Unisys (UIS) FY Conference Summary Company Overview - Unisys is a global IT services company operating in a $1.6 trillion market with high single-digit growth [3][4] - The company has approximately 16,000 employees, including 8,000 engineers, and serves around 700 clients across more than 50 countries [3][4] - Unisys generated nearly $2 billion in revenue, approximately $300 million in adjusted EBITDA, and over $50 million in free cash flow in 2024 [4] Business Segments - Unisys operates in three segments: 1. **Cloud Applications and Infrastructure Solutions**: Focuses on managed cloud services, application development, and cybersecurity [5][6] 2. **Digital Workplace**: Provides outsourced IT support and manages technology experiences for clients [7][8] 3. **Enterprise Computing**: Includes proprietary software (ClearPath Forward) used for mission-critical workloads in various industries [9][10][11] Financial Performance and Strategy - The company aims for 150 basis points of annual gross margin expansion in its XLNS solutions, having achieved 600 basis points since 2022 [25] - Unisys has implemented a cost reduction program, removing $30 million to $40 million from its SG&A base [26] - The company plans to execute $600 million in annuity purchases over the next two years to reduce pension liabilities [41] Pension Management - In June, Unisys issued $700 million in senior secured notes to refinance existing debt and contribute $250 million to its pension plans, reducing the pension deficit from $500 million to $250 million [34][35] - The company aims to eliminate its U.S. qualified defined benefit plans over the next three to five years [31][42] AI and Innovation - Unisys is leveraging AI to enhance service delivery and reduce costs, with a focus on improving employee productivity [22][23][45] - The company is developing knowledge management capabilities to address challenges in AI implementation and ensure data quality [57][59] Future Outlook - Unisys anticipates generating $100 million in pre-pension cash flow, with potential growth to $140 million as EBITDA increases to $300 million over the next six years [61][66] - The company plans to use future cash flows for debt reduction, organic growth investments, and returning capital to shareholders [68][71] Key Takeaways - Unisys is positioned for growth in the IT services market, with a strong focus on innovation and client relationships [4][18] - The company's strategic initiatives in pension management and AI integration are expected to enhance financial stability and operational efficiency [31][22] - Future financial performance will be closely tied to successful execution of its growth strategies and management of pension liabilities [34][42]

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]

Financial Data and Key Metrics Changes - First quarter revenue was $432 million, down 11.4% year over year as reported and 8.5% in constant currency, primarily due to license and support renewal timing [24] - First quarter adjusted EBITDA was $40 million, with a margin of 9.3% [32] - First quarter net income was negative $30 million, translating to a diluted loss of $0.42 per share [33] - First quarter pre-pension free cash flow was $23 million, up $11 million year over year [33] Business Line Data and Key Metrics Changes - Digital Workplace Solutions segment revenue declined 7.5% year over year to $119 million, primarily driven by lower field service volumes [26] - Cloud Applications and Infrastructure Solutions revenue declined 3.3% year over year to $177 million, affected by lower volumes with existing clients [27] - Enterprise Computing Solutions revenue was down 11.2% year over year to $119 million, due to license and support renewal timing [28] Market Data and Key Metrics Changes - First quarter new business total contract value (TCV) was $434 million, including $337 million from new business signings, up more than 50% sequentially and more than 80% year over year [9] - Backlog at the end of the first quarter was $2.9 billion, up 2% sequentially and 4% year over year [29] Company Strategy and Development Direction - The company is focused on enhancing free cash flow by optimizing delivery and improving cash conversion efficiency [6] - The ClearPath Forward 02/1950 strategy aims to expand and enhance the ecosystem of software and industry solutions [16] - The company is investing in technology, talent, and innovation to solidify its operating systems at the core of clients' IT operations [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full year revenue growth guidance and profitability guidance, despite macroeconomic uncertainties [18][78] - The company expects delayed client decision-making to have a marginal impact on revenue trajectory, but believes its diverse solution portfolio provides stability [19][21] - Management noted that clients are focused on modernizing applications and enhancing security, which supports growth in the security segment [12][13] Other Important Information - The company achieved titanium partner status at Dell, enhancing growth incentives and access to resources [17] - The first quarter gross profit was $108 million, with a gross margin of 24.9% [30] - The company is actively monitoring market conditions to opportunistically expand its debt structure and advance its pension mitigation strategy [39] Q&A Session Summary Question: What is enabling the L and S upside in revenues? - Management indicated that increased consumption and longer contract extensions are driving the upside in license and support revenues [44][46] Question: What types of sequential growth assumptions are needed in ex L and S and L and S? - Management expects increasing growth assumptions every quarter, with significant contracts expected in Q3 and Q4 [50][52] Question: How confident are you in your 2026 targets? - Management remains confident in meeting cash flow expectations and has not seen a decline in pipeline quality despite macro uncertainties [59][60] Question: How is the quality of the backlog assessed? - Management stated that the pipeline is growing and the quality is better aligned to solutions that the company can win, with no need for natural pairing [68][75]

Financial Data and Key Metrics Changes - First quarter revenue was $432 million, down 11.4% year over year as reported and 8.5% in constant currency, primarily due to license and support renewal timing [24][25] - First quarter non-GAAP operating profit margin was 2.8%, compared to 7.1% in the prior period, in line with low single-digit expectations [32] - First quarter net income was negative $30 million, translating to a diluted loss of $0.42 per share [33] Business Line Data and Key Metrics Changes - Digital Workplace Solutions segment revenue declined 7.5% year over year to $119 million, driven by lower field service volumes and discretionary project work [26] - Cloud Applications and Infrastructure Solutions revenue declined 3.3% year over year to $177 million, impacted by lower volumes with existing clients [27] - Enterprise Computing Solutions revenue was down 11.2% year over year to $119 million, primarily due to license and support renewal timing [28] Market Data and Key Metrics Changes - First quarter total contract value was $434 million, including $337 million from new business signings, up more than 50% sequentially and more than 80% year over year [9][29] - Backlog was $2.9 billion, up 2% sequentially and 4% year over year, with double-digit year-over-year backlog growth in Digital Workplace Solutions [29] Company Strategy and Development Direction - The company continues to execute its ClearPath Forward 02/1950 strategy, focusing on expanding its ecosystem and enhancing client relationships [16][77] - Investments in technology, talent, and innovation are aimed at solidifying the company's operating systems at the core of clients' IT operations [16] - The company is actively monitoring market conditions to opportunistically expand its debt structure and advance its pension mitigation strategy [77] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year revenue growth guidance and profitability guidance, citing resilience in diverse revenue streams [77] - The company anticipates a sequential ramp in revenue growth throughout the year, particularly in the second half due to renewal timing [48][39] - Management noted that macroeconomic factors are causing some delays in client decision-making but do not significantly impact the overall pipeline and backlog [60][62] Other Important Information - First quarter capital expenditures totaled approximately $20 million, relatively flat year over year [33] - Pre-pension free cash flow was $23 million, up $11 million year over year, while free cash flow was $13 million, more than doubling compared to the previous year [33][34] - The company achieved titanium partner status at Dell, enhancing growth incentives and access to resources [17] Q&A Session Summary Question: What is enabling the L and S upside in revenues? - Management indicated that increased consumption and longer contract extensions are driving the upside in license and support revenues [44][46] Question: What types of sequential growth assumptions are needed in ex L and S and L and S? - Management expects increasing growth assumptions every quarter, with significant contracts expected in Q3 and Q4 [49][51] Question: How confident are you in your 2026 targets? - Management remains confident in meeting cash flow expectations and has not changed its trajectory for 2026 [58] Question: Have you seen any hesitation among customers based on macro uncertainties? - Management acknowledged some delays in contract signing but noted that the pipeline and backlog continue to grow [60][62] Question: Any broader strategic changes since leadership transition? - Management confirmed that the strategic focus remains consistent, emphasizing market awareness, solution distinction, and associate development [68][70]

Financial Data and Key Metrics Changes - First quarter revenue was $432 million, down 11.4% year over year as reported and 8.5% in constant currency, primarily due to license and support (LNS) renewal timing [25][26] - First quarter net income was negative $30 million, translating to a diluted loss of $0.42 per share, while adjusted net loss was $3 million for the quarter, a diluted loss per share of $0.05 [35] - First quarter non-GAAP operating profit margin was 2.8%, compared to 7.1% in the prior period, in line with low single-digit expectations [34] Business Line Data and Key Metrics Changes - Digital Workplace Solutions (DWS) revenue declined 7.5% year over year to $119 million, primarily driven by lower field service volumes and discretionary project work [27] - Cloud Applications and Infrastructure Solutions revenue declined 3.3% year over year to $177 million, affected by lower volumes with existing clients [28] - Enterprise Computing Solutions revenue was down 11.2% year over year to $119 million, due to LNS renewal timing [29] Market Data and Key Metrics Changes - First quarter total contract value was $434 million, including $337 million from new business signings, up more than 50% sequentially and more than 80% year over year [9][30] - Backlog at the end of the first quarter was $2.9 billion, up 2% sequentially and 4% year over year [30] - The company expects a growing PC refresh cycle to support field service volumes as clients begin upgrades related to AI and Windows 11 [7] Company Strategy and Development Direction - The company is focused on enhancing free cash flow by optimizing delivery and improving cash conversion efficiency [6] - The ClearPath Forward 02/1950 strategy aims to expand and enhance the ecosystem of Unisys software and industry solutions [17][78] - The company is actively monitoring market conditions to opportunistically expand its debt structure and advance its pension mitigation strategy [21][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full year revenue growth guidance and profitability guidance, citing resilience in diverse revenue streams [78] - The company anticipates delayed client decision-making due to macroeconomic uncertainties but believes this will have a marginal impact on overall revenue [21][62] - Management noted that security remains an area of outsized growth within the market, with ongoing enhancements to the security portfolio [13] Other Important Information - First quarter capital expenditures totaled approximately $20 million, relatively flat year over year [35] - The company achieved a strong liquidity position with cash balances increasing to $393 million as of March 31 [36] - The company was elevated to disruptor status in AI services and named a leader in attack surface management by industry analysts [18] Q&A Session Summary Question: What is enabling the L and S upside in revenues? - Management indicated that increased consumption and longer contract extensions are driving the L and S revenue upside, with clients extending contracts from three to five years to seven years [46][48] Question: What types of sequential growth assumptions are needed in ex L and S and L and S? - Management expects increasing growth assumptions every quarter, with Q2 showing a slight uptick and more significant growth anticipated in Q3 and Q4 [51][52] Question: How confident is the company in its 2026 targets? - Management remains confident in meeting cash flow expectations and sees no change in the trajectory for 2026 targets [60] Question: How is the quality of the pipeline and backlog assessed amid macro uncertainties? - Management reported that the pipeline is growing, with no need for natural pairing, and the quality of the pipeline is better aligned to solutions that can be won [72][75]