third-quarter 2012 financial results - unisys · 2012-10-23 · • this presentation also includes...

Third-Quarter 2012 Financial Results October 23, 2012

www.unisys.com/investor

Ed Coleman

Chairman & CEO

Janet Haugen

Chief Financial Officer

© 2012 Unisys Corporation. All rights reserved. 2

Disclaimer

• Statements made by Unisys during today's presentation that are not historical facts, including those regarding future performance, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ from expectations. These risks and uncertainties are discussed in the company's reports filed with the SEC and in today's earnings release.

• This presentation also includes non-GAAP financial measures including, Constant Currency, non-GAAP Diluted Earnings per Share, Free Cash Flow, non-GAAP Operating Profit, EBITDA, Adjusted EBITDA, Net Cash (Debt), and non-GAAP Pretax Income. Definitions of these non-GAAP financial measures and reconciliations to GAAP measures are included in this presentation.

• These presentation materials can be accessed through a link on the Unisys Investor Web site at www.unisys.com/investor. Information in this presentation is as of October 23, 2012 and Unisys undertakes no duty to update this information.

http://www.unisys.com/investor

Ed Coleman

Chairman & CEO


3Q12 Overview

• Results impacted by:

– Weaker demand for short-term project services

– Continued softness in U.S. Federal business

– Higher pension expense, debt reduction charges

• Revenue down 14%, 10% in constant currency

• Services order signings were flat on constant currency basis

• Reported $12.4M net loss vs. $78.6M net income in 3Q11

• Non-GAAP* net income of $43.6M vs. $89.7M in 3Q11

• YTD, profit up vs. first nine months of 2011

• Free cash flow* also up significantly YTD excluding pension contributions

*See Schedules A and B: GAAP to non-GAAP Reconciliation


3Q12 Points of Continued Progress

• Grew international revenue in constant currency

• Continued good cost discipline across the company

• Strong margin performance in technology business

• Enhanced reputation and new wins in end-user outsourcing

• Innovative systems integration projects

• Eliminated remaining high-interest debt – early achievement of year-end 2013 debt reduction goal

El Dorado & Chengdu Airports


Focused on Driving Profitable Revenue Growth

• Solid, growing pipeline of opportunities

• Encouraged by reception for recently announced offerings

• New high-end ClearPath models leveraging Intel® Xeon® processors

• Received awards for service delivery excellence

• Encouraged by recent wins in U.S. Federal business

Los Angeles Leader Project Best Fit Integrator

Award from the Center for Digital Government

® Intel and Xeon are registered trademarks of Intel Corporation


Unisys – Delivering a Safer and More Secure Connected World

Our Areas of Strength How We Compete Growth Opportunities

Through Disruptive IT Trends

Security

• Differentiate with our expertise in

delivering mission critical IT

solutions and services.

• Ongoing differentiation from the

quality of our services and solutions.

• Place the customer at the center of

our actions to continuously improve

their loyalty.

• Maintain a narrow focus in our

portfolio of solutions and markets we

serve.

• Continuously improve our

operational efficiencies.

• Build a high performing sales culture

that delivers predictable, profitable

growth.

Data Center

Transformation

and Outsourcing (including our

ClearPath offerings)

Application

Modernization

and Outsourcing

End User

Outsourcing

and Support

Janet Haugen

SVP & CFO


$M (excluding EPS) 3Q12 3Q11 Y/Y Ch YTD12 YTD11 Y/Y Ch

Revenue $877 $1,020 (14%) $2,727 $2,869 (5%)

Gross Profit $219 $285 (23%) $688 $707 (3%)

Gross Profit Margin 24.9% 27.9% (3.0 pts) 25.2% 24.6% 0.6 pts

Operating Expenses (SG&A plus R&D) $157 $172 (8%) $483 $504 (4%)

Operating Profit $61 $113 (46%) $205 $203 1%

Operating Profit Margin 7.0% 11.1% (4.1 pts) 7.5% 7.1% 0.4 pts

Interest Expense $8 $13 $25 $52

Other Income (Expense) ($26) $17 ($35) ($57)

Pretax Income $28 $117 $145 $95

Tax Provision $33 $33 $77 $52

Net Income ($12) $79 $48 $26

Diluted Earnings per Share ($0.28) $1.63 $1.08 $0.60

Non-GAAP Diluted Earnings per Share* $0.85 $1.77 $3.23 $2.93

Financial Results

*See Schedules A and C: GAAP to non-GAAP Reconciliation


Operating Profit

-3

52

140

330

373

411

375 376

359

301

338 325

347

378

326

-45

9

107

306

352

397

366 373 366

317

363 359

398

441

411

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-$100

$0

$100

$200

$300

$400

$500

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

TTM Operating Profit (OP) TTM OP Excluding Pension*

OP as a % of Revenue OP (Excluding Pension) as a % of Revenue*

$M Trailing Twelve Months Operating Profit % of

Revenue

*See Schedule D: GAAP to non-GAAP Reconciliation


Segment Revenue

3Q11 Revenue =

$1,020M

3Q12 Revenue =

$877M

Technology 14%

Technology 15%

Services 86% Services 85%

YTD12 Revenue =

$2,727M

Technology 12%

Services 88%

YTD11 Revenue =

$2,869M

• Services revenue down 15% Y/Y – Services revenue declined 10%

in constant currency

– Excluding U.S. Federal, Services revenue declined 13%; 8% in constant currency

• Technology revenue down 10% Y/Y; 6% in constant currency

• Services revenue down 5% Y/Y – Services revenue declined 2%

in constant currency

– Excluding U.S. Federal, Services revenue declined 3%; increased 2% in constant currency

• Technology revenue down 3% Y/Y; up 1% in constant currency

3Q12 Year-to-Date 2012

Technology 12%

Services 88%


Services Revenue by Portfolio

$M 3Q12 Y/Y Ch YTD12 Y/Y Ch

Services Revenue $748 (15%) $2,387 (5%)

Gross Margin 19.9% (170 bp) 19.9% --

Operating Margin 6.0% (270 bp) 6.3% (40 bp)

Revenue by Portfolio 3Q12 Y/Y Ch YTD12 Y/Y Ch

Systems Integration $231 (25%) $802 (9%)

Information

Technology

Outsourcing

$300 (9%) $915 (1%)

Infrastructure Services $107 (14%) $330 (9%)

Core Maintenance $47 (15%) $144 (13%)

Business Process

Outsourcing $63 4% $196 3%

31% 35%

40% 38%

14% 14%

6% 6%

9% 7%

0%

25%

50%

75%

100%

3Q12 3Q11

BPO

Core

ISS

ITO

SI

Services Revenue

Services portfolio revenue as a %

of Unisys services revenue


Technology Revenue by Portfolio

Technology Revenue $M 3Q12 Y/Y Ch YTD12 Y/Y Ch

Technology

Revenue $129 (10%) $340 (3%)

Gross Margin 59.9% 250 bp 61.8% 870 bp

Operating Margin 29.1% 330 bp 27.8% 1320 bp

Revenue by

Portfolio 3Q12 Y/Y Ch YTD12 Y/Y Ch

Enterprise Class

Software & Servers $123 -- $320 6%

Other Technology $6 (71%) $20 (56%)

95%

86%

5%

14%

0%

25%

50%

75%

100%

3Q12 3Q11

OtherTechnology

EnterpriseClassSoftware &Servers

Technology portfolio revenue as a %

of Unisys technology revenue


U.S.

Federal

15%

Unisys Revenue Profile

U.S.

Federal

15%

Industry

Geography 3Q12

Y/Y

YTD12

Y/Y

North America Excluding U.S. Federal

(23%) (20%)

(7%) 4%

Europe/Africa (16%) (5%)

Asia Pacific 19% 12%

Latin America (7%) (15%)

3Q12

Y/Y

YTD12

Y/Y

Public Sector Excluding U.S. Federal

(18%) (10%)

(10%) (2%)

Commercial (5%) 3%

Financial (19%) (6%)

Europe/ Africa

30%

North America

41%

Latin America

12% Asia

Pacific 17%

Public Sector

40%

Commercial 38%

Financial 22%


U.S. Federal Government Business

3Q12 Business Mix

Revenue Y/Y

3Q12 (29%)

YTD 2012 (23%)

$157 $152

$181

$162

$125 $121 $129

$0

$50

$100

$150

$200

$250

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

Federal Revenue $M

Civilian 50% Homeland

Security 27%

Defense & Intelligence

23%


3Q12 Services Order Highlights

• Services order signings declined Y/Y but were flat on a constant currency basis

• Services orders by geography:

– Orders rose Y/Y in Asia Pacific and Latin America

– Orders declined Y/Y in North America and Europe

• Services orders by portfolio:

– ITO and Infrastructure Services orders grew Y/Y

– Systems Integration orders declined Y/Y but rose sequentially

• Closed 3Q12 with $5.1B in services backlog vs. $5.3B at 3Q11

– Services backlog was flat sequentially

– $690M of services backlog expected to turn into 4Q12 services revenue


Cash Flow Comparison

$M 3Q12 3Q11 YTD12 YTD11

Cash Flow From Operations $17 $94 $107 $158

Capital Expenditures ($32) ($29) ($97) ($101)

Free Cash Flow* ($15) $65 $11 $57

Pension Funding $56 $21 $175 $64

Free Cash Flow Before Pension Funding* $42 $86 $186 $120

Depreciation & Amortization $40 $47 $128 $150

EBITDA* $72 $176 $290 $290

Adjusted EBITDA* $125 $184 $397 $407

Cash Balance at September 30 $542 $667

Debt Balance at September 30 $211 $445

Net Cash* at September 30 $331 $222

*See Schedules B, E and F: GAAP to non-GAAP Reconciliation


Reducing Leverage

-$750

-$500

-$250

$0

$250

$500

$750

$1,000

$1,250

$1,500

4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

Long-Term Debt (LTD) AR Securitization\Revolver Cash Net Cash*$M

See Schedule F: GAAP to non-GAAP Reconciliation

*Net Cash = Cash less LTD and utilization under AR securitization\revolver facility.

Questions & Answers


Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding the company's results as

determined by generally accepted accounting principles (GAAP), the company also discusses, in its

earnings press release and/or earnings presentation materials, the following non-GAAP information

which management believes provides useful information to investors.

Constant Currency – The company refers to growth rates at constant currency or adjusting for currency so that

the business results can be viewed without the impact of fluctuations in foreign currency exchange rates to

facilitate comparisons of the company's business performance from one period to another. Constant currency for

revenue is calculated by retranslating current and prior period results at a consistent rate. This approach is based

on the pricing currency for each country which is typically the functional currency. Generally, when the dollar

either strengthens or weakens against other currencies, the growth at constant currency rates will be higher or

lower, respectively, than growth reported at actual exchange rates.

Non-GAAP Diluted Earnings Per Share – As a result of debt reductions, Unisys recorded charges, net of tax, of

$23.1 million and $0.1 million, respectively, during the third quarters of 2012 and 2011. Unisys recorded debt

reduction charges, net of tax, of $30.6 million and $77.6 million, respectively, during the first nine months of 2012

and 2011. The company also recorded pension expense, net of tax, of $28.9 million and $6.9 million,

respectively, during the third quarters of 2012 and 2011. Unisys recorded pension expense, net of tax, of $75.0

million and $21.3 million, respectively, during the first nine months of 2012 and 2011. In addition, during the

second quarter of 2011 the company recorded an after-tax charge of $8.9 million related to the loss of an old non-

income tax case concerning the company's former Brazilian manufacturing operations. In an effort to provide

investors with a perspective on the company's earnings without these charges, they are excluded from the non-

GAAP diluted earnings per share calculations.



Free Cash Flow – To better understand the trends in our business, we believe that it is helpful to present free

cash flow, which we define as cash flow from operations less capital expenditures. Management believes this

measure gives investors an additional perspective on cash flow from operating activities in excess of amounts

required for reinvestment. Because of the significance of the company's pension funding obligations in 2012, free

cash flow before pension funding is also provided.

Non-GAAP Operating Profit – In order to provide investors a better understanding of the company's operational

results, this measure attempts to show operating profit excluding the effect of pension income and expense.

EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is an approximate measure

of a company's operating cash flow based on data from the company's income statement. EBITDA is calculated

as earnings before the deduction of interest expenses, taxes, depreciation, and amortization. Management

believes this measure may be relevant to investors due to the level of fixed assets and related depreciation

charges. This measure is also of interest to the company's creditors, since it provides a perspective on earnings

available for interest payments.

Adjusted EBITDA – Unisys completed debt reductions in 3Q12 and 3Q11. As a result of these reductions, Unisys

recorded a pretax charge of $23.1 million and $0.1 million, respectively, during the third quarter of 2012 and 2011.

Unisys recorded pretax debt reduction charges of $30.6 million and $77.6 million, respectively, during the first nine

months of 2012 and 2011. In addition, during the second quarter of 2011 the company recorded a pre-tax charge

of $13.5 million related to the loss of an old non-income tax case concerning the company's former Brazilian

manufacturing operations. The company also recorded pretax pension expense of $29.9 million and $8.5 million,

respectively, during the third quarters of 2012 and 2011. Unisys recorded pretax pension expense of $76.7 million

and $26.2 million, respectively, during the first nine months of 2012 and 2011. In order to provide investors with

additional understanding of the company's operating results, these charges are excluded from the Adjusted

EBITDA calculation.



Net Cash (Debt) – In an effort to help investors better understand the debt held by the company, this measure

takes into account not only the total debt obligations of the company, but the significance of debt compared to its

cash balances. Net Cash (Debt) is calculated by subtracting Long-Term Debt and utilization under the company's

Accounts Receivable securitization/revolver facility from the company's cash balance.

Non-GAAP Pretax Income – Unisys completed debt reductions in 3Q12 and 3Q11. As a result of these

reductions, Unisys recorded a pretax charge of $23.1 million and $0.1 million, respectively, during the third quarter

of 2012 and 2011. Unisys recorded pretax debt reduction charges of $30.6 million and $77.6 million, respectively,

during the first nine months of 2012 and 2011. In addition, during the second quarter of 2011 the company

recorded a pre-tax charge of $13.5 million related to the loss of an old non-income tax case concerning the

company's former Brazilian manufacturing operations. The company also recorded pretax pension expense of

$29.9 million and $8.5 million, respectively, during the third quarters of 2012 and 2011. Unisys recorded pretax

pension expense of $76.7 million and $26.2 million, respectively, during the first nine months of 2012 and 2011. In

order to provide investors with additional understanding of the company's operating results, these charges are

excluded from the Pretax Income calculation.


Schedule A: GAAP to Non-GAAP Reconciliation

Non-GAAP Diluted Earnings (Loss) per Share

$M except share and per share data 3Q12 3Q11

GAAP net income (loss) attributable to Unisys Corporation common shareholders ($12.4) $78.6

Debt reduction charge, net of tax 23.1 0.1

Pension expense, net of tax 28.9 6.9

Non-GAAP net income (loss) attributable to Unisys Corporation common shareholders $39.6 $85.6

Add preferred stock dividends 4.0 4.1

Non-GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $43.6 $89.7

Weighted average shares (thousands) 43,966 43,246

Plus incremental shares from assumed conversion of employee stock plans and preferred stock 7,371 7,377

Adjusted weighted average shares 51,337 50,623

Earnings per Share

GAAP basis

GAAP net income (loss) attributable to Unisys Corporation common shareholders ($12.4) $82.7

Divided by weighted average shares 43,966 50,623

GAAP net income (loss) per share ($0.28) $1.63

Non-GAAP basis


Divided by adjusted weighted average shares 51,337 50,623

Non-GAAP diluted earnings (loss) per share $0.85 $1.77


Schedule B: GAAP to Non-GAAP Reconciliation

Free Cash Flow

$M 3Q12 3Q11 YTD12 YTD11

Cash Provided by Operations $16.9 $93.8 $107.4 $157.7

Capital Expenditures (31.5) (28.8) (96.7) (101.1)

Free Cash Flow ($14.6) $65.0 $10.7 $56.6

Pension Funding 56.3 20.8 175.1 63.6

Free Cash Flow Before Pension Funding $41.7 $85.8 $185.8 $120.2


Schedule C: GAAP to Non-GAAP Reconciliation

Non-GAAP Diluted Earnings (Loss) per Share

$M except share and per share data YTD12 YTD11

GAAP net income (loss) attributable to Unisys Corporation common shareholders $47.6 $26.2

Debt reduction charges, net of tax 30.6 77.6

Brazil non-income tax case, net of tax -- 8.9

Pension expense, net of tax 75.0 21.3

Non-GAAP net income (loss) attributable to Unisys Corporation common shareholders $153.2 $134.0

Add preferred stock dividends 12.1 9.5


Weighted average shares (thousands) 43,827 43,063

Plus incremental shares from assumed conversion of employee stock plans and preferred stock 7,358 5,974

Adjusted weighted average shares 51,185 49,037

Earnings per Share

GAAP basis

GAAP net income (loss) attributable to Unisys Corporation common shareholders $47.6 $26.2

Divided by weighted average shares 44,273 43,635

GAAP net income (loss) per share $1.08 $0.60

Non-GAAP basis


Divided by adjusted weighted average shares 51,185 49,037

Non-GAAP diluted earnings (loss) per share $3.23 $2.93


Schedule D: GAAP to Non-GAAP Reconciliation

Trailing Twelve Months Operating Profit Excluding Pension

$M 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

Reported

Revenue 1,269.3 1,242.3 1,213.0 1,043.8 1,076.9 1,106.4 1,158.6 977.4 1,037.0 960.6 1,044.6 911.2 937.2 1,020.1 985.3 928.4 921.3 877.4

Operating

Profit 14.8 23.2 (55.7) 15.2 69.1 111.6 134.1 58.5 106.5 76.1 134.6 41.9 48.1 113.0 121.6 64.4 79.0 61.2

Pension

(Inc)/Exp (8.8) (15.0) (16.0) (2.9) (8.9) (5.2) (6.6) (0.3) (1.2) (0.8) (0.6) 9.0 8.7 8.5 8.1 25.7 21.1 29.9

TTM

Revenue 4,768.4 4,576.0 4,440.1 4,385.7 4,319.3 4,279.4 4,133.6 4,019.6 3,953.4 3,853.6 3,913.1 3,853.8 3,871.0 3,855.1 3,712.4

TTM

Operating

Profit

(2.5) 51.8 140.2 330.0 373.3 410.7 375.2 375.7 359.1 300.7 337.6 324.6 347.1 378.0 326.2

OPM % (0.1%) 1.1% 3.2% 7.5% 8.6% 9.6% 9.1% 9.3% 9.1% 7.8% 8.6% 8.4% 9.0% 9.8% 8.8%

Excluding

Pension

Op Profit

Excluding

Pension

6.0 8.2 (71.7) 12.3 60.2 106.4 127.5 58.2 105.3 75.3 134.0 50.9 56.8 121.5 129.7 90.1 100.1 91.1

TTM Op

Profit

Excluding

Pension

(45.2) 9.0 107.2 306.4 352.3 397.4 366.3 372.8 365.5 317.0 363.2 358.9 398.1 441.4 411.0

OPM % (0.9%) 0.2% 2.4% 7.0% 8.2% 9.3% 8.9% 9.3% 9.2% 8.2% 9.3% 9.3% 10.3% 11.4% 11.1%


Schedule E: GAAP to Non-GAAP Reconciliation

EBITDA and Adjusted EBITDA

$M 3Q12 3Q11 YTD12 YTD11

Net Income Attributable to Unisys ($8.4) $82.7 $59.7 $35.7

Interest Expense 7.8 12.5 25.0 51.7

Income Tax Provision 32.7 33.4 76.8 52.4

Depreciation & Amortization 40.1 46.9 128.4 149.9

EBITDA $72.2 $175.5 $289.9 $289.7

Debt reduction charges 23.1 0.1 30.6 77.6

Pension Expense 29.9 8.5 76.7 26.2

Brazil Tax Matter -- -- -- 13.5

Adjusted EBITDA $125.2 $184.1 $397.2 $407.0

Earnings before Interest, Taxes, Depreciation and Amortization


Schedule F: GAAP to Non-GAAP Reconciliation

Net Cash (Debt)

$M 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

Long-Term Debt

(Including

Current

Maturities)

1,060.6 1,060.3 1,061.2 911.0 911.7 847.4 836.4 837.5 824.0 619.3 447.4 445.3 359.7 295.5 292.4 210.8

AR

Securitization /

Revolver Usage

141.0 120.0 130.0 118.0 100.0 - - - - - - - - - - -

Subtotal 1,201.6 1,180.3 1,191.2 1,029.0 1,011.7 847.4 836.4 837.5 824.0 619.3 447.4 445.3 359.7 295.5 292.4 210.8

Cash 544.0 468.7 475.0 473.6 647.6 468.5 496.5 688.7 828.3 833.1 625.0 667.3 714.9 654.7 659.7 541.6

Net Cash (Debt) (657.6) (711.6) (716.2) (555.4) (364.1) (378.9) (339.9) (148.8) 4.3 213.8 177.6 222.0 355.2 359.2 367.3 330.8


Schedule G: GAAP to Non-GAAP Reconciliation

Non-GAAP Pretax Income

$M 3Q12 3Q11 YTD12 YTD11

Pretax Income $27.6 $117.1 $144.7 $94.7

Debt Reduction 23.1 0.1 30.6 77.6

Pension Expense 29.9 8.5 76.7 26.2

Brazil Tax Matter -- -- -- 13.5

Non-GAAP Pre-tax Income $80.6 $125.7 $252.0 $212.0


Thank You

www.unisys.com/investor

third-quarter 2012 financial results - unisys · 2012-10-23 · • this presentation also includes...

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