Unisys Corp (UIS) Q4 2024 Earnings Call Highlights: Strong Sequential Growth Amid Revenue Challenges

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Thu, Feb 20, 2025, 12:03 AM 4 min read

Sequential Revenue Growth: 10% in Q4, both as reported and in constant currency.
Non-GAAP Operating Margin: 11.6% in Q4; full year margin of 8.8%, up 180 basis points year over year.
Free Cash Flow: Nearly doubled to $82 million in 2024.
New Business TCV: $220 million in Q4, up 24% year over year; $790 million for the full year, up 29% from 2023.
Fourth Quarter Revenue: $545 million, down 2.2% year over year as reported.
Full Year Revenue: $2 billion, down 0.3% year over year.
Digital Workplace Solutions Revenue: Declined 8.2% year over year to $128 million in Q4.
Cloud Applications and Infrastructure Solutions Revenue: Declined 5.2% year over year to $132 million in Q4.
Enterprise Computing Solutions Revenue: Up 6.2% year over year to $209 million in Q4.
License and Support Revenue: Grew 8.4% to $152 million in Q4; $432 million for the full year.
Adjusted EBITDA: $91 million in Q4; $292 million for the full year, representing a 14.5% margin.
Net Income: $30 million in Q4; adjusted net income of $24 million.
Capital Expenditures: Approximately $221 million in Q4; $80 million for the full year.
Cash Balances: $377 million at year end.
Net Leverage Ratio: 3.0 times at year end.

Warning! GuruFocus has detected 3 Warning Signs with UIS.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Unisys Corp (NYSE:UIS) reported a solid fourth quarter with a 10% sequential revenue growth and a strong non-GAAP operating margin of 11.6%.
The company exceeded its initial free cash flow outlook, nearly doubling free pension free cash flow to $82 million in 2024.
Unisys Corp (NYSE:UIS) raised its L&S revenue expectations to approximately $390 million in 2025 and $400 million in 2026, reflecting a $25 million annual increase.
Fourth quarter new business TCV was approximately $220 million, marking the strongest quarter of the year and a 24% increase compared to the prior year period.
The company received multiple leader designations from reputable firms, validating its investments in innovation, sales, and marketing.

Negative Points

Fourth quarter revenue was down 2.2% year over year as reported, and 1.5% in constant currency.
Ex-L&S revenue declined 4.7% as reported and 4.8% in constant currency during the fourth quarter.
Digital Workplace Solutions revenue declined 8.2% year over year in the fourth quarter.
Cloud Applications and Infrastructure Solutions revenue declined 5.2% year over year in the fourth quarter.
The company experienced a modest decline in backlog and book-to-bill ratio due to renewal timing and FX movements.

Q & A Highlights

Q: Given the low growth exit rate in the Ex-L&S business as you exit 2024, how are you looking at the growth trajectory in Ex-L&S for 2025? Is the confidence in growth based on backlog or assumptions about client volumes returning? A: Michael Thomson, President and COO, explained that the growth trajectory for Ex-L&S in 2025 is based on three components: strong new business signings in CA&I and DWS, an expected uptick in PC refresh cycles, and higher margin field services work. The company has visibility into backlog and later-stage deals, which supports their confidence in growth.

Q: Can you clarify the margin levers for improving free pension, free cash flow, and how much of the gross margin improvement is from cost takeout versus pricing and mix shift? A: Michael Thomson noted that gross margin improvement is driven by both top-line benefits from higher-margin solutions and operational efficiencies. Approximately half a point of improvement is expected from top-line growth and a point from workforce efficiency. Debra McCann, CFO, added that SG&A reductions will also contribute to operating profit improvement.

Q: Can you provide more details on the L&S revenue growth and what is driving the uptick in guidance? A: Michael Thomson highlighted that the L&S revenue growth is driven by broad-based client demand, longer contract durations, and increased consumption. The Clear Path Forward 2050 strategy and modernization efforts around the L&S platform are also contributing to the positive outlook.

Q: What is the rationale behind the timing of the application services restructuring and the creation of a software factory? A: Michael Thomson explained that the restructuring was always part of the strategic plan but was delayed to allow for maturity in leadership, structure, and solution development. The timing aligns with the company's readiness to leverage industry verticals and capitalize on growth opportunities.

Q: How does the expected stronger L&S performance in 2026 impact cash flow expectations? A: Debra McCann stated that the expected increase in L&S revenue to $400 million in 2026, at a higher margin of approximately 70%, will contribute significantly to cash flow. This, along with Ex-L&S gross margin improvements and SG&A reductions, will support cash flow growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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