1 CONSOLIDATED INCOME STATEMENT - USD ($) $ in Millions 12 Months Ended 2 3 Revenue 4 Cost 5 Gross profit 6 Expense and other (income) 7 Selling, general and administrative 8 Research, development and engineering Dec. 31, 2023 $61,860 Dec. 31, 2022 Dec. 31, 2021 $60,530 $57,350 27,560 27,842 25,865 34,300 32,687 31,486 19,003 18,609 18,745 6,775 6,567 6,488 9 Intellectual property and custom development income -860 -663 -612 10 Other (income) and expense -914 5,803 873 11 Interest expense 1,607 1,216 1,155 12 Total expense and other (income) 25,610 31,531 26,649 13 Income from continuing operations before income taxes 8,690 1,156 4,837 14 Provision for/(benefit from) income taxes 1,176 -626 124 15 Income from continuing operations 7,514 1,783 4,712 16 Income/(loss) from discontinued operations, net of tax -12 -143 1,030 17 Net income $7,502 $1,639 [1] $5,743 [2] 18 Assuming dilution 19 Continuing operations (in dollars per share) $8.15 $1.95 $5.21 20 Discontinued operations (in dollars per share) 21 Total (in dollars per share) 22 Basic 23 Continuing operations (in dollars per share) -0.01 -0.16 1.14 8.14 1.8 6.35 8.25 1.97 5.26 24 Discontinued operations (in dollars per share) -0.01 -0.16 1.15 25 Total (in dollars per share) $8.23 $1.82 $6.41 26 Weighted-average number of common shares outstanding 27 Assuming dilution (in shares) 922,073,828 912,269,062 28 Basic (in shares) 911,210,319 902,664,190 904,641,001 895,990,771 29 Services 30 Revenue 31 Cost 32 Sales 33 Revenue 34 Cost 35 Financing 36 Revenue 37 Cost 38 $30,378 $30,206 $29,225 21,051 21,062 19,147 30,745 29,673 27,346 6,127 6,374 6,184 737 651 780 $382 $406 $534 CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions Dec. 31, 2023 Dec. 31, 2022 Current assets Cash and cash equivalents $13,068 $7,886 Restricted cash 21 103 Marketable securities 373 852 Notes and accounts receivable-trade (net of allowances of $192 in 2023 and $233 in 2022) Short-term financing receivables 7,214 6,541 Held for investment (net of allowances of $129 in 2023 and $145 in 2022) 6,102 6,851 Held for sale 692 939 Other accounts receivable (net of allowances of $109 in 2023 and $89 in 2022) 640 817 Inventory 1,161 1,552 Deferred costs 998 967 Prepaid expenses and other current assets 2,639 2,611 Total current assets 32,908 29,118 Property, plant and equipment 18,122 18,695 Less: Accumulated depreciation 12,621 13,361 Property, plant and equipment-net 5,501 5,334 Operating right-of-use assets-net 3,220 2,878 Long-term financing receivables (net of allowances of $27 in 2023 and $28 in 2022) 5,766 5,806 Prepaid pension assets 7,506 8,236 Deferred costs 842 866 Deferred taxes 6,656 6,256 Goodwill 60,178 55,949 Intangible assets-net 11,036 11,184 Investments and sundry assets 1,626 1,617 Total assets 135,241 127,243 Current liabilities Taxes 2,270 2,196 Short-term debt 6,426 4,760 Accounts payable Compensation and benefits Deferred income 4,132 4,051 3,501 3,481 13,451 12,032 Operating lease liabilities 820 874 Other accrued expenses and liabilities 3,521 4,111 Total current liabilities 34,122 31,505 Long-term debt 50,121 46,189 Retirement and nonpension postretirement benefit obligations 10,808 9,596 Deferred income 3,533 3,499 Operating lease liabilities 2,568 2,190 Other liabilities 11,475 12,243 Total liabilities 112,628 105,222 Commitments and Contingencies IBM stockholders' equity Common stock 59,643 58,343 Retained earnings 151,276 149,825 Treasury stock, at cost (shares: 2023-1,351,897,514; 20221,351,024,943) -169,624 -169,484 Accumulated other comprehensive income/(loss) -18,761 -16,740 Total IBM stockholders' equity 22,533 21,944 Noncontrolling interests 80 77 Total equity 22,613 22,021 Total liabilities and equity $135,241 $127,243 CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions 12 Months Ended Dec. 31, 2023 Dec. 31, 2022 Dec. 31, 2021 Cash flows from operating activities Net income $7,502 $1,639 [1] $5,743 [2] Adjustments to reconcile net income to cash provided by operating activities Pension settlement charge 0 5,894 0 Depreciation [3] 2,109 2,407 3,888 Amortization of capitalized software and acquired intangible assets 2,287 2,395 2,529 Stock-based compensation 1,133 987 982 Deferred taxes -1,114 -2,726 -2,001 Net (gain)/loss on asset sales and other [4] -170 -363 -136 Change in operating assets and liabilities, net of acquisitions/divestitures Receivables (including financing receivables) 725 -539 1,372 Retirement related -462 331 1,038 Inventory Other assets/other liabilities Accounts payable Net cash provided by operating activities Cash flows from investing activities Payments for property, plant and equipment 390 71 138 [4] 1,466 126 -842 65 213 85 13,931 10,435 12,796 -1,245 -1,346 -2,062 Proceeds from disposition of property, plant and equipment 321 111 387 Investment in software -565 -626 -706 Purchases of marketable securities and other investments -11,143 -5,930 -3,561 Proceeds from disposition of marketable securities and other investments Acquisition of businesses, net of cash acquired 10,647 4,665 3,147 -5,082 -2,348 -3,293 Divestiture of businesses, net of cash transferred -4 1,272 114 Net cash provided by/(used in) investing activities -7,070 -4,202 -5,975 Cash flows from financing activities Proceeds from new debt 9,586 7,804 522 Payments to settle debt -5,082 -6,800 -8,597 Short-term borrowings/(repayments) less than 90 daysnet -7 217 -40 Common stock repurchases for tax withholdings -402 -407 -319 Financing other 176 176 70 Distribution from Kyndryl 0 0 879 [5] Cash dividends paid -6,040 -5,948 -5,869 Net cash provided by/(used in) financing activities -1,769 -4,958 -13,354 Effect of exchange rate changes on cash, cash equivalents and restricted cash 9 -244 -185 Net change in cash, cash equivalents and restricted cash 5,101 1,032 -6,718 Cash, cash equivalents and restricted cash at January 1 7,988 6,957 13,675 Cash, cash equivalents and restricted cash at December 31 13,089 7,988 6,957 Supplemental data Income taxes paid-net of refunds received 1,564 1,865 Interest paid on debt $1,668 $1,401 2,103 $1,512 A B 1 Amounts in Millions 2 3 4 Year 5 6 Revenues (3% of the total revenue) 0 0 D E F G H 1 2 3 4 5 7 Growth in Rev 15% $2,314.41 2661.572 2927.729 3074.115 3227.821 5% 5% 10% 8 9 Oper Income total revenue operating margin 527.07 606.1305 666.7436 700.0807 735.0848 10 Margin = (EBIT + Depreciation)/Total revenue 22.77% 11 Depreciation PPE/5 200.2 220.22 231.231 233.5433 235.8787 12 13 Tax Rate 14 15 Capital Expenditure 21.00% 1001 16 Growth in Exp 17 Chg Cap Exp 18 19 NWC/Sales 20 21 22 NWC 23 Chg NWC 24 25 26 FCF (millions) 27 1001 1101.1 1156.155 1167.717 1179.394 1191.188 10% 5% 1% 1% 1% 100.1 55.055 11.56155 11.67717 11.79394 0.06 Recover NWC 0 0 137.79 158.4585 174.3044 183.0196 192.1705 137.79 20.6685 15.84585 8.715217 9.150978 -192.171 -1001 220.5373 449.3658 547.8785 581.7155 417.136 28 Cost of Capital 29 30 NPV 12% $550.494 30% 31 IRR 32 33 Part 4 34 a 35 36 b 37 38 c 39 40 NPV IRR 2% $37.541 13% 4% $1,063.447 45% 10% $638.823 30% 15% $430.784 30% 0% $311.400 23% 10% $525.013 29%