Sign in

You're signed outSign in or to get full access.

UC

UNISYS CORP (UIS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $545.4M, down 2.2% YoY (down 1.5% cc), while non-GAAP operating margin was 11.6%; full-year 2024 non-GAAP operating margin of 8.8% exceeded the top end of raised guidance .
  • License & Support (L&S) revenue rose 5.1% YoY in Q4 to $151.7M and was $431.5M for FY24; management raised L&S expectations to ~$390M in 2025 and ~$400M in 2026, with ~70% gross margin .
  • Free cash flow improved sharply: Q4 FCF was $55.7M and FY24 FCF $55.3M (vs -$4.5M in FY23), aided by lower pension contributions and legal settlements; pre-pension FCF reached $82.4M in FY24 with ~$100M targeted for 2025 .
  • Stock reaction catalyst: narrative focuses on sustained Ex‑L&S margin expansion, stronger L&S consumption/renewals, and 2025 guidance calling for 0.5%–2.5% cc revenue growth and 6.5%–8.5% non-GAAP operating margin—paired with back-half weighted L&S timing .

What Went Well and What Went Wrong

  • What Went Well

    • Exceeded profitability guidance; FY24 non-GAAP operating margin reached 8.8% (up 180 bps YoY) and adjusted EBITDA margin ticked up 30 bps YoY to 14.5% .
    • L&S strength and longer-duration renewals; CFO: “We are also raising our L&S revenue expectations to approximately $390 million in 2025 and $400 million in 2026 at an average expected gross margin of approximately 70%” .
    • New business TCV momentum: Q4 New Business TCV ~$218M (up 24% YoY), FY24 New Business TCV $791M (up 29% YoY) with significant new logo wins (e.g., global OEM storage field services, QSR network deployment) .

  • What Went Wrong

    • Ex‑L&S revenue declined 4.7% YoY in Q4 (down 4.8% cc) due to lower client volumes; total gross margin contracted 40 bps YoY on higher cost-reduction charges .
    • ECS gross margin fell 270 bps YoY in Q4 to 64.7% on higher hardware mix; backlog eased to $2.84B (vs $3.01B LY) on renewal timing and FX .
    • DWS and CA&I revenue softness in Q4: DWS down 7.9% YoY and CA&I down 4.9% YoY on lower hardware/discretionary volumes; management flagged first-half weighting weakness in L&S for 2025 and low single-digit Q1 non-GAAP margin .

Financial Results

Consolidated financials vs prior quarters (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$478.2 $497.0 $545.4
GAAP Diluted EPS ($)($0.17) ($0.89) $0.41
Non-GAAP Diluted EPS ($)$0.16 ($0.08) $0.33
Gross Profit Margin (%)27.2% 29.2% 32.1%
Ex‑L&S Gross Margin (%)18.7% 17.9% 15.7%
Operating Profit Margin (%)4.9% 1.5% 8.9%
Non‑GAAP Operating Margin (%)6.1% 9.9% 11.6%
Adjusted EBITDA Margin (%)12.2% 15.5% 16.8%

Year-over-year Q4 comparison

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$557.6 $545.4
GAAP Diluted EPS ($)($2.42) $0.41
Non-GAAP Diluted EPS ($)$0.51 $0.33
Gross Profit Margin (%)32.5% 32.1%
Ex‑L&S Gross Margin (%)16.5% 15.7%
Operating Profit Margin (%)7.9% 8.9%
Non‑GAAP Operating Margin (%)11.5% 11.6%
Adjusted EBITDA Margin (%)18.0% 16.8%

Segment breakdown (Q4 YoY)

SegmentRevenue ($M) Q4 2023Revenue ($M) Q4 2024Gross Margin (%) Q4 2023Gross Margin (%) Q4 2024
Digital Workplace Solutions (DWS)$139.2 $128.2 15.3% 15.9%
Cloud, Applications & Infrastructure (CA&I)$138.9 $132.1 16.3% 15.4%
Enterprise Computing Solutions (ECS)$203.0 $208.9 67.4% 64.7%

KPIs and cash metrics

KPIQ3 2024Q4 2024
Total TCV ($USD Millions)$752 (up 36% YoY; -22% QoQ) $752 (down 35% YoY; +107% QoQ)
New Business TCV (Ex‑L&S, $M)$218 (up 24% YoY; +26% QoQ) $218 (up 24% YoY; +26% QoQ)
Backlog ($USD Billions)$2.80 $2.84
Cash from Operations ($M)$32.0 $76.6
Free Cash Flow ($M)$14.2 $55.7
Pre‑pension FCF ($M)$22.8 $61.8
Adjusted Free Cash Flow ($M)$28.3 $67.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non‑GAAP Operating MarginFY20245.5%–7.5% 6.5%–8.5% Raised
Free Cash FlowFY2024~$10M ~$30M Raised
L&S RevenueFY2024~$375M ~$415M Raised
Revenue Growth (cc)FY2025N/A0.5%–2.5% New
Non‑GAAP Operating MarginFY2025N/A6.5%–8.5% New
L&S RevenueFY2025~$370M avg (prior long-term color) ~ $390M Raised
L&S RevenueFY2026~$370M avg (prior) ~ $400M Raised
Pre‑pension Free Cash FlowFY2025N/A~ $100M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q3)Current Period (Q4 2024)Trend
AI initiatives across segments>120 active AI projects; Service Experience Accelerator; AI-infused delivery; industry use cases in education and QSR ops Continued investment; Service Experience Accelerator to disrupt DWS; liquid cooling for AI workloads; specialized AI agents Positive, scaling solutions
L&S ClearPath Forward 2050Slightly raised FY25–26 average L&S to ~$370M; upside noted in Q3 Raised further to ~$390M (2025) and ~$400M (2026); ~70% gross margin Strengthening outlook
Ex‑L&S margin expansionTargeting 150–200 bps annually through 2026; Q2/Q3 execution evident ~150 bps aggregate DWS+CA&I gross margin improvement planned in 2025 Ongoing execution
Legal/environmental paymentsExpect declines in 2025–26; FCF guidance raised $40M favorable litigation settlement (Q4); $25M remaining collection mid‑2025 Improving cash conversion
Backlog/TCV cadenceQ3 TCV up YoY; backlog up YoY; renewal timing affects book‑to‑bill 2025 expected higher renewal TCV year; backlog conversion consistent with 2024 Renewal normalization
Workforce optimizationCampus hiring, internal mobility; SG&A streamlining 2025 focus on talent optimization, utilization, cost reduction Efficiency tailwinds
Segment mix & DWS/CA&IDWS/CA&I new business up >40%; longer-term contracts DWS/CA&I softness in Q4; higher‑margin field services expansion win supports 2025 Near-term softness; medium-term improvement

Management Commentary

  • Strategic priorities: accelerate AI-enabled solutions, centralize application services into a “factory,” advance ClearPath Forward 2050, and strengthen go‑to‑market with partners and industry vertical teams .
  • CEO quote on profitability and cash: “Pre‑pension free cash flow nearly doubled to $82 million in 2024… we expect approximately $100 million in 2025” .
  • L&S outlook: “We are also raising our L&S revenue expectations to approximately $390 million in 2025 and $400 million in 2026 at an average expected gross margin of approximately 70%” .
  • Segment wins: Notable field services expansion with a global OEM, and a large QSR network deployment across >10,000 U.S. locations .
  • Ex‑L&S trajectory: Confidence in 2025 growth underpinned by backlog conversion, later-stage pipeline, PC refresh, and higher‑margin field services .

Q&A Highlights

  • Ex‑L&S growth inflection: Management expects 1%–5% cc growth in 2025 driven by backlog conversion, PC refresh cycle, and higher‑margin field services; later-stage pipeline provides visibility .
  • Margin levers and cash conversion: Gross margin improvement from mix/pricing and workforce efficiencies; SG&A still trending down despite reinvestments; pre‑pension FCF targets of ~$100M (2025) and ~$150M path (2026) .
  • L&S consumption and pricing: Upside driven by higher volumes and longer durations; clients extend contracts instead of paying list-price consumption surcharges .
  • Application services realignment: Effective Jan 1, 2025, centralization into CA&I/ECS to scale industry focus and cross‑sell; segment restatement 8‑K to follow after 10‑K .
  • Renewal timing/book‑to‑bill: 2025 expected to be a stronger renewal TCV year with some 2024 deals pushed; higher book‑to‑bill anticipated .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable due to access limits; therefore we cannot quantify beats/misses vs consensus for Q4 2024, Q3 2024, or Q2 2024 at this time. Values retrieved from S&P Global were unavailable.
  • Implications: Management met revenue guidance and exceeded profitability guidance (FY24), raised L&S trajectory for 2025–26, and outlined back‑half weighting for L&S in 2025; consensus may need to reflect lower first‑half L&S and a back‑half catch‑up, while recalibrating FY25 non‑GAAP margin within 6.5%–8.5% and pre‑pension FCF at ~$100M .

Key Takeaways for Investors

  • L&S remains a durable cash/margin engine; raised revenue outlook to ~$390M (2025) and ~$400M (2026) with ~70% gross margin supports valuation resilience and cash generation .
  • Ex‑L&S recovery should begin in 2025 as backlog/new logos ramp and PC refresh cycle improves DWS volumes; margins benefit from workforce optimization and AI-enabled delivery .
  • Cash conversion is improving (Q4 FCF $55.7M; FY24 FCF $55.3M); pre‑pension FCF target ~$100M for 2025, aided by legal settlement collection and lower environmental/legal payments .
  • Expect quarterly volatility from L&S renewal timing (first-half lighter, back-half heavier); monitor Q1 cadence (L&S ~$70M; low single-digit non‑GAAP margin) for entry points .
  • Segment mix: ECS margins sensitive to hardware mix; DWS/CA&I margin trajectory supported by mix shift to higher‑value solutions, centralized app factory, and SG&A efficiencies .
  • Strategic catalysts: AI portfolio expansion (Service Experience Accelerator) and logistics optimization (new multi‑modal routing module) can drive differentiated wins in enterprise and transportation verticals .
  • Watch for segment restatement 8‑K (post‑10‑K) and continued industry recognitions to validate positioning and support pipeline win rates .

Appendix – Additional Context

  • Non‑GAAP adjustments were primarily pension/postretirement expense, legal and environmental matters, cost‑reduction/other, and goodwill impairment (FY24), with detailed reconciliations provided in Q4 materials .
  • Product/solution update: Unisys introduced multi‑modal route optimization (MMRO) module to enhance logistics optimization across transport modes, aligning with ECS portfolio innovation .