International Business Machines Corporation · NYSE:IBM
International Business Machines — Q4 2021 Earnings Presentation
35 slides from International Business Machines's earnings presentation, Jan 24, 2022
Slide 1: IBM 4Q 2021 Earnings
IBM 4Q 2021 Earnings January 24, 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 PrivateSecurities 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 Financial Officer 3
Slide 4: CEO Perspective
CEO Perspective “We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting. 4Q21 Performance Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single digit revenue growth and strong free cash
Slide 5: Hybrid Cloud & AI Progress
Hybrid Cloud & AI Our Platform Approach Progress Accelerating client adoption of hybrid cloud & AI IBM Software Leveraging partner ecosystem Delivering innovation and enhancing portfolio 5 Enterprise Infrastructure Public Clouds IBM Infrastructure Edge Red Hat Hybrid Cloud Platform IBM Consulting Sy
Slide 6: Financial Highlights 4Q21
9% revenue growth incl. ~3.5pts from incremental sales to Kyndryl >70% revenue mix in software and consulting $20B hybrid cloud revenue (TTM), +19% yr/yr $7.9B 2021 post-separation baseline free cash flow $7.6B cash on hand, $10B debt reduction (TTM) 6 Financial Highlights 4Q21 $16.7B $3.5B RevenueP
Slide 7: Software
Software Revenue $7.3B Revenue Growth +10% includes ~5 pts from incremental sales to Kyndryl Hybrid Platform & Solutions led by Red Hat, Automation and Data & AI Over 3,800 clients using hybrid cloud platform Revenue Categories Annual Recurring Revenue* over $13B, +8% yr/yr Hybrid Platform & Solutio
Slide 8: Consulting
Consulting Revenue $4.7B Revenue Growth +16% Hybrid cloud revenue +34% yr/yr driven by digital transformations Book-to-bill ratio of 1.2x Revenue Categories Continued Red Hat momentum, with 150 new client engagements Business Transformation +20% yr/yr Application Operations +8% yr/yr Competitive lab
Slide 9: Infrastructure
Infrastructure Revenue $4.4B Revenue Growth +2% includes ~5 pts from incremental sales to Kyndryl IBM Z good performance in tenth quarter of z15 availability Distributed Infrastructure growth driven by storage Revenue Categories New segment structure improves hardware platform lifecycle management H
Slide 10: Executing on a Hybrid Cloud and AI Strategy
Executing on a Hybrid Cloud and AI Strategy ƒ Optimizing portfolio, including Kyndryl separation ƒ Revenue growth and free cash flow in line with mid-term model Increasing investments in skills, innovation, ecosystem Increasing focus and agility to better serve our clients Mid-single digit revenue g
Slide 11: ibm.com/investor
ibm.com/investor
Slide 12: Supplemental Materials
Supplemental Materials ●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) ●Retirement-Related S
Slide 13: Revenue and P&L Highlights
Revenue and P&L Highlights B/(W) Yr/Yr B/(W) Yr/Yr incr. KD benefit Revenue Highlights 4Q21 Operating P&L Highlights $ 4Q21 ~3.5 pts ~1 pts Gross Profit Expense Pre-Tax Income Net Income Earnings Per Share $9.7 $6.1 $3.5 $3.0 $3.35 3% 20% * 102% * 80% * 78% * B/(W) Yr/Yr Revenue Hybrid Cloud $16.7 $
Slide 14: Cash Flow and Balance Sheet Highlights
Cash Flow and Balance Sheet Highlights Cash Flow 4Q21 Yr/Yr FY21 Balance Sheet Dec 21 Dec 20 Consolidated Net Cash from Operations* $3.9 ($3.0) $8.9 Cash & Marketable Securities $7.6 $14.3 Consolidated Free Cash Flow** $3.3 ($2.7) $6.5 Total Debt $51.7 $61.5 Post-separation baseline Free Cash Flow**
Slide 15: Currency – Impact on Revenue Growth
Currency – Impact on Revenue Growth Revenue Impact, Future @ 1/21/22 Spot Prior View @ 10/19/21 Spot (2 pts) (2-1 pts) ~(3 pts) ~(2 pts) ~(3 pts) ~(2 pts) ~(2 pts) ~0 pts ~(2 pts) US$B Yr/Yr Revenue As Reported Currency Impact Revenue @CC $16.7 ($0.3) 6.5% (2 pts) 8.6% Supplemental Materials 15 Quar
Slide 16: Software & Infrastructure Segment Details
Software & Infrastructure Segment Details Includes incremental sales to Kyndryl B/(W) Yr/Yr B/(W) Yr/Yr Infrastructure Segment 4Q21 Software Segment 4Q21 Revenue Hybrid Platform & Solutions Transaction Processing Pre-Tax Income impact of structural actions Pre-Tax Income Margin impact of structural
Slide 17: Consulting Segment Details
Consulting Segment Details B/(W) Consulting Segment 4Q21 Yr/Yr Revenue Business Transformation Technology Consulting Application Operations Gross Profit Margin (External) Pre-Tax Income impact of structural actions Pre-Tax Income Margin impact of structural actions Hybrid Cloud Revenue $4.7 $2.2 $0.
Slide 18: Expense Summary
Expense Summary $ in billions *Yr/Yr reflects impact of ($1.5B) charge for structural actions in 4Q20 **includes acquisitions in the last twelve months net of non-operating acquisition-related charges and includes impact of divested businesses ***represents the percentage change after excluding the
Slide 19: Balance Sheet Summary
Balance Sheet Summary Consolidated Dec 21 Dec 20 Cash & Marketable Securities Core (non-IBM Financing) Assets* IBM Financing Assets Total Assets $7.6 $108.9 $15.5 $132.0 $14.3 $118.6 $23.1 $156.0 Other Liabilities Core (non-IBM Financing) Debt* IBM Financing Debt Total Debt Total Liabilities Equity
Slide 20: Cash Flow Summary
Cash Flow Summary Consolidated B/(W) Yr/Yr B/(W) Yr/Yr 4Q21 FY21 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 N
Slide 21: Cash Flow (ASC 230)
Cash Flow (ASC Consolidated 230) 4Q21 4Q20 FY21 FY20 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 o
Slide 22: Retirement-Related Summary
Retirement-Related Summary Expected *Qualified defined benefit plans ** Actual ROA not restated for Kyndryl spin-off *** includes cash and non-cash contributions Supplemental Materials 22 Key Assumptions and Metrics2020 2021 2022 Cost and Contributions2021 2022 Funded Status at Year end* US108% 112%
Slide 23: IBM New Segment Structure
IBM New Segment Structure Supplemental Materials 23
Slide 24: Software Segment Revenue Categories
Software Segment Revenue Categories Revenue Categories Revenue Categories – FY 2021 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,
Slide 25: Consulting Segment Revenue Categories
Consulting Segment Revenue Categories Revenue Categories Revenue Categories – FY 2021 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 desi
Slide 26: Infrastructure Segment Revenue Categories
Infrastructure Segment Revenue Categories Revenue Categories Revenue Categories – FY 2021 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 IBM Z: incl.
Slide 27: Performance Metrics
Performance Metrics Annual Recurring Revenue (ARR) ARR represents the annualized recurring, committed value for certain types of active contracts within the following consumption models: (1) software subscription agreements, including committed term licenses, (2) as -a-service arrangements (SaaS and
Slide 28: IBM Historical Financials – adjusted for Segment changes
IBM Historical Financials – adjusted for Segment changes IBM Segment Revenue, Pre-Tax Income & PTI Margins Adjusted for Segment Changes This information complements historical data included in the company's 8-K furnished with the SEC on December 27, 2021. Unaudited, ($ = M) SOFTWARE SEGMENT Revenue
Slide 29: Reconciliation of Revenue Performance - 4Q 2021
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 4Q 2021 4Q21 Yr/Yr 4Q21 Yr/Yr GAAP @CC GAAP @CC Software Hybrid Platform & Solutions Red Hat Automation Data & AI Security Transaction Processing Hybrid Cloud 8% 7% 19% 13% 1% (2%) 11% 22% 10% 9% 21% 15% 3% (1%) 14% 24% Consulti
Slide 30: Reconciliation of Revenue Performance – 4Q 2021
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance – 4Q 2021 4Q21 Yr/Yr GAAP @CC Total Revenue 6% 9% Americas Europe/ME/Africa Asia Pacific 7% 4% 11% 7% 7% 16% Total Hybrid Cloud 16% 18% The above reconciles the Non-GAAP financial information contained in the “Financial Highlights
Slide 31: Reconciliation of Expense Summary - 4Q 2021
Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 4Q 2021 4Q21 Non-GAAP Adjustments Operating (Non-GAAP) GAAP SG&A Currency Acquisitions/Divestitures Base* RD&E Currency Acquisitions/Divestitures Base* Operating Expense & Other Income Currency Acquisitions/Divestitures Base* 1 pts
Slide 32: Reconciliation of Continuing Operations - 4Q 2021
Non-GAAP Supplemental Materials Reconciliation of Continuing Operations - 4Q 2021 4Q21 Acquisition-Related Adjustments Retirement-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 33: Reconciliation of Post-Separation Baseline Free Cash Flow – FY 2021
Non-GAAP Supplemental Materials Reconciliation of IBM post-separation baseline Free Cash Flow – FY 2021 12 Months Ended Dec 2021 Consolidated Net Cash from Operations per GAAP $12.8 Less: change in Financing receivables $3.9 Capital Expenditures, net ($2.4) Consolidated Free Cash Flow $6.5 Less: Kyn
Slide 34: Reconciliation of Operating Pre-tax Income Margin – 2022 Expectations
Non-GAAP Supplemental Materials Reconciliation of Operating Pre-tax Income Margin – 2022 Expectations Operating GAAP (Non-GAAP) Pre-tax Income Margin Yr/Yr Expectation B/(W) B/(W) 1Q 2022 Full Year 2022 4 to 5 pts ~5 pts 2 to 3 pts ~4 pts The above reconciles the Non-GAAP financial information conta
Slide 35: ibm.com/investor
ibm.com/investor
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