UNISYS CORP Q4 FY2025 earnings call

First, continue to execute against a consistent operating strategy yielding improved profitability and free cash flow while advancing pension removal strategy. Second, market perception of Unisys and its solutions is advancing as seen in wins, pipeline, and industry analyst recognition. Third, AI is poised to be a powerful driver of long-term demand. In DWS, multiyear renewals and new scope signings show improved perception. In CA&I, advancing intelligent operations architecture with AI agents. In ECS, confidence in ClearPath Forward ecosystem and investing in core platforms and leveraging AI for various aspects.

Fourth quarter revenue grew 5% year over year. Full year revenue was above the revised midpoint. Non-GAAP operating margin was 18% in the quarter and 9.1% for the year. Digital Workplace Solutions (DWS) fourth quarter revenue was $126,000,000, flat sequentially and down 3.7% year over year; full year DWS revenue was $508,000,000, down 3.1%. Cloud, Applications and Infrastructure Solutions (CA&I) fourth quarter revenue was $191,000,000, down 4.1% year over year; full year CA&I revenue was $733,000,000, down 4.8%. Enterprise Computing Solutions (ECS) fourth quarter revenue was $237,000,000, up 14% year over year; full year ECS revenue was $629,000,000, relatively flat to 2024.

Expect total company revenue to decline between 6.5%-4.5% in constant currency, equating to reported revenue decline of 3.8%-1.8%. XLNS revenue decline of 7%-4.5% in constant currency. Full year L&S revenue $415,000,000 at ~70% gross margin. Expect 2027-2028 L&S revenues to average $400,000,000 per year. Non-GAAP operating profit margin between 9%-11% for full year. Full year free cash flow expected to be approximately negative $25,000,000, pre-pension free cash flow positive $67,000,000.

Industry competition with aggressive pricing affecting profitability and growth; long sales cycles due to macro factors; macroeconomic slowdown in discretionary spending; international pension deficit impacted by asset returns and volatility.

Q: How are AI and automated code modernization tools influencing the road map and demand for ClearPath Forward?

A: Code factoring is part of the story but not the whole. ClearPath Forward 2050 is the time frame, and AI-enabled tools above the enterprise level continue to enable data usage and drive more demand.

Q: Outlook for bookings in 2026?

A: Renewal cycle smaller this year allows more focus on new logo and new scope expansion in existing base.

Q: How to counter competitive pricing and sales cycle issues?

A: Focus on shortening sales cycles through tool and process changes, and maintain pricing discipline based on value and quality.

Q: Leading indicators for XLNS revenue growth acceleration?

A: New business conversion rate, deployment of embedded technology like Service Experience Accelerator.

Q: Margins outlook?

A: Primarily from application of emerging technology, adoption of digital workforce, and mix shift to higher margin work.

Q: L&S revenue outlook and AI impact?

A: Consumption and use driven by AI, leading to increased L&S revenue and expectation of continued trend.

Q: Balance sheet and pension outlook?

A: Expected cash contributions to pensions, reduction in pension deficit, and consideration of debt management but focus on conserving cash.