Unisys Corporation New

Good morning and welcome to the Unisys Corporation fourth quarter and full year 2024 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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.

Thank you, Operator. Good morning, everyone. Thank you for joining us. Yesterday afternoon, Unisys released its fourth quarter and full year financial results. I'm joined this morning to discuss those results by Peter Altabev, 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 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 fourth quarter and full year 2024 results. solid, with 10% sequential revenue growth, both as reported and in constant currency, and our non-GAAP operating margin was a strong 11.6%. Full-year non-GAAP operating profit was $176 million, representing an 8.8% margin, up 180 basis points year-over-year, and above the top end of our upwardly revised guidance range. We exceeded our initial free cash flow outlook and are delivering on our goal to improve cash conversion with lower aggregate legal, environmental, and cost reduction payments. Free pension free cash flow nearly doubled to $82 million in 2024. Our 2025 outlook continues to advance us toward our long-term goal of expansion in pre-pension free cash flow, with approximately $100 million expected in 2025. Our outlook reflects continued execution of our ongoing strategy to improve revenue growth and profitability of our ex-LNS solutions. enhance our high-margin L&S revenue, streamline corporate costs, and improve cash conversion. With the growth and margin of our new business signings in 2024 and our investments to improve delivery and optimize our workforce, we expect to provide an underpinning for another step up in ex-L&S profitability in 2025. we are also raising our L&S revenue expectations to approximately 390 million in 2025 and 400 million in 2026 at an average expected gross margin of approximately 70%. This 395 million average L&S revenue for 25 and 26 is a $25 million annual revenue increase to our previous expectation of 370 million on average for the next two years. This is the latest in a string of positive revisions that reflect the success of our ClearPath Forward 2050 strategy and further support the longevity and inherent value of our L&S solutions. Our optimism stems from our clients' long-term commitments to an expanding use of our platforms, which is also accompanied by a strong flow of demand for support in modernizing and optimizing the surrounding IT estates. Looking at client signings, fourth quarter new business TCV was approximately 220 million, our strongest quarter of the year, and up 24% compared to the prior year period. Full year new business TCV was approximately 790 million, up 29% compared to 2023. New logo TCV more than doubled year over year, both in the fourth quarter and on a full year basis. We believe this substantial improvement in new logo conversion marks a positive evolution in our ability to expand our client base. This means we will have a higher baseline potential for new scope and expansion in 2025, and we already have follow-on opportunities in the pipeline or being qualified with our 2024 new logos. Our new business success in 2024 provides underlying confidence in an inflection in ex-LNS revenue growth in 2025. As margin accretive signs increase as a proportion of our DWS and CNI revenue, we expect a multi-year tailwind to our ex-LNS gross margin. Our fourth quarter signings include several notable examples. In DWS, we signed a significant field services expansion with one of the largest global OEMs related to high-end enterprise storage systems in the United States, Canada, and Latin America. We expect this engagement will increase the volume of higher value, higher margin field services we provide for this large client. enhancing segment profitability, and beginning to offset some of the volume declines in lower-margin field services we experienced in 2024. In a separate field services new business win, Unisys was chosen by one of the largest global quick service restaurants to provide network deployment and ongoing support for more than 10,000 U.S. restaurant locations and new restaurant openings. These sizable wins with global blue-chip clients are a testament to our leadership and innovation in the digital workplace market. In CA&I, we signed a fourth-quarter new logo contract with a public sector utility expanding our footprint in Latin America. Unisys will provide a range of security-managed services to our clients' eight subsidiaries, including extended detection and response and continuous threat exposure management. In ECS, we had several fourth-quarter wins in specialized services to support modernization and continued use of our LNS platforms. In travel and transportation, we won a large managed services contract expansion with a leading international cruise line and client of over 40 years. Unisys will refresh, expand, and manage the client's mission-critical reservation system infrastructure and take over administration of databases for that maintain reservation, excursions, promotions, and travel agent interface data. We also secured long-term LNS renewals during the quarter, including with travel and transportation clients in Spain and Asia Pacific. In the public sector, Unisa secured a significant LNS renewal with a client in Europe, which included infrastructure and application services for a law enforcement system that runs on our software. In several cases, our ability to provide modernization services from both ECS and CA&I was a consideration for clients, demonstrating our ClearPass Forward 2050 strategy at work. The wins we have shared with you throughout this past year illustrate the evolution of client perception in our solutions. We see similar trends with independent analysts and advisors that influence client IT decisions. Most recently in the fourth quarter, we improved to a leader position in a major IDC report on worldwide digital workplace services and received new leader acknowledgements from Avisat for generative AI services and from Everest for both mid-market digital workplace services and analytics and AI services. We were also recognized as a leader in eight areas of multi-cloud services by ISG. In reports published during 2024, we have received 16 leader designations, six of which are new, from highly reputable firms, including Avasant, IDC, ISG, Everest, and Nelson Hall. In DWS, we received numerous leader designations for our global digital workplace offerings, as well as recognition in the future of work, end-user computing, and the ServiceNow ecosystem. In CA&I, we were awarded leader rankings in cloud services as well as designation for our solutions in areas such as security, data center services, Microsoft services, cognitive and self-healing IT infrastructure, and artificial intelligence. These recognitions are important validations of our investments in innovation, sales, and marketing and help us get invited to more opportunities. I'll now discuss four key 2025 priorities that will position us to capitalize on market demand. Artificial intelligence, application services, ClearPath for 2050, and go-to-market. We expect artificial intelligence to accelerate in 2025, and we are continuing to invest in our AI-enabled solutions and the services to build a strong IT foundation to support adoption. This foundation requires orchestrated operations across multi-cloud environments, data and application layers, and devices that deliver intelligent end-user experience to access knowledge. In CA&I, we are infusing AI into cloud services and development to increase automation and delivery speed and efficiency. We're also developing specialized AI agents for clients that train on client-specific data to automate specialized tasks. In EWS, we're investing in our generative AI-enabled technology framework called Service Experience Accelerator, which is the foundation of our next generation of service desks. We believe this accelerator has the potential to disrupt the digital workplace market, by addressing client data, security, and cost considerations. The platform significantly reduces client costs and deploys in the client's environment to provide client control over the use and security of their data. We're also expanding our liquid cooling expertise within field services to support power intensive AI workloads of the future. These AI-related investments compound on the strong foundation laid in 2024 to support our growth plans. Over the past year, we streamlined and modernized our field service dispatch and ticketing systems and bolstered our Salesforce and ServiceNow relationships, which allow us to onboard clients and scale delivery at a faster pace. We have also secured several framework agreements that are not reflected in our reported TCV or backlog. A second priority in 2025 is application services, where we are centralizing our capabilities and sharpening industry focus. Effective January 1, 2025, we executed a realignment to fast-track those efforts by consolidating most of our operations that are currently reported in all other, into our ECS and CA&I segments. These solutions are largely concentrated in Europe and Asia Pacific and broadly consist of application services for public sector clients, which will move into CA&I, and business process services in the financial and public sectors, which will move into ECS. Our IPSL check processing joint venture will continue to be reported within all other. We have also moved ECS client application services into CA&I. This centralizes our application development capabilities into one application factory, having a deeper industry focus and connection to all of our clients, including the ECS client base. This will enhance cross-selling, standardize development, and foster innovation within a central pool of application talent. which we can leverage to more effectively deliver faster and better solutions for our clients. A scaled application factory also elevates our position within the fast-growing application arena and will allow us to pursue larger engagements. A third priority is focused on supporting our ClearPath Forward 2050 strategy. In the fourth quarter, we went live with a major new ClearPath Forward release that delivers performance, scalability, and security enhancements. The release also includes new capabilities to prepare clients for post-quantum cryptography challenges, including PQC-compliant encryption for certain data. We're continuing to elevate our presence in air cargo to our industry solution portfolio. In the fourth quarter, we went live with an enhanced version of Unisys logistics optimization for cargo capacity planning and rolled out initial multimodal routing capabilities. We also enhanced our cargo core offering with functionality for compliance with new customs regulations and fully onboarded one of the largest global air cargo carriers into our cargo portal. A fourth priority for 2025 is advancing our go-to-market by investing in innovation through thought leadership, industry expertise, and our alliance partners. We are expanding both our team of client technology officers with key clients and our industry vertical teams where we see the largest opportunities for growth. Finally, we are intensifying our efforts to strengthen and expand our partner ecosystem, including relationships with key existing hyperscaler, OEM, and enterprise software partnerships, as well as with new partners that ensure we can deliver and incorporate a diverse set of emerging technology into our client environment. Before turning the call over to Deb, I want to briefly touch on our workforce initiatives. In 2024, we focused on career growth and cost-effective talent management by evolving career pathing and early career development programs and launching a new talent mobility platform. We also continued to promote a positive workplace, resulting in finishing the year with low trailing 12-month voluntary attrition of 11.8% compared to 12.4% a year ago. In 2025, we will increase our focus on talent transformation initiatives based around three key objectives. Our first objective is optimization of our internal labor. This includes initiative increasing campus hiring, talent rotation, and upskilling and redeploying associates. Our second objective is increasing utilization to enhance productivity and minimize external hiring. And our third objective is cost reduction, which includes initiatives related to contractor use and scaling capacity at key delivery centers in lower-cost domestic and international labor markets. With that, I'll turn the call over to Deb to discuss our financials in more detail.