Good day and welcome to the Unisys Fourth Quarter and Full Year 2015 Results Conference Call. At this time I would like to turn the conference over to Mr. Niels Christensen, Vice President of 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 fourth quarter and full year 2015 financial results. With us this afternoon to discuss our results are Peter Altabef, our President and CEO, and Janet Haugen, 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 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 provided reconciliations within the presentation. From time to time, Unisys may provide specific guidance regarding its expected future financial performance. Such guidance is effective only on the date given and Unisys generally will not update, reaffirm or otherwise comment on prior guidance except as deemed necessary and then in a manner that complies with Regulation FD. 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 Peter.

Thank you, Niels, and thank you all for joining us today. I first spoke with you a year ago and outlined my initial thoughts on refocusing our strategy, developing our software and integrated solutions, realigning our organization, and addressing our cost base. We expanded on those plans throughout 2015, implementing a go-to market vertical orientation, focusing our efforts within the services segment toward higher value and higher margin offerings, taking steps to better leverage Unisys IP and software, enhancing our leadership team, and building a security team to drive our sales solution into the marketplace and expand our presence in the managed security and consulting space. We made significant progress during 2015. In 2016, we will continue to strengthen our go-to market capabilities and work to deliver increased profitability and cash flow. We will also lay a foundation for renewed growth. Turning to our financial results, for the fourth quarter and full year, services revenue grew at 2% in constant currency. This is a meaningful accomplishment in a challenging environment. After a strong third quarter, services order bookings in the fourth quarter were down year over year with a tough compare. As we enter 2016, our sales and client account teams are fully aligned and appropriately incented to support our go-to market focus and leveraged offerings. Technology revenue was down year over year in the fourth quarter and for 2005 overall. We had communicated that a decline was expected, principally because of fewer ClearPath Forward license renewal opportunities in the year. This business is important to the Company and we've made great strides to modernize our ClearPath Forward platform and increase both its functionality and integration with other systems. For example, it is now plugged in to VMware Center and users can monitor and manage ClearPath Forward workload from the…

Thank you, Peter. Hello everyone and thank you for joining us on this call. In my comments today, I will first cover a summary of our fourth quarter and full year financial performance, followed by a discussion of our revenue composition for the fourth quarter and the full year. After the revenue discussion, I will cover segment performance and cash flow performance for the fourth quarter and the year. I will then provide an update on our cost reduction program and our defined benefit pension plan. And lastly, I'll provide additional comments on our 2016 guidance. I will provide comparisons on a GAAP and non-GAAP basis. The non-GAAP results typically exclude our pension and cost reduction charges. Unless otherwise mentioned, comparisons are on a GAAP basis. Let me begin with a summary of our fourth quarter and full year 2015 results. Please turn to Slide 4. Fourth quarter revenue was $790 million, which was down 13% year over year, 6% down in constant currency. In the fourth quarter, services revenue grew 2% on a constant currency basis, our fourth consecutive quarter of services revenue constant currency growth. Technology revenue declined in the fourth quarter. Technology revenue can vary significantly based upon the timing of software license renewals. Fourth quarter technology revenues declined by 30% year over year in constant currency on lower software license renewals as well as lower third-party product sales. Our cost reduction program is showing benefits across all of our cost lines, and I will provide an update on the overall program in a moment. Our fourth quarter non-GAAP operating profit margin of 12.1% rose 100 basis points year over year, reflecting the benefit of the cost reduction actions taken by the Company. We generated $152 million of adjusted EBITDA in the fourth quarter, which was 6%…

Janet, thanks very much. Niels, I think at this point we'll open the call to questions.

[Operator Instructions] We'll take our first question from James Friedman with Susquehanna.

Hi. Thanks. I appreciate the detailed disclosure and updated presentation. I want to ask you briefly first about the seasonality that we should be thinking about in terms of earnings. So, any view onto that, Janet, as we kind of season that across the quarters of 2016?

So, Jamie, thanks for joining the call. If we look at our two components of the business, services and technology, we have a different seasonal pattern happening. In technology, we looked at that pattern, we're anticipating to be very similar to the pattern we saw in 2015. When it comes to the services business, we are looking, as I mentioned in my comments, a bit of a slow start in the beginning of the year with lower project-based work and will anniversary the BEMS contract for renewal, but we expect in the services business for that revenue to increase sequentially quarter by quarter throughout 2016, as well as the operating margins improving quarter by quarter by quarter.

Okay --

Jamie, this is Peter. Thanks again for joining the call and for the question. So what I hope you're hearing from Janet is, now that we are providing guidance, we also want to give you a window into the periodicity of that number during the course of the year. So that's kind of the approach we're taking, where we are differing from kind of last year's, you know, pattern.

Yeah. No, that's helpful. And then, Peter, I was going to ask you, can you share with us, at least anecdotally, the progress you've made on refining the sales strategy? You seem to have some, you know, fairly sophisticated developments there. So, can you give us a progress report as to how that's going? That would be helpful.

Sure. And I think we are making progress. You know, you heard me pause a minute during the remarks when I talked about the fact that, with Eric's arrival next week, we have, you know, completed the leadership team for our go-to market. That's a very big deal. You know, these segments and sectors didn't exist last year. And so we created them. But, you know, midyear to fall, we started populating them with existing people during the fall to winter. It's not really until now that we've got leadership in place. So, you know, with Eric coming onboard next week, with Kelly coming onboard in December, with Mark Forman coming onboard in the fall, we now have that leadership in place. We expect that global leadership to really assist greatly in the new logos as well as renewals as we align through those industries. So it, you know, part of what you're seeing when we look at our revenue numbers, you know, our revenue mix, you know, we've had two kind of things going on in the company in big picture, right? We've had kind of consistent gross margin deterioration for a number of years and we've had revenue deterioration for a number of years. So what you see in 2015 is effectively a continuation of that, because those things were all underway. What you see in our guidance for 2016 is a turning of the corner on the profit margins, which, as I have explained earlier, I think is a necessary precursor to a turning on the revenue. Until we have the cost structure in place, until we've got the right go-to market and we can sell the right offerings, you know, more empty calories isn't going to help us. So what you see next year is a pretty aggressive, I think, increase in our profitability. We're going, you know, up from, you know, the 5.8% this year to between 7% and 8% next year. And then what -- we're not obviously giving guidance in 2017, but we expect in 2017 to begin, you know, to make progress on the revenue where we're continuing to have that revenue decrease in 2016. We certainly expect to stabilize revenue in 2017.

Got it. I'll jump back in the queue. Thank you.

Our next question comes from Ned Davis with William Smith & Co. Ned Davis - William Smith & Co.: Yes, thank you. I just want to confirm something. I assume that your current plan is to finance all of the cost savings program, Europe and U.S. internally. Did I hear that right?

Ned, thank you for joining the call. I guess what I said on the call is that we are self-funding the programs. You'll note that, in my comments, it reflects an extension of that program into 2017. With the $180 million estimate of cash for the program, we spent about $59 million in 2015, expect to spend roughly $95 million to $100 million in 2016, and then $100 million to $120 million of that cash would go out in 2017. So we have looked at the cost reduction opportunities, we have focused on the ones that have the fastest payback in getting the items that we've accelerated in, and we will extend the program into 2017 to allow us to self-fund that with the cash that we have and available financing that comes from the cash flow off of the business.

Yeah. And Ned, that could change, right? So we think that the right approach is to outline, and prudently we're outlining a self-funding approach. That self-funding approach takes about $100 million of that charge into 2017. If we do something different on the financing, if -- then that can accelerate. But currently that is our plan. Ned Davis - William Smith & Co.: Another question then on cash flow, Janet. Is there any way you can give us a sense of how far out into the future you are obliged to fund both the international and domestic pension funds regardless of discount rates and book liabilities?

Sure, Ned. We, in the materials, in the slides that are accompanying the presentations, we provided an updated view of the cash requirement going out to 2027. And in there you'll see both the U.S. defined benefit plans and the -- all other plans, which are the international plans. And we've updated that to reflect, one, the anticipated 2017 mortality tables that'll come out and affect the U.S. pension contributions, the actual returns in 2016, the regulation changes that happened in the U.S. that moved items out into 2018 and beyond, so that you can see our anticipated picture of the cash flows all the way out through 2017 based upon our best estimates at this time. Ned Davis - William Smith & Co.: I guess -- yeah, all right. Thank you for clarifying that. But I guess what I'm getting at is, if, let's say, the index rates right substantially over the next couple of years, in a strengthening worldwide economy, to what extent do you then reduce these contractual obligations? You know, is -- when are you not locked in to making the payments? Is there any way you can kind of generalize about that?

Sure. So the discount rate that we talk about is the U.S. GAAP discount rate that is used for presentation on the financials. There are different rates and assumptions that are used internationally based on regulations and trustees. And in the U.S., the way that the tax-funded calculation works, there is an alternative rate, the segment rate. So, generally, that rate -- that rate and how it -- how changes in that would impact our pension contributions, generally it's -- you have a two-year window before you see the impact of that rate. So if that rate were to move next year, you're somewhat locked in on the 2016 and 2017 contribution, but the 2018 and beyond number would change. Ned Davis - William Smith & Co.: Okay, great. Thank you. Peter, just switching over, it's -- congratulations on the extensive disclosure and guidance. And related to that, with your team as of next month now intact, the key people in your marketing team and verticals, in making this guidance, what is your view and expectation generally for the market, particularly on the services sector for the rest of 2016? Any kind of inherent assumptions there?

Yeah. Thank you again for the question. There are several assumptions. Again, you know, part of what we are doing is very consciously taking our operating profit and in fact our gross margin in the services business up. So, Janet mentioned that the operating profit increases sequentially each quarter; so does the gross margin. So we are really consciously saying we need to be providing higher-value, you know, higher-reward services. And so that is changing the mix of the business. There's a revenue consequence with that. So when you look at the, you know, we increased revenue 2% year on year on constant currency in 2015, but continued the downward trend on the margin. And so what we got to do is reverse that and be pickier, frankly, and getting our cost structure in place. So that's what we're doing. So, you know, you see some revenue in services going away from the go-forward activities or the cost takeout activities, you see some, because honestly, as you know, we had a very, very powerful year in U.S. federal, and some of that was some agencies wanting to increase their -- the deliverables ahead of some of their budget cycles. That doesn't -- we don't have that increase next year. So we've got a little headwind on the services revenue next year, but it's more a fact of we need to be, you know, really focused on margin. And I think long term that's just a critical part of our success. You know, in order to, you know, move forward in a very, very positive way, we got to get those higher-value solutions, and then we have to increase the marketing. You know, Stealth is a great example. It is not just license revenue from software. There are a host of services that rally around Stealth, from implementation to monitoring, etc. So, you know, that's all higher-value, higher-margin services that will come as the Stealth revenue and the Stealth market increases. Ned Davis - William Smith & Co.: Thank you. Appreciate it.

Thank you, Ned.

We'll hear next from Isaac Esseku with Susquehanna Financial Group.

Thanks for taking my call. So, Peter, you were just talking about Stealth, and I would appreciate it if you dig a little further into Stealth. With Stealth now on AWS, can you give us an idea of how you plan to sell, and also the mix of revenues over time you expect to see between software sales and the service component?

Yeah. Isaac, thank you for the question and the opportunity to elaborate on it. You know, as I said in my remarks, what we did last week I think was important for us as a company. It represented a culmination of a very focused strategy over 2015 to really look at how we intend to market Stealth and to expand the customer base, and to also expand the way we go about Stealth. So we have always had and we continue to have the ability to provide Stealth to our clients inside their datacenters or inside our datacenters. Stealth has gotten a lot better in the past 12 months. It went from an application that required an appliance or a server sitting in the datacenter, to one that is totally software-driven. That's important and helpful, you know, even if you're talking about the traditional datacenter environment. But what the AWS announcement gives us are two very different capabilities that we have not had before. The first is to put Stealth on AWS marketplace. So if you go to AWS marketplace right now, you can just log in as an AWS customer, you could be a consumer as well as an enterprise, you can stand up -- the servers in AWS are called EC2 -- you can stand up an EC2 server with Stealth in about seven minutes. So this is now completely automated. That will open up an entire new generation of clients and an entire new generation of users to Unisys that have never had an opportunity to use us before. And if you do this, Isaac, and you go out there this afternoon, you will find, you know, just like any other marketplace, you know, AWS has customer reviews. And I think you will be delighted, or at least I am delighted, to find those custom reviews are five-star reviews. It is getting enormously good feedback on AWS marketplace. So that's an interesting opportunity for us. You know, there are a million clients on AWS. It's very current, it's very exciting. The other opportunity we announced last week is just as interesting. And that is an opportunity now to take our Stealth platform and seamlessly integrate it over both an internal datacenter, whether it's our client or ours, and AWS. So, workloads can move over into the public cloud and back and forth, still be fully protected by AWS during the move, and still be -- by Stealth, and still be protected once it's in -- once it's in AWS. And the tools and the management tools are the same, in terms of seamlessly managing that environment, either on AWS or in our datacenter or our client's datacenter. So you get the benefit of the AWS pricing, you get the benefit of the cloud burst capability, but it's covered by Stealth. So we really think it's quite a significant change and one that required a huge amount of engineering over the past 12 months.

That's very, very helpful. Thanks for the color there.

Yeah, you're welcome, Isaac.

So the other question I have is on end-market demand, especially internationally. I mean there are signs of a global slowdown broadly, and if you could speak to us a little bit about end-market demand outside the U.S., how that's looking. Thank you.

Yes. Well, clearly, when you look at the numbers, you see a falloff in Latin America. And I think, as with, you know, almost all technology companies that are either global or regional, Brazil is the touch stone for Latin America. And the Brazilian, I would say, economy, is challenged right now and it's challenged for our sales. So I would say to you, we are cautious about Latin America. If I look at our pipeline, for the very first time in a while now, our pipeline is actually growing in Latin America. But it -- the fourth quarter was not a good quarter for Latin America or for growth in Latin America. So I would say the Latin American environment is challenged. Interestingly, as you listen to Janet's numbers, EMEA in the fourth quarter did better than I think many would have expected, and that includes us. I think it's a testament to the resiliency of that economy and of our team there, that we are doing, you know, much better than I think people would have expected in EMEA. Asia Pacific is an interesting environment. First of all, we see Asia Pacific in the market in aggregate and market demand in Asia Pacific continuing to grow. The growth has slowed but it is still a positive growth environment. You know, when I mentioned our new leadership team earlier in the call, Isaac, in addition to the global sector leaders, we've also enhanced our regional leadership, which is particular important in South -- in Latin -- in Asia Pacific, just because it's so far away. And in December, as I think you know and we issued a press release on this, so in December, Tony Windever joined us, and he has already made a big impact as our leader of Asia Pacific. So, you know, I think the market is still positive there and I think we're now acting in a much more deliberate sense in Asia Pacific. So, you know, 51% of our revenue is outside of the U.S. and Canada. We are very global. And I feel fine about our ability to compete outside the U.S. and Canada. I wish the exchange rates were more helpful.

Okay. That's very, very helpful. Thank you so much.

Thank you.

Your next, from Bill Smith with William Smith & Co. Bill Smith - William Smith & Co.: Hi, Peter. You mentioned the SAP Hana opportunity, with inside AWS with Stealth. Is that -- how is that -- how did that come about? Did you approach them? Did they approach you? And is that a relationship that we should think about that could grow? Is it a partnership with SAP as you market? Can you talk a little bit about that?

Yeah. We have had a very active relationship with SAP for a few years now and actually have been very active with the Hana solution. I would say, Bill, and thanks for the question, so even though we've got an active partnership with SAP, I think the bigger takeaway from me in that relationship with the Department of Interior is not SAP Hana as much as cloud. And it's SAP Hana on a secure public cloud. And we really have been showing an extraordinary leadership, particularly with the U.S. federal government, in migrating their applications to the cloud. So I mentioned that. I also mentioned another agency in the law enforcement world where we have moved them to the AWS cloud. And now with Stealth, I can tell you, last week at the -- when we announced Stealth, we had kickoff sessions in London, in D.C., as well as in Seattle. And the D.C. session with the AWS sales team was extraordinary. There's just huge focus on extending AWS for the government. I mentioned the secure site that was established with the CIA that we have gotten approval to. So I'm very happy about the SAP Hana relationship, but I think the bigger message for us is working around the cloud and the government. Bill Smith - William Smith & Co.: Yeah, got it. And so, are those reference points then for the private sector as well? And has that been helpful? Can you reference that into the private sector versus the --

They are. They are. And I mentioned the certification process in the government. One of the -- and I, you know, you saw where we are with the NSA's clearance and where we are with the other government clearances -- although not necessary, those are very important benchmarks, particularly in the financial services sector. So, you know, when -- as those progress, getting those benchmarks in government is just a green light in the financial services sector to open that sector up in a much more powerful way for us. You know, Eric Crabtree, who's joining us next week, has spent his career in next-generation financial center applications. A lot of it on the cloud, a lot of them in omni-channel. Omni-channel financial services is itself moving to the cloud. So our ability to approach financial services sector companies with a Stealth-enabled solution is a big deal. Their interest is going to follow some of these certifications that are underway. Bill Smith - William Smith & Co.: Yeah. That's great. Thank you, Peter.

You're welcome, Bill. Thanks very much.

And our final question comes from Ana Goshko with Bank of America.

Hi. Thanks very much. I have two questions. So the first, it's already been asked I think in a couple of different ways, but it really is, you know, on the macro sensitivity of the guidance -- and by the way I will echo the comments, thank you very much for the guidance and for really for increased transparency and detail on many fronts. But as you -- I think we're trying to assess how much macro sensitivity is on the guidance. And so as you look at it, do you feel that you've got more derailer possibility from external factors such as customer demand and the economic environment, or is it more internal based upon the Company's own ability to execute?

So, Ana, that is a great question. I'll take a shot and then I'll defer to Janet on this. Honestly, I think that a good amount of the Company's challenges to date have been to some extent self-inflicted, or at least inward-focused. We needed to get our cost structure aligned. It is getting there. Obviously this cost takeout is a process. We needed to get vertically integrated solutions and go-to market. So, some of this is playing catch-up to where we need to be competitively. That said, obviously the market is extraordinarily relevant, and there's no lack of good competitors there. I will tell you, we've got some real assets at the Company. Our end-user computing platform, which represents about 50% of our revenue, is what we call cloud and infrastructure. End-user is about 27%, so it's about half of that. It's really a globally leading platform. And so I do believe, as we get our costs in line, we can grow that business as we make it more economic and more profitable. So it's not that we don't live in a competitive environment, we do, but I think we as a company will have much more confidence to aggressively increase revenues as we get our cost structure lined up. Janet?

Sure. Hi, Ana. Thank you for joining the call. So if I -- if we look at the overall business and we look at the guidance, I think, to answer your question about the macro sensitivity versus the internal execution, I just want to point out two things. As we look at our services business, I mentioned that the range of revenue there is $2.43 billion to $2.51 billion. And I think it's important to keep in mind that we start the year with $1.8 billion of that in backlog. Against our guidance for the services business, we start the high and the low end between 72% and 74% of that revenue already in backlog. I then would say that -- and that's a significant portion of our services business that we know we start the year with. And then if I move over to the technology business which our range of revenues there, you know, in the 345 to 355 range, most of that revenue is coming from, at least for 2016, the majority of that revenue is coming from our ClearPath Forward customer base, where we have established relationship, where we understand their needs and demands, and the hardest part for us to call sometimes there is the timing of when transactions would occur. So I think there is a significant portion of our 2016 guidance that is already underpinned by existing relationships to existing backlog. So then the remainder of that I would say we feel two types of pressures. Clearly there is the global economic pressure, but we have great diversity in our client base by industry and by geography that provides us a bit of cushion against a downturn in one particular area of the world or one particular industry. And then I would say, second, as Peter mentioned and as we've been talking about for the past number of quarters, we've made significant investments in increasing and bringing great industry talent that brings perspectives and relationships to the Company, under Neil Gissler's direction, we've been enhancing the service offerings which we think gives us more to bring to bear. So I think that we feel very positive about what new we have to bring to the table from an internal standpoint in 2016 to build off of. But in any given year, we still got to close the rest of that services revenue and close these technology transactions. But we start the year with a good foundation.

Okay, great. Thank you so much for that. And then the second question is, if I go through the -- just the simple kind of cash flow guidance, and it looks like the Company should build cash in 2016. And I just wanted to understand what the base case and maybe what the backup plan is for the maturity that's due in 2017 in terms of the bond maturity? It does look that, if the capital markets remain as difficult as they, that there, you know, through a combination of cash on hand, cash generation and revolver availability, that there's a backup plan for that maturity. But just wanted to see if I missed something or you have other design in mind.

So, Ana, you mentioned all the different levers that we have available to us right now. I'd also point out that that was a consideration when we looked at the timing of the cash usage for the go-forward plan, and part of the decision why we decided to move some of the actions out of 2016 and into 2017, while we are hopeful that the debt markets return, that we would -- potentially to have an earlier ability to refinance, we have to plan for all the different alternatives, and that maturity coming in 2017 was part of our consideration on the design of the go-forward cash usage. You're exactly correct that we have a revolver that is in place, the majority of which is undrawn against. And we'll continue to focus on generate increasing the cash flow generated off of the business, both from the way the business performs, the working capital management, and including our move to a more capital light, less intensive capital expenditure model for the business. So those are all the levers we're working in case that that market isn't there.

Yeah. And Ana, again I just want to ratify what Janet has said, you know, we -- you know, markets come and go and we are certainly expecting that the current market will change over the course of the, you know, we got a decent headwind in front of us. But that piece of go-forward that we are effectively deferring into 2017 is a voluntary piece. We don't have to do it. We would like to do it, operationally it would be smart to do it, we get a good return on that, but that is approximately $100 million, that if we choose not to do it -- well, it's a little less than $100 million in terms of the incremental amount.

Right.

But we don't have to do it. So it's another arrow in our quiver. And we'll just see how it all plays out.

Great. Thank you so much.

Thank you for asking your question, Ana.

I think we are out of time. And so I'm going to thank everybody for joining the call. Obviously we have given all of you a little more digest with the guidance and with the additional disclosures and data. You'll note, we continue to put more and more data on our Investor Relations website. So, Niels and Janet and I and our team remain available to you for follow-up questions. And we thank you for attending, and look forward to the next call.