International Business Machines Corporation · NYSE:IBM
International Business Machines — Q1 2022 Earnings Presentation
31 slides from International Business Machines's earnings presentation, Apr 19, 2022
Slide 1: IBM 1Q 2022 Earnings
IBM 10 2022 Earnings April19, 2022 ibm.com/investor 1
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: Arvind Krishna and James Kavanaugh
Arvind Krishna Chairman and Chief Executive Officer James Kavanaugh SVP, Finance & Operations, Chief FinancialOfficer 3
Slide 4: CEO Perspective 1Q22 Performance
CEO Perspective 1Q22 Performance “Demand for hybrid cloud and AI drove growth in both Software and Consulting in the first quarter. Today we’re a more focused business and our results reflect the execution of our strategy. Hybrid cloud and AI progress We are off to a solid start for the year, and we
Slide 5: Hybrid Cloud and AI Progress
Hybrid Cloud and AI Progress Our platform approach Accelerating client adoption Expanding partner ecosystem Delivering innovation 5 Edge IBM Infrastructure zSystems Distributed Infrastructure (IBM Cloud, Power, Storage) Infrastructure Support Enterprise Infrastructure Public Clouds AWS Azure Others
Slide 6: Financial Highlights 1Q22
Financial Highlights 1Q22 11% Revenue growth incl. over 5 pts from incremental sales to Kyndryl 280bps Pre-tax margin expansion (Operating) >70% Revenue mix in software and consulting $10.8B Cash on hand, incl marketable securities “In the first quarter we continued to strengthen the fundamentals of
Slide 7: Software
Software Pervasive revenue growth across Hybrid Platform & Solutions Over 4,000 clients using hybrid cloud platform Annual Recurring Revenue* +9% yr/yr Revenue categories Hybrid Platform & Solutions + 10% yr/yr ~1.5 pts incremental Kyndryl Tr ansaction Processing + 31% yr/yr ~28 pts incremental Kynd
Slide 8: Consulting
Consulting Double-digit revenue growth across all revenue categories and geographies Hybrid cloud and strategic partnerships fueling growth Book-to-bill ratio of 1.1 for the quarter and past year Competitive labor environment Revenue categories Business Tr ansformation + 19% yr/yr Application Operat
Slide 9: Infrastructure
Infrastructure zSystems performance reflects product cycle Announced IBM z16 with embedded AI, cyber-resilient security, cloud-native Distributed Infrastructure growth driven by high-end Power Revenue categories Hybrid Infrastructure (2 %) yr/yr ~8 pts incremental Kyndryl I nfrastructure Support + 4
Slide 10: Summary: 2022 Expectations
Summary 2022 Expectations Mid-single digit revenue growth @cc plus ~3.5 pts from incremental sales to Kyndryl Free cash flow of $10–$10.5 billion 1Q 2022 Progress Executing a focused hybrid cloud and AI strategy Strong revenue growth led by Software and Consulting Investing in innovation, ecosystem,
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Slide 12: Supplemental Material
Supplemental Material Revenue and P&L Highlights Cash Flow and Balance Sheet Highlights Historical Free Cash Flow Attainment Currency – Impact on Revenue Growth Software & Infrastructure Segment Details Consulting Segment Details Expense Summary Balance Sheet Summary Cash Flow Summary Cash Flow (ASC
Slide 13: Revenue and P&L Highlights
Revenue and P&L Highlights Revenue Hybrid Cloud $14.2 $5.0 11% 17% > 5 pts ~ 2 pts Gross Profit Expense Pre-Tax Income Net Income Earnings Per Share $7.5 $6.0 $1.5 $1.3 $1.40 4% 3% 46% 25% 25% ~ 4 pts ~ 7 pts ~ 6 pts Gross Profit Margin Expense E/R Pre-Tax Income Margin Net Income Margin Tax Rate 52
Slide 14: Cash Flow and Balance Sheet Highlights
Cash Flow and Balance Sheet Highlights Consolidated Net Cash from Operations* Consolidated Free Cash Flow** $1.6 $1.2 ($0.4) ($0.3) Cash & Marketable Securities Total Debt $10.8 $54.2 $7.6 $51.7 $11.3 $56.4 Net Capital Expenditures Acquisitions Dividends $0.4 $0.7 $1.5 IBM Financing Debt Core (non-I
Slide 15: Historical Free Cash Flow Attainment
Historical Free Cash Attainment Flow First Quarter Free Cash Flow as % of Full Year 23% $1.2B of Free Cash Flow in 1Q 2022 Represents ~12% of full-year expected range, consistent with history 2021 an anomaly, reflecting Kyndryl separation dynamics 14% 2017-2020 13% 2017 2018 2019 2020 2021 Free cash
Slide 16: Currency Impact on Growth
Currency Impact on Growth US $B $14.2 ($0.4) Yr/Yr 7.7% (3 pts) 10.9% Revenue as reported Currency impact Revenue @CC 16 Quarterly averages per US $ 1Q22 Yr/Yr Spot 4/18/22 2Q22 3Q22 4Q22 FY22 Euro 0.89 (7%) Pound 0.75 (3%) Yen 116 (10%) Revenue impact, future @ 4/18/22 Spot ~(3 pts) Prior view @ 1/
Slide 17: Software & Infrastructure Segment Details
Software & Infrastructure Segment Details Includes incremental sales to Kyndryl Revenue Hybrid Platform & Solutions Transaction Processing Pre-Tax Income Pre-Tax Income Margin $5.8 $4.1 $1.7 $1.1 19.7% 15% 10% 31% 72% 6.8 pts Revenue Hybrid Infrastructure zSystems Distributed Infrastructure Infrastr
Slide 18: Consulting Segment Details
Consulting Segment Details Revenue Business Transformation Technology Consulting Application Operations Gross Profit Margin (External) Pre-Tax Income Pre-Tax Income Margin $4.8 $2.3 $1.0 $1.6 24.3% $0.3 7.2% 17% 19% 19% 14% (3.5 pts) 26% 0.7 pts Hybrid Cloud Revenue $2.1 29% Signings Book-to-bill ra
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 closed divested businesses **represents the percentage change after excluding the impact of currency, acquisitions and divestitures 19 Expense1Q22 B/
Slide 20: Balance Sheet Summary
Balance Sheet Summary Consolidated Cash & Marketable Securities Core (non-IBM Financing) Assets* IBM Financing Assets Total Assets $10.8 $108.9 $13.6 $133.3 $7.6 $108.9 $15.5 $132.0 $11.3 $117.3 $20.1 $148.6 Other Liabilities Core (non-IBM Financing) Debt* IBM Financing Debt Total Debt Total Liabili
Slide 21: Cash Flow Summary
Cash Flow Summary Consolidated Net Cash from Operations Less: IBM Financing Receivables Net Cash from Operations (excluding IBM Financing Receivables) Net Capital Expenditures Free Cash Flow (excluding IBM Financing Receivables) Acquisitions Divestitures Dividends Non-IBM Financing Debt Other (inclu
Slide 22: Cash Flow (ASC230)
Cash Flow (ASC230) Consolidated Net Income from Operations Depreciation / Amortization of Intangibles Stock-based Compensation Working Capital / Other IBM Financing A/R Net Cash provided by Operating Activities Capital Expenditures, net of payments & proceeds Divestitures, net of cash transferred Ac
Slide 23: Software Segment Categories
Software Segment Categories Hybrid Platform & Solutions Software, infused with AI, to help clients operate, manage, and optimize their IT resources and business processes within hybrid, multi -cloud environments Red Hat: incl. RHEL, OpenShift, Ansible Automation: incl. business automation, AIOps and
Slide 24: Consulting Segment Categories
Consulting Segment Categories Business Transformation Services that enable clients to apply technologies at scale to transform key workflows, processes and domains end-to-end incl. finance & supply chain, talent, strategy, business process design and operations, data and analytics, and system integr
Slide 25: Infrastructure Segment Categories
Infrastructure Segment Categories Hybrid Infrastructure Innovative infrastructure platforms to help meet the new requirements of hybrid multi-cloud and enterprise AI workloads leveraging flexible and as-a-service consumption models zSystems: incl. hardware and operating system Distributed Infrastruc
Slide 26: Reconciliation of Revenue Performance - 1Q 2022
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 1Q 2022 1Q22 Yr/Yr 1Q22 Yr/Yr GAAP @CC GAAP @CC Consulting Business Transformation Technology Consulting Application Operations Hybrid Cloud Revenue 13% 15% 14% 10% 24% 17% 19% 19% 14% 29% Software Hybrid Platform & Solutions Re
Slide 27: Reconciliation of Revenue Performance - 1Q 2022
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 1Q 2022 1Q22 Yr/Yr GAAP @CC Total Revenue 8% 11% Americas Europe/ME/Africa Asia Pacific 9% 8% 5% 9% 14% 11% Total Hybrid Cloud 14% 17% The above reconciles the Non-GAAP financial information contained in the “Financial Highlight
Slide 28: Reconciliation of Expense Summary - 1Q 2022
Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 1Q 2022 1Q22 Non-GAAP Adjustments GAAP Operating (Non-GAAP) SG&A Currency Acquisitions/Divestitures Base* RD&E Currency Acquisitions/Divestitures Base* Operating Expense & Other Income Currency Acquisitions/Divestitures Base* 2 pts
Slide 29: Reconciliation of Continuing Operations - 1Q 2022
Non-GAAP Supplemental Materials Reconciliation of Continuing Operations - 1Q 2022 1Q22 Retirement-Related Adjustments Acquisition-Related Adjustments Kyndryl-Related Impact Tax Reform Impacts Operating (Non-GaaP) GAAP Gross Profit Gross Profit Margin SG&A Other (Income) & Expense Total Expense Pre-t
Slide 30: Reconciliation of Tax Rate and Pre-tax Income Margin - Expectations
Non-GAAP Supplemental Materials Reconciliation of Tax Rate and Pre-tax Income Margin - Expectations Operating (Non-GAAP) B/(W) GAAP B/(W) Tax rate Full-Year 2022* Mid Teens Mid-High Teens Pre-tax margin Improvement from 1Q22 to 2Q22 5-6 pts** 4-5 pts *includes estimate of discrete tax events for the
Slide 31: ibm.com/investor
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