Unisys(UIS)2024-10-30 18:20Financial Data and Key Metrics Changes - Third quarter revenue was $497 million, an increase of 7% year-over-year or 8.2% in constant currency [34] - Non-GAAP operating profit margin was 9.9%, up from 0.1% in the prior period [48] - Third quarter gross profit was $145 million, with a gross margin of 29.2%, compared to 20.5% in the prior year [43] Business Line Data and Key Metrics Changes - Digital Workplace Solutions (DWS) revenue was $131 million, a 7.1% decline year-over-year, primarily due to lower discretionary volume [37] - Cloud, Applications and Infrastructure Solutions (CA&I) revenue was $132 million, a 1.5% decline year-over-year [38] - Enterprise Computing Solutions (ECS) revenue was $158 million, an increase of 29.2% year-over-year, with License and Support revenue within ECS increasing by 57% [39][40] Market Data and Key Metrics Changes - New business Total Contract Value (TCV) grew 50% year-over-year and is up 32% year-to-date [10] - Backlog increased to $2.8 billion, up 18% year-over-year [42] - Total pipeline grew 9% sequentially, with positive growth in all geographic regions [16] Company Strategy and Development Direction - The company is focusing on enhancing operational efficiency and delivery, with expectations for further gross margin expansion [45] - There is a strong emphasis on AI-enabled solutions across all segments, with over 120 active AI projects [20] - The company is committed to long-term growth in its License and Support business, with a roadmap for modernization and cloud enablement [74] Management's Comments on Operating Environment and Future Outlook - Management raised full-year non-GAAP operating margin guidance and improved outlook for 2024 free cash flow [8] - The company expects continued demand for its services, particularly in the public sector and financial services [12][14] - Management expressed confidence in the long-term viability of the DWS segment despite current market challenges [96] Other Important Information - Free cash flow was $14 million in the quarter, compared to negative $26 million in the prior year [54] - The company has strengthened its liquidity position by obtaining a 2-year extension on its ABL facility [57] - The trailing 12-month book-to-bill ratio is 1.2x for both the total company and Ex-L&S Solutions [42] Q&A Session Summary Question: L&S revenue outlook - Management indicated that the increase in L&S revenue outlook is due to strong pricing power and consumption levels, with no expected pull from future revenues [66][70] Question: Discretionary volumes in DWS - Management acknowledged a decline in discretionary volumes but remains optimistic about long-term contracts and future growth in the DWS segment [77][82] Question: New TCV signings and renewal dynamics - Management confirmed that new TCV signings are primarily for longer-term contracts, with strong renewal rates above 95% [89][90] Question: Goodwill impairment for DWS - The impairment was triggered by economic and industry dynamics affecting client signings, but management remains positive about the DWS market [96] Question: Margin expansion in Ex-L&S - Management expects margin expansion to be driven by value-added solutions, delivery efficiencies, and reduced SG&A expenses [98][100]