REG-Unisys Corp: Unisys Announces First-Quarter 2017 Financial Results <Origin Href="QuoteRef">UIS.N</Origin>
25/04/2017 07:05
Unisys Announces First-Quarter 2017 Financial Results, Re-affirms Full-Year
Financial Guidance
BLUE BELL, Pa., April 24, 2017 --
1Q 2017:
* Operating profit margin was (0.4) percent, up 370 basis points year over
year
* Non-GAAP operating profit((4)) margin was 6 percent, up 340 basis points
year over year
* Revenue was roughly flat year over year at $665 million versus $667 million
in the prior-year period
* Net loss attributable to Unisys Corporation common shareholders was $(33)
million, relative to $(40) million in the prior-year period
* Adjusted EBITDA((5)) was $84 million, an increase of 41 percent year over
year; Adjusted EBITDA margin was 13 percent, an increase of 370 basis points
year over year
* Diluted loss per share of $(0.65), versus $(0.80) in the prior-year period;
Non-GAAP diluted earnings per share((7)) of $0.30 versus $0.11 in the
prior-year period
* Unisys reaffirms full-year guidance for revenue of $2.65-2.75 billion,
non-GAAP operating profit margin of 7.25-8.25 percent and adjusted free cash
flow of $130-170 million
Unisys Corporation (http://www.unisys.com/) (NYSE: UIS) today reported
first-quarter 2017 financial results. Operating profit margin was up year over
year, and revenue was relatively flat versus the prior-year period.
Additionally, the company saw strong contract signings during the quarter,
with Total Contract Value((1)) (TCV) signed up 26 percent year over year.
"Our first-quarter results indicate continued progress executing against our
strategic and financial goals, including margin expansion and improvement of
revenue trends via our vertical go-to-market strategy," said Unisys President
and CEO Peter Altabef. "We intend to continue our disciplined financial focus
over the remainder of the year but are pleased with our strong start in the
first quarter. We are also pleased to have enhanced our liquidity position by
recently raising $440 million in a senior secured notes offering."
Summary of First-Quarter 2017 Business Results
Company:
Revenue for the quarter of $665 million was roughly flat relative to $667
million in the first quarter 2016 and was also roughly flat year over year on
a constant-currency((2)) basis.
First-quarter 2017 operating profit margin of (0.4) percent, which includes
cost-reduction and other charges and pension expense, was up 370 basis points
year over year. Non-GAAP operating profit margin was 6 percent, up 340 basis
points versus the first quarter 2016.
Net loss attributable to Unisys Corporation common shareholders for the
quarter was $(33) million, an improvement relative to $(40) million in the
prior-year period. Adjusted EBITDA for the quarter was $84 million, which was
up 41 percent year over year. Adjusted EBITDA margin for the quarter was 13
percent, up 370 basis points year over year.
In the first quarter 2017, operating cash flow decreased by $67 million year
over year to $(41) million. The company generated free cash flow((3)) of $(76)
million for the quarter, a reduction of $66 million year over year. Adjusted
free cash flow((6)) for the quarter of $(26) million decreased $66 million
from the prior-year period. Reductions in cash flow year over year were
largely due to a $40 million payment from a client received in the first
quarter of 2016 that had been due in the fourth quarter of 2015, along with
several other timing issues related to the collection of receivables.
At March 31, 2017, the company had $302 million in cash. In April 2017, the
company raised $440 million of capital through a high-yield notes offering.
The company has paid the trustee the amount necessary to discharge the
remaining portion of Senior Notes due 2017 outstanding at the time of the
offering and expects to redeem them by May 6, 2017. Pro forma for the offering
and redemption, the company would have had $635 million in cash as of March
31, 2017.
Services:
Services revenue, which represented 88 percent of first-quarter total revenue,
declined by 2 percent as reported and in constant currency to $585 million.
Services backlog ended the quarter at $3.7 billion, versus $3.9 billion last
quarter. Services gross margin was up 400 basis points versus the first
quarter 2016 at 18 percent, reflecting ongoing efforts to enhance the
efficiency of the Services business and helped by a particularly profitable
transaction. Services operating profit margin was up 400 basis points to 5
percent.
Technology:
Technology revenue, which represented 12 percent of total revenue, was up 10
percent year over year to $79 million, up 7 percent in constant currency.
Technology gross margin was down slightly to 47 percent from 49 percent in the
prior-year period. Technology operating profit margin was down to 15 percent
from 18 percent in the prior-year period.
Continued Execution on Business Strategy
The company in the first quarter entered into several key contracts in each of
its sectors of focus:
* U.S. Federal: The U.S. Internal Revenue Service (IRS) selected Unisys to
continue its work updating, operating and maintaining the system used by the
U.S. government to verify and monitor excise fuel tax filings.
* Public: New Zealand Transport Agency (NZTA) has renewed with Unisys to
support their driver and vehicle registry platform.
* Commercial: Unisys announced a contract with Catholic Health Initiatives
(CHI), the nation's third-largest nonprofit health system, to provide service
support and end-user services for CHI's 90,000-plus employees across the
United States. It was Unisys' largest contract of the quarter.
* Financial Services: Unisys signed a new agreement with the largest financial
services group in Latin America, to provide automation services for its branch
network, as well as maintenance and support services for the bank's ATMs
throughout Brazil. It was Unisys' largest financial services contract of the
quarter.
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.
((1)) Total Contract Value - TCV is the estimated total contractual revenue
related to signed contracts including option years and without regard for
cancellation.
((2)) 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 and Other 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
cost-reduction and other expense. 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.
((3)) 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 required for reinvestment.
((4)) Non-GAAP operating profit - The company recorded pretax pension expense
and pretax charges in connection with cost-reduction activities 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.
((5)) EBITDA & adjusted EBITDA – 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, interest expense (net of interest income) provision
for income taxes, depreciation and amortization. Adjusted EBITDA further
excludes pension expense, cost-reduction and other expense, 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.
((6)) 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
liquidity.
((7)) Non-GAAP diluted earnings per share - The company has recorded pension
expense and charges in connection with 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.
About Unisys
Unisys is a global information technology company that specializes in
providing industry-focused solutions integrated with leading-edge security to
clients in the government, financial services and commercial markets. Unisys
offerings include security solutions, advanced data analytics, cloud and
infrastructure services, application services and application and server
software. For more information, 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 of earnings, revenues, total contract value 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 total contract value
are based, in part, on the assumption that all options of the contracts
included in the calculation of such value will be exercised and that each of
those contracts will continue for their full contracted term. 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.: 0424/9499
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,
2017 2016
Revenue
Services $ 585.3 $ 595.1
Technology 79.2 71.7
664.5 666.8
Costs and expenses
Cost of revenue:
Services 504.5 533.7
Technology 39.8 34.6
544.3 568.3
Selling, general and administrative 109.1 110.1
Research and development 13.8 16.0
667.2 694.4
Operating profit (loss) (2.7) (27.6)
Interest expense 5.7 4.4
Other income (expense), net (8.4) (1.2)
Income (loss) before income taxes (16.8) (33.2)
Provision for income taxes 12.9 5.5
Consolidated net income (loss) (29.7) (38.7)
Net income attributable to noncontrolling interests 3.0 1.2
Net income (loss) attributable to Unisys Corporation common shareholders $(32.7) $ (39.9)
Earnings (loss) per share attributable to Unisys Corporation
Basic $ (0.65) $ (0.80)
Diluted $ (0.65) $ (0.80)
Shares used in the per share computations (in thousands)
Basic 50,256 50,004
Diluted 50,256 50,004
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended March 31, 2017
Customer revenue $ 664.5 $ 585.3 $ 79.2
Intersegment $ (5.3) — 5.3
Total revenue $ 664.5 $ (5.3) $ 585.3 $ 84.5
Gross profit percent 18.1 % 18.2 % 46.6 %
Operating profit (loss) percent (0.4)% 4.7 % 15.4 %
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 %
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
March 31, 2017 December 31, 2016
Assets
Current assets
Cash and cash equivalents $ 302.0 $ 370.6
Accounts and notes receivable, net 504.9 505.8
Inventories:
Parts and finished equipment 18.5 14.0
Work in process and materials 10.9 15.0
Prepaid expenses and other current assets 121.8 121.9 *
Total 958.1 1,027.3 *
Properties 902.5 886.6
Less-Accumulated depreciation and amortization 749.2 741.3
Properties, net 153.3 145.3
Outsourcing assets, net 164.8 172.5
Marketable software, net 135.1 137.0
Prepaid postretirement assets 36.7 33.3
Deferred income taxes 144.0 146.1 *
Goodwill 179.5 178.6
Restricted Cash 33.5 30.5 *
Other long-term assets 157.3 151.0 *
Total $ 1,962.3 $ 2,021.6 *
Liabilities and deficit
Current liabilities
Current maturities of long-term-debt $ 106.3 $ 106.0
Accounts payable 200.1 189.0
Deferred revenue 333.3 337.4
Other accrued liabilities 299.1 349.2 *
Total 938.8 981.6 *
Long-term debt 195.1 194.0 *
Long-term postretirement liabilities 2,258.5 2,292.6
Long-term deferred revenue 110.6 117.6
Other long-term liabilities 86.0 83.2 *
Commitments and contingencies
Total deficit (1,626.7) (1,647.4)
Total $ 1,962.3 $ 2,021.6 *
* Certain amounts have been reclassified to conform to the current-year presentation.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Three Months Ended
March 31,
2017 2016 *
Cash flows from operating activities
Consolidated net income (loss) $ (29.7) $ (38.7)
Add (deduct) items to reconcile consolidated net loss to net cash provided by (used for) operating activities:
Foreign currency transaction losses 5.3 0.1
Non-cash interest expense 2.0 0.7
Employee stock compensation 3.7 3.2
Depreciation and amortization of properties 10.1 9.6
Depreciation and amortization of outsourcing assets 12.9 11.1
Amortization of marketable software 15.7 16.4
Other non-cash operating activities (1.1) 0.3
Loss on disposal of capital assets 3.8 0.3
Pension contributions (28.9) (31.6)
Pension expense 24.5 20.3
Decrease (increase) in deferred income taxes, net 2.2 (6.9)
(Increase) decrease in receivables, net 0.1 69.4
Decrease (increase) in inventories 0.1 (1.9)
Decrease in accounts payable and other accrued liabilities (50.0) (34.8) *
(Decrease) increase in other liabilities (10.3) 3.4
(Increase) Decrease in other assets (1.4) 5.0 *
Net cash (used for) provided by operating activities (41.0) 25.9 *
Cash flows from investing activities
Proceeds from investments 1,218.9 1,365.0
Purchases of investments (1,211.5) (1,367.8)
Investment in marketable software (13.8) (14.3)
Capital additions of properties (8.5) (6.6)
Capital additions of outsourcing assets (12.9) (15.1)
Other (0.3) (0.2) *
Net cash used for investing activities (28.1) (39.0) *
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) (0.7)
Other (2.1) (0.4) *
Net cash provided by financing activities (2.8) 158.4 *
Effect of exchange rate changes on cash, cash equivalents and restricted cash 6.3 5.5 *
Increase (decrease) in cash, cash equivalents and restricted cash (65.6) 150.8 *
Cash, cash equivalents and restricted cash, beginning of period 401.1 396.8 *
Cash, cash equivalents and restricted cash, end of period $ 335.5 $ 547.6 *
* Certain amounts have been reclassified to conform with the 2017 presentation.
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31,
2017 2016
GAAP net income (loss) attributable to Unisys Corporation common $ (32.7) $ (39.9)
shareholders
Cost reduction and other expense: pretax 25.4 26.9
tax provision (benefit) (0.5) (2.2)
net of tax 24.9 24.7
Pension Expense: pretax 24.5 20.3
tax provision (benefit) 0.2 0.3
net of tax 24.7 20.6
Non-GAAP net income (loss) attributable to Unisys Corporation common 16.9 5.4
shareholders
Add interest expense on convertible notes 4.7 —
Non-GAAP net income (loss) attributable to Unisys Corporation for diluted $ 21.6 $ 5.4
earnings per share
Weighted average shares (thousands) 50,256 50,004
Plus incremental shares from assumed conversion:
Employee stock plans 388 134
Convertible notes 21,868 —
Non-GAAP adjusted weighted average shares 72,511 50,138
Diluted earnings (loss) per share
GAAP basis
GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $ (32.7) $ (39.9)
Divided by adjusted weighted average shares 50,256 50,004
GAAP diluted earnings (loss) per share $ (0.65) $ (0.80)
Non-GAAP basis
Non-GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $ 21.6 $ 5.4
Divided by Non-GAAP adjusted weighted average shares 72,511 50,138
Non-GAAP diluted earnings (loss) per share $ 0.30 $ 0.11
UNISYS CORPORATION
RECONCILIATION OF GAAP OPERATING PROFIT TO NON-GAAP OPERATING PROFIT
(Unaudited)
(Millions)
Three Months
Ended March 31,
2017 2016
GAAP operating profit (loss) $ (2.7) $ (27.6)
Cost reduction and other expense 20.1 26.9
FAS87 pension expense 24.5 20.3
Non-GAAP operating profit (loss) $ 41.9 $ 19.6
Customer Revenue $ 664.5 $666.8
GAAP operating profit (loss) % (0.4)% (4.1)%
Non-GAAP operating profit (loss) % 6.3 % 2.9 %
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
Three Months
Ended March 31,
2017 2016
Cash provided by (used for) operations $ (41.0) $ 25.9
Additions to marketable software (13.8) (14.3)
Additions to properties (8.5) (6.6)
Additions to outsourcing assets (12.9) (15.1)
Free cash flow (76.2) (10.1)
Pension funding 28.9 31.6
Cost reduction and other payments 21.2 18.0
Adjusted free cash flow $(26.1) $ 39.5
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
EBITDA
Three Months
Ended March 31,
2017 2016
Net income (loss) attributable to Unisys Corporation common shareholders $ (32.7) $ (39.9)
Net income attributable to noncontrolling interests 3.0 1.2
Interest expense, net of interest income of $2.4 and $2.5 respectively * 3.3 1.9
Provision for income taxes 12.9 5.5
Depreciation 23.0 20.7
Amortization 15.7 16.4
EBITDA $ 25.2 $ 5.8
Pension Expense 24.5 20.3
Cost reduction and other expense 25.4 26.9
Non-cash share based expense 3.7 3.2
Other (income) expense adjustment** 5.5 3.7
Adjusted EBITDA $ 84.3 $ 59.9
* Included in Other (income) expense, net on the Consolidated Statements of Income
** Other (income) expense, net as reported on the Consolidated Statements of Income less Interest income and items included in cost reduction and other expense
CONTACT: Investors: Courtney Holben, Unisys, 215-986-3379,
courtney.holben@unisys.com or Media: John Clendening, Unisys, 214-403-1981,
john.clendening@unisys.com
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