International Business Machines Corporation · NYSE:IBM
International Business Machines — Q4 2024 Earnings Presentation
40 slides from International Business Machines's earnings presentation, Jan 29, 2025
Slide 1: 4Q 2024 Earnings
4Q 2024 Earnings January 29, 2025 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 adjusted EBITDA and adjustments for currency. The rationale for management’s looking under the Private Securities Litigation Reform Act of 1995. Forward- use of this non-GAA
Slide 3: Arvind Krishna and James Kavanaugh
Arvind Krishna James Kavanaugh Chairman, President and SVP, Finance & Operations Chief Executive Officer and Chief Financial Officer 3
Slide 4: CEO perspective
CEO perspective “We closed the year with double-digit revenue growth in Software for the quarter, led by further acceleration in Red 4Q24 Performance Hat. Clients globally continue to turn to IBM to transform with AI. Our generative AI book of business now stands at more than $5 billion inception-to
Slide 5: Financial highlights
Financial highlights 4Q24 FY24 $12.7B $1.5B $17.6B $62.8B FY free cash flow FY free cash flow yr/yr Revenue 2% growth Revenue 3% growth 130bps 120bps FY gross margin expansion FY pre-tax margin expansion (operating) (operating) “With strong performance across our Software portfolio, we continue to d
Slide 6: Software
Software +11% +9% 4Q24 revenue growth FY24 revenue growth Growth accelerated to 11% including ~8 points of $7.9B revenue $27.1B revenue organic contribution Red Hat revenue growth +17%, OpenShift ARR of Revenue categories-4Q24 $1.4B, growing ~25% Transaction Hybrid Platform Solid recurring revenue b
Slide 7: Consulting
Consulting (1%) +1% 4Q24 revenue growth FY24 revenue growth Broad-based signings growth driven by demand for $5.2B revenue $20.7B revenue digital transformations Revenue categories-4Q24 Continued momentum in generative AI bookings, greater than $4B inception-to-date Application Business Book-to-bill
Slide 8: Infrastructure
Infrastructure (6%) (3%) 4Q24 revenue growth FY24 revenue growth Infrastructure performance reflects product $4.3B revenue $14.0B revenue cycle dynamics Revenue categories-4Q24 z16 our most successful program in history Distributed Infrastructure reflects double-digit Infrastructure Hybrid growth in
Slide 9: Summary
Summary 2024 Summary 2025 Expectations Met or exceeded mid-term model target metrics for Revenue growth @CC inflecting higher to 5%+ revenue growth, profitability & free cash flow growth Acceleration in growth across all our segments Software growth accelerated to 9% in 2024, and represents ~45% of
Slide 10: ibm.com/investor
ibm.com/investor
Slide 11: Supplemental material
Supplemental material Revenue and P&L highlights Revenue and P&L highlights – FY 2024 Adjusted EBITDA performance Software & Infrastructure segment details – FY 2024 Cash flow and balance sheet highlights Consulting segment details – FY 2024 Currency impact on revenue growth Expense summary – FY 202
Slide 12: Revenue and P&L highlights
Revenue and P&L highlights Revenue highlights 4Q24 B/(W) Operating P&L highlights $ 4Q24 B/(W) Yr/Yr Yr/Yr Revenue $17.6 2% Gross profit $10.6 2% Expense $6.4 (1%) Americas $8.5 (3%) Pre-tax income $4.3 2% Europe/ME/Africa $5.8 10% Net income $3.7 3% Asia Pacific $3.2 3% Earnings per share $3.92 1%
Slide 13: Adjusted EBITDA performance
Adjusted EBITDA performance 4Q24 Yr/Yr FY24 Yr/Yr Operating (non-GAAP) pre-tax income from continuing operations $4.3 $0.1 $11.2 $0.9 Net interest expense $0.3 $0.0 $1.0 $0.0 Depreciation/Amortization of non-acquired intangible assets $0.7 ($0.0) $2.8 $0.1 Stock-based compensation $0.3 $0.1 $1.3 $0.
Slide 14: Cash flow and balance sheet highlights
Cash flow and balance sheet highlights Cash flow FY24 Yr/Yr Balance sheet Dec 24 Dec 23 Net cash from operations* $13.9 $1.2 Cash & marketable securities $14.8 $13.5 Free cash flow** $12.7 $1.5 Total debt $55.0 $56.5 Select uses of cash FY24 Yr/Yr Select debt measures Dec 24 Dec 23 Net capital expen
Slide 15: Currency impact on revenue growth
Currency impact on revenue growth Quarterly averages per US $ 4Q24 Yr/Yr Spot 1Q25 2Q25 3Q25 4Q25 FY25 Assumed Euro 0.94 (1%) 0.96 (4%) (3%) (5%) (2%) (4%) Pound 0.78 3% 0.80 (2%) (1%) (5%) (3%) (3%) Yen 153 (3%) 156 (5%) 0% (4%) (2%) (3%) Revenue impact, future @assumed Spot (1.2 pts) (2.5-3 pts) (
Slide 16: Software & Infrastructure segment details
Software & Infrastructure segment details Software segment 4Q24 B/(W) Infrastructure segment 4Q24 B/(W) Yr/Yr Yr/Yr Revenue $7.9 11% Revenue $4.3 (6%) Hybrid Platform & Solutions $5.5 12% Hybrid Infrastructure $3.0 (8%) Red Hat 17% IBM Z (20%) Automation 16% Distributed Infrastructure 2% Data & AI 5
Slide 17: Consulting segment details
Consulting segment details Consulting segment 4Q24 B/(W) Yr/Yr Revenue $5.2 (1%) Business Transformation $2.3 2% Technology Consulting $0.9 (6%) Application Operations $1.9 (3%) Gross profit margin 28.0% (0.1 pts) Segment profit $0.6 (7%) Segment profit margin 11.7% (0.7 pts) Signings $8.5 23% Book-
Slide 18: Expense summary
Expense summary Expense 4Q24 B/(W) Acq/ Yr/Yr Currency Divest* Base** Operating expense & other income $6.4 (1%) 4 pts (1 pts) (4 pts) SG&A – operating $4.6 (1%) 1 pts (1 pts) (1 pts) RD&E $2.0 (13%) 0 pts 0 pts (12 pts) IP and custom development income ($0.3) 24% Other (income)/expense - operating
Slide 19: Balance sheet summary
Balance sheet summary Dec 24 Dec 23 Cash & marketable securities $14.8 $13.5 Core (non-IBM Financing) assets* $108.9 $107.9 IBM Financing assets $13.5 $13.9 Total assets $137.2 $135.2 Other liabilities $54.8 $56.1 Core (non-IBM Financing) debt* $42.9 $44.7 IBM Financing debt $12.1 $11.9 Total debt $
Slide 20: Free cash flow summary
Free cash flow summary B/(W) B/(W) 4Q24 Yr/Yr FY24 Yr/Yr Net cash from operations $4.3 ($0.1) $13.4 ($0.5) Less: IBM Financing receivables ($2.3) ($0.4) ($0.4) ($1.7) Net cash from operations (excluding IBM Financing receivables) $6.6 $0.2 $13.9 $1.2 Net capital expenditures ($0.4) ($0.2) ($1.1) $0.
Slide 21: Cash flow (ASC230)
Cash flow (ASC230) 4Q24 4Q23 FY24 FY23 Net income from operations $2.9 $3.3 $6.0 $7.5 Pension settlement charges $0.4 - $3.1 - Depreciation / amortization of intangibles* $1.1 $1.2 $4.7 $4.4 Stock-based compensation $0.3 $0.3 $1.3 $1.1 Operating assets and liabilities / other, net** $1.8 $1.6 ($1.2)
Slide 22: Revenue and P&L highlights – FY2024
Revenue and P&L highlights – FY2024 Revenue highlights FY24 B/(W) Operating P&L highlights $ FY24 B/(W) Yr/Yr Yr/Yr Revenue $62.8 3% Gross profit $36.3 4% Expense $25.1 (2%) Americas $31.3 (1%) Pre-tax income $11.2 9% Europe/ME/Africa $19.4 5% Net income $9.7 9% Asia Pacific $12.1 8% Earnings per sh
Slide 23: Software & Infrastructure segment details – FY 2024
Software & Infrastructure segment details – FY 2024 Software segment FY24 B/(W) Infrastructure segment FY24 B/(W) Yr/Yr Yr/Yr Revenue $27.1 9% Revenue $14.0 (3%) Hybrid Platform & Solutions $18.8 9% Hybrid Infrastructure $8.9 (2%) Red Hat 12% IBM Z (9%) Automation 15% Distributed Infrastructure 3% D
Slide 24: Consulting segment details – FY 2024
Consulting segment details – FY 2024 Consulting segment FY24 B/(W) Yr/Yr Revenue $20.7 1% Business Transformation $9.3 3% Technology Consulting $3.7 (1%) Application Operations $7.7 (2%) Gross profit margin 27.0% 0.3 pts Segment profit $2.1 (4%) Segment profit margin 9.9% (0.3 pts) Signings $25.1 5%
Slide 25: Expense summary – FY 2024
Expense summary – FY 2024 Expense FY24 B/(W) Acq/ Yr/Yr Currency Divest** Base*** Operating expense & other income $25.1 (2%) 1 pts 0 pts (3 pts) impact of workforce rebalancing $0.7 (1 pts) SG&A – operating $18.5 (3%) 1 pts (1 pts) (3 pts) impact of workforce rebalancing $0.7 (1 pts) RD&E $7.5 (10%
Slide 26: Retirement-related summary
Retirement-related summary Expected Key assumptions and metrics 2023 2024 2025 Cost and contributions 2024 2025 Funded status at year end* Operating cost 1.0 1.0 US 123% 136% Non-operating cost 3.5 ** 0.1 WW 111% 116% Total cost 4.5 1.1 Discount rate at year end Contributions*** 1.3 1.3 US 5.0% 5.5%
Slide 27: Software segment categories
Software segment categories Revenue categories Revenue categories – FY 2024 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 28: Consulting segment categories
Consulting segment categories Revenue categories Revenue categories – FY 2024 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 29: Infrastructure segment categories
Infrastructure segment categories Revenue categories Revenue categories – FY 2024 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 30: Non-GAAP supplemental materials: revenue performance
Non-GAAP supplemental materials Reconciliation of revenue performance – 4Q 2024 & FY 2024 4Q24 Yr/Yr FY24 Yr/Yr GAAP @CC GAAP @CC Total revenue 1% 2% Total revenue 1% 3% Americas (4%) (3%) Americas (1%) (1%) Europe/ME/Africa 9% 10% Europe/ME/Africa 5% 5% Asia Pacific 1% 3% Asia Pacific 3% 8% The abo
Slide 31: Non-GAAP supplemental materials: segment revenue 4Q 2024
Non-GAAP supplemental materials Reconciliation of segment revenue performance – 4Q 2024 4Q24 Yr/Yr 4Q24 Yr/Yr GAAP @CC GAAP @CC Software 10% 11% Consulting (2%) (1%) Hybrid Platform & Solutions 11% 12% Business Transformation 1% 2% Red Hat 16% 17% Technology Consulting (7%) (6%) Automation 15% 16% A
Slide 32: Non-GAAP supplemental materials: segment revenue FY 2024
Non-GAAP supplemental materials Reconciliation of segment revenue performance – FY 2024 FY24 Yr/Yr FY24 Yr/Yr GAAP @CC GAAP @CC Software 8% 9% Consulting (1%) 1% Hybrid Platform & Solutions 8% 9% Business Transformation 2% 3% Red Hat 11% 12% Technology Consulting (3%) (1%) Automation 14% 15% Applica
Slide 33: Non-GAAP supplemental materials: expense summary
Non-GAAP supplemental materials Reconciliation of expense summary – 4Q 2024 & FY 2024 4Q24 FY24 Non-GAAP Operating GAAP Non-GAAP Operating GAAP adjustments (non-GAAP) adjustments (non-GAAP) SG&A Currency 1 pts 0 pts 1 pts 1 pts 0 pts 1 pts Acquisitions/divestitures (1 pts) 0 pts (1 pts) (1 pts) 0 pt
Slide 34: Non-GAAP supplemental materials: continuing operations 4Q 2024
Non-GAAP supplemental materials Reconciliation of continuing operations – 4Q 2024 4Q24 Acquisition- Retirement- related related Tax reform Operating GAAP adjustments adjustments* impacts (non-GAAP) Gross profit $10,439 $191 — — $10,630 Gross profit margin 59% 1.1 pts — — 61% SG&A 4,866 (305) — — 4,5
Slide 35: Non-GAAP supplemental materials: continuing operations FY 2024
Non-GAAP supplemental materials Reconciliation of continuing operations – FY 2024 FY24 Acquisition- Retirement- related related Tax reform Operating GAAP adjustments adjustments* impacts (non-GAAP) Gross profit $35,551 $724 — — $36,275 Gross profit margin 56.7% 1.2 pts — — 57.8% SG&A 19,688 (1,159)
Slide 36: Non-GAAP supplemental materials: net income to adjusted EBITDA
Non-GAAP supplemental materials Reconciliation of GAAP net income to adjusted EBITDA 4Q24 Yr/Yr FY24 Yr/Yr Net income as reported (GAAP)* $2.9 ($0.4) $6.0 ($1.5) Less: income/(loss) from discontinued operations, net of tax ($0.0) ($0.0) $0.0 $0.0 Income from continuing operations $2.9 ($0.4) $6.0 ($
Slide 37: Non-GAAP supplemental materials: net cash to adjusted EBITDA
Non-GAAP supplemental materials Reconciliation of net cash from operations to adjusted EBITDA 4Q24 4Q23 FY24 FY23 Net cash provided by operating activities $4.3 $4.5 $13.4 $13.9 Add: Net interest expense $0.3 $0.3 $1.0 $0.9 Provision for/(Benefit from) income taxes from continuing operations $0.4 $0
Slide 38: Non-GAAP supplemental materials: pre-tax margin expectations
Non-GAAP supplemental materials Reconciliation of Pre-tax income margin – 1Q 2025 & FY 2025 expectations Operating GAAP (non-GAAP) Pre-tax income margin Yr/Yr expectations B/(W) B/(W) 1Q 2025 ~(1 pt) ~ 0.5 pts* FY 2025 >5 pts >0.5 pts *Excludes the effects of The Weather Company gain on sale of ~(2
Slide 39: Non-GAAP supplemental materials: mid-term model revenue CAGR
Non-GAAP supplemental materials Reconciliation of Mid-term model performance – 3-year revenue CAGR 3-year compound average revenue growth rate 2022-2024 GAAP @CC Total Revenue 3% 6% Consulting low single digit high single digit The above reconciles the non-GAAP financial information contained in the
Slide 40: ibm.com/investor
ibm.com/investor
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