Growing Hybrid Cloud Platform Adoption; Return to Revenue Growth; Strong Cash Flow

Highlights

First Quarter:

  • GAAP EPS from continuing operations of $1.06; Operating (non-GAAP) EPS of $1.77
  • Revenue of $17.7 billion, up 1 percent (down 2 percent adjusting for currency)

    — Cloud & Cognitive Software up 4 percent (up 1 percent adjusting for currency)

    — Systems up 4 percent (up 2 percent adjusting for currency)

    — Global Business Services up 2 percent (down 1 percent adjusting for currency)

  • Total cloud revenue of $6.5 billion, up 21 percent (up 18 percent adjusting for divested businesses and currency)

    — Cloud revenue of $26.3 billion over last 12 months, up 19 percent (up 18 percent adjusting for divested businesses and currency)

  • Red Hat revenue up 17 percent (up 15 percent adjusting for currency), normalized for historical comparability
  • GAAP gross profit margin of 46.3 percent, up 120 basis points; Operating (non-GAAP) gross profit margin of 47.3 percent, up 110 basis points
  • Net cash from operating activities of $4.9 billion, up $0.4 billion; adjusted free cash flow of $2.2 billion, up $0.8 billion

    — Over last 12 months: Net cash from operating activities of $18.6 billion; adjusted free cash flow of $11.6 billion

  • Debt reduced by $5.1 billion since year end 2020

ARMONK, N.Y.–(BUSINESS WIRE)–$IBM #IBM–IBM (NYSE: IBM) today announced first-quarter 2021 earnings results.

“Strong performance this quarter in cloud, driven by increasing client adoption of our hybrid cloud platform, and growth in software and consulting enabled us to get off to a solid start for the year,” said Arvind Krishna, IBM chairman and chief executive officer. “While we have more work to do, we are confident we can achieve full-year revenue growth and meet our adjusted free cash flow target in 2021.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FIRST QUARTER 2021

 

 

 

 

 

 

 

 

 

 

 

Pre-tax

 

Gross

 

 

 

 

Diluted

 

 

Net

 

 

Pre-tax

 

Income

 

Profit

 

 

 

 

EPS

 

 

Income

 

 

Income

 

Margin

 

Margin

 

GAAP from Continuing Operations

 

$

1.06

 

$

1.0B

 

$

0.9B

 

5.1

%

46.3

%

Year/Year

 

 

(19)

%

 

(19)

%

 

NM

 

5.4

Pts

1.2

Pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (Non-GAAP)

 

$

1.77

 

$

1.6B

 

$

1.8B

 

10.0

%

47.3

%

Year/Year

 

 

(4)

%

 

(3)

%

 

158

%

6.1

Pts

1.1

Pts

NM-Not meaningful

“In the first quarter we continued to improve the fundamentals of our business model,” said James Kavanaugh, IBM senior vice president and chief financial officer. “With strong cash generation and disciplined financial management, we increased investments in our hybrid cloud and AI capabilities, while significantly deleveraging in the quarter and supporting our commitment to a secure and growing dividend.”

Cash Flow and Balance Sheet

In the first quarter, the company generated net cash from operating activities of $4.9 billion, or $2.1 billion excluding Global Financing receivables. IBM’s free cash flow was $1.5 billion, which includes $0.6 billion of cash impacts from the company’s structural actions initiated in the fourth quarter of 2020 and the transaction costs associated with the separation of the managed infrastructure services business. IBM’s adjusted free cash flow, excluding these cash impacts, was $2.2 billion. The company returned $1.5 billion to shareholders in dividends.

Over the last 12 months, the company generated net cash from operating activities of $18.6 billion. IBM’s free cash flow for the last 12 months was $11.0 billion. The company’s adjusted free cash flow, excluding cash impacts as described above, was $11.6 billion.

IBM ended the first quarter with $11.3 billion of cash on hand (includes marketable securities), down $3.0 billion from year-end 2020. Debt, including Global Financing debt of $18.3 billion, totaled $56.4 billion, down $5.1 billion since the end of 2020, and down $16.6 billion since closing the Red Hat acquisition.

Segment Results for First Quarter

  • Cloud & Cognitive Software (includes Cloud & Data Platforms, Cognitive Applications and Transaction Processing Platforms) —revenues of $5.4 billion, up 3.8 percent (up 0.8 percent adjusting for currency). Cloud & Data Platforms grew 13 percent (up 10 percent adjusting for currency), led by the company’s hybrid cloud platform and Cloud Pak growth. Cognitive Applications grew 4 percent (up 2 percent adjusting for currency), led by growth in Security. Transaction Processing Platforms declined 12 percent (down 15 percent adjusting for currency). Cloud revenue up 38 percent (up 34 percent adjusting for currency). Gross profit margin up 60 basis points.
  • Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $4.2 billion, up 2.4 percent (down 1.4 percent adjusting for currency), with growth in Consulting and Global Process Services. Application Management revenue declined. Cloud revenue up 33 percent (up 28 percent adjusting for currency). Gross profit margin up 100 basis points.
  • Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.4 billion, down 1.5 percent (down 5.3 percent adjusting for currency). Infrastructure & Cloud Services and Technology Support Services declined. Cloud revenue up 6 percent (up 2 percent adjusting for currency). Gross profit margin up 60 basis points.
  • Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.4 billion, up 4.3 percent (up 2.2 percent adjusting for currency), led by IBM Z, while Power and Storage Systems declined. Operating Systems Software declined. Cloud revenue up 23 percent (up 21 percent adjusting for currency). Gross profit margin up 430 basis points.
  • Global Financing (includes financing and used equipment sales) — revenues of $240 million, down 20.0 percent (down 21.9 percent adjusting for currency), driven by lower financing volumes and sale of receivables.

Full-Year 2021 Expectations

The company expects to grow revenue for the full year 2021 based on mid-April 2021 foreign exchange rates. The company also expects adjusted free cash flow of $11 billion to $12 billion in 2021. Adjusted free cash flow expectations exclude approximately $3 billion of cash impacts from the company’s structural actions initiated in the fourth quarter of 2020 and the transaction costs associated with the separation of the managed infrastructure services business.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of 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. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the possibility that the proposed separation of the managed infrastructure services unit of the company’s Global Technology Services segment will not be completed within the anticipated time period or at all, the possibility of disruption or unanticipated costs in connection with the proposed separation or the possibility that the separation will not achieve its intended benefits; the company’s ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects from environmental matters, tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:

IBM results —

  • adjusting for currency (i.e., at constant currency);
  • total cloud revenue adjusting for divested businesses and currency;
  • Red Hat revenue normalized for historical comparability;
  • presenting operating (non-GAAP) earnings per share amounts and related income statement items;
  • net cash from operating activities, excluding Global Financing receivables;
  • free cash flow;
  • adjusted free cash flow.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8‑K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EDT, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-1q21. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2021

 

2020

 

 

REVENUE

 

 

 

 

 

 

 

 

Cloud & Cognitive Software

 

$

5,437

 

$

5,238

 

 

Global Business Services

 

 

4,234

 

 

4,136

 

 

Global Technology Services

 

 

6,370

 

 

6,467

 

 

Systems

 

 

1,427

 

 

1,368

 

 

Global Financing

 

 

240

 

 

299

 

 

Other

 

 

23

 

 

62

 

 

TOTAL REVENUE

 

 

17,730

 

 

17,571

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

8,204

 

 

7,922

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT MARGIN

 

 

 

 

 

 

 

 

Cloud & Cognitive Software

 

 

76.0

%

 

75.4

%

 

Global Business Services

 

 

28.2

%

 

27.2

%

 

Global Technology Services

 

 

34.5

%

 

34.0

%

 

Systems

 

 

54.5

%

 

50.2

%

 

Global Financing

 

 

31.9

%

 

40.7

%

 

 

 

 

 

 

 

 

 

 

TOTAL GROSS PROFIT MARGIN

 

 

46.3

%

 

45.1

%

 

 

 

 

 

 

 

 

 

 

EXPENSE AND OTHER INCOME

 

 

 

 

 

 

 

 

S,G&A

 

 

5,174

 

 

5,955

 

 

R,D&E

 

 

1,630

 

 

1,625

 

 

Intellectual property and custom development income

 

 

(147)

 

 

(116)

 

 

Other (income) and expense

 

 

362

 

 

182

 

 

Interest expense

 

 

280

 

 

326

 

 

TOTAL EXPENSE AND OTHER INCOME

 

 

7,299

 

 

7,972

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) FROM CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

BEFORE INCOME TAXES

 

 

905

 

 

(49)

 

 

Pre-tax margin

 

 

5.1

%

 

(0.3)

%

 

Provision for/(Benefit from) income taxes

 

 

(51)

 

 

(1,226)

 

 

Effective tax rate

 

 

(5.6)

%

 

NM

%

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

$

956

 

$

1,176

 

 

DISCONTINUED OPERATIONS

 

 

 

 

 

 

 

 

Income/(Loss) from discontinued operations, net of taxes

 

 

(1)

 

 

(1)

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

955

 

$

1,175

 

 

 

 

 

 

 

 

 

 

 

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK

 

 

 

 

 

 

 

 

Assuming Dilution

 

 

 

 

 

 

 

 

Continuing Operations

 

$

1.06

 

$

1.31

 

 

Discontinued Operations

 

$

0.00

 

$

0.00

 

 

TOTAL

 

$

1.06

 

$

1.31

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

Continuing Operations

 

$

1.07

 

$

1.32

 

 

Discontinued Operations

 

$

0.00

 

$

0.00

 

 

TOTAL

 

$

1.07

 

$

1.32

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s)

 

 

 

 

 

 

 

 

Assuming Dilution

 

 

901.7

 

 

895.0

 

 

Basic

 

 

893.6

 

 

888.0

 

 

_________________________________

NM-Not meaningful

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

 

 

 

 

 

 

 

 

At

 

At

 

 

March 31,

 

December 31,

(Dollars in Millions)

 

2021

 

2020

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,531

 

$

13,212

Restricted cash

 

 

142

 

 

463

Marketable securities

 

 

600

 

 

600

Notes and accounts receivable – trade, net

 

 

6,458

 

 

7,132

Short-term financing receivables, net

 

 

8,822

 

 

10,892

Other accounts receivable, net

 

 

787

 

 

714

Inventories

 

 

1,828

 

 

1,839

Deferred costs

 

 

2,223

 

 

2,107

Prepaid expenses and other current assets

 

 

2,647

 

 

2,206

Total Current Assets

 

 

34,038

 

 

39,165

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

9,452

 

 

10,040

Operating right-of-use assets, net

 

 

4,483

 

 

4,686

Long-term financing receivables, net

 

 

5,922

 

 

7,086

Prepaid pension assets

 

 

7,800

 

 

7,610

Deferred costs

 

 

2,336

 

 

2,449

Deferred taxes

 

 

8,953

 

 

9,241

Goodwill

 

 

59,984

 

 

59,617

Intangibles, net

 

 

13,535

 

 

13,796

Investments and sundry assets

 

 

2,125

 

 

2,282

Total Assets

 

$

148,629

 

$

155,971

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Taxes

 

$

2,640

 

$

3,301

Short-term debt

 

 

5,198

 

 

7,183

Accounts payable

 

 

4,140

 

 

4,908

Deferred income

 

 

14,197

 

 

12,833

Operating lease liabilities

 

 

1,337

 

 

1,357

Other liabilities

 

 

9,031

 

 

10,287

Total Current Liabilities

 

 

36,542

 

 

39,869

 

 

 

 

 

 

 

Long-term debt

 

 

51,206

 

 

54,355

Retirement related obligations

 

 

17,346

 

 

18,248

Deferred income

 

 

4,153

 

 

4,301

Operating lease liabilities

 

 

3,379

 

 

3,574

Other liabilities

 

 

14,489

 

 

14,897

Total Liabilities

 

 

127,116

 

 

135,244

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

IBM Stockholders’ Equity:

 

 

 

 

 

 

Common stock

 

 

56,788

 

 

56,556

Retained earnings

 

 

162,218

 

 

162,717

Treasury stock — at cost

 

 

(169,360)

 

 

(169,339)

Accumulated other comprehensive income/(loss)

 

 

(28,257)

 

 

(29,337)

Total IBM Stockholders’ Equity

 

 

21,389

 

 

20,597

 

 

 

 

 

 

 

Noncontrolling interests

 

 

124

 

 

129

Total Equity

 

 

21,513

 

 

20,727

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

148,629

$

155,971

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

 

 

 

 

 

 

 

 

Trailing Twelve

 

 

Three Months Ended

 

Months Ended

 

 

March 31,

 

March 31,

(Dollars in Millions)

 

2021

 

2020

 

2021

Net Cash Provided by Operating Activities per GAAP:

 

$

4,914

 

$

4,476

 

$

18,635

 

 

 

 

 

 

 

 

 

 

Less: change in Global Financing (GF) Receivables

 

 

2,863

 

 

2,381

 

 

4,831

Capital Expenditures, Net

 

 

(529)

 

 

(737)

 

 

(2,835)

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

1,522

 

 

1,358

 

 

10,969

 

 

 

 

 

 

 

 

 

 

Structural actions initiated in 4Q20 & Spin-off charges (1)

 

 

631

 

 

 

 

680

 

 

 

 

 

 

 

 

 

 

Adjusted Free Cash Flow

 

 

2,153

 

 

1,358

 

 

11,649

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

1,522

 

 

1,358

 

 

10,969

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

(1,120)

 

 

(13)

 

 

(1,442)

Divestitures

 

 

(15)

 

 

26

 

 

461

Dividends

 

 

(1,457)

 

 

(1,440)

 

 

(5,815)

Non-GF Debt

 

 

(1,725)

 

 

3,503

 

 

(5,007)

Other (includes GF Net Receivables and GF Debt)

 

 

(207)

 

 

(426)

 

 

88

 

 

 

 

 

 

 

 

 

 

Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities

 

$

(3,002)

 

$

3,008

 

$

(744)

_________________________________

(1) Includes cash impacts incurred in the period related to structural actions initiated in 4Q20 and spin-off related costs.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

(Dollars in Millions)

 

2021

 

2020

 

Net Income from Operations

 

$

955

 

$

1,175

 

Depreciation/Amortization of Intangibles

 

 

1,672

 

 

1,635

 

Stock-based Compensation

 

 

213

 

 

189

 

Working Capital / Other

 

 

(789)

 

 

(905)

 

Global Financing A/R

 

 

2,863

 

 

2,381

 

Net Cash Provided by Operating Activities

 

$

4,914

 

$

4,476

 

Capital Expenditures, net of payments & proceeds

 

 

(529)

 

 

(737)

 

Divestitures, net of cash transferred

 

 

(15)

 

 

26

 

Acquisitions, net of cash acquired

 

 

(1,120)

 

 

(13)

 

Marketable Securities / Other Investments, net

 

 

(335)

 

 

(178)

 

Net Cash Provided by/(Used in) Investing Activities

 

$

(2,000)

 

$

(902)

 

Debt, net of payments & proceeds

 

 

(4,299)

 

 

1,356

 

Dividends

 

 

(1,457)

 

 

(1,440)

 

Common Stock Transactions – Other

 

 

(26)

 

 

(31)

 

Net Cash Provided by/(Used in) Financing Activities

 

$

(5,783)

 

$

(115)

 

Effect of Exchange Rate changes on Cash

 

 

(134)

 

 

(403)

 

Net Change in Cash, Cash Equivalents and Restricted Cash

 

$

(3,002)

 

$

3,057

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

Cloud &

 

Global

 

Global

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Technology

 

 

 

 

Global

 

(Dollars in Millions)

 

Software

 

Services

 

Services

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

5,437

 

$

4,234

 

$

6,370

 

$

1,427

 

$

240

 

Internal

 

 

832

 

 

55

 

 

313

 

 

189

 

 

168

 

Total Segment Revenue

 

$

6,269

 

$

4,289

 

$

6,683

 

$

1,616

 

$

408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income/(Loss) from Continuing Operations

 

 

1,428

 

 

390

 

 

140

 

 

(2)

 

 

166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Margin

 

 

22.8

%

 

9.1

%

 

2.1

%

 

(0.1)

%

 

40.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change YTY Revenue – External

 

 

3.8

%

 

2.4

%

 

(1.5)

%

 

4.3

%

 

(20.0)

%

Change YTY Revenue – External @constant currency

 

 

0.8

%

 

(1.4)

%

 

(5.3)

%

 

2.2

%

 

(21.9)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

Cloud &

 

Global

 

Global

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Technology

 

 

 

 

Global

 

(Dollars in Millions)

 

Software

 

Services

 

Services

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

5,238

 

$

4,136

 

$

6,467

 

$

1,368

 

$

299

 

Internal

 

 

813

 

 

46

 

 

294

 

 

148

 

 

212

 

Total Segment Revenue

 

$

6,052

 

$

4,183

 

$

6,761

 

$

1,516

 

$

511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income/(Loss) from Continuing Operations

 

 

933

 

 

271

 

 

(178)

 

 

(217)

 

 

194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Margin

 

 

15.4

%

 

6.5

%

 

(2.6)

%

 

(14.3)

%

 

37.9

%

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

Continuing Operations

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax

 

Spin-off-

 

 

 

 

 

 

 

 

 

Related

 

Related

 

Reform

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments (1)

 

Adjustments (2)

 

Impacts

 

Charges (4)

 

(Non-GAAP)

 

Gross Profit

 

$

8,204

 

$

175

 

$

 

$

 

$

3

 

$

8,382

 

Gross Profit Margin

 

 

46.3

%

 

1.0

Pts

 

Pts

 

Pts

 

0.0

Pts

 

47.3

%

S,G&A

 

 

5,174

 

 

(293)

 

 

 

 

 

 

(58)

 

 

4,823

 

R,D&E

 

 

1,630

 

 

 

 

 

 

 

 

 

 

1,630

 

Other (Income) & Expense

 

 

362

 

 

(1)

 

 

(343)

 

 

 

 

 

 

18

 

Interest Expense

 

 

280

 

 

 

 

 

 

 

 

 

 

280

 

Total Expense & Other (Income)

 

 

7,299

 

 

(294)

 

 

(343)

 

 

 

 

(58)

 

 

6,604

 

Pre-tax Income from Continuing Operations

 

 

905

 

 

469

 

 

343

 

 

 

 

61

 

 

1,777

 

Pre-tax Income Margin from Continuing Operations

 

 

5.1

%

 

2.6

Pts

 

1.9

Pts

 

Pts

 

0.3

Pts

 

10.0

%

Provision for/(Benefit from) Income Taxes (3)

 

 

(51)

 

 

104

 

 

61

 

 

49

 

 

15

 

 

179

 

Effective Tax Rate

 

 

(5.6)

%

 

7.3

Pts

 

4.5

Pts

 

2.7

Pts

 

1.0

Pts

 

10.1

%

Income from Continuing Operations

 

 

956

 

 

365

 

 

282

 

 

(49)

 

 

46

 

 

1,599

 

Income Margin from Continuing Operations

 

 

5.4

%

 

2.1

Pts

 

1.6

Pts

 

(0.3)

Pts

 

0.3

Pts

 

9.0

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

 

$

1.06

 

$

0.40

 

$

0.31

 

$

(0.05)

 

$

0.05

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

Continuing Operations

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax

 

Spin-off-

 

 

 

 

 

 

 

 

 

Related

 

Related

 

Reform

 

Related

 

Operating

 

 

 

GAAP

 

Adjustments (1)

 

Adjustments (2)

 

Impacts

 

Charges (4)

 

(Non-GAAP)

 

Gross Profit

 

$

7,922

 

$

188

 

$

 

$

 

$

 

$

8,110

 

Gross Profit Margin

 

 

45.1

%

 

1.1

Pts

 

Pts

 

Pts

 

Pts

 

46.2

%

S,G&A

 

 

5,955

 

 

(285)

 

 

 

 

 

 

 

 

5,670

 

R,D&E

 

 

1,625

 

 

 

 

 

 

 

 

 

 

1,625

 

Other (Income) & Expense

 

 

182

 

 

(1)

 

 

(264)

 

 

 

 

 

 

(83)

 

Interest Expense

 

 

326

 

 

 

 

 

 

 

 

 

 

326

 

Total Expense & Other (Income)

 

 

7,972

 

 

(285)

 

 

(264)

 

 

 

 

 

 

7,422

 

Pre-tax Income/(Loss) from Continuing Operations

 

 

(49)

 

 

473

 

 

264

 

 

 

 

 

 

688

 

Pre-tax Income Margin from Continuing Operations

 

 

(0.3)

%

 

2.7

Pts

 

1.5

Pts

 

Pts

 

Pts

 

3.9

%

Provision for/(Benefit from) Income Taxes (3)

 

 

(1,226)

 

 

102

 

 

14

 

 

149

 

 

 

 

(961)

 

Income from Continuing Operations

 

 

1,176

 

 

371

 

 

250

 

 

(149)

 

 

 

 

1,649

 

Income Margin from Continuing Operations

 

 

6.7

%

 

2.1

Pts

 

1.4

Pts

 

(0.8)

Pts

 

Pts

 

9.4

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

 

$

1.31

 

$

0.42

 

$

0.28

 

$

(0.17)

 

$

 

$

1.84

 

_________________________________

(1) Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.

(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.

(3) Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results. The effective tax rate is not displayed as the calculated rate for the three months ended March 31, 2020 is not meaningful.

(4) Managed infrastructure services spin-off charges primarily relate to transaction and third-party support costs, business separation and applicable employee retention fees, pension settlements and related tax charges.

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Trailing Twelve Months

 

 

 

March 31, 2021

 

 

March 31, 2021

 

Cloud Revenue Adjusting for Divested Businesses and Currency

 

Change YTY

 

 

Change YTY

 

 

 

 

 

 

 

 

 

 

Cloud revenue as reported

 

 

21.3

%

 

 

19.2

%

Impact from divested businesses

 

 

0.3

Pts

 

 

1.0

Pts

Currency impact

 

 

(4.0)

Pts

 

 

(1.7)

Pts

Cloud revenue adjusting for divested businesses and currency (non-GAAP)

 

 

17.7

%

 

 

18.4

%

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31, 2021

 

 

Red Hat Revenue, Normalized for Historical Comparability

 

Change YTY

 

 

 

 

 

 

 

 

Red Hat Revenue GAAP growth rate (1)

 

 

53

%

 

Impact from purchase accounting deferred revenue and intercompany adjustments (2)

 

 

(35)

Pts

 

Red Hat revenue growth rate, normalized for historical comparability (non-GAAP)

 

 

17

%

 

Impact from currency

 

 

(3)

Pts

 

Red Hat revenue growth rate, normalized for historical comparability and adjusting for currency (non-GAAP)

 

 

15

%

 

_________________________________

(1) Represents change in GAAP revenue as reported by IBM, which is included in the Cloud & Cognitive Software segment.

(2) Represents change in the first-quarter 2021 impact of the deferred revenue purchase accounting adjustment and adjustments to add back revenue which was eliminated for sales between Red Hat and IBM. This line represents revenue that would have been recognized by Red Hat under GAAP if the acquisition had not occurred, but was not recognized by IBM due to purchase accounting and intercompany adjustments.

Contacts

IBM

Sarah Meron, 347‑891‑1770

sarah.meron@ibm.com

John Bukovinsky, 732‑618‑3531

jbuko@us.ibm.com

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