Press Releases

IBM RELEASES SECOND QUARTER RESULTS

Jul 18, 2022

Growth Across Key Segments Led by Hybrid Cloud Adoption; Solid Cash and Profit Generation

ARMONK, N.Y., July 18, 2022 /PRNewswire/ -- IBM (NYSE: IBM) today announced second-quarter 2022 earnings results.

"In the quarter we delivered good revenue performance with balanced growth across our geographies, driven by client demand for our hybrid cloud and AI offerings. The IBM team executed our strategy well," said Arvind Krishna, IBM chairman and chief executive officer. "With our first half results, we continue to expect full-year revenue growth at the high end of our mid-single digit model."

Second-Quarter Highlights

  • Revenue
    - Revenue of $15.5 billion, up 9 percent, up 16 percent at constant currency (about 5 points from sales to Kyndryl)
    - Software revenue up 6 percent, up 12 percent at constant currency (about 7 points from sales to Kyndryl)
    - Consulting revenue up 10 percent, up 18 percent at constant currency
    - Infrastructure revenue up 19 percent, up 25 percent at constant currency (about 7 points from sales to Kyndryl)
    - Hybrid cloud revenue, over the last 12 months, of $21.7 billion, up 16 percent, up 19 percent at constant currency
  • Cash Flow
    - On a consolidated basis, year to date, net cash from operating activities of $4.6 billion; free cash flow of $3.3 billion 

SECOND QUARTER 2022 INCOME STATEMENT SUMMARY

                     

Pre-tax 

             
           

Gross

   

Pre-tax 

 

Income 

   

Net 

   

Diluted 

 
     

Revenue

   

Profit

   

Income

 

Margin

   

Income

   

EPS

 

GAAP from
Continuing
Operations

 

$

15.5B

 

$

8.3B

 

$

1.7B

 

11.1

%

$

1.5B

 

$

1.61

 

    Year/Year

   

9

%*

 

6

%

 

89

%

4.7

Pts

 

81

%

 

79

%

Operating
(Non-GAAP)

       

$

8.5B

 

$

2.5B

 

16.2

%

$

2.1B

 

$

2.31

 

    Year/Year

         

5

%

 

48

%

4.2

Pts

 

45

%

 

43

%

*16% at constant currency

"We are a faster-growing, focused, disciplined company with sound business fundamentals," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our recurring revenue stream and solid cash generation position us well to continue to invest in R&D, acquire new companies, and strengthen our talent in every part of the business, while also returning value to shareholders through our dividend."

Segment Results for Second Quarter

  • Software (includes Hybrid Platform & Solutions, Transaction Processing)— revenues of $6.2 billion, up 6.4 percent, up 11.6 percent at constant currency (about 7 points from sales to Kyndryl):
    - Hybrid Platform & Solutions up 4 percent, up 9 percent at constant currency (about 1.5 points from sales to Kyndryl):
       -- Red Hat up 12 percent, up 17 percent at constant currency
       -- Automation up 4 percent, up 8 percent at constant currency
       -- Data & AI flat, up 4 percent at constant currency
       -- Security flat, up 5 percent at constant currency
    - Transaction Processing up 12 percent, up 19 percent at constant currency (about 22 points from sales to Kyndryl)
    - Software segment hybrid cloud revenue up 14 percent, up 18 percent at constant currency
     
  • Consulting (includes Business Transformation, Technology Consulting and Application Operations)— revenues of $4.8 billion, up 9.8 percent, up 17.8 percent at constant currency:
    - Business Transformation up 9 percent, up 16 percent at constant currency
    - Technology Consulting up 14 percent, up 23 percent at constant currency
    - Application Operations up 9 percent, up 17 percent at constant currency
    - Consulting segment hybrid cloud revenue up 20 percent, up 29 percent at constant currency
     
  • Infrastructure (includes Hybrid Infrastructure, Infrastructure Support)— revenues of $4.2 billion, up 19.0 percent, up 25.4 percent at constant currency (about 7 points from sales to Kyndryl):
    - Hybrid Infrastructure up 34 percent, up 41 percent at constant currency (about 7 points from sales to Kyndryl)
       -- IBM z Systems up 69 percent, up 77 percent at constant currency
       -- Distributed Infrastructure up 11 percent, up 17 percent at constant currency
    - Infrastructure Support down 2 percent, up 5 percent at constant currency (about 8 points from sales to Kyndryl)
    - Infrastructure segment hybrid cloud revenue up 24 percent, up 30 percent at constant currency
     
  • Financing (includes client and commercial financing)— revenues of $0.1 billion, down 29.9 percent, down 26.6 percent at constant currency

Cash Flow and Balance Sheet
On a consolidated basis, in the second quarter, the company generated net cash from operating activities of $1.3 billion or $2.6 billion excluding IBM Financing receivables. IBM's free cash flow was $2.1 billion. The company returned $1.5 billion to shareholders in dividends in the second quarter.

On a consolidated basis, for the first six months of the year, the company generated net cash from operating activities of $4.6 billion or $4.2 billion excluding IBM Financing receivables. IBM's free cash flow was $3.3 billion, which includes cash impacts from the company's structural actions initiated at the end of 2020.

IBM ended the second quarter with $7.8 billion of cash on hand (which includes marketable securities), up $0.2 billion from year-end 2021. Debt, including IBM Financing debt of $12.3 billion, totaled $50.3 billion, down $1.4 billion since the end of 2021.

Full-Year 2022 Expectations

  • Revenue growth: The company continues to expect constant currency revenue growth at the high end of its mid-single digit model. The company also expects an additional 3.5 point contribution from incremental sales to Kyndryl. At mid-July 2022 foreign exchange rates, currency is expected to be about a six-point headwind.
     
  • Free Cash Flow: The company now expects about $10 billion in consolidated free cash flow.

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 company's ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects related to climate change and environmental matters, tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; potential failure of the separation of Kyndryl Holdings, Inc. to qualify for tax-free treatment; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release
On November 3, 2021, IBM completed the separation of Kyndryl. Unless otherwise specified, results are presented on a continuing operations basis. All references to revenue impacts from sales to Kyndryl are incremental sales post-separation.

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);
  • presenting operating (non-GAAP) earnings per share amounts and related income statement items;
  • consolidated free cash flow;
  • consolidated cash from operating activities excluding IBM Financing receivables;

The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8‑K that includes this press release and is being submitted today to the SEC.

Conference Call and 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-2q22. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

Contact:       IBM
                    Sarah Meron, 347 891 1770
                    sarah.meron@ibm.com 
    
                    Tim Davidson, 914 844 7847
                    tfdavids@us.ibm.com  

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

 
   

Three Months Ended

     

Six Months Ended

   
   

June 30, 

     

June 30, 

   
   

2022

 

2021*

     

2022

 

2021*

   

REVENUE

                               

Software

 

$

6,166

 

$

5,795

     

$

11,938

 

$

10,933

   

Consulting

   

4,809

   

4,378

       

9,637

   

8,641

   

Infrastructure

   

4,235

   

3,560

       

7,453

   

6,853

   

Financing

   

146

   

209

       

300

   

417

   

Other

   

180

   

277

       

404

   

561

   

TOTAL REVENUE

   

15,535

   

14,218

       

29,732

   

27,405

   
                                 

GROSS PROFIT

   

8,290

   

7,852

       

15,625

   

14,879

   
                                 

GROSS PROFIT MARGIN

                               

Software

   

79.2

%

 

79.7

%

     

79.0

%

 

78.8

%

 

Consulting

   

24.2

%

 

27.6

%

     

24.3

%

 

27.7

%

 

Infrastructure

   

53.8

%

 

57.1

%

     

52.4

%

 

56.7

%

 

Financing

   

35.3

%

 

29.9

%

     

36.5

%

 

32.7

%

 
                                 

TOTAL GROSS PROFIT MARGIN

   

53.4

%

 

55.2

%

     

52.6

%

 

54.3

%

 
                                 

EXPENSE AND OTHER INCOME

                               

S,G&A

   

4,855

   

4,849

       

9,452

   

9,536

   

R,D&E

   

1,673

   

1,641

       

3,352

   

3,257

   

Intellectual property and custom development income

   

(176)

   

(133)

       

(297)

   

(278)

   

Other (income) and expense

   

(81)

   

302

       

166

   

647

   

Interest expense

   

297

   

281

       

607

   

561

   

TOTAL EXPENSE AND OTHER INCOME

   

6,568

   

6,940

       

13,280

   

13,724

   
                                 

INCOME/(LOSS) FROM CONTINUING OPERATIONS

                               

BEFORE INCOME TAXES

   

1,722

   

912

       

2,345

   

1,155

   

Pre-tax margin

   

11.1

%

 

6.4

%

     

7.9

%

 

4.2

%

 

Provision for/(Benefit from) income taxes

   

257

   

101

       

218

   

(58)

   

Effective tax rate

   

14.9

%

 

11.1

%

     

9.3

%

 

(5.0)

%

 
                                 

INCOME FROM CONTINUING OPERATIONS

 

$

1,465

 

$

810

     

$

2,127

 

$

1,213

   
                                 

DISCONTINUED OPERATIONS

                               

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

   

(73)

   

515

       

(2)

   

1,067

   
                                 

NET INCOME

 

$

1,392

 

$

1,325

     

$

2,125

 

$

2,280

   
                                 

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK

                               

Assuming Dilution

                               

Continuing Operations

 

$

1.61

 

$

0.90

     

$

2.34

 

$

1.34

   

Discontinued Operations

 

$

(0.08)

 

$

0.57

     

$

0.00

 

$

1.18

   

TOTAL

 

$

1.53

 

$

1.47

     

$

2.34

 

$

2.52

   
                                 

Basic

                               

Continuing Operations

 

$

1.62

 

$

0.91

     

$

2.36

 

$

1.36

   

Discontinued Operations

 

$

(0.08)

 

$

0.57

     

$

0.00

 

$

1.19

   

TOTAL

 

$

1.54

 

$

1.48

     

$

2.36

 

$

2.55

   
                                 

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

                               

Assuming Dilution

   

910.7

   

904.2

       

910.0

   

903.0

   

Basic

   

901.5

   

895.0

       

900.4

   

894.3

   

____________________

* Recast to conform with 2022 presentation.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 
   

At

 

At

   

June 30, 

 

December 31, 

(Dollars in Millions)

 

2022

 

2021

ASSETS:

           

Current Assets:

           

Cash and cash equivalents

 

$

7,034

 

$

6,650

Restricted cash

   

220

   

307

Marketable securities

   

524

   

600

Notes and accounts receivable - trade, net

   

5,867

   

6,754

Short-term financing receivables, net

   

7,233

   

8,014

Other accounts receivable, net

   

909

   

1,002

Inventories

   

1,684

   

1,649

Deferred costs

   

1,010

   

1,097

Prepaid expenses and other current assets

   

3,414

   

3,466

Total Current Assets

   

27,896

   

29,539

             

Property, plant and equipment, net

   

5,275

   

5,694

Operating right-of-use assets, net

   

2,848

   

3,222

Long-term financing receivables, net

   

5,316

   

5,425

Prepaid pension assets

   

9,930

   

9,850

Deferred costs

   

865

   

924

Deferred taxes

   

7,073

   

7,370

Goodwill

   

55,039

   

55,643

Intangibles, net

   

11,571

   

12,511

Investments and sundry assets

   

1,689

   

1,823

Total Assets

 

$

127,503

 

$

132,001

             

LIABILITIES:

           

Current Liabilities:

           

Taxes

 

$

1,742

 

$

2,289

Short-term debt

   

5,981

   

6,787

Accounts payable

   

3,707

   

3,955

Deferred income

   

12,522

   

12,518

Operating lease liabilities

   

884

   

974

Other liabilities

   

7,008

   

7,097

Total Current Liabilities

   

31,844

   

33,619

             

Long-term debt

   

44,328

   

44,917

Retirement related obligations

   

13,118

   

14,435

Deferred income

   

3,069

   

3,577

Operating lease liabilities

   

2,182

   

2,462

Other liabilities

   

13,486

   

13,996

Total Liabilities

   

108,026

   

113,005

             

EQUITY:

           

IBM Stockholders' Equity:

           

Common stock

   

57,802

   

57,319

Retained earnings

   

153,298

   

154,209

Treasury stock — at cost

   

(169,522)

   

(169,392)

Accumulated other comprehensive income/(loss)

   

(22,169)

   

(23,234)

Total IBM Stockholders' Equity

   

19,409

   

18,901

             

Noncontrolling interests

   

67

   

95

Total Equity

   

19,476

   

18,996

             

Total Liabilities and Equity

 

$

127,503

 

$

132,001

 

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)

 

2022

 

2021

 

2022

 

2021

 

2022

Consolidated Net Cash from Operations per GAAP

 

$

1,321

 

$

2,625

 

$

4,569

 

$

7,539

 

$

9,826

                               

Less: change in IBM Financing receivables

   

(1,264)

   

900

   

367

   

3,763

   

511

Capital Expenditures, net

   

(494)

   

(688)

   

(871)

   

(1,217)

   

(2,035)

                               

Consolidated Free Cash Flow

   

2,091

   

1,037

   

3,331

   

2,559

   

7,279

                               

Acquisitions

   

(260)

   

(1,747)

   

(958)

   

(2,866)

   

(1,385)

Divestitures

   

1,207

   

(10)

   

1,268

   

(25)

   

1,408

Dividends

   

(1,488)

   

(1,467)

   

(2,963)

   

(2,924)

   

(5,907)

Non-Financing Debt

   

(2,934)

   

(586)

   

1,740

   

(2,331)

   

2,880

Other (includes IBM Financing net receivables and debt)

   

(1,607)

   

(335)

   

(2,197)

   

(522)

   

(4,661)

                               

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

 

$

(2,991)

 

$

(3,108)

 

$

221

 

$

(6,110)

 

$

(387)

____________________

* Cash flows are presented on a consolidated basis. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

 
   

Three Months Ended

 

Six Months Ended

   

June 30, 

 

June 30, 

(Dollars in Millions)

 

2022

 

2021

 

2022

 

2021

Net Income from Operations

 

$

1,392

 

$

1,325

 

$

2,125

 

$

2,280

Depreciation/Amortization of Intangibles

   

1,245

   

1,680

   

2,501

   

3,352

Stock-based Compensation

   

254

   

243

   

488

   

457

Working Capital / Other

   

(307)

   

(1,524)

   

(912)

   

(2,313)

IBM Financing A/R

   

(1,264)

   

900

   

367

   

3,763

Net Cash Provided by Operating Activities

 

$

1,321

 

$

2,625

 

$

4,569

 

$

7,539

Capital Expenditures, net of payments & proceeds

   

(494)

   

(688)

   

(871)

   

(1,217)

Divestitures, net of cash transferred

   

1,207

   

(10)

   

1,268

   

(25)

Acquisitions, net of cash acquired

   

(260)

   

(1,747)

   

(958)

   

(2,866)

Marketable Securities / Other Investments, net

   

(281)

   

(227)

   

(625)

   

(562)

Net Cash Provided by/(Used in) Investing Activities

 

$

172

 

$

(2,671)

 

$

(1,186)

 

$

(4,671)

Debt, net of payments & proceeds

   

(2,514)

   

(1,500)

   

434

   

(5,799)

Dividends

   

(1,488)

   

(1,467)

   

(2,963)

   

(2,924)

Financing - Other

   

(195)

   

(163)

   

(290)

   

(190)

Net Cash Provided by/(Used in) Financing Activities

 

$

(4,197)

 

$

(3,131)

 

$

(2,819)

 

$

(8,914)

Effect of Exchange Rate changes on Cash

   

(262)

   

69

   

(267)

   

(65)

Net Change in Cash, Cash Equivalents and Restricted Cash*

 

$

(2,965)

 

$

(3,108)

 

$

297

 

$

(6,110)

____________________

* Cash flows are presented on a consolidated basis. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 
 
   

Three Months Ended June 30, 2022

 
                     

(Dollars in Millions)

 

Software

 

Consulting

 

Infrastructure

 

Financing

 

Revenue

 

$

6,166

 

$

4,809

 

$

4,235

 

$

146

 

Pre-tax Income/(Loss) from Continuing Operations

 

$

1,375

 

$

343

 

$

757

 

$

102

 

Pre-tax Margin

   

22.3

%

 

7.1

%

 

17.9

%

 

69.7

%

Change YTY Revenue

   

6.4

%

 

9.8

%

 

19.0

%

 

(29.9)

%

Change YTY Revenue - constant currency

   

11.6

%

 

17.8

%

 

25.4

%

 

(26.6)

%

                           
                           
   

Three Months Ended June 30, 2021*

 
                     

(Dollars in Millions)

 

Software

 

Consulting

 

Infrastructure

 

Financing

 

Revenue

 

$

5,795

 

$

4,378

 

$

3,560

 

$

209

 

Pre-tax Income/(Loss) from Continuing Operations

 

$

1,059

 

$

270

 

$

489

 

$

131

 

Pre-tax Margin

   

18.3

%

 

6.2

%

 

13.7

%

 

63.0

%

____________________

* Recast to conform with 2022 presentation. 

 
                           
   

Six Months Ended June 30, 2022

 
                     

(Dollars in Millions)

 

Software

 

Consulting

 

Infrastructure

 

Financing

 

Revenue

 

$

11,938

 

$

9,637

 

$

7,453

 

$

300

 

Pre-tax Income/(Loss) from Continuing Operations

 

$

2,509

 

$

691

 

$

956

 

$

186

 

Pre-tax Margin

   

21.0

%

 

7.2

%

 

12.8

%

 

62.0

%

Change YTY Revenue

   

9.2

%

 

11.5

%

 

8.8

%

 

(28.0)

%

Change YTY Revenue - constant currency

   

13.4

%

 

17.6

%

 

13.4

%

 

(25.5)

%

                           
                           
                           
   

Six Months Ended June 30, 2021*

 
                     

(Dollars in Millions)

 

Software

 

Consulting

 

Infrastructure

 

Financing

 

Revenue

 

$

10,933

 

$

8,641

 

$

6,853

 

$

417

 

Pre-tax Income/(Loss) from Continuing Operations

 

$

1,717

 

$

547

 

$

780

 

$

229

 

Pre-tax Margin

   

15.7

%

 

6.3

%

 

11.4

%

 

55.0

%

____________________

* Recast to conform with 2022 presentation.

 

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, 2022

 
   

Continuing Operations

 
         

Acquisition-

 

Retirement-

 

Tax

 

Kyndryl-

       
         

Related

 

Related

 

Reform

 

Related

 

Operating

 
   

GAAP

 

Adjustments (1)

 

Adjustments (2)

 

Impacts

 

Impacts (3)

 

(Non-GAAP)

 

Gross Profit

 

$

8,290

 

$

180

 

$

 

$

 

$

 

$

8,470

 

Gross Profit Margin

   

53.4

%

 

1.2

 pts.  

 

 pts.  

 

 pts.  

 

 pts.  

 

54.5

%

S,G&A

 

$

4,855

 

$

(279)

 

$

 

$

 

$

(0)

 

$

4,576

 

Other (Income) & Expense

   

(81)

   

(1)

   

(192)

   

   

(145)

   

(418)

 

Total Expense & Other (Income)

   

6,568

   

(280)

   

(192)

   

   

(145)

   

5,952

 

Pre-tax Income from Continuing
Operations

   

1,722

   

460

   

192

   

   

145

   

2,518

 

Pre-tax Income Margin from
Continuing Operations

   

11.1

%

 

3.0

 pts.  

 

1.2

 pts.  

 

 pts.  

 

0.9

 pts.  

 

16.2

%

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

 

$

257

 

$

115

 

$

46

 

$

(4)

 

$

 

$

413

 

Effective Tax Rate

   

14.9

%

 

1.8

 pts.  

 

0.7

 pts.  

 

(0.2)

 pts.  

 

(0.9)

 pts.  

 

16.4

%

Income from Continuing Operations

 

$

1,465

 

$

345

 

$

146

 

$

4

 

$

145

 

$

2,105

 

Income Margin from Continuing
Operations

   

9.4

%

 

2.2

 pts.  

 

0.9

 pts.  

 

0.0

 pts.  

 

0.9

 pts.  

 

13.5

%

Diluted Earnings/(Loss) Per Share:
Continuing Operations

 

$

1.61

 

$

0.38

 

$

0.16

 

$

0.00

 

$

0.16

 

$

2.31

 
 
   

Three Months Ended June 30, 2021

 
   

Continuing Operations

 
         

Acquisition-

 

Retirement-

 

Tax

 

Kyndryl-

       
         

Related

 

Related

 

Reform

 

Related

 

Operating

 
   

GAAP

 

Adjustments (1)

 

Adjustments (2)

 

Impacts

 

Impacts (3)

 

(Non-GAAP)

 

Gross Profit

 

$

7,852

 

$

179

 

$

 

$

 

$

 

$

8,031

 

Gross Profit Margin

   

55.2

%

 

1.3

 pts.  

 

 pts.  

 

 pts.  

 

 pts.  

 

56.5

%

S,G&A

 

$

4,849

 

$

(294)

 

$

 

$

 

$

 

$

4,555

 

Other (Income) & Expense

   

302

   

(1)

   

(317)

   

   

   

(16)

 

Total Expense & Other (Income)

   

6,940

   

(294)

   

(317)

   

   

   

6,329

 

Pre-tax Income/(Loss) from Continuing
Operations

   

912

   

474

   

317

   

   

   

1,702

 

Pre-tax Income Margin from
Continuing Operations

   

6.4

%

 

3.3

 pts.  

 

2.2

 pts.  

 

 pts.  

 

 pts.  

 

12.0

%

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

 

$

101

 

$

105

 

$

53

 

$

(14)

 

$

 

$

246

 

Effective Tax Rate

   

11.1

%

 

3.1

 pts.  

 

1.0

 pts.  

 

(0.8)

 pts.  

 

 pts.  

 

14.5

%

Income from Continuing Operations

 

$

810

 

$

368

 

$

264

 

$

14

 

$

 

$

1,456

 

Income Margin from Continuing
Operations

   

5.7

%

 

2.6

 pts.  

 

1.9

 pts.  

 

0.1

 pts.  

 

 pts.  

 

10.2

%

Diluted Earnings/(Loss) Per Share:
Continuing Operations

 

$

0.90

 

$

0.41

 

$

0.29

 

$

0.01

 

$

 

$

1.61

 

____________________

(1)  Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition
       integration and pre-closing charges, such as financing costs.

(2)  Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/
       settlements and pension insolvency costs and other costs.

(3)  Primarily relates to the fair value changes in the retained Kyndryl common stock and the related cash-settled swap.

(4)  Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax
       income under ASC 740, which employs an annual effective tax rate method to the results.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)

 
   

Six Months Ended June 30, 2022

 
   

Continuing Operations

 
         

Acquisition-

 

Retirement-

 

Tax

 

Kyndryl-

       
         

Related

 

Related

 

Reform

 

Related

 

Operating

 
   

GAAP

 

Adjustments (1)

 

Adjustments (2)

 

Impacts

 

Impacts (3)

 

(Non-GAAP)

 

Gross Profit

 

$

15,625

 

$

361

 

$

 

$

 

$

 

$

15,986

 

Gross Profit Margin

   

52.6

%

 

1.2

 pts.  

 

 pts.  

 

 pts.  

 

 pts.  

 

53.8

%

S,G&A

 

$

9,452

 

$

(565)

 

$

 

$

 

$

(0)

 

$

8,887

 

Other (Income) & Expense

   

166

   

(1)

   

(394)

   

   

(367)

   

(596)

 

Total Expense & Other (Income)

   

13,280

   

(566)

   

(394)

   

   

(367)

   

11,953

 

Pre-tax Income from Continuing
Operations

   

2,345

   

928

   

394

   

   

367

   

4,033

 

Pre-tax Income Margin from
Continuing Operations

   

7.9

%

 

3.1

 pts.  

 

1.3

 pts.  

 

 pts.  

 

1.2

 pts.  

 

13.6

%

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

 

$

218

 

$

224

 

$

104

 

$

112

 

$

 

$

657

 

Effective Tax Rate

   

9.3

%

 

3.4

 pts.  

 

1.7

 pts.  

 

2.8

 pts.  

 

(0.8)

 pts.  

 

16.3

%

Income from Continuing Operations

 

$

2,127

 

$

704

 

$

290

 

$

(112)

 

$

367

 

$

3,376

 

Income Margin from Continuing
Operations

   

7.2

%

 

2.4

 pts.  

 

1.0

 pts.  

 

(0.4)

 pts.  

 

1.2

 pts.  

 

11.4

%

Diluted Earnings/(Loss) Per Share:
Continuing Operations

 

$

2.34

 

$

0.77

 

$

0.32

 

$

(0.12)

 

$

0.40

 

$

3.71

 
                                       
   

Six Months Ended June 30, 2021

 
   

Continuing Operations

 
         

Acquisition-

 

Retirement-

 

Tax

 

Kyndryl-

       
         

Related

 

Related

 

Reform

 

Related

 

Operating

 
   

GAAP

 

Adjustments (1)

 

Adjustments (2)

 

Impacts

 

Impacts (3)

 

(Non-GAAP)

 

Gross Profit

 

$

14,879

 

$

353

 

$

 

$

 

$

 

$

15,232

 

Gross Profit Margin

   

54.3

%

 

1.3

 pts.  

 

 pts.  

 

 pts.  

 

 pts.  

 

55.6

%

S,G&A

 

$

9,536

 

$

(582)

 

$

 

$

 

$

 

$

8,954

 

Other (Income) & Expense

   

647

   

(1)

   

(649)

   

   

   

(3)

 

Total Expense & Other (Income)

   

13,724

   

(583)

   

(649)

   

   

   

12,491

 

Pre-tax Income from Continuing
Operations

   

1,155

   

936

   

649

   

   

   

2,741

 

Pre-tax Income Margin from
Continuing Operations

   

4.2

%

 

3.4

 pts.  

 

2.4

 pts.  

 

 pts.  

 

 pts.  

 

10.0

%

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

 

$

(58)

 

$

238

 

$

86

 

$

6

 

$

 

$

272

 

Effective Tax Rate

   

(5.0)

%

 

10.4

 pts.  

 

4.3

 pts.  

 

0.2

 pts.  

 

 pts.  

 

9.9

%

Income from Continuing Operations

 

$

1,213

 

$

699

 

$

563

 

$

(6)

 

$

 

$

2,469

 

Income Margin from Continuing
Operations

   

4.4

%

 

2.5

 pts.  

 

2.1

 pts.  

 

(0.0)

 pts.