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IBM Reports 2021 Second-Quarter Results – Yahoo Finance

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IBM Reports 2021 Second-Quarter Results - Yahoo Finance

Improved Revenue Growth Led by Hybrid Cloud Platform Adoption, Consulting and Software

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Highlights

Second Quarter:

  • Revenue of $18.7 billion, up 3 percent (flat adjusting for divested businesses and currency)
    — Cloud & Cognitive Software up 6 percent (up 2 percent adjusting for currency)
    — Global Business Services up 12 percent (up 7 percent adjusting for currency)

  • Net cash from operating activities of $17.7 billion and adjusted free cash flow of $11.0 billion, over last 12 months

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    Total cloud revenue over last 12 months of $27.0 billion, up 15 percent (up 13 percent adjusting for divested businesses and currency)

  • Total cloud revenue in the quarter of $7.0 billion, up 13 percent (up 9 percent adjusting for divested businesses and currency) led by
    — Cloud & Cognitive Software cloud revenue up 29 percent (up 25 percent adjusting for currency)
    — Global Business Services cloud revenue up 35 percent (up 30 percent adjusting for currency)

  • Red Hat revenue up 20 percent (up 17 percent adjusting for currency), normalized for historical comparability

  • GAAP gross profit margin of 48.0 percent, flat; Operating (non-GAAP) gross profit margin of 49.3 percent, up 30 basis points

  • Debt reduced by $6.4 billion since year-end 2020

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ARMONK, N.Y., July 20, 2021–(BUSINESS WIRE)–

IBM (NYSE: IBM) today announced second-quarter 2021 earnings results.

“In the second quarter client adoption of our hybrid cloud platform contributed to strong performance in Global Business Services and software and drove improved overall revenue growth. At the same time, we continued to help clients infuse our AI-based technology offerings into their core business workflows,” said Arvind Krishna, IBM chairman and chief executive officer. “We are pleased with our progress and we remain on track to deliver full-year revenue growth and meet our cash flow objective.”

SECOND QUARTER 2021

Pre-tax

Gross

Diluted

Net

Pre-tax

Income

Profit

EPS

Income

Income

Margin

Margin

GAAP from Continuing Operations

$

1.47

$

1.3B

$

1.6B

8.3

%

48.0

%

Year/Year

(3)

%

(3)

%

(1)

%

(0.4)

Pts

0.0

Pts

Operating (Non-GAAP)

$

2.33

$

2.1B

$

2.5B

13.5

%

49.3

%

Year/Year

7

%

8

%

9

%

0.7

Pts

0.3

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. The impact of the Kyndryl separation costs for second-quarter 2021 was ($0.15) per share.

“We expanded operating margins and grew profit dollars in the quarter, providing a key contribution to our cash performance,” said James Kavanaugh, IBM senior vice president and chief financial officer. “In the first half of the year we increased adjusted free cash flow, invested in strategic acquisitions to strengthen our hybrid cloud and AI capabilities, continued to deleverage and, consistent with our commitment, again increased our dividend.”

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $2.6 billion. IBM’s free cash flow was $1.0 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 $1.6 billion. The company returned $1.5 billion to shareholders in dividends.

In the first six months of the year, the company generated net cash from operating activities of $7.5 billion. Free cash flow for the first six months was $2.6 billion. The company’s adjusted free cash flow, excluding cash impacts of $1.2 billion for the structural actions and transaction separation costs, was $3.8 billion.

Over the last 12 months, the company generated net cash from operating activities of $17.7 billion. IBM’s free cash flow for the last 12 months was $9.7 billion. The company’s adjusted free cash flow, excluding cash impacts of $1.3 billion for the structural actions and transaction separation costs, was $11.0 billion.

IBM ended the second quarter with $8.2 billion of cash on hand (includes marketable securities), down $6.1 billion from year-end 2020 due primarily to acquisitions and debt reduction payments. Debt, including Global Financing debt of $17.5 billion, totaled $55.2 billion, down $6.4 billion since the end of 2020, and down $17.9 billion since closing the Red Hat acquisition.

Segment Results for Second Quarter

  • Cloud & Cognitive Software (includes Cloud & Data Platforms, Cognitive Applications and Transaction Processing Platforms) —revenues of $6.1 billion, up 6.1 percent (up 2.5 percent adjusting for currency). Cloud & Data Platforms grew 12 percent (up 8 percent adjusting for currency), led by the company’s hybrid cloud platform and Cloud Pak growth. Cognitive Applications grew 12 percent (up 8 percent adjusting for currency), led by growth in Security and AI applications. Transaction Processing Platforms declined 7 percent (down 11 percent adjusting for currency). Cloud revenue up 29 percent (up 25 percent adjusting for currency).

  • Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $4.3 billion, up 11.6 percent (up 7.3 percent adjusting for currency), with growth in Consulting, up 16 percent (up 11 percent adjusting for currency), Application Management up 5 percent (up 1 percent adjusting for currency) and Global Process Services up 28 percent (up 25 percent adjusting for currency). Cloud revenue up 35 percent (up 30 percent adjusting for currency). Gross profit margin declined 60 basis points.

  • Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.3 billion, up 0.4 percent (down 4.1 percent adjusting for currency). Both Infrastructure & Cloud Services and Technology Support Services were flat (down 4 percent adjusting for currency). Cloud revenue down 1 percent (down 5 percent adjusting for currency). Gross profit margin up 110 basis points.

  • Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.7 billion, down 7.3 percent (down 10.2 percent adjusting for currency), driven by declines in IBM Z (down 11 percent; down 13 percent adjusting for currency) and Storage Systems (down 7 percent, down 10 percent adjusting for currency). Power systems declined 2 percent (down 5 percent adjusting for currency). Cloud revenue down 16 percent (down 19 percent adjusting for currency).

  • Global Financing (includes financing and used equipment sales) — revenues of $242 million, down 8.6 percent (down 11.6 percent adjusting for currency).

Year-To-Date 2021 Results

Revenues for the six-month period ended June 30, 2021 totaled $36.5 billion, an increase of 2 percent year to year (down 1 percent adjusting for divested businesses and currency) compared with $35.7 billion for the first six months of 2020. Net income was $2.3 billion, down 10 percent year to year. Diluted earnings per share was $2.52 compared with $2.83 per diluted share for the 2020 period, a decrease of 11 percent.

GAAP earnings per share results include a ($1.58) 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 ($0.20) per share.

Operating (non-GAAP) net income for the six months ended June 30, 2021 was $3.7 billion compared with $3.6 billion in the prior-year period, an increase of 3 percent. Operating (non-GAAP) diluted earnings per share from continuing operations was $4.10 compared with $4.02 per diluted share for the 2020 period, an increase of 2 percent.

Full-Year 2021 Expectations

The company expects to grow revenue for the full year 2021 based on mid-July 2021 foreign exchange rates. The company continues to expect adjusted free cash flow of $11 billion to $12 billion in 2021. Adjusted free cash flow expectations exclude approximately $3 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.

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;

  • 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-2q21. 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

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

REVENUE

Cloud & Cognitive Software

$

6,098

$

5,748

$

11,534

$

10,987

Global Business Services

4,341

3,890

8,575

8,027

Global Technology Services

6,342

6,316

12,712

12,783

Systems

1,717

1,852

3,144

3,220

Global Financing

242

265

482

564

Other

5

50

28

113

TOTAL REVENUE

18,745

18,123

36,474

35,694

GROSS PROFIT

9,004

8,700

17,208

16,622

GROSS PROFIT MARGIN

Cloud & Cognitive Software

78.1

%

77.1

%

77.1

%

76.3

%

Global Business Services

27.9

%

28.4

%

28.0

%

27.8

%

Global Technology Services

35.3

%

34.2

%

34.9

%

34.1

%

Systems

55.1

%

57.8

%

54.8

%

54.6

%

Global Financing

27.4

%

38.6

%

29.7

%

39.7

%

TOTAL GROSS PROFIT MARGIN

48.0

%

48.0

%

47.2

%

46.6

%

EXPENSE AND OTHER INCOME

S,G&A

5,334

5,248

10,508

11,203

R,D&E

1,657

1,582

3,286

3,207

Intellectual property and custom development income

(135

)

(203

)

(282

)

(319

)

Other (income) and expense

315

179

676

361

Interest expense

281

323

562

649

TOTAL EXPENSE AND OTHER INCOME

7,451

7,129

14,751

15,101

INCOME/(LOSS) FROM CONTINUING OPERATIONS

BEFORE INCOME TAXES

1,552

1,571

2,457

1,522

Pre-tax margin

8.3

%

8.7

%

6.7

%

4.3

%

Provision for/(Benefit from) income taxes

227

209

177

(1,017

)

Effective tax rate

14.7

%

13.3

%

7.2

%

(66.8

)

%

INCOME FROM CONTINUING OPERATIONS

$

1,325

$

1,362

$

2,281

$

2,538

DISCONTINUED OPERATIONS

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

(1

)

(1

)

(2

)

NET INCOME

$

1,325

$

1,361

$

2,280

$

2,536

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK

Assuming Dilution

Continuing Operations

$

1.47

$

1.52

$

2.52

$

2.83

Discontinued Operations

$

0.00

$

0.00

$

0.00

$

0.00

TOTAL

$

1.47

$

1.52

$

2.52

$

2.83

Basic

Continuing Operations

$

1.48

$

1.53

$

2.55

$

2.85

Discontinued Operations

$

0.00

$

0.00

$

0.00

$

0.00

TOTAL

$

1.48

$

1.53

$

2.55

$

2.85

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

Assuming Dilution

904.2

894.9

903.0

895.0

Basic

895.0

889.4

894.3

888.7

INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

At

At

June 30,

December 31,

(Dollars in Millions)

2021

2020

ASSETS:

Current Assets:

Cash and cash equivalents

$

7,350

$

13,212

Restricted cash

215

463

Marketable securities

600

600

Notes and accounts receivable – trade, net

6,827

7,132

Short-term financing receivables, net

8,194

10,892

Other accounts receivable, net

802

714

Inventories

1,807

1,839

Deferred costs

2,211

2,107

Prepaid expenses and other current assets

2,768

2,206

Total Current Assets

30,774

39,165

Property, plant and equipment, net

9,423

10,040

Operating right-of-use assets, net

4,387

4,686

Long-term financing receivables, net

5,674

7,086

Prepaid pension assets

8,046

7,610

Deferred costs

2,362

2,449

Deferred taxes

8,954

9,241

Goodwill

61,645

59,617

Intangibles, net

13,539

13,796

Investments and sundry assets

2,010

2,282

Total Assets

$

146,814

$

155,971

LIABILITIES:

Current Liabilities:

Taxes

$

2,260

$

3,301

Short-term debt

6,442

7,183

Accounts payable

4,214

4,908

Deferred income

13,272

12,833

Operating lease liabilities

1,334

1,357

Other liabilities

9,095

10,287

Total Current Liabilities

36,616

39,869

Long-term debt

48,735

54,355

Retirement related obligations

17,265

18,248

Deferred income

4,113

4,301

Operating lease liabilities

3,278

3,574

Other liabilities

14,741

14,897

Total Liabilities

124,747

135,244

EQUITY:

IBM Stockholders’ Equity:

Common stock

56,912

56,556

Retained earnings

162,086

162,717

Treasury stock — at cost

(169,404

)

(169,339

)

Accumulated other comprehensive income/(loss)

(27,652

)

(29,337

)

Total IBM Stockholders’ Equity

21,942

20,597

Noncontrolling interests

125

129

Total Equity

22,067

20,727

Total Liabilities and Equity

$

146,814

$

155,971

INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)

Trailing Twelve

Three Months Ended

Six Months Ended

Months Ended

June 30,

June 30,

June 30,

(Dollars in Millions)

2021

2020

2021

2020

2021

Net Cash Provided by Operating Activities per GAAP:

$

2,625

$

3,576

$

7,539

$

8,052

$

17,684

Less: Change in Global Financing (GF) Receivables

900

589

3,763

2,971

5,142

Capital Expenditures, net

(688

)

(697

)

(1,217

)

(1,434

)

(2,826

)

Free Cash Flow

1,037

2,290

2,559

3,647

9,716

Structural actions initiated in 4Q20 & Separation charges (1)

595

1,224

1,274

Adjusted Free Cash Flow

1,631

2,290

3,783

3,647

10,990

Free Cash Flow

1,037

2,290

2,559

3,647

9,716

Acquisitions

(1,747

)

(6

)

(2,866

)

(19

)

(3,182

)

Divestitures

(10

)

731

(25

)

757

(280

)

Dividends

(1,467

)

(1,450

)

(2,924

)

(2,890

)

(5,832

)

Non-GF Debt

(586

)

455

(2,331

)

3,958

(6,068

)

Other (includes GF Net Receivables and GF Debt)

(335

)

213

(522

)

(213

)

(440

)

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

$

(3,108

)

$

2,233

$

(6,110

)

$

5,241

$

(6,085

)

___________________________
(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

Six Months Ended

June 30,

June 30,

(Dollars in Millions)

2021

2020

2021

2020

Net Income from Operations

$

1,325

$

1,361

$

2,280

$

2,536

Depreciation/Amortization of Intangibles

1,680

1,678

3,352

3,313

Stock-based Compensation

243

247

457

436

Working Capital / Other

(1,524

)

(300

)

(2,313

)

(1,204

)

Global Financing A/R

900

589

3,763

2,971

Net Cash Provided by Operating Activities

$

2,625

$

3,576

$

7,539

$

8,052

Capital Expenditures, net of payments & proceeds

(688

)

(697

)

(1,217

)

(1,434

)

Divestitures, net of cash transferred

(10

)

731

(25

)

757

Acquisitions, net of cash acquired

(1,747

)

(6

)

(2,866

)

(19

)

Marketable Securities / Other Investments, net

(227

)

(1,264

)

(562

)

(1,442

)

Net Cash Provided by/(Used in) Investing Activities

$

(2,671

)

$

(1,236

)

$

(4,671

)

$

(2,138

)

Debt, net of payments & proceeds

(1,500

)

(38

)

(5,799

)

1,319

Dividends

(1,467

)

(1,450

)

(2,924

)

(2,890

)

Common Stock Transactions – Other

(163

)

(137

)

(190

)

(168

)

Net Cash Provided by/(Used in) Financing Activities

$

(3,131

)

$

(1,624

)

$

(8,914

)

$

(1,739

)

Effect of Exchange Rate changes on Cash

69

101

(65

)

(301

)

Net Change in Cash, Cash Equivalents and Restricted Cash

$

(3,108

)

$

817

$

(6,110

)

$

3,874

INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)

Three Months Ended June 30, 2021

Cloud &

Global

Global

Cognitive

Business

Technology

Global

(Dollars in Millions)

Software

Services

Services

Systems

Financing

Revenue

External

$

6,098

$

4,341

$

6,342

$

1,717

$

242

Internal

726

58

326

241

260

Total Segment Revenue

$

6,824

$

4,399

$

6,668

$

1,958

$

502

Pre-tax Income/(Loss) from Continuing Operations

1,720

371

381

176

246

Pre-tax Margin

25.2

%

8.4

%

5.7

%

9.0

%

48.9

%

Change YTY Revenue – External

6.1

%

11.6

%

0.4

%

(7.3

)

%

(8.6

)

%

Change YTY Revenue – External @constant currency

2.5

%

7.3

%

(4.1

)

%

(10.2

)

%

(11.6

)

%

Three Months Ended June 30, 2020

Cloud &

Global

Global

Cognitive

Business

Technology

Global

(Dollars in Millions)

Software

Services

Services

Systems

Financing

Revenue

External

$

5,748

$

3,890

$

6,316

$

1,852

$

265

Internal

743

55

304

240

241

Total Segment Revenue

$

6,491

$

3,945

$

6,621

$

2,092

$

506

Pre-tax Income/(Loss) from Continuing Operations

1,708

362

250

248

176

Pre-tax Margin

26.3

%

9.2

%

3.8

%

11.8

%

34.9

%

INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)

Six Months Ended June 30, 2021

Cloud &

Global

Global

Cognitive

Business

Technology

Global

(Dollars in Millions)

Software

Services

Services

Systems

Financing

Revenue

External

$

11,534

$

8,575

$

12,712

$

3,144

$

482

Internal

1,558

113

639

430

428

Total Segment Revenue

$

13,093

$

8,688

$

13,351

$

3,574

$

910

Pre-tax Income/(Loss) from Continuing Operations

3,147

761

520

174

412

Pre-tax Margin

24.0

%

8.8

%

3.9

%

4.9

%

45.3

%

Change YTY Revenue – External

5.0

%

6.8

%

(0.6

)

%

(2.4

)

%

(14.7

)

%

Change YTY Revenue – External @constant currency

1.6

%

2.8

%

(4.7

)

%

(5.0

)

%

(17.1

)

%

Six Months Ended June 30, 2020

Cloud &

Global

Global

Cognitive

Business

Technology

Global

(Dollars in Millions)

Software

Services

Services

Systems

Financing

Revenue

External

$

10,987

$

8,027

$

12,783

$

3,220

$

564

Internal

1,556

101

599

388

453

Total Segment Revenue

$

12,543

$

8,128

$

13,382

$

3,608

$

1,017

Pre-tax Income/(Loss) from Continuing Operations

2,641

633

72

31

370

Pre-tax Margin

21.1

%

7.8

%

0.5

%

0.9

%

36.4

%

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, 2021

Continuing Operations

Acquisition-

Retirement-

Tax

Separation-

Related

Related

Reform

Related

Operating

GAAP

Adjustments (1)

Adjustments (2)

Impacts

Charges (4)

(Non-GAAP)

Gross Profit

$

9,004

$

180

$

$

$

58

$

9,242

Gross Profit Margin

48.0

%

1.0

Pts

Pts

Pts

0.3

Pts

49.3

%

S,G&A

5,334

(298

)

(116

)

4,919

R,D&E

1,657

(0

)

1,656

Other (Income) & Expense

315

(1

)

(328

)

(14

)

Interest Expense

281

281

Total Expense & Other (Income)

7,451

(299

)

(328

)

(117

)

6,708

Pre-tax Income from Continuing Operations

1,552

479

328

175

2,534

Pre-tax Income Margin from Continuing Operations

8.3

%

2.6

Pts

1.7

Pts

Pts

0.9

Pts

13.5

%

Provision for/(Benefit from) Income Taxes (3)

227

107

67

(14

)

44

431

Effective Tax Rate

14.7

%

1.4

Pts

0.7

Pts

(0.5

)

Pts

0.7

Pts

17.0

%

Income from Continuing Operations

1,325

373

261

14

131

2,103

Income Margin from Continuing Operations

7.1

%

2.0

Pts

1.4

Pts

0.1

Pts

0.7

Pts

11.2

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

$

1.47

$

0.41

$

0.29

$

0.01

$

0.15

$

2.33

Three Months Ended June 30, 2020

Continuing Operations

Acquisition-

Retirement-

Tax

Separation-

Related

Related

Reform

Related

Operating

GAAP

Adjustments (1)

Adjustments (2)

Impacts

Charges (4)

(Non-GAAP)

Gross Profit

$

8,700

$

187

$

$

$

$

8,887

Gross Profit Margin

48.0

%

1.0

Pts

Pts

Pts

Pts

49.0

%

S,G&A

5,248

(285

)

4,962

R,D&E

1,582

1,582

Other (Income) & Expense

179

(1

)

(273

)

(95

)

Interest Expense

323

323

Total Expense & Other (Income)

7,129

(286

)

(273

)

6,570

Pre-tax Income/(Loss) from Continuing Operations

1,571

473

273

2,318

Pre-tax Income Margin from Continuing Operations

8.7

%

2.6

Pts

1.5

Pts

Pts

Pts

12.8

%

Provision for/(Benefit from) Income Taxes (3)

209

108

52

369

Effective Tax Rate

13.3

%

1.9

Pts

0.7

Pts

Pts

Pts

15.9

%

Income from Continuing Operations

1,362

365

222

1,949

Income Margin from Continuing Operations

7.5

%

2.0

Pts

1.2

Pts

Pts

Pts

10.8

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

$

1.52

$

0.41

$

0.25

$

$

$

2.18

___________________
(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 charges.

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, 2021

Continuing Operations

Acquisition-

Retirement-

Tax

Separation-

Related

Related

Reform

Related

Operating

GAAP

Adjustments (1)

Adjustments (2)

Impacts

Charges (4)

(Non-GAAP)

Gross Profit

$

17,208

$

355

$

$

$

61

$

17,624

Gross Profit Margin

47.2

%

1.0

Pts

Pts

Pts

0.2

Pts

48.3

%

S,G&A

10,508

(591

)

(175

)

9,742

R,D&E

3,286

(0

)

3,286

Other (Income) & Expense

676

(1

)

(670

)

5

Interest Expense

562

562

Total Expense & Other (Income)

14,751

(593

)

(670

)

(175

)

13,313

Pre-tax Income from Continuing Operations

2,457

948

670

236

4,312

Pre-tax Income Margin from Continuing Operations

6.7

%

2.6

Pts

1.8

Pts

Pts

0.6

Pts

11.8

%

Provision for/(Benefit from) Income Taxes (3)

177

240

128

6

59

610

Effective Tax Rate

7.2

%

4.0

Pts

1.9

Pts

0.1

Pts

1.0

Pts

14.1

%

Income from Continuing Operations

2,281

707

542

(6

)

177

3,702

Income Margin from Continuing Operations

6.3

%

1.9

Pts

1.5

Pts

(0.0

)

Pts

0.5

Pts

10.1

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

$

2.52

$

0.79

$

0.60

$

(0.01

)

$

0.20

$

4.10

Six Months Ended June 30, 2020

Continuing Operations

Acquisition-

Retirement-

Tax

Separation-

Related

Related

Reform

Related

Operating

GAAP

Adjustments (1)

Adjustments (2)

Impacts

Charges (4)

(Non-GAAP)

Gross Profit

$

16,622

$

375

$

$

$

$

16,998

Gross Profit Margin

46.6

%

1.1

Pts

Pts

Pts

Pts

47.6

%

S,G&A

11,203

(570

)

10,633

R,D&E

3,207

3,207

Other (Income) & Expense

361

(1

)

(538

)

(178

)

Interest Expense

649

649

Total Expense & Other (Income)

15,101

(571

)

(538

)

13,992

Pre-tax Income from Continuing Operations

1,522

946

538

3,006

Pre-tax Income Margin from Continuing Operations

4.3

%

2.7

Pts

1.5

Pts

Pts

Pts

8.4

%

Provision for/(Benefit from) Income Taxes (3)

(1,017

)

210

65

149

(592

)

Effective Tax Rate

(66.8

)

%

28.0

Pts

14.1

Pts

5.0

Pts

Pts

(19.7

)

%

Income from Continuing Operations

2,538

736

472

(149

)

3,598

Income Margin from Continuing Operations

7.1

%

2.1

Pts

1.3

Pts

(0.4

)

Pts

Pts

10.1

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

$

2.83

$

0.83

$

0.53

$

(0.17

)

$

$

4.02

_______________________
(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 charges.

INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; Dollars in millions except per share amounts)

Trailing

Three Months Ended

Six Months Ended

Twelve Months Ended

June 30, 2021

June 30, 2021

June 30, 2021

Change YTY

Change YTY

Change YTY

Revenue Adjusting for Divested Businesses and Currency

Cloud

Total IBM

Total IBM

Cloud

Revenue as reported

12.6

%

3.4

%

2.2

%

15.2

%

Impact from divested businesses

0.2

Pts

0.1

Pts

0.1

Pts

0.5

Pts

Currency impact

(4.1

)

Pts

(4.0

)

Pts

(3.7

)

Pts

(3.1

)

Pts

Revenue adjusting for divested businesses and currency (non-GAAP)

8.7

%

(0.5

)

%

(1.4

)

%

12.6

%

Three Months Ended

June 30, 2021

Red Hat Revenue, Normalized for Historical Comparability

Change YTY

Red Hat Revenue GAAP growth rate (1)

36

%

Impact from purchase accounting deferred revenue and intercompany adjustments (2)

(16

)

Pts

Red Hat revenue growth rate, normalized for historical comparability (non-GAAP)

20

%

Impact from currency

(3

)

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 second-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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210719005788/en/

Contacts

IBM
Sarah Meron, 347‑891‑1770
[email protected]

John Bukovinsky, 732‑618‑3531
[email protected]

Published at Mon, 19 Jul 2021 23:58:08 +0000

This post originally posted here https://finance.yahoo.com/news/ibm-reports-2021-second-quarter-060000221.html

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IBM Reports 2021 Second-Quarter Results - Yahoo Finance
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