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IBM 1Q 2016 Earnings
April 18, 2016
ibm.com/investor
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 earning
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/1q16.html
The Non-GAAP Supplemental Materials are also included
as Attachment II to the Company’s Form 8-K dated April
18, 2016.
Overview
1Q16
$18.7B
$2.35
$14.3B
Revenue
Operating EPS
Free Cash Flow
Last 12 Months

Progress in transformation of business reflected in revenue dynamics
− Strategic Imperatives represent 37% of IBM revenue over last 12 months

Continuing to invest and partner to enhance cognitive solutions and
cloud platform capabilities

Actions to accelerate the transformation
Strategic Imperatives
Last 12 Months
$30B
37%
Revenue
IBM Revenue
1Q16
$7B
Revenue
17%
Year/Year
1Q16
Yr/Yr
Analytics
$4.2
9%
Cloud
$2.6
36%
$5.4
46%
Mobile
$0.8
93%
Security
$0.4
20%
Social
$0.2
(1%)
1Q16 Transformation Progress
•
Acquisitions enhance existing capabilities in cloud
video services, cloud consulting and digital experience
•
Key partnerships to accelerate adoption of enterprise
hybrid clouds
•
Expanding Watson ecosystem and reach
•
Enhanced Watson Health platform with acquisition of
Truven (announced)
Revenue growth rates @CC, $ in billions
Overlap in Strategic Imperatives primarily reflects solutions delivered via cloud
aaS-exit annual run rate
Key Financial Metrics
P&L Highlights
1Q16
B/(W)
Yr/Yr
Revenue
$18.7
(2%)
Expense
$7.5
PTI - Operating
NI - Operating
Last 12
1Q16
Months
$2.3
$14.3
(24%)
Free Cash Flow
(excl. GF Receivables)
$1.4
(62%)
Share Repurchase (Gross)
$0.9
$4.4
$2.3
(21%)
Dividends
$1.2
$5.1
$2.35
(19%)
Cash Balance @ March 31
GP Margin
47.5%
(1.8 pts)
Expense E/R
40.2%
(9.3 pts)
7.3%
(11.2 pts)
Tax Rate
(66.8%)
86.8 pts
NI Margin
12.1%
(2.6 pts)
EPS – Operating
P&L Ratios (Operating)
PTI Margin
Revenue growth rates @CC, $ in billions except for EPS
Cash Highlights
$14.9
•
Gross margin reflects higher level of investments and
mix within segments
•
Expense and pre-tax income also reflects charges for
actions to accelerate the transformation
•
Tax includes benefit from resolution of tax case
Current Segment Structure
•
IBM emerging as a cognitive solutions and cloud platform company
•
Segment structure reflects management system
-
Introduced at IBM’s investor briefing in February 2016
-
Historical financial information provided in March 2016
Cognitive Solutions & Industry Services
Cognitive Solutions
• Solutions Software
• Transaction
Processing Software
Global Business
Services
Technology Services
& Cloud Platforms
• Consulting
• Global Process
Services
• Application
Management
• Infrastructure
Services
• Technical Support
Services
• Integration Software
Systems
Global Financing
• Systems Hardware
• Operating Systems
Software
• Financing
• Used Sales
Cognitive Solutions Segment
Segment Results
Revenue (External)
Gross Margin (External)
PTI *
PTI Margin *
1Q16
Yr/Yr
$4.0
Flat
82.0%
(2.5 pts)
$1.0
(34%)
21.8%
(10.8 pts)
Segment Revenue Elements
Solutions
Software
3% Yr/Yr
Transaction
Processing
Software
(5%) Yr/Yr
Highlights
•
Solutions software growth led by security and analytics
including Watson solutions
•
Enhancing security capabilities by ramping security
experts and acquisition of Resilient
•
Continuing to build higher value solutions; announced
addition of Truven to Watson Health platform
Revenue growth rates @CC, $ in billions
*includes impact of 1Q16 charges: ($230M) PTI, (5.0 pts) PTI margin
Strategic Imperatives Revenue
1Q16
Yr/Yr
Strategic Imperatives
$2.5
4%
Cloud
$0.4
34%
as-a-Service exit run rate
$1.2
within Cognitive Solutions
Global Business Services Segment
Segment Results
Revenue (External)
Gross Margin (External)
PTI *
PTI Margin *
1Q16
Yr/Yr
$4.1
(2%)
25.8%
(1.6 pts)
$0.2
(68%)
4.5%
(8.7 pts)
Highlights
•
Engineering shift to strategic imperatives with growth
across cloud, analytics, mobility, and security practices
•
Expanded digital design capabilities with 3 acquisitions
to join IBM Interactive Experience, the largest global
digital agency
•
Announced the acquisition of Bluewolf
Revenue growth rates @CC, $ in billions
* includes impact of 1Q16 charges: ($330M) PTI, (7.7 pts) PTI margin
Segment Revenue Elements
Consulting
(4%) Yr/Yr
Application
Management
(1%) Yr/Yr
Strategic Imperatives Revenue
Global Process
Services
(1%) Yr/Yr
1Q16
Yr/Yr
Strategic Imperatives
$2.0
22%
Cloud
$0.6
55%
as-a-Service exit run rate
$0.5
within Global Business Services
Technology Services and Cloud Platforms Segment
Segment Results
Revenue (External)
Gross Margin (External)
PTI *
PTI Margin *
1Q16
Yr/Yr
$8.4
2%
40.9%
(1.1 pts)
$0.3
(77%)
3.0%
(10.0 pts)
Highlights
Segment Revenue Elements
Infrastructure
Services
+4% Yr/Yr
Integration
Software
(2%) Yr/Yr
Technical
Support Services
(1%) Yr/Yr
Strategic Imperatives Revenue
within Technology Svcs & Cloud Platforms
•
1Q16
Yr/Yr
Growth in infrastructure services; shifting from
systems integration to services integration, driven
by move to hybrid cloud
Strategic Imperatives
$1.8
45%
Cloud
$1.2
50%
•
Continued momentum in SoftLayer with strong
double-digit growth
as-a-Service exit run rate
$3.7
•
Cloud-enabled 100% of relevant IBM software and
announced key partnerships with VMware, GitHub
Revenue growth rates @CC, $ in billions
*includes impact of 1Q16 charges: ($700M) PTI, (8.1 pts) PTI margin
Systems Segment
Segment Results
Revenue (External)
Gross Margin (External)
PTI *
PTI Margin *
1Q16
Yr/Yr
$1.7
(21%)
57.2%
2.4 pts
$0.0
n/m
-0.5%
(11.8 pts)
Highlights
•
z Systems performance reflects product cycle
•
Linux on Power ~10% of the total Power revenue
•
Continue to see momentum in OpenPOWER foundation
•
Margin expansion across all hardware platforms
Revenue growth rates @CC, $ in billions
*includes impact of 1Q16 charges: ($130M) PTI, (6.9 pts) PTI margin
Segment Revenue Elements
Operating
Systems
Software
(7%) Yr/Yr
Strategic Imperatives Revenue
Systems
Hardware
(25)% Yr/Yr
1Q16
Yr/Yr
Strategic Imperatives
$0.7
(5%)
Cloud
$0.5
2%
within Systems
Cash Flow and Balance Sheet Highlights
Last 12
Months
1Q16
Yr/Yr
Net Cash from Operations*
$3.3
$1.3
$18.1
Free Cash Flow*
$2.3
$1.2
$14.3
Cash Flow
Balance Sheet
Selected Uses of Cash
$14.9
$8.2
$8.8
Total Debt
$45.6
$39.9
$38.7
Global Financing Debt
$26.8
$27.2
$26.2
7.3
7.3
7.0
$18.8
$12.7
$12.5
62%
54%
59%
$1.0
$3.8
Global Financing Leverage
Acquisitions
$2.6
$5.8
Non-GF Debt
Dividends/Share Repurchase
$2.2
$9.4
Non-GF Debt/Capital
Free Cash Flow up yr/yr; includes cash received
from tax refund
•
Free Cash Flow realization of 110% on a
trailing twelve month basis
•
Acquired 6 companies in the quarter
•
Dec 15 **Mar 15
Cash & Marketable Securities
Net Capital Expenditures
•
Mar 16
Higher cash and debt levels driven by timing of
debt issuances
$ in billions
*Excludes Global Financing receivables; **Prior year reclassified for the adoption of the FASB guidance (Debt issuance cost)
1Q 2016 Significant Items
EPS
Pre-Tax Income
% Realized
1Q16
2Q-4Q16
2Q16
3Q16
4Q16
Annualized
Workforce Transformation
($0.84)
>$500M
~10%
~30-35%
~55-60%
~$2B
Real Estate
($0.28)
~$0
Latin America Actions
($0.11)
Tax Discretes
+$1.21
Period contribution
Minimal savings
Reduced exposure
•
Transformation requires skills shift; actions free up spending to invest in strategic imperatives
•
Reflected in full year 2016 EPS and free cash flow expectations
<$50M
Summary
• Continued progress in transformation of business
-
Strong growth in strategic imperatives revenue
-
Added to capabilities – organic, acquisitions, partnerships
-
Significant actions to accelerate transformation
• Profit dynamics reflect higher levels of investment and impact of actions
• Continue to expect at least $13.50 of operating earnings per share for 2016
− Improved view of free cash flow
Supplemental Materials
•
Key Financial Metrics – 1Q 2016 Significant Items
•
Currency – Impact on Revenue Growth
•
Geographic Revenue
•
Segment Revenue & Gross Profit Margin
•
Additional Revenue & Backlog Information
•
Expense Summary
•
Global Financing Portfolio
•
Balance Sheet Summary
•
Cash Flow Summary
•
Cash Flow (ASC 230)
•
Non-GAAP Supplemental Materials
Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding
Key Financial Metrics – 1Q 2016 Significant Items
Impact of
charges/benefit
1Q16
B/(W)
Yr/Yr
$18.7
(2%)
Expense
$7.5
(24%)
$1.4
PTI - Operating
$1.4
(62%)
($1.5)
NI - Operating
$2.3
(21%)
$0.0
$2.35
(19%)
($0.01)
P&L Ratios (Operating)
GP Margin
47.5%
(1.8 pts)
(0.1 pts)
Expense E/R
40.2%
(9.3 pts)
7.6 pts
7.3%
(11.2 pts)
(7.8 pts)
Tax Rate
(66.8%)
86.8 pts
(85.8 pts)
NI Margin
12.1%
(2.6 pts)
(0.1 pts)
P&L Highlights
Revenue
EPS – Operating
PTI Margin
Revenue growth rates @CC, $ in billions except for EPS
Supplemental Materials
1Q16
Currency – Impact on Revenue Growth
4/15/16
Yr/Yr @ 4/15/16 Spot
1Q16
Yr/Yr
Spot
2Q16
3Q16
4Q16
FY16
Euro
0.91
(2%)
0.89
2%
2%
3%
1%
Pound
0.70
(6%)
0.71
(8%)
(9%)
(7%)
(7%)
Yen
115
3%
109
10%
11%
10%
9%
-1 to 0 pts
1 pts
1 to 2 pts
0 pts
Quarterly Averages per US $
IBM Revenue Impact
Revenue As Reported
Currency Impact
Revenue @ CC
Supplemental Materials
(2.6 pts)
(US$B)
Yr/Yr
$18.7
(5%)
(0.5) (2.6 pts)
(2%)
Geographic Revenue
1Q16
Yr/Yr
Americas
$8.7
(4%)
Europe/ME/Africa
$5.9
(1%)
Asia Pacific
$4.0
1%
Geography Revenue
Revenue growth rates @CC, $ in billions
Supplemental Materials
•
Americas performance consistent with 4Q15, with
sequential improvement in the US (-4%) offset by
weakness in Brazil
•
EMEA reflects modest decline in Europe, strong
performance in Middle East/Africa
•
Asia Pacific returned to growth led by improvement in AP
growth markets and continued growth in Japan (+2%)
•
Total growth markets down 3%
Segment Revenue & Gross Profit
Revenue
Yr/Yr
GP%
GP Yr/Yr
Cognitive Solutions
$4.0
Flat
82.0%
(2.5) pts
Global Business Services
$4.1
(2%)
25.8%
(1.6) pts
Cognitive Solutions & Industry Services
$8.1
(1%)
53.4%
(1.6) pts
Technology Services & Cloud Platforms
$8.4
2%
40.9%
(1.1) pts
Global Technology Services
$7.4
2%
35.1%
(0.9) pts
Integration Software
$1.0
(2%)
83.3%
(1.5) pts
$1.7
(21%)
57.2%
2.4 pts
Systems Hardware
$1.2
(25%)
46.4%
1.7 pts
Operating Systems Software
$0.4
(7%)
87.8%
(1.9) pts
$0.4
(6%)
42.4%
(7.1) pts
Segment Revenue & Profit Metrics
Systems
Global Financing
Revenue growth rates @CC, $ in billions
Supplemental Materials
Additional Revenue & Backlog Information
1Q16
Yr/Yr
Software Revenue*
$5.4
(1%)
Cognitive Solutions
$4.0
Flat
Solutions Software
$2.7
3%
Transaction Processing Software
$1.3
(5%)
Integration Software
$1.0
(2%)
Operating Systems Software
$0.4
(7%)
Hardware Revenue
$1.2
1Q16
Yr/Yr
$7.4
2%
Infrastructure Services
$5.6
4%
Technical Support Services
$1.8
(1%)
$4.1
(2%)
Consulting
$1.8
(4%)
Global Processing Services
$0.3
(1%)
Application Management
$1.9
(1%)
Services Revenue
Global Technology Services
Global Business Services
(25%)
z Systems
(42%)
Signings**
$8.0
(17%)
Power
(14%)
Services Backlog
$122
(1%)
Storage
(6%)
Currency Impact Year to Year
Currency Impact Qtr to Qtr
Growth rates @CC, $ in billions, Actual backlog calculated using March 31 currency spot rates
*Total Software = Cognitive Solutions + Integration Software + Operating Systems Software
**Prior year reclassified to reflect current segment structure.
Supplemental Materials
$1
$3
Expense Summary
Expense Metrics
1Q16
B/(W)
Yr/Yr
Currency
Acq. *
Base
SG&A – Operating
$5.9
(18%)
2 pts
(2 pts)
(18 pts)
RD&E – Operating
$1.4
(13%)
2 pts
(5 pts)
(10 pts)
($0.2)
26%
Other (Income)/Expense
$0.2
N/M
Interest Expense
$0.1
(37%)
Operating Expense & Other Income
$7.5
(24%)
1 pts
(3 pts)
(22 pts)
IP and Development Income
$ in billions
*includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges
Supplemental Materials
Global Financing Portfolio
1Q16 – $25.4B Net External Receivables
40%
Investment Grade
51%
Non-Investment Grade
49%
30%
30%
20%
9%
1%
B2 to B3
Caa1 to D
0%
Baa1 to Baa3
Supplemental Materials
4Q15
1Q15
Identified Loss Rate
2.0%
1.8%
1.9%
Anticipated Loss Rate
0.6%
0.3%
0.4%
Reserve Coverage
2.6%
2.1%
2.3%
4.2
3.8
4.2
$25M
$15M
$93M
Commercial A/R > 30 days
15%
10%
Aaa to A3
1Q16
Client Days Delinquent Outstanding
24%
21%
Global Financing Metrics
Ba1 to Ba2
Ba3 to B1
Balance Sheet Summary
Mar 16
Dec 15
Mar 15*
Cash & Marketable Securities
$14.9
$8.2
$8.8
Non-GF Assets **
$72.3
$67.7
$70.5
Global Financing Assets
$31.7
$34.6
$32.5
$118.9
$110.5
$111.8
$58.2
$56.2
$60.7
Non-GF Debt **
$18.8
$12.7
$12.5
Global Financing Debt
$26.8
$27.2
$26.2
$45.6
$39.9
$38.7
$103.8
$96.1
$99.5
$15.1
$14.4
$12.3
62%
54%
59%
7.3
7.3
7.0
Total Assets
Other Liabilities
Total Debt
Total Liabilities
Equity
Non-GF Debt / Capital
Global Financing Leverage
$ in billions
* Prior year reclassified for the adoption of the FASB guidance (Debt issuance cost and Deferred Tax classification)
**includes eliminations of inter-company activity
Supplemental Materials
Cash Flow Summary
B/(W)
1Q16
Yr/Yr
FY15
$5.6
$2.0
$17.0
$2.4
$0.8
$0.2
$3.3
$1.3
$16.9
($1.0)
($0.0)
($3.8)
$2.3
$1.2
$13.1
Acquisitions
($2.6)
($2.4)
($3.3)
Divestitures
$0.0
$0.0
($0.4)
Dividends
($1.2)
($0.2)
($4.9)
Share Repurchases (Gross)
($0.9)
$0.2
($4.6)
Non-GF Debt
$5.9
$5.5
($0.1)
Other (includes GF A/R & GF Debt)
$3.2
$2.0
$0.0
$6.7
$6.3
($0.3)
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
$ in billions
Supplemental Materials
Cash Flow (ASC 230)
1Q16
1Q15
$2.0
$2.3
Depreciation / Amortization of Intangibles
$1.0
$1.0
Stock-based Compensation
$0.1
$0.1
Working Capital / Other
$0.1
($1.4)
$2.4
$5.6
($1.0)
$1.6
$3.6
($0.9)
$0.0
$0.0
($2.6)
($0.1)
$1.5
$1.6
($2.0)
$0.6
$5.0
($1.3)
Dividends
($1.2)
($1.1)
Common Stock Repurchases
($0.9)
($1.2)
Common Stock Transactions - Other
$0.1
$0.2
Net Cash used in Financing Activities
$2.8
($3.4)
Effect of Exchange Rate changes on Cash
$0.2
($0.4)
Net Change in Cash & Cash Equivalents
$6.7
$0.3
Net Income from Operations
Global Financing A/R
Net Cash provided by Operating Activities
Capital Expenditures, net of payments & proceeds
Divestitures, net of cash transferred
Acquisitions, net of cash acquired
Marketable Securities / Other Investments, net
Net Cash used in Investing Activities
Debt, net of payments & proceeds
$ in billions
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 acquisition-related
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, multiemployer 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.
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 profit-generating 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.
.
Supplemental Materials
Non-GAAP Supplemental Materials
Reconciliation of Operating Earnings Per Share
IBM GAAP EPS
2016
Expectations
at least $12.35
IBM Operating EPS (Non-GAAP)
at least $13.50
EPS Guidance
Adjustments
Acquisition Related Charges*
$0.76
Non-Operating Retirement-Related Items
$0.39
* Includes acquisitions through March 31, 2016
The above reconciles the Non-GAAP financial information contained in the “Full-Year 2016 Expectations“ and “Summary” discussions in the
company’s earnings presentation. See Slide 26 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
Non-GAAP Supplemental Materials
Reconciliation of Revenue Growth-1Q 2016
1Q16 Yr/Yr
GAAP
@CC
Americas
(7%)
(4%)
Europe/ME/Africa
(4%)
(1%)
Asia Pacific
(1%)
1%
U.S.
(4%)
(4%)
5%
2%
(11%)
(3%)
Japan
Growth Markets
The above reconciles the Non-GAAP financial information contained in the “Geographic Revenue” discussions in the company’s earnings presentation.
See Slide 26-27 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
Non-GAAP Supplemental Materials
Reconciliation of Revenue Growth-1Q 2016 and 4Q 2015
1Q16 Yr/Yr
4Q15 Yr/Yr
GAAP
@CC
GAAP
@CC
Strategic Imperatives
14%
17%
10%
16%
Analytics
7%
9%
Cloud
34%
36%
Mobile
88%
93%
Security
18%
20%
Social
(4%)
(1%)
The above reconciles the Non-GAAP financial information contained in the “Strategic Imperatives” discussions in the company’s earnings
presentation. See Slide 26 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
Non-GAAP Supplemental Materials
Reconciliation of Revenue Growth-1Q 2016
Cognitive Solutions
Solutions Software
Transaction Processing Software
Strategic Imperatives
Cloud
Global Business Services
Consulting
Global Processing Services
Application Management
Strategic Imperatives
Cloud
Cognitive Solutions & Industry Svcs
1Q16 Yr/Yr
GAAP
@CC
(2%)
Flat
1%
3%
(8%)
(5%)
2%
4%
32%
34%
(4%)
(2%)
(6%)
(4%)
(3%)
(1%)
(3%)
(1%)
19%
22%
54%
55%
(3%)
(1%)
Tech Svcs & Cloud Platforms
Global Technology Services
Infrastructure Services
Technical Support Services
Integration Software
Strategic Imperatives
Cloud
Systems
Systems Hardware
z Systems
Power
Storage
Operating Systems
Strategic Imperatives
Cloud
Global Financing
Total Software
1Q16 Yr/Yr
GAAP
@CC
(2%)
2%
(1%)
2%
Flat
4%
(5%)
(1%)
(4%)
(2%)
41%
45%
46%
50%
(22%)
(21%)
(25%)
(25%)
(43%)
(42%)
(14%)
(14%)
(7%)
(6%)
(9%)
(7%)
(6%)
(5%)
1%
2%
(11%)
(6%)
(3%)
(1%)
The above reconciles the Non-GAAP financial information contained in the “Segment Revenue & Gross Profit”, “Additional Revenue & Backlog Information”,
“Cognitive Solutions Segment”, “Global Business Services Segment”, “Technology Services & Cloud Platforms Segment” and “Systems Segment” discussions
in the company’s earnings presentation. See Slide 26 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
Non-GAAP Supplemental Materials
Reconciliation of Revenue Growth – 1Q 2016, 4Q 2015 and 1Q 2015
1Q16 Yr/Yr
GAAP
4Q15 Yr/Yr
@CC
GAAP
@CC
z Systems
IBM
(5%)
(2%)
(9%)
(2%)
IBM excluding mainframe cycle & acquisitions
(4%)
(1%)
(10%)
(3%)
Flat
2%
(11%)
(6%)
Total Software Annuity
Total Software
1Q15 Yr/Yr
GAAP
@CC
118%
130%
The above reconciles the Non-GAAP financial information contained in the “Overview”, “Key Financial Metrics” , and “Systems Segment”
discussions in the company’s earnings presentation. See Slides 26 of this presentation for additional information on the use of these NonGAAP financial measures.
Supplemental Materials
Non-GAAP Supplemental Materials
Reconciliation of Debt-to-Capital Ratio
Non-Global Financing Debt/Capital
IBM Consolidated Debt/Capital
Mar 2016
62%
Dec 2015
54%
Mar 2015*
59%
75%
73%
76%
* Prior year reclassified for the adoption of the FASB guidance (Debt issuance cost)
The above reconciles the Non-GAAP financial information contained in the “Cash Flow and Balance Highlights” and “Balance Sheet
Summary” discussions in the company’s earnings presentation. See Slide 27 of this presentation for additional information on the use
of these Non-GAAP financial measures.
Supplemental Materials
Non-GAAP Supplemental Materials
Reconciliation of Free Cash Flow for the Last 12 Months
12 Months
Ended
Mar 2016
Net Cash from Operating Activities per GAAP:
Less: the change in Global Financing (GF) Receivables
Net Cash from Operating Activities (Excluding GF Receivables)
Capital Expenditures, Net
Free Cash Flow (Excluding GF Receivables)
$19.0
$0.9
$18.1
($3.8)
$14.3
$ in billions
The above reconciles the Non-GAAP financial information contained in the “Overview” and “Key Financial Metrics” discussions in the company’s
earnings presentation. See Slide 27 of this presentation for additional information on the use of these Non-GAAP financial measures.
Supplemental Materials
ibm.com/investor