International Business Machines Corporation · NYSE:IBM
International Business Machines — Q2 2022 Earnings Presentation
30 slides from International Business Machines's earnings presentation, Jul 18, 2022
Slide 1: IBM 2Q 2022 Earnings
IBM 20 2022 Earnings July 18, 2022 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: Presenters: Arvind Krishna and James Kavanaugh
Arvind Krishna Chairman and Chief Executive Officer James Kavanaugh SVP, Finance & Operations, Chief FinancialOfficer 3
Slide 4: CEO perspective 2Q22 Performance
CEO perspective 2Q22 Performance “In the quarter we delivered good revenue performance with balanced growth across our geographies, driven by client demand for our hybrid cloud and AI offerings. The IBM team executed our strategy well. Hybrid cloud and AI progress With our first half results, we con
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 2Q22
Financial highlights 2Q22 16% Revenue growth incl. nearly 5 pts from sales to Kyndryl 420bps Pre-tax margin expansion (Operating) >70% Revenue mix in software and consulting $7.8B Cash on hand, incl. marketable securities “We are a faster-growing, focused, disciplined company with sound business fun
Slide 7: Software
Software Broad-based growth across Hybrid Platform & Solutions Annual recurring revenue* of $12.9B, +8% yr/yr Investments in innovation and go to market Revenue categories Hybrid Platform & Solutions + 9% yr/yr ~1.5 pts sales to Kyndryl Tr ansaction Processing + 19% yr/yr ~22 pts sales to Kyndryl Re
Slide 8: Consulting
Consulting Pervasive double-digit revenue growth Book-to-bill ratio of 1.1 for the past year Strength in Red Hat and strategic partner practices Investments in skills and capabilities; competitive labor market Revenue categories Business Tr ansformation + 16% yr/yr Application Operations + 17% yr/yr
Slide 9: Infrastructure
Infrastructure Solid z16 launch Distributed Infrastructure growth driven by storage and high-end Power Pre-tax margin reflects mix benefit from zSystems growth Revenue categories Hybrid Infrastructure + 41% yr/yr ~7 pts sales to Kyndryl I nfrastructure Support + 5% yr/yr ~8 pts sales to Kyndryl zSys
Slide 10: Summary: 2022 Expectations
Summary 2022 Expectations Revenue growth @CC at high-end of mid-single digit model, plus ~3.5 pts from sales to Kyndryl Free cash flow of ~$10 billion 2Q 2022 Progress Executing a focused hybrid cloud and AI strategy Broad-based revenue performance Investing in innovation, ecosystem, talent 10
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Slide 12: Supplemental material
Supplemental material Revenue and P&L highlights 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) Software segment revenue categori
Slide 13: Revenue and P&L highlights
Revenue and P&L highlights ~5 pts ~1 pts Revenue Hybrid cloud Hybrid cloud (TTM) $15.5 $5.9 $21.7 16% 24% 19% Gross profit Expense Pre-tax income Net income Earnings per share $8.5 $6.0 $2.5 $2.1 $2.31 5% 6% 48% 45% 43% ~ 3 pts ~ 6 pts ~ 6 pts Gross profit margin Expense E/R Pre-tax income margin Ne
Slide 14: Cash flow and balance sheet highlights
Cash flow and balance sheet highlights Consolidated net cash from operations* Consolidated free cash flow** $2.6 $2.1 $0.9 $1.1 Cash & marketable securities Total debt $7.8 $50.3 $7.6 $51.7 $8.2 $55.2 Net capital expenditures Acquisitions Dividends $0.5 $0.3 $1.5 IBM Financing debt Core (non-IBM Fin
Slide 15: Currency impact on growth
Currency impact on growth US $B $15.5 ($0.9) Yr/Yr 9.3% (6 pts) 15.6% Revenue as reported Currency impact Revenue @CC 15 Quarterly averages per US $ 1Q22 Yr/Yr2Q22 Yr/Yr Spot 7/15/22 3Q22 4Q22 FY22 Euro 0.89 (7%) 0.94 (13%) Pound 0.75 (3%) 0.80 (11%) Yen 116 (10%) 130 (19%) Revenue impact, future @
Slide 16: Software & Infrastructure segment details
Software & Infrastructure segment details Includes sales to Kyndryl Revenue Hybrid Infrastructure zSystems Distributed Infrastructure Infrastructure Support Pre-tax income Pre-tax income margin $4.2 $2.8 25% 41% 77% 17% 5% 55% 4.1 pts Revenue Hybrid Platform & Solutions Red Hat Automation Data & AI
Slide 17: Consulting segment details
Consulting segment details Revenue Business Transformation Technology Consulting Application Operations Gross profit margin Pre-tax income Pre-tax income margin $4.8 $2.2 $0.9 $1.7 24.2% $0.3 7.1% 18% 16% 23% 17% (3.4 pts) 27% 1.0 pts Hybrid cloud revenue (TTM) $8.6 32% Signings Book-to-bill ratio (
Slide 18: Expense summary
Expense summary $ in billions *includes ~($0.230B) gain on divestiture of our healthcare software assets and ~($0.145B) net exchange gain which mitigates currency impact throughout the P&L **includes acquisitions in the last twelve months net of non-operating acquisition-related charges and includes
Slide 19: Balance sheet summary
Balance sheet summary Consolidated Cash & marketable securities Core (non-IBM Financing) assets* IBM Financing assets Total assets $7.8 $105.4 $14.3 $127.5 $7.6 $108.9 $15.5 $132.0 $8.2 $119.2 $19.4 $146.8 Other liabilities Core (non-IBM Financing) debt* IBM Financing debt Total debt Total liabiliti
Slide 20: Cash flow summary
Cash flow summary Consolidated $ in billions 20 QTDB/(W) 2Q22Yr/Yr YTDB/(W) 2Q22 Yr/Yr Net cash from operations $1.3 ($1.3) Less: IBM Financing receivables($1.3) ($2.2) Net cash from operations (excluding IBM Financing receivables)$2.6 $0.9 Net capital expenditures ($0.5) $0.2 Free cash flow (exclud
Slide 21: Cash flow (ASC230)
Cash flow (ASC230) Consolidated $ in billions 21 QTDQTD 2Q222Q21 YTDYTD 2Q22 2Q21 Net income from operations $1.4 $1.3 Depreciation / amortization of intangibles $1.2 $1.7 Stock-based compensation $0.3 $0.2 Working capital / other ($0.3) ($1.5) IBM Financing A/R ($1.3) $0.9 Net cash provided by oper
Slide 22: 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 23: 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 24: 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 25: Reconciliation of revenue performance - 2Q 2022
Non-GAAP supplemental materials Reconciliation of revenue performance - 2Q 2022 2Q22 Yr/Yr GAAP @CC Total revenue Total hybrid cloud Total hybrid cloud (TTM) 9% 18% 16% 16% 24% 19% Americas Europe/ME/Africa Asia Pacific 14% 5% 3% 15% 17% 15% The above reconciles the non-GAAP financial information co
Slide 26: Reconciliation of segment revenue performance - 2Q 2022
Non-GAAP supplemental materials Reconciliation of segment revenue performance - 2Q 2022 2Q22 Yr/Yr 2Q22 Yr/Yr GAAP @CC GAAP @CC Consulting Business Transformation Technology Consulting Application Operations Hybrid cloud revenue (TTM) 10% 9% 14% 9% 28% 18% 16% 23% 17% 32% Software Hybrid Platform &
Slide 27: Reconciliation of expense summary - 2Q 2022
Non-GAAP supplemental materials Reconciliation of expense summary - 2Q 2022 2Q22 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* 4 pts
Slide 28: Reconciliation of continuing operations - 2Q 2022
Non-GAAP supplemental materials Reconciliation of continuing operations - 2Q 2022 2Q22 Retirement-related adjustments Acquisition-related adjustments Tax reform impacts Kyndryl-related impact Operating (non-GAAP) GAAP Gross profit Gross profit margin SG&A Other (income) & expense Total expense Pre-t
Slide 29: 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 Yr/Yr from 3Q21 to 3Q22 ~3 pts** ~2 pts *includes estimate of discrete tax events for
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