International Business Machines Corporation · NYSE:IBM
International Business Machines — Q3 2017 Earnings Presentation
30 slides from International Business Machines's earnings presentation, Oct 17, 2017
Slide 1: 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 financial performance. Those statements by their na
Slide 2: Overview
3 Overview Improved revenue trajectory Revenue roughly flat yr/yr, -1% yr/yr at constant currency Growth in Cognitive Solutions and Systems segments Double-digit growth in Strategic Imperatives revenue Sequential improvement in gross and pre-tax margins Solid expense management while maintaining hig
Slide 3: A Cognitive Solutions & Cloud Platform Company
4 A Cognitive Solutions & Cloud Platform Company Revenue growth rates @CC, $ in billions Overlap in Strategic Imperatives revenue primarily reflects solutions delivered via cloud Embedding cloud and cognitive capabilities across our business to build new capabilities and to reinvent existing busines
Slide 4: Key Financial Metrics
5 Key Financial Metrics Revenue growth rates @CC, $ in billions except for EPS B/(W) Significant sequential improvement in yr/yr gross and pre-tax margin performance Expense yr/yr improvement reflects continued efficiency, while maintaining investments in strategic areas Strong free cash flow perfor
Slide 5: Cognitive Solutions Segment
6 Cognitive Solutions Segment Revenue growth in both Solutions Software and Transaction Processing Software Solutions Software growth led by analytics and security Annuity content continues to grow, driven by SaaS; strong software transactional performance Better than balanced performance Highlights
Slide 6: Global Business Services Segment
7 Global Business Services Segment Revenue and gross profit trajectory similar to last quarter Consulting returned to growth with strong performance in digital offerings Application Management focused on helping clients implement cloud-centric architectures; revenue decline driven by areas not as di
Slide 7: Technology Services and Cloud Platforms Segment
8 Technology Services and Cloud Platforms Segment Revenue and gross profit trajectory similar to last quarter Infrastructure Services revenue impacted by yr/yr headwinds and shift away from lower value work GTS signings up over 25% with continued momentum in cloud offerings; Infrastructure Services
Slide 8: Systems Segment
9 Systems Segment Successful launch of z14 with pervasive encryption capabilities drove strong z Systems performance Third consecutive quarter of growth in Storage Gross margin expanded, led by z Systems and Storage Highlights Revenue growth rates @CC, $ in billions Strategic Imperatives Revenue wit
Slide 9: Cash Flow and Balance Sheet Highlights
10 Cash Flow and Balance Sheet Highlights Strong free cash flow generation reflects solid working capital performance Free Cash Flow realization 96% over last 12 months Positioned to support business over the longer term $ in billions *Excludes Global Financing receivables Balance Sheet Sep 17 Dec 1
Slide 10: Summary
11 Summary Sequential improvement in year-to-year revenue and margin performance Embedding cognitive and cloud across the business fuels shift to strategic imperatives revenue Continuing to invest while driving efficiency in spend base Strong free cash flow generation supports investment and shareho
Slide 11: Summary
Summary e Sequential improvement in year-to-year revenue and margin performance e Embedding cognitive and cloud across the business fuels shift to strategic imperatives revenue Continuing to invest while driving efficiency in spend base Strong free cash flow generation supports investment and shareh
Slide 12: Supplemental Materials
13 Supplemental Materials Currency – Impact on Revenue Growth Geographic Revenue Segment Revenue & Gross Profit Additional Revenue & Backlog Information Expense Summary Global Financing Portfolio Balance Sheet Summary Cash Flow Summary Cash Flow (ASC 230) Non-GAAP Supplemental Materials Some columns
Slide 13: Currency – Impact on Revenue Growth
14 Currency – Impact on Revenue Growth Supplemental Materials 10/16/17 Quarterly Averages per US $ 2Q17 Yr/Yr 3Q17 Yr/Yr Spot 4Q17 FY17 1Q18 2Q18 Euro 0.91 (3%) 0.85 5% 0.85 9% 2% 10% 7% Pound 0.78 (12%) 0.76 (0%) 0.75 6% (5%) 7% 4% Yen 111 (3%) 111 (8%) 112 (2%) (3%) 2% (1%) Revenue Impact, Future
Slide 14: Geographic Revenue
15 Geographic Revenue Broad-based improvement in yr/yr geographic performance Americas reflects sequential improvement in US yr/yr performance (-3%), Latin America declined vs. strong 3Q16 E/ME/A includes growth in Germany, France, Italy, Spain; decline in UK Asia Pacific growth driven by Japan (+4%
Slide 15: Segment Revenue & Gross Profit
16 Segment Revenue & Gross Profit Revenue growth rates @CC, $ in billions *Total Software = Cognitive Solutions + Integration Software + Operating Systems Software **Global Technology Services = Infrastructure Services + Technical Support Services Supplemental Materials 3Q17 3Q17 Segment Revenue & G
Slide 16: Additional Revenue & Backlog Information
17 Additional Revenue & Backlog Information Growth rates @CC, $ in billions, Actual backlog calculated using September 30 currency spot rates Supplemental Materials 3Q17 Yr/Yr Signings $10.4 15% Services Backlog $119 (2%) Currency Impact Year to Year $1 Currency Impact Quarter to Quarter $2 3Q17 Yr/
Slide 17: Expense Summary
18 Expense Summary Supplemental Materials $ in billions *includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges **represents the percentage change after excluding the impact of currency and acquisitions Expense yr/yr improvement reflects continued effi
Slide 18: Global Financing Portfolio
19 Global Financing Portfolio 3Q17 – $26.1B Net External Receivables Global Financing Metrics 3Q17 2Q17 3Q16 Identified Loss Rate 1.0% 1.1% 2.1% Anticipated Loss Rate 0.4% 0.4% 0.5% Reserve Coverage 1.3% 1.5% 2.6% Client Days Delinquent Outstanding 6.9 4.9 3.9 Commercial A/R > 30 days $33M $31M $19M
Slide 19: Balance Sheet Summary
20 Balance Sheet Summary *includes eliminations of inter-company activity **Global Financing leverage reflects client and commercial financing entity established in 1Q17 Supplemental Materials $ in billions Sep 17 Dec 16 Sep 16 Cash & Marketable Securities $11.5 $8.5 $10.0 Non-GF Assets* $75.5 $74.4
Slide 20: Cash Flow Summary
21 Cash Flow Summary Supplemental Materials $ in billions *Reclassified to reflect adoption of the FASB guidance on stock-based compensation **Revised classification of certain financing receivables for 3Q16 (QTD/YTD) decreasing Net Cash from Operations offset by Global Financing Receivables. No imp
Slide 21: Cash Flow (ASC 230)
22 Cash Flow (ASC 230) Supplemental Materials $ in billions *Reclassified to reflect adoption of the FASB guidance on stock-based compensation **Revised classification of certain financing receivables for 3Q16 (QTD/YTD) decreasing Net Cash provided by Operating Activities and Net Cash used in Invest
Slide 22: Reconciliation of Operating Earnings Per Share
Reconciliation of Operating Earnings Per Share 23 Non-GAAP Supplemental Materials *Includes acquisitions through September 30, 2017 The above reconciles the Non-GAAP financial information contained in the “Summary” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the C
Slide 23: Reconciliation of Revenue Growth - 3Q 2017
Reconciliation of Revenue Growth - 3Q 2017 24 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Geographic Revenue” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated October 17, 2017 fo
Slide 24: Reconciliation of Revenue Growth - 3Q 2017
Reconciliation of Revenue Growth - 3Q 2017 25 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “A Cognitive Solutions & Cloud Platform Company” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8
Slide 25: Reconciliation of Revenue Growth - 3Q 2017
Reconciliation of Revenue Growth - 3Q 2017 26 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Segment Revenue & Gross Profit”, “Additional Revenue & Backlog Information”, “Cognitive Solutions Segment”, “Global Business Services Segment”, “Tec
Slide 26: Reconciliation of Expense Summary - 3Q 2017
Reconciliation of Expense Summary - 3Q 2017 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 17, 2017 for
Slide 27: Reconciliation of Debt-to-Capital Ratio
Reconciliation of Debt-to-Capital Ratio 28 Non-GAAP Supplemental Materials Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Cash Flow and Balance Sheet Highlights” and “Balance Sheet Summary” discussions in the company’s earnings presentation. See Exhi
Slide 28: Reconciliation of Free Cash Flow-Last 12 Months
Reconciliation of Free Cash Flow-Last 12 Months Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Overview”, “Key Financial Metrics” and “Cash Flow and Balance Sheet Highlights” discussions in the company’s earnings presentation. See Exhibit 99
Slide 29: Non-GAAP Supplemental Materials
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow-Last 12 Months 12 Months Ended Sep 2017 Net Cash from Operating Activities per GAAP: $15.0 Less: the change in Global Financing (GF) Receivables $08 Net Cash from Oper Activities (Excluding GF Receivables) $14.2 Capital Expenditures, N
Slide 30: ibm.com/investor
ibm.com/investor
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