ARMONK, N.Y., July 19, 2018 — IBM (NYSE:IBM) today announced second-quarter results.
“We delivered strong revenue and profit growth in the quarter, underscoring IBM’s progress and momentum in the emerging, high-value segments of the IT industry,” said Ginni Rometty, IBM chairman, president and chief executive officer. “More clients are engaging IBM on their journey to the cloud, and deploying IBM Cloud, Watson AI, analytics, blockchain and security solutions. This demonstrates IBM’s unique leadership in providing innovative technology coupled with deep industry expertise, trust and security.”
|SECOND QUARTER 2018|
|Diluted EPS||Net Income||Income||Margin|
|GAAP from Continuing Operations||$2.61||$2.4B||$2.8B||46.0%|
|REVENUE||Total IBM||Imperatives||Cloud||run rate|
|As reported (US$)||$20.0B||$10.1B||$4.7B||$11.1B|
|Year/Year adjusting for currency||2%||13%||18%||24%|
“We increased revenue, grew pre-tax income double digits and expanded pre-tax income margins year to year, while continuing to invest in the business and return capital to shareholders,” said James Kavanaugh, IBM senior vice president and chief financial officer. “We remain focused on delivering consistent operational performance, in line with our longer-term model.”
Strategic Imperatives Revenue
Strategic imperatives revenue over the last 12 months was $39.0 billion, up 15 percent (up 12 percent adjusting for currency). Total cloud revenue over the last 12 months was $18.5 billion, up 23 percent (up 20 percent adjusting for currency), with $8.2 billion from hardware, software and services to enable IBM clients to implement hybrid cloud solutions across public, private and multi-cloud environments, and $10.4 billion delivered as a service. The annual exit run rate for as-a-service revenue increased in the quarter to $11.1 billion, up 26 percent (up 24 percent adjusting for currency).
In the second quarter, revenues from analytics increased 7 percent to $5.4 billion (up 5 percent adjusting for currency); revenues from mobile increased 5 percent to $1.3 billion (up 3 percent adjusting for currency); and revenues from security increased 81 percent to $1.0 billion (up 79 percent adjusting for currency).
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of $2.3 billion, or $2.9 billion, excluding Global Financing receivables. IBM’s free cash flow was $1.9 billion. IBM returned $2.4 billion to shareholders through $1.4 billion in dividends and $1.0 billion in gross share repurchases. At the end of June 2018, IBM had $2.0 billion remaining in the current share repurchase authorization.
IBM ended the second quarter with $11.9 billion of cash on hand. Debt totaled $45.5 billion, including Global Financing debt of $31.1 billion. The balance sheet remains strong and is well positioned for the long term.
Segment Results for Second Quarter
- Cognitive Solutions (includes solutions software and transaction processing software) — revenues of $4.6 billion, flat year to year (down 1 percent adjusting for currency), with growth in analytics and industry vertical solutions led by financial services and IoT.
- Global Business Services (includes consulting, global process services and application management) — revenues of $4.2 billion, up 2 percent (flat year to year adjusting for currency), with growth in consulting driven by digital offerings.
- Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) — revenues of $8.6 billion, up 2 percent (flat year to year adjusting for currency). Strategic imperatives revenue grew 26 percent, led by hybrid cloud services, security and mobile.
- Systems (includes systems hardware and operating systems software) — revenues of $2.2 billion, up 25 percent (up 23 percent adjusting for currency) driven by growth in IBM Z, Power Systems and storage.
- Global Financing (includes financing and used equipment sales) — revenues of $394 million, down 5 percent (down 6 percent adjusting for currency).
Full-Year 2018 Expectations
The company expects operating (non-GAAP) diluted earnings per share of at least $13.80 and GAAP diluted earnings per share of at least $11.60. Operating (non-GAAP) diluted earnings per share exclude $2.20 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges as well as impacts from the enactment of U.S. Tax Reform.
IBM expects free cash flow of approximately $12 billion, with a realization rate greater than 100 percent.
Year-To-Date 2018 Results
Consolidated diluted earnings per share were $4.43 compared to $4.32, up 3 percent year to year. Consolidated net income was $4.1 billion, flat year to year. Revenues from continuing operations for the six-month period totaled $39.1 billion, an increase of 4 percent year to year (up 1 percent adjusting for currency) compared with $37.4 billion for the first six months of 2017.
Operating (non-GAAP) diluted earnings per share from continuing operations was $5.53 compared with $5.28 per diluted share for the 2017 period, an increase of 5 percent. Operating (non-GAAP) net income for the six months ended June 30, 2018 was $5.1 billion compared with $5.0 billion in the year-ago period, an increase of 2 percent.