Good day and welcome to the Unisys First Quarter 2014 Results Conference Call. At this time I'd like to turn the conference over to Mr. Niels Christensen, Vice President, Investor Relations at Unisys Corporation. Please go ahead, sir.

Thank you, operator. Good afternoon everyone, and thank you for joining us. Earlier today, Unisys released its first quarter 2014 financial results. With us this afternoon to discuss our results are Ed Coleman, our CEO, and Janet Haugen, our CFO. Before we begin, I want 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 afternoon to guide our discussion on our Investor website. Third, today’s presentation, which is complementary to the earnings press release, includes some non-GAAP financial measures. These have been provided in an effort to give investors additional information. The non-GAAP measures have been reconciled to the related GAAP measures and we have provided reconciliations within the presentation. 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 actual results to differ materially from expectations. These factors are discussed more fully in the earnings release and in the company’s SEC filings. Copies of these SEC reports are available from the SEC and from the Unisys Investor website. Now I’d like to turn the call over to Ed.

Thanks, Niels. Hello everyone, and thank you for joining us today to discuss our first quarter 2014 financial results. Let me provide a summary before turning the call over to Janet for a more detailed review of those financial results. Please turn to Slide 4 to begin our discussion. Following a strong fourth quarter of 2013 where we grew Technology and Services revenue and profit, our first quarter 2014 revenue and margins were impacted by lower sales of Technology, timing and execution issues on a few IT services projects, as well as lower than normal project-based revenue with our IT outsourcing customers. This resulted in a breakeven operating profit before pension expense, but a net loss of $54 million in the quarter versus a net loss of $34 million in the first quarter of 2013. We look for improved overall results through the course of the year, driven by anticipated full-year growth in our Technology business as well as improved Services margins. Our ClearPath revenue was unusually low in the quarter. As you know, our ClearPath sales can vary significantly from quarter to quarter depending on the timing of deal closings, which is why this business is best measured on an annual basis. Based on the ClearPath opportunities we have in the pipeline, we look for our full year 2014 Technology revenue to be about $500 million, which is consistent with the average over the past four years and represents growth over 2013. Revenue from Stealth and Forward! will be incremental to this. In our Services business, our goal is to keep our revenue approximately flat for the full year of 2014 in what continues to be a challenging market for IT Services. We are focused on improving our execution from the first quarter and capitalizing on growth opportunities for…

Thanks, Ed, and hello everyone. Following a strong performance in the fourth quarter, the first quarter revenue and margins were weaker. Please turn to Slide 10 for a discussion of our first quarter 2014 financial results. We reported revenue of $761.7 million in the quarter, which was down 6% year over year, down 4% on a constant currency basis. Technology revenue in the first quarter of 2014 was down compared to the year-ago period, principally reflecting lower sales of our ClearPath systems. The Technology performance continues to be best measured on an annual basis and we continue to target year-over-year growth for this business in 2014. The average revenue from our Technology segment over the past four years has been approximately $500 million. As Ed noted, our goal is for our base Technology business to achieve that level of revenue in 2014. Our Stealth and Forward! product offerings represent the opportunity for growth above that base. Our first quarter 2014 results were also impacted by timing and execution issues on a few IT services projects, as well as lower than normal in-quarter sell-and-bill revenue in our IT Outsourcing business. We started the quarter with $630 million of Services backlog expected to convert into first quarter 2014 revenue. As we previously discussed, 10% to 15% of our Services revenue is typically sold and delivered within a quarter. In the first quarter of 2014, only 9% of our actual Services revenue was sell and bill, below the low end of our historical range. This impacted not just revenue but also margins since the in-quarter project revenue normally has a higher incremental margin percentage. As I will discuss in more detail later, approximately $650 million of our March 31, 2014 backlog is anticipated to convert into second quarter 2014 Services revenue. This level…

Great. Thank you, Janet. Operator, we'd like to open the call up to questions at this time.

Thank you. [Operator Instructions] And we go first to James Friedman with SIG.

Hello, Jamie. James Friedman – SIG: Hi, Ed and Janet. Thanks for taking my questions. So Janet, I heard you call out the sell-and-bill impact on ITO and infrastructure slide, I think that's Slide 12. Are those services disproportionately sell-and-bill? And if so, why is that the case?

Sure. Jamie, as we've talked about historically, 10% to 15% of our services revenue comes from items that are sold and billed in the quarter. And that -- and a fair amount of that does come from our IT outsourcing business. In this quarter, we only achieved 9% of our services revenue coming from items that were sold and billed within the quarter. This type of work is project-based work that we're doing in existing customers, particularly within IT outsourcing customers. It generally comes at higher incremental margins, and so when we don't get in that range, it really does impact us both on the revenue and the margin lines. And when we are further in and we're doing more sell-and-bill, we can see the impact not just in the revenue rate and in the margin rate. So the fact that we only did 9% sell-and-bill in the quarter impacted us at the top line but also impacted us at the services gross and operating margins. James Friedman – SIG: And to what would you attribute that sort of outlier event this quarter and what makes you confident that it's going to return to a more normal pattern?

Jamie, this is Ed. I think it reflects a difficult environment on discretionary spend across the marketplace. But we do view it as an outlier. We've had such consistency in this 10% to 15% range over so many quarters; that does strike as an outlier. It causes us to reflect to what degree it's really a question on our part and making sure that we're alert to the opportunities for that incremental work, and pursuing it aggressively to win it. James Friedman – SIG: Okay. Meanwhile, U.S. Federal was actually pretty good, at least relative to my expectations, it's up year over year. And I know you had mentioned that, as your competitors had observed the tough environment out there, why is it that, you know, is this business for you more stable because of recompetes or just the technically acceptable standards that may play to your favor? Why are we up year over year?

A couple of years ago, Jamie, we really saw a decline in that business, kind of coincident with some years where we were -- had a large number of recompetes where we were defending business that we had. And to win that business, you either had to take some pretty aggressive pricing actions to win, and in many cases we did not win. We lost a number of those recompetes. Over the back half of 2012 and in 2013 and so far this year, we've really been in an environment where we've been less susceptible to recompetes and more opportunities to pursue other people's recompetes, and win some of that business. As Janet said, our services revenue was still down 2% year over year, and the increase that we saw came from the technology side of the business. James Friedman – SIG: Okay. And then maybe the last thing, on technology, and I'm sorry if I missed this, and if I didn't maybe you could at least qualitatively describe it. So where are we in terms of forward and sales? Do we have any material revenue from those in technology yet? Or is that, you know, still a work in process?

Yeah, I'd have to characterize it as a work in process. We have customer wins, and with both of those products, but at this point I'd say the revenue is still immaterial to our results. As I said in my comments, we expect that to be heavily weighted towards the second half of the year. James Friedman – SIG: Okay. All right. Thank you.

Thank you, Jamie.

[Operator Instructions] We go next to Glenn Mattson with Sidoti & Company. Glenn Mattson – Sidoti & Company: Hi everyone. Could you guys remind me real quick, what was the sell-and-bill last quarter? I remember it was high, but do you remember what the number was, as a percent of the total services?

Yeah. Glenn, it's Janet. So last quarter we did 23%. If you go through each of the quarters in 2013, a year ago in the first quarter of 2013 we did about 11%, second quarter it was 12%, third quarter 10%, fourth quarter it was 23%. We did call out that we thought that was more than the higher range. But if you go all the way back through 2012 and 2011, I think you have to go back into 2010 where we were outside of that, hitting at least the minimum range of 10%, generally running north of the 10% and the 11% to 12% range. So, coming in at 9% is outside of the historical typical range we've seen. Glenn Mattson – Sidoti & Company: So I guess that had been more steady until Q4. But I guess the one comment I would make is it seems like it's -- maybe this might be more for Ed, I'm not sure -- but in order to get to that 8% to 10% margin range in the software side, it seems to have -- you have to have a good quarter on that sell-and-bill side of the business. And that seems to kind of jump around a little bit. How do you consistently get to that margin range? Any comments on that?

Yeah. Well, I think getting to it, so, the typical sell-and-bill percentage is a part of it, but Janet, do you want to just comment on the different elements of that?

So, Glenn, if you're looking at the first quarter of 2014, we did about 1.9% operating margin. And when we look at the impact of the lower in-quarter revenue as well as some of those timing and execution items that we said in our comments, we think they run around 2-1/2% of a margin impact on us. So that if we had been in the range, at the low end of the range, and had not had those execution issues, we think that that margin would have been more in the, you know, about 4% margin rate, very similar to what we were running in the second quarter. When we get the mix, the higher revenue and the SG&A leverage, then we're getting closer to the 6%, 5.7%, 5.75% to 6% operating margin. When we get into -- in the midpoint of that sell-and-bill range, it has at times caused us to have as much as a 1% operating profit improvement. So that gets us into what we're running at for the 2013 average, which was about 6.2%, 6.3%. We know to go from there to the 8% to 10% target, it does take, as I said in my comments, the revenue growth, the continued movement towards higher Unisys IP content in our services offering. The federal stability, some better -- and some better SG&A leverage. Just to give you a sense of where we see this quarter compared to what we performed at last year in the first half of the year, how we performed in the services business for the full year of 2013, and for where we want to go to hit our 8% to 10% goal. Glenn Mattson – Sidoti & Company: Okay. And can you give a little more detail about what the timing and execution issues were on the IT services? Did you go into that really or is that -- any specifics there?

Well, we had a few projects where we expected to hit the milestones by the end of the quarter that would have been revenue-generating milestones for us. And we did not get it done. And we ended up with incurring the costs of those projects without getting the associated revenue. Glenn Mattson – Sidoti & Company: And do you feel comfortable talking about what the dollar -- or what type of revenue we're talking about?

I'd prefer not to. Glenn Mattson – Sidoti & Company: Okay.

I think I gave a sense of the magnitude in my comments where I said about 2-1/2 percentage points operating profit is the impact of the combination of the lower in-quarter revenue, just as we had gotten from the 9 to the bottom of the range, historical range of 10, as well as the execution challenges. Glenn Mattson – Sidoti & Company: Okay. And okay, moving on to technology really quick. Let's see. You said that there was 150 kind of customer engagements on Stealth I think with your channel partners. But do you want to go on a little bit more about that, like how many do you expect that as a percentage of revenue or what percent, or anything more detailed about that?

Well, I'm not sure I'm in the position to say how many are going to convert to revenue. What we were pleased with was the amount of activity that was being generated through this reseller channel and the channel organization that we've been standing up. And for us to have the opportunity to present Stealth to 150 different commercial enterprises or government organizations in a quarter, again the vast majority of them are clients or prospects that we've never spoken to before. We think it's an indication, one, of the -- it's certainly an indication that people are anxious to find a new solution to cybersecurity challenges. They're finding Stealth to be a unique and interesting differentiated approach to solving the problem. It says that we've got a channel out there that is bringing to us opportunities to speak to people that we've never spoken with before, all around this theme that we've had of new products sold to new channels in order to win new customers, that we are less dependent on our installed base and we have a growing customer base. Now this is just the first step to getting that business closed, right? But it starts with exposure to the marketplace and the opportunity to speak with people that we've never spoken with before. Glenn Mattson – Sidoti & Company: Okay. And -- but nothing on what kind of feedback you got from those customers --

Well, Glenn, outside, the feedback that we get around Stealth is pretty remarkable, very interesting. And then I can tell you that we've won new clients again here in the first quarter. We're pleased with that. We talked the last earnings call about a couple of important engagements in clients that we'd won. So we think that there's a building momentum here where we have a real marketplace need being met by a differentiated product offering and we're getting out there and getting good energy I think our go-to market and in the responses that we're receiving from the prospects. And it's not an easy sale, it's not a short-term sale. You have to keep, like most new technologies, you have to talk to the client or the prospects certainly more than once to get the order. Glenn Mattson – Sidoti & Company: Okay. Sounds good. Quick on ClearPath, I guess -- I think this is either the third quarter in a row it's coming a little below expectations, or maybe like two of the last three. On IBM's call they talked about seeing the bottom of the cycle for them for mainframes. I don’t know, is that something industry-wide or is that for them, specifically relate to their product cycle?

Yeah, I think ours is a little different. Ours is more driven, again, ours is more of a software license business than it is a hardware business. So it's just really a question of when clients want to renew those licenses, how, what -- how long a period they want to renew the license for, how large are the workloads that they're going to be running on those systems, for that upcoming license period. And it, you know, we just -- we always say it's spiky and not necessarily predictable with precision as to how all those things are going to transpire. And you see it in the quarterly results. And you're quite right, I think over the last three or four quarters we have been disappointed on a quarterly basis at times, other times we've exceeded what our expectation was. Glenn Mattson – Sidoti & Company: Okay. I guess last thing, on the buyback, does that need to be -- is it mandated that that gets completed by yearend 2014? It was nice to see the shares purchase and the aggressive action even after the quarter closed. But is that -- I'm just curious, does that need to be closed by the end of 2014?

The Board resolution goes through December 31, 2014. Glenn Mattson – Sidoti & Company: So if you don't exhaust the funds, then you -- then they would just, you know, it would be -- yeah, okay.

The Board authorization is $50 million [ph] to be spent through December 31, 2014 [ph]. Glenn Mattson – Sidoti & Company: Okay. Okay, great. That's it for me. Thanks.

Thanks, Glenn.

Thank you, Glenn.

And we go next to Bill Smith with William Smith Company. Bill Smith – William Smith Company: Hi, Ed. Did you add any R's [ph] this quarter? I think you had something like 60 when you spoke on the last quarter call.

Honestly, I don't know if we added some or deleted some. But the number is still 60. Bill Smith – William Smith Company: Yeah, okay.

There may have been a little bit of churn in there, but it'd be minimal churn. But our number is still 60. Bill Smith – William Smith Company: Okay. And then if I think about growing the technology business to $500 million as you pointed out, and if I look at say 20% or 21% operating margins, which is what I think you had last year, something like that in that business, and then if you held services flat, roughly $3 billion, and use a 6% margin, if I look at both of those numbers, say $100 million operating income on the ClearPath business or the tech business and $180 million on the services business, $280 million, not including any incremental business from Forward! or Stealth, would I be thinking about that correctly? Would those numbers, if I worked with those numbers, would I be in the right ballpark there?

So, Bill, it's Janet. So when you reflect on the $500 million that we're talking about the average of the business, you're right that in 2013 we ran around 21.1% margins in the technology business. And in the services business, we said that that number, our goal is to get that flat, with the 2.998 that it was in 2013. So then the question on that business is where we come in in total for the services operating profit for the year. We've given what our goal is and what we have to do to get from the first quarter performance to the full year performance. So those -- I think you have, conceptually, consistent with what we've discussed without commenting on the specific number. Bill Smith – William Smith Company: Without any improvement on the operating, just use a 6%, it sounds like you're in a position to improve upon that, using that 2013 6% number and the 20% or 21% --

I think -- Bill Smith – William Smith Company: -- $280 million without any contribution from Forward! or Stealth.

Bill, I think the only thing I would comment on with -- in addition to that is the comments we've made about the investments behind the new programs which we've said could add between $35 million and $70 million of increase in the operating expenses to put those new programs. Bill Smith – William Smith Company: Yes. Right. Okay. Thank you.

Thanks, Bill.

Thank you, Bill.

And at this time we have no further questions, so I'd like to turn the call back over to Ed Coleman.

Well, thank you, operator. And let me thank everyone who attended the call today. Appreciate your participation and look forward to speaking with you on our next call. Thank you very much.

And this concludes our conference. Thank you for your participation.