Good morning, and welcome to the Unisys Corporation First Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Michaela Pewarski, Vice President of Investor Relations. Please go ahead.

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 Thomson, 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 meaning 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 statements section of today's earnings release furnished on Form 8-K and in our most recent Forms 10-K and 10-Q 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…

Thank you, Mike, and good morning, everyone. As a reminder, my discussion today will reference the supplemental slides posted on our website. I will discuss total revenue growth, both as reported and in constant currency and segment growth in constant currency only. I will also provide information excluding license and support revenue or Ex-L&S and to allow investors to assess the progress we are making outside the portion of ECS, where revenue and profit recognition is tied to license renewal timing which can be uneven between quarters and years. As Mike discussed, our performance reflects consistent execution of our strategy and sustained improvement in brand awareness industry recognition and new business signings. We are gaining traction in the market for our solutions and see large growth opportunities in applications, security, data, device subscription services, endpoint management and experience management. We also continue to enhance our solutions to include emerging technology that supports our clients' future analytic operational, data and security needs and allows for continual operational improvement of our delivery. Our solution investment extends our clear path forward 2050 strategy, which continues to drive favorable trends in our Ex-L&S business. Looking at our results you can see on Slide 4. First quarter revenue was $432 million, down 11.4% year-over-year as reported and 8.5% in constant currency, primarily due to Ex-L&S renewal timing. Excluding license and support, first quarter revenue was $361 million, down 8.5% year-over-year and down 5.5% in constant currency, due to lower discretionary volumes in the DWS and CA&I segments. This directionally aligned to the color we provided at year end, as the sequential ramp is expected to begin in the second quarter of this year. Additionally, a one-time benefit in the prior year first quarter related to a favorable settlement of a previously exited contract negatively affected…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Rod Bourgeois with Deep Dive Equity Research. Please go ahead.

All right, guys, thank you for the commentary. A lot of helpful details in there. I want to start by asking about the interesting turn of events here with the L&S outlook increasing to offset some discretionary weakness that has occurred in Ex-L&S. So can you talk further about what's enabling the L&S upside in revenues and to what extent is that improved volumes which has been a trend we've seen I guess over the last almost two years now versus how much of it maybe is also related to earlier than expected renewals. So more color on that would be very helpful.

Sure. Hey, Rod, thanks for the question. Really appreciate it and appreciate you joining the call here. Yeah, I the two components you raised are pretty interesting. You're exactly right in that the L&S volume we've seen increasing consistently over the course of the last several years. Clearly, we've raised that outlook multiple times if you recall we raised it again. This quarter consistently what we're seeing is some increased consumption. We're attributing that rod to essentially use of data right? When you look at a little bit of repatriation in the market the cleansing of data all of the efforts from an AI perspective that need more data. That particular platform in particular is a source of data right? And so in general, we've seen consistent consumption use. And I would also say, we've seen several deals over the course of the last couple years extend. And so to us that is entrenching even further a very sticky platform in a longer-term point of view into that client portfolio. So for example, a client's looking originally we were renewing for three years or five years is looking for five or seven years and really doubling down on that effort. So, we've been very pleased with that. I mentioned our 2050 strategy and the multiple tiers to that 2050 strategy for clear path forward really about unlocking that data as I mentioned earlier, fixed on, I'll say the specialized services support which is the application layer and the modernization layer of that and then there's the continued use of that platform as we continue to add functionality, so really helpful in that regard. And I guess the other side of your question on the Ex-L&S side. We're pretty confident and you heard Deb and I both indicate that confidence that that ramp is pretty solid for the rest of the year. We're expecting Q2, Q3 and Q4 to continue to increase from a growth perspective, as well as from a margin improvement perspective. I mean we've got really good line of sight into that as most of that revenue and our guidance is embedded in our backlog. And when you think about the deals that we signed in the back half of last year and what we're signing in the front half of this year, those things are coming to revenue recognition. And so that gives us a good degree of confidence in the ability for that business to continue to ramp as we had expected.

All right and so the natural follow up to that is. So the guidance update for 2025 is overall encouraging on a sequential basis, what types of sequential growth assumptions are needed in Ex-L&S and also in LNF? Can you give us some expectations on how the sequential growth progression should play out in each side of the business?

Yeah look, I'll give it to you at a kind of a macro level here. We're expecting increasing growth assumptions essentially every quarter on quarter, so it'll pick up a little bit in Q2. We're expecting more in Q3 and more again in Q4. Again, I look at that through the lens rod of the backlog and the pipeline and when these deals are coming online, we clearly know when that's going to happen. We've seen an uptick in volumes and field services as we've talked about in our prepared remarks, both on the PC side and on the infrastructure side and the infrastructure side of that work is obviously higher margin work so that's kind of a knock-on impact to the margin profile. Again, I think fairly well aligned to our expectations, because most of that again is in backlog and in contracts that we're already working. The L&S component of that, we knew the back half of this year was going to be higher due on the renewal timing schedule. We're calling for a 35-65 split front half, back half and so there are some significant contracts to be signed in Q3 and Q4 and some of those in Q4 where the cash will actually come in 2026. So again, as we've got really strong visibility into those contracts and in general, those contracts end up as we talked earlier with some additional consumption, as well as either at the same timing or longer extension on those contracts. So, we feel pretty strong about our ability to execute against that.

Alright and I've got to slip one more in. You mentioned the enterprise storage work commencing in Q1. Given your DWS capabilities and the relationships you have in that market, are you in a position to derive some growth from AI related data centre build outs and the maintenance of those data centers?

Yeah, absolutely. I mean that that's obviously been part of our strategy. Deb mentioned that we were spending some more money kind of in advance of that revenue. That's really about training that team, hiring that team in advance of the revenue that we have a good line of sight that is coming through some of the OEM contracts that we signed at the tail end of last year. We've seen that activity start. It started a little later in the quarter than we were originally anticipating, but it did start in March. We're seeing that continue through April and we expect that that will continue to ramp.

Alright. Thanks guys.

Thanks, Rod.

The next question comes from Anja Soderstrom with Sidoti. Please go ahead.

Hi, and thank you for taking my questions. So you laid out the confidence you have in your 2025 guidance but how confident are you in your 2026 targets at this point?

Yes look I think Deb mentioned briefly in her prepared remarks that we're still on track to meet our cash flow expectations as we've talked about in our 2023-investor day. So really nothing's changed in our trajectory for that. They have talked a little bit about the slope of the Ex-L&S and probably specifically the DWS component of that. Over the course of that two-year period but really no change in our confidence level of exceeding the plan that we laid out in 2023.

Okay thank you. And you haven't seen any sort of wait and see or hesitation among your customers based on the macro uncertainties going on?

Yes no, of course we have as everyone, right? I mean we know what we know at this point in time and I think we laid out the areas, why we think we are not as exposed as perhaps some others may be. It may be the areas of risk in automotive or retail. We have very little exposure to China. We have very little direct exposure to the US federal government, but clearly volatility in the market gives people pause and pause ends up delaying the signing of contracts and as Anja, as we get into contract signing for things that we sign in the front half of the current year, we expect some level of revenue recognition in year for those signings. So even if they push a quarter that may push the timing of some of that revenue recognition. But what we have not seen and frankly we've seen a little bit of the opposite the pipeline is growing. Our backlog is growing as we've indicated. And so even though there is pause, let's say in pulling the trigger on signing of some contracts, it's not affecting the front end of the pipeline. We're seeing that grow just fine and it's growing in the areas that we think is aligned to our business.

Okay, thank you. I'll get back in the queue.

Great thanks.

Thanks, Anja.

[Operator Instructions] The next question comes from Arun Seshadri with BNP Paribas. Please go ahead.

Hi, guys. Thanks for taking my questions. Sorry I signed on a little bit late. Just wanted to see Mike, if you had any thoughts obviously, you've since you've taken over leadership of the company any sort of broader strategic things you're thinking about that might be different from the prior strategies would be great to hear. And then also just in terms of the quality of the pipeline and the backlog, can you talk a little bit about I guess given the macro uncertainty have you how are you sort of assessing the quality of your backlog and when you go back and look at some of that backlog, is there any natural pairing that you would do in order to make it a little bit safer just given what we're hearing from other companies as well. Thank you.

Great, thanks Arun for the questions. There's a lot in there, so I I'll Try to unpack some of that. Maybe just trying to do it in the order in which you asked it. Thinking about the strategy or my leadership here, that's been pretty consistent, as I've been with the company just about a decade now and have been the owner of the strategy for the last couple of years. And so I don't expect that we're going to see a whole lot from a strategic point of view different than what we've been executing and we're really focused on the execution of our strategy versus the change of our strategy but the main components that that I'm going to continue to spend my time on and we'll continue to kind of steer the company is around expansion of our market awareness. I think we've done a really nice job of that over the course of the last couple of years but it's this continual effort to get deeper and deeper into the client base and make sure that not only our existing clients but our prospective clients know Unisys know what we do, know what our capabilities are, et cetera. So the work we do with the industry analysts and advisors is really important in that particular area. The other area of focus is the continued solution distinction. I think we've done a really nice job of illustrating that. You see that in the Leader quadrant profiles that we're getting from various industry analysts. So we'll continue to make sure we're staying at the front edge of technology and that we continue to bring our clients what they need to advance their businesses as well as maintain their overall cost profile, et cetera. And then the other area…

This concludes our question-and-answer session. I would like to turn the conference back over to Mike Thomson for any closing remarks.

Before you go, I'd like to echo three key messages that we hope you took away from today's remarks. First, we have a clear line of sight to achieve our full year revenue growth guidance and believe we will be above the midpoint of our full year profitability guidance, which is a testament to our continued focus on driving more efficiency through delivery and operations and the resilience of our diverse stream of revenues across solutions, clients, sectors and geographies. Second, our Clear Path Forward 2050 strategy continues enhancing the ecosystem of Unisys software and industry solutions, providing opportunities to expand some of our deepest and longest client relationships. And third, we believe we have substantially de-risked our pension exposure through consistent execution of our strategy, keeping us on track to fund our contributions. In addition, we're actively monitoring market conditions to opportunistically expand our debt structure and further advance our pension mitigation strategy. Thank you all for joining us today. Operator, you may end the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.