International Business Machines Corporation

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.

Thank you. This is Patricia Murphy, and I'd like to welcome you to IBM's fourth quarter 2022 earnings presentation. I'm here today with Arvind Krishna, IBM's Chairman and Chief Executive Officer, and Jim Cavanaugh, IBM's Senior Vice President and Chief Financial Officer. We'll post today's prepared remarks on the IBM Investor website within a couple of hours, and a replay will be available by this time tomorrow. To provide additional information to our investors, our presentation includes certain non-GAAP measures. For example, all of our references to revenue growth are at constant currency. We have provided reconciliation charts for these and other non-GAAP measures at the end of the presentation, which is posted to our investor website. Finally, some comments made in this presentation may be considered forward-looking under the Private Securities Litigation Reform Act of 1995. These statements involve factors that could cause our actual results to differ materially. Additional information about these factors is included in the company's SEC filing. So with that, I'll turn the call over to Arvind.

Thank you for joining us. Our fourth quarter and full year results demonstrate the execution of our hybrid cloud and AI strategy. We delivered strong revenue growth in our business. The growth was broad-based across our software, consulting, and infrastructure segments, as well as across geographies. Our clients recognized that technology continues to be a fundamental source of competitive advantage. Over the last several quarters, it has become clear that technology is playing a significant role in boosting productivity in the face of inflation, demographic shifts, supply chain challenges, and sustainability requirements. We entered 2022 a more focused company and took steps to reinforce our position. We strengthened our consulting expertise, and expanded strategic partnerships. To bolster our software portfolio, we invested in hybrid cloud and AI capabilities. We also delivered significant innovations in infrastructure with our Z16 and Power Platforms. All of this was brought to market with a more technical and experiential sales approach. Looking back on the year, we are pleased with the progress we made. We delivered revenue growth above our mid-single-digit model and we delivered solid free cash flow. But I'll acknowledge there is more to do. This year, we'll unlock more productivity, expand our strategic partnerships, and put more investment in specific growth markets. For 2023, we see revenue growth in line with our mid-single-digit model range and about $10.5 billion of free cash flow. This keeps us on a path of sustainable growth. I will now provide some color on the progress we are making in the execution of our strategy. Our perspective is clear. Hybrid cloud and AI are the two most transformative technologies for business today. These technologies work together to drive business outcomes. Hybrid cloud is where the world is going. Containers are the preferred destination for applications. Hybrid cloud offers more value than relying on a singular public cloud. It enables organizations to drive business value across multiple clouds, on premise, or at the edge. This includes scale, security, ease of use, flexibility of deployment, seamless experiences, and faster innovation cycles. Our platform, built on Red Hat, is the leading container platform allowing clients to harness the power of open source software innovations. IBM's software and infrastructure technologies have been optimized for this platform. Our consultants and others leverage their extensive technical and business expertise to accelerate clients' digital transformation journeys. Clients are realizing real value from working with IBM's hybrid cloud platform approach. For example, We worked with the Canadian Imperial Bank of Commerce, PIBC, to adopt a hybrid cloud approach. Using Red Hat technology, PIBC manages and scales its infrastructure with greater speed and flexibility. They can now develop applications in a private cloud and quickly deploy them to a public cloud. They deliver hundreds of new applications and reduce provisioning time by 95% and deployment time by 50%. We are helping Delta Airlines leverage hybrid cloud to modernize applications, automate operations, and integrate security. IBM Consulting deployed Red Hat on Amazon Web Services and IBM Cloud Packs to provide a consistent platform. Delta now has more levers it can use to boost developer productivity, reduce time to market, and improve employee satisfaction. CIBC and Delta are both great examples of the value hybrid cloud can provide. Let's now talk about artificial intelligence or AI. AI is projected to contribute $16 trillion to the global economy by 2030, including a massive boost in productivity by infusing AI into every enterprise process. We have been co-creating with many clients to deploy AI at scale. we automated the drive-through experience for quick-serve restaurants. We accelerated the rollout of COVID-19 vaccines by automating the processes that assist millions of customers with inquiries and appointments. By applying AI and automation, we have helped security analysts reduce the time to respond to threats from hours or days to minutes. Recently, the U.S. Patent and Trademark Office partnered with IBM to leverage a host of AI capabilities that make it easier for people to glean insights from their vast database of patents. The BBC is now using our AIOps software to automate the management of its IT infrastructure. For businesses, deploying AI can be challenging because it takes time to train each model. But by using large language models, companies can now create multiple models using the same data set. This means businesses can deploy AI with a fraction of the time and resources. That is why we are investing in large language or foundation models for our clients and have infused these capabilities across our AI portfolio. Our partner ecosystem plays a critical role in the execution of our strategy. The fourth quarter, we made a series of new IBM software offerings available as a service in the AWS marketplace. Likewise, Red Hat continued the expansion of its offerings in hyperscaler marketplaces, making Ansible automation platform available on both Azure and AWS. Adobe and Salesforce are also leveraging open source innovation based on Red Hat technologies in their offerings. Business with our strategic partners continues to grow, with SAP, Microsoft, and AWS all over a billion dollars in revenue for the year. We've had great success with our strategic partners, and as we enter the new year, we are expanding and better enabling our broader ecosystem. Recently launched Partner Plus, a new simplified program that increases our reach and scale through new and existing IBM partners. We remain focused, on delivering new innovations that matter to our clients. The fourth quarter, we introduced Red Hat Device Edge, a lightweight solution to flexibly deploy traditional or containerized workloads on small devices, such as robots, IoT gateways, point of sale, and public transport. We also formed a collaboration with the Japanese consortium Rapidus to leverage the depth of our intellectual property on advanced semiconductors. We unveiled Osprey, a 433-qubit quantum processor that brings us closer to delivering our goal of building a 1,000-qubit system later this year. At the same time, we continue to acquire companies to complement our organic innovation. In the fourth quarter, we acquired Octo, which improves our footprint in the U.S. federal market. This caps the year with eight acquisitions across software and consulting. As sustainability becomes more of a priority, companies need digital technologies to analyze data, creating a baseline, and improve the way they operate. Our software has helped IBM reduce its own carbon footprint. Across IBM's global real estate presence, we were able to reduce carbon emissions by over 61% when compared to 2010. Using IBM's sustainability software, we have simplified and automated our sustainability reporting processes and reduced reporting costs by 30%. Let me wrap by saying I'm pleased with the progress we have made with our portfolio, our go-to-market, and our ecosystem. I'm confident in our ability to leverage hybrid cloud and AI to help clients turn business challenges into opportunities. Our strategy continues to strongly resonate with clients and partners and this gives us a solid foundation to build upon in this year. While there is more to be done, we enter the new year as a more capable and nimble company, well equipped to meet our clients' needs. I will now turn it over to Jim, who will give you more detailed information on our performance and expectations.