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IBM Releases First Quarter Results

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Double-Digit Software and Consulting Growth Led by Hybrid Cloud Adoption; Strong Profit Generation

IBM today announced first-quarter 2022 earnings results.

"Demand for hybrid cloud and AI drove growth in both Software and Consulting in the first quarter. Today we're a more focused business and our results reflect the execution of our strategy," said Arvind Krishna, IBM chairman and chief executive officer. "We are off to a solid start for the year, and we now see revenue growth for 2022 at the high end of our model."

First-Quarter Highlights

  • Revenue
    - Revenue of $14.2 billion, up 8 percent, up 11 percent at constant currency (over 5 points from incremental sales to Kyndryl) 
    - Software revenue up 12 percent, up 15 percent at constant currency (over 8 points from incremental sales to Kyndryl)
    - Consulting revenue up 13 percent, up 17 percent at constant currency
    - Infrastructure revenue down 2 percent, flat at constant currency (over 8 points from incremental sales to Kyndryl)
    - Hybrid cloud revenue:
       -- First Quarter: $5.0 billion, up 14 percent, up 17 percent at constant currency
       -- Last 12 months: $20.8 billion, up 17 percent
  • Free Cash Flow
    - On a consolidated basis, net cash from operating activities of $3.2 billion; free cash flow of $1.2 billion
                                     
   

FIRST QUARTER 2022 INCOME STATEMENT SUMMARY

                     

Pre-tax 

             
           

Gross

   

Pre-tax 

 

Income 

   

Net 

   

Diluted 

 
     

Revenue

   

Profit

   

Income

 

Margin

   

Income

   

EPS

 

GAAP from
Continuing
Operations

 

$

14.2B

 

$

7.3B

 

$

0.6B

 

4.4

%

$

0.7B

 

$

0.73

 

    Year/Year

   

8

%*

 

4

%

 

156

%

2.5

Pts

 

64

%

 

62

%

Operating
(Non-GAAP)

       

$

7.5B

 

$

1.5B

 

10.7

%

$

1.3B

 

$

1.40

 

    Year/Year

         

4

%

 

46

%

2.8

Pts

 

25

%

 

25

%

* 11% at constant currency

"In the first quarter we continued to strengthen the fundamentals of our business, consistent with our medium-term model," said James Kavanaugh, IBM senior vice president and chief financial officer. "We are a faster growing, more profitable company with a higher-value business mix, a significant recurring revenue base and strong cash generation."

Segment Results for First Quarter

  • Software (includes Hybrid Platform & Solutions, Transaction Processing)— revenues of $5.8 billion, up 12.3 percent, up 15.4 percent at constant currency (over 8 points from incremental sales to Kyndryl):
    - Hybrid Platform & Solutions up 7 percent, up 10 percent at constant currency (about  1.5 points from incremental sales to Kyndryl):
       -- Red Hat up 18 percent, up 21 percent at constant currency
       -- Automation up 3 percent, up 5 percent at constant currency
       -- Data & AI up 2 percent, up 4 percent at constant currency
       -- Security up 5 percent, up 8 percent at constant currency
    - Transaction Processing up 26 percent, up 31 percent at constant currency (about 28 points from incremental sales to Kyndryl)
    - Software segment hybrid cloud revenue up 22 percent, up 25 percent at constant currency
     
  • Consulting (includes Business Transformation, Technology Consulting and Application Operations)—  revenues of $4.8 billion, up 13.3 percent, up 17.4 percent at constant currency:
    - Business Transformation up 15 percent, up 19 percent at constant currency
    - Technology Consulting up 14 percent, up 19 percent at constant currency
    - Application Operations up 10 percent, up 14 percent at constant currency
    - Consulting segment hybrid cloud revenue up 24 percent, up 29 percent at constant currency
     
  • Infrastructure (includes Hybrid Infrastructure, Infrastructure Support)—  revenues of $3.2 billion, down 2.3 percent, up 0.3 percent at constant currency (over 8 points from incremental sales to Kyndryl):
    - Hybrid Infrastructure down 5 percent, down 2 percent at constant currency (over 8 points from incremental sales to Kyndryl)
       -- IBM z Systems down 19 percent, down 18 percent at constant currency
       -- Distributed Infrastructure up 5 percent, up 8 percent at constant currency
    - Infrastructure Support flat, up 4 percent at constant currency (over 8 points from incremental sales to Kyndryl)
    - Infrastructure segment hybrid cloud revenue down 20 percent, down 18 percent at constant currency
     
  • Financing (includes client and commercial financing)— revenues of $0.2 billion, down 26.2 percent, down 24.5 percent at constant currency

Cash Flow and Balance Sheet
On a consolidated basis, in the first quarter, the company generated net cash from operating activities of $3.2 billion or $1.6 billion excluding IBM Financing receivables. IBM's free cash flow was $1.2 billion, which includes cash impacts from the company's structural actions initiated at the end of 2020.

IBM ended the first quarter with $10.8 billion of cash on hand (which includes marketable securities), up $3.2 billion from year-end 2021. Debt, including IBM Financing debt of $12.2 billion, totaled $54.2 billion, up $2.5 billion since the end of 2021. The company returned $1.5 billion to shareholders in dividends in the first quarter.

Full-Year 2022 Expectations

  • Revenue growth: The company now expects constant currency revenue growth at the high end of the mid-single digit range. The company also expects an additional 3.5 point contribution from incremental sales to Kyndryl. At mid-April 2022 foreign exchange rates, currency is expected to be a three to four point headwind.
     
  • Free Cash Flow: The company continues to expect $10 billion to $10.5 billion in consolidated free cash flow.

IBM is a leading global hybrid cloud and AI, and business services provider, helping clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Nearly 3,000 government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM's hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently, and securely. IBM's breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and business services deliver open and flexible options to our clients. All of this is backed by IBM's legendary commitment to trust, transparency, responsibility, inclusivity, and service.

For more information, visit: www.ibm.com.

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