Third-Quarter 2011 Financial Results - Unisys€¦ · reports filed with the SEC and in today’s earnings release. • This presentation also includes non-GAAP financial measures

Third-Quarter 2011 Financial Results October 24, 2011

www.unisys.com/investor

Ed Coleman

Chairman & CEO

Janet Haugen

Chief Financial Officer

© 2011 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 Net Cash (Debt), EBITDA and Free Cash Flow. 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 24, 2011 and Unisys undertakes no duty to update this information.

http://www.unisys.com/investor

Ed Coleman

Chairman & CEO


Third-Quarter 2011 Results

• Grew revenue 6% year-over-year, up slightly in constant currency

– Excluding U.S. Federal, revenue grew 14%

– Services revenue grew 2%; 12% excluding U.S. Federal

• ITO, excluding U.S. Federal, grew 12%; seventh consecutive quarter of y/y growth

• Systems Integration, excluding U.S. Federal, grew 21%

– Technology revenue grew 36%

• ClearPath revenue about flat YTD

• Operating profit of $113M, up 48%; operating margin of 11.1%

• Services operating margin of 8.7%

• Net income from continuing operations of $79M, up 261%; EPS of $1.63


Unisys Differentiation

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


Information Technology Outsourcing:

Market Leadership Position in End User Outsourcing

“Unisys continues to be a Leader in the help desk Magic Quadrant for two main reasons. Firstly, it focuses on the day-to-day delivery of services to achieve high levels of customer satisfaction. And secondly, it improves customer productivity through continuous improvement.”

- Gartner, June 23, 2011

$0

$50

$100

$150

$200

$250

$300

$350

4Q 1Q 2Q 3Q

2009

2010

2011

Seven consecutive quarters of y/y revenue growth

(Excluding U.S. Federal)

http://www.google.com/imgres?imgurl=http://www.tran-solution.net/resources/HENKEL_logo02.jpg&imgrefurl=http://www.tran-solution.net/our-clients.php&h=561&w=950&sz=122&tbnid=PJn9mQb2bROr5M:&tbnh=87&tbnw=148&prev=/search?q=Henkel+logo&tbm=isch&tbo=u&zoom=1&q=Henkel+logo&hl=en&usg=__N7Oadk3Z4PA0ebx3u00UtOxmm4g=&sa=X&ei=9YtbTrPsGLHE0AH6we2TCQ&ved=0CBoQ9QEwAw

http://www.defence.gov.au/


Brazil Ports – Intelligent Carrier

Chengdu Airport

Michigan SACWIS Department of Energy/ Idaho National

Laboratory

Los Angeles Leader Project Best Fit Integrator

Award from the Center for Digital Government

Mexico ID Card

Systems Integration:

Disruptive Trends Driving Project Work


Technology:

ClearPath is a Mission Critical Operating Platform

Specially designed to support mission-critical computing

Unisys ClearPath systems are designed around six attributes that form the core of our differentiation. Because we have a deep understanding of

high-volume, transaction-intensive secure computing, we can partner with our clients to deliver operational efficiencies, reduced complexity,

increased productivity and superior availability.

“Unisys employs sound security practices and is currently implementing the best practice security

enhancements for the s-Par™ environment and its implemented operating systems… The design and

implementation of mainstream virtualization systems could be improved greatly by examining the security

engineering decisions that were made while developing the s-Par™ secure partitioning environment.”

- Symantec, September 2011.

ClearPath Attributes

Reliability and

Resiliency Security

Mobile

Computing Agility

Automation

Scalability


Unisys Delivers Cloud Capabilities to Our Customers in Multiple Ways

Unisys Cloud Computing capabilities also provide innovation in support

of our IT Outsourcing and Systems Integration businesses.

1. Cloud Managed Services (IT Outsourcing) Multi-tenant Cloud Infrastructure-as-a Service (IaaS), Platform-as-a-Service (PaaS), and Virtual

Desktop Infrastructure (VDI) intended to support our data center and end user outsourcing

business for existing renewal clients and selected new logos.

2. Cloud Professional Services (Systems Integration) Consulting and System Integration Services offering built around CloudBuild Advisory, Planning,

Design, and Implementation services to drive data center transformation and private cloud

implementations.

3. Cloud Stack (CME) Software Business (Infrastructure Software) Deployment of a Unisys-branded Cloud Management Environment (CME) as a stand-alone

software product and as an asset to our systems integration professional services.

4. SaaS Applications Business (Applications) Deployment of Unisys and/or third party software distributed “as a service”, and consulting and

modernization services to assist customers in delivering their applications “as a service.”

Unisys Cloud Computing Offerings


Three Year Financial Goals - Continued Progress Maintaining focus on operational efficiency while growing profitable revenue

Three Year Goals

2011 – 2013

3Q11

Progress

Revenue Growth

• Grow IT outsourcing and system

integration at market rates,

adjusted for loss of TSA revenue

• Maintain stable Technology

revenue

• ITO revenue, excluding U.S. Federal, grew 12%;

seventh consecutive quarter of Y/Y growth

• SI revenue, excluding U.S. Federal, grew 21%

• Technology revenue grew 36%

• Sales force refresh continued

Operational Efficiency

• Consistently deliver 8-10%

services operating margin

• Services operating margin was 8.7% in 3Q11

• Low cost labor 30% of total labor at Sept. 30,

2011

Pre-tax Profit

• Increase annual pre-tax profit to

$350M in 2013, excluding any

change in pension

income/expense from 2010 levels

• 3Q11 pre-tax profitability was $117M;

$126M before pension expense

• YTD pre-tax profitability was $199M excluding

pension expense and debt reduction charges

Debt Reduction

• By year end 2013, reduce our

outstanding debt by 75% (or

$625M) from September 30, 2010

levels

• Calling all $66M in 2012 maturities and with call,

debt reduced by $458M since Sept. 30, 2010

• With call, will achieve 73% of our debt reduction

goal


Summary

• Strong quarter; higher revenue and profitability

• Disruptive technologies creating growth opportunities

• Unisys positioned to benefit – Enhanced portfolio

– Streamlined cost structure

– Strengthened balance sheet

• Continued efforts to improve sales effectiveness

• Pleased with progress – focused on achieving three-year financial goals

Janet Haugen

SVP & CFO


3Q11 Financial Results

$M (excluding EPS) 3Q11 3Q10 Y/Y Ch

Revenue $1,020 $961 6%

Gross Profit $285 $237 20%

Gross Profit Margin 27.9% 24.7% 3.2 pts

Operating Expenses (SG&A plus R&D) $172 $161 7%

Operating Profit $113 $76 48%

Operating Profit Margin 11.1% 7.9% 3.2 pts

Other Income (Expense) $17 $0 $17

Pre-tax Income from Continuing Ops $117 $51 130%

Tax Expense $33 $28

Net Income from Continuing Ops $79 $22 261%

EBITDA * $176 $136

Net Income $79 $28 178%

Diluted EPS from Continuing Ops $1.63 $0.50

*See Schedule A: GAAP to non-GAAP Reconciliation.


3Q11 Segment Revenues and Margins

$M 3Q11 Y/Y Ch

Services Revenue $876 2%

Gross Margin 21.6% +100 bp

Operating Margin 8.7% +70 bp

$M 3Q11 Y/Y Ch

Technology Revenue $144 36%

Gross Margin 57.4% +990 bp

Operating Margin 25.8% +1840 bp

89% 86%

11% 14%

0%

25%

50%

75%

100%

3Q10 3Q11

Technology

Services

Segment Revenue

Segment revenue as a % of Unisys revenue


3Q11 Services Revenue by Portfolio

Revenue by Portfolio 3Q11 Y/Y Ch

Systems Integration $306 5%

Information Technology

Outsourcing $330 1%

Infrastructure Services $124 7%

Core Maintenance $55 Flat

Business Process

Outsourcing $61 (5%)

34% 35%

38% 38%

14% 14%

6% 6% 8% 7%

0%

25%

50%

75%

100%

3Q10 3Q11

BPO

Core

ISS

ITO

SI

Services Revenue

Services portfolio revenue as a %

of Unisys services revenue


3Q11 Technology Revenue by Portfolio

Technology Revenue Revenue by Portfolio 3Q11 Y/Y Ch

Enterprise Class

Software & Servers $124 60%

Other Technology $20 (28%)

73%

86%

27%

14%

0%

25%

50%

75%

100%

3Q10 3Q11

OtherTechnology

EnterpriseClassSoftware &Servers

Technology portfolio revenue as a %

of Unisys technology revenue


3Q11 U.S. Federal Government Business

3Q11 Business Mix

Revenue Y/Y

3Q11 (19%)

3Q11 Excluding TSA (5%)

$30 $31 $33 $22

$176 $182 $191 $177

$0

$50

$100

$150

$200

$250

$300

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Federal Revenue

TSA Rev. Revenue$M

$199 $213

$206 $224

$157 $152 Civilian

44%

Homeland Security

26%

Defense and Intelligence

30%

$181


3Q11 Unisys Revenue Profile

U.S.

Federal

18%

U.S.

Federal

18%

Industry

Geography Y/Y Ch

North America 3%

Europe/Africa 17%

Asia Pacific 8%

Latin America (7%)

Y/Y Ch

Public Sector (4%)

Commercial 14%

Financial 18%

Europe/ Africa

30%

North America

46%

Latin America

12% Asia Pacific

12%

Public Sector

43% Commercial

34%

Financial 23%


Services Order Highlights

• Closed 3Q11 with $5.3 billion in services backlog

– $730M of services backlog expected to turn into 4Q11 revenue

• Services orders declined low double digits y/y; up mid single digits sequentially

• Services orders by portfolio:

– ITO orders down y/y and sequentially

– SI/consulting orders up double-digit y/y and sequentially

• Services orders by geography:

– U.S. (excluding Federal) orders were up y/y

– Federal orders were down y/y but doubled sequentially

– International orders were lower y/y and sequentially


Cash Flow Comparison

$M 3Q11 3Q10 YTD11 YTD10

Cash Flow From Operations $94 $127 $158 $150

Capital Expenditures ($29) ($46) ($101) ($162)

Free Cash Flow* $65 $81 $57 ($12)

Depreciation & Amortization $47 $61 $150 $190

Cash Balance $667 $689 $667 $689

EBITDA** $176 $136 $290 $383

* Free cash flow = Cash flow from operations less capital expenditures

** EBITDA = Earnings before Interest, Taxes, Depreciation and Amortization

See Schedule *A & **B: GAAP to non-GAAP Reconciliation.


Strengthening the Balance Sheet

-$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 3Q11**

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

See Schedule C: GAAP to non-GAAP Reconciliation.

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

** Pro forma results reflect the expected impact of the 2012 debt maturity call.


Debt Update

• Calling all $66M of 8% notes due October 2012

• Debt will be redeemed at 100% of the principal amount, accrued interest plus a make-whole premium as set forth in the notes

– Expected to be completed on November 25, 2011

– Debt redemption charge of approximately $4.5M in 4Q11

– Annual interest expense reduced by about $5M

• Next debt maturities – not until 2014

• After redemption, total debt reduced to $379M

• Approximately 73% of three-year debt reduction goal achieved after this redemption


Pension Update

• No change to estimated Pension funding for 2011

• Current 2012 funding estimate for U.S. qualified defined benefit plan – $100M to $140M

– May change based on 4Q11 portfolio returns and final discount rate determination

Questions & Answers


Non-GAAP Financial Measures

In an effort to provide investors with additional perspective 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.

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.

Free Cash Flow – To better understand the trends in our business, we believe that it is helpful to adjust cash flows from operations to deduct amounts for capital expenditures, including investment in marketable software, capital additions of properties and capital additions of outsourcing assets. Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment.

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.

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 or adjusting for currency will be higher or lower than growth reported at actual exchange rates.


Schedule A: GAAP to Non-GAAP Reconciliation

EBITDA

$M 3Q11 3Q10 YTD11 YTD10

Net Income from Continuing Operations available to

Common Shareholders $78.6 $21.8 $26.2 $63.7

Add Preferred Stock Dividends 4.1 - 9.5 -

Net Income from Continuing Operations attributable to

Unisys 82.7 21.8 35.7 63.7

Interest Expense 12.5 25.0 51.7 76.8

Income Taxes Provision 33.4 28.2 52.4 52.7

Depreciation & Amortization 46.9 60.6 149.9 190.0

EBITDA $175.5 $135.6 $289.7 $383.2

Earnings before Interest, Taxes, Depreciation and Amortization


Schedule B: GAAP to Non-GAAP Reconciliation

Free Cash Flow

$M 3Q11 3Q10 YTD11 YTD10

Cash provided by operations $93.8 $126.8 $157.7 $150.0

Less Capital Expenditures (28.8) (45.6) (101.1) (161.9)

Free Cash Flow $65.0 $81.2 56.6 (11.9)


Schedule C: GAAP to Non-GAAP Reconciliation

Net Cash (Debt)

$M 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 3Q11PF*

Long-Term

Debt

(Including

Current

Maturities)

1,060.6 1,060.3 1,061.2 911.0 911.7 847.4 836.4 837.5 824.0 619.3 447.4 445.3 379.4

AR

Securitization

Usage

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

Subtotal 1,201.6 1,180.3 1,191.2 1,029.0 1,011.7 847.4 836.4 837.5 824.0 619.3 447.4 445.3 379.4

Cash 544.0 468.7 475.0 473.6 647.6 468.5 496.5 688.7 828.3 833.1 625.0 667.3 596.5

Net Cash (Debt) (657.6) (711.6) (716.2) (555.4) (364.1) (378.9) (339.9) (148.8) 4.3 213.8 177.6 222.0 217.1

* Pro forma results reflect the expected impact of the 2012 debt maturity call.


Thank You

www.unisys.com/investor

Documents

Third-Quarter 2011 Financial Results - Unisys€¦ · reports filed with the SEC and in today’s earnings release. • This presentation also includes non-GAAP financial measures