IBM 1Q 2013 Earnings
I was sitting here at JFK waitin’ on a plane and IBM’s 1Q 2013 earnings came across the wire, so here goes:
- Diluted EPS: GAAP: $2.70, up 3 percent; Operating (non-GAAP): $3.00, up 8 percent
- Net income: GAAP: $3.0 billion, down 1 percent; Operating (non-GAAP): $3.4 billion, up 3 percent
- Gross profit margin: GAAP: 45.6 percent, up 0.6 points; Operating (non-GAAP): 46.7 percent, up 1.0 points
- Revenue: $23.4 billion, down 5 percent, down 3 percent adjusting for currency
- Free cash flow of $1.7 billion, down $0.2 billion
- Software revenue flat, up 1 percent adjusting for currency; Pre-tax: income up 4 percent; margin up 1.2 points
- Services revenue down 4 percent, down 1 percent adjusting for currency; Pre-tax: income up 10 percent; margin up 2.0 points
- Services backlog of $141 billion, up 1 percent, up 5 percent adjusting for currency; Closed 22 deals of more than $100 million in the quarter
- Systems and Technology revenue down 17 percent, down 16 percent adjusting for currency
- Growth markets revenue down 1 percent, up 1 percent adjusting for currency
- Business analytics revenue up 7 percent; Smarter Planet revenue up more than 25 percent; Cloud revenue up more than 70 percent
- Reiterating full-year 2013 operating (non-GAAP) EPS expectation of at least $16.70.
IBM announced first-quarter 2013 diluted earnings of $2.70 per share, a year-to-year increase of 3 percent. Operating (non-GAAP) diluted earnings were $3.00 per share, compared with operating diluted earnings of $2.78 per share in the first quarter of 2012, an increase of 8 percent.
First-quarter net income was $3.0 billion, down 1 percent year-to-year. Operating (non-GAAP) net income was $3.4 billion compared with $3.3 billion in the first quarter of 2012, an increase of 3 percent. Total revenues for the first quarter of 2013 of $23.4 billion were down 5 percent (down 3 percent, adjusting for currency) from the first quarter of 2012.
“In the first quarter, we grew operating net income, earnings per share and expanded operating margins but we did not achieve all of our goals in the period. Despite a solid start and good client demand we did not close a number of software and mainframe transactions that have moved into the second quarter. The services business performed as expected with strong profit growth and significant new business in the quarter,” said Ginni Rometty, IBM chairman, president and chief executive officer.
“Looking ahead, in addition to closing those transactions, we expect to benefit from investments we are making in our growth initiatives and from the actions we are taking to improve under-performing parts of the business. We remain confident in this model of continuous transformation and in our ability to deliver our full-year 2013 operating earnings per share expectation of at least $16.70.”
Pre-tax income decreased 6 percent to $3.6 billion. Pre-tax margin decreased 0.1 points to 15.4 percent. Operating (non-GAAP) pre-tax income decreased 1 percent to $4.1 billion and pre-tax margin was 17.4 percent, up 0.8 points.
IBM’s tax rate was 15.9 percent, down 4.1 points year over year; operating (non-GAAP) tax rate was 17.3 percent, down 3.2 points compared to the year-ago period. The lower tax rate is primarily due to benefits recorded to reflect changes in tax laws enacted during the quarter, including the reinstatement of the U.S. Research and Development Tax Credit.
Net income margin increased 0.5 points to 13.0 percent. Total operating (non-GAAP) net income margin increased 1.2 points to 14.4 percent.
The weighted-average number of diluted common shares outstanding in the first-quarter 2013 was 1.12 billion compared with 1.17 billion shares in the same period of 2012. As of March 31, 2013, there were 1.11 billion basic common shares outstanding.
Debt, including Global Financing, totaled $33.4 billion, compared with $33.3 billion at year-end 2012. From a management segment view, Global Financing debt totaled $25.2 billion versus $24.5 billion at year-end 2012, resulting in a debt-to-equity ratio of 7.2 to 1. Non-global financing debt totaled $8.2 billion, a decrease of $0.6 billion since year-end 2012, resulting in a debt-to-capitalization ratio of 34.3 percent from 36.1 percent.
IBM ended the first-quarter 2013 with $12.0 billion of cash on hand and generated free cash flow of $1.7 billion, excluding Global Financing receivables, down approximately $0.2 billion year over year. The company returned $3.5 billion to shareholders through $0.9 billion in dividends and $2.6 billion of gross share repurchases. The balance sheet remains strong, and the company is well positioned to support the business over the long term.