Unisys Says Turnaround Remains On Track Despite Q3 Sales, Earnings Declines

Unisys continues to make progress toward improving its profitability and cash flow, company executives said Tuesday, despite a third-quarter decline in the solution provider's sales and a larger bottom-line loss.

"Q3 was a strong quarter in terms of sales activity," said President and CEO Peter Altabef in a phone conference with financial analysts Tuesday. "We continue to focus on improving our overall revenue trends. We are reaffirming our full-year guidance for revenues, non-GAAP operating profit margin and adjusted cash flow," he said.

Unisys reported revenue of $683.3 million for the third quarter ended Sept. 30, down 7.6 percent from $739.2 million in the third quarter of 2015.

[Related: Unisys CEO: Security Sales Set To Soar As Cybersecurity Software Is Taken Global]

Services generated $600.9 million in revenue, down more than 8 percent from $656.0 million one year earlier, while technology sales generated $82.4 million, down almost 1 percent year over year from $83.2 million. Services accounted for 88 percent of revenue in the third quarter while technology accounted for 22 percent.

The company's bottom-line loss in the quarter widened to $28.2 million compared with the $9.6 million loss the company reported in last year's third quarter.

Unisys, based in Blue Bell, Pa. and No. 19 on the 2016 CRN Solution Provider 500, emphasized what it described as strong operating cash flow growth in the quarter, which increased by $87 million – the fourth consecutive quarter of positive operating cash flow.

The company also said that total contract value signings have increased 22 percent on a year-to-date basis compared with one year ago, including more than $1.1 billion in signings in the third quarter. And the company's services backlog of $4.1 billion at the end of the quarter was up 6.7 percent sequentially.

Altabef said sales from the company's federal government, public sector and commercial business operations were "relatively stable" with either flat sales or small revenue increases or decreases. The exception was the financial services sector where revenue was down 27 percent in the quarter due to declines in software license renewals and a tough year-over-year comparison because of a big contract win in the year-ago quarter.

Sales of Unisys' Stealth security solutions are especially promising, the CEO said. "We see industry recognition for Unisys Stealth as a leading-edge technology continue to grow," he said, adding that the company continues to build "leading security protocols" into all of its product offerings, not just those specifically dedicated to security.

"Although revenue generated by Stealth is still small," Altabef said, "we continue to be encouraged about its prospects, based on positive proof-points for its value proposition."

Unisys continued its cost-reduction efforts, including employee headcount reductions, during the quarter. The reductions made in the quarter bring the company's total annualized cost savings to $185 million, putting the company on track against its plan to cut annual expenses by $200 million by year's end, said CFO Janet Haugen on the call with analysts.

Unisys is forecasting revenue for all of 2016 to be in the range of $2.775 to $2.875 billion.