International Business Machines Corporation · NYSE:IBM
International Business Machines — Q1 2017 Earnings Presentation
31 slides from International Business Machines's earnings presentation, Apr 18, 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 Continued strength in strategic imperatives Core capabilities deliver high-value, mission-critical solutions Continuing to invest for long term Maintain full-year expectations 1Q17 $18.2B $ 2.38 $10.5B Revenue Operating EPS Free Cash Flow Last 12 Months
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 Uniquely providing cognitive technologies on cloud platform with industry focus Scaling and extending reach of Watson and
Slide 4: Key Financial Metrics
5 Key Financial Metrics Revenue growth rates @CC, $ in billions except for EPS B/(W) Gross margin reflects investment and mix to as-a-Service Expense, pre-tax income and tax yr/yr dynamics impacted by 1Q16 charges/benefits Free cash flow reflects typical 1Q seasonality Last 12 Cash Highlights 1Q17 M
Slide 5: Cognitive Solutions Segment
6 Cognitive Solutions Segment Analytics including Watson and security led growth in Solutions Software Continued strong performance in SaaS Improvement in Transaction Processing Software yr/yr revenue performance Gross margin reflects investment levels and business mix Highlights Revenue growth rate
Slide 6: Global Business Services Segment
7 Global Business Services Segment Improvement in revenue trajectory Stable revenue base in Application Management; moving clients to cloud architectures Declining consulting revenue; strength in digital offset by declines in on-premise enterprise application work PTI margin expansion; gross margin
Slide 7: Technology Services and Cloud Platforms Segment
8 Technology Services and Cloud Platforms Segment Strategic imperatives growth led by cloud; building hybrid cloud environments Infrastructure Services revenue decline reflects productivity delivered to clients and contract dynamics PTI margin expansion; gross margin reflects investing in client env
Slide 8: Systems Segment
9 Systems Segment z Systems and Power revenue and gross margin declines reflect product cycles Storage hardware revenue growth led by Flash Continued to address shifting markets in Power and Storage Highlights Revenue growth rates @CC, $ in billions Strategic Imperatives Revenue within Systems 1Q17
Slide 9: Intellectual Property Income
10 Intellectual Property Income Intellectual Property Partnerships Investment in R&D and innovation creates significant intellectual property (IP) IP monetization through IP income is driven by strategy, e.g. scale economics, resource optimization Structure: License source code to technology or serv
Slide 10: Cash Flow and Balance Sheet Highlights
11 Cash Flow and Balance Sheet Highlights Free Cash Flow reflects 1Q seasonality; yr/yr impacted by 1Q16 tax refund Free Cash Flow realization 90% over last 12 months Global Financing leverage reflects new client and commercial financing entity Positioned to support business over the longer term $ i
Slide 11: Summary
12 Summary Continued strength in strategic imperatives Core capabilities deliver high-value, mission-critical solutions Continuing to invest for long term Maintain full-year 2017 expectations First half to second half profit improvement Operating EPS of at least $13.80 Free cash flow flat yr/yr
Slide 12: Summary
Summary + Continued strength in strategic imperatives * Core capabilities deliver high-value, mission-critical solutions * Continuing to invest for long term + Maintain full-year 2017 expectations + First half to second half profit improvement + Operating EPS of at least $13.80 * Free cash flow flat
Slide 13: Supplemental Materials
14 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 14: Currency – Impact on Revenue Growth
15 Currency – Impact on Revenue Growth Supplemental Materials 4/17/17 Quarterly Averages per US $ 1Q17 Yr/Yr Spot 2Q16 2Q17 3Q17 4Q17 FY17 Euro 0.94 (3%) 0.94 (6%) (5%) (1%) (4%) Pound 0.81 (15%) 0.79 (14%) (4%) 1% (8%) Yen 114 1% 108 (1%) (6%) 1% (1%) IBM Revenue Impact @ 4/17/17 Spot (0.7 pts) (2
Slide 15: Geographic Revenue
16 Geographic Revenue Americas reflects moderate decline in US (-1%), Latin America flat yr/yr E/ME/A weakness; declines in UK, Germany Asia Pacific includes modest sequential improvement in Japan (flat yr/yr), growth in India, decline in China following strong 4Q16 Revenue growth rates @CC, $ in bi
Slide 16: Segment Revenue & Gross Profit
17 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 1Q17 1Q17 Segment Revenue & G
Slide 17: Additional Revenue & Backlog Information
18 Additional Revenue & Backlog Information Growth rates @CC, $ in billions, Actual backlog calculated using March 31 currency spot rates Supplemental Materials 1Q17 Yr/Yr Signings $7.9 Flat Services Backlog $116 (2%) Currency Impact Year to Year ($3) Currency Impact Quarter to Quarter $2 1Q17 Yr/Yr
Slide 18: Expense Summary
19 Expense Summary Supplemental Materials $ in billions *includes workforce rebalancing charge $0.2B 1Q17, $1.0B 1Q16 **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 an
Slide 19: Global Financing Portfolio
20 Global Financing Portfolio 1Q17 – $24.4B Net External Receivables Global Financing Metrics 1Q17 4Q16 1Q16 Identified Loss Rate 1.4% 1.2% 2.0% Anticipated Loss Rate 0.4% 0.4% 0.6% Reserve Coverage 1.8% 1.6% 2.6% Client Days Delinquent Outstanding 4.8 4.0 4.2 Commercial A/R > 30 days $20M $22M $25M
Slide 20: Balance Sheet Summary
21 Balance Sheet Summary *includes eliminations of inter-company activity Supplemental Materials $ in billions Mar 17 Dec 16 Mar 16 Cash & Marketable Securities $10.7 $8.5 $14.9 Non-GF Assets* $74.6 $74.4 $72.3 Global Financing Assets $32.2 $34.6 $31.7 Total Assets $117.5 $117.5 $118.9 Other Liabili
Slide 21: Cash Flow Summary
22 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 FY 2016 increasing (1Q16 decreasing) Net Cash from Operations offset by Global Financing Receivab
Slide 22: Cash Flow (ASC 230)
23 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 1Q16 decreasing Net Cash provided by Operating Activities and Net Cash used in Investing Activi
Slide 23: Reconciliation of Operating Earnings Per Share
Reconciliation of Operating Earnings Per Share 24 Non-GAAP Supplemental Materials *Includes acquisitions through March 31, 2017 The above reconciles the Non-GAAP financial information contained in the “Summary” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Comp
Slide 24: Reconciliation of Revenue Growth - 1Q 2017
Reconciliation of Revenue Growth - 1Q 2017 25 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Geographic Revenue” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated April 18, 2017 for
Slide 25: Reconciliation of Revenue Growth - 1Q 2017
Reconciliation of Revenue Growth - 1Q 2017 26 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “A Cognitive Solutions & Cloud Platform Company” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form
Slide 26: Reconciliation of Revenue Growth - 1Q 2017
Reconciliation of Revenue Growth - 1Q 2017 27 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 27: Reconciliation of Expense Summary - 1Q 2017
Reconciliation of Expense Summary - 1Q 2017 28 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Expense Summary” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated April 18, 2017 for a
Slide 28: Reconciliation of Debt-to-Capital Ratio
Reconciliation of Debt-to-Capital Ratio 29 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 29: 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 30: Non-GAAP Supplemental Materials
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow-Last 12 Months 12 Months Ended Mar 2017 Net Cash from Operating Activities per GAAP: $15.5 Less: the change in Global Financing (GF) Receivables S15 Net Cash from Operating Activities (Excluding GF Receivables) $14.0 Capital Expenditur
Slide 31: ibm.com/investor
ibm.com/investor
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