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IBM RELEASES SECOND-QUARTER RESULTS

Accelerated revenue growth led by Software; Raises full-year free cash flow expectation
Jul 24, 2024

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

"We had a strong second quarter, exceeding our expectations, driven by growth in both revenue and free cash flow. We continue to see that clients turn to IBM for our technology and our expertise in enterprise AI, and our book of business for generative AI has grown to more than two billion dollars since the launch of watsonx one year ago," said Arvind Krishna, IBM chairman and chief executive officer. "Given our first-half results, we are raising our full-year view of free cash flow, which we now expect to be more than $12 billion." 

Second-Quarter Highlights

  • Revenue
    - Revenue of $15.8 billion, up 2 percent, up 4 percent at constant currency
    - Software revenue up 7 percent, up 8 percent at constant currency
    - Consulting revenue down 1 percent, up 2 percent at constant currency
    - Infrastructure revenue up 1 percent, up 3 percent at constant currency
  • Profit Margin
    - Gross Profit Margin: GAAP: 56.8 percent, up 180 basis points; Operating (Non-GAAP): 57.8 percent, up 190 basis points
    - Pre-Tax Income Margin: GAAP: 14.1 percent, up 110 basis points; Operating (Non-GAAP): 17.7 percent, up 220 basis points
  • Cash Flow
    - Year to date, net cash from operating activities of $6.2 billion, down $0.2 billion; free cash flow of $4.5 billion, up $1.1 billion
    - Over the last twelve months, net cash from operating activities of $13.8 billion; free cash flow of $12.3 billion

SECOND QUARTER 2024 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

$   15.8 B

    

$   8.9 B

    

56.8

%

  

$  2.2 B

    

14.1

%

  

$     1.8 B

    

$     1.96

  

Year/Year

2

%(1)

  

5

%

  

1.8

Pts

  

11

%

  

1.1

Pts

  

16

%

  

14

%

Operating

(Non-GAAP)

      

$   9.1 B

    

57.8

%

  

$  2.8 B

    

17.7

%

  

$     2.3 B

    

$     2.43

  

Year/Year

      

5

%

  

1.9

Pts

  

17

%

  

2.2

Pts

  

14

%

  

11

%

(1)  4% at constant currency.

"In the quarter, we accelerated our revenue growth as we continue to execute well on our strategy. Our business fundamentals, operating leverage, product mix and productivity initiatives all contributed to significant margin expansion and increased profit and free cash flow," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our strong cash generation enables us to continue investing in innovation and expertise across the portfolio, while returning value to shareholders through dividends."

Segment Results for Second Quarter

  • Software — revenues of $6.7 billion, up 7.1 percent, up 8.4 percent at constant currency:
    - Hybrid Platform & Solutions up 5 percent, up 6 percent at constant currency:
          -- Red Hat up 7 percent, up 8 percent at constant currency
          -- Automation up 15 percent, up 16 percent at constant currency
          -- Data & AI down 3 percent, down 2 percent at constant currency
          -- Security up 2 percent, up 3 percent at constant currency
    - Transaction Processing up 11 percent, up 13 percent at constant currency
     
  • Consulting — revenues of $5.2 billion, down 0.9 percent, up 1.8 percent at constant currency:
    - Business Transformation up 3 percent, up 6 percent at constant currency
    - Technology Consulting down 3 percent, up 1 percent at constant currency
    - Application Operations down 4 percent, down 2 percent at constant currency
     
  • Infrastructure — revenues of $3.6 billion, up 0.7 percent, up 2.7 percent at constant currency:
    - Hybrid Infrastructure up 4 percent, up 6 percent at constant currency
          -- IBM Z up 6 percent, up 8 percent at constant currency
          -- Distributed Infrastructure up 3 percent, up 5 percent at constant currency
    - Infrastructure Support down 5 percent, down 3 percent at constant currency
     
  • Financing — revenues of $0.2 billion, down 8.3 percent, down 6.6 percent at constant currency

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $2.1 billion, down $0.6 billion year to year. IBM's free cash flow was $2.6 billion, up $0.5 billion year to year. The company returned $1.5 billion to shareholders in dividends in the second quarter.

For the first six months of the year, the company generated net cash from operating activities of $6.2 billion, down $0.2 billion year to year. IBM's free cash flow was $4.5 billion, up $1.1 billion year to year. Over the last twelve months, the company generated net cash from operating activities of $13.8 billion and free cash flow of $12.3 billion.

IBM ended the second quarter with $16.0 billion of cash, restricted cash and marketable securities, up $2.5 billion from year-end 2023. Debt, including IBM Financing debt of $11.1 billion, totaled $56.5 billion, flat year to date.

Full-Year 2024 Expectations

  • Revenue: The company continues to expect constant currency revenue growth consistent with its mid-single digit model. At current foreign exchange rates, currency is expected to be about a one to two-point headwind to revenue growth
  • Free cash flow: The company now expects more than $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.

Statements in this communication regarding the strategic acquisition that are forward-looking may include projections as to closing date for the transaction, the extent of, and the time necessary to obtain, the regulatory approvals required for the transaction, the anticipated benefits of the transaction, the impact of the transaction on IBM's business, the synergies from the transaction, and the combined company's future operating results.

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 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-2q24. 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
June 30,

    

Six Months Ended
June 30,

  
 

2024

    

2023 (1)

    

2024

    

2023 (1)

  

REVENUE BY SEGMENT

                      

Software

$                   6,739

    

$                   6,294

    

$                12,637

    

$                11,885

  

Consulting

5,179

    

5,226

    

10,365

    

10,423

  

Infrastructure

3,645

    

3,618

    

6,721

    

6,716

  

Financing

169

    

185

    

362

    

380

  

Other

38

    

152

    

146

    

321

  

TOTAL REVENUE

15,770

    

15,475

    

30,231

    

29,727

  
                       

GROSS PROFIT

8,950

    

8,501

    

16,692

    

16,010

  
                       

GROSS PROFIT MARGIN

                      

Software

83.6

%

  

82.1

%

  

83.0

%

  

82.3

%

Consulting

26.3

%

  

25.9

%

  

25.8

%

  

25.7

%

Infrastructure

56.5

%

  

56.0

%

  

55.4

%

  

54.1

%

Financing

48.9

%

  

49.2

%

  

48.7

%

  

46.5

%
                       

TOTAL GROSS PROFIT MARGIN

56.8

%

  

54.9

%

  

55.2

%

  

53.9

%
                       

EXPENSE AND OTHER INCOME

                      

S,G&A

4,938

    

4,900

    

9,912

    

9,754

  

R,D&E

1,840

    

1,687

    

3,637

    

3,342

  

Intellectual property and custom development income

(241)

    

(248)

    

(458)

    

(428)

  

Other (income) and expense

(233)

    

(261)

    

(550)

    

(506)

  

Interest expense

427

    

423

    

859

    

790

  

TOTAL EXPENSE AND OTHER INCOME

6,730

    

6,501

    

13,399

    

12,952

  
                       

INCOME FROM CONTINUING OPERATIONS

BEFORE INCOME TAXES

2,219

    

2,000

    

3,293

    

3,058

  

Pre-tax margin

14.1

%

  

12.9

%

  

10.9

%

  

10.3

%

Provision for/(Benefit from) income taxes

389

    

419

    

(112)

    

543

  

Effective tax rate

17.5

%

  

21.0

%

  

(3.4)

%

  

17.8

%
                       

INCOME FROM CONTINUING OPERATIONS

$                   1,830

    

$                   1,581

    

$                   3,405

    

$                   2,515

  
                       

DISCONTINUED OPERATIONS

                      

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

4

    

2

    

34

    

(4)

  
                       

NET INCOME

$                   1,834

    

$                   1,583

    

$                   3,439

    

$                   2,511

  
                       

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK

                      

Assuming Dilution

                      

Continuing Operations

$                      1.96

    

$                      1.72

    

$                      3.65

    

$                      2.74

  

Discontinued Operations

$                      0.00

    

$                      0.00

    

$                      0.04

    

$                      0.00

  

TOTAL

$                      1.96

    

$                      1.72

    

$                      3.68

    

$                      2.73

  
                       

Basic

                      

Continuing Operations

$                      1.99

    

$                      1.74

    

$                      3.71

    

$                      2.77

  

Discontinued Operations

$                      0.00

    

$                      0.00

    

$                      0.04

    

$                      0.00

  

TOTAL

$                      1.99

    

$                      1.74

    

$                      3.74

    

$                      2.76

  
                       

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

                      

Assuming Dilution

934.4

    

919.5

    

933.9

    

918.6

  

Basic

920.3

    

909.9

    

918.7

    

908.7

  

____________________

  

(1)  Recast to reflect January 2024 segment changes.

  

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)
 

(Dollars in Millions)

  

At
June 30,
2024

  

At
December 31,
2023

ASSETS:

        

Current Assets:

        

Cash and cash equivalents

  

$                   12,210

  

$                   13,068

Restricted cash

  

2,268

  

21

Marketable securities

  

1,481

  

373

Notes and accounts receivable - trade, net

  

5,769

  

7,214

Short-term financing receivables, net

  

5,799

  

6,793

Other accounts receivable, net

  

757

  

640

Inventories

  

1,234

  

1,161

Deferred costs

  

997

  

998

Prepaid expenses and other current assets

  

2,784

  

2,639

Total Current Assets

  

33,299

  

32,908
         

Property, plant and equipment, net

  

5,600

  

5,501

Operating right-of-use assets, net

  

3,130

  

3,220

Long-term financing receivables, net

  

5,483

  

5,766

Prepaid pension assets

  

7,630

  

7,506

Deferred costs

  

820

  

842

Deferred taxes

  

6,378

  

6,656

Goodwill

  

59,416

  

60,178

Intangibles, net

  

10,251

  

11,036

Investments and sundry assets

  

1,840

  

1,626

Total Assets

  

$                  133,848

  

$                  135,241
         

LIABILITIES:

        

Current Liabilities:

        

Taxes

  

$                      1,691

  

$                      2,270

Short-term debt

  

3,602

  

6,426

Accounts payable

  

3,631

  

4,132

Deferred income

  

13,643

  

13,451

Operating lease liabilities

  

762

  

820

Other liabilities

  

6,319

  

7,022

Total Current Liabilities

  

29,648

  

34,122
         

Long-term debt

  

52,929

  

50,121

Retirement related obligations

  

10,200

  

10,808

Deferred income

  

3,489

  

3,533

Operating lease liabilities

  

2,546

  

2,568

Other liabilities

  

10,932

  

11,475

Total Liabilities

  

109,745

  

112,628
         

EQUITY:

        

IBM Stockholders' Equity:

        

Common stock

  

60,501

  

59,643

Retained earnings

  

151,659

  

151,276

Treasury stock — at cost

  

(169,815)

  

(169,624)

Accumulated other comprehensive income/(loss)

  

(18,319)

  

(18,761)

Total IBM Stockholders' Equity

  

24,026

  

22,533
         

Noncontrolling interests

  

77

  

80

Total Equity

  

24,103

  

22,613
         

Total Liabilities and Equity

  

$                 133,848

  

$                 135,241

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)
 
   

Three Months Ended
June 30,

  

Six Months Ended
June 30,

  

Trailing Twelve
Months Ended
June 30,

(Dollars in Millions)

  

2024

  

2023

  

2024

  

2023

  

2024

Net Cash from Operations per GAAP

  

$            2,066

  

$            2,638

  

$         6,234

  

$            6,412

  

$                      13,752
                     

Less: change in IBM Financing receivables

  

(946)

  

50

  

951

  

2,028

  

156

Capital Expenditures, net

  

(399)

  

(487)

  

(761)

  

(944)

  

(1,305)
                     

Free Cash Flow

  

2,612

  

2,101

  

4,522

  

3,441

  

12,292
                     

Acquisitions

  

(153)

  

(334)

  

(235)

  

(356)

  

(4,961)

Divestitures

  

—

  

6

  

703

  

6

  

693

Dividends

  

(1,537)

  

(1,510)

  

(3,058)

  

(3,007)

  

(6,092)

Non-Financing Debt

  

(4,168)

  

(1,178)

  

1,076

  

8,514

  

(1,892)

Other (includes IBM Financing net receivables and debt)

  

(73)

  

(347)

  

(510)

  

(1,109)

  

(410)
                     

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

  

$          (3,318)

  

$          (1,263)

  

$         2,497

  

$            7,489

  

$                            (370)

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)
 
   

Three Months Ended
June 30,

  

Six Months Ended
June 30,

(Dollars in Millions)

  

2024

  

2023

  

2024

  

2023

Net Income from Operations

  

$                     1,834

  

$                         1,583

  

$                     3,439

  

$                     2,511

Depreciation/Amortization of Intangibles (1)

  

1,155

  

1,076

  

2,287

  

2,150

Stock-based Compensation

  

316

  

288

  

636

  

556

Operating assets and liabilities/Other, net (2)

  

(293)

  

(359)

  

(1,079)

  

(832)

IBM Financing A/R

  

(946)

  

50

  

951

  

2,028

Net Cash Provided by Operating Activities

  

$                     2,066

  

$                         2,638

  

$                     6,234

  

$                     6,412
                 

Capital Expenditures, net of payments & proceeds

  

(399)

  

(487)

  

(761)

  

(944)

Divestitures, net of cash transferred

  

-

  

6

  

703

  

6

Acquisitions, net of cash acquired

  

(153)

  

(334)

  

(235)

  

(356)

Marketable Securities / Other Investments, net

  

2,791

  

822

  

(1,679)

  

(6,659)

Net Cash Provided by/(Used in) Investing Activities

  

$                     2,239

  

$                                7

  

$                   (1,971)

  

$                   (7,953)
                 

Debt, net of payments & proceeds

  

(2,900)

  

(1,135)

  

481

  

6,169

Dividends

  

(1,537)

  

(1,510)

  

(3,058)

  

(3,007)

Financing - Other

  

(78)

  

(86)

  

(61)

  

(185)

Net Cash Provided by/(Used in) Financing Activities

  

$                    (4,515)

  

$                       (2,731)

  

$                   (2,638)

  

$                     2,978
                 

Effect of Exchange Rate changes on Cash

  

(76)

  

(25)

  

(236)

  

(1)

Net Change in Cash, Cash Equivalents and Restricted Cash

  

$                       (287)

  

$                          (110)

  

$                     1,389

  

$                     1,436

____________________

(1)  Includes operating lease right-of-use assets amortization. 

(2)  Includes the reduction of tax reserves. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION

(Unaudited)
 
   

Three Months Ended

June 30,

  

Six Months Ended
June 30,

(Dollars in Billions)

  

2024

  

2023

  

Yr/Yr

  

2024

  

2023

  

Yr/Yr

Net Income as reported (GAAP)

  

$           1.8

  

$           1.6

  

$           0.3

  

$           3.4

  

$           2.5

  

$           0.9

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

  

0.0

  

0.0

  

0.0

  

0.0

  

0.0

  

0.0

Income from continuing operations

  

1.8

  

1.6

  

0.2

  

3.4

  

2.5

  

0.9

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

  

0.4

  

0.4

  

0.0

  

(0.1)

  

0.5

  

(0.7)

Pre-tax income from continuing operations (GAAP)

  

2.2

  

2.0

  

0.2

  

3.3

  

3.1

  

0.2

Non-operating adjustments (before tax)

                        

Acquisition-related charges (1)

  

0.5

  

0.4

  

0.1

  

1.0

  

0.8

  

0.2

Non-operating retirement-related costs/(income)

  

0.1

  

0.0

  

0.1

  

0.2

  

0.0

  

0.2
                         

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

  

2.8

  

2.4

  

0.4

  

4.4

  

3.8

  

0.6
                         

Net interest expense

  

0.2

  

0.2

  

0.0

  

0.4

  

0.4

  

0.0

Depreciation/Amortization of non-acquired intangible assets

  

0.7

  

0.7

  

0.0

  

1.4

  

1.4

  

0.0

Stock-based compensation

  

0.3

  

0.3

  

0.0

  

0.6

  

0.6

  

0.1

Workforce rebalancing charges

  

0.0

  

0.1

  

(0.1)

  

0.4

  

0.4

  

0.0

Corporate (gains) and charges (2)

  

0.0

  

0.0

  

0.0

  

(0.2)

  

0.0

  

(0.2)
                         

Adjusted EBITDA

  

$           4.0

  

$           3.7

  

$           0.4

  

$           7.1

  

$           6.5

  

$           0.5

____________________

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

(2)   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 June 30, 2024

  
                         

(Dollars in Millions)

  

Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                       6,739

    

$                        5,179

    

$                        3,645

    

$                            169

  

Segment Profit

  

$                       2,113

    

$                           463

    

$                           654

    

$                              77

  

Segment Profit Margin

  

31.3

%

  

8.9

%

  

17.9

%

  

45.3

%

Change YTY Revenue

  

7.1

%

  

(0.9)

%

  

0.7

%

  

(8.3)

%

Change YTY Revenue - Constant Currency

  

8.4

%

  

1.8

%

  

2.7

%

  

(6.6)

%
       
   

Three Months Ended June 30, 2023 (1)

  
                         

(Dollars in Millions)

  

 Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                       6,294

    

$                        5,226

    

$                        3,618

    

$                            185

  

Segment Profit

  

$                       1,749

    

$                           483

    

$                           732

    

$                              64

  

Segment Profit Margin

  

27.8

%

  

9.2

%

  

20.2

%

  

34.8

%

____________________

(1) Recast to reflect January 2024 segment changes. 
 
   

Six Months Ended June 30, 2024

  
                         

(Dollars in Millions)

  

Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                     12,637

    

$                      10,365

    

$                        6,721

    

$                           362

  

Segment Profit

  

$                       3,612

    

$                           888

    

$                           965

    

$                           168

  

Segment Profit Margin

  

28.6

%

  

8.6

%

  

14.4

%

  

46.5

%

Change YTY Revenue

  

6.3

%

  

(0.6)

%

  

0.1

%

  

(4.9)

%

Change YTY Revenue - Constant Currency

  

7.2

%

  

1.8

%

  

1.5

%

  

(4.0)

%
       
   

Six Months Ended June 30, 2023 (1)

  
                         

(Dollars in Millions)

  

 Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$                     11,885

    

$                      10,423

    

$                       6,716

    

$                           380

  

Segment Profit

  

$                       3,128

    

$                           910

    

$                       1,039

    

$                           164

  

Segment Profit Margin

  

26.3

%

  

8.7

%

  

15.5

%

  

43.2

%

__________

(1) Recast to reflect January 2004 segment changes. 

 

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, 2024

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Operating

(Non-GAAP)

  

Gross Profit

$       8,950

    

$                           170

    

$                               —

    

$                       —

    

$          9,120

  

Gross Profit Margin

56.8

%

  

1.1

pts

  

—

pts

  

—

pts

  

57.8

%

S,G&A

$       4,938

    

$                         (286)

    

$                               —

    

$                       —

    

$          4,651

  

Other (Income) & Expense

(233)

    

(18)

    

(98)

    

—

    

(349)

  

Total Expense & Other (Income)

6,730

    

(304)

    

(98)

    

—

    

6,328

  

Pre-tax Income from Continuing Operations

2,219

    

474

    

98

    

—

    

2,792

  

Pre-tax Income Margin from Continuing
Operations

14.1

%

  

3.0

pts

  

0.6

pts

  

—

pts

  

17.7

%

Provision for/(Benefit from) Income Taxes (3)

$          389

    

$                          113

    

$                              26

    

$                     (12)

    

$             516

  

Effective Tax Rate

17.5

%

  

1.1

pts

  

0.3

pts

  

(0.4)

pts

  

18.5

%

Income from Continuing Operations

$       1,830

    

$                          362

    

$                              72

    

$                      12

    

$          2,275

  

Income Margin from Continuing Operations

11.6

%

  

2.3

pts

  

0.5

pts

  

0.1

pts

  

14.4

%

Diluted Earnings Per Share: Continuing
Operations

$         1.96

    

$                         0.39

    

$                           0.08

    

$                   0.01

    

$            2.43

  
     
 

Three Months Ended June 30, 2023

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Operating

(Non-GAAP)

  

Gross Profit

$       8,501

    

$                          150

    

$                               —

    

$                      —

    

$           8,650

  

Gross Profit Margin

54.9

%

  

1.0

pts

  

—

pts

  

—

pts

  

55.9

%

S,G&A

$       4,900

    

$                         (245)

    

$                               —

    

$                      —

    

$           4,655

  

Other (Income) & Expense

(261)

    

0

    

(1)

    

—

    

(262)

  

Total Expense & Other (Income)

6,501

    

(246)

    

(1)

    

—

    

6,254

  

Pre-tax Income from Continuing Operations

2,000

    

395

    

1

    

—

    

2,396

  

Pre-tax Income Margin from Continuing
Operations

12.9

%

  

2.6

pts

  

0.0

pts

  

—

pts

  

15.5

%

Provision for/(Benefit from) Income Taxes (3)

$          419

    

$                            87

    

$                               (3)

    

$                  (110)

    

$              393

  

Effective Tax Rate

21.0

%

  

0.2

pts

  

(0.2)

pts

  

(4.6)

pts

  

16.4

%

Income from Continuing Operations

$       1,581

    

$                          308

    

$                                5

    

$                   110

    

$           2,003

  

Income Margin from Continuing Operations

10.2

%

  

2.0

pts

  

0.0

pts

  

0.7

pts

  

12.9

%

Diluted Earnings Per Share: Continuing
Operations

$         1.72

    

$                         0.34

    

$                           0.00

    

$                  0.12

    

$             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. 2024 also includes a loss of $18 million on foreign
        exchange derivative contracts entered into by the company prior to the 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)    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, 2024

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts (3)

    

Operating

(Non-GAAP)

  

Gross Profit

$    16,692

    

$                         341

    

$                               —

    

$                   —

    

$         17,033

  

Gross Profit Margin

55.2

%

  

1.1

pts

  

—

pts

  

—

pts

  

56.3

%

S,G&A

$      9,912

    

$                       (554)

    

$                               —

    

$                   —

    

$           9,358

  

Other (Income) & Expense

(550)

    

(68)

    

(194)

    

—

    

(812)

  

Total Expense & Other (Income)

13,399

    

(622)

    

(194)

    

—

    

12,584

  

Pre-tax Income from Continuing Operations

3,293

    

963

    

194

    

—

    

4,449

  

Pre-tax Income Margin from Continuing
Operations

10.9

%

  

3.2

pts

  

0.6

pts

  

—

pts

  

14.7

%

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

$        (112)

    

$                         255

    

$                              31

    

$                436

    

$              610

  

Effective Tax Rate

(3.4)

%

  

6.5

pts

  

0.9

pts

  

9.8

pts

  

13.7

%

Income from Continuing Operations

$      3,405

    

$                         707

    

$                            163

    

$               (436)

    

$           3,839

  

Income Margin from Continuing Operations

11.3

%

  

2.3

pts

  

0.5

pts

  

(1.4)

pts

  

12.7

%

Diluted Earnings Per Share: Continuing
Operations

$        3.65

    

$                        0.76

    

$                           0.17

    

$              (0.47)

    

$             4.11

  
     
 

Six Months Ended June 30, 2023

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Operating

(Non-GAAP)

  

Gross Profit

$    16,010

    

$                         298

    

$                               —

    

$                   —

    

$         16,308

  

Gross Profit Margin

53.9

%

  

1.0

pts

  

—

pts

  

—

pts

  

54.9

%

S,G&A

$      9,754

    

$                       (491)

    

$                               —

    

$                   —

    

$           9,263

  

Other (Income) & Expense

(506)

    

(2)

    

4

    

—

    

(504)

  

Total Expense & Other (Income)

12,952

    

(493)

    

4

    

—

    

12,463

  

Pre-tax Income from Continuing Operations

3,058

    

791

    

(4)

    

—

    

3,845

  

Pre-tax Income Margin from Continuing
Operations

10.3

%

  

2.7

pts

  

0.0

pts

  

—

pts

  

12.9

%

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

$         543

    

$                         178

    

$                            (14)

    

$               (115)

    

$              593

  

Effective Tax Rate

17.8

%

  

1.0

pts

  

(0.3)

pts

  

(3.0)

pts

  

15.4

%

Income from Continuing Operations

$      2,515

    

$                         613

    

$                             10

    

$                115

    

$           3,252

  

Income Margin from Continuing Operations

8.5

%

  

2.1

pts

  

0.0

pts

  

0.4

pts

  

10.9

%

Diluted Earnings Per Share: Continuing
Operations

$        2.74

    

$                        0.67

    

$                          0.01

    

$              0.13

    

$             3.54

  

____________________

(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. 2024 also includes a loss of $68 million on foreign
        exchange derivative contracts entered into by the company prior to the 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)    2024 includes a net benefit from discrete tax events.

(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
June 30,

  

Six Months Ended
June 30,

(Dollars in Billions)

  

2024

  

2023

  

2024

  

2023

Net Cash Provided by Operating Activities

  

$           2.1

  

$           2.6

  

$           6.2

  

$           6.4
                 

Add:

                

Net interest expense

  

0.2

  

0.2

  

0.4

  

0.4

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

  

0.4

  

0.4

  

(0.1)

  

0.5
                 

Less change in:

                

Financing receivables

  

(0.9)

  

0.1

  

1.0

  

2.0

Other assets and liabilities/Other, net (1)

  

(0.4)

  

(0.5)

  

(1.5)

  

(1.2)
                 

Adjusted EBITDA

  

$           4.0

  

$           3.7

  

$           7.1

  

$           6.5

____________________

(1)    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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