Charts (3.10MB)

3Q 2015 Earnings Presentation
October 19, 2015
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Forward Looking Statements and Non-GAAP Information
Certain comments made in this presentation may be characterized as forward looking under 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. Those
statements by their nature address matters that are uncertain to different degrees. Those
statements involve a number of factors that could cause actual results to differ materially.
Additional information concerning these factors is contained in the Company's filings with the
SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations.
Any forward-looking statement made during this presentation speaks only as of the date on
which it is made. The company assumes no obligation to update or revise any forward-looking
statements. These charts and the associated remarks and comments are integrally related, and
are intended to be presented and understood together.
In an effort to provide additional and useful information regarding the company’s financial
results and other financial information as determined by generally accepted accounting
principles (GAAP), the company also discusses, in its earnings press release and earnings
presentation materials, certain non-GAAP information including "operating earnings" and other
"operating" financial measures. The rationale for management’s use of this non-GAAP
information, the reconciliation of that information to GAAP, and other related information are
included in supplemental materials entitled “Non-GAAP Supplemental Materials” that are posted
on the Company’s investor relations web site at
http://www.ibm.com/investor/events/earnings/3q15.html The Non-GAAP Supplemental Materials
are also included as Attachment II to the Company’s Form 8-K dated October 19, 2015.
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3Q Overview
Revenue ($B)
Yr/Yr As Reported
Operating (Non-GAAP) EPS
3Q15
$ 19.3
$ 3.34
Yr/Yr
(1%)*
(14%)
(9%)
* Revenue growth rate @CC and excluding divested System x business
Ø Continued strength in Strategic Imperatives
•  YTD revenue growth > 30% yr/yr
Ø Expanded gross and net margins
•  Reflects shift to higher value
Ø Investing and adding capabilities
•  Building platforms and ecosystems
Ø Continued progress in transformation of business
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Key Financial Metrics
$ in Billions, except EPS
P&L Highlights
3Q15
Yr/Yr
P&L Ratios
(Operating)
Revenue
$ 19.3
(1%)
GP Margin
50.0%
0.8 pts
PTI – Operating
$ 4.0
(14%)
PTI Margin
20.7%
0.0 pts
NI – Operating
$ 3.3
(11%)
Tax Rate
18.0%
2.8 pts
EPS – Operating
$ 3.34
(9%)
NI Margin
17.0%
0.6 pts
3Q15
B/(W)
Yr/Yr
Revenue growth rate @CC and excluding divested System x business
Cash Highlights
Free Cash Flow (excl. GF Receivables)
3Q15
$ 2.6
Last
12 Mos.
$ 13.6
Share Repurchase (Gross)
1.5
4.0
Dividends
1.3
9.6
4.7
Cash Balance @ September 30
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Revenue by Geography
$ in Billions
3Q15
Yr/Yr
Americas
$9.1
(3%)
Europe/ME/Africa
6.1
1%
Asia Pacific
4.1
(1%)
$19.3
(1%)
IBM
Major Markets
Growth Markets
BRIC Countries
(1%)
(3%)
(7%)
Canada/ LA U.S. -­‐4% EMEA Japan AP ex. Japan +7% Revenue growth rate @CC and excluding divested System x business
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Revenue and Gross Profit Margin by Segment
Operating
Gross Profit Margin
Revenue
$ in Billions
Global Technology Services
3Q15
Yr/Yr
3Q15
Yr/Yr Pts
$ 7.9
1%
38.1%
(1.0 pts)
Global Business Services
4.2
(5%)
29.7%
(1.3 pts)
Software
5.1
(3%)
86.4%
(1.2 pts)
Systems Hardware
1.5
(2%)
44.7%
10.8 pts
Global Financing
0.4
7%
48.4%
0.6 pts
(1%)
50.0%
0.8 pts
Total Revenue & Op. GP Margin
$19.3
Revenue growth rates @CC and excluding divested System x business
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Expense Summary
$ in Billions
3Q15
B/(W)
Yr/Yr
SG&A – Operating
$4.6
11%
RD&E – Operating
1.3
7%
(0.2)
29%
IP and
Development Income
Other
(Income)/Expense
Interest Expense
Operating Expense &
Other Income
(0.1)
30%
0.1
7%
$5.7
12%
Drivers
B/(W)
Yr/Yr
Currency
9 pts
System x Divestiture
2 pts
Workforce Rebalancing
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(2 pts)
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Services Segments
Global Technology Services (GTS) $ in Billions
Revenue (External)
Gross Margin (External)
PTI Margin
$ in Billions
3Q15
$7.9
38.1%
15.7%
GTS 3Q15 Revenue
GTS Outsourcing
Integrated Technology Services
Maintenance
GBS 3Q15 Revenue
GBS Outsourcing
Consulting & Systems Integration
Backlog
Global Business Services (GBS) 3Q15
$118B
Yr/Yr
1%
(1.0 pts)
(2.2 pts)
Revenue (External)
Gross Margin (External)
PTI Margin
Yr/Yr
Flat
4%
1%
1%
(7%)
3Q15
$4.2
29.7%
15.6%
Yr/Yr
(5%)
(1.3 pts)
(1.7 pts)
3Q15 Revenue (% of Total Services) Maint. 12% GTS Outsourcing 35% 1%
ITS 18% GBS C&SI 25% GBS Outsourcing 10% Revenue growth rates @CC and excluding divested System x business; Backlog @CC
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Software Segment
$ in Billions
Revenue (External)
Gross Margin (External)
PTI Margin
3Q15 Revenue
1%
Information Management
1%
Tivoli
(2%)
Workforce Solutions
(3%)
Rational
(11%)
Key Branded Middleware
(1%)
Total Middleware
(2%)
Total Software
(3%)
Yr/Yr
(3%)
(1.2 pts)
(3.4 pts)
3Q15 Revenue (% of Total SoVware) Yr/Yr
WebSphere
3Q15
$5.1
86.4%
32.1%
Key Branded Middleware 67% Other Middleware 17% OperaZng Systems Other 9% 8% Revenue growth rates @CC
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Systems Hardware Segment
$ in Billions
Revenue (External)
Gross Margin (External)
PTI Margin
3Q15
$1.5
44.7%
(1.5%)
3Q15 Revenue
Yr/Yr
z Systems
20%
Power Systems
2%
Storage
(14%)
Total Systems Hardware
(2%)
Revenue growth rates @CC and excluding divested System x business
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Yr/Yr
(2%)
10.8 pts
2.3 pts
3Q15 Revenue (% of Total Sys Hardware) Servers 63% Storage 34% Other 10
Cash Flow Summary
3Q15
B/(W)
Yr/Yr
YTD
3Q15
B/(W)
Yr/Yr
$4.2
$0.3
$11.7
$0.9
0.7
0.0
2.0
(0.3)
3.5
0.3
9.8
1.2
(0.9)
0.1
(2.8)
0.0
2.6
0.4
7.0
1.2
Acquisitions
(0.1)
(0.1)
(0.8)
(0.2)
Divestitures
(0.6)
(0.6)
(0.5)
(1.0)
Dividends
(1.3)
(0.2)
(3.6)
(0.5)
Share Repurchases (Gross)
(1.5)
0.2
(3.8)
9.7
Non-GF Debt
0.4
0.9
0.8
(3.8)
Other (includes GF A/R & GF Debt)
1.4
0.4
2.1
(3.0)
$0.8
$1.0
$1.1
$2.6
$ in Billions
Net Cash from Operations
Less: Global Financing Receivables
Net Cash from Operations
(excluding GF Receivables)
Net Capital Expenditures
Free Cash Flow (excluding GF Receivables)
Change in Cash & Marketable Securities
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Balance Sheet Summary
$ in Billions
Sept. 14
$9.6
Dec. 14
$8.5
Sept. 15
$9.6
Non-GF Assets*
74.5
71.7
67.5
Global Financing Assets
34.8
37.3
31.5
118.9
117.5
108.6
Other Liabilities
58.8
64.7
55.5
Non-GF Debt*
17.1
11.7
13.7
Global Financing Debt
28.6
29.1
26.0
45.7
40.8
39.7
Total Liabilities
104.5
105.5
95.2
Equity
14.4
12.0
13.5
Non-GF Debt / Capital
62%
59%
58%
7.4
7.2
7.0
Cash & Marketable Securities
Total Assets
Total Debt
Global Financing Leverage
* Includes eliminations of inter-company activity
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Summary
Ø Strong performance in Strategic Imperatives
Ø Margin expansion reflects shift to higher value
Ø Investing and adding capabilities
Ø 2015 Full Year Expectations
•  Operating EPS of $14.75 - $15.75
•  Free Cash Flow relatively flat yr/yr
ConZnued progress in transformaZon of the business www.ibm.com/investor
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Supplemental Materials
Supplemental Materials
Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding
Ø 
Ø 
Ø 
Ø 
Ø 
Ø 
Currency – Year/Year Comparison
Supplemental Segment Information – Global Services
Supplemental Segment Information – Systems Hardware, Software
Global Financing Portfolio
Cash Flow (FAS 95)
Non-GAAP Supplemental Materials
•  Operating (Non-GAAP) Earnings Per Share and Related Income Statement Items, Constant Currency
•  Cash Flow, Debt-to-Capital Ratio, Customer Care Outsourcing and System x Business Divestiture
•  Reconciliation of Operating Earnings Per Share
•  GAAP to Operating (Non-GAAP) Bridge – 3Q 2015
•  GAAP to Operating (Non-GAAP) Bridge – 3Q 2014
•  GAAP to Operating (Non-GAAP) Bridge – 3Q YTD 2015
•  GAAP to Operating (Non-GAAP) Bridge – 3Q YTD 2014
•  GAAP to Operating (Non-GAAP) Bridge – 3Q 2015 and 3Q 2014
•  Reconciliation of Free Cash Flow (excluding GF Receivables) – 12 months ended 9/30/15
•  Reconciliation of Debt-to-Capital Ratio
•  Reconciliation of Revenue Growth
•  Reconciliation of Revenue Growth
•  Reconciliation of Revenue Growth
•  Reconciliation of Revenue Growth
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Supplemental Materials
Currency – Year/Year Comparison
Quarterly Averages per US $ 1Q15
Yr/Yr
2Q15
Yr/Yr
3Q15
Yr/Yr
10/16
Spot
Euro
0.89
(22%)
0.90
(24%)
0.90
(19%)
0.88
(10%)
(18%)
1%
3%
Pound
0.66
(9%)
0.65
(10%)
0.65
(8%)
0.65
(2%)
(7%)
2%
1%
Yen
119
(16%)
121
(19%)
122
(17%)
119
(4%)
(14%)
0%
2%
IBM Revenue Impact
(8 pts)
(9 pts)
(9 pts)
(8-9 pts)
Prior View (July 2015)
Revenue As Reported
Currency Impact
Revenue @ CC
(US$B)
$19.3
Yr/Yr
(14%)
(1.9)
(9 pts)
4Q15
Yr/Yr @ 10/16 Spot
FY15
1Q16
~(5 pts) ~(7-8 pts) ~(1pts)
(5-6 pts)
2Q16
~(0-1 pts)
(7-8 pts)
(5%)
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Supplemental Materials
Supplemental Segment Information – 3Q 2015
Global Services Revenue
Global Services Backlog / Signings
$ in Billions Revenue Growth Yr/Yr Backlog 3Q15 Yr/Yr $118
1%
GTS Outsourcing
Flat
Total Backlog
Integrated Tech Services
4%
Change in Backlog due to Currency
Maintenance
1%
Quarter-to-Quarter
1%
Year-to-Year
Total GTS
GBS Outsourcing
GBS C&SI
Total GBS
1%
(7%)
Signings (5%)
Total Outsourcing
Flat
Total Transactional
(2%)
Maintenance
Outsourcing Backlog
Outsourcing
- GTS O/S, GBS O/S
Transactional
- ITS, Consulting & AMS SI
(incl. US Federal)
1%
Total Signings
Growth rates @CC and excluding divested System x business
($2)
($11)
$74
4%
3Q15 Yr/Yr $3.9
(15%)
5.4
(1%)
$9.3
(7%)
Actual backlog calculated using Sept 30 currency spot rates
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Supplemental Materials
Supplemental Segment Information – 3Q 2015
Systems Hardware
Revenue Growth z Systems
Power Systems
Storage
Total Systems Hardware
Yr/Yr Software
GP% 20%
2%
(14%)
(2%)
Revenue Growth Yr/Yr WebSphere
1%
Information Management
1%
Tivoli
(2%)
Workforce Solutions
(3%)
Rational
Key Branded Middleware
Other Middleware
(11%)
(1%)
(7%)
Total Middleware
(2%)
Operating Systems
(7%)
Other Software/Services
Total Software
(10%)
(3%)
Revenue growth rates @CC and excluding divested System x business
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Supplemental Materials
Global Financing Portfolio
3Q15 – $25.2B Net External Receivables
40%
Investment Grade
55%
34%
30%
20%
Non-Investment Grade
45%
22%
21%
10%
13%
8%
2%
0%
Aaa to A3
Baa1 to Baa3
Ba1 to Ba2
B2 to B3
Caa1 to D
3Q15
2Q15
3Q14
Identified Loss Rate
2.1%
2.1%
1.5%
Anticipated Loss Rate
0.3%
0.3%
0.3%
Reserve Coverage
2.4%
2.4%
1.8%
4.2
3.8
4.0
$33M
$45M
$28M
Client Days Delinquent Outstanding
Commercial A/R > 30 days
19
Ba3 to B1
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Supplemental Materials
Cash Flow (FAS 95)
$ in Billions
QTD
3Q15
QTD
3Q14
YTD
3Q15
YTD
3Q14
Net Income from Operations
$3.0
$0.0
$8.7
$6.5
Depreciation / Amortization of Intangibles
0.9
1.1
2.9
3.4
Stock-based Compensation
0.1
0.2
0.4
0.4
(0.5)
(1.5)
(2.2)
(5.2)
Global Financing A/R
0.7
0.7
2.0
2.2
Loss on Microelectronics Business Disposal
0.0
3.3
0.0
3.3
4.2
3.9
11.7
10.8
Capital Expenditures, net of payments & proceeds
(0.9)
(1.0)
(2.8)
(2.8)
Divestitures, net of cash transferred
(0.6)
0.1
(0.5)
0.5
Acquisitions, net of cash acquired
(0.1)
(0.0)
(0.8)
(0.6)
0.3
0.2
1.4
1.2
(1.3)
(0.8)
(2.7)
(1.8)
0.9
(0.2)
(0.6)
6.4
Dividends
(1.3)
(1.1)
(3.6)
(3.2)
Common Stock Repurchases
(1.5)
(1.7)
(3.8)
(13.5)
0.1
0.1
0.3
0.5
(1.8)
(2.8)
(7.8)
(9.8)
Effect of Exchange Rate changes on Cash
0.0
(0.4)
(0.2)
(0.4)
Net Change in Cash & Cash Equivalents
1.1
(0.2)
1.0
(1.2)
Working Capital / Other
Net Cash provided by Operating Activities
Marketable Securities / Other Investments, net
Net Cash used in Investing Activities
Debt, net of payments & proceeds
Common Stock Transactions - Other
Net Cash used in Financing Activities
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Supplemental Materials
Non-GAAP Supplemental Materials
In an effort to provide investors with additional information regarding the company's results as determined by generally
accepted accounting principles (GAAP), the company also discusses, in its earnings press release and earnings presentation
materials, the following Non-GAAP information which management believes provides useful information to investors.
Operating (Non-GAAP) Earnings Per Share and Related Income Statement Items
Management presents certain financial measures from continuing operations excluding the effects of certain acquisitionrelated charges, non-operating retirement-related costs and any related tax impacts. Management uses the term
"operating" to describe this view of the company's financial results and other financial information. For acquisitions, these
measures exclude the amortization of purchased intangible assets and acquisition-related charges such as in-process
research and development, transaction costs, applicable restructuring and related expenses, and tax charges related to
acquisition integration. For retirement-related costs, the company has characterized certain items as operating and others
as non-operating. The company includes service cost, amortization of prior service cost and the cost of defined contribution
plans in its operating results. Non-operating retirement-related costs include interest cost, expected return on plan assets,
amortized actuarial gains/losses, the impacts of any plan curtailments/settlements, multi-employer plan costs, pension
insolvency costs, and other costs. Non-operating costs primarily relate to changes in pension plan assets and liabilities
which are tied to market performance, and management considers these costs to be outside the operational performance of
the business. Management’s calculation of these operating measures, as presented, may differ from similarly titled
measures reported by other companies.
Overall, management believes that providing investors with an operating view as described above provides increased
transparency and clarity into both the operational results of the business and the performance of the company’s pension
plans, improves visibility to management decisions and their impacts on operational performance, enables better
comparison to peer companies, and allows the company to provide a long term strategic view of the business going
forward. For its earnings per share guidance, the company is utilizing an operating view to establish its objectives and track
its progress. The company’s segment financial results and performance reflect operating earnings, consistent with the
company’s management and measurement system.
Constant Currency
Management refers to growth rates at constant currency or adjusting for currency so that certain financial results can be
viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period
comparisons of the company's business performance. Financial results adjusted for currency are calculated by translating
current period activity in local currency using the comparable prior year period’s currency conversion rate. This approach is
used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or
weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower
than growth reported at actual exchange rates.
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21
Supplemental Materials
Non-GAAP Supplemental Materials
Cash Flow
Management uses a free cash flow measure to evaluate the company’s operating results, plan share repurchase levels,
evaluate strategic investments and assess the company’s ability and need to incur and service debt. The entire free cash
flow amount is not necessarily available for discretionary expenditures. The company defines free cash flow as net cash
from operating activities less the change in Global Financing receivables and net capital expenditures, including the
investment in software. A key objective of the Global Financing business is to generate strong returns on equity, and
increasing receivables is the basis for growth. Accordingly, management considers Global Financing receivables as a profitgenerating investment, not as working capital that should be minimized for efficiency. Therefore, management includes
presentations of both free cash flow and cash flow from operations that exclude the effect of Global Financing receivables.
Debt-to-Capital Ratio
Management presents its debt-to-capital ratio excluding the Global Financing business. A financing business is managed on
a leveraged basis. The company funds its Global Financing segment using a debt-to-equity ratio target of approximately 7
to 1. Given this significant leverage, the company presents a debt-to-capital ratio which excludes the Global Financing
segment debt and equity because the company believes this is more representative of the company’s core business
operations.
Customer Care Outsourcing and System x Business Divestiture
With respect to the sale of IBM's worldwide customer care outsourcing services business to SYNNEX, the initial closing date
was January 31, 2014. With respect to the sale of IBM’s x86 server business to Lenovo, the initial closing date was October
1, 2014. Management believes that presenting financial information without either or both of these items is more
representative of operational performance and provides additional insight into, and clarifies the basis for, historical and/or
future performance, which may be more useful to investors.
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22
Supplemental Materials
Non-GAAP Supplemental Materials
ReconciliaZon of OperaZng Earnings Per Share 2015
Expectations
IBM GAAP EPS
$13.25 - $14.25
IBM Operating EPS (Non-GAAP)
$14.75 - $15.75
Adjustments
Acquisition-Related Charges *
$0.70
Non-Operating Retirement-Related Items
$0.80
* Includes acquisitions through September 30, 2015
The above serves to reconcile the Non-GAAP financial information contained in the “Full-Year Expectations“ and “Summary” discussions in the
company’s earnings presentation. See Slide 21 of this presentation for additional information on the use of these Non-GAAP financial measures.
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23
Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to OperaZng (Non-­‐GAAP) Bridge – 3Q 2015 $ in Millions, except EPS
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$9,436
$89
$118
$9,643
SG&A
4,731
(76)
(74)
4,581
RD&E
1,287
-
(12)
1,275
Other Income & Expense
(133)
0
-
(133)
Total Operating Expense & Other Income
5,815
(76)
(86)
5,652
Pre-Tax Income from Continuing Operations
3,621
165
204
3,991
659
(5)
64
718
Net Income from Continuing Operations
2,962
170
140
3,272
Diluted Earnings Per Share from Continuing
Operations
$3.02
$0.18
$0.14
$3.34
Gross Profit
Tax ***
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other [email protected], curtailments, mul/-­‐employer plans and insolvency insurance ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income from con/nuing opera/ons is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the “3Q Overview”, “Key Financial Metrics” and “Expense Summary”
discussions in the company’s earnings presentation. See Slide 21 of this presentation for additional information on the use of these Non-GAAP
financial measures.
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24
Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to OperaZng (Non-­‐GAAP) Bridge – 3Q 2014 $ in Millions, except EPS
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$10,874
$106
$43
$11,023
SG&A
5,281
(96)
(48)
5,137
RD&E
1,354
-
19
1,373
Other Income & Expense
(103)
0
-
(103)
Total Operating Expense & Other Income
6,513
(96)
(29)
6,389
Pre-Tax Income from Continuing Operations
4,361
202
71
4,634
906
42
14
963
Net Income from Continuing Operations
3,455
159
57
3,671
Diluted Earnings Per Share from Continuing
Operations
$3.46
$0.16
$0.06
$3.68
Gross Profit
Tax ***
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges. ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other [email protected], curtailments, mul/-­‐employer plans and insolvency insurance. ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income from con/nuing opera/ons is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the “3Q Overview”, “Key Financial Metrics” and “Expense Summary”
discussions in the company’s earnings presentation. See Slide 21 of this presentation for additional information on the use of these Non-GAAP
financial measures.
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25
Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to OperaZng (Non-­‐GAAP) Bridge – 3Q YTD 2015 $ in Millions, except EPS
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$29,278
$268
$350
$29,896
SG&A
15,273
(230)
(445)
14,598
RD&E
3,885
-
(36)
3,849
Other Income & Expense
(578)
(5)
-
(583)
Total Operating Expense & Other Income
18,431
(235)
(481)
17,715
Pre-Tax Income from Continuing Operations
10,846
503
831
12,181
Tax ***
1,943
52
234
2,228
Net Income from Continuing Operations
8,904
452
597
9,953
Diluted Earnings Per Share from Continuing
Operations
$9.03
$0.46
$0.60
$10.09
Gross Profit
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other [email protected], curtailments, mul/-­‐employer plans and insolvency insurance ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income from con/nuing opera/ons is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the “Year-To-Date 2015 Results” discussions in the company’s earnings
presentation. See Slide 21 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to OperaZng (Non-­‐GAAP) Bridge – 3Q YTD 2014 $ in Millions, except EPS
GAAP
Acquisition-related
Adjustments*
Retirement-related
Adjustments**
Operating
(Non-GAAP)
$33,545
$315
$141
$34,001
SG&A
17,146
(291)
(162)
16,693
RD&E
4,117
-
56
4,173
Other Income & Expense
(433)
0
-
(433)
Total Operating Expense & Other Income
20,654
(292)
(106)
20,257
Pre-Tax Income from Continuing Operations
12,891
607
246
13,744
2,655
123
49
2,827
Net Income from Continuing Operations
10,237
483
197
10,917
Diluted Earnings Per Share from Continuing
Operations
$10.09
$0.48
$0.19
$10.76
Gross Profit
Tax ***
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other [email protected], curtailments, mul/-­‐employer plans and insolvency insurance ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income from con/nuing opera/ons is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the “Year-To-Date 2015 Results” discussions in the company’s earnings
presentation. See Slide 21 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
GAAP to OperaZng (Non-­‐GAAP) Bridge – 3Q 2015 and 3Q 2014 GAAP
Acquisitionrelated
Adjustments*
Retirement-related
Adjustments **
Operating
(Non-GAAP)
Gross Profit Margin from Continuing Operations
48.9%
0.5 pts
0.6 pts
50.0%
PTI Margin from Continuing Operations
18.8%
0.9 pts
1.1 pts
20.7%
Tax Rate ***
18.2%
-0.9 pts
0.7 pts
18.0%
Net Income Margin from Continuing Operations
15.4%
0.9 pts
0.7 pts
17.0%
Gross Profit Margin from Continuing Operations
48.6%
0.5 pts
0.2 pts
49.2%
PTI Margin from Continuing Operations
19.5%
0.9 pts
0.3 pts
20.7%
Tax Rate ***
20.8%
0.0 pts
0.0 pts
20.8%
Net Income Margin from Continuing Operations
15.4%
0.7 pts
0.3 pts
16.4%
3Q 2015
3Q 2014
* Includes amor/za/on of purchased Intangibles, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisi/on integra/on tax charges ** Includes re/rement related interest cost, expected return on plan assets, recognized actuarial losses or gains, amor/za/on of transi/on assets, other [email protected], curtailments, mul/-­‐employer plans and insolvency insurance ***The tax impact on the Opera/ng (Non-­‐GAAP) Pre-­‐Tax Income from con/nuing opera/ons is calculated under the same accoun/ng principles applied to the As Reported Pre-­‐Tax Income under ASC 740, which employs an annual effec/ve tax rate method to the results. The above serves to reconcile the Non-GAAP financial information contained in the ”Key Financial Metrics” and “Revenue and Gross Profit Margin by
Segment” discussions in the company’s earnings presentation. See Slide 21 of this presentation for additional information on the use of these NonGAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
ReconciliaZon of Free Cash Flow (excluding GF Receivables) 12 months
ended
9/30/15
$ in Billions
Net Cash from Operations
Less: Global Financing Receivables
Net Cash from Operations
(excluding GF Receivables)
Net Capital Expenditures
Free Cash Flow
(excluding GF Receivables)
$17.8
0.5
17.3
(3.7)
$13.6
The above serves to reconcile the Non-GAAP financial information contained in the “Key Financial Metrics” discussions in the company’s
earnings presentation. See Slide 22 of this presentation for additional information on the use of these Non-GAAP financial measures.
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29
Supplemental Materials
Non-GAAP Supplemental Materials
ReconciliaZon of Debt-­‐to-­‐Capital RaZo Sept. 2015
Dec. 2014
Sept. 2014
Non-Global Financing Debt / Capital
58%
59%
62%
IBM Consolidated Debt / Capital
75%
77%
76%
The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet Summary” discussions in the
company’s earnings presentation. See Slide 22 of this presentation for additional information on the use of these Non-GAAP financial
measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
ReconciliaZon of Revenue Growth 3Q YTD 2015 Yr/Yr
IBM
GAAP
@CC
(13%)
(5%)
@CC excl.
Divested
Businesses
(1%)
3Q 2015 Yr/Yr
GAAP
Total Strategic Imperatives
17%
@CC
25%
@CC excl.
Divested
Business
27%
The above serves to reconcile the Non-GAAP financial information contained in the “Strategic Imperatives” and “Year-To-Date 2015 Results”
discussions in the company’s earnings presentation. See Slides 21-22 of this presentation for additional information on the use of these NonGAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
ReconciliaZon of Revenue Growth 3Q15 Yr/Yr
Americas
U.S.
Europe/ME/Africa
Asia Pacific
Japan
Major Markets
Growth Markets
BRIC Countries
Brazil
China
GAAP
(10%)
(7%)
(16%)
(19%)
(11%)
(11%)
(22%)
(30%)
(35%)
(35%)
@CC
(5%)
(7%)
(3%)
(8%)
4%
(3%)
(11%)
(18%)
(6%)
(34%)
@CC excl.
Divested
Business
(3%)
(4%)
1%
(1%)
7%
(1%)
(3%)
(7%)
(4%)
(17%)
2Q15 Yr/Yr
Growth Markets
BRIC Countries
GAAP
(21%)
(35%)
@CC
(13%)
(28%)
@CC excl.
Divested
Business
(5%)
(18%)
The above serves to reconcile the Non-GAAP financial information contained in the “Revenue by Geography” discussions in the company’s
earnings presentation. See Slides 21-22 of this presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
ReconciliaZon of Revenue Growth 3Q15 Yr/Yr
GTS Outsourcing
Integrated Technology Services
GBS Outsourcing
Consulting & Systems Integration
Total Outsourcing
Total Transactional
GAAP
(11%)
(6%)
(8%)
(15%)
(11%)
(11%)
@CC
Flat
4%
1%
(7%)
Flat
(2%)
3Q15 Yr/Yr
Global Technology Services (GTS)
Maintenance
GAAP
(10%)
(13%)
@CC
1%
(3%)
@CC excl.
Divested
Business
1%
1%
The above serves to reconcile the Non-GAAP financial information contained in the “Revenue and Gross Profit Margin by Segment”, “Services
Segment” and “Supplemental Segment Information-3Q 2015” discussions in the company’s earnings presentation. See Slides 21-22 of this
presentation for additional information on the use of these Non-GAAP financial measures.
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Supplemental Materials
Non-GAAP Supplemental Materials
ReconciliaZon of Revenue Growth 3Q15 Yr/Yr
GAAP
(5%)
(7%)
(8%)
(10%)
(17%)
(9%)
(15%)
(16%)
WebSphere
Information Management
Tivoli
Workforce Solutions
Rational
Total Middleware
Other Middleware
Other Software/Services
@CC
1%
1%
(2%)
(3%)
(11%)
(2%)
(7%)
(10%)
3Q15 Yr/Yr
Systems Hardware Segment
GAAP
(39%)
@CC
(35%)
@CC excl.
Divested
Business
(2%)
The above serves to reconcile the Non-GAAP financial information contained in the “Revenue and Gross Profit Margin by Segment”,
“Software Segment”, “Systems Hardware Segment” and “Supplemental Segment Information-3Q 2015” discussions in the company’s
earnings presentation. See Slides 21-22 of this presentation for additional information on the use of these Non-GAAP financial measures.
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