Unisys Announces 3Q23 Results

BLUE BELL, PA — Unisys (NYSE: UIS) recently reported financial results for the third quarter ended September 30, 2023.

Unisys reported another solid quarter of results. Total revenue grew 0.7% YoY or a decline of 1.4% in constant currency. Ex-L&S revenue increased by 6.2% YoY, or 4.1% in constant currency and License and Support (L&S)(13) revenue was better than expected due to increased client consumption levels. Ex-L&S solutions pipeline TCV is 18% higher than a year ago, driven by a 50% increase in Next-Gen Solutions pipeline.

During the quarter, Unisys unveiled its new quantum-powered solution – Unisys Logistics OptimizationTM – that leverages quantum computing, advanced analytics, and proprietary pre-trained artificial intelligence models to solve complex logistics optimization challenges in seconds. This cutting-edge solution enables faster and smarter business decisions that help airlines, freight forwarders, and ground handlers by giving them an optimal plan for packing, storing and routing shipments across multiple vehicles more efficiently and cost effectively.

“We are raising our 2023 guidance ranges based on another solid quarter of revenue and profit results. We saw increased activity with existing clients in both Digital Workplace Solutions and Cloud, Applications & Infrastructure Solutions segments and our License and Support solutions saw increased consumption levels. Our pipeline is robust, with a significant portion of Next-Gen Solutions opportunities such as applications, cloud, data and artificial intelligence, and employee experience. We are also excited by the initial market reception to our new Unisys Logistics Optimization solution, which we believe has the potential to advance cargo logistics,” said Unisys Chair and CEO Peter A. Altabef.

Summary of Third Quarter 2023 Results
Please refer to the accompanying financial tables for a reconciliation of the GAAP to non-GAAP measures presented in its original release except for financial guidance since such a reconciliation is not practicable without unreasonable effort.

• Revenue:
  • Revenue of $464.6M vs. $461.2M in 3Q22, up 0.7% YoY, or down 1.4% YoY in constant currency
  • Ex-L&S revenue of $397.5M vs. $374.3M in 3Q22, up 6.2% YoY, or up 4.1% YoY in constant currency, driven by expansion and new scope with existing clients
• Gross Profit:
  • Gross profit of $95.3M vs. $104.3M in 3Q22
  • Gross profit margin of 20.5% vs. 22.6% in 3Q22, down 210 bps YoY, primarily due to lower software license renewals, as expected
  • Ex-L&S gross profit margin of 14.0% vs. 11.7% in 3Q22, up 230 bps YoY, primarily driven by additional expenses associated with a contract included in the prior year period and delivery improvements
• Operating Profit:
  • GAAP operating loss of $17.1M vs. $8.0M operating loss in 3Q22
  • GAAP operating loss margin of 3.7% vs. 1.7% operating loss margin in 3Q22
  • Non-GAAP operating profit of $0.4M vs. $14.1M operating profit in 3Q22
  • Non-GAAP operating profit margin of 0.1% vs. 3.1% operating profit margin in 3Q22
• Net Income/Loss:
  • GAAP net loss of $50.0M vs. net loss of $40.1M in 3Q22
  • Non-GAAP net loss(9) of $22.3M vs. net income of $3.1M in 3Q22
•  Adjusted EBITDA:
  • Adjusted EBITDA of $37.0M vs. $52.5M in 3Q22
  • Adjusted EBITDA margin of 8.0% vs. 11.4% in 3Q22
• Earnings/Loss Per Share:
  • Diluted loss per share of $0.73 vs. diluted loss per share of $0.59 in 3Q22
  • Non-GAAP diluted loss per share of $0.33 vs. diluted earnings per share of $0.05 in 3Q22
• Cash Flow:
  • Cash used for operations was $4.1M vs. cash provided by $44.5M in 3Q22
  • Free cash flow(10) was $(25.7)M vs. $23.8M in 3Q22
  • Adjusted free cash flow(12) was $1.4M vs. $53.1M in 3Q22
  • Prior year period benefited from the timing of L&S technology collections
• Pipeline, TCV and Backlog:
  • Total company pipeline increased 11% YoY and decreased (5%) quarter over quarter (QoQ)
    • Increase in YoY primarily due to new logo opportunities
    • Next-Gen Solutions pipeline increased 50% YoY and decreased (8%) QoQ
  • TCV(4) decreased (47%) YoY and (31%) QoQ primarily due to the timing of contract renewals in Ex-L&S
    • The company expects strong sequential growth in TCV for the fourth quarter of 2023, renewals signed in October 2023 exceed total 3Q23 TCV.
  • Ex-L&S pipeline increased 18% YoY and decreased (6%) QoQ
    • Increase in YoY driven by 68% growth in Ex-L&S new logo pipeline, the majority of which are Next-Gen Solutions opportunities
  • Ex-L&S TCV decreased (46%) YoY and (30%) QoQ primarily due to the timing of contract renewals
  • Backlog(2) was $2.38B vs. $2.69B in 2Q23 primarily driven by contract renewal timing
• Balance Sheet:
  • As of September 30, 2023, total cash and cash equivalents was $385.0M vs. $391.8M as of December 31, 2022

3Q23 Financial Highlights by Segment:

Digital Workplace Solutions (DWS):

• Revenue:
  • DWS revenue of $140.9M vs. $130.1M in 3Q22, an increase of 8.3% YoY, or an increase of 6.2% YoY in constant currency, primarily driven by additional scope with existing clients
• Gross Margin:
  • DWS gross profit margin of 14.8% vs. 15.1% in 3Q22, a decrease of 30 bps YoY

Cloud, Applications & Infrastructure Solutions (CA&I):

• Revenue:
  • CA&I revenue $133.5M vs. $122.3M in 3Q22, an increase of 9.2% YoY, or an increase of 8.7% YoY in constant currency, in part due to new scope with existing clients
• Gross Margin:
  • CA&I gross profit margin of 15.3% vs. 5.6% in 3Q22, an increase of 970 bps YoY, primarily driven by additional expenses associated with a contract included in the prior year period as well as delivery improvements in 3Q23

Enterprise Computing Solutions (ECS):

• Revenue:
  • ECS revenue of $122.2M vs. $137.7M in 3Q22, a decline of 11.3% YoY, or a decline of 14.2% YoY in constant currency, due to lower software license renewals
• Gross Margin:
  • ECS gross profit margin was 50.2% vs. 58.7% in 3Q22, a decrease of 850 bps YoY, primarily due to lower software license renewals

2023 Financial Guidance

The company raises full-year 2023 revenue growth and profitability guidance:

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