Unisys Corporation (UIS) is a global information technology company that provides a portfolio of digital workplace, cloud, and enterprise computing solutions. The company has undergone a significant transformation in recent years, shifting its focus towards higher-margin, next-generation offerings while streamlining its legacy business. This strategic shift has positioned Unisys to capitalize on growing market demand for modern IT solutions and services.
Financials
In the fiscal year 2023, Unisys reported annual revenue of $2,015.4 million, a decline of 5.5% compared to the previous year. The company's net loss for the year was $430.7 million, reflecting the impact of pension settlement losses and other one-time charges. Despite the challenging top-line performance, Unisys generated annual operating cash flow of $74.2 million and reported a free cash flow of -$4.5 million, as the company continued to invest in its transformation initiatives.
During the first quarter of 2024, Unisys reported revenue of $487.8 million, a decrease of 5.5% compared to the same period in the prior year. The company's net loss for the quarter was $149.5 million, primarily due to a $132.3 million non-cash pension settlement loss. However, Unisys' Ex-L&S (excluding license and support) revenue grew by 4% year-over-year, reflecting the company's progress in expanding its higher-margin solutions.
Business Overview
Unisys' reportable segments include Digital Workplace Solutions (DWS), Cloud Applications & Infrastructure (CA&I), and Enterprise Computing Solutions (ECS). In the first quarter of 2024, DWS revenue was $132.3 million, flat compared to the prior-year period, while CA&I revenue increased by 2.4% to $129.0 million. The ECS segment, which includes the company's legacy license and support (L&S) business, saw a 21.9% decline in revenue to $147.0 million due to the timing of software license renewals.
The company's focus on growing its Ex-L&S solutions has yielded positive results, with Ex-L&S gross profit margin expanding by 420 basis points year-over-year to 18% in the first quarter of 2024. This improvement was driven by delivery cost savings and margin accretion from new business contracts. Unisys' total company gross profit margin, however, declined to 27.9% from 30.8% in the prior-year period, primarily due to the lower L&S gross profit.
Cost Management Initiatives
Unisys' management team has been proactive in addressing the company's cost structure, implementing initiatives to streamline its general and administrative expenses. The company expects these efforts, combined with the anticipated decline in legal and environmental payments, to improve its free cash flow conversion in the coming years.
Recent Developments
The company's new logo signings more than doubled in the first quarter of 2024 compared to the prior-year period, a positive indicator of growing market demand for Unisys' solutions. The company's pipeline also showed strong momentum, with a 6% sequential increase in the first quarter, driven by robust demand for its digital workplace, cloud, and specialized computing offerings.
Geographic Revenue Breakdown
Unisys' geographic revenue breakdown reflects the company's global footprint, with 43.5% of revenue generated in the United States, 13.7% in the United Kingdom, and the remaining 42.8% from other international markets. The company's diversified revenue base provides some resilience against regional economic fluctuations.
Outlook
Looking ahead, Unisys has reiterated its full-year 2024 guidance, expecting total company revenue growth of -1.5% to 1.5% in constant currency and a non-GAAP operating profit margin of 5.5% to 7.5%. The company anticipates approximately $10 million in positive free cash flow for the full year, as it continues to execute on its transformation initiatives and capitalize on growing demand for its next-generation solutions.
Conclusion
Unisys' journey of transformation has not been without its challenges, as the company navigates the evolving IT landscape and addresses legacy business headwinds. However, the company's strategic focus on higher-margin, next-generation solutions, coupled with its cost optimization efforts and improving cash flow dynamics, position Unisys for long-term success. As the company continues to execute on its strategic priorities, investors will closely monitor Unisys' ability to drive sustainable revenue growth, expand profitability, and generate consistent free cash flow.