34 slides from International Business Machines's earnings presentation, Apr 16, 2014
Slide 1: 1Q 2014 Earnings Presentation
1Q 2014 Earnings Presentation April 16, 2014 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: 1Q 2014 Overview
1Q 2014 Overview 1Q14 $ Yr/Yr Revenue $22.5 (4%) @CC excl. Cust. Care BPO (1%) Operating (Non-GAAP) EPS $2.54 (15%) Significant actions to continue shift to higher value Revenue dynamics: • Growth in Software, Services and Financing @CC • Hardware impacted by product cycle and ongoing business model
Slide 4: Key Financial Metrics
Key Financial Metrics $ in Billions, except EPS P&L Ratios P&L Highlights B/(W) B/(W) (Operating) 1Q14 Yr/Yr 1Q14 Yr/Yr Revenue $22.5 (4%) GP Margin 47.6% 0.9 pts @CC (2%) PTI Margin 14.7% (2.7 pts) @CC excl. Cust. Care (1%) Tax Rate 20.0% (2.7 pts) PTI – Operating $3.3 (19%) NI – Operating $2.6 (22
Slide 5: Revenue by Geography
Revenue by Geography $ in Billions B/(W) Yr/Yr 1Q14 Rptd @CC Americas $9.6 (4%) (2%) Canada/ Europe/ME/A 7.6 4% 1% LA Asia Pacific 5.0 (12%) (6%) EMEA U.S. Total Geographies $22.1 (4%) (2%) -4% AP Japan ex. Japan IBM $22.5 (4%) (2%) +2% excl. Cust. Care BPO (3%) (1%) @CC OEM Major Markets (2%) (1%)
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) 1Q14 Rptd @CC 1Q14 Yr/Yr Pts Global Technology Services $9.3 (3%) (1%) 37.9% 1.2 pts excl. Cust. Care BPO (1%) 2% Global Business Services 4.5 Flat 2% 30.0% 1.4 pts Software 5.7 2% 2% 87.
Slide 7: Expense Summary
Expense Summary B/(W) B/(W) Yr/Yr Drivers $ in Billions 1Q14 Yr/Yr Currency Acq.* Base SG&A – Operating** $6.1 (13%) 1 pts (2 pts) (13 pts) RD&E – Operating 1.5 7% 1 pts (2 pts) 8 pts IP and Development Income (0.2) 13% Other (Income)/Expense** (0.1) 88% Interest Expense 0.1 (12%) Operating Expense
Slide 8: Services Segments
Services Segments Global Technology Services (GTS) Global Business Services (GBS) B/(W) Yr/Yr B/(W) Yr/Yr $ in Billions 1Q14 Rptd @CC $ in Billions 1Q14 Rptd @CC Revenue (External) $9.3 (3%) (1%) Revenue (External) $4.5 Flat 2% excl. Cust. Care BPO (1%) 2% Gross Margin (External) 37.9% 1.2 pts Gross
Slide 9: Software Segment
Software Segment B/(W) Yr/Yr $ in Billions 1Q14 Rptd @CC Revenue (External) $5.7 2% 2% Gross Margin (External) 87.5% 0.3 pts PTI Margin* 29.1% (2.4 pts) * Reflects Workforce Rebalancing charge of $0.2B 1Q14 Revenue Yr/Yr 1Q14 Revenue Rptd @CC (% of Total Software) WebSphere 12% 12% Information Manag
Slide 10: Systems & Technology Segment
Systems & Technology Segment B/(W) Yr/Yr $ in Billions 1Q14 Rptd @CC Revenue (External) $2.4 (23%) (23%) Gross Margin (External) 27.0% (5.3 pts) PTI Margin* (25.8%) (13.2 pts) * Reflects Workforce Rebalancing charge of $0.2B 1Q14 Revenue Yr/Yr 1Q14 Revenue (% of Total Sys & Tech) Rptd @CC System z (
Slide 11: Cash Flow Analysis
Cash Flow Analysis B/(W) $ in Billions 1Q14 Yr/Yr FY13 Net Cash from Operations $3.3 ($0.7) $17.5 Less: Global Financing Receivables 1.8 0.2 (1.3) Net Cash from Operations 1.5 (0.9) 18.8 (excluding GF Receivables) Net Capital Expenditures (0.9) (0.2) (3.8) Free Cash Flow (excluding GF Receivables) 0
Slide 12: Balance Sheet Summary
Balance Sheet Summary $ in Billions Mar. 13 Dec. 13 Mar. 14 Cash & Marketable Securities $12.0 $11.1 $9.7 Non-GF Assets* 70.7 76.5 76.7 Global Financing Assets 34.5 38.7 36.2 Total Assets 117.3 126.2 122.6 Other Liabilities 64.6 63.6 61.9 Non-GF Debt* 8.2 12.2 15.7 Global Financing Debt 25.2 27.5 28
Slide 13: 1Q 2014 Summary
1Q 2014 Summary Significant actions to continue shift to higher value and right-size business • Continued investment aligned with strategic shifts of Data, Cloud, Engagement – SoftLayer, BlueMix, Watson – Aspera and Cloudant acquisitions • Divesting businesses that no longer fit strategic profile •
Slide 14: www.ibm.com/investor
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Slide 15: Supplemental Materials
Supplemental Materials Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding Currency – Year/Year Comparison Supplemental Segment Information – Global Services Supplemental Segment Information – Systems & Technology, Softwar
Slide 16: Currency – Year/Year Comparison
Supplemental Materials Currency – Year/Year Comparison Quarterly Averages per US $ 4/15 Yr/Yr @ 4/15 Spot 1Q14 Yr/Yr Spot 2Q14 3Q14 4Q14 FY14 Euro 0.73 4% 0.72 5% 4% 2% 4% Pound 0.60 6% 0.60 8% 7% 3% 6% Yen 103 (11%) 102 (3%) (3%) (1%) (4%) IBM Revenue (2 pts) ~0 pts ~1 pts ~0 pts ~0 pts Impact (US$
Slide 17: Supplemental Segment Information – 1Q 2014
Supplemental Materials Supplemental Segment Information – 1Q 2014 Global Services Revenue Global Services Backlog / Signings Revenue Growth $ in Billions Backlog Yr/Yr @CC 1Q14 Yr/Yr @CC GTS Outsourcing (5%) (3%) Total Backlog $138 (2%) (2%) excl. Cust. Care BPO (1%) 1% excl. Cust. Care BPO Flat 1%
Slide 18: Supplemental Segment Information – 1Q 2014
Supplemental Materials Supplemental Segment Information – 1Q 2014 Systems & Technology Software Revenue Growth Revenue Growth Yr/Yr @CC GP% Yr/Yr @CC System z (40%) (40%) WebSphere 12% 12% Power Systems (22%) (21%) Information Management 1% 2% Tivoli 7% 7% System x (18%) (17%) Workforce Solutions (4
Slide 19: Pre-Tax Income by Segment
Supplemental Materials Pre-Tax Income by Segment Segment PTI $ Segment PTI Margin $ in Billions 1Q14 B/(W) B/(W) Yr/Yr 1Q14 B/(W) B/(W) Yr/Yr PTI $ Yr/Yr Excl. WFR* PTI % Yr/Yr Excl. WFR* Global Technology Services $1.3 (15%) 5% 14.1% (2.0 pts) 1.3 pts Global Business Services 0.6 (11%) 12% 13.6% (1
Slide 20: Global Financing Portfolio
Supplemental Materials Global Financing Portfolio 1Q14 – $29.7B Net External Receivables Investment Grade Non-Investment Grade 58% 42% 40% 30% 20% 39% 10% 19% 21% 11% 8% 2% 0% AAA to A- BBB+ to BBB- BB+ to BB BB- to B+ B to B- CCC+ to D 1Q14 4Q13 1Q13 Identified Loss Rate 1.0% 0.8% 0.8% Anticipated
Slide 21: Revenue by Key Industry Sales Unit
Supplemental Materials Revenue by Key Industry Sales Unit $ in Billions B/(W) Yr/Yr* Distribution 1Q14 Rptd @CC Industrial Comms Financial Services $5.1 Flat 3% Public 2.0 3% 4% Public Industrial 1.2 (12%) (11%) Distribution 1.2 4% 5% Financial Enterprise & Services MidMarket Communications 1.2 (11%
Slide 22: Cash Flow (FAS 95)
Supplemental Materials Cash Flow (FAS 95) $ in Billions 1Q14 1Q13 Net Income from Operations $2.4 $3.0 Depreciation / Amortization of Intangibles 1.1 1.2 Stock-based Compensation 0.1 0.1 Working Capital / Other (2.1) (1.9) Global Financing A/R 1.8 1.6 Net Cash provided by Operating Activities 3.3 4.
Slide 23: Non-GAAP Supplemental Materials
Supplemental Materials Non-GAAP Supplemental 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 m
Slide 24: Non-GAAP Supplemental Materials
Supplemental Materials Non-GAAP Supplemental 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 cas
Slide 25: Reconciliation of Operating Earnings Per Share
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Operating Earnings Per Share 2014 Expectations IBM GAAP EPS $17.00+ IBM Operating EPS (Non-GAAP) $18.00+ Adjustments Acquisition-Related Charges * $0.72 Amortization of Purchased Intangibles $0.69 Other Acquisition-Related Char
Slide 26: GAAP to Operating (Non-GAAP) Bridge – 1Q 2014
Supplemental Materials Non-GAAP Supplemental Materials GAAP to Operating (Non-GAAP) Bridge – 1Q 2014 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $10,543 $104 $52 $10,699 SG&A 6,289 (97) (87) 6,104 RD&E 1,501 0 17
Slide 27: GAAP to Operating (Non-GAAP) Bridge – 1Q 2013
Supplemental Materials Non-GAAP Supplemental Materials GAAP to Operating (Non-GAAP) Bridge – 1Q 2013 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $10,678 $95 $164 $10,937 SG&A 5,577 (92) (104) 5,381 RD&E 1,644 0 (1
Slide 28: GAAP to Operating (Non-GAAP) Bridge – 1Q 2014 and 1Q 2013
Supplemental Materials Non-GAAP Supplemental Materials GAAP to Operating (Non-GAAP) Bridge – 1Q 2014 and 1Q 2013 Acquisition- Retirement- related related Operating 1Q 2014 GAAP Adjustments* Adjustments ** (Non-GAAP) Gross Profit Margin 46.9% 0.5 pts 0.2 pts 47.6% PTI Margin 13.3% 0.9 pts 0.5 pts 14.
Slide 29: Reconciliation of B/(W) Yr/Yr Expense Drivers – 1Q14
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of B/(W) Yr/Yr Expense Drivers – 1Q14 Non-GAAP Operating GAAP Adjustments (Non-GAAP) SG&A Currency 1 pts 0 pts 1 pts Acquisitions (2 pts) 0 pts (2 pts) Base (12 pts) (1 pts) (13 pts) RD&E Currency 1 pts 0 pts 1 pts Acquisitions (2
Slide 30: Reconciliation of B/(W) Yr/Yr Expense Drivers – 1Q14
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of B/(W) Yr/Yr Expense Drivers – 1Q14 Non-GAAP Operating GAAP Adjustments (Non-GAAP) Operating Expense & Other Income Base excluding workforce rebalancing and divestiture gains 5 pts (1 pts) 4 pts The above serves to reconcile the
Slide 31: Reconciliation of Debt-to-Capital Ratio
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Debt-to-Capital Ratio March 2014 Dec. 2013 March 2013 Non-Global Financing Debt / Capital 55% 39% 34% IBM Consolidated Debt / Capital 72% 63% 63% The above serves to reconcile the Non-GAAP financial information contained in the
Slide 32: Reconciliation of Free Cash Flow (excluding GF Receivables)
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow (excluding GF Receivables) 12 months $ in Billions ended 3/31/14 Net Cash from Operations $16.8 Less: Global Financing Receivables (1.1) Net Cash from Operations (excluding GF 17.9 Receivables) Net Capital Expend
Slide 33: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplemental Materials Reconciliation of Revenue Growth 1Q14 Yr/Yr 4Q13 Yr/Yr At Constant At Constant As Reported Currency As Reported Currency IBM (5%) (3%) IBM Total Services (2%) ~0 IBM Total Services excluding customer care business ~0 2% Japan (8%) 2% China (19%)
Slide 34: www.ibm.com/investor
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