Unisys(UIS)2022-11-08 18:38Financial 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]