Good day, ladies and gentlemen, and welcome to the Unisys Fourth Quarter and Full Year 2016 Results Conference Call. At this time, I would like to turn the conference over to Ms. Courtney Holben, Vice President of Investor Relations at Unisys Corporation. Please go ahead, ma'am.

Thank you, operator. Good afternoon, everyone. This is Courtney Holben, Vice President of Investor Relations speaking. Thank you for joining us. Earlier today, Unisys released its fourth quarter and full year 2016 financial results. I'm joined this afternoon to discuss those results by Peter Altabef, our President and CEO; and Inder Singh, 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. 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 pension and cost reduction and other expenses. 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 expenses, non-GAAP operating profit, non-GAAP diluted earnings per share, free cash flow and adjusted free cash flow, EBITDA and adjusted EBITDA in constant currency. From time to time, Unisys may provide specific guidance regarding its expected future financial performance. Such guidance is effective only on the date given. Unisys generally will not update, reaffirm, or otherwise comment on any prior guidance, except as Unisys 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 filings. Copies of those SEC reports are available from the SEC and from the Unisys Investor website. And now, I'd like to turn the call over to Peter.

Thank you, Courtney, and thank you all for joining us today to discuss our fourth quarter and full year 2016 financial performance and 2017 guidance. I will begin on slide four of the presentation. At the beginning of 2016, we provided financial guidance for revenue, non-GAAP operating profit margin, and adjusted free cash flow for the first time in more than a decade. We are very pleased to report that we have achieved that guidance for both revenue and non-GAAP operating profit margin, and have exceeded it on adjusted free cash flow. These results are a significant step for our company, and were driven by a focus on a number of operational and financial goals we set entering 2016. First, we successfully executed against our vertical go-to-market strategy, including hiring leaders of key sectors and industries within those sectors. We also launched several new offerings aligned with our security focus and vertical go-to-market strategy, including new applications and delivery methods for Unisys Stealth, and tailored solutions for our targeted industries. These improvements helped to contribute to an increase in total contract value or TCV of 13% in 2016 versus 2015. We also continued the work begun in 2015 toward a more competitive and sustainable cost structure. Specifically, we achieved $205 million of annualized cost savings exiting 2016 against our goal of $200 million. We continued our transition to a more asset-lite business model, which resulted in reduced CapEx needs; and overall, we saw significantly improved cash flow, and were free cash flow positive for the year. Lastly, we effectively managed our balance sheet and liquidity needs, including successfully placing convertible notes, and recently paying off early a portion of our pre-existing notes due in 2017. While there is still work to be done to further improve our EMEA business and…

Thanks, Peter. Hello, everyone. Thanks for joining us this afternoon. In my comments today, I'll provide comparisons on a GAAP and non-GAAP basis. Just to remind you, the non-GAAP results exclude pension expense, cost reduction and other charges. As Peter highlighted, we delivered on our full-year guidance with revenue and non-GAAP operating profit margin coming within the ranges we guided at the beginning of 2016; and adjusted free cash flow exceeded the range we had provided. We're very pleased with our results for the year and that we delivered on what we told you we would do at the beginning of last year. We're particularly proud of the cash flow that we're able to generate over the course of the year. We believe that we have the right strategies in place to continue to make improvements both operationally and financially. Turning to slide 6. Our full-year 2016 results highlight the progress we made throughout the year in terms of improving profitability and cash flow. Revenue for the year was $2.8 billion, which was approximately the midpoint of the guidance range we had provided. We're pleased to see that our operating profit margin increased year-over-year on both the GAAP and non-GAAP basis. With GAAP operating margin increasing 350 basis points relative to 2015, non-GAAP operating profit margin for 2016 was 7.7%, slightly better than the midpoint of our guidance range and up 190 basis points year-over-year. With respect to earnings per share, please keep in mind that based on accounting related to the convertible note that we placed in 2016, the share count used in calculating non-GAAP EPS for the fourth quarter and full year numbers was significantly higher than that used in the prior-year periods, which impacts a year-over-year comparison. Shares used to calculate non-GAAP diluted earnings per share were…

Thank you, Inder. We'd now like to open the call to everyone to provide answers to any questions you might have. Operator, would you please open the line?

Absolutely. We will take our first question today from James Friedman, Susquehanna.

Hi, Jamie. How are you?

Hey, Peter, Inder, Courtney, this is Jonathan Lee pinch-hitting for Jamie. Congrats on the quarter.

Okay. Thank you, Jonathan.

And congrats on the year. Just a few questions, if you don't mind. Not sure, if I missed this, but how much of the Services backlog is expected to convert to revenue in the first quarter?

So, our typical for that is a range of 90% to 95% of the backlog converting to revenue. And we expect it to be in that range, again, for the first quarter.

Got it. And how are you thinking about FX for 2017? I know you had mentioned that FX was quite volatile, and that you're expecting a 1% to 5% year-over-year decline in constant currency, given that we are modeling (36:20). How should we think about that?

Yeah. It's a good question. Let me answer sort of the – we gave guidance on a constant currency and a as-reported basis, which would suggest that our expectation or at least our estimate is a 1 percentage point impact of currency. But as I noted in my comments, it's been a particularly volatile environment for the last few months. So it's always to project what the outcome will be at the end of the year, but that's what we are using for planning purposes, Jonathan.

Understood. And what are your expectations in each of the sectors going forward?

Well, Jonathan, as you know, we don't necessarily provide specific guidance on that, but I'll give you as much color as I can. So, we think of – obviously, we think of government, commercial and financial services. As I indicated in my remarks – this is Peter – the financial services team is the last to be fully geared up. So, in terms of revenue performance for the year, I'd expect that to be a little behind the other two. I think the other two will frankly be neck and neck. But the bigger story is probably inside the sectors into the focus industries. So when we talk about those focus industries that I've been highlighting for a year now, travel and transportation, life sciences and healthcare, justice, law enforcement, border protection and commercial and retail banking, we are expecting stronger performance in each of those than we would in the specific sectors. And that's part of the plan. We chose those sectors because the industry is growing faster in those sectors, and because we have specific domain knowledge and IP. So, that's kind of where we think the market is heading. We think that's our differentiation. So you would expect to see higher growth from us in those targeted sectors. And that's what I'm speaking to in most of my comments.

That's really helpful. Thanks again, guys. Congrats on the quarter.

Thanks, Jonathan.

Thank you.

And our next question will be James Friedman, Susquehanna.

Hi. I know it's like an out-of body experience. This is Jamie. We don't mean to team up on you, but I wanted to ask you another one, if I could.

Of course, Jamie. Thank you.

I was just juggling a couple of things tonight. So, Peter, I think, in your comments, you had described ClearPath Forward services, and you had the language, land and expand. I haven't heard the company talk about that so much before. I was wondering if you can elaborate on what that opportunity looks like.

Yeah. Absolutely. And my diction might have been off. Those were actually two different sentences, so I'm going to split that up for you so. So, this ClearPath Forward services, and then there is the expansion of our consulting team. So, let me do ClearPath Forward services first. The land and expand was with the consulting team. So, obviously, we've had a ClearPath Forward business for many years. It's an important generator of revenue, and an even more important generator of cash and margins. But before relatively recent times that ClearPath Forward team had been segregated from the rest of the company largely, which meant that there was not, if you will, an integrated focus on selling services to those customers. It was mostly a software sale and a license sale, and a sale of some applications we had on top of ClearPath Forward like our core banking systems. So, the result of that is, many of our clients have created literally hundreds of applications that sit on top of ClearPath Forward. And so the ClearPath Forward services initiative, which began last in 2016, is actually go to those clients, and say look, we know the underlying architecture better than anybody, why don't we take off your hands or outsource the development and maintenance and expansion of all these applications you've put on top of ClearPath Forward. We launched that early last year. It has been very successful. There has been a significant increase in revenue for us. And we expect to continue to increase that revenue this year. If you will, it's a bit low-hanging fruit, because it's existing work that our client is doing, in some cases, with other third parties, and we are now focusing on kind of bringing that home. Two other benefits to that, one…

That's great. I just wanted to ask one for Inder as a follow-up to that, Peter, if I could, and then I'll drop into the queue. But with the rev-rec on ClearPath Forward services, Inder, is that Tech revenue or Services revenue? And I'll just ask this another one, Peter, TCV, you gave fiscal year numbers. I might have missed it. I heard the 13% up for 2016, the new biz, up 17%, but did you give the Q4 number? Or am I thinking about that the wrong way? So, two questions there.

Right. So, Technology revenue, to answer your first question, Jamie, a lot of it, frankly, as you realize and we've talked about in the past, is around retaining those clients (43:55-44:02) and helping those clients migrate their installed base of applications that run on our technology platform, and then migrate them to new interfaces and offer things like omni-channel banking, for example, or modernize the language from COBOL to Python and other things. So a lot of it is very tied in with technology. With respect to the numbers that I gave on TCV, these were for the full year, and whether you look at it on a total TCV basis, as I mentioned, or frankly, on the focus verticals that we have, which were around 20% – little over 20%, those were all full year numbers.

Yeah. If we look just on the quarter, Jamie, for TCV signings, compared to last year, the TCV was slightly less on in order of little less than 10% below TCV from the prior quarter. But the new business TCV was significantly higher. So the issue with the TCV is, of course, it includes renewals, and renewals can be coming at any time, so slightly less overall, but for new business, which is new logos and new scope, significantly higher.

Great. Thanks for the color. I will drop back into the queue.

Thanks, Jamie.

Thanks, Jamie.

Our next question today will come from Frank Atkins of SunTrust.

Thanks so much for taking my questions. Congratulations on the hiring of the new CMO. And I wanted to ask where do you feel you stand in terms of where the sales force sits right now, how close are you getting to kind of the force that you won and the training and cross-selling abilities there?

Frank, this is Peter. Thanks for the question, and thanks for being on the call. With regards to hiring Ann, it's a wonderful asset to this company. She joined in December, and I will tell you is already really bringing a fresh outlook to the company, which is exactly why we brought her in. So, one of the last things that Inder had done as he had brought a fresh outlook into the company was a branding campaign that was launched in late-October and early-November, which I think you may have seen, it's our Securing Your Tomorrow campaign. And so, Ann is moving forward with that significantly, and also moving forward with all of the branding around, and all of the campaigns that I described, specifically, around security, and around our vertical, kind of, software-led platforms. The sales teams, in addition, have received a change, if you will, as of late last year, kind of in December. So, one of the things that we did over the past little over a year was to stand up these sectors in government, commercial and financial services and the industries underneath them. The sales force has historically been kind of separate as a distinct sales force. And the longer term plan was, once we had the thought leadership by industry and by sector, to actually move the sales force into the industry and sector teams, so that they would work side-by-side with our subject matter experts, which we've also been hiring for the last year and a half. But you can't really move salespeople other than at the end of the year because of commission plans, and in fairness, we didn't think that the sectors and industries were ready until the end of last year. So we have now done that. So we feel very good about our sales force now. And as I said, it is now embedded inside those industries and inside those sectors. It's a great question, Frank. Thank you for asking it.

Okay. Great. Thank you. And then, if you could talk about TCV by geography a little bit and how that impacts FX going forward. And then, how are we to think about the translation of TCV to revenue? You've had nice trends in that total (48:39) contract value, up year-over-year. When may that translate into revenue trend?

Yeah. I don't have the TCV by regions in front of me. I'm not sure if we'll grab it during this call or we'll get back to you later on that afterwards, Frank. In terms of the translation of TCV into revenue, it's complicated, because TCV, of course, number one, includes renewals, which can happen every three or four years for specific clients. Number two, TCV is a total number. And there is a difference between – there is the same TCV for a three-year contract or a five-year contract, even though the revenue result will be different. So it's I would say a blunt instrument in talking about future revenue growth. I actually think our guidance is more helpful than that. I would tell you that, through the consultant and project work that I mentioned with Jamie, that's kind of, if you will, a second element of our revenue growth. So while we do expect TCV and revenue growth from long-term contracts, and the 13% increase year-on-year is a nice harbinger for long-term growth, we're not relying exclusively on that. We're ramping up the consultant project work, and that will give a lot of shorter term revenue, but frankly, more impactful than a longer term TCV number. So it's a combination of both.

Okay. That's helpful. And thank you for the guidance, by the way, that's great to see. Can you talk a little bit about what drove the decision on the cash-out offer on the pension side, why do that now and why choose kind of that level?

Yes, Frank. I think that, as we look at the pension plan and the obligations that we face over the next 10 years, we're trying to make sure that we not only care for the way we are looking at the underfunded position as a company, but of course care for the obligations that we have to our beneficiaries of that program as well. We felt we had really sufficient cash available from a number of reasons. But we also felt that our intent over the longer term is to bring down that underfunded position. So we felt that we would see what the take rates were on a lump sum offer. And as you and I have talked in the past, and I know you've asked this question around how we would manage the pension obligation, this is merely one of the tools that we intend to use over the next few years to do that. We were pleased by the results of the lump sum offer and the take rates on that lump sum offer. From a cash contribution standpoint, for us, this was essentially neutral. And so we felt very comfortable that this is the right thing to do at this point in time. As I said earlier, don't be surprised if we have other types or maybe other instances of this type of an offer. We like the take rate we saw.

Okay. Great. And last one from me, if I could ask Peter, to put on kind of a strategy hat, and I know there's a lot of uncertainty around this, but what exposure do you have to potential regulatory changes as a result of Trump, either visa exposure, changes in border control, healthcare side? If you could address, maybe at a high level, your thoughts around some of the issues.

Well, obviously – Frank, it's a great question. I think it's less a strategy hat and more a crystal ball in trying to figure out the future, because it's not completely knowable at this point. But I would say a couple of things. So, first, on the – obviously, there is some uncertainty about what will happen in certain federal agencies about their pipeline in terms of new contracts. So exactly how that will affect us, we'll have to see. I think in general though, the areas of our focus are areas where you are I think less likely to see that and more likely to see actual focus and attention, and perhaps growth. So, clearly, on things such as border security, which is our largest client in the federal government, I would say we'd become increasingly bullish about that. On the other hand, there are some agencies that, at least according to early published reports, are under some duress. There was a few published reports today that the EPA might have a temporary contract freeze. Well, we don't do any business with the EPA currently. So I think it's really going to be more a question of that kind of agency for agency review. And we work with 30 different agencies in the U.S. federal government. I gave two easy examples, but time will tell as you get into more agencies. But in general, I would say we feel bullish that our focus is increasingly the focus of the new administration.

I'm just going to piggyback on that. We believe we're well positioned from where we think the U.S. Federal business is positioned. Our relationship with the U.S. border security efforts over the last several years, we believe, positions in the right way. Peter alluded to eu-LISA in his comments earlier and that's the IT infrastructure business for the organization that manages the European borders and the IT infrastructure there. We've been in discussions with them, and we do business with them and we're well positioned. So as it is a global phenomenon around border security, we do believe we're well positioned, Frank.

All right. Great. Thank you for taking my question.

Thank you, Frank.

Everyone, we have time for one more question today. That comes from Joan Tong, Sidoti. Joan K. Tong - Sidoti & Co. LLC: Hi, guys. How are you?

Good, Joan. Thank you for being on the call. Joan K. Tong - Sidoti & Co. LLC: So, most of my questions have been answered already, but I just wanted to ask you on the consultancy and advisory work or the capability that you were talking about, how realistic like we are thinking about that particular portion of the business as a percentage of total? Like are we talking about you really want to get into some sort of consultant business? Or is it more sort of related to land and expand – you're trying to use that as a tool to kind of land further business and the other part of the Services business?

Joan, I think that's a great question. And so, let me try to answer it as fully as I can. The first part is we are not making a major shift in the company to a company that is driven by short-term project work. So if you look at our revenue chart that Inder put as part of the package, I think about 66% of our revenue is recurring, about 15% is in Technology, so only about 19% or so – and I'm doing this from memory – is in short-term project work today. So, we do some of that work today, and we're talking about more marginally increasing that percentage, but not dramatically changing the company. So, that's point number one. Point number two is we're doing it in a very targeted way. So this is not consultant for consultant sake, this is specific consultants that have expertise in our specific areas of focus, be that applications, be that security, be that the retail banking program that I just outlined, it's that kind of – in travel and transportation and in healthcare. So, very, very specific, and of course, around border protection. So we are not trying to boil the ocean here, we are trying to be very, very specific. And the primary reason for that is in-year revenue, but we do believe that, as with most consultant practices, it will result in a land and expand and longer term contracts over time. Joan, I hope that helps. Joan K. Tong - Sidoti & Co. LLC: Oh, yeah, definitely. Thank you. And then, if we were to think about 2017, your Services margin. And obviously, you gave the total operating margin on a non-GAAP basis, but I understand that you spent – make some investment in 2016, so that your service margin would be little bit below what you originally anticipated. Do we have any spilled over of that into 2017? And also, would you be able to provide sort of like a guidance how service margins going to look like for this year?

We don't provide guidance on margins below the full company's line. I would say that we do expect service margins – Services gross margins to continue to grow. They grew last year. You saw a 40 basis point growth over the year and you saw 100 basis points growth in the fourth quarter. I think the growth of gross margins, we would expect to grow higher than the growth last year, frankly. So we expect expanding gross margins at a higher rate. Part of that is because we have been putting all of these investments into it. So that's a big part of our future. So, yes, we do expect expanded Services gross margins going forward on an annual basis. There's going to be quarterly blips.

This is Inder, John. In 2016, we actually saw gross margin improve in three out of our four quarters, to Peter's point.

Right.

It's our goal to make that a more sustained improvement quarter to quarter to quarter. Of course, there is always going to be a volatility type of thing here or there, but we're pretty happy about the direction we've seen gross margins going for the bulk of 2016.

Thank you, Joan. Joan K. Tong - Sidoti & Co. LLC: Got it. Thank you.

And that does conclude our question-and-answer session. I'll hand things back to our speakers for any additional or closing remarks.

I want to thank everyone for joining the call. I hope we had an opportunity to answer as many questions as we could get to. We did not get to all of them. So we will hope that those of you who still haven't had a chance to ask questions will do so after the call. Again, our team remains available to you. Again, we are putting more and more information on our Investor website, and we would urge you to take a look at that. So until our next call, thank you very much.

And, everyone, that does conclude today's conference. We would like to thank you all for your participation today.