Executive Summary

Q2 2025 delivered sequential improvement and modest YoY growth: revenue $483.3M (+1.1% YoY; +11.8% QoQ), non-GAAP operating margin 7.6% (+150 bps YoY), and adjusted EBITDA margin 12.7% (+50 bps YoY), with strength in License & Support (L&S) and DWS offsetting CA&I softness .
Guidance mix-shift: midpoint for constant-currency revenue tempered to flat (-1.0% to +1.0%) while full-year non-GAAP operating margin raised to 8.0–9.0 (prior 6.5–8.5); L&S outlook lifted to ~$430M (from $410M) .
Capital structure/pension de-risking: $700M notes due 2031 refinanced 2027 notes; $250M discretionary U.S. pension contribution and asset allocation changes meaningfully reduce contribution volatility; liquidity extended, ABL revolver renewed to 2030 .
Estimate beats: Revenue beat consensus ($483.3M vs $444.7M*) and non-GAAP EPS beat (-$0.285* est. vs $0.19 actual); management flagged some Q2 pull-forward of Q3 L&S hardware/integrated systems .
Near-term catalysts: margin guidance raise and pension strategy clarity; watch Q3 L&S timing (guide ~$95M) and XL&S ~$390M with a stronger Q4 inflection implied .

What Went Well and What Went Wrong

What Went Well

L&S outperformed on consumption and timing: $87.6M revenue (+6.7% YoY), GP% 68.8% (up 100 bps YoY); management: “continued strong consumption in our License and Support solutions” .
DWS stabilized and grew: $138.1M revenue (+4.5% YoY), GP% 16.9% (+70 bps YoY), aided by delivery improvements and higher infrastructure field services volumes .
Profitability improved: operating margin 6.3% (+140 bps YoY) and non-GAAP operating margin 7.6% (+150 bps YoY), supported by SG&A reduction and efficiency initiatives including AI .
Strategic de-risking: “removed substantially all volatility from our U.S. pension contributions,” extended major debt maturity to 2031, reaffirmed 2026 L&S ~$400M outlook .

What Went Wrong

CA&I remained soft: $185.2M (-4.5% YoY; -4.9% cc), citing lower public-sector volumes and cautious client funding; profitability held (GP% 20.8%) but growth headwinds persisted .
Free cash flow negative due to pension funding: FCF -$336.5M vs -$18.5M YoY, driven by $278.2M global pension/postretirement contributions and working capital timing .
TCV mixed: total company TCV $437M (-5% YoY) on lower Ex-L&S New Business (timing), partially offset by stronger renewals; QoQ total TCV only +1% .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$478.2	$432.1	$483.3
Gross Profit Margin %	27.2%	24.9%	26.9%
Operating Margin % (GAAP)	4.9%	1.2%	6.3%
Non-GAAP Operating Margin %	6.1%	2.8%	7.6%
Adjusted EBITDA ($USD Millions)	$58.4	$40.2	$61.4
Adjusted EBITDA Margin %	12.2%	9.3%	12.7%
Diluted EPS (GAAP)	-$0.17	-$0.42	-$0.28
Diluted EPS (Non-GAAP)	$0.16	-$0.05	$0.19

Segment breakdown

Segment	Q2 2024 Revenue ($M)	Q1 2025 Revenue ($M)	Q2 2025 Revenue ($M)	Q2 2024 GP%	Q1 2025 GP%	Q2 2025 GP%
Digital Workplace Solutions (DWS)	$132.1	$118.6	$138.1	16.2%	14.2%	16.9%
Cloud, Applications & Infrastructure (CA&I)	$193.9	$176.6	$185.2	20.7%	19.5%	20.8%
Enterprise Computing Solutions (ECS)	$130.7	$118.7	$140.2	53.3%	47.7%	53.5%

L&S vs Ex-L&S

Metric	Q2 2024	Q1 2025	Q2 2025
L&S Revenue ($M)	$82.1	$71.1	$87.6
Ex-L&S Revenue ($M)	$396.1	$361.0	$395.7
L&S Gross Profit ($M)	$55.7	$43.3	$60.3
Ex-L&S Gross Profit ($M)	$74.2	$64.2	$69.7
L&S GP%	67.8%	60.9%	68.8%
Ex-L&S GP%	18.7%	17.8%	17.6%

KPIs and cash metrics

KPI	Q2 2024	Q1 2025	Q2 2025
Total TCV ($M)	$462	$434	$437
Ex-L&S New Business TCV ($M)	$215	$337	$122
Ex-L&S Renewals TCV ($M)	$144	$76	$266
L&S Renewals TCV ($M)	$103	$21	$49
Backlog ($B)	$2.79	$2.89	$2.92
Cash from Operations ($M)	$2.7	$33.3	-$316.2
Free Cash Flow ($M)	-$18.5	$13.2	-$336.5
Pre-pension and postretirement FCF ($M)	-$13.8	$22.6	-$58.3
Adjusted Free Cash Flow ($M)	-$8.0	$28.3	-$49.4

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue growth (constant currency)	FY 2025	+0.5% to +2.5%	-1.0% to +1.0%	Lowered
Reported revenue growth (FX at Q2 end)	FY 2025	(1.1)% to +0.9%	(0.5)% to +1.5%	Raised slightly (FX impact)
Non-GAAP operating margin	FY 2025	6.5% to 8.5%	8.0% to 9.0%	Raised
L&S revenue	FY 2025	~$410M	~$430M	Raised
XL&S constant-currency growth	FY 2025	+1% to +5%	~flat	Lowered
Pre-pension free cash flow	FY 2025	n/a	~$110M	New
Capex	FY 2025	n/a	~$95M	New
Cash taxes	FY 2025	n/a	~$70M	New
Net interest payments	2H 2025	n/a	~$3M (shift into January post-refi)	New
Pension contributions	2H 2025	n/a	~~$55M (~~$27M per quarter)	New
Potential annuity purchase settlement loss (non-cash)	FY 2025	n/a	Up to ~$290M (remove up to $400M U.S. liabilities)	New
Q3 L&S revenue	Q3 2025	n/a	~$95M	New
Q3 Ex-L&S revenue	Q3 2025	n/a	~$390M	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
AI/delivery automation (SEA, DSS)	Focus on efficiency gains; portfolio evolution to support margins	SEA in production; automation resolutions rising from ~15% to ~40%; multiple patents pursued	Accelerating adoption; margin tailwind
Public sector demand	Cautious funding, muted volumes	CA&I softness tied to public sector; pipeline improving incl. higher education	Early signs of easing
Macro/trade	FX and macro uncertainties noted	“Encouraged by recent progress on trade negotiations,” elongation in decision cycles and implementation ramps	Uncertainty moderating
L&S consumption & timing	FY24 L&S $431.5M, strong consumption trends	Q2 L&S above plan; some pull-forward of integrated systems from Q3; FY25 L&S raised to ~$430M; FY26 ~ $400M reiterated	Stronger mix; stable multi-year trajectory
Backlog/TCV	FY24 total TCV down; new logos up; backlog $2.84B	Backlog $2.92B (+5% YoY); TCV -5% YoY in Q2 on timing; 1H new business TCV +15% YoY	Backlog up; new business momentum intact
Pension strategy/debt	FY24 cash FCF improved; pension a focus	$700M notes; $250M discretionary contribution; asset allocation to match liabilities; volatility “substantially removed”	Structural de-risking underway
Alliances	Industry recognition improving	Deeper partner model; three awards at Dell Tech World; expanding DSS into Apple/peripherals	Broadening ecosystem

Management Commentary

CEO: “The investments we made in applying agentic and generative artificial intelligence capabilities to our most innovative solutions are beginning to advance our growth and efficiency priorities as evidenced by our improved profitability and enhanced cash generation.”
CFO: “Our capital structure transformation removed substantially all volatility from our U.S. pension contributions… extending our only major debt maturity to 2031 and renewing our undrawn asset-backed revolver.”
CEO on DWS/AI ops: “SEA… harnesses generative and agentic AI, service data analytics, and intelligent workflow automation… seeing end-to-end automation resolution increase from an average of 15% to 40%.”
CFO on mix and margins: “Second quarter non-GAAP operating profit margin was 7.6%, up from 6.1%… driven by higher L&S revenue, as well as improved operational efficiency.”

Q&A Highlights

Guidance composition: Tempered revenue outlook driven by macro/public-sector budget uncertainty, backlog ramp timings, and conservative revenue recognition on in-flight contracts; profitability raised on L&S strength and efficiencies .
DWS volumes: PC services stabilized; higher value infrastructure field services ramping; Windows 11 upgrades contributing; L&S margins ~70% and consumption trend remains strong .
L&S trajectory/new logos: FY26 L&S ~$400M reiterated; FY25 increased to ~$430M primarily from consumption; pipeline/new logos healthy though signing cycles remain complex .

Estimates Context

Metric	Q2 2024 Consensus	Q2 2024 Actual	Q1 2025 Consensus	Q1 2025 Actual	Q2 2025 Consensus	Q2 2025 Actual
Revenue ($USD Millions)	$485.9*	$478.2	$441.2*	$432.1	$444.7*	$483.3
Primary EPS (USD)	-$0.0067*	$0.16	-$0.2233*	-$0.05	-$0.285*	$0.19
EBITDA ($USD Millions)	$58.2*	$28.6 (EBITDA)	$33.0*	$5.1 (EBITDA)	$32.35*	$28.6 (EBITDA)

Values retrieved from S&P Global*. Note: Company reports both EBITDA and adjusted EBITDA; Q2 2025 adjusted EBITDA was $61.4M . The large beats on revenue and non-GAAP EPS indicate upside vs consensus, while EBITDA definition differences should be considered when comparing to street models.

Key Takeaways for Investors

Margin story strengthening: non-GAAP operating margin raised to 8–9% for FY25; execution on SG&A reductions and AI-enabled delivery supports upside to profitability mix .
L&S durability: continued consumption and timing benefits; FY25 L&S ~$430M and FY26 ~$400M guide provide multi-year visibility; watch quarterly timing (hardware/integrated systems) .
De-risked capital structure: extended maturities to 2031, reduced U.S. pension contribution volatility, and a path to additional annuity purchases; expect non-cash settlement loss if executed .
Near-term cadence: Q3 guide implies softer YoY revenue (low single-digit decline) with mid-single-digit non-GAAP op margin, and strong Q4 inflection driven by L&S and upfront components on signings .
CA&I recovery to monitor: pipeline strengthening (incl. higher education/public sector), but conversion pacing remains sensitive to macro decision cycles .
Cash flow context: Q2 FCF was heavily impacted by discretionary pension funding; FY25 pre-pension FCF guide ~$110M suggests underlying cash generation resilience .
Trading implications: Beat on Q2 revenue/EPS vs consensus and margin guide raise are positive catalysts; stock path likely hinges on confidence in Q4 L&S ramp and continued delivery of AI-driven efficiencies .

UNISYS CORP (UIS)·Q2 2025 Earnings Summary