REG-International Business Machines Corp: IBM Releases Second-Quarter Results
20/07/2023 07:15
IBM RELEASES SECOND-QUARTER RESULTS
Solid Software and Consulting Revenue Growth; Strong Gross Profit Margin
Expansion
ARMONK, N.Y., July 20, 2023 -- IBM (NYSE: IBM
(http://www.ibm.com/investor)) today announced second-quarter 2023 earnings
results.
"Organizations are using our hybrid cloud and AI technology, and our
consulting capabilities, to transform their operations," said Arvind Krishna,
IBM chairman and chief executive officer. "We continue to respond to the needs
of our clients who seek trusted, enterprise AI solutions, and we are
particularly excited about the response to the recently launched watsonx AI
platform. Finally, we remain confident in our revenue and free cash flow
growth expectations for the full year."
Second-Quarter Highlights
* Revenue
- Revenue of $15.5 billion, down 0.4 percent, up 0.4 percent at constant
currency
- Software revenue up 7 percent, up 8 percent at constant currency
- Consulting revenue up 4 percent, up 6 percent at constant currency
- Infrastructure revenue down 15 percent, down 14 percent at constant
currency
* Profit Margin
- Gross Profit Margin: GAAP: 54.9 percent, up 160 basis points; Operating
(Non-GAAP): 55.9 percent, up 140 basis points
- Pre-Tax Income Margin: GAAP: 12.9 percent, up 180 basis points; Operating
(Non-GAAP): 15.5 percent, down 70 basis points
* Cash Flow
- Year to date net cash from operating activities of $6.4 billion, up $1.8
billion; free cash flow of $3.4 billion, up $0.1 billion
SECOND QUARTER 2023 INCOME STATEMENT SUMMARY
Results include YTY impact from gains on the 2Q22 sale of healthcare software assets*
Revenue Gross Profit Gross Profit Margin Pre-tax Income* Pre-tax Income Margin* Net Income* Diluted Earnings Per Share*
GAAP from Continuing Operations $ 15.5 B $ 8.5 B 54.9 % $ 2.0 B 12.9 % $ 1.6 B $ 1.72
Year/Year (0.4) %** 3 % 1.6 Pts 16 % 1.8 Pts 8 % 7 %
Operating (Non-GAAP) $ 8.7 B 55.9 % $ 2.4 B 15.5 % $ 2.0 B $ 2.18
Year/Year 2 % 1.4 Pts (5) % (0.7) Pts (5) % (6) %
* Results include the YTY impact from the gains on the 2Q22 sale of healthcare software assets. GAAP: Pre-Tax Income (17 pts); Pre-Tax
Income Margin (1.4 pts); Net Income (15 pts); EPS (15 pts). Operating (Non-GAAP): Pre-Tax Income (9 pts); Pre-Tax Income Margin (1.4
pts); Net Income (9 pts); EPS (9 pts).
** 0.4% at constant currency
"In the quarter, revenue performance was led by our growth vectors of software
and consulting, and we continued to expand our gross profit margin, driven by
our improving portfolio mix and productivity initiatives," said James
Kavanaugh, IBM senior vice president and chief financial officer. "This year
we have leveraged our strong cash position to invest for growth, announcing
seven acquisitions to bolster our hybrid cloud and AI strategy, while
continuing to return value to shareholders through dividends."
Segment Results for Second Quarter
* Software — revenues of $6.6 billion, up 7.2 percent, up 7.5 percent at
constant currency:
- Hybrid Platform & Solutions up 6 percent, up 7 percent at constant
currency:
-- Red Hat up 11 percent
-- Automation up 1 percent, up 2 percent at constant currency
-- Data & AI up 10 percent, up 11 percent at constant currency
-- Security down 2 percent, down 1 percent at constant currency
- Transaction Processing up 9 percent, up 10 percent at constant currency
* Consulting — revenues of $5.0 billion, up 4.3 percent, up 5.9 percent at
constant currency:
- Business Transformation up 3 percent, up 5 percent at constant currency
- Technology Consulting up 4 percent, up 5 percent at constant currency
- Application Operations up 6 percent, up 8 percent at constant currency
* Infrastructure — revenues of $3.6 billion, down 14.6 percent, down 13.8
percent at constant currency:
- Hybrid Infrastructure down 18 percent:
-- IBM z Systems down 30 percent
-- Distributed Infrastructure down 6 percent
- Infrastructure Support down 8 percent, down 6 percent at constant currency
* Financing — revenues of $0.2 billion, up 26.2 percent, up 27.1 percent at
constant currency
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating
activities of $2.6 billion, up $1.3 billion year to year. Net cash from
operating activities excluding IBM Financing receivables was $2.6 billion.
IBM's free cash flow was $2.1 billion, flat 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 $6.4 billion, up $1.8 billion year to year. Net cash
from operating activities excluding IBM Financing receivables was $4.4
billion. IBM's free cash flow was $3.4 billion, up $0.1 billion year to year.
IBM ended the second quarter with $16.3 billion of cash and marketable
securities, up $7.5 billion from year-end 2022. Debt, including IBM Financing
debt of $10.6 billion, totaled $57.5 billion, up $6.5 billion since the end of
2022.
Full-Year 2023 Expectations
* Revenue: The company continues to expect constant currency revenue growth of
three percent to five percent. At current foreign exchange rates, currency is
expected to be neutral to revenue growth.
* Free cash flow: The company continues to expect about $10.5 billion in free
cash flow, up more than $1 billion year to year.
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;
* cash from operating activities excluding IBM Financing receivables.
The rationale for management's use of these non-GAAP measures is included in
Exhibit 99.2 in the Form 8-K that includes this press release and is being
submitted today to the SEC.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00
p.m. EDT, today. The Webcast may be accessed via a link
at https://www.ibm.com/investor/events/earnings-2q23. Presentation charts
will be available shortly before the Webcast.
Financial Results Below (certain amounts may not add due to use of rounded
numbers; percentages presented are calculated from the underlying whole-dollar
amounts).
Contact: IBM
Sarah Meron, 347-891-1770
sarah.meron@ibm.com
Tim Davidson, 914-844-7847
tfdavids@us.ibm.com
INTERNATIONAL BUSINESS MACHINES CORPORATION COMPARATIVE FINANCIAL RESULTS (Unaudited; Dollars in millions except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2023 2022 2023 2022
REVENUE BY SEGMENT
Software $ 6,608 $ 6,166 $ 12,529 $ 11,938
Consulting 5,013 4,809 9,975 9,637
Infrastructure 3,618 4,235 6,716 7,453
Financing 185 146 380 300
Other 51 180 126 404
TOTAL REVENUE 15,475 15,535 29,727 29,732
GROSS PROFIT 8,501 8,290 16,010 15,625
GROSS PROFIT MARGIN
Software 79.3 % 79.2 % 79.4 % 79.0 %
Consulting 25.9 % 24.2 % 25.6 % 24.3 %
Infrastructure 55.8 % 53.8 % 53.9 % 52.4 %
Financing 49.2 % 35.3 % 46.5 % 36.5 %
TOTAL GROSS PROFIT MARGIN 54.9 % 53.4 % 53.9 % 52.6 %
EXPENSE AND OTHER INCOME
S,G&A 4,900 4,855 9,754 9,452
R,D&E 1,687 1,673 3,342 3,352
Intellectual property and custom development income (248) (176) (428) (297)
Other (income) and expense (261) (81) (506) 166
Interest expense 423 297 790 607
TOTAL EXPENSE AND OTHER INCOME 6,501 6,568 12,952 13,280
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,000 1,722 3,058 2,345
Pre-tax margin 12.9 % 11.1 % 10.3 % 7.9 %
Provision for/(Benefit from) income taxes 419 257 543 218
Effective tax rate 21.0 % 14.9 % 17.8 % 9.3 %
INCOME FROM CONTINUING OPERATIONS $ 1,581 $ 1,465 $ 2,515 $ 2,127
DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of taxes 2 (73) (4) (2)
NET INCOME $ 1,583 $ 1,392 $ 2,511 $ 2,125
EARNINGS/(LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations $ 1.72 $ 1.61 $ 2.74 $ 2.34
Discontinued Operations $ 0.00 $ (0.08) $ 0.00 $ 0.00
TOTAL $ 1.72 $ 1.53 $ 2.73 $ 2.34
Basic
Continuing Operations $ 1.74 $ 1.62 $ 2.77 $ 2.36
Discontinued Operations $ 0.00 $ (0.08) $ 0.00 $ 0.00
TOTAL $ 1.74 $ 1.54 $ 2.76 $ 2.36
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (M's)
Assuming Dilution 919.5 910.7 918.6 910.0
Basic 909.9 901.5 908.7 900.4
INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in Millions) At June 30, At December 31,
2023 2022
ASSETS:
Current Assets:
Cash and cash equivalents $ 9,394 $ 7,886
Restricted cash 31 103
Marketable securities 6,904 852
Notes and accounts receivable - trade, net 5,673 6,541
Short-term financing receivables, net 6,429 7,790
Other accounts receivable, net 838 817
Inventories 1,501 1,552
Deferred costs 957 967
Prepaid expenses and other current assets 2,730 2,611
Total Current Assets 34,458 29,118
Property, plant and equipment, net 5,443 5,334
Operating right-of-use assets, net 2,653 2,878
Long-term financing receivables, net 5,221 5,806
Prepaid pension assets 8,735 8,236
Deferred costs 897 866
Deferred taxes 6,340 6,256
Goodwill 56,385 55,949
Intangibles, net 10,496 11,184
Investments and sundry assets 1,585 1,617
Total Assets $ 132,213 $ 127,243
LIABILITIES:
Current Liabilities:
Taxes $ 1,606 $ 2,196
Short-term debt 6,785 4,760
Accounts payable 3,732 4,051
Deferred income 12,712 12,032
Operating lease liabilities 842 874
Other liabilities 6,836 7,592
Total Current Liabilities 32,513 31,505
Long-term debt 50,691 46,189
Retirement related obligations 9,385 9,596
Deferred income 3,264 3,499
Operating lease liabilities 1,986 2,190
Other liabilities 12,103 12,243
Total Liabilities 109,942 105,222
EQUITY:
IBM Stockholders' Equity:
Common stock 58,963 58,343
Retained earnings 149,318 149,825
Treasury stock — at cost (169,581) (169,484)
Accumulated other comprehensive income/(loss) (16,499) (16,740)
Total IBM Stockholders' Equity 22,201 21,944
Noncontrolling interests 70 77
Total Equity 22,271 22,021
Total Liabilities and Equity $ 132,213 $ 127,243
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited)
Three Months Ended Six Months Ended Trailing Twelve Months Ended June 30,
June 30, June 30,
(Dollars in Millions) 2023 2022* 2023 2022* 2023
Net Cash from Operations per GAAP $ 2,638 $ 1,321 $ 6,412 $ 4,569 $ 12,278
Less: change in IBM Financing receivables 50 (1,264) 2,028 367 944
Capital Expenditures, net (487) (494) (944) (871) (1,933)
Free Cash Flow 2,101 2,091 3,441 3,331 9,402
Acquisitions (334) (260) (356) (958) (1,747)
Divestitures 6 1,207 6 1,268 10
Dividends (1,510) (1,488) (3,007) (2,963) (5,992)
Non-Financing Debt (1,178) (2,934) 8,514 1,740 8,683
Other (includes IBM Financing net receivables and debt) (347) (1,607) (1,109) (2,197) (1,805)
Change in Cash, Cash Equivalents, Restricted Cash $ (1,263) $ (2,991) $ 7,489 $ 221 $ 8,551
and Short-term Marketable Securities
____________________
* Includes immaterial cash flows from discontinued operations.
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in Millions) 2023 2022* 2023 2022*
Net Income from Operations $ 1,583 $ 1,392 $ 2,511 $ 2,125
Depreciation/Amortization of Intangibles 1,076 1,245 2,150 2,501
Stock-based Compensation 288 254 556 488
Working Capital / Other (359) (307) (832) (912)
IBM Financing A/R 50 (1,264) 2,028 367
Net Cash Provided by Operating Activities $ 2,638 $ 1,321 $ 6,412 $ 4,569
Capital Expenditures, net of payments & proceeds (487) (494) (944) (871)
Divestitures, net of cash transferred 6 1,207 6 1,268
Acquisitions, net of cash acquired (334) (260) (356) (958)
Marketable Securities / Other Investments, net 822 (281) (6,659) (625)
Net Cash Provided by/(Used in) Investing Activities $ 7 $ 172 $ (7,953) $ (1,186)
Debt, net of payments & proceeds (1,135) (2,514) 6,169 434
Dividends (1,510) (1,488) (3,007) (2,963)
Financing - Other (86) (195) (185) (290)
Net Cash Provided by/(Used in) Financing Activities $ (2,731) $ (4,197) $ 2,978 $ (2,819)
Effect of Exchange Rate changes on Cash (25) (262) (1) (267)
Net Change in Cash, Cash Equivalents and Restricted Cash $ (110) $ (2,965) $ 1,436 $ 297
____________________
* Includes immaterial cash flows from discontinued operations.
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited)
Three Months Ended June 30, 2023
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 6,608 $ 5,013 $ 3,618 $ 185
Pre-tax Income from Continuing Operations* $ 1,504 $ 446 $ 633 $ 64
Pre-tax Margin* 22.8 % 8.9 % 17.5 % 34.9 %
Change YTY Revenue 7.2 % 4.3 % (14.6) % 26.2 %
Change YTY Revenue - Constant Currency 7.5 % 5.9 % (13.8) % 27.1 %
Three Months Ended June 30, 2022
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 6,166 $ 4,809 $ 4,235 $ 146
Pre-tax Income from Continuing Operations $ 1,375 $ 343 $ 757 $ 102
Pre-tax Margin 22.3 % 7.1 % 17.9 % 69.7 %
____________________
* The second quarter 2023 pre-tax charge of approximately $0.12 billion for stranded costs related to portfolio actions is not included in the measure of segment
pre-tax income, consistent with the company's management system.
Six Months Ended June 30, 2023
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 12,529 $ 9,975 $ 6,716 $ 380
Pre-tax Income from Continuing Operations* $ 2,668 $ 828 $ 849 $ 165
Pre-tax Margin* 21.3 % 8.3 % 12.6 % 43.3 %
Change YTY Revenue 5.0 % 3.5 % (9.9) % 26.8 %
Change YTY Revenue - Constant Currency 6.6 % 7.0 % (7.8) % 29.1 %
Six Months Ended June 30, 2022
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 11,938 $ 9,637 $ 7,453 $ 300
Pre-tax Income from Continuing Operations $ 2,509 $ 691 $ 956 $ 186
Pre-tax Margin 21.0 % 7.2 % 12.8 % 62.0 %
____________________
* The year-to-date 2023 pre-tax charge of approximately $0.38 billion for stranded costs related to portfolio actions 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 June 30, 2023
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts Kyndryl- Related Impacts (3) Operating (Non-GAAP)
Gross Profit $ 8,501 $ 150 $ — $ — $ — $ 8,650
Gross Profit Margin 54.9 % 1.0 pts. — pts. — pts. — pts. 55.9 %
S,G&A $ 4,900 $ (245) $ — $ — $ — $ 4,655
Other (Income) & Expense (261) 0 (1) — — (262)
Total Expense & Other 6,501 (246) (1) — — 6,254
(Income)
Pre-tax Income from 2,000 395 1 — — 2,396
Continuing Operations
Pre-tax Income Margin from 12.9 % 2.6 pts. 0.0 pts. — pts. — pts. 15.5 %
Continuing Operations
Provision for/(Benefit from) $ 419 $ 87 $ (3) $ (110) $ — $ 393
Income Taxes (4)
Effective Tax Rate 21.0 % 0.2 pts. (0.2) pts. (4.6) pts. — pts. 16.4 %
Income from Continuing $ 1,581 $ 308 $ 5 $ 110 $ — $ 2,003
Operations
Income Margin from 10.2 % 2.0 pts. 0.0 pts. 0.7 pts. — pts. 12.9 %
Continuing Operations
Diluted Earnings Per Share: $ 1.72 $ 0.34 $ 0.00 $ 0.12 $ — $ 2.18
Continuing Operations
Three Months Ended June 30, 2022
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts Kyndryl- Related Impacts (3) Operating (Non-GAAP)
Gross Profit $ 8,290 $ 180 $ — $ — $ — $ 8,470
Gross Profit Margin 53.4 % 1.2 pts. — pts. — pts. — pts. 54.5 %
S,G&A $ 4,855 $ (279) $ — $ — $ 0 $ 4,576
Other (Income) & Expense (81) (1) (192) — (145) (418)
Total Expense & Other 6,568 (280) (192) — (145) 5,952
(Income)
Pre-tax Income from 1,722 460 192 — 145 2,518
Continuing Operations
Pre-tax Income Margin from 11.1 % 3.0 pts. 1.2 pts. — pts. 0.9 pts. 16.2 %
Continuing Operations
Provision for/(Benefit from) $ 257 $ 115 $ 46 $ (4) $ — $ 413
Income Taxes (4)
Effective Tax Rate 14.9 % 1.8 pts. 0.7 pts. (0.2) pts. (0.9) pts. 16.4 %
Income from Continuing $ 1,465 $ 345 $ 146 $ 4 $ 145 $ 2,105
Operations
Income Margin from 9.4 % 2.2 pts. 0.9 pts. 0.0 pts. 0.9 pts. 13.5 %
Continuing Operations
Diluted Earnings Per Share: $ 1.61 $ 0.38 $ 0.16 $ 0.00 $ 0.16 $ 2.31
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.
(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)
Six Months Ended June 30, 2023
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts Kyndryl- Related Impacts (3) Operating (Non-GAAP)
Gross Profit $ 16,010 $ 298 $ — $ — $ — $ 16,308
Gross Profit Margin 53.9 % 1.0 pts. — pts. — pts. — pts. 54.9 %
S,G&A $ 9,754 $ (491) $ — $ — $ — $ 9,263
Other (Income) & Expense (506) (2) 4 — — (504)
Total Expense & Other 12,952 (493) 4 — — 12,463
(Income)
Pre-tax Income from 3,058 791 (4) — — 3,845
Continuing Operations
Pre-tax Income Margin from 10.3 % 2.7 pts. 0.0 pts. — pts. — pts. 12.9 %
Continuing Operations
Provision for/(Benefit from) $ 543 $ 178 $ (14) $ (115) $ — $ 593
Income Taxes (4)
Effective Tax Rate 17.8 % 1.0 pts. (0.3) pts. (3.0) pts. — pts. 15.4 %
Income from Continuing $ 2,515 $ 613 $ 10 $ 115 $ — $ 3,252
Operations
Income Margin from 8.5 % 2.1 pts. 0.0 pts. 0.4 pts. — pts. 10.9 %
Continuing Operations
Diluted Earnings Per Share: $ 2.74 $ 0.67 $ 0.01 $ 0.13 $ — $ 3.54
Continuing Operations
Six Months Ended June 30, 2022
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts Kyndryl- Related Impacts (3) Operating (Non-GAAP)
Gross Profit $ 15,625 $ 361 $ — $ — $ — $ 15,986
Gross Profit Margin 52.6 % 1.2 pts. — pts. — pts. — pts. 53.8 %
S,G&A $ 9,452 $ (565) $ — $ — $ 0 $ 8,887
Other (Income) & Expense 166 (1) (394) — (367) (596)
Total Expense & Other 13,280 (566) (394) — (367) 11,953
(Income)
Pre-tax Income from 2,345 928 394 — 367 4,033
Continuing Operations
Pre-tax Income Margin from 7.9 % 3.1 pts. 1.3 pts. — pts. 1.2 pts. 13.6 %
Continuing Operations
Provision for/(Benefit from) $ 218 $ 224 $ 104 $ 112 $ — $ 657
Income Taxes (4)
Effective Tax Rate 9.3 % 3.4 pts. 1.7 pts. 2.8 pts. (0.8) pts. 16.3 %
Income from Continuing $ 2,127 $ 704 $ 290 $ (112) $ 367 $ 3,376
Operations
Income Margin from 7.2 % 2.4 pts. 1.0 pts. (0.4) pts. 1.2 pts. 11.4 %
Continuing Operations
Diluted Earnings Per Share: $ 2.34 $ 0.77 $ 0.32 $ (0.12) $ 0.40 $ 3.71
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.
(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.
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