REG-Unisys Corp: Second quarter financial results
05/08/2020 07:05
Unisys Announces Second-Quarter Results
Full-Year Revenue Expectations Unchanged, First Detailed Post COVID-19
Perspective on Profitability Expectations, Sequential Services Margin
Expansion and Strong Liquidity Position
BLUE BELL, Pa., Aug. 4, 2020 /PRNewswire/ --
* Full-year revenue expectations unchanged relative to end of Q1 at (10)% YoY
* Current expectations for full-year non-GAAP operating profit margin between
5.2% and 6.7%
* Services gross profit margin of 15.5%, up 260 basis points sequentially
* Strong cash balance of $782 million, relative to $790 million at the end of
the first quarter
* Total company revenue of $439 million, relative to $569 million in
prior-year period
* Total company operating profit margin of (1.9)%, relative to 9.3% in
prior-year period, largely due to timing of ClearPath Forward® renewals
within Technology
* Non-GAAP operating profit((5)) margin of 0.2%, relative to 9.8% in
prior-year period
* Total company pipeline((2)) up 10.1% sequentially versus the first quarter
* Services Total Contract Value((3)) ("TCV") up 1.4% year over year
Unisys Corporation
(https://c212.net/c/link/?t=0&l=en&o=2876262-1&h=4078469577&u=http%3A%2F%2Fwww.unisys.com%2F&a=Unisys+Corporation) (NYSE:
UIS) today reported second-quarter 2020 financial results. "Our revenue
expectations are unchanged for the full year 2020 and we now have enough
visibility to provide profitability expectations for the year. Our client
satisfaction is high, represented by an industry-leading Net Promoter Score,
and our liquidity is strong coming out of the most challenging COVID-19
quarter." said Unisys Chairman and CEO Peter A. Altabef. "Approximately half
of the year-over-year revenue decline in the quarter was due to COVID-related
impacts within Services. The rest was driven by intra-year shifts in ClearPath
Forward(®) renewal timing, currency movement and expected declines in our
check-processing JV. While non-GAAP operating profit was down year over year,
over 90 percent of this was due to lighter ClearPath Forward renewals in the
quarter, which we view as a timing issue only."
Second-Quarter 2020 Highlights
YoY Revenue Growth YoY Profitability
Revenue Services Technology Operating Net Income EBITDA Diluted
Growth Revenue Revenue Profit Margin Margin EPS
Growth Growth Margin
GAAP (22.9%) (17.7%) (51.6%) GAAP (1.9%) (17.4%) (4.1%) ($1.21)
Constant-Currency (GAAP) (19.8%) (14.4%) (49.7%) YoY Change (1,120) bps (1,750) bps (1,430) bps N/M
Non-GAAP (22.0%) (16.5%) N/A Non-GAAP 0.2% (2.2%) 11.4% ($0.15)
YoY Change (960) bps (820) bps (540) bps N/M
Beginning January 1, 2020, the historical results of the company's U.S.
Federal business have been reflected in the company's consolidated financial
statements as discontinued operations. Prior-period amounts have been
reclassified to reflect the company's U.S. Federal business as discontinued
operations. Throughout this release we only refer to the company's continuing
operations.
Summary of Second-Quarter 2020 Business Results
Company:
Second-quarter revenue was $438.8 million, versus $569.4 million in the
prior-year period, down 22.9% year over year (down 19.8% on a
constant-currency((1)) basis). Non-GAAP adjusted revenue((4)) was $438.8
million, relative to $562.9 million in the prior-year period. Of the
year-over-year declines, approximately half were due to impacts of COVID-19,
including declines in field services, travel and transportation and
volume-based BPO contracts; while the rest were due to the timing of ClearPath
Forward contract renewals, currency movement and expected declines in the
company's UK-based check-processing JV.
Second-quarter total company operating profit was $(8.5) million, versus $53.0
million in the prior-year period, and operating profit margin was (1.9)%,
versus 9.3% in the second quarter of 2019. Total company non-GAAP operating
profit was $0.8 million, versus $55.3 million in the prior-year period, and
non-GAAP operating profit margin was 0.2%, versus 9.8% in the second quarter
of 2019. Of the year-over-year decline in non-GAAP operating profit, $50.2
million was attributable to the flow through effect of lower Technology
revenue (due to ClearPath Forward renewal timing) on a relatively fixed base
of software development and support costs.
Net loss for the second quarter was $76.5 million versus net income of $0.7
million in the prior-year period. Similarly, the loss per share was $1.21,
compared to earnings per share of $0.01 in the prior-year period. These
metrics were impacted by $66.8 million of charges ($1.06 per share) in the
period, including $28.5 million related to the early extinguishment of debt
associated with the repayment of the previously-outstanding senior secured
notes. Non-GAAP net loss for the second quarter was $9.7 million, versus
non-GAAP net income of $33.6 million in the prior-year period. Non-GAAP
diluted loss per share((9)) was $0.15, versus non-GAAP earnings per share of
$0.52 in the prior-year period. These year-over-year declines were largely due
to the issues noted above with respect to revenue and operating profit.
Adjusted EBITDA((8)) was $50.2 million, relative to $94.5 million in the
prior-year period, due to the issues noted above with respect to revenue and
operating profit. Net income margin was (17.4)%, compared to 0.1% in the
prior-year period, due to the profitability and charges noted above. Adjusted
EBITDA margin was 11.4%, relative to 16.8% in the prior-year period.
Second-quarter cash used in operations was $14.2 million, versus operating
cash flow of $50.9 million in the prior-year period. Adjusted free cash
flow((11)) was $(37.1) million, versus $14.3 million in the prior-year period.
The year-over-year cash flow comparisons were impacted by significantly higher
Technology revenue in the second quarter of 2019, based on ClearPath Forward
renewal timing. At June 30, 2020, the company had $782.2 million in cash and
cash equivalents, relative to $789.6 million at the end of the first
quarter.
Pipeline:
Total company pipeline was up 10.1% sequentially versus the end of the first
quarter.
Full-Year Expectations:
Full-year revenue expectations are unchanged relative to the end of the first
quarter at (10)% YoY. Profitability expectations were not provided in the
first quarter; however, the company's current expectations for full-year
non-GAAP operating profit margin are between 5.2% and 6.7%.
Services:
Services revenue in the second quarter was $396.0 million, relative to $481.0
million in the prior-year period, down 17.7% year over year (down 14.4% in
constant-currency). Services non-GAAP adjusted revenue was $396.0 million,
relative to $474.5 million in the prior-year period. These declines were
largely due to the COVID-19-related impact on field services, travel and
transportation and volume-based BPO contracts, as well as anticipated declines
in the company's UK-based check-processing JV. Services gross profit margin
was 15.5%, versus 16.5% in the second quarter of 2019 and up 260 basis points
sequentially versus the first quarter. Non-GAAP adjusted Services gross profit
margin((6)) was up 20 basis points year over year to 15.5%, versus 15.3% in
the prior-year period, and was up 280 basis points sequentially. Services
operating profit margin was (0.4)%, versus 1.9% in the second quarter of 2019.
Second-quarter non-GAAP adjusted Services operating profit((7)) margin was
(0.4)%, versus 0.5% in the prior-year period, and was up 310 basis points
sequentially. The year-over-year declines in operating profit margin were
largely due to the flow-through impact of lower revenues against SG&A costs
that are more fixed in the short-term, relative to cost of revenue. Services
backlog was $3.6 billion, relative to $3.7 billion at the end of the first
quarter. Services TCV was up 1.4% year over year.
Technology:
Second-quarter Technology revenue was $42.8 million, relative to $88.4 million
in the prior-year period, down 51.6% year over year (down 49.7% in constant
currency), largely driven by intra-year timing shifts of four ClearPath
Forward contract renewals. Two of these were signed earlier than expected as
noted in the first quarter, and two were delayed from the second quarter and
are now expected to be signed in the third quarter. Second-quarter Technology
gross profit margin was 42.0%, compared to 78.1% in the prior-year period.
Technology operating profit margin was 2.2%, versus 56.7% in the prior-year
period. Technology costs are largely related to software development and
overhead and so are relatively fixed in the short term. As a result, margins
in Technology were down more significantly than the declines in Services.
Select Second-Quarter Contract Signings:
In the second quarter, the company entered into several noteworthy contracts:
* Focus on InteliServe™: Unisys has extended and expanded its relationship
with a leading provider of innovative technology solutions for the treatment
of cancer and brain disorders. Unisys will now deliver its InteliServe
solution alongside technology from ServiceNow(®) to enable omnichannel
service desk support for improved end user experience and lower cost. The
engagement is also designed with a focus on flexibility to allow for the fast
integration of new technology and services as the company evolves its digital
workplace and growth agendas.
* Focus on CloudForte(®): Unisys entered into a new expanded contract with a
global commercial real estate services firm for whom Unisys had previously
been providing IT service management (ITSM) and managed services support.
Under this new-scope contract, Unisys will now provide a full suite of IT
outsourcing services, including CloudForte to optimize their cloud
environment. Unisys will also provide InteliServe to automate the client's
digital workplace support experience, highlighting Unisys' ability to provide
best-in-class solutions and services across a wide spectrum of today's digital
business needs.
* Focus on Security Services: A Unisys partner secured a multi-year contract
with a leading U.S.-based service organization to provide Unisys Stealth(®)
security software and deployment services, establishing a software-defined
perimeter that uses identity-based micro-segmentation to reduce their attack
surface globally and protect critical applications across an assortment of IT
infrastructures; including data centers, retail stores and distribution
centers.
Tax Asset Plan Termination
The company announced that its board of directors unanimously approved the
early termination of its one-year Tax Asset Protection Plan (the "Plan"),
adopted on February 5, 2020, advancing the expiration date from February 5,
2021 to August 4, 2020. Stockholders do not have to take any action as a
result of the early termination. The Plan was designed to protect Unisys'
valuable tax assets in connection with the sale of its U.S. Federal business
to Science Applications International Corp. (NYSE: SAIC), which was completed
on March 13, 2020 (the "Transaction"), by discouraging persons from acquiring
more than 4.9% of Unisys' common stock. Following the completion of the
Transaction, Unisys' board of directors determined that the Plan is no longer
necessary to protect such tax assets and that termination of the Plan is in
the best interests of its stockholders. Tax asset protection plans similar to
the Plan may be adopted in the future if the board of directors determines
that it is in the best interests of the company and its stockholders at that
time.
Conference Call
Unisys will hold a conference call today at 5:00 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 website 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.
( (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)) Pipeline – Pipeline represents prospective sale opportunities being
pursued or for which bids have been submitted. There is no assurance that
pipeline will translate into recorded revenue.
((3)) Total Contract Value – TCV is the estimated total contractual revenue
related to contracts signed in the period without regard for cancellation
terms. New business TCV represents TCV attributable to new scope for existing
clients and new logo contracts.
Non-GAAP and Other Information
Although appropriate under generally accepted accounting principles ("GAAP"),
the company's results reflect revenue and charges that the company believes
are not indicative of its ongoing operations and that can make its revenue,
profitability and liquidity results difficult to compare to prior periods,
anticipated future periods, or to its competitors' results. These items
consist of certain portions of revenue, post-retirement, debt exchange and
extinguishment and cost-reduction and other expenses. 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.
((4)) Non-GAAP adjusted revenue – In 2019 and 2020, the company's non-GAAP
results reflect adjustments to exclude certain revenue and related profit
relating to reimbursements from the company's check-processing JV partners for
restructuring expenses included as part of the company's restructuring
program.
((5)) Non-GAAP operating profit – The company recorded pretax
post-retirement expense and pretax charges in connection with cost-reduction
activities, debt exchange/extinguishment and other expenses. For the company,
non-GAAP operating profit excluded these items. 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. During 2019 and 2020,
the company included the non-GAAP adjustments discussed in (4) herein.
((6) ) Non-GAAP adjusted Services gross profit – During 2019 and 2020, the
company included the adjustments discussed in (4) herein.
((7)) Non-GAAP adjusted Services operating profit – During 2019 and 2020,
the company included the adjustments discussed in (4) herein.
((8)) EBITDA & adjusted EBITDA – Earnings before interest, taxes,
depreciation and amortization ("EBITDA") is calculated by starting with net
income (loss) from continuing operations attributable to Unisys Corporation
common shareholders and adding or subtracting the following items: net income
attributable to noncontrolling interests, interest expense (net of interest
income), provision for income taxes, depreciation and amortization. Adjusted
EBITDA further excludes post-retirement, debt exchange/extinguishment, and
cost-reduction and other expenses, non-cash share-based expense, and other
(income) expense adjustment. In order to provide investors with additional
understanding of the company's operating results, these charges are excluded
from the adjusted EBITDA calculation. During 2019 and 2020, the company
included the adjustments discussed in (4) herein.
((9)) Non-GAAP diluted earnings per share – The company has recorded
post-retirement expense and charges in connection with debt
exchange/extinguishment and cost-reduction activities and other expenses.
Management believes that investors may have a better understanding of the
company's performance and return to shareholders by excluding these charges
from the GAAP diluted earnings/loss per share calculations. The tax amounts
presented for these items for the calculation of non-GAAP diluted earnings per
share include the current and deferred tax expense and benefits recognized
under GAAP for these amounts. During 2019 and 2020, the company included the
adjustments discussed in (4) herein.
((10)) Free cash flow – The company defines free cash flow as cash flow
from operations less capital expenditures. Management believes this liquidity
measure gives investors an additional perspective on cash flow from on-going
operating activities in excess of amounts used for reinvestment.
((11)) Adjusted free cash flow – Because inclusion of the company's
post-retirement contributions, discontinued operations and cost-reduction
charges/reimbursements and other 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. This liquidity measure was provided to
analysts and investors in the form of external guidance and is used by
management to measure operating liquidity.
About Unisys
Unisys is a global information technology company that builds
high-performance, security-centric solutions for the most demanding businesses
and governments. Unisys offerings include security software and services;
digital transformation and workplace services; industry applications and
services; and innovative software operating environments for high-intensity
enterprise computing. For more information on how Unisys builds better
outcomes securely for its clients across the government, financial services
and commercial markets, visit 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 or expectations of earnings, revenues, annual contract
value, total contract value, new business ACV or TCV, backlog 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. In particular, statements concerning annual and total
contract value are based, in part, on the assumption that each of those
contracts will continue for their full contracted term. Risks and
uncertainties that could affect the company's future results include, but are
not limited to, the following: our business and results of operations and our
financial condition has been and is expected to continue to be impacted by the
outbreak of COVID-19 and such impact could be materially adverse, our ability
to improve revenue and margins in our services business; our ability to
maintain our installed base and sell new solutions; the potential adverse
effects of aggressive competition in the information services and technology
marketplace; our significant pension obligations and required cash
contributions and requirements to make additional significant cash
contributions to our defined benefit pension plans; our ability to effectively
anticipate and respond to volatility and rapid technological innovation in our
industry; our ability to retain significant clients; our contracts may not be
as profitable as expected or provide the expected level of revenues; the risks
of doing business internationally when a significant portion of our revenue is
derived from international operations; our ability to access financing
markets; the adverse effects of a reduction in our credit rating;
cybersecurity breaches could result in significant costs and could harm our
business and reputation; we may not achieve the operational and financial
results that we anticipate from the sale of our U.S. Federal business; the
business and financial risk in implementing future acquisitions or
dispositions; the adverse effects of global economic conditions, acts of war,
terrorism, natural disasters or the widespread outbreak of infectious
diseases; the impact of Brexit could adversely affect the company's operations
in the United Kingdom as well as the funded status of the company's U.K.
pension plans; our ability to attract, motivate and retain experienced and
knowledgeable personnel in key positions; a significant disruption in our IT
systems could adversely affect our business and reputation; we may face damage
to our reputation or legal liability if our clients are not satisfied with our
services or products; the performance and capabilities of third parties with
whom we have commercial relationships; our ability to use our net operating
loss carryforwards and certain other tax attributes may be limited; an
involuntary termination of the company's U.S. qualified defined benefit
pension plans; the potential for intellectual property infringement claims to
be asserted against us or our clients; the possibility that legal proceedings
could affect our results of operations or cash flow or may adversely affect
our business or reputation; 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.: 0804/9781
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 (LOSS)
(Unaudited)
(Millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenue
Services $ 396.0 $ 481.0 $ 821.9 $ 955.0
Technology 42.8 88.4 132.3 168.9
438.8 569.4 954.2 1,123.9
Costs and expenses
Cost of revenue:
Services 340.0 399.1 715.7 795.9
Technology 23.9 17.7 50.5 50.3
363.9 416.8 766.2 846.2
Selling, general and administrative 80.2 92.4 167.0 183.3
Research and development 3.2 7.2 9.4 16.2
447.3 516.4 942.6 1,045.7
Operating income (loss) (8.5) 53.0 11.6 78.2
Interest expense 4.6 16.2 18.5 31.7
Other expense, net (53.7) (28.9) (101.8) (59.3)
Income (loss) from continuing operations before income (66.8) 7.9 (108.7) (12.8)
taxes
Provision for income taxes 9.7 3.6 20.5 13.0
Consolidated net income (loss) from continuing operations (76.5) 4.3 (129.2) (25.8)
Net income attributable to noncontrolling interests - 3.6 0.5 6.2
Net income (loss) from continuing operations attributable (76.5) 0.7 (129.7) (32.0)
to Unisys Corporation
Income (loss) from discontinued operations, net of tax (2.1) 25.5 1,066.4 38.8
Net income (loss) attributable to Unisys Corporation $ (78.6) $ 26.2 $ 936.7 $ 6.8
Earnings (loss) per share attributable to Unisys Corporation
Basic
Continuing Operations $ (1.21) $ 0.01 $ (2.06) $ (0.62)
Disontinuing Operations $ (0.04) $ 0.50 $ 16.97 $ 0.75
Total $ (1.25) $ 0.51 $ 14.91 $ 0.13
Diluted
Continuing Operations $ (1.21) $ 0.01 $ (2.06) $ (0.62)
Disontinuing Operations $ (0.04) $ 0.49 $ 16.97 $ 0.75
Total $ (1.25) $ 0.50 $ 14.91 $ 0.13
Shares used in the per share computations (in thousands):
Basic 63,010 51,782 62,830 51,600
Diluted 63,010 52,110 62,830 51,600
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended June 30, 2020
Customer revenue $ 438.8 $ - $ 396.0 $ 42.8
Intersegment - (2.4) - 2.4
Total revenue $ 438.8 $ (2.4) $ 396.0 $ 45.2
Gross profit percent 17.1 % 15.5 % 42.0 %
Operating profit (loss) percent (1.9)% (0.4)% 2.2 %
Three Months Ended June 30, 2019
Customer revenue $ 569.4 $ - $ 481.0 $ 88.4
Intersegment - (2.1) - 2.1
Total revenue $ 569.4 $ (2.1) $ 481.0 $ 90.5
Gross profit percent 26.8 % 16.5 % 78.1 %
Operating profit percent 9.3 % 1.9 % 56.7 %
Total Eliminations Services Technology
Six Months Ended June 30, 2020
Customer revenue $ 954.2 $ - $ 821.9 $ 132.3
Intersegment - (4.9) - 4.9
Total revenue $ 954.2 $ (4.9) $ 821.9 $ 137.2
Gross profit percent 19.7 % 14.2 % 59.6 %
Operating profit percent 1.2 % (1.9)% 31.5 %
Six Months Ended June 30, 2019
Customer revenue $ 1,123.9 $ - $ 955.0 $ 168.9
Intersegment - (4.5) - 4.5
Total revenue $ 1,123.9 $ (4.5) $ 955.0 $ 173.4
Gross profit percent 24.7 % 15.8 % 68.6 %
Operating profit percent 7.0 % 0.8 % 45.9 %
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
June 30, 2020 December 31,
2019
Assets
Cash and cash equivalents $ 782.2 $ 538.8
Accounts receivable, net 364.5 417.7
Contract assets 39.0 38.4
Inventories 14.8 16.4
Prepaid expenses and other current assets 119.6 100.7
Current assets of discontinued operations - 109.3
Total current assets 1,320.1 1,221.3
Properties 761.2 784.0
Less-accumulated depreciation and amortization 652.7 668.0
Properties, net 108.5 116.0
Outsourcing assets, net 182.1 202.1
Marketable software, net 187.5 186.8
Operating lease right-of-use assets 66.3 71.4
Prepaid postretirement assets 136.1 136.2
Deferred income taxes 109.0 114.0
Goodwill 108.6 110.4
Restricted cash 10.2 13.0
Other long-term assets 170.9 198.9
Long-term assets of discontinued operations - 133.9
Total assets $ 2,399.3 $ 2,504.0
Liabilities and deficit
Current liabilities:
Notes payable $ 60.3 $ -
Current maturities of long-term-debt 97.5 13.5
Accounts payable 161.6 204.3
Deferred revenue 217.8 246.4
Other accrued liabilities 255.6 316.7
Current liabilities of discontinued operations - 146.4
Total current liabilities 792.8 927.3
Long-term debt 47.3 565.9
Long-term postretirement liabilities 1,574.4 1,960.2
Long-term deferred revenue 130.4 147.0
Long-term operating lease liabilities 47.9 56.0
Other long-term liabilities 45.2 47.6
Long-term liabilities of discontinued operations - 28.3
Commitments and contingencies
Total Unisys Corporation stockholders' deficit (274.3) (1,265.4)
Noncontrolling interests 35.6 37.1
Total deficit (238.7) (1,228.3)
Total liabilities and deficit $ 2,399.3 $ 2,504.0
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Six Months Ended
June 30,
2020 2019
Cash flows from operating activities
Consolidated net loss from continuing operations $ (129.2) $ (25.8)
Income from discontinued operations, net of tax 1,066.4 38.8
Adjustments to reconcile consolidated net loss to net cash used for operating activities:
Gain on sale of U.S. Federal business (1,057.4) -
Loss on debt extinguishment 28.5 -
Foreign currency translation losses 15.3 5.3
Non-cash interest expense 2.7 5.4
Employee stock compensation 8.0 7.3
Depreciation and amortization of properties 15.6 17.8
Depreciation and amortization of outsourcing assets 32.7 31.7
Amortization of marketable software 36.0 21.6
Other non-cash operating activities 1.3 (0.2)
Loss on disposal of capital assets 0.5 1.3
Postretirement contributions (333.0) (47.7)
Postretirement expense 48.4 47.1
Deferred income taxes, net (7.0) 2.7
Changes in operating assets and liabilities:
Receivables, net 39.6 10.1
Inventories 1.4 (0.3)
Accounts payable and current liabilities (161.5) (140.3)
Other liabilities 2.6 16.9
Other assets (3.0) (11.2)
Net cash used for operating activities (392.1) (19.5)
Cash flows from investing activities
Net proceeds from sale of U.S. Federal business 1,159.4 -
Proceeds from investments 1,735.3 1,704.1
Purchases of investments (1,755.9) (1,706.9)
Investment in marketable software (36.7) (37.2)
Capital additions of properties (10.6) (20.8)
Capital additions of outsourcing assets (15.8) (39.7)
Net proceeds from sale of properties - (0.2)
Other (0.2) (0.4)
Net cash provided by (used for) investing activities 1,075.5 (101.1)
Cash flows from financing activities
Proceeds from notes payable 60.3 -
Proceeds from issuance of long-term debt 4.0 28.1
Payments of long-term debt (448.4) (10.5)
Cash paid for debt extinguishment (23.7) -
Other (4.7) (4.5)
Net cash (used for) provided by financing activities (412.5) 13.1
Effect of exchange rate changes on cash, cash equivalents and restricted cash (30.3) 0.9
Increase (decrease) in cash, cash equivalents and restricted cash 240.6 (106.6)
Cash, cash equivalents and restricted cash, beginning of period 551.8 624.1
Cash, cash equivalents and restricted cash, end of period $ 792.4 $ 517.5
UNISYS CORPORATION
RECONCILIATIONS OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
GAAP net income (loss) from continuing operations $ (76.5) $ 0.7 $ (129.7) $ (32.0)
attributable to Unisys Corporation
Postretirement expense: pretax 24.9 23.6 48.4 47.1
tax 0.4 - 0.7 (0.1)
net of tax 24.5 23.6 47.7 47.2
Debt extinguishment, cost reduction and other expenses: pretax 42.8 7.0 73.7 10.6
tax 0.5 0.3 1.1 1.0
net of tax 42.3 6.7 72.6 9.6
minority interest - 2.6 0.4 3.3
net of minority interest 42.3 9.3 73.0 12.9
Non-GAAP net income (loss) from continuing operations (9.7) 33.6 (9.0) 28.1
attributable to Unisys Corporation
Add interest expense on convertible notes - 5.0 - 10.0
Non-GAAP net income (loss) attributable to Unisys $ (9.7) $ 38.6 $ (9.0) $ 38.1
Corporation for diluted earnings per share
Weighted average shares (thousands) 63,010 51,782 62,830 51,600
Plus incremental shares from assumed conversion:
Employee stock plans - 328 422
Convertible notes - 21,868 - 21,868
Non-GAAP adjusted weighted average shares 63,010 73,978 62,830 73,890
Diluted earnings (loss) per share from continuing operations
GAAP basis
GAAP net income (loss) from continuing operations attributable to Unisys Corporation for diluted earnings per share $ (76.5) $ 0.7 $ (129.7) $ (32.0)
Divided by weighted average shares 63,010 52,110 62,830 51,600
GAAP diluted earnings (loss) per share $ (1.21) $ 0.01 $ (2.06) $ (0.62)
Non-GAAP basis
Non-GAAP net income (loss) from continuing operations attributable to Unisys Corporation for diluted earnings per share $ (9.7) $ 38.6 $ (9.0) $ 38.1
Divided by Non-GAAP adjusted weighted average shares 63,010 73,978 62,830 73,890
Non-GAAP diluted earnings (loss) per share $ (0.15) $ 0.52 $ (0.14) $ 0.52
UNISYS CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Cash (used for) provided by operations $ (14.2) $ 50.9 $ (392.1) $ (19.5)
Additions to marketable software (19.4) (19.2) (36.7) (37.2)
Additions to properties (5.0) (10.1) (10.6) (20.8)
Additions to outsourcing assets (11.0) (10.3) (15.8) (39.7)
Free cash flow (49.6) 11.3 (455.2) (117.2)
Postretirement funding 5.3 24.6 333.0 47.7
Discontinued operations (0.1) (34.0) (9.1) (51.7)
Debt extinguishment, cost reduction and other payments, net of reimbursements 7.3 12.4 17.1 21.9
Adjusted free cash flow $ (37.1) $ 14.3 $ (114.2) $ (99.3)
UNISYS CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
EBITDA
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Net income ( loss) from continuing operations attributable $ (76.5) $ 0.7 $ (129.7) $ (32.0)
to Unisys Corporation
Net income attributable to noncontrolling interests - 3.6 0.5 6.2
Interest expense, net of interest income of $2.4, $2.9, $4.7, $5.8 respectively* 2.2 13.3 13.8 25.9
Provision for income taxes 9.7 3.6 20.5 13.0
Depreciation 24.1 24.5 48.3 49.5
Amortization 22.4 12.1 36.0 21.6
EBITDA $ (18.1) $ 57.8 $ (10.6) $ 84.2
Postretirement expense 24.9 23.6 48.4 47.1
Debt extinguishment, cost reduction and other expenses** 42.8 7.0 73.7 9.5
Non-cash share based expense 2.9 2.6 8.0 7.3
Other expense, net adjustment*** (2.3) 3.5 2.1 11.1
Adjusted EBITDA $ 50.2 $ 94.5 $ 121.6 $ 159.2
*Included in other expense, net on the consolidated statements of income
**Reduced for depreciation and amortization included above
***Other expense, net as reported on the consolidated statements of income less postretirement expense, interest income and items included in debt extinguishment, cost reduction and other expenses
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenue $ 438.8 $ 569.4 $ 954.2 $ 1,123.9
Non-GAAP revenue $ 438.8 $ 562.9 $ 953.3 $ 1,115.4
Net income (loss) from continuing operations attributable to Unisys Corporation as a percentage of revenue (17.4)% 0.1 % (13.6)% (2.8)%
Non-GAAP net income (loss) from continuing operations attributable to Unisys Corporation as a percentage of Non- GAAP revenue (2.2)% 6.0 % (0.9)% 2.5 %
Adjusted EBITDA as a percentage of Non-GAAP revenue 11.4 % 16.8 % 12.8 % 14.3 %
UNISYS CORPORATION
RECONCILIATIONS OF SEGMENT REPORTING TO NON-GAAP SEGMENT REPORTING
(Unaudited)
(Millions)
Three Months Ended Six Months Ended
Services Segment June 30, June 30,
2020 2019 2020 2019
GAAP total revenue $ 396.0 $ 481.0 $ 821.9 $ 955.0
Restructuring reimbursement - (6.5) (0.9) (8.5)
Non-GAAP revenue $ 396.0 $ 474.5 $ 821.0 $ 946.5
GAAP gross margin $ 61.5 $ 79.3 $ 116.4 $ 150.8
Restructuring reimbursement - (6.5) (0.9) (8.5)
Non-GAAP gross margin $ 61.5 $ 72.8 $ 115.5 $ 142.3
GAAP operating profit $ (1.6) $ 9.0 $ (15.6) $ 7.6
Restructuring reimbursement - (6.5) (0.9) (8.5)
Non-GAAP operating profit (loss) $ (1.6) $ 2.5 $ (16.5) $ (0.9)
GAAP gross margin % 15.5% 16.5% 14.2% 15.8%
Non-GAAP gross margin % 15.5% 15.3% 14.1% 15.0%
GAAP operating profit % (0.4)% 1.9% (1.9)% 0.8%
Non-GAAP operating profit (loss) % (0.4)% 0.5% (2.0)% (0.1)%
Three Months Ended Six Months Ended
Total Unisys June 30, June 30,
2020 2019 2020 2019
GAAP total revenue $ 438.8 $ 569.4 $ 954.2 $ 1,123.9
Restructuring reimbursement - (6.5) (0.9) (8.5)
Non-GAAP revenue $ 438.8 $ 562.9 $ 953.3 $ 1,115.4
GAAP gross margin $ 74.9 $ 152.6 $ 188.0 $ 277.7
Restructuring reimbursement - (6.5) (0.9) (8.5)
Cost reduction expense 6.9 (1.0) 12.8 (4.7)
Non-GAAP gross margin $ 81.8 $ 145.1 $ 199.9 $ 264.5
GAAP operating profit $ (8.5) $ 53.0 $ 11.6 $ 78.2
Restructuring reimbursement - (6.5) (0.9) (8.5)
Postretirement expense 0.8 0.8 1.6 1.6
Cost reduction and other expense 8.5 8.0 17.0 10.6
Non-GAAP operating profit $ 0.8 $ 55.3 $ 29.3 $ 81.9
GAAP gross margin % 17.1% 26.8% 19.7% 24.7%
Non-GAAP gross margin % 18.6% 25.8% 21.0% 23.7%
GAAP operating profit % (1.9)% 9.3% 1.2% 7.0%
Non-GAAP operating profit % 0.2% 9.8% 3.1% 7.3%
CONTACT: Investors: Courtney Holben, Unisys, 215-986-3379,
courtney.holben@unisys.com; Media: John Clendening, Unisys, 214-403-1981,
john.clendening@unisys.com
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