International Business Machines Corporation · NYSE:IBM
International Business Machines — Q3 2021 Earnings Presentation
31 slides from International Business Machines's earnings presentation, Oct 20, 2021
Slide 1: IBM 3Q 2021 Earnings
IBM 3Q 2021 Earnings October 20, 2021 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 fi
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 “With the separation of Kyndryl early next month, IBM takes the next step in our evolution as a platform-centric hybrid cloud and AI company. 3Q21 Performance We continue to make progress in our software and consulting businesses, which represent our higher growth opportunities. With
Slide 5: Hybrid Cloud & AI Progress
Hybrid Cloud & AI Our Platform Approach Progress Accelerating client adoption of hybrid cloud & AI IBM Software (IBM Cloud Paks) Leveraging partner ecosystem Delivering innovation and enhancing portfolio 5 Enterprise Infrastructure Public Clouds IBM Infrastructure Edge Red Hat Hybrid Cloud Platform
Slide 6: Financial Highlights
Revenue growth Revenue growth (LTM) 6 Financial Highlights 3Q21 $17.6B $11.1B RevenueFree Cash Flow, Adjusted (LTM) “We again had solid cash generation for the quarter and over the last year, while maintaining a strong balance sheet and the liquidity to support our hybrid cloud and AI strategy. Our
Slide 7: Cloud & Cognitive Software
Cloud & Cognitive Software Revenue C&CS Cloud Revenue Growth +20% yr/yr $5.7B +2% yr/yr Software growth led by Red Hat, Security and Automation Over 3,500 clients using hybrid cloud platform Segment Elements Annual Recurring Revenue* +7% yr/yr; Software renewal rates remain strong Cognitive Applicat
Slide 8: Global Business Services
Global Business Services Revenue $4.4B +11% yr/yr GBS Cloud Revenue Growth +37% yr/yr Revenue growth acceleration driven by ecosystem and cloud offerings Book-to-bill ratio of 1.1x (LTM) Segment Elements Consulting +16% yr/yr Continued momentum in Red Hat engagements Application Management +5% yr/yr
Slide 9: Systems
Systems Revenue $1.1B (12%) yr/yr IBM Z Program Revenue >100% z15 vs. z14 IBM Z and Power impacted by product cycle dynamics Growth in Storage driven by entry-level all-flash storage and tape Segment Elements Segment profit margins reflect mix headwind Systems Hardware (14%) yr/yr Operating Systems
Slide 10: Global Technology Services
Global Technology Services Revenue Gross Margin Expansion $6.2B (5%) yr/yr +120 yr/yr bps Kyndryl separation on track for November 3, 2021 Gross margin expansion reflects actions to improve profit profile Segment Elements Revenue reflects clients pausing on projects in advance of separation Infrastr
Slide 11: Summary
Summary Improving revenue trajectory led by Software and Consulting Kyndryl separation creates value through focus ƒ ƒ Increasing investments in skills, innovation, ecosystem Solid free cash flow generation Fourth quarter important milestone in the transition to future IBM Exit 2021 in position to d
Slide 12: ibm.com/investor
ibm.com/investor
Slide 13: Supplemental Materials
Supplemental Materials Future Investor Communications Revenue and P&L Highlights Cash Flow and Balance Sheet Highlights Currency – Impact on Revenue Growth Services Segments Details Software and Systems Segment Details Expense Summary Balance Sheet Summary Cash Flow Summary Cash Flow (ASC 230) Non-G
Slide 14: Future IBM Investor Communications
Future IBM Investor Communications Assumes Kyndryl distribution date of November 3, 2021 Date (Estimated) Communication Content October 20, 2021 3Q 2021 Earnings Report IBM results @ pre-separation of Kyndryl Estimated impact of KD separation to IBM 4Q 2021 Consolidated Results November 3-4, 2021 (w
Slide 15: Revenue and P&L Highlights
Revenue and P&L Highlights B/(W) Yr/Yr* B/(W) Yr/Yr Revenue Highlights 3Q21 Operating P&L Highlights $ 3Q21 Revenue Cloud Cloud (LTM) $17.6 $6.7 $27.8 Flat 12% 11% Gross Profit Expense Pre-Tax Income Net Income Earnings Per Share $8.5 $6.1 $2.4 $2.3 $2.52 (2%) Flat (7%) (1%) (2%) B/(W) Yr/Yr B/(W) Y
Slide 16: Cash Flow and Balance Sheet Highlights
Cash Flow and Balance Sheet Highlights $ in billions *Non-GAAP financial measures; excludes financing receivables **Non-GAAP financial measures; excludes cash impacts incurred in the period related to structural actions initiated in 4Q20 and separation related costs Supplemental Materials 16 Cash Fl
Slide 17: Currency – Impact on Revenue Growth
Currency – Impact on Revenue Growth Revenue Impact, Future @ 10/19/21 Spot Prior View @ 7/16/21 Spot 1 pts 0-1 pts (2-1 pts) ~(1 pts) 1-2 pts 1-2 pts ~(2 pts) ~(2 pts) US$B Yr/Yr Revenue As Reported Currency Impact Revenue @CC $17.6 $0.1 0.3% 0.6 pts (0.3%) Supplemental Materials 17 Quarterly Averag
Slide 18: Services Segments Details
Services Segments Details B/(W) Yr/Yr B/(W) Yr/Yr GBS Segment 3Q21 GTS Segment 3Q21 Revenue (External) Consulting Application Management Global Process Services Gross Profit Margin (External) Pre-Tax Income Pre-Tax Income Margin Cloud Revenue (External) $4.4 $2.3 $1.8 $0.3 29.8% $0.6 13.1% $2.0 11%
Slide 19: Software and Systems Segment Details
Software and Systems Segment Details B/(W) Yr/Yr B/(W) Yr/Yr Cloud & Cognitive Software Segment 3Q21 Systems Segment 3Q21 Revenue (External) Systems Hardware IBM Z Power Storage Operating Systems Software Gross Profit Margin (External) Systems Hardware Operating Systems Software Pre-Tax Income Pre-T
Slide 20: Expense Summary
Expense Summary $ in billions *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 impact of currency, acquisitions and divestitures Supplemental Materials 2
Slide 21: Balance Sheet Summary
Balance Sheet Summary Sep 21 Dec 20 Sep 20 Cash & Marketable Securities Core (non-GF) Assets* Global Financing Assets Total Assets $8.4 $117.8 $18.0 $144.2 $14.3 $118.5 $23.2 $156.0 $15.8 $115.7 $22.7 $154.1 Other Liabilities Core (non-GF) Debt* Global Financing Debt Total Debt Total Liabilities Equ
Slide 22: Cash Flow Summary
Cash Flow Summary QTD 3Q21 B/(W) Yr/Yr YTD 3Q21 B/(W) Yr/Yr Net Cash from Operations Less: Global Financing Receivables Net Cash from Operations (excluding GF Receivables) Net Capital Expenditures Free Cash Flow (excluding GF Receivables) Structural actions initiated in 4Q20 & separation charges* Ad
Slide 23: Cash Flow (ASC 230)
Cash Flow (ASC 230) QTD 3Q21 QTD 3Q20 YTD 3Q21 YTD 3Q20 Net Income from Operations Depreciation / Amortization of Intangibles Stock-based Compensation Working Capital / Other Global Financing A/R Net Cash provided by Operating Activities Capital Expenditures, net of payments & proceeds Divestitures,
Slide 24: Reconciliation of Revenue Performance - 3Q 2021
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 3Q 2021 3Q21 Yr/Yr 3Q21 Yr/Yr GAAP @CC GAAP @CC Cloud & Cognitive Software Cloud & Data Platforms Cognitive Applications Transaction Processing Platforms Cloud Global Business Services Consulting Application Management Global Pr
Slide 25: Reconciliation of Revenue Performance - 3Q 2021
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 3Q 2021 3Q21 Yr/Yr GAAP Divest impact Currency impact Adjusted Total Revenue 0% 0 pts (1 pts) (0%) Americas Europe/ME/Africa Asia Pacific 1% 1% (1%) 0 pts 0 pts (0 pts) (1 pts) (2 pts) 1 pts 0% (1%) (0%) The above reconciles the
Slide 26: Reconciliation of Revenue normalized to exclude Kyndryl
Non-GAAP Supplemental Materials Reconciliation of Revenue normalized to exclude Kyndryl – 2021 & Last 12 months *Estimated as of September 30, 2021 The above reconciles the Non-GAAP financial information contained in the “Prepared Remarks” discussion in the company’s earnings presentation. See Exhi
Slide 27: Reconciliation of Revenue for Red Hat, Normalized
Non-GAAP Supplemental Materials Reconciliation of Revenue for Red Hat, Normalized - 3Q 2021 3Q21 Yr/Yr Red Hat Revenue, Normalized for Historical Comparability Revenue GAAP growth rate* Impact from purchase accounting deferred revenue and intercompany adjustments ** Revenue growth rate, normalized f
Slide 28: Reconciliation of Expense Summary - 3Q 2021
Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 3Q 2021 3Q21 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* 0 pts
Slide 29: Reconciliation of Continuing Operations - 3Q 2021
Non-GAAP Supplemental Materials Reconciliation of Continuing Operations - 3Q 2021 3Q21 Acquisition-Related Adjustments Retirement-Related Adjustments Separation-Related Charges Tax Reform Impacts Adjusted GAAP Gross Profit Gross Profit Margin SG&A RD&E Other (Income) & Expense Total Expense Pre-tax
Slide 30: Reconciliation of Free Cash Flow – Last 12 Months
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow – Last 12 Months 12 Months Ended Sep 2021 Net Cash from Operating Activities per GAAP: $16.1 Less: change in Global Financing (GF) Receivables $4.3 Net Cash from Operating Activities (Excluding GF Receivables) $11.9 Capital Expenditure
Slide 31: ibm.com/investor
ibm.com/investor
International Business Machines — Q3 2021 Earnings Presentation on 6ix