Try our mobile app

IBM RELEASES SECOND-QUARTER RESULTS

Published: 2023-07-19 20:08:00 ET
<<<  go to IBM company page

Solid Software and Consulting Revenue Growth; Strong Gross Profit Margin Expansion

ARMONK, N.Y., July 19, 2023 /PRNewswire/ -- IBM (NYSE: IBM) today announced second-quarter 2023 earnings results.

IBM Corporation logo. (PRNewsfoto/IBM)

"Organizations are using our hybrid cloud and AI technology, and our consulting capabilities, to transform their operations," said Arvind Krishna, IBM chairman and chief executive officer. "We continue to respond to the needs of our clients who seek trusted, enterprise AI solutions, and we are particularly excited about the response to the recently launched watsonx AI platform. Finally, we remain confident in our revenue and free cash flow growth expectations for the full year."

Second-Quarter Highlights

  • Revenue-  Revenue of $15.5 billion, down 0.4 percent, up 0.4 percent at constant currency-  Software revenue up 7 percent, up 8 percent at constant currency-  Consulting revenue up 4 percent, up 6 percent at constant currency-  Infrastructure revenue down 15 percent, down 14 percent at constant currency
  • Profit Margin-  Gross Profit Margin: GAAP: 54.9 percent, up 160 basis points; Operating (Non-GAAP): 55.9 percent, up 140 basis points-  Pre-Tax Income Margin: GAAP: 12.9 percent, up 180 basis points; Operating (Non-GAAP): 15.5 percent, down 70 basis points
  • Cash Flow-  Year to date net cash from operating activities of $6.4 billion, up $1.8 billion; free cash flow of $3.4 billion, up $0.1 billion

SECONDQUARTER 2023 INCOME STATEMENT SUMMARY

Results include YTY impact from gains on the 2Q22 sale of healthcare software assets*

Revenue

Gross

Profit

Gross

Profit

 Margin

Pre-tax

Income*

Pre-tax

Income

Margin*

Net

Income*

Diluted

Earnings

Per Share*

GAAP from

Continuing

Operations

$   15.5 B

$     8.5 B

54.9

%

$     2.0 B

12.9

%

$     1.6 B

$     1.72

Year/Year

(0.4)

%**

3

%

1.6

Pts

16

%

1.8

Pts

8

%

7

%

Operating

(Non-GAAP)

$     8.7 B

55.9

%

$     2.4 B

15.5

%

$     2.0 B

$     2.18

Year/Year

2

%

1.4

Pts

(5)

%

(0.7)

Pts

(5)

%

(6)

%

* Results include the YTY impact from the gains on the 2Q22 sale of healthcare software assets.  GAAP: Pre-Tax Income (17 pts); Pre-Tax   Income Margin (1.4 pts); Net Income (15 pts); EPS (15 pts).  Operating (Non-GAAP):  Pre-Tax Income (9 pts); Pre-Tax Income Margin (1.4   pts); Net Income (9 pts); EPS (9 pts).

** 0.4% at constant currency

"In the quarter, revenue performance was led by our growth vectors of software and consulting, and we continued to expand our gross profit margin, driven by our improving portfolio mix and productivity initiatives," said James Kavanaugh, IBM senior vice president and chief financial officer. "This year we have leveraged our strong cash position to invest for growth, announcing seven acquisitions to bolster our hybrid cloud and AI strategy, while continuing to return value to shareholders through dividends."

Segment Results for Second Quarter

  • Software — revenues of $6.6 billion, up 7.2 percent, up 7.5 percent at constant currency:-  Hybrid Platform & Solutions up 6 percent, up 7 percent at constant currency:   --  Red Hat up 11 percent   --  Automation up 1 percent, up 2 percent at constant currency   --  Data & AI up 10 percent, up 11 percent at constant currency   --  Security down 2 percent, down 1 percent at constant currency-  Transaction Processing up 9 percent, up 10 percent at constant currency
  • Consulting — revenues of $5.0 billion, up 4.3 percent, up 5.9 percent at constant currency:-  Business Transformation up 3 percent, up 5 percent at constant currency-  Technology Consulting up 4 percent, up 5 percent at constant currency-  Application Operations up 6 percent, up 8 percent at constant currency
  • Infrastructure — revenues of $3.6 billion, down 14.6 percent, down 13.8 percent at constant currency:-  Hybrid Infrastructure down 18 percent:   --  IBM z Systems down 30 percent   --  Distributed Infrastructure down 6 percent-  Infrastructure Support down 8 percent, down 6 percent at constant currency
  • Financing — revenues of $0.2 billion, up 26.2 percent, up 27.1 percent at constant currency

Cash Flow and Balance SheetIn the second quarter, the company generated net cash from operating activities of $2.6 billion, up $1.3 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $2.6 billion. IBM's free cash flow was $2.1 billion, flat year to year. The company returned $1.5 billion to shareholders in dividends in the second quarter.

For the first six months of the year, the company generated net cash from operating activities of $6.4 billion, up $1.8 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $4.4 billion. IBM's free cash flow was $3.4 billion, up $0.1 billion year to year.

IBM ended the second quarter with $16.3 billion of cash and marketable securities, up $7.5 billion from year-end 2022. Debt, including IBM Financing debt of $10.6 billion, totaled $57.5 billion, up $6.5 billion since the end of 2022.

Full-Year 2023 Expectations

  • Revenue: The company continues to expect constant currency revenue growth of three percent to five percent. At current foreign exchange rates, currency is expected to be neutral to revenue growth.
  • Free cash flow: The company continues to expect about $10.5 billion in free cash flow, up more than $1 billion year to year.

Forward-Looking and Cautionary StatementsExcept 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 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 related to climate change and 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; potential failure of the separation of Kyndryl Holdings, Inc. to qualify for tax-free treatment; 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 ReleaseIn 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);
  • presenting operating (non-GAAP) earnings per share amounts and related income statement items;
  • free cash flow;
  • cash from operating activities excluding IBM Financing receivables.

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 WebcastIBM'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-2q23. 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                    Sarah Meron, 347-891-1770                    sarah.meron@ibm.com                        Tim Davidson, 914-844-7847                    tfdavids@us.ibm.com 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

Three Months EndedJune 30,

Six Months EndedJune 30,

2023

2022

2023

2022

REVENUE BY SEGMENT

Software

$                   6,608

$                   6,166

$                12,529

$                11,938

Consulting

5,013

4,809

9,975

9,637

Infrastructure

3,618

4,235

6,716

7,453

Financing

185

146

380

300

Other

51

180

126

404

TOTAL REVENUE

15,475

15,535

29,727

29,732

GROSS PROFIT

8,501

8,290

16,010

15,625

GROSS PROFIT MARGIN

Software

79.3

%

79.2

%

79.4

%

79.0

%

Consulting

25.9

%

24.2

%

25.6

%

24.3

%

Infrastructure

55.8

%

53.8

%

53.9

%

52.4

%

Financing

49.2

%

35.3

%

46.5

%

36.5

%

TOTAL GROSS PROFIT MARGIN

54.9

%

53.4

%

53.9

%

52.6

%

EXPENSE AND OTHER INCOME

S,G&A

4,900

4,855

9,754

9,452

R,D&E

1,687

1,673

3,342

3,352

Intellectual property and custom development income

(248)

(176)

(428)

(297)

Other (income) and expense

(261)

(81)

(506)

166

Interest expense

423

297

790

607

TOTAL EXPENSE AND OTHER INCOME

6,501

6,568

12,952

13,280

INCOME FROM CONTINUING OPERATIONS

BEFORE INCOME TAXES

2,000

1,722

3,058

2,345

Pre-tax margin

12.9

%

11.1

%

10.3

%

7.9

%

Provision for/(Benefit from) income taxes

419

257

543

218

Effective tax rate

21.0

%

14.9

%

17.8

%

9.3

%

INCOME FROM CONTINUING OPERATIONS

$                   1,581

$                   1,465

$                   2,515

$                   2,127

DISCONTINUED OPERATIONS

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

2

(73)

(4)

(2)

NET INCOME

$                   1,583

$                   1,392

$                   2,511

$                   2,125

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK

Assuming Dilution

Continuing Operations

$                      1.72

$                      1.61

$                      2.74

$                      2.34

Discontinued Operations

$                      0.00

$                    (0.08)

$                      0.00

$                      0.00

TOTAL

$                      1.72

$                      1.53

$                      2.73

$                      2.34

Basic

Continuing Operations

$                      1.74

$                      1.62

$                      2.77

$                      2.36

Discontinued Operations

$                      0.00

$                    (0.08)

$                      0.00

$                      0.00

TOTAL

$                      1.74

$                      1.54

$                      2.76

$                      2.36

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

Assuming Dilution

919.5

910.7

918.6

910.0

Basic

909.9

901.5

908.7

900.4

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(Dollars in Millions)

At

June 30,2023

At

December 31,2022

ASSETS:

Current Assets:

Cash and cash equivalents

$                      9,394

$                      7,886

Restricted cash

31

103

Marketable securities

6,904

852

Notes and accounts receivable - trade, net

5,673

6,541

Short-term financing receivables, net

6,429

7,790

Other accounts receivable, net

838

817

Inventories

1,501

1,552

Deferred costs

957

967

Prepaid expenses and other current assets

2,730

2,611

Total Current Assets

34,458

29,118

Property, plant and equipment, net

5,443

5,334

Operating right-of-use assets, net

2,653

2,878

Long-term financing receivables, net

5,221

5,806

Prepaid pension assets

8,735

8,236

Deferred costs

897

866

Deferred taxes

6,340

6,256

Goodwill

56,385

55,949

Intangibles, net

10,496

11,184

Investments and sundry assets

1,585

1,617

Total Assets

$                132,213

$                127,243

LIABILITIES:

Current Liabilities:

Taxes

$                      1,606

$                      2,196

Short-term debt

6,785

4,760

Accounts payable

3,732

4,051

Deferred income

12,712

12,032

Operating lease liabilities

842

874

Other liabilities

6,836

7,592

Total Current Liabilities

32,513

31,505

Long-term debt

50,691

46,189

Retirement related obligations

9,385

9,596

Deferred income

3,264

3,499

Operating lease liabilities

1,986

2,190

Other liabilities

12,103

12,243

Total Liabilities

109,942

105,222

EQUITY:

IBM Stockholders' Equity:

Common stock

58,963

58,343

Retained earnings

149,318

149,825

Treasury stock — at cost

(169,581)

(169,484)

Accumulated other comprehensive income/(loss)

(16,499)

(16,740)

Total IBM Stockholders' Equity

22,201

21,944

Noncontrolling interests

70

77

Total Equity

22,271

22,021

Total Liabilities and Equity

$                132,213

$                127,243

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

Three Months EndedJune 30,

Six Months EndedJune 30,

Trailing Twelve

Months Ended

June 30,

(Dollars in Millions)

2023

2022*

2023

2022*

2023

Net Cash from Operations per GAAP

$            2,638

$            1,321

$            6,412

$            4,569

$                      12,278

Less: change in IBM Financing receivables

50

(1,264)

2,028

367

944

Capital Expenditures, net

(487)

(494)

(944)

(871)

(1,933)

Free Cash Flow

2,101

2,091

3,441

3,331

9,402

Acquisitions

(334)

(260)

(356)

(958)

(1,747)

Divestitures

6

1,207

6

1,268

10

Dividends

(1,510)

(1,488)

(3,007)

(2,963)

(5,992)

Non-Financing Debt

(1,178)

(2,934)

8,514

1,740

8,683

Other (includes IBM Financing net receivables and debt)

(347)

(1,607)

(1,109)

(2,197)

(1,805)

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

$          (1,263)

$          (2,991)

$            7,489

$                 221

$                         8,551

____________________

*   Includes immaterial cash flows from discontinued operations.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

Three Months EndedJune 30,

Six Months EndedJune 30,

(Dollars in Millions)

2023

2022*

2023

2022*

Net Income from Operations

$                      1,583

$                      1,392

$                      2,511

$                      2,125

Depreciation/Amortization of Intangibles

1,076

1,245

2,150

2,501

Stock-based Compensation

288

254

556

488

Working Capital / Other

(359)

(307)

(832)

(912)

IBM Financing A/R

50

(1,264)

2,028

367

Net Cash Provided by Operating Activities

$                      2,638

$                      1,321

$                      6,412

$                      4,569

Capital Expenditures, net of payments & proceeds

(487)

(494)

(944)

(871)

Divestitures, net of cash transferred

6

1,207

6

1,268

Acquisitions, net of cash acquired

(334)

(260)

(356)

(958)

Marketable Securities / Other Investments, net

822

(281)

(6,659)

(625)

Net Cash Provided by/(Used in) Investing Activities

$                               7

$                          172

$                    (7,953)

$                    (1,186)

Debt, net of payments & proceeds

(1,135)

(2,514)

6,169

434

Dividends

(1,510)

(1,488)

(3,007)

(2,963)

Financing - Other

(86)

(195)

(185)

(290)

Net Cash Provided by/(Used in) Financing Activities

$                      (2,731)

$                    (4,197)

$                      2,978

$                    (2,819)

Effect of Exchange Rate changes on Cash

(25)

(262)

(1)

(267)

Net Change in Cash, Cash Equivalents and Restricted Cash

$                         (110)

$                    (2,965)

$                      1,436

$                         297

____________________

*   Includes immaterial cash flows from discontinued operations.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

Three Months Ended June 30, 2023

(Dollars in Millions)

Software

Consulting

Infrastructure

Financing

Revenue

$                       6,608

$                        5,013

$                        3,618

$                            185

Pre-tax Income from Continuing Operations*

$                       1,504

$                           446

$                           633

$                              64

Pre-tax Margin*

22.8

%

8.9

%

17.5

%

34.9

%

Change YTY Revenue

7.2

%

4.3

%

(14.6)

%

26.2

%

Change YTY Revenue - Constant Currency

7.5

%

5.9

%

(13.8)

%

27.1

%

Three Months Ended June 30, 2022

(Dollars in Millions)

 Software

Consulting

Infrastructure

Financing

Revenue

$                       6,166

$                        4,809

$                        4,235

$                           146

Pre-tax Income from Continuing Operations

$                       1,375

$                           343

$                           757

$                           102

Pre-tax Margin

22.3

%

7.1

%

17.9

%

69.7

%

____________________

*   The second quarter 2023 pre-tax charge of approximately $0.12 billion for stranded costs related to portfolio actions is not included in the measure of segment     pre-tax income, consistent with the company's management system.

Six Months Ended June 30, 2023

(Dollars in Millions)

Software

Consulting

Infrastructure

Financing

Revenue

$                     12,529

$                        9,975

$                        6,716

$                           380

Pre-tax Income from Continuing Operations*

$                       2,668

$                           828

$                           849

$                           165

Pre-tax Margin*

21.3

%

8.3

%

12.6

%

43.3

%

Change YTY Revenue

5.0

%

3.5

%

(9.9)

%

26.8

%

Change YTY Revenue - Constant Currency

6.6

%

7.0

%

(7.8)

%

29.1

%

Six Months Ended June 30, 2022

(Dollars in Millions)

 Software

Consulting

Infrastructure

Financing

Revenue

$                     11,938

$                        9,637

$                        7,453

$                           300

Pre-tax Income from Continuing Operations

$                       2,509

$                           691

$                           956

$                           186

Pre-tax Margin

21.0

%

7.2

%

12.8

%

62.0

%

____________________

*   The year-to-date 2023 pre-tax charge of approximately $0.38 billion for stranded costs related to portfolio actions is not included in the measure of segment     pre-tax income, consistent with the company's management system.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)

Three Months Ended June 30, 2023

Continuing Operations

GAAP

Acquisition-

Related

Adjustments (1)

Retirement-

Related

Adjustments (2)

Tax

Reform

Impacts

Kyndryl-

Related

Impacts (3)

Operating

(Non-GAAP)

Gross Profit

$      8,501

$                         150

$                               —

$                —

$                   —

$         8,650

Gross Profit Margin

54.9

%

1.0

pts.

—

pts.

—

pts.

—

pts.

55.9

%

S,G&A

$      4,900

$                        (245)

$                               —

$                —

$                   —

$         4,655

Other (Income) & Expense

(261)

0

(1)

—

—

(262)

Total Expense & Other (Income)

6,501

(246)

(1)

—

—

6,254

Pre-tax Income from Continuing Operations

2,000

395

1

—

—

2,396

Pre-tax Income Margin from Continuing Operations

12.9

%

2.6

pts.

0.0

pts.

—

pts.

—

pts.

15.5

%

Provision for/(Benefit from) Income Taxes (4)

$          419

$                            87

$                               (3)

$            (110)

$                   —

$              393

Effective Tax Rate

21.0

%

0.2

pts.

(0.2)

pts.

(4.6)

pts.

—

pts.

16.4

%

Income from Continuing Operations

$       1,581

$                          308

$                                5

$             110

$                   —

$          2,003

Income Margin from Continuing Operations

10.2

%

2.0

pts.

0.0

pts.

0.7

pts.

—

pts.

12.9

%

Diluted Earnings Per Share: Continuing Operations

$         1.72

$                         0.34

$                           0.00

$            0.12

$                   —

$            2.18

Three Months Ended June 30, 2022

Continuing Operations

GAAP

Acquisition-

Related

Adjustments (1)

Retirement-

Related

Adjustments (2)

Tax

Reform

Impacts

Kyndryl-

Related

Impacts (3)

Operating

(Non-GAAP)

Gross Profit

$      8,290

$                         180

$                               —

$                —

$                   —

$         8,470

Gross Profit Margin

53.4

%

1.2

pts.

—

pts.

—

pts.

—

pts.

54.5

%

S,G&A

$      4,855

$                        (279)

$                               —

$                —

$                   0

$         4,576

Other (Income) & Expense

(81)

(1)

(192)

—

(145)

(418)

Total Expense & Other (Income)

6,568

(280)

(192)

—

(145)

5,952

Pre-tax Income from Continuing Operations

1,722

460

192

—

145

2,518

Pre-tax Income Margin from Continuing Operations

11.1

%

3.0

pts.

1.2

pts.

—

pts.

0.9

pts.

16.2

%

Provision for/(Benefit from) Income Taxes (4)

$          257

$                         115

$                             46

$               (4)

$                   —

$              413

Effective Tax Rate

14.9

%

1.8

pts.

0.7

pts.

(0.2)

pts.

(0.9)

pts.

16.4

%

Income from Continuing Operations

$       1,465

$                         345

$                           146

$                 4

$                145

$          2,105

Income Margin from Continuing Operations

9.4

%

2.2

pts.

0.9

pts.

0.0

pts.

0.9

pts.

13.5

%

Diluted Earnings Per Share: Continuing Operations

$         1.61

$                        0.38

$                          0.16

$           0.00

$               0.16

$             2.31

____________________

(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)

Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM and the related cash-settled swap.

(4)

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 Ended June 30, 2023

Continuing Operations

GAAP

Acquisition-

Related

Adjustments (1)

Retirement-

Related

Adjustments (2)

Tax

Reform

Impacts

Kyndryl-

Related

Impacts (3)

Operating

(Non-GAAP)

Gross Profit

$    16,010

$                         298

$                                  —

$                —

$                   —

$       16,308

Gross Profit Margin

53.9

%

1.0

pts.

—

pts.

—

pts.

—

pts.

54.9

%

S,G&A

$      9,754

$                       (491)

$                                  —

$                —

$                   —

$         9,263

Other (Income) & Expense

(506)

(2)

4

—

—

(504)

Total Expense & Other (Income)

12,952

(493)

4

—

—

12,463

Pre-tax Income from Continuing Operations

3,058

791

(4)

—

—

3,845

Pre-tax Income Margin from Continuing Operations

10.3

%

2.7

pts.

0.0

pts.

—

pts.

—

pts.

12.9

%

Provision for/(Benefit from) Income Taxes (4)

$          543

$                         178

$                              (14)

$            (115)

$                   —

$              593

Effective Tax Rate

17.8

%

1.0

pts.

(0.3)

pts.

(3.0)

pts.

—

pts.

15.4

%

Income from Continuing Operations

$       2,515

$                         613

$                                10

$             115

$                   —

$           3,252

Income Margin from Continuing Operations

8.5

%

2.1

pts.

0.0

pts.

0.4

pts.

—

pts.

10.9

%

Diluted Earnings Per Share: Continuing Operations

$         2.74

$                        0.67

$                             0.01

$            0.13

$                   —

$             3.54

Six Months Ended June 30, 2022

Continuing Operations

GAAP

Acquisition-

Related

Adjustments (1)

Retirement-

Related

Adjustments (2)

Tax

Reform

Impacts

Kyndryl-

Related

Impacts (3)

Operating

(Non-GAAP)

Gross Profit

$    15,625

$                         361

$                               —

$                —

$                   —

$       15,986

Gross Profit Margin

52.6

%

1.2

pts.

—

pts.

—

pts.

—

pts.

53.8

%

S,G&A

$      9,452

$                       (565)

$                               —

$                —

$                    0

$         8,887

Other (Income) & Expense

166

(1)

(394)

—

(367)

(596)

Total Expense & Other (Income)

13,280

(566)

(394)

—

(367)

11,953

Pre-tax Income from Continuing Operations

2,345

928

394

—

367

4,033

Pre-tax Income Margin from Continuing Operations

7.9

%

3.1

pts.

1.3

pts.

—

pts.

1.2

pts.

13.6

%

Provision for/(Benefit from) Income Taxes (4)

$          218

$                         224

$                         104

$             112

$                   —

$              657

Effective Tax Rate

9.3

%

3.4

pts.

1.7

pts.

2.8

pts.

(0.8)

pts.

16.3

%

Income from Continuing Operations

$       2,127

$                         704

$                         290

$           (112)

$                 367

$           3,376

Income Margin from Continuing Operations

7.2

%

2.4

pts.

1.0

pts.

(0.4)

pts.

1.2

pts.

11.4

%

Diluted Earnings Per Share: Continuing Operations

$         2.34

$                        0.77

$                        0.32

$         (0.12)

$               0.40

$             3.71

____________________

(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)

Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM and the related cash-settled swap.

(4)

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.

   

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/ibm-releases-second-quarter-results-301881419.html

SOURCE IBM