IBM RELEASES FOURTH-QUARTER RESULTS
PR Newswire
ARMONK, N.Y., Jan. 24, 2024
Revenue growth in all segments; Strong margin expansion and cash generation
ARMONK, N.Y., Jan. 24, 2024 /PRNewswire/ — IBM (NYSE: IBM) today announced fourth-quarter 2023 earnings results.
“In the fourth quarter, we grew revenue in all of our segments, driven by continued adoption of our hybrid cloud and AI offerings. Client demand for AI is accelerating and our book of business for watsonx and generative AI roughly doubled from the third to the fourth quarter,” said Arvind Krishna, IBM chairman and chief executive officer. “For the year, revenue growth was in line with our expectations, and we exceeded our free cash flow objective. Based on the strength of our portfolio and demonstrated track record of innovation, for 2024 we expect revenue performance in line with our mid-single digit model and about $12 billion in free cash flow.”
Fourth-Quarter Highlights
-- Revenue- Revenue of $17.4 billion, up 4 percent, up 3 percent at constant
currency- Software revenue up 3 percent, up 2 percent at constant
currency- Consulting revenue up 6 percent, up 5 percent at constant
currency- Infrastructure revenue up 3 percent, up 2 percent at constant
currency
-- Profit Margin- Gross Profit Margin: GAAP: 59.1 percent, up 1.4 points;
Operating (Non-GAAP): 60.1 percent, up 1.4 points- Pre-Tax Income Margin:
GAAP: 21.6 percent, up 1.8 points; Operating (Non-GAAP): 24.0 percent, up
1.1 points
Full-Year Highlights
-- Revenue of $61.9 billion, up 2 percent, up 3 percent at constant
currency- Software revenue up 5 percent- Consulting revenue up 5 percent,
up 6 percent at constant currency- Infrastructure revenue down 5 percent,
down 4 percent at constant currency
-- Profit Margin- Gross Profit Margin: GAAP: 55.4 percent, up 1.4 points;
Operating (Non-GAAP): 56.5 percent, up 1.3 points- Pre-Tax Income Margin:
GAAP: 14.0 percent, up 12.1 points; Operating (Non-GAAP): 16.7 percent,
up 0.4 points
-- Cash Flow- Net cash from operating activities of $13.9 billion, up $3.5
billion; free cash flow of $11.2 billion, up $1.9 billion
FOURTH QUARTER 2023 INCOME STATEMENT SUMMARY
Gross Pre-tax Diluted
Gross Profit Pre-tax Income Net Earnings
Revenue Profit Margin Income Margin Income Per Share
GAAP from
Continuing
Operations $ 17.4 B $ 10.3 B 59.1% $ 3.8 B 21.6% $ 3.3 B $ 3.54
Year/Year 4 %(1) 7% 1.4 Pts 13% 1.8 Pts 14% 13%
----------- --------- ---- -------- ------ --- ------- ---- --- ---------- ---------
Operating
(Non-GAAP) $ 10.4 B 60.1% $ 4.2 B 24.0% $ 3.6 B $ 3.87
Year/Year 7% 1.4 Pts 9% 1.1 Pts 9% 8%
----------- --------- ---- -------- ------ --- ------- ---- --- ---------- ---------
(1) 3% at constant currency
“We again demonstrated the fundamental strengths of our business in the fourth quarter through solid, broad-based revenue growth, continued profit margin expansion, increased productivity gains and strong cash generation,” said James Kavanaugh, IBM senior vice president and chief financial officer. “Throughout 2023, those strengths enabled us to increase our investment in R&D and talent, and complete nine acquisitions to bolster our hybrid cloud and AI capabilities, all while continuing to return value to shareholders through our dividend.”
Segment Results for Fourth Quarter
-- Software -- revenues of $7.5 billion, up 3.1 percent, up 2.0 percent at
constant currency:- Hybrid Platform & Solutions up 2 percent, up 1
percent at constant currency: -- Red Hat up 8 percent, up 7 percent at
constant currency -- Automation up 1 percent, flat at constant
currency -- Data & AI up 1 percent -- Security down 5 percent, down 6
percent at constant currency- Transaction Processing up 5 percent, up 4
percent at constant currency
-- Consulting -- revenues of $5.0 billion, up 5.8 percent, up 5.5 percent at
constant currency:- Business Transformation up 6 percent, up 5 percent at
constant currency- Technology Consulting up 5 percent, up 4 percent at
constant currency- Application Operations up 7 percent, up 6 percent at
constant currency
-- Infrastructure -- revenues of $4.6 billion, up 2.7 percent, up 2.0
percent at constant currency:- Hybrid Infrastructure up 8 percent, up 7
percent at constant currency -- IBM zSystems up 8 percent --
Distributed Infrastructure up 8 percent, up 7 percent at constant
currency- Infrastructure Support down 9 percent
-- Financing -- revenues of $0.2 billion, up 1.8 percent, up 0.3 percent at
constant currency
Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from operating activities of $4.5 billion, up $0.5 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $6.3 billion. IBM’s free cash flow was $6.1 billion, up $0.9 billion year to year. The company returned $1.5 billion to shareholders in dividends in the fourth quarter.
For the year, the company generated net cash from operating activities of $13.9 billion, up $3.5 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $12.7 billion. IBM’s free cash flow was $11.2 billion, up $1.9 billion year to year.
IBM ended the fourth quarter with $13.5 billion of cash and marketable securities, up $4.6 billion from year-end 2022. Debt, including IBM Financing debt of $11.9 billion, totaled $56.5 billion, up $5.6 billion since the end of 2022.
Full-Year 2023 Results
FULL-YEAR 2023 INCOME STATEMENT SUMMARY
Gross Pre-tax Diluted
Gross Profit Pre-tax Income Net Earnings
Revenue Profit Margin Income Margin Income Per Share
GAAP from
Continuing
Operations $ 61.9 B $ 34.3 B 55.4% $ 8.7 B 14.0% $ 7.5 B $ 8.15
Year/Year 2 %(1) 5% 1.4 Pts NM (2) 12.1 Pts(2) NM (2) NM %(2)
----------- --------- ---- -------- ------ --- -------- --- ---- ------ ---------- --- --------- ----
Operating
(Non-GAAP) $ 34.9 B 56.5% $ 10.3 B 16.7% $ 8.9 B $ 9.62
Year/Year 5% 1.3 Pts 5% 0.4 Pts 7% 5%
----------- --------- ---- -------- ------ --- -------- ---- ------ ---------- --------- ---
(1) 3% at constant currency
(2) GAAP YTY results include the impact of a one-time, non-cash pension settlement charge related to the transfer of a
portion of the company's U.S. defined benefit pension obligations and related plan assets to third-party insurers in
third-quarter 2022.
Full-Year 2024 Expectations
-- Revenue: The company expects constant currency revenue growth consistent
with its mid-single digit model. At current foreign exchange rates,
currency is expected to be about a one-point headwind to revenue growth
-- Free cash flow: The company expects about $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;