Second-Quarter 2013 Financial Results Ed Coleman, Chairman & CEO Janet Haugen, Chief Financial Officer

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Transcription:

Second-Quarter 2013 Financial Results Ed Coleman, Chairman & CEO Janet Haugen, Chief Financial Officer July 23, 2013 www.unisys.com/investor

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 non- GAAP Earnings per Diluted Share, Constant Currency, Free Cash Flow, EBITDA, Adjusted EBITDA, and Net Cash. Definitions of these non-gaap financial measures and reconciliations to GAAP measures are included in this presentation. These presentation materials can be accessed on the Unisys Investor Web site at www.unisys.com/investor. Information in this presentation is as of July 23, 2013 and Unisys undertakes no duty to update this information. 2013 Unisys Corporation. All rights reserved. 2

Ed Coleman Chairman & CEO

2Q13 Overview Sequential improvement in revenue and profitability Strong performance in Technology ClearPath revenue growth for the quarter and YTD Services business remains challenging Improvement in U.S. Federal business Key growth investments: Stealth cybersecurity solutions Reseller channel program Application managed services ClearPath enhancements and follow on products 2013 Unisys Corporation. All rights reserved. 4

Disruptive Technologies Drive Growth Opportunities Case in Point: Cloud Computing Cloud Services Application Migration Email systems (Google Apps for Government) ERP in the Cloud Stealth for Amazon Air Cargo As a Service Offerings UFSS mortgage solution InfoImage content management solutions IT Service Management (ITSM) Workplace as a Service Storage as a Service 2013 Unisys Corporation. All rights reserved. 5

Key Growth Initiatives Where We Are Investing Unisys Stealth Solution Suite Reseller Channel Application Managed Services ClearPath Follow On 2013 Unisys Corporation. All rights reserved. 6

Janet Haugen SVP & CFO

2Q13 Financial Results $M (excluding EPS) 2Q13 2Q12 Y/Y Ch Revenue $859 $921 (7%) Gross Profit $201 $243 (17%) Gross Profit Margin 23.4% 26.4% (3.0 pts) Operating Expenses (SG&A plus R&D) $163 $164 (1%) Operating Profit $38 $79 (52%) Operating Profit Margin 4.4% 8.6% (4.2 pts) Interest Expense $3 $8 (67%) Other Income $14 $4 Pretax Income $50 $75 (34%) Tax Provision $23 $22 Net Income (Loss) $20 $47 (56%) Diluted EPS $0.46 $0.99 (54%) Non-GAAP Earnings per Diluted Share* $0.91 $1.41 (35%) See Schedule A : GAAP to non-gaap Reconciliation 2013 Unisys Corporation. All rights reserved. 8

2Q13 Segment Revenue Services revenue decreased 9% Y/Y; decreased 8% in constant currency Technology revenue increased 13% Y/Y; increased 8% in constant currency 2Q13 Revenue = $859M 2Q12 Revenue = $921M Technology 14% Technology 11% Services 86% Services 89% 2013 Unisys Corporation. All rights reserved. 9

2Q13 Services Revenue by Portfolio 100% 75% 50% 25% Services Revenue 6% 6% 9% 8% 14% 13% 32% 32% 39% 41% Core BPO ISS SI ITO $M 2Q13 Y/Y Ch Services Revenue $740 (9%) Gross Margin 18.2% (280 bp) Operating Margin 4.0% (400 bp) Revenue by Portfolio 2Q13 Y/Y Ch Information Technology Outsourcing $292 (12%) Systems Integration $235 (11%) Infrastructure Services Business Process Outsourcing $105 (2%) $63 (5%) 0% 2Q13 2Q12 Services portfolio revenue as a % of Unisys services revenue Core Maintenance $45 (7%) 2013 Unisys Corporation. All rights reserved. 10

2Q13 Technology Revenue by Portfolio Technology Revenue $M 2Q13 Y/Y Ch 100% 6% 5% Other Technology Technology Revenue $119 13% Gross Margin 59.4% (400 bp) 75% 50% 94% 95% Enterprise Class Software & Servers Operating Margin 23.9% (470 bp) Revenue by Portfolio 2Q13 Y/Y Ch Enterprise Class Software & Servers $112 11% 25% Other Technology $7 40% 0% 2Q13 2Q12 Technology portfolio revenue as a % of Unisys technology revenue 2013 Unisys Corporation. All rights reserved. 11

2Q13 Unisys Revenue Profile Geography Latin America 13% Asia Pacific 15% North America 41% U.S. Federal 14% Y/Y Ch North America (6%) U.K. 11% Europe 31% Europe (10%) Asia Pacific (20%) Industry Financial 24% Public Sector 41% U.S. Federal 14% Latin America 22% Y/Y Ch Public Sector (6%) Commercial 35% Commercial (9%) Geographic & Industry revenue as a % of Unisys revenue Financial (5%) 2013 Unisys Corporation. All rights reserved. 12

U.S. Federal Government Business 2Q13 Business Mix $M $250 Federal Revenue Defense & Intelligence 26% Civilian 46% Homeland Security 28% $200 $150 $100 $125 $121 $129 $148 $114 $119 $50 Revenue Y/Y 2Q13 (2%) $0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 2013 Unisys Corporation. All rights reserved. 13

2Q13 Services Order Highlights Services orders increased low single digits Y/Y Services orders by portfolio: Orders grew in Systems Integration and Core Maintenance Orders declined in ITO, BPO and Infrastructure Services Services orders by geography: Orders grew in North America and Latin America Orders declined in Europe and Asia Pacific Within North America, both U.S. Federal orders and non-federal orders increased Closed 2Q13 with $4.8B in services backlog vs. $5.1B at 2Q12 $645M of services backlog expected to turn into 3Q13 revenue 2013 Unisys Corporation. All rights reserved. 14

Cash Flow Comparison $M 2Q13 2Q12 Cash Flow From Operations $16 $57 Capital Expenditures $38 $35 Free Cash Flow* ($22) $22 Pension Funding $35 $51 Free Cash Flow Before Pension Funding* $13 $73 Depreciation & Amortization $40 $47 EBITDA** $90 $127 Adjusted EBITDA** $113 $149 Cash Balance $576 $660 Debt Balance at June 30 $210 $292 Net Cash at June 30 $366 $368 See Schedule *B and **C: GAAP to non-gaap Reconciliation 2013 Unisys Corporation. All rights reserved. 15

Defined Benefit Pension Plans $B $10 Assets Liabilities Deficit As reported Adjusted to reflect June 30, 2013 market conditions. $8 $8.6 $8.0 $6 $6.2 $6.2 $4 $2 $0 -$2 -$2.4 -$1.8 -$4 December 31, 2012 Estimated June 30, 2013 In accordance with U.S. GAAP, discount rates are set annually at December 31. Using discount rates reflective of June 30, 2013 market conditions. Actual 2013 discount rates will be set at December 31, 2013. 2013 Unisys Corporation. All rights reserved. 16

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Estimated Future Pension Cash Contributions $M $300 U.S. Defined Benefit Plan All Other Plans $250 $200 $150 $100 $50 $0 2013 Unisys Corporation. All rights reserved. 17

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. Non-GAAP Earnings Per Diluted Share As a result of debt reductions, Unisys recorded charges, net of tax, of $0.3 million during the second quarter of 2012. The company also recorded pension expense, net of tax, of $21.9 million and $21.5 million during the second quarters of 2013 and 2012, respectively. In an effort to provide investors with a perspective on the company's earnings without these charges, they are excluded from the non- GAAP earnings per diluted share calculations. 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. 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 2013 and 2012, free cash flow before pension funding is also provided. 2013 Unisys Corporation. All rights reserved. 19

Non-GAAP Financial Measures 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 2Q12. As a result of these reductions, Unisys recorded a pretax charge of $0.3 million in the second quarter of 2012. The company also recorded pretax pension expense of $22.8 million and $21.1 million, respectively, during the second quarters of 2013 and 2012, respectively. 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 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 is calculated by subtracting Long-Term Debt and utilization under the company's revolving credit facility from the company's cash balance. 2013 Unisys Corporation. All rights reserved. 20

Schedule A: GAAP to Non-GAAP Reconciliation Non-GAAP Earnings per Diluted Share $M except share and per share data 2Q13 2Q12 GAAP net income attributable to Unisys Corporation common shareholders $20.4 $46.6 Debt reduction charge, net of tax 0.0 0.3 Pension expense, net of tax 21.9 21.5 Non-GAAP net income attributable to Unisys Corporation common shareholders $42.3 $68.4 Add preferred stock dividends $4.1 $4.1 Non-GAAP net income attributable to Unisys Corporation for diluted earnings per share $46.4 $72.5 Weighted average shares (thousands) 43,780 43,905 Plus incremental shares from assumed conversion of employee stock plans and preferred stock 7,328 7,339 Adjusted weighted average shares 51,108 51,244 Earnings per Share GAAP basis GAAP net income attributable to Unisys Corporation common shareholders 20.4 $50.7 Divided by weighted average shares 44,195 51,244 GAAP net income per share $0.46 $0.99 Non-GAAP basis Non-GAAP net income attributable to Unisys Corporation for diluted earnings per share $46.4 $72.5 Divided by adjusted weighted average shares 51,108 51,244 Non-GAAP earnings per diluted share $0.91 $1.41 2013 Unisys Corporation. All rights reserved. 21

Schedule B: GAAP to Non-GAAP Reconciliation Free Cash Flow $M 2Q13 2Q12 Cash Provided by Operations $16.1 $57.1 Capital Expenditures (38.2) (34.8) Free Cash Flow ($22.1) $22.3 Pension Funding 34.7 50.6 Free Cash Flow Before Pension Funding $12.6 $72.9 2013 Unisys Corporation. All rights reserved. 22

Schedule C: GAAP to Non-GAAP Reconciliation EBITDA and Adjusted EBITDA Earnings before Interest, Taxes, Depreciation and Amortization $M 2Q13 2Q12 Net Income (Loss) Attributable to Unisys $24.5 $50.7 Interest Expense 2.6 7.9 Income Tax Provision 22.7 22.1 Depreciation & Amortization 40.0 46.5 EBITDA $89.8 $127.2 Debt reduction charges 0.0 0.3 Pension Expense 22.8 21.1 Adjusted EBITDA $112.6 $148.6 2013 Unisys Corporation. All rights reserved. 23

www.unisys.com/investor