REG-International Business Machines Corp: Half-Yearly Report
25/07/2024 07:15
IBM RELEASES SECOND-QUARTER RESULTS
Accelerated revenue growth led by Software; Raises full-year free cash flow
expectation
ARMONK, N.Y., July 24, 2024 -- IBM (NYSE: IBM (http://www.ibm.com/investor))
today announced second-quarter 2024 earnings results.
Logo - https://mma.prnewswire.com/media/2319830/IBM_LOGO_1.jpg
"We had a strong second quarter, exceeding our expectations, driven by growth
in both revenue and free cash flow. We continue to see that clients turn to
IBM for our technology and our expertise in enterprise AI, and our book of
business for generative AI has grown to more than two billion dollars
since the launch of watsonx one year ago," said Arvind Krishna, IBM chairman
and chief executive officer. "Given our first-half results, we are raising our
full-year view of free cash flow, which we now expect to be more than $12
billion."
Second-Quarter Highlights
* Revenue
- Revenue of $15.8 billion, up 2 percent, up 4 percent at constant currency
- Software revenue up 7 percent, up 8 percent at constant currency
- Consulting revenue down 1 percent, up 2 percent at constant currency
- Infrastructure revenue up 1 percent, up 3 percent at constant currency
* Profit Margin
- Gross Profit Margin: GAAP: 56.8 percent, up 180 basis points; Operating
(Non-GAAP): 57.8 percent, up 190 basis points
- Pre-Tax Income Margin: GAAP: 14.1 percent, up 110 basis points; Operating
(Non-GAAP): 17.7 percent, up 220 basis points
* Cash Flow
- Year to date, net cash from operating activities of $6.2 billion, down
$0.2 billion; free cash flow of $4.5 billion, up $1.1 billion
- Over the last twelve months, net cash from operating activities of $13.8
billion; free cash flow of $12.3 billion
SECOND QUARTER 2024 INCOME STATEMENT SUMMARY
Revenue Gross Profit Gross Pre-tax Income Pre-tax Income Margin Net Income Diluted Earnings Per Share
Profit
Margin
GAAP from $ 15.8 B $ 8.9 B 56.8 % $ 2.2 B 14.1 % $ 1.8 B $ 1.96
Continuing
Operations
Year/Year 2 % (1) 5 % 1.8 Pts 11 % 1.1 Pts 16 % 14 %
Operating (Non-GAAP) $ 9.1 B 57.8 % $ 2.8 B 17.7 % $ 2.3 B $ 2.43
Year/Year 5 % 1.9 Pts 17 % 2.2 Pts 14 % 11 %
(1) 4% at constant currency.
"In the quarter, we accelerated our revenue growth as we continue to execute
well on our strategy. Our business fundamentals, operating leverage, product
mix and productivity initiatives all contributed to significant margin
expansion and increased profit and free cash flow," said James Kavanaugh, IBM
senior vice president and chief financial officer. "Our strong cash generation
enables us to continue investing in innovation and expertise across the
portfolio, while returning value to shareholders through dividends."
Segment Results for Second Quarter
* Software — revenues of $6.7 billion, up 7.1 percent, up 8.4 percent at
constant currency:
- Hybrid Platform & Solutions up 5 percent, up 6 percent at constant
currency:
-- Red Hat up 7 percent, up 8 percent at constant currency
-- Automation up 15 percent, up 16 percent at constant currency
-- Data & AI down 3 percent, down 2 percent at constant currency
-- Security up 2 percent, up 3 percent at constant currency
- Transaction Processing up 11 percent, up 13 percent at constant currency
* Consulting — revenues of $5.2 billion, down 0.9 percent, up 1.8 percent at
constant currency:
- Business Transformation up 3 percent, up 6 percent at constant currency
- Technology Consulting down 3 percent, up 1 percent at constant currency
- Application Operations down 4 percent, down 2 percent at constant currency
* Infrastructure — revenues of $3.6 billion, up 0.7 percent, up 2.7 percent
at constant currency:
- Hybrid Infrastructure up 4 percent, up 6 percent at constant currency
-- IBM Z up 6 percent, up 8 percent at constant currency
-- Distributed Infrastructure up 3 percent, up 5 percent at constant
currency
- Infrastructure Support down 5 percent, down 3 percent at constant currency
* Financing — revenues of $0.2 billion, down 8.3 percent, down 6.6 percent
at constant currency
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating
activities of $2.1 billion, down $0.6 billion year to year. IBM's free cash
flow was $2.6 billion, up $0.5 billion year to year. The company returned $1.5
billion to shareholders in dividends in the second quarter.
For the first six months of the year, the company generated net cash from
operating activities of $6.2 billion, down $0.2 billion year to year. IBM's
free cash flow was $4.5 billion, up $1.1 billion year to year. Over the last
twelve months, the company generated net cash from operating activities of
$13.8 billion and free cash flow of $12.3 billion.
IBM ended the second quarter with $16.0 billion of cash, restricted cash and
marketable securities, up $2.5 billion from year-end 2023. Debt, including IBM
Financing debt of $11.1 billion, totaled $56.5 billion, flat year to date.
Full-Year 2024 Expectations
* Revenue: The company continues to expect constant currency revenue growth
consistent with its mid-single digit model. At current foreign exchange rates,
currency is expected to be about a one to two-point headwind to revenue growth
* Free cash flow: The company now expects more than $12 billion in 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.
Statements in this communication regarding the strategic acquisition that are
forward-looking may include projections as to closing date for the
transaction, the extent of, and the time necessary to obtain, the regulatory
approvals required for the transaction, the anticipated benefits of the
transaction, the impact of the transaction on IBM's business, the synergies
from the transaction, and the combined company's future operating results.
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);
* presenting operating (non-GAAP) earnings per share amounts and related
income statement items;
* free cash flow;
* net cash from operating activities excluding IBM Financing receivables;
* adjusted EBITDA.
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.
For generative AI, book of business includes Software transactional revenue,
SaaS Annual Contract Value and Consulting signings.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00
p.m. ET, today. The Webcast may be accessed via a link at
https://www.ibm.com/investor/events/earnings-2q24. 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 Six Months Ended
June 30, June 30,
2024 2023 (1) 2024 2023 (1)
REVENUE BY SEGMENT
Software $ 6,739 $ 6,294 $ 12,637 $ 11,885
Consulting 5,179 5,226 10,365 10,423
Infrastructure 3,645 3,618 6,721 6,716
Financing 169 185 362 380
Other 38 152 146 321
TOTAL REVENUE 15,770 15,475 30,231 29,727
GROSS PROFIT 8,950 8,501 16,692 16,010
GROSS PROFIT MARGIN
Software 83.6 % 82.1 % 83.0 % 82.3 %
Consulting 26.3 % 25.9 % 25.8 % 25.7 %
Infrastructure 56.5 % 56.0 % 55.4 % 54.1 %
Financing 48.9 % 49.2 % 48.7 % 46.5 %
TOTAL GROSS PROFIT MARGIN 56.8 % 54.9 % 55.2 % 53.9 %
EXPENSE AND OTHER INCOME
S,G&A 4,938 4,900 9,912 9,754
R,D&E 1,840 1,687 3,637 3,342
Intellectual property and custom development income (241) (248) (458) (428)
Other (income) and expense (233) (261) (550) (506)
Interest expense 427 423 859 790
TOTAL EXPENSE AND OTHER INCOME 6,730 6,501 13,399 12,952
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,219 2,000 3,293 3,058
Pre-tax margin 14.1 % 12.9 % 10.9 % 10.3 %
Provision for/(Benefit from) income taxes 389 419 (112) 543
Effective tax rate 17.5 % 21.0 % (3.4) % 17.8 %
INCOME FROM CONTINUING OPERATIONS $ 1,830 $ 1,581 $ 3,405 $ 2,515
DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of taxes 4 2 34 (4)
NET INCOME $ 1,834 $ 1,583 $ 3,439 $ 2,511
EARNINGS/(LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations $ 1.96 $ 1.72 $ 3.65 $ 2.74
Discontinued Operations $ 0.00 $ 0.00 $ 0.04 $ 0.00
TOTAL $ 1.96 $ 1.72 $ 3.68 $ 2.73
Basic
Continuing Operations $ 1.99 $ 1.74 $ 3.71 $ 2.77
Discontinued Operations $ 0.00 $ 0.00 $ 0.04 $ 0.00
TOTAL $ 1.99 $ 1.74 $ 3.74 $ 2.76
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (M's)
Assuming Dilution 934.4 919.5 933.9 918.6
Basic 920.3 909.9 918.7 908.7
____________________
(1) Recast to reflect January 2024 segment changes.
INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in Millions) At At
June 30, December 31,
2024 2023
ASSETS:
Current Assets:
Cash and cash equivalents $ 12,210 $ 13,068
Restricted cash 2,268 21
Marketable securities 1,481 373
Notes and accounts receivable - trade, net 5,769 7,214
Short-term financing receivables, net 5,799 6,793
Other accounts receivable, net 757 640
Inventories 1,234 1,161
Deferred costs 997 998
Prepaid expenses and other current assets 2,784 2,639
Total Current Assets 33,299 32,908
Property, plant and equipment, net 5,600 5,501
Operating right-of-use assets, net 3,130 3,220
Long-term financing receivables, net 5,483 5,766
Prepaid pension assets 7,630 7,506
Deferred costs 820 842
Deferred taxes 6,378 6,656
Goodwill 59,416 60,178
Intangibles, net 10,251 11,036
Investments and sundry assets 1,840 1,626
Total Assets $ 133,848 $ 135,241
LIABILITIES:
Current Liabilities:
Taxes $ 1,691 $ 2,270
Short-term debt 3,602 6,426
Accounts payable 3,631 4,132
Deferred income 13,643 13,451
Operating lease liabilities 762 820
Other liabilities 6,319 7,022
Total Current Liabilities 29,648 34,122
Long-term debt 52,929 50,121
Retirement related obligations 10,200 10,808
Deferred income 3,489 3,533
Operating lease liabilities 2,546 2,568
Other liabilities 10,932 11,475
Total Liabilities 109,745 112,628
EQUITY:
IBM Stockholders' Equity:
Common stock 60,501 59,643
Retained earnings 151,659 151,276
Treasury stock — at cost (169,815) (169,624)
Accumulated other comprehensive income/(loss) (18,319) (18,761)
Total IBM Stockholders' Equity 24,026 22,533
Noncontrolling interests 77 80
Total Equity 24,103 22,613
Total Liabilities and Equity $ 133,848 $ 135,241
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited)
Three Months Ended Six Months Ended Trailing Twelve
June 30, June 30, Months Ended
June 30,
(Dollars in Millions) 2024 2023 2024 2023 2024
Net Cash from Operations per GAAP $ 2,066 $ 2,638 $ 6,234 $ 6,412 $ 13,752
Less: change in IBM Financing receivables (946) 50 951 2,028 156
Capital Expenditures, net (399) (487) (761) (944) (1,305)
Free Cash Flow 2,612 2,101 4,522 3,441 12,292
Acquisitions (153) (334) (235) (356) (4,961)
Divestitures — 6 703 6 693
Dividends (1,537) (1,510) (3,058) (3,007) (6,092)
Non-Financing Debt (4,168) (1,178) 1,076 8,514 (1,892)
Other (includes IBM Financing net receivables and debt) (73) (347) (510) (1,109) (410)
Change in Cash, Cash Equivalents, Restricted Cash $ (3,318) $ (1,263) $ 2,497 $ 7,489 $ (370)
and Short-term Marketable Securities
INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in Millions) 2024 2023 2024 2023
Net Income from Operations $ 1,834 $ 1,583 $ 3,439 $ 2,511
Depreciation/Amortization of Intangibles (1) 1,155 1,076 2,287 2,150
Stock-based Compensation 316 288 636 556
Operating assets and liabilities/Other, net (2) (293) (359) (1,079) (832)
IBM Financing A/R (946) 50 951 2,028
Net Cash Provided by Operating Activities $ 2,066 $ 2,638 $ 6,234 $ 6,412
Capital Expenditures, net of payments & proceeds (399) (487) (761) (944)
Divestitures, net of cash transferred - 6 703 6
Acquisitions, net of cash acquired (153) (334) (235) (356)
Marketable Securities / Other Investments, net 2,791 822 (1,679) (6,659)
Net Cash Provided by/(Used in) Investing Activities $ 2,239 $ 7 $ (1,971) $ (7,953)
Debt, net of payments & proceeds (2,900) (1,135) 481 6,169
Dividends (1,537) (1,510) (3,058) (3,007)
Financing - Other (78) (86) (61) (185)
Net Cash Provided by/(Used in) Financing Activities $ (4,515) $ (2,731) $ (2,638) $ 2,978
Effect of Exchange Rate changes on Cash (76) (25) (236) (1)
Net Change in Cash, Cash Equivalents and Restricted Cash $ (287) $ (110) $ 1,389 $ 1,436
____________________
(1) Includes operating lease right-of-use assets amortization.
(2) Includes the reduction of tax reserves.
INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION (Unaudited)
Three Months Ended June 30, Six Months Ended
June 30,
(Dollars in Billions) 2024 2023 Yr/Yr 2024 2023 Yr/Yr
Net Income as reported (GAAP) $ 1.8 $ 1.6 $ 0.3 $ 3.4 $ 2.5 $ 0.9
Less: Income/(loss) from discontinued operations, net of tax 0.0 0.0 0.0 0.0 0.0 0.0
Income from continuing operations 1.8 1.6 0.2 3.4 2.5 0.9
Provision for/(Benefit from) income taxes from continuing ops. 0.4 0.4 0.0 (0.1) 0.5 (0.7)
Pre-tax income from continuing operations (GAAP) 2.2 2.0 0.2 3.3 3.1 0.2
Non-operating adjustments (before tax)
Acquisition-related charges (1) 0.5 0.4 0.1 1.0 0.8 0.2
Non-operating retirement-related costs/(income) 0.1 0.0 0.1 0.2 0.0 0.2
Operating (non-GAAP) pre-tax income from continuing ops. 2.8 2.4 0.4 4.4 3.8 0.6
Net interest expense 0.2 0.2 0.0 0.4 0.4 0.0
Depreciation/Amortization of non-acquired intangible assets 0.7 0.7 0.0 1.4 1.4 0.0
Stock-based compensation 0.3 0.3 0.0 0.6 0.6 0.1
Workforce rebalancing charges 0.0 0.1 (0.1) 0.4 0.4 0.0
Corporate (gains) and charges (2) 0.0 0.0 0.0 (0.2) 0.0 (0.2)
Adjusted EBITDA $ 4.0 $ 3.7 $ 0.4 $ 7.1 $ 6.5 $ 0.5
____________________
(1) Primarily consists of amortization of acquired intangible assets.
(2) Corporate (gains) and charges primarily consists of unique corporate actions such as gains on divestitures.
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited)
Three Months Ended June 30, 2024
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 6,739 $ 5,179 $ 3,645 $ 169
Segment Profit $ 2,113 $ 463 $ 654 $ 77
Segment Profit Margin 31.3 % 8.9 % 17.9 % 45.3 %
Change YTY Revenue 7.1 % (0.9) % 0.7 % (8.3) %
Change YTY Revenue - Constant Currency 8.4 % 1.8 % 2.7 % (6.6) %
Three Months Ended June 30, 2023 (1)
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 6,294 $ 5,226 $ 3,618 $ 185
Segment Profit $ 1,749 $ 483 $ 732 $ 64
Segment Profit Margin 27.8 % 9.2 % 20.2 % 34.8 %
____________________
(1) Recast to reflect January 2024 segment changes.
Six Months Ended June 30, 2024
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 12,637 $ 10,365 $ 6,721 $ 362
Segment Profit $ 3,612 $ 888 $ 965 $ 168
Segment Profit Margin 28.6 % 8.6 % 14.4 % 46.5 %
Change YTY Revenue 6.3 % (0.6) % 0.1 % (4.9) %
Change YTY Revenue - Constant Currency 7.2 % 1.8 % 1.5 % (4.0) %
Six Months Ended June 30, 2023 (1)
(Dollars in Millions) Software Consulting Infrastructure Financing
Revenue $ 11,885 $ 10,423 $ 6,716 $ 380
Segment Profit $ 3,128 $ 910 $ 1,039 $ 164
Segment Profit Margin 26.3 % 8.7 % 15.5 % 43.2 %
__________
(1) Recast to reflect January 2004 segment changes.
INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts)
Three Months Ended June 30, 2024
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts Operating (Non-GAAP)
Gross Profit $ 8,950 $ 170 $ — $ — $ 9,120
Gross Profit Margin 56.8 % 1.1 pts — pts — pts 57.8 %
S,G&A $ 4,938 $ (286) $ — $ — $ 4,651
Other (Income) & Expense (233) (18) (98) — (349)
Total Expense & Other (Income) 6,730 (304) (98) — 6,328
Pre-tax Income from Continuing Operations 2,219 474 98 — 2,792
Pre-tax Income Margin from Continuing 14.1 % 3.0 pts 0.6 pts — pts 17.7 %
Operations
Provision for/(Benefit from) Income Taxes (3) $ 389 $ 113 $ 26 $ (12) $ 516
Effective Tax Rate 17.5 % 1.1 pts 0.3 pts (0.4) pts 18.5 %
Income from Continuing Operations $ 1,830 $ 362 $ 72 $ 12 $ 2,275
Income Margin from Continuing Operations 11.6 % 2.3 pts 0.5 pts 0.1 pts 14.4 %
Diluted Earnings Per Share: Continuing $ 1.96 $ 0.39 $ 0.08 $ 0.01 $ 2.43
Operations
Three Months Ended June 30, 2023
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts Operating (Non-GAAP)
Gross Profit $ 8,501 $ 150 $ — $ — $ 8,650
Gross Profit Margin 54.9 % 1.0 pts — pts — pts 55.9 %
S,G&A $ 4,900 $ (245) $ — $ — $ 4,655
Other (Income) & Expense (261) 0 (1) — (262)
Total Expense & Other (Income) 6,501 (246) (1) — 6,254
Pre-tax Income from Continuing Operations 2,000 395 1 — 2,396
Pre-tax Income Margin from Continuing 12.9 % 2.6 pts 0.0 pts — pts 15.5 %
Operations
Provision for/(Benefit from) Income Taxes (3) $ 419 $ 87 $ (3) $ (110) $ 393
Effective Tax Rate 21.0 % 0.2 pts (0.2) pts (4.6) pts 16.4 %
Income from Continuing Operations $ 1,581 $ 308 $ 5 $ 110 $ 2,003
Income Margin from Continuing Operations 10.2 % 2.0 pts 0.0 pts 0.7 pts 12.9 %
Diluted Earnings Per Share: Continuing $ 1.72 $ 0.34 $ 0.00 $ 0.12 $ 2.18
Operations
____________________
(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. 2024 also includes a loss of $18 million on foreign
exchange derivative contracts entered into by the company prior to the acquisition of StreamSets and webMethods from Software AG.
(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.
INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts)
Six Months Ended June 30, 2024
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts (3) Operating (Non-GAAP)
Gross Profit $ 16,692 $ 341 $ — $ — $ 17,033
Gross Profit Margin 55.2 % 1.1 pts — pts — pts 56.3 %
S,G&A $ 9,912 $ (554) $ — $ — $ 9,358
Other (Income) & Expense (550) (68) (194) — (812)
Total Expense & Other (Income) 13,399 (622) (194) — 12,584
Pre-tax Income from Continuing Operations 3,293 963 194 — 4,449
Pre-tax Income Margin from Continuing 10.9 % 3.2 pts 0.6 pts — pts 14.7 %
Operations
Provision for/(Benefit from) Income Taxes (4) $ (112) $ 255 $ 31 $ 436 $ 610
Effective Tax Rate (3.4) % 6.5 pts 0.9 pts 9.8 pts 13.7 %
Income from Continuing Operations $ 3,405 $ 707 $ 163 $ (436) $ 3,839
Income Margin from Continuing Operations 11.3 % 2.3 pts 0.5 pts (1.4) pts 12.7 %
Diluted Earnings Per Share: Continuing $ 3.65 $ 0.76 $ 0.17 $ (0.47) $ 4.11
Operations
Six Months Ended June 30, 2023
Continuing Operations
GAAP Acquisition- Related Adjustments (1) Retirement- Related Adjustments (2) Tax Reform Impacts Operating (Non-GAAP)
Gross Profit $ 16,010 $ 298 $ — $ — $ 16,308
Gross Profit Margin 53.9 % 1.0 pts — pts — pts 54.9 %
S,G&A $ 9,754 $ (491) $ — $ — $ 9,263
Other (Income) & Expense (506) (2) 4 — (504)
Total Expense & Other (Income) 12,952 (493) 4 — 12,463
Pre-tax Income from Continuing Operations 3,058 791 (4) — 3,845
Pre-tax Income Margin from Continuing 10.3 % 2.7 pts 0.0 pts — pts 12.9 %
Operations
Provision for/(Benefit from) Income Taxes (4) $ 543 $ 178 $ (14) $ (115) $ 593
Effective Tax Rate 17.8 % 1.0 pts (0.3) pts (3.0) pts 15.4 %
Income from Continuing Operations $ 2,515 $ 613 $ 10 $ 115 $ 3,252
Income Margin from Continuing Operations 8.5 % 2.1 pts 0.0 pts 0.4 pts 10.9 %
Diluted Earnings Per Share: Continuing $ 2.74 $ 0.67 $ 0.01 $ 0.13 $ 3.54
Operations
____________________
(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. 2024 also includes a loss of $68 million on foreign
exchange derivative contracts entered into by the company prior to the acquisition of StreamSets and webMethods from Software AG.
(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) 2024 includes a net benefit from discrete tax events.
(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 GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in Billions) 2024 2023 2024 2023
Net Cash Provided by Operating Activities $ 2.1 $ 2.6 $ 6.2 $ 6.4
Add:
Net interest expense 0.2 0.2 0.4 0.4
Provision for/(Benefit from) income taxes from continuing operations 0.4 0.4 (0.1) 0.5
Less change in:
Financing receivables (0.9) 0.1 1.0 2.0
Other assets and liabilities/Other, net (1) (0.4) (0.5) (1.5) (1.2)
Adjusted EBITDA $ 4.0 $ 3.7 $ 7.1 $ 6.5
____________________
(1) Other assets and liabilities/Other, net mainly consists of Operating assets and liabilities/Other, net in the Cash flow chart, workforce
rebalancing charges, non-operating impacts and corporate (gains) and charges.
SOURCE IBM
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