International Business Machines Corporation · NYSE:IBM
International Business Machines — Q1 2018 Earnings Presentation
30 slides from International Business Machines's earnings presentation, Apr 17, 2018
Slide 1: Forward Looking Statements and Non-GAAP Information
Forward Looking Statements and Non-GAAP Information 2 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
Slide 2: Overview
Overview 3 1Q18 $19.1B Revenue $2.45 Operating EPS $13.3B Free Cash Flow Last 12 Months y Revenue up 5% yr/yr; nominal revenue growth at constant currency - Strategic imperatives revenue up 15% yr/yr (10% @CC), led by cloud and security - Over last twelve months strategic imperatives revenue of $37.
Slide 3: Operating Earnings per Share Drivers – 1Q17 to 1Q18
Operating Earnings per Share Drivers – 1Q17 to 1Q18 (0.05) 4 0.05 (0.02) 0.04 2.45 0.10 1Q17 Revenue Growth @Actual Pre-Tax Margin (Expansion) Annual Tax Rate (Headwind) Shares Significant Items (Headwind) B/(W) Yr/Yr 1Q18 EPS Yr/Yr Underlying Dynamics: Significant Items* 1Q18 • • • • Nominal revenu
Slide 4: Key Financial Metrics
Key Financial Metrics 5 Last 12 B/(W) Yr/Yr Impact of P&L Ratios (Operating) • • P&L metrics impacted by significant items Gross margin yr/yr trajectory improved, driven by mix and productivity led by services Expense yr/yr increase driven by currency and actions to continue to reposition the busine
Slide 5: Cognitive Solutions Segment
Cognitive Solutions Segment 6 Yr/Yr Impact of Segment Revenue Elements Solutions Software +2% Yr/Yr Transaction Processing Software +1% Yr/Yr Highlights • • Solutions Software growth led by analytics and security Transaction Processing Software growth reflects clients’ long-term commitment to our pl
Slide 6: Global Business Services Segment
Global Business Services Segment 7 Yr/Yr Impact of Segment Revenue Elements Consulting Flat Yr/Yr Application Management (2%) Yr/Yr Global Process Services (6%) Yr/Yr Highlights • Modest improvement in yr/yr revenue performance compared to 4Q17 Third consecutive quarter of growth in Consulting, driv
Slide 7: Technology Services and Cloud Platforms Segment
Technology Services and Cloud Platforms Segment 8 Yr/Yr Impact of s Segment Revenue Elements Infrastructure Services Flat Yr/Yr Integration Software +1% Yr/Yr Technical Support Services (4%) Yr/Yr Highlights • Double-digit growth in Infrastructure Services signings, driven by cloud Three point impro
Slide 8: Systems Segment
Systems Segment 9 Yr/Yr Impact of s Segment Revenue Elements Systems Hardware +6% Yr/Yr Operating Systems Software (1%) Yr/Yr Highlights Strategic Imperatives Revenue within Systems • Strong IBM Z performance driven by z14, new workloads growing faster than traditional MIPS Power grew for second con
Slide 9: Cash Flow and Balance Sheet Highlights
Cash Flow and Balance Sheet Highlights 10 • Free cash flow reflects solid working capital performance, mitigated by higher cash taxes and capex Free cash flow realization ~120%** over last 12 months •Positioned to support business over the longer term • $ in billions *Excludes Global Financing recei
Slide 10: Summary
Summary 11 • Differentiated value proposition is driven by innovative technologies, industry expertise, trust and security, delivered through an integrated model • Revenue up yr/yr, with improved trajectory across several areas • Gross margin reflects broad-based improvement in yr/yr performance vs.
Slide 11: Summary
Summary ” e Differentiated value proposition is driven by innovative technologies, industry expertise, trust and security, delivered through an integrated model e Revenue up yr/yr, with improved trajectory across several areas e Gross margin reflects broad-based improvement in yr/yr performance vs.
Slide 12: Supplemental Materials
Supplemental Materials 13 • • • • • • • • • • Currency – Impact on Revenue Growth Strategic Imperatives Revenue Geographic Revenue Segment Revenue & Gross Profit Additional Revenue & Backlog Information Expense Summary Balance Sheet Summary Cash Flow Summary Cash Flow (ASC 230) Non-GAAP Supplemental
Slide 13: Currency – Impact on Revenue Growth
Currency – Impact on Revenue Growth 14 IBM Revenue Impact @ 5 Yr Historical Average FX ~4 pts ~2 pts 1-2 pts ~3 pts US$B Yr/Yr Revenue As Reported $19.1 5.1% Currency Impact $0.9 5.0 pts Revenue @ CC $18.2 Flat Supplemental Materials Quarterly Averages per US $ 1Q18 Yr/Yr 4/16/18 Spot 2Q18 3Q18 4Q18
Slide 14: Strategic Imperatives Revenue
Strategic Imperatives Revenue 15 • Strategic Imperatives revenue of $37.7B over last 12 months, 47% of IBM revenue • Cloud revenue of $17.7B over last 12 months, up 22% at actual rates, 22% of IBM revenue • Double-digit growth in 1Q18, led by strong as-a-Service performance Revenue growth rates @CC,
Slide 15: Geographic Revenue
Geographic Revenue 16 • Americas reflects growth in Canada and Latin America, decline in US (-2%) • E/ME/A up 1% led by growth in France, Spain and Middle East/Africa; UK, Germany improving though still declined • Asia Pacific improved yr/yr performance from 4Q17, Japan modest decline (-1%) Revenue
Slide 16: Segment Revenue & Gross Profit
Segment Revenue & Gross Profit 17 Segment Revenue & Gross Profit Metrics - 1Q18 Cognitive Solutions Global Business Services Technology Services & Cloud Platforms Systems Global Financing Revenue growth rates @CC, $ in billions Supplemental Materials 1Q18 Revenue Yr/Yr 1Q18 GP% Yr/Yr $4.3 2% 76.3% (
Slide 17: Additional Revenue & Backlog Information
Additional Revenue & Backlog Information 18 IBM Z 54% Power 3% Backlog Yr/Yr@Actual 4% Storage (15%) Growth rates @CC, $ in billions, Services Backlog calculated using March 31 currency spot rates Supplemental Materials 1Q18 Yr/Yr Signings $9.3 10% Services Backlog $121 (2%) 1Q18 Yr/Yr Systems Hardw
Slide 18: Expense Summary
Expense Summary 19 • Expense yr/yr increase driven by currency, higher level workforce transformation charge (up ~$375M yr/yr) and lower level of IP income (down ~ $130M yr/yr) $ in billions *includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges **rep
Slide 19: Balance Sheet Summary
Balance Sheet Summary 20 $ in billions *Reflects adoption of the FASB guidance on restricted cash, Dec 17 and Mar 17 recast **includes eliminations of inter-company activity Supplemental Materials Mar 18 Dec 17 Mar 17 Cash & Marketable Securities* $13.2 $12.8 $10.9 Non-GF Assets*, ** $75.6 $74.2 $74
Slide 20: Cash Flow Summary
Cash Flow Summary 21 $ in billions *Reflects adoption of the FASB guidance on restricted cash, FY17 recast Supplemental Materials B/(W) FY17 1Q18 Yr/Yr Net Cash from Operations $4.6 $0.6 $16.7 Less: Global Financing Receivables $2.4 $0.3 $0.4 Net Cash from Operations (excluding GF Receivables) $2.2
Slide 21: Cash Flow (ASC 230)
Cash Flow (ASC 230) 22 $ in billions *Reflects adoption of the FASB guidance on restricted cash, 1Q17 recast Supplemental Materials 1Q18 1Q17 Net Income from Operations $1.7 $1.8 Depreciation / Amortization of Intangibles $1.1 $1.1 Stock-based Compensation $0.1 $0.1 Working Capital / Other ($0.7) ($
Slide 22: Reconciliation of Operating Earnings Per Share
Non-GAAP Supplemental Materials Reconciliation of Operating Earnings Per Share 23 2018 Expectations GAAP Diluted EPS at least $11.58 Operating EPS (Non-GAAP) at least $13.80 Adjustments Acquisition-Related Charges* $0.78 Non-Operating Retirement-Related Items $1.32 Tax Reform One-time Charge Adjustm
Slide 23: Reconciliation of Revenue Growth - 1Q 2018
Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 1Q 2018 24 1Q18 Yr/Yr GAAP @CC Americas Flat Flat Europe/ME/Africa 14% 1% Asia Pacific 5% Flat U.S. (2%) (2%) Japan 4% (1%) UK 10% (2%) Germany 12% (3%) The above reconciles the Non-GAAP financial information contained in the Geograp
Slide 24: Reconciliation of Revenue Growth - 1Q 2018
Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 1Q 2018 25 1Q18 Yr/Yr GAAP @CC Strategic Imperatives 15% 10% Analytics 9% 4% Cloud 20% 14% aaS annual run rate 25% 20% Mobile 19% 14% Security 65% 60% Social (18%) (22%) The above reconciles the Non-GAAP financial information contain
Slide 25: Reconciliation of Revenue Growth - 1Q 2018
Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 1Q 2018 1Q18 Yr/Yr 26 1Q18 Yr/Yr GAAP @CC GAAP @CC C ognitive Sol utions 6% 2% T ech Svcs & C l oud Pl atfor m s 5% (1%) Solutions Software 6% 2% Global Technology Services 5% (1%) Transaction Processing Software 6% 1% Infrastructure
Slide 26: Reconciliation of Expense Summary - 1Q 2018
Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 1Q 2018 27 Non-GAAP Adjustments Operating (Non-GAAP) GAAP SG&A Currency (4 pts) 0 pts (4 pts) Acquisitions 0 pts 0 pts 0 pts Base * (4 pts) (1 pts) (5 pts) RD &E Currency (2 pts) 0 pts (2 pts) Acquisitions 0 pts 0 pts 0 pts Base * 8
Slide 27: Reconciliation of Free Cash Flow-Last 12 Months
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow-Last 12 Months 28 12 Months Ended Mar 2018 Net Cash from Operating Activities per GAAP: $17.4 Less: the change in Global Financing (GF) Receivables $0.7 Net Cash from Operating Activities (Excluding GF Receivables) $16.6 Capital Expend
Slide 28: Reconciliation of Free Cash Flow Realization-Last 12 Months
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow Realization-Last 12 Months 29 LTM Excluding Tax Reform* LTM Free Cash Flow Realization 233% ~120% The above reconciles the Non-GAAP financial information contained in the “Cash Flow and Balance Sheet Highlights” discussions in the comp
Slide 29: Reconciliation of Free Cash Flow Realization-Last 12 Months
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow Realization-Last 12 Months LIM Excluding LIM Tax Reform* Free Cash Flow Realization 233% ~120% The above reconciles the Non-GAAP financial information contained in the “Cash Flow and Balance Sheet Highlights” discussions in the company
Slide 30: ibm.com/investor
ibm.com/investor
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