IBM RELEASES FOURTH-QUARTER RESULTS
Revenue growth in all segments; Strong margin expansion and cash generation
ARMONK, N.Y., Jan. 24, 2024 -- IBM (NYSE: IBM (http://www.ibm.com/investor))
today announced fourth-quarter 2023 earnings results.
Logo - https://mma.prnewswire.com/media/2319830/4511865/IBM_LOGO_1.jpg
"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 Pre-tax Income Pre-tax Income Margin Net Income Diluted Earnings Per Share
Profit
Margin
GAAP from $ 17.4 B $ 10.3 B 59.1 % $ 3.8 B 21.6 % $ 3.3 B $ 3.54
Continuing
Operations
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 Pre-tax Income Pre-tax Income Margin Net Income Diluted Earnings Per Share
Profit
Margin
GAAP from $ 61.9 B $ 34.3 B 55.4 % $ 8.7 B 14.0 % $ 7.5 B $ 8.15
Continuing
Operations
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 Year Ended
December 31, 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 (242) (245) (860) (663)
income
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 3 (159) (12) (143)
taxes
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 At
December 31, December 31,
2023 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 Year Ended
December 31, 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 $ 2,466 $ (888) $ 4,622 $ 1,283
Marketable Securities
____________________
(1) Includes immaterial cash flows from discontinued operations.
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited)
Three Months Ended Year Ended
December 31, 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 $ 5,814 $ 13 $ 5,101 $ 1,032
Cash
____________________
(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 Year Ended
December 31, 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 6,509 (259) 22 — — 6,272
(Income)
Pre-tax Income from 3,759 431 (22) — — 4,167
Continuing Operations
Pre-tax Income Margin from 21.6 % 2.5 pts. (0.1) pts. — pts. — pts. 24.0 %
Continuing Operations
Provision for/(Benefit from) $ 474 $ 91 $ 19 $ (4) $ — $ 580
Income Taxes (4)
Effective Tax Rate 12.6 % 0.9 pts. 0.5 pts. (0.1) pts. — pts. 13.9 %
Income from Continuing $ 3,285 $ 339 $ (41) $ 4 $ — $ 3,587
Operations
Income Margin from 18.9 % 2.0 pts. (0.2) pts. 0.0 pts. — pts. 20.6 %
Continuing Operations
Diluted Earnings Per Share: $ 3.54 $ 0.37 $ (0.04) $ 0.00 $ — $ 3.87
Continuing Operations
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 3,312 419 93 — (2) 3,823
Operations
Pre-tax Income Margin from 19.8 % 2.5 pts. 0.6 pts. — pts. 0.0 pts. 22.9 %
Continuing Operations
Provision for/(Benefit from) $ 443 $ 109 $ 16 $ (42) $ — $ 526
Income Taxes (4)
Effective Tax Rate 13.4 % 1.4 pts. 0.1 pts. (1.1) pts. 0.0 pts. 13.8 %
Income from Continuing $ 2,869 $ 310 $ 77 $ 42 $ (2) $ 3,296
Operations
Income Margin from Continuing 17.2 % 1.9 pts. 0.5 pts. 0.3 pts. 0.0 pts. 19.8 %
Operations
Diluted Earnings Per Share: $ 3.13 $ 0.34 $ 0.08 $ 0.05 $ 0.00 $ 3.60
Continuing Operations
____________________
(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 25,610 (1,029) 39 — — 24,620
(Income)
Pre-tax Income from 8,690 1,660 (39) — — 10,311
Continuing Operations
Pre-tax Income Margin from 14.0 % 2.7 pts. (0.1) pts. — pts. — pts. 16.7 %
Continuing Operations
Provision for/(Benefit from) $ 1,176 $ 368 $ (8) $ (95) $ — $ 1,441
Income Taxes (4)
Effective Tax Rate 13.5 % 1.4 pts. 0.0 pts. (0.9) pts. — pts. 14.0 %
Income from Continuing $ 7,514 $ 1,292 $ (30) $ 95 $ — $ 8,870
Operations
Income Margin from 12.1 % 2.1 pts. 0.0 pts. 0.2 pts. — pts. 14.3 %
Continuing Operations
Diluted Earnings Per Share: $ 8.15 $ 1.40 $ (0.03) $ 0.10 $ — $ 9.62
Continuing Operations
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 1,156 1,765 6,548 — 351 9,821
Operations
Pre-tax Income Margin from 1.9 % 2.9 pts. 10.8 pts. — pts. 0.6 pts. 16.2 %
Continuing Operations
Provision for/(Benefit from) $ (626) $ 436 $ 1,615 $ 70 $ — $ 1,495
Income Taxes (4)
Effective Tax Rate (54.2) % 14.2 pts. 52.6 pts. 0.7 pts. 1.9 pts. 15.2 %
Income from Continuing $ 1,783 $ 1,329 $ 4,933 $ (70) $ 351 $ 8,326
Operations
Income Margin from Continuing 2.9 % 2.2 pts. 8.1 pts. (0.1) pts. 0.6 pts. 13.8 %
Operations
Diluted Earnings Per Share: $ 1.95 $ 1.46 $ 5.41 $ (0.08) $ 0.38 $ 9.13
Continuing Operations
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(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 Year Ended
Ended December 31,
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.
SOURCE IBM
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