Third-Quarter 2012 Financial Results - Unisys · 2012-10-23 · • This presentation also includes...
Transcript of 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.
Ed Coleman
Chairman & CEO
© 2012 Unisys Corporation. All rights reserved. 4
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
© 2012 Unisys Corporation. All rights reserved. 5
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
© 2012 Unisys Corporation. All rights reserved. 6
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
© 2012 Unisys Corporation. All rights reserved. 7
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
© 2012 Unisys Corporation. All rights reserved. 9
$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
© 2012 Unisys Corporation. All rights reserved. 10
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
© 2012 Unisys Corporation. All rights reserved. 11
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%
© 2012 Unisys Corporation. All rights reserved. 12
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
© 2012 Unisys Corporation. All rights reserved. 13
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
© 2012 Unisys Corporation. All rights reserved. 14
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%
© 2012 Unisys Corporation. All rights reserved. 15
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%
© 2012 Unisys Corporation. All rights reserved. 16
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
© 2012 Unisys Corporation. All rights reserved. 17
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
© 2012 Unisys Corporation. All rights reserved. 18
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
© 2012 Unisys Corporation. All rights reserved. 20
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.
© 2012 Unisys Corporation. All rights reserved. 21
Non-GAAP Financial Measures
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.
© 2012 Unisys Corporation. All rights reserved. 22
Non-GAAP Financial Measures
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.
© 2012 Unisys Corporation. All rights reserved. 23
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
Non-GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $43.6 $89.7
Divided by adjusted weighted average shares 51,337 50,623
Non-GAAP diluted earnings (loss) per share $0.85 $1.77
© 2012 Unisys Corporation. All rights reserved. 24
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
© 2012 Unisys Corporation. All rights reserved. 25
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
Non-GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $165.3 $143.5
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
Non-GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $165.3 $143.5
Divided by adjusted weighted average shares 51,185 49,037
Non-GAAP diluted earnings (loss) per share $3.23 $2.93
© 2012 Unisys Corporation. All rights reserved. 26
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%
© 2012 Unisys Corporation. All rights reserved. 27
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
© 2012 Unisys Corporation. All rights reserved. 28
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
© 2012 Unisys Corporation. All rights reserved. 29
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
© 2012 Unisys Corporation. All rights reserved. 30
Thank You
www.unisys.com/investor