IBM
$128.48
IBM
($1.18)
(.91%)
Earnings Details
1st Quarter March 2022
Tuesday, April 19, 2022 4:08:00 PM
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Summary

IBM Reports In-line

IBM (IBM) reported 1st Quarter March 2022 earnings of $1.40 per share on revenue of $14.2 billion. The consensus earnings estimate was $1.34 per share on revenue of $13.9 billion. The Earnings Whisper number was $1.40 per share. Revenue fell 19.9% compared to the same quarter a year ago.

The company said it expects 2022 revenue of approximately $62.5 billion. The current consensus revenue estimate is $60.7 billion for the year ending December 31, 2022.

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
$1.40
Earnings Whisper
$1.40
Consensus Estimate
$1.34
Reported Revenue
$14.20 Bil
Revenue Estimate
$13.87 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IBM RELEASES FIRST QUARTER RESULTS

Double-Digit Software and Consulting Growth Led by Hybrid Cloud Adoption; Strong Profit Generation

ARMONK, N.Y., April 19, 2022 /PRNewswire/ -- IBM (NYSE: IBM) today announced first-quarter 2022 earnings results.

"Demand for hybrid cloud and AI drove growth in both Software and Consulting in the first quarter. Today we're a more focused business and our results reflect the execution of our strategy," said Arvind Krishna, IBM chairman and chief executive officer. "We are off to a solid start for the year, and we now see revenue growth for 2022 at the high end of our model."

First-Quarter Highlights

  • Revenue
    - Revenue of $14.2 billion, up 8 percent, up 11 percent at constant currency (over 5 points from incremental sales to Kyndryl) 
    - Software revenue up 12 percent, up 15 percent at constant currency (over 8 points from incremental sales to Kyndryl)
    - Consulting revenue up 13 percent, up 17 percent at constant currency
    - Infrastructure revenue down 2 percent, flat at constant currency (over 8 points from incremental sales to Kyndryl)
    - Hybrid cloud revenue:
       -- First Quarter: $5.0 billion, up 14 percent, up 17 percent at constant currency
       -- Last 12 months: $20.8 billion, up 17 percent
  • Free Cash Flow
    - On a consolidated basis, net cash from operating activities of $3.2 billion; free cash flow of $1.2 billion





















FIRST QUARTER 2022 INCOME STATEMENT SUMMARY












Pre-tax 














Gross



Pre-tax 


Income 



Net 



Diluted 





Revenue



Profit



Income


Margin



Income



EPS


GAAP from
Continuing
Operations


$

14.2B


$

7.3B


$

0.6B


4.4

%

$

0.7B


$

0.73


    Year/Year



8

%*


4

%


156

%

2.5

Pts


64

%


62

%

Operating
(Non-GAAP)





$

7.5B


$

1.5B


10.7

%

$

1.3B


$

1.40


    Year/Year






4

%


46

%

2.8

Pts


25

%


25

%

* 11% at constant currency

"In the first quarter we continued to strengthen the fundamentals of our business, consistent with our medium-term model," said James Kavanaugh, IBM senior vice president and chief financial officer. "We are a faster growing, more profitable company with a higher-value business mix, a significant recurring revenue base and strong cash generation."

Segment Results for First Quarter

  • Software (includes Hybrid Platform & Solutions, Transaction Processing)— revenues of $5.8 billion, up 12.3 percent, up 15.4 percent at constant currency (over 8 points from incremental sales to Kyndryl):
    - Hybrid Platform & Solutions up 7 percent, up 10 percent at constant currency (about  1.5 points from incremental sales to Kyndryl):
       -- Red Hat up 18 percent, up 21 percent at constant currency
       -- Automation up 3 percent, up 5 percent at constant currency
       -- Data & AI up 2 percent, up 4 percent at constant currency
       -- Security up 5 percent, up 8 percent at constant currency
    - Transaction Processing up 26 percent, up 31 percent at constant currency (about 28 points from incremental sales to Kyndryl)
    - Software segment hybrid cloud revenue up 22 percent, up 25 percent at constant currency

  • Consulting (includes Business Transformation, Technology Consulting and Application Operations)—  revenues of $4.8 billion, up 13.3 percent, up 17.4 percent at constant currency:
    - Business Transformation up 15 percent, up 19 percent at constant currency
    - Technology Consulting up 14 percent, up 19 percent at constant currency
    - Application Operations up 10 percent, up 14 percent at constant currency
    - Consulting segment hybrid cloud revenue up 24 percent, up 29 percent at constant currency

  • Infrastructure (includes Hybrid Infrastructure, Infrastructure Support)—  revenues of $3.2 billion, down 2.3 percent, up 0.3 percent at constant currency (over 8 points from incremental sales to Kyndryl):
    - Hybrid Infrastructure down 5 percent, down 2 percent at constant currency (over 8 points from incremental sales to Kyndryl)
       -- IBM z Systems down 19 percent, down 18 percent at constant currency
       -- Distributed Infrastructure up 5 percent, up 8 percent at constant currency
    - Infrastructure Support flat, up 4 percent at constant currency (over 8 points from incremental sales to Kyndryl)
    - Infrastructure segment hybrid cloud revenue down 20 percent, down 18 percent at constant currency

  • Financing (includes client and commercial financing)— revenues of $0.2 billion, down 26.2 percent, down 24.5 percent at constant currency

Cash Flow and Balance Sheet
On a consolidated basis, in the first quarter, the company generated net cash from operating activities of $3.2 billion or $1.6 billion excluding IBM Financing receivables. IBM's free cash flow was $1.2 billion, which includes cash impacts from the company's structural actions initiated at the end of 2020.

IBM ended the first quarter with $10.8 billion of cash on hand (which includes marketable securities), up $3.2 billion from year-end 2021. Debt, including IBM Financing debt of $12.2 billion, totaled $54.2 billion, up $2.5 billion since the end of 2021. The company returned $1.5 billion to shareholders in dividends in the first quarter.

Full-Year 2022 Expectations

  • Revenue growth: The company now expects constant currency revenue growth at the high end of the mid-single digit range. The company also expects an additional 3.5 point contribution from incremental sales to Kyndryl. At mid-April 2022 foreign exchange rates, currency is expected to be a three to four point headwind.

  • Free Cash Flow: The company continues to expect $10 billion to $10.5 billion in consolidated 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
On November 3, 2021, IBM completed the separation of Kyndryl. Unless otherwise specified, results are presented on a continuing operations basis.

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. EDT, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-1q22. 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





March 31





2022


2021*



REVENUE









Software


$

5,772


$

5,138



Consulting



4,829



4,262



Infrastructure



3,219



3,293



Financing



154



208



Other



224



284



TOTAL REVENUE



14,197



13,187












GROSS PROFIT



7,335



7,027












GROSS PROFIT MARGIN









Software



78.8

%


77.8

%


Consulting



24.3

%


27.8

%


Infrastructure



50.5

%


56.3

%


Financing



37.7

%


35.5

%











TOTAL GROSS PROFIT MARGIN



51.7

%


53.3

%











EXPENSE AND OTHER INCOME









S,G&A



4,597



4,688



R,D&E



1,679



1,616



Intellectual property and custom development income



(121)



(146)



Other (income) and expense



246



346



Interest expense



311



280



TOTAL EXPENSE AND OTHER INCOME



6,712



6,784












INCOME/(LOSS) FROM CONTINUING OPERATIONS









BEFORE INCOME TAXES



623



244



Pre-tax margin



4.4

%


1.8

%


Provision for/(Benefit from) income taxes



(39)



(160)



Effective tax rate



(6.3)

%


(65.5)

%











INCOME FROM CONTINUING OPERATIONS


$

662


$

403












DISCONTINUED OPERATIONS









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



71



552












NET INCOME


$

733


$

955












EARNINGS/(LOSS) PER SHARE OF COMMON STOCK









Assuming Dilution









Continuing Operations


$

0.73


$

0.45



Discontinued Operations


$

0.08


$

0.61



TOTAL


$

0.81


$

1.06












Basic









Continuing Operations


$

0.74


$

0.45



Discontinued Operations


$

0.08


$

0.62



TOTAL


$

0.82


$

1.07












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









Assuming Dilution



909.2



901.7



Basic



899.3



893.6



____________________
* Recast to conform with 2022 presentation.


 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)




At


At



March 31


December 31

(Dollars in Millions)


2022


2021

ASSETS:







Current Assets:







Cash and cash equivalents


$

9,934


$

6,650

Restricted cash



286



307

Marketable securities



550



600

Notes and accounts receivable - trade, net



5,963



6,754

Short-term financing receivables, net



7,169



8,014

Other accounts receivable, net



1,003



1,002

Inventories



1,776



1,649

Deferred costs



1,103



1,097

Prepaid expenses and other current assets



3,548



3,466

Total Current Assets



31,330



29,539








Property, plant and equipment, net



5,559



5,694

Operating right-of-use assets, net



3,108



3,222

Long-term financing receivables, net



4,610



5,425

Prepaid pension assets



9,995



9,850

Deferred costs



916



924

Deferred taxes



7,567



7,370

Goodwill



56,106



55,643

Intangibles, net



12,312



12,511

Investments and sundry assets



1,771



1,823

Total Assets


$

133,275


$

132,001








LIABILITIES:







Current Liabilities:







Taxes


$

1,798


$

2,289

Short-term debt



7,690



6,787

Accounts payable



3,453



3,955

Deferred income



13,526



12,518

Operating lease liabilities



954



974

Other liabilities



6,635



7,097

Total Current Liabilities



34,056



33,619








Long-term debt



46,545



44,917

Retirement related obligations



13,937



14,435

Deferred income



3,423



3,577

Operating lease liabilities



2,358



2,462

Other liabilities



13,844



13,996

Total Liabilities



114,162



113,005








EQUITY:







IBM Stockholders' Equity:







Common stock



57,603



57,319

Retained earnings



153,401



154,209

Treasury stock — at cost



(169,422)



(169,392)

Accumulated other comprehensive income/(loss)



(22,532)



(23,234)

Total IBM Stockholders' Equity



19,050



18,901








Noncontrolling interests



62



95

Total Equity



19,112



18,996








Total Liabilities and Equity


$

133,275


$

132,001

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)










Three Months Ended



March 31

(Dollars in Millions)


2022


2021

Consolidated Net Cash from Operations per GAAP


$

3,248


$

4,914








Less: change in IBM Financing receivables



1,631



2,863

Capital Expenditures, net



(378)



(529)








Consolidated Free Cash Flow



1,240



1,522








Acquisitions



(698)



(1,120)

Divestitures



61



(15)

Dividends



(1,475)



(1,457)

Non-Financing Debt



4,675



(1,725)

Other (includes IBM Financing net receivables and debt)



(590)



(207)








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


$

3,213


$

(3,002)

____________________
* Cash flows are presented on a consolidated basis. 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)












Three Months Ended




March 31


(Dollars in Millions)


2022


2021


Net Income from Operations


$

733


$

955


Depreciation/Amortization of Intangibles



1,257



1,672


Stock-based Compensation



234



213


Working Capital / Other



(606)



(789)


IBM Financing A/R



1,631



2,863


Net Cash Provided by Operating Activities


$

3,248


$

4,914


Capital Expenditures, net of payments & proceeds



(378)



(529)


Divestitures, net of cash transferred



61



(15)


Acquisitions, net of cash acquired



(698)



(1,120)


Marketable Securities / Other Investments, net



(344)



(335)


Net Cash Provided by/(Used in) Investing Activities


$

(1,358)


$

(2,000)


Debt, net of payments & proceeds



2,948



(4,299)


Dividends



(1,475)



(1,457)


Financing - Other



(95)



(26)


Net Cash Provided by/(Used in) Financing Activities


$

1,377


$

(5,783)


Effect of Exchange Rate changes on Cash



(5)



(134)


Net Change in Cash, Cash Equivalents and Restricted Cash*


$

3,263


$

(3,002)


____________________
* Cash flows are presented on a consolidated basis. 


 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

















Three Months Ended March 31, 2022













(Dollars in Millions)


Software


Consulting


Infrastructure


Financing


Revenue


$

5,772


$

4,829


$

3,219


$

154


Pre-tax Income/(Loss) from Continuing Operations



1,134



348



199



84


Pre-tax Margin



19.7

%


7.2

%


6.2

%


54.6

%

Change YTY Revenue



12.3

%


13.3

%


(2.3)

%


(26.2)

%

Change YTY Revenue - constant currency



15.4

%


17.4

%


0.3

%


(24.5)

%

















Three Months Ended March 31, 2021*













(Dollars in Millions)


Software


Consulting


Infrastructure


Financing


Revenue


$

5,138


$

4,262


$

3,293


$

208


Pre-tax Income/(Loss) from Continuing Operations



658



277



292



98


Pre-tax Margin



12.8

%


6.5

%


8.9

%


47.0

%

____________________
* 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 March 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


$

7,335


$

181


$


$


$


$

7,516


Gross Profit Margin



51.7

%


1.3

pts. 


pts. 


pts. 


pts.


52.9

%

S,G&A


$

4,597


$

(286)


$


$


$

(0)


$

4,311


Other (Income) & Expense



246



(1)



(202)





(222)



(179)


Total Expense & Other (Income)



6,712



(287)



(202)





(222)



6,001


Pre-tax Income from Continuing
Operations



623



468



202





222



1,515


Pre-tax Income Margin from
Continuing Operations



4.4

%


3.3

pts. 


1.4

pts. 


pts. 


1.6

pts.


10.7

%

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


$

(39)


$

109


$

58


$

116


$


$

244


Effective Tax Rate



(6.3)

%


9.1

pts. 


4.6

pts. 


7.7

pts. 


0.9

pts.


16.1

%

Income from Continuing Operations


$

662


$

359


$

144


$

(116)


$

222


$

1,271


Income Margin from Continuing
Operations



4.7

%


2.5

pts. 


1.0

pts. 


(0.8)

pts. 


1.6

pts.


9.0

%

Diluted Earnings/(Loss) Per Share:
Continuing Operations


$

0.73


$

0.39


$

0.16


$

(0.13)


$

0.24


$

1.40












































Three Months Ended March 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


$

7,027


$

174


$


$


$


$

7,201


Gross Profit Margin



53.3

%


1.3

pts. 


pts. 


pts. 


pts.


54.6

%

S,G&A


$

4,688


$

(288)


$


$


$


$

4,399


Other (Income) & Expense



346



(1)



(332)







13


Total Expense & Other (Income)



6,784



(289)



(332)







6,162


Pre-tax Income/(Loss) from Continuing
Operations



244



463



332







1,039


Pre-tax Income Margin from
Continuing Operations



1.8

%


3.5

pts. 


2.5

pts. 


pts. 


pts.


7.9

%

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


$

(160)


$

132


$

33


$

19


$


$

25


Effective Tax Rate



(65.5)

%


41.9

pts. 


24.2

pts. 


1.8

pts. 


pts.


2.4

%

Income from Continuing Operations


$

403


$

330


$

299


$

(19)


$


$

1,013


Income Margin from Continuing
Operations



3.1

%


2.5

pts. 


2.3

pts. 


(0.1)

pts. 


pts.


7.7

%

Diluted Earnings/(Loss) Per Share:
Continuing Operations


$

0.45


$

0.37


$

0.33


$

(0.02)


$


$

1.12


____________________

(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.

(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