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APOG
2019-04-11 10:00:00
2019Q2
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Prepared Remarks: Operator Good day, ladies and gentlemen, and welcome to Apogee's Fiscal 2019 Fourth Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a ...
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APOG
2019-04-11 10:00:00
2019Q2
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everyone that our call will contain forward-looking statements, reflecting management's expectations, which are based on currently available information. Actual results may differ materially. More information about factors that could affect Apogee's business and financial results can be found in our SEC filings. And wi...
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APOG
2019-04-11 10:00:00
2019Q2
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solid demand for Apogee's products and services, reflecting healthy end markets and the strength of Apogee's portfolio in the markets we serve. Full year orders for the entire Company were up 12% compared to fiscal year '18. We ended the year with higher backlogs, driven by the long lead time parts of our business. In ...
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APOG
2019-04-11 10:00:00
2019Q2
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in the fourth quarter operating margin which is 500 basis point improvement over the first half of the year. Fourth quarter operating margins would have been even stronger except for some severe winter storms, which interrupted production during the fourth quarter primarily in the month of February. We expect to realiz...
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APOG
2019-04-11 10:00:00
2019Q2
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Framing Systems. It provides increased scale, adding to our product offerings, and expanding the markets we serve. I remain very confident that EFCO is an important part of our future at Apogee in our future improvements. However, as we previously discussed, we also inherited a few legacy projects with the EFCO acquisi...
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APOG
2019-04-11 10:00:00
2019Q2
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As we move into fiscal '20, we are focused on putting these issues behind us in positioning EFCO and Framing Systems segment overall for long-term success. We see tremendous opportunity for EFCO to grow revenue and significantly improve profitability. We've been laying the foundation for these improvements since the ac...
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APOG
2019-04-11 10:00:00
2019Q2
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very positive results from EFCO. Turning to our outlook and long-term direction. Looking at the rest of Apogee, I'm optimistic about the future. Conditions in our end markets remain favorable, particularly the US architectural markets. The external indicators we track all remain favorable. The Architectural Billing Ind...
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APOG
2019-04-11 10:00:00
2019Q2
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script for a minute and comment on this. In March, Wells Fargo and the Department of Commerce issued a report, and I'd like to quote that while construction has steadily tended higher or trended higher for much of this expansion, the pace of activity fall short of prior cycles. For example, at the peak of the 2001 cycl...
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APOG
2019-04-11 10:00:00
2019Q2
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determining how to best expand our presence with a new operating facility. This is a significant long-term opportunity for Apogee, which will begin to contribute meaningfully to Glass segment revenues and operating income in fiscal '21. We are very excited about this initiative, but at this point we are intentionally l...
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APOG
2019-04-11 10:00:00
2019Q2
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reminder, our services business is focused on a small number of large projects. This makes the business inherently lumpy due to the timing of projects in the pipeline. Not every year will look like the one just completed regardless of our momentum. Despite this lumpiness we have good long-term visibility in this segmen...
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APOG
2019-04-11 10:00:00
2019Q2
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'21. We also have numerous attractive opportunity in our sales pipeline, and are continuing our disciplined approach to project selection to focus on those projects that have a best fit for Apogee. We believe our confidence is well founded and is supported by this segment's performance over the past several years. For ...
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APOG
2019-04-11 10:00:00
2019Q2
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fiscal 2020. With that, I'll pass the call over to Jim, who will provide details on the quarter and the outlook and the guidance before we take your questions. I'll return for a few additional comments. Thank you. Jim? James S. Porter -- Executive Vice President and Chief Financial Officer Thanks, Joe and good morning,...
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APOG
2019-04-11 10:00:00
2019Q2
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compared to $34.1 million in last year's fourth quarter. The decrease was primarily driven by reduced volumes and lower margins in Architectural Framing Systems, which offset higher operating income in Architectural Services. Adjusted EBITDA came in at $42.4 million compared to $46.2 million in last year's fourth quart...
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APOG
2019-04-11 10:00:00
2019Q2
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full-year results, we had earnings per diluted share of $1.63. On an adjusted basis, earnings per share was $2.96. I'd like to mention that in our full-year adjusted results, the project-related charges that we recorded in the fourth quarter included some adjustments for profits recognized in the first three quarters o...
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APOG
2019-04-11 10:00:00
2019Q2
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fiscal year. The segment's revenues grew 13% in the quarter to $104 million and operating margin came in at 7.1%. The Architectural Glass segment has now improved its operating margin by 510 basis points compared to 2% in the second quarter of fiscal '19. Architectural Services turned in another outstanding quarter. Re...
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APOG
2019-04-11 10:00:00
2019Q2
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over the past two years. Given the project schedules established by our customers, we expect roughly 50% of the services backlog will be converted to revenue in fiscal '20 with the balance scheduled for fiscal '21 or '22. As Joe mentioned, at this point, it looks like Architectural Services is set up for another very s...
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APOG
2019-04-11 10:00:00
2019Q2
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fourth quarter, we repurchased 658,000 shares of stock for $20 million, bringing our full-year stock buybacks to nearly 1.3 million shares, more than 4% of shares that were outstanding at the beginning of the fiscal year. With that let me turn to our guidance for fiscal 2020. Slide 10 and 11 present details on our outl...
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APOG
2019-04-11 10:00:00
2019Q2
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fiscal '21 and '22. Company operating margins will also be impacted by $4 million to $5 million of start-up costs for the new Architectural Glass growth initiative and we anticipate increased corporate cost from higher legal and other advisory expenses. We expect the tax rate of approximately 24.5% and full-year intere...
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APOG
2019-04-11 10:00:00
2019Q2
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margin improvements will be weighted to the back half of the fiscal year, as we work through some remaining less favorable mix along with initiatives we have under way at EFCO generate positive contributions. In Architectural Glass, revenue growth is expected of approximately 10% and operating margins of approximately ...
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APOG
2019-04-11 10:00:00
2019Q2
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-- roughly balanced throughout the year. At Large-Scale Optical we expect mid single-digit growth as we make progress on our initiatives to extend into adjacent market opportunities. Segment margins are expected to be approximately 25%, just slightly below the fiscal 2019 level. This short lead time business has quarte...
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APOG
2019-04-11 10:00:00
2019Q2
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you to open up the call for questions please. Questions and Answers: Operator (Operator Instructions) And our first question will come from the line of Chris Moore with CJS Securities. Your line is open. Christopher Moore -- CJS Securities -- Analyst Thanks. Hey, good morning, guys. Yeah, maybe we could -- (multiple sp...
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APOG
2019-04-11 10:00:00
2019Q2
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-- Analyst The -- it sounds like by Q3 of this year most of the troubles -- troubled EFCO contracts will be completed. So, reasonable to assume that, I don't know, from your remarks, last quarter and then forward in terms of improved EFCO margin -- improved Framing margins is reasonable. Joseph F. Puishys -- Chief Exec...
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APOG
2019-04-11 10:00:00
2019Q2
7,381
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orders. Q1 has remained very strong, only 5.5 weeks into a new year, but it's still important. And so the core EFCO business is starting to look good. The overhang from these legacy projects one in particular has been substantial and the distraction of that goes away. We're almost done with manufacturing the product, a...
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APOG
2019-04-11 10:00:00
2019Q2
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it. That's helpful. Jim you had mentioned anticipated increased corporate costs from higher legal and advisory, can you maybe just talk to that a little bit? James S. Porter -- Executive Vice President and Chief Financial Officer Yeah, I mean, I think really the bottom line is on our corporate line we're probably estim...
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APOG
2019-04-11 10:00:00
2019Q2
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-- Craig-Hallum -- Analyst Maybe just sticking with EFCO, I mean, and this maybe a tough question, but any, I mean, any thoughts on your confidence level regarding the ability whether it's insurance or legal to recover some of this. I mean, obviously you've got -- would seem to have a pretty good leg to stand on. And I...
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APOG
2019-04-11 10:00:00
2019Q2
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hopefully, deliver some good news in the future year or years and also leave it at that, Eric. Eric Stine -- Craig-Hallum -- Analyst Got it. No, understand. Well, in this question, maybe in that same category, but just in terms of the investment in Glass and it was, thank you for quantifying that amount, and I know you...
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APOG
2019-04-11 10:00:00
2019Q2
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we go down a rat hole and unfortunately, we'd be forced to mislead by not talking about it. That said I believe by the end of the first quarter and certainly by some point in the second quarter, we'll be able to talk more thoroughly about this effort. It's been well thought out. It is organic. I don't want anyone to be...
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APOG
2019-04-11 10:00:00
2019Q2
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or maybe year-over-year some way to make a comparison there? Joseph F. Puishys -- Chief Executive Officer Yes. Our installation business has done an amazing job of project selection over the last several years. Actually their efforts in project selection began about seven years ago and it's been paying dividends. They ...
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APOG
2019-04-11 10:00:00
2019Q2
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into Q2 and there's a pretty large slate of projects that will be awarded to someone that we are active on many of them and feel good about our chances on some core projects. So, we believe the momentum will continue on an upward trajectory for that business. It is literally impossible in that world when your average w...
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APOG
2019-04-11 10:00:00
2019Q2
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after risky jobs because of a hole in the pipeline. So, the pipeline is very strong. You'll see backlog increase in Q1. Beyond that I don't want to get into backlog projections, but as I mentioned, we've got more than $100 million in the backlog in that business than we did a year ago and that -- look what happened aft...
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APOG
2019-04-11 10:00:00
2019Q2
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D.A. Davidson -- Analyst Hey, great. Thanks. Good morning. James S. Porter -- Executive Vice President and Chief Financial Officer Good morning. Joseph F. Puishys -- Chief Executive Officer Hey, Brent. Good morning. Brent Thielman -- D.A. Davidson -- Analyst Joe or Jim on Glass, any sense how much the weather-related d...
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APOG
2019-04-11 10:00:00
2019Q2
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I think we had about 14 shifts of production that we lost. Because it happened in February I didn't have a chance to make it up later in the quarter that was the end of the quarter. It impacted our Large-Scale Optical factory as well. We don't call it out because the business is much smaller, but it impacted that busin...
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APOG
2019-04-11 10:00:00
2019Q2
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business, but surely in the quarter, as I said, it was a little over 100 basis points and that should -- that goes away. Brent Thielman -- D.A. Davidson -- Analyst Yes. Okay, and then you guys are projecting 7% margins in that segment this year. Understand some of these investments are going to weigh on margins a littl...
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APOG
2019-04-11 10:00:00
2019Q2
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at that double digit operating margin level. Brent Thielman -- D.A. Davidson -- Analyst Got it. The installation business is great, I mean, it was really a great year. Joe, I want to get your thoughts, I know, you want to manage kind of how large that business gets a piece of the whole pie. But does this year's perform...
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APOG
2019-04-11 10:00:00
2019Q2
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can continue to grow the business. I think the revenues of approximately $300 million or where I'd like to be at -- in the -- and as we approach the top of the cycle, and maybe low-200s, at the bottom end of a cycle at lowest. But I think our -- my expectations on operating margins, Brent, admittedly are now higher. Th...
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APOG
2019-04-11 10:00:00
2019Q2
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important. As we close out projects, we tend to take a good news later in the projects for obvious reasons. If we ever have bad news, we take it immediately, but as we execute well, you see a little bit more margin pick up as projects progress to the end of the installation. Our F '20 maturity is a little bit lower. So...
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APOG
2019-04-11 10:00:00
2019Q2
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holes through the year or is that just work you don't really necessarily want to pursue? Joseph F. Puishys -- Chief Executive Officer Well, they can still win projects that will have beginning revenue flows in F '20. As we get to this point in the calendar, it's most projects that they get awarded will have very little...
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APOG
2019-04-11 10:00:00
2019Q2
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Thanks for taking the questions. Joseph F. Puishys -- Chief Executive Officer Hey, Julio. Good morning. Julio Romero -- Sidoti & Company -- Analyst I wanted to ask about the retrofit initiative. Nice job growing that about $50 million for the year. Can you just give us a refresher on what the margins look like for that...
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APOG
2019-04-11 10:00:00
2019Q2
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It tends to be anti-cyclical at times. I want to point out that $50 million were awards or orders, the revenue stream follows that. I still believe we can get to $100 million that I -- as an annual impact. We have added to the team. We are working on it further expanding our footprint across the geography of the US wit...
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APOG
2019-04-11 10:00:00
2019Q2
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Chief Financial Officer About $25 million kind of roughly $25 million is maintenance capital. Julio Romero -- Sidoti & Company -- Analyst Okay. Very good. I'll hop back in queue. Thanks very much. Joseph F. Puishys -- Chief Executive Officer Okay. Chelsy, can you see if there are any more questions from any of the list...
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APOG
2019-04-11 10:00:00
2019Q2
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Operator Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day. Duration: 49 minutes Call participants: Jeff Huebschen -- Vice President, Investor Relations and Communications Joseph F. Puishys -- Chief Executive Off...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
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Prepared Remarks: Operator Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections you may disconnect at this time. Now I will turn the meeting over to Ms. Patricia Murphy with IBM. Ma'am, you may begin. Patricia M...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
investors. We've provided reconciliation charts at the end of the presentation and in the 8-K submitted to the SEC. Before turning the call over to Jim, I want to remind you we recently made changes to our management system and our organizational structure. Our segment reporting for 2019 has been updated to reflect thi...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
strong performance and offerings that help clients with their digital transformations and Journeys to cloud. At the same time, we continue to take actions to optimize our portfolio while investing to lead in the emerging high value areas of the IT industry. You saw this play out in our results. Our cloud growth acceler...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
point year-to-year at constant currency, slightly better than our fourth quarter performance. Our reported revenue as expected includes a significant currency headwind, as always, our focus on constant currency performance. From a geographic perspective, our year-to-year revenue growth in the developed markets improved...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
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220
At the same time, consistent with our high-value focus, we're continuing to take actions to optimize our GTS performance by exiting lower value content. While this contributes to lower GTS revenue, we had higher profit, margin and cash contribution. Our systems revenue declined, reflecting the IBM Z product cycle dynam...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
address this opportunity, enterprises need to be able to move and manage data, services and workflows across multiple clouds and on-prem. And they need to be able to address security concerns, data protection and protocols, availability and cloud management. This requires a hybrid multi-cloud open approach. And so we h...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
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220
the four key stages of their cloud transformation journey: advise, move, build and manage. These offerings span our cloud and cognitive software, global business services and global technology services, leveraging the integrated value of IBM. And so we have a strong foundation for the addition of Red Hat. Together, we ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
share performance, especially because there are couple of larger items in last year's results that impact the dynamics. In fact , these larger items contributed a $0.32 benefit to last year's earnings per share, which of course creates a headwind to this year's growth. And so looking at the drivers, as I said, our reve...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
leverage and margin expansion, offset by a $0.32 impact of last year's significant items, resulting in an operating EPS of $2.25. So now getting into profit and margin metrics, we continue to drive operating leverage, expanding both gross and pre-tax margins. Our operating gross margin was up 90 basis points. This was ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
Regarding currency, while the stronger dollar hurts the top line, it generally helps expense, due both to translation and the benefit of hedging contracts. In the first quarter, currency helped our year-to-year expense by nearly 6 points. Much of this was reflected in other income and expense. In fact, the $200 million...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
cash metrics, we generated $1.7 billion of free cash flow in the quarter, which is up about $350 million over last year. There is a lot of seasonality in our cash generation and so looking over the last 12 months, we generated over $12 billion of free cash flow, that's a 114% of our GAAP net income normalized. I'll tou...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
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to our segment structure for 2019. First, we brought our cloud and cognitive software together in one segment. Second, we combined our security services with security software, consistent with the way we are running that integrated business. And then finally, we moved the results for the businesses we're divesting to t...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
transaction processing platforms, includes the middleware and database software that supports our clients' mission critical workloads running on z/OS as well as storage software. Looking at our services segments, the scope of global business services segment overall is unchanged other than moving the divested mortgage ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
while transaction processing platforms was flat. I'll break down some of the drivers behind these areas. Our cloud and data platforms grew 2%. We delivered growth this quarter by helping clients build across public and private clouds with IBM cloud private, which as you know is built on Linux containers and Kubernetes....
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
as well as solution areas like health, supply chain, and weather. In security, we delivered strong double-digit growth with our integrated software and services value proposition. In particular, we continue to see good traction with our threat management software and services offerings including QRadar and Resilient. A...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
to profit for the segment, we expanded pre-tax margin by 2 points year-to-year. This reflects the lower level of workforce rebalancing this year, mitigated by a headwind in IP income and continued investment in key strategic areas. As we look forward, essentially all of our software portfolio now runs on Linux containe...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
portfolio. The growth this quarter was led by digital strategy and IX, as well as consulting for cloud application migrations and our next generation enterprise application practice. Within cloud application migration, GBS cloud advisory services works with enterprises to plan and implement a clear strategy and roadmap...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
then, global process services had solid performance in first quarter. Revenue was up 5% with strong performance in risk and compliance, along with financial process services. Turning to GBS profit, our gross margin was 26%, which is up 280 basis points, driven by our mix to higher value offerings, the yield on our prod...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
our clients to hybrid cloud. As we moved through last year, we improved GTS profit and margin, creating operating leverage. This gives us a solid base from which we can de-emphasize lower-value contracts and third-party content, enabling continued investment for Chapter II of the cloud and delivering sustained margin i...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
to the cloud. As clients migrate these workloads to a hybrid multi-cloud environment, they faced increased complexity in managing their infrastructure. Because we've been running these workloads, we're better positioned to help our clients to build and manage these new environments. During the first quarter, we announc...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
in hybrid multi-cloud services. In systems, revenue was down 9% this quarter with declines in IBM Z reflecting where we are in the product cycle, and in storage driven by market and competitive dynamics. That said, we had good performance in Power. This quarter, IBM Z revenue declined 38%. I'll remind you we are wrappi...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
Both the high end entry-level offerings posted strong growth this quarter, as clients continue to adopt this new technology. Storage hardware was down 11% with declines in both the high-end and mid-range, offset by continued growth in all-flash arrays. Performance reflects declines in our high-end, which is tied to our...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
and the strategy I mentioned earlier to de-emphasize some lower value content. This reduces our capital requirements. And so free cash flow came in where we expected, and there is no change in our full year outlook of about $12 billion. Looking at uses of cash, we've returned $2.3 billion to the shareholders in the qua...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
is in support of our financing business. The leverage in our financing business remains at 9:1. And the credit quality of our financing receivables remained strong at 55% investment grade. That's 2 points better than a year ago. As a reminder, our financing debt will decrease throughout the year as a result of the wind...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
90 basis points. This reflects our shift to higher value, and our focus on productivity and operational efficiencies, what I'd characterize as improving fundamentals. We are continuing to prioritize our investments and announced additional actions to divest some businesses that aren't contributing to the integrated val...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
foregone profit, the gain on sale, the actions to address the structure and stranded cost, and the resulting benefit from these actions to have minimal impact to our profit and earnings per share for the year. And so, our guidance assumes, these divestitures Looking at the skew of earnings per share for the year, we as...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
absorb these headwinds in the full year expectation of about $12 billion. And with that, let me turn it back to Patricia for the Q&A. Patricia Murphy -- Vice President of Investor Relations Thank you, Jim. Before we begin the Q&A, I'd like to mention a couple of items. First, we have supplemental charts at the end of t...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
open. Toni Sacconaghi -- Bernstein -- Analyst Yes, good afternoon and thank you. Jim, I'm just wondering if you can comment about how the quarter turned out to your expectations, 90 days ago? I think at the time, in Q4 you delivered minus 1% growth in constant currency and you've stated that revenues would improve, 1 t...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
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perspective of how we saw the quarter play out and I'll touch on each of your points here as I go through this. We feel like we -- it's through the first 90 days of the year, we started out with a solid performance. Why? Because we see the fundamentals of our business model playing out in terms of growth in key high va...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
solid execution in our cloud and cognitive software, where our value propositions around hybrid cloud are playing out very nicely and we're winning in the market. And we saw accelerated growth in our cloud-based business, basically going from mid-single digits in the fourth quarter, when you look at our cloud performan...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
deceleration in revenue. And that was really driven by our transactional related businesses, both systems and the Cloud and Cognitive Software, where we had a good transactional pipeline, and during the quarter and just based on client buying decision delays, we did not execute. Those are great value propositions, they...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
enterprise productivity initiatives play out. And when you adjust for the $200 million impact year-to-year on IP, our operating pre-tax margins are up, they're not down. So we feel like we started out, we delivered a strong quarter. We should came up with some more revenue, especially in our emerging markets, the team ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
in Tony's question? James J. Kavanaugh -- Senior Vice President and Chief Financial Officer Okay. Thanks, Katy, and I appreciate the question. Around strategic imperatives, again, let me put this in perspective, we put this signpost out back in the beginning of 2015, if you all remember at our Investor Day. Why , becau...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
the last quarter, both at think many of you as analysts and also with our investors to talk about, as we changed our external segmentation to reposition and get this Company focused on chapter two, and the journey to cloud and hybrid cloud, the same feedback we've got from many of you and many of our investors is the s...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
strong offerings, team executed well both across cloud and data platforms where we're up 2%, but also across cognitive applications where we were up 4%. And I talked about in the prepared remarks, how we continue to differentiate around our hybrid cloud software value proposition where our integration software had a ve...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
And we see pretty consistent performance moving forward here in the second quarter and throughout the year. Patricia Murphy -- Vice President of Investor Relations Thanks, Katy. Can we go to the next question please? Operator Our next question is from John Roy with UBS. Your line is open. John Roy -- UBS -- Analyst Hey...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
quarter, but also the operational indices we see right in front of us, and our business plans and strategies that we're executing on moving forward. First around GBS, our GBS business has its a lot of momentum. We actually delivered signings growth again for our GBS business, those we got great momentum around our cons...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
Around GTS, as I mentioned in our prepared remarks and I'll go back to what we talked about kind of -- at late 90 days ago is we embarked on a very conscious strategy around exiting low value third-party OEM content. We said at that time it was going to depress revenue in the near-term, but have higher value and higher...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
got another quarter's worth a headwind on that. But we've got strong growth and momentum in our Power. Following that innovation cycle, we rolled out our POWER9 architecture for the first quarter, we had our high-end, we had strong adoption. We continue to win in that space, leveraging our cloud design systems for AI a...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
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we go to the next question. Operator Our next question is from Jim Schneider with Goldman Sachs. Your line is open. Jim Schneider -- Goldman Sachs -- Analyst Good afternoon, and thanks for taking my question. Maybe, Jim, I was wondering if you could comment on the overall performance in the services business, signings ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
it's very, very important because why are signings an indicator that's of interest of all of our investors, because it leads to backlog that then leads to backlog realization and revenue. And as I've said many quarters, all signings are not equal and they vary, they vary with lumpiness mainly based on the size of signi...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
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also just on what we executed with solid execution exiting the year. But now let's take a look at backlog. Backlog has many factors that influence it, signings only being one of it, the duration, the mix of those signings, erosion, and client dissatisfaction issues and also new signings, new logo versus extensions. And...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
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led to higher realization of revenue. That's what's playing out in GBS. In GTS, that is a function as we're shifting our portfolio to really capture the hybrid multi-cloud opportunity and that backlog in GTS is flat. It's flat while we've transitioned now in our GTS outsourcing business, our cloud penetration is over 3...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
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220
heard everything you just said, you mentioned GTS in the near term, should be pretty consistent with what we saw in Q1, but I'm curious if we want to reconcile your prioritization of margin versus growth, the portfolio cleanup, the deterioration in signings and maybe even some resegmentation impact on revenue, when mig...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
better business profile going forward over the long term. And if you look at first quarter, that's exactly what played out. Our GTS revenue was down about 2 points from exiting that lower value content, but Tien-Tsin to your question, our gross margins were I truly believe in a services based business where value is re...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
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220
targeted leverage ratios in a few years. We've committed that to our shareholders and we are taking the actions. GTS being one action about getting out of low value third-party content that ties up our balance sheet, that ties up our financial flexibility and brings little to no profit to it. The second is our IGF busi...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
of the software used in outsourcing is IBM content, and that's growing. And 60% of our outsourcing engagements include the management of mainframe. So it is a very integral part, we are being selective in our investment prioritization, because we've chosen where we want to win and how we're going to win going forward. ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
let me put in perspective, from a profit perspective around announced divestitures, which most recently included the sale of our marketing and commerce remaining products to Centerbridge that on the annualized basis about $1.8 billion, right. From a profit perspective, we said very consistent to last quarter that we ar...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
to your question, we are going to take actions to address the stranded cost and structure that's going to spend the majority of -- vast majority of that gain. And then, Steve, as you know, the return on that restructuring and those actions will help us mitigate the foregone profit in the second half of the year because...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
We certainly understand your reluctance to talk too much about this publicly, but is there anything that you can share with us that they give us some idea of how many other assets in the portfolio may fit this profile and how much of a drag they've been on your growth rate? James J. Kavanaugh -- Senior Vice President a...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
of return for our investors, and we can win in the marketplace and deliver the innovative value and technology to our clients to enable them to win and create competitive advantage. And that's what we're focused on overall, David. Patricia Murphy -- Vice President of Investor Relations Thanks, David. Let's go to the ne...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
Yes. Sure, Jeff, no problem. Thanks for the question. So -- actually both kind of clarification questions, so let me just try to address it real quick and directly. Our as a service business -- first of all are cloud. Our cloud business accelerated in the quarter. First quarter we grew 12% overall at constant currency,...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
you take into account the catch-up to those project milestones, as we continuously improve our service delivery quality that was expected from our perspective. And we see that continuing momentum building throughout the year as we move forward with the value of our offerings and proposition. And just a clarification qu...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
Your line is open. Keith Bachman -- Bank of Montreal -- Analyst Hi, Thank you, team, very much for fitting me in. Jim, I also wanted to ask about services and the growth rates. And particularly if I look at GBS, could you make some comments on the durability of that, is the first part of my question. Application mainte...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
J. Kavanaugh -- Senior Vice President and Chief Financial Officer Sure. Thank you, Keith, for the question. GBS overall as I stated, we have a very good momentum in that business coming throughout the second half of 2018, and into the first quarter where we grew 4% led by consulting up 9%, and within that great growth ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
and free cash flow. But we feel pretty confident that we've got a strong hand here, a team that's executing on the field. And we're delivering real value to our clients, and that's why we're seeing the performance overall. The second question, I think, you asked if I remember correctly it was around our services base o...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
our portfolio of IBM, and us leading this next generation of hybrid cloud, both in our software-based businesses but also services. And when you take a look at services overall, we have spent a lot of time and I talked about this in the prepared remarks about rearchitecting our offerings to enable our clients on their ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
220
said and I firmly believe the fundamentals of our business model are playing out in terms of growth in key high value areas, like software and GBS, while delivering strong operating leverage across our business. We will continue this in the second quarter, with revenue dynamics from 1Q to 2Q, similar to last couple of ...
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IBM
2019-04-16 17:00:00
2019Q2
10,655
ab1c92d6980101d104e8d42fcbe498bb
215
of Investor Relations Thanks, Brandon, let me -- let me have it close at the call. Operator Thank you for participating on today's call. The conference has now ended. You may disconnect at this time. Duration: 73 minutes Call participants: Patricia Murphy -- Vice President of Investor Relations James J. Kavanaugh -- Se...
37f1258a6e321a6cff7a4921d7e8d698
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