Improved Revenue Growth Led by Hybrid Cloud
Platform Adoption, Consulting and Software
Highlights
Second Quarter:
- Revenue of $18.7 billion, up 3 percent (flat adjusting for
divested businesses and currency) -- Cloud & Cognitive Software
up 6 percent (up 2 percent adjusting for currency) -- Global
Business Services up 12 percent (up 7 percent adjusting for
currency)
- Net cash from operating activities of $17.7 billion and
adjusted free cash flow of $11.0 billion, over last 12 months
- Total cloud revenue over last 12 months of $27.0 billion, up 15
percent (up 13 percent adjusting for divested businesses and
currency)
- Total cloud revenue in the quarter of $7.0 billion, up 13
percent (up 9 percent adjusting for divested businesses and
currency) led by -- Cloud & Cognitive Software cloud revenue up
29 percent (up 25 percent adjusting for currency) -- Global
Business Services cloud revenue up 35 percent (up 30 percent
adjusting for currency)
- Red Hat revenue up 20 percent (up 17 percent adjusting for
currency), normalized for historical comparability
- GAAP gross profit margin of 48.0 percent, flat; Operating
(non-GAAP) gross profit margin of 49.3 percent, up 30 basis
points
- Debt reduced by $6.4 billion since year-end 2020
IBM (NYSE: IBM) today announced second-quarter
2021 earnings results.
“In the second quarter client adoption of our hybrid cloud
platform contributed to strong performance in Global Business
Services and software and drove improved overall revenue growth. At
the same time, we continued to help clients infuse our AI-based
technology offerings into their core business workflows," said
Arvind Krishna, IBM chairman and chief executive officer. "We are
pleased with our progress and we remain on track to deliver
full-year revenue growth and meet our cash flow objective.”
SECOND QUARTER 2021
Pre-tax
Gross
Diluted
Net
Pre-tax
Income
Profit
EPS
Income
Income
Margin
Margin
GAAP from Continuing Operations
$
1.47
$
1.3B
$
1.6B
8.3
%
48.0
%
Year/Year
(3)
%
(3)
%
(1)
%
(0.4)
Pts
0.0
Pts
Operating (Non-GAAP)
$
2.33
$
2.1B
$
2.5B
13.5
%
49.3
%
Year/Year
7
%
8
%
9
%
0.7
Pts
0.3
Pts
GAAP EPS results include impacts related
to the amortization of purchased intangible assets and other
acquisition-related charges, retirement-related charges, U.S. tax
reform enactment impacts, and transaction costs associated with the
Kyndryl separation. The impact of the Kyndryl separation costs for
second-quarter 2021 was ($0.15) per share.
“We expanded operating margins and grew profit dollars in the
quarter, providing a key contribution to our cash performance,"
said James Kavanaugh, IBM senior vice president and chief financial
officer. "In the first half of the year we increased adjusted free
cash flow, invested in strategic acquisitions to strengthen our
hybrid cloud and AI capabilities, continued to deleverage and,
consistent with our commitment, again increased our dividend.”
Cash Flow and Balance
Sheet
In the second quarter, the company generated net cash from
operating activities of $2.6 billion. IBM’s free cash flow was $1.0
billion, which includes $0.6 billion of cash impacts from the
company’s structural actions initiated in the fourth quarter of
2020 and the transaction costs associated with the separation of
Kyndryl. IBM’s adjusted free cash flow, excluding these cash
impacts, was $1.6 billion. The company returned $1.5 billion to
shareholders in dividends.
In the first six months of the year, the company generated net
cash from operating activities of $7.5 billion. Free cash flow for
the first six months was $2.6 billion. The company’s adjusted free
cash flow, excluding cash impacts of $1.2 billion for the
structural actions and transaction separation costs, was $3.8
billion.
Over the last 12 months, the company generated net cash from
operating activities of $17.7 billion. IBM’s free cash flow for the
last 12 months was $9.7 billion. The company’s adjusted free cash
flow, excluding cash impacts of $1.3 billion for the structural
actions and transaction separation costs, was $11.0 billion.
IBM ended the second quarter with $8.2 billion of cash on hand
(includes marketable securities), down $6.1 billion from year-end
2020 due primarily to acquisitions and debt reduction payments.
Debt, including Global Financing debt of $17.5 billion, totaled
$55.2 billion, down $6.4 billion since the end of 2020, and down
$17.9 billion since closing the Red Hat acquisition.
Segment Results for Second
Quarter
- Cloud & Cognitive Software (includes Cloud & Data
Platforms, Cognitive Applications and Transaction Processing
Platforms) —revenues of $6.1 billion, up 6.1 percent (up 2.5
percent adjusting for currency). Cloud & Data Platforms grew 12
percent (up 8 percent adjusting for currency), led by the company’s
hybrid cloud platform and Cloud Pak growth. Cognitive Applications
grew 12 percent (up 8 percent adjusting for currency), led by
growth in Security and AI applications. Transaction Processing
Platforms declined 7 percent (down 11 percent adjusting for
currency). Cloud revenue up 29 percent (up 25 percent adjusting for
currency).
- Global Business Services (includes Consulting, Application
Management and Global Process Services) — revenues of $4.3 billion,
up 11.6 percent (up 7.3 percent adjusting for currency), with
growth in Consulting, up 16 percent (up 11 percent adjusting for
currency), Application Management up 5 percent (up 1 percent
adjusting for currency) and Global Process Services up 28 percent
(up 25 percent adjusting for currency). Cloud revenue up 35 percent
(up 30 percent adjusting for currency). Gross profit margin
declined 60 basis points.
- Global Technology Services (includes Infrastructure & Cloud
Services and Technology Support Services) — revenues of $6.3
billion, up 0.4 percent (down 4.1 percent adjusting for currency).
Both Infrastructure & Cloud Services and Technology Support
Services were flat (down 4 percent adjusting for currency). Cloud
revenue down 1 percent (down 5 percent adjusting for currency).
Gross profit margin up 110 basis points.
- Systems (includes Systems Hardware and Operating Systems
Software) — revenues of $1.7 billion, down 7.3 percent (down 10.2
percent adjusting for currency), driven by declines in IBM Z (down
11 percent; down 13 percent adjusting for currency) and Storage
Systems (down 7 percent, down 10 percent adjusting for currency).
Power systems declined 2 percent (down 5 percent adjusting for
currency). Cloud revenue down 16 percent (down 19 percent adjusting
for currency).
- Global Financing (includes financing and used equipment sales)
— revenues of $242 million, down 8.6 percent (down 11.6 percent
adjusting for currency).
Year-To-Date 2021 Results
Revenues for the six-month period ended June 30, 2021 totaled
$36.5 billion, an increase of 2 percent year to year (down 1
percent adjusting for divested businesses and currency) compared
with $35.7 billion for the first six months of 2020. Net income was
$2.3 billion, down 10 percent year to year. Diluted earnings per
share was $2.52 compared with $2.83 per diluted share for the 2020
period, a decrease of 11 percent.
GAAP earnings per share results include a ($1.58) per-share
impact for charges related to amortization of purchased intangible
assets and other acquisition-related charges, retirement-related
charges, U.S. tax reform enactment impacts, and transaction costs
associated with the Kyndryl separation. The impact of the Kyndryl
separation costs was ($0.20) per share.
Operating (non-GAAP) net income for the six months ended June
30, 2021 was $3.7 billion compared with $3.6 billion in the
prior-year period, an increase of 3 percent. Operating (non-GAAP)
diluted earnings per share from continuing operations was $4.10
compared with $4.02 per diluted share for the 2020 period, an
increase of 2 percent.
Full-Year 2021 Expectations
The company expects to grow revenue for the full year 2021 based
on mid-July 2021 foreign exchange rates. The company continues to
expect adjusted free cash flow of $11 billion to $12 billion in
2021. Adjusted free cash flow expectations exclude approximately $3
billion of cash impacts from the company’s structural actions
initiated in the fourth quarter of 2020 and the transaction costs
associated with the separation of Kyndryl.
Forward-Looking and Cautionary
Statements
Except for the historical information and discussions contained
herein, statements contained in this release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based on the company’s current assumptions regarding
future business and financial performance. These statements involve
a number of risks, uncertainties and other factors that could cause
actual results to differ materially, including, but not limited to,
the following: a downturn in economic environment and client
spending budgets; a failure of the company’s innovation
initiatives; damage to the company’s reputation; risks from
investing in growth opportunities; failure of the company’s
intellectual property portfolio to prevent competitive offerings
and the failure of the company to obtain necessary licenses; the
possibility that the proposed separation of the managed
infrastructure services unit of the company’s Global Technology
Services segment will not be completed within the anticipated time
period or at all, the possibility of disruption or unanticipated
costs in connection with the proposed separation or the possibility
that the separation will not achieve its intended benefits; the
company’s ability to successfully manage acquisitions, alliances
and dispositions, including integration challenges, failure to
achieve objectives, the assumption of liabilities, and higher debt
levels; fluctuations in financial results; impact of local legal,
economic, political, health and other conditions; the company’s
failure to meet growth and productivity objectives; ineffective
internal controls; the company’s use of accounting estimates;
impairment of the company’s goodwill or amortizable intangible
assets; the company’s ability to attract and retain key employees
and its reliance on critical skills; impacts of relationships with
critical suppliers; product quality issues; impacts of business
with government clients; reliance on third party distribution
channels and ecosystems; cybersecurity and data privacy
considerations; adverse effects from environmental matters, tax
matters; legal proceedings and investigatory risks; the company’s
pension plans; currency fluctuations and customer financing risks;
impact of changes in market liquidity conditions and customer
credit risk on receivables; risk factors related to IBM securities;
and other risks, uncertainties and factors discussed in the
company’s Form 10-Qs, Form 10-K and in the company’s other filings
with the U.S. Securities and Exchange Commission or in materials
incorporated therein by reference. Any forward-looking statement in
this release speaks only as of the date on which it is made. Except
as required by law, the company assumes no obligation to update or
revise any forward-looking statements.
Presentation of Information in
this Press Release
In an effort to provide investors with additional information
regarding the company’s results as determined by generally accepted
accounting principles (GAAP), the company has also disclosed in
this press release the following non-GAAP information, which
management believes provides useful information to investors:
IBM results —
- adjusting for currency (i.e., at constant currency);
- total revenue and cloud revenue adjusting for divested
businesses and currency;
- Red Hat revenue normalized for historical comparability;
- presenting operating (non-GAAP) earnings per share amounts and
related income statement items;
- free cash flow;
- adjusted free cash flow.
The rationale for management’s use of these non-GAAP measures is
included in Exhibit 99.2 in the Form 8‑K that includes this press
release and is being submitted today to the SEC.
Conference Call and
Webcast
IBM’s regular quarterly earnings conference call is scheduled to
begin at 5:00 p.m. EDT, today. The Webcast may be accessed via a
link at https://www.ibm.com/investor/events/earnings-2q21.
Presentation charts will be available shortly before the
Webcast.
Financial Results Below (certain amounts may not add due
to use of rounded numbers; percentages presented are calculated
from the underlying whole-dollar amounts).
INTERNATIONAL BUSINESS MACHINES
CORPORATION COMPARATIVE FINANCIAL RESULTS (Unaudited;
Dollars in millions except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
REVENUE
Cloud & Cognitive Software
$
6,098
$
5,748
$
11,534
$
10,987
Global Business Services
4,341
3,890
8,575
8,027
Global Technology Services
6,342
6,316
12,712
12,783
Systems
1,717
1,852
3,144
3,220
Global Financing
242
265
482
564
Other
5
50
28
113
TOTAL REVENUE
18,745
18,123
36,474
35,694
GROSS PROFIT
9,004
8,700
17,208
16,622
GROSS PROFIT MARGIN
Cloud & Cognitive Software
78.1
%
77.1
%
77.1
%
76.3
%
Global Business Services
27.9
%
28.4
%
28.0
%
27.8
%
Global Technology Services
35.3
%
34.2
%
34.9
%
34.1
%
Systems
55.1
%
57.8
%
54.8
%
54.6
%
Global Financing
27.4
%
38.6
%
29.7
%
39.7
%
TOTAL GROSS PROFIT MARGIN
48.0
%
48.0
%
47.2
%
46.6
%
EXPENSE AND OTHER INCOME
S,G&A
5,334
5,248
10,508
11,203
R,D&E
1,657
1,582
3,286
3,207
Intellectual property and custom
development income
(135
)
(203
)
(282
)
(319
)
Other (income) and expense
315
179
676
361
Interest expense
281
323
562
649
TOTAL EXPENSE AND OTHER INCOME
7,451
7,129
14,751
15,101
INCOME/(LOSS) FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES
1,552
1,571
2,457
1,522
Pre-tax margin
8.3
%
8.7
%
6.7
%
4.3
%
Provision for/(Benefit from) income
taxes
227
209
177
(1,017
)
Effective tax rate
14.7
%
13.3
%
7.2
%
(66.8
)
%
INCOME FROM CONTINUING
OPERATIONS
$
1,325
$
1,362
$
2,281
$
2,538
DISCONTINUED OPERATIONS
Income/(Loss) from discontinued
operations, net of taxes
—
(1
)
(1
)
(2
)
NET INCOME
$
1,325
$
1,361
$
2,280
$
2,536
EARNINGS/(LOSS) PER SHARE OF COMMON
STOCK
Assuming Dilution
Continuing Operations
$
1.47
$
1.52
$
2.52
$
2.83
Discontinued Operations
$
0.00
$
0.00
$
0.00
$
0.00
TOTAL
$
1.47
$
1.52
$
2.52
$
2.83
Basic
Continuing Operations
$
1.48
$
1.53
$
2.55
$
2.85
Discontinued Operations
$
0.00
$
0.00
$
0.00
$
0.00
TOTAL
$
1.48
$
1.53
$
2.55
$
2.85
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (M’s)
Assuming Dilution
904.2
894.9
903.0
895.0
Basic
895.0
889.4
894.3
888.7
INTERNATIONAL BUSINESS MACHINES
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At
At
June 30,
December 31,
(Dollars in Millions)
2021
2020
ASSETS:
Current Assets:
Cash and cash equivalents
$
7,350
$
13,212
Restricted cash
215
463
Marketable securities
600
600
Notes and accounts receivable - trade,
net
6,827
7,132
Short-term financing receivables, net
8,194
10,892
Other accounts receivable, net
802
714
Inventories
1,807
1,839
Deferred costs
2,211
2,107
Prepaid expenses and other current
assets
2,768
2,206
Total Current Assets
30,774
39,165
Property, plant and equipment, net
9,423
10,040
Operating right-of-use assets, net
4,387
4,686
Long-term financing receivables, net
5,674
7,086
Prepaid pension assets
8,046
7,610
Deferred costs
2,362
2,449
Deferred taxes
8,954
9,241
Goodwill
61,645
59,617
Intangibles, net
13,539
13,796
Investments and sundry assets
2,010
2,282
Total Assets
$
146,814
$
155,971
LIABILITIES:
Current Liabilities:
Taxes
$
2,260
$
3,301
Short-term debt
6,442
7,183
Accounts payable
4,214
4,908
Deferred income
13,272
12,833
Operating lease liabilities
1,334
1,357
Other liabilities
9,095
10,287
Total Current Liabilities
36,616
39,869
Long-term debt
48,735
54,355
Retirement related obligations
17,265
18,248
Deferred income
4,113
4,301
Operating lease liabilities
3,278
3,574
Other liabilities
14,741
14,897
Total Liabilities
124,747
135,244
EQUITY:
IBM Stockholders’ Equity:
Common stock
56,912
56,556
Retained earnings
162,086
162,717
Treasury stock — at cost
(169,404
)
(169,339
)
Accumulated other comprehensive
income/(loss)
(27,652
)
(29,337
)
Total IBM Stockholders’ Equity
21,942
20,597
Noncontrolling interests
125
129
Total Equity
22,067
20,727
Total Liabilities and Equity
$
146,814
$
155,971
INTERNATIONAL BUSINESS MACHINES
CORPORATION CASH FLOW ANALYSIS (Unaudited)
Trailing Twelve
Three Months Ended
Six Months Ended
Months Ended
June 30,
June 30,
June 30,
(Dollars in Millions)
2021
2020
2021
2020
2021
Net Cash Provided by Operating
Activities per GAAP:
$
2,625
$
3,576
$
7,539
$
8,052
$
17,684
Less: Change in Global Financing (GF)
Receivables
900
589
3,763
2,971
5,142
Capital Expenditures, net
(688
)
(697
)
(1,217
)
(1,434
)
(2,826
)
Free Cash Flow
1,037
2,290
2,559
3,647
9,716
Structural actions initiated in 4Q20 &
Separation charges (1)
595
—
1,224
—
1,274
Adjusted Free Cash Flow
1,631
2,290
3,783
3,647
10,990
Free Cash Flow
1,037
2,290
2,559
3,647
9,716
Acquisitions
(1,747
)
(6
)
(2,866
)
(19
)
(3,182
)
Divestitures
(10
)
731
(25
)
757
(280
)
Dividends
(1,467
)
(1,450
)
(2,924
)
(2,890
)
(5,832
)
Non-GF Debt
(586
)
455
(2,331
)
3,958
(6,068
)
Other (includes GF Net Receivables and GF
Debt)
(335
)
213
(522
)
(213
)
(440
)
Change in Cash, Cash Equivalents,
Restricted Cash and Short-term Marketable Securities
$
(3,108
)
$
2,233
$
(6,110
)
$
5,241
$
(6,085
)
___________________________ (1) Includes cash impacts incurred
in the period related to structural actions initiated in 4Q20 and
separation related costs.
INTERNATIONAL BUSINESS MACHINES
CORPORATION CASH FLOW (Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in Millions)
2021
2020
2021
2020
Net Income from Operations
$
1,325
$
1,361
$
2,280
$
2,536
Depreciation/Amortization of
Intangibles
1,680
1,678
3,352
3,313
Stock-based Compensation
243
247
457
436
Working Capital / Other
(1,524
)
(300
)
(2,313
)
(1,204
)
Global Financing A/R
900
589
3,763
2,971
Net Cash Provided by Operating
Activities
$
2,625
$
3,576
$
7,539
$
8,052
Capital Expenditures, net of payments
& proceeds
(688
)
(697
)
(1,217
)
(1,434
)
Divestitures, net of cash transferred
(10
)
731
(25
)
757
Acquisitions, net of cash acquired
(1,747
)
(6
)
(2,866
)
(19
)
Marketable Securities / Other Investments,
net
(227
)
(1,264
)
(562
)
(1,442
)
Net Cash Provided by/(Used in)
Investing Activities
$
(2,671
)
$
(1,236
)
$
(4,671
)
$
(2,138
)
Debt, net of payments & proceeds
(1,500
)
(38
)
(5,799
)
1,319
Dividends
(1,467
)
(1,450
)
(2,924
)
(2,890
)
Common Stock Transactions - Other
(163
)
(137
)
(190
)
(168
)
Net Cash Provided by/(Used in)
Financing Activities
$
(3,131
)
$
(1,624
)
$
(8,914
)
$
(1,739
)
Effect of Exchange Rate changes on
Cash
69
101
(65
)
(301
)
Net Change in Cash, Cash Equivalents
and Restricted Cash
$
(3,108
)
$
817
$
(6,110
)
$
3,874
INTERNATIONAL BUSINESS MACHINES
CORPORATION SEGMENT DATA (Unaudited)
Three Months Ended June 30,
2021
Cloud &
Global
Global
Cognitive
Business
Technology
Global
(Dollars in Millions)
Software
Services
Services
Systems
Financing
Revenue
External
$
6,098
$
4,341
$
6,342
$
1,717
$
242
Internal
726
58
326
241
260
Total Segment Revenue
$
6,824
$
4,399
$
6,668
$
1,958
$
502
Pre-tax Income/(Loss) from Continuing
Operations
1,720
371
381
176
246
Pre-tax Margin
25.2
%
8.4
%
5.7
%
9.0
%
48.9
%
Change YTY Revenue - External
6.1
%
11.6
%
0.4
%
(7.3
)
%
(8.6
)
%
Change YTY Revenue - External @constant
currency
2.5
%
7.3
%
(4.1
)
%
(10.2
)
%
(11.6
)
%
Three Months Ended June 30,
2020
Cloud &
Global
Global
Cognitive
Business
Technology
Global
(Dollars in Millions)
Software
Services
Services
Systems
Financing
Revenue
External
$
5,748
$
3,890
$
6,316
$
1,852
$
265
Internal
743
55
304
240
241
Total Segment Revenue
$
6,491
$
3,945
$
6,621
$
2,092
$
506
Pre-tax Income/(Loss) from Continuing
Operations
1,708
362
250
248
176
Pre-tax Margin
26.3
%
9.2
%
3.8
%
11.8
%
34.9
%
INTERNATIONAL BUSINESS MACHINES
CORPORATION SEGMENT DATA (Unaudited)
Six Months Ended June 30,
2021
Cloud &
Global
Global
Cognitive
Business
Technology
Global
(Dollars in Millions)
Software
Services
Services
Systems
Financing
Revenue
External
$
11,534
$
8,575
$
12,712
$
3,144
$
482
Internal
1,558
113
639
430
428
Total Segment Revenue
$
13,093
$
8,688
$
13,351
$
3,574
$
910
Pre-tax Income/(Loss) from Continuing
Operations
3,147
761
520
174
412
Pre-tax Margin
24.0
%
8.8
%
3.9
%
4.9
%
45.3
%
Change YTY Revenue - External
5.0
%
6.8
%
(0.6
)
%
(2.4
)
%
(14.7
)
%
Change YTY Revenue - External @constant
currency
1.6
%
2.8
%
(4.7
)
%
(5.0
)
%
(17.1
)
%
Six Months Ended June 30,
2020
Cloud &
Global
Global
Cognitive
Business
Technology
Global
(Dollars in Millions)
Software
Services
Services
Systems
Financing
Revenue
External
$
10,987
$
8,027
$
12,783
$
3,220
$
564
Internal
1,556
101
599
388
453
Total Segment Revenue
$
12,543
$
8,128
$
13,382
$
3,608
$
1,017
Pre-tax Income/(Loss) from Continuing
Operations
2,641
633
72
31
370
Pre-tax Margin
21.1
%
7.8
%
0.5
%
0.9
%
36.4
%
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,
2021
Continuing Operations
Acquisition-
Retirement-
Tax
Separation-
Related
Related
Reform
Related
Operating
GAAP
Adjustments (1)
Adjustments (2)
Impacts
Charges (4)
(Non-GAAP)
Gross Profit
$
9,004
$
180
$
—
$
—
$
58
$
9,242
Gross Profit Margin
48.0
%
1.0
Pts
—
Pts
—
Pts
0.3
Pts
49.3
%
S,G&A
5,334
(298
)
—
—
(116
)
4,919
R,D&E
1,657
—
—
—
(0
)
1,656
Other (Income) & Expense
315
(1
)
(328
)
—
—
(14
)
Interest Expense
281
—
—
—
—
281
Total Expense & Other (Income)
7,451
(299
)
(328
)
—
(117
)
6,708
Pre-tax Income from Continuing
Operations
1,552
479
328
—
175
2,534
Pre-tax Income Margin from Continuing
Operations
8.3
%
2.6
Pts
1.7
Pts
—
Pts
0.9
Pts
13.5
%
Provision for/(Benefit from) Income Taxes
(3)
227
107
67
(14
)
44
431
Effective Tax Rate
14.7
%
1.4
Pts
0.7
Pts
(0.5
)
Pts
0.7
Pts
17.0
%
Income from Continuing Operations
1,325
373
261
14
131
2,103
Income Margin from Continuing
Operations
7.1
%
2.0
Pts
1.4
Pts
0.1
Pts
0.7
Pts
11.2
%
Diluted Earnings/(Loss) Per Share:
Continuing Operations
$
1.47
$
0.41
$
0.29
$
0.01
$
0.15
$
2.33
Three Months Ended June 30,
2020
Continuing Operations
Acquisition-
Retirement-
Tax
Separation-
Related
Related
Reform
Related
Operating
GAAP
Adjustments (1)
Adjustments (2)
Impacts
Charges (4)
(Non-GAAP)
Gross Profit
$
8,700
$
187
$
—
$
—
$
—
$
8,887
Gross Profit Margin
48.0
%
1.0
Pts
—
Pts
—
Pts
—
Pts
49.0
%
S,G&A
5,248
(285
)
—
—
—
4,962
R,D&E
1,582
—
—
—
—
1,582
Other (Income) & Expense
179
(1
)
(273
)
—
—
(95
)
Interest Expense
323
—
—
—
—
323
Total Expense & Other (Income)
7,129
(286
)
(273
)
—
—
6,570
Pre-tax Income/(Loss) from Continuing
Operations
1,571
473
273
—
—
2,318
Pre-tax Income Margin from Continuing
Operations
8.7
%
2.6
Pts
1.5
Pts
—
Pts
—
Pts
12.8
%
Provision for/(Benefit from) Income Taxes
(3)
209
108
52
—
—
369
Effective Tax Rate
13.3
%
1.9
Pts
0.7
Pts
—
Pts
—
Pts
15.9
%
Income from Continuing Operations
1,362
365
222
—
—
1,949
Income Margin from Continuing
Operations
7.5
%
2.0
Pts
1.2
Pts
—
Pts
—
Pts
10.8
%
Diluted Earnings/(Loss) Per Share:
Continuing Operations
$
1.52
$
0.41
$
0.25
$
—
$
—
$
2.18
___________________ (1) Includes amortization of purchased
intangible assets, in process R&D, transaction costs,
applicable restructuring and related expenses, tax charges related
to acquisition integration and pre-closing charges, such as
financing costs. (2) Includes amortization of prior service costs,
interest cost, expected return on plan assets, amortized actuarial
gains/losses, the impacts of any plan curtailments/settlements and
pension insolvency costs and other costs. (3) Tax impact on
operating (non-GAAP) pre-tax income from continuing operations is
calculated under the same accounting principles applied to the As
Reported pre-tax income under ASC 740, which employs an annual
effective tax rate method to the results. (4) Kyndryl separation
charges primarily relate to transaction and third-party support
costs, business separation and applicable employee retention fees,
pension settlements and related tax charges.
INTERNATIONAL BUSINESS MACHINES
CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS
RECONCILIATION (Unaudited; Dollars in millions except per
share amounts)
Six Months Ended June 30,
2021
Continuing Operations
Acquisition-
Retirement-
Tax
Separation-
Related
Related
Reform
Related
Operating
GAAP
Adjustments (1)
Adjustments (2)
Impacts
Charges (4)
(Non-GAAP)
Gross Profit
$
17,208
$
355
$
—
$
—
$
61
$
17,624
Gross Profit Margin
47.2
%
1.0
Pts
—
Pts
—
Pts
0.2
Pts
48.3
%
S,G&A
10,508
(591
)
—
—
(175
)
9,742
R,D&E
3,286
—
—
—
(0
)
3,286
Other (Income) & Expense
676
(1
)
(670
)
—
—
5
Interest Expense
562
—
—
—
—
562
Total Expense & Other (Income)
14,751
(593
)
(670
)
—
(175
)
13,313
Pre-tax Income from Continuing
Operations
2,457
948
670
—
236
4,312
Pre-tax Income Margin from Continuing
Operations
6.7
%
2.6
Pts
1.8
Pts
—
Pts
0.6
Pts
11.8
%
Provision for/(Benefit from) Income Taxes
(3)
177
240
128
6
59
610
Effective Tax Rate
7.2
%
4.0
Pts
1.9
Pts
0.1
Pts
1.0
Pts
14.1
%
Income from Continuing Operations
2,281
707
542
(6
)
177
3,702
Income Margin from Continuing
Operations
6.3
%
1.9
Pts
1.5
Pts
(0.0
)
Pts
0.5
Pts
10.1
%
Diluted Earnings/(Loss) Per Share:
Continuing Operations
$
2.52
$
0.79
$
0.60
$
(0.01
)
$
0.20
$
4.10
Six Months Ended June 30,
2020
Continuing Operations
Acquisition-
Retirement-
Tax
Separation-
Related
Related
Reform
Related
Operating
GAAP
Adjustments (1)
Adjustments (2)
Impacts
Charges (4)
(Non-GAAP)
Gross Profit
$
16,622
$
375
$
—
$
—
$
—
$
16,998
Gross Profit Margin
46.6
%
1.1
Pts
—
Pts
—
Pts
—
Pts
47.6
%
S,G&A
11,203
(570
)
—
—
—
10,633
R,D&E
3,207
—
—
—
—
3,207
Other (Income) & Expense
361
(1
)
(538
)
—
—
(178
)
Interest Expense
649
—
—
—
—
649
Total Expense & Other (Income)
15,101
(571
)
(538
)
—
—
13,992
Pre-tax Income from Continuing
Operations
1,522
946
538
—
—
3,006
Pre-tax Income Margin from Continuing
Operations
4.3
%
2.7
Pts
1.5
Pts
—
Pts
—
Pts
8.4
%
Provision for/(Benefit from) Income Taxes
(3)
(1,017
)
210
65
149
—
(592
)
Effective Tax Rate
(66.8
)
%
28.0
Pts
14.1
Pts
5.0
Pts
—
Pts
(19.7
)
%
Income from Continuing Operations
2,538
736
472
(149
)
—
3,598
Income Margin from Continuing
Operations
7.1
%
2.1
Pts
1.3
Pts
(0.4
)
Pts
—
Pts
10.1
%
Diluted Earnings/(Loss) Per Share:
Continuing Operations
$
2.83
$
0.83
$
0.53
$
(0.17
)
$
—
$
4.02
_______________________ (1) Includes amortization of purchased
intangible assets, in process R&D, transaction costs,
applicable restructuring and related expenses, tax charges related
to acquisition integration and pre-closing charges, such as
financing costs. (2) Includes amortization of prior service costs,
interest cost, expected return on plan assets, amortized actuarial
gains/losses, the impacts of any plan curtailments/settlements and
pension insolvency costs and other costs. (3) Tax impact on
operating (non-GAAP) pre-tax income from continuing operations is
calculated under the same accounting principles applied to the As
Reported pre-tax income under ASC 740, which employs an annual
effective tax rate method to the results. (4) Kyndryl separation
charges primarily relate to transaction and third-party support
costs, business separation and applicable employee retention fees,
pension settlements and related tax charges.
INTERNATIONAL BUSINESS MACHINES
CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS
RECONCILIATION (Unaudited; Dollars in millions except per
share amounts)
Trailing
Three Months Ended
Six Months Ended
Twelve Months Ended
June 30, 2021
June 30, 2021
June 30, 2021
Change YTY
Change YTY
Change YTY
Revenue Adjusting for Divested
Businesses and Currency
Cloud
Total IBM
Total IBM
Cloud
Revenue as reported
12.6
%
3.4
%
2.2
%
15.2
%
Impact from divested businesses
0.2
Pts
0.1
Pts
0.1
Pts
0.5
Pts
Currency impact
(4.1
)
Pts
(4.0
)
Pts
(3.7
)
Pts
(3.1
)
Pts
Revenue adjusting for divested businesses
and currency (non-GAAP)
8.7
%
(0.5
)
%
(1.4
)
%
12.6
%
Three Months Ended
June 30, 2021
Red Hat Revenue, Normalized for
Historical Comparability
Change YTY
Red Hat Revenue GAAP growth rate (1)
36
%
Impact from purchase accounting deferred
revenue and intercompany adjustments (2)
(16
)
Pts
Red Hat revenue growth rate, normalized
for historical comparability (non-GAAP)
20
%
Impact from currency
(3
)
Pts
Red Hat revenue growth rate, normalized
for historical comparability and adjusting for currency
(non-GAAP)
17
%
___________________ (1) Represents change in GAAP revenue as
reported by IBM, which is included in the Cloud & Cognitive
Software segment. (2) Represents change in the second-quarter 2021
impact of the deferred revenue purchase accounting adjustment and
adjustments to add back revenue which was eliminated for sales
between Red Hat and IBM. This line represents revenue that would
have been recognized by Red Hat under GAAP if the acquisition had
not occurred, but was not recognized by IBM due to purchase
accounting and intercompany adjustments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210719005778/en/
IBM Sarah Meron, 347‑891‑1770 sarah.meron@ibm.com John
Bukovinsky, 732‑618‑3531 jbuko@us.ibm.com
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