Unisys Corporation New

Q3 2021 Earnings Conference Call


spk_0: the morning and welcome to the unisys corporation third quarter twenty twenty one earnings call all participants will be in a listen only mode should you need assistance please signal a conference specialist by pressing the starkey followed by zero after today's presentation there will be an opportunity to ask questions please note this event is being recorded oh no way to turn the conference over to courtney hope and vice president of investor relations please go ahead
spk_1: thank you operator good morning everyone this is courtney more hoban vice president of investor relations thank you for joining us yesterday afternoon units are released it's third quarter twenty twenty one financial results and join this morning to discuss those results by peter out about or chair and ceo and my thompson are cfl before we begin at like to cover a few details first today's conference call and the queue in a session or being webcast via the unisys investor website second you can find the earnings press release and the presentation slides and we will be using this morning to guide our discussion as well as other information relating to our third quarter performance on our investor website which we encourage you to visit third today presentation which is complimentary to the earnings press release includes some non dabs financial measures and on gap measures have been reconciled with the related gap measures and we've provided reconciliations within the presentation although appropriate under generally accepted accounting principles the company's results reflect charges that the company believes are not indicative of it's ongoing operations and that can make of profitability and liquidity results difficult compared prior period anticipated feature period or to it's competitors results these items consist of post retirement that exchange and establishment and cost reduction and other stuff management believe each of these items can distort the visibility of trend associated with the company's ongoing performance management also believe that the evaluation of the company's financial performance can be enhanced by use of supplemental presentation of it's result that exclude the impact of these items in order to enhance consistency and comparative this with prior or future period results the following measures are often provided and utilized by the company's management analysts and investors to enhance comparability of the or over your results as well as to compare results to other companies in our industry now operating profit non gaap deluded earnings per share free cash flow and adjusted free cash flow even die and adjusted ebitda and constant currency for more information regarding these metrics and related adjustments please the earnings release and are formed ten que from time to time unisys may provide specific guidance for color regarding as expected future financial performance such information is effective only on the date given unicef generally will not update reaffirm or otherwise comment on any such information except as unisys deems necessary and then only in a manner of complies with regulation ft and finally i'd like to remind you that all forward looking statements made during the conference call are subject to various risks and uncertainties that could cause the actual results to differ materially from our expectation these factors are discussed more fully in the earnings release and in the company's fcc filing copies of those as if the reports are available from the s e c and along with the other materials i mentioned earlier on the used to send us your website and now i'd like to turn the call over to peter
spk_0: good morning everyone and thank you for joining us to discuss or third quarter results
spk_2: during a third quarter we may continue to progress executing on a strategy for sustained revenue growth and margin improvement by expanding our solution portfolio and enhancing i go to market it while managing our workforce to successfully attract and retain tell it in a competitive labor market we also increased gross profit and free cash flow year over year michael provide detail on our financial performance and accomplishments but first i will give some insight into the business starting with digital workplace solutions or d w s our goal has been to transform to a higher growth and higher margin business by inhibiting and expanding our solution portfolio with a focus on proactive experience leveraging at recognize leadership position in the market and our intel a and our sweet platforms in the third quarter we made progress toward the strategic goals while exiting some contracts that weren't court to how we plan to grow this business with respect to the build portion of our build partner by strategy we have developed our experience model office solution or x ammo this offering analyzing data from multiple sources including device experience tools such as our parachute solution our cloud context enter platform and other satisfaction and said in the tools to identify and remediate pain points and improve user experience this will apply a touchy business schools such as maximizing productivity and improving employee engagement and will also streamline our support model by reducing react if service needs additionally we defined and began incorporating our second generation experience level agreement or x l a framework into contracts providing a more advanced persona based way for clients to assess the impact our solutions are having on user experience we believe we are leading the market in advancing to second generation x l ase that our clients are responding positively we also filled several key leadership an architect rules during the quarter with the spectrum partnerships in dws we have brought into relationships with some leading device experience management partners to become channel partners in addition to solution for and our integration of unify square is progressing as we continue to actively assess additional opportunities to enhance our solution portfolio through acquisitions in the quarter we sided dws contract with a global commercial real estate services from to implement a case management system which will help the client move to a centralized global bottle for this process and technology also when the quarter unify square sign contracts with nearly twenty new logo clients including consulting contracts and power sweet software subscriptions focused on migrating to or managing zoom and mike ross microsoft teams ucas environments living to cloud and infrastructure solutions or see it i we continue to execute on our strategy of growing cloud in are targeted markets by leveraging our establish credentials glad forte and embedded security solutions to help clients transform their traditional ideal environments to effective hybrid and multikine solutions revenue growth continue during the third quarter in see it i was cloud revenue specifically growing twenty six percent year over year as we noted on our last call in july we completed a new release of are bad for jay program and since july we have continued to enhance the artificial intelligence embedded in couch forty with a specific focus on cloud spend optimization for also utilizing predictive analytics to help clients avoid incentives and automated cause analysis to remediate and prevent future issues additionally increased migration automation in our solution allows us to move significantly more workloads to the cloud more quickly at increased levels of relied on we're on schedule for a new release of the club for the platform with additional functionality in the fourth quarter we're also expanding our partnering with cloud forty including enhance integration with google cloud increasing our ability to deliver out from based and to and out services to quiet using google cloud add to help them optimize their workforce environment we have brought broadened i work with a w s and microsoft azure increasing automation to enable a more seamless experience for clients with improved functionality while also enhancing cost efficiency we are assessing potential see and i acquisition candidate with the focus on an antique specific capabilities and increasing geographic coverage and during the quarter we signed a contract with a leading mexican insurance company to design a hybrid environment integrating public and private clouds and to perform related migration one turning to enterprise computing solutions or easy as our goal is to grow revenue through expanding the easiest ecosystem while maintaining license revenue stability we are enhancing our existing services and platforms and developing new solutions tell clients manage their clear path forward environments we are incorporating advanced ai and automation into our application like cycle management platforms and work flow oriented design into our application development solutions for also expanding the interoperability of are clear path forward systems which are already able to be deployed in the public cloud the a clear path forward for sure to add able to use in a hybrid and mulvey cloud and barb r i p lead industry focus solutions such as air corps and elevates represent an additional opportunity for growth in his yes we're partnering with software and platform developers to moderniser application development and to enhance our life cycle management of these solutions and we're working with channel partners to embed these industry applications into their solutions to increase our client reach were also evaluating opportunities to acquire smaller companies that support clear path forward we recently signed a contract with new zealand's i could totally envy transport agency to extend our engagement to manage eighty infrastructure on the clear path forward platform to support system is processing upon approximately twenty five million driver's license and sixty million motor vehicle transit options for you turning to our broader go to market efforts our total company tcp was up thirteen percent year over year in the third quarter and total easy the was up thirty percent year over year as we priced contracts were aiming to offset are anticipated cost increases leading to the competitive market or for later total company pipeline was also up five percent sequentially supported by growth and are proactive experience t w s solutions and cloud solutions pipelines which increased sequentially both on a dollar basis and as a percent of total public we are increasing awareness in our new d w as and cloud capabilities midi frequently was industry analyst such as gardner i d c everest i as g and e service and we have been recognized for our leadership and a number of areas we were recently named a leader in advisory firm i as trees provider lens study on the future of work in both managed employee experience services and managed digital workplace services in the u s the uk editors ill in addition to other regional leadership recognition we were also named a leader in the next jen private and a hybrid cloud manage services by i s g in the u s the uk and brazil and were recognized by i d c as a major player in worldwide managed month a cloud services we have evolved significantly as a company and we're launching a global advertising campaign to help ensure that the market knows who unisys is today for undertaking a similar initiative aimed at attracting talent in key recruiting geography we're also expanding the depth and breadth of content on our website and implementing a cross selling initiative to highlight are full portfolio of solutions across segments to clients the mark of retired remains highly competitive but our workforce management efforts including compensation retention adjustments and increased associate initiatives such as talent development internal mobility and focus on work life flexibility have helped us to continue to attract and retain t resort she's needed to execute on our strategy our last twelve months voluntary attrition was fifteen point three percent which is significantly below the pre pandemic level of seventeen percent in the third quarter of two thousand and nineteen demand for open roles filled internally as a percent of total increased six points for the year to date versus twenty twenty two thirty six percent reflecting the effectiveness of our internal development mobility programs and of skillet and referrals represent over twenty percent of total hiring on a year to year basis our commitment to d e i is a bedrock of our people strategy unisys was named a champion of board diversity for the seventh consecutive year by the form of executive women and women representation as a percent of the leadership of the company has increased by three points from thirty two percent as if twenty twenty to thirty five percent on a you to day basis in conclusion i like to thank her associates for their ongoing efforts and supporting our strategy and progressing toward achieving the goals we set out at the beginning of the with that i'll turn over the call to make to discuss our financial results
spk_3: like thank you peter good morning everyone my discussion today our fair to both gap non gap results as reminder reconciliation of these metrics are available on earnings me to as peter highlighted during the third quarter we continue executing on our strategy for sustained revenue growth and margin improvement by expanding our solution portfolio and enhancing i go to market efforts while proactively managing the workforce and increasing gross profit and free cash flow year over year overall are you today performance in line with our internal expectations and we are reaffirming all four year twenty twenty one guidance metrics as a result you are in the third quarter we grew revenue in two of our three segments with continued year over year revenue growth in both see and i am ii yes are ongoing enhancements to our cloud capabilities and efforts to increase awareness with industry analyst inclines continue to yield results with seen i revenue growth of one point seven percent new every year to one hundred and eighteen point nine million in the third quarter this was supported by cloud revenue growth within the segment of twenty six percent year over year
spk_4: one item to keep in mind going into the fourth quarter is that we expect our see and i revenue can be down year over year due to a timing issue associated with revenue recognition from a public sector klein and benefited as in the fourth quarter of twenty twenty as well as some run off of traditional infrastructure work that not part of
spk_3: how are planning to grow has been we still expect see an eye to be the fastest growing segment overall for the four year twenty twenty one he enhanced functionality associated with are easy as solutions including clear path forward for your and our focus on growing easier services continues to provide benefits to the easier segment easy as revenue grew one point eight percent year over year this growth was helped by higher light and revenue than expected in part due to a contract been renewed for a longer duration than initially anticipated i think the fact that clients are signing your agreements for a clear path forward operating system is a testament to the strength of the solution and the modernization road map that supports this often you as services revenue grew one percent year over year
spk_2: as we've previously noted we had expected the third quarter to be the lightest of year in terms of light and weapon which we still expect to be split approximately fifty five percent forty five percent between the first and second half of
spk_4: the software renewal kane is as expected and actually be risks the fourth quarter as easy as lightens revenue is more evenly distributed throughout the year with a lot less reliance on fourth quarter sign as a reminder that prior year first half second have split with forty percent sixty percent with forty percent of the full year segment revenue coming in the fourth quarter
spk_3: we expect overall twenty twenty one easiest revenue to be roughly flat you have a year
spk_4: with respect to dws we're moving into the next phase of our transformation of the segment with the heavy emphasis on our go to market implementation enabling us to bring on hand experience solutions to new and existing clients we have transition away from some heritage contracts that we're not core how are planning to grow this business
spk_3: we also saw some impacts related to supply chain shortages and both of these items impacted revenue which was down four point seven percent year over year two hundred and forty one point three million
spk_5: as a result of all this to total company revenue was down one point five percent year over year and the third quarter to four hundred and eighty eight million
spk_4: as i noted that does does not change our expectations the revenue for the full year as his quarterly kings was anticipated and with embedded in our guidance as was our expectation for year over year decline in the fourth quarter revenue do the timing issues i mention which is why we're reaffirming that guidance and zero to two percent year over year revenue
spk_5: growth
spk_4: the company backlog with impacted by the continued shift of our mix of bitterness towards higher growth and higher margin solution and the exiting have some knowledge from tv contracts
spk_3: additionally dorn twenty twenty one we have seen generation of contract and backlog short me as a demon twenty two thousand and twenty now team as a result tow company backlog with three billion at of the end of the third quarter relative the three point three billion as a beginner the prior court i put solutions that we're shifting on next was unless less capital intensive and have a shorter implementation time frame which we expect we'll leave the backlog to convert to revenue more quickly than it has in the path it's is supported by year over year increase in a d that peter know it of the three billion in backlog we expect approximately three hundred and eighty million will convert into revenue in the fourth quarter moving to profitability third quarter total company gross profit was up year over year and gross profit margin was up the over here as well
spk_2: these results were supported by year over year improvement and fee and i and ii she gets close minded
spk_3: he and i gross profit increased a hundred and sixty point three percent year over year to nine point three million and gross margin improved four hundred and ten basis points to seven point eight percent driven by the improvements to margin in both cloud and traditional infrastructure what you see as gross profit increase twenty eight point eight percent year over year to ninety seven million and gross margin improved one thousand three hundred and sixty basis points to sixty five percent helped by the higher revenue i mentioned earlier you'd have us gross profit was sixteen point eight million relative to twenty one point six million in the prior year period largely driven by the flow true impact and eleven dw as gross margin like eleven point nine percent relative to fourteen point six percent in the prior year period as with revenue or year to date non gap operating profit margin results are roughly in line with internal expectation and accordingly were reaffirming or four year twenty twenty one guidance for this metric at night to ten percent as dna spent increased year over year in the quarter largely due to increased investment and i've got a market effort primarily related to direct sales support and increases in non cash based compensation
spk_4: as a result total company non gap operating profit margin is five point seven percent relative to a point six percent in the prime your period
spk_3: we anticipated additional investments and i go to market efforts over the next few quarters to support our growth strategy increased awareness of our and had solution portfolio and within the context of a highly competitive labor market across the ip services industry increase compensation to retain and attract top talent need to match
spk_4: semis or growth strategy
spk_3: based on yes we expect to be toward the lower end of the non gaap operating profit margin guy with i just mentioned the system with our discussions over the last couple quarters i'm pleased to report that we've concluded our cost optimization program and it is now fully underpinned the on your life saving the associated with this program i the high end of the target range we provide which was one hundred and thirty two one hundred and sixty million as i mentioned already the reinvestment of a portion of the saving has begun and will continue to the first half of twenty twenty two
spk_4: or net loss from continuing operations with eighteen point seven million or twenty eight cents per diluted share versus thirty point three million or twenty one cents per diluted share in the prior year period non gaap net income with six point nine million versus thirty six point eight million in the prior year period
spk_3: and nine gap the loony dps with ten cents per six fifty one sense in the prior year period the gap and non gaap net income and dps results are reflective of lower operating profit damage and as well as higher taxes this year due to the geography too much income was on as with revenue and non gaap operating profit margin or year to date adjusted ebitda results are generally ally with our expectations and so we reaffirming for your twenty twenty one guy for this metric at seventeen and a quarter to aging and a quarter percent just that he bit on a quarter with seventy four point six million relative to eighty two point three million in the prior year period and adjusted ebitda margin in the quarter with fifty point three percent versus sixty point six percent in the prior year period based on similar drivers as non gap operating profit and margin likewise as with operating profit we expect to be toward the lower end of the guys range in light of these investments in our team to support growth in a competitive labor market we continue our capital like strategy and our focus on integrating best in class offering to enhance our solution than optimize our development costs
spk_2: our capital expenditures decline year over year again in the third quarter down eighteen point four percent to twenty six point one million
spk_4: we now expect cat back to be between one hundred and one hundred and ten million for the four year twenty twenty one which is lower than our previous expectation
spk_2: free cash flow and adjusted free cash flow also continued to improve with free cash flow up fourteen point nine percent year over year to thirty nine point four million and adjusted free cash flow of thirty six point three percent to sixty nine point nine nine
spk_3: need cash flow metrics were also up significantly i sequential basis and we continue to expect to be free cash flow positive for the four year twenty twenty one
spk_4: the continuing our efforts to further the risk of balance sheet we completed a transfer of additional both pension liabilities in october through a two hundred and thirty five million dollars annually contract we expect a one time noncash pretax said on the charge in the fourth quarter associated with this liability transfer of approximately
spk_3: one hundred and thirty million or one dollar and ninety four cents per share
spk_2: another positive bound she gave him to know his last week moody's has resolved the positive outlook associated with are dead by providing an upgrade of our corporate family rating to be one with a stable outlook and are see secured notes for upgraded to be one as well to wrap up or third quarter with consistent with our expectations and represents continued progress on a refreshed strategy and you cheapen about their short and long term financial goals and we look forward to continuing his progress in the fourth quarter with that a turn to call back over to peter peter thank you mike before opening the called for questions i would like to highlight some upcoming leadership changes that we noted in our earnings press release mike will be taking on the role of president and chief operating officer effective upon the hiring of a new c f o as you know mike has played a central role in the significant financial transformation of the company since become a cfl in two thousand and nineteen including the substantial strengthening of the company's delish mike is also played an important operational role in the company and he currently overseas or corporate development efforts and our strategy much i would also like to thank eric cuddle our current president and chief operating officer was leaving the company after six and a half years of service to pursue other interests eric has been instrumental in improving the financial performance of the company of the last few years or enter the implementation of only strategy and opry model as well as other elements of the company's business during his tenure eric will be leaving his court role on nov thirty
spk_0: we have begun a search for a new seattle and mike will continue to fill that role until we have appointed a new see ever at that point you will transition to president and chief operating officer i will assume eric's responsibilities on an interim basis until the cfl about transition is complete as a reminder i also served as president from january of two thousand and fifteen until march of two thousand and twenty we wish eric success in his future endeavors and look forward to mike's contributions in his new role with an operator can we please open to call for questions thank you will now begin the question and answer session to ask a question he may press star than one on your touched on phone few years in a speaker phone please pick up your handset before pressing the keys to withdraw your question please press star them to
spk_6: at this time we will pause momentarily to similar roster i first question comes from rod bourgeois from deep dive equity research please go hit ah a guy take guy good morning and ape that first first question about our top line trans degree with with bookings arm so the the backlog i guess i'm wondering is there are additional
spk_2: an intentional backlog turned that should occur as you continue to shift your mix to these more attractive segments i guess i'm just wondering if you get a lot of make see happening
spk_7: and impacting the backlog you exit it's and contract this quarter is there more of that activity to calm or is the bulk of that completed at this point
spk_2: yeah right this is peter thanks for the question there is a little more of that to come so when when they're a couple of things happening on the backlog number and mike pointed out ah several a bit the first is there is just not there is some additional if he will feel services revenue that is low margin i'm that we are continuing to work with clients on or and were looking for a path to get to higher margin palm contracts with them really moving them into next generation of if we do that's great if it continues to be basically from us not a successful endeavor then we expect he'll be some more of that attrition of the lower margin work not a material amount but some seconding thing that's happening around the backlog number is my also pointed out is really it of a mix change in what were signing on well as a mix change in our pipeline so from up from a backlog standpoint when we look at the types of work were signing ah a bigger percentage of that is higher margin a bigger percent of that is the next generation work in our dws business and the cloud working in our cloud infrastructure business that's what we want that is the strategy of the company but but those are types of business tend to be shorter duration hunter rex at least initially and so you see our a see the or annual contract value which is what we measure as the the revenue for the first twelve months of signing a contract a the is going up thirty percent while tc the the total contract value is going up
spk_6: thirteen percent both good numbers we like thirty percent up we like thirty percent up but you could see the balances different and that because the contracts at least to date or shorter term as we move into that new world to that's why you know you have a a little more effect on backlog that hope that's helpful yellow that's very helpful and and clear and i assume he should we assume that contract duration will continue to come down
spk_2: i and be given that big lower duration is not only he is is is continuing in your existing pipelines
spk_6: i think i think to a modest great of of as i'm looking at the average contact size of that we have now i think that it's it's very close to where it will eventually stabilize so i think there's a little bit of that rod but i don't think there's much left i think we're close to the average contract duration we expect to get okay great and then just on the operating margin outlook it it it seems that is you you call that in your commentary your you increase your go to market investments i'm at it was is interesting to me a lot of the other i t services firms are just seeing a general increase in talent costs wage inflation attrition and so on
spk_2: and it seems like that affect with unisys is less pronounced perhaps and what's happening at other firms is that an accurate assessment where you know your your margin challenge this year is more to do with go to market investments rather than a general increase in talent cross across the board is that the right with to to look at your your margin challenge this year such a really good question and it's one that we've actually done a lot of work thought are cheating ibrahimi who leads are hr our team mike and others as as well as myself for really kind of wanting to understand for a while we're on track so you know we're very specific about the guidance were you aware reaffirming guidance that's on a revenue standpoint that i'm earning standpoint are as you know as as well as as as and either dust standpoint and so we're on track with our numbers and we're on track with the process we expected this year so there are couple of things going on for us beyond what i would consider the to surprises and the to surprises or your increased labor rates and supply chain hindrance if you want to talk about that to let me get back to the to surprises or after i kind of set out the the framework so we always knew this year was going to have really two parts first half and a second half which is the way you should have a year swear with or two part but but specifically in the first half of the year that was the you know bringing in and enhancing our leadership team ah now that we have changed so organizational model as of january six two this you and in the first six months we brought and six significant executives and they have brought in our members of their teams as well so leadership team started ah end of the second thing that happened in the first half of the it was really building out the functionality and the capability of what we expected to sell in next generation dws and the next generation clout the second half of the year it was really devoted to building out our go to market efforts and those are underway and so you're seeing us spend more money around or around sales resources you're seeing i spend more money as we put together a new branding and advertising which for unisys is very important that's a part of what we have to do as we move into the next stage so so we're on track but it has been a year full of change which we expected now with spec to margins again we're on track on our margins but we have had to surprised and and labour the cost of labor is higher than we expected and that's true really on a global basis pub you know one of the things that has happened in a in a coven and posts covered world is the availability of people is actually higher because you can now hire people to work remotely pretty much anywhere that's a good thing and the bad thing is that means they can work for anybody so the demand on resources is higher so we are seeing an increase in labor costs are we think we're handling that pretty well our arab turn over our last twelve months turn over is lower than it was in nineteen which we think is the right compare and we think that the increase in our turn over has been modest compared to some other firms in our industry but it's still getting getting to that point has still required if he will a surprise upside to our core structure and we're not ah and and and although we are making changes and pricing and we do believe that we have the ability to increase prices are that's on new work on renewals or as well as as to cost of living adjustments in our existing price got a contract and it's not immediate and it's not necessarily a complete one for one in a quarter or even into quarters but we think that we have pricey power we have a handle on that the other change that has been a surprise is supply chain so we we are having issues getting all of the third party equipment and parts are necessary to kind of feel are expected of final it's so that means some less revenue for us in the quarter or in terms of getting third party product through our system but more than the third party product revenue it means our people are not as busy as we think that temporary and of so you know we are if you will staffing
spk_6: to a slightly higher rate of supply chain than we currently have to deliver and that's because we do believe the supply chain issues are temporary so in the meantime that has increased our cost someone long winded answer
spk_0: but i hope that helps that super helpful and congratulations on the on the attrition
spk_8: but accomplishment there so they are are handed over thank you the next apart me again if you have a question please press star than one or next question comes from just vasey from canaccord is go ahead the guys are good morning and i'm like who on the coming closer look well deserved on on will be you know it's it's maybe a little early but here we are we're in november and i know you're not playing dungeons yet but how you look in the next year when you look out there around the demand environment relative to this year pilot set sign
spk_2: under just as he thought their on on numb the set up i guess looking into twenty twenty two and now quit follow or joe thanks let me take the first part of that and then really let my take the second one of the functions as a company that has reported to my thought is a if he well our our strategy and and planning function so we just completed her of what we call a long term plan which is odd hours now if you will our strategy of both from an operation standpoint as well as from a financial standpoint the next three years so i'm mike mike will give you a little more color on that end up as a said he's he's been in charge of that now for a couple of years at up with respect to the first part of the question about your how do we how do we think about the man you know in part we feel that to demand in general in the marketplace is good and we think that busy shunning that we are doing is better so as i mentioned to rods question know when we look at our have at our narrowly at our sales and we see you know what we're selling when we look forward had our pipeline we find a five percent increase in or pipeline and even more significantly when we look at the can at the come position of their pipeline we find mix shifting in the pipeline so our higher margin that next generation and user experience piece of the dws pi if he will is expanding as a percentage and an absolute dollars inside the pipeline the cloud and vs cloud and infrastructure piece is expanding are in a percentage and an absolute dollars in the pipeline so that's really what our strategy is about ah in terms of growth and in terms of getting to higher margin so we think we think the demand base of our pipeline and what we're seeing in the market is there we think our opportunity again the second half of the year has been about building out that go to market function with the opportune eddie for us to take advantage of that is there and then in in his yes we're seeing increases in our services revenue which has been a piece of easy as that we think is is readily accessible ah and so we're pleased with that although we think that can increase of more quickly as we move on for that to like over to for the rest your thanks joe and and thanks for the compliment the in the intro here really appreciate your teaching huge ports outlook i i think it's certainly not by mistake that i made a comment around both are short law long term results you're you're right it's a little earlier we will obviously give our guidance when we when we conclude the year and do next quarter but look i have from from our perspective were feeling really good about where where i where we're entering this next phase in the construct of our go to market strategy were really doubling down on our efforts there as far as the communication of that strategy the awareness of that strategy the feedback that we've gotten from industry analyst and clients in what the pipeline looks like ah gives us gives us some some real uplift in where we think we're going so we we feel pretty good about while we told you in january
spk_9: ah yes there are some general economic headwinds in the construct of the things that peter mentioned our workforce and supply chain eccentrics but the same thing that everyone's dealing with in the industry think for the things that we can control ah we feel really good about what we're seeing we feel really good about the solo
spk_2: oceans the continued expansion of those solutions and their acceptance in the marketplace so you know i don't think joe that you'll see from us arm anyway bring on other commitments that we that we had discussed in january of this year and you know again we we're we feel pretty good about where we're going here we feel
spk_8: would dollar right an hour so will continue to to get through ah the remainder of this year continue to ramp up and nearly half of of next year with all of those go to market efforts and again disraeli stay on track for that commitments that we've made that's great thanks like and then this one quick follow the just kind of notice you know we won in the clock your last couple years a lot of the larger knew when to he mentioned historically were know that know it's those a pretty big nixon say state and local deals i know this quarter know you're mentioning more on that enterprise side and sounds like also the that go to market will be
spk_2: and broader like that is really more geared to enterprise notices know perhaps that state and local market i was wondering if if you're seen a potential expansion tier with them as a result of this or how do you think about the new go the market vs previous and you know you know you targeted by thanks a lot diageo that's a great question and and you're right so i'd and i think part of that change is is due to the the branding approach they were taking ah and part of it is due to and the enhance go to market efforts so you know there's no question that one of the things that unisys has is very very solid reputation yeah the and governments around the world including in the us state and local were not currently in the us and federal i'm to to the sale of that team to see i see but we're we're not taking that for granted but where but by we are expanding what we call our commercial sales efforts so efforts outside working for government and as you can see from our numbers for the quarter the commercial sector for us as a percentage of revenue actually grew significantly in so you know as we are you know we're starting from strength if you will with a government sector
spk_9: and that government reputation bomb but as we move out
spk_2: into you know the newer solutions we're fine we're finding a lot of interest and support in the commercial sector so that's an accurate observation joe and the answer to that is we're embracing the we think that's terrific
spk_3: and joe maybe one could fall for me on that as well so we did have ah with cops and that came on recently ah which are the state and we are seeing expansion in the state local areas that we currently supports and there's lots of work to be done there are clearly i think there's been some
spk_10: i'm i won't call it delay but that would all of the budget discussions and where things are going from that perspective or we do expect that will see our continued growth in that area and and reminder to that we always think about that public sector you know is highly regulated complex environments
spk_0: are not limited to stay local but are we do feel like we've got some some really strong support in that particular arena and and have always do that as a little bit of a tailwind for for that see i business
spk_11: that's great thank god
spk_9: thank you of
spk_2: again if you have the question please press star than one our next question comes from matthew glencoe from max and group with your her aig morning ah thanks for take my question i'm a going back to the supply chain challenges are you mention yeah you're still playing dollars behind you sound like you can't understand that those are temporary and then maybe the and and stay here that course in your mouth but the would put into the confidence what are you seeing or hearing in the market that ah they you think we'll see some resolution and that has some of those delayed are gonna be yeah so that's a great question at at again i think this this two elements for us you know in particular one is that and and mike reference both of them and his comments so one reference one was gonna with suspect to if you have a winding down have some of them least profitable are feel services contract there are some stranded costs that you have their that that is not and ah you know our a light switch and what you saw this quarter particularly in the t w s profitability it was the result not only of of the revenue going away but but a bigger percentage of profit loss ah if you will because of the wind down costs of someone's contracts that really independent of the supply chain issues so that to there as well that on the supply chain the we worked very closely with our suppliers and you know i think it's fair to say there's a scramble to make sure that those supply chain lines are are solid are we work we believe with the absolute best our suppliers and partners in the industry who get very close relationships with oh suppliers and so we do think that that's a temporary issue
spk_11: now how long that takes whether it goes through the end of the first quarter of next year
spk_12: i think that probably
spk_11: accurate so i think you can expect the you know the fourth quarter in the first quarter to continue to have some supply chain constraints but at least for us ah we we think that by the end of the first quarter
spk_2: we should not see any significant supply chain contract will see a minute it's a work in progress but that kind of the way where modeling it and we are you know making sure that our labor team is responsive to that environment but we also think it's a little bit shorter got it right that help on then maybe on the and on the i'm in a front of i can remember and maybe i missed it but i know he he did talk about possibly making acquisitions and new easy service providers based on the had a commentary around and in the past but damn
spk_13: but eloise part of the plan
spk_2: that that you know seventy three year plan or like and treasure that you said i recently or that and that evolution of of higher saying the market h always part of the plan i didn't match you're exactly right out of that we mentioned it before it's not a significant part time so i think we put it in the comments really for of to to be holistic you know when we think about our our inorganic activities the their the vast majority of those enact inorganic activities are earmarked at t w s and at cloud you know we've only made one acquisition this year that unify square that it was shown as progressing
spk_11: but when i look at the pipeline of acquisitions that we might have complete let's say in the next twelve months
spk_14: they continue to be focused on t w s and cloud or one of the things we have looked at and it was originally part of the plan was whether there are smaller shops that are servicing our cloud forte of clear path forward our clients ah and why
spk_0: that makes sense at some point to roll up some of those smaller shops because those shops are focused holistically on services for not only clear path forward but the clear path forward family about petition to the applications they clients have that sit on top of clear pencil it so that's always been part of the
spk_2: a plan it's never been a significant part of the plan was it is smaller roll ups we haven't closed any of those but yo for completeness we wanted to mention that just or a knew that that could happen but at we don't expect that to be material at all ballard that helpful thank you you will coming my next question comes from john ten tank from cj a securities please go ahead a good morning of on thanks to take my question than i can vouch mike again on the a promotion i'm just a quick question again on the footlights and stuff i wonder if you quantify how much revenue mr quarter i get outta to the shorter or to laden availability and during that to catch up to those nom the you know that that pushed out back on the a year and yourself yeah jaune thanks for the question i'll i'll take the beginning of that and let might take the second part of that which is the catch up and when we expect a habit catch up the first part of the question is actually not so easy the it clear you know about the third party supply chain issues from where we can qualify you know what what we were not able to take delivery of what we were not able to install or what we were not able to process but the the bigger issue for us is not that this not that revenue per se
spk_3: but the services revenue of our team ah and kind of the last opportunity to not do that so i can tell you that i do think it's a significant part of the dubbed the relatively minor revenue shortfall this quarter compared to what consensus provide
spk_2: added
spk_9: so i think it's a it's a significant part of that it's just difficult to quantify because some of that is his last services opportunities not just adding up the hardware and software
spk_2: and so you daigo bike and on catch up yes your and john i'm in i think peter touched on it but i do believe that the catch up aspect of the direct components of the supply chain i eat our field services technicians getting the parts they need to ah the it's an issue of of our clients ride so bad piece of it will come back ah and you know again it's really just the the longevity of how long it takes to get those particular part in a peter did mention i think as well we have a pretty strong relationship with most of the part providers and equipment providers that way i use backed in a lot of cases were kind of going to market together so i think we're pretty high on that list on on getting mad ah equipment and or part in place so that we can continue to services so vast to shorter piece on the combat ah and i would expect that to be maybe a quarter or or two in regards to the recovery they're the other piece and and i think theaters right well as being a catch up on the indirect piece is is actually the one that's harder to quantify right we don't know our what decisions are being differed from our clients because they can't get a certain make way men in order to transform our infrastructure exaggerates ah although i do think it will spark some additional reasons to continue with cloud transformations and cloud migrations right because when you look at that the on prime time infrastructure component it it certainly much more difficult to run so i think it plays in well to our longer term strategy but i definitely think that you'll see at least a quarter or to of slowness in regards to the recovery of both the direct and indirect components of the supply chain yeah and just picking up from when mike said one hundred percent agree and yeah i think he made a really good point while while we tend to think of the most direct impact of this be field services are in our dws business there's also a direct impact and are cloud an introduction services business and that is a supply chain constrictions a particularly on the infrastructure site and i do agree with mike as well that that that construction or is likely to put more pressure on enhancing our club business or which is a good thing for us then if the car business and the band in general and that assumes that the cloud providers ten chance school up to meet existing demand okay great that think i pressure that kind of the second question if i was just wondering are you mention that the the technology on and licensing with better than expected i did because you extend the contract like lot more than that i guess you didn't asleep by you look well with the magnitude of that increase in kind of it it at just to clarify you don't expect to choose new queue for renewals i'm as a result that yeah i'll take that if you don't mind peter so our doll talk about it in the construct of terms right so the initial expectation for that particular client was a five year contract renewal and they ultimately react for eight years so you know again i'd game as i mentioned in the comments it it's from our perspective a really good indication of or the longevity of back their path forward operating system and the confidence instead of the clients that use that operating system have any and and and ten i think to the road map for that particular solution i you know we've done quite a bit too and ah over the course of the last three to five years and modernizing it's having it ready to run on microsoft does your ex eighty six machines third party open software sourcing except result so really really strengthens that that product it is not a pull forward right it's not like we're stealing from to for to increase you three in that regard that was you know an individual contract that we expected design and two three and a design for a longer duration and than anticipated okay great thanks to their color and in my final one on peter you mentioned utilities and some opportunity than the see an eye on bagman i enjoy that acquisition could you just give them a call the what you believe you're looking for nuggets what would actually young that is available under that the multiple the that are out there yeah sighed happy to have we continue to look at bothered to tell us and the see a nice face again it is more a capabilities are play for us ah that a specific revenue play at this point we really like what we're seeing and unify square in terms of filling out those capabilities are dws with a there was an excellent acquisition ah we are lucky and a couple of more capability plays in dws and then were selected cloud you know it's it's it's an interesting view there ah we are looking at specific capability plays are we believe that going forward for i t services companies like us they'll continue to be expansion on the infrastructure side of of cloud if you will not the managing migrations the managing the data the moving data from a from one cloud to the other optimizing the cost for our companies on the cloud we also see really an expanded opportunity around application that only application modernization but new application development for cloud optimized applications or and so as you think about our acquisition
spk_9: framework one of the things that i think you can expect us to see is really filling out and enhancing that application a modernization and application developer capability we have some of that in house because we think about the future we think about where the demand in cloud will be not just now but over the next two to three years
spk_2: i think you can see us focus on building up that application side of the cloud pretty significant
spk_15: and job maybe i'll just add one thing there as well
spk_2: and peter cover their capability side but there's also some geography play in regards to that as well strengthening as certain presence and at a certain regions ah and then getting some scale for doing that as well from a resource perspective whether that advisory or to peters point the skill sets around apps development modernization migration except for so so again lot lot of good i'm a targets out there you asked a little bit about the multiples you know clearly we are looking at our all different sizes and shapes and looking for specific skills and or capability so i think guy from a perspective of due diligence we we know exactly what we want and where we wanted and i think that's helping now of the search and certainly putting us in a position to cost them effectively
spk_0: and i hope real following up on my comment there a hope the people on this whole appreciate while we do think the inorganic a efforts we have underway are significant they're mostly significant in compared to the industry just as we haven't done
spk_16: you know the unify square was the first acquisition this company had done in a long time
spk_2: and it's the only one we have done this year so again you know our have strengthened balance sheet is not burning a hole in our pocket will be very careful and very diligent while when we find good opportunities or will act up ah but we're not acting just for the sake of acting i think i hope we've made that clear to everybody on this call and i think your actions are pretty clear or next question comes from on yes soderstrom from said ot please go ahead hi and thank you for taking my question a lot of that question at the ready but i'm just curious my then you have an attitude and and keep the a lesson the law back that that the a contract valueless higher and he alluded to sort of contracts there has picky about concepts leah that's a great question did i guess in part of you know that we'll we'll see how sticky those contracts are
spk_9: you know looking at the deals we have sign
spk_2: end at that that it is a to be expected because again when you're dealing with next generation piled work new dealing with next generation are you x work you are also doing things for clients and haven't been done before
spk_17: so this isn't just a young a new source of increase margin and revenue for us it's new value to the twice but we do expect over time that those will result in a longer term more t c v focus contracts because we think that the value of those contracts is going to be on
spk_16: the us so we actually feel very good over time about expanding if he will the relative ratio of tcp to a the in that business itself
spk_18: ah but it's gonna take a little while to do that makes thoughts on it
spk_0: yeah and i think that's right peter i'm clearly on had some of these contracts have option years on the back and we we typically don't count them in the construct a whopper discussing year and a lot of these are moving more and more and just sas based contracting models so hence the that shortening of did
spk_18: duration or there quicker implementation based on the solutions that were actually offerings bringing that to revenue sooner in the life cycle less cap to to bring it on all of those i think are favorable things but i think peter hit the most important thing here the whole solution is geared towards profit of
spk_2: melody of our clients and of were making them more successful and more profitable we expected that gonna be a very sticky scenario in regards to just extending the life of those contracts and from our perspective hopefully are opening the door for us to have multiple contracts and expand the relationship even for okay thank yet our balcony
spk_0: oh thanks very much

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