IBM
$136.22
IBM
$.38
.28%
Earnings Details
Quarter December 2022
Wednesday, January 25, 2023 4:08:00 PM
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Summary

IBM Misses

IBM (IBM) reported Quarter December 2022 earnings of $3.60 per share on revenue of $16.7 billion. The consensus earnings estimate was $3.61 per share on revenue of $16.4 billion. The Earnings Whisper number was $3.64 per share. Revenue fell 0.0% 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
$3.60
Earnings Whisper
$3.64
Consensus Estimate
$3.61
Reported Revenue
$16.69 Bil
Revenue Estimate
$16.37 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IBM RELEASES FOURTH-QUARTER RESULTS

Revenue Growth in All Key Segments; Expanded Margins; Solid Cash Generation

ARMONK, N.Y., Jan. 25, 2023 /PRNewswire/ -- IBM (NYSE: IBM) today announced fourth-quarter 2022 earnings results.

"Our solid fourth-quarter performance capped a year in which we grew revenue above our mid-single digit model. Clients in all geographies increasingly embraced our hybrid cloud and AI solutions as technology remains a differentiating force in today's business environment," said Arvind Krishna, IBM chairman and chief executive officer. "Looking ahead to 2023, we expect full-year revenue growth consistent with our mid-single digit model."

Fourth-Quarter Highlights

  • Revenue of $16.7 billion, flat, up 6 percent at constant currency 
    - Software revenue up 3 percent, up 8 percent at constant currency
    - Consulting revenue up 0.5 percent, up 9 percent at constant currency
    - Infrastructure revenue up 2 percent, up 7 percent at constant currency

Full-Year Highlights

  • Revenue of $60.5 billion, up 6 percent, up 12 percent at constant currency (about 4 points from sales to Kyndryl)
    - Hybrid cloud revenue of $22.4 billion, up 11 percent, up 17 percent at constant currency

  • On a consolidated basis, net cash from operating activities of $10.4 billion; free cash flow of $9.3 billion

Full-Year 2023 Expectations

  • The company expects constant currency revenue growth consistent with its mid-single digit model and about $10.5 billion in consolidated free cash flow, up more than $1 billion year to year





















FOURTH QUARTER 2022 INCOME STATEMENT SUMMARY












Pre-tax






Diluted








Gross



Pre-tax


  Income



Net



Earnings





Revenue



Profit



Income


Margin



Income



Per Share


GAAP from
Continuing
Operations


$

16.7B


$

9.6B


$

3.3B


19.8

%

$

2.9B


$

3.13


    Year/Year



0

%*


1

%


15

%

2.7

Pts


17

%


15

%

Operating
(Non-GAAP)





$

9.8B


$

3.8B


22.9

%

$

3.3B


$

3.60


    Year/Year






1

%


8

%

1.7

Pts


9

%


7

%

* 6% at constant currency

"IBM's revenue growth and operating profit in 2022 demonstrate the strength and multiplier effect of our platform-centric approach to hybrid cloud and AI," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our client-focused portfolio and strong recurring revenue stream position IBM well for continued growth, solid cash generation and returning value to shareholders through dividends."

Segment Results for Fourth Quarter

  • Software (includes Hybrid Platform & Solutions, Transaction Processing)— revenues of $7.3 billion, up 2.8 percent, up 8.0 percent at constant currency:
    - Hybrid Platform & Solutions up 5 percent, up 10 percent at constant currency:
          -- Red Hat up 10 percent, up 15 percent at constant currency
          -- Automation up 4 percent, up 9 percent at constant currency
          -- Data & AI up 4 percent, up 8 percent at constant currency
          -- Security up 4 percent, up 10 percent at constant currency
    - Transaction Processing down 3 percent, up 3 percent at constant currency

  • Consulting (includes Business Transformation, Technology Consulting and Application Operations)— revenues of $4.8 billion, up 0.5 percent, up 9.3 percent at constant currency:
    - Business Transformation down 1 percent, up 7 percent at constant currency
    - Technology Consulting up 1 percent, up 10 percent at constant currency
    - Application Operations up 2 percent, up 12 percent at constant currency

  • Infrastructure (includes Hybrid Infrastructure, Infrastructure Support)— revenues of $4.5 billion, up 1.6 percent, up 7.4 percent at constant currency:
    - Hybrid Infrastructure up 6 percent, up 11 percent at constant currency:
          -- IBM z Systems up 16 percent, up 21 percent at constant currency
          -- Distributed Infrastructure flat, up 5 percent at constant currency
    - Infrastructure Support down 8 percent, flat at constant currency

  • Financing (includes client and commercial financing)— revenues of $0.2 billion, down 0.4 percent, up 3.9 percent at constant currency

Cash Flow and Balance Sheet
On a consolidated basis, in the fourth quarter, the company generated net cash from operating activities of $4.0 billion, up $1.4 billion. Net cash from operating activities excluding IBM Financing receivables was $5.8 billion, up $1.9 billion. IBM's free cash flow was $5.2 billion, up $1.9 billion. The company returned $1.5 billion to shareholders in dividends in the fourth quarter.

On a consolidated basis, for the full year, the company generated net cash from operating activities of $10.4 billion, down $2.4 billion. Net cash from operating activities excluding IBM Financing receivables was $11.2 billion, up $2.3 billion. IBM's free cash flow was $9.3 billion, up $2.8 billion. IBM returned $5.9 billion to shareholders in dividends.

IBM ended the fourth quarter with $8.8 billion of cash on hand (which includes marketable securities), up $1.3 billion from year-end 2021. Debt, including IBM Financing debt of $12.9 billion, totaled $50.9 billion, down $0.8 billion since the end of 2021.

Full-Year 2022 Results






















FULL-YEAR 2022 INCOME STATEMENT



GAAP results include impact of one-time, non-cash pension settlement charge*












Pre-tax 














Gross



Pre-tax 


Income 



Net 



Diluted 





Revenue



Profit



Income


Margin



Income



EPS


GAAP from
Continuing
Operations


$

60.5B


$

32.7B


$

1.2B

*

1.9

%* 

$

1.8B

*

$

1.95

*

    Year/Year



6

%**


4

%


(76)

%* 

(6.5)

Pts*


(62)

%*


(63)

%*




















Operating
(Non-GAAP)





$

33.4B


$

9.8B


16.2

%

$

8.3B


$

9.13


    Year/Year






4

%


25

%

2.5

Pts


16

%


15

%

* GAAP results include the impact of a one-time, non-cash pension settlement charge in the third quarter of $5.9 billion ($4.4 billion net of tax) 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.

** 12% at constant currency

Full-Year 2023 Expectations

  • Revenue Growth: The company expects constant currency revenue growth consistent with its mid-single digit model. At current foreign exchange rates, currency is expected to be neutral to a one-point tailwind to revenue growth.

  • Free Cash Flow: The company expects about $10.5 billion in consolidated 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
On November 3, 2021, IBM completed the separation of Kyndryl. Unless otherwise specified, results are presented on a continuing operations basis. The reference in Full-Year Highlights to the revenue impacts from sales to Kyndryl are incremental sales post-separation, year to date through October.

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;
  • consolidated free cash flow;
  • consolidated 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. EST, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-4q22. 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





2022


2021*




2022** 


2021*



REVENUE BY SEGMENT

















Software


$

7,288


$

7,087




$

25,037


$

23,426



Consulting



4,770



4,746





19,107



17,844



Infrastructure



4,483



4,414





15,288



14,188



Financing



172



172





645



774



Other



(22)



275





453



1,119



TOTAL REVENUE



16,690



16,695





60,530



57,350




















GROSS PROFIT



9,632



9,500





32,687



31,486




















GROSS PROFIT MARGIN

















Software



81.2

%


81.6

%




79.6

%


79.6

%


Consulting



27.4

%


27.0

%




25.5

%


28.0

%


Infrastructure



54.9

%


54.8

%




52.8

%


55.3

%


Financing



47.1

%


32.5

%




38.3

%


31.7

%



















TOTAL GROSS PROFIT MARGIN



57.7

%


56.9

%




54.0

%


54.9

%



















EXPENSE AND OTHER INCOME

















S,G&A



4,765



4,903





18,609



18,745



R,D&E



1,604



1,625





6,567



6,488



Intellectual property and custom development income



(245)



(181)





(663)



(612)



Other (income) and expense



(118)



(18)





5,803



873



Interest expense



313



303





1,216



1,155



TOTAL EXPENSE AND OTHER INCOME



6,320



6,632





31,531



26,649




















INCOME FROM CONTINUING OPERATIONS

















BEFORE INCOME TAXES



3,312



2,869





1,156



4,837



Pre-tax margin



19.8

%


17.2

%




1.9

%


8.4

%


Provision for/(Benefit from) income taxes



443



407





(626)



124



Effective tax rate



13.4

%


14.2

%




(54.2)

%


2.6

%



















INCOME FROM CONTINUING OPERATIONS


$

2,869


$

2,462




$

1,783


$

4,712




















DISCONTINUED OPERATIONS

















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



(159)



(129)





(143)



1,030




















NET INCOME


$

2,711


$

2,332




$

1,639


$

5,743




















EARNINGS PER SHARE OF COMMON STOCK

















Assuming Dilution

















Continuing Operations


$

3.13


$

2.72




$

1.95


$

5.21



Discontinued Operations


$

(0.17)


$

(0.14)




$

(0.16)


$

1.14



TOTAL


$

2.96


$

2.57




$

1.80


$

6.35




















Basic

















Continuing Operations


$

3.17


$

2.74




$

1.97


$

5.26



Discontinued Operations


$

(0.18)


$

(0.14)




$

(0.16)


$

1.15



TOTAL


$

2.99


$

2.60




$

1.82


$

6.41




















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

















Assuming Dilution



915.9



906.6





912.3



904.6



Basic



905.8



898.2





902.7



896.0



____________________

*   Recast to conform with 2022 presentation.

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

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)




At


At



December 31


December 31

(Dollars in Millions)


2022


2021

ASSETS:







Current Assets:







Cash and cash equivalents


$

7,886


$

6,650

Restricted cash



103



307

Marketable securities



852



600

Notes and accounts receivable - trade, net



6,541



6,754

Short-term financing receivables, net



7,790



8,014

Other accounts receivable, net



817



1,002

Inventories



1,552



1,649

Deferred costs



967



1,097

Prepaid expenses and other current assets



2,611



3,466

Total Current Assets



29,118



29,539








Property, plant and equipment, net



5,334



5,694

Operating right-of-use assets, net



2,878



3,222

Long-term financing receivables, net



5,806



5,425

Prepaid pension assets



8,236



9,850

Deferred costs



866



924

Deferred taxes



6,256



7,370

Goodwill



55,949



55,643

Intangibles, net



11,184



12,511

Investments and sundry assets



1,617



1,823

Total Assets


$

127,243


$

132,001








LIABILITIES:







Current Liabilities:







Taxes


$

2,196


$

2,289

Short-term debt



4,760



6,787

Accounts payable



4,051



3,955

Deferred income



12,032



12,518

Operating lease liabilities



874



974

Other liabilities



7,592



7,097

Total Current Liabilities



31,505



33,619








Long-term debt



46,189



44,917

Retirement related obligations



9,596



14,435

Deferred income



3,499



3,577

Operating lease liabilities



2,190



2,462

Other liabilities



12,243



13,996

Total Liabilities



105,222



113,005








EQUITY:







IBM Stockholders' Equity:







Common stock



58,343



57,319

Retained earnings



149,825



154,209

Treasury stock — at cost



(169,484)



(169,392)

Accumulated other comprehensive income/(loss)



(16,740)



(23,234)

Total IBM Stockholders' Equity



21,944



18,901








Noncontrolling interests



77



95

Total Equity



22,021



18,996








Total Liabilities and Equity


$

127,243


$

132,001

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)









Three Months Ended


Year Ended



December 31


December 31

(Dollars in Millions)


2022


2021


2022


2021

Consolidated Net Cash from Operations per GAAP


$

3,965


$

2,543


$

10,435


$

12,796














Less: change in IBM Financing receivables



(1,788)



(1,328)



(717)



3,907

Capital Expenditures, net



(544)



(526)



(1,860)



(2,381)














Consolidated Free Cash Flow



5,209



3,345



9,291



6,508














Acquisitions



(1,329)



(275)



(2,348)



(3,293)

Divestitures



1



88



1,272



114

Dividends



(1,494)



(1,474)



(5,948)



(5,869)

Non-Financing Debt



(2,777)



(20)



1,909



(1,191)

Other (includes IBM Financing net receivables and debt)



(498)



(2,514)



(2,893)



(2,987)














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


$

(888)


$

(850)


$

1,283


$

(6,718)

____________________

* Cash flows are presented on a consolidated basis. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)




Three Months Ended


Year Ended



December 31


December 31

(Dollars in Millions)


2022


2021


2022


2021

Net Income from Operations


$

2,711


$

2,332


$

1,639


$

5,743

Pension Settlement Charge



-



-



5,894



-

Depreciation/Amortization of Intangibles



1,137



1,380



4,802



6,416

Stock-based Compensation



248



264



987



982

Working Capital / Other



1,657



(105)



(2,170)



(4,253)

IBM Financing A/R



(1,788)



(1,328)



(717)



3,907

Net Cash Provided by Operating Activities


$

3,965


$

2,543


$

10,435


$

12,796














Capital Expenditures, net of payments & proceeds



(544)



(526)



(1,860)



(2,381)

Divestitures, net of cash transferred



1



88



1,272



114

Acquisitions, net of cash acquired



(1,329)



(275)



(2,348)



(3,293)

Marketable Securities / Other Investments, net



553



38



(1,265)



(414)

Net Cash Provided by/(Used in) Investing Activities


$

(1,318)


$

(675)


$

(4,202)


$

(5,975)














Debt, net of payments & proceeds



(1,350)



(2,030)



1,221



(8,116)

Dividends



(1,494)



(1,474)



(5,948)



(5,869)

Financing - Other



(8)



811



(231)



630

Net Cash Provided by/(Used in) Financing Activities


$

(2,852)


$

(2,692)


$

(4,958)


$

(13,354)














Effect of Exchange Rate changes on Cash



219



(26)



(244)



(185)

Net Change in Cash, Cash Equivalents and Restricted Cash*


$

13


$

(850)


$

1,032


$

(6,718)

____________________

* Cash flows are presented on a consolidated basis. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)




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

%

Change YTY Revenue



2.8

%


0.5

%


1.6

%


(0.4)

%

Change YTY Revenue - constant currency



8.0

%


9.3

%


7.4

%


3.9

%

















Three Months Ended December 31, 2021













(Dollars in Millions)


  Software *


Consulting


Infrastructure


Financing


Revenue


$

7,087


$

4,746


$

4,414


$

172


Pre-tax Income from Continuing Operations


$

2,142


$

436


$

1,036


$

79


Pre-tax Margin



30.2

%


9.2

%


23.5

%


46.0

%

____________________

* Recast to conform with 2022 presentation. 

















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

%

Change YTY Revenue



6.9

%


7.1

%


7.8

%


(16.6)

%

Change YTY Revenue - constant currency



11.9

%


14.9

%


13.5

%


(13.0)

%

















Year Ended December 31, 2021













(Dollars in Millions)


  Software *


Consulting


Infrastructure


Financing


Revenue


$

23,426


$

17,844


$

14,188


$

774


Pre-tax Income from Continuing Operations


$

4,849


$

1,449


$

2,025


$

441


Pre-tax Margin



20.7

%


8.1

%


14.3

%


57.0

%

____________________

* Recast to conform with 2022 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 December 31, 2022




Continuing Operations







Acquisition-


Retirement-


Tax


Kyndryl-










Related


Related


Reform


Related


Operating




GAAP


Adjustments (1)


Adjustments (2)


Impacts


Impacts (3)


(Non-GAAP)


Gross Profit


$

9,632


$

156


$


$


$


$

9,788


Gross Profit Margin



57.7

%


0.9

pts. 


pts. 


pts. 


pts.


58.6

%

S,G&A


$

4,765


$

(262)


$


$


$

(0)


$

4,503


Other (Income) & Expense



(118)



(1)



(93)





2



(210)


Total Expense & Other (Income)



6,320



(263)



(93)





2



5,965


Pre-tax Income from Continuing
Operations



3,312



419



93





(2)



3,823


Pre-tax Income Margin from
Continuing Operations



19.8

%


2.5

pts. 


0.6

pts. 


pts. 


(0.0)

pts.


22.9

%

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


$

443


$

109


$

16


$

(42)


$


$

526


Effective Tax Rate



13.4

%


1.4

pts. 


0.1

pts. 


(1.1)

pts. 


0.0

pts.


13.8

%

Income from Continuing Operations


$

2,869


$

310


$

77


$

42


$

(2)


$

3,296


Income Margin from Continuing
Operations



17.2

%


1.9

pts. 


0.5

pts. 


0.3

pts. 


(0.0)

pts.


19.8

%

Diluted Earnings Per Share:Continuing
Operations


$

3.13


$

0.34


$

0.08


$

0.05


$

(0.00)


$

3.60
























Three Months Ended December 31, 2021




Continuing Operations







Acquisition-


Retirement-


Tax


Kyndryl-










Related


Related


Reform


Related


Operating




GAAP


Adjustments (1)


Adjustments (2)


Impacts


Impacts (3)


(Non-GAAP)


Gross Profit


$

9,500


$

182


$


$


$


$

9,682


Gross Profit Margin



56.9

%


1.1

pts. 


pts. 


pts. 


pts.


58.0

%

S,G&A


$

4,903


$

(290)


$


$


$

(8)


$

4,605


Other (Income) & Expense



(18)



(1)



(315)





126



(208)


Total Expense & Other (Income)



6,632



(290)



(315)





118



6,145


Pre-tax Income from Continuing
Operations



2,869



472



315





(118)



3,537


Pre-tax Income Margin from
Continuing Operations



17.2

%


2.8

pts. 


1.9

pts. 


pts. 


(0.7)

pts.


21.2

%

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


$

407


$

117


$

109


$

(94)


$

(37)


$

502


Effective Tax Rate



14.2

%


1.4

pts. 


1.8

pts. 


(2.7)

pts. 


(0.6)

pts.


14.2

%

Income from Continuing Operations


$

2,462


$

355


$

206


$

94


$

(81)


$

3,035


Income Margin from Continuing
Operations



14.7

%


2.1

pts. 


1.2

pts. 


0.6

pts. 


(0.5)

pts.


18.2

%

Diluted Earnings Per Share: Continuing
Operations


$

2.72


$

0.39


$

0.23


$

0.10


$

(0.09)


$

3.35


____________________

(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 the realized gain/(loss) and unrealized fair value changes in Kyndryl common stock and the related 2022 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, 2022




Continuing Operations







Acquisition-


Retirement-


Tax


Kyndryl-










Related


Related


Reform


Related


Operating




GAAP


Adjustments (1)


Adjustments* (2)


Impacts


Impacts (3)


(Non-GAAP)


Gross Profit


$

32,687


$

682


$


$


$


$

33,370


Gross Profit Margin



54.0

%


1.1

pts. 


pts. 


pts. 


pts. 


55.1

%

S,G&A


$

18,609


$

(1,080)


$


$


$

(0)


$

17,529


Other (Income) & Expense



5,803



(3)



(6,548)





(351)



(1,099)


Total Expense & Other (Income)



31,531



(1,083)



(6,548)





(351)



23,549


Pre-tax Income from Continuing
Operations



1,156



1,765



6,548





351



9,821


Pre-tax Income Margin from
Continuing Operations



1.9

%


2.9

pts. 


10.8

pts. 


pts. 


0.6

pts. 


16.2

%

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


$

(626)


$

436


$

1,615


$

70


$


$

1,495


Effective Tax Rate



(54.2)

%


14.2

pts. 


52.6

pts. 


0.7

pts. 


1.9

pts. 


15.2

%

Income from Continuing Operations


$

1,783


$

1,329


$

4,933


$

(70)


$

351


$

8,326


Income Margin from Continuing
Operations



2.9

%


2.2

pts. 


8.1

pts. 


(0.1)

pts. 


0.6

pts. 


13.8

%

Diluted Earnings Per Share: Continuing
Operations


$

1.95


$

1.46


$

5.41


$

(0.08)


$

0.38


$

9.13


____________________

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























Year Ended December 31, 2021




Continuing Operations







Acquisition-


Retirement-


Tax


Kyndryl-










Related


Related


Reform


Related


Operating




GAAP


Adjustments (1)


Adjustments (2)


Impacts


Impacts (3)


(Non-GAAP)


Gross Profit


$

31,486


$

719


$


$


$


$

32,205


Gross Profit Margin



54.9

%


1.3

pts. 


pts. 


pts. 


pts. 


56.2

%

S,G&A


$

18,745


$

(1,160)


$


$


$

(8)


$

17,577


Other (Income) & Expense



873



(2)



(1,282)





126



(285)


Total Expense & Other (Income)



26,649



(1,162)



(1,282)





118



24,324


Pre-tax Income from Continuing
Operations



4,837



1,881



1,282





(118)



7,881


Pre-tax Income Margin from
Continuing Operations



8.4

%


3.3

pts. 


2.2

pts. 


pts. 


(0.2)

pts. 


13.7

%

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


$

124


$

457


$

251


$

(89)


$

(37)


$

706


Effective Tax Rate



2.6

%


5.2

pts. 


2.8

pts. 


(1.1)

pts. 


(0.4)

pts. 


9.0

%

Income from Continuing Operations


$

4,712


$

1,424


$

1,031


$

89


$

(81)


$

7,174


Income Margin from Continuing
Operations



8.2

%


2.5

pts. 


1.8

pts. 


0.2

pts. 


(0.1)

pts. 


12.5

%

Diluted Earnings Per Share: Continuing
Operations


$

5.21


$

1.57


$

1.14


$

0.10


$

(0.09)


$

7.93


____________________

(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 the realized gain/(loss) and unrealized fair value changes in Kyndryl common stock and the related 2022 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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SOURCE IBM