Unisys Corporation New

Good morning and welcome to the Unisys Corporation third quarter 2024 financial results and conference call. All participants will be in the listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Michaela Paworski, Vice President of Investor Relations. Please go ahead.

Michaela Paworski Thank you, operator. Good morning, everyone. Thank you for joining us. Yesterday afternoon, Unisys released its third quarter financial results. I'm joined this morning to discuss those results with Peter Althabeb, our chair and CEO, Deb McCann, our CFO, and Mike Thompson, our president and COO, who will participate in the Q&A session. As a reminder, certain statements in today's conference call contain estimates and other forward-looking statements within the meaning of the securities laws. We caution listeners that the current expectations, assumptions, and beliefs forming the basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to differ materially from our expectations. These items can also be found in the forward-looking statement section of today's earnings release furnished on Form 8K and in our most recent Forms 10K and 10Q as filed with the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. We will also be referring to certain non-GAAP financial measures such as non-GAAP operating profit or adjusted EBITDA that exclude certain items such as post-retirement expense, cost reduction activities, and other expenses the company believes are not indicative of its ongoing operations as they may be unusual or non-recurring. We believe these measures provide a more complete understanding of our financial performance. However, they are not intended to be a substitute for GAAP. The non-GAAP measures have been reconciled to the related GAAP measures, and we have provided reconciliations within the presentation. The slides accompanying today's call are available on our investor website. With that, I'd like to turn the call over to Peter.

Thank you, Michaela. Good morning, everyone, and thank you for joining us to discuss the company's third quarter results. It was another solid quarter of execution, and we are pleased to be raising our full-year non-GAAP operating margin guidance and have an improved outlook for 2024 free cash flow. Third quarter revenue grew 8.2% in constant currency, which keeps us on track to achieve our full year revenue guidance range. Our results provide a number of encouraging signs for future revenue and our ability to accelerate growth next year. For example, new business TCV was up significantly year over year again this quarter and with a higher contribution from new logo signings. We generated solid sequential growth in our pipeline with solutions that are well aligned to market demand. We expect an incremental $40 million of revenue upside this year in our L&S solutions, and we are slightly increasing our previous L&S forecasts for the next two years. Our results also demonstrate year-over-year expansion in our gross margin and non-GAAP operating margin, which are benefiting from our delivery and operational efficiency initiatives. Over the coming quarters, we expect to further enhance our pre-pension free cash flow as new business signings generate increasing revenue, we execute our efficiency plans, and as legal and environmental payments decline through 2025 and 2026. Looking more closely at our third quarter client signings, new business TCV grew 50% year over year and is up 32% year to date. Similar to the first half, New logos were a strong contributor to new business in the third quarter, and new logo TCV more than doubled year over year for the third consecutive quarter. Adding new clients to our base is important for future growth as they increase our potential to generate revenue from new scope and expansion opportunities. We have a number of these opportunities with new logo logos signed in the first half of the year. In CNI, New logo signings were particularly strong, including in application development and cloud service engagements with public sector clients. For example, one of the most populous cities in the United States chose Unisys to transform, simplify, and streamline its licensing and permitting processes. As part of this engagement, we will partner closely with this client to create an innovative citywide system with a single point of entry, secure identity management, and data protection. In DWS, we also had a notable public sector new scope win with an existing large nonprofit U.S. hospital system client. Unisys will provide a variety of digital workplace solutions to modernize and upgrade end-user devices and operating systems and work with individual hospitals and offices to ensure compliance with system-wide standards. This new scope adds to the IT support we already provide to nearly 200,000 end users at this client. In ECS, there is demand for specialized services to modernize the infrastructure and applications adjacent to our platforms. As an example, during the quarter we signed a new scope to modernize mission critical infrastructure for an existing large European financial services client. In sales and marketing, we have accelerated our go-to-market speed, improved sales processes and technology adoption, including the adoption of new AI tools, are helping us prospect, scope, price, and propose at a faster pace, leading to faster average sales cycles in our third quarter cycles. Targeted solution-focused campaigns and relevant thought leadership are improving the quality of our leads and new logo win rates, which are higher in the first three quarters compared to 2023. I'll now discuss some of the trends we are seeing in our pipelines. Total pipeline grew 9% sequentially, including 10% growth in our XLNS pipeline and positive sequential pipeline growth in all geographic regions. We are building awareness of our innovation with existing clients through our client technology officers and new business pipeline with existing clients increased more than 20% sequentially in our XLNS solutions. In CA&I, we have strengthened relationships with large key public sector clients, where we saw an increase in new opportunities, driven by interest in our application development capabilities and security managed services. In DWS, we have a number of new opportunities in communication and collaboration, unified endpoint management solutions, and frontline worker enablement. Many opportunities in our new logo pipeline include solutions from both DWS and CA&I. Initially engaging a new client in multiple segments increases the stickiness of the new relationship and also provides access to more adjacencies for expansion. In the ECS segment, we are seeing new opportunities to help existing clients modernize and expand the digital capabilities in their application layers, especially in the financial services and public sectors where our teams have deep industry and data expertise. We are seeing client demand for AI-enabled solutions in all three segments, and we are increasing adoption of AI in our delivery and internal corporate functions. There are more than 120 active AI projects across the company. The majority of these projects include generative AI, and many are forming the basis for standardized solution architectures. About 50 of these projects are in production, and about 40 of them are client-facing. As an example, in DWS, our Unisys Service Experience Accelerator is a generative AI foundation and knowledge generator that we can deploy within a client's trusted environment, allowing it to securely leverage operational data and maintain data sovereignty. In CA&I, we are custom engineering and education companion for one of our higher education clients. This generative AI offering uses specified open source textbook content while interacting in multiple languages. It reduces barriers to education caused by language limitations and the need for physical textbook ownership with the result of making education more accessible to a diverse student body. We expect specialized generative AI knowledge assistance that are specific to an industry, function, and organization to become commonplace productivity drivers. These assistants can quickly identify gaps and inconsistencies in knowledge and generate content to accelerate code generation, solution development, and training, building shared intelligence across delivery and solution architecture. In DWS and CA&I, we are deepening our capabilities in managed services that are required to run and optimize AI workloads. such as multi-cloud management and data center management solutions. These include managing and servicing data and, where applicable, the physical infrastructure required in AI factories. In our corporate functions, we have engineered specialized generative AI assistance to navigate internal systems and policies more efficiently. In ECS, we are innovating our travel and transportation solution portfolio. This includes Unisys logistics optimization, our cargo capacity, warehousing, and routing solution that leverages both AI and quantum annealing. We are enhancing this solution by expanding cargo and container types for capacity optimization and are adding revenue management capabilities to enable financial forecasting and contract optimization through the platform. We will also begin offering multimodal routing in the near future. Recognizing our innovation in travel and transportation, Avison included Unisys as a disruptor in its air freight and logistics digital services radar view published during the third quarter. We are also increasing awareness in our travel and transportation portfolio enhancements with our base of airline and freight forwarder clients. These existing relationships position us as a known provider in the industry for scaling new solutions such as Unisys logistics optimization. Also in the third quarter, we added a new airline client through our cargo portal solution, which will allow this top five global air cargo carrier to sell capacity to freight forwarders booking through our portal. I'll now touch on the progress we are making from our workforce initiatives. Our success with new logos has created a host of new opportunities for associate development. And our initiatives to map talent and facilitate mobility have allowed us to improve internal fulfillment rates on new logos. As part of our internal efforts to improve delivery efficiency, we are also increasing campus hiring and optimizing our labor markets. We are investing in technology, process improvement, and talent initiatives that prioritize skill development and career growth for our employees while expanding our capabilities in areas relevant to our clients. Our trailing 12-month voluntary attrition is low at 11.8%, which compares to 13.3% a year ago. Before turning the call over to Deb, I want to share some of the recent acknowledgements we have received from third-party analysts and advisors. These industry experts influence client decisions and access to RFPs, and we have been building awareness and relevance with this group. Unisys has received a number of new recognitions from these industry experts. Since June, Avasat, Everest, ISG, and Nelson Hall have published reports recognizing our solutions. These include leader designations from ISG in global digital workplace services from Everest, in a new report for digital workplace services for mid-market enterprises, and from Nelson Hall in end-to-end cloud and infrastructure management services. I'll now hand the call over to Deb to discuss our financial results in more detail.