International Business Machines Corporation · NYSE:IBM
International Business Machines — IBM — Q3 2011 Earnings Presentation
38 slides from International Business Machines's earnings presentation, Oct 17, 2011
Slide 1: 3Q 2011 Earnings Presentation
® 3Q 2011 Earnings Presentation October 17, 2011 www.ibm.com/investor
Slide 2: Forward Looking Statements and Non-GAAP Information
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 f
Slide 3: 3Q 2011 Highlights
3Q 2011 Highlights Revenue $26.2B +8%, 3% yr/yr @CC Operating (Non-GAAP) EPS $3.28 +15% yr/yr ¾ Performance driven by: • Software PTI +12% yr/yr; Key Branded Middleware revenue +17% • Hardware PTI +8% yr/yr; Power Systems revenue +15% • Services PTI +13% yr/yr; revenue led by Growth Markets • Growth
Slide 4: Key Financial Metrics
Key Financial Metrics $ in Billions, except EPS P&L Highlights B/(W) P&L Ratios B/(W) 3Q11 Yr/Yr (Operating) 3Q11 Yr/Yr Revenue $26.2 8% GP Margin 46.8% 1.5 pts @CC 3% PTI Margin 19.8% 0.4 pts PTI – Operating $5.2 10% NI Margin 15.1% 0.2 pts EPS – Operating $3.28 15% Tax Rate 23.6% (0.6 pts) Cash Hi
Slide 5: Revenue by Geography
Revenue by Geography $ in Billions B/(W) Yr/Yr 3Q11 Rptd @CC Canada/ Americas $10.9 7% 6% LA Europe/ME/A 8.0 9% Flat EMEA Asia Pacific 6.5 10% 1% U.S. +4% OEM 0.7 (8%) (8%) Japan APac IBM $26.2 8% 3% - 10% @CC Major Markets 5% Flat OEM Growth Markets 19% 13% BRIC Countries 17% 13% Performance led by
Slide 6: Revenue and Gross Profit Margin by Segment
Revenue and Gross Profit Margin by Segment Operating Revenue Gross Profit Margin $ in Billions B/(W) Yr/Yr B/(W) 3Q11 Rptd @CC 3Q11 Yr/Yr Pts Global Technology Services $10.3 9% 3% 35.7% 0.6 pts Global Business Services 4.8 6% Flat 29.4% 0.8 pts Software 5.8 13% 8% 88.1% 0.2 pts Systems & Technology
Slide 7: Expense Summary
Expense Summary B/(W) B/(W) Yr/Yr Drivers $ in Billions 3Q11 Yr/Yr Currency Acq.* Base SG&A – Operating $5.6 (10%) (5 pts) (2 pts) (3 pts) RD&E – Operating 1.6 (5%) (2 pts) (4 pts) 2 pts IP and Development Income (0.3) 7% Other (Income)/Expense 0.1 nm Interest Expense 0.1 (14%) Operating Expense & O
Slide 8: Services Segments
Services Segments Global Technology Services (GTS) Global Business Services (GBS) B/(W) Yr/Yr $ in Billions B/(W) Yr/Yr $ in Billions 3Q11 Rptd @CC 3Q11 Rptd @CC Revenue (External) $10.3 9% 3% Revenue (External) $4.8 6% Flat Gross Margin (External) 35.7% 0.6 pts Gross Margin (External) 29.4% 0.8 pts
Slide 9: Software Segment
Software Segment B/(W) Yr/Yr $ in Billions 3Q11 Rptd @CC Revenue (External) $5.8 13% 8% Gross Margin (External) 88.1% 0.2 pts Pre-Tax Income $2.2 12% PTI Margin 33.4% (0.2 pts) 3Q11 Revenue Yr/Yr 3Q11 Revenue Rptd @CC (% of Total Software) WebSphere Family 52% 46% Information Management 12% 7% Tivol
Slide 10: Systems & Technology Segment
Systems & Technology Segment $ in Billions B/(W) Yr/Yr 3Q11 Rptd @CC Revenue (External) $4.5 4% 1% Gross Margin (External) 39.8% 3.4 pts Pre-Tax Income $0.3 8% PTI Margin 6.8% 0.3 pts 3Q11 Revenue Yr/Yr 3Q11 Revenue Rptd @CC (% of Total Sys & Tech) System z (5%) (7%) Power Systems 15% 12% System x 1
Slide 11: Cash Flow Analysis
Cash Flow Analysis B/(W) YTD B/(W) $ in Billions 3Q11 Yr/Yr 3Q11 Yr/Yr Net Cash from Operations $4.7 $0.1 $12.7 $0.0 Less: Global Financing Receivables 0.2 (0.2) 2.1 (0.1) Net Cash from Operations 4.5 0.3 10.6 0.1 (excluding GF Receivables) Net Capital Expenditures (1.0) 0.0 (3.0) (0.1) Free Cash Fl
Slide 12: Balance Sheet Summary
Balance Sheet Summary $ in Billions Sept. 10 Dec. 10 Sept. 11 Cash & Marketable Securities $11.1 $11.7 $11.3 Non-GF Assets* 65.7 67.3 67.5 Global Financing Assets 30.4 34.5 31.4 Total Assets 107.2 113.5 110.2 Other Liabilities 57.4 61.7 57.6 Non-GF Debt* 5.5 5.8 7.4 Global Financing Debt 22.0 22.8 2
Slide 13: Operating EPS Bridge – 3Q10 to 3Q11
Operating EPS Bridge – 3Q10 to 3Q11 $0.18 $3.28 $0.03 $0.22 Gross Margin 0.23 $2.85 Expense E/R (0.17) Tax (0.03) 3Q10 Revenue Growth Margin Share 3Q11 Operating EPS @ Actual Expansion Repurchases Operating EPS www.ibm.com/investor 13
Slide 14: 3Q 2011 Summary
At least 3Q 2011 Summary 2015 $20 ¾ Continued strength in growth initiatives • Growth markets YTD revenue up 20% yr/yr, 13% @CC, more than half of IBM’s revenue growth @CC • Business analytics YTD revenue up 19% yr/yr • Cloud YTD revenue doubled full year 2010 revenue 2010 $11.67 • Smarter Planet YT
Slide 15: www.ibm.com/investor
www.ibm.com/investor 15
Slide 16: Supplemental Materials
Supplemental Materials Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding ¾ Currency – Year/Year Comparison ¾ Supplemental Segment Information – Global Services ¾ Supplemental Segment Information – Systems & Technology, S
Slide 17: Currency – Year/Year Comparison
Supplemental Materials Currency – Year/Year Comparison Quarterly Averages per US $ 10/14 @ 10/14 Spot 1Q11 Yr/Yr 2Q11 Yr/Yr 3Q11 Yr/Yr Spot 4Q11 FY11 Euro 0.73 (1%) 0.69 12% 0.71 8% 0.72 2% 5% Pound 0.62 3% 0.61 9% 0.62 4% 0.63 0% 4% Yen 82 9% 82 11% 78 9% 77 6% 9% Revenue Impact - Pts 3 pts 7 pts 5
Slide 18: Supplemental Segment Information – 3Q 2011
Supplemental Materials Supplemental Segment Information – 3Q 2011 Supplemental Revenue Information Supplemental Backlog / Signings Information Revenue Growth $ in Billions Backlog Global Services Yr/Yr @CC Global Services 3Q11 Yr/Yr @CC GTS Outsourcing 9% 3% Total Backlog $137 +2 +2 Integrated Tech
Slide 19: Supplemental Segment Information – 3Q 2011
Supplemental Materials Supplemental Segment Information – 3Q 2011 Revenue Growth Revenue Growth Systems & Technology Yr/Yr @CC GP% Share Software Yr/Yr @CC System z (5%) (7%) WebSphere Family 52% 46% Information Management 12% 7% Power Systems 15% 12% Tivoli 8% 3% System x 1% (3%) Lotus 6% 1% Storag
Slide 20: Global Financing Portfolio
Supplemental Materials Global Financing Portfolio 3Q11 – $23.3B Net External Receivables Investm ent Grade Non-Investm ent Grade 65% 35% 50% 40% 30% 20% 39% 26% 10% 19% 4% 10% 2% 0% Aaa-A3 Baa1-Baa3 Ba1-Ba2 Ba3-B1 B2-B3 Caa-D 3Q11 2Q11 3Q10 Identified Loss Rate 1.0% 1.0% 1.6% Anticipated Loss Rate 0
Slide 21: Revenue by Key Industry Sales Unit
Supplemental Materials Revenue by Key Industry Sales Unit $ in Billions B/(W) Yr/Yr 3Q11 Rptd @CC Public Industrial Financial Services $7.7 10% 3% Public 4.0 5% 1% Financial Distribution Industrial 2.6 8% 2% Services Distribution 2.6 11% 7% Comms General Communications 2.6 9% 5% Business General Bus
Slide 22: Cash Flow (FAS 95)
Supplemental Materials Cash Flow (FAS 95) $ in Billions QTD QTD YTD YTD 3Q11 3Q10 3Q11 3Q10 Net Income from Operations $3.8 $3.6 $10.4 $9.6 Depreciation / Amortization of Intangibles 1.2 1.2 3.6 3.6 Stock-based Compensation 0.2 0.2 0.5 0.5 Working Capital / Other (0.7) (0.8) (3.9) (3.1) Global Finan
Slide 23: Non-GAAP Supplementary Materials
Supplemental Materials Non-GAAP Supplementary 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
Slide 24: Non-GAAP Supplementary Materials
Supplemental Materials Non-GAAP Supplementary 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 ca
Slide 25: Reconciliation of Operating Earnings Per Share
Supplemental Materials Non-GAAP Supplementary Materials Non-GAAP Reconciliation of Operating Earnings Per Share 2011 Expectations IBM GAAP EPS $12.95+ IBM Operating EPS (Non-GAAP) $13.35+ Adjustments Acquisition-Related Charges * $0.42 Amortization of Purchased Intangibles $0.39 Other Acquisition-Re
Slide 26: GAAP to Operating (Non-GAAP) Bridge – 3Q 2011
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – 3Q 2011 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $12,173 $87 ($7) $12,253 SG&A 5,662 (75) 0 5,587 RD&E 1,546 0 22 1,
Slide 27: GAAP to Operating (Non-GAAP) Bridge – 3Q 2010
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – 3Q 2010 $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) Gross Profit $11,001 $65 ($53) $11,013 SG&A 5,149 (76) 20 5,094 RD&E 1,464 0 31
Slide 28: GAAP to Operating (Non-GAAP) Bridge – YTD
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – YTD $ in Millions, except EPS Acquisition-related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) YTD 3Q 2011 Total Operating Expense & Other Income 21,687 (249) 49 21,487 Pre-Tax In
Slide 29: GAAP to Operating (Non-GAAP) Bridge – 3Q 2011
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge -- 3Q 2011 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 46.5% 0.3 pts 0.0 pts 46.8% PTI Margin 19.2% 0.7 pts (0.1) pts 19.8% Tax Rate ***
Slide 30: GAAP to Operating (Non-GAAP) Bridge – 3Q 2010
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge -- 3Q 2010 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 45.3% 0.3 pts (0.2) pts 45.4 % PTI Margin 19.3% 0.6 pts (0.4) pts 19.4 % Tax Rate
Slide 31: GAAP to Operating (Non-GAAP) Bridge – YTD 3Q 2011
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – YTD 3Q 2011 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 45.7% 0.3 pts 0.0 pts 46.1 % PTI Margin 17.7% 0.7 pts 0.0 pts 18.3 % Tax Rate
Slide 32: GAAP to Operating (Non-GAAP) Bridge – YTD 3Q 2010
Supplemental Materials Non-GAAP Supplementary Materials GAAP to Operating (Non-GAAP) Bridge – YTD 3Q 2010 Acquisition- Retirement- related * related ** Operating GAAP adjustments adjustments (Non-GAAP) Gross Profit Margin 44.9% 0.3 pts (0.2) pts 44.9 % PTI Margin 18.0% 0.5 pts (0.4) pts 18.1 % Tax R
Slide 33: Reconciliation of Free Cash Flow (excluding GF Receivables)
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Free Cash Flow (excluding GF Receivables) $ in Billions 12 months ended 9/30/11 Net Cash from Operations $19.5 Less: Global Financing Receivables (0.9) Net Cash from Operations (excluding GF Receivables) 20.4 Net Capital Expen
Slide 34: Reconciliation of Revenue Growth
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Revenue Growth 3Q11 Yr/Yr As Rptd @CC Canada 14% 7% Spain 19% 9% UK 9% 5% Japan (0%) (10%) Growth Markets GTS Outsourcing 20% 10% Systems & Technology 16% 12% System x 21% 15% The above serves to reconcile the Non-GAAP financi
Slide 35: Reconciliation of B/(W) Yr/Yr Expense Drivers
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of B/(W) Yr/Yr Expense Drivers Non-GAAP Operating GAAP Adjustments (Non-GAAP) SG&A Currency (5 pts) 0 pts (5 pts) Acquisitions (3 pts) 0 pts (2 pts) Base (2 pts) 0 pts (3 pts) RD&E Currency (2 pts) 0 pts (2 pts) Acquisitions (4 p
Slide 36: Reconciliation of Debt-to-Capital Ratio
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Debt-to-Capital Ratio 3Q11 FY10 3Q10 Non-Global Financing Debt / Capital 28% 23% 22% IBM Consolidated Debt / Capital 57% 55% 55% The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet
Slide 37: Reconciliation of Operating EPS Bridge 3Q10 to 3Q11
Supplemental Materials Non-GAAP Supplementary Materials Reconciliation of Operating EPS Bridge 3Q10 to 3Q11 Acquisition- related Retirement-related Operating GAAP Adjustments* Adjustments** (Non-GAAP) 3Q10 EPS $2.82 $0.08 ($0.05) $2.85 Revenue growth @ actual 0.22 0.01 (0.01) 0.22 Margin expansion G
Slide 38: www.ibm.com/investor
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