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.
Ed Coleman
Chairman & CEO
© 2011 Unisys Corporation. All rights reserved. 4
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
© 2011 Unisys Corporation. All rights reserved. 5
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
© 2011 Unisys Corporation. All rights reserved. 6
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)
© 2011 Unisys Corporation. All rights reserved. 7
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
© 2011 Unisys Corporation. All rights reserved. 8
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
© 2011 Unisys Corporation. All rights reserved. 9
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
© 2011 Unisys Corporation. All rights reserved. 10
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
© 2011 Unisys Corporation. All rights reserved. 11
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
© 2011 Unisys Corporation. All rights reserved. 13
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.
© 2011 Unisys Corporation. All rights reserved. 14
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
© 2011 Unisys Corporation. All rights reserved. 15
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
© 2011 Unisys Corporation. All rights reserved. 16
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
© 2011 Unisys Corporation. All rights reserved. 17
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
© 2011 Unisys Corporation. All rights reserved. 18
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%
© 2011 Unisys Corporation. All rights reserved. 19
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
© 2011 Unisys Corporation. All rights reserved. 20
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.
© 2011 Unisys Corporation. All rights reserved. 21
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.
© 2011 Unisys Corporation. All rights reserved. 22
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
© 2011 Unisys Corporation. All rights reserved. 23
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
© 2011 Unisys Corporation. All rights reserved. 25
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.
© 2011 Unisys Corporation. All rights reserved. 26
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
© 2011 Unisys Corporation. All rights reserved. 27
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)
© 2011 Unisys Corporation. All rights reserved. 28
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.
© 2011 Unisys Corporation. All rights reserved. 29
Thank You
www.unisys.com/investor