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IBM RELEASES FOURTH-QUARTER RESULTS

Revenue growth in all segments; Strong margin expansion and cash generation
Jan 24, 2024

ARMONK, N.Y., Jan. 24, 2024 /PRNewswire/ -- IBM (NYSE: IBM) today announced fourth-quarter 2023 earnings results.

"In the fourth quarter, we grew revenue in all of our segments, driven by continued adoption of our hybrid cloud and AI offerings. Client demand for AI is accelerating and our book of business for watsonx and generative AI roughly doubled from the third to the fourth quarter," said Arvind Krishna, IBM chairman and chief executive officer. "For the year, revenue growth was in line with our expectations, and we exceeded our free cash flow objective. Based on the strength of our portfolio and demonstrated track record of innovation, for 2024 we expect revenue performance in line with our mid-single digit model and about $12 billion in free cash flow." 

Fourth-Quarter Highlights

  • Revenue
    - Revenue of $17.4 billion, up 4 percent, up 3 percent at constant currency
    - Software revenue up 3 percent, up 2 percent at constant currency
    - Consulting revenue up 6 percent, up 5 percent at constant currency
    - Infrastructure revenue up 3 percent, up 2 percent at constant currency
     
  • Profit Margin
    - Gross Profit Margin: GAAP: 59.1 percent, up 1.4 points; Operating (Non-GAAP): 60.1 percent, up 1.4 points
    - Pre-Tax Income Margin: GAAP: 21.6 percent, up 1.8 points; Operating (Non-GAAP): 24.0 percent, up 1.1 points

Full-Year Highlights

  • Revenue of $61.9 billion, up 2 percent, up 3 percent at constant currency
    - Software revenue up 5 percent
    - Consulting revenue up 5 percent, up 6 percent at constant currency
    - Infrastructure revenue down 5 percent, down 4 percent at constant currency
     
  • Profit Margin
    - Gross Profit Margin: GAAP: 55.4 percent, up 1.4 points; Operating (Non-GAAP): 56.5 percent, up 1.3 points
    - Pre-Tax Income Margin: GAAP: 14.0 percent, up 12.1 points; Operating (Non-GAAP): 16.7 percent, up 0.4 points
     
  • Cash Flow
    - Net cash from operating activities of $13.9 billion, up $3.5 billion; free cash flow of $11.2 billion, up $1.9 billion
 

FOURTH QUARTER 2023 INCOME STATEMENT SUMMARY

  
 

Revenue

  

Gross

Profit

    

Gross
Profit
Margin

    

Pre-tax

Income

  

Pre-tax

Income

Margin

  

Net

Income

  

Diluted

Earnings

Per Share

GAAP from
Continuing
Operations

$   17.4 B

    

$ 10.3 B

    

59.1

%

  

$  3.8 B

    

21.6

%

  

$     3.3 B

    

$     3.54

  

Year/Year

4

%(1)

  

7

%

  

1.4

Pts

  

13

%

  

1.8

Pts

  

14

%

  

13

%

Operating

(Non-GAAP)

      

$ 10.4 B

    

60.1

%

  

$  4.2 B

    

24.0

%

  

$     3.6 B

    

$     3.87

  

Year/Year

      

7

%

  

1.4

Pts

  

9

%

  

1.1

Pts

  

9

%

  

8

%

(1)  3% at constant currency

"We again demonstrated the fundamental strengths of our business in the fourth quarter through solid, broad-based revenue growth, continued profit margin expansion, increased productivity gains and strong cash generation," said James Kavanaugh, IBM senior vice president and chief financial officer. "Throughout 2023, those strengths enabled us to increase our investment in R&D and talent, and complete nine acquisitions to bolster our hybrid cloud and AI capabilities, all while continuing to return value to shareholders through our dividend."

Segment Results for Fourth Quarter

  • Software — revenues of $7.5 billion, up 3.1 percent, up 2.0 percent at constant currency:
    - Hybrid Platform & Solutions up 2 percent, up 1 percent at constant currency:
       -- Red Hat up 8 percent, up 7 percent at constant currency
       -- Automation up 1 percent, flat at constant currency
       -- Data & AI up 1 percent
       -- Security down 5 percent, down 6 percent at constant currency
    - Transaction Processing up 5 percent, up 4 percent at constant currency
     
  • Consulting — revenues of $5.0 billion, up 5.8 percent, up 5.5 percent at constant currency:
    - Business Transformation up 6 percent, up 5 percent at constant currency
    - Technology Consulting up 5 percent, up 4 percent at constant currency
    - Application Operations up 7 percent, up 6 percent at constant currency
     
  • Infrastructure — revenues of $4.6 billion, up 2.7 percent, up 2.0 percent at constant currency:
    - Hybrid Infrastructure up 8 percent, up 7 percent at constant currency
       -- IBM zSystems up 8 percent
       -- Distributed Infrastructure up 8 percent, up 7 percent at constant currency
    - Infrastructure Support down 9 percent
     
  • Financing — revenues of $0.2 billion, up 1.8 percent, up 0.3 percent at constant currency

Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from operating activities of $4.5 billion, up $0.5 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $6.3 billion. IBM's free cash flow was $6.1 billion, up $0.9 billion year to year. The company returned $1.5 billion to shareholders in dividends in the fourth quarter.

For the year, the company generated net cash from operating activities of $13.9 billion, up $3.5 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $12.7 billion. IBM's free cash flow was $11.2 billion, up $1.9 billion year to year.

IBM ended the fourth quarter with $13.5 billion of cash and marketable securities, up $4.6 billion from year-end 2022. Debt, including IBM Financing debt of $11.9 billion, totaled $56.5 billion, up $5.6 billion since the end of 2022.

Full-Year 2023 Results

 

FULL-YEAR 2023 INCOME STATEMENT SUMMARY

  
 

Revenue

  

Gross

Profit

    

Gross
Profit
Margin

    

Pre-tax

Income

  

Pre-tax

Income

Margin

  

Net

Income

  

Diluted

Earnings

Per Share

GAAP from
Continuing
Operations

$   61.9 B

    

$ 34.3 B

    

55.4

%

  

$  8.7 B

    

14.0

%

  

$     7.5 B

    

$     8.15

  

Year/Year

2

%(1)

  

5

%

  

1.4

Pts

  

NM(2)

 

  

12.1

Pts(2)

  

NM(2)

 

  

NM   

%(2)

Operating

(Non-GAAP)

      

$ 34.9 B

    

56.5

%

  

$ 10.3 B

    

16.7

%

  

$     8.9 B

    

$     9.62

  

Year/Year

      

5

%

  

1.3

Pts

  

5

%

  

0.4

Pts

  

7

%

  

5

%

(1)   3% at constant currency

(2)  GAAP YTY results include the impact of a one-time, non-cash pension settlement charge related to the transfer of a portion of the
company's U.S. defined benefit pension obligations and related plan assets to third-party insurers in third-quarter 2022.

Full-Year 2024 Expectations

  • Revenue: The company expects constant currency revenue growth consistent with its mid-single digit model. At current foreign exchange rates, currency is expected to be about a one-point headwind to revenue growth
  • Free cash flow: The company expects about $12 billion in 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
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;
  • free cash flow;
  • net cash from operating activities excluding IBM Financing receivables;
  • adjusted EBITDA.

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.

For watsonx and generative AI, book of business includes Software transactional revenue, SaaS Annual Contract Value and Consulting signings.

Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-4q23. 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
December 31,

    

Year Ended
December 31,

  
 

2023

    

2022

    

2023

    

2022(1)

  

REVENUE BY SEGMENT

                      

Software

$                   7,514

    

$                   7,288

    

$                26,308

    

$                25,037

  

Consulting

5,048

    

4,770

    

19,985

    

19,107

  

Infrastructure

4,604

    

4,483

    

14,593

    

15,288

  

Financing

175

    

172

    

741

    

645

  

Other

41

    

(22)

    

233

    

453

  

TOTAL REVENUE

17,381

    

16,690

    

61,860

    

60,530

  
                       

GROSS PROFIT

10,267

    

9,632

    

34,300

    

32,687

  
                       

GROSS PROFIT MARGIN

                      

Software

81.7

%

  

81.2

%

  

80.1

%

  

79.6

%

Consulting

27.7

%

  

27.4

%

  

26.6

%

  

25.5

%

Infrastructure

60.6

%

  

54.9

%

  

56.0

%

  

52.8

%

Financing

50.2

%

  

47.1

%

  

48.1

%

  

38.3

%
                       

TOTAL GROSS PROFIT MARGIN

59.1

%

  

57.7

%

  

55.4

%

  

54.0

%
                       

EXPENSE AND OTHER INCOME

                      

S,G&A

4,791

    

4,765

    

19,003

    

18,609

  

R,D&E

1,748

    

1,604

    

6,775

    

6,567

  

Intellectual property and custom development
income

(242)

    

(245)

    

(860)

    

(663)

  

Other (income) and expense

(193)

    

(118)

    

(914)

    

5,803

  

Interest expense

405

    

313

    

1,607

    

1,216

  

TOTAL EXPENSE AND OTHER INCOME

6,509

    

6,320

    

25,610

    

31,531

  
                       

INCOME FROM CONTINUING OPERATIONS

BEFORE INCOME TAXES

3,759

    

3,312

    

8,690

    

1,156

  

Pre-tax margin

21.6

%

  

19.8

%

  

14.0

%

  

1.9

%

Provision for/(Benefit from) income taxes

474

    

443

    

1,176

    

(626)

  

Effective tax rate

12.6

%

  

13.4

%

  

13.5

%

  

(54.2)

%
                       

INCOME FROM CONTINUING OPERATIONS

$                   3,285

    

$                   2,869

    

$                   7,514

    

$                   1,783

  
                       

DISCONTINUED OPERATIONS

                      

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

3

    

(159)

    

(12)

    

(143)

  
                       

NET INCOME

$                   3,288

    

$                   2,711

    

$                   7,502

    

$                   1,639

  
                       

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK

                      

Assuming Dilution

                      

Continuing Operations

$                      3.54

    

$                      3.13

    

$                      8.15

    

$                      1.95

  

Discontinued Operations

$                      0.00

    

$                    (0.17)

    

$                    (0.01)

    

$                    (0.16)

  

TOTAL

$                      3.55

    

$                      2.96

    

$                      8.14

    

$                      1.80

  
                       

Basic

                      

Continuing Operations

$                      3.59

    

$                      3.17

    

$                      8.25

    

$                      1.97

  

Discontinued Operations

$                      0.00

    

$                    (0.18)

    

$                    (0.01)

    

$                    (0.16)

  

TOTAL

$                      3.59

    

$                      2.99

    

$                      8.23

    

$                      1.82

  
                       

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

                      

Assuming Dilution

927.3

    

915.9

    

922.1

    

912.3

  

Basic

914.7

    

905.8

    

911.2

    

902.7

  

____________________

                      

(1)  Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

 

(Unaudited)
 

(Dollars in Millions)

  

At
December 31,
2023

  

At
December 31,
2022

ASSETS:

        

Current Assets:

        

Cash and cash equivalents

  

$                   13,068

  

$                      7,886

Restricted cash

  

21

  

103

Marketable securities

  

373

  

852

Notes and accounts receivable - trade, net

  

7,214

  

6,541

Short-term financing receivables, net

  

6,793

  

7,790

Other accounts receivable, net

  

640

  

817

Inventories

  

1,161

  

1,552

Deferred costs

  

998

  

967

Prepaid expenses and other current assets

  

2,639

  

2,611

Total Current Assets

  

32,908

  

29,118
         

Property, plant and equipment, net

  

5,501

  

5,334

Operating right-of-use assets, net

  

3,220

  

2,878

Long-term financing receivables, net

  

5,766

  

5,806

Prepaid pension assets

  

7,506

  

8,236

Deferred costs

  

842

  

866

Deferred taxes

  

6,656

  

6,256

Goodwill

  

60,178

  

55,949

Intangibles, net

  

11,036

  

11,184

Investments and sundry assets

  

1,626

  

1,617

Total Assets

  

$                  135,241

  

$                  127,243
         

LIABILITIES:

        

Current Liabilities:

        

Taxes

  

$                      2,270

  

$                      2,196

Short-term debt

  

6,426

  

4,760

Accounts payable

  

4,132

  

4,051

Deferred income

  

13,451

  

12,032

Operating lease liabilities

  

820

  

874

Other liabilities

  

7,022

  

7,592

Total Current Liabilities

  

34,122

  

31,505
         

Long-term debt

  

50,121

  

46,189

Retirement related obligations

  

10,808

  

9,596

Deferred income

  

3,533

  

3,499

Operating lease liabilities

  

2,568

  

2,190

Other liabilities

  

11,475

  

12,243

Total Liabilities

  

112,628

  

105,222
         

EQUITY:

        

IBM Stockholders' Equity:

        

Common stock

  

59,643

  

58,343

Retained earnings

  

151,276

  

149,825

Treasury stock — at cost

  

(169,624)

  

(169,484)

Accumulated other comprehensive income/(loss)

  

(18,761)

  

(16,740)

Total IBM Stockholders' Equity

  

22,533

  

21,944
         

Noncontrolling interests

  

80

  

77

Total Equity

  

22,613

  

22,021
         

Total Liabilities and Equity

  

$                  135,241

  

$                  127,243

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)
 
   

Three Months Ended
December 31,

  

Year Ended
December 31,

  

(Dollars in Millions)

  

2023

  

2022

  

2023

  

2022(1)

  

Net Cash from Operations per GAAP

  

$            4,463

  

$            3,965

  

$      13,931

  

$         10,435

  
                   

Less: change in IBM Financing receivables

  

(1,887)

  

(1,788)

  

1,233

  

(717)

  

Capital Expenditures, net

  

(263)

  

(544)

  

(1,488)

  

(1,860)

  
                   

Free Cash Flow

  

6,087

  

5,209

  

11,210

  

9,291

  
                   

Acquisitions

  

(137)

  

(1,329)

  

(5,082)

  

(2,348)

  

Divestitures

  

—

  

1

  

(4)

  

1,272

  

Dividends

  

(1,518)

  

(1,494)

  

(6,040)

  

(5,948)

  

Non-Financing Debt

  

(2,025)

  

(2,777)

  

5,547

  

1,909

  

Other (includes IBM Financing net receivables and debt)

  

59

  

(498)

  

(1,009)

  

(2,893)

  
                   

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

  

$            2,466

  

$               (888)

  

$         4,622

  

$            1,283

  

____________________

(1) Includes immaterial cash flows from discontinued operations. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)
 
   

Three Months Ended
December 31,

  

Year Ended
December 31,

(Dollars in Millions)

  

2023

  

2022

  

2023

  

2022(1)

Net Income from Operations

  

$                     3,288

  

$                     2,711

  

$                     7,502

  

$                     1,639

Pension Settlement Charge

  

-

  

-

  

-

  

5,894

Depreciation/Amortization of Intangibles

  

1,152

  

1,137

  

4,395

  

4,802

Stock-based Compensation

  

291

  

248

  

1,133

  

987

Operating assets and liabilities / Other, net(2)

  

1,619

  

1,657

  

(332)

  

(2,170)

IBM Financing A/R

  

(1,887)

  

(1,788)

  

1,233

  

(717)

Net Cash Provided by Operating Activities

  

$                     4,463

  

$                     3,965

  

$                   13,931

  

$                   10,435
                 

Capital Expenditures, net of payments & proceeds

  

(263)

  

(544)

  

(1,488)

  

(1,860)

Divestitures, net of cash transferred

  

-

  

1

  

(4)

  

1,272

Acquisitions, net of cash acquired

  

(137)

  

(1,329)

  

(5,082)

  

(2,348)

Marketable Securities / Other Investments, net

  

3,236

  

553

  

(496)

  

(1,265)

Net Cash Provided by/(Used in) Investing Activities

  

$                     2,837

  

$                   (1,318)

  

$                   (7,070)

  

$                   (4,202)
                 

Debt, net of payments & proceeds

  

(122)

  

(1,350)

  

4,497

  

1,221

Dividends

  

(1,518)

  

(1,494)

  

(6,040)

  

(5,948)

Financing - Other

  

26

  

(8)

  

(226)

  

(231)

Net Cash Provided by/(Used in) Financing Activities

  

$                   (1,615)

  

$                   (2,852)

  

$                   (1,769)

  

$                   (4,958)
                 

Effect of Exchange Rate changes on Cash

  

128

  

219

  

9

  

(244)

Net Change in Cash, Cash Equivalents and Restricted
Cash

  

$                     5,814

  

$                          13

  

$                     5,101

  

$                    1,032

____________________

(1)   Includes immaterial cash flows from discontinued operations. 

(2)   Full-year 2022 includes a $1.5 billion tax effect associated with the one-time, non-cash, pension settlement charge. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION

(Unaudited)
 
   

Three Months Ended
December 31,

  

Year Ended
December 31,

(Dollars in Billions)

  

2023

  

2022

  

Yr/Yr

  

2023

  

2022

  

Yr/Yr

Net Income as reported (GAAP)

  

$           3.3

  

$           2.7

  

$           0.6

  

$           7.5

  

$           1.6

  

$           5.9

Less: Income/(loss) from discontinued operations, net of tax

  

0.0

  

(0.2)

  

0.2

  

0.0

  

(0.1)

  

0.1

Income from continuing operations

  

3.3

  

2.9

  

0.4

  

7.5

  

1.8

  

5.7

Provision for/(Benefit from) income taxes from continuing ops.

  

0.5

  

0.4

  

0.0

  

1.2

  

(0.6)

  

1.8

Pre-tax income from continuing operations (GAAP)

  

3.8

  

3.3

  

0.4

  

8.7

  

1.2

  

7.5

Non-operating adjustments (before tax)

                        

Acquisition-related charges(1)

  

0.4

  

0.4

  

0.0

  

1.7

  

1.8

  

(0.1)

Non-operating retirement-related costs/(income)(2)

  

0.0

  

0.1

  

(0.1)

  

0.0

  

6.5

  

(6.6)

Kyndryl-related impacts

  

—

  

0.0

  

0.0

  

—

  

0.4

  

(0.4)
                         

Operating (non-GAAP) pre-tax income from continuing ops.

  

4.2

  

3.8

  

0.3

  

10.3

  

9.8

  

0.5
                         

Net interest expense

  

0.3

  

0.2

  

0.0

  

0.9

  

1.1

  

(0.1)

Depreciation/Amortization of non-acquired intangible assets

  

0.7

  

0.7

  

0.0

  

2.8

  

3.1

  

(0.3)

Stock-based compensation

  

0.3

  

0.2

  

0.0

  

1.1

  

1.0

  

0.1

Workforce rebalancing charges

  

0.0

  

0.0

  

0.0

  

0.4

  

0.0

  

0.4

Corporate (gains) and charges(3)

  

0.0

  

0.0

  

0.0

  

(0.1)

  

(0.3)

  

0.3
                         

Adjusted EBITDA

  

$           5.5

  

$           5.0

  

$           0.4

  

$        15.5

  

$        14.6

  

$           0.9

____________________

(1)   Primarily consists of amortization of acquired intangible assets. 

(2)   Full-year 2022 includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion. 

(3)   Corporate (gains) and charges primarily consists of unique corporate actions such as gains on divestitures. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)
 
   

Three Months Ended December 31, 2023

  
                         

(Dollars in Millions)

  

Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                       7,514

    

$                       5,048

    

$                       4,604

    

$                           175

  

Pre-tax Income from Continuing Operations(1)

  

$                       2,417

    

$                          582

    

$                       1,185

    

$                           117

  

Pre-tax Margin(1)

  

32.2

%

  

11.5

%

  

25.7

%

  

67.3

%

Change YTY Revenue

  

3.1

%

  

5.8

%

  

2.7

%

  

1.8

%

Change YTY Revenue - Constant Currency

  

2.0

%

  

5.5

%

  

2.0

%

  

0.3

%
 
   

Three Months Ended December 31, 2022

  
                         

(Dollars in Millions)

  

 Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                       7,288

    

$                       4,770

    

$                       4,483

    

$                            172

  

Pre-tax Income from Continuing Operations

  

$                       2,347

    

$                          523

    

$                       1,026

    

$                              75

  

Pre-tax Margin

  

32.2

%

  

11.0

%

  

22.9

%

  

43.6

%

____________________

(1) The fourth-quarter 2023 pre-tax charge of approximately $0.03 billion for workforce rebalancing is not included in the measure of
      segment pre-tax income, consistent with the company's management system. 
 
 
 
   

Year Ended December 31, 2023

  
                         

(Dollars in Millions)

  

Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                     26,308

    

$                     19,985

    

$                     14,593

    

$                           741

  

Pre-tax Income from Continuing Operations(1)

  

$                       6,571

    

$                       1,918

    

$                       2,421

    

$                           374

  

Pre-tax Margin(1)

  

25.0

%

  

9.6

%

  

16.6

%

  

50.5

%

Change YTY Revenue

  

5.1

%

  

4.6

%

  

(4.5)

%

  

14.8

%

Change YTY Revenue - Constant Currency

  

5.2

%

  

6.1

%

  

(3.9)

%

  

15.0

%
 
   

Year Ended December 31, 2022

  
                         

(Dollars in Millions)

  

 Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                     25,037

    

$                     19,107

    

$                     15,288

    

$                           645

  

Pre-tax Income from Continuing Operations

  

$                       6,162

    

$                       1,677

    

$                       2,262

    

$                           340

  

Pre-tax Margin

  

24.6

%

  

8.8

%

  

14.8

%

  

52.6

%

____________________

(1) The full-year 2023 pre-tax charge of approximately $0.4 billion for workforce rebalancing is not included in the measure of segment
      pre-tax income, consistent with the company's management system. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)
 
 

Three Months Ended December 31, 2023

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Kyndryl-

Related

Impacts

    

Operating

(Non-
GAAP)

  

Gross Profit

$     10,267

    

$                          172

    

$                               —

    

$                —

    

$                   —

    

$         10,439

  

Gross Profit Margin

59.1

%

  

1.0

pts.

  

—

pts.

  

—

pts.

  

—

pts.

  

60.1

%

S,G&A

$       4,791

    

$                        (271)

    

$                               —

    

$                —

    

$                   —

    

$           4,520

  

Other (Income) & Expense

(193)

    

12

    

22

    

—

    

—

    

(159)

  

Total Expense & Other
(Income)

6,509

    

(259)

    

22

    

—

    

—

    

6,272

  

Pre-tax Income from
Continuing Operations

3,759

    

431

    

(22)

    

—

    

—

    

4,167

  

Pre-tax Income Margin from
Continuing Operations

21.6

%

  

2.5

pts.

  

(0.1)

pts.

  

—

pts.

  

—

pts.

  

24.0

%

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

$          474

    

$                            91

    

$                              19

    

$                (4)

    

$                   —

    

$              580

  

Effective Tax Rate

12.6

%

  

0.9

pts.

  

0.5

pts.

  

(0.1)

pts.

  

—

pts.

  

13.9

%

Income from Continuing
Operations

$       3,285

    

$                          339

    

$                             (41)

    

$                 4

    

$                   —

    

$           3,587

  

Income Margin from
Continuing Operations

18.9

%

  

2.0

pts.

  

(0.2)

pts.

  

0.0

pts.

  

—

pts.

  

20.6

%

Diluted Earnings Per Share:
Continuing Operations

$         3.54

    

$                         0.37

    

$                          (0.04)

    

$            0.00

    

$                   —

    

$             3.87

  
     
     
 

Three Months Ended December 31, 2022

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Kyndryl-

Related

Impacts (3)

    

Operating

(Non-
GAAP)

  

Gross Profit

$      9,632

    

$                          156

    

$                               —

    

$                —

    

$                   —

    

$           9,788

  

Gross Profit Margin

57.7

%

  

0.9

pts.

  

—

pts.

  

—

pts.

  

—

pts.

  

58.6

%

S,G&A

$      4,765

    

$                        (262)

    

$                               —

    

$                —

    

$                    0

    

$           4,503

  

Other (Income) & Expense

(118)

    

(1)

    

(93)

    

—

    

2

    

(210)

  

Total Expense & Other (Income)

6,320

    

(263)

    

(93)

    

—

    

2

    

5,965

  

Pre-tax Income from Continuing
Operations

3,312

    

419

    

93

    

—

    

(2)

    

3,823

  

Pre-tax Income Margin from
Continuing Operations

19.8

%

  

2.5

pts.

  

0.6

pts.

  

—

pts.

  

0.0

pts.

  

22.9

%

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

$          443

    

$                          109

    

$                              16

    

$           (42)

    

$                   —

    

$              526

  

Effective Tax Rate

13.4

%

  

1.4

pts.

  

0.1

pts.

  

(1.1)

pts.

  

0.0

pts.

  

13.8

%

Income from Continuing
Operations

$       2,869

    

$                          310

    

$                              77

    

$             42

    

$                   (2)

    

$           3,296

  

Income Margin from Continuing
Operations

17.2

%

  

1.9

pts.

  

0.5

pts.

  

0.3

pts.

  

0.0

pts.

  

19.8

%

Diluted Earnings Per Share:
Continuing Operations

$         3.13

    

$                         0.34

    

$                           0.08

    

$         0.05

    

$               0.00

    

$             3.60

  

____________________

(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. 2023 also includes a gain of $12 million on foreign
        exchange call option contracts related to the company's planned acquisition of StreamSets and webMethods from Software AG.

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

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

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

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)
 
 

Year Ended December 31, 2023

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Kyndryl-

Related

Impacts

    

Operating

(Non-
GAAP)

  

Gross Profit

$     34,300

    

$                         631

    

$                                  —

    

$                —

    

$                   —

    

$        34,931

  

Gross Profit Margin

55.4

%

  

1.0

pts.

  

—

pts.

  

—

pts.

  

—

pts.

  

56.5

%

S,G&A

$     19,003

    

$                    (1,039)

    

$                                  —

    

$                —

    

$                   —

    

$        17,964

  

Other (Income) & Expense

(914)

    

10

    

39

    

—

    

—

    

(866)

  

Total Expense & Other
(Income)

25,610

    

(1,029)

    

39

    

—

    

—

    

24,620

  

Pre-tax Income from
Continuing Operations

8,690

    

1,660

    

(39)

    

—

    

—

    

10,311

  

Pre-tax Income Margin from
Continuing Operations

14.0

%

  

2.7

pts.

  

(0.1)

pts.

  

—

pts.

  

—

pts.

  

16.7

%

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

$       1,176

    

$                         368

    

$                                  (8)

    

$              (95)

    

$                   —

    

$          1,441

  

Effective Tax Rate

13.5

%

  

1.4

pts.

  

0.0

pts.

  

(0.9)

pts.

  

—

pts.

  

14.0

%

Income from Continuing
Operations

$       7,514

    

$                      1,292

    

$                                (30)

    

$               95

    

$                   —

    

$          8,870

  

Income Margin from
Continuing Operations

12.1

%

  

2.1

pts.

  

0.0

pts.

  

0.2

pts.

  

—

pts.

  

14.3

%

Diluted Earnings Per Share:
Continuing Operations

$         8.15

    

$                        1.40

    

$                             (0.03)

    

$            0.10

    

$                   —

    

$            9.62

  
 
 
 

Year Ended December 31, 2022

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Kyndryl-

Related

Impacts (3)

    

Operating

(Non-
GAAP)

  

Gross Profit

$     32,687

    

$                         682

    

$                                  —

    

$                —

    

$                   —

    

$        33,370

  

Gross Profit Margin

54.0

%

  

1.1

pts.

  

—

pts.

  

—

pts.

  

—

pts.

  

55.1

%

S,G&A

$     18,609

    

$                    (1,080)

    

$                                  —

    

$                —

    

$                    0

    

$        17,529

  

Other (Income) & Expense

5,803

    

(3)

    

(6,548)

    

—

    

(351)

    

(1,099)

  

Total Expense & Other (Income)

31,531

    

(1,083)

    

(6,548)

    

—

    

(351)

    

23,549

  

Pre-tax Income from Continuing
Operations

1,156

    

1,765

    

6,548

    

—

    

351

    

9,821

  

Pre-tax Income Margin from
Continuing Operations

1.9

%

  

2.9

pts.

  

10.8

pts.

  

—

pts.

  

0.6

pts.

  

16.2

%

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

$        (626)

    

$                         436

    

$                            1,615

    

$               70

    

$                   —

    

$          1,495

  

Effective Tax Rate

(54.2)

%

  

14.2

pts.

  

52.6

pts.

  

0.7

pts.

  

1.9

pts.

  

15.2

%

Income from Continuing
Operations

$       1,783

    

$                      1,329

    

$                            4,933

    

$              (70)

    

$                351

    

$          8,326

  

Income Margin from Continuing
Operations

2.9

%

  

2.2

pts.

  

8.1

pts.

  

(0.1)

pts.

  

0.6

pts.

  

13.8

%

Diluted Earnings Per Share:
Continuing Operations

$         1.95

    

$                        1.46

    

$                              5.41

    

$           (0.08)

    

$               0.38

    

$            9.13

  

____________________

(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. 2023 also includes a gain of $12 million on foreign
        exchange call option contracts related to the company's planned acquisition of StreamSets and webMethods from Software AG.

(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. 2022 also includes a one-time, non-cash, pre-tax pension settlement
        charge of $5.9 billion ($4.4 billion net of tax).

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

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

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION

(Unaudited)
 
   

Three Months
Ended
December 31,

  

Year Ended
December 31,

(Dollars in Billions)

  

2023

  

2022

  

2023

  

2022

Net Cash Provided by Operating Activities

  

$           4.5

  

$           4.0

  

$        13.9

  

$        10.4
                 

Add:

                

Net interest expense

  

0.3

  

0.2

  

0.9

  

1.1

Provision for / (Benefit from) income taxes from continuing operations(1)

  

0.5

  

0.4

  

1.2

  

(0.6)
                 

Less change in:

                

Financing receivables

  

(1.9)

  

(1.8)

  

1.2

  

(0.7)

Other assets and liabilities / Other, net(1)(2)

  

1.6

  

1.4

  

(0.7)

  

(3.1)
                 

Adjusted EBITDA

  

$           5.5

  

$           5.0

  

$        15.5

  

$        14.6

__________

(1)    Full-year 2022 includes a $1.5 billion tax effect associated with the one-time, non-cash pension settlement charge. 

(2)   Other assets and liabilities / Other, net mainly consists of Operating assets and liabilities / Other, net in the Cash flow chart, workforce 
        rebalancing charges, non-operating impacts and corporate (gains) and charges. 

 

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