ARMONK, NY, July 20, 2021 – IBM has announced its second quarter 2021 results.

“In the second quarter, customer adoption of our hybrid cloud platform contributed to strong performance in global business services and software and led to improved overall revenue growth. At the same time, we have continued to help our customers integrate our AI-based technology offerings into their core workflows, ”said Arvind Krishna, President and CEO of IBM. “We are pleased with our progress and remain on track to generate full year revenue growth and meet our cash flow target. “

Strong points

Second quarter:

  • Revenue of $ 18.7 billion, up 3% (fixed adjustment for divested businesses and currency)
    – Cloud & Cognitive Software up 6% (up 2% taking currency into account)
    – Global Business Services up 12% (up 7% taking currency into account)
  • Net cash flow from operating activities of $ 17.7 billion and adjusted free cash flow of $ 11.0 billion in the last 12 months
  • Total cloud revenue in the last 12 months of $ 27.0 billion, up 15% (up 13% including divested business and currency)
  • Total cloud revenue in the quarter of $ 7.0 billion, up 13% (up 9% including divested businesses and currency) thanks to
    – Cloud & Cognitive Software cloud revenue up 29% (up 25% taking currency into account)
    – Global Business Services cloud revenue up 35% (up 30% taking currency into account)
  • Red Hat revenue up 20% (up 17% after currency adjustment), normalized for historical comparability
  • 48.0% GAAP gross profit margin, stable; Gross operating profit margin (non-GAAP) of 49.3%, up 30 basis points
  • Debt reduction of $ 6.4 billion since the end of 2020

SECOND QUARTER 2021

Before tax

Gross

Diluted

Report

Before tax

Returned

Profit

EPS

Returned

Returned

Margin

Margin

GAAP for continuing operations

$

1.47

$

1.3B

$

1.6B

8.3

%

48.0

%

Year / Year

(3)

%

(3)

%

(1)

%

(0.4)

pts

0.0

pts

Operations (non-GAAP)

$

2.33

$

2.1B

$

2.5B

13.5

%

49.3

%

Year / Year

7

%

8

%

9

%

0.7

pts

0.3

pts

BPA GAAP results include impacts related to the amortization of purchased intangible assets and other acquisition-related charges, retirement-related charges, the impacts of US tax reform and transaction costs associated with the separation from Kyndryl. The impact of Kyndryl’s separation costs for the second quarter of 2021 was ($ 0.15) per share.

“We increased our operating margins and increased our profits during the quarter, making a key contribution to our cash performance,” said James Kavanaugh, senior vice president and chief financial officer of IBM. “During the first half of the year, we increased Adjusted Free Cash Flow, invested in strategic acquisitions to strengthen our hybrid cloud and AI capabilities, continued to deleverage and, in line with our commitment, again increased our dividend. “

Cash flow and balance sheet

In the second quarter, the company generated free cash flow from operating activities of $ 2.6 billion. IBM’s free cash flow was $ 1.0 billion, which includes $ 0.6 billion cash impacts from the company’s structural actions initiated in Q4 2020 and transaction costs associated with Kyndryl’s separation. IBM’s adjusted free cash flow, excluding these cash impacts, was $ 1.6 billion. The company returned $ 1.5 billion to shareholders in dividends.

In the first six months of the year, the company generated net cash from operating activities of $ 7.5 billion. Free cash flow for the first six months was $ 2.6 billion. The company’s adjusted free cash flow, excluding cash impacts of $ 1.2 billion for structural actions and transaction separation costs, was $ 3.8 billion.

Over the past 12 months, the company generated free cash flow from operating activities of $ 17.7 billion. IBM’s free cash flow for the past 12 months was $ 9.7 billion. The company’s adjusted free cash flow, excluding cash impacts of $ 1.3 billion for structural actions and transaction separation costs, was $ 11.0 billion.

IBM ended the second quarter with $ 8.2 billion in cash (including marketable securities), down $ 6.1 billion from the end of 2020 mainly due to acquisitions and payments debt reduction. Debt, including $ 17.5 billion global financing debt, amounted to $ 55.2 billion, down $ 6.4 billion from late 2020 and $ 17.9 billion since the closing of the acquisition of Red Hat.

Second Quarter Segment Results

  • Cloud and cognitive software (including cloud and data platforms, cognitive applications and transaction processing platforms) – revenue of $ 6.1 billion, up 6.1 percent (up 2.5 percent after adjusting for currency). Cloud and data platforms grew 12% (up 8% considering currency), driven by the company’s hybrid cloud platform and the growth of Cloud Pak. Cognitive apps grew 12% (up 8% when factoring in currency), driven by growth in security and AI apps. Transaction processing platforms fell 7% (down 11% after adjusting for currency). Cloud revenue up 29% (up 25% including currency).
  • Global Business Services (includes consulting, application management and global process services) – revenue of $ 4.3 billion, up 11.6 percent (up 7.3 percent after adjusting for currency), with growth in consulting, up 16 percent ( up 11 percent after currency adjustment), Application Management up 5 percent (up 1 percent after currency adjustment) and Global Process Services up 28% (up 25 percent) % after adjustment for currency). Cloud revenue up 35% (up 30% when factoring in currency). The gross profit margin decreased by 60 basis points.
  • Global Technology Services (includes infrastructure and cloud services and technology support services) – revenue of $ 6.3 billion, up 0.4 percent (down 4.1 percent after adjusting for currency). Infrastructure and cloud services and technology support services were flat (down 4% after adjusting for currency). Cloud revenue down 1% (down 5% including currency). Gross margin up 110 basis points.
  • Systems (including system hardware and operating system software) – revenue of $ 1.7 billion, down 7.3% (down 10.2% after adjusting for currency), due to declines in IBM Z (down 11%; in 13% decrease taking currency into account) and storage systems (down 7%, down 10% taking currency into account). Electrical systems fell 2 percent (down 5 percent after adjusting for currency). Cloud revenue down 16% (down 19% including currency).
  • Global financing (includes financing and sale of used equipment) – revenue of $ 242 million, down 8.6 percent (down 11.6 percent after adjusting for currency).

Cumulative 2021 results

Revenue for the six-month period ended June 30, 2021 totaled $ 36.5 billion, an increase of 2% year-over-year (down 1% after adjusting for divested operations and currency) compared to $ 35.7 billion for the first six months of 2020. Net income was $ 2.3 billion, down 10% year-over-year. Diluted earnings per share were $ 2.52 compared to $ 2.83 per diluted share for the 2020 period, a decrease of 11%.

GAAP per share results include an impact ($ 1.58) per share for expenses related to the amortization of purchased intangible assets and other acquisition-related charges, retirement-related charges, US tax reform and the transaction costs associated with the Kyndryl separation. The impact of Kyndryl’s separation costs was ($ 0.20) per share.

Net operating income (non-GAAP) for the six-month period ended June 30, 2021 was $ 3.7 billion compared to $ 3.6 billion for the period of the previous year, an increase by 3%. Diluted (non-GAAP) operating income per share from continuing operations was $ 4.10, compared to $ 4.02 per diluted share for the 2020 period, an increase of 2%.

Expectations for the whole of 2021

The company expects to increase its revenue for the full year 2021 based on the exchange rates of mid-July 2021. The company continues to expect adjusted free cash flow of 11 to $ 12 billion in 2021. The adjusted free cash flow forecast excludes approximately $ 3 billion cash impacts from the company’s structural actions initiated in Q4 2020 and transaction costs associated with the Kyndryl separation .

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Source: IBM


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