Unisys(US:UIS)2023-08-02 16:15Financial 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]