8-K: Unisys Announces 1Q25 Results: Operating and Free Cash Flow Improve, New Logo Signings Drive TCV Growth

Unisys reports improved operating and free cash flow in 1Q25, driven by momentum in new logo signings, despite a decline in overall revenue.

Summary

• Unisys Corporation reported its financial results for the first quarter of 2025.
• Total company revenue was $432.1 million, a decrease of 11.4% year-over-year, or 8.5% in constant currency.
• Excluding License and Support (Ex-L&S) revenue was $361.0 million, down 8.5% year-over-year, or 5.5% in constant currency.
• Gross profit margin was 24.9%, while the Ex-L&S gross profit margin was 17.8%.
• Operating profit margin was 1.2%, with a non-GAAP operating profit margin of 2.8%.
• Cash provided by operations was $33.3 million, compared to $23.8 million in 1Q24.
• Free cash flow was $13.2 million, compared to $3.9 million in 1Q24.
• Ex-L&S New Business Total Contract Value (TCV) reached $337 million, an increase of 83% year-over-year.
• The company reiterated its full-year 2025 guidance for revenue growth and profitability.
• Backlog increased both year-over-year and sequentially, reaching $2.89 billion.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While revenue declined, there were improvements in cash flow and new business signings, and the company reiterated its guidance. The negative net loss tempers the positive aspects.

Positives

• New business signings increased significantly, driving TCV growth.
• Operating cash flow and free cash flow improved year-over-year.
• Backlog increased, indicating future revenue potential.
• The company reiterated its full-year 2025 guidance, suggesting confidence in its outlook.

Negatives

• Total company revenue decreased by 11.4% year-over-year.
• Ex-L&S revenue declined by 8.5% year-over-year.
• Gross profit margin decreased by 300 bps year-over-year.
• Net loss attributable to Unisys Corporation was $(29.5) million.

Risks

• The company's revenue is affected by fluctuations in foreign currency exchange rates.
• The timing of software license renewals can significantly impact revenue and gross profit.
• The conversion of backlog to revenue may be impacted by various factors, including contract terminations and adjustments to pricing or volumes.

Future Outlook

Unisys reiterates its full-year 2025 revenue growth guidance of 0.5% to 2.5% in constant currency and non-GAAP operating profit margin guidance of 6.5% to 8.5%.

Management Comments

• Michael Thomson, Unisys CEO and President, stated that they are pleased with the momentum in New Business signings, which increased more than 80% year-over-year.
• Deb McCann, Unisys Chief Financial Officer, said that they achieved solid profitability results in the first quarter and continue to see favorable trends in License & Support solutions.

Industry Context

The announcement reflects the ongoing shift in the IT services industry towards cloud-based solutions and digital transformation, with Unisys focusing on innovative solutions to meet client needs in efficiency, security, and data insights. The emphasis on new logo signings and TCV growth suggests a competitive landscape where acquiring new clients is crucial for sustained growth.

Comparison to Industry Standards

• Comparing Unisys' performance to competitors like IBM, Accenture, and Tata Consultancy Services (TCS) in the IT services sector, the revenue decline is a concern, as many of these firms are showing stable or growing revenues.
• However, the significant increase in new business TCV is a positive sign, potentially indicating a turnaround in future quarters.
• The focus on improving free cash flow aligns with industry trends, as investors increasingly prioritize companies with strong cash generation capabilities.
• Unisys' non-GAAP operating profit margin of 2.8% lags behind industry leaders, suggesting room for improvement in operational efficiency.

Stakeholder Impact

• Shareholders may be concerned about the revenue decline and net loss.
• Employees may be affected by cost-reduction activities.
• Customers may benefit from the company's focus on innovative solutions.
• Suppliers and creditors may be impacted by the company's financial performance.

Next Steps

• Unisys will hold a conference call on May 1, 2025, to discuss the results.
• The company will continue to focus on driving revenue growth and improving profitability.
• Unisys will continue to monitor and manage its pension liability.

Key Dates

Keywords

Unisys, financial results, 1Q25, revenue, free cash flow, TCV, backlog, profitability, new business, constant currency