IBM RELEASES FOURTH-QUARTER RESULTS

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Jan 25, 2023, 16:08 ET

Revenue Growth in All Key Segments; Expanded Margins; Solid Cash Generation

ARMONK, N.Y., Jan. 25, 2023 /PRNewswire/ -- IBM (NYSE: IBM) today announced fourth-quarter 2022 earnings results.

"Our solid fourth-quarter performance capped a year in which we grew revenue above our mid-single digit model. Clients in all geographies increasingly embraced our hybrid cloud and AI solutions as technology remains a differentiating force in today's business environment," said Arvind Krishna, IBM chairman and chief executive officer. "Looking ahead to 2023, we expect full-year revenue growth consistent with our mid-single digit model."

Fourth-Quarter Highlights

Revenue of $16.7 billion, flat, up 6 percent at constant currency
- Software revenue up 3 percent, up 8 percent at constant currency
- Consulting revenue up 0.5 percent, up 9 percent at constant currency
- Infrastructure revenue up 2 percent, up 7 percent at constant currency

Full-Year Highlights

Revenue of $60.5 billion, up 6 percent, up 12 percent at constant currency (about 4 points from sales to Kyndryl)
- Hybrid cloud revenue of $22.4 billion, up 11 percent, up 17 percent at constant currency
On a consolidated basis, net cash from operating activities of $10.4 billion; free cash flow of $9.3 billion

Full-Year 2023 Expectations

The company expects constant currency revenue growth consistent with its mid-single digit model and about $10.5 billion in consolidated free cash flow, up more than $1 billion year to year


	FOURTH QUARTER 2022 INCOME STATEMENT SUMMARY
										Pre-tax						Diluted
					Gross			Pre-tax		Income			Net			Earnings
		Revenue			Profit			Income		Margin			Income			Per Share
GAAP from Continuing Operations	$	16.7B		$	9.6B		$	3.3B		19.8	%	$	2.9B		$	3.13
Year/Year		0	%*		1	%		15	%	2.7	Pts		17	%		15	%
Operating (Non-GAAP)				$	9.8B		$	3.8B		22.9	%	$	3.3B		$	3.60
Year/Year					1	%		8	%	1.7	Pts		9	%		7	%
* 6% at constant currency

"IBM's revenue growth and operating profit in 2022 demonstrate the strength and multiplier effect of our platform-centric approach to hybrid cloud and AI," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our client-focused portfolio and strong recurring revenue stream position IBM well for continued growth, solid cash generation and returning value to shareholders through dividends."

Segment Results for Fourth Quarter

Software (includes Hybrid Platform & Solutions, Transaction Processing)— revenues of $7.3 billion, up 2.8 percent, up 8.0 percent at constant currency:
- Hybrid Platform & Solutions up 5 percent, up 10 percent at constant currency:
-- Red Hat up 10 percent, up 15 percent at constant currency
-- Automation up 4 percent, up 9 percent at constant currency
-- Data & AI up 4 percent, up 8 percent at constant currency
-- Security up 4 percent, up 10 percent at constant currency
- Transaction Processing down 3 percent, up 3 percent at constant currency
Consulting (includes Business Transformation, Technology Consulting and Application Operations)— revenues of $4.8 billion, up 0.5 percent, up 9.3 percent at constant currency:
- Business Transformation down 1 percent, up 7 percent at constant currency
- Technology Consulting up 1 percent, up 10 percent at constant currency
- Application Operations up 2 percent, up 12 percent at constant currency
Infrastructure (includes Hybrid Infrastructure, Infrastructure Support)— revenues of $4.5 billion, up 1.6 percent, up 7.4 percent at constant currency:
- Hybrid Infrastructure up 6 percent, up 11 percent at constant currency:
-- IBM z Systems up 16 percent, up 21 percent at constant currency
-- Distributed Infrastructure flat, up 5 percent at constant currency
- Infrastructure Support down 8 percent, flat at constant currency
Financing (includes client and commercial financing)— revenues of $0.2 billion, down 0.4 percent, up 3.9 percent at constant currency

Cash Flow and Balance Sheet
On a consolidated basis, in the fourth quarter, the company generated net cash from operating activities of $4.0 billion, up $1.4 billion. Net cash from operating activities excluding IBM Financing receivables was $5.8 billion, up $1.9 billion. IBM's free cash flow was $5.2 billion, up $1.9 billion. The company returned $1.5 billion to shareholders in dividends in the fourth quarter.

On a consolidated basis, for the full year, the company generated net cash from operating activities of $10.4 billion, down $2.4 billion. Net cash from operating activities excluding IBM Financing receivables was $11.2 billion, up $2.3 billion. IBM's free cash flow was $9.3 billion, up $2.8 billion. IBM returned $5.9 billion to shareholders in dividends.

IBM ended the fourth quarter with $8.8 billion of cash on hand (which includes marketable securities), up $1.3 billion from year-end 2021. Debt, including IBM Financing debt of $12.9 billion, totaled $50.9 billion, down $0.8 billion since the end of 2021.

Full-Year 2022 Results

FULL-YEAR 2022 INCOME STATEMENT

GAAP results include impact of one-time, non-cash pension settlement charge*

Pre-tax

Gross

Pre-tax

Income

Net

Diluted

Revenue

Profit

Income

Margin

Income

EPS

GAAP from
Continuing
Operations

60.5B

32.7B

1.2B

1.9

1.8B

1.95

Year/Year

%**

(76)

(6.5)

Pts*

(62)

(63)

Operating
(Non-GAAP)

33.4B

9.8B

16.2

8.3B

9.13

Year/Year

2.5

Pts

* GAAP results include the impact of a one-time, non-cash pension settlement charge in the third quarter of $5.9 billion ($4.4 billion net of tax) related to the transfer of a portion of the company's U.S. defined benefit pension obligations and related plan assets to third party insurers.

** 12% at constant currency

Full-Year 2023 Expectations

Revenue Growth: The company expects constant currency revenue growth consistent with its mid-single digit model. At current foreign exchange rates, currency is expected to be neutral to a one-point tailwind to revenue growth.
Free Cash Flow: The company expects about $10.5 billion in consolidated free cash flow, up more than $1 billion year to year.

Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of 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. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects related to climate change and environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; potential failure of the separation of Kyndryl Holdings, Inc. to qualify for tax-free treatment; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release
On November 3, 2021, IBM completed the separation of Kyndryl. Unless otherwise specified, results are presented on a continuing operations basis. The reference in Full-Year Highlights to the revenue impacts from sales to Kyndryl are incremental sales post-separation, year to date through October.

In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:

IBM results —

adjusting for currency (i.e., at constant currency);
presenting operating (non-GAAP) earnings per share amounts and related income statement items;
consolidated free cash flow;
consolidated cash from operating activities excluding IBM Financing receivables.

The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8–K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EST, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-4q22. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

Contact: IBM
Sarah Meron, 347–891–1770
[email protected]

Tim Davidson, 914–844–7847
[email protected]

INTERNATIONAL BUSINESS MACHINES CORPORATION COMPARATIVE FINANCIAL RESULTS (Unaudited; Dollars in millions except per share amounts)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2022			2021*			2022**			2021*
REVENUE BY SEGMENT
Software	$	7,288		$	7,087		$	25,037		$	23,426
Consulting		4,770			4,746			19,107			17,844
Infrastructure		4,483			4,414			15,288			14,188
Financing		172			172			645			774
Other		(22)			275			453			1,119
TOTAL REVENUE		16,690			16,695			60,530			57,350

GROSS PROFIT		9,632			9,500			32,687			31,486

GROSS PROFIT MARGIN
Software		81.2	%		81.6	%		79.6	%		79.6	%
Consulting		27.4	%		27.0	%		25.5	%		28.0	%
Infrastructure		54.9	%		54.8	%		52.8	%		55.3	%
Financing		47.1	%		32.5	%		38.3	%		31.7	%

TOTAL GROSS PROFIT MARGIN		57.7	%		56.9	%		54.0	%		54.9	%

EXPENSE AND OTHER INCOME
S,G&A		4,765			4,903			18,609			18,745
R,D&E		1,604			1,625			6,567			6,488
Intellectual property and custom development income		(245)			(181)			(663)			(612)
Other (income) and expense		(118)			(18)			5,803			873
Interest expense		313			303			1,216			1,155
TOTAL EXPENSE AND OTHER INCOME		6,320			6,632			31,531			26,649

INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		3,312			2,869			1,156			4,837
Pre-tax margin		19.8	%		17.2	%		1.9	%		8.4	%
Provision for/(Benefit from) income taxes		443			407			(626)			124
Effective tax rate		13.4	%		14.2	%		(54.2)	%		2.6	%

INCOME FROM CONTINUING OPERATIONS	$	2,869		$	2,462		$	1,783		$	4,712

DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of taxes		(159)			(129)			(143)			1,030

NET INCOME	$	2,711		$	2,332		$	1,639		$	5,743

EARNINGS PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations	$	3.13		$	2.72		$	1.95		$	5.21
Discontinued Operations	$	(0.17)		$	(0.14)		$	(0.16)		$	1.14
TOTAL	$	2.96		$	2.57		$	1.80		$	6.35

Basic
Continuing Operations	$	3.17		$	2.74		$	1.97		$	5.26
Discontinued Operations	$	(0.18)		$	(0.14)		$	(0.16)		$	1.15
TOTAL	$	2.99		$	2.60		$	1.82		$	6.41

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M's)
Assuming Dilution		915.9			906.6			912.3			904.6
Basic		905.8			898.2			902.7			896.0
____________________
* Recast to conform with 2022 presentation.
** Includes a one-time, non-cash pension settlement charge of $5.9 billion ($4.4 billion net of tax).

INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

	At		At
	December 31,		December 31,
(Dollars in Millions)	2022		2021
ASSETS:
Current Assets:
Cash and cash equivalents	$	7,886	$	6,650
Restricted cash		103		307
Marketable securities		852		600
Notes and accounts receivable - trade, net		6,541		6,754
Short-term financing receivables, net		7,790		8,014
Other accounts receivable, net		817		1,002
Inventories		1,552		1,649
Deferred costs		967		1,097
Prepaid expenses and other current assets		2,611		3,466
Total Current Assets		29,118		29,539

Property, plant and equipment, net		5,334		5,694
Operating right-of-use assets, net		2,878		3,222
Long-term financing receivables, net		5,806		5,425
Prepaid pension assets		8,236		9,850
Deferred costs		866		924
Deferred taxes		6,256		7,370
Goodwill		55,949		55,643
Intangibles, net		11,184		12,511
Investments and sundry assets		1,617		1,823
Total Assets	$	127,243	$	132,001

LIABILITIES:
Current Liabilities:
Taxes	$	2,196	$	2,289
Short-term debt		4,760		6,787
Accounts payable		4,051		3,955
Deferred income		12,032		12,518
Operating lease liabilities		874		974
Other liabilities		7,592		7,097
Total Current Liabilities		31,505		33,619

Long-term debt		46,189		44,917
Retirement related obligations		9,596		14,435
Deferred income		3,499		3,577
Operating lease liabilities		2,190		2,462
Other liabilities		12,243		13,996
Total Liabilities		105,222		113,005

EQUITY:
IBM Stockholders' Equity:
Common stock		58,343		57,319
Retained earnings		149,825		154,209
Treasury stock — at cost		(169,484)		(169,392)
Accumulated other comprehensive income/(loss)		(16,740)		(23,234)
Total IBM Stockholders' Equity		21,944		18,901

Noncontrolling interests		77		95
Total Equity		22,021		18,996

Total Liabilities and Equity	$	127,243	$	132,001

INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW ANALYSIS (Unaudited)


	Three Months Ended				Year Ended
	December 31,				December 31,
(Dollars in Millions)	2022		2021		2022		2021
Consolidated Net Cash from Operations per GAAP	$	3,965	$	2,543	$	10,435	$	12,796

Less: change in IBM Financing receivables		(1,788)		(1,328)		(717)		3,907
Capital Expenditures, net		(544)		(526)		(1,860)		(2,381)

Consolidated Free Cash Flow		5,209		3,345		9,291		6,508

Acquisitions		(1,329)		(275)		(2,348)		(3,293)
Divestitures		1		88		1,272		114
Dividends		(1,494)		(1,474)		(5,948)		(5,869)
Non-Financing Debt		(2,777)		(20)		1,909		(1,191)
Other (includes IBM Financing net receivables and debt)		(498)		(2,514)		(2,893)		(2,987)

Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities*	$	(888)	$	(850)	$	1,283	$	(6,718)
____________________
* Cash flows are presented on a consolidated basis.

INTERNATIONAL BUSINESS MACHINES CORPORATION CASH FLOW (Unaudited)

	Three Months Ended				Year Ended
	December 31,				December 31,
(Dollars in Millions)	2022		2021		2022		2021
Net Income from Operations	$	2,711	$	2,332	$	1,639	$	5,743
Pension Settlement Charge		-		-		5,894		-
Depreciation/Amortization of Intangibles		1,137		1,380		4,802		6,416
Stock-based Compensation		248		264		987		982
Working Capital / Other		1,657		(105)		(2,170)		(4,253)
IBM Financing A/R		(1,788)		(1,328)		(717)		3,907
Net Cash Provided by Operating Activities	$	3,965	$	2,543	$	10,435	$	12,796

Capital Expenditures, net of payments & proceeds		(544)		(526)		(1,860)		(2,381)
Divestitures, net of cash transferred		1		88		1,272		114
Acquisitions, net of cash acquired		(1,329)		(275)		(2,348)		(3,293)
Marketable Securities / Other Investments, net		553		38		(1,265)		(414)
Net Cash Provided by/(Used in) Investing Activities	$	(1,318)	$	(675)	$	(4,202)	$	(5,975)

Debt, net of payments & proceeds		(1,350)		(2,030)		1,221		(8,116)
Dividends		(1,494)		(1,474)		(5,948)		(5,869)
Financing - Other		(8)		811		(231)		630
Net Cash Provided by/(Used in) Financing Activities	$	(2,852)	$	(2,692)	$	(4,958)	$	(13,354)

Effect of Exchange Rate changes on Cash		219		(26)		(244)		(185)
Net Change in Cash, Cash Equivalents and Restricted Cash*	$	13	$	(850)	$	1,032	$	(6,718)
____________________
* Cash flows are presented on a consolidated basis.

INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited)

	Three Months Ended December 31, 2022

(Dollars in Millions)	Software			Consulting			Infrastructure			Financing
Revenue	$	7,288		$	4,770		$	4,483		$	172
Pre-tax Income from Continuing Operations	$	2,347		$	523		$	1,026		$	75
Pre-tax Margin		32.2	%		11.0	%		22.9	%		43.6	%
Change YTY Revenue		2.8	%		0.5	%		1.6	%		(0.4)	%
Change YTY Revenue - constant currency		8.0	%		9.3	%		7.4	%		3.9	%

	Three Months Ended December 31, 2021

(Dollars in Millions)	Software *			Consulting			Infrastructure			Financing
Revenue	$	7,087		$	4,746		$	4,414		$	172
Pre-tax Income from Continuing Operations	$	2,142		$	436		$	1,036		$	79
Pre-tax Margin		30.2	%		9.2	%		23.5	%		46.0	%
____________________
* Recast to conform with 2022 presentation.

	Year Ended December 31, 2022

(Dollars in Millions)	Software			Consulting			Infrastructure			Financing
Revenue	$	25,037		$	19,107		$	15,288		$	645
Pre-tax Income from Continuing Operations	$	6,162		$	1,677		$	2,262		$	340
Pre-tax Margin		24.6	%		8.8	%		14.8	%		52.6	%
Change YTY Revenue		6.9	%		7.1	%		7.8	%		(16.6)	%
Change YTY Revenue - constant currency		11.9	%		14.9	%		13.5	%		(13.0)	%

	Year Ended December 31, 2021

(Dollars in Millions)	Software *			Consulting			Infrastructure			Financing
Revenue	$	23,426		$	17,844		$	14,188		$	774
Pre-tax Income from Continuing Operations	$	4,849		$	1,449		$	2,025		$	441
Pre-tax Margin		20.7	%		8.1	%		14.3	%		57.0	%
____________________
* Recast to conform with 2022 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts)

	Three Months Ended December 31, 2022
	Continuing Operations
				Acquisition-			Retirement-			Tax			Kyndryl-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments ⁽¹⁾			Adjustments ⁽²⁾			Impacts			Impacts ⁽³⁾			(Non-GAAP)
Gross Profit	$	9,632		$	156		$	—		$	—		$	—		$	9,788
Gross Profit Margin		57.7	%		0.9	pts.		—	pts.		—	pts.		—	pts.		58.6	%
S,G&A	$	4,765		$	(262)		$	—		$	—		$	(0)		$	4,503
Other (Income) & Expense		(118)			(1)			(93)			—			2			(210)
Total Expense & Other (Income)		6,320			(263)			(93)			—			2			5,965
Pre-tax Income from Continuing Operations		3,312			419			93			—			(2)			3,823
Pre-tax Income Margin from Continuing Operations		19.8	%		2.5	pts.		0.6	pts.		—	pts.		(0.0)	pts.		22.9	%
Provision for/(Benefit from) Income Taxes ⁽⁴⁾	$	443		$	109		$	16		$	(42)		$	—		$	526
Effective Tax Rate		13.4	%		1.4	pts.		0.1	pts.		(1.1)	pts.		0.0	pts.		13.8	%
Income from Continuing Operations	$	2,869		$	310		$	77		$	42		$	(2)		$	3,296
Income Margin from Continuing Operations		17.2	%		1.9	pts.		0.5	pts.		0.3	pts.		(0.0)	pts.		19.8	%
Diluted Earnings Per Share:Continuing Operations	$	3.13		$	0.34		$	0.08		$	0.05		$	(0.00)		$	3.60

	Three Months Ended December 31, 2021
	Continuing Operations
				Acquisition-			Retirement-			Tax			Kyndryl-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments ⁽¹⁾			Adjustments ⁽²⁾			Impacts			Impacts ⁽³⁾			(Non-GAAP)
Gross Profit	$	9,500		$	182		$	—		$	—		$	—		$	9,682
Gross Profit Margin		56.9	%		1.1	pts.		—	pts.		—	pts.		—	pts.		58.0	%
S,G&A	$	4,903		$	(290)		$	—		$	—		$	(8)		$	4,605
Other (Income) & Expense		(18)			(1)			(315)			—			126			(208)
Total Expense & Other (Income)		6,632			(290)			(315)			—			118			6,145
Pre-tax Income from Continuing Operations		2,869			472			315			—			(118)			3,537
Pre-tax Income Margin from Continuing Operations		17.2	%		2.8	pts.		1.9	pts.		—	pts.		(0.7)	pts.		21.2	%
Provision for/(Benefit from) Income Taxes ⁽⁴⁾	$	407		$	117		$	109		$	(94)		$	(37)		$	502
Effective Tax Rate		14.2	%		1.4	pts.		1.8	pts.		(2.7)	pts.		(0.6)	pts.		14.2	%
Income from Continuing Operations	$	2,462		$	355		$	206		$	94		$	(81)		$	3,035
Income Margin from Continuing Operations		14.7	%		2.1	pts.		1.2	pts.		0.6	pts.		(0.5)	pts.		18.2	%
Diluted Earnings Per Share: Continuing Operations	$	2.72		$	0.39		$	0.23		$	0.10		$	(0.09)		$	3.35

____________________
(1)	Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.
(2)	Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.
(3)	Primarily relates to the realized gain/(loss) and unrealized fair value changes in Kyndryl common stock and the related 2022 cash-settled swap.
(4)	Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; Dollars in millions except per share amounts)

	Year Ended December 31, 2022
	Continuing Operations
				Acquisition-			Retirement-			Tax			Kyndryl-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments ⁽¹⁾			*Adjustments ⁽²⁾**			Impacts			Impacts ⁽³⁾			(Non-GAAP)
Gross Profit	$	32,687		$	682		$	—		$	—		$	—		$	33,370
Gross Profit Margin		54.0	%		1.1	pts.		—	pts.		—	pts.		—	pts.		55.1	%
S,G&A	$	18,609		$	(1,080)		$	—		$	—		$	(0)		$	17,529
Other (Income) & Expense		5,803			(3)			(6,548)			—			(351)			(1,099)
Total Expense & Other (Income)		31,531			(1,083)			(6,548)			—			(351)			23,549
Pre-tax Income from Continuing Operations		1,156			1,765			6,548			—			351			9,821
Pre-tax Income Margin from Continuing Operations		1.9	%		2.9	pts.		10.8	pts.		—	pts.		0.6	pts.		16.2	%
Provision for/(Benefit from) Income Taxes ⁽⁴⁾	$	(626)		$	436		$	1,615		$	70		$	—		$	1,495
Effective Tax Rate		(54.2)	%		14.2	pts.		52.6	pts.		0.7	pts.		1.9	pts.		15.2	%
Income from Continuing Operations	$	1,783		$	1,329		$	4,933		$	(70)		$	351		$	8,326
Income Margin from Continuing Operations		2.9	%		2.2	pts.		8.1	pts.		(0.1)	pts.		0.6	pts.		13.8	%
Diluted Earnings Per Share: Continuing Operations	$	1.95		$	1.46		$	5.41		$	(0.08)		$	0.38		$	9.13
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* Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).

	Year Ended December 31, 2021
	Continuing Operations
				Acquisition-			Retirement-			Tax			Kyndryl-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments ⁽¹⁾			Adjustments ⁽²⁾			Impacts			Impacts ⁽³⁾			(Non-GAAP)
Gross Profit	$	31,486		$	719		$	—		$	—		$	—		$	32,205
Gross Profit Margin		54.9	%		1.3	pts.		—	pts.		—	pts.		—	pts.		56.2	%
S,G&A	$	18,745		$	(1,160)		$	—		$	—		$	(8)		$	17,577
Other (Income) & Expense		873			(2)			(1,282)			—			126			(285)
Total Expense & Other (Income)		26,649			(1,162)			(1,282)			—			118			24,324
Pre-tax Income from Continuing Operations		4,837			1,881			1,282			—			(118)			7,881
Pre-tax Income Margin from Continuing Operations		8.4	%		3.3	pts.		2.2	pts.		—	pts.		(0.2)	pts.		13.7	%
Provision for/(Benefit from) Income Taxes ⁽⁴⁾	$	124		$	457		$	251		$	(89)		$	(37)		$	706
Effective Tax Rate		2.6	%		5.2	pts.		2.8	pts.		(1.1)	pts.		(0.4)	pts.		9.0	%
Income from Continuing Operations	$	4,712		$	1,424		$	1,031		$	89		$	(81)		$	7,174
Income Margin from Continuing Operations		8.2	%		2.5	pts.		1.8	pts.		0.2	pts.		(0.1)	pts.		12.5	%
Diluted Earnings Per Share: Continuing Operations	$	5.21		$	1.57		$	1.14		$	0.10		$	(0.09)		$	7.93

____________________
(1)	Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs.
(2)	Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.
(3)	Primarily relates to the realized gain/(loss) and unrealized fair value changes in Kyndryl common stock and the related 2022 cash-settled swap.
(4)	Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.