Unisys Corporation New · NYSE:UIS
Unisys Corporation New — Unisys — Q3 2006 Earnings Presentation
36 slides from Unisys Corporation New's earnings presentation, Oct 25, 2006
Slide 1: 3Q06 Financial Results
3Q06 Financial Results October 25, 2006 Joe McGrath Janet Haugen Jack McHale President & CEO Chief Financial Officer Investor Relations Officer Webcast available on www.unisys.com/investor
Slide 2: Disclaimer
Disclaimer • Statements made by Unisys during today’s presentation that are not historical facts, including those regarding future performance, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumption
Slide 3: 3Q06 Strategic Update
3Q06 Strategic Update Joe McGrath President & CEO
Slide 4: 3Q06 Overview
Slide 1 3Q06 Overview • Solid progress in repositioning Unisys for profitable growth • Double-digit services order growth • Increased goal for annualized savings from cost-reduction program • Expanded use of global sourcing • Announced major contracts in security, outsourcing • Began to see benefits
Slide 5: 3Q06 Financial Results – GAAP
Slide 2 3Q06 Financial Results – GAAP $M 3Q05 3Q06 Y/Y Change Revenue $1,387 $1,410 +2% Services $1,174 $1,218 +4% Technology $213 $192 -10% Operating Profit (Loss) ($76.2) ($42.9) $33.3 Operating Margin % (5.5%) (3.0%) + 250 BP Services Operating Profit (Loss) ($60.2) ($15.6) $44.6 Technology Opera
Slide 6: Operating Profit Trends – Non-GAAP
Slide 3 Operating Profit Trends – Non-GAAP* $M 3Q05 3Q06 Y/Y Improvement Operating Profit (Loss) ($32.0) $36.9 $68.9 Operating Margin % -2.3% 2.6% +490 BP Services Profit (Loss) ($23.5) $22.3 $45.8 Technology Profit (Loss) ($8.1) $20.2 $28.3 * Excludes restructuring charges and pension expense. See
Slide 7: Operating Profit & Margin Trends – GAAP
Slide 4 Operating Profit & Margin Trends – GAAP 2006 Transitional Year $M 2005 1Q 2Q 3Q Operating Profit (Loss) ($162.4) ($168.8) ($183.7) ($42.9) Operating Margin -2.8% -12.2% -13.1% -3.0%
Slide 8: Operating Profit & Margin Trends – Non-GAAP
Slide 5 Operating Profit & Margin Trends – Non-GAAP* 2006 Transitional Year $M 2005 1Q 2Q 3Q 2008 Goal Operating Profit (Loss) $18.7 ($12.5) ($1.7) $36.9 Operating Margin 0.3% -0.9% -0.1% 2.6% 8-10% * Excludes restructuring charges and pension expense. See Schedule A: GAAP to non-GAAP Reconciliation
Slide 9: Overall Demand Trends
Slide 6 Overall Demand Trends • Services orders grew double-digits, driven by outsourcing – Double-digit services order growth in 3 of last 4 quarters • Technology orders declined vs. 3Q05 but up sequentially • Overall orders up single digits from year ago – Doesn’t include significant wins on DHS S
Slide 10: Focus on Enterprise Security
Slide 7 Focus on Enterprise Security • Enterprise security a key growth market for Unisys • Deep expertise in applying leading-edge secure solutions • Established reputation as leader in security • Gaining momentum in security program
Slide 11: Major 3Q06 Security Wins
Slide 8 Major 3Q06 Security Wins • SBInet – co-integrator with Boeing • U.S. Federal Bureau of Investigation – DNA system • Australian Dept. of Immigration and Multicultural Affairs – Identity management solution for securing borders – Outsourcing services, including email/Internet security Signific
Slide 12: Focus on Outsourcing
Slide 9 Focus on Outsourcing • Strong pipeline of opportunities for outsourcing services • Targeted market: Mid-sized deals ($10M - $150M) – Can clearly differentiate ourselves for value-added opportunities • Increasing trend of clients disaggregating large procurements – shift toward multi-sourced
Slide 13: Major 3Q06 Wins
Slide 10 Major 3Q06 Wins • Starbucks Coffee Company: Managed services supporting international expansion • U.S. Fortune 500 company: Managed services partnering with Wipro • U.S. Centers for Disease Control: Expansion of data center • BT (U.K.): Data center services
Slide 14: Key Drivers to 2008 Operating Margin Target
Slide 11 Key Drivers to 2008 Operating Margin Target 8-10% Offsetting Factors: • Investment in growth initiatives • Investment in global sourcing centers/people • Employee development Global Sourcing • Declines in ClearPath, core maintenance Attrition Management Revenue Growth Fix Problem Contracts
Slide 15: Update on Global Sourcing
Slide 12 Update on Global Sourcing • Continue to expand use of global sourcing • Current sourcing center in Bangalore now fully staffed • Announced planned opening of two new centers in India • Currently have ~2,100 offshore resources primarily in India • Continue to target ~6,000 resources in India
Slide 16: Summary
Slide 13 Summary • Made solid progress in 3Q with repositioning program • Good demand for strategic focused growth programs • Continue to move aggressively to implement cost-reduction actions • Starting to see benefits in margins, profitability • Look to build on the progress in 4Q06 and 2007
Slide 17: 3Q06 Financial Review
3Q06 Financial Review Janet Haugen Chief Financial Officer
Slide 18: 3Q06 Financial Results
Slide 14 3Q06 Financial Results 3Q05 3Q06 Revenue $1,387M $1,410M Operating Expenses* $322.2M $301.6M Pre-tax Restructuring Charge -- $36.4M Pre-Tax Loss ($80.0M) ($61.5M) Provision for Taxes $1,548.2M $16.0M Net Loss ($1,628.2M) ($77.5M) Loss Per Share ($4.78) ($0.23) *Operating expenses = SG&A plu
Slide 19: 3Q06 Revenue by Geography
Slide 15 3Q06 Revenue by Geography Customer Revenue: $1,410 Million Americas 3Q06 % 9% Customer Change Pacific Revenue vs. 3Q05 Asia 12% United United States $637M -5% States 45% International $773M +8% Europe/ Africa 34% Overall $1,410M +2%
Slide 20: 3Q06 Revenue by Segment
Slide 16 3Q06 Revenue by Segment Customer Revenue: $1,410 Million 3Q06 % Customer Change Services Revenue vs. 3Q05 86% Services $1,218M +4% Technology $192M -10% Technology Overall $1,410M +2% 14%
Slide 21: 3Q06 Services Revenue
Slide 17 3Q06 Services Revenue Customer Revenue: $1,218 Million 3Q06 % Core Customer Change Maint. Revenue vs. 3Q05 9% Consulting/ Consulting/SI $378M -4% Infrastructure Systems Int. 31% Outsourcing $491M +13% Services 19% Infrastructure $237M +7% Services Outsourcing 41% Core $112M -11% Maintenance
Slide 22: 3Q06 Technology Revenue
Slide 18 3Q06 Technology Revenue Customer Revenue: $192 Million 3Q06 % Customer Change Revenue vs. 3Q05 Enterprise $146M -14% Servers Specialized Enterprise Technology Servers Specialized 24% 76% $46M +10% Technology Overall $192M -10%
Slide 23: Operating Expenses Declining – GAAP
Slide 19 Operating Expenses Declining – GAAP Operating Expenses* -- % of Revenue 30% 26.7% 24.6% 25% 23.0% 21.4% 20% 15% Year 2005 1Q06 2Q06 3Q06 *Operating expenses = SG&A plus R&D
Slide 24: Operating Expenses Declining – Non-GAAP
Slide 20 Operating Expenses Declining – Non-GAAP* Operating Expenses* -- % of Revenue 30% 25% 22.0% 22.2% 21.0% 19.9% 20% 15% Year 2005 1Q06 2Q06 3Q06 *Operating expenses = SG&A plus R&D, excluding restructuring charges and pension expense. See Schedule B: GAAP to non-GAAP Reconciliations
Slide 25: Operating Margin Trends – GAAP
Slide 21 Operating Margin Trends – GAAP 3Q05 3Q06 Y/Y Improvement Operating Margin -5.5% -3.0% 2.5 pts Services Operating Margin -5.1% -1.3% 3.8 pts Technology Operating Margin -5.9% 5.5% 11.4 pts
Slide 26: Operating Margin Trends – Non-GAAP
Slide 22 Operating Margin Trends – Non-GAAP* 3Q05 3Q06 Y/Y Improvement Operating Margin -2.3% 2.6% 4.9 pts Services Operating Margin -2.0% 1.8% 3.8 pts Technology Operating Margin -3.0% 7.6% 10.6 pts 2008 Operating Profit Margin Goal 8-10% *Excludes restructuring charges and pension expense. See Sch
Slide 27: 3Q06 Cash Flow
Slide 23 3Q06 Cash Flow $M 3Q05 3Q06 Cash Flow From Operations ($68) $27 Capital Expenditures $85 $60 Free Cash Flow (Usage) ($153) ($33) Depreciation & Amortization $91 $96 Cash Balance $466 $612
Slide 28: Timetable for Reductions, Cost Savings
Slide 24 Timetable for Reductions, Cost Savings Headcount Reductions Net Annualized Cost Savings 2Q06 ~2,200 End of 2006 2H 2007 3Q06 ~1,400 ~$280M $340M+ 4Q06 ~1,400 Cash Requirements FY06 ~5,000 2006 2007+ 1H07 ~600 $182M $148M
Slide 29: Questions & Answers
Questions & Answers Joe McGrath Janet Haugen President & CEO Chief Financial Officer
Slide 30: Reconciliation of GAAP to Non-GAAP Financial Information
Reconciliation of GAAP to Non-GAAP Financial Information The following slides present financial information with and without pension expense and cost-reduction charges. The company has provided this information as a supplement to financial information presented on a GAAP basis. The company believes
Slide 31: Operating Profit: GAAP to Non-GAAP Reconciliation
Schedule A Operating Profit: GAAP to Non-GAAP Reconciliation $M 3Q05 FY05 1Q06 2Q06 3Q06 Operating Profit (Loss) – ($76.2) -5.5% ($162.4) -2.8% ($168.8) -12.2% ($183.7) -13.1% ($42.9) -3.0% GAAP Pre-tax Pension $44.2 3.2% $181.1 3.1% $7.9* 0.6% $40.5 2.9% $43.4 3.1% Expense Pre-tax Restructuring --
Slide 32: Operating Expenses As % of Revenue: GAAP to Non-GAAP Reconciliation
Schedule B Operating Expenses As % of Revenue: GAAP to Non-GAAP Reconciliation $M FY05 1Q06 2Q06 3Q06 Operating Expenses $1,323.8 23.0% $370.7 26.7% $346.6 24.6% $301.6 21.4% (GAAP) Pre-tax Pension $55.3 1.0% $0.2 -- $11.3 0.8% $12.3 0.9% Expense Pre-tax Restructuring -- -- $63.0 4.5% $40.1 2.8% $8.
Slide 33: Operating Profit & Margins: GAAP to Non-GAAP Reconciliation
Schedule C Operating Profit & Margins: GAAP to Non-GAAP Reconciliation $M 3Q05 3Q06 SERVICES Operating Profit (Loss) – GAAP ($60.2) -5.1% ($15.6) -1.3% Pre-tax Pension Expense $36.7 3.1% $37.9 3.1% Operating Profit (Loss) – Non-GAAP ($23.5) -2.0% $22.3 1.8% TECHNOLOGY Operating Profit (Loss) – GAAP
Slide 34: Restructuring Charge & Pension Expense Detail
Schedule D Restructuring Charge & Pension Expense Detail Restructuring Charge Pension Expense 9Mos 9Mos $M 3Q06 3Q06 2006 YTD 2006 YTD* Cost of Revenue $28.1 $214.9 $31.1 $68.0 SG&A $8.3 $82.0 $9.2 $19.5 R&D $0.0 $29.4 $3.1 $4.3 Other Income $0.0 ($2.8) $0.0 $0.0 Total $36.4 $323.5 $43.4 $91.8 *Net
Slide 35: Pension Expense
Schedule E Pension Expense 9Mos 9Mos $M 3Q05 3Q06 2005 2006 2005 2006E* YTD YTD* Services $36.7 $37.9 $114.6 $83.0 $151.6 $121.0 Technology $7.5 $5.5 $22.2 $8.8 $29.5 $14.0 Total $44.2 $43.4 $136.8 $91.8 $181.1 $135.0 Note: Estimates concerning expected pension income (expense) are based on actuaria
Slide 36: Retirement Expense (Income) Expectations
Schedule F Retirement Expense (Income) Expectations $Millions U.S. 401k Plan Worldwide Defined Benefit Pension Plans $250 $200 $200 $154* $150 $121 $114 $181 $85 $100 $135* $62 $94 $25 $50 $59 $60 $19 $20 $19 $19 $0 -$23 ($4) -$50 2003 2004 2005 2006E 2007E 2008E Note: Estimates concerning expected