IBM International Business Machines Corp

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