Unisys Corporation New

Good morning and welcome to the Unisys Corporation first quarter 2026 earnings call. All participants will be in a listen only mode. Should you need assistance, please signal an operator 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 and then two. Please note, this event is being recorded. I would now like to turn the conference over to Michaela Paworski, Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone. Thank you for joining us. Yesterday afternoon, Unisys released its first quarter 2026 financial results. Joining me to discuss those results are Mike Thompson, our CEO and President, and Deb McCann, our Chief Financial Officer. As a reminder, Today's call contains estimates and other forward-looking statements within the meaning of the securities laws. We caution listeners that these statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed on this call. These items can be found in the forward-looking statement section of yesterday's earnings release furnished on Form 8K and in our most recent Form 10K and 10Q filed with the SEC. We do not assume any obligation to review or revise any forward-looking statements in light of future events. We will also refer to certain non-GAAP financial measures, such as non-GAAP operating profit, that exclude certain unusual or non-recurring items, such as post-retirement expense, cost reduction activities, and other expenses that the company believes are not indicative of its ongoing operations. While we believe these measures provide a more complete understanding of our financial performance, they are not intended to be a substitute for GAAP. Reconciliations for non-GAAP measures are provided in the slides for today's call, which are available on our investor website. With that, I'd like to turn the call over to Mike.

Thank you, Michaela. Good morning, everyone, and thank you for joining us to discuss the company's first quarter 2026 results. We're off to a good start in 2026. Both growth and profitability were modestly ahead of the expectations we provided, keeping us on track to achieve our full-year guidance ranges. Strong new business signings improved our trailing 12-month book-to-bill ratios and will contribute to in-year revenue. While geopolitical events have introduced new uncertainties in the markets, Client budget seems to be loosening a bit, and especially in the commercial sector and in Europe. Project volumes are beginning to materialize on the back of last year's renewal with solid pipeline in place for the remainder of the year. First quarter profit improvement keeps us on track to achieve our full-year free cash flow expectations and reflects our focus on adopting AI and continued workforce optimizations. As expected, our pension deficit and estimates for future cash contributions remain stable due to the actions we took last year to remove the majority of the pension contribution volatility, allowing us to focus on strategic growth and efficiency initiatives. Looking more closely at the first quarter, revenue was up 1% year over year and 3% in our XLNS solutions. Volumes with existing clients were better than anticipated, including a modest pickup in the PC refresh cycle. This helped offset some of the top-line effects from client attrition and modest price pressures created through sharing AI cost savings with clients, which we discussed last quarter. While AI efficiency gains reset market pricing last year, they're benefiting gross margins, which improved 80 basis points in the first quarter, including 170 basis points of XLNS gross margin expansions. During the client signings, our first quarter wins increased confidence in achieving our 2026 performance goals, and we continue to have a higher portion of guided revenue contracted and in backlog compared to a year ago. The first quarter new business TCB was $158 million, up 16% sequentially and 45% year over year. This was our strongest quarter of new business signings since the fourth quarter of 2024, with growth from both new logos and the existing base. Several multi-year contract wins illustrate our ability to gain market share when leading with innovation. For example, we had several notable signings for our agentic service desk powered by our service experience accelerator capabilities. During the quarter, we won a large new scope contract to provide our agentic service desk with one of the world's premier quick service restaurants expanding our existing support to the entirety of their nearly 14,000 restaurants in the United States, with additional growth opportunities around the world. We also signed a new logo on Australia, which will be our first deployment of our agentic service desk in the Asia-Pacific region, where we've landed several recent wins. As a part of this engagement, we will provide elevated IT support to approximately 11,000 employees in Australia's Department of Health, Disability, and Aging, where we now support numerous regulatory functions. This is a multi-year contract which has options extending to 10 years and is structured on delivering against automation and service experience outcomes rather than ticket volumes. The value behind our service experience accelerator is proving to be a compelling point-of-the-sphere solution for new businesses. delivering measurable results and quickly orienting us as an experienced AI partner in moving enterprise AI from concept to reality. Our device subscription service, or DSS, continues to resonate with another first quarter win at a large financial client in the United States. Clients are grappling with evaluating OEMs and hardware costs, understanding device AI capabilities, and forecasting headcount fluctuations, all of which makes our clients more open to our intelligent refresh offering, which simplifies the process and helps offset cost pressures. We have recently expanded our intelligent offering to encompass certain IoT devices through a deeper partnership with Dell. Several key engagements for application development and management also contributed to strong first quarter new business TCB. For example, we expanded our existing services relationships with Nair, Bain's air traffic controller, a client of 30 years. The renewal included a sizable new scope, which involves managing more than 100 of our clients' existing applications across numerous functions, with additional funds budgeted for future projects to design, test, and deploy new applications. Our application capabilities also opened the door at the largest community college system in the United States, with UNICEF signing a new logo agreement to modernize and manage an important student-facing applications that provides their approximately 2 million students with resources and tailored education pathways for more efficient incoming transfers, graduations, and entry into the workforce. This engagement established a solid foundation, which is already leading to additional work expected beginning in the second quarter. We also made progress on our initiatives to cross-sell CA&I application services into our ECS client base. In the first quarter, we signed a renewal with a large Colombian retailer for existing ClearPass Forward managed services that integrated new scope application development work supporting the client's core commercial and inventory applications. Across our segments, TCB renewal rates were strong and above 95% for the total company. We are also seeing some unexpected extensions from attrited clients stemming from the lack of readiness from the new service provider. At one such client, we were awarded a large new scope in the first quarter for infrastructure modernization services. We believe this win demonstrates the desire of some of these clients to remain engaged with us, which we attribute to the deep relationships we've established, our delivery track record, and the broadening awareness of our capabilities. Looking at our go-to-market and pipeline, we've seen a modest pickup in client demand over the past few months and a stronger pickup with new logos where qualified pipeline increased sequentially in XLNS solutions. A number of these opportunities originated from a new initiative within our direct sales organization, which is the development of rapid value assessments for our key AI-enabled solutions. These repeatable assessments help quantify time to value inclusive of estimated timelines and outcome-based pricing scenarios, easing friction associated with returns on AI investments, especially in the mid-market. We're currently utilizing rapid value assessments for our agentic service desk, intelligent operations, and security operations with assessments for agentic application transformation and management and intelligent device refresh in the works. We're also generating more leads by collaborating with alliance partners on development and marketing around a narrower set of solutions which identified overlapping priorities and strong value propositions. These efforts have led some partners to place Unisys more prominently on their roadmaps and using us as their primary and preferred implementation and managed service partner for their technology. And they're directly handing off leads in areas such as enterprise service management, unified endpoint management, and field services to implement technology for smart reading rooms, kiosks, and digital signage. I want to shift the focus to discuss our investments in the business. much of which is concentrated on leveraging artificial intelligence to move into higher valued services and penetrate emerging market opportunities stemming from AI. Our approach towards enterprise AI has been to avoid simply rebranding existing solutions as AI enabled, but instead to use AI to fundamentally transform the outcomes we deliver to our clients, and that positions us well for future-proofing our client relationships. In our XLNS IT services, this involves thoughtfully choosing partnerships to strengthen, enhancing the skills of our workforce, expanding our operational accelerators, and constructing agentic workflows and governance frameworks to deliver secure, reliable results. We have also been proactive about rolling out delivery innovation in our existing base to create measurable results increasing our relevance and thought leadership with clients, prospects, and industry analysts. We're working to maximize that momentum by investing more deeply in our talent. We're expanding our forward-deployed engineering capabilities to increase capability in areas such as agentic application services. We view agentic AI as a major opportunity for organizations to close the modernization gap, especially in public sector and higher education. Expanding our forward-deployed engineering capabilities positions us to take a more prominent role in designing and managing agentic workflows, whether they enhance software applications or replace elements of their functionality. In some cases, we're seeing client interest in expanding these services beyond central IT to reshape business as usual and functions such as HR and finance. As we think about upscaling for AI more broadly, the skills in demand are rapidly evolving almost on a daily basis with the one constant being the pace of change coming from frontier models, hyperscalers, software, and OEM providers. We're committed to maintaining a platform and model agnostic approach that best addresses a given use case within a specific industry for a specific client. At the same time, Significant existing technical debt within IT estates will require subject matter expertise to meet clients where they are today and help them transform and transition their technical debt over time. To do that successfully, we're aligning certain technical resources around key models and platforms to provide specialized consulting to both our external and internal delivery teams. Physical AI infrastructure is another emerging growth vector for Unisys. stemming from demand for AI compute and the rapid build-out of data center capability that's occurring. Data center builds are expanding the need for field technicians knowledgeable in the installation and maintenance of complex AI-focused IT infrastructure. Our large, globally scaled field services organization with cutting-edge training and delivery experience connects humans, data, and AI agents on one trusted platform. In the first quarter, we signed a new business engagement with the leading global OEM to support the build-out of a large US-based data center. While the initial scope is small, it lends credibility to our specialized capabilities for the installation and support of AI infrastructure. AI infrastructure is just one element of our overarching strategy to expand our field service revenue streams. We're continuing to grow hybrid infrastructure volumes and focus on generating opportunities in network equipment and enterprise storage. We're also broadening field services capability in a variety of hardware, most notably within offices, restaurants, retail, and manufacturing facilities. In L&S Solutions, we're approaching AI from both ends, infusing AI functionality directly into the ClearPass Forward ecosystem, while also making it easier to extend ClearPass Forward data and applications to fuel AI in other parts of the enterprise. During the quarter, we put out a new release of AB Suite, which is our low-code development environment for building applications on top of ClearPath. The updates speed development, enhance data encryption, and simplify integration of data with external environments without disruption of mission-critical operations. The release also adds capabilities for generating AI-based synthetic test data allowing developers to rapidly test new functionality while reducing the risk of exposing sensitive data, strengthening security and compliance. In addition to AB Suite release, we launched a new AI developer toolkit with practical guidance for building AI data models within the ClearPath Forward ecosystem. This is the first in a series of targeted client AI-enabled initiatives aimed at reinforcing ClearPath's value proposition and role as a long-term AI-ready platform that clients can rely on for decades. Taking a step back across all our segments, we're seeing AI disrupt the status of the industry and push clients to rethink their solutions and IT providers. This has given us an opportunity to show our agility and step into a more prominent role with clients and partners and accelerate the shift in our brand perceptions. We also hear it in our conversations with and recognition from the industry analysts and advisors that influence client decision making. In the first quarter, Unisys was again named a leader in reports on end-user computing services and mid-market digital workplace solutions by Avasant and Everest. We are also newly included in the HFS report on next-generation IT infrastructure services. which includes providers able to help enterprise reimagine infrastructure specifically for AI-native operations and distributed digital environments. These acknowledgments follow Gartner's elevating unisys to a global leader in digital workplace services. With that, I'll turn the call over to Deb to discuss our results in more detail.