Unisys Corporation New

Good day, and welcome to the Unisys Corporation fourth quarter and full year 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists 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'd 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 Holben, Vice President of Investor Relations. Thank you for joining us. Yesterday afternoon, Unisys released its fourth quarter and full year 2021 financial results. I'm joined this morning to discuss those results by Peter Altseff, 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 and the presentation slides that we will be using this morning to guide our discussion, as well as other information relating to our fourth quarter and full year 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. 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-K. 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 or reaffirm or otherwise comment on any such information except as UNISIS deems necessary and then only in a manner that complies with regulation updates. 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 filings. 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 fourth quarter and full year 2021 results. 2021 was a very active and exciting year for Unisys. We made advances on revenue, profit and cash flow, and our investments in solutions, go-to-market and workforce management planning have positioned us to advance our momentum in 2022. 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, we made significant progress in 2021 on our goal to transform to higher growth and higher margin user experience-based solutions. As of year-end, we have established our base offering portfolio to compete effectively in additional markets, and we are seeing traction with recent new contract wins. We are focused to continuously improve our solutions to involve with and lead the market. We are integrating our solutions with capabilities added through acquisitions to enhance our full suite of DWS solutions. As we noted on the last call, industry analysts such as Gartner, IDC, Everest, ISG, and HFS are recognizing our improved and expanded capabilities. During the fourth quarter, we were designated a leader in advanced digital workplace services in Nelson Hall's NEET assessment. During the fourth quarter, we accelerated our Unified Endpoint Management, or UEM, capabilities, one of our targeted solution sets, with the acquisition of Mobinergy. We are already seeing cross-fertilization opportunities across both client bases and key strategic partners of Mobinergy and Unisys. which now includes the clients from our Unify Square acquisition of earlier in the year. Mobinergy has strong relationships with many telecom carriers, which are valuable prospective partners to the Unify Square business, as they can embed PowerSuite, which focuses on UCaaS. During the fourth quarter, we signed a contract with a new banking client in Europe to provide an upgraded user experience with digital workplace solutions. including device lifecycle management, unified endpoint management, and field service. Moving to cloud and infrastructure solutions, or CNI, our strategy of growing cloud in our targeted markets resulted in CNI being our fastest growing segment in 2021. Cloud revenue specifically grew 22% year over year for the full year. In the fourth quarter, we further advanced our cloud migration and management capability. We improved our single pane of glass services management to drive actionable insights across infrastructure as a service, cloud native applications, and data capture. We enhanced our multi-cloud management capabilities across hyperscalers and added plug-in accelerators for container-based application management services. We expanded our capabilities in Google Cloud Platform, Microsoft Azure, and AWS, including upskilling talent with training and professional level certifications across each of these platforms. Through our Unisys University program, we increased our cloud infrastructure as a service and microservices certifications. We achieved an 80% increase in expert level accreditations in cloud computing for the year. During 2022, we are focusing our capability development efforts on enhanced cloud native application development, cloud security, and AI machine learning operations. Our new cloud capabilities also received additional recognition from industry analysts, as we were recently named a major player globally in managed multi-cloud services by IDC. We were also named a leader in the US, the UK, and Brazil in ISG's provider lens on public cloud solutions and services. In the fourth quarter, we acquired CompuGain, deepening our cloud offerings with CompuGain's significant application modernization, cloud native agile application development, and cloud and hybrid cloud data management expertise and capabilities. including designation as an Amazon Web Services Advanced Consulting Partner. CompuGain has a strong presence in the financial services sector, which has added to our established position in that sector, and we expect cross-selling opportunities with CompuGain and Unisys clients. We recently signed a new scope contract with a leader in the U.S. housing finance system, to develop and implement cloud-native data pipeline solutions to increase agility and reduce time to market for data workloads in a highly controlled environment. Turning to Enterprise Computing Solutions, or ECS, our goal has been to grow revenue through expanding the ECS ecosystem while maintaining license revenue stability. We've broadened our approach to key industry solutions to encompass the diverse workflow-centric demands of our clients. In travel and transportation, we are extending capabilities into retail channels in the airline industry. We are also augmenting our cargo solution with a robust data analytics capability. With respect to our financial services industry solution, we have signed a partnership agreement to augment our capabilities around payment processing. During the fourth quarter, we signed a renewal and expansion with a major US-based global airline for our SAS-based cargo solutions product suite to support air freight management, sales, operations, load planning, cargo handling, customs, and mail handling, along with interfaces to e-commerce, mobile devices, revenue management, and accounting. Turning to our broader go-to-market efforts, throughout 2021, We invested in our Salesforce, solution architects, and marketing initiatives, leading to our strongest TCV and ACV of the year in the fourth quarter. Year-over-year growth in total company pipeline and expected continued improvement in go-to-market metrics during 2022. Full-year ACV was up 11% year-over-year. ACV grew 54% sequentially. in the fourth quarter. TCV grew 29% sequentially in the fourth quarter. Full year TCV was down 11% year over year, but noting average contract length is declining as the market evolves. Had the average contract length been consistent year over year, TCV would have been flat. Notwithstanding, we expect to have an absolute increase in TCV in 2022. And finally, our pipeline grew 5% year over year. We are pricing new contracts to offset anticipated cost increases related to the competitive labor market, and the weighted average expected gross margin associated with contracts signed in 2021 was higher than that in 2020. Turning to marketing initiatives, we are investing in our brand and have brought in world-class agencies to support us in these branding efforts, and we look forward to updating you on these activities in the near future. We have partnered with Landor & Fitch to enhance the Unisys brand, including positioning, visual identity, and messaging. In addition, we have brought in TBWA Worldwide to advance our advertising, and we have hired Golan as our public relations firm to help us better connect to clients and prospects through media coverage and thought leadership. With respect to workforce management, the market for talent is highly competitive. We adapted quickly during the year with targeted talent attraction and retention initiatives, resulting in voluntary attrition for 2021 of 17.1%, which was lower than the pre-pandemic level of 17.9% for 2019. Initiatives such as internal mobility and upskilling programs have increased opportunities for our associates, which resulted in a 33% internal fulfillment rate for 2021, which is up from 30% in 2020, which is itself up from 24% in 2019. With respect to wage inflation, we're actively reviewing our workforce and also focusing on our compensation adjustment. on the capabilities and roles that have been identified as critical to achieving our short and long-term strategic goals. We're also leveraging referral-based hiring, which increased to 21% in 2021, from 19% in 2020, and 16% in 2019. These overall efforts allowed us to avoid any material disruption of service to our clients and kept us on track to drive growth while improving margins. They also position us to continue executing against our operational and financial goals in 2022. Turning to ESG and DEI, at the end of 2021, we published new sustainability and DEI reports on our website, which we encourage you to review. A few highlights of our recent ESG progress includes joining the UN Global Compact in the fourth quarter and driving 75% of our key suppliers to disclose their ESG actions and commitments. We expect to reach our 2026 goal for reduced Scope 1 and 2 GHG emissions in 2022. A few highlights of our recent DEI progress include launching a new leadership development program for associates from underrepresented groups and a new inclusive leadership workshop, which is underway and which nearly 90% of our leaders have already completed. We also expanded our associate impact groups that facilitated more than 50 programs during 2021 and increased our women and underrepresented ethnic group representation by three points each within director and above levels. In conclusion, We made significant progress executing our strategy in 2021. I would like to thank our associates for their hard work and commitment. With that, I'll turn the call over to Mike to discuss our financial results. Mike?