TIDMUSY
Unisys Announces Second-Quarter 2016 Financial Results
BLUE BELL, Pa., July 26, 2016 --
2Q 2016:
* Operating profit margin of 6.6 percent, an increase of 1310 basis points
from operating profit margin of (6.5) percent in 2Q 2015
* Non-GAAP operating profit margin(1) of 10.8 percent, an increase of 690
basis points from the prior year
* Diluted earnings per share of $0.36 versus ($1.17) in 2Q 2015
* Non-GAAP diluted earnings per share(2) of $0.81 versus $0.33 in 2Q 2015
* Operating cash flow increase of $55.7 million year over year to $34.6
million; $78.7 million increase in non-GAAP adjusted free cash flow(4)
year-over-year to $54.3 million
* Revenue of $748.9 million, down 2 percent, or down less than 1 percent on a
constant-currency basis*, year over year
* Unisys re-affirms full-year guidance for total company revenue, non-GAAP
operating profit margin and adjusted free cash flow
Unisys Corporation (NYSE: UIS) today reported second quarter 2016 results
highlighted by continued year-over-year increases in operating profit margin,
operating cash flow and free cash flow(3).
The company reported an operating profit margin of 6.6 percent including cost
reduction charges and pension expense, an increase of 1310 basis points
relative to operating profit margin of (6.5) percent in the second quarter of
2015, consistent with ongoing cost-cutting efforts and helped by increased
revenues from higher-margin technology products. Second quarter 2016 non-GAAP
operating profit margin was 10.8 percent, an increase of 690 basis points from
the prior year. In addition, operating cash flow for the quarter increased by
$55.7 million versus the prior year to $34.6 million, while adjusted free cash
flow in the second quarter of 2016 increased $78.7 million from the prior year
to $54.3 million, representing the third consecutive quarter of positive
adjusted free cash flow. The Company also reported diluted earnings per share
of $0.36 versus ($1.17) in the same quarter a year ago and non-GAAP diluted
earnings per share of $0.81 versus $0.33 in the second quarter of 2015.
Revenues for the second quarter 2016 were $748.9 million, which is down 2
percent or down less than 1 percent on a constant-currency basis relative to
the second quarter of 2015.
"Our second quarter results reflect improvement in our GAAP and non-GAAP
operating profit margin and cash flow generation. Revenues were slightly down,
less than 1 percent, on a constant-currency basis," said Unisys President and
CEO Peter Altabef. "We are continuing to execute against the strategy we
commenced in 2015, which focuses on providing security in everything we do,
growing demand for both cyber and physical security offerings, while investing
to improve our go-to-market effectiveness by aligning vertically."
Summary of Second Quarter 2016 Business Results
Company:
* Overall operating profit margin of 6.6 percent includes cost reduction
charges and pension expense. Second quarter 2016 non-GAAP operating profit
margin was 10.8 percent, an increase of 690 basis points from the prior
year.
* Net income grew to $21.6 million versus $(58.2) million in the second
quarter of 2015, representing margin expansion of 1050 basis points.
Adjusted EBITDA(5) saw growth of 71.0 percent to $123.6 million versus the
prior year, representing margin expansion of 710 basis points.
* Overall increased profitability was driven in large part by decreased
operating expenses resulting from the company's ongoing cost-cutting
efforts and was also helped by an increase in revenues from higher-margin
technology products.
* Operating cash flow increased by $55.7 million versus the prior year to
$34.6 million, while adjusted free cash flow in the second quarter 2016
increased $78.7 million from the prior year, representing the third
consecutive quarter of positive adjusted free cash flow.
* Revenue of $748.9 million declined 2.1 percent year over year or (0.9)
percent on a constant-currency basis.
Services:
* Services revenue, which represented 82.0 percent of total revenue, declined
by 7.2 percent to $613.8 million, down 6.1 percent in constant currency.
The decline in the Services business was largely offset by a strong quarter
for the Technology business, as noted below.
* Services gross margin improved 110 basis points from 15.7 percent to 16.8
percent. Services operating profit margin was 2.1 percent, a decrease of 10
basis points from the prior year, or flat on a constant-currency basis,
reflecting continued investment in the business to reach longer-term
profitability goals.
* Total Services backlog ended the second quarter at $3.8 billion, down 13.7
percent year-over-year.
Technology:
* Technology revenue, which represented 18.0 percent of total revenue,
increased 30.7 percent year-over-year, 32.4 percent in constant currency,
largely driven by increased ClearPath ForwardT sales.
* Technology operating profit margin improved to 48.0 percent from 15.6
percent in the prior year due to increased gross margins, as well as the
benefit of selling, general & administrative reductions.
Cash Flow:
* Capital expenditures declined 36.4 percent year-over-year to $34.0 million,
reflective of significant investments in outsourcing assets that were made
in the second quarter of 2015.
* Second quarter 2016 operating cash flow increased by $55.7 million versus
the prior year to $34.6 million. Free cash flow of $0.6 million improved
$75.2 million year-over-year and was positive due to higher operating cash
flow and lower capital expenditures. Adjusted free cash flow in the second
quarter of 2016 increased $78.7 million from the prior year to $54.3
million, representing the third consecutive quarter of positive adjusted
free cash flow.
* During the second quarter 2016, the company executed on cost-cutting plans,
largely related to headcount reductions, that are expected to result in $30
million of annualized cost savings, bringing the total to date to $155
million against a plan of $200 million for 2016, with another $30 million
expected in 2017.
* At June 30, 2016, the company had $463.6 million in cash.
Continued Execution on Business Strategy
The company recently made several major announcements regarding security,
alliances, and groundbreaking technologies:
* A series of security-related achievements, including approval of Unisys
Stealth® from the U.S. National Security Agency's (NSA) Commercial
Solutions for Classified (CSfC) program in the U.S., and by the National
Information Assurance Partnership (NIAP), making Unisys Stealth eligible
for use by governments in more than 20 countries to protect their most
sensitive systems and information.
* A hardware-independent version of the ClearPath Forward MCP operating
environment software, marking the first time that Unisys has offered a
software-only version of its ClearPath Forward operating system platform.
* The new Unisys, Sandstone and PCT (USP) digital banking platform designed
to enable financial institutions to provide more secure banking services.
The platform will provide built-in adaptive biometric and data analytics to
securely identify customers and validate transactions, to reduce fraud and
enhance customer experience.
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.
*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.
Non-GAAP Information
Although appropriate under generally accepted accounting principles (GAAP), the
company's results reflect charges that the company believes are not indicative
of its ongoing operations and that can make its profitability and liquidity
results difficult to compare to prior periods, anticipated future periods, or
to its competitors' results. These items consist of pension and restructuring
costs. Management believes each of these items can distort the visibility of
trends associated with the company's ongoing performance. Management also
believes that the evaluation of the company's financial performance can be
enhanced by use of supplemental presentation of its results that exclude the
impact of these items in order to enhance consistency and comparativeness with
prior or future period results. The following measures are often provided and
utilized by the company's management, analysts, and investors to enhance
comparability of year-over-year results, as well as to compare results to other
companies in our industry.
(1) Non-GAAP operating profit - During the second quarter 2016 and 2015, Unisys
recorded pretax pension expense and a pretax charge in connection with cost
reduction actions. The company believes that this profitability measure is more
indicative of the company's operating results and aligns those results to the
company's external guidance which is used by the company's management to
allocate resources and may be used by analysts and investors to gauge the
company's ongoing performance.
(2) Non-GAAP diluted earnings per share - During the second quarter 2016 and
2015, Unisys recorded pension expense and a charge in connection with cost
reduction actions (both net of tax). Management believes that investors may
have a better understanding of the company's performance and return to
shareholders by excluding these charges from the non-GAAP diluted earnings/loss
per share calculations. The tax amounts netted from pension expense and the
charge in connection with cost reduction actions for the calculation of
non-GAAP diluted earnings per share include the current and deferred tax
expense and benefits recognized under GAAP for pension expense and
restructuring costs during the second quarter 2016 and 2015.
(3) Free cash flow - The company defines free cash flow as cash flow from
operations less capital expenditures. Management believes this liquidly measure
gives investors an additional perspective on cash flow from on-going operating
activities in excess of amounts required for reinvestment.
(4) Adjusted free cash flow - Because inclusion of the company's pension
contributions and cost reduction payments in free cash flow may distort the
visibility of the company's ability to generate cash flow from its operations
without the impact of these non-operational costs, management believes that
investors may be interested in adjusted free cash flow, which provides free
cash flow before these payments and is more indicative of its on-going
operations. This liquidity measure was provided to analysts and investors in
the form of external guidance and is used by management to measure operating
liquidly.
(5) EBITDA & adjusted EBITDA - For the company earnings before interest, taxes,
depreciation and amortization (EBITDA) is calculated by starting with net
income (loss) attributable to Unisys Corporation common shareholders and adding
or subtracting the following items: net income attributable to noncontrolling
interests, non-cash share-based expense, other (income) expense (net), Interest
expense, provision for income taxes, depreciation and amortization. Adjusted
EBITDA further excludes both pension expense and cost reduction charges. Unisys
recorded pretax pension expense during the second quarters of 2016 and 2015.
During the second quarters 2016 and 2015, Unisys recorded a pretax charge in
connection with cost reduction actions and other expense. In order to provide
investors with additional understanding of the company's operating results,
these charges are excluded from the adjusted EBITDA calculation. The company
has also provided external guidance to investors and analysts that it thinks
will aid any interested party in understanding and measuring the company's
ongoing operations and profitability.
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.: 0726/9440
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 Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Revenue
Services $ 613.8 $ 661.5 $ 1,208.9 $ 1,300.5
Technology 135.1 103.3 206.8 185.5
748.9 764.8 1,415.7 1,486.0
Costs and expenses
Cost of revenue:
Services 529.1 585.7 1,062.8 1,150.0
Technology 41.5 54.8 76.1 94.7
570.6 640.5 1,138.9 1,244.7
Selling, general and 115.7 145.4 225.8 274.2
administrative
Research and development 13.1 28.4 29.1 46.6
699.4 814.3 1,393.8 1,565.5
Operating profit (loss) 49.5 (49.5) 21.9 (79.5)
Interest expense 7.8 2.7 12.2 5.3
Other income (expense), 2.6 1.4 1.4 6.3
net
Income (loss) before 44.3 (50.8) 11.1 (78.5)
income taxes
Provision for income 18.8 5.1 24.3 18.4
taxes
Consolidated net income 25.5 (55.9) (13.2) (96.9)
(loss)
Net income attributable 3.9 2.3 5.1 4.5
to noncontrolling
interests
Net income (loss) $ 21.6 $ (58.2) $ (18.3) $ (101.4)
attributable to Unisys
Corporation
Earnings (loss) per share
attributable to Unisys
Corporation
Basic $ 0.43 $ (1.17) $ (0.37) $ (2.03)
Diluted $ 0.36 $ (1.17) $ (0.37) $ (2.03)
Shares used in the per
share computations (in
thousands)
Basic 50,069 49,927 50,036 49,874
Diluted 71,786 49,927 50,036 49,874
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended June 30, 2016
Customer revenue $ 748.9 $ 613.8 $ 135.1
Intersegment $ (5.9) - 5.9
Total revenue $ 748.9 $ (5.9) $ 613.8 $ 141.0
Gross profit percent 23.8 % 16.8 % 66.9 %
Operating profit percent 6.6 % 2.1 % 48.0 %
Three Months Ended June 30, 2015
Customer revenue $ 764.8 $ 661.5 $ 103.3
Intersegment $ (22.0) 0.1 21.9
Total revenue $ 764.8 $ (22.0) $ 661.6 $ 125.2
Gross profit percent 16.3 % 15.7 % 43.9 %
Operating profit (loss) percent (6.5)% 2.2 % 15.6 %
Total Eliminations Services Technology
Six Months Ended June 30, 2016
Customer revenue $ 1,415.7 $ 1,208.9 $ 206.8
Intersegment $ (11.5) - 11.5
Total revenue $ 1,415.7 $ (11.5) $ 1,208.9 $ 218.3
Gross profit percent 19.6 % 15.5 % 60.4 %
Operating profit percent 1.5 % 1.4 % 37.4 %
Six Months Ended June 30, 2015
Customer revenue $ 1,486.0 $ 1,300.5 $ 185.5
Intersegment $ (28.7) 0.1 28.6
Total revenue $ 1,486.0 $ (28.7) $ 1,300.6 $ 214.1
Gross profit percent 16.2 % 14.9 % 46.3 %
Operating profit (loss) percent (5.3)% 0.4 % 11.3 %
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
June 30, 2016 December 31, 2015
Assets
Current assets
Cash and cash equivalents $ 463.6 $ 365.2
Accounts and notes 561.1 581.6
receivable, net
Inventories:
Parts and finished 18.2 20.9
equipment
Work in process and 20.9 22.9
materials
Prepaid expenses and 130.4 120.9 *
other current assets
Total 1,194.2 1,111.5 *
Properties 888.9 876.6
Less-Accumulated 743.5 722.8
depreciation and
amortization
Properties, net 145.4 153.8
Outsourcing assets, net 185.4 182.0
Marketable software, net 136.3 138.5
Prepaid postretirement 68.4 45.1
assets
Deferred income taxes 130.5 127.4 *
Goodwill 179.7 177.4
Other long-term assets 201.7 194.3 *
Total $ 2,241.6 $ 2,130.0 *
Liabilities and deficit
Current liabilities
Notes payable $ - $ 65.8
Current maturities of 11.1 11.0
long-term-debt
Accounts payable 187.2 219.3
Deferred revenue 333.2 335.1
Other accrued liabilities 352.4 329.9 *
Total 883.9 961.1 *
Long-term debt 408.8 233.7 *
Long-term postretirement 1,999.3 2,111.3
liabilities
Long-term deferred 139.8 123.3
revenue
Other long-term 83.4 79.2 *
liabilities
Commitments and
contingencies
Total deficit (1,273.6) (1,378.6)
Total $ 2,241.6 $ 2,130.0 *
* Certain amounts have been reclassified to conform to the current-year
presentation.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Six Months Ended June 30,
2016 2015
Cash flows from operating activities
Consolidated net loss $ (13.2) $ (96.9)
Add (deduct) items to reconcile consolidated
net loss to net
cash provided by (used for) operating
activities:
Foreign currency transaction losses 0.4 0.6
Non-cash interest expense 2.8 -
Employee stock compensation 5.3 6.2
Depreciation and amortization of properties 19.3 22.7
Depreciation and amortization of 25.7 26.1
outsourcing assets
Amortization of marketable software 32.4 32.9
Other non-cash operating activities 1.0 2.9
Loss on disposal of capital assets 1.6 5.0
Pension contributions (64.1) (75.7)
Pension expense 41.8 54.3
Increase in deferred income taxes, net (9.7) (7.2)
Decrease in receivables, net 24.9 62.3
Decrease (increase) in inventories 5.8 (10.1)
Decrease in accounts payable and other (36.0) (84.1)
accrued liabilities
Increase (decrease) in other liabilities 12.3 (14.3)
Decrease in other assets 8.5 10.9
Net cash provided by (used for) operating 58.8 (64.4)
activities
Cash flows from investing activities
Proceeds from investments 2,236.8 2,203.1
Purchases of investments (2,238.0) (2,174.4)
Investment in marketable software (30.2) (33.4)
Capital additions of properties (11.0) (24.7)
Capital additions of outsourcing assets (28.8) (52.7)
Other (0.7) (1.7)
Net cash used for investing activities (71.9) (83.8)
Cash flows from financing activities
Proceeds from issuance of long-term debt 213.5 31.8
Payments for capped call transactions (27.3) -
Issuance costs relating to long-term debt (7.3) -
Payments of long-term debt (1.3) (0.6)
Proceeds from exercise of stock options - 3.7
Payments of short-term borrowings (65.8) -
Net cash provided by financing activities 111.8 34.9
Effect of exchange rate changes on cash and (0.3) (16.2)
cash equivalents
Increase (decrease) in cash and cash 98.4 (129.5)
equivalents
Cash and cash equivalents, beginning of 365.2 494.3
period
Cash and cash equivalents, end of period $ 463.6 $ 364.8
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
2016 2015 2016 2015
GAAP net income (loss) $ 21.6 $ (58.2) $ (18.3) $ (101.4)
attributable to Unisys
Corporation common
shareholders
Cost reduction expense, net 10.3 48.6 35.0 48.6
of tax of ($0.1), $4.0, $2.1,
$4.0, respectively
Pension expense, net of tax 21.8 25.9 42.4 53.3
of ($0.3), $0.5, ($0.6),
$1.0, respectively
Non-GAAP net income (loss) 53.7 16.3 59.1 0.5
attributable to Unisys
Corporation common
shareholders
Add interest expense on 4.5 - 5.2 -
convertible notes
Non-GAAP net income (loss) $ 58.2 $ 16.3 $ 64.3 $ 0.5
attributable to Unisys
Corporation for diluted
earnings per share
Weighted average shares 50,069 49,927 50,036 49,874
(thousands)
Plus incremental shares from
assumed conversion:
Employee stock plans 167 155 151 187
Convertible notes 21,550 - 12,593 -
Non-GAAP adjusted weighted 71,786 50,082 62,780 50,061
average shares
Diluted earnings (loss) per
share
GAAP basis
GAAP net income (loss) $ 26.1 $ (58.2) $ (18.3) $ (101.4)
attributable to Unisys
Corporation for diluted
earnings per share
Divided by adjusted weighted 71,786 49,927 50,036 49,874
average shares
GAAP income (loss) per $ 0.36 $ (1.17) $ (0.37) $ (2.03)
diluted share
Non-GAAP basis
Non-GAAP net income (loss) $ 58.2 $ 16.3 $ 64.3 $ 0.5
attributable to Unisys
Corporation for diluted
earnings per share
Divided by Non-GAAP adjusted 71,786 50,082 62,780 50,061
weighted average shares
Non-GAAP earnings (loss) per $ 0.81 $ 0.33 $ 1.02 $ 0.01
diluted share
UNISYS CORPORATION
RECONCILIATION OF GAAP OPERATING PROFIT TO NON-GAAP OPERATING PROFIT
(Unaudited)
(Millions)
Three Months Six Months
Ended June 30 Ended June 30
2016 2015 2016 2015
GAAP operating income (loss) $ 49.5 $ (49.5) $ 21.9 $ (79.5)
Cost reduction expense 10.2 52.6 37.1 52.6
FAS87 pension expense 21.5 26.4 41.8 54.3
Non-GAAP operating profit (loss) $ 81.2 $ 29.5 $ 100.8 $ 27.4
Customer Revenue $ 748.9 $ 764.8 $ 1,415.7 $ 1,486.0
GAAP operating income (loss) % 6.6 % (6.5)% 1.5 % (5.3)%
Non-GAAP operating profit (loss) % 10.8 % 3.9 % 7.1 % 1.8 %
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
Three Months Six Months
Ended June 30 Ended June 30
2016 2015 2016 2015
Cash provided by (used for) operations $ 34.6 $ (21.1) $ 58.8 $ (64.4)
Additions to marketable software (15.9) (16.7) (30.2) (33.4)
Additions to properties (4.4) (10.8) (11.0) (24.7)
Additions to outsourcing assets (13.7) (26.0) (28.8) (52.7)
Free cash flow 0.6 (74.6) (11.2) (175.2)
Pension funding 32.5 37.0 64.1 75.7
Cost reduction funding 21.2 13.2 39.2 13.2
Free cash flow before pension & cost $ 54.3 $ (24.4) $ 92.1 $ (86.3)
reduction funding
CONTACT: Investor Contact - Courtney Holben, 215-986-3379,
courtney.holben@unisys.com; or Media Contact - John Clendening, 214-403-1981,
john.clendening@unisys.com
SOURCE: Unisys Corporation
END
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