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IBM Q1 2019 Revenue $18.2B Down 4.7%, but Cloud Revenue Up 10% in 12 Months

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4/16/2019
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Highlights

First Quarter:

  • GAAP EPS from continuing operations of $1.78
  • Operating (non-GAAP) EPS of $2.25
  • Revenue of $18.2 billion, down 4.7 percent (down 0.9 percent adjusting for currency)
  • Cloud revenue growth accelerated in the quarter; now $19.5 billion over the last 12 months, up 10 percent (up 12 percent adjusting for currency)
  • As-a-service annual exit run rate for cloud revenue of $11.7 billion, up 10 percent year to year (up 15 percent adjusting for currency)
  • Gross profit margin: GAAP, up 100 basis points; Operating (non-GAAP), up 90 basis points
    –  GBS gross profit margin up 280 basis points; GTS up 110 basis points
  • Pre-tax income margin: GAAP, up 440 basis points; Operating (non-GAAP), up 320 basis points
  • Maintains full-year EPS and free cash flow expectations

ARMONK, N.Y., April 16, 2019 … IBM today announced first-quarter results.

"In the first quarter, our cloud revenue growth accelerated, and we again grew in key, high-value areas in Cloud and Cognitive Software and in consulting," said Ginni Rometty, IBM chairman, president and chief executive officer.  "IBM's investments in innovative technologies coupled with our industry expertise and our commitment to trust and security position us well to help clients move to chapter two of their digital reinvention."

"Our results reflect the fundamental changes we have made to our business, allowing us to generate greater operating leverage.  In the first quarter, we significantly expanded profit margins, led by our services businesses," said James Kavanaugh, IBM senior vice president and chief financial officer.  "Our focus on prioritizing our investments in the emerging high-value segments of our industry has enabled us to drive higher profitability and strong cash generation."

Cash Flow and Balance Sheet

In the first quarter, the company generated net cash from operating activities of $4.8 billion, or $2.3 billion, excluding Global Financing receivables.  IBM's free cash flow was $1.7 billion.  IBM returned $2.3 billion to shareholders through $1.4 billion in dividends and $0.9 billion in gross share repurchases.  At the end of March 2019, IBM had $2.4 billion remaining in the current share repurchase authorization.

IBM ended the first quarter with $18.1 billion of cash on hand.  Debt totaled $50.0 billion, including Global Financing debt of $29.5 billion.  The balance sheet remains strong and is well positioned for the long term.

Segment Results for First Quarter

  • Cloud & Cognitive Software (includes cloud and data platforms, cognitive applications and transaction processing platforms)_ – revenues of $5.0 billion, down 2 percent (up 2 percent adjusting for currency), led by cognitive applications, up 2 percent (up 4 percent adjusting for currency), and by cloud and data platforms, down 2 percent (up 2 percent adjusting for currency).
  • Global Business Services (includes consulting, application management and global process services)_ –revenues of $4.1 billion, flat year to year (up 4 percent adjusting for currency), with growth in consulting and global process services.  Gross profit margin increased 280 basis points.
  • Global Technology Services (includes infrastructure and cloud services and technology support services)_ – revenues of $6.9 billion, down 7 percent (down 3 percent adjusting for currency), with growth in hybrid cloud revenue.  Gross profit margin increased 110 basis points.
  • Systems (includes systems hardware and operating systems software)_ – revenues of $1.3 billion, down 11 percent (down 9 percent adjusting for currency), with growth in Power, offset by the impact of the IBM Z product cycle dynamics and weakness in Storage.
  • Global Financing (includes financing and used equipment sales)_ – revenues of $406 million, flat year to year (up 4 percent adjusting for currency).

Full-Year 2019 Expectations

The company continues to expect GAAP diluted earnings per share of at least $12.45, and operating (non-GAAP) diluted earnings per share of at least $13.90.  Operating (non-GAAP) diluted earnings per share exclude $1.45 per share of charges for: amortization of purchased intangible assets and other acquisition-related charges, including pre-closing charges, such as financing costs, associated with the Red Hat acquisition; retirement-related charges; and tax reform enactment impacts.

IBM continues to expect free cash flow of approximately $12 billion, with a realization rate of approximately 100 percent of GAAP Net Income.

IBM Corp. (NYSE: IBM)

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