Unisys Corporation New · NYSE:UIS
Unisys Corporation New — Unisys — Deutsche Bank Leveraged Finance Conference 2023
39 slides from Unisys Corporation New's conference presentation, Oct 4, 2023
Slide 1: Investor Presentation
Investor Presentation October 4, 2023 Deutsche Bank Leveraged Finance Conference
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements:This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Unisys Co
Slide 3: Market Backdrop
Market Backdrop unisys
Slide 4: Global IT services
Global IT services We operate in a large and growing market Secular Growth Tailwinds Workplace Infrastructure ~12% ~19% Smart Workplace Infrastructure Consulting 1.5T Mobility/BYOD Application Modernization Unified Communications Infrastructure as a Service 11% ~$60B by 2025 ~$390B by 2025 3YR CAGR
Slide 5: Unisys today
Unisys today unisys
Slide 6: We drive breakthroughs
We drive We are… breakthroughs ~16K 2K + ~37% Associates Engineers Women Our top 50 clients on average have Supporting… been with us for more than 20 years ~230 financial institutions globally 800 + 50 + ~11M depend on Unisys every day Clients Countries End-Users 8 out of 10 of the world’s top With…
Slide 7: What we do
Our clients rely on us to solve many of their most complex business and What we do technology challenges to unlock faster growth and operational efficiency Orchestrating a seamless and secure employee and Digital Workplace frontline worker experience. Solutions (DWS) We deliver device, endpoint, com
Slide 8: License & Support (L&S)
License & High margin software license & support revenue within ECS Support (L&S) Proprietary operating system 24% Running mission-critical business operations Ex-L&S MIX on-premise & in the cloud OF 2022 TOTAL 76% COMPANY REVENUE Decades-long client relationships ~95% retention with our top clients
Slide 9: Ex-L&S revenue growth and margin expansion being driven by Next-Gen Solutions
Ex-L&S revenue growth and margin expansion being driven by Next-Gen Solutions Experience-based workplace solutions within DWS to enable centralized, secure, and proactive management of Modern devices, communication & collaboration platforms, as well Workplace as endpoints all wrapped with data telem
Slide 10: Our Strategy
Our Strategy unisys
Slide 11: Core elements of our strategy
Core elements of our strategy Addressable Land Solution Gross Margin Operational Market Growth and Expand Development Expansion Excellence
Slide 12: Where we are going
MARKET GROWTH We have the opportunity to significantly increase Where we are going our mix of Next-Gen revenue over the next three years 10% -15% Next-Gen ~65% ~ 35 % Annual Growth <55% 45% + Traditional Next-Gen Ex-L&S Solutions Traditional Next-Gen Ex-L&S Solutions Solutions ~38% Solutions Expecte
Slide 13: We have the right combination of agility and scale for the mid-market
MARKET GROWTH We have the right combination of agility and scale for the mid-market Consolidated partnerships Opportunities $2B – $5B Revenue | ~900 Potential U.S. Clients | $14B+ IT Spend Addressable to Unisys Larger skills gaps Less customization Value trust & reliability Manufacturing / Prioritiz
Slide 14: Landing effectively
LAND AND EXPAND Landing effectively Industry Brand Partner Analysts & Awareness & Direct Sales Ecosystem Advisors Marketing Aligned around point Leveraging our Engaging third-party Top of funnel lead of spear and full eco- channel, alliance, and analysts & advisors generation targeting innovation ou
Slide 15: Key Unisys partners
LAND AND EXPAND Key Unisys partners
Slide 16: Quality client base
LAND AND EXPAND Quality client base Serving as access points for expansion TECHNOLOGY/ MANUFACTURING/ LIFE SCIENCES TRAVEL AND FINANCIAL PUBLIC TELECOM / RETAIL CONSUMER AND HEALTHCARE TRANSPORTATION SERVICES SECTOR MEDIA PACKAGED GOODS Note: logos reflect select Unisys clients
Slide 17: Existing client growth opportunity
LAND AND EXPAND Existing client growth opportunity $2.5B Traditional $9B Digital Platforms $31B Workplace & Applications Untapped addressable wallet Traditional at our existing clients for DWS Infrastructure and CA&I solutions alone1 Modern $2B Workplace 44% Of our $1M+ clients bought solutions from
Slide 18: Our variable solution development platform
SOLUTION DEVELOPMENT Our variable solution development platform A platform that balances industry expertise, targeted innovation & integration, managed and purposeful orchestration to deliver optimized value Flexibility & variability in the technology solutions Standardized with ability to leverage
Slide 19: Our approach to Data & AI
SOLUTION DEVELOPMENT Our approach to Data & AI Simplifying complexity Areas of opportunity Expanding upon our existing solutions Data DESIGN IMPLEMENT MANAGE INNOVATE Engineering Data Security & Governance Generative AI Domain-Specified Insights Business Outcomes Quantum Computing
Slide 20: How we plan to expand gross margins
MARGIN EXPANSION How we plan to expand gross margins Higher value capabilities Next-Gen Traditional Lower the cost of delivery Incorporating generative AI, Solutions Solutions through increased use of hyper-automation, quantum computing automation and labor optimization Aligned to future demand Stra
Slide 21: Targeting $50M annual reduction
OPERATIONAL EXCELLENCE Targeting ~$20M ~$20M $50M annual Optimize and Balance labor location reduction streamline core G&A and pyramid functions and real estate footprint $50M Annual reduction in Sales, General & Administrative (SG&A) ~1/3 per year expenses by 2026 run-rate achieved 2023-2025 ~$10M
Slide 22: Improving Free Cash Flow
OPERATIONAL EXCELLENCE Improving Free Cash Flow Working capital Capex-lite improvement strategy While meeting our Operational improvements Capex ~5% of revenue pension obligations Improved contract terms & investing for Improving future growth Free Cash Flow Margin Pension expansion management Next-
Slide 23: Pension strategy
Since Year-End 2019 OPERATIONAL EXCELLENCE Pension strategy Liabilities $B $9 $7.9 Transfers to Annuity $6 $4.8 multi-client / purchases Lump sums multi-employer $4.4 $3.1 plans $3 $2.8 $1.6 3 US transactions 1 US transaction 2 international plans $0 totaling ~$750M totaling ~$300M totaling ~$700M 2
Slide 24: 2Q23 Financial Highlights
2Q23 Financial Highlights REVENUE GROSS PROFIT $477M $396M $116M $63M EX - L&S TOTAL COMPANY EX - L&S TOTAL COMPANY (7.4%) YoY (6.3%) YoY +4.9% YoY +6.5% YoY 24.3% (450) Bps 16.0% Ex-L&S +560 Bps As Reported Constant Currency As Reported Constant Currency Gross Margin YoY Gross Margin YoY 14% YoY 1.
Slide 25: An investment in Unisys is an investment in…
An investment in Large market Large market opportunity, operating Unisys is an 1 opportunity within the ~$1T global IT solutions market investment in… Innovative Next-Gen Increasingly levered to higher growth 2 and margin areas of the marketplace and Industry Solutions with expanding development cap
Slide 26: Appendix
Appendix unIsyS (©2028 UNISYS CORPORATION. ALL RIGHTS RESERVED. 26
Slide 27: Long-term revenue growth and profitability targets
Long-term revenue Long-term profitability growth targets targets TARGET 3YR CAGR FROM MID-POINT OF FY 2023 GUIDANCE TO 2026 TARGET FULL-YEAR 2026 NON-GAAP MARGINS 4% - 6% 5% - 7% 10% - 12% 17-19% Total Company Ex-L&S Total Company Total Company Revenue Growth Revenue Growth Operating Margin Adj. EBI
Slide 28: Mid-term Free Cash Flow assumptions
Mid-term Free Cash Flow assumptions Targeting 40 - 45% adj. EBITDA to Free Cash Flow conversion by 2026 (pre-pension) Capital Taxes Interest Restructuring & Pension Expenditures Other Annual Capex of ~4- 5% Annual Cash Taxes of Annual Interest Estimating ~$40M in Refer to Appendix of Revenue ~$50-$6
Slide 29: Potential Free Cash Flow
Targeted by 2026 Potential Free Cash $2.1B - $2.2B 4% - 6% Flow Total company revenue Revenue Growth equation 350 - $400M + $Adjusted ~17-19% EBITDA Adj. EBITDA Margin Sufficient to service pension, invest in future growth, and drive = $150 - $175M 40 - 45% Adj EBITDA to Free Cash shareholder value
Slide 30: Pre-pension Free Cash Flow expected to increase as pension contributions decrease
Pre-pension Free Cash Flow expected to increase as estimated expected pension contributions decrease FCF expected to increase as $150-$175M Estimated global pension 2026 Estimated FCF pension contributions are (Pre-Pension) expected to decrease cash contributions $M, as of December 31, 2022 $144 $13
Slide 31: Unisys segment and solutions map
Unisys segment and solutions map SEGMENT / REPORTING NEXT-GEN SOLUTIONS TRADITIONAL SOLUTIONS Digital Workplace Modern Workplace Traditional Workplace Solutions (DWS) Digital Platforms & Infrastructure Cloud, Application & Applications Infrastructure Solutions (CA&I) “DP&A” Specialized Services & Li
Slide 32: Pension terminology
Pension terminology Funding terms Accounting terms IRS Minimum Funding Liabilities: projected future benefits, US GAAP Accounting Liabilities: projected future benefits, present present valued at either segment or full yield curve corporate valued at current market corporate discount rates discount
Slide 33: 2Q Excluding License and Support (Ex-L&S)
2Q Excluding License and Support (Ex-L&S) $M 2Q23 2Q22 GAAP REVENUE $ 476.8 $ 515.0 L&S REVENUE 80.8 137.6 EX-L&S REVENUE (NON-GAAP) $ 396.0 $ 377.4 GAAP GROSS PROFIT $ 115.8 $148.1 L&S GROSS PROFIT 52.4 108.8 EX-L&S GROSS PROFIT (NON-GAAP) $ 63.4 $ 39.3 GAAP GROSS MARGIN 24.3% 28.8% AS A % OF REVEN
Slide 34: 2Q Non-GAAP Operating Profit
2Q Non-GAAP Operating Profit $M 2Q23 2Q22 GAAP OPERATING INCOME $ 0.1 $ 33.7 COST REDUCTION AND OTHER EXPENSES 1 15.8 12.3 POSTRETIREMENT EXPENSE 2 0.4 0.6 NON-GAAP OPERATING PROFIT $ 16.3 $ 46.6 REVENUE $ 476.8 $ 515.0 GAAP OPERATING PROFIT MARGIN 0.0% 6.5% NON-GAAP OPERATING PROFIT MARGIN 3.4% 9.0
Slide 35: 2Q Adjusted EBITDA Reconciliation
2Q Adjusted EBITDA Reconciliation $M 2Q23 2Q22 NET INCOME (LOSS) ATTRIBUTABLE TO UNISYS ($ 40.0) ($ 17.1) NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 0.5 0.3 INTEREST EXPENSE, NET OF INTEREST INCOME OF $6.5 AND $3.4 RESPEC TIVELY 1 1.0 4.9 PROVISION FOR INCOME TAX 15.4 20.3 DEPRECIATION 17.4
Slide 36: YTD Adjusted Free Cash Flow
YTD Adjusted Free Cash Flow SIX MONTHS ENDED JUNE 30, $M 2023 2022 CASH PROVIDED BY (USED FOR) OPERATIONS $ 55.3 ($ 66.7) ADDITIONS TO MARKETABLE SOFTWARE (21.3) (23.6) ADDITIONS TO PROPERTIES (11.9) (14.0) ADDITIONS TO OUTSOURCING ASSETS (4.9) (6.5) FREE CASH FLOW $ 17.2 ($ 110.8) POSTRETIREMENT FU
Slide 37: Leverage Detail
Leverage Detail $M JUNE 30, 2023 SENIOR SECURED NOTES 1 $ 485.0 FINANCE LEASES AND OTHER DEBT 23.2 TOTAL DEBT $ 508.2 GLOBAL NET PENSION DEFICIT (AS OF DEC 31, 2022) 543.1 TOTAL DEBT INCLUDING PENSION DEFICIT $ 1,051.3 CASH $ 423.2 NET LEVERAGE $ 85.0 NET LEVERAGE INCLUDING PENSION DEFICIT $ 628.1 L
Slide 38: Definitions of non-GAAP financial metrics and other terms
Definitions of non-GAAP financial metrics and other terms Non-GAAP Information: This presentation includes non-GAAP financial information such as non-GAAP operating profit, EBITDA, adjusted EBITDA, and revenue excluding License and Support. The Company’s non-GAAP financial measures exclude certain i
Slide 39: Thank you
Thank you Contact us: investor@unisys.com
Unisys — Deutsche Bank Leveraged Finance Conference 2023 on 6ix