IBM(IBM) - 2024 Q3 - Quarterly Report

Financial Performance - In Q3 2024, the company reported revenue of $15.0 billion, a 1.5$0.3 billion, impacted by a one-time pension settlement charge of $2.7 billion[223]. - Operating (non-GAAP) earnings for Q3 2024 were$2.2 billion, with diluted earnings per share of $2.30, reflecting a 6.1$45.2 billion, reflecting a year-over-year growth of 1.6 percent[235]. - Total revenue for Q3 2024 was $14,968 million, reflecting a 1.5$14,752 million in Q3 2023[255]. - Net income from continuing operations was $3.1 billion for the first nine months of 2024, a decrease of 27.0 percent compared to$4.2 billion in the prior-year period[235]. - Diluted earnings per share from continuing operations was $3.30 for the nine months ended September 30, 2024, down 28.1 percent from the prior-year period[242]. Revenue Breakdown - Software revenue grew by 9.7$4,600 million in Q3 2024, a 9.8% increase year-over-year (9.7% adjusted for currency)[256]. - Red Hat revenue grew by 13.7% in Q3 2024, contributing approximately 3.5 points to total Software revenue growth[256]. - For the first nine months of 2024, Software revenue totaled $19,162 million, a 7.5$5,152 million, a decrease of 0.5 percent year-over-year, reflecting a challenging macroeconomic environment[266]. Expenses and Costs - Total expenses increased by 50.0% year-over-year, primarily due to the pension settlement charge and higher workforce rebalancing costs[228]. - Total expense for the three months ended September 30, 2024, was $9,222 million, an increase of 50.0$6,150 million in 2023[296]. - Total selling, general and administrative (SG&A) expense for the three months ended September 30, 2024, was $4,911 million, an increase of 10.2$4,458 million in 2023[299]. - Research, development, and engineering (RD&E) expense rose by 11.3% in Q3 2024 and 9.7% for the first nine months compared to the prior year, driven by investments in AI, hybrid cloud, and quantum technologies[304]. - Other (income) and expense showed a total expense of $2,244 million in Q3 2024, compared to income of$215 million in the prior year, largely due to a non-operating retirement-related cost of $2,797 million[310]. Cash Flow and Liquidity - The company generated$2.9 billion in cash from operations and $2.1 billion in free cash flow during the quarter[223]. - Cash provided by operating activities was$9.1 billion in the first nine months of 2024, a decrease of $0.4 billion compared to the same period in 2023[245]. - Free cash flow for the first nine months of 2024 was$6.6 billion, an increase of $1.5 billion year-over-year[245]. - Net cash provided by operating activities decreased by$353 million to $9,115 million compared to the first nine months of 2023[341]. Assets and Equity - Total assets decreased by$0.9 billion from December 31, 2023, primarily due to a decrease in receivables[244]. - Total equity increased to $24.5 billion as of September 30, 2024, up$1.9 billion from December 31, 2023, driven by year-to-date net income[244]. - Noncurrent assets increased by $1,463 million primarily due to an increase in goodwill and intangible assets from acquisitions[330]. Debt and Financing - Total debt as of September 30, 2024, was$56,579 million, flat compared to December 31, 2023[324]. - Long-term debt increased by $2,859 million primarily driven by first-quarter 2023 debt issuances[331]. - The Financing debt-to-equity ratio remained at 9.0 to 1 as of September 30, 2024[336]. Risks and Challenges - The company acknowledges potential risks including economic downturns and client spending budgets that could impact future performance[393]. - Risks related to cybersecurity and data privacy are emphasized as critical factors for the company's operations[393]. - The potential failure of the separation of Kyndryl Holdings, Inc. to qualify for tax-free treatment is noted as a significant risk[393]. - The impact of climate change and environmental matters is recognized as a concern for the company's future strategies[393]. - The company must navigate currency fluctuations and customer financing risks that could affect its financial stability[393].