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UNISYS CORP (UIS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was in line with management’s plan to be seasonally soft on License & Support (L&S) renewals and ramp sequentially beginning in Q2; total revenue declined to $432.1M, gross margin fell to 24.9%, and non-GAAP operating margin was 2.8% . EPS on a non-GAAP basis was a diluted loss of $0.05 and GAAP diluted loss was $0.42 .
  • Versus Wall Street consensus, UIS delivered a non-GAAP EPS beat (−$0.05 actual vs −$0.22 consensus*) and an adjusted EBITDA beat ($40.2M actual vs ~$32.3M consensus*), while missing revenue ($432.1M actual vs ~$441.2M consensus*). Management reiterated FY2025 guidance and raised the L&S revenue assumption to ~$410M (from ~$390M previously) .
  • What went well: strong new logos and Ex‑L&S new business TCV ($337M, +83% YoY), backlog rose to $2.89B, operating cash flow improved to $33.3M and FCF to $13.2M . What went wrong: YoY revenue decline −11.4% and margin compression driven by L&S timing and lower volumes with clients .
  • Near-term stock catalysts: clearer Q2 inflection (mid-single-digit sequential Ex‑L&S growth with slightly positive non-GAAP operating margin), back-half weighting of L&S (35%/65%) with sizable Q3/Q4 renewals, and raised L&S assumption that supports profitability above guidance midpoint .

What Went Well and What Went Wrong

What Went Well

  • New business momentum: Ex‑L&S New Business TCV was $337M (+83% YoY), driven by new logo signings, and total company TCV reached $434M (+17% YoY) .
  • Cash generation improved: cash from operations rose to $33.3M (from $23.8M) and free cash flow to $13.2M (from $3.9M), aided by working capital timing .
  • Raised L&S assumption backs profitability: FY2025 L&S revenue assumption increased to ~$410M, providing “a path to come in above the midpoint” of the non-GAAP operating margin range, per CFO Deb McCann .

What Went Wrong

  • Top-line and margin pressure: revenue −11.4% YoY (−8.5% cc), gross margin down 300 bps YoY to 24.9%, and non‑GAAP operating margin down to 2.8% (from 7.1%) due to timing of L&S renewals and lower volumes with clients .
  • ECS margin contraction: ECS gross margin fell to 47.7% (−690 bps YoY) as L&S renewal timing and higher hardware mix weighed on profitability .
  • Ex‑L&S softness: Ex‑L&S revenue declined −8.5% YoY (−5.5% cc), impacted by lower discretionary project work and volumes; prior-year Ex‑L&S also benefited from a one-time contractual dispute resolution (160 bps revenue impact; 140 bps margin) .

Financial Results

Consolidated Performance (quarterly)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$497 $545 $432.1
Gross Margin %29.2% 32.1% 24.9%
Non-GAAP Operating Margin %9.9% 11.6% 2.8%
Adjusted EBITDA ($USD Millions)$77 $91 $40.2
GAAP Diluted EPS ($USD)−$0.89 $0.41 −$0.42
Non-GAAP Diluted EPS ($USD)−$0.08 $0.33 −$0.05

Segment Breakdown (Q1 2025 vs Q1 2024)

SegmentRevenue Q1 2024 ($M)Revenue Q1 2025 ($M)Gross Margin Q1 2024Gross Margin Q1 2025
Digital Workplace Solutions (DWS)$132.3 $118.6 14.4% 14.2%
Cloud, Applications & Infrastructure (CA&I)$188.4 $176.6 19.4% 19.5%
Enterprise Computing Solutions (ECS)$139.3 $118.7 54.6% 47.7%
Other$27.8 $18.2 n/an/a

KPIs and Cash

KPIQ1 2024Q4 2024Q1 2025
Backlog ($USD Billions)$2.78 $2.84 $2.89
Ex‑L&S New Business TCV ($USD Millions)n/an/a$337
Total Company TCV ($USD Millions)n/an/a$434
Cash & Equivalents ($USD Millions)n/a$376.5 $393.1
Cash from Operations ($USD Millions)$23.8 n/a$33.3
Free Cash Flow ($USD Millions)$3.9 n/a$13.2
Trailing 12‑mo Book‑to‑Bill (Ex‑L&S and Total)n/a~1.0x (Ex‑L&S 0.9x at Q4) 1.0x (Total and Ex‑L&S)

Results vs S&P Global Consensus (Q1 2025)

MetricConsensusActualSurprise
Revenue ($USD Millions)$441.2M*$432.1M −$9.1M (−2.1%)*
Primary EPS ($USD)−$0.22*−$0.05 +$0.17 (beat)*
EBITDA ($USD Millions)$32.3M*$40.2M +$7.9M (beat)*

Values marked with * are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth (Constant Currency)FY 2025+0.5% to +2.5% +0.5% to +2.5% Maintained
Revenue Growth (Reported)FY 2025−1.9% to +0.1% −1.1% to +0.9% Improved (FX rates at Q1)
L&S Revenue AssumptionFY 2025~$390M ~$410M Raised
Ex‑L&S Revenue Growth (cc)FY 2025~+1% to +5% +1% to +5% Maintained (trajectory may be below midpoint)
Non‑GAAP Operating MarginFY 20256.5%–8.5% 6.5%–8.5% Maintained (path above midpoint)
Pre‑pension Free Cash FlowFY 2025~$100M ~$100M Maintained

Q2 2025 color: Ex‑L&S revenue ~$375M; L&S similar to Q1 with 35%/65% H1/H2 split; total reported revenue decline of ~7–8%; slightly positive non‑GAAP OP margin .

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
AI/Technology Initiatives120+ active AI projects; Service Experience Accelerator; education companion; logistics optimization with AI/quantum ClearPath Forward new release incl. PQC; Service Experience Accelerator; liquid cooling expertise; application factory realignment Agentic AI data abstraction; Intelligence Accelerator; Service Experience Accelerator PoC; PQC advisory launched Expanding scope; commercialization momentum
Licensing & Support (L&S)Raised 2024 L&S, slight increase 2025–2026 average; consumption and longer durations L&S 2024 $432M, 2025 ~$390M, 2026 ~$400M; ~70% GM target Raised FY2025 L&S to ~$410M; back-half weighted; drivers: consumption and longer terms Stronger outlook; back-half skew
DWS/Field Services & PCI RefreshDWS discretionary softness; pipeline up; margin improvement Higher-end storage field services wins; network deployment for QSR PCI refresh cycle; enterprise storage volumes rising; DSS wins incl. 380k devices over 14 countries Sequential tailwinds expected
Tariffs/Macro Exposuren/an/aLow exposure to China and high-risk sectors; some delayed decisions in public sector; resilient base Macro watch; limited direct risk
Security OfferingsManaged services; cloud/infrastructure management recognitions Security portfolio; PQC features Managed security services wins; PQC posture assessment Building security mix
Alliances/PartnershipsISG/Everest/NelsonHall recognitions Alliance expansion; hyperscalers/OEMs; Dell Titanium partner status Added EasyVista/Freshworks; Dell incentives; awards at Dell Technologies World Strengthened ecosystem
Legal/Regulatory & CashABL extension; improved FCF outlook to ~$30M $40M legal settlement ($25M due mid-2025); pre‑pension FCF $82M 2024; $100M target 2025 2025 pre‑pension FCF ~$100M; slightly positive FCF after pension Cash conversion improving

Management Commentary

  • “We are 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 … upside in our License & Support … to provide a path above the midpoint for our profitability guidance range.” — CEO Michael Thomson .
  • “We achieved solid profitability results in the first quarter … clients are making long-term commitments to the Unisys software and industry application ecosystem. We are reiterating our full-year financial guidance … and see a path to come in above the midpoint of our profitability guidance.” — CFO Deb McCann .
  • “First quarter new business TCV was $337 million, up more than 50% sequentially and more than 80% year-over-year … New logo TCV was the primary driver of this growth.” — CEO Michael Thomson .
  • “For license and support, we are now assuming revenue of approximately $410 million … roughly half of the $20 million increase … is related to longer terms expected on certain fourth quarter renewals.” — CFO Deb McCann .

Q&A Highlights

  • L&S upside drivers: increased consumption (data utilization for AI), longer contract terms (e.g., 5–7 years), and entrenched platform stickiness; back-half weighted renewals (35%/65%) with strong visibility into Q3/Q4 contracts .
  • Sequential improvement cadence: Ex‑L&S growth expected to increase each quarter (Q2 → Q3 → Q4) with higher-margin field services volumes aiding margins; L&S revenues step up in Q3/Q4 .
  • AI data center work: ramping enterprise storage field services tied to AI-related infrastructure; investments in training/hiring ahead of revenue .
  • Pipeline and backlog quality: later-stage pipeline, rigid qualification, diversified geographies/industries, and continued growth in backlog and pipeline despite macro pauses .
  • FY2025 quarterly color: Q2 Ex‑L&S ~$375M, L&S similar to Q1, total reported revenue down ~7–8%, slightly positive non‑GAAP OP margin; full-year ranges anchored by back-half L&S and Ex‑L&S sequential ramp .

Estimates Context

  • Q1 2025 comparison vs S&P Global consensus: UIS beat consensus on non-GAAP EPS (−$0.05 vs −$0.22*), beat on adjusted EBITDA ($40.2M vs ~$32.3M*), and missed on revenue ($432.1M vs ~$441.2M*). Consensus was light on profitability, while top-line was a modest miss. Values marked with * are retrieved from S&P Global.
  • Estimate implications: Back-half L&S weighting and sequential ramp in Ex‑L&S suggest upward revisions to H2 profitability could be warranted; revenue estimates may need to reflect lower discretionary volumes in H1 and stronger renewals in H2 per management’s cadence .

Key Takeaways for Investors

  • Backlog/TCV underpin sequential growth: Ex‑L&S new business TCV (+83% YoY) and $2.89B backlog support the expected Q2–Q4 ramp; watch Q2 Ex‑L&S ~$375M and margin inflection .
  • Profitability path above midpoint: Raised L&S assumption to ~$410M and delivery efficiencies keep the company on track to exceed the midpoint of 6.5–8.5% non-GAAP operating margin for FY2025 .
  • AI-related field services and DSS are traction points: PCI refresh cycle and enterprise storage demand should boost higher-margin field services; large DSS logo adds multi-year revenue visibility .
  • Estimate resets: H1 discretionary softness and L&S timing may warrant near-term revenue estimate moderation, offset by H2 L&S renewal step-up and improved EBITDA trajectory .
  • Cash conversion improving: Operating cash flow and FCF strengthened; pre‑pension FCF ~$100M expected for 2025 with slightly positive FCF after pension funding .
  • Risk checks: Macro delays in public sector decision-making and hardware mix in L&S can pressure margins; diversification and long-term contracts mitigate exposure .
  • Trading setup: Near-term catalysts include Q2 sequential growth and updated H2 visibility on L&S renewals; back-half skew suggests monitoring for stronger margin and cash flow prints into Q3/Q4 .

Cross-References and Clarifications

  • Prior-year one-time items: Q1 2024 Ex‑L&S revenue and margin benefited from contractual dispute resolution (160 bps revenue, 140 bps margin); current-year comparisons reflect removal of this tailwind .
  • Guidance consistency: Core FY2025 ranges maintained; reported revenue growth improved on FX assumptions; L&S raised; Ex‑L&S growth may be below midpoint in H1 due to delayed decisions; profitability path above midpoint affirmed .
  • Non-GAAP measures: Adjusted EBITDA and non‑GAAP EPS exclude pension/postretirement expense, legal/environmental items, and restructuring; reconciliations provided in the release .

Source Documents

  • Q1 2025 8‑K 2.02 and news release: revenue, margins, segment details, cash flow, TCV, backlog, guidance .
  • Q1 2025 earnings call transcript: strategic/operational themes, guidance color, L&S dynamics, pipeline quality .
  • Prior quarters: Q4 2024 and Q3 2024 transcripts for trend analysis .
  • Additional relevant press release: Dell Titanium partner awards, alliance strength .

Values marked with * are retrieved from S&P Global.