*DJ Unisys 2Q Rev $438.8M >UIS

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August 04, 2020 16:01 ET (20:01 GMT)

Press Release: Unisys Announces Second-Quarter Results

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

PR Newswire

BLUE BELL, Pa., Aug. 4, 2020

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(R) 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 (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(R) 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 Services Technology Operating Net Revenue Revenue Revenue Profit Income EBITDA Diluted Growth Growth Growth Margin Margin Margin EPS
GAAP (22.9%) (17.7%) (51.6%) GAAP (1.9%) (17.4%) (4.1%) ($1.21)
Constant-Currency YoY (1,120) (1,750) (1,430) (GAAP) (19.8%) (14.4%) (49.7%) Change bps bps bps N/M
Non-GAAP (22.0%) (16.5%) N/A Non-GAAP 0.2% (2.2%) 11.4% ($0.15) YoY (960) bps (820) (540) N/M Change bps bps

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:

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