Unisys Announces
First-Quarter 2016 Financial Results
BLUE BELL, Pa., April 21, 2016 --
1Q 2016:
- Revenue of $667 million, down 8
percent year-over-year (3 percent in constant
currency(1))
- Diluted loss per share of ($0.80)
versus ($0.87) in 1Q 2015
- Non-GAAP diluted earnings per share(2) of
$0.11 versus diluted loss per share
of ($0.32) in 1Q 2015
- $100 million increase in adjusted
free cash flow(3) year-over-year
Unisys Corporation (NYSE: UIS) today reported first quarter 2016
results highlighted by year-over-year increases in both operating
profit margin and free cash flow.
The company reported an operating profit margin of (4.1) percent
including cost reduction charges and pension expense. First quarter
2016 non-GAAP operating profit margin(4) was 2.9
percent, an increase of 320 basis points from the prior year. In
addition, the company reported first quarter 2016 free cash flow
usage of $12 million(5),
an $89 million improvement
year-over-year due to higher operating cash flow and lower capital
expenditures. Adjusted free cash flow in first quarter 2016
increased $100 million from the prior
year.
"Our first quarter results represent a step toward our goal of
improving profitability and cash flow," said Unisys President and
CEO Peter Altabef. "We also
continued to deepen our vertical go-to-market capabilities and
leadership team and expand our security solutions during the
quarter."
Summary of First Quarter 2016 Business
Results
Company:
- Revenue of $667 million declined
8 percent year-over-year; down 3 percent in constant currency.
- Overall operating profit margin of (4.1) percent includes cost
reduction charges and pension expense. First quarter 2016 non-GAAP
operating profit margin was 2.9 percent, an increase of 320 basis
points from the prior year.
Services:
- Services revenue, which represented 89 percent of total
revenue, declined by 7 percent, down 2 percent in constant
currency.
- Services operating profit margin was 0.7 percent, an increase
of 200 basis points from the prior year, reflecting the benefit of
cost reduction actions taken during the past twelve months.
Technology:
- Technology revenue, which represented 11 percent of total
revenue, declined 13 percent, down 10 percent in constant currency,
reflecting reduced ClearPath Forward™ revenue, which can vary
significantly from quarter-to-quarter based on the timing of
license renewals.
- Operating profit margin improved to 18.1 percent from 5.2
percent in the prior year due to the benefit of operating cost
reductions.
Cash Flow:
- First quarter 2016 free cash flow usage of $12 million improved $89
million year-over-year due to higher operating cash flow and
lower capital expenditures. Adjusted free cash flow in first
quarter 2016 increased $100 million
to $38 million from the prior
year.
- During the first quarter 2016, the company completed a
convertible senior notes offering that generated net proceeds of
approximately $160 million.
- At March 31, 2016, the company
had $514 million in cash.
Executing on Business Strategy
Unisys business strategy, laid out in 2015, is to execute on
several key areas for improved business performance in 2016:
go-to-market vertical market orientation; security solutions, most
notably Unisys Stealth™; and higher-value, advisory
consulting services. The company has announced business wins,
strategic moves and implementation successes covering each of these
areas, including in the past week:
- The global delivery of Unisys Stealth(cloud)™ on the Microsoft
Azure Cloud, a platform used by more than 66 percent of Fortune 500
companies in 140 countries.
- The successful implementation of Stealth(core) to protect
ANGKASA's self-service banking kiosks in Malaysia.
- A new agreement to deliver Stealth(mobile) to Mitel clients.
Mitel is a new Unisys client that will use Stealth to protect its
systems, data and intellectual property and leverage Stealth to
protect users across its global network.
- A contract with the State of
Washington, Division of Child Support, Department of Social
& Health Services to deliver managed data center services and
ClearPath Forward services.
- A contract with China's
HubSky, a new Unisys client, to deliver cloud/data center design
and consulting services.
In addition, the company made three major leadership
announcements in Q1:
- Inder M. Singh as senior vice
president and chief marketing and strategy officer. Immediately
prior to joining Unisys, Singh was a managing director at SunTrust
Robinson Humphrey, Inc., where he provided equity research and
advice across the technology, media and telecommunications sectors.
Singh has also held strategy and financial leadership positions at
Comcast, Cisco Systems, and AT&T.
- Andy Stafford as senior vice
president of Services. Most recently, Stafford was a senior
managing director at Accenture, where he led the firm's Global
Delivery Network for Technology. Prior to Accenture, Stafford held
senior positions with Xchanging, Virgin Group, Deloitte Consulting,
Computacenter and Andersen Consulting.
- Eric Crabtree as the global
leader of our Financial Services vertical industry group. Crabtree
most recently served as managing director of omni-channel banking
at Royal Bank of Scotland. He
previously held senior executive leadership positions at Barclays
Bank and Washington Mutual, and founded an advisory and consulting
firm focused on the financial services industry.
Conference Call
Unisys will hold a conference call today at 5:30 p.m. Eastern Time to discuss its results.
The listen-only Webcast, as well as the accompanying presentation
materials, can be accessed on the Unisys Investor Web site at
www.unisys.com/investor. Following the call, an audio replay of the
Webcast, and accompanying presentation materials, can be accessed
through the same link.
Non-GAAP Information
Unisys reports its results in accordance with Generally Accepted
Accounting Principles (GAAP) in the
United States. However, in an effort to provide investors
with additional perspective regarding the company's results as
determined by GAAP, the company also discusses, in its earnings
press release and/or earnings presentation materials, non-GAAP
information which management believes provides useful information
to investors. Management uses supplemental non-GAAP financial
measures internally to understand, manage and evaluate the business
and assess operational alternatives.
Non-GAAP measures are not intended to be considered in isolation
or as substitutes for results determined in accordance with GAAP
and should be read only in conjunction with our consolidated
financial statements prepared in accordance with GAAP. (See GAAP to
non-GAAP reconciliations attached.)
(1) Constant currency – The company refers to
growth rates in constant currency or on a constant currency basis
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 is calculated by retranslating
current and prior period results at a consistent rate.
(2) Non-GAAP diluted earnings per share –
During the first quarter 2016, Unisys recorded pension expense, net
of tax, and a charge, net of tax, in connection with cost reduction
actions. 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/loss per share calculations.
(3) Adjusted free cash flow – Adjusted free
cash flow provides free cash flow before the company's pension
contributions or cost reduction payments in an effort to provide
investors with a perspective on the company's free cash flow
generation before these items.
(4) Non-GAAP operating profit – During the
first quarter 2016, Unisys recorded pretax pension expense and a
pretax charge in connection with cost reduction actions. In order
to provide investors with additional understanding of the company's
operating results, these changes are excluded from the operating
profit.
(5) Free cash flow – The company defines free
cash flow 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.
About Unisys
Unisys is a global information technology company that works
with many of the world's largest companies and government
organizations to solve their most pressing IT and business
challenges. Unisys specializes in providing integrated,
leading-edge solutions to clients in the government, financial
services and commercial markets. With more than 20,000 employees
serving clients around the world, Unisys offerings include cloud
and infrastructure services, application services, security
solutions, and high-end server technology. For more information,
visit http://www.unisys.com/.
Forward-Looking Statements
Any statements contained in this release that are not historical
facts are forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include, but are not limited to, any projections of
earnings, revenues, or other financial items; any statements of the
company's plans, strategies or objectives for future operations;
statements regarding future economic conditions or performance; and
any statements of belief or expectation. All forward-looking
statements rely on assumptions and are subject to various risks and
uncertainties that could cause actual results to differ materially
from expectations. Risks and uncertainties that could affect the
company's future results include the company's ability to
effectively anticipate and respond to volatility and rapid
technological innovation in its industry; the company's ability to
improve margins in its services business; the company's ability to
sell new products while maintaining its installed base in its
technology business; the company's ability to access financing
markets to refinance its outstanding debt; the company's ability to
realize anticipated cost savings and to successfully implement its
cost reduction initiatives to drive efficiencies across all of its
operations; the company's significant pension obligations and
requirements to make significant cash contributions to its defined
benefit plans; the company's ability to attract, motivate and
retain experienced and knowledgeable personnel in key positions;
the risks of doing business internationally when a significant
portion of the company's revenue is derived from international
operations; the potential adverse effects of aggressive competition
in the information services and technology marketplace; the
company's ability to retain significant clients; the company's
contracts may not be as profitable as expected or provide the
expected level of revenues; cybersecurity breaches could result in
significant costs and could harm the company's business and
reputation; a significant disruption in the company's IT systems
could adversely affect the company's business and reputation; the
company may face damage to its reputation or legal liability if its
clients are not satisfied with its services or products; the
performance and capabilities of third parties with whom the company
has commercial relationships; the adverse effects of global
economic conditions, acts of war, terrorism or natural disasters;
contracts with U.S. governmental agencies may subject the company
to audits, criminal penalties, sanctions and other expenses and
fines; the potential for intellectual property infringement claims
to be asserted against the company or its clients; the possibility
that pending litigation could affect the company's results of
operations or cash flow; the business and financial risk in
implementing future dispositions or acquisitions; and the company's
consideration of all available information following the end of the
quarter and before the filing of the Form 10-Q and the possible
impact of this subsequent event information on its financial
statements for the reporting period. Additional discussion of
factors that could affect the company's future results is contained
in its periodic filings with the Securities and Exchange
Commission. The company assumes no obligation to update any
forward-looking statements.
RELEASE NO.: 0421/9418
Unisys and other Unisys products and services mentioned herein,
as well as their respective logos, are trademarks or registered
trademarks of Unisys Corporation. Any other brand or product
referenced herein is acknowledged to be a trademark or registered
trademark of its respective holder.
UIS-Q
UNISYS
CORPORATION |
CONSOLIDATED
STATEMENTS OF INCOME |
(Unaudited) |
(Millions, except
per share data) |
|
|
|
|
|
|
|
|
|
Three
Months |
|
|
|
Ended March
31 |
|
|
|
2016 |
|
2015 |
Revenue |
|
|
|
|
Services |
|
$595.1 |
|
$639.0 |
Technology |
|
71.7 |
|
82.2 |
|
|
|
666.8 |
|
721.2 |
Costs and expenses |
|
|
|
|
Cost of revenue: |
|
|
|
|
Services |
|
533.7 |
|
564.3 |
Technology |
|
34.6 |
|
39.9 |
|
|
|
568.3 |
|
604.2 |
Selling, general and
administrative |
|
110.1 |
|
128.8 |
Research and development |
|
16.0 |
|
18.2 |
|
|
|
694.4 |
|
751.2 |
Operating loss |
|
(27.6) |
|
(30.0) |
|
|
|
|
|
|
Interest expense |
|
4.4 |
|
2.6 |
Other income (expense), net |
|
(1.2) |
|
4.9 |
Loss before income taxes |
|
(33.2) |
|
(27.7) |
|
|
|
|
|
|
Provision for income taxes |
|
5.5 |
|
13.3 |
Consolidated net loss |
|
(38.7) |
|
(41.0) |
Net income attributable to |
|
|
|
|
|
noncontrolling interests |
|
1.2 |
|
2.2 |
Net loss attributable to
Unisys |
|
|
|
|
|
Corporation common shareholders |
|
($39.9) |
|
($43.2) |
|
|
|
|
|
|
Loss per common share |
|
|
|
|
|
attributable to Unisys Corporation |
|
|
|
|
|
Basic |
|
($ .80) |
|
($
.87) |
|
Diluted |
|
($ .80) |
|
($
.87) |
|
|
|
|
|
|
Shares used in the per share
computations (thousands): |
|
|
Basic |
|
50,004 |
|
49,821 |
Diluted |
|
50,004 |
|
49,821 |
|
|
|
|
|
|
UNISYS
CORPORATION |
SEGMENT
RESULTS |
(Unaudited) |
(Millions) |
|
|
|
|
|
|
|
|
|
Total |
|
Eliminations |
|
Services |
|
Technology |
Three Months Ended |
|
|
|
|
|
|
|
March 31, 2016 |
|
|
|
|
|
|
|
Customer revenue |
$666.8 |
|
|
|
$595.1 |
|
$71.7 |
Intersegment |
|
|
($5.6) |
|
- |
|
5.6 |
Total revenue |
$666.8 |
|
($5.6) |
|
$595.1 |
|
$77.3 |
|
|
|
|
|
|
|
|
Gross profit percent |
14.8% |
|
|
|
14.2% |
|
48.6% |
Operating profit (loss) percent |
(4.1%) |
|
|
|
0.7% |
|
18.1% |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
March 31, 2015 |
|
|
|
|
|
|
|
Customer revenue |
$721.2 |
|
|
|
$639.0 |
|
$82.2 |
Intersegment |
|
|
($6.7) |
|
- |
|
6.7 |
Total revenue |
$721.2 |
|
($6.7) |
|
$639.0 |
|
$88.9 |
|
|
|
|
|
|
|
|
Gross profit percent |
16.2% |
|
|
|
14.1% |
|
49.6% |
Operating profit (loss) percent |
(4.2%) |
|
|
|
(1.3%) |
|
5.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNISYS
CORPORATION |
CONSOLIDATED
BALANCE SHEETS |
(Unaudited) |
(Millions) |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December
31, |
|
|
|
|
2016 |
|
2015 * |
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$513.8 |
|
$365.2 |
Accounts and notes receivable,
net |
|
520.8 |
|
581.6 |
Inventories |
|
|
|
|
Parts and finished
equipment |
|
18.8 |
|
20.9 |
Work in process and
materials |
|
27.7 |
|
22.9 |
Prepaid expense and other current
assets |
|
125.9 |
|
120.9 |
Total |
|
1,207.0 |
|
1,111.5 |
|
|
|
|
|
|
|
Properties |
|
891.1 |
|
876.6 |
Less accumulated depreciation and
amortization |
|
739.0 |
|
722.8 |
Properties, net |
|
152.1 |
|
153.8 |
Outsourcing assets, net |
|
190.1 |
|
182.0 |
Marketable software, net |
|
136.5 |
|
138.5 |
Prepaid postretirement assets |
|
57.4 |
|
45.1 |
Deferred income taxes |
|
133.3 |
|
127.4 |
Goodwill |
|
179.4 |
|
177.4 |
Other long-term assets |
|
209.3 |
|
194.3 |
Total |
|
$2,265.1 |
|
$2,130.0 |
|
|
|
|
|
|
|
Liabilities and deficit |
|
|
|
|
Current liabilities |
|
|
|
|
Notes payable |
|
$65.7 |
|
$65.8 |
Current maturities of long-term
debt |
|
11.1 |
|
11.0 |
Accounts payable |
|
216.0 |
|
219.3 |
Deferred revenue |
|
343.5 |
|
335.1 |
Other accrued liabilities |
|
309.2 |
|
329.9 |
Total |
|
945.5 |
|
961.1 |
|
|
|
|
|
|
|
Long-term debt |
|
388.2 |
|
233.7 |
Long-term postretirement
liabilities |
|
2,070.4 |
|
2,111.3 |
Long-term deferred revenue |
|
131.4 |
|
123.3 |
Other long-term liabilities |
|
83.9 |
|
79.2 |
Commitments and contingencies |
|
|
|
|
Total deficit |
|
(1,354.3) |
|
(1,378.6) |
Total |
|
$2,265.1 |
|
$2,130.0 |
|
|
|
|
|
|
|
* Certain amounts have been
reclassified to conform with the 2016 presentation. |
|
|
|
|
|
|
|
UNISYS
CORPORATION |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited) |
(Millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
March
31 |
|
|
|
|
2016 |
|
2015 |
Cash flows from operating
activities |
|
|
|
|
Consolidated net loss |
|
($38.7) |
|
($41.0) |
Add (deduct) items to reconcile
consolidated net loss |
|
|
|
|
to net
cash provided by (used for) operating activities: |
|
|
|
|
Foreign currency transaction loss |
|
0.1 |
|
- |
Non-cash interest expense |
|
0.7 |
|
- |
Employee stock compensation |
|
3.2 |
|
4.4 |
Depreciation and amortization of
properties |
|
9.6 |
|
11.7 |
Depreciation and amortization of
outsourcing assets |
|
11.1 |
|
12.7 |
Amortization of marketable
software |
|
16.4 |
|
16.3 |
Other non-cash operating
activities |
|
0.3 |
|
(0.1) |
Disposals of capital assets |
|
0.3 |
|
1.4 |
Pension contributions |
|
(31.6) |
|
(38.7) |
Pension expense |
|
20.3 |
|
27.9 |
Increase in deferred income taxes,
net |
|
(6.9) |
|
(4.4) |
Decrease in receivables, net |
|
69.4 |
|
106.8 |
Increase in inventories |
|
(1.9) |
|
(15.1) |
Decrease in accounts payable and other
accrued liabilities |
|
(35.2) |
|
(106.4) |
Increase (decrease) in other
liabilities |
|
3.4 |
|
(11.1) |
Decrease (increase) in other
assets |
|
3.7 |
|
(7.7) |
Net cash provided by (used for)
operating activities |
|
24.2 |
|
(43.3) |
|
|
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
Proceeds
from investments |
|
1,365.0 |
|
1,153.4 |
Purchases of investments |
|
(1,367.8) |
|
(1,126.7) |
Investment in marketable
software |
|
(14.3) |
|
(16.7) |
Capital
additions of properties |
|
(6.6) |
|
(13.9) |
Capital
additions of outsourcing assets |
|
(15.1) |
|
(26.7) |
Other |
|
(0.6) |
|
1.5 |
Net cash used for investing
activities |
|
(39.4) |
|
(29.1) |
|
|
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
Proceeds
from issuance of long-term debt |
|
190.0 |
|
- |
Payments
for capped call transactions |
|
(24.3) |
|
- |
Issuance
costs relating to long-term debt |
|
(6.2) |
|
- |
Payments
of long-term debt |
|
(0.7) |
|
(0.3) |
Proceeds
from exercise of stock options |
|
- |
|
3.5 |
Net cash provided by financing
activities |
|
158.8 |
|
3.2 |
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents |
|
5.0 |
|
(23.1) |
|
|
|
|
|
|
|
Increase (decrease) in cash and
cash equivalents |
|
148.6 |
|
(92.3) |
Cash and cash equivalents,
beginning of period |
|
365.2 |
|
494.3 |
Cash and cash equivalents, end of
period |
|
$513.8 |
|
$402.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( 1 ) |
UNISYS
CORPORATION |
RECONCILIATION OF
SELECTED GAAP MEASURES TO NON-GAAP MEASURES |
(Unaudited) |
(Millions, except
per share data) |
|
|
|
|
|
|
|
|
|
Three
Months |
|
|
|
Ended March
31 |
|
|
|
2016 |
|
2015 |
GAAP net loss |
|
|
|
|
attributable to Unisys
Corporation |
|
|
|
|
common shareholders |
|
($39.9) |
|
($43.2) |
|
|
|
|
|
|
Cost reduction expense, net of
tax |
|
24.7 |
|
0.0 |
|
|
|
|
|
|
Pension expense, net of tax |
|
20.6 |
|
27.4 |
|
|
|
|
|
|
Non-GAAP net income (loss) |
|
|
|
|
attributable to Unisys
Corporation |
|
|
|
|
common shareholders |
|
5.4 |
|
(15.8) |
|
|
|
|
|
|
Add interest expense on convertible
notes |
|
0.7 |
|
0.0 |
|
|
|
|
|
|
Non-GAAP net income (loss) |
|
|
|
|
attributable to Unisys
Corporation |
|
|
|
|
for diluted earnings per
share |
|
$6.1 |
|
($15.8) |
|
|
|
|
|
|
Weighted average shares
(thousands) |
|
50,004 |
|
49,821 |
|
|
|
|
|
|
Plus incremental shares from assumed
conversion: |
|
|
|
|
Employee stock plans |
|
134 |
|
0 |
|
Convertible notes |
|
0 |
|
0 |
|
|
|
|
|
|
GAAP adjusted weighted average
shares |
|
50,138 |
|
49,821 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
share |
|
|
|
|
|
|
|
|
|
|
GAAP basis |
|
|
|
|
GAAP net loss |
|
|
|
|
attributable to Unisys
Corporation |
|
|
|
|
for diluted earnings per
share |
|
($39.9) |
|
($43.2) |
|
|
|
|
|
|
Divided by adjusted weighted average
shares |
50,004 |
|
49,821 |
|
|
|
|
|
|
GAAP loss per diluted
share |
|
($ .80) |
|
($
.87) |
|
|
|
|
|
|
Non-GAAP basis |
|
|
|
|
Non-GAAP net income (loss) |
|
|
|
|
attributable to Unisys
Corporation |
|
|
|
|
for diluted earnings per
share |
|
$5.4 |
|
($15.8) |
|
|
|
|
|
|
Divided by Non-GAAP adjusted weighted
average shares |
50,138 |
|
49,821 |
|
|
|
|
|
|
Non-GAAP earnings (loss) per
diluted share |
$ .11 |
|
($
.32) |
|
|
|
|
|
|
(2) |
UNISYS
CORPORATION |
RECONCILIATION OF
GAAP OPERATING PROFIT TO NON-GAAP OPERATING PROFIT |
(Unaudited) |
(Millions) |
|
|
|
|
|
|
|
|
Three
Months |
|
|
|
|
Ended March
31 |
|
|
|
|
2016 |
|
2015 |
|
|
|
GAAP operating loss |
($27.6) |
|
($30.0) |
|
|
|
|
|
|
|
|
|
Cost reduction expense |
26.9 |
|
0.0 |
|
|
|
|
|
|
|
|
|
FAS87 pension expense |
20.3 |
|
27.9 |
|
|
|
|
|
|
|
|
|
Non-GAAP operating profit
(loss) |
$19.6 |
|
($2.1) |
|
|
|
|
|
|
|
|
|
|
Customer Revenue |
$666.8 |
|
$721.2 |
|
|
|
GAAP operating loss % |
(4.1%) |
|
(4.2%) |
|
|
|
Non-GAAP operating profit (loss)
% |
2.9% |
|
(0.3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
UNISYS
CORPORATION |
RECONCILIATION OF
GAAP TO NON-GAAP |
(Unaudited) |
(Millions) |
|
|
|
|
|
|
|
FREE CASH FLOW |
|
|
Three
Months |
|
|
|
|
Ended March
31 |
|
|
|
|
2016 |
|
2015 |
|
|
Cash provided by (used for) operations |
|
$24.2 |
|
($43.3) |
|
|
Additions to marketable software |
|
(14.3) |
|
(16.7) |
|
|
Additions to properties |
|
(6.6) |
|
(13.9) |
|
|
Additions to outsourcing assets |
|
(15.1) |
|
(26.7) |
|
|
Free cash flow |
|
(11.8) |
|
(100.6) |
|
|
Pension funding |
|
31.6 |
|
38.7 |
|
|
Cost reduction funding |
|
18.0 |
|
- |
|
|
Free cash flow before pension & cost
reduction funding |
|
$37.8 |
|
($61.9) |
|
|
|
|
|
|
|
|
|
SOURCE Unisys Corporation
CONTACT: Investor Contact: Niels
Christensen, 215-986-6651, niels.christensen@unisys.com, or
Media Contact: John Clendening,
214-403-1981, john.clendening@unisys.com