34 slides from International Business Machines's earnings presentation, Apr 19, 2010
Slide 1: 1Q 2010 Earnings Presentation
® 1Q 2010 Earnings Presentation April 19, 2010 www.ibm.com/investor
Slide 2: Forward Looking Statements
Forward Looking Statements Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerni
Slide 3: 1Q 2010 Highlights
1Q 2010 Highlights Pre-Tax Income $3.5B +13% yr/yr EPS $1.97 +16% yr/yr Free Cash Flow* $1.4B +$400M yr/yr ¾ Significant improvements in revenue growth rates across the segments and geographies ¾ Continued margin expansion through improving mix and ongoing focus on productivity ¾ Strong cash flow pe
Slide 4: Revenue Growth Rate Improvement
Revenue Growth Rate Improvement @ Constant Currency Segment Revenue 1Q10 Yr/Yr vs. Geo Revenue 1Q10 Yr/Yr vs. 4Q09 Yr/Yr 4Q09 Yr/Yr Global Technology Services 3 pts Americas 6 pts Global Business Services 4 pts EMEA 5 pts Asia 4 pts Software 9 pts Major Markets 5 pts Systems & Technology 11 pts Grow
Slide 5: Financial Summary
Financial Summary $ in Billions, except EPS B/(W) 1Q10 Yr/Yr Revenue $22.9 5% @CC Flat GP % 43.6% 0.2 pts Expense $6.5 (2%) Pre-Tax Income $3.5 13% PTI Margin 15.4% 1.0 pts Tax Rate 26.0% 0.5 pts Net Income $2.6 13% Shares (Diluted) (M) 1,321.6 2% EPS $1.97 16% Improving revenue growth and margin ex
Slide 6: Revenue by Geography
Revenue by Geography $ in Billions B/(W) Yr/Yr 1Q10 Rptd @CC Canada/ Americas $9.5 2% Flat LA Europe/ME/A 7.6 5% (2%) U.S. EMEA Asia Pacific 5.3 10% 1% -1% Total Geographies $22.3 5% Flat APac Japan +7% -3% @CC IBM $22.9 5% Flat @CC OEM Major Markets 2% (2%) +18% Growth Markets 20% 8% BRIC Countries
Slide 7: Revenue and Gross Margin by Segment
Revenue and Gross Margin by Segment Revenue Gross Profit Margin $ in Billions B/(W) Yr/Yr B/(W) 1Q10 Rptd @CC 1Q10 Yr/Yr Pts Global Technology Services $9.3 6% Flat 34.4% 0.5 pts Global Business Services 4.4 Flat (5%) 27.3% 0.7 pts Software 5.0 11% 5% 84.6% 0.4 pts Systems & Technology 3.4 5% 2% 33.
Slide 8: Expense Summary
Expense Summary B/(W) Yr/Yr Drivers B/(W) $ in Billions 1Q10 Yr/Yr Currency Acq. (1) Ops SG&A (2) $5.7 (8%) (7 pts) (1 pts) 0 pts RD&E 1.5 (2%) (3 pts) (1 pts) 2 pts IP and Development Income (0.3) (2%) Other (Income)/Expense (3) (0.5) 80% Interest Expense 0.1 40% Total Expense & Other Income $6.5 (
Slide 9: Pre-Tax Income by Segment
Pre-Tax Income by Segment $ in Billions B/(W) Yr/Yr B/(W) Yr/Yr Segment B/(W) w/o Unique Segment B/(W) w/o Unique PTI $ Yr/Yr Items* PTI % Yr/Yr Items* Global Technology Services $1.0 (13%) 9% 10.0% (2.1 pts) 0.3 pts Global Business Services 0.4 (15%) (4%) 9.7% (1.6 pts) (0.5 pts) Software 2.1 54% 2
Slide 10: Services Segments
Services Segments Global Technology Services (GTS) Global Business Services (GBS) $ in Billions B/(W) Yr/Yr $ in Billions B/(W) Yr/Yr 1Q10 Rptd @CC 1Q10 Rptd @CC Revenue (External) $9.3 6% Flat Revenue (External) $4.4 Flat (5%) Gross Margin (External) 34.4% 0.5 pts Gross Margin (External) 27.3% 0.7
Slide 11: Software Segment
Software Segment B/(W) Yr/Yr $ in Billions 1Q10 Rptd @CC Revenue (External) $5.0 11% 5% Gross Margin (External) 84.6% 0.4 pts PTI Margin 35.5% 9.6 pts PTI Margin excl Unique Items 27.0% 2.8 pts 1Q10 Revenue Yr/Yr 1Q10 Revenue Rptd @CC (% of Total Software) WebSphere Family 13% 8% Information Managem
Slide 12: Systems & Technology Segment
Systems & Technology Segment $ in Billions B/(W) Yr/Yr 1Q10 Rptd @CC Revenue (External) $3.4 5% 2% Gross Margin (External) 33.6% (0.4 pts) PTI Margin (4.8%) (5.6 pts) PTI Margin excl Unique Items (3.2%) (2.2 pts) 1Q10 Revenue Yr/Yr 1Q10 Revenue Rptd @CC (% of Total Sys & Tech) System z (17%) (18%) P
Slide 13: Cash Flow Analysis
Cash Flow Analysis B/(W) $ in Billions 1Q10 Yr/Yr FY09 Net Cash from Operations $4.4 $0.1 $20.8 Less: Global Financing Receivables 2.1 (0.5) 1.9 Net Cash from Operations 2.3 0.5 18.9 (excluding GF Receivables) Net Capital Expenditures (0.9) (0.1) (3.7) Free Cash Flow (excluding GF Receivables) 1.4 0
Slide 14: Balance Sheet Summary
Balance Sheet Summary $ in Billions Mar. 09 Dec. 09 Mar.10 Cash & Marketable Securities $12.3 $14.0 $14.0 Non-GF Assets* 59.1 61.7 61.3 Global Financing Assets 30.5 33.3 29.9 Total Assets 101.9 109.0 105.2 Other Liabilities 57.3 60.2 56.7 Non-GF Debt* 7.6 3.7 4.1 Global Financing Debt 23.4 22.4 22.2
Slide 15: EPS Bridge – 1Q09 to 1Q10
EPS Bridge – 1Q09 to 1Q10 $0.04 $1.97 $0.10 $0.01 $0.03 $0.09 $1.70 1Q09 EPS Revenue Growth Gross Expense Tax Share 1Q10 EPS @ Actual Margin Productivity Rate Repurchases www.ibm.com/investor 15
Slide 16: 1Q 2010 Summary
$11.20+ 1Q 2010 Summary 2010 ¾ Broad-based improvement in revenue performance 2009 $10.01 2008 $8.89 ¾ Margin expansion through shift to higher value and focus on productivity 2007 $7.15 ¾ Strong profit and cash performance 2006 $6.05 ¾ Continued IBM’s transformation: • Acquired high value capabilit
Slide 17: www.ibm.com/investor
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Slide 18: 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, Software ¾ Global Financ
Slide 19: Currency – Year/Year Comparison
Currency – Year/Year Comparison Quarterly Averages per US $ 4/16 Yr/Yr @ 4/16 Spot 1Q10 Yr/Yr Spot 2Q10 3Q10 4Q10 Euro 0.72 6% 0.74 (1%) (6%) (9%) Pound 0.64 8% 0.65 0% (6%) (6%) Yen 91 3% 93 5% 1% (3%) IBM Revenue Impact 5 pts 2-3 pts ~(1)-0 pts ~(2-3 pts) January 19 View ~6-7 pts ~4-5 pts ~1-2 pts
Slide 20: Supplemental Segment Information – 1Q 2010
Supplemental Segment Information – 1Q 2010 Revenue Growth Backlog Global Services Yr/Yr @CC Global Services 1Q10 GTS Outsourcing 8% 1% Backlog $134B Integrated Tech Services 2% (4%) Change in Backlog due to Currency Maintenance 7% 1% Quarter-to-Quarter ($2B) Global Technology Services 6% Flat Year-t
Slide 21: Supplemental Segment Information – 1Q 2010
Supplemental Segment Information – 1Q 2010 Revenue Growth Revenue Growth Systems & Technology Yr/Yr @CC GP% Share Software Yr/Yr @CC WebSphere Family 13% 8% System z (17%) (18%) = Information Management 11% 6% POWER Systems (17%) (20%) = Tivoli 23% 18% System x 36% 31% Lotus 1% (3%) Storage 11% 7% R
Slide 22: Global Financing Portfolio
Global Financing Portfolio 1Q10 – $22.0B Net External Receivables Investment Grade Non-Investment Grade 60% 40% 40% 35% 30% 25% 20% 35% 15% 25% 10% 21% 11% 5% 3% 5% 0% Aaa-A3 Baa1-Baa3 Ba1-Ba2 Ba3-B1 B2-B3 Caa-D 1Q10 4Q09 1Q09 Identified Loss Rate 1.9% 1.6% 1.7% Anticipated Loss Rate 0.4% 0.5% 0.6%
Slide 23: Revenue by Key Industry Sales Unit
Revenue by Key Industry Sales Unit $ in Billions B/(W) Yr/Yr 1Q10 Rptd @CC Financial Services $6.4 5% (1%) Public Public 3.7 5% Flat Industrial Industrial 2.5 3% (2%) Financial Distribution Distribution 2.3 10% 5% Services Communications 2.2 (1%) (7%) Comms General Business General Business 4.4 10%
Slide 24: Cash Flow (FAS 95)
Cash Flow (FAS 95) $ in Billions 1Q10 1Q09 Net Income from Operations $2.6 $2.3 Depreciation / Amortization of Intangibles 1.2 1.2 Stock-based Compensation 0.2 0.1 Working Capital / Other (1.6) (1.9) Global Financing A/R 2.1 2.6 Net Cash provided by Operating Activities 4.4 4.4 Capital Expenditures,
Slide 25: Revenue Growth Rate Improvement @CC
Revenue Growth Rate Improvement @CC 1Q10 Yr/Yr vs. 4Q09 Yr/Yr Segment Revenue 4Q09 1Q10 Growth Rate Geo Revenue 4Q09 1Q10 Growth Rate Yr/Yr Yr/Yr Improvement Yr/Yr Yr/Yr Improvement Global Tech Svcs (3%) Flat 3 pts Americas (6%) Flat 6 pts Global Business Svcs (9%) (5%) 4 pts EMEA (7%) (2%) 5 pts As
Slide 26: Supplemental EPS Information – Acquisition-Related Activity
Supplemental EPS Information – Acquisition-Related Activity The company is including a view of the impact of certain acquisition- related charges on IBM’s earnings results. Management’s view is that this supplemental information provides additional insight into the company’s ongoing operations and e
Slide 27: Supplemental EPS Information – Acquisition-Related Activity - 2010
Supplemental EPS Information – Acquisition-Related Activity - 2010 $ in Millions, except EPS 1Q10 As Reported Pre-Tax Income $3,515 Net Income $2,601 EPS $1.97 Adjustments Pre-Tax Income Total $116 Amortization of Acquired Intangibles 115 In Process R&D 0 Acquisition-Related Charges 2 Net Income $86
Slide 28: Non-GAAP Supplementary 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/or earnings presentation materials, the follo
Slide 29: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Debt-to-Capital Ratio Management presents its debt-to-capital ratio excluding the Global Financing business. A financing business is managed on a leveraged basis. The company funds its Global Financing segment using a debt-to-equity ratio target of approximately 7 to
Slide 30: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Segment Revenue Growth Rates 1Q10 Yr/Yr vs. 4Q09 Yr/Yr 4Q09 Yr/Yr As Rptd @CC As Rptd @CC Global Technology Services 2 pts 3 pts 4% (3%) Global Business Services 3 pts 4 pt (3%) (9%) Software 8 pts 9 pts 2% (4%) Systems & Technology 9 pts 11 pts (4%
Slide 31: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Geography Revenue Growth 1Q10 Yr/Yr As Rptd @CC Asia Pacific, other than Japan 21% 7% Japan Flat (3%) UK 17% 8% Reconciliation of Services Segment Revenue Growth Rates 1Q10 Yr/Yr vs. 4Q09 Yr/Yr As Rptd @CC Global Services 2 pts 3 pts The above serve
Slide 32: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Pre-Tax Income 1Q10 1Q09 B/(W) Workforce Workforce w/o w/o Yr/Yr w/o B/(W) PLM Gain Rebalancing Geodis Gain Rebalancing Unique Unique Unique Pre-Tax Income 1Q10 1Q09 Yr/Yr 1Q10 1Q10 1Q09 1Q09 Items* Items* Items* Global Technology Services $1.0 $1.1
Slide 33: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Debt-to-Capital Ratio 1Q10 FY09 1Q09 Non-Global Financing Debt / Capital 18% 16% 42% IBM Consolidated Debt / Capital 54% 53% 69% The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet Summary” discussion reg
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