55 slides from International Business Machines's earnings presentation, Jan 19, 2012
Slide 1: 4Q 2011 Earnings Presentation
® 4Q 2011 Earnings Presentation January 19, 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: 2011 Summary
2011 Summary 4Q11 FY11 $ Yr/Yr $ Yr/Yr Revenue $29.5B +2% $106.9B +7% Operating Pre-Tax Income $7.4B +6% $21.6B +9% Operating (Non-GAAP) EPS $4.71 +11% $13.44 +15% ¾ 4Q Segment highlights: • Continued momentum in Software: Revenue +9%, Profit +12% • Services revenue led by growth markets +13% @CC; S
Slide 4: Key Financial Metrics
Key Financial Metrics $ in Billions, except EPS P&L Highlights B/(W) P&L Ratios B/(W) 4Q11 Yr/Yr (Operating) 4Q11 Yr/Yr Revenue $29.5 2% GP Margin 50.2% 1.1 pts @CC 1% PTI Margin 25.1% 0.9 pts PTI – Operating $7.4 6% NI Margin 19.0% 0.5 pts EPS – Operating $4.71 11% Tax Rate 24.4% (0.7 pts) Cash Hig
Slide 5: Revenue by Geography
Revenue by Geography $ in Billions B/(W) Yr/Yr 4Q11 Rptd @CC Americas $12.5 3% 3% Canada/ LA Europe/ME/A 9.6 1% 1% EMEA Asia Pacific 6.7 2% (1%) U.S. +1% OEM 0.7 (9%) (9%) Japan APac IBM $29.5 2% 1% - 9% @CC Major Markets Flat Flat OEM Growth Markets 7% 8% BRIC Countries 10% 11% Performance led by G
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) 4Q11 Rptd @CC 4Q11 Yr/Yr Pts Global Technology Services $10.5 3% 3% 36.6% 2.1 pts Global Business Services 4.9 3% 2% 29.3% 1.3 pts Software 7.6 9% 9% 89.8% 0.2 pts Systems & Technology 5.
Slide 7: Expense Summary
Expense Summary B/(W) B/(W) Yr/Yr Drivers $ in Billions 4Q11 Yr/Yr Currency Acq.* Base SG&A – Operating $6.0 (2%) 0 pts (1 pts) (1 pts) RD&E – Operating 1.6 2% 0 pts (2 pts) 3 pts IP and Development Income (0.3) (20%) Other (Income)/Expense 0.0 5% Interest Expense 0.1 (12%) 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 4Q11 Rptd @CC 4Q11 Rptd @CC Revenue (External) $10.5 3% 3% Revenue (External) $4.9 3% 2% Gross Margin (External) 36.6% 2.1 pts Gross Margin (External) 29.3% 1.3 pts P
Slide 9: Total Services Backlog Run Out
Total Services Backlog Run Out 2011 Revenue Services Run Out (% of Total Services) 60 Revenue from base growth 50 and new signings 40 Projected 70% Revenue from 12/31/11 ($B) Revenue from 30 12/31/10 Backlog Transactional Outsourcing Backlog Revenue from Backlog 40% 47% 20 +3% Yr/Yr * 10 Maint. 0 13
Slide 10: Software Segment
Software Segment B/(W) Yr/Yr $ in Billions 4Q11 Rptd @CC Revenue (External) $7.6 9% 9% Gross Margin (External) 89.8% 0.2 pts Pre-Tax Income $3.7 12% PTI Margin 43.7% 1.4 pts 4Q11 Revenue Yr/Yr 4Q11 Revenue Rptd @CC (% of Total Software) WebSphere Family 21% 21% Information Management 9% 9% Tivoli 14
Slide 11: Systems & Technology Segment
Systems & Technology Segment $ in Billions B/(W) Yr/Yr 4Q11 Rptd @CC Revenue (External) $5.8 (8%) (8%) Gross Margin (External) 40.5% (3.1 pts) Pre-Tax Income $0.8 (33%) PTI Margin 13.2% (4.8 pts) 4Q11 Revenue Yr/Yr 4Q11 Revenue Rptd @CC (% of Total Sys & Tech) System z (31%) (31%) Power Systems 6% 6
Slide 12: Cash Flow Analysis
Cash Flow Analysis B/(W) B/(W) $ in Billions 4Q11 Yr/Yr FY11 Yr/Yr Net Cash from Operations $7.1 $0.3 $19.8 $0.3 Less: Global Financing Receivables (2.9) 0.1 (0.8) (0.1) Net Cash from Operations 10.0 0.2 20.7 0.4 (excluding GF Receivables) Net Capital Expenditures (1.1) 0.0 (4.1) (0.1) Free Cash Flo
Slide 13: Balance Sheet Summary
Balance Sheet Summary $ in Billions Dec. 10 Dec. 11 Cash & Marketable Securities $11.7 $11.9 Non-GF Assets* 67.3 69.4 Global Financing Assets 34.5 35.1 Total Assets 113.5 116.4 Other Liabilities 61.7 64.9 Non-GF Debt* 5.8 8.0 Global Financing Debt 22.8 23.3 Total Debt 28.6 31.3 Total Liabilities 90.
Slide 14: Operating EPS Bridge – 4Q10 to 4Q11
Operating EPS Bridge – 4Q10 to 4Q11 $0.26 $4.71 $0.13 $0.07 $4.25 Gross Margin 0.19 Expense E/R (0.02) Tax (0.04) 4Q10 Revenue Growth Margin Share 4Q11 Operating EPS @ Actual Expansion Repurchases Operating EPS www.ibm.com/investor 14
Slide 15: Operating EPS Bridge – FY10 to FY11
Operating EPS Bridge – FY10 to FY11 $0.77 $13.44 $0.18 $0.82 $11.67 Gross Margin 0.68 Expense E/R (0.49) Tax (0.01) 2010 Revenue Growth Margin Share 2011 Operating EPS @ Actual Expansion Repurchases Operating EPS www.ibm.com/investor 15
Slide 16: FY 2011 Summary
At least FY 2011 Summary 2015e $20 ¾ Continued strength in growth initiatives • Growth markets +11% @CC yr/yr, 22% of Geo revenue • Business analytics +16% yr/yr 2012e $14.85+ • Smarter Planet +47% yr/yr 2011 $13.44 • Cloud >3x yr/yr 2010 $11.67 ¾ Expanded margins in line with the model • Operating
Slide 17: IBM Transformation Continues
IBM Transformation Continues At Least Operating PTI / EPS * $20 Segment Operating PTI At Least Operating EPS $14.85 $13.44 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12e '13e '14e '15e Hardware / Financing Services Software * Non-GAAP: Excludes acquisition-related charges and non-operating ret
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Slide 19: Supplemental Materials
Supplemental Materials Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding ¾ Currency – Year/Year Comparison ¾ Supplemental Segment Information – Global Services ¾ Supplemental Segment Information – Systems & Technology, S
Slide 20: Currency – Year/Year Comparison
Supplemental Materials Currency – Year/Year Comparison Quarterly Averages per US $ 1/18 Yr/Yr @ 1/18 Spot 3Q11 Yr/Yr 4Q11 Yr/Yr Spot 1Q12 2Q12 3Q12 4Q12 FY12 Euro 0.71 8% 0.74 (1%) 0.78 (7%) (12%) (10%) (5%) (8%) Pound 0.62 4% 0.64 (1%) 0.65 (4%) (6%) (4%) (2%) (4%) Yen 78 9% 77 6% 77 7% 6% 1% 1% 4%
Slide 21: Supplemental Segment Information – 4Q 2011
Supplemental Materials Supplemental Segment Information – 4Q 2011 Supplemental Revenue Information Supplemental Backlog / Signings Information Revenue Growth $ in Billions Backlog Global Services Yr/Yr @CC Global Services 4Q11 Yr/Yr @CC GTS Outsourcing 3% 3% Total Backlog $141 ($2) Flat Integrated T
Slide 22: Supplemental Segment Information – 4Q 2011
Supplemental Materials Supplemental Segment Information – 4Q 2011 Revenue Growth Revenue Growth Systems & Technology Yr/Yr @CC GP% Share Software Yr/Yr @CC System z (31%) (31%) WebSphere Family 21% 21% Information Management 9% 9% Power Systems 6% 6% Tivoli 14% 14% System x (2%) (3%) = Lotus (2%) (3
Slide 23: Global Financing Portfolio
Supplemental Materials Global Financing Portfolio 4Q11 – $27.0B Net External Receivables Invest ment Grade N o n- Invest ment Grade 63% 3 7% 50% 40% 30% 20% 39% 10% 24% 20% 5% 10% 2% 0% Aaa-A3 Baa1-Baa3 Ba1-Ba2 Ba3-B1 B2-B3 Caa-D 4Q11 3Q11 4Q10 Identified Loss Rate 0.8% 1.0% 1.1% Anticipated Loss Ra
Slide 24: Key Financial Metrics – FY 2011
Supplemental Materials Key Financial Metrics – FY 2011 $ in Billions, except EPS P&L Highlights B/(W) P&L Ratios B/(W) FY11 Yr/Yr (Operating) FY11 Yr/Yr Revenue $106.9 7% GP Margin 47.2% 1.1 pts @CC 3% PTI Margin 20.2% 0.3 pts PTI – Operating $21.6 9% NI Margin 15.3% 0.2 pts EPS – Operating $13.44 1
Slide 25: Revenue by Geography – FY 2011
Supplemental Materials Revenue by Geography – FY 2011 $ in Billions B/(W) Yr/Yr FY11 Rptd @CC Americas $44.9 7% 6% Canada/ LA Europe/ME/A 34.0 7% 2% EMEA Asia Pacific 25.3 9% 2% U.S. +4% OEM 2.7 (2%) (3%) Japan APac IBM $106.9 7% 3% - 7% @CC Major Markets 5% 2% OEM Growth Markets 16% 11% BRIC Countr
Slide 26: Revenue by Segment – FY 2011
Supplemental Materials Revenue by Segment – FY 2011 $ in Billions B/(W) Yr/Yr FY11 Rptd @CC Global Business Systems Global Technology Services $40.9 7% 3% Services & Global Business Services 19.3 6% 1% Technology Software 24.9 11% 8% Global Technology Systems & Technology 19.0 6% 3% Software Service
Slide 27: Revenue by Key Industry Sales Unit – 4Q & FY 2011
Supplemental Materials Revenue by Key Industry Sales Unit – 4Q & FY 2011 $ in Billions B/(W) Yr/Yr B/(W) Yr/Yr 4Q11 Rptd @CC FY11 Rptd @CC Financial Services $8.9 Flat (1%) $31.8 9% 5% Public 4.4 Flat Flat 16.1 3% Flat Industrial 2.9 3% 2% 10.6 5% 1% Distribution 2.9 6% 6% 10.3 7% 4% Communications
Slide 28: Gross Margins by Segment – FY 2011
Supplemental Materials Gross Margins by Segment – FY 2011 External Gross Profit Margins B/(W) FY11 Yr/Yr Pts Global Technology Services 35.0% 0.5 pts Global Business Services 28.8% 0.7 pts Software 88.5% 0.5 pts Systems & Technology 39.8% 1.6 pts Global Financing 49.8% (1.5 pts) Total IBM - Operatin
Slide 29: Expense Summary – FY 2011
Supplemental Materials Expense Summary – FY 2011 B/(W) B/(W) Yr/Yr Drivers $ in Billions FY11 Yr/Yr Currency Acq.* Base SG&A – Operating $23.3 (8%) (3 pts) (3 pts) (2 pts) RD&E – Operating 6.3 (3%) (2 pts) (4 pts) 2 pts IP and Development Income (1.1) (4%) Other (Income)/Expense 0.0 (94%) Interest E
Slide 30: Pre-Tax Income by Segment – FY 2011
Supplemental Materials Pre-Tax Income by Segment – FY 2011 Segment PTI $ Segment PTI Margin $ in Billions B/(W) Yr/Yr B/(W) Yr/Yr B/(W) w/o Unique B/(W) w/o Unique PTI $ Yr/Yr Items* PTI % Yr/Yr Items* Global Technology Services $6.3 14% 11% 14.9% 1.0 pts 0.6 pts Global Business Services 3.0 18% 14%
Slide 31: Cash Flow (FAS 95)
Supplemental Materials Cash Flow (FAS 95) $ in Billions 4Q11 4Q10 FY11 FY10 Net Income from Operations $5.5 $5.3 $15.9 $14.8 Depreciation / Amortization of Intangibles 1.2 1.2 4.8 4.8 Stock-based Compensation 0.2 0.2 0.7 0.6 Working Capital / Other 3.1 3.1 (0.7) 0.0 Global Financing A/R (2.9) (3.0)
Slide 32: Retirement-Related Charges
Supplemental Materials Retirement-Related Charges Funded Status* Actual ROA Expected ROA Discount Rate US WW US WW WW WW YE 2010 101% 99% 13.6% 11.7% 7.3% 4.7% YE 2011 98% 96% 8.4% 6.1% 7.3% 4.2% Operating Non-Operating Pre-Tax Retirement-Related (Cost) / Income ($B) $0.5 $0.4 $0.1 ($0.0) ($0.4) ($0
Slide 33: Retirement-Related Charges
Supplemental Materials Retirement-Related Charges Funded Status* Expected ROA Actual ROA Discount Rate US WW WW WW WW YE 2010 101% 99% 7.3% 11.7% 4.7% YE 2011 98% 96% 7.3% 6.1% 4.2% Upside 7.3% 14.0% 4.7% Downside 7.3% 0.0% 3.7% Operating Non-Operating Pre-Tax Retirement-Related (Cost) / Income ($B)
Slide 34: Retirement-Related Charges
Supplemental Materials Retirement-Related Charges Non-operating Retirement-Related ($B) Pre-tax (Cost) / Income $0.5 $0.4 $0.1 ($0.0) ($0.4) ($0.4) ($0.8) B/(W) Y/Y ($0.1) ($0.3) ($0.5) ($0.4) $0.4 $0.4 2009 2010 2011 2012 2013 2014 2015 Cash Drivers ($1.4) ($1.4) ($1.4) ($1.4) ($1.5) ($1.7) ($1.5)
Slide 35: Non-GAAP Supplementary Materials
Supplemental Materials Non-GAAP Supplementary 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
Slide 36: Non-GAAP Supplementary Materials
Supplemental Materials Non-GAAP Supplementary 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 ca
Slide 37: Reconciliation of Operating Earnings Per Share
Supplemental Materials Non-GAAP Supplementary Materials Non-GAAP Reconciliation of Operating Earnings Per Share 2012 Expectations IBM GAAP EPS $14.16+ IBM Operating EPS (Non-GAAP) $14.85+ Adjustments Acquisition-Related Charges * $0.43 Amortization of Purchased Intangibles $0.41 Other Acquisition-Re
Slide 38: GAAP to Operating (Non-GAAP) Bridge – 4Q 2011
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – 4Q 2011 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $14,722 $81 ($10) $14,793 SG&A 6,076 (82) 2 5,996 RD&E 1,555 0 23 1
Slide 39: GAAP to Operating (Non-GAAP) Bridge – 4Q 2010
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – 4Q 2010 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $14,227 $82 ($60) $14,249 SG&A 5,951 (95) 28 5,884 RD&E 1,578 0 33
Slide 40: GAAP to Operating (Non-GAAP) Bridge – FY 2011
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – FY 2011 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $50,138 $341 $2 $50,481 SG&A 23,594 (309) (13) 23,272 RD&E 6,258 0
Slide 41: GAAP to Operating (Non-GAAP) Bridge – FY 2010
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – FY 2010 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $46,014 $260 ($204) $46,070 SG&A 21,837 (294) 84 21,628 RD&E 6,026
Slide 42: GAAP to Operating (Non-GAAP) Bridge – 4Q 2011
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – 4Q 2011 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 49.9% 0.3 pts (0.0 pts) 50.2 % PTI Margin 24.7% 0.6 pts (0.1 pts) 25.1 % Tax Rate
Slide 43: GAAP to Operating (Non-GAAP) Bridge – 4Q 2010
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – 4Q 2010 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 49.0% 0.3 pts (0.2 pts) 49.1 % PTI Margin 24.0% 0.6 pts (0.4 pts) 24.2 % Tax Rate
Slide 44: GAAP to Operating (Non-GAAP) Bridge – FY 2011
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – FY 2011 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 46.9% 0.3 pts 0.0 pts 47.2% PTI Margin 19.6% 0.6 pts (0.1 pts) 20.2% Tax Rate ***
Slide 45: GAAP to Operating (Non-GAAP) Bridge – FY 2010
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – FY 2010 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 46.1% 0.3 pts (0.2 pts) 46.1 % PTI Margin 19.7% 0.6 pts (0.4 pts) 19.9 % Tax Rate
Slide 46: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Revenue Growth 4Q11 Yr/Yr As Rptd @CC Japan (3%) (9%) Canada 12% 13% Germany 3% 4% UK 8% 9% Spain 8% 9% Growth Markets - Services 11% 13% FY11 Yr/Yr As Rptd @CC Japan 2% (7%) The above serves to reconcile the Non-GAAP financia
Slide 47: Reconciliation of GBS Revenue Growth
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of GBS Revenue Growth As Rptd @CC (Excl. Japan and (Excl. Japan and As Rptd Public Sector) Public Sector) 4Q11 3% 8% 9% FY11 6% 12% 8% The above serves to reconcile the Non-GAAP financial information contained in the “Services Se
Slide 48: Reconciliation of B/(W) Yr/Yr Expense Drivers – 4Q11
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of B/(W) Yr/Yr Expense Drivers – 4Q11 Non-GAAP Operating GAAP Adjustments (Non-GAAP) SG&A Currency 0 pts 0 pts 0 pts Acquisitions (1 pts) 0 pts (1 pts) Base (1 pts) 0 pts (1 pts) RD&E Currency 0 pts 0 pts 0 pts Acquisitions (2 pt
Slide 49: Reconciliation of B/(W) Yr/Yr Expense Drivers – FY11
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of B/(W) Yr/Yr Expense Drivers – FY11 Non-GAAP Operating GAAP Adjustments (Non-GAAP) SG&A Currency (3 pts) 0 pts (3 pts) Acquisitions (3 pts) 0 pts (3 pts) Base (2 pts) 0 pts (2 pts) RD&E Currency (2 pts) 0 pts (2 pts) Acquisitio
Slide 50: Reconciliation of Debt-to-Capital Ratio
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Debt-to-Capital Ratio FY11 FY10 Non-Global Financing Debt / Capital 32% 23% IBM Consolidated Debt / Capital 61% 55% The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet Summary” disc
Slide 51: Reconciliation of Operating EPS Bridge 4Q10 to 4Q11
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Operating EPS Bridge 4Q10 to 4Q11 Acquisition- related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) 4Q10 EPS $4.18 $0.14 ($0.06) $4.25 Revenue growth @ actual 0.07 0.00 0.00 0.07 Margin expansion Gro
Slide 52: Reconciliation of Operating EPS Bridge FY10 to FY11
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Operating EPS Bridge FY10 to FY11 Acquisition- related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) FY10 EPS $11.52 $0.34 ($0.20) $11.67 Revenue growth @ actual 0.81 0.02 (0.01) 0.82 Margin expansion
Slide 53: Reconciliation of Consolidated EPS
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Consolidated EPS EPS Acquisition Non-Operating (As Reported) Related Retirement Related Operating EPS 2000 $3.88 $0.05 ($0.62) $3.32 2001 $3.94 $0.04 ($0.72) $3.26 2002 $2.43 $0.07 ($0.68) $1.81 2003 $3.76 $0.13 ($0.48) $3.41
Slide 54: Reconciliation of Segment Pre-Tax Income and Margin Growth
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Segment Pre-Tax Income and Margin Growth FY11 Yr/Yr Workforce As Rptd Rebalancing PLM Gain Normalized Pre-Tax Income Growth Global Technology Services 14% (3 pts) 0 pts 11% Global Business Services 18% (4 pts) 0 pts 14% Softwa
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