[Information Concerning Forward-Looking Statements](index=4&type=section&id=Information%20Concerning%20Forward-Looking%20Statements) [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section serves as a cautionary note regarding forward-looking statements within the report, emphasizing that actual results may differ materially from management's expectations due to various factors. The company assumes no obligation to update these statements - Forward-looking statements are based on management's current expectations, assumptions, and beliefs, and actual results may differ materially[8](index=8&type=chunk) - The company assumes no obligation to update any forward-looking statement to reflect events or circumstances that occur after the statement's date[8](index=8&type=chunk) - Key risk factors that could cause actual results to differ include implementation of business strategy, significant underfunded pension obligations, and general business risks such as revenue growth, competition, technological innovation, client retention, contract profitability, cybersecurity, and internal control weaknesses[9](index=9&type=chunk)[10](index=10&type=chunk)[12](index=12&type=chunk) [PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for Unisys Corporation, including statements of income (loss), comprehensive income (loss), balance sheets, cash flows, and equity (deficit), along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items [Consolidated Statements of Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) | Metric | Three Months Ended June 30, 2023 (Millions) | Three Months Ended June 30, 2022 (Millions) | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :----- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Revenue | $476.8 | $515.0 | $993.2 | $961.7 | | Operating income | $0.1 | $33.7 | $50.0 | $10.2 | | (Loss) earnings before income taxes | $(24.1) | $3.5 | $(178.7) | $(49.4) | | Consolidated net loss | $(39.5) | $(16.8) | $(214.0) | $(73.8) | | Net loss attributable to Unisys Corporation | $(40.0) | $(17.1) | $(215.4) | $(74.4) | | Basic Loss per share | $(0.59) | $(0.25) | $(3.16) | $(1.10) | | Diluted Loss per share | $(0.59) | $(0.25) | $(3.16) | $(1.10) | - For the three months ended June 30, 2023, revenue decreased by **7.4% YoY**, and the company reported a net loss of **$40.0 million**, a significant increase from **$17.1 million** in the prior-year period[16](index=16&type=chunk) - For the six months ended June 30, 2023, revenue increased by **3.3% YoY**, but the net loss attributable to Unisys Corporation widened substantially to **$215.4 million** from **$74.4 million**, primarily due to a U.S. pension plan settlement loss[16](index=16&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | Metric | Three Months Ended June 30, 2023 (Millions) | Three Months Ended June 30, 2022 (Millions) | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :----- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Consolidated net loss | $(39.5) | $(16.8) | $(214.0) | $(73.8) | | Total other comprehensive income (loss) | $30.7 | $(7.2) | $233.4 | $32.4 | | Comprehensive (loss) income attributable to Unisys Corporation | $(9.4) | $(24.3) | $18.0 | $(40.8) | - Total other comprehensive income (loss) significantly improved for the six months ended June 30, 2023, reaching **$233.4 million** compared to **$32.4 million** in the prior-year period, driven by foreign currency translation gains and postretirement adjustments[18](index=18&type=chunk) [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) | Metric | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :----- | :----------------------- | :--------------------------- | | Total current assets | $950.5 | $930.4 | | Total assets | $2,032.7 | $2,065.6 | | Total current liabilities | $641.0 | $650.5 | | Long-term debt | $488.5 | $495.7 | | Total Unisys Corporation stockholders' equity (deficit) | $11.4 | $(14.7) | | Total equity | $49.3 | $21.8 | - Total assets slightly decreased from **$2,065.6 million** at December 31, 2022, to **$2,032.7 million** at June 30, 2023. However, total Unisys Corporation stockholders' equity improved from a deficit of **$14.7 million** to a positive **$11.4 million**[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :----- | :---------------------------------------- | :---------------------------------------- | | Net cash provided by (used for) operating activities | $55.3 | $(66.7) | | Net cash used for investing activities | $(23.5) | $(74.4) | | Net cash used for financing activities | $(11.0) | $(15.0) | | Increase (decrease) in cash, cash equivalents and restricted cash | $29.5 | $(171.3) | | Cash, cash equivalents and restricted cash, end of period | $432.2 | $389.3 | - Net cash provided by operating activities significantly improved to **$55.3 million** for the six months ended June 30, 2023, compared to a usage of **$66.7 million** in the prior-year period[23](index=23&type=chunk) - Cash used for investing activities decreased from **$74.4 million** to **$23.5 million**, and cash used for financing activities also decreased from **$15.0 million** to **$11.0 million**[23](index=23&type=chunk) [Consolidated Statements of Equity (Deficit)](index=10&type=section&id=Consolidated%20Statements%20of%20Equity%20(Deficit)) | Metric | Balance at December 31, 2022 (Millions) | Balance at June 30, 2023 (Millions) | | :----- | :-------------------------------------- | :---------------------------------- | | Total Unisys Corporation stockholders' equity (deficit) | $(14.7) | $11.4 | | Accumulated deficit | $(1,515.0) | $(1,730.4) | | Accumulated other comprehensive loss | $(3,076.0) | $(2,842.6) | - Unisys Corporation's stockholders' equity shifted from a deficit of **$14.7 million** at December 31, 2022, to a positive **$11.4 million** at June 30, 2023, despite an increase in accumulated deficit[26](index=26&type=chunk) - Accumulated other comprehensive loss improved from **$(3,076.0) million** to **$(2,842.6) million**, primarily due to translation adjustments and postretirement plan changes[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1 - Basis of Presentation](index=11&type=section&id=Note%201%20-%20Basis%20of%20Presentation) - The unaudited consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, with certain information condensed or omitted[28](index=28&type=chunk) - Management makes estimates and assumptions about future events, which affect reported amounts and disclosures, and these estimates are subject to change based on economic conditions[30](index=30&type=chunk) [Note 2 - Cost-Reduction Actions](index=11&type=section&id=Note%202%20-%20Cost-Reduction%20Actions) | Cost-Reduction Charges (Millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Net Charges | $3.5 | $3.1 | $0.7 | $6.1 | | Workforce reductions (severance) | $2.1 | $(0.3) (credit) | $2.8 | $(0.9) (credit) | | Professional fees/other expenses | $1.3 | $0.7 | $1.3 | N/A | | Net foreign currency (gains) losses | $0.1 | $1.8 | $(2.1) (credit) | $2.9 | | Asset impairments | N/A | $0.9 | N/A | $4.7 | - Net cost-reduction charges for the three months ended June 30, 2023, were **$3.5 million**, primarily due to workforce reductions (**$2.1 million** severance costs)[32](index=32&type=chunk) - For the six months ended June 30, 2023, net cost-reduction charges were **$0.7 million**, including **$2.8 million** for workforce reductions and a net credit of **$2.1 million** from foreign currency gains[34](index=34&type=chunk) [Note 3 - Pension and Postretirement Benefits](index=13&type=section&id=Note%203%20-%20Pension%20and%20Postretirement%20Benefits) | Metric | Three Months Ended June 30, 2023 (Millions) | Three Months Ended June 30, 2022 (Millions) | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :----- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net periodic pension expense (income) | $10.9 | $12.9 | $204.4 | $23.5 | | Net periodic postretirement benefit income | $(0.3) | $(0.4) | $(0.6) | $(0.8) | - Net periodic pension expense for the six months ended June 30, 2023, significantly increased to **$204.4 million**, primarily due to a **$183.2 million** pre-tax settlement loss from purchasing a group annuity contract to transfer U.S. defined benefit pension obligations[37](index=37&type=chunk) - The company expects to make cash contributions of approximately **$41 million** to its international defined benefit pension plans in 2023 and **$4.0 million** to its postretirement benefit plan[37](index=37&type=chunk)[40](index=40&type=chunk) [Note 4 - Stock Compensation](index=14&type=section&id=Note%204%20-%20Stock%20Compensation) | Metric | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :----- | :---------------------------------------- | :---------------------------------------- | | Share-based compensation expense | $8.9 | $10.3 | | Aggregate weighted-average grant-date fair value of restricted stock and RSUs granted | $16.7 | $26.7 | | Unrecognized compensation cost (as of June 30, 2023) | $28.4 | N/A | - Share-based compensation expense decreased to **$8.9 million** for the six months ended June 30, 2023, from **$10.3 million** in the prior-year period[43](index=43&type=chunk) - As of June 30, 2023, there was **$28.4 million** of total unrecognized compensation cost related to outstanding restricted stock and restricted stock units, expected to be recognized over a weighted-average period of **2.0 years**[46](index=46&type=chunk) [Note 5 - Other (expense), net](index=15&type=section&id=Note%205%20-%20Other%20(expense)%2C%20net) | Component | Three Months Ended June 30, 2023 (Millions) | Three Months Ended June 30, 2022 (Millions) | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :-------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Postretirement expense* | $(10.2) | $(11.9) | $(203.1) | $(21.6) | | Foreign exchange (losses) gains** | $(3.2) | $(2.6) | $0.5 | $(0.4) | | Environmental costs and other, net*** | $(3.3) | $(7.4) | $(11.0) | $(20.9) | | Total other (expense), net | $(16.7) | $(21.9) | $(213.6) | $(42.9) | - Other (expense), net for the six months ended June 30, 2023, significantly increased to **$213.6 million**, primarily due to a **$183.2 million** settlement loss related to a U.S. defined benefit pension plan[48](index=48&type=chunk) [Note 6 - Income Taxes](index=15&type=section&id=Note%206%20-%20Income%20Taxes) - The company maintains a full valuation allowance for all U.S. and certain foreign deferred tax assets in excess of deferred tax liabilities, meaning U.S. operations generally have no tax provision or benefit[53](index=53&type=chunk) - The ability to realize net deferred tax assets depends on generating sustained taxable income in various jurisdictions, and future changes in tax laws or an 'ownership change' under Section 382 could limit the utilization of NOL carryforwards[52](index=52&type=chunk)[54](index=54&type=chunk) [Note 7 - Loss Per Share](index=16&type=section&id=Note%207%20-%20Loss%20Per%20Share) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic loss per common share | $(0.59) | $(0.25) | $(3.16) | $(1.10) | | Diluted loss per common share | $(0.59) | $(0.25) | $(3.16) | $(1.10) | | Weighted average shares (thousands) | 68,289 | 67,694 | 68,116 | 67,541 | - Basic and diluted loss per common share increased significantly for both the three-month and six-month periods ended June 30, 2023, primarily due to the higher net loss attributable to Unisys Corporation[55](index=55&type=chunk) [Note 8 - Contract Assets and Deferred Revenue](index=17&type=section&id=Note%208%20-%20Contract%20Assets%20and%20Deferred%20Revenue) | Metric | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :----- | :----------------------- | :--------------------------- | | Contract assets - current | $16.5 | $28.9 | | Contract assets - long-term | $9.8 | $11.0 | | Deferred revenue - current | $(219.8) | $(200.7) | | Deferred revenue - long-term | $(113.0) | $(122.3) | - Current contract assets decreased from **$28.9 million** to **$16.5 million**, while current deferred revenue increased from **$200.7 million** to **$219.8 million**, indicating a shift in contract liability balances[56](index=56&type=chunk) [Note 9 - Capitalized Contract Costs](index=17&type=section&id=Note%209%20-%20Capitalized%20Contract%20Costs) | Metric | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :----- | :----------------------- | :--------------------------- | | Deferred commissions | $2.6 | $4.9 | | Costs to fulfill a contract (outsourcing assets, net) | $28.5 | $34.8 | - Deferred commissions decreased from **$4.9 million** to **$2.6 million**, and costs to fulfill outsourcing contracts (capitalized) decreased from **$34.8 million** to **$28.5 million**[57](index=57&type=chunk)[58](index=58&type=chunk) | Amortization Expense (Millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Deferred commissions | $0.4 | $0.8 | $0.8 | $1.9 | | Costs to fulfill a contract | $1.4 | $7.5 | $3.6 | $16.4 | [Note 10 - Financial Instruments and Fair Value Measurements](index=18&type=section&id=Note%2010%20-%20Financial%20Instruments%20and%20Fair%20Value%20Measurements) - The company uses foreign exchange forward contracts to reduce exposure to foreign currency exchange rate fluctuations, with notional amounts of **$462.1 million** at June 30, 2023[60](index=60&type=chunk) | Metric | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :----- | :----------------------- | :--------------------------- | | Total fair value of foreign exchange forward contracts | $1.7 | $6.6 | | Fair value of 6.875% senior secured notes due 2027 | $349.8 | $373.0 | | Gains and (losses) on foreign exchange forward contracts (Millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Other (expense), net | $(29.3) | $5.0 | $10.2 | $(40.2) | [Note 11 - Goodwill and Intangible Assets](index=18&type=section&id=Note%2011%20-%20Goodwill%20and%20Intangible%20Assets) | Metric | December 31, 2022 (Millions) | June 30, 2023 (Millions) | | :----- | :--------------------------- | :----------------------- | | Total Goodwill | $287.1 | $287.3 | | Total Intangible assets, net | $52.4 | $47.5 | - Goodwill remained relatively stable at **$287.3 million** at June 30, 2023, with no goodwill allocated to reporting units with negative net assets[65](index=65&type=chunk) - Net intangible assets decreased to **$47.5 million** at June 30, 2023, from **$52.4 million** at December 31, 2022, with future amortization expense estimated at **$4.7 million** for the remainder of 2023[66](index=66&type=chunk)[67](index=67&type=chunk) [Note 12 - Debt](index=19&type=section&id=Note%2012%20-%20Debt) | Metric | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :----- | :----------------------- | :--------------------------- | | Total debt | $503.0 | $513.1 | | Long-term debt | $488.5 | $495.7 | | Current maturities of long-term debt | $14.5 | $17.4 | - Total debt decreased to **$503.0 million** at June 30, 2023, from **$513.1 million** at December 31, 2022[68](index=68&type=chunk) - The company has outstanding **$485.0 million** aggregate principal amount of **6.875% Senior Secured Notes due 2027**, which are secured by substantially all assets of the company and its subsidiary guarantors[69](index=69&type=chunk)[70](index=70&type=chunk) - The Amended and Restated ABL Credit Facility, maturing October 29, 2025, provides for revolving loans and letters of credit up to **$145.0 million**, with **$56.5 million** available at June 30, 2023[77](index=77&type=chunk) [Note 13 - Litigation and Contingencies](index=21&type=section&id=Note%2013%20-%20Litigation%20and%20Contingencies) - The company is involved in various lawsuits, claims, investigations, and proceedings in the ordinary course of business, including tax-related matters in Brazil estimated up to **$119 million**[83](index=83&type=chunk)[89](index=89&type=chunk) - A putative securities class action complaint was filed on **November 11, 2022**, alleging violations of the Securities Exchange Act of 1934 based on allegedly false or misleading statements[90](index=90&type=chunk) - The company records provisions for these matters when a liability is probable and estimable, and believes it has adequate provisions at June 30, 2023[84](index=84&type=chunk)[88](index=88&type=chunk) [Note 14 - Accumulated Other Comprehensive Loss](index=22&type=section&id=Note%2014%20-%20Accumulated%20Other%20Comprehensive%20Loss) | Metric | December 31, 2022 (Millions) | June 30, 2023 (Millions) | | :----- | :--------------------------- | :----------------------- | | Total Accumulated other comprehensive loss | $(3,076.0) | $(2,842.6) | | Translation Adjustments | $(977.4) | $(923.3) | | Postretirement Plans | $(2,098.6) | $(1,919.3) | - Accumulated other comprehensive loss improved by **$233.4 million** for the six months ended June 30, 2023, primarily due to positive translation adjustments and postretirement plan changes[92](index=92&type=chunk) | Reclassifications from Accumulated Other Comprehensive Loss (Millions) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | | Total before tax | $218.0 | $80.5 | | Settlement losses (Postretirement plans) | $183.2 | — | [Note 15 - Supplemental Cash Flow Information](index=23&type=section&id=Note%2015%20-%20Supplemental%20Cash%20Flow%20Information) | Metric | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :----- | :---------------------------------------- | :---------------------------------------- | | Cash paid for Income taxes, net of refunds | $37.0 | $29.3 | | Cash paid for Interest | $18.1 | $18.7 | | Total cash, cash equivalents and restricted cash (end of period) | $432.2 | $402.7 | - Cash paid for income taxes increased to **$37.0 million** for the six months ended June 30, 2023, from **$29.3 million** in the prior-year period[95](index=95&type=chunk) [Note 16 - Segment Information](index=23&type=section&id=Note%2016%20-%20Segment%20Information) - The company operates through three reportable segments: Digital Workplace Solutions (DWS), Cloud, Applications & Infrastructure Solutions (CA&I), and Enterprise Computing Solutions (ECS)[97](index=97&type=chunk) | Segment Revenue (Millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Segments | $402.2 | $443.1 | $847.4 | $817.6 | | DWS | $135.0 | $127.2 | $266.0 | $252.0 | | CA&I | $132.6 | $130.1 | $258.6 | $259.2 | | ECS | $134.6 | $185.8 | $322.8 | $306.4 | | Segment Gross Profit (Millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Segments | $113.6 | $146.6 | $271.1 | $232.4 | | DWS | $18.4 | $16.5 | $34.0 | $32.5 | | CA&I | $22.4 | $7.1 | $38.8 | $14.1 | | ECS | $72.8 | $123.0 | $198.3 | $185.8 | [Note 17 - Remaining Performance Obligations](index=25&type=section&id=Note%2017%20-%20Remaining%20Performance%20Obligations) - At June 30, 2023, the company had approximately **$0.6 billion** in remaining performance obligations[100](index=100&type=chunk) - Approximately **17%** of these obligations are expected to be recognized as revenue by the end of **2023**, **27%** by the end of **2024**, **22%** by the end of **2025**, **16%** by the end of **2026**, and **18%** thereafter[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting key drivers of revenue, expenses, and profitability, as well as liquidity and capital resources. It also discusses segment-specific results and critical accounting policies [Overview](index=26&type=section&id=Overview) - Unisys Corporation reported a net loss of **$40.0 million** (**$0.59 per diluted share**) for Q2 2023, compared to a **$17.1 million** loss (**$0.25 per diluted share**) in Q2 2022[103](index=103&type=chunk) - For the six months ended June 30, 2023, the net loss was **$215.4 million** (**$3.16 per diluted share**), significantly higher than **$74.4 million** (**$1.10 per diluted share**) in the prior-year period, primarily due to a **$183.2 million** U.S. pension plan settlement loss[104](index=104&type=chunk)[105](index=105&type=chunk) [Results of operations](index=26&type=section&id=Results%20of%20operations) | Metric | Three Months Ended June 30, 2023 (Millions) | Three Months Ended June 30, 2022 (Millions) | Six Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2022 (Millions) | | :----- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Revenue | $476.8 | $515.0 | $993.2 | $961.7 | | Gross profit | $115.8 | $148.1 | $274.8 | $235.5 | | Gross profit margin | 24.3% | 28.8% | 27.7% | 24.5% | | Operating profit | $0.1 | $33.7 | $50.0 | $10.2 | | Loss before income taxes | $(24.1) | $3.5 | $(178.7) | $(49.4) | | Net loss attributable to Unisys Corporation | $(40.0) | $(17.1) | $(215.4) | $(74.4) | - Q2 2023 revenue decreased by **7.4% YoY** to **$476.8 million**, primarily due to lower software license renewals in the ECS segment, with foreign currency having a **1 percentage-point negative impact**[106](index=106&type=chunk) - For the six months ended June 30, 2023, revenue increased by **3.3% YoY** to **$993.2 million**, despite a **2 percentage-point negative impact** from foreign currency fluctuations[118](index=118&type=chunk) - Operating profit for the six months ended June 30, 2023, increased to **$50.0 million** from **$10.2 million** in the prior-year period, driven by higher gross profit in CA&I and ECS segments[124](index=124&type=chunk) [Segment results](index=28&type=section&id=Segment%20results) | Segment Revenue (Millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | DWS | $135.0 | $127.2 | $266.0 | $252.0 | | CA&I | $132.6 | $130.1 | $258.6 | $259.2 | | ECS | $134.6 | $185.8 | $322.8 | $306.4 | | Segment Gross Profit Percent | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | DWS | 13.6% | 13.0% | 12.8% | 12.9% | | CA&I | 16.9% | 5.5% | 15.0% | 5.4% | | ECS | 54.1% | 66.2% | 61.4% | 60.6% | - DWS revenue increased by **6.1%** for Q2 2023 and **5.6%** for the six months ended June 30, 2023, driven by recent contract signings and additional scope with existing clients[130](index=130&type=chunk)[133](index=133&type=chunk) - CA&I gross profit percent significantly increased to **16.9%** for Q2 2023 and **15.0%** for the six months ended June 30, 2023, from **5.5%** and **5.4%** respectively, due to additional cost incurred in the prior-year period associated with certain contracts as well as delivery improvements[131](index=131&type=chunk)[134](index=134&type=chunk) - ECS revenue declined by **27.6%** for Q2 2023 due to lower software license renewals, but increased by **5.4%** for the six months ended June 30, 2023, driven by higher software license renewals[132](index=132&type=chunk)[135](index=135&type=chunk) [Financial condition](index=30&type=section&id=Financial%20condition) - Cash and cash equivalents increased to **$423.2 million** at June 30, 2023, from **$391.8 million** at December 31, 2022[138](index=138&type=chunk) - Cash provided by operations was **$55.3 million** for the six months ended June 30, 2023, a significant improvement from cash usage of **$66.7 million** in the prior-year period[140](index=140&type=chunk) - The company has successfully reduced its global defined benefit pension obligations by **$1.7 billion** since December 2020, including a **$265 million** group annuity contract purchase in March 2023[143](index=143&type=chunk) - Total debt decreased to **$503.0 million** at June 30, 2023, from **$513.1 million** at December 31, 2022[146](index=146&type=chunk) - The Amended and Restated ABL Credit Facility provides **$145.0 million** in revolving loans and letters of credit, with **$56.5 million** available at June 30, 2023, and the company has met all covenants[147](index=147&type=chunk)[152](index=152&type=chunk) [Critical accounting policies and estimates](index=31&type=section&id=Critical%20accounting%20policies%20and%20estimates) - There have been no significant changes to the company's critical accounting policies and estimates as reported in its Annual Report on Form 10-K for the year ended December 31, 2022[154](index=154&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there have been no material changes to the company's assessment of its sensitivity to market risk since its last annual report - No material changes in the company's assessment of market risk sensitivity since the December 31, 2022, Annual Report on Form 10-K[155](index=155&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and internal control over financial reporting, identifying material weaknesses and outlining the remediation plan [Disclosure Controls and Procedures](index=32&type=section&id=Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of June 30, 2023, due to material weaknesses in disclosure controls and internal control over financial reporting[156](index=156&type=chunk) - A material weakness was identified regarding the lack of effective formal policies and procedures to ensure timely communication from IT and legal/compliance functions to accounting and governance, which could result in material misstatements[158](index=158&type=chunk) - Despite the material weaknesses, management believes the consolidated financial statements present the company's financial condition, results of operations, and cash flows in all material respects due to additional analysis and procedures performed[160](index=160&type=chunk) [Remediation Plan for Material Weaknesses](index=32&type=section&id=Remediation%20Plan%20for%20Material%20Weaknesses) - Management implemented several remedial actions during Q4 2022, including enhancing policies for cyber-incident information escalation, strengthening the disclosure committee, requiring CEO direct reports to confirm awareness of SEC filing matters, and providing training to non-finance executives[161](index=161&type=chunk) - As of June 30, 2023, all remedial actions related to IT and legal/compliance communication to accounting functions have been implemented, but there has been insufficient time to demonstrate consistent execution and conclude on operating effectiveness[162](index=162&type=chunk) [Changes in Internal Control Over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - Except for the remediation plan described, there have been no other material changes in internal control over financial reporting during the quarter ended June 30, 2023[163](index=163&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 13 of the Consolidated Financial Statements for detailed information on legal proceedings, which are incorporated by reference - Information regarding legal proceedings is incorporated by reference from Note 13 of the Notes to Consolidated Financial Statements[165](index=165&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the 'Risk Factors' as disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[166](index=166&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[167](index=167&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023[167](index=167&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to credit agreements, certifications, and XBRL financial information - Exhibits include Amendment No.1 to the Amended and Restated Credit Agreement, certifications by Peter A. Altabef and Debra McCann, and Inline XBRL financial information[171](index=171&type=chunk) [Signatures](index=37&type=section&id=Signatures) [Report Signatures](index=37&type=section&id=Report%20Signatures) This section contains the official signatures of the company's Executive Vice President and Chief Financial Officer, Debra McCann, and William Reinheimer, Principal Accounting Officer, certifying the filing of the report - The report is duly signed by Debra McCann, Executive Vice President and Chief Financial Officer, and William Reinheimer, Principal Accounting Officer, on August 2, 2023[174](index=174&type=chunk)

Financial Data and Key Metrics Changes - Total company revenue for Q2 2023 was $477 million, a decline of 7.4% year-over-year and 6.3% in constant currency, primarily due to lower license and support (L&S) revenue within the Enterprise Computing Solutions (ECS) segment [5][19][27] - Excluding L&S, second quarter revenue was $396 million, reflecting a strong year-over-year increase of 6.5% in constant currency [6][20] - The second quarter gross margin was 24.3%, down from 28.8% in Q2 2022, while the gross margin excluding L&S improved to 16% from 10.4% year-over-year [25][27] Business Line Data and Key Metrics Changes - Digital Workplace Solutions (DWS) segment revenue grew 7.7% year-over-year, driven by expanded engagements with existing clients [21] - Cloud Application and Infrastructure (CA&I) segment revenue increased 2.6% year-over-year, with growth in commercial sector clients offsetting a decline in financial services clients [21] - ECS segment revenue, which includes L&S and Specialized Services & Next-Gen Compute (SS&C), declined 27% year-over-year, while SS&C grew 14.5% year-over-year [22] Market Data and Key Metrics Changes - The trailing 12-month ex-L&S book-to-bill ratio was 1.0x, unchanged from the previous quarter, indicating stable contract signings [7] - New and expanded scopes within existing clients grew total contract value (TCV) by 14% year-over-year, despite a 4% decline in TCV year-over-year due to lower signings with new logos [7][58] Company Strategy and Development Direction - The company is focusing on next-generation solutions, which include Modern Workplace, Digital Platforms & Applications, and Specialized Services & Next-Gen Compute, with a 55% larger pipeline compared to the previous year [4][11] - Generative AI is seen as a significant market opportunity, with the company adapting to new tools and technologies released by hyperscalers and enterprise software companies [5][12] Management's Comments on Operating Environment and Future Outlook - Management noted that financial services clients remain cautious, impacting new investments, but activity levels picked up in June [7][29] - The company reaffirmed its full-year revenue guidance, expecting a decline of 3% to 7%, with ex-L&S revenue projected to range from a decline of 1% to growth of 4% [23][24] Other Important Information - The company reported a net loss of $40 million for Q2 2023, compared to a loss of $17 million in the same quarter last year [27] - Free cash flow for Q2 was positive at $25 million, with expectations to align with 2022's negative free cash flow of approximately $75 million [28][52] Q&A Session Summary Question: Any changes in long-term financial projections? - Management stated that long-term financial projections remain unchanged since the June Investor Day, despite recent activity increases [32] Question: Can you elaborate on the pickup in activity? - Management indicated that the increase in activity is attributed to both internal efforts and broader industry changes, with a significant increase in the new logo pipeline [34][35] Question: What caused the labor productivity jump? - Management highlighted improvements in attrition rates and ongoing automation efforts as key factors contributing to increased labor productivity [39] Question: What is the gross margin profile of the Next-Gen portfolio? - Next-Gen margins are targeted to be in the 25% range, with a focus on achieving 50 basis points of expansion annually until 2026 [44] Question: Are there any renewals that may not be economically viable? - Management confirmed that there are no current renewals that are deemed unworthy, with a strong renewal rate exceeding 95% [48]

Financial Data and Key Metrics Changes - Total company revenue for Q1 2023 was $516 million, reflecting an 18.9% increase on a constant currency basis and 15.6% as reported, driven largely by the timing of license renewals within License and Support (L&S) [21][24] - Excluding L&S revenue, constant currency revenue growth for Q1 was 4.6% and 1.7% as reported, with high single-digit growth in Digital Workplace Solutions (DWS) and specialized services [21][24] - Gross profit for Q1 was $159 million, resulting in a gross margin of 30.8%, compared to 19.6% in the prior year, primarily due to higher license renewals [27][30] Business Line Data and Key Metrics Changes - DWS revenue grew 7.7% year-over-year, benefiting from strong new business wins and improved pricing on large renewals [22] - Cloud Applications and Infrastructure Solutions (CA&I) revenue declined 1.4% year-over-year, impacted by caution in volumes and cloud investments, particularly from financial services clients [23] - Enterprise Computing Solutions (ECS) revenue, including L&S, increased 60.1% year-over-year, with specialized services and next-gen compute growing 11.9% [23][24] Market Data and Key Metrics Changes - The total contract value (TCV) grew 2% year-over-year, driven by strong renewal rates and expansion with existing clients, while annual contract value (ACV) declined 18% year-over-year due to the mix of license renewal bookings [25] - The pipeline for next-generation solutions increased 15% sequentially and 6% year-over-year, with a notable 34% sequential increase in the next-gen pipeline [40][41] Company Strategy and Development Direction - The company is focusing on next-generation solutions, particularly in areas like artificial intelligence, cybersecurity, and data analytics, which are expected to drive future growth and margin improvements [5][9] - Investments are being made in modern workplace offerings and automation to enhance delivery efficiency and reduce costs [14][17] - The company aims to improve its margin profile by right-sizing legacy contracts and optimizing talent distribution [17][30] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic uncertainty, particularly in the financial services sector, but emphasized the resilience of the revenue base and strong renewal rates [6][21] - The outlook for the remainder of the year includes expectations for lower L&S revenue in the upcoming quarters, with a focus on maintaining growth in Ex-L&S solutions [26][34] - Management reiterated full-year guidance for total company revenue to decline in the range of negative 3% to negative 7% year-over-year, while Ex-L&S revenue is expected to range from negative 1% to positive 4% [26][34] Other Important Information - The company is committed to diversity, equity, and inclusion initiatives, and was recognized on Forbes' list of Best Employers for Diversity [18] - The company is executing an ESG strategy and has launched a business process solution to assist clients with their ESG efforts [18] Q&A Session Summary Question: License renewal patterns and expectations - Management indicated that the first quarter saw slightly better than expected L&S renewals, but overall, the lumpiness of L&S revenue is expected to continue [38][39] Question: Long-term improvements and fundamentals - Management is focused on improving margins and business fundamentals through AI and ML development, right-shoring, and cleaning up legacy contracts [41][43] Question: Drivers of sequential pipeline growth - The growth in the pipeline is attributed to modern workplace solutions and increased cross-selling efforts, with consistent volume across businesses [44][45] Question: Client investment shifts - Management noted a perceptible decrease in client volume in financial services but an increased interest in data analytics and AI across other sectors [47][48] Question: Next-gen solutions and sales cycle - The faster sales cycle for next-gen solutions is driven by standardized offerings and smaller deal sizes, allowing quicker revenue recognition [51][53] Question: Focus on small to mid-size opportunities - The company is intentionally targeting small to mid-size clients for quicker decision-making and shorter project durations, aligning with current market needs [55][56]

| --- | --- | |------------------------|-----------------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | First Quarter | Peter Altabef Chair and CEO | | 2023 Financial Results | Deb McCann CFO | | | | | | MAY 02, 2023 | | --- ...

PART I - FINANCIAL INFORMATION Presents the unaudited consolidated financial statements, management's discussion, market risk, and controls for the quarter [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents Q1 2023 and 2022 unaudited consolidated financial statements, detailing income, balance sheets, cash flows, and notes, with revenue growth and a significant pension settlement charge [Consolidated Statements of Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) Unisys reported a 15.6% revenue increase and operating income turnaround in Q1 2023, but a larger net loss due to a substantial increase in other expenses Consolidated Statements of Income (Loss) (Millions, except per share data) | Metric | Q1 2023 | Q1 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$516.4** | **$446.7** | **+15.6%** | | Services Revenue | $403.9 | $392.1 | +3.0% | | Technology Revenue | $112.5 | $54.6 | +106.0% | | **Operating Income (Loss)** | **$49.9** | **($23.5)** | **N/A** | | Other (expense), net | ($196.9) | ($21.0) | +837.6% | | **Consolidated Net Loss** | **($174.5)** | **($57.0)** | **+206.1%** | | **Diluted Loss Per Share** | **($2.58)** | **($0.85)** | **+203.5%** | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets remained stable at $2,066.4 million as of March 31, 2023, with a shift to positive stockholders' equity driven by comprehensive loss adjustments Consolidated Balance Sheet Highlights (Millions) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $391.9 | $391.8 | | Total current assets | $977.7 | $930.4 | | **Total Assets** | **$2,066.4** | **$2,065.6** | | Total current liabilities | $652.8 | $650.5 | | Long-term debt | $490.1 | $495.7 | | Long-term postretirement liabilities | $697.3 | $714.6 | | **Total Liabilities** | **$2,012.4** | **$2,043.8** | | **Total Equity** | **$54.0** | **$21.8** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 saw positive cash from operating activities at $12.8 million, a significant improvement from the prior year, with stable cash balances Cash Flow Summary (Millions) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $12.8 | ($33.0) | | Net cash used for investing activities | ($11.5) | ($21.7) | | Net cash used for financing activities | ($7.6) | ($11.2) | | **Decrease in cash, cash equivalents and restricted cash** | **($2.2)** | **($59.7)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes disclose a $183.2 million pension settlement loss, strong ECS segment growth, and ongoing litigation matters in Brazil - In March 2023, the company purchased a group annuity contract for approximately **$265 million** to transfer pension obligations, resulting in a pre-tax settlement loss of **$183.2 million**[30](index=30&type=chunk) - The company is involved in various litigation matters in Brazil concerning indirect taxes and labor disputes, with unreserved tax-related matters estimated up to approximately **$111 million**[81](index=81&type=chunk) - A securities class action complaint was filed against the company in November 2022, alleging false or misleading statements regarding business prospects and internal controls[82](index=82&type=chunk) Segment Revenue and Gross Profit (Millions) | Segment | Q1 2023 Revenue | Q1 2022 Revenue | Q1 2023 Gross Profit | Q1 2022 Gross Profit | | :--- | :--- | :--- | :--- | :--- | | DWS | $131.0 | $124.8 | $15.6 | $16.0 | | CA&I | $126.0 | $129.1 | $16.4 | $7.0 | | ECS | $188.2 | $120.6 | $125.5 | $62.8 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, highlighting revenue growth driven by ECS, a widened net loss due to pension settlement, and stable liquidity [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Total revenue grew 15.6% year-over-year, primarily from ECS software license renewals, improving gross profit margin, but a net loss due to a pension settlement - Overall revenue increased **15.6% YoY**, primarily due to higher software license renewals within the Enterprise Computing Solutions (ECS) segment[95](index=95&type=chunk) - ECS segment revenue increased **56.1% YoY**, and its gross profit margin expanded to **66.7%** from **52.1%**[112](index=112&type=chunk) - DWS segment revenue increased **5.0%** due to recent contract signings, while CA&I revenue declined **2.4%**[110](index=110&type=chunk)[111](index=111&type=chunk) - A pre-tax settlement loss of **$183.2 million** related to a U.S. defined benefit pension plan was a major contributor to the net loss in Q1 2023[93](index=93&type=chunk)[102](index=102&type=chunk) [Financial Condition](index=26&type=section&id=Financial%20Condition) Liquidity is supported by cash on hand and an ABL credit facility, with positive cash from operations and continued pension de-risking efforts - Principal sources of liquidity are cash on hand (**$391.9 million**), cash from operations, and a revolving credit facility[113](index=113&type=chunk)[114](index=114&type=chunk) - Cash provided by operations was **$12.8 million**, compared to a usage of **$33.0 million** in the prior-year period, driven by higher Technology collections[116](index=116&type=chunk) - As of March 31, 2023, the company had no borrowings under its ABL credit facility, with **$6.6 million** of letters of credit outstanding and **$64.0 million** of availability[123](index=123&type=chunk) - The company expects to make cash contributions of approximately **$40 million** to its international pension plans in 2023 and does not expect mandatory contributions to its U.S. plans until 2025[120](index=120&type=chunk)[121](index=121&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material change in market risk assessment since the 2022 Annual Report on Form 10-K - There has been no material change in the company's assessment of its sensitivity to market risk since its 2022 Form 10-K filing[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective as of March 31, 2023, due to material weaknesses in information communication policies - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of March 31, 2023, due to material weaknesses[131](index=131&type=chunk) - The material weaknesses relate to ineffective policies and procedures for ensuring timely communication from the IT, legal, and compliance functions to the accounting function regarding financial reporting[133](index=133&type=chunk) - Remediation steps were implemented in Q4 2022, including enhancing policies and the disclosure committee, but management cannot yet conclude on their operating effectiveness as of March 31, 2023[136](index=136&type=chunk)[137](index=137&type=chunk) PART II - OTHER INFORMATION Covers legal proceedings, risk factors, and the exhibit index for the reporting period [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 13 of the Consolidated Financial Statements - Information regarding legal proceedings is detailed in Note 13 of the Notes to Consolidated Financial Statements[139](index=139&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No significant changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K - There have been no significant changes to the company's risk factors since its 2022 Annual Report on Form 10-K[140](index=140&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications - The Exhibit Index lists all documents filed with the report, including certifications from the CEO (Peter A. Altabef) and CFO (Debra McCann) as required by the Sarbanes-Oxley Act[148](index=148&type=chunk)

Financial Performance - In 2022, the company recorded a net loss of $106.0 million, or $1.57 per diluted share, compared to a loss of $448.5 million, or $6.75 per diluted share in 2021[138]. - Revenue for 2022 was $1.98 billion, a decrease of 3.6% from $2.05 billion in 2021, with foreign currency fluctuations negatively impacting revenue by 3.7 percentage points[124]. - International operations revenue decreased by 6.1% to $1.13 billion in 2022, primarily due to declines in Europe and Asia/Pacific, with foreign currency fluctuations having a 6.4 percentage-point negative impact[125]. - Gross profit for 2022 was $529.6 million, with a gross profit margin of 26.7%, down from $572.0 million and 27.8% in 2021, mainly due to higher cost-reduction charges[128]. - Operating profit for 2022 was $52.2 million, down from $154.0 million in 2021, primarily due to increased marketing investments and higher non-recurring expenses[130]. Expenses and Charges - Selling, general and administrative expenses increased to $453.2 million in 2022, representing 22.9% of revenue, compared to $389.5 million, or 19.0% of revenue in 2021[129]. - The company recognized cost-reduction charges of $54.9 million in 2022, up from $23.2 million in 2021, with significant charges related to asset impairments and workforce reductions[126]. Cash Flow and Liquidity - Cash and cash equivalents at December 31, 2022, were $391.8 million, a decrease from $552.9 million at the end of 2021[151]. - Cash provided by operating activities was $12.7 million in 2022, significantly lower than $132.5 million in 2021, primarily due to changes in accounts receivable[153]. - The company expects adequate liquidity to meet cash requirements for at least the next twelve months[150]. - Cash used for investing activities in 2022 was $131.4 million, a decrease from $360.3 million in 2021, with $239.3 million of the 2021 amount attributed to acquisitions[154]. - Cash used for financing activities in 2022 was $21.6 million, significantly lower than $105.5 million in 2021, primarily due to prior year debt redemptions[155]. Debt and Financing - Total debt at the end of 2022 was $513.1 million, down from $529.4 million at the end of 2021[159]. - The company has a secured revolving credit facility of up to $145.0 million, with availability of $67.9 million net of letters of credit issued as of December 31, 2022[164]. - The company expects to continue meeting all covenants and conditions under its lending agreements for at least the next twelve months[169]. Pension Plans and Obligations - The company expects to make cash contributions of approximately $40 million in 2023 for its international defined benefit pension plans, slightly up from $39.3 million in 2022[158]. - The company anticipates a non-cash pre-tax settlement loss of approximately $200 million in Q1 2023 related to a group annuity contract for $250 million of projected benefit obligations[157]. - As of December 31, 2022, the company's operating lease liabilities were $55.7 million, with finance lease liabilities totaling $1.1 million[160]. - The calculated value of U.S. qualified defined benefit pension plan assets was $2.89 billion, with a fair value of $2.44 billion as of December 31, 2022[184]. - The company recognized consolidated pension expense of $47.1 million for the year ended December 31, 2022, down from $553.9 million in 2021, and expects to recognize approximately $41.5 million in 2023[187]. Currency and Impairment Risks - The company is exposed to foreign currency exchange rate risks and uses derivative financial instruments to mitigate these risks, with a hypothetical 10% adverse movement in exchange rates potentially reducing the fair value of derivatives by approximately $54 million[203]. - The reporting unit closest to impairment had a fair value exceeding book value, including goodwill, by 6% as of December 31, 2022[196]. - Goodwill by reporting unit totaled $287.1 million, with DWS at $140.5 million, CA&I at $38.0 million, ECS at $98.3 million, and Other at $10.3 million[198].

Unisys Corp (NYSE:UIS) Q4 2022 Earnings Conference Call February 23, 2023 8:00 AM ET Company Participants Michaela Pewarski - VP, IR Peter Altabef - Chairman & CEO Debra McCann - EVP & CFO Michael Thomson - President & COO Conference Call Participants Rod Bourgeois - DeepDive Equity Research Joseph Vafi - Canaccord Genuity Matthew Galinko - Maxim Group Operator Good morning, and welcome to the Unisys Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions]. I would now li ...

Financial Data and Key Metrics Changes - Total company revenue was $461 million in Q3 2022, down 5.5% year-over-year, but up 0.3% in constant currency [38] - The gross profit margin decreased by 340 basis points year-over-year to 22.6% [45] - The company reported a net loss of $40.1 million or $0.59 per diluted share compared to a net loss of $18.7 million or $0.28 per diluted share in the prior year [50] Business Line Data and Key Metrics Changes - Digital Workplace Solutions (DWS) revenue declined 4% year-over-year, but grew 12.2% when excluding non-strategic contracts exited in 2021 [39] - Cloud Applications and Infrastructure Solutions (CA&I) revenue grew 8.1% year-over-year, driven by growth in Digital Platforms and Applications (DP&A) [40] - Enterprise Computing Solutions (ECS) revenue declined 3% year-over-year due to a light ClearPath Forward license renewal quarter [41] Market Data and Key Metrics Changes - The qualified pipeline was approximately $6 billion, representing a growth of 25% year-over-year [36] - The total contract value in the quarter was up 31% year-over-year [37] - The pipeline for Modern Workplace solutions exceeded $400 million, more than doubling year-over-year [16] Company Strategy and Development Direction - The company is focusing on higher value solutions in the areas of Modern Workplace and Digital Platforms and Applications [9][63] - A new brand identity and marketing campaign is expected to launch in Q4 2022, aimed at increasing market awareness and driving sales metrics [31][32] - The company anticipates that approximately half of DWS revenues will come from Modern Workplace by 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management noted unexpected challenges since the last earnings call, primarily macroeconomic factors affecting revenue and profitability guidance [33][42] - The company revised its full-year revenue growth guidance to a range of negative 1% to positive 1% on a constant currency basis [44] - Management expressed confidence in the pipeline and client engagement despite macroeconomic uncertainties [68] Other Important Information - The company is implementing a cost reduction program, with a pre-tax charge expected between $50 million and $60 million in Q4 [52] - The company is conducting an internal investigation regarding disclosure controls, which may result in material weaknesses in internal control over financial reporting [61][62] - The company expects to require cash contributions to its defined benefit pension plans beginning in 2025, averaging approximately $100 million annually for eight years [58] Q&A Session Summary Question: What is causing the slowdown in revenue guidance? - Management indicated a mix of contract delays and smaller contract sizes due to economic uncertainty [66][67] Question: How much of the guidance is due to currency impacts? - Foreign exchange had about a 100 basis point impact on the as-reported revenue guidance [70] Question: Are there any verticals performing better or worse than others? - Management did not identify any specific verticals performing significantly better or worse than expectations [74] Question: Has the pipeline become more ripe for deals? - The pipeline is described as more ripe, with significant growth in total contract value and backlog [79] Question: Can you elaborate on the cost reduction plan? - The cost reduction plan includes real estate right-sizing, asset retirement, and workforce actions [80] Question: Are there any changes to the licensing model for ClearPath Forward? - Management remains open to clients moving to a more as-a-service model, which could shift revenue from licensing and support to specialized services [82] Question: Will the rebranding campaign be delayed due to macro conditions? - Management confirmed that the rebranding campaign is still on track for Q4 launch, emphasizing its importance for growth [88][89] Question: Are there risks of more unprofitable contracts emerging? - Management does not foresee any concerning contracts in the upcoming renewal schedule [93]

UNÍSYS © 2021 Unisys Corporation. All rights reserved. | Third-Quarter 2022 Financial Results Peter Altabef, Chair & CEO Deb McCann, CFO November 8, 2022 | --- | --- | |-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Financial Data and Key Metrics Changes - Total company revenue grew 2.8% year-over-year in constant currency or remained flat as reported [43] - Total company ACV grew 25% year-over-year, with DWS ACV growing 15% and CA&I ACV growing 63% year-over-year [25][47] - Total company gross profit was $148 million, up 4.1% year-over-year, with a gross margin of 28.8%, up 130 basis points [54] Business Line Data and Key Metrics Changes - Digital Workplace Solutions (DWS) revenue decreased 11.7% year-over-year in constant currency, but excluding exited contracts, it grew 5.7% [48] - Cloud Applications and Infrastructure (CA&I) revenue grew 8.7% year-over-year in constant currency, driven by higher-margin digital platforms and applications [46] - Enterprise Computing Solutions (ECS) segment saw 11.3% year-over-year constant currency growth due to early renewals of ClearPath Forward licenses [44] Market Data and Key Metrics Changes - Total company pipeline grew 30% year-over-year, with DWS pipeline increasing by 20% and CA&I pipeline growing by 45% [26] - The pipeline for Modern Workplace and digital platforms and applications now amounts to approximately $1 billion of the total $6 billion pipeline [27] Company Strategy and Development Direction - The company is focusing on higher growth, higher margin solutions in digital workplace and cloud applications [8][14] - A brand transformation is planned to enhance awareness and engagement, launching in Q4 2022 [30] - The company aims to stabilize labor costs and improve internal talent deployment through career development programs [32] Management's Comments on Operating Environment and Future Outlook - Management noted that demand drivers such as digital transformation and hybrid work models remain robust, but signings have been slower than expected due to macroeconomic uncertainties [36][37] - Revenue and profitability guidance for the year has been lowered due to delayed signings and foreign exchange impacts, but growth is still expected in the second half [52][60] Other Important Information - The company announced a goal of net zero greenhouse gas emissions for Scope 1 and 2 by 2030 [35] - A recent cyberattack incident is being addressed with no service disruptions reported [35] Q&A Session Summary Question: Update on pension in light of market conditions - Management indicated that the accounting deficit for the pension plan is expected to improve due to higher discount rates, but cash contributions may be required depending on market conditions [70][72] Question: Causes of signing delays - Management attributed signing delays to macroeconomic uncertainties rather than internal processes, with a significant portion of revenue being long-term contracts [73][76] Question: Target margins on new contracts - Management confirmed that target margins for new contracts are higher than in previous years, driven by a shift to higher-margin work [82][85] Question: Distinction in customer needs for new deals - Management noted that successful deals often involve comprehensive solutions rather than one-off services, leading to richer contracts [107] Question: ECS renewals timing - Management explained that some ECS renewals were signed earlier than anticipated, contributing to better-than-expected results for the segment [110]