Revenue growth led by Software and Consulting; Strong profit and cash generation
ARMONK, N.Y., Oct. 25, 2023 /PRNewswire/ — IBM (NYSE: IBM) today announced third-quarter 2023 earnings results.
“Technology remains a critical source of competitive differentiation and progress for organizations around the world,” said Arvind Krishna, IBM chairman and chief executive officer. “Clients are increasingly adopting our watsonx AI and data platform along with our hybrid cloud solutions to unlock productivity and operational efficiency. This is helping drive solid growth in our software and consulting businesses. As a result, we remain confident in our revenue and free cash flow growth expectations for the full year.”
Third-Quarter Highlights
Revenue
– Revenue of $14.8 billion, up 4.6 percent, up 3.5 percent at constant currency
– Software revenue up 8 percent, up 6 percent at constant currency
– Consulting revenue up 6 percent, up 5 percent at constant currency
– Infrastructure revenue down 2 percent, down 3 percent at constant currencyProfit Margin
– Gross Profit Margin: GAAP: 54.4 percent, up 1.7 points; Operating (Non-GAAP): 55.5 percent, up 1.6 points
– Pre-Tax Income Margin: GAAP: 12.7 percent, up 44.6 points; Operating (Non-GAAP): 15.6 percent, up 1.7 pointsCash Flow
– Year to date net cash from operating activities of $9.5 billion, up $3.0 billion; free cash flow of $5.1 billion, up $1.0 billion
THIRD QUARTER 2023 INCOME STATEMENT SUMMARY
Revenue
Gross
Profit
Gross
Profit
Margin
Pre-tax
Income
Pre-tax
Income
Margin
Net
Income
Diluted
Earnings
Per Share
GAAP from
Continuing
Operations
$ 14.8 B
$ 8.0 B
54.4
%
$ 1.9 B
12.7
%
$ 1.7 B
$ 1.86
Year/Year
4.6
%*
8
%
1.7
Pts
NM
**
44.6
Pts**
NM
**
NM
**
Operating
(Non-GAAP)
$ 8.2 B
55.5
%
$ 2.3 B
15.6
%
$ 2.0 B
$ 2.20
Year/Year
8
%
1.6
Pts
17
%
1.7
Pts
23
%
22
%
* 3.5% at constant currency
** GAAP YTY results include the impact of a one-time, non-cash pension settlement charge 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 in third quarter 2022.
“Our continued focus on the fundamentals of our business is driving solid revenue growth, profit margin expansion, and strong cash generation,” said James Kavanaugh, IBM senior vice president and chief financial officer. “That cash generation has enabled us to increase our investment in R&D and acquisitions, strengthening our future AI and hybrid cloud capabilities, while supporting continued shareholder returns through our dividend.”
Segment Results for Third Quarter
Software — revenues of $6.3 billion, up 7.8 percent, up 6.3 percent at constant currency:
– Hybrid Platform & Solutions up 8 percent, up 7 percent at constant currency:
— Red Hat up 9 percent, up 8 percent at constant currency
— Automation up 14 percent, up 13 percent at constant currency
— Data & AI up 6 percent
— Security down 2 percent, down 3 percent at constant currency
– Transaction Processing up 7 percent, up 5 percent at constant currencyConsulting — revenues of $5.0 billion, up 5.6 percent, up 5.0 percent at constant currency:
– Business Transformation up 6 percent, up 5 percent at constant currency
– Technology Consulting up 2 percent, up 1 percent at constant currency
– Application Operations up 7 percentInfrastructure — revenues of $3.3 billion, down 2.4 percent, down 3.2 percent at constant currency:
– Hybrid Infrastructure up 1 percent, flat at constant currency
— IBM zSystems up 9 percent
— Distributed Infrastructure down 4 percent, down 6 percent at constant currency
– Infrastructure Support down 6 percent, down 7 percent at constant currencyFinancing — revenues of $0.2 billion, up 6.9 percent, up 5.1 percent at constant currency
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from operating activities of $3.1 billion, up $1.2 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $2.0 billion. IBM’s free cash flow was $1.7 billion, up $0.9 billion year to year. The company returned $1.5 billion to shareholders in dividends in the third quarter.
For the first nine months of the year, the company generated net cash from operating activities of $9.5 billion, up $3.0 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $6.3 billion. IBM’s free cash flow was $5.1 billion, up $1.0 billion year to year.
IBM ended the third quarter with $11.0 billion of cash and marketable securities, up $2.2 billion from year-end 2022. Debt, including IBM Financing debt of $9.9 billion, totaled $55.2 billion, up $4.3 billion since the end of 2022.
Full-Year 2023 Expectations
Revenue: The company continues to expect constant currency revenue growth of three percent to five percent. At current foreign exchange rates, currency is expected to be about a one-point headwind to revenue growth.Free cash flow: The company continues to expect about $10.5 billion in 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
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.
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. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-3q23. 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
September 30,
Nine Months Ended
September 30,
2023
2022*
2023
2022*
REVENUE BY SEGMENT
Software
$ 6,265
$ 5,811
$ 18,794
$ 17,749
Consulting
4,963
4,700
14,938
14,337
Infrastructure
3,272
3,352
9,988
10,805
Financing
186
174
566
474
Other
67
70
192
475
TOTAL REVENUE
14,752
14,107
44,479
43,840
GROSS PROFIT
8,023
7,430
24,033
23,055
GROSS PROFIT MARGIN
Software
79.5
%
79.0
%
79.4
%
79.0
%
Consulting
27.4
%
26.0
%
26.2
%
24.8
%
Infrastructure
53.5
%
50.8
%
53.8
%
51.9
%
Financing
49.7
%
32.8
%
47.5
%
35.1
%
TOTAL GROSS PROFIT MARGIN
54.4
%
52.7
%
54.0
%
52.6
%
EXPENSE AND OTHER INCOME
S,G&A
4,458
4,391
14,212
13,843
R,D&E
1,685
1,611
5,027
4,963
Intellectual property and custom development income
(190)
(121)
(618)
(418)
Other (income) and expense
(215)
5,755
(721)
5,921
Interest expense
412
295
1,202
903
TOTAL EXPENSE AND OTHER INCOME
6,150
11,931
19,102
25,212
INCOME/(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
1,873
(4,501)
4,931
(2,156)
Pre-tax margin
12.7
%
(31.9)
%
11.1
%
(4.9)
%
Provision for/(Benefit from) income taxes
159
(1,287)
702
(1,070)
Effective tax rate
8.5
%
28.6
%
14.2
%
49.6
%
INCOME/(LOSS) FROM CONTINUING OPERATIONS
$ 1,714
$ (3,214)
$ 4,229
$ (1,087)
DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of taxes
(10)
18
(15)
16
NET INCOME/(LOSS)
$ 1,704
$ (3,196)
$ 4,214
$ (1,071)
EARNINGS/(LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations
$ 1.86
$ (3.55)
$ 4.59
$ (1.21)
Discontinued Operations
$ (0.01)
$ 0.02
$ (0.02)
$ 0.02
TOTAL
$ 1.84
$ (3.54)
$ 4.58
$ (1.19)
Basic
Continuing Operations
$ 1.88
$ (3.55)
$ 4.65
$ (1.21)
Discontinued Operations
$ (0.01)
$ 0.02
$ (0.02)
$ 0.02
TOTAL
$ 1.87
$ (3.54)
$ 4.63
$ (1.19)
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (M’s)
Assuming Dilution
923.7
904.1
920.3
901.6
Basic
912.8
904.1
910.1
901.6
_________________________
* Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in Millions)
At
September 30,
2023
At
December 31,
2022
ASSETS:
Current Assets:
Cash and cash equivalents
$ 7,257
$ 7,886
Restricted cash
19
103
Marketable securities
3,721
852
Notes and accounts receivable – trade, net
5,330
6,541
Short-term financing receivables, net
5,625
7,790
Other accounts receivable, net
842
817
Inventories
1,399
1,552
Deferred costs
931
967
Prepaid expenses and other current assets
2,582
2,611
Total Current Assets
27,705
29,118
Property, plant and equipment, net
5,369
5,334
Operating right-of-use assets, net
3,112
2,878
Long-term financing receivables, net
4,789
5,806
Prepaid pension assets
8,901
8,236
Deferred costs
822
866
Deferred taxes
6,168
6,256
Goodwill
59,596
55,949
Intangibles, net
11,278
11,184
Investments and sundry assets
1,582
1,617
Total Assets
$ 129,321
$ 127,243
LIABILITIES:
Current Liabilities:
Taxes
$ 1,559
$ 2,196
Short-term debt
6,414
4,760
Accounts payable
3,342
4,051
Deferred income
11,917
12,032
Operating lease liabilities
807
874
Other liabilities
6,566
7,592
Total Current Liabilities
30,606
31,505
Long-term debt
48,828
46,189
Retirement related obligations
9,090
9,596
Deferred income
3,085
3,499
Operating lease liabilities
2,476
2,190
Other liabilities
12,081
12,243
Total Liabilities
106,165
105,222
EQUITY:
IBM Stockholders’ Equity:
Common stock
59,313
58,343
Retained earnings
149,506
149,825
Treasury stock — at cost
(169,640)
(169,484)
Accumulated other comprehensive income/(loss)
(16,098)
(16,740)
Total IBM Stockholders’ Equity
23,081
21,944
Noncontrolling interests
75
77
Total Equity
23,156
22,021
Total Liabilities and Equity
$ 129,321
$ 127,243
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Trailing Twelve
Months Ended
September 30,
(Dollars in Millions)
2023
2022
2023
2022*
2023
Net Cash from Operations per GAAP
$ 3,055
$ 1,901
$ 9,468
$ 6,470
$ 13,432
Less: change in IBM Financing receivables
1,092
704
3,119
1,071
1,331
Capital Expenditures, net
(282)
(445)
(1,226)
(1,317)
(1,769)
Free Cash Flow
1,682
752
5,123
4,082
10,332
Acquisitions
(4,589)
(62)
(4,945)
(1,020)
(6,274)
Divestitures
(10)
3
(4)
1,271
(3)
Dividends
(1,515)
(1,491)
(4,522)
(4,454)
(6,016)
Non-Financing Debt
(942)
2,946
7,572
4,686
4,795
Other (includes IBM Financing net receivables and
debt)
41
(198)
(1,068)
(2,395)
(1,566)
Change in Cash, Cash Equivalents, Restricted Cash
and Short-term Marketable Securities
$ (5,333)
$ 1,950
$ 2,156
$ 2,171
$ 1,268
_________________________
* Includes immaterial cash flows from discontinued operations.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in Millions)
2023
2022
2023
2022*
Net Income/(Loss) from Operations
$ 1,704
$ (3,196)
$ 4,214
$ (1,071)
Pension Settlement Charge
–
5,894
–
5,894
Depreciation/Amortization of Intangibles
1,093
1,163
3,243
3,665
Stock-based Compensation
286
251
843
739
Working Capital / Other
(1,119)
(2,914)
(1,952)
(3,827)
IBM Financing A/R
1,092
704
3,119
1,071
Net Cash Provided by Operating Activities
$ 3,055
$ 1,901
$ 9,468
$ 6,470
Capital Expenditures, net of payments & proceeds
(282)
(445)
(1,226)
(1,317)
Divestitures, net of cash transferred
(10)
3
(4)
1,271
Acquisitions, net of cash acquired
(4,589)
(62)
(4,945)
(1,020)
Marketable Securities / Other Investments, net
2,927
(1,193)
(3,732)
(1,818)
Net Cash Provided by/(Used in) Investing Activities
$ (1,953)
$ (1,697)
$ (9,906)
$ (2,883)
Debt, net of payments & proceeds
(1,550)
2,138
4,619
2,572
Dividends
(1,515)
(1,491)
(4,522)
(4,454)
Financing – Other
(67)
67
(252)
(223)
Net Cash Provided by/(Used in) Financing Activities
$ (3,132)
$ 714
$ (154)
$ (2,106)
Effect of Exchange Rate changes on Cash
(119)
(197)
(120)
(463)
Net Change in Cash, Cash Equivalents and Restricted
Cash
$ (2,149)
$ 721
$ (713)
$ 1,018
_________________________
* Includes immaterial cash flows from discontinued operations.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Three Months Ended September 30, 2023
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 6,265
$ 4,963
$ 3,272
$ 186
Pre-tax Income from Continuing Operations*
$ 1,486
$ 509
$ 387
$ 91
Pre-tax Margin*
23.7
%
10.2
%
11.8
%
49.2
%
Change YTY Revenue
7.8
%
5.6
%
(2.4)
%
6.9
%
Change YTY Revenue – Constant Currency
6.3
%
5.0
%
(3.2)
%
5.1
%
Three Months Ended September 30, 2022
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 5,811
$ 4,700
$ 3,352
$ 174
Pre-tax Income from Continuing Operations
$ 1,306
$ 462
$ 280
$ 79
Pre-tax Margin
22.5
%
9.8
%
8.3
%
45.4
%
_________________________
* The third quarter 2023 pre-tax charge of approximately $0.03 billion for workforce rebalancing is not included in the measure of
segment pre-tax income, consistent with the company’s management system.
Nine Months Ended September 30, 2023
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 18,794
$ 14,938
$ 9,988
$ 566
Pre-tax Income from Continuing Operations*
$ 4,154
$ 1,336
$ 1,236
$ 256
Pre-tax Margin*
22.1
%
8.9
%
12.4
%
45.3
%
Change YTY Revenue
5.9
%
4.2
%
(7.6)
%
19.5
%
Change YTY Revenue – Constant Currency
6.5
%
6.4
%
(6.4)
%
20.3
%
Nine Months Ended September 30, 2022
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 17,749
$ 14,337
$ 10,805
$ 474
Pre-tax Income from Continuing Operations
$ 3,816
$ 1,154
$ 1,236
$ 265
Pre-tax Margin
21.5
%
8.0
%
11.4
%
55.9
%
_________________________
* The year-to-date 2023 pre-tax charge of approximately $0.41 billion for workforce rebalancing is not included in the measure of
segment pre-tax income, consistent with the company’s management system.
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, 2023
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Kyndryl-
Related
Impacts (3)
Operating
(Non-GAAP)
Gross Profit
$ 8,023
$ 162
$ —
$ —
$ —
$ 8,185
Gross Profit Margin
54.4
%
1.1
pts.
—
pts.
—
pts.
—
pts.
55.5
%
S,G&A
$ 4,458
$ (277)
$ —
$ —
$ —
$ 4,181
Other (Income) & Expense
(215)
—
12
—
—
(203)
Total Expense & Other (Income)
6,150
(277)
12
—
—
5,885
Pre-tax Income from
Continuing Operations
1,873
438
(12)
—
—
2,299
Pre-tax Income Margin from
Continuing Operations
12.7
%
3.0
pts.
(0.1)
pts.
—
pts.
—
pts.
15.6
%
Provision for/(Benefit from)
Income Taxes (4)
$ 159
$ 99
$ (14)
$ 24
$ —
$ 268
Effective Tax Rate
8.5
%
2.7
pts.
(0.5)
pts.
1.0
pts.
—
pts.
11.7
%
Income from Continuing
Operations
$ 1,714
$ 340
$ 1
$ (24)
$ —
$ 2,031
Income Margin from
Continuing Operations
11.6
%
2.3
pts.
0.0
pts.
(0.2)
pts.
—
pts.
13.8
%
Diluted Earnings Per Share:
Continuing Operations
$ 1.86
$ 0.37
$ 0.00
$ (0.03)
$ —
$ 2.20
Three Months Ended September 30, 2022
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Kyndryl-
Related
Impacts (3)
Operating
(Non-GAAP)
Gross Profit
$ 7,430
$ 165
$ —
$ —
$ —
$ 7,595
Gross Profit Margin
52.7
%
1.2
pts.
—
pts.
—
pts.
—
pts.
53.8
%
S,G&A
$ 4,391
$ (253)
$ —
$ —
$ 0
$ 4,138
Other (Income) & Expense
5,755
(1)
(6,062)
—
14
(293)
Total Expense & Other (Income)
11,931
(253)
(6,062)
—
14
5,630
Pre-tax Income/(Loss) from
Continuing Operations
(4,501)
418
6,062
—
(14)
1,965
Pre-tax Income/(Loss) Margin
from Continuing Operations
(31.9)
%
3.0
pts.
43.0
pts.
—
pts.
(0.1)
pts.
13.9
%
Provision for/(Benefit from)
Income Taxes (4)
$ (1,287)
$ 103
$ 1,495
$ —
$ —
$ 312
Effective Tax Rate
28.6
%
(0.8)
pts.
(12.1)
pts.
—
pts.
0.2
pts.
15.9
%
Income/(Loss) from Continuing
Operations
$ (3,214)
$ 315
$ 4,566
$ —
$ (14)
$ 1,653
Income/(Loss) Margin from
Continuing Operations
(22.8)
%
2.2
pts.
32.4
pts.
—
pts.
(0.1)
pts.
11.7
%
Diluted Earnings/(Loss) Per
Share: Continuing Operations (5)
$ (3.55)
$ 0.35
$ 5.05
$ —
$ (0.02)
$ 1.81
_________________________
(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. 2022 also includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion
net of tax).
(3)
Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM and the related 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.
(5)
Due to the GAAP net loss for the three months ended September 30, 2022, dilutive potential shares were excluded from the GAAP loss per share as the effect would
have been antidilutive. The difference in share count resulted in an additional ($0.02) reconciling item.
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, 2023
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Kyndryl-
Related
Impacts (3)
Operating
(Non-GAAP)
Gross Profit
$ 24,033
$ 460
$ —
$ —
$ —
$ 24,492
Gross Profit Margin
54.0
%
1.0
pts.
—
pts.
—
pts.
—
pts.
55.1
%
S,G&A
$ 14,212
$ (768)
$ —
$ —
$ —
$ 13,444
Other (Income) & Expense
(721)
(2)
16
—
—
(707)
Total Expense & Other
(Income)
19,102
(770)
16
—
—
18,348
Pre-tax Income from
Continuing Operations
4,931
1,229
(16)
—
—
6,144
Pre-tax Income Margin from
Continuing Operations
11.1
%
2.8
pts.
0.0
pts.
—
pts.
—
pts.
13.8
%
Provision for/(Benefit from)
Income Taxes (4)
$ 702
$ 277
$ (27)
$ (91)
$ —
$ 861
Effective Tax Rate
14.2
%
1.7
pts.
(0.4)
pts.
(1.5)
pts.
—
pts.
14.0
%
Income from Continuing
Operations
$ 4,229
$ 953
$ 11
$ 91
$ —
$ 5,283
Income Margin from
Continuing Operations
9.5
%
2.1
pts.
0.0
pts.
0.2
pts.
—
pts.
11.9
%
Diluted Earnings Per Share:
Continuing Operations
$ 4.59
$ 1.04
$ 0.01
$ 0.10
$ —
$ 5.74
Nine Months Ended September 30, 2022
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Kyndryl-
Related
Impacts (3)
Operating
(Non-GAAP)
Gross Profit
$ 23,055
$ 526
$ —
$ —
$ —
$ 23,582
Gross Profit Margin
52.6
%
1.2
pts.
—
pts.
—
pts.
—
pts.
53.8
%
S,G&A
$ 13,843
$ (818)
$ —
$ —
$ 0
$ 13,025
Other (Income) & Expense
5,921
(2)
(6,455)
—
(353)
(889)
Total Expense & Other (Income)
25,212
(820)
(6,455)
—
(353)
17,584
Pre-tax Income/(Loss) from
Continuing Operations
(2,156)
1,346
6,455
—
353
5,998
Pre-tax Income/(Loss) Margin
from Continuing Operations
(4.9)
%
3.1
pts.
14.7
pts.
—
pts.
0.8
pts.
13.7
%
Provision for/(Benefit from)
Income Taxes (4)
$ (1,070)
$ 327
$ 1,599
$ 112
$ —
$ 969
Effective Tax Rate
49.6
%
(5.7)
pts.
(26.7)
pts.
1.9
pts.
(2.9)
pts.
16.1
%
Income/(Loss) from Continuing
Operations
$ (1,087)
$ 1,019
$ 4,856
$ (112)
$ 353
$ 5,029
Income/(Loss) Margin from
Continuing Operations
(2.5)
%
2.3
pts.
11.1
pts.
(0.3)
pts.
0.8
pts.
11.5
%
Diluted Earnings/(Loss) Per
Share: Continuing Operations (5)
$ (1.21)
$ 1.13
$ 5.39
$ (0.12)
$ 0.39
$ 5.52
_________________________
(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. 2022 also includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).
(3)
Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM and the related 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.
(5)
Due to GAAP net loss for the nine months ended September 30, 2022, dilutive potential shares were excluded from the GAAP loss per share calculation as the effect would
have been antidilutive. The difference in share count resulted in an additional ($0.06) reconciling item.
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SOURCE IBM