Unisys Corporation New

Good morning and welcome to the Unisys Corporation first quarter 2025 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.

Michaela Paworski Thank you, Operator. Good morning, everyone. Thank you for joining us. Yesterday afternoon, Unisys released its first quarter 2025 financial results. I'm joined this morning to discuss those results by Mike Thompson, our CEO and President, and Deb McCann, our Chief Financial Officer. As a reminder, certain statements in today's conference call contain estimates and other forward-looking statements within the meanings 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 10Qs 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 Mike.

Thank you, Michaela, and good morning, everyone, and thank you for joining us to discuss the company's first quarter 2025 results. Our performance reflects consistent execution against our strategy to enhance free cash flow by optimizing delivery, improving cash conversion efficiency, and expanding our solutions within our client base and prospective clients as we continue to build upon the go-to-market momentum we've achieved in 2024. We're pleased to reiterate our full-year guidance ranges for both total company constant currency revenue growth and non-GAAP operating profit margin. We also expect enhanced delivery operational efficiencies and upside in our license and support or L&S solutions to provide a path above the midpoint for our profitability guidance range. I'll discuss a number of factors to support our expectations for solid sequential improvement as we move through the year. We've achieved another quarter of strong growth in new business TCV, driven by sustained momentum in new logos. We also saw an increase in field service volumes during the course of the quarter, driven by higher margin infrastructure volumes. We're expecting a growing PC refresh cycle to support field service volumes as we move through the year. PC demand has been pent up as clients have deferred refreshes while evaluating future device compatibility with AI and Windows 11 upgrades as we approach the Windows 10 end of life in the fall. We expect more clients to begin undertaking upgrades which should drive product work, as well as additional signings for our device subscription services, or DSS, while supporting field service volumes for distribution and imaging services, reclaim and disposal services, as well as restoration of expired warranties. We also expect to benefit from a further rise in infrastructure field services, and in particular, high-end enterprise storage, which began during the first quarter. At the same time, new business signings from the back half of 2024 are continuing to ramp in all three segments, which were primarily multi-year contracts with longer transition periods. These tailwinds give us visibility into sequential revenue improvement through the remainder of the year, especially given the back half weighting of L&S revenue for which we have also increased our outlook. In terms of profitability, Our first quarter non-GAAP operating margin of 2.8% is in line with our low single-digit expectations, keeping us on track for our full-year profitability guidance range and for our pre-pension free cash flow expectations of approximately $100 million. Looking more closely at client signings, first quarter new business TCV was $337 million, up more than 50% sequentially and more than 80% year-over-year. New logo TCB was the primary driver of this growth, and we increased the number of new logos added to our base. Our go-to-market results demonstrate that we are delivering solution innovation aligned with business outcomes that are required for clients and prospects, which include cost optimization, data integration and security, improved asset and employee productivity, and AI enablement. In DWS, our device subscription service with intelligent refresh based on user personas and device performance offers tangible value by reducing cost, increasing the efficiency of procurement, provisioning, and deployment, all while improving employee experience, asset allocation, and overall security posture. We built a significant pipeline of DSS opportunities during 2024, and we're beginning to see the clients and prospects move forward with investments. These engagements provide an entry point for expansion into higher-margin device-managed services as well as opportunities to cross-penetrate into service desk and endpoint management, hybrid infrastructure, application modernization, security services, and experience management. DSS signings in the quarter included a large new logo win with a leading global technology supplier. Under this contract, we will provide quarterly procurement and services for 380,000 devices across 14 countries, ramping up to full revenue run rate over two years. We also signed a DSS new scope contract with a biotech client that now benefits from the full suite of our digital workplace services. We'll be rolling out these services globally and providing modern device management as part of this agreement to support more than 21,000 devices across multiple geographic regions. We also added two key technology partners to our DWS Alliance ecosystem, EasyVista and Freshworks. These partnerships expand our IT service management platform capabilities, accelerate deployment, and increased flexibility we can offer clients seeking to accelerate time to value and reduce costs without sacrificing functionality and high-quality technology support. In CA&I, clients remain focused on modernizing applications and bolstering their security posture to protect critical assets from growing threats to data and the increased frequency of ransomware attacks. During the quarter, we signed a new scope contract to provide a range of application services for a leading self-regulatory organization in the financial services sector. At this client, we'll work on applications and projects to support our client's market regulation and surveillance operations and provide engineering capabilities to help transform their data and data processing capabilities. We also signed a new scope contract in CA&I for managed security services with a leading power distributor in Latin America. We'll provide this client with continuous threat exposure management and extended detection and response solutions, overseeing critical data operations and protecting approximately 3,000 of our clients' employees, 600 servers, and 150 internal networks. We expect security to remain an area of outsized growth within the market, and we continue to enhance our security portfolio. We launched our first post-quantum cryptography or PQC solution in the first quarter, a cryptographic posture assessment, which takes inventory and analyzes an organization's cryptographic environment and identifies potential vulnerabilities. We expect to expand upon this advisory offering to build out a comprehensive set of consulting and technology capabilities to help organizations prepare for and defend against future quantum threats. Clients remain focused on adopting AI to accelerate their business objectives, and we continue to advance our solutions to make that adoption as turnkey as possible. An example of that is our service experience accelerator, which is gaining market awareness with clients as we are rolling out our second proof of concept. Service experience accelerator is our technology framework for Service Desk, harnessing generative AI, service data, analytics, and intelligent workflow automation and can be deployed within a client's trusted network. For many clients, a bottleneck to AI adoption is the high cost of structuring and leveraging high-value data siloed within various hybrid environments. Our data abstraction techniques and use of agentic AI reduce that barrier. For example, in the first quarter, we rolled out our intelligence accelerator, an application framework that connects disparate data sets across environments, and disseminates outputs to required destinations with embedded security. We're also working on several agentic AI proof of concepts, leveraging AI agents to cleanse low-quality data and structure it for AI consumption. Our logistics optimization offering is another example of a solution developed to create value from client data by bringing together our engineering, industry, and computing expertise. During the quarter, we rolled out multimodal routing capabilities to our platform and cargo portal, providing an end-to-end framework for executing shipments encompassing bookings, analytics, and dynamic remediation. Bookings through the portal increased in the first quarter, and we remain optimistic that its use will continue to grow as we onboard new airlines, elevating our presence and increasing awareness of our broader travel and transportation portfolio. In financial services, we launched a new version of our branch banking solution and expanded our partnership with Thought Machine, who we will collaborate with to deliver end-to-end digital retail banking capabilities, primarily in the international markets. The enhancements we're making to our industry solutions portfolio have the added benefit of increasing the value proposition for our clients using ClearPath Forward platforms. Delivering innovative capabilities through our proprietary platforms and industry solutions is one of the three key pillars of our ClearPath Forward 2050 strategy to expand and enhance our ecosystem and ultimately drive increased consumption, retention, and revenue growth. The second pillar is unlocking and protecting data through secure data exchange across hybrid infrastructure environments with our platforms serving as a home for centralization and analysis for our clients' most valuable data. The third pillar is delivering specialized services and support to bridge client skill gaps and modernize the infrastructure and application layer around our platforms. We believe the investments we're making in technology, talent, and innovation embedded in our ClearPath Forward 2050 strategy solidifies our operating systems at the core of our clients' mission-critical IT operations. The solutions we are developing and our marketing efforts are driving increased brand awareness and recognition for our solutions from both the industry analysts and the advisors who influence client decisions. In the first quarter, Avasant elevated us to disruptor in their AI services radar view, and we were named a leader in attack surface management in a new report from Nelson Hall. These acknowledgements add to the numerous new and improved rankings received in multi-cloud, digital workplace, security, analytics, AI, and generative AI services in 2024. This recognition helps us get invited to more deals supporting our new logo momentum. During the quarter, we obtained titanium partner status at Dell, the highest designation, and having over 4,000 Dell-certified engineers. This designation signifies the strength of our strategic relationship, commitment to excellence, and the depth of our expertise across Dell's portfolio. It also brings enhanced growth incentives and access resources from Dell to support our growth. As we discussed last quarter, our workflow optimization efforts are primarily focused on optimizing delivery and increasing associate utilization. During the quarter, we nearly doubled the pace of our campus hiring and are increasing internal fulfillment on new business engagements by upskilling our workforce and frontline workers, leverage support services, and within our industry solutions. Our trailing 12-month voluntary attrition remains low at 11.8 and supports our workforce optimization efforts. Before turning the call over to Deb, I want to take a moment to share why we believe we're well-positioned to achieve our guidance despite the ongoing macroeconomic and geopolitical uncertainty, including tariffs and trade restrictions. Our diverse solution portfolio is anchored in non-discretionary spend and deployed across a wide geography and industry mix with no material client concentration. Most of our work comes in the form of longer term contracts with recurring revenue streams, which help limit the impact from macroeconomic or geopolitical fluctuations in any given period. Less than 1% of our revenue on average is generated from China, and we have a relatively low exposure to higher-risk client sectors such as automotive and retail. While we have no direct revenue exposure to U.S. federal government and a low component of project consulting revenue, we're seeing some trickle-down effects of increased scrutiny on federal government spending, which has caused some delayed decision-making at the state, local, and higher education clients. While the macro environment is having some impact on timing of new business signings and the in-year revenue they will generate, this is a marginal impact given most of the full-year revenue in our guidance is generated from solutions and services already contracted and in backlog. We believe the combination of all of these characteristics provides us relative stability and resilience in periods of uncertain market conditions. We also believe our progress against long-term financial and operational objectives and the strength of our balance sheet provide us increased flexibility as we continue to construct our desired capital structure. Although we don't have any maturities occurring before November 2027, we're actively reviewing our outstanding debt to consider whether opportunistically refinancing or expanding our debt structure and furthering our pension mitigation strategy make sense provided market conditions are favorable. Over the past several quarters, we've spent a significant amount of time educating a broad base of investors on our transformation strategy and progress. In light of this and the performance of the business, we believe we're well positioned to access the capital markets, and I'm excited to be at the helm during this pivotal time of our company's history. With that, I'll turn the call over to Deb to discuss our financial results in more detail.