International Business Machines Corporation · NYSE:IBM
International Business Machines — Q1 2024 Earnings Presentation
38 slides from International Business Machines's earnings presentation, Apr 24, 2024
Slide 1: 1Q 2024 Earnings
1Q 2024 Earnings April 24, 2024 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 earnings press release and presentation materials, certain non-GAAP information looking under the Private Securities Litigation Reform Act of 1995. Forward- including operat
Slide 3: Arvind Krishna and James Kavanaugh
Arvind Krishna James Kavanaugh Chairman and Chief SVP, Finance & Operations Executive Officer and Chief Financial Officer 3
Slide 4: CEO perspective
CEO perspective “We began the year with solid revenue and free cash flow growth, reflecting the strength of our hybrid cloud and AI strategy. We continue to capitalize on the excitement and demand for enterprise AI from our clients. Our book of business for watsonx and generative AI again showed str
Slide 5: Creates Leading End-to-End Hybrid and Multi-Cloud Platform
Creates Leading End-to-End Hybrid and Multi-Cloud Platform Infrastructure complexity is increasing …driven by an explosion of applications across hybrid cloud environments, magnified by AI Leading Provider of Hybrid Cloud & AI Solutions This combination creates a comprehensive platform … to include
Slide 6: Together We Unlock Value and Drive Growth
Together We Unlock Value and Drive Growth Accelerates Growth in Enhances Ability to Attractive Financial Focus Areas Capture TAM Opportunity - Synergies across Red - Delivers comprehensive - Accelerates IBM’s Hat, watsonx, data hybrid and multi-cloud growth profile over time security, IT automation
Slide 7: CEO perspective
CEO perspective “We began the year with solid revenue and free cash flow growth, reflecting the strength of our hybrid cloud and AI strategy. We continue to capitalize on the excitement and 1Q24 Performance demand for enterprise AI from our clients. Our book of business for watsonx and generative AI
Slide 8: Financial highlights
Financial highlights 1Q24 3% $0.6B $14.5B $1.9B Revenue growth Free cash flow yr/yr Revenue Free cash flow >75% 100bps “In the quarter we continued to focus on the fundamentals of Revenue mix in Gross margin expansion software and consulting (operating) our business, growing revenue, expanding opera
Slide 9: Software
Software $5.9B +6% Revenue Revenue growth Strong growth across Hybrid Platform & Solutions and Transaction Processing Revenue categories Strength in OpenShift, Apptio and watsonx Solid and growing recurring revenue base; Transaction Hybrid Platform ARR* of $13.9 billion, +8% yr/yr Processing & Solut
Slide 10: Consulting
Consulting $5.2B +2% Revenue Revenue growth Continued strength in technology-driven transformations Revenue categories Growth in strategic partnerships and Red Hat practice Application Business Book-to-bill ratio of >1.15 for the last year Operations Transformation (1%) yr/yr +3% yr/yr Reduced yield
Slide 11: Infrastructure
Infrastructure $3.1B 0.2% Revenue Revenue growth Infrastructure benefitting from AI across IBM Z and storage Revenue categories IBM Z drove revenue growth as z16 remains ahead of prior cycles Infrastructure Hybrid Distributed Infrastructure performance reflects Support Infrastructure strength in Pow
Slide 12: Summary
Summary 1Q24 Summary 2024 Expectations Results demonstrate strength of diversified portfolio Revenue growth @CC in line with mid-single digit model watsonx continued to gain traction across Software and Consulting Free cash flow of ~$12 billion Operating leverage and productivity initiatives drove m
Slide 13: ibm.com/investor
ibm.com/investor
Slide 14: Supplemental material
Supplemental material Revenue and P&L highlights Adjusted EBITDA performance Cash flow and balance sheet highlights Currency impact on revenue growth Software & Infrastructure segment details Consulting segment details Expense summary Balance sheet summary Cash flow summary Cash flow (ASC 230) Softw
Slide 15: Revenue and P&L highlights
Revenue and P&L highlights Revenue highlights 1Q24 B/(W) Operating P&L highlights $ 1Q24 B/(W) Yr/Yr Yr/Yr* Revenue $14.5 3% Gross profit $7.9 3% Expense $6.3 (1%) Americas $7.3 3% Pre-tax income $1.7 14% Europe/ME/Africa $4.3 (2%) Net income $1.6 25% Asia Pacific $2.9 8% Earnings per share $1.68 24
Slide 16: Adjusted EBITDA performance
Adjusted EBITDA performance 1Q24 Yr/Yr Operating (non-GAAP) pre-tax income from continuing operations $1.7 $0.2 Net interest expense $0.2 $0.0 Depreciation/Amortization of non-acquired intangible assets $0.7 $0.0 Stock-based compensation $0.3 $0.1 Workforce rebalancing charges $0.4 $0.1 Corporate (g
Slide 17: Cash flow and balance sheet highlights
Cash flow and balance sheet highlights Cash flow 1Q24 Yr/Yr Balance sheet Mar 24 Dec 23 Mar 23 Net cash from operations* $2.3 $0.5 Cash & marketable securities $19.3 $13.5 $17.6 Free cash flow** $1.9 $0.6 Total debt $59.5 $56.5 $58.7 Select uses of cash 1Q24 Yr/Yr Select debt measures Mar 24 Dec 23
Slide 18: Currency impact on revenue growth
Currency impact on revenue growth Quarterly averages per US $ 1Q24 Yr/Yr Spot 2Q24 3Q24 4Q24 FY24 assumed Euro 0.92 1% 0.94 (2%) (2%) (1%) (1%) Pound 0.79 4% 0.80 (0%) (2%) 0% 1% Yen 148 (12%) 154 (12%) (7%) (5%) (9%) Revenue impact, future @assumed Spot (1 pts) ~(2.5 pts) (1.5-2 pts) (1-1.5 pts) (1
Slide 19: Software & Infrastructure segment details
Software & Infrastructure segment details Software segment 1Q24 B/(W) Infrastructure segment 1Q24 B/(W) Yr/Yr Yr/Yr Revenue $5.9 6% Revenue $3.1 Flat Hybrid Platform & Solutions $4.1 7% Hybrid Infrastructure $1.8 6% Red Hat 9% IBM Z 5% Automation 13% Distributed Infrastructure 7% Data & AI 1% Infras
Slide 20: Consulting segment details
Consulting segment details Consulting segment 1Q24 B/(W) Yr/Yr Revenue $5.2 2% Business Transformation $2.3 3% Technology Consulting $0.9 3% Application Operations $1.9 (1%) Gross profit margin 25.3% (0.2 pts) Segment profit $0.4 (1%) Segment profit margin 8.2% Flat Signings $5.5 4% Book-to-bill rat
Slide 21: Expense summary
Expense summary Expense 1Q24 B/(W) Acq/ Yr/Yr Currency Divest* Base** Operating expense & other income $6.3 (1%) (1 pts) 3 pts (2 pts) impact of workforce rebalancing $0.4 (2 pts) SG&A – operating $4.7 (2%) 0 pts (1 pts) (2 pts) impact of workforce rebalancing $0.4 (3 pts) RD&E $1.8 (9%) 0 pts (1 pt
Slide 22: Balance sheet summary
Balance sheet summary Mar 24 Dec 23 Mar 23 Cash & marketable securities $19.3 $13.5 $17.6 Core (non-IBM Financing) assets* $106.4 $107.9 $103.6 IBM Financing assets $11.5 $13.9 $12.5 Total assets $137.2 $135.2 $133.6 Other liabilities $54.3 $56.1 $53.3 Core (non-IBM Financing) debt* $49.6 $44.7 $48.
Slide 23: Cash flow summary
Cash flow summary B/(W) 1Q24 Yr/Yr Net cash from operations $4.2 $0.4 Less: IBM Financing receivables $1.9 ($0.1) Net cash from operations (excluding IBM Financing receivables) $2.3 $0.5 Net capital expenditures ($0.4) $0.1 Free cash flow (excluding IBM Financing receivables) $1.9 $0.6 Acquisitions
Slide 24: Cash flow (ASC230)
Cash flow (ASC230) 1Q24 1Q23 Net income from operations $1.6 $0.9 Depreciation / amortization of intangibles $1.1 $1.1 Stock-based compensation $0.3 $0.3 Operating assets and liabilities / other, net ($0.8) ($0.5) IBM Financing A/R $1.9 $2.0 Net cash provided by operating activities $4.2 $3.8 Capita
Slide 25: Software segment categories
Software segment categories Revenue categories Revenue categories – FY 2023 Hybrid Platform & Solutions Hybrid Platform Software, infused with AI, to help clients operate, manage, and optimize their & Solutions IT resources and business processes within hybrid, multi-cloud environments: – Red Hat: i
Slide 26: Consulting segment categories
Consulting segment categories Revenue categories Revenue categories – FY 2023 Business Transformation Business Strategy, process design, system implementation and operations services to Transformation improve and transform key business processes. Deploys AI and automation in business processes to ex
Slide 27: Infrastructure segment categories
Infrastructure segment categories Revenue categories Revenue categories – FY 2023 Hybrid Infrastructure Hybrid Innovative infrastructure platforms to help meet the new requirements Infrastructure of hybrid multi-cloud and enterprise AI workloads leveraging flexible and as-a-service consumption model
Slide 28: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of revenue performance – 1Q 2024 1Q24 Yr/Yr GAAP @CC Total revenue 1% 3% Americas 3% 3% Europe/ME/Africa Flat (2%) Asia Pacific Flat 8% The above reconciles the non-GAAP financial information contained in the “Financial highlights”, “Revenue and P&L hig
Slide 29: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of segment revenue performance – 1Q 2024 1Q24 Yr/Yr 1Q24 Yr/Yr GAAP @CC GAAP @CC Software 5% 6% Consulting Flat 2% Hybrid Platform & Solutions 6% 7% Business Transformation 1% 3% Red Hat 9% 9% Technology Consulting 1% 3% Automation 13% 13% Application O
Slide 30: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of expense summary – 1Q 2024 1Q24 Non-GAAP Operating GAAP adjustments (non-GAAP) SG&A Currency 0 pts 0 pts 0 pts Acquisitions/divestitures (1 pts) 0 pts (1 pts) Base* (2 pts) 0 pts (2 pts) RD&E Currency 0 pts 0 pts 0 pts Acquisitions/divestitures (1 pts
Slide 31: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of continuing operations – 1Q 2024 1Q24 Acquisition- Retirement- related related Tax reform Operating GAAP adjustments adjustments impacts* (non-GAAP) Gross profit $7,742 $170 — — $7,913 Gross profit margin 53.5% 1.2 pts — — 54.7% SG&A 4,974 (268) — — 4
Slide 32: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of GAAP net income to adjusted EBITDA 1Q24 Yr/Yr Net income as reported (GAAP) $1.6 $0.7 Less: Income/(loss) from discontinued operations, net of tax $0.0 $0.0 Income from continuing operations $1.6 $0.6 Provision for/(Benefit from) income taxes from co
Slide 33: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of net cash from operations to adjusted EBITDA 1Q24 1Q23 Net cash provided by operating activities $4.2 $3.8 Add: Net interest expense $0.2 $0.2 Provision for/(Benefit from) income taxes from continuing operations ($0.5) $0.1 Less change in: Financing r
Slide 34: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of Pre-tax income margin – 1Q 2024 Pre-tax margin B/(W) GAAP 0.0 Pts Non-operating adjustments* 1.3 Pts Operating (non-GAAP) 1.3 Pts Adjusted to exclude workforce rebalancing and divesture dynamics** (0.8) Pts Operating (non-GAAP) excl. impacts of workf
Slide 35: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of tax rate and Pre-tax income margin – FY 2024 expectations Operating Tax rate GAAP (Non-GAAP) Full-Year 2024* Mid-to-High Single Digits Mid Teens Operating GAAP (non-GAAP) Pre-tax income margin B/(W) B/(W) Pre-tax income margin Yr/Yr Flat ~ 0.5 Pts *I
Slide 36: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of free cash flow realization – annual average post Red Hat acquisition Free cash flow as a % of Operating GAAP (non-GAAP) Net income Net income Free Cash Flow Realization* ~250% ~120% *Represents the average annual free cash flow realization since the
Slide 37: Non-GAAP supplemental materials
Non-GAAP supplemental materials Reconciliation of free cash flow – last 12 months 12 Months Ended Mar 2024 Net cash from operating activities per GAAP $14.3 Less: change in IBM Financing receivables $1.2 Net cash from operating activities (excluding IBM Financing receivables) $13.2 Net capital expen
Slide 38: ibm.com/investor
ibm.com/investor
International Business Machines — Q1 2024 Earnings Presentation on 6ix