8-K: Unisys Reports Strong Q2 2024 Results Driven by New Business Growth

Unisys announced a solid second quarter with revenue growth and significant improvements in profitability, driven by a surge in new business signings.

Summary

• Unisys reported a 0.3% year-over-year revenue increase, or 0.5% in constant currency, for the second quarter of 2024.
• Excluding License and Support revenue, revenue was flat year-over-year, with a 0.1% increase in constant currency.
• The company's gross profit margin improved to 27.2%, a 290 basis point increase year-over-year.
• Excluding License and Support, the gross profit margin was 18.7%, a 270 basis point increase year-over-year.
• New Business Total Contract Value (TCV) increased by 64% year-over-year and 17% quarter-over-quarter, driven by a doubling of new logo signings.
• Operating profit margin was 4.9%, with a non-GAAP operating profit margin of 6.1%.
• The company is reiterating its full-year 2024 revenue growth and profitability guidance.

Sentiment

Score: 7

Explanation: The document shows positive momentum with strong new business growth and improved profitability, but there are some concerns about free cash flow and revenue declines in certain segments. The reiteration of full-year guidance is a positive sign.

Positives

• New business signings have more than doubled sequentially for the third consecutive quarter.
• The company's gross profit margin and Ex-L&S gross profit margin have improved significantly year-over-year.
• The company is seeing strong marketplace momentum for its solution portfolio.
• Unisys is advancing industry solutions that bring together data, engineering, and industry expertise.
• The company anticipates sequential revenue growth and operating profit and cash flow improvement in the second half of the year.
• The company's backlog increased to $2.79 billion from $2.69 billion year-over-year.

Negatives

• Free cash flow declined by $43.2 million year-over-year in the second quarter of 2024.
• Total company and Ex-L&S pipeline declined year-over-year due to strong new business conversion and timing of the renewal schedule.
• Digital Workplace Solutions (DWS) revenue declined 2.1% year-over-year.
• The company reported a net loss attributable to Unisys Corporation of $12.0 million for the quarter.

Risks

• The company's revenue is affected by fluctuations in foreign currency exchange rates.
• The company's TCV is based on the assumption that contracts will continue for their full contracted term.
• There is no assurance that pipeline will translate into recorded revenue.
• The company's free cash flow declined year-over-year due to the timing of collections and other fluctuations in working capital.

Future Outlook

The company anticipates sequential revenue growth and operating profit and cash flow improvement in the second half of the year as new business signings begin to generate revenue and the company benefits from operating efficiency initiatives. The company reiterates full-year 2024 revenue growth and profitability guidance.

Management Comments

• Unisys had another strong quarter of new logo signings, which more than doubled sequentially for the third consecutive quarter, said Unisys Chair and CEO Peter A. Altabef.
• Overall New Business TCV grew double-digit year-over-year, which we believe signals strong marketplace momentum for our solution portfolio and recognition of the innovation we are bringing to our clients, said Peter A. Altabef.
• Unisys reported another solid quarter, with slightly stronger than expected Ex-L&S revenue growth, said Unisys Chief Financial Officer Deb McCann.
• Our second quarter Ex-L&S gross profit margin improvement of 270 bps compared to prior year extends a track record of execution against our plan to improve profitability, said Deb McCann.
• Looking ahead for the second half of the year, we anticipate sequential revenue growth and operating profit and cash flow improvement as New Business signings begin to generate revenue and we further benefit from our operating efficiency initiatives, said Deb McCann.

Industry Context

The results indicate a positive trend for Unisys in a competitive technology solutions market, with a focus on new business and higher-margin solutions. The company's emphasis on data, engineering, and industry expertise aligns with current industry trends towards integrated and innovative solutions.

Comparison to Industry Standards

• While Unisys's revenue growth is modest at 0.3% year-over-year, the 64% increase in New Business TCV is a strong indicator of future potential, outperforming many established players in the IT services sector.
• The 290 bps improvement in gross profit margin suggests effective cost management and a shift towards higher-margin offerings, which is a key focus for companies like Accenture and IBM in their consulting and technology services divisions.
• The doubling of new logo signings is a positive sign, indicating that Unisys is gaining market share and attracting new clients, a metric that is closely watched by investors and analysts when comparing companies like Cognizant and Infosys.
• The company's focus on 'Next-Gen Solutions' aligns with the industry's move towards cloud, data, and AI, similar to strategies adopted by companies like Microsoft and Amazon Web Services.
• However, the decline in free cash flow is a concern, and Unisys will need to improve its cash management to compete effectively with companies that have stronger cash positions, such as Tata Consultancy Services.

Stakeholder Impact

• Shareholders will likely view the improved profitability and new business growth positively.
• Employees may benefit from the company's growth and efficiency initiatives.
• Customers will benefit from the company's focus on innovative solutions.
• Suppliers may see increased business opportunities with the company's growth.
• Creditors may view the company's improved profitability as a positive sign.

Next Steps

• Unisys will hold a conference call on August 6, 2024, to discuss the results.
• The company will continue to focus on converting new business signings into revenue.
• The company will continue to implement operating efficiency initiatives.

Key Dates

Keywords

Unisys, financial results, revenue growth, profitability, new business, gross profit margin, TCV, operating profit, constant currency, digital workplace solutions, cloud applications, infrastructure solutions, enterprise computing solutions