International Business Machines Corporation (NYSE:IBM) Q1 2017 Earnings Conference Call Transcript

Apr 18, 2017 • 05:00 pm ET


International Business Machines Corporation (NYSE:IBM) Q1 2017 Earnings Conference Call Transcript


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Welcome, and thank you for standing by.

(Operator Instructions)

Today's conference is being recorded. If you have any objections, you may disconnect at this point. Now I'd like to turn the meeting over to Ms. Patricia Murphy, Vice President of Investor Relations. Ma'am, you may begin.

Patricia Murphy

Thank you. This is Patricia Murphy, Vice President of Investor Relations for IBM. I'm here today with Martin Schroeter, IBM's Senior Vice President and Chief Financial Officer. I'd like to welcome you to our first quarter earnings presentation.

The prepared remarks will be available within a couple of hours, and a replay of the webcast will be posted by this time tomorrow.

(Forward-Looking Cautionary Statements)

Our presentation also includes certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You'll find reconciliation charts at the end of the presentation and in the Form 8-K submitted to the SEC.

So with that, I'll turn the call over to Martin Schroeter.

Martin Schroeter

Thanks, Patricia. In the first quarter, we delivered over $18 billion of revenue, operating pretax income of $2.1 billion and operating earnings per share of $2.38, which is up year-to-year. This is in line with the view we provided back in January and keeps us on track to our full-year expectations for earnings per share and free cash flow.

In the first quarter, we continued to deliver strong performance in our strategic imperative, with revenue up 13% at constant currency. As is typical, I'll focus on constant currency growth rates throughout.

Our cloud offerings were up 35% this quarter, led by Cloud-as-a-Service, which was up over 60%. Analytics, the largest of our strategic areas, was up 7%, mobile was up over 20%, and security, up 10%. We also continued to deliver core capabilities to our clients running mission-critical systems and processes.

Many of these products provide the foundation of hybrid environments, enabling our clients to get more value from their on-premise data and application. Some of these key franchises are growing, like WebSphere, while others are declining as they are in declining markets, but all are high-value.

We've been very clear that to be successful with enterprise clients and to solve real problems, you need to bring together cognitive solutions on cloud platforms and create industry-specific solutions. And so, we've been focused on building a cognitive and cloud platform and amassing the best industry skills and capabilities, all while maintaining our focus on delivering higher-value solutions.

As part of the transformation, we've made significant investments and shifted resources. This level of investment and the longer return profile of the Cloud-as-a-Service businesses are reflected in our margins. Our foundation is now solidly in place, and while the investments will continue, our focus shifts to improving the returns on these investments by building scale and realizing operating efficiencies, keeping us on track to our full-year objectives.

And so our first quarter results, once again, reflect the success we're having