IBM RELEASES FOURTH-QUARTER RESULTS

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

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Jan 25, 2023

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

IBM Corporation logo. (PRNewsfoto/IBM)

“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)