International Business Machines Corporation · NYSE:IBM
International Business Machines — Q1 2021 Earnings Presentation
29 slides from International Business Machines's earnings presentation, Apr 19, 2021
Slide 1: IBM 1Q 2021 Earnings
IBM 1Q 2021 Earnings April 19, 2021 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 In an effort to provide additional and useful information regarding characterized as forward looking under the Private Securities the company’s financial results and other financial information as L
Slide 3: Arvind Krishna and James Kavanaugh
Arvind Krishna Chairman and Chief Executive Officer James Kavanaugh Senior Vice President and Chief Financial Officer 3
Slide 4: CEO Perspective: 1Q21 Progress
hybrid cloud platform and growth in software Clients, Ecosystems and Innovation cash flow target in 2021.” CEO Perspective “Strong performance this quarter in cloud, driven by increasing client adoption of our 1Q21 Progress and consulting enabled us to get off to a solid start for the year.Hybrid Cl
Slide 5: IBM's Hybrid Cloud & AI Strategy
Cloud Paks Systems Public Cloud Infrastructure AWS | Azure | Others IBM’s Hybrid Cloud & AI Strategy Our Platform Approach SERVICES Accelerating client adoption of hybrid cloud & AI Partners SOFTWARE IBM Software Expanding partner ecosystem HYBRID CLOUD PLATFORM Delivering innovation INFRASTRUCTURE
Slide 6: Financial Highlights 1Q21
Cloud revenue growth returned to growth Fundamentals Financial Highlights 1Q21 $17.7B $11.6B RevenueFree Cash Flow, Adjusted (LTM) “In the first quarter we continued to improve the fundamentals of our business model. With strong cash generation and disciplined financial management, we increased inve
Slide 7: Cloud & Cognitive Software
Cloud & Data Platforms grew yr/yr 1% yr/yr Segment Elements +2% yr/yr Transaction Processing Platforms +10% yr/yr Transaction Cloud & Cognitive Software RevenueC&CS Cloud Revenue Growth $5.4B +34% double-digit rate on strength in Red Hat and Cloud Paks ~3000 hybrid cloud platform clients Growth in C
Slide 8: Global Business Services
Cloud revenue growth up 28% yr/yr yr/yr (1%) yr/yr Expanding gross margin, while Management Global Business ServicesRevenueGross Margin Expansion $4.2B +100 bps Consulting returns to growth driven by ecosystem and cloud offerings Segment Elements Accelerating Red Hat engagements Consulting +2% yr/yr
Slide 9: Systems
IBM Z reflects demand for secure, Segment Elements Systems RevenueIBM Z Revenue Growth $1.4B +49% scalable and reliable platform +2% yr/yr yr/yr Storage and Power performance reflects product cycle dynamics Strong gross margin performance, +430 basis points yr/yr Systems Hardware +10% yr/yr Operatin
Slide 10: Global Technology Services
Continued renewals and new client (5%) yr/yr yr/yr Segment Elements and projects Managed infrastructure services Support (5%) yr/yr end of 2021 Global Technology ServicesRevenueGross Margin Expansion $6.4B +60 bps additions Improving revenue trajectory driven by increased client volumes Gross margin
Slide 11: Summary: Accelerating IBM's Performance
Summary Focus on hybrid cloud and AI strategy Progress in revenue trajectory and business model fundamentals Executing actions to accelerate change Maintaining expectations for full-year 2021 –Revenue growth based on mid-April spot rates –Adjusted free cash flow* of $11-12 billion *Adjusted FCF excl
Slide 12: L iS wn o > (ex = S (S) f=
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Slide 13: Supplemental Materials
Supplemental Materials ● Revenue and P&L Highlights ● Cash Flow and Balance Sheet Highlights ● Currency – Impact on Revenue Growth ● Services Segments Details ● Software and Systems Segment Details ● Expense Summary ● Balance Sheet Summary ● Cash Flow Summary ● Cash Flow (ASC 230) ● Non-GAAP Supplem
Slide 14: Revenue and P&L Highlights
Revenue and P&L Highlights B/(W) B/(W) Revenue Highlights1Q21 Yr/Yr*Operating P&L Highlights $ 1Q21 Yr/Yr Revenue$17.7 (2%) Gross Profit $8.4 3% Cloud $6.5 18% Expense$6.6 11%** Pre-Tax Income$1.8 158%** B/(W)Net Income$1.6 (3%) Geography Revenue1Q21 Yr/Yr* Earnings Per Share$1.77 (4%) Americas $8.2
Slide 15: Cash Flow and Balance Sheet Highlights
Cash Flow and Balance Sheet Highlights $ in billions *Non-GAAP metrics; excludes financing receivables **Non-GAAP metrics; excludes cash impacts incurred in the period related to structural actions initiated in 4Q20 and spin-off related costs Supplemental Materials 15 Cash Flow 1Q21 Yr/Yr LTM Balanc
Slide 16: Currency – Impact on Revenue Growth
Currency – Impact on Revenue Growth Revenue Impact, Future @ 4/16/21 Spot3 pts ~3 pts ~1 pts (1)-0 pts 1-2 pts Prior View @ 1/20/21 Spot3-4 pts ~4 pts 1-2 pts 0-1 pts ~2 pts US$B Yr/Yr Revenue As Reported $17.7 1% Currency Impact $0.6 3 pts Revenue @CC(2%) Supplemental Materials 16 Quarterly Average
Slide 17: Services Segments Details
B/(W) Services Segments Details B/(W) B/(W) GBS Segment 1Q21 Yr/YrGTS Segment 1Q21 Yr/Yr Revenue (External) $4.2 (1%) Revenue (External) $6.4 (5%) Consulting $2.2 2% Infrastructure & Cloud Services$4.9 (5%) Application Management$1.8 (8%) Technology Support Services$1.5 (5%) Global Process Services$
Slide 18: Software and Systems Segment Details
Software and Systems Segment Details B/(W) B/(W) Cloud & Cognitive Software Segment1Q21 Yr/Yr Systems Segment1Q21 Yr/Yr Revenue (External) $5.4 1% Revenue (External) $1.4 2% Cloud & Data Platforms $2.9 10% Systems Hardware $1.1 10% Cognitive Applications $1.2 2% IBM Z49% Transaction Processing Platf
Slide 19: Expense Summary
Expense Summary $ in billions *impact includes ($0.15B) workforce rebalancing charges in 1Q21 and ($0.9B) workforce rebalancing and one-time charges in 1Q20 **includes acquisitions in the last twelve months net of non-operating acquisition-related charges and includes impact of divested businesses *
Slide 20: Balance Sheet Summary
Balance Sheet Summary Mar 21 Dec 20 Mar 20 Cash & Marketable Securities $11.3 $14.3 $12.0 Core (non-GF) Assets* $117.1 $118.5 $116.4 Global Financing Assets$20.2 $23.2 $24.9 Total Assets$148.6 $156.0 $153.4 Other Liabilities $70.7 $73.7 $68.9 Core (non-GF) Debt* $38.1 $40.4 $42.1 Global Financing De
Slide 21: Cash Flow Summary
Cash Flow Summary B/(W) 1Q21 Yr/Yr Net Cash from Operations$4.9 $0.4 Less: Global Financing Receivables $2.9 $0.5 Net Cash from Operations (excluding GF Receivables)$2.1 ($0.0) Net Capital Expenditures ($0.5) $0.2 Free Cash Flow (excluding GF Receivables)$1.5 $0.2 Structural actions initiated in 4Q2
Slide 22: Cash Flow (ASC 230)
Cash Flow (ASC 230) QTDQTD 1Q21 1Q20 Net Income from Operations$1.0 $1.2 Depreciation / Amortization of Intangibles$1.7 $1.6 Stock-based Compensation$0.2 $0.2 Working Capital / Other ($0.8) ($0.9) Global Financing A/R$2.9 $2.4 Net Cash provided by Operating Activities$4.9 $4.5 Capital Expenditures,
Slide 23: Non-GAAP Supplemental Materials: Reconciliation of Revenue Performance
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 1Q 2021 1Q21 Yr/Yr1Q21 Yr/Yr GAAP @CC GAAP @CC Cloud & Cognitive Software 4% 1% Global Technology Services (1%) (5%) Cloud & Data Platforms 13% 10% Infrastructure & Cloud Services (1%) (5%) Cognitive Applications 4% 2% Technolog
Slide 24: Non-GAAP Supplemental Materials: Reconciliation of Revenue Performance
Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 1Q 2021 1Q21 Yr/Yr GAAPDivest impact Currency impact Adjusted Total Revenue1% 0 pts (3 pts) (2%) Americas 0% 0 pts 0 pts 0% Europe/ME/Africa 2% 0 pts (8 pts) (5%) Asia Pacific 1% 0 pts (4 pts) (4%) Total Cloud21% 0 pts (4 pts) 1
Slide 25: Non-GAAP: Reconciliation of Revenue for Red Hat and Cloud & Data Platforms
Non-GAAP Supplemental Materials Reconciliation of Revenue for Red Hat and Cloud & Data Platforms - 1Q 2021 1Q21 Yr/Yr Cloud & Data Revenue, Normalized for Historical ComparabilityRed Hat Platforms Revenue GAAP growth rate*53% 13% Impact from purchase accounting deferred revenue and intercompany adju
Slide 26: Non-GAAP: Reconciliation of Expense Summary
Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 1Q 2021 1Q21 Non-GAAPOperating GAAPAdjustments(Non-GAAP) SG&A Currency (2 pts) 0 pts (2 pts) Acquisitions/Divestitures0 pts 0 pts 0 pts Base*15 pts 2 pts 17 pts RD&E Currency(2 pts) 0 pts (2 pts) Acquisitions/Divestitures0 pts 0 pts
Slide 27: Non-GAAP: Reconciliation of Continuing Operations
Non-GAAP Supplemental Materials Reconciliation of Continuing Operations - 1Q 2021 1Q21 Acquisition-Retirement-Spin-off-Related Related Tax Reform Related GAAPAdjustmentsAdjustmentsImpactsChargesAdjusted Gross Profit $8,204 $175 ——$3 $8,382 Gross Profit Margin46.3% 1.0 pts ——0.0 pts 47.3% SG&A 5,174
Slide 28: Non-GAAP: Reconciliation of Free Cash Flow - Last 12 Months
Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow - Last 12 Months 12 Months Ended Mar 2021 Net Cash from Operating Activities per GAAP:$18.6 Less: change in Global Financing (GF) Receivables$4.8 Net Cash from Operating Activities (Excluding GF Receivables)$13.8 Capital Expenditures,
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