International Business Machines Corp - Half-Yearly Report

IBM RELEASES SECOND-QUARTER RESULTS Accelerated revenue growth led by Software; Raises full-year free cash flow expectation ARMONK, N.Y., July 24, 2024 -- IBM (NYSE: IBM (http://www.ibm.com/investor)) today announced second-quarter 2024 earnings results. Logo - https://mma.prnewswire.com/media/2319830/IBM_LOGO_1.jpg "We had a strong second quarter, exceeding our expectations, driven by growth in both revenue and free cash flow. We continue to see that clients turn to IBM for our technology and our expertise in enterprise AI, and our book of business for generative AI has grown to more than two billion dollars sincethe launch of watsonx one year ago," said Arvind Krishna, IBM chairman and chief executive officer. "Given our first-half results, we are raising our full-year view of free cash flow, which we now expect to be more than $12 billion." Second-Quarter Highlights · Revenue - Revenue of $15.8 billion, up 2 percent, up 4 percent at constant currency - Software revenue up 7 percent, up 8 percent at constant currency -Consulting revenue down 1 percent, up 2 percent at constant currency -Infrastructure revenue up 1 percent, up 3 percent at constant currency · Profit Margin -Gross Profit Margin: GAAP: 56.8 percent, up 180 basis points; Operating (Non -GAAP): 57.8 percent, up 190 basis points -Pre-Tax Income Margin: GAAP: 14.1 percent, up 110 basis points; Operating (Non -GAAP): 17.7 percent, up 220 basis points · Cash Flow -Year to date, net cash from operating activities of $6.2 billion, down $0.2 billion; free cash flow of $4.5 billion, up $1.1 billion -Over the last twelve months, net cash from operating activities of $13.8 billion; free cash flow of $12.3 billion SECOND QUARTER 2024 INCOME STATEMENT SUMMARY Revenue Gross Gross Pre Pre Net Diluted Profit -tax -tax Profit Margin Income Earnings Income Income Per Margin Share GAAP from $ 15.8 $ 8.9 56.8 % $ 2.2 14.1 % $ 1.8 $ 1.96 Continuing B B B B Operations Year/Year 2 %(1) 5 % 1.8 Pts 11 % 1.1 Pts 16 % 14 % Operating $ 9.1 57.8 % $ 2.8 17.7 % $ 2.3 $ 2.43 B B B (Non-GAAP) Year/Year 5 % 1.9 Pts 17 % 2.2 Pts 14 % 11 % (1) 4% at constant currency. "In the quarter, we accelerated our revenue growth as we continue to execute well on our strategy. Our business fundamentals, operating leverage, product mix and productivity initiatives all contributed to significant margin expansion and increased profit and free cash flow," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our strong cash generation enables us to continue investing in innovation and expertise across the portfolio, while returning value to shareholders through dividends." Segment Results for Second Quarter · Software - revenues of $6.7 billion, up 7.1 percent, up 8.4 percent at constant currency: -Hybrid Platform & Solutions up 5 percent, up 6 percent at constant currency: -- Red Hat up 7 percent, up 8 percent at constant currency -- Automation up 15 percent, up 16 percent at constant currency -- Data & AI down 3 percent, down 2 percent at constant currency -- Security up 2 percent, up 3 percent at constant currency -Transaction Processing up 11 percent, up 13 percent at constant currency · Consulting - revenues of $5.2 billion, down 0.9 percent, up 1.8 percent at constant currency: -Business Transformation up 3 percent, up 6 percent at constant currency -Technology Consulting down 3 percent, up 1 percent at constant currency -Application Operations down 4 percent, down 2 percent at constant currency · Infrastructure - revenues of $3.6 billion, up 0.7 percent, up 2.7 percent at constant currency: -Hybrid Infrastructure up 4 percent, up 6 percent at constant currency -- IBM Z up 6 percent, up 8 percent at constant currency -- Distributed Infrastructure up 3 percent, up 5 percent at constant currency -Infrastructure Support down 5 percent, down 3 percent at constant currency · Financing - revenues of $0.2 billion, down 8.3 percent, down 6.6 percent at constant currency Cash Flow and Balance Sheet In the second quarter, the company generated net cash from operating activities of $2.1 billion, down $0.6 billion year to year. IBM's free cash flow was $2.6 billion, up $0.5 billion year to year. The company returned $1.5 billion to shareholders in dividends in the second quarter. For the first sixmonths of the year, the company generated net cash from operating activities of $6.2 billion, down$0.2 billion year to year. IBM's free cash flow was $4.5 billion, up $1.1 billion year to year. Over the last twelve months, the company generated net cash from operating activities of $13.8 billion and free cash flow of $12.3 billion. IBM ended the second quarter with $16.0 billion of cash, restricted cash and marketable securities, up $2.5 billion from year-end 2023. Debt, including IBM Financing debt of $11.1 billion, totaled $56.5 billion, flat year to date. Full-Year 2024 Expectations · Revenue: The company continues to expect constant currency revenue growth consistent with its mid-single digit model. At current foreign exchange rates, currency is expected to be about a one to two-point headwind to revenue growth · Free cash flow: The company now expects more than $12 billion in free cash flow Forward-Looking and Cautionary Statements Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects related to climate change and environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; potential failure of the separation of Kyndryl Holdings, Inc. to qualify for tax-free treatment; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference. Statements in this communication regarding the strategic acquisition that are forward-looking may include projections as to closing date for the transaction, the extent of, and the time necessary to obtain, the regulatory approvals required for the transaction, the anticipated benefits of the transaction, the impact of the transaction on IBM's business, the synergies from the transaction, and the combined company's future operating results. Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements. Presentation of Information in this Press Release In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non -GAAP information, which management believes provides useful information to investors: IBM results - · adjusting for currency (i.e., at constant currency); · presenting operating (non-GAAP) earnings per share amounts and related income statement items; · free cash flow; · net cash from operating activities excluding IBM Financing receivables; · adjusted EBITDA. 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. For generative AI, book of business includes Software transactional revenue, SaaS Annual Contract Value and Consulting signings. Conference Call and Webcast IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q24.Presentation charts will be available shortly before the Webcast. Financial Results Below(certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts). Contact:     IBM Sarah Meron, 347-891-1770 sarah.meron@ibm.com Tim Davidson, 914-844-7847 tfdavids@us.ibm.com INTERNATIONAL BUSINESS MACHINES CORPORATION COMPARATIVE FINANCIAL RESULTS (Unaudited; Dollars in millions except per share amounts) Three Six Months Months Ended Ended June June 30, 30, 2024 2023 2024 2023 (1) (1) REVENUE BY SEGMENT Software $ 6,739 $ 6,294 $ 12,63 $ 11,88 7 5 Consulting 5,179 5,226 10,365 10,423 Infrastructure 3,645 3,618 6,721 6,716 Financing 169 185 362 380 Other 38 152 146 321 TOTAL REVENUE 15,770 15,475 30,231 29,727 GROSS PROFIT 8,950 8,501 16,692 16,010 GROSS PROFIT MARGIN Software 83.6 % 82.1 % 83.0 % 82.3 % Consulting 26.3 % 25.9 % 25.8 % 25.7 % Infrastructure 56.5 % 56.0 % 55.4 % 54.1 % Financing 48.9 % 49.2 % 48.7 % 46.5 % TOTAL GROSS PROFIT 56.8 % 54.9 % 55.2 % 53.9 % MARGIN EXPENSE AND OTHER INCOME S,G&A 4,938 4,900 9,912 9,754 R,D&E 1,840 1,687 3,637 3,342 Intellectual (241) (248) (458) (428) property and custom development income Other (income) and (233) (261) (550) (506) expense Interest expense 427 423 859 790 TOTAL EXPENSE AND 6,730 6,501 13,399 12,952 OTHER INCOME INCOME FROM 2,219 2,000 3,293 3,058 CONTINUING OPERATIONS BEFORE INCOME TAXES Pre-tax margin 14.1 % 12.9 % 10.9 % 10.3 % Provision 389 419 (112) 543 for/(Benefit from) income taxes Effective tax rate 17.5 % 21.0 % (3.4) % 17.8 % INCOME FROM $ 1,830 $ 1,581 $ 3,405 $ 2,515 CONTINUING OPERATIONS DISCONTINUED OPERATIONS Income/(loss) from 4 2 34 (4) discontinued operations, net of taxes NET INCOME $ 1,834 $ 1,583 $ 3,439 $ 2,511 EARNINGS/(LOSS) PER SHARE OF COMMON STOCK Assuming Dilution Continuing $ 1.96 $ 1.72 $ 3.65 $ 2.74 Operations Discontinued $ 0.00 $ 0.00 $ 0.04 $ 0.00 Operations TOTAL $ 1.96 $ 1.72 $ 3.68 $ 2.73 Basic Continuing $ 1.99 $ 1.74 $ 3.71 $ 2.77 Operations Discontinued $ 0.00 $ 0.00 $ 0.04 $ 0.00 Operations TOTAL $ 1.99 $ 1.74 $ 3.74 $ 2.76 WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M's) Assuming Dilution 934.4 919.5 933.9 918.6 Basic 920.3 909.9 918.7 908.7 ____________________ (1) Recast to reflect January 2024 segment changes. INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Dollars in Millions) At At June 30, December 31, 2024 2023 ASSETS: Current Assets: Cash and cash equivalents $ 12,210 $ 13,068 Restricted cash 2,268 21 Marketable securities 1,481 373 Notes and accounts receivable - trade, net 5,769 7,214 Short-term financing receivables, net 5,799 6,793 Other accounts receivable, net 757 640 Inventories 1,234 1,161 Deferred costs 997 998 Prepaid expenses and other current assets 2,784 2,639 Total Current Assets 33,299 32,908 Property, plant and equipment, net 5,600 5,501 Operating right-of-use assets, net 3,130 3,220 Long-term financing receivables, net 5,483 5,766 Prepaid pension assets 7,630 7,506 Deferred costs 820 842 Deferred taxes 6,378 6,656 Goodwill 59,416 60,178 Intangibles, net 10,251 11,036 Investments and sundry assets 1,840 1,626 Total Assets $ 133,848 $ 135,241 LIABILITIES: Current Liabilities: Taxes $ 1,691 $ 2,270 Short-term debt 3,602 6,426 Accounts payable 3,631 4,132 Deferred income 13,643 13,451 Operating lease liabilities 762 820 Other liabilities 6,319 7,022 Total Current Liabilities 29,648 34,122 Long-term debt 52,929 50,121 Retirement related obligations 10,200 10,808 Deferred income 3,489 3,533 Operating lease liabilities 2,546 2,568 Other liabilities 10,932 11,475 Total Liabilities 109,745 112,628 EQUITY: IBM Stockholders' Equity: Common stock 60,501 59,643 Retained earnings 151,659 151,276 Treasury stock - at cost (169,815) (169,624) Accumulated other comprehensive income/(loss) (18,319) (18,761) Total IBM Stockholders' Equity 24,026 22,533 Noncontrolling interests 77 80 Total Equity 24,103 22,613 Total Liabilities and Equity $ 133,848 $ 135,241 INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited) Three Six Trailing Months Months Twelve Ended Ended Months June June Ended 30, 30, June 30, (Dollars in 2024 2023 2024 2023 2024 Millions) Net Cash from $ 2,066 $ 2,638 $ 6,234 $ 6,412 $ 13,752 Operations per GAAP Less: change (946) 50 951 2,028 156 in IBM Financing receivables Capital (399) (487) (761) (944) (1,305) Expenditures, net Free Cash 2,612 2,101 4,522 3,441 12,292 Flow Acquisitions (153) (334) (235) (356) (4,961) Divestitures - 6 703 6 693 Dividends (1,537) (1,510) (3,058) (3,007) (6,092) Non-Financing (4,168) (1,178) 1,076 8,514 (1,892) Debt Other (73) (347) (510) (1,109) (410) (includes IBM Financing net receivables and debt) Change in $ (3,318 $ (1,263 $ 2,497 $ 7,489 $ (370) Cash, Cash ) ) Equivalents, Restricted Cash and Short -term Marketable Securities INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited) Three Six Months Ended Months June 30, Ended June 30, (Dollars in Millions) 2024 2023 2024 2023 Net Income from Operations $ 1,834 $ 1,583 $ 3,439 $ 2,511 Depreciation/Amortization of 1,155 1,076 2,287 2,150 Intangibles (1) Stock-based Compensation 316 288 636 556 Operating assets and (293) (359) (1,079) (832) liabilities/Other, net (2) IBM Financing A/R (946) 50 951 2,028 Net Cash Provided by $ 2,066 $ 2,638 $ 6,234 $ 6,412 Operating Activities Capital Expenditures, net of (399) (487) (761) (944) payments & proceeds Divestitures, net of cash - 6 703 6 transferred Acquisitions, net of cash (153) (334) (235) (356) acquired Marketable Securities / 2,791 822 (1,679) (6,659) Other Investments, net Net Cash Provided by/(Used $ 2,239 $ 7 $ (1,971) $ (7,953) in) Investing Activities Debt, net of payments & (2,900) (1,135) 481 6,169 proceeds Dividends (1,537) (1,510) (3,058) (3,007) Financing - Other (78) (86) (61) (185) Net Cash Provided by/(Used $ (4,515 $ (2,731) $ (2,638) $ 2,978 in) Financing Activities ) Effect of Exchange Rate (76) (25) (236) (1) changes on Cash Net Change in Cash, Cash $ (287) $ (110) $ 1,389 $ 1,436 Equivalents and Restricted Cash ____________________ (1) Includes operating lease right-of-use assets amortization. (2) Includes the reduction of tax reserves. INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION (Unaudited) Three Six Months Months Ended Ended June June 30, 30, (Dollars in 2024 2023 Yr/Yr 2024 2023 Yr/Yr Billions) Net Income as $ 1.8 $ 1.6 $ 0.3 $ 3.4 $ 2.5 $ 0.9 reported (GAAP) Less: Income/(loss) 0.0 0.0 0.0 0.0 0.0 0.0 from discontinued operations, net of tax Income from 1.8 1.6 0.2 3.4 2.5 0.9 continuing operations Provision 0.4 0.4 0.0 (0.1) 0.5 (0.7) for/(Benefit from) income taxes from continuing ops. Pre-tax income from 2.2 2.0 0.2 3.3 3.1 0.2 continuing operations (GAAP) Non-operating adjustments (before tax) Acquisition-related 0.5 0.4 0.1 1.0 0.8 0.2 charges (1) Non-operating 0.1 0.0 0.1 0.2 0.0 0.2 retirement -related costs/(income) Operating (non-GAAP) 2.8 2.4 0.4 4.4 3.8 0.6 pre-tax income from continuing ops. Net interest expense 0.2 0.2 0.0 0.4 0.4 0.0 Depreciation/Amortiza 0.7 0.7 0.0 1.4 1.4 0.0 tion of non-acquired intangible assets Stock-based 0.3 0.3 0.0 0.6 0.6 0.1 compensation Workforce 0.0 0.1 (0.1) 0.4 0.4 0.0 rebalancing charges Corporate (gains) 0.0 0.0 0.0 (0.2) 0.0 (0.2) and charges (2) Adjusted EBITDA $ 4.0 $ 3.7 $ 0.4 $ 7.1 $ 6.5 $ 0.5 ____________________ (1) Primarily consists of amortization of acquired intangible assets. (2) Corporate (gains) and charges primarily consists of unique corporate actions such as gains on divestitures. INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) Three Months Ended June 30, 2024 (Dollars in Software Consulting Infrastructure Financing Millions) Revenue $ 6,739 $ 5,179 $ 3,645 $ 169 Segment Profit $ 2,113 $ 463 $ 654 $ 77 Segment Profit 31.3 % 8.9 % 17.9 % 45.3 % Margin Change YTY Revenue 7.1 % (0.9) % 0.7 % (8.3) % Change YTY Revenue - 8.4 % 1.8 % 2.7 % (6.6) % Constant Currency Three Months Ended June 30, 2023 (1) (Dollars in Software Consulting Infrastructure Financing Millions) Revenue $ 6,294 $ 5,226 $ 3,618 $ 185 Segment Profit $ 1,749 $ 483 $ 732 $ 64 Segment Profit 27.8 % 9.2 % 20.2 % 34.8 % Margin ____________________ (1) Recast toreflect January 2024 segment changes. Six Months Ended June 30, 2024 (Dollars in Software Consulting Infrastructure Financing Millions) Revenue $ 12,637 $ 10,365 $ 6,721 $ 362 Segment Profit $ 3,612 $ 888 $ 965 $ 168 Segment Profit 28.6 % 8.6 % 14.4 % 46.5 % Margin Change YTY Revenue 6.3 % (0.6) % 0.1 % (4.9) % Change YTY Revenue - 7.2 % 1.8 % 1.5 % (4.0) % Constant Currency Six Months Ended June 30, 2023 (1) (Dollars in Software Consulting Infrastructure Financing Millions) Revenue $ 11,885 $ 10,423 $ 6,716 $ 380 Segment Profit $ 3,128 $ 910 $ 1,039 $ 164 Segment Profit 26.3 % 8.7 % 15.5 % 43.2 % Margin __________ (1) Recast to reflect January 2004 segment changes. INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts) Three Months Ended June 30, 2024 Continuing Operations GAAP Acquisition Retirement- Tax Operating - Related Reform (Non Related -GAAP) Adjustments Impacts Adjustments (2) (1) Gross Profit $ 8,950 $ 170 $ - $ - $ 9,120 Gross Profit Margin 56.8 % 1.1 pts - pts - pts 57.8 % S,G&A $ 4,938 $ (286) $ - $ - $ 4,651 Other (Income) & (233) (18) (98) - (349) Expense Total Expense & Other 6,730 (304) (98) - 6,328 (Income) Pre-tax Income from 2,219 474 98 - 2,792 Continuing Operations Pre-tax Income Margin 14.1 % 3.0 pts 0.6 pts - pts 17.7 % from Continuing Operations Provision for/(Benefit $ 389 $ 113 $ 26 $ (12) $ 516 from) Income Taxes (3) Effective Tax Rate 17.5 % 1.1 pts 0.3 pts (0.4) pts 18.5 % Income from Continuing $ 1,830 $ 362 $ 72 $ 12 $ 2,275 Operations Income Margin from 11.6 % 2.3 pts 0.5 pts 0.1 pts 14.4 % Continuing Operations Diluted Earnings Per $ 1.96 $ 0.39 $ 0.08 $ 0.01 $ 2.43 Share: Continuing Operations Three Months Ended June 30, 2023 Continuing Operations GAAP Acquisition Retirement- Tax Operating - Related Reform (Non Related -GAAP) Adjustments Impacts Adjustments (2) (1) Gross Profit $ 8,501 $ 150 $ - $ - $ 8,650 Gross Profit Margin 54.9 % 1.0 pts - pts - pts 55.9 % S,G&A $ 4,900 $ (245) $ - $ - $ 4,655 Other (Income) & (261) 0 (1) - (262) Expense Total Expense & Other 6,501 (246) (1) - 6,254 (Income) Pre-tax Income from 2,000 395 1 - 2,396 Continuing Operations Pre-tax Income Margin 12.9 % 2.6 pts 0.0 pts - pts 15.5 % from Continuing Operations Provision for/(Benefit $ 419 $ 87 $ (3) $ (110) $ 393 from) Income Taxes (3) Effective Tax Rate 21.0 % 0.2 pts (0.2) pts (4.6) pts 16.4 % Income from Continuing $ 1,581 $ 308 $ 5 $ 110 $ 2,003 Operations Income Margin from 10.2 % 2.0 pts 0.0 pts 0.7 pts 12.9 % Continuing Operations Diluted Earnings Per $ 1.72 $ 0.34 $ 0.00 $ 0.12 $ 2.18 Share: Continuing Operations ____________________ (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. 2024 also includes a loss of $18 million on foreign exchange derivative contracts entered into by the company prior to the acquisition of StreamSets and webMethods from Software AG. (2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlement s 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. INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts) Six Months Ended June 30, 2024 Continuing Operations GAAP Acquisition Retirement- Tax Operating - Related Reform (Non Related -GAAP) Adjustments Impacts Adjustments (2) (3) (1) Gross Profit $ 16,692 $ 341 $ - $ - $ 17,033 Gross Profit Margin 55.2 % 1.1 pts - pts - pts 56.3 % S,G&A $ 9,912 $ (554) $ - $ - $ 9,358 Other (Income) & (550) (68) (194) - (812) Expense Total Expense & 13,399 (622) (194) - 12,584 Other (Income) Pre-tax Income from 3,293 963 194 - 4,449 Continuing Operations Pre-tax Income 10.9 % 3.2 pts 0.6 pts - pts 14.7 % Margin from Continuing Operations Provision $ (112) $ 255 $ 31 $ 436 $ 610 for/(Benefit from) Income Taxes (4) Effective Tax Rate (3.4) % 6.5 pts 0.9 pts 9.8 pts 13.7 % Income from $ 3,405 $ 707 $ 163 $ (436) $ 3,839 Continuing Operations Income Margin from 11.3 % 2.3 pts 0.5 pts (1.4) pts 12.7 % Continuing Operations Diluted Earnings Per $ 3.65 $ 0.76 $ 0.17 $ (0.47) $ 4.11 Share: Continuing Operations Six Months Ended June 30, 2023 Continuing Operations GAAP Acquisition Retirement- Tax Operating - Related Reform (Non Related -GAAP) Adjustments Impacts Adjustments (2) (1) Gross Profit $ 16,010 $ 298 $ - $ - $ 16,308 Gross Profit Margin 53.9 % 1.0 pts - pts - pts 54.9 % S,G&A $ 9,754 $ (491) $ - $ - $ 9,263 Other (Income) & (506) (2) 4 - (504) Expense Total Expense & 12,952 (493) 4 - 12,463 Other (Income) Pre-tax Income from 3,058 791 (4) - 3,845 Continuing Operations Pre-tax Income 10.3 % 2.7 pts 0.0 pts - pts 12.9 % Margin from Continuing Operations Provision $ 543 $ 178 $ (14) $ (115) $ 593 for/(Benefit from) Income Taxes (4) Effective Tax Rate 17.8 % 1.0 pts (0.3) pts (3.0) pts 15.4 % Income from $ 2,515 $ 613 $ 10 $ 115 $ 3,252 Continuing Operations Income Margin from 8.5 % 2.1 pts 0.0 pts 0.4 pts 10.9 % Continuing Operations Diluted Earnings Per $ 2.74 $ 0.67 $ 0.01 $ 0.13 $ 3.54 Share: Continuing Operations ____________________ (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. 2024 also includes a loss of $68 million on foreign exchange derivative contracts entered into by the company prior to the acquisition of StreamSets and webMethods from Software AG. (2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settleme nt s and pension insolvency costs and other costs. (3) 2024 includes a net benefit from discrete tax events. (4) Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results. INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION (Unaudited) Three Six Months Months Ended Ended June June 30, 30, (Dollars in Billions) 2024 2023 2024 2023 Net Cash Provided by Operating $ 2.1 $ 2.6 $ 6.2 $ 6.4 Activities Add: Net interest expense 0.2 0.2 0.4 0.4 Provision for/(Benefit from) 0.4 0.4 (0.1) 0.5 income taxes from continuing operations Less change in: Financing receivables (0.9) 0.1 1.0 2.0 Other assets and (0.4) (0.5) (1.5) (1.2) liabilities/Other, net (1) Adjusted EBITDA $ 4.0 $ 3.7 $ 7.1 $ 6.5 ____________________ (1) Other assets and liabilities/Other, net mainly consists of Operating assets and liabilities/Other, net in the Cash flow chart, workforce rebalancing charges, non-operating impacts and corporate (gains) and charges.  SOURCE IBM This information was brought to you by Cision http://news.cision.com

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