Business Overview and History
Unisys Corporation (UIS) is a global information technology solutions provider that has been powering breakthroughs for the world's leading organizations for over 150 years. The company's diverse portfolio of offerings, spanning cloud, artificial intelligence (AI), digital workplace, logistics, and enterprise computing solutions, has positioned it as a trusted partner in driving digital transformation across various industries.
Unisys Corporation has a rich history dating back to 1873, with its current form emerging from the merger of Sperry Corporation and Burroughs Corporation in 1986. The company's legacy is rooted in innovation, having produced some of the earliest mainframe computers as the Sperry Univac division of Sperry Corporation.
Throughout its history, Unisys has demonstrated remarkable resilience and adaptability in the face of significant industry changes. The company successfully navigated the shift from mainframe to distributed computing and has continuously evolved to meet the changing needs of its customers. Despite facing challenges from new competitors and rapidly changing technologies, Unisys has maintained its position as a trusted provider of mission-critical IT services and solutions to some of the world's largest organizations in both the private and public sectors.
Unisys has a global presence, with operations in numerous countries worldwide. The company's commitment to innovation has been recognized through numerous patents and accolades from industry analysts and media outlets. As a pioneer in areas such as security, data analytics, and artificial intelligence, Unisys has consistently helped its clients stay ahead of the curve in an increasingly complex technology landscape.
In the 1990s and 2000s, Unisys underwent significant restructuring efforts to streamline its operations and refocus on its core strengths in the IT services and solutions market. This strategic pivot has enabled the company to maintain its relevance and competitiveness in the rapidly evolving technology sector.
Financial Performance and Ratios
Unisys' financial performance has been marked by a focus on improving profitability and cash flow generation. In the fiscal year 2024, the company reported total revenue of $2.01 billion, a slight decrease of 0.3% compared to the previous year. However, the company's non-GAAP operating profit margin improved by 180 basis points to 8.8%, reflecting the success of its cost optimization initiatives and strategic investments in high-growth areas.
The company's liquidity position remains strong, with cash and cash equivalents of $376.5 million as of December 31, 2024. Unisys' free cash flow nearly doubled in 2024, reaching $55.3 million, compared to a negative $4.5 million in the prior year. This improvement in cash flow generation can be attributed to lower pension contributions, reduced legal and environmental payments, and improved profitability in its core business segments.
Unisys' balance sheet is characterized by a debt-to-equity ratio of 0.72, indicating a moderate level of financial leverage. The company's current ratio of 1.56 and quick ratio of 1.54 suggest a healthy liquidity position, allowing it to meet its short-term obligations.
For the fourth quarter of 2024, Unisys reported revenue of $545.4 million, representing a 2.2% year-over-year decline on a reported basis and a 1.5% decline in constant currency. The quarterly net income stood at $30 million. The decline in revenue was primarily driven by lower hardware and isolated lower margin field services volumes in the Digital Workplace Solutions (DWS) segment, as well as lower third-party technology revenues and uneven project volumes in the Cloud, Applications & Infrastructure Solutions (CAI) segment. This was partially offset by 8.4% growth in License & Support (L&S) revenue within the Enterprise Computing Solutions (ECS) segment.
Unisys has a secured revolving credit facility, the Amended and Restated ABL Credit Facility, with a capacity of $125 million and an accordion feature up to $155 million. The facility was amended in October 2024 to extend the maturity to October 2027. As of December 31, 2024, the facility was undrawn, and availability stood at $117.1 million.
Segmental Performance and Outlook
Unisys operates through three reportable segments: Digital Workplace Solutions (DWS), Cloud and Applications Infrastructure Solutions (CAI), and Enterprise Computing Solutions (ECS).
The DWS segment, which provides intelligent workplace services, proactive experience management, and collaboration tools, saw a 4.1% year-over-year decline in revenue to $523.5 million in 2024. The decrease was primarily driven by lower volume with existing clients, partially offset by revenue from expansion and new scope for existing clients and new logo contracts. However, the segment's gross profit margin improved by 170 basis points to 15.7%, driven by the company's investments in delivery modernization and workforce optimization initiatives.
The CAI segment, responsible for cloud migration, management, and application transformation, reported a 0.8% revenue decline to $526.9 million in 2024. The segment's gross profit margin, on the other hand, increased by 110 basis points to 16.5%, reflecting the benefits of increased automation and expanded campus hiring.
The ECS segment, which provides secure and high-intensity enterprise computing solutions, reported a 0.5% revenue increase to $651.3 million in 2024. However, the segment's gross profit margin declined by 100 basis points to 60.2%, primarily due to a higher mix of hardware revenue relative to license renewals.
Looking ahead, Unisys is focused on driving growth in its Ex-L&S (excluding License and Support) solutions, which it expects to grow by 1% to 5% in constant currency during 2025. The company also anticipates its License and Support revenue to reach approximately $390 million in 2025 and $400 million in 2026, with an average gross margin of around 70%. This growth is expected to be fueled by the company's ClearPath Forward 2050 strategy, which is designed to capitalize on the longevity and inherent value of its proprietary operating systems.
For the full year 2025, Unisys expects total company revenue growth of 0.5% to 2.5% in constant currency (negative 1.9% to 0.1% reported), a non-GAAP operating profit margin between 6.5% and 8.5%, and pre-pension free cash flow of approximately $100 million. The company also anticipates slightly positive free cash flow after pension contributions.
Unisys is investing heavily in AI-enabled solutions and services, leveraging its expertise in areas such as cloud, data engineering, and application modernization to support its clients' digital transformation journeys. The company's recent partnerships with leading technology providers, such as Freshworks, further strengthen its ability to deliver comprehensive IT solutions to its customers.
Geographic Performance
Unisys maintains a strong global presence, with international operations contributing significantly to its revenue. In 2024, approximately 57% of the company's total revenue was derived from international operations, underscoring the importance of its global footprint in driving growth and diversifying its revenue streams.
Human Capital
As of December 31, 2024, Unisys employed approximately 15,900 professionals globally. Of this workforce, 2,500 were located in the United States, while 13,400 were based in other countries. This diverse and global talent pool enables Unisys to serve its international client base effectively and leverage expertise from various markets.
Risks and Challenges
Like any technology company, Unisys faces several risks and challenges that could impact its future performance. These include:
1. Intense competition in the IT services and solutions market, where the company competes with global system integrators, consulting firms, and other technology providers.
2. Potential challenges in attracting and retaining top talent, given the highly competitive nature of the industry.
3. Cybersecurity threats and the need to continuously invest in safeguarding client data and systems.
4. Ongoing volatility in global economic and geopolitical conditions, which could affect client spending and the company's overall operations.
5. Reliance on a limited number of large clients, which could create revenue concentration risks.
6. Pension funding obligations, which require the company to make significant cash contributions to its defined benefit plans.
7. Difficulty in precisely forecasting the timing and amount of License and Support revenue due to factors like renewal timing and client budgeting decisions.
Unisys actively monitors these risks and has implemented various strategies to mitigate their potential impact, including diversifying its client base, investing in talent development, strengthening its cybersecurity measures, and optimizing its pension funding obligations.
Conclusion
Unisys Corporation, with its rich history and innovative approach to technology solutions, is well-positioned to capitalize on the growing demand for digital transformation across various industries. The company's focus on improving profitability, enhancing cash flow generation, and expanding its portfolio of high-growth offerings positions it for continued success in the years ahead. While the company faces ongoing challenges, its strong market presence, strategic partnerships, and commitment to innovation make it a compelling investment opportunity for those seeking exposure to the ever-evolving IT services and solutions market.
The company's performance in 2024, marked by improved profitability and strong free cash flow generation, demonstrates its ability to execute on its strategic initiatives. With a clear focus on expanding its Ex-L&S solutions and maintaining a strong License and Support business, Unisys is poised for growth in the coming years. The company's guidance for 2025, including expectations of revenue growth and improved profitability, further underscores its positive outlook and commitment to delivering value to its shareholders.