Unisys Corporation New

Good morning and welcome to the Unisys Corporation third quarter 2021 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Courtney Holbin, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone. This is Courtney Holbin, Vice President of Investor Relations. Thank you for joining us. Yesterday afternoon, Unisys released its third quarter 2021 financial results. I'm joined this morning to discuss those results by Peter Altebeff, our Chair and CEO, and Mike Thompson, our CFO. Before we begin, I'd like to cover a few 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 in the presentation slides that we will be using this morning to guide our discussion, as well as other information relating to our third quarter performance on our investor website, which we encourage you to visit. Third, today's presentation, which is complementary to the earnings press release, includes some non-GAAP financial measures. The non-GAAP measures have been reconciled to the related GAAP measures, and we've provided reconciliations within the presentation. Although appropriate under generally accepted accounting principles, the company's results reflect charges that the company believes are not indicative of its ongoing operations, and that can make its profitability and liquidity results difficult to compare to prior periods, anticipated future periods, or to its competitors' results. These items consist of post-retirement debt exchange and extinguishment, and cost reduction and other expense. Management believes each of these items can distort the visibility of trends associated with the company's ongoing performance. Management also believes that the evaluation of the company's financial performance can be enhanced by use of supplemental presentation of its results that exclude the impact of these items in order to enhance consistency and comparativeness with prior or future period results. The following measures are often provided and utilized by the company's management, analysts, and investors to enhance comparability of year-over-year results, as well as to compare results to other companies in our industry. Non-GAAP operating profit, non-GAAP diluted earnings per share, free cash flow and adjusted free cash flow, EBITDA and adjusted EBITDA, and constant currency. For more information regarding these metrics and related adjustments, please see our earnings release and our Form 10-Q. From time to time, UNISIS may provide specific guidance or color regarding its expected future financial performance. Such information is effective only on the date given. UNISIS generally will not update, reaffirm, or otherwise comment on any such information except as UNISIS deems necessary, and then only in a manner that complies with Regulation FD. And 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 the actual results to differ materially from our expectations. These factors are discussed more fully in the earnings release and in the company's SEC filing. Copies of those SEC reports are available from the SEC and along with the other materials I mentioned earlier on the Unisys investor website. And now, I'd like to turn the call over to Peter.

Good morning, everyone, and thank you for joining us to discuss our third quarter results. During the third quarter, we made continued progress executing on our strategy for sustained revenue growth and margin improvement by expanding our solution portfolio and enhancing our go-to-market efforts, while managing our workforce to successfully attract and retain talent in a competitive labor market. We also increased gross profit and free cash flow year over year, Mike will provide detail on our financial performance and accomplishments, but first, I will give some insight into the business. Starting with Digital Workplace Solutions, or DWS, our goal has been to transform to a higher growth and higher margin business by enhancing and expanding our solution portfolio with a focus on proactive experience, leveraging a recognized leadership position in the market, and our Intelliserve and PowerSuite platforms. In the third quarter, we made progress toward these strategic goals while exiting some contracts that weren't core to how we plan to grow this business. With respect to the build portion of our build partner buy strategy, we have developed our experience model office solution, or XMO. This offering analyzes data from multiple sources, including device experience tools, such as our PowerSuite solution, our cloud contact center platform, and other satisfaction and sentiment tools to identify and remediate pain points and improve user experience. This will help clients achieve business goals such as maximizing productivity and improving employee engagement, and will also streamline our support model by reducing reactive service needs. Additionally, we defined and began incorporating our second generation experience level agreement, or XLA, framework into contracts, providing a more advanced persona-based way for clients to assess the impact our solutions are having on user experience. We believe we are leading the market in advancing to second generation XLA's and our clients are responding positively. We also filled several key leadership and architect roles during the quarter. With respect to partnerships in DWS, we have broadened our relationships with some leading device experience management partners to become channel partners in addition to solution partners. And our integration of Unify Square is progressing as we continue to actively assess additional opportunities to enhance our solution portfolio through acquisitions. In the quarter, we signed a DWS contract with a global commercial real estate services firm to implement a case management system which will help the client move to a centralized global model for this process and technology. Also in the quarter, Unify Square signed contracts with nearly 20 new logo clients, including consulting contracts and PowerSuite software subscriptions focused on migrating to or managing Zoom and Microsoft Teams UCaaS environments. Moving to Cloud and Infrastructure Solutions, or CNI, we continue to execute on our strategy of growing cloud in our targeted markets by leveraging our established credentials, cloud forte, and embedded security solutions to help clients transform their traditional ITO environments to effective hybrid and multi-cloud solutions. Revenue growth continued during the third quarter in CNI, with cloud revenue specifically growing 26% year over year. As we noted on our last call, In July, we completed a new release of our Cloud Forte program. And since July, we have continued to enhance the artificial intelligence embedded in Cloud Forte with a specific focus on cloud spend optimization. We're also utilizing predictive analytics to help clients avoid incidents and automated root cause analysis to remediate and prevent future issues. Additionally, Increased migration automation in our solution allows us to move significantly more workloads to the cloud more quickly at increased levels of reliability. We are on schedule for a new release of the Cloud Forte platform with additional functionality in the fourth quarter. We're also expanding our partnering with Cloud Forte, including enhanced integration with Google Cloud, increasing our ability to deliver outcome-based end-to-end cloud services to clients using Google Cloud and to help them optimize their workforce environment. We have broadened our work with AWS and Microsoft Azure, increasing automation to enable a more seamless experience for clients with improved functionality while also enhancing cost efficiency. We are assessing potential CNI acquisition candidates with a focus on enhancing specific capabilities and increasing geographic coverage. And during the quarter, we signed a contract with a leading Mexican insurance company to design a hybrid environment integrating public and private clouds and to perform related migration work. Turning to Enterprise Computing Solutions, or ECS. Our goal is to grow revenue through expanding the ECS ecosystem, while maintaining license revenue stability. We are enhancing our existing services and platforms and developing new solutions to help clients manage their ClearPass Forward environments. We are incorporating advanced AI and automation into our application lifecycle management platforms and workflow-oriented design into our application development solutions. We're also expanding the interoperability of our ClearPass Forward systems which are already able to be deployed in the public cloud via ClearPath Forward for Azure to enable use in hybrid and multi-cloud environments. Our IP-led industry-focused solutions, such as AirCore and Elevate, represent an additional opportunity for growth in ECS. We're partnering with software and platform developers to modernize our application development and to enhance our lifecycle management of these solutions. And we're working with channel partners to embed these industry applications into their solutions to increase our client reach. We're also evaluating opportunities to acquire smaller companies that support ClearPath Forward. We recently signed a contract with New Zealand's Waka Katoui NZ Transport Agency to extend our engagement to manage IT infrastructure on the ClearPath Forward platform that supports systems processing approximately 25 million driver's license, and 60 million motor vehicle transactions per year. Turning to our broader go-to-market efforts, our total company TCV was up 13% year-over-year in the third quarter, and total ACV was up 30% year-over-year. As we price contracts, we're aiming to offset or anticipate cost increases leading to the competitive market for labor. Total company pipeline was also up 5% sequentially, supported by growth in our proactive experience DWS solutions and cloud solutions pipelines, which increased sequentially both on a dollar basis and as a percent of total pipeline. We are increasing awareness in our new DWS and cloud capabilities, meeting frequently with industry analysts such as Gartner, IDC, Everest, ISG, and HFS. and we have been recognized for our leadership in a number of areas. We were recently named a leader in advisory firm ISG's provider lens study on the future of work in both managed employee experience services and managed digital workplace services in the US, the UK, and Brazil, in addition to other regional leadership recognition. We were also named a leader in the next gen private and hybrid cloud managed services by ISG in the US, the UK, and Brazil, and we're recognized by IDC as a major player in worldwide managed multi-cloud services. We have evolved significantly as a company, and we're launching a global advertising campaign to help ensure that the market knows who Unisys is today. We're undertaking a similar initiative aimed at attracting talent in key recruiting geographies. We're also expanding the depth and breadth of content on our website and implementing a cross-selling initiative to highlight our full portfolio of solutions across segments to clients. The market for talent remains highly competitive, but our workforce management efforts, including compensation retention adjustments and increased associate initiatives, such as talent development, internal mobility, and focus on work-life flexibility have helped us to continue to attract and retain key resources needed to execute on our strategy. Our last 12 months voluntary attrition was 15.3%, which is significantly below the pre-pandemic level of 17% in the third quarter of 2019. Demand for open roles filled internally as a percent of total increased six points for the year to date versus 2020 to 36%, reflecting the effectiveness of our internal development, mobility programs, and upskilling. And referrals represent over 20% of total hiring on a year-to-year basis. Our commitment to DEI is a bedrock of our people strategy. Unisys was named a champion of board diversity for the seventh consecutive year by the Forum of Executive Women, and women representation as a percent of the leadership of the company has increased by three points, from 32% as of 2020 to 35% on a year-to-date basis. In conclusion, I'd like to thank our associates for their ongoing efforts in supporting our strategy, and progressing toward achieving the goals we set out at the beginning of the year. With that, I'll turn over the call to Mike to discuss our financial results. Mike?