Financial Model. Mark Loughridge Senior Vice President and Chief Financial Officer, Finance and Enterprise Transformation

Transcription

1 Financial Model Mark Loughridge Senior Vice President and Chief Financial Officer, Finance and Enterprise Transformation

2 2015 Roadmap Base revenue growth ~2% excluding divestitures Shift to faster growing business mix provides ~1% revenue growth ~$20B of acquisition spend provides ~2% revenue growth Enterprise Productivity yields margin expansion Shift to a higher value portfolio continues to provide leverage ~$50B returned through share repurchase s 11% CAGR Base Revenue Growth Revenue Mix Acquisitions Enterprise Productivity Margin Mix ~$2.80 At Least $20 ~$2.50 ~$ EPS* * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense. Assumes current tax policy and Non-GAAP tax rate of 25% 2015 EPS* 2

3 2015 Roadmap Progress EPS* 14% CAGR Revenue Results Continued strong growth across key initiatives Growth Markets +10% CAGR Smarter Planet >25% CAGR Business Analytics + Cloud ~7x 2010 revenue At Least $ % CAGR Strong acquisition performance Margin expansion driven by continued business mix shift to higher value areas, Enterprise Productivity savings and operational improvements Cash & holder Return Generated $35 billion in free cash flow and returned $34B to shareholders through gross share repurchase and dividends in 2011 and * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense 3

4 Growth Initiatives Growth Initiatives Roadmap Objectives Smarter Planet Contributes ~$7B of growth over Roadmap Growth Markets Approaches 30% of IBM s geographic revenue by 2015 Business Analytics Contributes ~$10B of growth over Roadmap up from $6B previously EPS Cloud Contributes ~$7B of revenue, of which ~$3B is incremental growth 4

5 Growth Initiatives Growth Initiatives contributed ~$9 billion of revenue growth ~$17B ~$4B ~$10B ~$4B ~$7B ~$3B Double-digit yr/yr growth ~$3B ~$0.4B ~$9B EPS 2010* Revenue from Key Initiatives Growth Markets Business Analytics *Adjusted for scope added in 2012 Smarter Planet Incremental Cloud 2015 Revenue from Key Initiatives 5

6 Revenue Dynamics Growth Initiatives and high value offerings drove 4% growth at higher margins ~85% of total segment revenue in % CAGR 2pts 2pts 1pts 3% CAGR Includes: GBS Growth Markets GTS IGF IP-based Proc Svcs Mainframe Power PureSystems Software Storage Includes: Labor-based Proc Svcs Legacy Advisory Svcs Legacy App Svcs RSS Industry Std Servers 2%** CAGR BAO Smarter Planet Cloud High Value Currently '10-'12 CGR Under-performing (excl. Growth Initiatives content) EPS 2012 GP% * ~60% ~50% ~20% * External Segment GP % modeled based on brand mix within each category at 2012 average margins by brand ** External segment revenue 6

7 Acquisitions Closed acquisitions through 2012 position us on track to achieve the 2015 objectives Annual EPS from Closed Acquisitions Actual Projected Roadmap ~$0.90 ~5% Pending Acquisitions ~95% Closed Acquisitions EPS

8 Acquisitions closed since beginning of 2010 generated ~$1B of profit since inception Acquisition PTI 27 of the 33 acquisitions closed by the end of 2012 are exceeding their profit business cases Scalable intellectual property Key to solutions offerings Acquisitions Drive synergies through global distribution ~$1B EPS actual rates Acquisitions closed

9 Acquisitions Analytics around the correlation between key attributes and deal performance validate our acquisition strategy and improve our selection process 57% 54% 33% 50% 71% Likelihood of a deal achieving objectives 10% 75% 21% 61% 63% 36% 40% 59% 29% EPS Attribute 1 Attribute 2 Attribute 3 Attribute 4 Attribute 5 Deals that exhibit selected attribute Success Factors Attribute 17 Attribute 18 Deals that don t exhibit selected attribute End-to-end themes that build on IBM strategic platforms organic or acquired and extend adjacently into new market opportunities. Examples: Smarter Commerce built on Websphere Commerce Business Analytics built on Cognos acquisition Enterprise Social built on Collaboration Solutions enhanced by Kenexa acquisition Security built on Tivoli connected by Q1 Labs acquisition 9

10 Servers, Networking & Storage Optimization Cloud Smarter Planet Business Intelligence & Data Analytics Acquisitions Spent $19B in R&D and ~$12B for 35 acquisitions closed / announced since beginning of 2010 Complements Organic Assets IBM Hardware Portfolio IBM Hardware Portfolio GTS Service Delivery Industry Solutions Frameworks GBS Offerings EPS Governance, Risk, Compliance & Security GBS BAO Service Line 8 Analytics Solution Centers 10

11 Acquisitions Acquisitions have contributed significantly to IBM s growth in key strategic areas Big Data Social Business Mobile Acquired Organic IBM InfoSphere IBM Connections IBM Mobile Connect Enable secure discovery Help customers recruit, Deliver application and exploration of data on board, enable, train development, across a broad range of and manage staff with an connectivity, enterprise content and big integrated social platform management & security data to maximize return to create a smarter capabilities across many EPS on information workforce device types 11

12 Deployment of Analytics Manage Risk Enterprise Risk Management and advisor to business units and senior management Implementation of Finance 2.0 Operational Efficiency Efficient service delivery through standardization, automation and centralization Business Insight Trusted Business Advisors Tools Deployed Tools Deployed Tools Deployed Country Financial Risk Scorecard PRISM M&A risk management Strategic planning optimization (SEE) Critical Parts Management Tool Employee expenses monitoring Worldwide spending analytics Workforce Analytics Coverage Optimization SO Cost and Risk Management Labor claiming analytics Business Intelligence Dashboards Services Backlog Run Out and Revenue Analytics Business Partner Optimization and Opportunity Growth Transformation for Quota and Opportunity Alignment EPS 12

13 Investing for Growth We will continue to focus our investments on higher value businesses 6, US Patents Research & Development 5, $30B 2015 Roadmap ~$35B 3,174 3,032 2,769 2,613 2,447 2,013 1,652 1,624 IBM Samsung Canon Sony Panasonic Microsoft Toshiba Hon Hai GE LG EPS Source: IFI CLAIMS Patent Services 20 Consecutive Years of Patent Leadership 13

14 10% +8 pts 1% Growth Markets IBM s business mix continues to shift towards the Growth CC 11% 11% +10 pts +10 pts 7% +8 pts Growth Markets % of IBM Geographic Revenue* Approaches 30% 24% 2% +8 pts 1% 2% -1% % -6% % % Major Markets Growth Markets % EPS * Revenue mix percentages exclude PCD and Printers divestitures % 14

15 Growth Markets delivered over 60% of IBM s geographic gross profit growth between 2010 and 2012 ~$1.49 Geographic Gross Profit Bridge* ~$47B $0.6B $1.9B Growth Markets $1.1B $0.5B Major Markets ~$51B Growth Markets Mix 80% 20% Major Markets Gross Profit Growth Mix Growth Markets 61% 39% Major Markets EPS Gross profit from revenue growth Gross profit from margin expansion * Sum of geographic gross profit not equal to IBM gross profit 15

16 IBM expands margins in 2015 Roadmap by continuing to shift to higher value ~$1.49 Pre-tax Income Mix* 2000** 10% Margin 19% 10% 8% Mix* 15% Margin 28% 10% 12% Mix* 38% 16% 15% % Margin Mix* ~50% ~40% ~10% 2015 Hardware/Financing Services Software EPS * Sum of operating segment pre-tax income not equal to IBM operating pre-tax income ** Stock-based compensation expense was not recorded at the segment level and excludes Enterprise Investments 16

17 On track to achieve $8B of Enterprise Productivity $8B Enterprise Productivity Savings ($B) $8B $8B ~$1.49 Integrated Operations Software Revenue Productivity End-to-End Process Transformation Services Cost & Expense Reduction d Services Hardware / Financing EPS 17

18 Enterprise Productivity $8B Enterprise Productivity is a critical source of investment funding ~40% flow to bottom-line ~$1.49 Acquisitions* Growth Markets Smarter Planet BAO Cloud ~60% reinvested for growth EPS Growth Investments * Investment in acquisitions not already accounted for in the growth initiatives 18

19 ~$1.50 Free Cash Flow* $B Cash Generation and Usage Strong Free Cash Flow supports investments and shareholder returns : Generate $90B - $100B of Free Cash Flow ~$ Primary Cash Uses $B Gross $27 Capital $8 Return $70B to shareholders through gross share repurchases and dividends Spend $20B in acquisitions $30B - $40B of Financial Flexibility EPS * Excluding GF Receivables Dividends $7 Acquisitions $6 19

20 2015 Roadmap Base revenue growth ~2% excluding divestitures Shift to faster growing business mix provides ~1% revenue growth ~$20B of acquisition spend provides ~2% revenue growth Enterprise Productivity yields margin expansion Shift to a higher value portfolio continues to provide leverage ~$50B returned through share repurchase At Least $20 ~$ %+ CAGR to go Performance through 12: ~$1.49 ~$2.80 ~$3.05 ~$ EPS* Base Revenue Growth Revenue Mix Acquisitions Enterprise Productivity Margin Mix s * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense. Assumes current tax policy and Non-GAAP tax rate of 25% 2015 EPS* 20

21 Scenario IBM model supports the Roadmap base and provides opportunity for upside Execution on business unit objectives Flexibility in Enterprise Productivity savings Cash generation and capital structure 2012 EPS* * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense. Assumes current tax policy and Non-GAAP tax rate of 25% Enterprise Productivity Margin Mix s 2015 EPS* 21

22 Scenario Remaining $23B of gross share repurchase delivers ~$1.35 EPS ~$1.35 Buyback 2012 EPS* Enterprise Productivity Margin Mix s * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense. Assumes current tax policy and Non-GAAP tax rate of 25% 2015 EPS* 22

23 Scenario Software profit at historical growth delivers ~$2.70 EPS ~$2.70 ~$1.35 Software Profit Growth Buyback 2012 EPS* Enterprise Productivity Margin Mix s * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense. Assumes current tax policy and Non-GAAP tax rate of 25% 2015 EPS* 23

24 Scenario Enterprise Productivity delivers ~$.70 EPS $20 ~$0.70 ~$2.70 ~$1.35 Enterprise Prod. yield Software Profit Growth Buyback 2012 EPS* Enterprise Productivity Margin Mix s * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense. Assumes current tax policy and Non-GAAP tax rate of 25% 2015 EPS* 24

25 Scenario Capture additional growth opportunity from Software, Services & Hardware At Least $20 ~$0.70 ~$2.70 Enterprise Prod. yield Software Profit Growth ~$1.35 Buyback 2012 EPS* Enterprise Productivity Margin Mix s * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense. Assumes current tax policy and Non-GAAP tax rate of 25% 2015 EPS* 25

26 PTI / EPS * Segment PTI$ EPS 2015 Roadmap At Least $16.70 At Least $ Objectives Software contributes about half of our segment profit Growth Initiatives deliver > $20B in revenue growth Growth Markets approach 30% of IBM s geographic revenue $3.32 $1.81 Enterprise Productivity delivers $8B in gross savings IBM returns $70B to shareholders over the Roadmap '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13e '14e '15e Hardware / Financing Services Software * Non-GAAP: Excludes Acquisition-related charges and non-operating retirement-related expense Sum of external segment pre-tax income not equal to IBM pre-tax income 2000 & 2001 segments not restated for stock based compensation 26

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28 These charts and the associated remarks and comments are integrally related, and they are intended to be presented and understood together. In an effort to provide additional and useful information regarding the company s financial results and other financial information as determined by generally accepted accounting principles (GAAP), certain materials presented during this event include non- GAAP information. The rationale for management s use of this non-gaap information, the reconciliation of that information to GAAP, and other related information is included in supplemental materials entitled Non-GAAP Supplemental Materials that are linked to the company s investor relations web site at The Non-GAAP Supplemental Materials are also included as Attachment II to the company s Forms 8-K dated January 22, 2013 and February 28,

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