International Business Machines Corp 8-K, filed Jan 30, 2025
International Business Machines Corp (IBM)
8-K
2025-01-30
For: 2025-01-29
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April 08, 2026
About this 8-K
International Business Machines Corp filed this 8-K on January 30, 2025, reporting on events of January 29, 2025.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 29, 2025
(Date of earliest event reported)
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01. Regulation FD Disclosure.
Exhibit 99.1 of this Form 8-K contains the prepared remarks for IBM's Chairman, President and Chief Executive Officer Arvind Krishna and Chief Financial Officer Jim Kavanaugh's fourth-quarter 2024 earnings presentation to investors on January 29, 2025.
The slides for IBM's Chairman, President and Chief Executive Officer Arvind Krishna and Chief Financial Officer Jim Kavanaugh's fourth-quarter 2024 earnings presentation on January 29, 2025, are Exhibit 99.2 to this Form 8-K.
Reconciliations of non-GAAP financial measures discussed in the earnings presentation to the most directly comparable financial measures calculated and presented in accordance with GAAP are included in Exhibit 99.2 to this Form 8-K.
The information in this Item 7.01, including the corresponding Exhibits 99.1 and 99.2, is being furnished with the Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits
The following exhibits are being furnished as part of this report:
| Exhibit No. | Description of Exhibit | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
The following exhibit is being filed as part of this report:
| Exhibit No. | Description of Exhibit | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document) | |||||||
IBM’s web site (www.ibm.com) contains a significant amount of information about IBM, including financial and other information for investors (www.ibm.com/investor/). IBM encourages investors to visit its various web sites from time to time, as information is updated and new information is posted.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Date: January 30, 2025 | ||||||||
| By: | /s/ Nicolás A. Fehring | |||||||
| Nicolás A. Fehring | ||||||||
| Vice President and Controller | ||||||||
3
IBM 4Q24 Earnings Prepared Remarks 1 Introduction Thank you. I’d like to welcome you to IBM’s fourth quarter 2024 earnings presentation. I’m Olympia McNerney, and I’m here today with Arvind Krishna, IBM’s Chairman, President and Chief Executive Officer, and Jim Kavanaugh, IBM’s Senior Vice President and Chief Financial Officer. We’ll post today’s prepared remarks on the IBM investor website within a couple of hours, and a replay will be available by this time tomorrow. To provide additional information to our investors, our presentation includes certain non-GAAP measures. For example, all of our references to revenue and signings growth are at constant currency. We’ve provided reconciliation charts for these and other non-GAAP financial measures at the end of the presentation, which is posted to our investor website. Finally, some comments made in this presentation may be considered forward looking under the Private Securities Litigation Reform Act of 1995. These statements involve factors that could cause our actual results to differ materially. Additional information about these factors is included in the company’s SEC filings. So with that, I’ll turn the call over to Arvind. Exhibit 99.1
IBM 4Q24 Earnings Prepared Remarks 2 CEO Perspective Thank you for joining us today. Let me start by reflecting on our strong close to 2024 and performance over the mid-term model, then get into more detail on the execution of our strategy. We are pleased with the progress we made in 2024, delivering revenue growth of 3% and $12.7 billion of free cash flow. We saw continued acceleration in Software and our highest level of cash flow generation in many years. As we close out the mid-term model we laid out at the end of 2021, I am proud of our achievements. We met or exceeded our target metrics for revenue growth, profitability and free cash flow growth. We set out a plan for mid-single digit growth and we delivered on it, growing our revenue by a 6% CAGR over this period. All of our segments delivered revenue growth in line with our model over the last three years. Software grew ahead of our goal of mid-single digits, and this momentum continued with 9% growth in 2024. We committed to accelerate the growth of Red Hat, and we delivered double digits for the year. Infrastructure performed in line with our model as we invested in innovation and transformed the business model. Consulting met the model for high single digit growth, although we acknowledge 2024 was below model. We are confident that our investment in partnerships and skills as well as our early leadership in GenAI position us to accelerate Consulting growth as we move forward. Overall, our technology momentum and Consulting signings bolster our confidence in our future performance. Before getting deeper into our execution, I’ll make a few comments on the macroeconomic environment. As we look at the broader environment, IBM’s mission to help businesses leverage technology to both scale revenue and grow profitably is more critical than ever. Geopolitical
IBM 4Q24 Earnings Prepared Remarks 3 tensions, interest rate volatility, supply chain vulnerabilities, demographic shifts, and evolving cyber threats are creating headwinds for businesses worldwide. In this context, technology is key to drive sustainable growth. IBM’s combination of advanced technology and deep consulting expertise positions us to uniquely deliver end-to-end business transformations. We entered the year intent on enhancing our portfolio. Software is now about 45% of our business, with more than $15 billion of ARR, growing at double digits. We delivered strong and accelerating revenue growth of 11% in the fourth quarter, which includes about 8 points of organic growth and strength across the portfolio. This growth was led by Red Hat, up 17% in the quarter. Our early leadership in generative AI and the Consulting Advantage platform have positioned us well in today’s evolving market. In Infrastructure, z16 is our most successful program in history, highlighting customer adoption and continued reliance on the mainframe. We see more opportunities ahead as our infrastructure solutions play a crucial role in helping clients bring AI workloads closer to their data and we will launch z17 in the middle of 2025. Let me now address our progress in generative AI. We continue to gain momentum, with our GenAI book of business growing to over $5 billion inception-to-date, up by about $2 billion quarter-over-quarter. Approximately one-fifth of this book of business comes from Software, and the remaining four-fifths is Consulting. Our AI portfolio is tailored to meet the diverse needs of enterprise clients, enabling them to leverage a mix of models—IBM’s, their own, and open models from Hugging Face, Meta, and Mistral. IBM’s Granite models, designed for specific purposes, are 90% more cost-efficient than larger alternatives. Additionally, RHEL AI and OpenShift AI provide clients with a consistent and scalable AI foundation built on open-source technology.
IBM 4Q24 Earnings Prepared Remarks 4 This quarter, we saw strong traction in our watsonx middleware solutions and AI assistants, including watsonx.gov, watsonx.ai, watsonx Code Assistant for Z, watsonx Orchestrate, as well as products embedding AI such as Concert. And Consulting remains key to designing and implementing AI use cases, driving watsonx deployment. Through the year, we introduced key innovations that are resonating with clients. This quarter, we launched OpenShift Virtualization Engine to meet growing virtualization demand. In Infrastructure, the Telum II processor enhances IBM Z’s AI capabilities and performance. We just announced RISE with SAP on IBM Power Virtual Server, offering the fastest and easiest migration from on-premises to cloud for the 10,000 plus clients who use SAP on IBM Power. The Consulting Advantage platform is integrating our technology and industry expertise to drive business transformation. With more than 75 quantum systems deployed worldwide, our focus on emerging innovation is clear. This quarter we announced a collaboration with the State of Illinois to establish the National Quantum Algorithm Center in Chicago. M&A remains a key enabler of our strategy. The acquisition of Neural Magic strengthens our AI solutions with advanced model optimization. Clients worldwide trust IBM to lead transformations. Notable examples this quarter include NatWest and Lockheed Martin, leveraging our Granite models for advanced AI applications. L’Oréal is partnering with IBM to use our AI, consulting, and research capabilities to develop foundation models for cosmetics formulation. We also collaborated with UFC and Ferrari, helping them tap into IBM’s AI and consulting expertise to drive operational efficiency. Announced earlier this month, IBM and the UK Home Office will partner on the Emergency Services Network, supporting more than 300,000 emergency responders in Great Britain. Our ecosystem continues to expand as we strengthen our partnerships with
IBM 4Q24 Earnings Prepared Remarks 5 leading technology providers, including AMD, Palo Alto Networks, SAP, Amazon, Microsoft and CoreWeave. These partnerships allow us to co- innovate and deliver greater value to clients. Before I conclude, let me touch on our outlook. We see continued momentum in our business driven by our focused strategy, enhanced portfolio and culture of innovation. For 2025, we expect revenue growth inflecting higher to 5% plus and about $13.5 billion of free cash flow. I look forward to sharing more details at our upcoming Investor Day on February 4. I will now hand over to Jim to walk you through the details of the quarter. Jim, over to you.
IBM 4Q24 Earnings Prepared Remarks 6 Financial Highlights Thanks Arvind. For the full year, we delivered about $63 billion in revenue, $11.2 billion of operating pre-tax income and operating earnings per share of $10.33. And we generated $12.7 billion of free cash flow, our strongest level of free cash flow generation in many years and our highest reported free cash flow margin in history. Revenue growth, combined with 120 basis points of operating pre-tax margin expansion drove 9% operating pre-tax profit growth, 14% free cash flow growth and 7% operating diluted earnings per share growth. We are pleased with these results, delivering durable revenue growth in our re-positioned business and exceeding our expectations on profitability, free cash flow and earnings per share. Revenue performance for the year was led by Software, up 9%, with strength across our portfolio. We achieved Rule of 40, driven by the combination of accelerating growth and margin expansion throughout the year. Consulting revenue was up 1%, and continued to be impacted by a dynamic market environment as clients reprioritize spending. While Infrastructure was down 3% reflecting product cycle dynamics, we delivered more than 120% program to program growth for z16, our most successful program in history. Our portfolio mix, operating leverage and yield from productivity initiatives generated strong operating gross margin and operating profit performance. For the full year, we expanded operating gross profit margin by 130 basis points. Our operating pre-tax margin expanded by 120 basis points, ahead of our expectations and well above our model. These results represent our highest levels of operating gross margin and operating pre- tax margin in many years.
IBM 4Q24 Earnings Prepared Remarks 7 Now, turning to a deeper dive on the quarter. We generated $17.6 billion of revenue, up over 2% at constant currency and ahead of our expectation. Software growth accelerated to 11%, with strength across our key categories of Red Hat, Automation, Data & AI and Transaction Processing. Consulting was down 1%. This quarter we achieved record levels of signings and strong sequential growth in our generative AI book of business reflecting our early leadership in the areas our clients are prioritizing. Infrastructure was down 6%, reflecting product cycle dynamics in our eleventh quarter of z16. Looking at our profit metrics, in the fourth quarter we expanded operating gross margin by 50 basis points and operating pre-tax margin by 40 basis points. We are pleased with this strong performance driven by our portfolio mix, operating leverage and ongoing productivity initiatives, similar to the full year. This allowed for continued investments to drive innovation in our portfolio which you can see in our higher R&D expense, up 13%. Our operating tax rate was 14%, which is flat versus last year. And our operating earnings per share of $3.92 was up 1%. For the full year, we generated $12.7 billion of free cash flow, up $1.5 billion and growing 14%. The largest driver of this growth comes from Adjusted EBITDA, up about $900 million year-over-year. We realized $500 million in proceeds from the Palo Alto QRadar transaction, which was a small contribution to free cash flow given the payout of structural actions and foregone profit. We also delivered sustainable lower cash requirements through changes in our retirement plans. As we close out the mid-term model we introduced in 2021, we’ve grown free cash flow faster than revenue in each of the last three years, have exited 2024 with our highest free cash flow margin in reported history, and our free cash flow run-rate is above our mid-term model.
IBM 4Q24 Earnings Prepared Remarks 8 In terms of cash uses for the year, we invested over $3 billion on acquisitions, and we returned just over $6 billion to shareholders in the form of dividends. Looking at the balance sheet, we ended the year with a strong liquidity position with cash of $14.8 billion, which is up $1.3 billion year over year. Our debt balance ended the year down $1.6 billion at $55 billion, including approximately $12 billion of debt associated with our financing business.
IBM 4Q24 Earnings Prepared Remarks 9 Software Turning to the segments, Software revenue growth accelerated to 11% in the fourth quarter, driven by strength across the portfolio – with growth of 17% for Red Hat, 16% for Automation, 11% for Transaction Processing and 5% for both Data & AI and Security. We are pleased with how we finished the year, exceeding the Rule of 40 and the growth driver expectations we set back in January. Let me dive in a little deeper on each of these growth drivers. We continue to see momentum in Red Hat with fourth quarter revenue growth of 17%, fueled by six consecutive quarters of double-digit bookings growth. This performance reflects the continued demand for our hybrid cloud solutions as clients are prioritizing application modernization on OpenShift containers and Ansible automation to optimize their IT spend and reduce operational complexity. OpenShift is now a $1.4 billion ARR business, growing about 25%, and we continue to see increased volume in OpenShift Virtualization engagements. In addition to the strength in subscriptions, we saw a recovery in the consumption-based services business. Looking forward, Red Hat’s six-month revenue under contract – a reflection of the strong bookings performance mentioned – continues to grow in the mid-teens. We delivered strong results in our recurring revenue base and are seeing momentum from innovation across our portfolio. Our Hybrid Platform & Solutions ARR was $15.3 billion, up 11%. Transaction Processing delivered another strong quarter, driven by growing capacity demands, solid renewal rates, and increasing contribution from our generative AI product, watsonx Code Assistant for Z. We continue to introduce new products, which are making a meaningful impact on Software’s results. We have confidence in our portfolio with our
IBM 4Q24 Earnings Prepared Remarks 10 market leading businesses centered around Hybrid Cloud, Automation, Data, and Transaction Processing. In the quarter, about eight points of our growth was organic led by demand for our generative AI products like Concert and our AI assistants. We launched new products such as the next generation of watsonx Code Assistant that provides coding support for multiple languages and Guardium Quantum Safe that helps organizations monitor and manage their cryptographic security to fix vulnerabilities. And these investments in generative AI are paying off, with the Software AI book of business reaching about $1 billion inception to date in the fourth quarter. Our performance continues to benefit from our recent acquisitions. We are seeing growing contribution from the StreamSets and webMethods assets acquired in the second quarter. And at the end of 2024 we closed the acquisition of Neural Magic, which strengthens our AI capabilities in performance engineering and model optimization. And we are looking forward to the opportunities that the pending HashiCorp acquisition will bring. Looking at Software profit for the quarter, gross margin expanded, and segment profit was up over 220 basis points year to year, reflecting operating leverage driven by our revenue performance.
IBM 4Q24 Earnings Prepared Remarks 11 Consulting In Consulting, revenue was down 1%. Throughout the year we have operated in a dynamic macroeconomic environment. We continue to see clients reprioritizing their IT spending toward digital transformation and AI initiatives for cost optimization and operational efficiency as we wrap on a strong above market performance in 2023. Our focus remains on rapidly evolving our offerings and enhancing investments in skills and capabilities to align with these priorities. Our ability to address client demands drove signings growth of 23% in the quarter, our highest fourth quarter signings in recent history. Generative AI contributed about $1.5 billion of new bookings in the quarter as clients see the value our extensive industry and enterprise AI expertise can bring to accelerating their digital transformations. This strong signings performance takes our book-to-bill ratio up to 1.21 over the last twelve months. Our overall backlog remains healthy, up 8% year over year and our backlog erosion levels remain stable. Our Red Hat practice delivered another record-breaking quarter of signings and double-digit revenue growth. And we now have annual revenue of nearly $3 billion. In the quarter, strategic partnerships were a growth contributor both in signings and revenue with solid performance from partnerships with AWS and Azure. We are actively investing to enhance our skills and capabilities to address our clients’ top priorities with acquisitions like Accelalpha, a global Oracle services provider, which closed in the fourth quarter. And earlier this month we announced our intent to acquire Applications Technology Software, a consultancy known for driving business transformation with Oracle Cloud Applications.
IBM 4Q24 Earnings Prepared Remarks 12 Turning to our lines of business, Business Transformation revenue grew 2% driven by continued strength in transformational projects for data, finance, and supply chain. Both Technology Consulting and Application Operations declined in the quarter. Similar to last quarter, there was strength in cloud-based application services across modernization, development, and management but we continued to see clients reprioritize spending away from on-prem customized services. Looking at Consulting profit, we delivered segment profit margin of nearly 12%, a sequential expansion of almost one point, as we continue to realize the benefits of our productivity actions.
IBM 4Q24 Earnings Prepared Remarks 13 Infrastructure Moving to the Infrastructure segment, revenue was down 6%, reflecting product cycle dynamics. Hybrid Infrastructure was down 8% and Infrastructure Support was flat. Within Hybrid Infrastructure, IBM Z revenue is down 20% in the quarter. This is the eleventh quarter of z16 availability, and the combination of resiliency, reliability, and security continues to resonate with clients. Nearly three years in, this product cycle has outpaced prior cycles and program to date installed MIPs have increased over 30% as clients’ capacity needs continue to grow. IBM Z remains an enduring platform for mission critical workloads, driving not just hardware adoption but also the related software, storage and services. Distributed Infrastructure revenue grew 2%. This performance was fueled by double digit growth in Storage, as we introduced new innovation in the quarter designed to give clients the ability to scale storage capacity to meet growing data demands to support the next generation of AI workloads and projects. For Infrastructure profit, we expanded gross profit margin nearly two points sequentially. Our segment profit margin was down 320 basis points in the quarter, reflecting where we are in the product cycle and continued investments in innovation. For the full year our segment profit margin was 17.5 percent.
IBM 4Q24 Earnings Prepared Remarks 14 Summary Now, let me bring it back up to the IBM level to wrap up. As Arvind mentioned we met or exceeded our mid-term model target metrics for revenue growth, profitability and free cash flow growth. And we have fundamentally repositioned our business to a software led, integrated platform. Let me now turn to 2025 guidance, and our two key measures of success – revenue growth and free cash flow. We expect constant currency revenue growth inflecting higher to 5% plus. And we expect to grow free cash flow faster than revenue growth with about $13.5 billion of free cash flow. Given the continued strengthening of the dollar, we expect currency to be about a two-point headwind to revenue growth for the year. Our revenue expectations are underpinned by accelerating growth across our business. In Software, given the strength of our portfolio, investment in innovation and the contribution from acquisitions, we expect revenue growth approaching double digits. And we continue to see strength in Red Hat, with mid-teens growth for the year. In Consulting, the combination of our backlog levels, record signings in the fourth quarter, and our book of business in GenAI support an acceleration in growth to low single digits. And with our new mainframe launch in mid-2025, we expect Infrastructure to be about a point contribution to IBM’s overall revenue growth. For the full year, we expect IBM’s operating pre-tax margin to expand by over half a point. Portfolio mix and ongoing productivity initiatives continue to drive margin expansion, mitigated by the impact of dilution from acquisitions. Our tax rate for the year should be in the mid-teens and
IBM 4Q24 Earnings Prepared Remarks 15 as always, the timing of discrete items can cause the rate to vary within the year. For free cash flow, we expect to generate about $13.5 billion in 2025. Given the strong fundamentals of our business, we expect double-digit Adjusted EBITDA growth which is the primary driver of our free cash flow. This will be offset by cash tax headwinds and higher capex. Our productivity initiatives have enabled investments in innovation, skills and go-to-market capabilities including our ecosystem. We have accomplished this while simultaneously growing our operating profit margin and free cash flow, which in turn has increased our financial flexibility. This remains our playbook going forward, having executed on $3.5 billion of annual run rate savings exiting 2024, supporting our strong free cash flow growing in excess of revenue. Looking to the first quarter, I expect our constant currency revenue growth rate to be similar to the fourth quarter. We expect workforce rebalancing fairly consistent with the prior year. We are also wrapping on the $241 million gain from the divestiture of The Weather Company. Excluding the year over year impact of the gain, we expect about 50 basis points of operating pre-tax margin expansion. It is hard to predict discrete events, but our best view is that the first quarter tax rate could be a few points lower than the full year rate, but still a headwind over last year. In summary, we have delivered durable growth over the mid-term model and expect to drive an upwards inflection. We have repositioned our business and are excited about 2025 and beyond. We look forward to discussing more details at our upcoming investor day on February 4. Arvind and I are now happy to take your questions. Olympia, let’s get started.
IBM 4Q24 Earnings Prepared Remarks 16 Closing Thank you, Jim. Before we begin the Q&A, I’d like to mention a couple of items. First, supplemental information is provided at the end of the presentation. And then second, as always, I’d ask you to refrain from multi-part questions. Operator, let’s please open it up for questions.
January 29, 2025 ibm.com/investor 4Q 2024 Earnings Exhibit 99.2
Forward-looking statements and non-GAAP information Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Forward- looking statements are based on the company’s current assumptions regarding future business and financial performance. Those statements by their nature address matters that are uncertain to different degrees. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company’s filings with the SEC. Copies are available from the SEC, from the IBM website, or from IBM Investor Relations. Any forward-looking statement made during this presentation speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements except as required by law; these charts and the associated remarks and comments are integrally related and 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), the company also discusses, in its earnings press release and presentation materials, certain non-GAAP information including operating earnings and other “operating” financial measures, free cash flow, net cash from operating activities excluding IBM Financing receivables, adjusted EBITDA and adjustments for currency. The rationale for management’s use of this non-GAAP information is included as Exhibit 99.2 to the company’s Form 8-K submitted to the SEC on January 29, 2025. The reconciliation of non- GAAP information to GAAP is included in the press release within Exhibit 99.1 to the company’s Form 8-K submitted to the SEC on January 29, 2025, as well as on the slides entitled “Non-GAAP supplemental materials” in this presentation. To provide better transparency, the company also discusses management performance metrics including annual recurring revenue, annual bookings, signings, and book-to-bill. The metrics are used to monitor the performance of the business and are viewed as useful decision-making information for management and stakeholders. The rationale for management’s use of these performance metrics and their calculation, as well as other information including the definition of book of business, are included in Exhibit 99.2 to the company’s Form 8-K submitted to the SEC on January 29, 2025, or in the Management Discussion section of the company’s 2023 Annual Report, which is Exhibit 13 to the Form 10-K submitted with the SEC on February 26, 2024. For other related information please visit the Company’s investor relations website at: https://www.ibm.com/investor/events/earnings-4Q24 2
3 Arvind Krishna Chairman, President and Chief Executive Officer James Kavanaugh SVP, Finance & Operations and Chief Financial Officer
“We closed the year with double-digit revenue growth in Software for the quarter, led by further acceleration in Red Hat. Clients globally continue to turn to IBM to transform with AI. Our generative AI book of business now stands at more than $5 billion inception-to-date, up nearly $2 billion quarter over quarter. Three years ago, we laid out a vision for a faster-growing, more profitable IBM. I’m proud of the work the IBM team has done to meet or exceed our commitments. With our focused strategy, enhanced portfolio, and culture of innovation, we’re well-positioned for 2025 and beyond and expect revenue growth of at least five percent and free cash flow of about $13.5 billion this year.” Arvind Krishna IBM Chairman, President and CEO 4 4Q24 Performance Investments, innovation and clients Generative AI CEO perspective
Financial highlights 5Revenue growth rates @CC $17.6B Revenue 2% growth $62.8B Revenue 3% growth 4Q24 $1.5B FY free cash flow yr/yr 120bps FY pre-tax margin expansion (operating) 7% FY diluted EPS growth (operating) $12.7B FY free cash flow 130bps FY gross margin expansion (operating) 9% FY pre-tax income growth (operating) FY24 “With strong performance across our Software portfolio, we continue to drive solid fundamentals within our business. As a result, we generated $12.7 billion in free cash flow, far- outpacing our expectation for the year. Continued strength in operating profitability and free cash flow fuels our ability to invest for the future while returning value to shareholders through dividends.” James Kavanaugh IBM SVP & CFO
6 Revenue categories-4Q24 Red Hat +17% Automation +16% Data & AI +5% Security +5% Software 4Q24 results; revenue growth rates @CC *Annual recurring revenue for Hybrid Platform & Solutions, growth rate @CC Transaction Processing +11% yr/yr Hybrid Platform & Solutions +12% yr/yr Growth accelerated to 11% including ~8 points of organic contribution Red Hat revenue growth +17%, OpenShift ARR of $1.4B, growing ~25% Solid recurring revenue base; ARR* of $15.3 billion, +11% yr/yr Exceeded Rule of 40 +11% 4Q24 revenue growth $7.9B revenue +9% FY24 revenue growth $27.1B revenue
7 Technology Consulting (6%) yr/yr Consulting 4Q24 results; revenue growth rates @CC Revenue categories-4Q24 Application Operations (3%) yr/yr Business Transformation +2% yr/yr Broad-based signings growth driven by demand for digital transformations Continued momentum in generative AI bookings, greater than $4B inception-to-date Book-to-bill ratio 1.21 for the last year Client reprioritization and spend constraints impacting revenue yield (1%) 4Q24 revenue growth $5.2B revenue +1% FY24 revenue growth $20.7B revenue
8 Infrastructure 4Q24 results; revenue growth rates @CC Revenue categories-4Q24 IBM Z (20%) Distributed Infrastructure +2% Infrastructure Support Flat yr/yr Hybrid Infrastructure (8%) yr/yr Infrastructure performance reflects product cycle dynamics z16 our most successful program in history Distributed Infrastructure reflects double-digit growth in storage Ongoing investment in innovation (6%) 4Q24 revenue growth $4.3B revenue (3%) FY24 revenue growth $14.0B revenue
9 Summary 2025 Expectations Revenue growth @CC inflecting higher to 5%+ Acceleration in growth across all our segments Operating pre-tax operating margin to expand by over half a point Full-year free cash flow ~$13.5 billion 2024 Summary Met or exceeded mid-term model target metrics for revenue growth, profitability & free cash flow growth Software growth accelerated to 9% in 2024, and represents ~45% of our business Productivity enabling investments in innovation, driving strong organic growth Generative AI book of business greater than $5 billion inception-to-date Free cash flow of $12.7 billion; highest reported free cash flow margin in history
ibm.com/investor
Supplemental material 11Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding Revenue and P&L highlights Adjusted EBITDA performance Cash flow and balance sheet highlights Currency impact on revenue growth Software & Infrastructure segment details Consulting segment details Expense summary Balance sheet summary Free cash flow summary Cash flow (ASC 230) Revenue and P&L highlights – FY 2024 Software & Infrastructure segment details – FY 2024 Consulting segment details – FY 2024 Expense summary – FY 2024 Retirement-related summary Software segment categories Consulting segment categories Infrastructure segment categories Non-GAAP supplemental materials
Revenue and P&L highlights 12Revenue growth rates @CC, $ in billions Revenue highlights 4Q24 B/(W) Yr/Yr Revenue $17.6 2% Americas $8.5 (3%) Europe/ME/Africa $5.8 10% Asia Pacific $3.2 3% Operating P&L highlights $ 4Q24 B/(W) Yr/Yr Gross profit $10.6 2% Expense $6.4 (1%) Pre-tax income $4.3 2% Net income $3.7 3% Earnings per share $3.92 1% Adjusted EBITDA $5.6 2% Operating P&L highlights % 4Q24 B/(W) Yr/Yr Gross profit margin 60.6% 0.5 pts Expense E/R 36.2% (0.1 pts) Pre-tax income margin 24.3% 0.4 pts Net income margin 21.0% 0.4 pts Tax rate 13.6% 0.3 pts
Adjusted EBITDA performance 13 $ in billions *Corporate (gains) and charges primarily consists of unique corporate actions such as gains on divestitures and asset sales (e.g., certain QRadar SaaS assets) 4Q24 Yr/Yr FY24 Yr/Yr Operating (non-GAAP) pre-tax income from continuing operations $4.3 $0.1 $11.2 $0.9 Net interest expense $0.3 $0.0 $1.0 $0.0 Depreciation/Amortization of non-acquired intangible assets $0.7 ($0.0) $2.8 $0.1 Stock-based compensation $0.3 $0.1 $1.3 $0.2 Workforce rebalancing charges ($0.0) ($0.0) $0.7 $0.3 Corporate (gains) and charges* ($0.0) ($0.0) ($0.6) ($0.6) Adjusted EBITDA $5.6 $0.1 $16.4 $0.9
Cash flow and balance sheet highlights 14 $ in billions *Non-GAAP financial measure; excludes Financing receivables **Non-GAAP financial measure; adjusts for Financing receivables and net capital expenditures Balance sheet Dec 24 Dec 23 Cash & marketable securities $14.8 $13.5 Total debt $55.0 $56.5 Select debt measures Dec 24 Dec 23 IBM Financing debt $12.1 $11.9 Core (non-IBM Financing) debt $42.9 $44.7 Cash flow FY24 Yr/Yr Net cash from operations* $13.9 $1.2 Free cash flow** $12.7 $1.5 Select uses of cash FY24 Yr/Yr Net capital expenditures $1.1 ($0.4) Acquisitions $3.3 ($1.8) Dividends $6.1 $0.1
Currency impact on revenue growth 15 Quarterly averages per US $ 4Q24 Yr/Yr Spot 1Q25 2Q25 3Q25 4Q25 FY25 Assumed Euro 0.94 (1%) 0.96 (4%) (3%) (5%) (2%) (4%) Pound 0.78 3% 0.80 (2%) (1%) (5%) (3%) (3%) Yen 153 (3%) 156 (5%) 0% (4%) (2%) (3%) Revenue impact, future @assumed Spot (1.2 pts) (2.5-3 pts) (1.5-2 pts) ~(3 pts) (1-1.5 pts) ~(2 pts) Prior view ~(0.5 pts) ~(1 pts) ~0 pts (0-1 pts) US $B Yr/Yr Revenue as reported $17.6 1% Currency impact ($0.2) (1.2 pts) Revenue @CC 2%
Software & Infrastructure segment details 16 Revenue growth rates @CC, $ in billions *Annual recurring revenue for Hybrid Platform & Solutions, growth rate @CC Software segment 4Q24 B/(W) Yr/Yr Revenue $7.9 11% Hybrid Platform & Solutions $5.5 12% Red Hat 17% Automation 16% Data & AI 5% Security 5% Transaction Processing $2.4 11% Segment profit $3.1 17% Segment profit margin 39.2% 2.2 pts Annual recurring revenue* $15.3 11% Infrastructure segment 4Q24 B/(W) Yr/Yr Revenue $4.3 (6%) Hybrid Infrastructure $3.0 (8%) IBM Z (20%) Distributed Infrastructure 2% Infrastructure Support $1.3 Flat Segment profit $1.1 (18%) Segment profit margin 25.0% (3.2 pts)
Consulting segment details 17Revenue & signings growth rates @CC, $ in billions Consulting segment 4Q24 B/(W) Yr/Yr Revenue $5.2 (1%) Business Transformation $2.3 2% Technology Consulting $0.9 (6%) Application Operations $1.9 (3%) Gross profit margin 28.0% (0.1 pts) Segment profit $0.6 (7%) Segment profit margin 11.7% (0.7 pts) Signings $8.5 23% Book-to-bill ratio (FY) 1.21
Expense summary 18 $ in billions *Includes acquisitions in the last twelve months net of non-operating acquisition-related charges and includes impact of closed divested businesses **Represents the percentage change after excluding the impact of currency translation & hedges, acquisitions and divestitures Expense 4Q24 B/(W) Acq/ Yr/Yr Currency Divest* Base** Operating expense & other income $6.4 (1%) 4 pts (1 pts) (4 pts) SG&A – operating $4.6 (1%) 1 pts (1 pts) (1 pts) RD&E $2.0 (13%) 0 pts 0 pts (12 pts) IP and custom development income ($0.3) 24% Other (income)/expense - operating ($0.3) 83% Interest expense $0.4 (5%)
Balance sheet summary 19 $ in billions *Includes eliminations of inter-company activity Dec 24 Dec 23 Cash & marketable securities $14.8 $13.5 Core (non-IBM Financing) assets* $108.9 $107.9 IBM Financing assets $13.5 $13.9 Total assets $137.2 $135.2 Other liabilities $54.8 $56.1 Core (non-IBM Financing) debt* $42.9 $44.7 IBM Financing debt $12.1 $11.9 Total debt $55.0 $56.5 Total liabilities $109.8 $112.6 Equity $27.4 $22.6
Free cash flow summary 20$ in billions B/(W) B/(W) 4Q24 Yr/Yr FY24 Yr/Yr Net cash from operations $4.3 ($0.1) $13.4 ($0.5) Less: IBM Financing receivables ($2.3) ($0.4) ($0.4) ($1.7) Net cash from operations (excluding IBM Financing receivables) $6.6 $0.2 $13.9 $1.2 Net capital expenditures ($0.4) ($0.2) ($1.1) $0.4 Free cash flow (excluding IBM Financing receivables) $6.2 $0.1 $12.7 $1.5
Cash flow (ASC230) 21 $ in billions *Includes operating lease right-of-use assets amortization **FY24 includes a $0.7B tax effect associated with a one-time, non-cash, U.S. pension settlement charge in 3Q 2024 ***FY24 includes proceeds of $0.4B from the sale of certain QRadar SaaS assets in 3Q 2024 4Q24 4Q23 FY24 FY23 Net income from operations $2.9 $3.3 $6.0 $7.5 Pension settlement charges $0.4 - $3.1 - Depreciation / amortization of intangibles* $1.1 $1.2 $4.7 $4.4 Stock-based compensation $0.3 $0.3 $1.3 $1.1 Operating assets and liabilities / other, net** $1.8 $1.6 ($1.2) ($0.3) IBM Financing A/R ($2.3) ($1.9) ($0.4) $1.2 Net cash provided by operating activities $4.3 $4.5 $13.4 $13.9 Capital expenditures, net of payments & proceeds*** ($0.4) ($0.3) ($1.1) ($1.5) Divestitures, net of cash transferred ($0.0) - $0.7 ($0.0) Acquisitions, net of cash acquired ($0.5) ($0.1) ($3.3) ($5.1) Marketable securities / other investments, net ($0.4) $3.2 ($1.2) ($0.5) Net cash provided by/(used in) investing activities ($1.4) $2.8 ($4.9) ($7.1) Debt, net of payments & proceeds ($0.1) ($0.1) ($0.9) $4.5 Dividends ($1.5) ($1.5) ($6.1) ($6.0) Financing - other ($0.0) $0.0 ($0.1) ($0.2) Net cash provided by/(used in) financing activities ($1.7) ($1.6) ($7.1) ($1.8) Effect of exchange rate changes on cash ($0.3) $0.1 ($0.4) $0.0 Net change in cash, cash equivalents & restricted cash $0.9 $5.8 $1.1 $5.1
Revenue and P&L highlights – FY2024 22Revenue growth rates @CC, $ in billions Revenue highlights FY24 B/(W) Yr/Yr Revenue $62.8 3% Americas $31.3 (1%) Europe/ME/Africa $19.4 5% Asia Pacific $12.1 8% Operating P&L highlights $ FY24 B/(W) Yr/Yr Gross profit $36.3 4% Expense $25.1 (2%) Pre-tax income $11.2 9% Net income $9.7 9% Earnings per share $10.33 7% Adjusted EBITDA $16.4 6% Operating P&L highlights % FY24 B/(W) Yr/Yr Gross profit margin 57.8% 1.3 pts Expense E/R 39.9% (0.1 pts) Pre-tax income margin 17.9% 1.2 pts Net income margin 15.4% 1.1 pts Tax rate 13.6% 0.4 pts
Software & Infrastructure segment details – FY 2024 23Revenue growth rates @CC, $ in billions Software segment FY24 B/(W) Yr/Yr Revenue $27.1 9% Hybrid Platform & Solutions $18.8 9% Red Hat 12% Automation 15% Data & AI 2% Security 1% Transaction Processing $8.3 10% Segment profit $8.7 16% Segment profit margin 32.1% 2.1 pts Infrastructure segment FY24 B/(W) Yr/Yr Revenue $14.0 (3%) Hybrid Infrastructure $8.9 (2%) IBM Z (9%) Distributed Infrastructure 3% Infrastructure Support $5.1 (3%) Segment profit $2.4 (13%) Segment profit margin 17.5% (1.9 pts)
Consulting segment details – FY 2024 24Revenue & signings growth rates @CC, $ in billions Consulting segment FY24 B/(W) Yr/Yr Revenue $20.7 1% Business Transformation $9.3 3% Technology Consulting $3.7 (1%) Application Operations $7.7 (2%) Gross profit margin 27.0% 0.3 pts Segment profit $2.1 (4%) Segment profit margin 9.9% (0.3 pts) Signings $25.1 5% Book-to-bill ratio 1.21
Expense summary – FY 2024 25 $ in billions *Yr/Yr includes a gain of $0.6B from the sale of certain QRadar SaaS assets ($0.4B) and Weather ($0.2B) **Includes acquisitions in the last twelve months net of non-operating acquisition-related charges and includes impact of closed divested businesses ***Represents the percentage change after excluding the impact of currency translation & hedges, acquisitions and divestitures Expense FY24 B/(W) Acq/ Yr/Yr Currency Divest** Base*** Operating expense & other income $25.1 (2%) 1 pts 0 pts (3 pts) impact of workforce rebalancing $0.7 (1 pts) SG&A – operating $18.5 (3%) 1 pts (1 pts) (3 pts) impact of workforce rebalancing $0.7 (1 pts) RD&E $7.5 (10%) 0 pts 0 pts (10 pts) IP and custom development income ($1.0) 16% Other (income)/expense - operating* ($1.7) 91% Interest expense $1.7 (7%)
Retirement-related summary 26 $ in billions *Qualified defined benefit plans **2024 results include one-time, non-cash, U.S. and non-U.S pension settlement charges of $3.1B *** Includes cash and non-cash contributions; 2024 contributions do not reflect the impact of salary increases related to the 2024 U.S. Retirement Plan changes Key assumptions and metrics 2023 2024 2025 Funded status at year end* US 123% 136% WW 111% 116% Discount rate at year end US 5.0% 5.5% WW 4.0% 4.2% Expected ROA at prior year end US 5.5% 5.0% 5.5% WW 4.9% 4.9% 5.1% Actual ROA US 4.3% 2.6% WW 4.5% 2.0% Expected Cost and contributions 2024 2025 Operating cost 1.0 1.0 Non-operating cost 3.5 0.1 Total cost 4.5 1.1 Contributions*** 1.3 1.3 **
Software segment categories Revenue categories – FY 2024 Hybrid Platform & Solutions Transaction Processing Hybrid Platform & Solutions Software, infused with AI, to help clients operate, manage, and optimize their IT resources and business processes within hybrid, multi-cloud environments: – Red Hat: incl. RHEL, OpenShift, Ansible – Automation: incl. business automation, AIOps and management, integration, and application servers – Data & AI: incl. data fabric, customer care, data management, business analytics, dataops & governance, asset & supply chain management, and information exchange – Security: incl. software for threat, data and identity Transaction Processing Software that supports clients’ mission-critical on-premise workloads in industries such as banking, airlines and retail incl. transaction processing software such as Customer Information Control System and storage software, and analytics and integration software running on IBM operating systems (e.g., DB2 and WebSphere running on z/OS). Revenue categories Red Hat Data & AI Security Automation 27
Business Transformation Technology Consulting Application Operations Consulting segment categories Business Transformation Strategy, process design, system implementation and operations services to improve and transform key business processes. Deploys AI and automation in business processes to exploit the value of data and includes an ecosystem of partners alongside IBM technology, including strategic partnerships with Adobe, Oracle, Salesforce and SAP, among others. Technology Consulting Skills to architect and implement solutions across cloud platforms, including Amazon, Microsoft and IBM, and strategies to transform the enterprise experience and enable innovation, including transformation using AI with watsonx and application modernization for hybrid cloud with Red Hat OpenShift. Application Operations Manages, optimizes, orchestrates and secures custom applications and ISV packages for clients. Provides application management, platform engineering, and security services across hybrid cloud environments. Revenue categories – FY 2024 28 Revenue categories
Infrastructure segment categories Hybrid Infrastructure Innovative infrastructure platforms to help meet the new requirements of hybrid multi-cloud and enterprise AI workloads leveraging flexible and as-a-service consumption models: – IBM Z: incl. hardware and operating system – Distributed Infrastructure: incl. Power hardware and operating system, storage hardware, IBM Cloud IaaS, OEM asset recovery service Infrastructure Support Comprehensive, proactive and AI enabled services to maintain and improve the availability and value of clients’ IT infrastructure (hardware and software) both on-premises and in the cloud incl. maintenance for IBM products and other technology platforms. Hybrid Infrastructure Infrastructure Support Revenue categories – FY 2024 29 Revenue categories IBM Z Distributed Infrastructure
Non-GAAP supplemental materials Reconciliation of revenue performance – 4Q 2024 & FY 2024 30 The above reconciles the non-GAAP financial information contained in the “Financial highlights”, “Revenue and P&L highlights”, “Revenue and P&L highlights – FY 2024” and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures. GAAP @CC Total revenue 1% 2% Americas (4%) (3%) Europe/ME/Africa 9% 10% Asia Pacific 1% 3% 4Q24 Yr/Yr GAAP @CC Total revenue 1% 3% Americas (1%) (1%) Europe/ME/Africa 5% 5% Asia Pacific 3% 8% FY24 Yr/Yr
GAAP @CC Software 10% 11% Hybrid Platform & Solutions 11% 12% Red Hat 16% 17% Automation 15% 16% Data & AI 4% 5% Security 4% 5% Transaction Processing 10% 11% 4Q24 Yr/Yr GAAP @CC Consulting (2%) (1%) Business Transformation 1% 2% Technology Consulting (7%) (6%) Application Operations (4%) (3%) Infrastructure (8%) (6%) Hybrid Infrastructure (10%) (8%) IBM Z (21%) (20%) Distributed Infrastructure Flat 2% Infrastructure Support (2%) Flat 4Q24 Yr/Yr Non-GAAP supplemental materials Reconciliation of segment revenue performance – 4Q 2024 31 The above reconciles the non-GAAP financial information contained in the “Software”, “Consulting”, “Infrastructure”, “Software & Infrastructure segment details”, “Consulting segment details” and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures.
Non-GAAP supplemental materials Reconciliation of segment revenue performance – FY 2024 32 The above reconciles the non-GAAP financial information contained in the “Software”, “Consulting”, “Infrastructure”, “Software & Infrastructure segment details – FY 2024”, “Consulting segment details – FY 2024” and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures. GAAP @CC Software 8% 9% Hybrid Platform & Solutions 8% 9% Red Hat 11% 12% Automation 14% 15% Data & AI 2% 2% Security 1% 1% Transaction Processing 9% 10% FY24 Yr/Yr GAAP @CC Consulting (1%) 1% Business Transformation 2% 3% Technology Consulting (3%) (1%) Application Operations (3%) (2%) Infrastructure (4%) (3%) Hybrid Infrastructure (3%) (2%) IBM Z (10%) (9%) Distributed Infrastructure 2% 3% Infrastructure Support (5%) (3%) FY24 Yr/Yr
Non-GAAP supplemental materials Reconciliation of expense summary – 4Q 2024 & FY 2024 33 *Represents the percentage change after excluding the impact of currency translation & hedges, acquisitions and divestitures **2024 results include the impacts of one-time, non-cash, U.S. and non-U.S. pension settlement charges of $0.4B in 4Q24 and $3.1B in FY24 The above reconciles the non-GAAP financial information contained in the “Expense summary” and “Expense summary – FY 2024” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures. Non-GAAP Operating GAAP Non-GAAP Operating GAAP adjustments (non-GAAP) adjustments (non-GAAP) SG&A Currency 1 pts 0 pts 1 pts 1 pts 0 pts 1 pts Acquisitions/divestitures (1 pts) 0 pts (1 pts) (1 pts) 0 pts (1 pts) Base* (1 pts) 1 pts (1 pts) (3 pts) 1 pts (3 pts) RD&E Currency 0 pts 0 pts 0 pts 0 pts 0 pts 0 pts Acquisitions/divestitures 0 pts 0 pts 0 pts 0 pts 0 pts 0 pts Base* (12 pts) 0 pts (12 pts) (10 pts) 0 pts (10 pts) Operating expense & other income Currency 4 pts 0 pts 4 pts 1 pts 0 pts 1 pts Acquisitions/divestitures (1 pts) 0 pts (1 pts) 0 pts 0 pts 0 pts Base*,** (13 pts) 8 pts (4 pts) (17 pts) 14 pts (3 pts) 4Q24 FY24
Non-GAAP supplemental materials Reconciliation of continuing operations – 4Q 2024 34 $ in millions (except EPS which is in whole dollars) *2024 results include the impact of a one-time, non-cash, non-U.S. pension settlement charge of $0.4B The above reconciles the non-GAAP financial information contained in the “Revenue and P&L highlights”, “Expense summary” and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non- GAAP financial measures. GAAP Acquisition- related adjustments Retirement- related adjustments* Tax reform impacts Operating (non-GAAP) Gross profit $10,439 $191 — — $10,630 Gross profit margin 59% 1.1 pts — — 61% SG&A 4,866 (305) — — 4,561 Other (income) & expense 177 (2) (467) — (291) Total expense 7,133 (307) (467) — 6,359 Pre-tax income 3,306 498 467 — 4,271 Pre-tax income margin 18.8% 2.8 pts 2.7 pts — 24.3% Tax rate 11.5% 1.5 pts 0.1 pts 0.5 pts 13.6% Net income 2,927 375 408 (21) 3,690 Net income margin 16.7% 2.1 pts 2.3 pts (0.1 pts) 21.0% Earnings per share $3.11 $0.40 $0.43 ($0.02) $3.92 4Q24
Non-GAAP supplemental materials Reconciliation of continuing operations – FY 2024 35 $ in millions (except EPS which is in whole dollars) *2024 results include the impacts of one-time, non-cash U.S. and non-U.S pension settlement charges of $3.1B ($2.4B net of tax) The above reconciles the non-GAAP financial information contained in the “Revenue and P&L highlights – FY 2024”, “Expense summary – FY 2024 and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures. GAAP Acquisition- related adjustments Retirement- related adjustments* Tax reform impacts Operating (non-GAAP) Gross profit $35,551 $724 — — $36,275 Gross profit margin 56.7% 1.2 pts — — 57.8% SG&A 19,688 (1,159) — — 18,529 Other (income) & expense 1,871 (70) (3,457) — (1,656) Total expense 29,754 (1,229) (3,457) — 25,068 Pre-tax income 5,797 1,953 3,457 — 11,207 Pre-tax income margin 9.2% 3.1 pts 5.5 pts — 17.9% Tax rate (3.8%) 5.1 pts 8.2 pts 4.1 pts 13.6% Net income 6,015 1,456 2,668 (455) 9,684 Net income margin 9.6% 2.3 pts 4.3 pts (0.7 pts) 15.4% Earnings per share $6.42 $1.55 $2.85 ($0.49) $10.33 FY24
4Q24 Yr/Yr FY24 Yr/Yr Net income as reported (GAAP)* $2.9 ($0.4) $6.0 ($1.5) Less: income/(loss) from discontinued operations, net of tax ($0.0) ($0.0) $0.0 $0.0 Income from continuing operations $2.9 ($0.4) $6.0 ($1.5) Provision for/(Benefit from) income taxes from continuing operations $0.4 ($0.1) ($0.2) ($1.4) Pre-tax income from continuing operations (GAAP) $3.3 ($0.5) $5.8 ($2.9) Non-operating adjustments (before tax) Acquisition-related charges** $0.5 $0.1 $2.0 $0.3 Non-operating retirement-related costs/(income)* $0.5 $0.5 $3.5 $3.5 Operating (non-GAAP) pre-tax income from continuing operations $4.3 $0.1 $11.2 $0.9 Net interest expense $0.3 $0.0 $1.0 $0.0 Depreciation/Amortization of non-acquired intangible assets $0.7 ($0.0) $2.8 $0.1 Stock-based compensation $0.3 $0.1 $1.3 $0.2 Workforce rebalancing charges ($0.0) ($0.0) $0.7 $0.3 Corporate (gains) and charges*** ($0.0) ($0.0) ($0.6) ($0.6) Adjusted EBITDA $5.6 $0.1 $16.4 $0.9 Non-GAAP supplemental materials Reconciliation of GAAP net income to adjusted EBITDA 36 $ in billions *2024 results include the impacts of one-time, non-cash pension settlement charges in 3Q of $2.7B ($2.0B net of tax) in the U.S. and 4Q of $0.4B in the non-U.S. **Primarily consists of amortization of acquired intangible assets ***Corporate (gains) and charges primarily consists of unique corporate actions such as gains on divestitures and asset sales (e.g., certain QRadar SaaS assets) The above reconciles the non-GAAP financial information contained in the “Revenue and P&L highlights", “Revenue and P&L highlights – FY 2024”, “Adjusted EBITDA performance” and "Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures.
Non-GAAP supplemental materials Reconciliation of net cash from operations to adjusted EBITDA 37 $ in billions *Other assets and liabilities/other, net mainly consists of operating assets and liabilities/other, net in the “Cash flow (ASC230)” discussion, workforce rebalancing charges, non-operating impacts and corporate (gains) and charges The above reconciles the non-GAAP financial information contained in the “Prepared remarks” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures. 4Q24 4Q23 FY24 FY23 Net cash provided by operating activities $4.3 $4.5 $13.4 $13.9 Add: Net interest expense $0.3 $0.3 $1.0 $0.9 Provision for/(Benefit from) income taxes from continuing operations $0.4 $0.5 ($0.2) $1.2 Less change in: Financing receivables ($2.3) ($1.9) ($0.4) $1.2 Other assets and liabilities/other, net* $1.7 $1.6 ($1.8) ($0.7) Adjusted EBITDA $5.6 $5.5 $16.4 $15.5
Non-GAAP supplemental materials Reconciliation of Pre-tax income margin – 1Q 2025 & FY 2025 expectations *Excludes the effects of The Weather Company gain on sale of ~(2 pts) in 1Q24 The above reconciles the non-GAAP financial information contained in the “Summary” and “Prepared remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures. 38 GAAP Operating (non-GAAP) Pre-tax income margin Yr/Yr expectations B/(W) B/(W) 1Q 2025 ~(1 pt) ~ 0.5 pts FY 2025 >5 pts >0.5 pts *
Non-GAAP supplemental materials Reconciliation of Mid-term model performance – 3-year revenue CAGR The above reconciles the non-GAAP financial information contained in the “Prepared remarks” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 29, 2025, for additional information on the use of these non-GAAP financial measures. 39 GAAP @CC Total Revenue 3% 6% Consulting low single digit high single digit 3-year compound average revenue growth rate 2022-2024
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