International Business Machines Corporation · NYSE:IBM
International Business Machines — Q3 2022 Earnings Presentation
29 slides from International Business Machines's earnings presentation, Oct 20, 2022
Slide 1: IBM 3Q 2022 Earnings
IBM 3Q 2022 Earnings October 19, 2022 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
“IBM delivered strong revenue growth in the quarter, reflecting our continued focus on the execution of our strategy. Globally, clients view technology as an opportunity to enhance their business, which is evident in the results across our portfolio. With our year - to - date performance, we now exp
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: 3Q22 Financial highlights
$14.1B Revenue $4 ..1 B Free Cash Flow (YTD) 3Q22 Financial highlights Revenue growth rates @CC 6 15% R evenue growth incl. ~5 pts from sales to Kyndryl >70% R evenue mix in software and consulting $22.2B Hybrid cloud revenue (TTM), +20% yr/yr 180bps Pre - tax margin expansion (Operating) $9.7B C as
Slide 7: Software 3Q22 results
Strong and growing software recurring revenue base Annual recurring revenue* of $13B, +9% yr / yr Pre - tax margin reflects solid revenue performance 7 $5.8B Revenue Revenue categories Transaction Processing +33% yr/ yr ~26 pts sales to Kyndryl +14% Revenue growth (includes ~8 pts from sales to Kynd
Slide 8: Consulting 3Q22 results
8 $4.7B Revenue Revenue categories Application Operations +17% yr/yr +16% Revenue growth Pervasive growth driven by demand for digital transformations Strength in Red Hat and strategic partner practices Book - to - bill ratio of 1.05 for the last year Profit reflects continued labor cost inflation;
Slide 9: Infrastructure 3Q22 results
9 $3.4B Revenue Revenue categories Infrastructure Support +5% yr/ yr ~7 pts sales to Kyndryl +23% Revenue growth (includes ~9 pts from sales to Kyndryl) Hybrid Infrastructure +41% yr/ yr ~11 pts sales to Kyndryl zSystems +98% Distributed Infrastructure +21% zSystems performance fueled by new workloa
Slide 10: Summary
10 Summary 3Q 2022 Progress Executing a focused hybrid cloud and AI strategy Broad - based revenue growth Port folio mix contributes to profit and margin Generated >$4B of free c ash flow year to date FY 2022 Expectations Revenue growth @CC above mid - single digit model , plus ~3.5 pts from sales t
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 Unless otherwise specified, results are presented on a
Slide 13: Revenue and P&L highlights
13 Revenue and P&L highlights Revenue growth rates @CC, $ in billions Operating P&L highlights $ 3Q22 B/(W) Yr/Yr Gross profit $7.6 4% Expense $5.6 1% Pre-tax income $2.0 23% Net income $1.7 (1%) Earnings per share $1.81 (2%) Operating P&L highlights % 3Q22 B/(W) Yr/Yr Gross profit margin 53.8% (1.2
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 Sep 22 Dec 21 Sep 21 Cash & marketable securities $9.7 $7.6 $8.4 Total de
Slide 15: Currency impact on growth
15 Currency impact on growth Quarterly averages per US $ 3Q22 Yr/Yr Spot 4Q22 FY22 1Q23 2Q23 3Q23 FY23 10/18/22 Euro 0.99 (17%) 1.02 (16%) (14%) (14%) (8%) (2%) (6%) Pound 0.85 (17%) 0.88 (19%) (13%) (19%) (11%) (4%) (8%) Yen 138 (26%) 149 (31%) (21%) (28%) (15%) (8%) (12%) Revenue impact, future @
Slide 16: Software & Infrastructure segment details
16 Software & Infrastructure segment details Includes sales to Kyndryl Software segment 3Q22 B/(W) Yr/Yr Revenue $5.8 14% Hybrid Platform & Solutions $4.2 8% Red Hat 18% Automation 3% Data & AI 4% Security 6% Transaction Processing $1.6 33% Pre-tax income $1.3 32% Pre-tax income margin 22.5% 4.2 pts
Slide 17: Consulting segment details
17 Consulting segment details Revenue and signings growth rates @CC, $ in billions Consulting segment 3Q22 B/(W) Yr/Yr Revenue $4.7 16% Business Transformation $2.2 14% Technology Consulting $0.9 17% Application Operations $1.6 17% Gross profit margin 26.0% (3.5 pts) Pre-tax income $0.5 (1%) Pre-tax
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, acquisitions and divestitures Expense 3Q
Slide 19: Balance sheet summary
19 Balance sheet summary $ in billions *includes eliminations of inter - company activity Consolidated Sep 22 Dec 21 Sep 21 Cash & marketable securities $9.7 $7.6 $8.4 Core (non-IBM Financing) assets* $102.9 $108.9 $117.8 IBM Financing assets $13.2 $15.5 $18.0 Total assets $125.8 $132.0 $144.2 Other
Slide 20: Cash flow summary
20 Cash flow summary $ in billions Consolidated QTD B/(W) YTD B/(W) 3Q22 Yr/Yr 3Q22 Yr/Yr Net cash from operations $1.9 ($0.8) $6.5 ($3.8) Less: IBM Financing receivables $0.7 ($0.8) $1.1 ($4.2) Net cash from operations (excluding IBM Financing receivables) $1.2 ($0.0) $5.4 $0.4 Net capital expendit
Slide 21: Cash flow (ASC230)
21 Cash flow (ASC230) Consolidated $ in billions QTD QTD YTD YTD 3Q22 3Q21 3Q22 3Q21 Net income/(loss) from operations ($3.2) $1.1 ($1.1) $3.4 Pension settlement charges $5.9 - $5.9 - Depreciation / amortization of intangibles $1.2 $1.7 $3.7 $5.0 Stock-based compensation $0.3 $0.3 $0.7 $0.7 Working
Slide 22: 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 23: Consulting segment categories
23 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 24: Infrastructure segment categories
24 Infrastructure segment categories Revenue categories Revenue categories – FY 2021 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 25: Non-GAAP supplemental materials
25 Non - GAAP supplemental materials The above reconciles the non - GAAP financial information contained in the “Financial highlights”, “Revenue and P&L highlights”, a nd “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8 - K date
Slide 26: Non-GAAP supplemental materials
26 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 27: Non-GAAP supplemental materials
27 Non - GAAP supplemental materials The above reconciles the non - GAAP financial information contained in the “Expense summary” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8 - K dated October 19, 2022, for additional information on the use of
Slide 28: Non-GAAP supplemental materials
GAAP Acquisition- related adjustments Retirement- related adjustments* Tax reform impacts Kyndryl- related impact Operating (non-GAAP) Gross profit $7,430 $165 — — — $7,595 Gross profit margin 52.7% 1.2 pts — — — 53.8% SG&A 4,391 (253) — — (0) 4,138 Other (income) & expense 5,755 (1) (6,062) — 14 (2
Slide 29: ibm.com/investor
ibm.com /investor
International Business Machines — Q3 2022 Earnings Presentation on 6ix