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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
International Business Machines Corporation | LSE:IBM | London | Ordinary Share | COM STK USD0.20 (CDI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 118.95 | 25,462 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Computer Communication Equip | 61.86B | 7.5B | 8.1833 | 20.43 | 153.24B |
TIDMIBM
IBM (NYSE: IBM) today announced third-quarter 2021 earnings results.
"With the separation of Kyndryl early next month, IBM takes the next step in our evolution as a platform-centric hybrid cloud and AI company, " said Arvind Krishna, IBM chairman and chief executive officer. "We continue to make progress in our software and consulting businesses, which represent our higher growth opportunities. With our increased focus and agility to better serve clients, we are confident in achieving our medium-term objectives of mid-single digit revenue growth and strong free cash flow generation."
THIRD QUARTER 2021 All GAAP results include the impact of Kyndryl separation costs* Pre-tax Gross Diluted Net Pre-tax Income Profit EPS Income Income Margin Margin GAAP from Continuing Operations $1.25 $1.1B $1.3B 7.5 % 46.4% Year/Year (34 )% (33 )% (28 )% (2.9 )Pts (1.6 )Pts Operating (Non-GAAP) $2.52 $2.3B $2.4B 13.6% 48.0% Year/Year (2 )% (1 )% (7 )% (1.0 )Pts (1.0 )Pts GAAP EPS results include impacts related to the amortization of purchased intangible assets and other acquisition-related charges, retirement-related charges, U.S. tax reform enactment impacts, and transaction costs associated with the Kyndryl separation. * Impact of Kyndryl separation costs for third quarter 2021 GAAP results: EPS ($0.56) per share; Net Income ($0.5B); Pre-tax Income ($0.3B); Pre-Tax Income Margin (1.6) points; Gross Profit Margin (0.6) points
"We again had solid cash generation for the quarter and over the last year, while maintaining a strong balance sheet and the liquidity to support our hybrid cloud and AI strategy," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our post-separation portfolio mix is shifted toward our growth vectors, with a higher-value recurring revenue stream and strong cash generation, allowing us to continue to invest in the business and provide attractive shareholder returns."
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from operating activities of $2.7 billion. IBM's free cash flow was $0.6 billion, which includes $0.6 billion of cash impacts from the company's structural actions initiated in the fourth quarter of 2020 and the transaction costs associated with the separation of Kyndryl. IBM's adjusted free cash flow, excluding these cash impacts, was $1.2 billion. The company returned $1.5 billion to shareholders in dividends.
Over the last 12 months, the company generated net cash from operating activities of $16.1 billion. IBM's free cash flow for the last 12 months was $9.2 billion. The company's adjusted free cash flow, excluding cash impacts of $1.8 billion for the structural actions and transaction separation costs, was $11.1 billion.
IBM ended the third quarter with $8.4 billion of cash on hand (includes marketable securities), down $5.9 billion from year-end 2020 reflecting acquisitions of $3.0 billion and debt reduction payments. Debt, including Global Financing debt of $15.9 billion, totaled $54.5 billion, down $7.0 billion since the end of 2020, and down $18.5 billion since closing the Red Hat acquisition.
Segment Results for Third Quarter
-- Cloud & Cognitive Software (includes Cloud & Data Platforms, Cognitive Applications and Transaction Processing Platforms) --revenues of $5.7 billion, up 2.5 percent (up 1.9 percent adjusting for currency). Cloud & Data Platforms grew 10 percent (up 9 percent adjusting for currency), Cognitive Applications revenue was flat (down 1 percent adjusting for currency) and Transaction Processing Platforms declined 9 percent. Cloud revenue up 21 percent (up 20 percent adjusting for currency). -- Global Business Services (includes Consulting, Application Management and Global Process Services) -- revenues of $4.4 billion, up 11.6 percent (up 11.0 percent adjusting for currency), with growth in Consulting, up 17 percent (up 16 percent adjusting for currency), Application Management up 5 percent, and Global Process Services up 19 percent. Cloud revenue up 38 percent (up 37 percent adjusting for currency). -- Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) -- revenues of $6.2 billion, down 4.8 percent (down 5.4 percent adjusting for currency). Infrastructure & Cloud Services declined 5 percent (down 6 percent adjusting for currency) and Technology Support Services declined 4 percent (down 5 percent adjusting for currency). Cloud revenue up 1 percent (flat adjusting for currency). Gross profit margin up 120 basis points. -- Systems (includes Systems Hardware and Operating Systems Software) -- revenues of $1.1 billion, down 11.9 percent (down 12.4 percent adjusting for currency), driven by declines in IBM Z (down 33 percent) and Power systems down 24 percent (down 25 percent adjusting for currency). Storage Systems grew 11 percent. Cloud revenue down 42 percent (down 43 percent adjusting for currency). -- Global Financing (includes financing and used equipment sales) -- revenues of $220 million, down 19.2 percent (down 19.8 percent adjusting for currency).
Year-To-Date 2021 Results
Revenues for the nine-month period ended September 30, 2021 totaled $54.1 billion, an increase of 1.6 percent year to year (down 1 percent adjusting for divested businesses and currency) compared with $53.3 billion for the first nine months of 2020. Net income was $3.4 billion, down 19 percent year to year, reflecting the impact of $0.7 billion of transaction costs associated with the Kyndryl separation. Diluted earnings per share was $3.77 compared with $4.72 per diluted share for the 2020 period, a decrease of 20 percent.
GAAP earnings per share results include a ($2.85) per-share impact for charges related to amortization of purchased intangible assets and other acquisition-related charges, retirement-related charges, U.S. tax reform enactment impacts, and transaction costs associated with the Kyndryl separation. The impact of the Kyndryl separation costs was ($0.76) per share.
Operating (non-GAAP) net income for the nine months ended September 30, 2021 was $6.0 billion compared with $5.9 billion in the prior-year period, an increase of 1.3 percent. Operating (non-GAAP) diluted earnings per share from continuing operations was $6.62 compared with $6.60 per diluted share for the 2020 period, flat 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 possibility that the proposed separation of the managed infrastructure services unit of the company's Global Technology Services segment will not be completed within the anticipated time period or at all, the possibility of disruption or unanticipated costs in connection with the proposed separation or the possibility that the separation will not achieve its intended benefits; 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 from 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; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
Presentation of Information in this Press Release
In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:
IBM results --
-- adjusting for currency (i.e., at constant currency); -- total revenue and cloud revenue adjusting for divested businesses and currency; -- total revenue normalized to exclude Kyndryl to be separated in November; -- Red Hat revenue normalized for historical comparability; -- presenting operating (non-GAAP) earnings per share amounts and related income statement items; -- free cash flow; -- adjusted free cash flow.
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-3q21. 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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020 REVENUE Cloud & Cognitive Software $5,692 $5,553 $17,227 $16,540 Global Business Services 4,427 3,965 13,002 11,992 Global Technology Services 6,154 6,462 18,866 19,245 Systems 1,107 1,257 4,251 4,477 Global Financing 220 273 702 837 Other 18 50 45 163 TOTAL REVENUE 17,618 17,560 54,093 53,253 GROSS PROFIT 8,171 8,430 25,379 25,052 GROSS PROFIT MARGIN Cloud & Cognitive Software 77.0 % 77.1 % 77.1 % 76.6 % Global Business Services 29.8 % 32.9 % 28.6 % 29.5 % Global Technology Services 36.2 % 35.0 % 35.3 % 34.4 % Systems 41.3 % 51.2 % 51.3 % 53.7 % Global Financing 25.6 % 37.5 % 28.4 % 39.0 % TOTAL GROSS PROFIT MARGIN 46.4 % 48.0 % 46.9 % 47.0 % EXPENSE AND OTHER INCOME S,G&A 4,860 4,647 15,368 15,849 R,D&E 1,621 1,515 4,907 4,722 Intellectual property and custom development income (153 ) (134 ) (435 ) (453 ) Other (income) and expense 234 253 911 614 Interest expense 291 323 852 971 TOTAL EXPENSE AND OTHER INCOME 6,852 6,603 21,603 21,704 INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,319 1,827 3,776 3,348 Pre-tax margin 7.5 % 10.4 % 7.0 % 6.3 % Provision for/(Benefit from) income taxes 188 128 365 (888 ) Effective tax rate 14.3 % 7.0 % 9.7 % (26.5 ) % INCOME FROM CONTINUING OPERATIONS $1,130 $1,698 $3,411 $4,237 DISCONTINUED OPERATIONS Income/(Loss) from discontinued operations, net of taxes -- (1 ) (1 ) (2 ) NET INCOME $1,130 $1,698 $3,410 $4,234 EARNINGS/(LOSS) PER SHARE OF COMMON STOCK Assuming Dilution Continuing Operations $1.25 $1.89 $3.77 $4.72 Discontinued Operations $0.00 $0.00 $0.00 $0.00 TOTAL $1.25 $1.89 $3.77 $4.72 Basic Continuing Operations $1.26 $1.90 $3.81 $4.76 Discontinued Operations $0.00 $0.00 $0.00 $0.00 TOTAL $1.26 $1.90 $3.81 $4.76 WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M's) Assuming Dilution 906.0 897.3 904.0 895.8 Basic 897.1 891.4 895.3 889.6 INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) At At September 30, December 31, (Dollars in Millions) 2021 2020 ASSETS: Current Assets: Cash and cash equivalents $ 7,455 $ 13,212 Restricted cash 352 463 Marketable securities 600 600 Notes and accounts receivable - trade, net 6,609 7,132 Short-term financing receivables, net 7,161 10,892 Other accounts receivable, net 899 714 Inventories 1,891 1,839 Deferred costs 2,046 2,107 Prepaid expenses and other current assets 2,954 2,206 Total Current Assets 29,967 39,165 Property, plant and equipment, net 9,138 10,040 Operating right-of-use assets, net 4,253 4,686 Long-term financing receivables, net 5,046 7,086 Prepaid pension assets 8,197 7,610 Deferred costs 2,248 2,449 Deferred taxes 8,967 9,241 Goodwill 61,378 59,617 Intangibles, net 13,025 13,796 Investments and sundry assets 1,996 2,282 Total Assets $ 144,214 $ 155,971 LIABILITIES: Current Liabilities: Taxes $ 2,159 $ 3,301 Short-term debt 7,575 7,183 Accounts payable 4,248 4,908 Deferred income 12,264 12,833 Operating lease liabilities 1,285 1,357 Other liabilities 8,300 10,287 Total Current Liabilities 35,832 39,869 Long-term debt 46,926 54,355 Retirement related obligations 16,764 18,248 Deferred income 3,965 4,301 Operating lease liabilities 3,192 3,574 Other liabilities 15,179 14,897 Total Liabilities 121,858 135,244 EQUITY: IBM Stockholders' Equity: Common stock 57,189 56,556 Retained earnings 161,747 162,717 Treasury stock -- at cost (169,406 ) (169,339 ) Accumulated other comprehensive income/(loss) (27,302 ) (29,337 ) Total IBM Stockholders' Equity 22,228 20,597 Noncontrolling interests 129 129 Total Equity 22,357 20,727 Total Liabilities and Equity $ 144,214 $ 155,971 INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited) Trailing Twelve Three Months Ended Nine Months Ended Months Ended September 30, September 30, September 30, (Dollars in Millions) 2021 2020 2021 2020 2021 Net Cash Provided by Operating Activities per GAAP: $2,713 $4,286 $10,252 $12,337 $ 16,111 Less: Change in Global Financing (GF) Receivables 1,472 2,353 5,235 5,324 4,260 Capital Expenditures, net (638 ) (829 ) (1,855) (2,262) (2,635) Free Cash Flow 603 1,104 3,162 4,751 9,216 Structural actions initiated in 4Q20 & Separation charges (1) 566 -- 1,792 -- 1,841 Adjusted Free Cash Flow 1,170 1,104 4,954 4,751 11,057 Free Cash Flow 603 1,104 3,162 4,751 9,216 Acquisitions (152 ) (17 ) (3,018) (37 ) (3,317) Divestitures 51 (248 ) 26 510 19 Dividends (1,471) (1,453) (4,395) (4,343) (5,850) Non-GF Debt 1,187 1,019 (1,143) 4,977 (5,899) Other (includes GF Net Receivables and GF Debt) 22 1,098 (500 ) 886 (1,516) Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities $241 $1,503 $(5,868) $6,744 $ (7,347) _______________ (1) Includes cash impacts incurred in the period related to structural
actions initiated in 4Q20 and separation related costs. INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, (Dollars in Millions) 2021 2020 2021 2020 Net Income from Operations $1,130 $1,698 $3,410 $4,234 Depreciation/Amortization of Intangibles 1,684 1,683 5,036 4,996 Stock-based Compensation 262 222 719 658 Working Capital / Other (1,834) (1,670) (4,147 ) (2,874) Global Financing A/R 1,472 2,353 5,235 5,324 Net Cash Provided by Operating Activities $2,713 $4,286 $10,252 $12,337 Capital Expenditures, net of payments & proceeds (638 ) (829 ) (1,855 ) (2,262) Divestitures, net of cash transferred 51 (248 ) 26 510 Acquisitions, net of cash acquired (152 ) (17 ) (3,018 ) (37 ) Marketable Securities / Other Investments, net 109 762 (453 ) (680 ) Net Cash Provided by/(Used in) Investing Activities $(629 ) $(332 ) $(5,300 ) $(2,470) Debt, net of payments & proceeds (287 ) (252 ) (6,086 ) 1,067 Dividends (1,471) (1,453) (4,395 ) (4,343) Common Stock Transactions - Other 9 16 (181 ) (152 ) Net Cash Provided by/(Used in) Financing Activities $(1,748) $(1,689) $(10,662) $(3,428) Effect of Exchange Rate changes on Cash (94 ) 101 (159 ) (200 ) Net Change in Cash, Cash Equivalents and Restricted Cash $241 $2,366 $(5,868 ) $6,239 INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) Three Months Ended September 30, 2021 Cloud & Global Global Cognitive Business Technology Global (Dollars in Millions) Software Services Services Systems Financing Revenue External $ 5,692 $ 4,427 $ 6,154 $1,107 $ 220 Internal 764 53 317 176 153 Total Segment Revenue $ 6,456 $ 4,480 $ 6,471 $1,283 $ 373 Pre-tax Income/(Loss) from Continuing Operations 1,675 587 383 (207 ) 206 Pre-tax Margin 25.9 % 13.1 % 5.9 % (16.1) % 55.1 % Change YTY Revenue - External 2.5 % 11.6 % (4.8 ) % (11.9) % (19.2 ) % Change YTY Revenue - External @constant currency 1.9 % 11.0 % (5.4 ) % (12.4) % (19.8 ) % Three Months Ended September 30, 2020 Cloud & Global Global Cognitive Business Technology Global (Dollars in Millions) Software Services Services Systems Financing Revenue External $ 5,553 $ 3,965 $ 6,462 $1,257 $ 273 Internal 875 49 312 240 208 Total Segment Revenue $ 6,428 $ 4,014 $ 6,774 $1,497 $ 480 Pre-tax Income/(Loss) from Continuing Operations 1,834 570 399 (37 ) 196 Pre-tax Margin 28.5 % 14.2 % 5.9 % (2.5 ) % 40.7 % INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) Nine Months Ended September 30, 2021 Cloud & Global Global Cognitive Business Technology Global (Dollars in Millions) Software Services Services Systems Financing Revenue External $ 17,227 $ 13,002 $ 18,866 $4,251 $ 702 Internal 2,322 166 956 606 581 Total Segment Revenue $ 19,549 $ 13,168 $ 19,822 $4,857 $ 1,283 Pre-tax Income/(Loss) from Continuing Operations 4,822 1,349 903 (33 ) 618 Pre-tax Margin 24.7 % 10.2 % 4.6 % (0.7 ) % 48.1 % Change YTY Revenue - External 4.2 % 8.4 % (2.0 ) % (5.1 ) % (16.2 ) % Change YTY Revenue - External @constant currency 1.7 % 5.5 % (4.9 ) % (7.0 ) % (18.0 ) % Nine Months Ended September 30, 2020 Cloud & Global Global Cognitive Business Technology Global (Dollars in Millions) Software Services Services Systems Financing Revenue External $ 16,540 $ 11,992 $ 19,245 $4,477 $ 837 Internal 2,431 150 911 628 660 Total Segment Revenue $ 18,971 $ 12,142 $ 20,155 $5,106 $ 1,497 Pre-tax Income/(Loss) from Continuing Operations 4,475 1,203 471 (7 ) 566 Pre-tax Margin 23.6 % 9.9 % 2.3 % (0.1 ) % 37.8 % INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts) Three Months Ended September 30, 2021 Continuing Operations Acquisition- Retirement- Tax Separation- Related Related Reform Related Operating Adjustments Adjustments GAAP (1) (2) Impacts Charges (4) (Non-GAAP) Gross Profit $8,171 $184 $-- $ -- $ 108 $ 8,463 Gross Profit Margin 46.4 % 1.0 Pts -- Pts -- Pts 0.6 Pts 48.0 % S,G&A 4,860 (293) -- -- (169) 4,398 R,D&E 1,621 -- -- -- (1) 1,620 Other (Income) & Expense 234 (1) (328) -- -- (94) Interest Expense 291 -- -- -- -- 291 Total Expense & Other (Income) 6,852 (294) (328) -- (169) 6,061 Pre-tax Income from Continuing Operations 1,319 478 328 -- 277 2,402 Pre-tax Income Margin from Continuing Operations 7.5 % 2.7 Pts 1.9 Pts -- Pts 1.6 Pts 13.6 % Provision for/(Benefit from) Income Taxes (3) 188 103 57 -- (233) 115 Effective Tax Rate 14.3 % 1.5 Pts 0.4 Pts -- Pts (11.4) Pts 4.8 % Income from Continuing Operations 1,130 375 271 -- 510 2,286 Income Margin from Continuing Operations 6.4 % 2.1 Pts 1.5 Pts -- Pts 2.9 Pts 13.0 % Diluted Earnings/(Loss) Per Share: Continuing Operations $1.25 $0.41 $0.30 $ -- $ 0.56 $ 2.52 Three Months Ended September 30, 2020 Continuing Operations Acquisition- Retirement- Tax Separation- Related Related Reform Related Operating Adjustments Adjustments GAAP (1) (2) Impacts Charges (4) (Non-GAAP) Gross Profit $8,430 $180 $-- $ -- $ -- $ 8,610 Gross Profit Margin 48.0 % 1.0 Pts -- Pts -- Pts -- Pts 49.0 % S,G&A 4,647 (279) -- -- -- 4,367 R,D&E 1,515 -- -- -- -- 1,515 Other (Income) & Expense 253 (1) (291) -- -- (39) Interest Expense 323 -- -- -- -- 323 Total Expense & Other (Income) 6,603 (280) (291) -- -- 6,032 Pre-tax Income/(Loss) from Continuing
Operations 1,827 460 291 -- -- 2,578 Pre-tax Income Margin from Continuing Operations 10.4 % 2.6 Pts 1.7 Pts -- Pts -- Pts 14.7 % Provision for/(Benefit from) Income Taxes (3) 128 102 54 (21) -- 263 Effective Tax Rate 7.0 % 2.7 Pts 1.3 Pts (0.8) Pts -- Pts 10.2 % Income from Continuing Operations 1,698 358 237 21 -- 2,315 Income Margin from Continuing Operations 9.7 % 2.0 Pts 1.4 Pts 0.1 Pts -- Pts 13.2 % Diluted Earnings/(Loss) Per Share: Continuing Operations $1.89 $0.40 $0.26 $ 0.03 $ -- $ 2.58 _______________ (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) 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. (4) Kyndryl separation charges primarily relate to transaction and third-party support costs, business separation and applicable employee retention fees, pension settlements and related tax separation charges. INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts) Nine Months Ended September 30, 2021 Continuing Operations Acquisition- Retirement- Tax Separation- Related Related Reform Related Operating Adjustments Adjustments GAAP (1) (2) Impacts Charges (4) (Non-GAAP) Gross Profit $25,379 $540 $-- $-- $ 168 $ 26,087 Gross Profit Margin 46.9 % 1.0 Pts -- Pts -- Pts 0.3 Pts 48.2 % S,G&A 15,368 (884) -- -- (343) 14,141 R,D&E 4,907 -- -- -- (1) 4,906 Other (Income) & Expense 911 (2) (998) -- -- (90) Interest Expense 852 -- -- -- -- 852 Total Expense & Other (Income) 21,603 (886) (998) -- (344) 19,374 Pre-tax Income from Continuing Operations 3,776 1,426 998 -- 513 6,713 Pre-tax Income Margin from Continuing Operations 7.0 % 2.6 Pts 1.8 Pts -- Pts 0.9 Pts 12.4 % Provision for/(Benefit from) Income Taxes (3) 365 344 185 6 (174) 725 Effective Tax Rate 9.7 % 3.1 Pts 1.3 Pts 0.1 Pts (3.3) Pts 10.8 % Income from Continuing Operations 3,411 1,082 813 (6) 687 5,988 Income Margin from Continuing Operations 6.3 % 2.0 Pts 1.5 Pts (0.0) Pts 1.3 Pts 11.1 % Diluted Earnings/(Loss) Per Share: Continuing Operations $3.77 $1.20 $0.90 $(0.01) $ 0.76 $ 6.62 Nine Months Ended September 30, 2020 Continuing Operations Acquisition- Retirement- Tax Separation- Related Related Reform Related Operating Adjustments Adjustments GAAP (1) (2) Impacts Charges (4) (Non-GAAP) Gross Profit $25,052 $556 $-- $-- $ -- $ 25,608 Gross Profit Margin 47.0 % 1.0 Pts -- Pts -- Pts -- Pts 48.1 % S,G&A 15,849 (849) -- -- -- 15,000 R,D&E 4,722 -- -- -- -- 4,722 Other (Income) & Expense 614 (2) (829) -- -- (217) Interest Expense 971 -- -- -- -- 971 Total Expense & Other (Income) 21,704 (851) (829) -- -- 20,024 Pre-tax Income from Continuing Operations 3,348 1,407 829 -- -- 5,584 Pre-tax Income Margin from Continuing Operations 6.3 % 2.6 Pts 1.6 Pts -- Pts -- Pts 10.5 % Provision for/(Benefit from) Income Taxes (3) (888) 312 119 128 -- (329) Effective Tax Rate (26.5)% 12.3 Pts 6.1 Pts 2.3 Pts -- Pts (5.9) % Income from Continuing Operations 4,237 1,095 710 (128) -- 5,913 Income Margin from Continuing Operations 8.0 % 2.1 Pts 1.3 Pts (0.2) Pts -- Pts 11.1 % Diluted Earnings/(Loss) Per Share: Continuing Operations $4.72 $1.23 $0.79 $(0.14) $ -- $ 6.60 _______________ (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) 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. (4) Kyndryl separation charges primarily relate to transaction and third-party support costs, business separation and applicable employee retention fees, pension settlements and related tax separation charges. INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts) Trailing Twelve Three Months Nine Months Months Ended Ended Ended September September 30, September 30, 2021 2021 30, 2021 Change YTY Change YTY Change YTY Revenue Adjusting for Divested Businesses and Currency Total IBM Total IBM Cloud Revenue as reported 0.3 % 1.6 % 13.6 % Impact from divested businesses 0.0 Pts 0.1 Pts 0.3 Pts Currency impact (0.6) Pts (2.7) Pts (2.8) Pts Revenue adjusting for divested businesses and currency (non-GAAP) (0.2) % (1.0) % 11.1 % Three Months Ended September 30, 2021 Total IBM Revenue, Normalized to Exclude Kyndryl Change YTY Revenue as reported 0.3 % Impact from Kyndryl (1) 2.1 Pts Revenue normalized to exclude Kyndryl (non-GAAP) 2.5 % Impact from divested businesses 0.1 Pts Currency impact (0.7) Pts Revenue normalized to exclude Kyndryl, adjusted for divested businesses and currency (non-GAAP) 1.9 % _______________ (1) Estimated as of September 30, 2021. Three Months Ended
September 30, 2021 Red Hat Revenue, Normalized for Historical Comparability Change YTY Red Hat Revenue GAAP growth rate (1) 23 % Impact from purchase accounting deferred revenue and intercompany adjustments (2) (6) Pts Red Hat revenue growth rate, normalized for historical comparability (non-GAAP) 17 % Impact from currency (0) Pts Red Hat revenue growth rate, normalized for historical comparability and adjusting for currency (non-GAAP) 17 % _______________ (1) Represents change in GAAP revenue as reported by IBM, which is included in the Cloud & Cognitive Software segment. (2) Represents change in the third-quarter 2021 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
Sarah Meron, 347-891-1770
sarah.meron@ibm.com
Tim Davidson, 914-844-7847
tfdavids@us.ibm.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20211020006120/en/
CONTACT:
IBM
SOURCE: Intnl Bus. Mach Copyright Business Wire 2021
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