Unisys (UIS) Conference Call Summary - July 24, 2025 Company Overview - **Company**: Unisys Corporation (UIS) - **Event**: Capital Structure and Pension Strategy Discussion Conference Call Key Points Industry and Company Context - The call focused on Unisys's capital structure and pension strategy, particularly the management of its U.S. Qualified defined benefit pension plans [2][7][20]. Core Insights and Arguments 1. **Pension Volatility Management**: Unisys has taken significant steps to reduce pension volatility, aiming to remove the pension from its balance sheet entirely [7][20]. 2. **Debt Issuance**: The company issued $700 million of debt maturing in January 2031, primarily to refinance existing notes and contribute $250 million to its pension plans [13][14]. 3. **Pension Liability Reduction**: Since the inception of its pension strategy, Unisys has reduced pension liabilities by approximately $1.5 billion through various risk transfer transactions [11][40]. 4. **Future Contributions**: The recent changes are expected to stabilize future cash contributions to the pension plans, reducing volatility to about 3% [9][41]. 5. **Annuity Purchases**: Unisys plans to remove an additional $600 million in liabilities through annuity purchases by 2026, which will eliminate about one-third of the remaining U.S. plan liabilities [17][20]. 6. **Financial Flexibility**: The company aims to maintain a solid liquidity profile and reduce net leverage to improve credit ratings and access to capital [12][20]. 7. **Capital Return Program**: Following the resolution of pension obligations, Unisys plans to implement a capital return program, potentially through stock buybacks or dividends [52][53]. Important but Overlooked Details 1. **Investment Strategy Changes**: Unisys has shifted its pension plan investment strategy to reduce volatility, moving from a 65% allocation to growth assets to a more stable asset allocation that hedges liability movements [25][26]. 2. **Cash Flow Projections**: The company anticipates generating approximately $100 million in free cash flow this year, with growth expected in subsequent years [81]. 3. **Market Conditions**: The timing of the debt issuance and pension contributions was strategically aligned with favorable market conditions to minimize costs [62][89]. 4. **Risk Factors**: While the company is confident in its ability to execute its pension strategy, there are inherent risks related to business performance and market conditions that could affect the timeline for full pension removal [78][80]. Conclusion Unisys is actively working to simplify its financial profile by managing pension liabilities and enhancing cash flow stability. The strategic steps taken are expected to position the company favorably for future growth and investor interest while maintaining financial flexibility.

Capital Structure and Debt Transaction - The company issued $700 million of senior secured notes due January 15, 2031, with a coupon of 10625%[20] - The company refinanced $485 million of existing notes and extended the asset-backed revolver[10] - A $250 million contribution was made to the U S Qualified Defined Benefit (QDB) plan, including $50 million from balance sheet cash[11, 20] Pension Plan Management - The company reallocated U S QDB plan assets to reduce volatility[12, 23] - The company is planning for $600 million of annuity purchases by year-end 2026 to reduce the cost of full removal of U S QDB plans[34] - The company expects approximately $35 million average annual reduction in required contributions in 2026-2029 to U S QDB Pension Plans[35] Financial Impact - The transaction swaps $200 million of pension deficit with funded debt[22] - The company anticipates approximately $70 million aggregate cash flow benefit (~$14M average annual benefit) for the 5-year period of 2025-2029[35] - The company's target asset allocation is 90% in the Liability Hedging Portfolio and 10% in the Growth Portfolio[24]

Core Insights - Unisys Corporation is introducing its first Post-Quantum Cryptography solution to address vulnerabilities in encryption frameworks as quantum computing advances [1][9] - The company's strategy aligns with its "Clear Path Forward 2050" roadmap, focusing on modernizing client infrastructure with quantum-resilient security and AI-enabled services [2] - Despite an 11.4% year-over-year revenue decline in Q1, Unisys reported an 80% increase in new business total contract value (TCV), indicating strong future growth potential [3][9] Financial Performance - Unisys' balance sheet remains strong with $393 million in cash and improving free cash flow, while management maintains full-year guidance with expectations of tailwinds in high-margin segments [3] - Earnings estimates for 2025 and 2026 suggest significant year-over-year growth of 28.9% and 120.7%, respectively, indicating positive future earnings potential [14] Competitive Landscape - Unisys faces competition from DXC Technology and Leidos Holdings, both of which are also investing in post-quantum security and AI-driven solutions [5][6] - DXC Technology focuses on modernizing IT infrastructure and securing hybrid environments, while Leidos expands its cybersecurity capabilities through government contracts that include quantum threat mitigation [5][6] Stock Performance - Unisys shares have increased by 9.6% over the past three months, outperforming the Zacks Computers - IT Services industry but underperforming the broader Zacks Computer and Technology sector and the S&P 500 index [7] - The stock is currently trading at a discounted valuation compared to industry peers, with a forward 12-month price-to-sales (P/S) ratio of 0.16 [11]

Financial Results Announcement - Unisys will release its second-quarter 2025 financial results on July 30, 2025, after the close of trading on the New York Stock Exchange [1] - A conference call to discuss the results will be held on July 31, 2025, at 8 a.m. EDT [1] Conference Call Details - The conference call will be available via a live, listen-only webcast on the Unisys Investor Website [2] - Domestic callers can dial 1-844-695-5518, while international callers can dial 1-412-902-6749, using the passcode "Unisys Corporation Call" [2] Replay Information - A replay of the conference call will be available on the Unisys Investor Website shortly after the call [3] - Domestic callers can access the replay by dialing 1-877-344-7529, and international callers can dial 1-412-317-0088, entering access code 4992919 [3] Upcoming Investor Conferences - Unisys management will host one-on-one and group meetings at various upcoming investor conferences [4] - Specific events include virtual meetings at the Needham FinTech & Digital Transformation Conference on August 13, 2025, and presentations at the Midwest IDEAS Conference in Chicago, IL, on August 26, 2025 [6] Company Overview - Unisys is a global technology solutions company that provides services in cloud, AI, digital workplace, logistics, and enterprise computing [5] - The company has been assisting clients in pushing boundaries for over 150 years [5]

Core Viewpoint - Unisys is hosting a conference call to discuss the benefits of its recent capital structure transformation, including a $250 million discretionary pension contribution and changes to asset allocations within its U.S. Qualified Defined Benefit Plans, aimed at reducing its pension deficit and volatility [1]. Group 1: Conference Call Details - The conference call is scheduled for July 24, 2025, at 2 p.m. EDT, led by CEO Mike Thomson and CFO Deb McCann [1]. - Investors can submit questions via email and join the call through a dedicated phone line or webcast [2]. Group 2: Webcast and Replay Information - A replay of the webcast will be available shortly after the event on the Unisys Investor Relations site, with a telephone replay accessible for a limited time [3]. Group 3: Company Overview - Unisys is a global technology solutions company that provides services in cloud, AI, digital workplace, logistics, and enterprise computing, helping clients unlock their potential [4].

Core Insights - Unisys Corporation (UIS) is experiencing strong bookings in its Digital Workplace Solutions (DWS) segment, driven by a market shift towards AI-driven solutions [1] - The company is focusing on innovations that meet client needs in cost optimization, data integration, security, productivity, and AI enablement [1] Group 1: Digital Workplace Solutions (DWS) - Since 2024, UIS has been developing a significant pipeline for its Device Subscription Service (DSS), which is expected to create value by reducing costs and enhancing efficiency [2] - In Q1 2025, UIS secured scalable DSS signings, including a major deal with a global tech supplier for 380,000 devices across 14 countries, enhancing long-term revenue visibility [3] - Despite a 7.5% year-over-year revenue decline in the DWS segment due to weak discretionary spending, UIS anticipates recovery in the second half of 2025 as DSS signings increase [4] Group 2: Market Performance and Valuation - UIS shares have increased by 6.5% over the past three months, underperforming compared to the Zacks Computers - IT Services industry and the S&P 500 index [5] - UIS is trading at a forward price-to-sales (P/S) ratio of 0.14, indicating a discounted valuation compared to peers, which may present an attractive entry point for investors [10] - Competitors Wipro and DXC Technology have forward P/S ratios of 2.86 and 0.22, respectively, highlighting UIS's relative valuation advantage [11] Group 3: Earnings Estimates - Earnings estimates for UIS for 2025 and 2026 suggest year-over-year growth of 28.9% and 120.7%, respectively, indicating strong long-term growth potential [12] - The current earnings estimates for 2025 and 2026 remain unchanged, reflecting stability in the company's growth trajectory [12]

Core Insights - Unisys Corporation (UIS) shares have decreased by 12.1% over the past month, underperforming the industry and the S&P 500 [1][6] - The stock closed at $4.27, below its 52-week high of $8.93 and above its 52-week low of $3.32 [1] - The decline is attributed to lower discretionary project work and declines in third-party volume, alongside concerns over revenue from cloud applications and infrastructure solutions [4][5] Financial Performance - UIS has a forward price-to-sales (P/S) ratio of 0.15, significantly lower than peers like C3.ai (7.39X), SoundHound (26.25X), and Genpact (1.55X) [6][16] - The Zacks Consensus Estimate for UIS' earnings per share (EPS) for 2025 and 2026 remains unchanged, with projections indicating growth of 28.9% and 120.7% respectively [6] Business Development - Unisys is experiencing strong momentum in new business signings and client engagement, particularly in Device Subscription Services, application modernization, and cybersecurity [9] - The company is focusing on innovation in generative AI, cybersecurity, and quantum-resistant technologies, which are gaining traction among clients [12][13] Operational Execution - Field service activity is showing signs of recovery, supported by improving trends in infrastructure-related work and anticipation of a broader PC refresh cycle [10] - The company expects clients to accelerate technology upgrades, which will likely boost demand for high-margin services [11] Strategic Positioning - Unisys maintains a healthy financial foundation with disciplined cost management, leading to lower operating expenses and improved cash generation [14] - Recognition from industry analysts and strengthened partnerships enhance brand credibility and access to new opportunities [15]

Core Insights - Unisys Corporation (UIS) is enhancing its focus on AI solutions to meet the increasing market demand for efficient business operations, particularly in agentic AI capabilities, which provides a competitive advantage over peers [1][3][5] Group 1: Product Development and Strategy - On May 5, 2025, Unisys launched three cloud AI solutions: Cloud AI Foundation, Cloud AI Enablement, and Cloud AI Customer Experience, aimed at improving operational efficiency and integrating AI into core business processes [2][10] - The solutions are built on the Unisys Intelligence Accelerator, a modular framework designed to facilitate the design, training, scaling, and governance of AI systems [2] Group 2: Market Position and Competition - Unisys is actively investing in agentic AI solutions to capture market share and enhance revenue visibility, with logistics optimization offerings that leverage client data [3][10] - The company faces competition from major players like Microsoft, which offers Azure AI Foundry and Palantir Technologies, which launched the Artificial Intelligence Platform (AIP) in 2023 [5][6][7] Group 3: Financial Performance and Growth Estimates - Unisys' earnings estimates for 2025 and 2026 indicate year-over-year growth of 28.9% and 120.7%, respectively, reflecting strong long-term growth potential [8][10] - The stock is currently trading at a low forward price-to-sales (P/S) ratio of 0.15x, suggesting an attractive entry point for investors [12]

Core Insights - Unisys Corporation is strategically repositioning itself in the AI-driven IT services sector through its ClearPath Forward 2050 strategy, focusing on AI, automation, and data-driven intelligence across its offerings [1][11] - The company is addressing enterprise challenges such as data fragmentation and low productivity by leveraging AI technologies, exemplified by its Service Experience Accelerator [2][11] - Unisys is developing agentic-AI frameworks to enhance decision-making and service delivery, creating new revenue opportunities in endpoint management and AI-enabled infrastructure [3][11] AI Innovations - The Service Experience Accelerator utilizes generative AI and workflow automation to improve service desk operations, gaining traction among clients [2] - The intelligence accelerator connects siloed datasets, providing secure and real-time insights, which enhances service delivery [3] Industry Positioning - Unisys is recognized as a "disruptor" in the AI Services sector and is investing in post-quantum cryptography and threat detection solutions [4] - The company competes with major players like C3.ai, Palantir Technologies, and IBM, each with unique AI strategies [6] Financial Performance - Unisys shares have increased by 12% over the past three months, while the industry has grown by 20.1% [9] - The stock has risen by 22.4% in three months, with projected earnings per share (EPS) growth of over 120% for 2026 [11] - The current valuation shows a forward price-to-earnings ratio of 4.73X, indicating a discount compared to industry peers [12] Earnings Estimates - The Zacks Consensus Estimate predicts a year-over-year earnings increase of 28.9% for 2025 and 120.7% for 2026 [14] - Current estimates for EPS in 2025 and 2026 are 0.58 and 1.28, respectively, reflecting significant growth potential [16]

Core Viewpoint - Unisys Corporation successfully closed a $700 million offering of 10.625% Senior Secured Notes due 2031, aimed at refinancing existing debt and strengthening its financial position [1][2]. Financing and Use of Proceeds - The net proceeds from the Senior Secured Notes will be used to finance a tender offer for its outstanding 6.875% senior secured notes due 2027, fund a portion of its long-term pension deficit, and cover general corporate purposes [1][2]. - The company plans to redeem any remaining outstanding Existing Notes after the tender offer and consent solicitation [1]. Financial Structure and Guarantees - The Senior Secured Notes are guaranteed by material domestic subsidiaries of Unisys and secured by liens on substantially all assets of the company and its subsidiaries [2]. - The offering is structured to ensure that the Senior Secured Notes and guarantees are subordinated to the liens on ABL collateral in favor of ABL secured parties [2]. Credit Facility Amendment - Unisys amended its secured Asset-Based Lending (ABL) credit facility, maintaining it at $125 million with an option to increase to $155 million, and extended the maturity date to June 2030 [7].