International Business Machines Corporation · NYSE:IBM
International Business Machines — Q2 2012 Earnings Presentation
35 slides from International Business Machines's earnings presentation, Jul 18, 2012
Slide 1: 2Q 2012 Earnings Presentation
® 2Q 2012 Earnings Presentation July 18, 2012 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: 2Q 2012 Highlights
2Q 2012 Highlights Revenue $25.8B (3%), +1% yr/yr @CC Operating Net Income $4.1B +8% yr/yr Operating (Non-GAAP) EPS $3.51 +14% yr/yr Free Cash Flow $3.7B +9% yr/yr 2Q Segment highlights: • Software revenue @CC led by Europe, Japan, Growth Markets • Services profit +18%; backlog flat @CC • Systems
Slide 4: Key Financial Metrics
Key Financial Metrics $ in Billions, except EPS P&L Highlights P&L Ratios B/(W) B/(W) (Operating) 2Q12 Yr/Yr 2Q12 Yr/Yr Revenue $25.8 (3%) GP Margin 48.2% 1.5 pts @CC 1% PTI Margin 21.1% 2.2 pts NI – Operating $4.1 8% Tax Rate 25.0% Flat EPS – Operating $3.51 14% NI Margin 15.8% 1.6 pts Cash Highlig
Slide 5: Revenue by Geography
Revenue by Geography $ in Billions B/(W) Yr/Yr 2Q12 Rptd @CC Americas $11.1 (1%) 1% Canada/ LA Europe/ME/A 7.9 (9%) Flat EMEA Asia Pacific 6.3 2% 4% U.S. Flat OEM 0.5 (24%) (24%) Japan APac IBM $25.8 (3%) 1% - 5% @CC Major Markets (4%) (1%) OEM Growth Markets 2% 8% BRIC Countries 5% 12% Performance
Slide 6: Revenue and Gross Profit Margin by Segment
Revenue and Gross Profit Margin by Segment Operating Revenue Gross Profit Margin $ in Billions B/(W) Yr/Yr B/(W) 2Q12 Rptd @CC 2Q12 Yr/Yr Pts Global Technology Services $10.0 (2%) 2% 36.3% 2.3 pts Global Business Services 4.7 (4%) (1%) 30.7% 1.9 pts Software 6.2 Flat 4% 88.4% Flat Systems & Technolo
Slide 7: Expense Summary
Expense Summary B/(W) B/(W) Yr/Yr Drivers $ in Billions 2Q12 Yr/Yr Currency Acq.* Base SG&A – Operating $5.7 4% 5 pts (2 pts) 1 pts RD&E – Operating 1.6 Flat 3 pts (3 pts) 1 pts IP and Development Income (0.3) (2%) Other (Income)/Expense (0.1) nm Interest Expense 0.1 (20%) Operating Expense & Other
Slide 8: Services Segments
Services Segments Global Technology Services (GTS) Global Business Services (GBS) B/(W) Yr/Yr $ in Billions B/(W) Yr/Yr $ in Billions 2Q12 Rptd @CC 2Q12 Rptd @CC Revenue (External) $10.0 (2%) 2% Revenue (External) $4.7 (4%) (1%) Gross Margin (External) 36.3% 2.3 pts Gross Margin (External) 30.7% 1.9
Slide 9: Software Segment
Software Segment B/(W) Yr/Yr $ in Billions 2Q12 Rptd @CC Revenue (External) $6.2 Flat 4% Gross Margin (External) 88.4% Flat Pre-Tax Income $2.5 8% PTI Margin 35.9% 2.7 pts 2Q12 Revenue Yr/Yr 2Q12 Revenue Rptd @CC (% of Total Software) WebSphere Family 3% 7% Information Management (1%) 3% Tivoli 2% 6
Slide 10: Systems & Technology Segment
Systems & Technology Segment $ in Billions B/(W) Yr/Yr 2Q12 Rptd @CC Revenue (External) $4.3 (9%) (7%) Gross Margin (External) 38.3% (2.3 pts) Pre-Tax Income $0.2 (40%) PTI Margin 5.3% (2.7 pts) 2Q12 Revenue Yr/Yr 2Q12 Revenue Rptd @CC (% of Total Sys & Tech) System z (11%) (9%) Power Systems (7%) (
Slide 11: Cash Flow Analysis
Cash Flow Analysis B/(W) YTD B/(W) $ in Billions 2Q12 Yr/Yr 1H12 Yr/Yr Net Cash from Operations $4.4 $0.2 $8.7 $0.7 Less: Global Financing Receivables (0.5) (0.5) 0.9 (1.0) Net Cash from Operations 4.9 0.6 7.8 1.6 (excluding GF Receivables) Net Capital Expenditures (1.3) (0.3) (2.3) (0.3) Free Cash
Slide 12: Balance Sheet Summary
Balance Sheet Summary $ in Billions June 11 Dec. 11 June 12 Cash & Marketable Securities $11.8 $11.9 $11.2 Non-GF Assets* 68.8 69.4 70.2 Global Financing Assets 32.9 35.1 32.5 Total Assets 113.5 116.4 113.8 Other Liabilities 60.5 64.9 60.8 Non-GF Debt* 6.4 8.0 9.8 Global Financing Debt 23.4 23.3 22.
Slide 13: Operating EPS Bridge – 2Q11 to 2Q12
Operating EPS Bridge – 2Q11 to 2Q12 $0.17 $3.51 $0.35 $3.09 ($0.10) 2Q11 Revenue Growth Margin Share 2Q12 Operating EPS @ Actual Expansion Repurchases Operating EPS www.ibm.com/investor 13
Slide 14: 2Q 2012 Summary
2015e At least $20 2Q 2012 Summary Continued strength in growth initiatives • Growth markets YTD revenue up 9% yr/yr @CC 2012e $15.10+ • Business analytics YTD revenue up 13% yr/yr • Cloud YTD revenue doubled yr/yr 2011 $13.44 • Smarter Planet YTD revenue >20% yr/yr 2010 $11.67 Annuity businesse
Slide 15: www.ibm.com/investor
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Slide 16: 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 & Technology, S
Slide 17: Currency – Year/Year Comparison
Currency – Year/Year Comparison Quarterly Averages per US $ 7/17 Yr/Yr @ 7/17 Spot 1Q12 Yr/Yr 2Q12 Yr/Yr Spot 3Q12 4Q12 FY12 Euro 0.76 (4%) 0.78 (12%) 0.82 (15%) (10%) (10%) Pound 0.64 (2%) 0.63 (3%) 0.64 (3%) (1%) (2%) Yen 79 4% 80 2% 79 (2%) (2%) 0% IBM Revenue Impact (1 pts) (4 pts) ~(4-5 pts) ~(
Slide 18: Supplemental Segment Information – 2Q 2012
Supplemental Materials Supplemental Segment Information – 2Q 2012 Supplemental Revenue Information Supplemental Backlog / Signings Information Revenue Growth $ in Billions Backlog Global Services Yr/Yr @CC Global Services 2Q12 Yr/Yr @CC GTS Outsourcing (3%) 2% Total Backlog $136 ($8) $1 Integrated T
Slide 19: Supplemental Segment Information – 2Q 2012
Supplemental Materials Supplemental Segment Information – 2Q 2012 Revenue Growth Revenue Growth Systems & Technology Yr/Yr @CC GP% Share Software Yr/Yr @CC System z (11%) (9%) WebSphere Family 3% 7% Information Management (1%) 3% Power Systems (7%) (4%) Tivoli 2% 6% System x (8%) (5%) Lotus (8%) (4%
Slide 20: Global Financing Portfolio
Supplemental Materials Global Financing Portfolio 2Q12 – $25.1B Net External Receivables Investment Grade Non-Investment Grade 40% 61% 39% 37% 30% 20% 24% 21% 10% 12% 5% 1% 0% Aaa-A3 Baa1-Baa3 Ba1-Ba2 Ba3-B1 B2-B3 Caa-D 2Q12 1Q12 2Q11 Identified Loss Rate 0.8% 0.8% 1.0% Anticipated Loss Rate 0.5% 0.
Slide 21: Revenue by Key Industry Sales Unit
Supplemental Materials Revenue by Key Industry Sales Unit $ in Billions B/(W) Yr/Yr 2Q12 Rptd @CC Public Financial Services $7.5 (3%) 1% Industrial Public 4.0 1% 4% Financial Distribution Industrial 2.6 (1%) 3% Services Comms Distribution 2.4 (7%) (4%) General Communications 2.4 (9%) (5%) Business G
Slide 22: Cash Flow (FAS 95)
Supplemental Materials Cash Flow (FAS 95) $ in Billions QTD QTD YTD YTD 2Q12 2Q11 1H12 1H11 Net Income from Operations $3.9 $3.7 $6.9 $6.5 Depreciation / Amortization of Intangibles 1.2 1.2 2.3 2.4 Stock-based Compensation 0.2 0.2 0.3 0.3 Working Capital / Other (0.3) (0.7) (1.8) (3.1) Global Financ
Slide 23: 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 24: Non-GAAP Supplemental Materials: Cash Flow
Supplemental Materials Non-GAAP Supplemental Materials Cash Flow Management uses a free cash flow measure to evaluate the company’s operating results, plan share repurchase levels, evaluate strategic investments and assess the company’s ability and need to incur and service debt. The entire free cas
Slide 25: Reconciliation of Operating Earnings Per Share
Supplemental Materials Non-GAAP Supplemental Materials Non-GAAP Reconciliation of Operating Earnings Per Share 2012 Expectations IBM GAAP EPS $14.40+ IBM Operating EPS (Non-GAAP) $15.10+ Adjustments Acquisition-Related Charges * $0.46 Amortization of Purchased Intangibles $0.43 Other Acquisition-Rel
Slide 26: GAAP to Operating (Non-GAAP) Bridge – 2Q 2012
Supplemental Materials Non-GAAP Supplemental Materials GAAP to Operating (Non-GAAP) Bridge – 2Q 2012 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $12,281 $93 $66 $12,440 SG&A 5,837 (87) (33) 5,717 RD&E 1,587 0 5 1,
Slide 27: GAAP to Operating (Non-GAAP) Bridge – 2Q 2011
Supplemental Materials Non-GAAP Supplemental Materials GAAP to Operating (Non-GAAP) Bridge – 2Q 2011 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $12,385 $87 $6 $12,477 SG&A 6,030 (76) (5) 5,950 RD&E 1,569 0 24 1,5
Slide 28: GAAP to Operating (Non-GAAP) Bridge – 2Q 2012
Supplemental Materials Non-GAAP Supplemental Materials GAAP to Operating (Non-GAAP) Bridge – 2Q 2012 Acquisition- Retirement- related related Operating GAAP Adjustments* Adjustments ** (Non-GAAP) Gross Profit Margin 47.6% 0.4 pts 0.3 pts 48.2% PTI Margin 20.0% 0.7 pts 0.4 pts 21.1% Tax Rate *** 24.8
Slide 29: GAAP to Operating (Non-GAAP) Bridge – 2Q 2011
Supplemental Materials Non-GAAP Supplemental Materials GAAP to Operating (Non-GAAP) Bridge – 2Q 2011 Acquisition- Retirement- related related Operating GAAP Adjustments* Adjustments ** (Non-GAAP) Gross Profit Margin 46.4% 0.3 pts 0.0 pts 46.8% PTI Margin 18.3% 0.6 pts (0.0 pts) 18.9% Tax Rate *** 25
Slide 30: Reconciliation of Free Cash Flow (excluding GF Receivables)
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow (excluding GF Receivables) $ in Billions 12 months ended 6/30/12 Net Cash from Operations $20.5 Less: Global Financing Receivables (1.8) Net Cash from Operations (excluding GF Receivables) 22.3 Net Capital Expend
Slide 31: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Revenue Growth 2Q12 Yr/Yr As Rptd @CC China 26% 24% Japan (3%) (5%) Major Markets – Services (4%) (1%) Growth Markets – Services 3% 10% Growth Markets – ITS 10% 16% Europe – GBS (11%) (3%) Storage Software 9% 13% 1H12 Yr/Yr As
Slide 32: Reconciliation of B/(W) Yr/Yr Expense Drivers – 2Q12
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of B/(W) Yr/Yr Expense Drivers – 2Q12 Non-GAAP Operating GAAP Adjustments (Non-GAAP) SG&A Currency 5 pts 0 pts 5 pts Acquisitions (2 pts) 0 pts (2 pts) Base 1 pts 0 pts 1 pts RD&E Currency 3 pts 0 pts 3 pts Acquisitions (3 pts) 0
Slide 33: Reconciliation of Debt-to-Capital Ratio
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Debt-to-Capital Ratio 2Q11 FY11 2Q12 Non-Global Financing Debt / Capital 24% 32% 36% IBM Consolidated Debt / Capital 56% 61% 61% The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet”
Slide 34: Reconciliation of Operating EPS Bridge 2Q11 to 2Q12
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Operating EPS Bridge 2Q11 to 2Q12 Acquisition- Retirement- related related Operating GAAP Adjustments* Adjustments** (Non-GAAP) 2Q11 EPS $3.00 $0.10 ($0.01) $3.09 Revenue growth @ actual (0.10) - - (0.10) Margin expansion 0.28
Slide 35: www.ibm.com/investor
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