Unisys Corporation New · NYSE:UIS
Unisys Corporation New — Unisys — Q4 2006 Earnings Presentation
38 slides from Unisys Corporation New's earnings presentation, Jan 24, 2007
Slide 1: 4Q06 Financial Results
4Q06 Financial Results January 24, 2007 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: 4Q06 Strategic Update
4Q06 Strategic Update Joe McGrath President & CEO
Slide 4: 4Q06 Overview
Slide 1 4Q06 Overview • Closed year of change in 2006 with solid, profitable 4Q • Continued to make progress in repositioning program • Significant improvement in profit margins • Double-digit services order growth • Continued to drive down operating costs, expand global sourcing • Generated $102M o
Slide 5: Demand Trends
Slide 2 Demand Trends • Continue to see good demand – particularly for outsourcing, enterprise security solutions • Double-digit services order growth, driven by outsourcing • Major 4Q06 wins: Client Term $ Value Texas Department of Information Resources/IBM 7 years ~$135M Australian Dept. of Immigr
Slide 6: Key 2006 Client Wins: Outsourcing
Slide 3 Key 2006 Client Wins: Outsourcing Australian Government Department of Immigration and Multicultural Affairs
Slide 7: Key 2006 Client Wins: Enterprise Security
Slide 4 Key 2006 Client Wins: Enterprise Security Australian Government Department of Immigration and Multicultural Affairs European Commission
Slide 8: 4Q06 & FY06 Financial Results – GAAP
Slide 5 4Q06 & FY06 Financial Results – GAAP $M 4Q06 Y/Y Change 2006 Y/Y Change Revenue $1,552 -1% $5,757 Flat Services $1,299 +2% $4,917 +3% Technology $253 -15% $840 -13% Operating Profit (Loss) $68.6 +$32.0 ($326.8)* -$164.4 Operating Margin (Loss) % 4.4% +210 BP (5.7%)* -290 BP Services Operatin
Slide 9: Operating Profit Trends – Non-GAAP
Slide 6 Operating Profit Trends – Non-GAAP* $M 4Q05 4Q06 Y/Y Change Operating Profit $80.9 $102.0 +$21.1 Operating Margin % 5.2% 6.6% +140 BP Services Operating Profit $11.7 $53.1 +$41.4 Technology Operating Profit $67.5 $50.5 -$17.0 * Excludes pension expense and restructuring. See Schedule A and C
Slide 10: Operating Profit & Margin Trends (GAAP)
Slide 7 Operating Profit & Margin Trends (GAAP) 2006 $M 1Q 2Q 3Q 4Q Operating Profit (Loss) ($168.8) ($183.7) ($42.9) $68.6 Operating Margin -12.2% -13.1% -3.0% 4.4%
Slide 11: Operating Profit & Margin Trends (Non-GAAP)
Slide 8 Operating Profit & Margin Trends (Non-GAAP*) 2006 2008 $M 1Q 2Q 3Q 4Q Goal Operating Profit (Loss) ($12.5) ($1.7) $36.9 $102.0 Operating Margin -0.9% -0.1% 2.6% 6.6% 8-10% * Excludes pension expense and restructuring. See Schedule A: GAAP to non-GAAP Reconciliation
Slide 12: Repositioning – 2006 Accomplishments
Slide 9 Repositioning – 2006 Accomplishments 9 Adopted changes to U.S. retirement plans ... substantial savings 9 Improved two major challenging BPO operations 9 Moved to account-based sales programs focused on Top 500 clients 9 Realigned services delivery force to support growth initiatives 9 Reach
Slide 13: Progress on Reductions, Cost Savings
Slide 10 Progress on Reductions, Cost Savings Headcount Reductions Net Annualized Cost Savings FY06 ~4,900 End of 2006 ~$280M 1H07 ~700 2H 2007 $340M+ Total 5,600
Slide 14: Goals for 2007: Focus on Implementation
Slide 11 Goals for 2007: Focus on Implementation • Focus on core strategic growth programs • Strengthen account-centric sales focus • Continue to deepen services delivery capabilities • Continue to enhance cost competitiveness through offshoring • Continue to streamline operations and drive down cos
Slide 15: 4Q06 Financial Review
4Q06 Financial Review Janet Haugen Chief Financial Officer
Slide 16: 4Q06 Financial Results
Slide 12 4Q06 Financial Results 4Q05 4Q06 Y/Y Ch Revenue $1,570M $1,552M -1% Operating Expenses* $341.1M $317.5M -$23.6 Pre-Tax Income $27.2M $49.3M +$22.1 Provision for Taxes $58.3M $28.0M -$30.3 Net Income/Loss ($31.1M) $21.3M +$52.4 Income (Loss) Per Share ($0.09) $0.06 +$0.15 *Operating expenses
Slide 17: 4Q06 Revenue by Geography
Slide 13 4Q06 Revenue by Geography Customer Revenue: $1,552 Million Americas 4Q06 % 9% Customer Change Pacific Revenue vs. 4Q05 Asia 11% United United States $655M -5% States 42% International $897M +2% Europe/ Africa 38% Overall $1,552M -1%
Slide 18: 4Q06 Revenue by Segment
Slide 14 4Q06 Revenue by Segment Customer Revenue: $1,552 Million 4Q06 % Customer Change Services Revenue vs. 4Q05 84% Services $1,299M +2% Technology $253M -15% Technology Overall $1,552M -1% 16%
Slide 19: 4Q06 Services Revenue
Slide 15 4Q06 Services Revenue Customer Revenue: $1,299 Million 4Q06 % Core Customer Change Maint. Revenue vs. 4Q05 9% Systems Int./ Outsourcing $499M +8% Infrastructure Consulting 33% SI/Consulting $429M -4% Services 20% Infrastructure $257M +9% Services Outsourcing 38% Core $114M -9% Maintenance O
Slide 20: 4Q06 Technology Revenue
Slide 16 4Q06 Technology Revenue Customer Revenue: $253 Million 4Q06 % Customer Change Revenue vs. 4Q05 Enterprise $208M -17% Servers Specialized Enterprise Technologies Servers Specialized 18% 82% $45M -6% Technologies Overall $253M -15%
Slide 21: 2006 Revenue by Geography
Slide 17 2006 Revenue by Geography Customer Revenue: $5,757 Million Americas 2006 % 9% Customer Change Pacific Revenue vs. 2005 Asia 12% United United States $2,540M -4% States 44% International $3,217M +4% Europe/ Africa 35% Overall $5,757M Flat
Slide 22: 2006 Revenue by Segment
Slide 18 2006 Revenue by Segment Customer Revenue: $5,757 Million 2006 % Customer Change Services Revenue vs. 2005 85% Services $4,917M +3% Technology $840M -13% Technology Overall $5,757M Flat 15%
Slide 23: 2006 Services Revenue
Slide 19 2006 Services Revenue Customer Revenue: $4,917 Million 2006 % Core Customer Change Maint. Revenue vs. 2005 9% Systems Int./ Outsourcing $1,916M +10% Infrastructure Consulting 33% SI/Consulting $1,592M -4% Services 19% Infrastructure $948M +9% Services Outsourcing 39% Core $461M -11% Mainten
Slide 24: 2006 Technology Revenue
Slide 20 2006 Technology Revenue Customer Revenue: $840 Million 2006 % Customer Change Revenue vs. 2005 Enterprise $669M -15% Servers Specialized Enterprise Technologies Servers Specialized 20% 80% $171M -7% Technologies Overall $840M -13%
Slide 25: Operating Expenses Declining – GAAP
Slide 21 Operating Expenses Declining – GAAP Operating Expenses* -- % of Revenue 30% 26.7% 24.6% 25% 23.0% 23.2% 21.4% 20.5% 20% 15% Year 2005 1Q06 2Q06 3Q06 4Q06 Year 2006 *Operating expenses = SG&A plus R&D
Slide 26: Operating Expenses Declining – Non-GAAP
Slide 22 Operating Expenses Declining – Non-GAAP* Operating Expenses* -- % of Revenue 30% 25% 22.0% 22.2% 21.0% 20.8% 19.9% 20.0% 20% 15% Year 2005 1Q06 2Q06 3Q06 4Q06 Year 2006 *Operating expenses = SG&A plus R&D, excluding pension expense and restructuring. See Schedule B: GAAP to non-GAAP Reconci
Slide 27: Key Drivers to 2008 Operating Margin Target
Slide 23 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 Fix Problem Contracts Revenue Growth
Slide 28: Cash Flow Comparison
Slide 24 Cash Flow Comparison $M 4Q05 4Q06 FY05 FY06 Cash Flow From Operations $260 $167 $282 $29 Capital Expenditures $88 $58 $382 $257 Free Cash Flow (Usage) $172 $109 ($100) ($228) Depreciation & Amortization $97 $101 $374 $389 Cash Balance $643 $719
Slide 29: Retirement Expense (Income) Expectations
Slide 25 Retirement Expense (Income) Expectations $Millions U.S. 401k Plan Worldwide Defined Benefit Pension Plans $250 $200 $200 $154* $150 $114 $101 $181 $100 $136* $42 $94 $50 $59 $19 $20 $19 $18 $0 -$23 ($4) -$50 2003 2004 2005 2006 2007E Note: Estimates concerning expected pension income (expen
Slide 30: Questions & Answers
Questions & Answers Joe McGrath Janet Haugen President & CEO Chief Financial Officer
Slide 31: 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 32: Operating Profit: GAAP to Non-GAAP Reconciliation
Schedule A Operating Profit: GAAP to Non-GAAP Reconciliation $M 4Q05 1Q06 2Q06 3Q06 4Q06 Operating Profit (Loss) – $36.6 2.3% ($168.8) -12.2% ($183.7) -13.1% ($42.9) -3.0% $68.6 4.4% GAAP Pre-tax Pension $44.3 2.9% $7.9* 0.6% $40.5 2.9% $43.4 3.1% $43.7 2.8% Expense Pre-tax -- -- $148.4 10.7% $141.5
Slide 33: 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 4Q06 Operating Expenses $1,323.8 23.0% $370.7 26.7% $346.6 24.6% $301.6 21.4% $317.5 20.5% (GAAP) Pre-tax Pension $55.3 1.0% $0.2 -- $11.3 0.8% $12.3 0.9% $12.4 0.8% Expense Pre-tax -- -- $63.0 4.5%
Slide 34: Operating Profit & Margins: GAAP to Non-GAAP Reconciliation
Schedule C Operating Profit & Margins: GAAP to Non-GAAP Reconciliation $M 4Q05 4Q06 SERVICES Operating Profit (Loss) – GAAP ($25.3) -2.0% $15.0 1.2% Pre-tax Pension Expense $37.0 2.9% $38.1 2.9% Operating Profit (Loss) – Non-GAAP $11.7 0.9% $53.1 4.1% TECHNOLOGY Operating Profit (Loss) – GAAP $60.2
Slide 35: Restructuring Charge Detail
Schedule D Restructuring Charge Detail $M 2006 Cost of Revenue $218.9 SG&A $84.6 R&D $29.4 Other Income ($2.8) Total $330.1
Slide 36: Pension Expense Detail
Schedule E Pension Expense Detail $M 4Q06 2006 * Cost of Revenue $31.3 $99.3 SG&A $9.3 $28.8 R&D $3.1 $7.4 Total $43.7 $135.5 *Net of $45.0 curtailment gain
Slide 37: Pension Expense
Schedule F Pension Expense $M 4Q05 4Q06 2005 2006* Services $37.0 $38.1 $151.6 $121.1 Technology $7.3 $5.6 $29.5 $14.4 Total $44.3 $43.7 $181.1 $135.5 Note: Estimates concerning expected pension income (expense) are based on actuarial assumptions and on current assumptions regarding interest rates a
Slide 38: 4Q06 Financial Results
4Q06 Financial Results January 24, 2007