Unisys Announces 2Q21 Results

unisys corporation

BLUE BELL, PA — Unisys Corporation (NYSE: UIS) recently reported second-quarter 2021 financial results. “We achieved double-digit year-over-year revenue growth and significant year-over-year improvements to profitability and cash flow in the second quarter,” said Unisys Chair and CEO Peter A. Altabef. “We also continued executing on the strategic goals that we described during our January investor presentation for sustainable growth and margin expansion, including advancing the transformation of our Digital Workplace Solutions business, broadening our cloud capabilities, and expanding our enterprise computing solutions.”

The segment formerly referred to as ClearPath Forward® (CPF) is now called Enterprise Computing Solutions (ECS). This reflects a name change only. 

Summary of Second-Quarter 2021 Results

  • Revenue:
    • Revenue grew 17.9% YoY to $517.3M vs. $438.8M in 2Q20 (11.5% YoY growth in constant currency(1))
      • Revenue growth was supported by YoY growth in each of the company’s three segments
  • Operating Profit:
    • Operating profit grew $49.3M YoY to $40.8M vs. $(8.5)M in 2Q20
      • Non-GAAP operating profit grew $49.3M YoY to $50.1M vs. $0.8M in 2Q20
    • Operating profit margin improved 980 bps YoY to 7.9% vs. (1.9)% in 2Q20
      • Non-GAAP operating profit margin improved 950 bps YoY to 9.7% vs. 0.2% in 2Q20
    • YoY operating profit margin increases were supported by YoY improvements in gross margin for each of the company’s three segments
  • Adjusted EBITDA and Net Income:
    • Adjusted EBITDA(6) increased 124.8% YoY to $94.4M vs. $42.0M in 2Q20
      • Adjusted EBITDA margin improved 860 bps YoY to 18.2% vs. 9.6% in 2Q20
    • The company completed its goal of $1.2B in gross pension liability reductions during the quarter, and recognized settlement charges of $210.7M ($2.37 per diluted share) related to its most recent pension liability-reduction initiatives
      • Net loss from continuing operations was $140.8M vs. a net loss of $76.5M in 2Q20, with the noted settlement charges of $210.7M exceeding the size of the net loss
      • Net income margin of (27.2)% vs. (17.4)% in 2Q20 (980 bps decline)
    • Non-GAAP net income from continuing operations(7) improved $55.7M YoY to $46.0M vs. $(9.7)M in 2Q20
      • Non-GAAP net income margin improved 1110 bps to 8.9% vs. (2.2)% in 2Q20
  • Earnings Per Share from Continuing Operations:
    • As noted above, the company completed its $1.2B pension liability-reduction goal during the quarter and recognized related settlement charges
      • Loss per share from continuing operations of $2.10 vs. a loss of $1.21 in 2Q20, with the noted settlement charges of $2.37 per diluted share exceeding the size of the net loss per share
      • Non-GAAP diluted earnings per share from continuing operations(7) improved $0.83 to $0.68 vs. $(0.15) in 2Q20
  • Cash Flow:
    • Cash from operations improved $56.1M to $41.9M vs. cash used in operations of $14.2M in 2Q20, helped by margin improvements
    • Free cash flow improved $68.6M to $19.0M vs. $(49.6)M in 2Q20, helped by capex being lower by 35.3% in 2Q21
    • Adjusted free cash flow improved $91.6M to $54.5M vs. $(37.1)M in 2Q20
  • Backlog:
    • Total company backlog(2) of $3.3B vs. $3.4B as of 1Q21
      • Sequential decline in backlog due to a delay in signing of one large new DWS contract, which has since been signed.
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Financial Highlights by Segment:
DWS:

  • DWS revenue grew 9.7% YoY to $146.5M vs. $133.5M in 2Q20 (4.4% YoY growth in constant currency)
    • YoY growth reflects increased revenue from proactive experience solutions and improvement in businesses that were impacted by COVID-19
  • DWS gross profit grew 144.9% YoY to $22.3M vs. $9.1M in 2Q20
    • DWS gross margin improved 840 bps YoY to 15.2% vs. 6.8% in 2Q20
  • During 2Q21, the company signed a contract with a consortium of U.S.-based energy companies (a new client for Unisys) to provide a full range of IT solutions including digital workplace, application support and cloud & infrastructure, all with security oversight and protection. The agreement highlights the use of Unisys’ IP-led solutions, including InteliServe™ and CloudForte®, to improve productivity and deliver a superior employee experience.
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C&I:

  • C&I revenue grew 9.9% YoY to $124.4M vs. $113.2M in 2Q20 (5.9% YoY growth in constant currency)
    • C&I revenue growth supported by 15.7% YoY growth in C&I revenue in the U.S. & Canada
  • C&I gross profit grew 163.2% YoY to $15.6M vs. $5.9M in 2Q20
    • C&I gross margin improved 730 bps YoY to 12.5% vs. 5.2% in 2Q20
  • During 2Q21 the company signed a contract that spans both DWS and C&I with the State of Wisconsin Department of Workforce Development, a new client, to provide a cloud-based contact center solution that will improve the experience of how citizens interact with government. Through this new solution, Wisconsin citizens will be able to contact various government programs more quickly, and all contacts they have with these programs will be seamlessly linked across platforms to improve access and ensure better customer service.

ECS:

  • ECS revenue grew 40.2% YoY to $169.5M vs. $120.9M in 2Q20 (32.9% YoY growth in constant currency)
    • YoY revenue growth was supported by higher license renewal revenue than anticipated, driven by higher-volumes than expected
    • ECS services revenue also grew 2% YoY
  • ECS gross profit grew 83.6% YoY to $104.2M vs. $56.8M in 2Q20
    • ECS gross margin improved 1430 bps YoY to 61.3% vs. 47.0% in 2Q20
  • During 2Q21, the Company signed a contract expansion with one of the largest financial services institutions in Brazil for consulting and application services for their ClearPath Forward and related application environment, including development and modernization related to the integration of more than 90 systems to support the institution’s mortgage processing operation across different states, channels and partners in the country. Unisys will also deploy Stealth™ software to secure multiple state applications.
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(1) Constant currency – The company refers to growth rates in constant currency or on a constant currency basis so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates to facilitate comparisons of the company’s business performance from one period to another. Constant currency is calculated by retranslating current and prior period results at a consistent rate.

(2) Backlog – Represents future revenue associated with contracted work which has not yet been delivered or performed. Although the Company states it believes this backlog is firm, they state they may, for commercial reasons, allow the orders to be cancelled, with or without penalty.

(3) Pipeline – Pipeline represents prospective sale opportunities being pursued or for which bids have been submitted. There is no assurance that pipeline will translate into recorded revenue.

(4) Total Contract Value – TCV is the estimated total contractual revenue related to contracts signed in the period without regard for cancellation terms. New business TCV represents TCV attributable to new scope for existing clients and new logo contracts.

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