UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 17, 2019
(Date of earliest event reported)
INTERNATIONAL BUSINESS MACHINES
CORPORATION
(Exact name of registrant as specified in its charter)
New York |
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1‑2360 |
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13‑0871985 |
(State of Incorporation) |
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(Commission File Number) |
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(IRS employer Identification No.) |
ARMONK, NEW YORK |
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10504 |
(Address of principal executive offices) |
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(Zip Code) |
914‑499‑1900
(Registrant’s telephone number)
Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12) |
☐ |
Pre-commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading symbol(s) |
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Name of each exchange |
Capital stock, par value $.20 per share |
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IBM |
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New York Stock Exchange |
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Chicago Stock Exchange |
1.375% Notes due 2019 |
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IBM 19B |
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New York Stock Exchange |
2.750% Notes due 2020 |
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IBM 20B |
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New York Stock Exchange |
1.875% Notes due 2020 |
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IBM 20A |
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New York Stock Exchange |
0.500% Notes due 2021 |
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IBM 21B |
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New York Stock Exchange |
2.625% Notes due 2022 |
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IBM 22A |
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New York Stock Exchange |
1.25% Notes due 2023 |
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IBM 23A |
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New York Stock Exchange |
0.375% Notes due 2023 |
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IBM 23B |
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New York Stock Exchange |
1.125% Notes due 2024 |
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IBM 24A |
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New York Stock Exchange |
2.875% Notes due 2025 |
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IBM 25A |
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New York Stock Exchange |
0.950% Notes due 2025 |
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IBM 25B |
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New York Stock Exchange |
0.875% Notes due 2025 |
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IBM 25C |
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New York Stock Exchange |
0.300% Notes due 2026 |
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IBM 26B |
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New York Stock Exchange |
1.250% Notes due 2027 |
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IBM 27B |
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New York Stock Exchange |
1.750% Notes due 2028 |
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IBM 28A |
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New York Stock Exchange |
1.500% Notes due 2029 |
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IBM 29 |
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New York Stock Exchange |
1.750% Notes due 2031 |
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IBM 31 |
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New York Stock Exchange |
8.375% Debentures due 2019 |
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IBM 19 |
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New York Stock Exchange |
7.00% Debentures due 2025 |
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IBM 25 |
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New York Stock Exchange |
6.22% Debentures due 2027 |
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IBM 27 |
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New York Stock Exchange |
6.50% Debentures due 2028 |
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IBM 28 |
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New York Stock Exchange |
7.00% Debentures due 2045 |
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IBM 45 |
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New York Stock Exchange |
7.125% Debentures due 2096 |
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IBM 96 |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b‑2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
The registrant’s press release dated July 17, 2019, regarding its financial results for the periods ended June 30, 2019, including consolidated financial statements for the periods ended June 30, 2019, is Exhibit 99.1 of this Form 8‑K.
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 disclosed in the attached press release certain non-GAAP information which management believes provides useful information to investors. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included in the press release, which is Exhibit 99.1 to this Form 8‑K. The rationale for management’s use of non-GAAP measures is included in Exhibit 99.2 to this Form 8‑K.
The information in this Item 2.02, including the corresponding Exhibits 99.1 and 99.2, is hereby filed.
Item 7.01. Regulation FD Disclosure.
The slides for IBM’s Chief Financial Officer Jim Kavanaugh’s second-quarter 2019 earnings presentation on July 17, 2019, are Exhibit 99.3 to this Form 8‑K.
The information in this Item 7.01, including the corresponding Exhibit 99.3, is being furnished with the Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are being filed as part of this report:
Exhibit No. |
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Description of Exhibit |
99.1 |
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99.2 |
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The following exhibit is being furnished as part of this report:
Exhibit No. |
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Description of Exhibit |
99.3 |
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Earnings Presentation of the Registrant, dated July 17, 2019 |
IBM’s web site (www.ibm.com) contains a significant amount of information about IBM, including financial and other information for investors (www.ibm.com/investor/). IBM encourages investors to visit its various web sites from time to time, as information is updated and new information is posted.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Date: July 17, 2019 |
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By: |
/s/ Robert F. Del Bene |
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Robert F. Del Bene |
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Vice President and Controller |
3
Exhibit 99.1
IBM REPORTS 2019 SECOND-QUARTER RESULTS
Growth in Software, Consulting and Cloud Revenue; Continued Margin Expansion
Highlights
Second Quarter:
· |
GAAP EPS from continuing operations of $2.81 |
· |
Operating (non-GAAP) EPS of $3.17 |
· |
Revenue of $19.2 billion, down 4.2 percent (down 1.6 percent adjusting for currency) |
· |
Revenue growth in Cloud & Cognitive Software, and Global Business Services segments |
-- Cloud & Cognitive Software up 3.2 percent (up 5.4 percent adjusting for currency)
-- Global Business Services up 0.5 percent (up 3.4 percent adjusting for currency)
· |
Cloud revenue of $19.5 billion over the last 12 months, up 5 percent (up 8 percent adjusting for currency) |
· |
Gross profit margin up 100 basis points; largest year-to-year expansion in more than 5 years |
· |
Net cash from operating activities of $16.1 billion over the last 12 months; free cash flow of $12.7 billion over the last 12 months |
· |
Through the second quarter, on track to achieve full-year 2019 EPS and free cash flow expectations excluding impact of Red Hat acquisition |
Full-Year Expectations Update:
· |
Company to update full-year 2019 expectations, including the impact of Red Hat acquisition, on August 2 |
· |
Continues to expect Red Hat, including related activity, to be accretive to free cash flow in the first year, and accretive to operating (non-GAAP) earnings per share by the end of the second year after closing, as previously stated |
ARMONK, N.Y., July 17, 2019 . . . IBM (NYSE: IBM) today announced second-quarter results.
“In the second quarter, we continued to grow in the high-value areas of the business, led by a strong performance across our Cloud and Cognitive Software segment,” said Ginni Rometty, IBM chairman, president and chief executive officer. “With the completion of our acquisition of Red Hat, we will provide the only true open hybrid multicloud platform in the industry, strengthening our leadership position and uniquely helping clients succeed in chapter 2 of their digital reinventions.”
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SECOND QUARTER 2019 |
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Pre-tax |
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Gross |
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Diluted |
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Net |
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Pre-tax |
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Income |
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Profit |
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EPS |
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Income |
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Income |
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Margin |
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Margin |
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GAAP from Continuing Operations |
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$ |
2.81 |
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$ |
2.5B |
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$ |
2.8B |
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14.4 |
% |
47.0 |
% |
Year/Year |
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|
8 |
% |
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4 |
% |
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0 |
% |
0.6 |
Pts |
1.0 |
Pts |
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Operating (Non-GAAP) |
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$ |
3.17 |
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$ |
2.8B |
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$ |
3.2B |
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16.6 |
% |
47.4 |
% |
Year/Year |
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3 |
% |
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0 |
% |
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(6) |
% |
(0.3) |
Pts |
1.0 |
Pts |
“We maintained our momentum in the second quarter, again expanding gross profit margin and growing free cash flow, driven to a great extent by our increasing mix of high-value offerings for clients,” said James Kavanaugh, IBM senior vice president and chief financial officer. “On August 2, we will discuss how the acquisition of Red Hat will accelerate IBM's revenue growth, contribute to our high-value model and enhance our free cash flow generation going forward.”
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of $2.9 billion, or $2.8 billion, excluding Global Financing receivables. IBM’s free cash flow was $2.4 billion. IBM returned $1.8 billion to shareholders through $1.4 billion in dividends and $0.3 billion in gross share repurchases. The company suspended its share repurchase program on July 9.
IBM ended the second quarter with $46.4 billion of cash on hand, of which approximately $34 billion was used in July to close the acquisition of Red Hat. Debt totaled $73.0 billion, including Global Financing debt of $25.0 billion.
Segment Results for Second Quarter
· |
Cloud & Cognitive Software (includes cloud and data platforms, cognitive applications and transaction processing platforms) — revenues of $5.6 billion, up 3.2 percent (up 5.4 percent adjusting for currency), with growth in cloud and data platforms, up 5 percent (up 7 percent adjusting for currency); cognitive applications, up 3 percent (up 5 percent adjusting for currency); and transaction processing platforms, up 2 percent (up 4 percent adjusting for currency). |
· |
Global Business Services (includes consulting, application management and global process services) — revenues of $4.2 billion, up 0.5 percent (up 3.4 percent adjusting for currency), with broad-based strength led by growth in consulting, up 2 percent (up 5 percent adjusting for currency). |
· |
Global Technology Services (includes infrastructure and cloud services and technology support services) — revenues of $6.8 billion, down 6.7 percent (down 3.5 percent adjusting for currency). Gross profit margin increased 120 basis points. |
· |
Systems (includes systems hardware and operating systems software) — revenues of $1.8 billion, down 19.5 percent (down 18.0 percent adjusting for currency), with growth in Power, more than offset by the impact of product cycle dynamics in IBM Z and Storage. |
· |
Global Financing (includes financing and used equipment sales) — revenues of $351 million, down 11.0 percent (down 8.5 percent adjusting for currency), reflects the wind-down of OEM commercial financing. |
Full-Year 2019 Expectations
Through the second quarter, IBM remains on track to achieve GAAP diluted earnings per share of at least $12.45, operating (non-GAAP) diluted earnings per share of at least $13.90 and free cash flow of approximately $12 billion, all excluding the impact of Red Hat and related activity. Operating (non-GAAP) diluted earnings per share expectations exclude $1.45 per share of charges for amortization of purchased intangible assets and other acquisition-related charges, including pre-closing charges, such as financing costs associated with the Red Hat acquisition; retirement-related charges; and tax reform enactment impacts. It does not include any other amounts for Red Hat or Red Hat related activity. The company will provide an update to these full-year expectations (including GAAP EPS expectations) on August 2, 2019 to reflect the addition of the recently-closed Red Hat acquisition. IBM continues to expect Red Hat, including related activity, to be accretive to free cash flow in the first year; accretive to operating (non-GAAP) earnings per share by the end of the second year after closing; and dilutive to full-year 2019 earnings per share due primarily to a non-cash purchase accounting adjustment.
Year-To-Date 2019 Results
Consolidated diluted earnings per share was $4.58 compared to $4.43, up 3 percent year to year. Consolidated net income was $4.1 billion, flat year to year. Revenues for the six-month period ended June 30, 2019 totaled $37.3 billion, a decrease of 4 percent year to year (down 1 percent adjusting for currency) compared with $39.1 billion for the first six months of 2018.
Operating (non-GAAP) diluted earnings per share from continuing operations was $5.42 compared with $5.53 per diluted share for the 2018 period, a decrease of 2 percent. Operating (non-GAAP) net income for the six months ended June 30, 2019 was $4.8 billion compared with $5.1 billion in the prior-year period, a decrease of 5 percent.
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; the company’s failure to meet growth and productivity objectives; 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; cybersecurity and data privacy considerations; fluctuations in financial results, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; 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; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels and ecosystems; 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; legal proceedings and investigatory risks; 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 (SEC) 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 —
· |
presenting operating (non-GAAP) earnings per share amounts and related income statement items; |
· |
adjusting for free cash flow; |
· |
net cash from operating activities, excluding Global Financing receivables; |
· |
adjusting for currency (i.e., at constant currency). |
Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows. The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore it is not considered when formulating guidance for free cash
flow. As a result, the company does not estimate a GAAP Net Cash from Operations expectation metric.
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 http://www.ibm.com/investor/events/earnings/2q19.html. 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).
Contact: |
IBM |
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Melinda Zurich, 914‑499‑4034 |
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melinda.zurich@us.ibm.com |
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John Bukovinsky, 732‑618‑3531 |
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jbuko@us.ibm.com |
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INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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REVENUE |
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Cloud & Cognitive Software |
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$ |
5,645 |
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$ |
5,470 |
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* |
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$ |
10,682 |
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$ |
10,586 |
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* |
Global Business Services |
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4,155 |
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4,135 |
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* |
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8,274 |
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8,250 |
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* |
Global Technology Services |
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6,837 |
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7,325 |
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* |
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13,711 |
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14,746 |
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* |
Systems |
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1,753 |
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2,177 |
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3,081 |
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3,676 |
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Global Financing |
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351 |
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394 |
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757 |
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|
799 |
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Other |
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420 |
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503 |
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* |
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837 |
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1,017 |
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* |
TOTAL REVENUE |
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19,161 |
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20,003 |
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37,342 |
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39,075 |
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GROSS PROFIT |
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9,010 |
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9,199 |
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17,053 |
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17,445 |
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GROSS PROFIT MARGIN |
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Cloud & Cognitive Software |
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77.3 |
% |
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77.7 |
% |
* |
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76.3 |
% |
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77.1 |
% |
* |
Global Business Services |
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26.0 |
% |
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26.0 |
% |
* |
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26.1 |
% |
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24.7 |
% |
* |
Global Technology Services |
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34.4 |
% |
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33.2 |
% |
* |
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34.1 |
% |
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32.9 |
% |
* |
Systems |
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53.5 |
% |
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50.6 |
% |
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50.3 |
% |
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47.8 |
% |
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Global Financing |
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35.0 |
% |
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26.6 |
% |
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34.9 |
% |
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30.6 |
% |
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TOTAL GROSS PROFIT MARGIN |
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47.0 |
% |
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46.0 |
% |
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45.7 |
% |
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44.6 |
% |
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EXPENSE AND OTHER INCOME |
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S,G&A |
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5,456 |
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4,857 |
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10,147 |
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10,302 |
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R,D&E |
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1,407 |
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|
1,364 |
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2,840 |
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2,769 |
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Intellectual property and custom development income |
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(222) |
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(250) |
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(323) |
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(567) |
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Other (income) and expense |
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(747) |
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|
280 |
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|
|
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(820) |
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|
692 |
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Interest expense |
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|
348 |
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|
173 |
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|
|
|
558 |
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|
338 |
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TOTAL EXPENSE AND OTHER INCOME |
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|
6,242 |
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|
6,423 |
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|
|
|
12,402 |
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|
13,534 |
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INCOME FROM CONTINUING OPERATIONS |
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|
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BEFORE INCOME TAXES |
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2,768 |
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|
2,776 |
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|
|
|
4,651 |
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|
3,911 |
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Pre-tax margin |
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14.4 |
% |
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13.9 |
% |
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12.5 |
% |
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10.0 |
% |
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Provision for / (Benefit from) income taxes |
|
|
269 |
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|
373 |
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|
|
|
558 |
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|
(166) |
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Effective tax rate |
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|
9.7 |
% |
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13.5 |
% |
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12.0 |
% |
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(4.3) |
% |
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INCOME FROM CONTINUING OPERATIONS |
|
$ |
2,499 |
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$ |
2,402 |
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|
|
$ |
4,093 |
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$ |
4,078 |
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DISCONTINUED OPERATIONS |
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Income / (Loss) from discontinued operations, net of taxes |
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(1) |
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1 |
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(4) |
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5 |
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NET INCOME |
|
$ |
2,498 |
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$ |
2,404 |
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|
|
$ |
4,089 |
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$ |
4,083 |
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EARNINGS / (LOSS) PER SHARE OF COMMON STOCK |
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Assuming Dilution |
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Continuing Operations |
|
$ |
2.81 |
|
$ |
2.61 |
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|
|
$ |
4.58 |
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$ |
4.42 |
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Discontinued Operations |
|
$ |
0.00 |
|
$ |
0.00 |
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|
|
$ |
0.00 |
|
$ |
0.01 |
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TOTAL |
|
$ |
2.81 |
|
$ |
2.61 |
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|
|
$ |
4.58 |
|
$ |
4.43 |
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|
|
|
|
|
|
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|
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|
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|
|
Basic |
|
|
|
|
|
|
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|
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|
|
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|
|
Continuing Operations |
|
$ |
2.82 |
|
$ |
2.63 |
|
|
|
$ |
4.61 |
|
$ |
4.44 |
|
|
Discontinued Operations |
|
$ |
0.00 |
|
$ |
0.00 |
|
|
|
$ |
0.00 |
|
$ |
0.01 |
|
|
TOTAL |
|
$ |
2.82 |
|
$ |
2.63 |
|
|
|
$ |
4.61 |
|
$ |
4.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming Dilution |
|
|
890.8 |
|
|
919.4 |
|
|
|
|
892.4 |
|
|
922.4 |
|
|
Basic |
|
|
886.3 |
|
|
915.1 |
|
|
|
|
887.9 |
|
|
917.9 |
|
|
*Recast to conform with 2019 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
At |
|
At |
||
|
|
June 30, |
|
December 31, |
||
(Dollars in Millions) |
|
2019 |
|
2018 |
||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
45,399 |
|
$ |
11,379 |
Restricted cash |
|
|
135 |
|
|
225 |
Marketable securities |
|
|
874 |
|
|
618 |
Notes and accounts receivable - trade, net |
|
|
7,414 |
|
|
7,432 |
Short-term financing receivables, net |
|
|
15,543 |
|
|
22,388 |
Other accounts receivable, net |
|
|
1,781 |
|
|
743 |
Inventories |
|
|
1,745 |
|
|
1,682 |
Deferred costs |
|
|
2,217 |
|
|
2,300 |
Prepaid expenses and other current assets |
|
|
2,409 |
|
|
2,378 |
Total Current Assets |
|
|
77,517 |
|
|
49,146 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
10,202 |
|
|
10,792 |
Operating right-of-use assets, net* |
|
|
4,998 |
|
|
— |
Long-term financing receivables, net |
|
|
8,441 |
|
|
9,148 |
Prepaid pension assets |
|
|
5,319 |
|
|
4,666 |
Deferred costs |
|
|
2,662 |
|
|
2,676 |
Deferred taxes |
|
|
5,274 |
|
|
5,216 |
Goodwill and intangibles, net |
|
|
38,011 |
|
|
39,353 |
Investments and sundry assets |
|
|
2,228 |
|
|
2,386 |
Total Assets |
|
$ |
154,652 |
|
$ |
123,382 |
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Taxes |
|
$ |
2,439 |
|
$ |
3,046 |
Short-term debt |
|
|
14,594 |
|
|
10,207 |
Accounts payable |
|
|
4,724 |
|
|
6,558 |
Deferred income |
|
|
11,261 |
|
|
11,165 |
Operating lease liabilities* |
|
|
1,319 |
|
|
— |
Other liabilities |
|
|
8,014 |
|
|
7,251 |
Total Current Liabilities |
|
|
42,351 |
|
|
38,227 |
|
|
|
|
|
|
|
Long-term debt |
|
|
58,445 |
|
|
35,605 |
Retirement related obligations |
|
|
16,471 |
|
|
17,002 |
Deferred income |
|
|
3,474 |
|
|
3,445 |
Operating lease liabilities* |
|
|
3,946 |
|
|
— |
Other liabilities |
|
|
12,190 |
|
|
12,174 |
Total Liabilities |
|
|
136,876 |
|
|
106,452 |
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
IBM Stockholders’ Equity: |
|
|
|
|
|
|
Common stock |
|
|
55,404 |
|
|
55,151 |
Retained earnings |
|
|
160,467 |
|
|
159,206 |
Treasury stock — at cost |
|
|
(169,385) |
|
|
(168,071) |
Accumulated other comprehensive income/(loss) |
|
|
(28,841) |
|
|
(29,490) |
Total IBM Stockholders’ Equity |
|
|
17,645 |
|
|
16,796 |
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
131 |
|
|
134 |
Total Equity |
|
|
17,776 |
|
|
16,929 |
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
154,652 |
|
$ |
123,382 |
*Reflects the adoption of the FASB guidance on leases.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
(Dollars in Millions) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
Net Cash Provided by Operating Activities per GAAP: |
|
$ |
2,941 |
|
$ |
2,295 |
|
$ |
7,700 |
|
$ |
6,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: change in Global Financing (GF) Receivables |
|
|
119 |
|
|
(582) |
|
|
2,577 |
|
|
1,778 |
Capital Expenditures, Net |
|
|
(431) |
|
|
(1,004) |
|
|
(1,045) |
|
|
(1,897) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow |
|
|
2,391 |
|
|
1,873 |
|
|
4,078 |
|
|
3,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions |
|
|
(42) |
|
|
(51) |
|
|
(43) |
|
|
(122) |
Divestitures |
|
|
855 |
|
|
— |
|
|
888 |
|
|
— |
Dividends |
|
|
(1,435) |
|
|
(1,437) |
|
|
(2,833) |
|
|
(2,819) |
Share Repurchase |
|
|
(316) |
|
|
(989) |
|
|
(1,236) |
|
|
(1,767) |
Non-GF Debt |
|
|
27,509 |
|
|
(65) |
|
|
33,399 |
|
|
(611) |
Other (includes GF Net Receivables and GF Debt) |
|
|
(698) |
|
|
(559) |
|
|
(68) |
|
|
1,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities |
|
$ |
28,264 |
|
$ |
(1,229) |
|
$ |
34,186 |
|
$ |
(916) |
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
(Dollars in Millions) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
Net Income from Operations |
|
$ |
2,498 |
|
$ |
2,404 |
|
$ |
4,089 |
|
$ |
4,083 |
Depreciation/Amortization of Intangibles |
|
|
1,294 |
|
|
1,116 |
|
|
2,740 |
|
|
2,230 |
Stock-based Compensation |
|
|
135 |
|
|
125 |
|
|
248 |
|
|
242 |
Working Capital / Other |
|
|
(1,106) |
|
|
(768) |
|
|
(1,954) |
|
|
(1,436) |
Global Financing A/R |
|
|
119 |
|
|
(582) |
|
|
2,577 |
|
|
1,778 |
Net Cash Provided by Operating Activities |
|
$ |
2,941 |
|
$ |
2,295 |
|
$ |
7,700 |
|
$ |
6,896 |
Capital Expenditures, net of payments & proceeds |
|
|
(431) |
|
|
(1,004) |
|
|
(1,045) |
|
|
(1,897) |
Divestitures, net of cash transferred |
|
|
855 |
|
|
— |
|
|
888 |
|
|
— |
Acquisitions, net of cash acquired |
|
|
(42) |
|
|
(51) |
|
|
(43) |
|
|
(122) |
Marketable Securities / Other Investments, net |
|
|
3,779 |
|
|
420 |
|
|
3,509 |
|
|
(380) |
Net Cash Provided by / (Used in) Investing Activities |
|
$ |
4,162 |
|
$ |
(634) |
|
$ |
3,309 |
|
$ |
(2,399) |
Debt, net of payments & proceeds |
|
|
22,841 |
|
|
(37) |
|
|
27,073 |
|
|
(751) |
Dividends |
|
|
(1,435) |
|
|
(1,437) |
|
|
(2,833) |
|
|
(2,819) |
Common Stock Repurchases |
|
|
(316) |
|
|
(989) |
|
|
(1,236) |
|
|
(1,767) |
Common Stock Transactions - Other |
|
|
(59) |
|
|
(55) |
|
|
(111) |
|
|
(91) |
Net Cash Provided by / (Used in) Financing Activities |
|
$ |
21,031 |
|
$ |
(2,519) |
|
$ |
22,894 |
|
$ |
(5,428) |
Effect of Exchange Rate changes on Cash |
|
|
129 |
|
|
(444) |
|
|
27 |
|
|
(344) |
Net Change in Cash, Cash Equivalents and Restricted Cash |
|
$ |
28,263 |
|
$ |
(1,302) |
|
$ |
33,930 |
|
$ |
(1,274) |
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
|
|
SECOND - QUARTER 2019 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
5,645 |
|
$ |
4,155 |
|
$ |
6,837 |
|
$ |
1,753 |
|
$ |
351 |
|
Internal |
|
|
607 |
|
|
69 |
|
|
302 |
|
|
171 |
|
|
281 |
|
Total Segment Revenue |
|
$ |
6,252 |
|
$ |
4,224 |
|
$ |
7,139 |
|
$ |
1,924 |
|
$ |
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
2,001 |
|
|
300 |
|
|
235 |
|
|
61 |
|
|
239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin |
|
|
32.0 |
% |
|
7.1 |
% |
|
3.3 |
% |
|
3.2 |
% |
|
37.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change YTY Revenue - External |
|
|
3.2 |
% |
|
0.5 |
% |
|
(6.7) |
% |
|
(19.5) |
% |
|
(11.0) |
% |
Change YTY Revenue - External @constant currency |
|
|
5.4 |
% |
|
3.4 |
% |
|
(3.5) |
% |
|
(18.0) |
% |
|
(8.5) |
% |
|
|
SECOND - QUARTER 2018 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software* |
|
Services* |
|
Services* |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
5,470 |
|
$ |
4,135 |
|
$ |
7,325 |
|
$ |
2,177 |
|
$ |
394 |
|
Internal |
|
|
811 |
|
|
83 |
|
|
169 |
|
|
242 |
|
|
473 |
|
Total Segment Revenue |
|
$ |
6,280 |
|
$ |
4,218 |
|
$ |
7,494 |
|
$ |
2,419 |
|
$ |
867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
2,029 |
|
|
372 |
|
|
451 |
|
|
346 |
|
|
357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin |
|
|
32.3 |
% |
|
8.8 |
% |
|
6.0 |
% |
|
14.3 |
% |
|
41.2 |
% |
*Recast to conform with 2019 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
|
|
SIX MONTHS 2019 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software |
|
Services |
|
Services |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
10,682 |
|
$ |
8,274 |
|
$ |
13,711 |
|
$ |
3,081 |
|
$ |
757 |
|
Internal |
|
|
1,448 |
|
|
143 |
|
|
591 |
|
|
334 |
|
|
581 |
|
Total Segment Revenue |
|
$ |
12,131 |
|
$ |
8,417 |
|
$ |
14,303 |
|
$ |
3,415 |
|
$ |
1,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
3,768 |
|
|
615 |
|
|
510 |
|
|
(141) |
|
|
527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin |
|
|
31.1 |
% |
|
7.3 |
% |
|
3.6 |
% |
|
(4.1) |
% |
|
39.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change YTY Revenue - External |
|
|
0.9 |
% |
|
0.3 |
% |
|
(7.0) |
% |
|
(16.2) |
% |
|
(5.3) |
% |
Change YTY Revenue - External @constant currency |
|
|
3.6 |
% |
|
3.9 |
% |
|
(3.3) |
% |
|
(14.2) |
% |
|
(2.2) |
% |
|
|
SIX MONTHS 2018 |
|
|||||||||||||
|
|
Cloud & |
|
Global |
|
Global |
|
|
|
|
|
|
|
|||
|
|
Cognitive |
|
Business |
|
Technology |
|
|
|
|
Global |
|
||||
(Dollars in Millions) |
|
Software* |
|
Services* |
|
Services* |
|
Systems |
|
Financing |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External |
|
$ |
10,586 |
|
$ |
8,250 |
|
$ |
14,746 |
|
$ |
3,676 |
|
$ |
799 |
|
Internal |
|
|
1,741 |
|
|
172 |
|
|
310 |
|
|
395 |
|
|
902 |
|
Total Segment Revenue |
|
$ |
12,327 |
|
$ |
8,422 |
|
$ |
15,055 |
|
$ |
4,072 |
|
$ |
1,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income / (Loss) from Continuing Operations |
|
|
3,709 |
|
|
497 |
|
|
517 |
|
|
143 |
|
|
734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax margin |
|
|
30.1 |
% |
|
5.9 |
% |
|
3.4 |
% |
|
3.5 |
% |
|
43.1 |
% |
*Recast to conform with 2019 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
|
|
SECOND - QUARTER 2019 |
|
|||||||||||||
|
|
CONTINUING OPERATIONS |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
9,010 |
|
$ |
73 |
|
|
— |
|
|
— |
|
$ |
9,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
47.0 |
% |
|
0.4 |
Pts |
|
— |
|
|
— |
|
|
47.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
5,456 |
|
|
(149) |
|
|
— |
|
|
— |
|
|
5,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
1,407 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
(747) |
|
|
119 |
|
|
(136) |
|
|
— |
|
|
(764) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
348 |
|
|
(168) |
|
|
— |
|
|
— |
|
|
180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
6,242 |
|
|
(198) |
|
|
(136) |
|
|
— |
|
|
5,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
2,768 |
|
|
272 |
|
|
136 |
|
|
— |
|
|
3,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
14.4 |
% |
|
1.4 |
Pts |
|
0.7 |
Pts |
|
— |
|
|
16.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes*** |
|
|
269 |
|
|
55 |
|
|
40 |
|
|
(14) |
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
9.7 |
% |
|
0.9 |
Pts |
|
0.8 |
Pts |
|
(0.4) |
Pts |
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
2,499 |
|
|
217 |
|
|
97 |
|
|
14 |
|
|
2,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
13.0 |
% |
|
1.1 |
Pts |
|
0.5 |
Pts |
|
0.1 |
Pts |
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
2.81 |
|
$ |
0.24 |
|
$ |
0.11 |
|
$ |
0.01 |
|
$ |
3.17 |
|
|
|
SECOND - QUARTER 2018 |
|
|||||||||||||
|
|
CONTINUING OPERATIONS |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
9,199 |
|
$ |
94 |
|
|
— |
|
|
— |
|
$ |
9,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
46.0 |
% |
|
0.5 |
Pts |
|
— |
|
|
— |
|
|
46.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
4,857 |
|
|
(110) |
|
|
— |
|
|
— |
|
|
4,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
1,364 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
280 |
|
|
— |
|
|
(394) |
|
|
— |
|
|
(115) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
173 |
|
|
— |
|
|
— |
|
|
— |
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
6,423 |
|
|
(110) |
|
|
(394) |
|
|
— |
|
|
5,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
2,776 |
|
|
204 |
|
|
394 |
|
|
— |
|
|
3,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
13.9 |
% |
|
1.0 |
Pts |
|
2.0 |
Pts |
|
— |
|
|
16.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes*** |
|
|
373 |
|
|
44 |
|
|
109 |
|
|
14 |
|
|
540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
13.5 |
% |
|
0.5 |
Pts |
|
1.6 |
Pts |
|
0.4 |
Pts |
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
2,402 |
|
|
160 |
|
|
286 |
|
|
(14) |
|
|
2,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
12.0 |
% |
|
0.8 |
Pts |
|
1.4 |
Pts |
|
(0.1) |
Pts |
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
2.61 |
|
$ |
0.17 |
|
$ |
0.31 |
|
$ |
(0.01) |
|
$ |
3.08 |
|
* 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.
** 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.
*** 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.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
|
|
SIX MONTHS 2019 |
|
|||||||||||||
|
|
CONTINUING OPERATIONS |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
17,053 |
|
$ |
149 |
|
|
— |
|
|
— |
|
$ |
17,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
45.7 |
% |
|
0.4 |
Pts |
|
— |
|
|
— |
|
|
46.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
10,147 |
|
|
(273) |
|
|
— |
|
|
— |
|
|
9,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
2,840 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
(820) |
|
|
142 |
|
|
(274) |
|
|
— |
|
|
(951) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
558 |
|
|
(204) |
|
|
— |
|
|
— |
|
|
354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
12,402 |
|
|
(335) |
|
|
(274) |
|
|
— |
|
|
11,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
4,651 |
|
|
484 |
|
|
274 |
|
|
— |
|
|
5,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
12.5 |
% |
|
1.3 |
Pts |
|
0.7 |
Pts |
|
— |
|
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for / (Benefit from) Income Taxes*** |
|
|
558 |
|
|
104 |
|
|
66 |
|
|
(155) |
|
|
574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
12.0 |
% |
|
0.8 |
Pts |
|
0.6 |
Pts |
|
(2.9) |
Pts |
|
10.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
4,093 |
|
|
381 |
|
|
208 |
|
|
155 |
|
|
4,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
11.0 |
% |
|
1.0 |
Pts |
|
0.6 |
Pts |
|
0.4 |
Pts |
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
4.58 |
|
$ |
0.44 |
|
$ |
0.23 |
|
$ |
0.17 |
|
$ |
5.42 |
|
|
|
SIX MONTHS 2018 |
|
|||||||||||||
|
|
CONTINUING OPERATIONS |
|
|||||||||||||
|
|
|
|
|
Acquisition- |
|
Retirement- |
|
Tax |
|
|
|
|
|||
|
|
|
|
|
Related |
|
Related |
|
Reform |
|
Operating |
|
||||
|
|
GAAP |
|
Adjustments* |
|
Adjustments** |
|
Impacts |
|
(Non-GAAP) |
|
|||||
Gross Profit |
|
$ |
17,445 |
|
$ |
187 |
|
|
— |
|
|
— |
|
$ |
17,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit Margin |
|
|
44.6 |
% |
|
0.5 |
Pts |
|
— |
|
|
— |
|
|
45.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S,G&A |
|
|
10,302 |
|
|
(220) |
|
|
— |
|
|
— |
|
|
10,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R,D&E |
|
|
2,769 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) & Expense |
|
|
692 |
|
|
— |
|
|
(796) |
|
|
— |
|
|
(104) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
338 |
|
|
— |
|
|
— |
|
|
— |
|
|
338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense & Other (Income) |
|
|
13,534 |
|
|
(220) |
|
|
(796) |
|
|
— |
|
|
12,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income from Continuing Operations |
|
|
3,911 |
|
|
407 |
|
|
796 |
|
|
— |
|
|
5,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income Margin from Continuing Operations |
|
|
10.0 |
% |
|
1.0 |
Pts |
|
2.0 |
Pts |
|
— |
|
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for / (Benefit from) Income Taxes*** |
|
|
(166) |
|
|
83 |
|
|
185 |
|
|
(93) |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
(4.3) |
% |
|
2.0 |
Pts |
|
4.3 |
Pts |
|
(1.8) |
Pts |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
|
4,078 |
|
|
324 |
|
|
611 |
|
|
93 |
|
|
5,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Margin from Continuing Operations |
|
|
10.4 |
% |
|
0.8 |
Pts |
|
1.6 |
Pts |
|
0.2 |
Pts |
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings / (Loss) Per Share: Continuing Operations |
|
$ |
4.42 |
|
$ |
0.35 |
|
$ |
0.66 |
|
$ |
0.10 |
|
$ |
5.53 |
|
* 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.
** 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.
*** 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.
INTERNATIONAL BUSINESS MACHINES CORPORATION
NON – GAAP RECONCILIATION
(Unaudited)
EPS expectations (GAAP and Operating (non-GAAP)) will be updated on August 2 to include the impact of the Red Hat acquisition.
2019 Full Year Expectations |
|
|
|
(through second-quarter 2019, prior to the completion of the Red Hat acquisition) |
|
|
|
GAAP Diluted EPS |
|
|
at least $12.45 |
|
|
|
|
Operating EPS (non-GAAP) |
|
|
at least $13.90 |
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
Acquisition-related Charges * |
|
$ |
0.76 |
|
|
|
|
Non-Operating Retirement-Related Items |
|
$ |
0.45 |
|
|
|
|
Tax Reform Enactment Impacts |
|
$ |
0.24 |
*Includes acquisitions as of June 30, 2019. This amount includes pre-closing charges, such as financing costs, associated with the Red Hat acquisition. It does not include any other amounts for Red Hat or Red Hat related activity.
Exhibit 99.2
Non-GAAP Financial Information
Operating (non-GAAP) Earnings Per Share and Related Income Statement Items
In an effort to provide better transparency into the operational results of the business, supplementally, the company separates business results into operating and non-operating categories. Operating earnings from continuing operations is a non-GAAP measure that excludes the effects of certain acquisition-related charges, intangible asset amortization expense resulting from basis differences on equity method investments, retirement-related costs and discontinued operations and their related tax impacts. Due to the unique, non-recurring nature of the enactment of the U.S. Tax Cuts and Jobs Act (“U.S. tax reform”), the company characterizes the one-time provisional charge recorded in the fourth quarter of 2017 and adjustments to that charge as non-operating. Adjustments include true-ups, accounting elections, any changes to regulations, laws, audit adjustments, etc. that affect the recorded one-time charge. For acquisitions, operating (non-GAAP) earnings exclude the amortization of purchased intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. These charges are excluded as they may be inconsistent in amount and timing from period to period and are significantly impacted by the size, type and frequency of the company’s acquisitions. All other spending for acquired companies is included in both earnings from continuing operations and in operating (non-GAAP) earnings. For retirement-related costs, the company characterizes certain items as operating and others as non-operating, consistent with GAAP. The company includes defined benefit plan and nonpension postretirement benefit plan service costs, multi-employer plan costs and the cost of defined contribution plans in operating earnings. Non-operating retirement-related costs include defined benefit plan and nonpension postretirement benefit plan 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. Non-operating retirement-related costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance, and the company considers these costs to be outside of the operational performance of the business.
Overall, the company believes that supplementally providing investors with a view of operating earnings as described above provides increased transparency and clarity into both the operational results of the business and the performance of the company’s pension plans; improves visibility to management decisions and their impacts on operational performance; enables better comparison to peer companies; and allows the company to provide a long-term strategic view of the business going forward. The company’s reportable segment financial results reflect pre-tax operating earnings from continuing operations, consistent with the company’s management and measurement system. In addition, these non-GAAP measures provide a perspective consistent with areas of interest the company routinely receives from investors and analysts.
Free Cash Flow
The company uses free cash flow as a measure to evaluate its operating results, plan share repurchase levels, strategic investments and assess its ability and need to incur and service debt. The entire free cash flow amount is not necessarily available for discretionary expenditures. The company defines free cash flow as net cash from operating activities less the change in Global Financing receivables and net capital expenditures, including the investment in software. A key objective of the Global Financing business is to generate strong returns on equity, and increasing receivables is the basis for growth. Accordingly, management considers Global Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency. Therefore, management includes presentations of both free cash flow and net cash from operating activities that exclude the effect of Global Financing receivables. Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows. Since the company views Global Financing receivables as a profit-generating investment which it seeks to maximize, it is not considered when formulating guidance for free cash flow. As a result the company does not estimate a GAAP Net Cash from Operations expectation metric.
Constant Currency
When the company refers to growth rates at constant currency or adjusts such growth rates for currency, it is done so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of its business performance. Financial results adjusted for currency are calculated by translating current period activity in local currency using the comparable prior year period’s currency conversion rate. This approach is used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.
Exhibit 99.3
IBM 2Q 2019 Earnings July 17, 2019 ibm.com/investor 1 |
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 nature address matters that are uncertain to different degrees. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company’s filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations. Any forward-looking statement made during this presentation speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements. These charts and the associated remarks and comments are integrally related, and are intended to be presented and understood together. In an effort to provide additional and useful information regarding the company’s financial results and other financial information as determined by generally accepted accounting principles (GAAP), the company also discusses, in its earnings press release and earnings presentation materials, certain non-GAAP information including “operating earnings”, other “operating” financial measures, including free cash flow, net cash from operating activities excluding Global Financing receivables, and adjustments for currency. The rationale for management’s use of this non- GAAP information is included as Exhibit 99.2 to the company’s Form 8-K filed with the SEC on July 17, 2019. The reconciliation of non-GAAP information to GAAP is included on the slides entitled “Non-GAAP Supplemental Materials” in this presentation, as well as in Exhibit 99.1 to the company’s Form 8-K filed with the SEC on July 17, 2019. For other related information please visit the Company’s investor relations web site at: http://www.ibm.com/investor/events/earnings/2q19.html Forward Looking Statements and Non-GAAP Information |
3 2Q19 $19.2B $3.17 $12.7B Revenue Operating (non-GAAP) EPS Free Cash Flow Last 12 Months y Revenue growth in key high-value areas − Led by Cloud & Cognitive Software and Global Business Services y Strong margin performance with gross margin expansion of 100 basis points − Continued actions to optimize portfolio y Positioned to lead in the next chapter of cloud − Cloud revenue of $19.5 billion over the last 12 months y Through 2nd quarter, on track to achieve full-year expectations for earnings per share and free cash flow, excluding impact of Red Hat − Update expectations in early August to reflect Red Hat acquisition Overview |
4 B/(W) P&L Highlights 2Q19 Yr/Yr Revenue $19.2 (1.6%) Cloud & Cognitive Software $5.6 5% Global Business Services $4.2 3% Global Technology Services $6.8 (4%) Systems $1.8 (18%) Pre-Tax Income - Operating $3.2 (6%) Net Income - Operating $2.8 Flat Earnings Per Share - Operating $3.17 3% Cash Highlights LTM Free Cash Flow (excl. GF Receivables) $2.4 $12.7 Share Repurchase (Gross) $0.3 $3.9 Dividends $1.4 $5.7 Cash Balance @ June 30 $46.4 B/(W) P&L Ratios - Operating 2Q19 Yr/Yr Gross Profit Margin 47.4% 1.0 pts Expense E/R 30.8% (1.2 pts) Pre-Tax Income Margin 16.6% (0.3 pts) Tax Rate 11.0% 5.0 pts Net Income Margin 14.8% 0.6 pts Key Financial Metrics y Gross margin expansion reflects shift to higher value, services productivity and cloud scale efficiencies y EPS yr/yr growth reflects solid operating leverage, mitigated by operational declines in divested businesses y Solid free cash flow performance, with normalized free cash flow realization of 118% over the last 12 months Revenue growth rates @CC, $ in billions |
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing B/(W) Segment 2Q19* Yr/Yr* Revenue (External) $5.6 5% PTI $2.0 (1%) (6 pts) PTI Margin 32.0% (0.3 pts) (2 pts) Cloud Revenue Cloud $0.8 8% as-a-Service annual run rate $2.1 Transaction Processing Platforms +4% Yr/Yr Cognitive Applications +5% Yr/Yr 5 Cloud & Data Platforms +7% Yr/Yr Revenue growth rates @CC, $ in billions *PTI includes impact of $0.13B workforce rebalancing charge in 2Q19 Cloud & Cognitive Software Segment y Cloud & Data Platforms reflects broad-based growth across hybrid cloud and data portfolio y Cognitive Applications led by security and growth across many industry vertical solutions y Pre-tax income growth and margin expansion, excluding workforce rebalancing charges Segment Revenue Elements Segment Results Overview |
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing B/(W) Segment 2Q19* Yr/Yr* Revenue (External) $4.2 3% Gross Profit Margin (External) 26.0% (0.1 pts) PTI $0.3 (19%) (17 pts) PTI Margin 7.1% (1.7 pts) (2 pts) Cloud Revenue Cloud $1.2 17% as-a-Service annual run rate $1.7 Global Process Services +3% Yr/Yr Consulting +5% Yr/Yr 6 Application Management +2% Yr/Yr Global Business Services Segment y Revenue growth across all business lines driven by digital strategy, next gen enterprise apps and hybrid cloud y Gross margin yr/yr reflects shift to higher value and currency, offset by higher level of investment Segment Revenue Elements Segment Results Overview Revenue growth rates @CC, $ in billions *PTI includes impact of $0.07B workforce rebalancing charge in 2Q19 |
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing B/(W) Segment 2Q19* Yr/Yr* Revenue (External) $6.8 (4%) Gross Profit Margin (External) 34.4% 1.2 pts PTI $0.2 (48%) (48 pts) PTI Margin 3.3% (2.7 pts) (3 pts) Cloud Revenue Cloud $2.0 5% as-a-Service annual run rate $7.4 7 Infrastructure & Cloud Services (4%) Yr/Yr Technology Support Services (2%) Yr/Yr Global Technology Services Segment y Revenue performance reflects actions to shift away from low-value services content y Expanded gross and pre-tax margin, excluding workforce rebalancing charges y Continued investment to capture hybrid cloud opportunity Segment Revenue Elements Segment Results Overview Revenue growth rates @CC, $ in billions *PTI includes impact of $0.22B workforce rebalancing charge in 2Q19 |
Y Yr/Yr Impact of 2Q19 Workforce Rebalancing 8 Systems Segment y IBM Z and Storage performance reflects product cycle dynamics and challenging yr/yr compare y Power growth driven by continued strength in POWER9 y Margin performance reflects mix headwind from IBM Z mainframe cycle Systems Hardware (23%) Yr/Yr Operating Systems Software +3% Yr/Yr Segment Revenue Elements Segment Results Overview Revenue growth rates @CC, $ in billions *PTI includes impact of $0.03B workforce rebalancing charge in 2Q19 B/(W) Segment 2Q19* Yr/Yr* Revenue (External) $1.8 (18%) PTI $0.1 (82%) (9 pts) PTI Margin 3.2% (11.1 pts) (2 pts) Cloud Revenue Cloud $0.7 (16%) |
9 Balance Sheet Jun 19 Dec 18 Jun 18 Cash & Marketable Securities $46.4 $12.2 $11.9 Global Financing Debt $25.0 $31.2 $31.1 Core (non-GF) Debt $48.1 $14.6 $14.4 Total Debt $73.0 $45.8 $45.5 Cash Flow 2Q19 Yr/Yr LTM Net Cash from Operations** $2.8 ($0.1) $15.6 Free Cash Flow** $2.4 $0.5 $12.7 Selected Uses of Cash Net Capital Expenditures $0.4 $2.9 Acquisitions $0.0 $0.1 Dividends/Share Repurchase $1.8 $9.6 Cash Flow and Balance Sheet Highlights ● Solid performance in free cash flow ● Free cash flow realization 118%* over last 12 months ● Cash and debt elevated in advance of Red Hat closing; expect to return to targeted leverage ratios within a couple of years $ in billions *Adjusted for charges associated with enactment of U.S. tax reform **Non-GAAP metrics; excludes Global Financing receivables |
10 Summary y Revenue growth in key high-value areas y Strong margin performance and operating leverage y Positioned to lead in the next chapter of cloud y Full-year expectations to be updated in early August |
11 ibm.com/investor |
12 Supplemental Materials ● Currency – Impact on Revenue Growth ● Additional Revenue Information ● Additional Revenue, Gross Profit & Backlog Information ● Expense Summary ● Balance Sheet Summary ● Cash Flow Summary ● Cash Flow (ASC 230) ● Non-GAAP Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding |
7/16/2019 Quarterly Averages per US $ 1Q19 Yr/Yr 2Q19 Yr/Yr Spot 3Q19 4Q19 FY19 Euro 0.88 (8%) 0.89 (6%) 0.89 (4%) (2%) (5%) Pound 0.77 (7%) 0.78 (6%) 0.81 (5%) (4%) (5%) Yen 110 (2%) 110 (1%) 108 3% 4% 1% Revenue Impact, Future @ 7/16/19 Spot (2.6 pts) ~(1 pts) 0 pts ~(2)Pts Prior View @ 4/15/19 Spot ~(2.5 pts) ~(1 pts) 0 pts ~(2pts) US$B Yr/Yr Revenue As Reported $19.2 (4.2%) Currency Impact ($0.5) (2.6 pts) Revenue @ CC (1.6%) 13 Currency – Impact on Revenue Growth Supplemental Materials Second half revenue impacts @ 7/16/19 spot rates before addition of Red Hat |
14 B/(W) Cloud Revenue Revenue Yr/Yr Total Cloud - 2Q19 $4.8 5% as-a-Service annual run rate $11.5 7% Total Cloud - LTM $19.5 8% B/(W) Geography Revenue 2Q19 Yr/Yr Americas $8.8 (3%) Europe/ME/Africa $6.1 1% Asia Pacific $4.2 (2%) B/(W) Segment Revenue 2Q19 Yr/Yr Cloud & Cognitive Software $5.6 5% Cognitive Applications $1.5 5% Cloud & Data Platforms $2.2 7% Transaction Processing Platforms $2.0 4% Global Business Services $4.2 3% Consulting $2.0 5% Global Process Services $0.3 3% Application Management $1.9 2% Global Technology Services $6.8 (4%) Infrastructure & Cloud Services $5.2 (4%) Technology Support Services $1.7 (2%) Systems $1.8 (18%) Systems Hardware $1.3 (23%) Operating Systems Software $0.4 3% Global Financing $0.4 (9%) Additional Revenue Information Revenue growth rates @CC, $ in billions Supplemental Materials |
15 B B/(W) S Signings & Backlog* 2 2Q19 Yr/Yr S Signings $9.7 (14%) B Backlog $111.2 (4%) Backlog Yr/Yr @Actual (5%) B/(W) S Systems Revenue 2Q19 Yr/Yr S Systems Hardware Revenue $1.3 (23%) IBM Z (41%) Power 3% Storage (21%) Additional Revenue, Gross Profit & Backlog Information Growth rates @CC, $ in billions, Services Backlog calculated using June 30 currency spot rates *Signings & Backlog includes Global Technology Services, Global Business Services and Security Services; consistent with 2018 reporting Supplemental Materials B/(W) S Systems Gross Profit 2Q19 Yr/Yr S Systems Gross Profit 53.5% 2.9 pts Systems Hardware 43.6% 0.7 pts Operating Systems Software 84.3% 1.9 pts |
16 Expense Summary Supplemental Materials $ in billions *2Q19 charges for workforce rebalancing and unfavorable legal ruling **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 B/(W) Expense 2Q19 Yr/Yr Currency Acq.** Base*** SG&A – Operating $5.3 (12%) 3 pts 0 pts (15 pts) includes 2Q19 Charges* $0.6 (11 pts) RD&E $1.4 (3%) 1 pts 0 pts (4 pts) IP and Custom Development Income ($0.2) (11%) Other (Income)/Expense - Operating ($0.8) $0.6 includes divestiture gains ($0.6) Interest Expense - Operating $0.2 (4%) Operating Expense & Other Income $5.9 Flat 4 pts 0 pts (4 pts) |
17 Jun 19 Dec 18 Jun 18 Cash & Marketable Securities $46.4 $12.2 $11.9 Core (non-GF) Assets* $79.0 $71.7 $72.5 Global Financing Assets $29.3 $39.5 $37.2 Total Assets $154.7 $123.4 $121.6 Other Liabilities $63.8 $60.6 $57.5 Core (non-GF) Debt* $48.1 $14.6 $14.4 Global Financing Debt $25.0 $31.2 $31.1 Total Debt $73.0 $45.8 $45.5 Total Liabilities $136.9 $106.5 $103.0 Equity $17.8 $16.9 $18.6 Balance Sheet Summary *includes eliminations of inter-company activity Supplemental Materials $ in billions |
18 QTD B/(W) YTD B/(W) 2Q19 Yr/Yr 2Q19 Yr/Yr Net Cash from Operations $2.9 $0.6 $7.7 $0.8 Less: Global Financing Receivables $0.1 $0.7 $2.6 $0.8 Net Cash from Operations (excluding GF Receivables) $2.8 ($0.1) $5.1 $0.0 Net Capital Expenditures ($0.4) $0.6 ($1.0) $0.9 Free Cash Flow (excluding GF Receivables) $2.4 $0.5 $4.1 $0.9 Acquisitions ($0.0) $0.0 ($0.0) $0.1 Divestitures $0.9 $0.9 $0.9 $0.9 Dividends ($1.4) $0.0 ($2.8) ($0.0) Share Repurchases (Gross) ($0.3) $0.7 ($1.2) $0.5 Non-GF Debt $27.5 $27.6 $33.4 $34.0 Other (includes GF Net A/R & GF Debt) ($0.7) ($0.1) ($0.1) ($1.3) Change in Cash & Marketable Securities $28.3 $29.5 $34.2 $35.1 Cash Flow Summary Supplemental Materials $ in billions |
QTD QTD YTD YTD 2Q19 2Q18 2Q19 2Q18 Net Income from Operations $2.5 $2.4 $4.1 $4.1 Depreciation / Amortization of Intangibles $1.3 $1.1 $2.7 $2.2 Stock-based Compensation $0.1 $0.1 $0.2 $0.2 Working Capital / Other ($1.1) ($0.8) ($2.0) ($1.4) Global Financing A/R $0.1 ($0.6) $2.6 $1.8 Net Cash provided by Operating Activities $2.9 $2.3 $7.7 $6.9 Capital Expenditures, net of payments & proceeds ($0.4) ($1.0) ($1.0) ($1.9) Divestitures, net of cash transferred $0.9 $0.0 $0.9 $0.0 Acquisitions, net of cash acquired ($0.0) ($0.1) ($0.0) ($0.1) Marketable Securities / Other Investments, net $3.8 $0.4 $3.5 ($0.4) Net Cash provided by/(used in) Investing Activities $4.2 ($0.6) $3.3 ($2.4) Debt, net of payments & proceeds $22.8 ($0.0) $27.1 ($0.8) Dividends ($1.4) ($1.4) ($2.8) ($2.8) Common Stock Repurchases ($0.3) ($1.0) ($1.2) ($1.8) Common Stock Transactions - Other ($0.1) ($0.1) ($0.1) ($0.1) Net Cash provided by/(used in) Financing Activities $21.0 ($2.5) $22.9 ($5.4) Effect of Exchange Rate changes on Cash $0.1 ($0.4) $0.0 ($0.3) Net Change in Cash & Cash Equivalents $28.3 ($1.3) $33.9 ($1.3) 19 Cash Flow (ASC 230) Supplemental Materials $ in billions |
2019 Full-Year Expectations (as of second quarter 2019, prior to the completion of Red Hat acquisition) GAAP Diluted EPS at least $12.45 Operating EPS (Non-GAAP) at least $13.90 Adjustments Acquisition-Related Charges* $0.76 Non-Operating Retirement-Related Items $0.45 Tax Reform Enactment Impacts $0.24 20 Reconciliation of Operating Earnings Per Share Non-GAAP Supplemental Materials *Includes acquisitions as of June 30, 2019. This amount includes pre-closing charges such as financing charges, associated with the Red Hat acquisition. It does not include any other amounts for Red Hat or Red Hat related activity. The above reconciles the Non-GAAP financial information contained in the “2Q19 Prepared Remarks” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated July 17, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials EPS expectations (GAAP and Operating (Non-GAAP)) will be updated on August 2 to include the impact of the Red Hat acquisition |
21 GAAP @CC Global Technology Services (7%) (4%) Infrastructure & Cloud Services (7%) (4%) Technology Support Services (5%) (2%) Cloud 2% 5% Systems (19%) (18%) Systems Hardware (24%) (23%) IBM Z (42%) (41%) Power 1% 3% Storage (22%) (21%) Operating Systems Software 1% 3% Cloud (17%) (16%) Global Financing (11%) (9%) 2Q19 Yr/Yr Reconciliation of Revenue Performance - 2Q 2019 Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Key Financial Metrics”, “Cloud & Cognitive Software Segment”, “Global Business Services Segment”, “Global Technology Services Segment”, “Systems Segment”, “Additional Revenue Information”, “Additional Revenue, Gross Profit & Backlog Information”, and “2Q19 Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated July 17, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials GAAP @CC Cloud & Cognitive Software 3% 5% Cognitive Applications 3% 5% Cloud & Data Platforms 5% 7% Transaction Processing Platforms 2% 4% Cloud 6% 8% Global Business Services Flat 3% Consulting 2% 5% Global Process Services Flat 3% Application Management (1%) 2% Cloud 14% 17% 2Q19 Yr/Yr |
22 GAAP @CC Americas (4%) (3%) Europe/ME/Africa (4%) 1% Asia Pacific (4%) (2%) 2Q19 Yr/Yr Reconciliation of Revenue Performance - 2Q 2019 & Last 12 Months Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Additional Revenue Information” and “2Q Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated July 17, 2019 for additional information on the use of these Non- GAAP financial measures. Supplemental Materials GAAP @CC GAAP @CC Total Cloud Revenue 2% 5% 5% 8% Total as-a-Service Revenue 4% 7% 2Q19 Yr/Yr Last 12 Months |
23 Non-GAAP Operating GAAP Adjustments (Non-GAAP) SG&A Currency 3 pts 0 pts 3 pts Acquisitions 0 pts 0 pts 0 pts Base * (15 pts) 0 pts (15 pts) RD&E Currency 1 pts 0 pts 1 pts Acquisitions 0 pts 0 pts 0 pts Base * (4 pts) 0 pts (4 pts) Operating Expense & Other Income Currency 4 pts 0 pts 4 pts Acquisitions 0 pts 0 pts 0 pts Base* (1 pts) (3 pts) (4 pts) 2Q19 Reconciliation of Expense Summary - 2Q 2019 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 July 17, 2019 for additional information on the use of these Non-GAAP financial measures. *Represents the percentage change after excluding the impact of currency and acquisitions. Supplemental Materials |
24 12 Months Ended Jun 2019 Net Cash from Operating Activities per GAAP: $16.1 Less: change in Global Financing (GF) Receivables $0.5 Net Cash from Operating Activities (Excluding GF Receivables) $15.6 Capital Expenditures, Net ($2.9) Free Cash Flow (Excluding GF Receivables) $12.7 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”, “Cash Flow and Balance Sheet Highlights” and “2Q Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated July 17, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials $ in billions |
25 LTM Excluding LTM Tax Reform* Free Cash Flow Realization 146% 118% Reconciliation of Free Cash Flow Realization - Last 12 Months Non-GAAP Supplemental Materials The above reconciles the Non-GAAP financial information contained in the “Key Metrics”, “Cash Flow and Balance Sheet Highlights” and “2Q Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated July 17, 2019 for additional information on the use of these Non-GAAP financial measures. * Adjusted for the charges associated with enactment of U.S. tax reform Supplemental Materials |
26 ibm.com/investor |
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