EMEA!!!!!! Asia Pacific 4.1 (2%) +2%!! IBM $19.6 0% Japan! AP! ex.!Japan! Major Markets 0% +4%! Growth Markets (1%) BRIC Countries (3%) Revenue growth rates @CC and excluding divested bu
Slide 6: Revenue and Gross Profit Margin by Segment
Revenue and Gross Profit Margin by Segment Operating Revenue Gross Profit Margin $ in Billions 1Q15 Yr/Yr 1Q15 Yr/Yr Pts Global Technology Services $7.9 (1%) 37.4% (1.4 pts) Global Business Services 4.3 (4%) 27.4% (1.8 pts) Software 5.2 (2%) 86.6% (0.9 pts) Systems Hardware 1.7 30% 44.5% 10.5 pts Gl
Slide 7: Expense Summary
Expense Summary $ in Billions B/(W) 1Q15 Yr/Yr SG&A – Operating $5.0 18% B/(W) Drivers Yr/Yr RD&E – Operating 1.3 9% Currency 8 pts IP and (0.2) (17%) System x Divestiture 2 pts Development Income Other (Income)/ Divestiture Gains (1Q14) (1 pts) (0.1) 12% Expense Workforce Rebalancing 7 pts Interest
Slide 8: Services Segments
Services Segments Global!Technology!Services!(GTS)! Global!Business!Services!(GBS)! $ in Billions $ in Billions 1Q15 Yr/Yr 1Q15 Yr/Yr Revenue (External) $7.9 (1%) Revenue (External) $4.3 (4%) Gross Margin (External) 37.4% (1.4 pts) Gross Margin (External) 27.4% (1.8 pts) PTI Margin 12.3% (1.1 pts) P
Slide 9: Software Segment
Software Segment $ in Billions 1Q15 Yr/Yr Revenue (External) $5.2 (2%) Gross Margin (External) 86.6% (0.9 pts) PTI Margin 31.4% 2.3 pts 1Q15 Revenue 1Q15!Revenue!!!!!!!!!!!!! Yr/Yr (%!of!Total!SoUware)! WebSphere 1% Information Management 0% Tivoli 4% Key!!!!!!! Other! Workforce Solutions 10% Brande
Slide 10: Systems Hardware Segment
Systems Hardware Segment $ in Billions 1Q15 Yr/Yr Revenue (External) $1.7 30% Gross Margin (External) 44.5% 10.5 pts PTI Margin 1.4% 21.2 pts 1Q15!Revenue! 1Q15 Revenue (%!of!Total!Sys!Hardware)! Yr/Yr System z 130% Power Systems 1% Storage (2%) Servers!!!!!!! Storage!!!!!!! Total Systems Hardware 3
Slide 11: Cash Flow Summary
Cash Flow Summary B/(W) $ in Billions 1Q15 Yr/Yr FY14 Net Cash from Operations $3.6 $0.3 $16.9 Less: Global Financing Receivables 1.6 (0.2) 0.7 Net Cash from Operations 2.0 0.5 16.2 (excluding GF Receivables) Net Capital Expenditures (0.9) 0.0 (3.8) Free Cash Flow (excluding GF Receivables) 1.1 0.4
Slide 12: Balance Sheet Summary
Balance Sheet Summary $ in Billions Mar. 14 Dec. 14 Mar.15 Cash & Marketable Securities $9.7 $8.5 $8.8 Non-GF Assets* 76.7 71.7 70.8 Global Financing Assets 36.2 37.3 32.5 Total Assets 122.6 117.5 112.0 Other Liabilities 61.9 64.7 60.9 Non-GF Debt* 15.7 11.7 12.6 Global Financing Debt 28.3 29.1 26.2
Slide 13: Summary
Summary ! 1Q performance reflects progress in transformation • Acceleration in strategic imperatives • Strength in high-end systems • Margin expansion reflects high-end strength and portfolio actions • Shifting investments and resources to address long-term opportunities ! Maintaining expectations f
Slide 14: www.ibm.com/investor
www.ibm.com/investor 14
Slide 15: Supplemental Materials
Supplemental Materials Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding ! Currency – Year/Year Comparison ! Supplemental Segment Information – Global Services ! Supplemental Segment Information – Systems Hardware, Softw
Slide 16: Currency – Year/Year Comparison
Supplemental Materials Currency – Year/Year Comparison Quarterly!Averages!per!US!$! 4/17 Yr/Yr @ 4/17 Spot 1Q15 Yr/Yr Spot 2Q15 3Q15 4Q15 FY15 Euro 0.89 (22%) 0.93 (27%) (23%) (16%) (22%) Pound 0.66 (9%) 0.67 (13%) (12%) (6%) (10%) Yen 119 (16%) 119 (17%) (14%) (4%) (12%) IBM Revenue Impact (8 pts)
Slide 17: Supplemental Segment Information – 1Q 2015
Supplemental Materials Supplemental Segment Information – 1Q 2015 Global Services Revenue Global Services Backlog / Signings $!in!Billions! Revenue!Growth! Yr/Yr! Backlog! 1Q15! Yr/Yr! GTS Outsourcing (2%) Total Backlog $121 0% Integrated Tech Services (1%) Change in Backlog due to Currency Maintena
Slide 18: Supplemental Segment Information – 1Q 2015
Supplemental Materials Supplemental Segment Information – 1Q 2015 Systems Hardware Software Revenue!Growth! Yr/Yr! GP%! Revenue!Growth! Yr/Yr! System z 130% WebSphere 1% Information Management 0% Power Systems 1% Tivoli 4% Storage (2%) Workforce Solutions 10% Total Sys Hardware* 30% Rational (10%) K
Slide 19: Global Financing Portfolio
Supplemental Materials Global Financing Portfolio 1Q15 – $25.8B Net External Receivables Investment Grade Non-Investment Grade 56% 44% 40% 35% 30% 20% 21% 22% 10% 12% 8% 2% 0% Aaa to A3 Baa1 to Baa3 Ba1 to Ba2 Ba3 to B1 B2 to B3 Caa1 to D 1Q15 4Q14 1Q14 Identified Loss Rate 1.9% 1.6% 1.0% Anticipate
Slide 20: Cash Flow (FAS 95)
Supplemental Materials Cash Flow (FAS 95) $ in Billions 1Q15 1Q14 Net Income from Operations $2.3 $2.4 Depreciation / Amortization of Intangibles 1.0 1.1 Stock-based Compensation 0.1 0.1 Working Capital / Other (1.4) (2.1) Global Financing A/R 1.6 1.8 Net Cash provided by Operating Activities 3.6 3.
Slide 21: Non-GAAP Supplemental Materials
Supplemental Materials Non-GAAP Supplemental Materials In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company also discusses, in its earnings press release and earnings presentation m
Slide 22: Non-GAAP Supplemental Materials
Supplemental Materials Non-GAAP Supplemental Materials Cash Flow Management uses a free cash flow measure to evaluate the companys operating results, plan share repurchase levels, evaluate strategic investments and assess the companys ability and need to incur and service debt. The entire free cash
Slide 23: Reconciliation of Operating Earnings Per Share
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!OperaYng!Earnings!Per!Share! 2015 Expectations IBM GAAP EPS $14.17 - $14.92 IBM Operating EPS (Non-GAAP) $15.75 - $16.50 Adjustments Acquisition-Related Charges * $0.74 Amortization of Purchased Intangibles $0.72 Other Acquisiti
Slide 24: GAAP to Operating (Non-GAAP) Bridge – 1Q 2015
Supplemental Materials Non-GAAP Supplemental Materials GAAP!to!OperaYng!(NoncGAAP)!Bridge!–!1Q!2015! $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $9,452 $91 $121 $9,664 SG&A 5,362 (79) (308) 4,975 RD&E 1,298 - (13)
Slide 25: GAAP to Operating (Non-GAAP) Bridge – 1Q 2014
Supplemental Materials Non-GAAP Supplemental Materials GAAP!to!OperaYng!(NoncGAAP)!Bridge!–!1Q!2014! $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $10,627 $104 $52 $10,783 SG&A 6,272 (97) (87) 6,087 RD&E 1,402 - 17
Slide 26: GAAP to Operating (Non-GAAP) Bridge – 1Q 2015 and 1Q 2014
Supplemental Materials Non-GAAP Supplemental Materials GAAP!to!OperaYng!(NoncGAAP)!Bridge!–!1Q!2015!and!1Q!2014! Acquisition- related Retirement-related Operating 1Q 2015 GAAP Adjustments* Adjustments ** (Non-GAAP) Gross Profit Margin from Continuing Operations 48.2% 0.5 pts 0.6 pts 49.3% PTI Margin
Slide 27: Reconciliation of B/(W) Yr/Yr Expense Drivers – 1Q 2015
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!B/(W)!Yr/Yr!Expense!Drivers!–!1Q!2015! Non-GAAP Operating GAAP Adjustments (Non-GAAP) Operating Expense & Other Income Currency 9 pts (1 pts) 8 pts System x Divestiture 2 pts 0 pts 2 pts Divestiture Gains (1Q14) (1 pts) 0 pts (1
Slide 28: Reconciliation of Free Cash Flow (excluding GF Receivables)
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!Free!Cash!Flow!(excluding!GF!Receivables)! 12 months $ in Billions ended 3/31/15 Net Cash from Operations $17.2 Less: Global Financing Receivables 0.5 Net Cash from Operations 16.6 (excluding GF Receivables) Net Capital Expendit
Slide 29: Reconciliation of Debt-to-Capital Ratio
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!DebtctocCapital!RaYo! March 2015 Dec. 2014 March 2014 Non-Global Financing Debt / Capital 59.6% 59.4% 55.3% IBM Consolidated Debt / Capital 76.0% 77.3% 72.4% The above serves to reconcile the Non-GAAP financial information conta
Slide 30: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!Revenue!Growth!! 3Q14 Yr/Yr 4Q14 Yr/Yr At Constant At Constant Currency excl. Currency excl. At Constant Divested At Constant Divested GAAP Currency Businesses GAAP Currency Businesses IBM (4%) (4%) (2%) (12%) (8%) (2%) The abov
Slide 31: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!Revenue!Growth!! 1Q15 Yr/Yr At Constant Currency excl. At Constant Divested GAAP Currency Businesses Americas (3%) 0% 2% U.S. (1%) (1%) 2% Europe/ME/A (19%) (5%) (2%) Asia Pacific (18%) (10%) (2%) Japan (13%) 1% 4% Major Markets
Slide 32: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!Revenue!Growth!! 1Q15 Yr/Yr At Constant Currency excl. At Constant Divested GAAP Currency Businesses Global Services (12%) (3%) (2%) Global Technology Services (GTS) (11%) (2%) (1%) Global Business Services (GBS) (13%) (5%) (4%)
Slide 33: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplemental Materials ReconciliaYon!of!Revenue!Growth!! 1Q15 Yr/Yr At Constant GAAP Currency WebSphere (4%) 1% Information Management (6%) 0% Tivoli (3%) 4% Workforce Solutions 1% 10% Rational (16%) (10%) Total Middleware (7%) (1%) Other Middleware (14%) (7%) Other S
Slide 34: www.ibm.com/investor
www.ibm.com/investor 34