International Business Machines Corporation · NYSE:IBM
International Business Machines — Q4 2022 Earnings Presentation
37 slides from International Business Machines's earnings presentation, Jan 26, 2023
Slide 1: IBM 4Q 2022 Earnings
IBM 4Q 2022 Earnings January 25, 2023 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
Slide 3: Arvind Krishna and James Kavanaugh
3 Arvind Krishna Chairman and Chief Executive Officer James Kavanaugh SVP, Finance & Operations, Chief Financial Officer
Slide 4: CEO perspective
“Our solid fourth - quarter performance capped a year in which we grew revenue above our mid - single digit model. Clients in all geographies increasingly embraced our hybrid cloud and AI solutions as technology remains a differentiating force in today’s business environment. Looking ahead to 2023,
Slide 5: Hybrid cloud and AI progress
5 Hybrid cloud and AI progress Our platform approach Accelerating client adoption Expanding partner ecosystem Delivering innovation Red Hat Hybrid Cloud Platform Development, Security and Operational Services Public Clouds AWS Azure Others Enterprise Infrastructure Edge IBM Infrastructure zSystems D
Slide 6: 4Q22 Financial highlights
$16.7B Revenue $9 ..3 B Free Cash Flow (FY) 4Q22 Financial highlights Revenue growth rates @CC 6 6% R evenue growth >70% R evenue mix in software and consulting $22.4B Hybrid cloud revenue (FY), +17% yr/yr $2.8B Free cash flow growth (FY) 170bps Pre - tax margin expansion (Operating) $8.8B C ash on
Slide 7: Software
Broad - based growth across Software Solid and growing recurring revenue; Hybrid Platform & Solutions annual recurring revenue of $13.3 billion Continued pre - tax margin expansion with full year nearly 25% 7 $7.3B Revenue Revenue categories Transaction Processing +3% yr/ yr +8% Revenue growth Hybri
Slide 8: Consulting
8 $4.8B Revenue Revenue categories Application Operations +12% yr/yr +9% Revenue growth Broad - based growth driven by demand for digital transformations Book - to - bill ratio of 1.1 for the year Strength in Red Hat and strategic partner practices Profit margin expansion as productivity and pricing
Slide 9: Infrastructure
9 $4.5B Revenue Revenue categories Infrastructure Support Flat yr/ yr +7% Revenue growth Hybrid Infrastructure +11% yr/ yr zSystems +21% Distributed Infrastructure +5% zSystems performance reflects strong adoption of new z16 capabilities Distributed Infrastructure growth fueled by Power innovation F
Slide 10: Summary: 2022 and 2023 expectations
10 Summary 2022 Positions IBM for Sustainable Growth More focused company aligned to clients’ needs Continued progress across portfolio, go - to - market, ecosystem Investments in talent and innovation Higher - growth, higher - value business 2023 Expectations Revenue growth @CC in line with mid - s
Slide 11: ibm.com/investor
ibm.com/investor
Slide 12: Supplemental material
12 Supplemental material ● 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) Unless other
Slide 13: Revenue and P&L highlights
13 Revenue and P&L highlights Revenue growth rates @CC, $ in billions Revenue highlights 4Q22 B/(W) Yr/Yr Revenue $16.7 6% Hybrid cloud (FY) $22.4 17% Operating P&L highlights % 4Q22 B/(W) Yr/Yr Gross profit margin 58.6% 0.6 pts Expense E/R 35.7% 1.1 pts Pre-tax income margin 22.9% 1.7 pts Net incom
Slide 14: Cash flow and balance sheet highlights
14 Cash flow and balance sheet highlights $ in billions *Non - GAAP financial measure; excludes Financing receivables **Non - GAAP financial measure; adjusts for Financing receivables and net capital expenditures Balance sheet Dec 22 Dec 21 Cash & marketable securities $8.8 $7.6 Total debt $50.9 $51
Slide 15: Currency impact on revenue growth
15 Currency impact on revenue growth Quarterly averages per US $ 4Q22 Yr/Yr Spot 1Q23 2Q23 3Q23 4Q23 FY23 1/24/23 Euro 0.98 (12%) 0.92 (4%) 2% 7% 6% 3% Pound 0.85 (15%) 0.81 (9%) (2%) 5% 5% (0%) Yen 141 (24%) 130 (12%) (0%) 6% 8% 1% Revenue impact, future @ 1/24/23 Spot (6 pts) (3-4 pts) (0-1 pts) 2
Slide 16: Software & Infrastructure segment details
16 Software & Infrastructure segment details Revenue growth rates @CC, $ in billions *Annual recurring revenue for Hybrid Platform & Solutions, growth rate @CC Software segment 4Q22 B/(W) Yr/Yr Revenue $7.3 8% Hybrid Platform & Solutions $5.2 10% Red Hat 15% Automation 9% Data & AI 8% Security 10% T
Slide 17: Consulting segment details
17 Consulting segment details Consulting segment 4Q22 B/(W) Yr/Yr Revenue $4.8 9% Business Transformation $2.2 7% Technology Consulting $0.9 10% Application Operations $1.6 12% Gross profit margin 27.4% 0.3 pts Pre-tax income $0.5 20% Pre-tax income margin 11.0% 1.8 pts Hybrid cloud revenue (FY) $9.
Slide 18: Expense summary
18 Expense summary $ in billions *includes acquisitions in the last twelve months net of non - operating acquisition - related charges and includes impact of closed divested businesses **represents the percentage change after excluding the impact of currency translation & hedges, acquisitions and di
Slide 19: Balance sheet summary
19 Balance sheet summary $ in billions *includes eliminations of inter - company activity Consolidated Dec 22 Dec 21 Cash & marketable securities $8.8 $7.6 Core (non-IBM Financing) assets* $103.4 $108.9 IBM Financing assets $15.0 $15.5 Total assets $127.2 $132.0 Other liabilities $54.3 $61.3 Core (n
Slide 20: Cash flow summary
20 Cash flow summary $ in billions Consolidated B/(W) B/(W) 4Q22 Yr/Yr FY22 Yr/Yr Net cash from operations $4.0 $1.4 $10.4 ($2.4) Less: IBM Financing receivables ($1.8) ($0.5) ($0.7) ($4.6) Net cash from operations (excluding IBM Financing receivables) $5.8 $1.9 $11.2 $2.3 Net capital expenditures (
Slide 21: Cash flow (ASC230)
21 Cash flow (ASC230) Consolidated $ in billions 4Q22 4Q21 FY22 FY21 Net income from operations $2.7 $2.3 $1.6 $5.7 Pension settlement charges - - $5.9 - Depreciation / amortization of intangibles $1.1 $1.4 $4.8 $6.4 Stock-based compensation $0.2 $0.3 $1.0 $1.0 Working capital / other $1.7 ($0.1) ($
Slide 22: Revenue and P&L highlights – FY 2022
22 Revenue and P&L highlights – FY 2022 Revenue growth rates @CC, $ in billions Revenue highlights FY22 B/(W) sales to KD Yr/Yr benefit Revenue $60.5 12% ~4 pts Hybrid cloud $22.4 17% Geography revenue FY22 B/(W) sales to KD Yr/Yr benefit Americas $31.1 10% ~3 pts Europe/ME/Africa $18.0 14% ~5 pts A
Slide 23: Software & Infrastructure segment details – FY 2022
23 Software & Infrastructure segment details – FY 2022 Software segment FY22 B/(W) sales to KD Yr/Yr benefit Revenue $25.0 12% ~6 pts Hybrid Platform & Solutions $17.9 9% ~1 pts Red Hat 17% Automation 7% Data & AI 6% Security 7% Transaction Processing $7.2 19% ~19 pts Pre-tax income $6.2 27% Pre-tax
Slide 24: Consulting segment details – FY 2022
24 Consulting segment details – FY 2022 Revenue and signings growth rates @CC, $ in billions Consulting segment FY22 B/(W) Yr/Yr Revenue $19.1 15% Business Transformation $8.8 14% Technology Consulting $3.8 17% Application Operations $6.5 15% Gross profit margin 25.5% (2.5 pts) Pre-tax income $1.7 1
Slide 25: Expense summary – FY 2022
25 Expense summary – FY 2022 $ in billions *includes acquisitions in the last twelve months net of non - operating acquisition - related charges and includes impact of closed divested businesses **represents the percentage change after excluding the impact of currency translation & hedges, acquisiti
Slide 26: Retirement-related summary
26 Retirement - related summary $ in billions *Qualified defined benefit plans ** Actual ROA in 2021 not restated for Kyndryl spin - off *** Includes a one - time non - cash pre - tax pension settlement charge of $5.9 billion **** Includes cash and non - cash contributions Key assumptions and metric
Slide 27: Software segment categories
Red Hat Automation Data & AI Security 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, Ansible Automation: incl. business automation
Slide 28: Consulting segment categories
28 Consulting segment categories Revenue categories 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 design and operations, data and an
Slide 29: Infrastructure segment categories
29 Infrastructure segment categories Revenue categories Revenue categories – FY 2022 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 zSystems :
Slide 30: Non-GAAP supplemental materials: revenue performance
30 Non - GAAP supplemental materials The above reconciles the non - GAAP financial information contained in the “Financial highlights”, “Revenue and P&L highlights”, “ Revenue and P&L highlights – FY 2022” and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 in
Slide 31: Non-GAAP supplemental materials: 4Q segment revenue
31 Non - GAAP supplemental materials The above reconciles the non - GAAP financial information contained in the “Software”, “Consulting”, “Infrastructure”, “Software & Infrastructure segment details”, “Consulting segment details”, and “Prepared remarks” discussions in the company’s earnings presenta
Slide 32: Non-GAAP supplemental materials: FY segment revenue
32 Non - GAAP supplemental materials The above reconciles the non - GAAP financial information contained in the “Software & Infrastructure segment details – FY 2022”, “Consulting segment details – FY 2022”, and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 i
Slide 33: Non-GAAP supplemental materials: expense summary
33 Non - GAAP supplemental materials *r epresents the percentage change after excluding the impact of currency translation & hedges, acquisitions and divestitures. ** includes a one - time non - cash pre - tax pension settlement charge of $5.9 billion The above reconciles the non - GAAP financial in
Slide 34: Non-GAAP supplemental materials: 4Q 2022 continuing operations
34 Non - GAAP supplemental materials $ in millions (except EPS which is in whole dollars) The above reconciles the non - GAAP financial information contained in the “Revenue and P&L highlights”, “Expense summary” and “Pr epared remarks” discussions in the company’s earnings presentation. See Exhibit
Slide 35: Non-GAAP supplemental materials: FY 2022 continuing operations
35 Non - GAAP supplemental materials $ in millions (except EPS which is in whole dollars) *includes a one - time non - cash pre - tax pension settlement charge of $5.9 billion ($4.4 billion net of tax) The above reconciles the non - GAAP financial information contained in the “Revenue and P&L highli
Slide 36: Non-GAAP supplemental materials: 2023 pre-tax margin expectations
36 Non - GAAP supplemental materials *excludes expected ~$0.3B charge to address remaining stranded costs from portfolio actions ** Yr / Yr reflects a one - time non - cash pension settlement charge of $5.9 billion in 2022 The above reconciles the non - GAAP financial information contained in the “P
Slide 37: ibm.com/investor
ibm.com /investor
International Business Machines — Q4 2022 Earnings Presentation on 6ix