Unisys' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Unisys (UIS)

Q1 2012 Earnings Call

April 24, 2012 5:30 pm ET


Niels Christensen -

J. Edward Coleman - Chairman of the Board, Chief Executive Officer and Member of Finance Committee

Janet Brutschea Haugen - Chief Financial Officer and Senior Vice President


Geoffrey K. Dancey - Cutler Capital Management LLC

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

William S. Smith - Wm Smith Securities, Inc.

Chris McDonald - Kennedy Capital Management, Inc.

Vlad Shteynberg



Good day, and welcome to the Unisys First Quarter 2012 Results Conference Call. At this time, I would like to turn the conference over to Mr. Niels Christensen, Vice President of Investor Relations at Unisys Corporation. Go ahead, sir.

Niels Christensen

Thank you, operator. Good afternoon, everyone, and thank you for joining us.

Earlier today, Unisys released its first quarter 2012 financial results. With us this afternoon to discuss our results are Ed Coleman, our CEO; and Janet Haugen, our CFO.

Before we begin, I want to cover a few housekeeping details. First, today's conference call and the Q&A session are being webcast via the Unisys investor website. Second, you can find the earnings press release and the presentation slides that we will be using this afternoon to guide our discussion on our investor website. These materials are available for viewing as well as downloading and printing.

Third, today's presentation, which is complementary to the earnings press release, includes some non-GAAP financial measures. These have been provided in an effort to give investors additional information. The non-GAAP measures have been reconciled to the related GAAP measures, and we've provided reconciliation charts at the end of the presentation.

Finally, I'd like to remind you that all forward-looking statements made during this conference call are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. These factors are discussed more fully in the earnings release and in the company's SEC filings. Copies of these SEC reports are available from the SEC and from the Unisys investor website.

And now I'd like to turn the call over to Ed.

J. Edward Coleman

Thanks, Niels. Hello, everyone, and thank you for joining us today to discuss our first quarter 2012 financial results.

We reported increased profits on higher revenue for the first quarter, and Janet will go through the numbers in detail, but please see Page 4 of the presentation for highlights.

We reported diluted earnings per share of $0.30 compared to a diluted net loss of $0.95 in the first quarter of 2011. Excluding debt reduction charges and pension expense in both years, our non-GAAP earnings per share increased to $0.97 from a non-GAAP loss of $0.04 a year ago.

Revenue grew 2% year-over-year overall and 3% in our services business. This was the second quarter in the past 3 that we've grown our top line. We've done this despite continued weakness in our U.S. Federal business where conditions remained challenging. Margins improved in our services business, although we still have work to do to get to our goal of a consistent 8% to 10% operating profit margin.

Our technology business delivered strong margins in the quarter on 5% lower revenue as we benefited from a richer mix of enterprise software.

We also continued to make progress in reducing debt during the quarter, retiring an additional $66 million of high-coupon notes. Since September 2010, we've cut our outstanding debt by more than $540 million or nearly 2/3 and we are now 87% of the way toward our year-end 2013 debt reduction goal. These actions have reduced our annualized interest expense by $69 million.

Moving to Page 5. From a demand perspective, we're encouraged by the interest we saw from customers for our enhanced services and solutions portfolio. Services orders grew double digits for the second straight quarter, driven by major signings by both new and existing clients. We saw a particular order strength for our end-user and data center outsourcing solutions. To drive profitable growth, we continue to enhance our portfolio and delivery capabilities to help organizations address major disruptive trends occurring in the marketplace. These trends, such as mobility, cloud computing and social computing, are changing the way people work, play and go about their lives. These technologies have freed people from the constraints of time and geography and enabled them to access and share information in a "24/7, always on, connected" global economy.

For companies and government agencies, however, these trends create significant challenges, for example, how to support and manage mobile end users who are increasingly using their own devices in the workplace; how to secure critical data from sophisticated hackers and cyber thieves; how to manage, store and use all the information being created to better know and serve customers; and how to manage all these new demands and requirements while also reducing cost. All of these trends create growth opportunities that we believe Unisys, with our systems integration expertise, our security skills, our outsourcing capabilities, our mission-critical technology, is well positioned to capitalize on.

As we look to the market, we see an opportunity for Unisys to differentiate ourselves as the company that provides services and solutions to help organizations operate more safely and securely in an ever more connected world. We deliver these solutions through project-based systems integration engagements or through an outsourced managed services environment. We also provide the technologies that supports secure, mission-critical environments.

In the area of IT outsourcing, for example, during the first quarter we closed significant new business with the American Red Cross to provide end user and data center managed services to make sure their 20,000 workers are well supported and connected in order to achieve their critical mission.

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