IBM
$125.45
IBM
($.39)
(.31%)
Earnings Details
2nd Quarter June 2020
Monday, July 20, 2020 4:05:00 PM
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Summary

IBM Beats

IBM (IBM) reported 2nd Quarter June 2020 earnings of $2.18 per share on revenue of $18.1 billion. The consensus earnings estimate was $2.14 per share on revenue of $17.7 billion. The Earnings Whisper number was $2.16 per share. Revenue fell 5.4% compared to the same quarter a year ago.

International Business Machines Corp is an Information Technology (IT) company. It creates business value for clients and solves business problems through integrated solutions that leverage information technology & knowledge of business processes.

Results
Reported Earnings
$2.18
Earnings Whisper
$2.16
Consensus Estimate
$2.14
Reported Revenue
$18.12 Bil
Revenue Estimate
$17.72 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IBM Reports 2020 Second-Quarter Results

Accelerated Cloud Revenue Growth; Gross Margin Expansion; Strong Balance Sheet and Liquidity Position

ARMONK, N.Y.--(BUSINESS WIRE)--IBM (NYSE: IBM) today announced second-quarter 2020 earnings results.

“Our clients see the value of IBM’s hybrid cloud platform, based on open technologies, at a time of unprecedented business disruption," said Arvind Krishna, IBM chief executive officer. "We are committed to building, with a growing ecosystem of partners, an enduring hybrid cloud platform that will serve as a powerful catalyst for innovation for our clients and the world.”

Highlights for the second quarter include:

  • GAAP EPS from continuing operations of $1.52
  • Operating (non-GAAP) EPS of $2.18
  • Revenue of $18.1 billion, down 5.4 percent (down 1.9 percent adjusting for divested businesses and currency)
    -- Cloud & Cognitive Software revenue up 3 percent (up 5 percent adjusting for currency)
    -- Systems revenue up 6 percent
  • Total cloud revenue of $6.3 billion, up 30 percent (up 34 percent adjusting for divested businesses and currency)
    -- Total cloud revenue of $23.5 billion over the last 12 months, up 20 percent (up 23 percent adjusting for divested businesses and currency)
  • Red Hat revenue up 17 percent (up 18 percent adjusting for currency), normalized for historical comparability
  • GAAP gross profit margin of 48 percent, up 100 basis points; Operating (non-GAAP) gross profit margin of 49 percent up 160 basis points
  • Net cash from operating activities of $15.1 billion and free cash flow of $11.5 billion, over the last 12 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SECOND QUARTER 2020

 

 

 

Results Reflect the Impact of Items Related to

 

 

 

the Red Hat Acquisition Closed in July 2019

 

 

 

 

 

 

 

 

 

 

 

Pre-tax

 

Gross

 

 

 

Diluted

 

Net

 

Pre-tax

 

Income

 

Profit

 

 

 

EPS

 

Income

 

Income

 

Margin

 

Margin

 

GAAP from Continuing Operations

 

$

1.52

 

$

1.4B

 

$

1.6B

 

8.7

%

48.0

%

Year/Year

 

 

(46)

%

 

(46)

%

 

(43)

%

(5.8)

Pts

1.0

Pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (Non-GAAP)

 

$

2.18

 

$

1.9B

 

$

2.3B

 

12.8

%

49.0

%

Year/Year

 

 

(31)

%

 

(31)

%

 

(27)

%

(3.8)

Pts

1.6

Pts

“Our prudent financial management in these turbulent times enabled us to expand our gross profit margin, generate strong free cash flow and improve our liquidity position," said James Kavanaugh, IBM senior vice president and chief financial officer. "We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy.”

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $3.6 billion, or $3.0 billion excluding Global Financing receivables. IBM’s free cash flow was $2.3 billion. The company returned $1.5 billion to shareholders in dividends.

IBM ended the second quarter with $14.3 billion of cash on hand which includes marketable securities, up $5.2 billion from year-end 2019. Debt, including Global Financing debt of $21.9 billion, totaled $64.7 billion.

Segment Results for Second Quarter

Segment results reflect growing adoption of IBM's hybrid cloud platform while clients continue to shift priorities to preserve cash and maintain operational stability.

  • Cloud & Cognitive Software (includes Cloud & Data Platforms which includes Red Hat, Cognitive Applications and Transaction Processing Platforms) — revenues of $5.7 billion, up 3 percent (up 5 percent adjusting for currency), with growth in Cloud & Data Platforms, up 29 percent (up 30 percent adjusting for currency) led by Red Hat. Cognitive Applications and Transaction Processing Platforms declined. Cloud revenue more than doubled.
  • Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $3.9 billion, down 7 percent (down 6 percent adjusting for currency), driven by declines in Application Management and Consulting. Cloud revenue up 12 percent (up 13 percent adjusting for currency). Gross profit margin up 240 basis points.
  • Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.3 billion, down 8 percent (down 5 percent adjusting for currency). Cloud revenue up 18 percent (up 20 percent adjusting for currency).
  • Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.9 billion, up 6 percent, led by IBM Z, up 69 percent (up 68 percent adjusting for currency). Storage Systems revenue up 2 percent (up 3 percent adjusting for currency); Power declined. Cloud revenue up 22 percent. Gross profit margin up 430 basis points.
  • Global Financing (includes financing and used equipment sales) — revenues of $265 million, down 25 percent (down 23 percent adjusting for currency), reflecting the wind-down of OEM commercial financing. Gross profit margin up 360 basis points.

Year-To-Date 2020 Results

Consolidated diluted earnings per share was $2.83 compared to $4.58, down 38 percent year to year. Consolidated net income was $2.5 billion, down 38 percent year to year. Revenues for the six-month period ended June 30, 2020 totaled $35.7 billion, a decrease of 4 percent year to year (down 1 percent adjusting for divested businesses and currency) compared with $37.3 billion for the first six months of 2019.

Operating (non-GAAP) diluted earnings per share from continuing operations was $4.02 compared with $5.42 per diluted share for the 2019 period, a decrease of 26 percent. Operating (non-GAAP) net income for the six months ended June 30, 2020 was $3.6 billion compared with $4.8 billion in the prior-year period, a decrease of 26 percent.

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; the company’s failure to meet growth and productivity objectives; 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; cybersecurity and data privacy considerations; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; 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; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels and ecosystems; 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; legal proceedings and investigatory risks; 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 (SEC) 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);
  • total revenue and cloud revenue adjusting for divested businesses and currency;
  • Red Hat revenue normalized for historical comparability;
  • presenting operating (non-GAAP) earnings per share amounts and related income statement items;
  • adjusting for free cash flow;
  • net cash from operating activities, excluding Global 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/ibm-2q-2020-earnings-announcement. 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).

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,

 

 

 

 

2020

 

2019

 

 

 

2020

 

2019

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud & Cognitive Software

 

$

5,748

 

$

5,563

*

 

 

$

10,987

 

$

10,530

*

 

Global Business Services

 

 

3,890

 

 

4,197

*

 

 

 

8,027

 

 

8,353

*

 

Global Technology Services

 

 

6,316

 

 

6,837

 

 

 

 

12,783

 

 

13,711

 

 

Systems

 

 

1,852

 

 

1,753

 

 

 

 

3,220

 

 

3,081

 

 

Global Financing

 

 

265

 

 

351

 

 

 

 

564

 

 

757

 

 

Other

 

 

50

 

 

460

*

 

 

 

113

 

 

911

*

 

TOTAL REVENUE

 

 

18,123

 

 

19,161

 

 

 

 

35,694

 

 

37,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

8,700

 

 

9,010

 

 

 

 

16,622

 

 

17,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT MARGIN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud & Cognitive Software

 

 

77.1

%

 

77.7

%

*

 

 

76.3

%

 

76.7

%

*

Global Business Services

 

 

28.4

%

 

26.0

%

*

 

 

27.8

%

 

26.1

%

*

Global Technology Services

 

 

34.2

%

 

34.4

%

 

 

 

34.1

%

 

34.1

%

 

Systems

 

 

57.8

%

 

53.5

%

 

 

 

54.6

%

 

50.3

%

 

Global Financing

 

 

38.6

%

 

35.0

%

 

 

 

39.7

%

 

34.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL GROSS PROFIT MARGIN

 

 

48.0

%

 

47.0

%

 

 

 

46.6

%

 

45.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSE AND OTHER INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

 

5,248

 

 

5,456

 

 

 

 

11,203

 

 

10,147

 

 

R,D&E

 

 

1,582

 

 

1,407

 

 

 

 

3,207

 

 

2,840

 

 

Intellectual property and custom development income

 

 

(203)

 

 

(222)

 

 

 

 

(319)

 

 

(323)

 

 

Other (income) and expense

 

 

179

 

 

(747)

 

 

 

 

361

 

 

(820)

 

 

Interest expense

 

 

323

 

 

348

 

 

 

 

649

 

 

558

 

 

TOTAL EXPENSE AND OTHER INCOME

 

 

7,129

 

 

6,242

 

 

 

 

15,101

 

 

12,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEFORE INCOME TAXES

 

 

1,571

 

 

2,768

 

 

 

 

1,522

 

 

4,651

 

 

Pre-tax margin

 

 

8.7

%

 

14.4

%

 

 

 

4.3

%

 

12.5

%

 

Provision for / (Benefit from) income taxes

 

 

209

 

 

269

 

 

 

 

(1,017)

 

 

558

 

 

Effective tax rate

 

 

13.3

%

 

9.7

%

 

 

 

(66.8)

%

 

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

$

1,362

 

$

2,499

 

 

 

$

2,538

 

$

4,093

 

 

DISCONTINUED OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(1)

 

 

(1)

 

 

 

 

(2)

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

1,361

 

$

2,498

 

 

 

$

2,536

 

$

4,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS / (LOSS) PER SHARE OF COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assuming Dilution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

1.52

 

$

2.81

 

 

 

$

2.83

 

$

4.58

 

 

Discontinued Operations

 

$

0.00

 

$

0.00

 

 

 

$

0.00

 

$

0.00

 

 

TOTAL

 

$

1.52

 

$

2.81

 

 

 

$

2.83

 

$

4.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

1.53

 

$

2.82

 

 

 

$

2.85

 

$

4.61

 

 

Discontinued Operations

 

$

0.00

 

$

0.00

 

 

 

$

0.00

 

$

0.00

 

 

TOTAL

 

$

1.53

 

$

2.82

 

 

 

$

2.85

 

$

4.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assuming Dilution

 

 

894.9

 

 

890.8

 

 

 

 

895.0

 

 

892.4

 

 

Basic

 

 

889.4

 

 

886.3

 

 

 

 

888.7

 

 

887.9

 

 

______________________________

* Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

 

 

 

 

 

 

 

 

At

 

At

June 30,

December 31,

(Dollars in Millions)

 

2020

 

2019

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,041

 

$

8,172

Restricted cash

 

 

147

 

 

141

Marketable securities

 

 

2,063

 

 

696

Notes and accounts receivable - trade, net

 

 

6,543

 

 

7,870

Short-term financing receivables, net

 

 

11,967

 

 

14,192

Other accounts receivable, net

 

 

937

 

 

1,733

Inventories

 

 

1,869

 

 

1,619

Deferred costs

 

 

2,127

 

 

1,896

Prepaid expenses and other current assets

 

 

2,260

 

 

2,101

Total Current Assets

 

 

39,953

 

 

38,420

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

9,709

 

 

10,010

Operating right-of-use assets, net

 

 

4,774

 

 

4,996

Long-term financing receivables, net

 

 

7,351

 

 

8,712

Prepaid pension assets

 

 

7,254

 

 

6,865

Deferred costs

 

 

2,445

 

 

2,472

Deferred taxes

 

 

8,689

 

 

5,182

Goodwill

 

 

57,833

 

 

58,222

Intangibles, net

 

 

14,270

 

 

15,235

Investments and sundry assets

 

 

1,921

 

 

2,074

Total Assets

 

$

154,200

 

$

152,186

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Taxes

 

$

2,627

 

$

2,839

Short-term debt

 

 

9,289

 

 

8,797

Accounts payable

 

 

4,719

 

 

4,896

Deferred income

 

 

12,469

 

 

12,026

Operating lease liabilities

 

 

1,343

 

 

1,380

Other liabilities

 

 

7,995

 

 

7,763

Total Current Liabilities

 

 

38,442

 

 

37,701

 

 

 

 

 

 

 

Long-term debt

 

 

55,449

 

 

54,102

Retirement related obligations

 

 

16,483

 

 

17,142

Deferred income

 

 

3,787

 

 

3,851

Operating lease liabilities

 

 

3,684

 

 

3,879

Other liabilities

 

 

15,666

 

 

14,526

Total Liabilities

 

 

133,512

 

 

131,202

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

IBM Stockholders’ Equity:

 

 

 

 

 

 

Common stock

 

 

56,135

 

 

55,895

Retained earnings

 

 

162,559

 

 

162,954

Treasury stock — at cost

 

 

(169,386)

 

 

(169,413)

Accumulated other comprehensive income/(loss)

 

 

(28,757)

 

 

(28,597)

Total IBM Stockholders’ Equity

 

 

20,551

 

 

20,841

 

 

 

 

 

 

 

Noncontrolling interests

 

 

137

 

 

144

Total Equity

 

 

20,688

 

 

20,985

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

154,200

 

$

152,186

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

Trailing Twelve Months

 

 

June 30,

 

June 30,

 

Ended June 30,

(Dollars in Millions)

 

2020

 

2019

 

2020

 

2019

 

2020

Net Cash Provided by Operating Activities per GAAP:

 

$

3,576

 

$

2,941

 

$

8,052

 

$

7,700

 

$

15,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: change in Global Financing (GF) Receivables

 

 

589

 

 

119

 

 

2,971

 

 

2,577

 

 

885

Capital Expenditures, Net

 

 

(697)

 

 

(431)

 

 

(1,434)

 

 

(1,045)

 

 

(2,759)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

2,290

 

 

2,391

 

 

3,647

 

 

4,078

 

 

11,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

(6)

 

 

(42)

 

 

(19)

 

 

(43)

 

 

(32,607)

Divestitures

 

 

731

 

 

855

 

 

757

 

 

888

 

 

945

Dividends

 

 

(1,450)

 

 

(1,435)

 

 

(2,890)

 

 

(2,833)

 

 

(5,764)

Share Repurchase

 

 

 

 

(316)

 

 

 

 

(1,236)

 

 

(126)

Non-GF Debt

 

 

455

 

 

27,509

 

 

3,958

 

 

33,399

 

 

(6,649)

Other (includes GF Net Receivables and GF Debt)

 

 

213

 

 

(698)

 

 

(213)

 

 

(68)

 

 

564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

2,233

 

$

28,264

 

$

5,241

 

$

34,186

 

$

(32,158)

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

(Dollars in Millions)

 

2020

 

2019

 

2020

 

2019

Net Income from Operations

 

$

1,361

 

$

2,498

 

$

2,536

 

$

4,089

Depreciation/Amortization of Intangibles

 

 

1,678

 

 

1,294

 

 

3,313

 

 

2,740

Stock-based Compensation

 

 

247

 

 

135

 

 

436

 

 

248

Working Capital / Other

 

 

(300)

 

 

(1,106)

 

 

(1,204)

 

 

(1,954)

Global Financing A/R

 

 

589

 

 

119

 

 

2,971

 

 

2,577

Net Cash Provided by Operating Activities

 

$

3,576

 

$

2,941

 

$

8,052

 

$

7,700

Capital Expenditures, net of payments & proceeds

 

 

(697)

 

 

(431)

 

 

(1,434)

 

 

(1,045)

Divestitures, net of cash transferred

 

 

731

 

 

855

 

 

757

 

 

888

Acquisitions, net of cash acquired

 

 

(6)

 

 

(42)

 

 

(19)

 

 

(43)

Marketable Securities / Other Investments, net

 

 

(1,264)

 

 

3,779

 

 

(1,442)

 

 

3,509

Net Cash Provided by / (Used in) Investing Activities

 

$

(1,236)

 

$

4,162

 

$

(2,138)

 

$

3,309

Debt, net of payments & proceeds

 

 

(38)

 

 

22,841

 

 

1,319

 

 

27,073

Dividends

 

 

(1,450)

 

 

(1,435)

 

 

(2,890)

 

 

(2,833)

Common Stock Repurchases

 

 

 

 

(316)

 

 

 

 

(1,236)

Common Stock Transactions – Other

 

 

(137)

 

 

(59)

 

 

(168)

 

 

(111)

Net Cash Provided by / (Used in) Financing Activities

 

$

(1,624)

 

$

21,031

 

$

(1,739)

 

$

22,894

Effect of Exchange Rate changes on Cash

 

 

101

 

 

129

 

 

(301)

 

 

27

Net Change in Cash, Cash Equivalents and Restricted Cash

 

$

817

 

$

28,263

 

$

3,874

 

$

33,930

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

Cloud &

 

Global

 

Global

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Technology

 

 

 

 

Global

 

(Dollars in Millions)

 

Software

 

Services

 

Services

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

5,748

 

$

3,890

 

$

6,316

 

$

1,852

 

$

265

 

Internal

 

 

743

 

 

55

 

 

304

 

 

240

 

 

241

 

Total Segment Revenue

 

$

6,491

 

$

3,945

 

$

6,621

 

$

2,092

 

$

506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income / (Loss) from Continuing Operations

 

 

1,708

 

 

362

 

 

250

 

 

248

 

 

176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Margin

 

 

26.3

%

 

9.2

%

 

3.8

%

 

11.8

%

 

34.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change YTY Revenue – External

 

 

3.3

%

 

(7.3)

%

 

(7.6)

%

 

5.7

%

 

(24.5)

%

Change YTY Revenue - External @constant currency

 

 

4.6

%

 

(6.0)

%

 

(5.4)

%

 

6.3

%

 

(22.7)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

Cloud &

 

Global

 

Global

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Technology

 

 

 

 

Global

 

(Dollars in Millions)

 

Software*

 

Services*

 

Services

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

5,563

 

$

4,197

 

$

6,837

 

$

1,753

 

$

351

 

Internal

 

 

607

 

 

69

 

 

302

 

 

171

 

 

281

 

Total Segment Revenue

 

$

6,170

 

$

4,266

 

$

7,139

 

$

1,924

 

$

632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income / (Loss) from Continuing Operations

 

 

2,007

 

 

290

 

 

235

 

 

61

 

 

239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Margin

 

 

32.5

%

 

6.8

%

 

3.3

%

 

3.2

%

 

37.8

%

______________________________

* Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2020

 

 

 

Cloud &

 

Global

 

Global

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Technology

 

 

 

 

Global

 

(Dollars in Millions)

 

Software

 

Services

 

Services

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

10,987

 

$

8,027

 

$

12,783

 

$

3,220

 

$

564

 

Internal

 

 

1,556

 

 

101

 

 

599

 

 

388

 

 

453

 

Total Segment Revenue

 

$

12,543

 

$

8,128

 

$

13,382

 

$

3,608

 

$

1,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income / (Loss) from Continuing Operations

 

 

2,641

 

 

633

 

 

72

 

 

31

 

 

370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Margin

 

 

21.1

%

 

7.8

%

 

0.5

%

 

0.9

%

 

36.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change YTY Revenue – External

 

 

4.3

%

 

(3.9)

%

 

(6.8)

%

 

4.5

%

 

(25.4)

%

Change YTY Revenue - External @constant currency

 

 

5.6

%

 

(2.6)

%

 

(4.7)

%

 

5.4

%

 

(23.9)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

Cloud &

 

Global

 

Global

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Technology

 

 

 

 

Global

 

(Dollars in Millions)

 

Software*

 

Services*

 

Services

 

Systems

 

Financing

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External

 

$

10,530

 

$

8,353

 

$

13,711

 

$

3,081

 

$

757

 

Internal

 

 

1,448

 

 

143

 

 

591

 

 

334

 

 

581

 

Total Segment Revenue

 

$

11,978

 

$

8,495

 

$

14,303

 

$

3,415

 

$

1,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income / (Loss) from Continuing Operations

 

 

3,792

 

 

587

 

 

510

 

 

(141)

 

 

527

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Margin

 

 

31.7

%

 

6.9

%

 

3.6

%

 

(4.1)

%

 

39.4

%

______________________________

* Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

Continuing Operations

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax

 

 

 

 

 

 

 

 

 

Related

 

Related

 

Reform

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

Impacts

 

(Non-GAAP)

 

Gross Profit

 

$

8,700

 

$

187

 

$

 

$

 

$

8,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

48.0

%

 

1.0

Pts

 

 

 

 

 

49.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

 

5,248

 

 

(285)

 

 

 

 

 

 

4,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

 

1,582

 

 

 

 

 

 

 

 

1,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Income) & Expense

 

 

179

 

 

(1)

 

 

(273)

 

 

 

 

(95)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

323

 

 

 

 

 

 

 

 

323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expense & Other (Income)

 

 

7,129

 

 

(286)

 

 

(273)

 

 

 

 

6,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

 

1,571

 

 

473

 

 

273

 

 

 

 

2,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income Margin from Continuing Operations

 

 

8.7

%

 

2.6

Pts

 

1.5

Pts

 

 

 

12.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

209

 

 

108

 

 

52

 

 

 

 

369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

13.3

%

 

1.9

Pts

 

0.7

Pts

 

 

 

15.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

 

1,362

 

 

365

 

 

222

 

 

 

 

1,949

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

 

7.5

%

 

2.0

Pts

 

1.2

Pts

 

 

 

10.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings / (Loss) Per Share: Continuing Operations

 

$

1.52

 

$

0.41

 

$

0.25

 

$

 

$

2.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

Continuing Operations

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax

 

 

 

 

 

 

 

 

 

Related

 

Related

 

Reform

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

Impacts

 

(Non-GAAP)

 

Gross Profit

 

$

9,010

 

$

73

 

$

 

$

 

$

9,083

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

47.0

%

 

0.4

Pts

 

 

 

 

 

47.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

 

5,456

 

 

(149)

 

 

 

 

 

 

5,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

 

1,407

 

 

 

 

 

 

 

 

1,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Income) & Expense

 

 

(747)

 

 

119

 

 

(136)

 

 

 

 

(764)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

348

 

 

(168)

 

 

 

 

 

 

180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expense & Other (Income)

 

 

6,242

 

 

(198)

 

 

(136)

 

 

 

 

5,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

 

2,768

 

 

272

 

 

136

 

 

 

 

3,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income Margin from Continuing Operations

 

 

14.4

%

 

1.4

Pts

 

0.7

Pts

 

 

 

16.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

269

 

 

55

 

 

40

 

 

(14)

 

 

349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

9.7

%

 

0.9

Pts

 

0.8

Pts

 

(0.4)

Pts

 

11.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

 

2,499

 

 

217

 

 

97

 

 

14

 

 

2,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

 

13.0

%

 

1.1

Pts

 

0.5

Pts

 

0.1

Pts

 

14.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings / (Loss) Per Share: Continuing Operations

 

$

2.81

 

$

0.24

 

$

0.11

 

$

0.01

 

$

3.17

 

______________________________

*

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.

**

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.

***

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, 2020

 

 

 

Continuing Operations

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax

 

 

 

 

 

 

 

 

 

Related

 

Related

 

Reform

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

Impacts

 

(Non-GAAP)

 

Gross Profit

 

$

16,622

 

$

375

 

$

 

$

 

$

16,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

46.6

%

 

1.1

Pts

 

 

 

 

 

47.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

 

11,203

 

 

(570)

 

 

 

 

 

 

10,633

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

 

3,207

 

 

 

 

 

 

 

 

3,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Income) & Expense

 

 

361

 

 

(1)

 

 

(538)

 

 

 

 

(178)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

649

 

 

 

 

 

 

 

 

649

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expense & Other (Income)

 

 

15,101

 

 

(571)

 

 

(538)

 

 

 

 

13,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

 

1,522

 

 

946

 

 

538

 

 

 

 

3,006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income Margin from Continuing Operations

 

 

4.3

%

 

2.7

Pts

 

1.5

Pts

 

 

 

8.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(1,017)

 

 

210

 

 

65

 

 

149

 

 

(592)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

(66.8)

%

 

28.0

Pts

 

14.1

Pts

 

5.0

Pts

 

(19.7)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

 

2,538

 

 

736

 

 

472

 

 

(149)

 

 

3,598

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

 

7.1

%

 

2.1

Pts

 

1.3

Pts

 

(0.4)

Pts

 

10.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings / (Loss) Per Share: Continuing Operations

 

$

2.83

 

$

0.83

 

$

0.53

 

$

(0.17)

 

$

4.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

Continuing Operations

 

 

 

 

 

 

Acquisition-

 

Retirement-

 

Tax

 

 

 

 

 

 

 

 

 

Related

 

Related

 

Reform

 

Operating

 

 

 

GAAP

 

Adjustments*

 

Adjustments**

 

Impacts

 

(Non-GAAP)

 

Gross Profit

 

$

17,053

 

$

149

 

$

 

$

 

$

17,202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Margin

 

 

45.7

%

 

0.4

Pts

 

 

 

 

 

46.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

 

10,147

 

 

(273)

 

 

 

 

 

 

9,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

 

2,840

 

 

 

 

 

 

 

 

2,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Income) & Expense

 

 

(820)

 

 

142

 

 

(274)

 

 

 

 

(951)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

558

 

 

(204)

 

 

 

 

 

 

354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expense & Other (Income)

 

 

12,402

 

 

(335)

 

 

(274)

 

 

 

 

11,793

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income from Continuing Operations

 

 

4,651

 

 

484

 

 

274

 

 

 

 

5,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Income Margin from Continuing Operations

 

 

12.5

%

 

1.3

Pts

 

0.7

Pts

 

 

 

14.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

558

 

 

104

 

 

66

 

 

(155)

 

 

574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

12.0

%

 

0.8

Pts

 

0.6

Pts

 

(2.9)

Pts

 

10.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

 

4,093

 

 

381

 

 

208

 

 

155

 

 

4,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Margin from Continuing Operations

 

 

11.0

%

 

1.0

Pts

 

0.6

Pts

 

0.4

Pts

 

13.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings / (Loss) Per Share: Continuing Operations

 

$

4.58

 

$

0.44

 

$

0.23

 

$

0.17

 

$

5.42

 

______________________________

*

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.

**

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.

***

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)

 

 

 

 

 

 

 

Trailing

 

 

 

Three Months Ended

 

 

Six Months Ended

 

Twelve Months Ended

 

 

 

June 30, 2020

 

 

June 30, 2020

 

June 30, 2020

 

 

 

Change YTY

 

 

Change YTY

 

Change YTY

 

Revenue Adjusting for Divested Businesses and Currency

 

Cloud

 

Total IBM

 

 

Total IBM

 

Cloud

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue as reported

 

 

30.1

%

 

(5.4)

%

 

 

(4.4)

%

 

20.2

%

Impact from divested businesses

 

 

2.4

Pts

 

2.0

Pts

 

 

2.0

Pts

 

1.8

Pts

Currency impact

 

 

1.8

Pts

 

1.6

Pts

 

 

1.6

Pts

 

1.3

Pts

Revenue adjusting for divested businesses and currency (non-GAAP)

 

 

34.3

%

 

(1.9)

%

 

 

(0.9)

%

 

23.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Change

 

Red Hat Revenue, Normalized for Historical Comparability

 

June 30, 2020

 

June 30, 2019

 

YTY

 

YTY @constant currency

 

 

 

 

 

 

 

 

 

 

 

 

 

Red Hat revenue as reported in IBM consolidated results (1)

 

$

867

 

$

 

 

 

 

 

Add: Red Hat revenue prior to acquisition (2)

 

 

 

 

936

 

 

 

 

 

Add: Purchase accounting deferred revenue and intercompany adjustments (3)

 

 

227

 

 

 

 

 

 

 

Red Hat revenue, normalized for historical comparability (non-GAAP)

 

$

1,094

 

$

936

 

17

%

18

%

(1) Represents GAAP revenue as reported by IBM, which is included in the Cloud & Cognitive Software segment.
(2) Revenue for the three months ended June 30, 2019 represents pre-acquisition Red Hat standalone revenue and is included for comparative purposes.
(3) Represents the second-quarter 2020 impact of the deferred revenue purchase accounting adjustment and adjustments to add back revenue which was eliminated for sales between Red Hat and IBM. This line represents revenue that would have been recognized by Red Hat under GAAP if the acquisition had not occurred, but was not recognized by IBM due to purchase accounting and intercompany adjustments.

IBM
Edward Barbini, 914-499-6565
barbini@us.ibm.com

John Bukovinsky, 732-618-3531
jbuko@us.ibm.com

Source: IBM