Unisys Corporation (NYSE:UIS) Q2 2021 Earnings Conference Call August 3, 2021 8:00 AM ET Company Participants Courtney Holben – Vice President-Investor Relations Peter Altabef – Chief Executive Officer Mike Thomson – Chief Financial Officer Conference Call Participants Joseph Vafi – Canaccord Jon Tanwanteng – CJS Securities Rod Bourgeois – DeepDive Equity Research Ana Goshko – Bank of America Sienna Mori – Goldman Sachs Operator Good day, everyone and welcome to the Unisys Corporation Second Quarter 2021 Ea ...

© 2021 Unisys Corporation. All rights reserved. | Second Quarter 2021 Financial Results Peter Altabef, Chair & CEO Mike Thomson, CFO August 3rd, 2021 | --- | --- | |-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 1-8729 UNISYS CORPORATION (Exact name of registrant as specified in its charter) Indicate by check mark whether the registrant (1) has ...

Financial Data and Key Metrics Changes - Non-GAAP operating profit increased 75% year-over-year to $51 million, with non-GAAP operating profit margin rising 440 basis points to 10% [34] - Adjusted EBITDA increased 30% year-over-year to $94 million, with adjusted EBITDA margin up 440 basis points to 18% [37] - Non-GAAP EPS rose significantly to $0.46 from $0.02 in the prior year period [37] - Cash used in operations improved $335 million year-over-year to $43 million, and adjusted free cash flow improved $52 million to a negative $24 million [38] Business Line Data and Key Metrics Changes - Digital Workplace Services (DWS) gross profit increased 157% year-over-year to $19 million, with gross margins up 860 basis points to 13% [34] - Cloud and Infrastructure (C&I) gross profit improved from a negative $3 million to a positive $12 million, with gross margin up 1,240 basis points to 10% [35] - ClearPath Forward gross profit was up 3% year-over-year to $103 million, with gross margins up 290 basis points to 61% [35] - DWS revenue declined 12% year-over-year, attributed to a large base of legacy solutions [43] Market Data and Key Metrics Changes - C&I revenue increased 19% year-over-year to $123 million, with cloud revenue within this segment growing 31% year-over-year [42] - ClearPath Forward revenue was down 2% year-over-year, primarily due to currency effects and divestiture of low-margin contracts [42] - Total company backlog was $3.4 billion at the end of Q1 2021, with expectations for $380 million to convert to revenue in Q2 [47] Company Strategy and Development Direction - The company is focusing on growing margin, cash flow, and revenue through DWS transformation and expansion of cloud offerings [16] - A new segment structure was implemented, targeting DWS, C&I, and ClearPath Forward, to enhance operational efficiency and reporting [13] - The company plans to pursue acquisitions to enhance its experience-based strategy, particularly in DWS [27][80] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the infrastructure bill potentially benefiting the public sector, particularly in cybersecurity and broadband access [64] - The company expects continued improvements in cash flow and profitability driven by efficiency gains and reduced pension contributions [40][52] - Management anticipates that the DWS transformation and growth in cloud services will drive further profitability and revenue growth in 2022 and 2023 [18] Other Important Information - The company has made significant progress on pension obligations, with no additional contributions required due to the American Rescue Plan Act [52] - The weighted average length of contracts signed in Q1 2021 was shorter than in 2020, indicating quicker revenue conversion from backlog [48] Q&A Session Summary Question: Will backlog grow sequentially or just over the year? - Management expects growth in backlog both in the second quarter and for the full year [59] Question: How sustainable is the operating margin in services? - Management believes services margins are solid and sustainable, with consistent improvement expected [61] Question: Will the infrastructure bill benefit the company? - Management sees opportunities in cybersecurity and new platforms for state and local governments if the infrastructure bill passes [64] Question: Are supply chain issues affecting hardware delivery? - Management indicated that supply chain issues are not significantly impacting hardware availability for clients [66] Question: How is the ROI on sales and marketing expenses across segments? - Management expects revenue growth from DWS, C&I, and ClearPath Forward, with a focus on existing client relationships [72][73] Question: How will the freed-up cash from pension contributions be deployed? - Management does not feel urgency to spend the freed-up cash and will focus on strategic acquisitions in DWS and cloud [78][80] Question: Is there an uptick in add-on work at existing accounts? - Management confirmed an increase in add-on work, particularly in the public sector and cloud services [119]

Financial Performance - Revenue for the three months ended March 31, 2021, was $509.8 million, a decrease of 1.1% from $515.4 million in the same period of 2020, with foreign currency fluctuations contributing a 2 percentage-point positive impact [106]. - U.S. revenue increased by 8.8% in the current period, while international revenue decreased by 8.2%, primarily due to declines in Latin America [107]. - The company reported an operating profit of $43.6 million for the three months ended March 31, 2021, compared to $20.1 million in the prior year, reflecting efficiency gains [109]. - The net loss from continuing operations attributable to the company was $157.8 million, or a loss of $(2.45) per diluted share, compared to a loss of $53.2 million, or $(0.85) per diluted share, in the prior year [114]. - Digital Workplace Services (DWS) revenue was $141.1 million, a decline of 11.9% year-over-year, while Cloud & Infrastructure Solutions (C&I) revenue increased by 18.6% to $123.3 million [119][120]. - CPF revenue for Q1 2021 was $167.6 million, a decline of 2.4% compared to Q1 2020 [121]. Profitability and Margins - Gross profit margin improved to 27.3% in Q1 2021 from 21.9% in Q1 2020, driven by efficiency improvements and cost-reduction initiatives [108]. - Gross profit margin increased to 61.2% in Q1 2021 from 58.3% in Q1 2020 [121]. Cash Flow and Liquidity - Cash and cash equivalents decreased to $716.6 million as of March 31, 2021, down from $898.5 million at December 31, 2020 [123]. - Cash used for operations in Q1 2021 was $42.9 million, significantly lower than $377.9 million in Q1 2020 [125]. - Cash used for investing activities was $33.9 million in Q1 2021, compared to cash provided of $1,093.8 million in Q1 2020 [126]. - Total debt decreased to $541.1 million as of March 31, 2021, from $629.9 million at December 31, 2020 [132]. Pension and Settlement - The company removed approximately $930 million in gross defined benefit pension plan liabilities during the three months ended March 31, 2021, in addition to $276 million removed in Q4 2020, totaling approximately $1.2 billion when completed [94]. - The company expects to make cash contributions of approximately $50.3 million for international defined benefit pension plans in 2021, a significant decrease from $826.2 million in 2020 [100]. - The company anticipates a settlement loss of approximately $186 million related to the transfer of its Dutch subsidiary's pension plan in Q2 2021 [96]. Debt and Credit Facilities - The company has a secured revolving credit facility of up to $145.0 million, with $123.4 million available as of March 31, 2021 [135]. - The company has met all covenants and conditions under its lending agreements and expects to continue doing so for at least the next twelve months [140]. - The company maintains a shelf registration statement for the offer and sale of debt or equity securities [141].

PART I [ITEM 1. BUSINESS](index=6&type=section&id=Item%201.%20Business) Unisys Corporation is a global IT services company offering digital workplace, cloud and infrastructure services, and software operating environments, which reorganized its segments in January 2021 and completed the sale of its U.S. Federal business in March 2020 for **$1.2 billion**, reclassifying it as discontinued operations - Unisys Corporation is a global information technology (IT) services company delivering digital workplace services, cloud and infrastructure services, and software operating environments for high-intensity enterprise computing, with integrated security[23](index=23&type=chunk) - Effective January 2021, Unisys revised its reportable segments to Digital Workplace Services, Cloud & Infrastructure, ClearPath Forward, and Other (primarily BPO solutions), to better address evolving client needs[24](index=24&type=chunk)[431](index=431&type=chunk) - On March 13, 2020, Unisys completed the sale of its U.S. Federal business for **$1.2 billion** in cash, with financial statements retroactively reclassified to report this as discontinued operations[30](index=30&type=chunk)[101](index=101&type=chunk) Services Segment Backlog (2019-2020) | Metric | 2020 (USD billions) | 2019 (USD billions) | | :----- | :------------------ | :------------------ | | Firm Order Backlog | $3.4 | $4.3 | | Expected 2021 Revenue Conversion | $1.3 (39%) | N/A | - As of December 31, 2020, Unisys employed approximately **17,200 employees** globally[40](index=40&type=chunk) [General](index=6&type=section&id=General) Unisys is a global IT services company providing digital workplace, cloud, infrastructure, and software operating environments with integrated security - Unisys Corporation is a global IT services company providing digital workplace services, cloud and infrastructure services, and software operating environments for high-intensity enterprise computing, with security integrated into all solutions[23](index=23&type=chunk) - As of December 31, 2020, Unisys operated in two business segments: Services and Technology. In January 2021, the company revised its reportable segments to Digital Workplace Services, Cloud & Infrastructure, ClearPath Forward, and Other (BPO solutions) to better address client needs[24](index=24&type=chunk) [Principal Products and Services](index=6&type=section&id=Principal%20Products%20and%20Services) Unisys delivers high-performance, security-centric IT services and solutions to government, commercial, and financial services markets, including cloud, application, and BPO services - Unisys delivers high-performance, security-centric services and solutions to Government (national, state, local), Commercial (travel, transportation, life sciences, healthcare), and Financial Services (commercial, retail banking) markets[25](index=25&type=chunk) - Key Services solutions include cloud and infrastructure services, application services, and business process outsourcing (BPO) services, all with advanced security built-in[26](index=26&type=chunk) - Leveraged Services solutions include Unisys InteliServe (transforms service desk with AI/ML), Unisys CloudForte (managed service for secure cloud migration), and Unisys Security Solutions (managed security, consulting, Incident Response, TrustCheck, Stealth)[27](index=27&type=chunk)[33](index=33&type=chunk) [Technology Products](index=7&type=section&id=Technology%20Products) The Technology segment provides a secure, scalable software operating environment for high-intensity enterprise computing, including hardware procurement and security software - Unisys Technology segment offers a secure, scalable software operating environment and related applications for high-intensity enterprise computing, including hardware procurement[28](index=28&type=chunk) - Key Technology products include Unisys ClearPath Forward (hardware-independent, secure operating environment for mission-critical processing, deployable on Intel x86 or public cloud like Microsoft Azure) and Unisys Stealth security software (micro-segmentation, user authentication, attack surface reduction)[29](index=29&type=chunk)[33](index=33&type=chunk) [Sale of U.S. Federal Business](index=7&type=section&id=Sale%20of%20U.S.%20Federal%20Business) On March 13, 2020, Unisys sold its U.S. Federal business for **$1.2 billion** in cash, reclassifying it as discontinued operations in financial statements - On March 13, 2020, Unisys sold its U.S. Federal business to Science Applications International Corporation for **$1.2 billion** in cash. This business is now reported as discontinued operations in financial statements[30](index=30&type=chunk) [Materials](index=7&type=section&id=Materials) Unisys sources components globally, relying on single or limited suppliers for certain Technology products, which poses a risk of supply disruption - Unisys sources components globally, relying on single or limited suppliers for certain Technology products, which poses a risk if suppliers fail to deliver sufficient quantities in a timely manner[31](index=31&type=chunk) [Patents, Trademarks and Licenses](index=7&type=section&id=Patents%202C%20Trademarks%20and%20Licenses) As of January 31, 2021, Unisys holds over **510 active U.S. patents** and over **50 non-U.S. patents**, along with numerous trademark registrations, which are actively monitored and protected - As of January 31, 2021, Unisys holds over **510 active U.S. patents** and over **50 non-U.S. patents** covering information security, cloud computing, virtualization, and database management[32](index=32&type=chunk) - The company also maintains **24 U.S. trademark** and service mark registrations and over **500 non-U.S. registrations**, which are actively monitored and protected[33](index=33&type=chunk) [Seasonality](index=8&type=section&id=Seasonality) Revenue is influenced by new service/product introductions, sales cycle length, and purchase seasonality, but generally has not caused material quarterly revenue changes - Revenue is influenced by new service/product introductions, sales cycle length, and purchase seasonality, but seasonality generally has not caused material quarterly revenue changes[34](index=34&type=chunk) [Customers](index=8&type=section&id=Customers) No single client accounted for more than **10%** of Unisys's revenue in the year ended December 31, 2020 - No single client accounted for more than **10%** of Unisys's revenue in the year ended December 31, 2020[35](index=35&type=chunk) [Backlog](index=8&type=section&id=Backlog) The Services segment reported a firm order backlog of **$3.4 billion** as of December 31, 2020, with approximately **39%** expected to convert to revenue in 2021 Services Segment Firm Order Backlog | Date | Backlog (USD billions) | | :--- | :--------------------- | | Dec 31, 2020 | $3.4 | | Dec 31, 2019 | $4.3 | - Approximately **39%** (**$1.3 billion**) of the 2020 Services backlog is expected to convert to revenue in 2021[36](index=36&type=chunk) - Backlog information for the Technology segment is not considered material due to its relatively short order-to-shipment cycle[37](index=37&type=chunk) [Competition](index=8&type=section&id=Competition) Unisys operates in a highly competitive IT industry, competing on service, product performance, technological innovation, and price, with R&D and sales/marketing investments aimed at improving its competitive position - Unisys operates in a highly competitive IT industry, facing systems integrators, consulting firms, outsourcing providers, hardware manufacturers, and software providers[38](index=38&type=chunk) - Competition is primarily based on service, product performance, technological innovation, and price. Unisys believes its investment in R&D and sales/marketing will positively impact its competitive position[38](index=38&type=chunk) [Environmental Matters](index=8&type=section&id=Environmental%20Matters) Compliance with environmental regulations has not materially affected Unisys's financial position, and future environmental capital expenditures are not expected to be material in 2021 and 2022 - Compliance with environmental regulations has not materially affected Unisys's capital expenditures, earnings, or competitive position, and future environmental capital expenditures are not expected to be material in 2021 and 2022[39](index=39&type=chunk) [Employees](index=8&type=section&id=Employees) As of December 31, 2020, Unisys employed approximately **17,200 individuals** globally - As of December 31, 2020, Unisys employed approximately **17,200 individuals** globally[40](index=40&type=chunk) [Available Information](index=8&type=section&id=Available%20Information) Unisys provides its annual, quarterly, and current reports, along with corporate governance documents and code of ethics, free of charge on its investor website - Unisys makes its annual, quarterly, and current reports, along with corporate governance documents and code of ethics, available free of charge on its investor website (www.unisys.com/investor)[41](index=41&type=chunk) [INFORMATION ABOUT OUR EXECUTIVE OFFICERS](index=9&type=section&id=Information%20About%20Our%20Executive%20Officers) This section lists Unisys's executive officers as of February 15, 2021, including their age, position, and brief biographies, noting that officers are elected annually Unisys Executive Officers (as of Feb 15, 2021) | Name | Age | Position with Unisys | | :--------------- | :-- | :----------------------------------------- | | Peter A. Altabef | 61 | Chairman and Chief Executive Officer | | Eric Hutto | 56 | President and Chief Operating Officer | | Katie Ebrahimi | 51 | Senior Vice President and Chief Human Resources Officer | | Lisa Madion | 50 | Senior Vice President, Corporate Services | | Matthew Newfield | 49 | Senior Vice President and Chief Security and Infrastructure Officer | | Gerald P. Kenney | 69 | Senior Vice President, General Counsel and Secretary | | Ann S. Ruckstuhl | 58 | Senior Vice President and Chief Marketing Officer | | Michael M. Thomson | 52 | Senior Vice President and Chief Financial Officer | | Shalabh Gupta | 59 | Vice President, Strategy, Tax and Treasurer | - Executive officers are elected annually by the Board of Directors for a one-year term or until a successor is elected[43](index=43&type=chunk) - Peter A. Altabef has served as Chairman since 2018 and CEO since 2015, previously holding leadership roles at MICROS Systems and Perot Systems[44](index=44&type=chunk) - Ann S. Ruckstuhl's employment as Senior Vice President and Chief Marketing Officer will terminate effective February 28, 2021[51](index=51&type=chunk) [ITEM 1A. RISK FACTORS](index=11&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could adversely affect Unisys's future results, including the ongoing impact of the COVID-19 pandemic, challenges in implementing business strategy, substantial pension obligations, limitations on tax asset utilization, and various general business risks - The COVID-19 pandemic has negatively impacted the global economy, supply chains, and workforce, creating significant volatility and disruption, with the full extent of its impact on Unisys's operational and financial performance remaining uncertain[55](index=55&type=chunk) - Key business strategy risks include the inability to attract, motivate, and retain experienced personnel, grow revenue and expand margins in Digital Workplace Services and Cloud and Infrastructure, maintain the ClearPath Forward installed base, and sell new solutions[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Unisys faces aggressive competition in the IT marketplace from various firms, which could lead to reduced demand, pricing pressure, and margin erosion[60](index=60&type=chunk) - The company has significant unfunded obligations under its U.S. and non-U.S. defined benefit pension plans, requiring substantial cash contributions, with an estimated **$250.6 million** in 2021[67](index=67&type=chunk) - Unisys's ability to utilize its net operating loss carryforwards and other tax attributes may be limited by 'ownership change' rules under Section 382 of the Internal Revenue Code[69](index=69&type=chunk) - General business risks include foreign currency fluctuations, changing global data privacy regulations, political/economic instability in international operations, cybersecurity breaches, reliance on third-party performance, and potential damage to reputation from client dissatisfaction or legal liabilities[70](index=70&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) [COVID-19](index=11&type=section&id=COVID-19) The COVID-19 pandemic has negatively impacted the global economy, supply chains, and workforce, with its full operational and financial impact on Unisys remaining uncertain - The COVID-19 pandemic has negatively impacted the global economy, supply chains, and workforce, causing significant volatility and disruption in financial markets[55](index=55&type=chunk) - The full extent of COVID-19's impact on Unisys's operational and financial performance, including its ability to execute business strategies, demand for products/services, client payment ability, and office closures, remains uncertain[55](index=55&type=chunk) [Implementation of Business Strategy in Information Technology Marketplace](index=11&type=section&id=Implementation%20of%20Business%20Strategy%20in%20Information%20Technology%20Marketplace) Unisys's future success depends on its ability to attract and retain skilled personnel, grow revenue and margins in key segments, maintain its ClearPath Forward base, and compete effectively in a highly competitive IT market - Unisys's future success is critical on its ability to attract, motivate, and retain experienced personnel with the necessary skills for its target markets[56](index=56&type=chunk) - The company's strategy emphasizes growing revenue and expanding margins in Digital Workplace Services and Cloud and Infrastructure businesses, particularly in higher-value offerings[57](index=57&type=chunk) - Failure to maintain the ClearPath Forward installed base or successfully sell new solutions like Stealth could adversely impact revenue and return on investment[58](index=58&type=chunk)[59](index=59&type=chunk) - Aggressive competition in the IT market from various providers could lead to reduced demand, lower pricing, and adverse effects on Unisys's business[60](index=60&type=chunk) - The company's financial results may be subject to increased volatility and risk due to a higher concentration in the global commercial sector after the sale of its U.S. Federal business[66](index=66&type=chunk) [Defined Benefit Pension Plans](index=13&type=section&id=Defined%20Benefit%20Pension%20Plans) Unisys has significant unfunded obligations under its U.S. and non-U.S. defined benefit pension plans, requiring substantial cash contributions, with an estimated **$250.6 million** in 2021 - Unisys has significant unfunded obligations under its U.S. and non-U.S. defined benefit pension plans[67](index=67&type=chunk) Pension Plan Cash Contributions | Year | Worldwide Contributions (USD millions) | U.S. Qualified Plans (USD millions) | Non-U.S. Plans (USD millions) | | :--- | :----------------------------------- | :---------------------------------- | :---------------------------- | | 2020 | $826.2 | $791.1 | $35.1 | | 2021 (Estimate) | $250.6 | $200.0 (voluntary) | $50.6 | - Deterioration in plan asset values or changes in discount rates, asset returns, or demographic trends could necessitate larger or accelerated cash contributions, reducing cash available for other corporate uses[68](index=68&type=chunk) [Tax Assets](index=13&type=section&id=Tax%20Assets) Unisys's ability to deduct net operating loss carryforwards and utilize other tax attributes may be limited under Section 382 of the Internal Revenue Code if an 'ownership change' occurs - Unisys's ability to deduct net operating loss carryforwards and utilize other tax attributes may be limited under Section 382 of the Internal Revenue Code if an 'ownership change' occurs[69](index=69&type=chunk) [General Business Risks](index=13&type=section&id=General%20Business%20Risks) Unisys faces various general business risks, including foreign currency fluctuations, data privacy regulations, political instability, cybersecurity breaches, ESG compliance, financing access, global economic conditions, and Brexit - A significant portion of Unisys's revenue comes from international operations, exposing it to risks like foreign currency fluctuations, changing data privacy regulations, political/economic conditions, and trade protection measures[70](index=70&type=chunk)[71](index=71&type=chunk) - Future acquisitions or dispositions carry business and financial risks, including substantial indebtedness, integration difficulties, potential loss of employees/clients, and diversion of management attention[72](index=72&type=chunk) - Cybersecurity breaches could lead to significant costs, legal liability, loss of clients, and harm to business and reputation[73](index=73&type=chunk) - Failure to meet environmental, social, and governance (ESG) standards could result in reputational damage and negatively impact business[75](index=75&type=chunk) - Inability to access financing markets or a reduction in credit rating could adversely affect liquidity, increase cost of funds, and impact growth and profitability[76](index=76&type=chunk)[78](index=78&type=chunk) - Global economic conditions, acts of war, terrorism, natural disasters, or widespread infectious diseases could reduce demand and pressure revenue/margins[79](index=79&type=chunk) - The impact of Brexit could adversely affect Unisys's U.K. operations and the funded status of its U.K. pension plans[80](index=80&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=16&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This section states that there are no unresolved staff comments applicable to the company [ITEM 2. PROPERTIES](index=16&type=section&id=Item%202.%20Properties) As of December 31, 2020, Unisys did not own or lease any physical properties considered material to its business operations - As of December 31, 2020, Unisys did not own or lease any physical properties material to its business[87](index=87&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=16&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 18, 'Litigation and contingencies,' of the Notes to Consolidated Financial Statements - Information on legal proceedings is detailed in Note 18, 'Litigation and contingencies,' of the Notes to Consolidated Financial Statements[88](index=88&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to Unisys Corporation PART II [ITEM 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=17&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Unisys Common Stock is traded on the NYSE and London Stock Exchange, with approximately **4,700 stockholders** of record as of January 31, 2021, and no cash dividends paid since 1990, while its stock performance graph shows outperformance against the S&P 500 but underperformance against the S&P 500 IT Services index over five years - Unisys Common Stock is listed for trading on the New York Stock Exchange (UIS) and London Stock Exchange (USY)[91](index=91&type=chunk) - As of January 31, 2021, there were approximately **4,700 stockholders of record**[92](index=92&type=chunk) - Unisys has not declared or paid cash dividends on its Common Stock since 1990 and does not anticipate doing so in the foreseeable future[93](index=93&type=chunk) Cumulative Total Stockholder Return (2015-2020, $100 invested) | Index | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | :------------------- | :--- | :--- | :--- | :--- | :--- | :--- | | Unisys Corporation | $100 | $135 | $74 | $105 | $107 | $178 | | S&P 500 | $100 | $112 | $136 | $130 | $171 | $203 | | S&P 500 IT Services | $100 | $110 | $145 | $151 | $213 | $261 | [ITEM 6. Selected Financial Data](index=18&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of selected financial data for Unisys, highlighting trends in revenue, operating income, net income (loss) from continuing operations, and financial position metrics, reflecting the reclassification of the U.S. Federal business as discontinued operations and including cost-reduction and debt extinguishment charges Five-Year Summary of Selected Financial Data (Dollars in millions, except per share data) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------------------ | :-------- | :-------- | :-------- | :-------- | :-------- | | Revenue | $2,026.3 | $2,222.8 | $2,251.2 | $2,170.9 | $2,256.6 | | Operating income (loss) | $87.0 | $137.9 | $212.1 | $24.5 | $(18.2) | | Income (loss) from continuing operations before income taxes | $(271.8) | $(60.6) | $71.0 | $(145.1) | $(46.1) | | Net income (loss) from continuing operations attributable to Unisys Corporation | $(317.7) | $(92.2) | $21.6 | $(109.7) | $(89.7) | | Basic EPS from continuing operations | $(5.05) | $(1.65) | $0.42 | $(2.18) | $(1.79) | | Diluted EPS from continuing operations | $(5.05) | $(1.65) | $0.42 | $(2.18) | $(1.79) | | Total assets | $2,707.9 | $2,504.0 | $2,457.6 | $2,542.4 | $2,021.6 | | Long-term debt | $527.1 | $565.9 | $642.8 | $633.9 | $194.0 | - The financial statements for all periods presented have been retroactively reclassified to report the U.S. Federal business as discontinued operations following its sale on March 13, 2020[98](index=98&type=chunk) Pretax Cost-Reduction and Debt Extinguishment Charges | Year | Cost-Reduction Charges (USD millions) | Debt Extinguishment Charges (USD millions) | | :--- | :------------------------------------ | :--------------------------------------- | | 2020 | $95.5 | $28.5 | | 2019 | $28.7 | $20.1 | | 2018 | $19.7 | — | | 2017 | $146.8 | — | | 2016 | $82.1 | $4.0 | [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an in-depth analysis of Unisys's financial performance and condition, highlighting the impact of the COVID-19 pandemic and the sale of the U.S. Federal business, detailing revenue declines, significant financial events, segment-specific results, liquidity, and critical accounting policies - Revenue for 2020 decreased by **8.8%** to **$2.03 billion** from **$2.22 billion** in 2019, primarily due to expected declines in the U.K. check-processing joint venture and COVID-19 impacts on field services, travel, entertainment, and volume-based BPO contracts[100](index=100&type=chunk)[108](index=108&type=chunk)[111](index=111&type=chunk) - Unisys reported a net loss from continuing operations attributable to Unisys Corporation of **$317.7 million** in 2020, compared to a **$92.2 million** loss in 2019, largely due to higher cost reduction charges and a **$142.1 million** U.S. pension settlement charge[107](index=107&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk)[128](index=128&type=chunk) - In 2020, Unisys redeemed **$440.0 million** of 10.750% Senior Secured Notes due 2022 and issued **$485.0 million** of 6.875% Senior Secured Notes due 2027, contributing net proceeds to its U.S. defined benefit pension plan[102](index=102&type=chunk)[103](index=103&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - Cash used for operating activities increased significantly to **$681.2 million** in 2020, primarily due to higher cash contributions to U.S. qualified defined benefit pension plans[145](index=145&type=chunk) - Cash provided by investing activities was **$1,041.6 million** in 2020, driven by **$1,162.9 million** net proceeds from the sale of the U.S. Federal business[146](index=146&type=chunk) [Overview](index=19&type=section&id=Overview) The COVID-19 pandemic significantly impacted Unisys's business, leading to an **8.8% revenue decline** in 2020, while the company completed the sale of its U.S. Federal business for **$1.2 billion** and undertook significant debt and pension-related financial actions - The COVID-19 pandemic significantly impacted Unisys's business, leading to an **8.8% revenue decline** in 2020, primarily from its U.K. check-processing joint venture and reduced field services, travel, entertainment, and volume-based BPO contracts[100](index=100&type=chunk) - Unisys completed the sale of its U.S. Federal business for **$1.2 billion** on March 13, 2020, with historical results reclassified as discontinued operations[101](index=101&type=chunk) - In 2020, Unisys redeemed **$440.0 million** of 10.750% Senior Secured Notes due 2022, incurring a **$28.5 million** debt extinguishment charge[102](index=102&type=chunk) - The company issued **$485.0 million** of 6.875% Senior Secured Notes due 2027, with net proceeds contributed to its U.S. defined benefit pension plan[103](index=103&type=chunk) - Unisys contributed **$791.1 million** to its U.S. qualified pension plans in 2020 and recorded a **$142.1 million** non-cash pre-tax settlement charge from a lump-sum cash-out offer for former associates[106](index=106&type=chunk) - Unisys reported a net loss from continuing operations of **$317.7 million** in 2020, compared to a **$92.2 million** loss in 2019[107](index=107&type=chunk) [Company Results](index=20&type=section&id=Company%20Results) Unisys experienced an **8.8%** total revenue decrease in 2020, with Services revenue declining **10.6%** and Technology revenue increasing **1.0%**, while operating profit decreased due to higher cost reduction charges and significant pension and foreign exchange losses Revenue Performance (2018-2020) | Metric | 2020 (USD billions) | 2019 (USD billions) | 2018 (USD billions) | | :----- | :------------------ | :------------------ | :------------------ | | Total Revenue | $2.03 | $2.22 | $2.25 | | Services Revenue | $1.69 | $1.89 | $1.86 | | Technology Revenue | $0.33 | $0.33 | $0.39 | - Total revenue decreased by **8.8%** in 2020 compared to 2019, with Services revenue declining **10.6%** and Technology revenue increasing **1.0%**. Foreign currency fluctuations had a 1-percentage-point negative impact on both segments[108](index=108&type=chunk)[109](index=109&type=chunk) Cost-Reduction Charges and Other Costs (2018-2020) | Year | Total Charges (USD millions) | Workforce Reductions (USD millions) | Other Charges (USD millions) | | :--- | :--------------------------- | :---------------------------------- | :--------------------------- | | 2020 | $95.5 | $25.5 | $70.0 | | 2019 | $28.7 | $22.1 | $6.6 | | 2018 | $19.7 | $19.0 | $0.7 | Gross Profit and Operating Profit (2018-2020) | Metric | 2020 | 2019 | 2018 | | :----- | :------ | :------ | :------ | | Gross Profit % | 23.8% | 24.0% | 26.0% | | Operating Profit | $87.0 | $137.9 | $212.1 | - Operating profit declined in 2020 primarily due to higher cost reduction charges[120](index=120&type=chunk) Interest Expense and Other (Expense), Net (2018-2020) | Metric | 2020 (USD millions) | 2019 (USD millions) | 2018 (USD millions) | | :----- | :------------------ | :------------------ | :------------------ | | Interest Expense | $29.2 | $62.1 | $64.0 | | Other (Expense), Net | $(329.6) | $(136.4) | $(77.1) | - The decline in interest expense in 2020 was due to the redemption of 2022 Notes. Other (expense), net, increased significantly in 2020 due to a **$142.1 million** U.S. pension settlement charge and **$32.3 million** in foreign exchange losses[121](index=121&type=chunk)[122](index=122&type=chunk) Net Income (Loss) from Continuing Operations (2018-2020) | Year | Net Income (Loss) (USD millions) | Diluted EPS (USD) | | :--- | :------------------------------- | :---------------- | | 2020 | $(317.7) | $(5.05) | | 2019 | $(92.2) | $(1.65) | | 2018 | $21.6 | $0.42 | [Segment Results](index=22&type=section&id=Segment%20Results) Unisys's Services segment revenue declined **10.6%** in 2020 due to expected reductions and COVID-19 impacts, while Technology revenue increased **1.0%**, with both segments experiencing a decrease in operating profit percentage - Unisys operates in two business segments: Services (Cloud & infrastructure, Application services, BPO solutions) and Technology (software operating environments and related applications)[129](index=129&type=chunk)[132](index=132&type=chunk) Customer Revenue by Segment (2018-2020, USD millions) | Segment / Service | 2020 | 2019 | 2018 | 2020 vs 2019 Change (%) | | :---------------- | :-------- | :-------- | :-------- | :---------------------- | | **Services** | $1,692.9 | $1,892.7 | $1,857.6 | (10.6)% | | Cloud & infrastructure services | $1,178.1 | $1,287.2 | $1,225.4 | (8.5)% | | Application services | $350.2 | $370.9 | $381.7 | (5.6)% | | BPO solutions | $164.6 | $234.6 | $250.5 | (29.8)% | | **Technology** | $333.4 | $330.1 | $393.6 | 1.0% | | **Total Customer Revenue** | $2,026.3 | $2,222.8 | $2,251.2 | (8.8)% | - The decline in Services revenue in 2020 was largely due to expected reductions in the U.K. check-processing joint venture and COVID-19 impacts on field services, travel, entertainment, and volume-based BPO contracts[134](index=134&type=chunk) - Services gross profit percent increased slightly to **16.5%** in 2020 from **16.2%** in 2019, while operating profit percent decreased to **0.7%** from **1.1%**, negatively impacted by lower revenues due to COVID-19[138](index=138&type=chunk) - Technology gross profit percent decreased to **65.0%** in 2020 from **69.0%** in 2019, and operating profit percent decreased to **40.8%** from **46.1%**, primarily due to a lower mix of higher-margin software sales[140](index=140&type=chunk) [New Accounting Pronouncements](index=24&type=section&id=New%20Accounting%20Pronouncements) Effective January 1, 2020, Unisys adopted ASU No. 2018-15, ASU No. 2016-13, and ASU 2019-12, which did not materially impact its consolidated financial results - Effective January 1, 2020, Unisys adopted ASU No. 2018-15 (Cloud Computing Arrangement Costs), ASU No. 2016-13 (Credit Losses on Financial Instruments), and ASU 2019-12 (Simplifying Income Taxes)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - The adoption of these new accounting standards did not have a material impact on Unisys's consolidated results of operations and financial position[292](index=292&type=chunk)[293](index=293&type=chunk) [Financial Condition](index=24&type=section&id=Financial%20Condition) Unisys's liquidity is supported by cash on hand, operations, and its ABL credit facility, with total debt increasing to **$629.9 million** in 2020 due to new note issuance and pension contributions, and significant contractual obligations and expected pension settlement charges in early 2021 - Unisys's primary liquidity sources are cash on hand, cash from operations, and its ABL credit facility. The company believes it has adequate liquidity for at least the next twelve months[142](index=142&type=chunk) Cash and Cash Equivalents (2019-2020) | Date | Cash and Cash Equivalents (USD millions) | | :----------- | :------------------------------------- | | Dec 31, 2020 | $898.5 | | Dec 31, 2019 | $538.8 | - As of December 31, 2020, **$326.3 million** of cash and cash equivalents were held by foreign subsidiaries, with potential restrictions on transfer to the U.S. and possible withholding taxes[144](index=144&type=chunk) Cash Flow Activities (2019-2020, USD millions) | Activity Type | 2020 | 2019 | | :------------ | :-------- | :-------- | | Operating | $(681.2) | $123.9 | | Investing | $1,041.6 | $(158.2) | | Financing | $5.1 | $(38.0) | - Total debt increased to **$629.9 million** at December 31, 2020, from **$579.4 million** in 2019, primarily due to the issuance of 6.875% senior secured notes, partially offset by the redemption of 10.750% notes[148](index=148&type=chunk) - The Amended and Restated ABL Credit Facility provides for revolving loans and letters of credit up to **$145.0 million**, maturing in October 2025, with **$112.9 million** available at December 31, 2020[157](index=157&type=chunk) - In March 2021, Unisys expects to deliver **$84.2 million** in cash and approximately **4.6 million shares** of common stock to convert holders of its 2021 Notes, increasing outstanding shares by about **3.4 million** after capped call transactions[162](index=162&type=chunk) Contractual Cash Obligations (as of Dec 31, 2020, USD millions) | Obligation Type | Total | Less than 1 year | 1-3 years | 4-5 years | After 5 years | | :------------------------ | :-------- | :--------------- | :-------- | :-------- | :------------ | | Long-term debt | $638.8 | $103.6 | $34.7 | $12.6 | $487.9 | | Interest payments on debt | $249.9 | $40.0 | $72.1 | $68.9 | $68.9 | | Operating leases | $108.2 | $40.8 | $53.2 | $13.4 | $0.8 | | Work-force reductions | $55.9 | $40.7 | $15.2 | — | — | | **Total** | **$1,052.8**| **$225.1** | **$175.2**| **$94.9** | **$557.6** | - In early 2021, Unisys expects to incur approximately **$373 million** in one-time, non-cash, pre-tax settlement charges related to pension plan transfers in the U.S., Netherlands, and Switzerland[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) [Critical Accounting Policies and Estimates](index=27&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The preparation of financial statements requires management to make significant estimates and judgments for revenue recognition, income taxes, pensions, and goodwill, which are subject to future events and economic conditions - The preparation of financial statements requires management to make significant estimates and judgments, including those for revenue recognition, income taxes, pensions, and goodwill, which are subject to future events and economic conditions[172](index=172&type=chunk)[245](index=245&type=chunk) [ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Unisys is exposed to interest rate risk from its fixed-rate long-term debt and foreign currency exchange rate risk from international operations, which it mitigates using derivative financial instruments, with a hypothetical **10%** adverse currency movement reducing derivative fair value by approximately **$50 million** in 2020 - Unisys's long-term debt is primarily fixed-rate, limiting exposure to rising interest rates. A hypothetical **10%** increase in interest rates would not materially impact the fair value of financial instruments or cash flows[197](index=197&type=chunk) - As of December 31, 2020, Unisys had **$476.9 million** (face value **$485.0 million**) in 6.875% senior secured notes due 2027 and **$83.6 million** (face value **$84.2 million**) in 5.50% convertible senior notes due 2021[198](index=198&type=chunk) - The company is a net receiver of non-U.S. dollar currencies, benefiting from a weaker dollar but adversely affected by a stronger dollar, which can impact consolidated revenue and operating margins[199](index=199&type=chunk) - Unisys uses derivative financial instruments, primarily foreign exchange forward contracts (notional amount **$588.5 million** in 2020), to reduce exposure to foreign currency exchange rate risks on intercompany balances[200](index=200&type=chunk)[340](index=340&type=chunk) - A hypothetical **10%** adverse movement in foreign currency exchange rates would have reduced the estimated fair value of derivative financial instruments by approximately **$50 million** in 2020 (vs. **$44 million** in 2019)[201](index=201&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Unisys Corporation's audited consolidated financial statements for 2020, 2019, and 2018, including statements of income (loss), comprehensive income (loss), balance sheets, cash flows, and deficit, along with management and auditor reports and detailed notes covering accounting policies, discontinued operations, and other financial disclosures - Management is responsible for the integrity of the financial statements, prepared in conformity with U.S. GAAP, and concluded that internal control over financial reporting was effective as of December 31, 2020[204](index=204&type=chunk)[209](index=209&type=chunk) - PricewaterhouseCoopers LLP audited the 2020 consolidated financial statements and internal control over financial reporting, issuing an unqualified opinion[212](index=212&type=chunk)[213](index=213&type=chunk) - KPMG LLP audited the 2019 consolidated financial statements, issuing an unqualified opinion[227](index=227&type=chunk) - A critical audit matter identified for 2020 was the valuation of U.S. and certain international defined benefit pension plan obligations, particularly the discount rate assumption, due to significant management and auditor judgment[222](index=222&type=chunk)[223](index=223&type=chunk) [Report of Management](index=33&type=section&id=Report%20of%20Management) Management is responsible for the integrity of the financial statements, prepared in conformity with U.S. GAAP, and concluded that internal control over financial reporting was effective as of December 31, 2020 - Management is responsible for the integrity of the financial statements, prepared in conformity with U.S. GAAP, and based on management's best estimates and judgments[204](index=204&type=chunk) - Management concluded that the company maintained effective internal control over financial reporting as of December 31, 2020, based on the COSO framework[209](index=209&type=chunk) [Reports of Independent Registered Public Accounting Firms](index=34&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firms) PricewaterhouseCoopers LLP issued an unqualified opinion on Unisys's 2020 consolidated financial statements and internal control, while KPMG LLP issued an unqualified opinion on the 2019 statements, with pension valuation identified as a critical audit matter for 2020 - PricewaterhouseCoopers LLP audited Unisys's 2020 consolidated financial statements and internal control over financial reporting, issuing an unqualified opinion on both[212](index=212&type=chunk)[213](index=213&type=chunk) - KPMG LLP audited Unisys's 2019 consolidated financial statements, issuing an unqualified opinion[227](index=227&type=chunk) - The valuation of U.S. and certain international defined benefit pension plan obligations, particularly the discount rate, was identified as a critical audit matter for 2020 due to significant judgment and specialized skill required[222](index=222&type=chunk)[223](index=223&type=chunk) [Consolidated Statements of Income (Loss)](index=37&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) This section presents the consolidated statements of income (loss) for Unisys Corporation for the years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Income (Loss) (Millions, except per share data) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Revenue | $2,026.3 | $2,222.8 | $2,251.2 | | Operating income | $87.0 | $137.9 | $212.1 | | Income (loss) from continuing operations before income taxes | $(271.8) | $(60.6) | $71.0 | | Net income (loss) from continuing operations attributable to Unisys Corporation | $(317.7) | $(92.2) | $21.6 | | Income from discontinued operations, net of tax | $1,068.4 | $75.0 | $53.9 | | Net income (loss) attributable to Unisys Corporation | $750.7 | $(17.2) | $75.5 | | Basic EPS - Total | $11.93 | $(0.31) | $1.48 | | Diluted EPS - Total | $11.93 | $(0.31) | $1.47 | [Consolidated Statements of Comprehensive Income (Loss)](index=38&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the consolidated statements of comprehensive income (loss) for Unisys Corporation for the years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Comprehensive Income (Loss) (Millions) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Consolidated net income (loss) from continuing operations | $(317.2) | $(88.3) | $25.0 | | Income from discontinued operations, net of tax | $1,068.4 | $75.0 | $53.9 | | Total | $751.2 | $(13.3) | $78.9 | | Other comprehensive income (loss) | $156.2 | $(14.5) | $(48.0) | | Comprehensive income (loss) attributable to Unisys Corporation | $899.8 | $(21.0) | $15.2 | [Consolidated Balance Sheets](index=39&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets for Unisys Corporation as of December 31, 2020, and 2019 Consolidated Balance Sheets (Millions) | As of December 31, | 2020 | 2019 | | :---------------------- | :-------- | :-------- | | **Assets** | | | | Cash and cash equivalents | $898.5 | $538.8 | | Total current assets | $1,506.0 | $1,221.3 | | Total assets | $2,707.9 | $2,504.0 | | **Liabilities and deficit** | | | | Total current liabilities | $935.1 | $927.3 | | Long-term debt | $527.1 | $565.9 | | Long-term postretirement liabilities | $1,286.1 | $1,960.2 | | Total Unisys stockholders' deficit | $(356.8) | $(1,265.4) | | Total liabilities and deficit | $2,707.9 | $2,504.0 | [Consolidated Statements of Cash Flows](index=40&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows for Unisys Corporation for the years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Cash Flows (Millions) | Year ended December 31, | 2020 | 2019 | 2018 |\n| :---------------------- | :-------- | :-------- | :-------- | | Net cash (used for) provided by operating activities | $(681.2) | $123.9 | $73.9 | | Net cash provided by (used for) investing activities | $1,041.6 | $(158.2) | $(185.0) | | Net cash provided by (used for) financing activities | $5.1 | $(38.0) | $(4.8) | | Increase (decrease) in cash, cash equivalents and restricted cash | $354.9 | $(72.3) | $(140.0) | | Cash, cash equivalents and restricted cash, end of year | $906.7 | $551.8 | $624.1 | [Consolidated Statements of Deficit](index=41&type=section&id=Consolidated%20Statements%20of%20Deficit) This section presents the consolidated statements of deficit for Unisys Corporation as of December 31, 2020, and 2019 Consolidated Statements of Deficit (Millions) | As of December 31, | Total Deficit | Total Unisys Corporation Stockholders' Deficit | Accumulated Deficit | | :---------------------- | :------------ | :--------------------------------------------- | :------------------ | | Balance at December 31, 2019 | $(1,228.3) | $(1,265.4) | $(1,711.2) | | Consolidated net income | $751.2 | $750.7 | $750.7 | | Stock-based activity | $8.8 | $8.8 | — | | Translation adjustments | $49.3 | $46.3 | — | | Postretirement plans | $106.9 | $102.8 | — | | Balance at December 31, 2020 | $(312.1) | $(356.8) | $(960.5) | [Note 1 — Summary of significant accounting policies](index=42&type=section&id=Note%201%20%E2%80%94%20Summary%20of%20significant%20accounting%20policies) Financial statements are prepared in conformity with U.S. GAAP, requiring management to make significant estimates and judgments for revenue recognition, income taxes, pensions, and goodwill, which are continually reevaluated and subject to future events - Financial statements are prepared in conformity with U.S. GAAP, requiring management to make estimates and assumptions, which are continually reevaluated[245](index=245&type=chunk) - Key accounting estimates include valuation of credit losses, contract assets, outsourcing assets, marketable software, goodwill, legal contingencies, systems integration projects, income taxes, and post-employment benefits[245](index=245&type=chunk) - Unisys assesses the impact of COVID-19 on these accounting matters, noting no material impact as of December 31, 2020, but future assessments could result in material impacts[246](index=246&type=chunk) - Revenue is recognized when performance obligations are satisfied, transferring control of goods or services to the customer, with significant judgment applied to determine timing and transaction price allocation[267](index=267&type=chunk)[270](index=270&type=chunk) - In the Services segment, most revenue is recognized over time as work progresses, while in the Technology segment, most revenue is recognized at a single point in time upon product transfer or software license term inception[280](index=280&type=chunk)[281](index=281&type=chunk) - Goodwill is tested for impairment annually in the fourth quarter, or when triggering events occur, using a combination of income and market approaches to estimate fair value[257](index=257&type=chunk)[258](index=258&type=chunk) - Defined benefit pension plan obligations and costs are determined actuarially, relying on assumptions such as discount rates, expected return on plan assets, and mortality rates[264](index=264&type=chunk)[265](index=265&type=chunk) [Note 2 — Discontinued Operations](index=46&type=section&id=Note%202%20%E2%80%94%20Discontinued%20Operations) On March 13, 2020, Unisys sold its U.S. Federal business for **$1.2 billion**, with net cash proceeds of **$1,162.9 million**, and its financial statements have been retroactively reclassified to report this as discontinued operations - On March 13, 2020, Unisys sold its U.S. Federal business for **$1.2 billion**, with net cash proceeds of **$1,162.9 million**[290](index=290&type=chunk) - The company's financial statements have been retroactively reclassified to report the U.S. Federal business as discontinued operations[290](index=290&type=chunk) Results of U.S. Federal Business Discontinued Operations (Millions) | Year ended December 31, | 2020* | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Revenue | $149.5 | $725.9 | $573.8 | | Income (loss) from Operations | $8.4 | $100.3 | $72.2 | | Gain on sale | $1,060.7 | — | — | | Income from discontinued operations, net of tax | $1,068.4 | $75.0 | $53.9 | *Includes results of operations through March 13, 2020 closing date. [Note 3 — Recent accounting pronouncements and accounting changes](index=46&type=section&id=Note%203%20%E2%80%94%20Recent%20accounting%20pronouncements%20and%20accounting%20changes) Effective January 1, 2020, Unisys adopted ASU No. 2018-15, ASU No. 2016-13, and ASU 2019-12, which did not have a material impact on its consolidated financial results - Effective January 1, 2020, Unisys adopted ASU No. 2018-15 (Cloud Computing Arrangement Costs), ASU No. 2016-13 (Credit Losses on Financial Instruments), and ASU 2019-12 (Simplifying Income Taxes)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - The adoption of these new accounting standards did not have a material impact on Unisys's consolidated results of operations and financial position[292](index=292&type=chunk)[293](index=293&type=chunk) [Note 4 — Cost-reduction actions](index=47&type=section&id=Note%204%20%E2%80%94%20Cost-reduction%20actions) Unisys incurred **$95.5 million** in total cost-reduction charges in 2020, including **$25.5 million** for workforce reductions and **$70.0 million** for other charges such as foreign currency losses and asset impairments Cost-Reduction Charges and Other Costs (Millions) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Total Cost-Reduction Charges | $95.5 | $28.7 | $19.7 | | Workforce Reductions | $25.5 | $22.1 | $19.0 | | Other Charges | $70.0 | $6.6 | $0.7 | - In 2020, other charges included **$32.3 million** for foreign currency losses related to exiting foreign countries and **$24.0 million** for asset impairments[295](index=295&type=chunk) Cost-Reduction Charges by Statement of Income Classification (Millions) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Cost of revenue: Services | $22.2 | $10.8 | $18.1 | | Selling, general and administrative | $38.5 | $15.5 | $1.6 | | Other (expenses), net | $32.3 | — | — | | Total | $95.5 | $28.7 | $19.7 | Workforce Reduction Liabilities and Expected Payments (Millions) | Metric | Total (2020) | U.S. (2020) | International (2020) | | :---------------------- | :----------- | :---------- | :------------------- | | Balance at Dec 31, 2020 | $55.9 | $13.1 | $42.8 |\n| Expected payments in 2021 | $40.7 | $13.1 | $27.6 | [Note 5 — Leases and commitments](index=48&type=section&id=Note%205%20%E2%80%94%20Leases%20and%20commitments) Unisys recognizes operating lease right-of-use assets and liabilities at commencement, amortizes finance leases, and had approximately **$191 million** in outstanding standby letters of credit and surety bonds as of December 31, 2020 - Unisys determines if an arrangement is a lease at inception, based on control over an identified asset for a period in exchange for consideration[301](index=301&type=chunk) - Operating lease right-of-use (ROU) assets and lease liabilities are recognized at commencement based on the present value of lease payments, with expense recognized straight-line over the lease term[302](index=302&type=chunk) - Finance leases are included in outsourcing assets, net, and long-term debt, with ROU assets amortized straight-line and liabilities measured at amortized cost[303](index=303&type=chunk) Components of Lease Expense (Millions) | Year ended December 31, | 2020 | 2019 | | :---------------------- | :-------- | :-------- | | Operating lease cost | $42.3 | $37.9 | | Total finance lease cost | $1.9 | $1.9 | | Short-term lease costs | $1.4 | $0.6 | | Variable lease cost | $10.3 | $13.7 | | Sublease income | $(12.1) | $(0.7) | | Total lease cost | $43.8 | $53.4 | Supplemental Balance Sheet Information Related to Leases (Millions) | As of December 31, | 2020 | 2019 | | :---------------------- | :-------- | :-------- | | Operating lease right-of-use assets | $79.3 | $71.4 | | Total operating lease liabilities | $99.5 | $90.1 | | Total finance lease liabilities | $5.5 | $5.3 | | Weighted-Average Remaining Lease Term (Operating) | **2.3 years** | **3.4 years** | | Weighted-Average Discount Rate (Operating) | **6.4%** | **6.4%** | Maturities of Lease Liabilities (as of Dec 31, 2020, Millions) | Year | Finance Leases | Operating Leases | | :---------- | :------------- | :--------------- | | 2021 | $2.6 | $40.8 | | 2022 | $2.0 | $33.6 | | 2023 | $0.7 | $19.6 | | 2024 | $0.4 | $9.0 | | 2025 | — | $4.4 | | Thereafter | — | $0.8 | | Total lease payments | $5.7 | $108.2 | - As of December 31, 2020, Unisys had outstanding standby letters of credit and surety bonds totaling approximately **$191 million** related to performance and payment guarantees[315](index=315&type=chunk) [Note 6 — Other (expense), net](index=51&type=section&id=Note%206%20%E2%80%94%20Other%20(expense)%2C%20net) Unisys reported total other expense, net, of **$(329.6) million** in 2020, significantly higher than prior years, primarily due to **$(235.9) million** in postretirement expense, including a **$142.1 million** pension settlement charge, and **$(36.2) million** in foreign exchange losses Other (Expense), Net (Millions) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Postretirement expense* | $(235.9) | $(93.3) | $(80.3) | | Debt extinguishment charge | $(28.5) | $(20.1) | — | | Foreign exchange losses** | $(36.2) | $(10.4) | $(5.9) | | Environmental costs and other, net | $(29.0) | $(12.6) | $9.1 | | Total other expense, net | $(329.6) | $(136.4) | $(77.1) | *Includes **$142.1 million** settlement charge in 2020 related to U.S. defined benefit pension plans. **Includes **$32.3 million** for foreign currency losses in 2020 related to substantial completion of liquidation of foreign subsidiaries. [Note 7 — Income taxes](index=52&type=section&id=Note%207%20%E2%80%94%20Income%20taxes) Unisys reported a total income (loss) from continuing operations before income taxes of **$(271.8) million** in 2020, with a total tax provision of **$45.4 million**, and maintains a full valuation allowance against U.S. deferred tax assets, with utilization of tax attributes limited by an annual **$70.6 million** cap due to an ownership change Income (Loss) from Continuing Operations Before Income Taxes (Millions) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | United States | $(316.3) | $(148.4) | $(125.8) | | Foreign | $44.5 | $87.8 | $196.8 | | Total | $(271.8) | $(60.6) | $71.0 | Provision (Benefit) for Income Taxes (Millions) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Current | $58.8 | $23.3 | $37.8 | | Deferred | $(13.4) | $4.4 | $8.2 | | Total Provision | $45.4 | $27.7 | $46.0 | Deferred Tax Assets and Liabilities (Millions) | As of December 31, | 2020 | 2019 | | :---------------------- | :-------- | :-------- | | Total deferred tax assets | $1,458.0 | $1,691.5 | | Valuation allowance | $(1,271.5) | $(1,524.7) | | Net deferred tax assets | $186.5 | $166.8 | | Total deferred tax liabilities | $77.2 | $73.7 | | Net deferred tax assets (liabilities) | $109.3 | $93.1 | - The valuation allowance declined by **$253.2 million** in 2020, primarily due to a net income tax benefit of **$189.0 million**[320](index=320&type=chunk) - Unisys has tax loss carryforwards of **$795.2 million** and tax credit carryforwards of **$230.5 million** as of December 31, 2020[321](index=321&type=chunk)[322](index=322&type=chunk) - The company maintains a full valuation allowance against the realization of all U.S. deferred tax assets and certain foreign deferred tax assets[329](index=329&type=chunk) - The ability to utilize U.S. net operating losses and tax credits is subject to an annual limitation of **$70.6 million** due to an ownership change in February 2011[329](index=329&type=chunk) [Note 8 — Earnings per common share](index=56&type=section&id=Note%208%20%E2%80%94%20Earnings%20per%20common%20share) Unisys reported a net income attributable to Unisys Corporation of **$750.7 million** in 2020, with basic and diluted EPS of **$11.93**, and details anti-dilutive stock options and convertible senior notes Earnings (Loss) Per Common Share Attributable to Unisys Corporation (Thousands, except per share data) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Net income (loss) from continuing operations | $(317.7) | $(92.2) | $21.6 | | Income from discontinued operations, net of tax | $1,068.4 | $75.0 | $53.9 | | Net income (loss) attributable to Unisys Corporation | $750.7 | $(17.2) | $75.5 | | Weighted average shares | **62,932** | **55,961** | **50,946** | | Basic EPS - Total | **$11.93** | $(0.31) | $1.48 | | Diluted EPS - Total | **$11.93** | $(0.31) | $1.47 | - Anti-dilutive weighted-average stock options and restricted stock units were **579 thousand** in 2020, **1,393 thousand** in 2019, and **1,226 thousand** in 2018[332](index=332&type=chunk) - Anti-dilutive weighted-average common shares issuable upon conversion of 5.50% convertible senior notes were **3,425 thousand** in 2020, **16,578 thousand** in 2019, and **21,868 thousand** in 2018[332](index=332&type=chunk) [Note 9 — Accounts receivable](index=56&type=section&id=Note%209%20%E2%80%94%20Accounts%20receivable) Accounts receivable primarily consist of unsecured trade accounts due within 30 to 90 days, with unbilled accounts receivable at **$63.3 million** in 2020 and an allowance for doubtful accounts of **$9.2 million** - Accounts receivable primarily consist of unsecured trade accounts, generally due within 30 to 90 days[333](index=333&type=chunk) - Revenue recognized in excess of billings (unbilled accounts receivable) was **$63.3 million** at December 31, 2020, up from **$60.8 million** in 2019[334](index=334&type=chunk) Allowance for Doubtful Accounts (Millions) | As of December 31, | 2020 | 2019 | | :----------------- | :------- | :------- | | Allowance for doubtful accounts | $9.2 | $11.8 | | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :------- | :------- | :------- | | Provision for doubtful accounts | $(0.3) | $(1.6) | $(5.1) | [Note 10 — Contract assets and deferred revenue](index=57&type=section&id=Note%2010%20%E2%80%94%20Contract%20assets%20and%20deferred%20revenue) Net contract assets (liabilities) show current contract assets of **$44.3 million** and current deferred revenue of **$(257.1) million** as of December 31, 2020, with **$236.1 million** of revenue recognized from deferred revenue in 2020 Net Contract Assets (Liabilities) (Millions) | As of December 31, | 2020 | 2019 | | :---------------------- | :-------- | :-------- | | Contract assets - current | $44.3 | $38.4 | | Contract assets - long-term | $20.7 | $21.6 | | Deferred revenue - current | $(257.1) | $(246.4) | | Deferred revenue - long-term | $(137.9) | $(147.0) | - Revenue recognized that was included in deferred revenue at the beginning of the period was **$236.1 million** in 2020, down from **$270.1 million** in 2019[336](index=336&type=chunk) [Note 11 — Capitalized contract costs](index=57&type=section&id=Note%2011%20%E2%80%94%20Capitalized%20contract%20costs) Unisys defers and amortizes incremental direct costs of obtaining a contract, primarily sales commissions, over the initial contract life, with **$8.7 million** in deferred commissions and **$74.4 million** in costs to fulfill a contract as of December 31, 2020 - Incremental direct costs of obtaining a contract, primarily sales commissions, are deferred and amortized over the initial contract life[337](index=337&type=chunk) Deferred Commissions and Amortization Expense (Millions) | Metric | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Deferred commissions (as of Dec 31) | $8.7 | $9.1 | N/A | | Amortization expense | $3.2 | $3.1 | $6.5 | - Costs incurred upon initiation of outsourcing contracts (costs to fulfill a contract), such as initial customer setup, are capitalized and amortized over the initial contract life[338](index=338&type=chunk) Costs to Fulfill a Contract and Amortization Expense (Millions) | Metric | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Costs to fulfill a contract (as of Dec 31) | $74.4 | $75.8 | N/A | | Amortization expense | $27.5 | $24.2 | $21.7 | [Note 12 — Financial instruments and concentration of credit risks](index=58&type=section&id=Note%2012%20%E2%80%94%20Financial%20instruments%20and%20concentration%20of%20Credit%20Risks) Unisys uses foreign exchange forward contracts with a notional amount of **$588.5 million** in 2020 to reduce foreign currency exchange rate risks on intercompany balances and has no significant concentrations of credit risk with any one customer - Unisys uses foreign exchange forward contracts, generally with maturities of three months or less, to reduce exposure to foreign currency exchange rate risks on intercompany balances[340](index=340&type=chunk) Foreign Exchange Forward Contracts (Millions) | As of December 31, | 2020 | 2019 | | :----------------- | :-------- | :-------- | | Notional amount | $588.5 | $437.0 | | Total fair value | $0.4 | $2.0 | Gains and Losses on Foreign Exchange Forward Contracts (Millions) | Year ended December 31, | 2020 | 2019 | 2018 | | :---------------------- | :-------- | :-------- | :-------- | | Other (expense), net | $7.6 | $1.7 | $(14.2) | - Unisys has no significant concentrations of credit risk with any one customer, and cash equivalents are carried at cost plus acc

Unisys Corporation (NYSE:UIS) Q4 2020 Earnings Conference Call February 23, 2021 8:00 AM ET Company Participants Courtney Holben - Vice President of Investor Relations Peter Altabef - Chairman and Chief Executive Officer Mike Thomson - Senior Vice President and Chief Financial Officer Conference Call Participants Jonathan Tanwanteng - CJS Securities Joseph Vafi - Canaccord Genuity Matthew Galinko - Sidoti Rod Bourgeois - DeepDive Equity Research William Smith - William Smith & Company Operator Good day, and ...

| --- | --- | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------------|-------|-------|-------|-------|-------| | Full-Year and Fourth-Quarter | | | | | | | | | | | | | | | | | | | | | 2020 Financial Results | | | | | | | | | | | | | | | | | | | | | | | | | | | | February 23 rd , 2021 Peter Altabef, Chairman & CEO Mike Thomson, Senior Vice President & CFO | | | | | | Disclaimer 2 • Statements made by Unisys during today's presentation that ar ...

Unisys Corporation (NYSE:UIS) Q3 2020 Earnings Conference Call October 27, 2020 8:00 AM ET Company Participants Courtney Holben - VP of IR Peter Altabef - Chairman & CEO Mike Thomson - Senior VP & CFO Conference Call Participants Jon Tanwanteng - CJS Securities Joseph Vafi - Canaccord Rod Bourgeois - DeepDive Equity Research Frank Jarman - Goldman Sachs Doug Thomas - JET Equity Partners Operator Good day, and welcome to the Unisys Corporation Third Quarter 2020 Earnings Conference Call. [Operator Instructio ...

® Third-Quarter 2020 Financial Results October 27, 2020 Peter Altabef | Chairman & CEO Mike Thomson | Senior Vice President & CFO www.unisys.com/investor 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 assumptions and involve risks and uncertainties that could cause act ...