TIDMIBM
IBM (NYSE: IBM) today announced third-quarter 2021 earnings
results.
"With the separation of Kyndryl early next month, IBM takes the
next step in our evolution as a platform-centric hybrid cloud and
AI company, " said Arvind Krishna, IBM chairman and chief executive
officer. "We continue to make progress in our software and
consulting businesses, which represent our higher growth
opportunities. With our increased focus and agility to better serve
clients, we are confident in achieving our medium-term objectives
of mid-single digit revenue growth and strong free cash flow
generation."
THIRD QUARTER 2021
All GAAP results include the impact of Kyndryl separation
costs*
Pre-tax Gross
Diluted Net Pre-tax Income Profit
EPS Income Income Margin Margin
GAAP from
Continuing
Operations $1.25 $1.1B $1.3B 7.5 % 46.4%
Year/Year (34 )% (33 )% (28 )% (2.9 )Pts (1.6 )Pts
Operating
(Non-GAAP) $2.52 $2.3B $2.4B 13.6% 48.0%
Year/Year (2 )% (1 )% (7 )% (1.0 )Pts (1.0 )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. * Impact of Kyndryl separation costs for third
quarter 2021 GAAP results: EPS ($0.56) per share; Net Income ($0.5B);
Pre-tax Income ($0.3B); Pre-Tax Income Margin (1.6) points; Gross Profit
Margin (0.6) points
"We again had solid cash generation for the quarter and over the
last year, while maintaining a strong balance sheet and the
liquidity to support our hybrid cloud and AI strategy," said James
Kavanaugh, IBM senior vice president and chief financial officer.
"Our post-separation portfolio mix is shifted toward our growth
vectors, with a higher-value recurring revenue stream and strong
cash generation, allowing us to continue to invest in the business
and provide attractive shareholder returns."
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from
operating activities of $2.7 billion. IBM's free cash flow was $0.6
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 $1.2 billion. The company returned $1.5 billion to
shareholders in dividends.
Over the last 12 months, the company generated net cash from
operating activities of $16.1 billion. IBM's free cash flow for the
last 12 months was $9.2 billion. The company's adjusted free cash
flow, excluding cash impacts of $1.8 billion for the structural
actions and transaction separation costs, was $11.1 billion.
IBM ended the third quarter with $8.4 billion of cash on hand
(includes marketable securities), down $5.9 billion from year-end
2020 reflecting acquisitions of $3.0 billion and debt reduction
payments. Debt, including Global Financing debt of $15.9 billion,
totaled $54.5 billion, down $7.0 billion since the end of 2020, and
down $18.5 billion since closing the Red Hat acquisition.
Segment Results for Third Quarter
-- Cloud & Cognitive Software (includes Cloud & Data Platforms, Cognitive
Applications and Transaction Processing Platforms) --revenues of $5.7
billion, up 2.5 percent (up 1.9 percent adjusting for currency). Cloud &
Data Platforms grew 10 percent (up 9 percent adjusting for currency),
Cognitive Applications revenue was flat (down 1 percent adjusting for
currency) and Transaction Processing Platforms declined 9 percent. Cloud
revenue up 21 percent (up 20 percent adjusting for currency).
-- Global Business Services (includes Consulting, Application Management and
Global Process Services) -- revenues of $4.4 billion, up 11.6 percent (up
11.0 percent adjusting for currency), with growth in Consulting, up 17
percent (up 16 percent adjusting for currency), Application Management up
5 percent, and Global Process Services up 19 percent. Cloud revenue up 38
percent (up 37 percent adjusting for currency).
-- Global Technology Services (includes Infrastructure & Cloud Services and
Technology Support Services) -- revenues of $6.2 billion, down 4.8
percent (down 5.4 percent adjusting for currency). Infrastructure & Cloud
Services declined 5 percent (down 6 percent adjusting for currency) and
Technology Support Services declined 4 percent (down 5 percent adjusting
for currency). Cloud revenue up 1 percent (flat adjusting for currency).
Gross profit margin up 120 basis points.
-- Systems (includes Systems Hardware and Operating Systems Software) --
revenues of $1.1 billion, down 11.9 percent (down 12.4 percent adjusting
for currency), driven by declines in IBM Z (down 33 percent) and Power
systems down 24 percent (down 25 percent adjusting for currency). Storage
Systems grew 11 percent. Cloud revenue down 42 percent (down 43 percent
adjusting for currency).
-- Global Financing (includes financing and used equipment sales) --
revenues of $220 million, down 19.2 percent (down 19.8 percent adjusting
for currency).
Year-To-Date 2021 Results
Revenues for the nine-month period ended September 30, 2021
totaled $54.1 billion, an increase of 1.6 percent year to year
(down 1 percent adjusting for divested businesses and currency)
compared with $53.3 billion for the first nine months of 2020. Net
income was $3.4 billion, down 19 percent year to year, reflecting
the impact of $0.7 billion of transaction costs associated with the
Kyndryl separation. Diluted earnings per share was $3.77 compared
with $4.72 per diluted share for the 2020 period, a decrease of 20
percent.
GAAP earnings per share results include a ($2.85) 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 ($0.76) per share.
Operating (non-GAAP) net income for the nine months ended
September 30, 2021 was $6.0 billion compared with $5.9 billion in
the prior-year period, an increase of 1.3 percent. Operating
(non-GAAP) diluted earnings per share from continuing operations
was $6.62 compared with $6.60 per diluted share for the 2020
period, flat year to year.
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;
-- total revenue normalized to exclude Kyndryl to be separated in November;
-- 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-3q21.
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 Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
REVENUE
Cloud & Cognitive
Software $5,692 $5,553 $17,227 $16,540
Global Business
Services 4,427 3,965 13,002 11,992
Global Technology
Services 6,154 6,462 18,866 19,245
Systems 1,107 1,257 4,251 4,477
Global Financing 220 273 702 837
Other 18 50 45 163
TOTAL REVENUE 17,618 17,560 54,093 53,253
GROSS PROFIT 8,171 8,430 25,379 25,052
GROSS PROFIT MARGIN
Cloud & Cognitive
Software 77.0 % 77.1 % 77.1 % 76.6 %
Global Business
Services 29.8 % 32.9 % 28.6 % 29.5 %
Global Technology
Services 36.2 % 35.0 % 35.3 % 34.4 %
Systems 41.3 % 51.2 % 51.3 % 53.7 %
Global Financing 25.6 % 37.5 % 28.4 % 39.0 %
TOTAL GROSS PROFIT
MARGIN 46.4 % 48.0 % 46.9 % 47.0 %
EXPENSE AND OTHER
INCOME
S,G&A 4,860 4,647 15,368 15,849
R,D&E 1,621 1,515 4,907 4,722
Intellectual
property and custom
development income (153 ) (134 ) (435 ) (453 )
Other (income) and
expense 234 253 911 614
Interest expense 291 323 852 971
TOTAL EXPENSE AND
OTHER INCOME 6,852 6,603 21,603 21,704
INCOME/(LOSS) FROM
CONTINUING
OPERATIONS
BEFORE INCOME TAXES 1,319 1,827 3,776 3,348
Pre-tax margin 7.5 % 10.4 % 7.0 % 6.3 %
Provision
for/(Benefit from)
income taxes 188 128 365 (888 )
Effective tax rate 14.3 % 7.0 % 9.7 % (26.5 ) %
INCOME FROM
CONTINUING
OPERATIONS $1,130 $1,698 $3,411 $4,237
DISCONTINUED
OPERATIONS
Income/(Loss) from
discontinued
operations, net of
taxes -- (1 ) (1 ) (2 )
NET INCOME $1,130 $1,698 $3,410 $4,234
EARNINGS/(LOSS) PER
SHARE OF COMMON
STOCK
Assuming Dilution
Continuing
Operations $1.25 $1.89 $3.77 $4.72
Discontinued
Operations $0.00 $0.00 $0.00 $0.00
TOTAL $1.25 $1.89 $3.77 $4.72
Basic
Continuing
Operations $1.26 $1.90 $3.81 $4.76
Discontinued
Operations $0.00 $0.00 $0.00 $0.00
TOTAL $1.26 $1.90 $3.81 $4.76
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING
(M's)
Assuming Dilution 906.0 897.3 904.0 895.8
Basic 897.1 891.4 895.3 889.6
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
At At
September 30, December 31,
(Dollars in Millions) 2021 2020
ASSETS:
Current Assets:
Cash and cash equivalents $ 7,455 $ 13,212
Restricted cash 352 463
Marketable securities 600 600
Notes and accounts receivable -
trade, net 6,609 7,132
Short-term financing receivables, net 7,161 10,892
Other accounts receivable, net 899 714
Inventories 1,891 1,839
Deferred costs 2,046 2,107
Prepaid expenses and other current
assets 2,954 2,206
Total Current Assets 29,967 39,165
Property, plant and equipment, net 9,138 10,040
Operating right-of-use assets, net 4,253 4,686
Long-term financing receivables, net 5,046 7,086
Prepaid pension assets 8,197 7,610
Deferred costs 2,248 2,449
Deferred taxes 8,967 9,241
Goodwill 61,378 59,617
Intangibles, net 13,025 13,796
Investments and sundry assets 1,996 2,282
Total Assets $ 144,214 $ 155,971
LIABILITIES:
Current Liabilities:
Taxes $ 2,159 $ 3,301
Short-term debt 7,575 7,183
Accounts payable 4,248 4,908
Deferred income 12,264 12,833
Operating lease liabilities 1,285 1,357
Other liabilities 8,300 10,287
Total Current Liabilities 35,832 39,869
Long-term debt 46,926 54,355
Retirement related obligations 16,764 18,248
Deferred income 3,965 4,301
Operating lease liabilities 3,192 3,574
Other liabilities 15,179 14,897
Total Liabilities 121,858 135,244
EQUITY:
IBM Stockholders' Equity:
Common stock 57,189 56,556
Retained earnings 161,747 162,717
Treasury stock -- at cost (169,406 ) (169,339 )
Accumulated other comprehensive
income/(loss) (27,302 ) (29,337 )
Total IBM Stockholders' Equity 22,228 20,597
Noncontrolling interests 129 129
Total Equity 22,357 20,727
Total Liabilities and Equity $ 144,214 $ 155,971
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Trailing
Twelve
Three Months Ended Nine Months Ended Months Ended
September 30, September 30, September 30,
(Dollars in Millions) 2021 2020 2021 2020 2021
Net Cash Provided by
Operating Activities
per GAAP: $2,713 $4,286 $10,252 $12,337 $ 16,111
Less: Change in Global
Financing (GF)
Receivables 1,472 2,353 5,235 5,324 4,260
Capital Expenditures,
net (638 ) (829 ) (1,855) (2,262) (2,635)
Free Cash Flow 603 1,104 3,162 4,751 9,216
Structural actions
initiated in 4Q20 &
Separation charges
(1) 566 -- 1,792 -- 1,841
Adjusted Free Cash Flow 1,170 1,104 4,954 4,751 11,057
Free Cash Flow 603 1,104 3,162 4,751 9,216
Acquisitions (152 ) (17 ) (3,018) (37 ) (3,317)
Divestitures 51 (248 ) 26 510 19
Dividends (1,471) (1,453) (4,395) (4,343) (5,850)
Non-GF Debt 1,187 1,019 (1,143) 4,977 (5,899)
Other (includes GF Net
Receivables and GF
Debt) 22 1,098 (500 ) 886 (1,516)
Change in Cash, Cash
Equivalents,
Restricted Cash and
Short-term Marketable
Securities $241 $1,503 $(5,868) $6,744 $ (7,347)
_______________
(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 Nine Months Ended
September 30, September 30,
(Dollars in Millions) 2021 2020 2021 2020
Net Income from Operations $1,130 $1,698 $3,410 $4,234
Depreciation/Amortization
of Intangibles 1,684 1,683 5,036 4,996
Stock-based Compensation 262 222 719 658
Working Capital / Other (1,834) (1,670) (4,147 ) (2,874)
Global Financing A/R 1,472 2,353 5,235 5,324
Net Cash Provided by
Operating Activities $2,713 $4,286 $10,252 $12,337
Capital Expenditures, net
of payments & proceeds (638 ) (829 ) (1,855 ) (2,262)
Divestitures, net of cash
transferred 51 (248 ) 26 510
Acquisitions, net of cash
acquired (152 ) (17 ) (3,018 ) (37 )
Marketable Securities /
Other Investments, net 109 762 (453 ) (680 )
Net Cash Provided by/(Used
in) Investing Activities $(629 ) $(332 ) $(5,300 ) $(2,470)
Debt, net of payments &
proceeds (287 ) (252 ) (6,086 ) 1,067
Dividends (1,471) (1,453) (4,395 ) (4,343)
Common Stock Transactions -
Other 9 16 (181 ) (152 )
Net Cash Provided by/(Used
in) Financing Activities $(1,748) $(1,689) $(10,662) $(3,428)
Effect of Exchange Rate
changes on Cash (94 ) 101 (159 ) (200 )
Net Change in Cash, Cash
Equivalents and Restricted
Cash $241 $2,366 $(5,868 ) $6,239
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Three Months Ended September 30, 2021
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 5,692 $ 4,427 $ 6,154 $1,107 $ 220
Internal 764 53 317 176 153
Total Segment Revenue $ 6,456 $ 4,480 $ 6,471 $1,283 $ 373
Pre-tax Income/(Loss)
from Continuing
Operations 1,675 587 383 (207 ) 206
Pre-tax Margin 25.9 % 13.1 % 5.9 % (16.1) % 55.1 %
Change YTY Revenue -
External 2.5 % 11.6 % (4.8 ) % (11.9) % (19.2 ) %
Change YTY Revenue -
External @constant
currency 1.9 % 11.0 % (5.4 ) % (12.4) % (19.8 ) %
Three Months Ended September 30, 2020
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 5,553 $ 3,965 $ 6,462 $1,257 $ 273
Internal 875 49 312 240 208
Total Segment Revenue $ 6,428 $ 4,014 $ 6,774 $1,497 $ 480
Pre-tax Income/(Loss)
from Continuing
Operations 1,834 570 399 (37 ) 196
Pre-tax Margin 28.5 % 14.2 % 5.9 % (2.5 ) % 40.7 %
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Nine Months Ended September 30, 2021
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 17,227 $ 13,002 $ 18,866 $4,251 $ 702
Internal 2,322 166 956 606 581
Total Segment Revenue $ 19,549 $ 13,168 $ 19,822 $4,857 $ 1,283
Pre-tax Income/(Loss)
from Continuing
Operations 4,822 1,349 903 (33 ) 618
Pre-tax Margin 24.7 % 10.2 % 4.6 % (0.7 ) % 48.1 %
Change YTY Revenue -
External 4.2 % 8.4 % (2.0 ) % (5.1 ) % (16.2 ) %
Change YTY Revenue -
External @constant
currency 1.7 % 5.5 % (4.9 ) % (7.0 ) % (18.0 ) %
Nine Months Ended September 30, 2020
Cloud & Global Global
Cognitive Business Technology Global
(Dollars in Millions) Software Services Services Systems Financing
Revenue
External $ 16,540 $ 11,992 $ 19,245 $4,477 $ 837
Internal 2,431 150 911 628 660
Total Segment Revenue $ 18,971 $ 12,142 $ 20,155 $5,106 $ 1,497
Pre-tax Income/(Loss)
from Continuing
Operations 4,475 1,203 471 (7 ) 566
Pre-tax Margin 23.6 % 9.9 % 2.3 % (0.1 ) % 37.8 %
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
Three Months Ended September 30, 2021
Continuing Operations
Acquisition- Retirement- Tax Separation-
Related Related Reform Related Operating
Adjustments Adjustments
GAAP (1) (2) Impacts Charges (4) (Non-GAAP)
Gross Profit $8,171 $184 $-- $ -- $ 108 $ 8,463
Gross Profit Margin 46.4 % 1.0 Pts -- Pts -- Pts 0.6 Pts 48.0 %
S,G&A 4,860 (293) -- -- (169) 4,398
R,D&E 1,621 -- -- -- (1) 1,620
Other (Income) &
Expense 234 (1) (328) -- -- (94)
Interest Expense 291 -- -- -- -- 291
Total Expense &
Other (Income) 6,852 (294) (328) -- (169) 6,061
Pre-tax Income from
Continuing
Operations 1,319 478 328 -- 277 2,402
Pre-tax Income
Margin from
Continuing
Operations 7.5 % 2.7 Pts 1.9 Pts -- Pts 1.6 Pts 13.6 %
Provision
for/(Benefit from)
Income Taxes (3) 188 103 57 -- (233) 115
Effective Tax Rate 14.3 % 1.5 Pts 0.4 Pts -- Pts (11.4) Pts 4.8 %
Income from
Continuing
Operations 1,130 375 271 -- 510 2,286
Income Margin from
Continuing
Operations 6.4 % 2.1 Pts 1.5 Pts -- Pts 2.9 Pts 13.0 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $1.25 $0.41 $0.30 $ -- $ 0.56 $ 2.52
Three Months Ended September 30, 2020
Continuing Operations
Acquisition- Retirement- Tax Separation-
Related Related Reform Related Operating
Adjustments Adjustments
GAAP (1) (2) Impacts Charges (4) (Non-GAAP)
Gross Profit $8,430 $180 $-- $ -- $ -- $ 8,610
Gross Profit Margin 48.0 % 1.0 Pts -- Pts -- Pts -- Pts 49.0 %
S,G&A 4,647 (279) -- -- -- 4,367
R,D&E 1,515 -- -- -- -- 1,515
Other (Income) &
Expense 253 (1) (291) -- -- (39)
Interest Expense 323 -- -- -- -- 323
Total Expense &
Other (Income) 6,603 (280) (291) -- -- 6,032
Pre-tax
Income/(Loss) from
Continuing
Operations 1,827 460 291 -- -- 2,578
Pre-tax Income
Margin from
Continuing
Operations 10.4 % 2.6 Pts 1.7 Pts -- Pts -- Pts 14.7 %
Provision
for/(Benefit from)
Income Taxes (3) 128 102 54 (21) -- 263
Effective Tax Rate 7.0 % 2.7 Pts 1.3 Pts (0.8) Pts -- Pts 10.2 %
Income from
Continuing
Operations 1,698 358 237 21 -- 2,315
Income Margin from
Continuing
Operations 9.7 % 2.0 Pts 1.4 Pts 0.1 Pts -- Pts 13.2 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $1.89 $0.40 $0.26 $ 0.03 $ -- $ 2.58
_______________
(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 separation charges.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
Nine Months Ended September 30, 2021
Continuing Operations
Acquisition- Retirement- Tax Separation-
Related Related Reform Related Operating
Adjustments Adjustments
GAAP (1) (2) Impacts Charges (4) (Non-GAAP)
Gross Profit $25,379 $540 $-- $-- $ 168 $ 26,087
Gross Profit Margin 46.9 % 1.0 Pts -- Pts -- Pts 0.3 Pts 48.2 %
S,G&A 15,368 (884) -- -- (343) 14,141
R,D&E 4,907 -- -- -- (1) 4,906
Other (Income) &
Expense 911 (2) (998) -- -- (90)
Interest Expense 852 -- -- -- -- 852
Total Expense &
Other (Income) 21,603 (886) (998) -- (344) 19,374
Pre-tax Income from
Continuing
Operations 3,776 1,426 998 -- 513 6,713
Pre-tax Income
Margin from
Continuing
Operations 7.0 % 2.6 Pts 1.8 Pts -- Pts 0.9 Pts 12.4 %
Provision
for/(Benefit from)
Income Taxes (3) 365 344 185 6 (174) 725
Effective Tax Rate 9.7 % 3.1 Pts 1.3 Pts 0.1 Pts (3.3) Pts 10.8 %
Income from
Continuing
Operations 3,411 1,082 813 (6) 687 5,988
Income Margin from
Continuing
Operations 6.3 % 2.0 Pts 1.5 Pts (0.0) Pts 1.3 Pts 11.1 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $3.77 $1.20 $0.90 $(0.01) $ 0.76 $ 6.62
Nine Months Ended September 30, 2020
Continuing Operations
Acquisition- Retirement- Tax Separation-
Related Related Reform Related Operating
Adjustments Adjustments
GAAP (1) (2) Impacts Charges (4) (Non-GAAP)
Gross Profit $25,052 $556 $-- $-- $ -- $ 25,608
Gross Profit Margin 47.0 % 1.0 Pts -- Pts -- Pts -- Pts 48.1 %
S,G&A 15,849 (849) -- -- -- 15,000
R,D&E 4,722 -- -- -- -- 4,722
Other (Income) &
Expense 614 (2) (829) -- -- (217)
Interest Expense 971 -- -- -- -- 971
Total Expense &
Other (Income) 21,704 (851) (829) -- -- 20,024
Pre-tax Income from
Continuing
Operations 3,348 1,407 829 -- -- 5,584
Pre-tax Income
Margin from
Continuing
Operations 6.3 % 2.6 Pts 1.6 Pts -- Pts -- Pts 10.5 %
Provision
for/(Benefit from)
Income Taxes (3) (888) 312 119 128 -- (329)
Effective Tax Rate (26.5)% 12.3 Pts 6.1 Pts 2.3 Pts -- Pts (5.9) %
Income from
Continuing
Operations 4,237 1,095 710 (128) -- 5,913
Income Margin from
Continuing
Operations 8.0 % 2.1 Pts 1.3 Pts (0.2) Pts -- Pts 11.1 %
Diluted
Earnings/(Loss) Per
Share: Continuing
Operations $4.72 $1.23 $0.79 $(0.14) $ -- $ 6.60
_______________
(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 separation charges.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)
Trailing
Twelve
Three Months Nine Months Months
Ended Ended Ended
September September 30, September
30, 2021 2021 30, 2021
Change YTY Change YTY Change YTY
Revenue
Adjusting for
Divested
Businesses
and Currency Total IBM Total IBM Cloud
Revenue as
reported 0.3 % 1.6 % 13.6 %
Impact from
divested
businesses 0.0 Pts 0.1 Pts 0.3 Pts
Currency
impact (0.6) Pts (2.7) Pts (2.8) Pts
Revenue
adjusting for
divested
businesses
and currency
(non-GAAP) (0.2) % (1.0) % 11.1 %
Three Months Ended
September 30, 2021
Total IBM Revenue, Normalized to Exclude Kyndryl Change YTY
Revenue as reported 0.3 %
Impact from Kyndryl (1) 2.1 Pts
Revenue normalized to exclude Kyndryl (non-GAAP) 2.5 %
Impact from divested businesses 0.1 Pts
Currency impact (0.7) Pts
Revenue normalized to exclude Kyndryl, adjusted for
divested businesses and currency (non-GAAP) 1.9 %
_______________
(1) Estimated as of September 30, 2021.
Three Months Ended
September 30, 2021
Red Hat Revenue, Normalized for Historical
Comparability Change YTY
Red Hat Revenue GAAP growth rate (1) 23 %
Impact from purchase accounting deferred revenue
and intercompany adjustments (2) (6) Pts
Red Hat revenue growth rate, normalized for
historical comparability (non-GAAP) 17 %
Impact from currency (0) 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 third-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.
IBM
Sarah Meron, 347-891-1770
sarah.meron@ibm.com
Tim Davidson, 914-844-7847
tfdavids@us.ibm.com
View source version on businesswire.com:
https://www.businesswire.com/news/home/20211020006120/en/
CONTACT:
IBM
SOURCE: Intnl Bus. Mach
Copyright Business Wire 2021
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