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Form 8-K INTERNATIONAL BUSINESS For: Jan 24

January 24, 2022 4:13 PM

Exhibit 99.1

IBM RELEASES FOURTH QUARTER RESULTS

Software and Consulting Growth Driven by Hybrid Cloud Adoption; Strong Profit Performance

ARMONK, N.Y., January 24, 2022 . . . IBM (NYSE: IBM) today announced fourth-quarter 2021 earnings results.

We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting," said Arvind Krishna, IBM chairman and chief executive officer. "Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single digit revenue growth and strong free cash flow in 2022.

On November 3, 2021, IBM completed the separation of Kyndryl. Unless otherwise specified, fourth-quarter and full-year results are presented on a continuing operations basis.

Fourth-Quarter Highlights

Revenue
Revenue of $16.7 billion, up 6.5 percent, up 8.6 percent at constant currency (including about 3.5 points from incremental external sales to Kyndryl)
Software revenue up 8 percent, up 10 percent at constant currency (including about 5 points from incremental external sales to Kyndryl)
Consulting revenue up 13 percent, up 16 percent at constant currency
Infrastructure revenue flat, up 2 percent at constant currency (including about 5 points from incremental external sales to Kyndryl)
Hybrid cloud revenue:

-- Fourth Quarter: $6.2 billion, up 16 percent, up 18 percent at constant currency

-- Full Year: $20.2 billion, up 20 percent, up 19 percent at constant currency

Pre-tax Income:
GAAP: $2.9 billion, up 183 percent, including 167 points from the impact of fourth-quarter 2020 charge for structural actions
Operating (Non-GAAP): $3.5 billion, up 102 percent, including 92 points from the impact of fourth-quarter 2020 charge for structural actions

FOURTH QUARTER 2021 INCOME STATEMENT SUMMARY

    

    

 

    

Pre-tax

    

    

    

Gross

 

Pre-tax

Income

Net

Diluted

Revenue

Profit

 

Income**

Margin**

Income**

EPS**

GAAP from Continuing Operations

$

16.7B

$

9.5B

$

2.9B

 

17.2

%  

$

2.5B

$

2.72

Year/Year

 

6.5

%*

 

2.8

%  

 

183

%  

10.7

Pts

 

107

%  

 

106

%  

Operating
(Non-GAAP)

$

$

9.7B

$

3.5B

 

21.2

%  

$

3.0B

$

3.35

Year/Year

 

2.8

%  

 

102

%  

10.0

Pts

 

80

%  

 

78

%  

* 8.6% at constant currency

** Year-to-year results include impact of $1.5 billion pre-tax charge for structural actions in fourth quarter of 2020

“In 2021, we continued to invest for the future by increasing R&D spending, expanding our ecosystem and acquiring 15 companies to strengthen our hybrid cloud and AI capabilities," said James Kavanaugh, IBM senior vice president and chief financial officer. "With the separation of Kyndryl we now have taken the next step in the evolution of our strategy, creating value through focus and strengthening our financial profile.”


Segment Results for Fourth Quarter

Software (includes Hybrid Platform & Solutions, Transaction Processing)— revenues of $7.3 billion, up 8.2 percent, up 10.1 percent at constant currency (including about 5 points from incremental external sales to Kyndryl):

- Hybrid Platform & Solutions up 7 percent, up 9 percent at constant currency (including about 1 point from incremental external sales to Kyndryl):

-- Red Hat up 19 percent, up 21 percent at constant currency

-- Automation up 13 percent, up 15 percent at constant currency

-- Data & AI up 1 percent, up 3 percent at constant currency

-- Security down 2 percent, down 1 percent at constant currency

- Transaction Processing up 11 percent, up 14 percent at constant currency (including about 16 points from incremental external sales to Kyndryl)

- Software segment hybrid cloud revenue up 22 percent, up 24 percent at constant currency

Consulting (includes Business Transformation, Technology Consulting and Application Operations)— revenues of $4.7 billion, up 13.1 percent, up 15.7 percent at constant currency:

- Business Transformation up 18 percent, up 20 percent at constant currency

- Technology Consulting up 14 percent, up 19 percent at constant currency

- Application Operations up 6 percent, up 8 percent at constant currency

- Consulting segment hybrid cloud revenue up 31 percent, up 34 percent at constant currency

Infrastructure (includes Hybrid Infrastructure, Infrastructure Support)— revenues of $4.4 billion, down 0.2 percent, up 1.7 percent at constant currency (including about 5 points from incremental external sales to Kyndryl):

- Hybrid Infrastructure flat, up 2 percent at constant currency (including about 4 points from incremental external sales to Kyndryl)

-- IBM Z down 6 percent, down 4 percent at constant currency

-- Distributed Infrastructure up 5 percent, up 7 percent at constant currency

- Infrastructure Support down 1 percent, up 1 percent at constant currency (including about 6 points from incremental external sales to Kyndryl)

- Infrastructure segment hybrid cloud revenue down 12 percent, down 11 percent at constant currency

Financing (includes client and commercial financing) revenues of $0.2 billion, down 29.4 percent, down 28.8 percent at constant currency

Cash Flow and Balance Sheet

On a consolidated basis, full-year cash from operating activities was $12.8 billion and free cash flow was $6.5 billion. These consolidated results include ten months of Kyndryl results, and reflect cash paid in 2021 for separation charges and fourth-quarter 2020 structural actions.

IBM’s post-separation baseline free cash flow for the year was $7.9 billion excluding Kyndryl charges and pre-separation activity. This view is aligned to the company’s go-forward business. Payments for IBM-related structural actions and deferred cash taxes paid in 2021 contributed to the year-to-year decline in the post-separation baseline free cash flow.

IBM ended the year with $7.6 billion of cash on hand (which includes marketable securities), down $6.7 billion from year-end 2020, reflecting acquisitions of $3.3 billion and debt reduction payments consistent with the company’s previously-stated intention to deleverage. Debt, including Financing debt of $13.9 billion, totaled $51.7 billion, down $9.6 billion since the end of 2020, and down more than $21 billion since closing the Red Hat acquisition. The company returned $5.9 billion to shareholders in dividends.

Full-Year 2022 Expectations

The company will discuss 2022 expectations during today’s quarterly earnings conference call.


Continuing Operations

With the separation completed on November 3, 2021, Kyndryl’s operational activity has been reclassified to IBM’s discontinued operations results in accordance with U.S. Generally Accepted Accounting Principles (GAAP). As discussed in previous communications, discontinued operations does not include historical intercompany transactions between IBM and Kyndryl (e.g., purchases of IBM hardware and software) which were previously eliminated in consolidation. It also does not include the spending for shared services (e.g., finance, marketing, human resources, global sales coverage) that has already been transferred to Kyndryl. IBM results on a continuing operations basis after separation reflect the new commercial relationship with Kyndryl and do not include shared services costs, which have been transferred to Kyndryl.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company’s ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects from environmental matters, tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:

IBM results —

adjusting for currency (i.e., at constant currency);
presenting operating (non-GAAP) earnings per share amounts and related income statement items;
consolidated free cash flow;
post-separation baseline free cash flow.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.


Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EST, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-4q21. 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

[email protected]

Tim Davidson, 914-844-7847

[email protected]


INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

Three Months Ended

 

Year Ended

 

December 31, 

 

December 31, 

 

    

2021

    

2020

 

2021

    

2020

 

REVENUE

 

  

 

  

  

 

  

Software

$

7,273

$

6,719

$

24,141

$

22,927

Consulting

 

4,746

 

4,196

 

17,844

 

16,257

Infrastructure

 

4,414

 

4,425

 

14,188

 

14,533

Financing

 

172

 

244

 

774

 

975

Other

 

89

 

98

 

404

 

488

TOTAL REVENUE

 

16,695

 

15,682

 

57,350

 

55,179

GROSS PROFIT

 

9,500

 

9,238

 

31,486

 

30,865

GROSS PROFIT MARGIN

 

 

 

 

Software

 

80.9

%

 

80.5

%

 

78.8

%  

 

78.3

%

Consulting

 

27.0

%

 

29.7

%

 

28.0

%  

 

29.3

%

Infrastructure

 

54.8

%

 

60.1

%

 

55.3

%  

 

57.5

%

Financing

 

32.5

%

 

36.0

%

 

31.7

%  

 

41.6

%

TOTAL GROSS PROFIT MARGIN

 

56.9

%  

 

58.9

%

 

54.9

%  

 

55.9

%

EXPENSE AND OTHER INCOME

 

 

  

 

  

 

  

S,G&A

 

4,903

 

6,256

 

18,745

 

20,561

R,D&E

 

1,625

 

1,592

 

6,488

 

6,262

Intellectual property and custom development income

 

(181)

 

(171)

 

(612)

 

(620)

Other (income) and expense

 

(18)

 

230

 

873

 

802

Interest expense

 

303

 

317

 

1,155

 

1,288

TOTAL EXPENSE AND OTHER INCOME

 

6,632

 

8,224

 

26,649

 

28,293

INCOME/(LOSS) FROM CONTINUING OPERATIONS

 

 

 

 

BEFORE INCOME TAXES

 

2,869

 

1,014

 

4,837

 

2,572

Pre-tax margin

 

17.2

%  

 

6.5

%

 

8.4

%  

 

4.7

%

Provision for/(Benefit from) income taxes

 

407

 

(175)

 

124

 

(1,360)

Effective tax rate

 

14.2

%  

 

(17.3)

%

 

2.6

%  

 

(52.9)

%

INCOME FROM CONTINUING OPERATIONS

$

2,462

$

1,190

$

4,712

$

3,932

DISCONTINUED OPERATIONS

 

 

 

 

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

 

(129)

 

166

 

1,030

 

1,658

NET INCOME

$

2,332

$

1,356

$

5,743

$

5,590

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK

 

 

  

 

  

 

  

Assuming Dilution

 

 

  

 

  

 

  

Continuing Operations

$

2.72

$

1.32

$

5.21

$

4.38

Discontinued Operations

$

(0.14)

$

0.19

$

1.14

$

1.85

TOTAL

$

2.57

$

1.51

$

6.35

$

6.23

Basic

 

 

 

 

Continuing Operations

$

2.74

$

1.33

$

5.26

$

4.42

Discontinued Operations

$

(0.14)

$

0.19

$

1.15

$

1.86

TOTAL

$

2.60

$

1.52

$

6.41

$

6.28

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

 

 

 

 

Assuming Dilution

 

906.6

 

899.0

 

904.6

 

896.6

Basic

 

898.2

 

892.6

 

896.0

 

890.3


INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

    

At

    

At

December 31, 

December 31, 

(Dollars in Millions)

2021

2020

ASSETS:

 

  

 

  

Current Assets:

 

  

 

  

Cash and cash equivalents

$

6,650

$

13,188

Restricted cash

 

307

 

463

Marketable securities

 

600

 

600

Notes and accounts receivable - trade, net

 

6,754

 

5,790

Short-term financing receivables, net

 

8,014

 

10,892

Other accounts receivable, net

 

1,002

 

695

Inventories

 

1,649

 

1,812

Deferred costs

 

1,097

 

1,018

Prepaid expenses and other current assets

 

3,466

 

2,089

Current assets of discontinued operations

2,618

Total Current Assets

 

29,539

 

39,165

Property, plant and equipment, net

 

5,694

 

6,205

Operating right-of-use assets, net

 

3,222

 

3,566

Long-term financing receivables, net

 

5,425

 

7,086

Prepaid pension assets

 

9,850

 

7,557

Deferred costs

 

924

 

1,150

Deferred taxes

 

7,370

 

8,404

Goodwill

 

55,643

 

53,765

Intangibles, net

12,511

13,739

Investments and sundry assets

 

1,823

 

2,187

Non-current assets of discontinued operations

 

 

13,147

Total Assets

$

132,001

$

155,971

LIABILITIES:

 

  

 

  

Current Liabilities:

 

  

 

  

Taxes

$

2,289

$

3,198

Short-term debt

 

6,787

 

7,116

Accounts payable

 

3,955

 

4,033

Deferred income

 

12,518

 

11,980

Operating lease liabilities

 

974

 

1,035

Other liabilities

 

7,097

 

8,688

Current liabilities of discontinued operations

 

 

3,820

Total Current Liabilities

 

33,619

 

39,869

Long-term debt

 

44,917

 

54,217

Retirement related obligations

 

14,435

 

17,184

Deferred income

 

3,577

 

3,758

Operating lease liabilities

 

2,462

 

2,720

Other liabilities

 

13,996

 

14,180

Non-current liabilities of discontinued operations

 

 

3,317

Total Liabilities

 

113,005

 

135,244

EQUITY:

 

 

  

IBM Stockholders’ Equity:

 

 

  

Common stock

 

57,319

 

56,556

Retained earnings

 

154,209

 

162,717

Treasury stock — at cost

 

(169,392)

 

(169,339)

Accumulated other comprehensive income/(loss)

 

(23,234)

 

(29,337)

Total IBM Stockholders’ Equity

 

18,901

 

20,597

Noncontrolling interests

 

95

 

129

Total Equity

 

18,996

 

20,727

Total Liabilities and Equity

$

132,001

$

155,971


INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

Three Months Ended

Year Ended

December 31, 

December 31, 

(Dollars in Millions)

2021

    

2020

    

2021

    

2020

Consolidated Net Cash from Operations per GAAP

$

2,543

$

5,859

$

12,796

$

18,197

Less: change in IBM Financing receivables

 

(1,328)

(974)

 

3,907

4,349

Capital Expenditures, net

 

(526)

(780)

 

(2,381)

(3,042)

Consolidated Free Cash Flow

 

3,345

6,054

 

6,508

10,805

Acquisitions

 

(275)

(299)

 

(3,293)

(336)

Divestitures

 

88

(7)

 

114

503

Dividends

 

(1,474)

(1,455)

 

(5,869)

(5,797)

Non-IBM Financing debt

 

(20)

(4,814)

 

(1,191)

221

Other (includes IBM Financing net receivables and debt)*

 

(2,514)

(958)

 

(2,987)

(130)

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

$

(850)

$

(1,478)

$

(6,718)

$

5,265


* The three months and year ended December 31, 2021 include distribution from Kyndryl of $0.9 billion.

** Cash flows above are presented on an IBM consolidated basis and therefore include an immaterial amount of cash and cash equivalents presented in current assets of discontinued operations in the IBM Condensed Consolidated Balance Sheet at December 31, 2020.


INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

Three Months Ended

Year Ended

December 31, 

December 31, 

(Dollars in Millions)

2021

    

2020

    

2021

    

2020

Net Income from Operations

$

2,332

$

1,356

$

5,743

$

5,590

Depreciation/Amortization of Intangibles

 

1,380

 

1,699

 

6,416

 

6,695

Stock-based Compensation

 

264

 

279

 

982

 

937

Working Capital / Other

 

(105)

 

3,499

 

(4,253)

 

625

IBM Financing A/R

 

(1,328)

 

(974)

 

3,907

 

4,349

Net Cash Provided by Operating Activities

$

2,543

$

5,859

$

12,796

$

18,197

Capital Expenditures, net of payments & proceeds

 

(526)

 

(780)

 

(2,381)

 

(3,042)

Divestitures, net of cash transferred

 

88

 

(7)

 

114

 

503

Acquisitions, net of cash acquired

 

(275)

 

(299)

 

(3,293)

 

(336)

Marketable Securities / Other Investments, net

 

38

 

528

 

(414)

 

(153)

Net Cash Provided by/(Used in) Investing Activities

$

(675)

$

(558)

$

(5,975)

$

(3,028)

Debt, net of payments & proceeds

 

(2,030)

 

(4,781)

 

(8,116)

 

(3,714)

Dividends

 

(1,474)

 

(1,455)

 

(5,869)

 

(5,797)

Financing - Other*

 

811

 

(57)

 

630

 

(210)

Net Cash Provided by/(Used in) Financing Activities

$

(2,692)

$

(6,293)

$

(13,354)

$

(9,721)

Effect of Exchange Rate changes on Cash

 

(26)

 

113

 

(185)

 

(87)

Net Change in Cash, Cash Equivalents and Restricted Cash**

$

(850)

$

(878)

$

(6,718)

$

5,361


* Represents Common Stock Transactions and other financing activities. The three months and year ended December 31, 2021 include distribution from Kyndryl of $0.9 billion.

** Cash flows above are presented on an IBM consolidated basis and therefore include an immaterial amount of cash and cash equivalents presented in current assets of discontinued operations in the IBM Condensed Consolidated Balance Sheet at December 31, 2020.


INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

Three Months Ended December 31, 2021

 

    

 

(Dollars in Millions)

Software

Consulting

Infrastructure

Financing

 

Revenue

$

7,273

$

4,746

$

4,414

$

172

Pre-tax Income/(Loss) from Continuing Operations

 

2,109

436

1,036

79

Pre-tax Margin

 

29.0

%  

 

9.2

%  

 

23.5

%  

 

46.0

%

Change YTY Revenue

 

8.2

%  

 

13.1

%  

 

(0.2)

%  

 

(29.4)

%

Change YTY Revenue - constant currency

 

10.1

%  

 

15.7

%  

 

1.7

%  

 

(28.8)

%

Three Months Ended December 31, 2020

 

    

 

(Dollars in Millions)

Software

Consulting

Infrastructure

Financing

 

Revenue

$

6,719

$

4,196

$

4,425

$

244

Pre-tax Income/(Loss) from Continuing Operations

 

1,151

62

629

110

Pre-tax Margin

 

17.1

%  

 

1.5

%  

 

14.2

%  

 

45.1

%

Year Ended December 31, 2021

 

    

 

(Dollars in Millions)

Software

Consulting

Infrastructure

Financing

 

Revenue

$

24,141

$

17,844

$

14,188

$

774

Pre-tax Income/(Loss) from Continuing Operations

 

4,722

1,449

2,025

441

Pre-tax Margin

 

19.6

%  

 

8.1

%  

 

14.3

%  

 

57.0

%

Change YTY Revenue

 

5.3

%  

 

9.8

%  

 

(2.4)

%  

 

(20.6)

%

Change YTY Revenue - constant currency

 

4.1

%  

 

8.3

%  

 

(3.4)

%  

 

(21.9)

%

Year Ended December 31, 2020

 

    

(Dollars in Millions)

Software

Consulting

Infrastructure

Financing

 

Revenue

$

22,927

$

16,257

$

14,533

$

975

Pre-tax Income/(Loss) from Continuing Operations

 

3,341

1,034

1,654

449

Pre-tax Margin

 

14.6

%  

 

6.4

%  

 

11.4

%  

 

46.1

%


INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

Three Months Ended December 31, 2021

 

Continuing Operations

 

    

    

Acquisition-

    

Retirement-

    

Tax

    

Kyndryl-

    

 

Related

Related

Reform

Related

Operating

 

GAAP

Adjustments (1)

Adjustments (2)

Impacts

Impacts (4)

(Non-GAAP)

 

Gross Profit

$

9,500

$

182

$

$

$

$

9,682

Gross Profit Margin

 

56.9

%  

 

1.1

Pts

Pts

Pts

Pts

 

58.0

%

S,G&A

 

4,903

 

(290)

(8)

 

4,605

Other (Income) & Expense

 

(18)

 

(1)

(315)

126

 

(208)

Total Expense & Other (Income)

 

6,632

 

(290)

(315)

118

 

6,145

Pre-tax Income from Continuing Operations

 

2,869

 

472

315

(118)

 

3,537

Pre-tax Income Margin from Continuing Operations

 

17.2

%  

 

2.8

Pts

1.9

Pts

Pts

(0.7)

Pts

 

21.2

%

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

 

407

 

117

109

(94)

(37)

 

502

Effective Tax Rate

 

14.2

%  

 

1.4

Pts

1.8

Pts

(2.7)

Pts

(0.6)

Pts

 

14.2

%

Income from Continuing Operations

 

2,462

 

355

206

94

(81)

 

3,035

Income Margin from Continuing Operations

 

14.7

%  

 

2.1

Pts

1.2

Pts

0.6

Pts

(0.5)

Pts

 

18.2

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

$

2.72

$

0.39

$

0.23

$

0.10

$

(0.09)

$

3.35

Three Months Ended December 31, 2020

Continuing Operations

    

    

Acquisition-

    

Retirement-

    

Tax

Kyndryl-

    

Related

Related

Reform

Related

Operating

GAAP

Adjustments (1)

Adjustments (2)

Impacts

Impacts (4)

    

(Non-GAAP)

Gross Profit

$

9,238

$

176

$

$

$

$

9,414

Gross Profit Margin

 

58.9

%  

 

1.1

Pts

Pts

Pts

Pts

 

60.0

%

S,G&A

 

6,256

 

(283)

 

5,973

Other (Income) & Expense

 

230

 

(1)

(278)

 

(49)

Total Expense & Other (Income)

 

8,224

 

(283)

(278)

 

7,662

Pre-tax Income/(Loss) from Continuing Operations

 

1,014

 

459

278

 

1,752

Pre-tax Income Margin from Continuing Operations

 

6.5

%  

 

2.9

Pts

1.8

Pts

Pts

Pts

 

11.2

%

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

 

(175)

 

102

156

(18)

 

66

Effective Tax Rate

 

(17.3)

%  

 

10.4

Pts

11.7

Pts

(1.0)

Pts

Pts

 

3.7

%

Income from Continuing Operations

 

1,190

 

357

122

18

 

1,686

Income Margin from Continuing Operations

 

7.6

%  

 

2.3

Pts

0.8

Pts

0.1

Pts

Pts

 

10.8

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

$

1.32

$

0.40

$

0.14

$

0.02

$

$

1.88


(1)  Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.

(2)  Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.

(3)  Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

(4) Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM, employee awards, and separation related tax impacts.


INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

Year Ended December 31, 2021

 

Continuing Operations

 

    

    

Acquisition-

    

Retirement-

    

Tax

    

Kyndryl-

    

 

Related

Related

Reform

Related

Operating

 

GAAP

Adjustments (1)

Adjustments (2)

Impacts

Impacts (4)

(Non-GAAP)

 

Gross Profit

$

31,486

$

719

$

$

$

$

32,205

Gross Profit Margin

 

54.9

%  

 

1.3

Pts

Pts

Pts

Pts

 

56.2

%

S,G&A

 

18,745

 

(1,160)

(8)

 

17,577

Other (Income) & Expense

 

873

 

(2)

(1,282)

126

 

(285)

Total Expense & Other (Income)

 

26,649

 

(1,162)

(1,282)

118

 

24,324

Pre-tax Income from Continuing Operations

 

4,837

 

1,881

1,282

(118)

 

7,881

Pre-tax Income Margin from Continuing Operations

 

8.4

%  

 

3.3

Pts

2.2

Pts

Pts

(0.2)

Pts

 

13.7

%

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

 

124

 

457

251

(89)

(37)

 

706

Effective Tax Rate

 

2.6

%  

 

5.2

Pts

2.8

Pts

(1.1)

Pts

(0.4)

Pts

 

9.0

%

Income from Continuing Operations

 

4,712

 

1,424

1,031

89

(81)

 

7,174

Income Margin from Continuing Operations

 

8.2

%  

 

2.5

Pts

1.8

Pts

0.2

Pts

(0.1)

Pts

 

12.5

%

Diluted Earnings/(Loss) Per Share: Continuing Operations

$

5.21

$

1.57

$

1.14

$

0.10

$

(0.09)

$

7.93

Year Ended December 31, 2020

 

Continuing Operations

 

    

    

Acquisition-

    

Retirement-

    

Tax

    

Kyndryl-

    

 

Related

Related

Reform

Related

Operating

 

GAAP

Adjustments (1)

Adjustments