UIS - Earnings call transcript Q4 2021

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Operator

Good day. And welcome to the Unisys Corporation Fourth Quarter and Full Year 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. turn Investor over Relations. to Vice Courtney like of President now the to conference Holben, I’d Please ahead. go

Courtney Holben

Thank CFO. you, for Altabef, by Operator. and joined Holben, and afternoon Vice this Good CEO; released our full morning, everyone. of Unisys Thomson, discuss results. Mike Relations. Chair This year Investor morning XXXX and Thank I fourth to Peter you its joining financial Yesterday President us. our quarter is am Courtney results those

a cover few we begin, to Before like details. I’d

conference website. today’s Unisys are the being webcast session First, call Q&A and via the Investor

release Second, be you Investor website can year and guide as find the encourage morning our we this which relating slides the our will full to earnings fourth we information on as visit. and well press other performance that our to you discussion, presentation using to quarter

and the Third, press related non-GAAP have today’s been earnings reconciled measures. within release, includes measures have complementary which the The is non-GAAP financial the presentation. measures we presentation, to provided reconciliations to some GAAP

per Although share, and the results. that believes destroy financial company’s year-over-year also consistency other of profit, visibility and and post-retirement, evaluation items Management by Principles, constant of periods in of results. free the flow, expense. currency. the These companies management, to with competitor’s use or and in the appropriate and results operations cash and profitability compared following to results earnings future well items adjusted associated liquidity that and often indicative be results ongoing company’s anticipated Non-GAAP these debt the and not order enhanced performance periods, can performance. non-GAAP company’s supplemental impact can Accounting presentation consist our results its its and of and operating provided trends the enhance Accepted industry. are extinguishment, cost of by Management comparability believes are that of make reduction flow these company difficult charges measures of to of or its exchange enhance reflect as to prior future Generally as and The under items ongoing free believes analysts, company’s that prior to each utilized period comparativeness diluted the investors to the can EBITDA results, exclude EBITDA, of compare other adjusted cash its with

along of And that call to fully made all are expectations. more could Copies like to I’d SEC available mentioned earnings date are information related then now, subject filings. adjustments, and the update, information comment on regarding more and other in remind release generally Unisys FD. please not And deems the given. to cause will reports our materially metrics For during Unisys to reaffirm only actual differ factors conference XX-K. SEC Form These that necessary the time Such this on performance. Unisys expected discussed the such the to from the as like complies provide our website. color that and those I with you is and risks results Investor in financial are Regulation guidance may manner the these otherwise and and the earlier on company’s finally, effective only over forward-looking release in I’d future turn earnings From a see or or Unisys information SEC specific regarding Peter. our time, to with from materials except uncertainties any its call statements various

Peter Altabef

planning year solutions, advance XXXX on Good us for active and revenue, our thank our margin have year advances morning, and Starting in XXXX profit workforce Digital our to cash some transform joining will and significant to to progress made full higher us for quarter We results. but into first, to and very flow, management was on will exciting investments we everyone. discuss Unisys. give you on Workplace And experience-based fourth in positioned and our a go-to-market XXXX provide higher growth made with the detail performance goal insight XXXX. user solutions. and in financial momentum accomplishments, I business. Solutions Mike our and or DWS,

additional we we and recent wins. offering new compete our contract with As base year-end, to of established seeing markets traction have portfolio are effectively in

lead and We are solutions improve involve focused continuously to to our the with market.

our full of added capabilities through solutions enhance to DWS with suite acquisitions We integrating our are solutions.

and are we Gartner, IDC, noted and HFS call, improved expanded our as As on capabilities. the industry analysts recognizing Everest, such last ISG

During Advanced in we and the Services, Workplace NEAT leader quarter, fourth Digital were NelsonHall’s designated Assessment. a

fourth UEM the targeted Mobinergy. or the Unified our accelerated one acquisition our solution Management Endpoint capabilities, of with of sets, we quarter, During

We which PowerSuite, has carriers, UCaaS. cross-fertilization and many strong clients includes prospective with now embed partners business, the opportunities and relationships focuses Mobinergy the are can to bases Square client Unify both of telecom on already strategic acquisition are Square partners the they seeing which in earlier Unify across which Unisys, year. key Mobinergy valuable our as from

fourth Europe and to new a an client Endpoint Unified Workplace the user banking Service. quarter, we provide Management, including in upgraded Lifecycle Field During Digital signed Management contract a Device Solutions, experience with with

specifically management enhanced migration In to single management cloud level growing University markets for We platforms. our Unisys growing and in C&I, of management Cloud with pane our and computing added in quarter, achieved platform glass increased in hyperscalers certifications expanded infrastructure segment Cloud across in being our cloud for including of services. year. Moving We applications resulted in of further plug-in year. full advanced improved increase infrastructure-as-a-service, XX% the services capture. cloud XXXX. capabilities and capability. upskilling for Program a native to actionable our Google cloud accreditations multi-cloud across or insights our container Azure drive fourth across cloud and management service We Cloud each AWS training based we accelerators We fastest microservices and these our data XX% level and our targeted we as Through our our the revenue certifications. the professional capabilities grew Microsoft and application in year-over-year Infrastructure an expert strategy Solutions talent C&I

we are application enhanced operation. capability cloud and development development, machine XXXX, cloud security focusing efforts learning native During AI our on

with native Solutions solutions new recognition scope management cloud time the named and data Provider U.K. and increase market and leader Lens a analysts, Managed designation develop received cross-selling hybrid cloud offerings a including application Our development, acquired deepening strong were to CompuGain in major by as data an Unisys’ Web added Advanced agility on clients. workloads implement we also sector, new system CompuGain’s environment. we cloud native opportunities the in in IDC. and and in in the Cloud U.S. our leader to Partner. capabilities, from recently and Services and We we ISG’s additional globally CompuGain contract with reduce In fourth quarter, also Multi-Cloud modernization, Consulting CompuGain, industry a capabilities highly U.S., Services. significant as pipeline a and named which the services Services established agile housing cloud position our We finance new and controlled application data a were player Brazil the expertise recently with cloud sector cloud Public a presence signed to has to expect has financial in in for Amazon that

through the stability. our goal ecosystem, license maintaining ECS, or has expanding been Solutions grow Computing to Enterprise ECS to while Turning revenue revenue

the have in key are to demands airline into the workflow-centric channels our solutions capabilities retail industry. travel approach and encompass in we our We clients. brought to extending diverse industry In of transportation

our We are also with our data we Services partnership respect signed capabilities Solutions, agreement processing. Cargo payment to to around robust a capability. augmenting have Financial With Solutions augment a our Industry analytics

handling, U.S.-based airline product we with suite management, for our e-commerce, a mobile devices, the planning, and with along to revenue cargo and interfaces support sales, major handling, signed operations, During to global accounting. Solutions SaaS-based renewal quarter, and management fourth customs load airfreight expansion a Cargo mail

XXXX. Turning grew pipeline year growth average Notwithstanding, ACV in contract architects company to the noting And year in TCV length the and was in but the expected go-to-market marketing been contract XX% metrics in evolves. XX% invested sequentially in throughout our has strongest in and in Full improvement we initiatives, XX% market year-over-year. year-over-year. year absolute down average Full ACV total XX% was TCV TCV year-over-year, year-over-year, have during Had fourth to been and the of we our length pipeline our the to sales XXXX. grew finally, leading quarter. TCV flat. quarter. the is broader in have fourth up solution ACV X% efforts, TCV fourth grew an consistent increase declining as would go-to-market quarter, expect year-over-year force, sequentially our continued XXXX,

market labor We to offset was that anticipated signed are average higher with associated pricing and gross weighted XXXX related competitive to margin expected cost contract XXXX. in the the increases in than contracts new

in in forward updating and brand Turning to we have support branding to you are look marketing investing initiatives, our these near brought and future. world-class on in in to us efforts, these the activities agencies we

with visual enhance to messaging. brand, & Landor partnered identity have and Fitch Unisys We positioning, the including

Initiatives In which increased TBWA better relations help as in which for upskilling in talent as the we for up from internal management, XX% voluntary our and through resulted and our leadership. from XX.X% up XXXX, and adapted with initiatives, for have such for quickly retention been media XX% itself have during long-term to programs respect Golan to to highly of firm actively XXXX, and competitive. the in attraction the which that addition, in achieving public XX% hired our XX.X%, Worldwide the associates, goals. we internal is our connect coverage talent We clients as capabilities of us focusing inflation, have which XXXX. in to is brought reviewing our level was compensation lower thought fulfillment identified mobility advance a workforce opportunities we workforce and are pre-pandemic short- on roles than prospects With have and targeted and is market With adjustments to wage resulting our strategic year XXXX. critical respect XXXX advertising to attrition also for and rate

to hiring, leveraging in position continue XXXX. our also us XX% service XX% allowed disruption increased are us efforts These avoid to any material also against growth and of and operational margins on executing in kept from to overall to referral-based XXXX. our and financial improving clients XXXX us drive XX% track in while XXXX in goals We that which to

to and encourage joining new we end ESG few Turning the reports our suppliers actions at we DEI commitments. recent includes, quarter sustainability XXXX, website, and of A XX% our UN in key and progress DEI, the the our on their Compact Global published you disclose and driving ESG fourth of review. to which to ESG of highlights

highlights our few and to our I & leadership of nearly A reach a We GHG expect for a for is launching underrepresented our progress in Scope reduced program emissions new which leaders workshop, which and XX% inclusive goal development of completed. associates XXXX new recent already DEI underway have from II groups XXXX. leadership include

significant and strategy work hard to our Group that, representation I in XXXX Ethnic We like our turn Mike? more their will our progress Impact In facilitated than also would levels. XXXX. by and X results. we within our expanded executing Groups thank that and Mike financial call to director I Women made commitment. above XX increased programs each over conclusion, our Underrepresented discuss to during and Associate With the associates for points

Mike Thomson

refer and today, results. I Thank discussion my will and morning, you, good everyone. non-GAAP to In both GAAP Peter,

materials. are metrics these of in available reconciliations earnings reminder, our a As

first highlighted, Peter financial resulted three objectives. pleased time free us our and supported made It being free with in The and margin also year-over-year for profitability by in operational revenue, profit and since full key in gross during progress growth the resulted cash are of flow our flow. increases year-over-year on in As progress XXXX year cash XXXX, each we gross segments. positive the we

achieved solutions, well to year all advance us We year to investments momentum guidance XXXX. our our in the full approach the positions during enhancing workforce of believe we our metrics. go-to-market management that also We and the proactive in our made strategy

improvement, profitability I which XXXX are accelerated will cover highlight growth when guidance shortly. revenue I We additional expecting and our

percent review full growth is XXXX, to me for above the let results revenue the of X.X% growth. zero midpoint our X% year-over-year, First, of of guidance which year range

total C&I of and ongoing efforts the at was XXXX increase to with million, growing XX% year, year the to capabilities analysts cloud our X.X% company representing quarter full for being revenue resulted awareness industry revenue year full $XXX.X Our growth the growing now year-over-year cloud within a segment supported This enhancements fastest revenue. of in and segment approximately by with clients year-over-year. to

expected client. we fourth we quarter revenue C&I’s call, prior noted pickup a received revenue public sector in our on to revenue than planned. the stronger from quarter in year-over-year. we contracts a primarily As fourth XXXX our a expectations, year-over-year C&I several earlier revenue X.X% the This little growth to as last year period than be one-time down of Ultimately, year due in grew came was ECS expectations. a internal which renewed above full annual were result

We Forward and remains our renewal XX%. strong Solutions continued client for see rate our to above ClearPath demand large

on have we of As revenue we second and approximately to cadence. between software XX% anticipated the previously license and renewal our ECS the noted, half year, be XX% expected based split half first

XX%, in of full As XX% a the was reminder, first license quarter. half/second the with XX% and fourth half XXXX license coming revenue split the year

new With was half so now have Peter XX-XX. As expected better was half/second to of fourth DWS, license we integrated quarter the XX.X% revenue our portfolio and than we offerings into client year-over-year, expansion. revenue pushed experience wins established to first of are this and a of with examples and respect as base our share moving split the increasing our mentioned, showing result, ECS down enrichment of implementing traction phase recent of offerings. for Peter wallet logo ultimately, with next segment, go-to-market some an noted on strategy, enhanced transformation of our our the solutions, emphasis continued

down nature call, these year-over-year DWS to contracts full client exclusion X.X% with be scheduled our for renewed also revenue, year. transitioned our to part noted, both not I from in part in our We being X.X% in and As on profit the as fourth our contracts margin fourth results the revenue roadmap. some exited. not get of growth were illustrates the I core the revenue was last up material we guidance. work and we in quarter heritage even quarter, experience have gross will resulted the we with the all line that in low renewed future and to as of our The segment which XXXX periods shortly, of Overall, contracts for remarked away were lower in

expect be even X% ClearPath organic Forward X% renewal We of guidance with higher of implies digits X% down the when the for X% considering digits revenue we This growth the for or of providing guidance low-double the full rate revenue are XXXX rest XXXX, from high-single in due and to growth year growth to operations. that business year-over-year accelerated revenue that of license growth schedule. ECS to XXXX expect to anticipated coming

contracts this lower that up reminder, in not a be As to means that we expect are expecting renewal fewer for we XXXX, rates. renewal

Total ECS Our backlog at sequentially back XX% XX% to is of the first in XXXX. expected half/second half be and half and billion. approximately license revenue company flat $X half front was split

of on additional strategy As and addition capabilities advisory well a XXXX. in up our the the reminder, all ramp go-to-market of back of as the hiring the was the direct as emphasis of half sales sellers, happening and channel

into and XXXX throughout increase to XXXX. backlog expecting are We

to We backlog increase the for XXXX. XX% are also in expecting full a year X%

XXXX. that seen in of towards conversion shifting believe the which the by quarter of a to capital billion the Peter have backlog year-over-year we discussed, we approximately to in quicker revenue we less intensive timeframe, ACV This the past. have convert we supported than will backlog, mentioned. are shorter type are revenue of million and implementation in is we lead into $XXX will solutions As in first Of expect increases that $X us

down mentioned first Forward schedule ECS digits year-over-year to ClearPath previously. that company quarter timing license revenue due revenue expect the of to We I total be low-double the

quarter gross each was year-over-year and results XX.X% supported basis were margin three and was points gross margin total in company Moving improvements by profit profit gross our up margin full as year points, profit for revenue. These profit segments. XXXX basis a and XXX was of profitability, to profit year-over-year. up Fourth DWS up gross with year-over-year year-over-year lower XXX gross even increased X.X% gross full year result,

Solutions year XX% some points contracts, Full profit of year-over-year Full full exiting our to year-over-year, the both on basis full C&I gross with $XX.X C&I Traditional margin profit our was margin gross XXXX, up XXXX, margin to DWS quarter Additionally, driven Work. XXX% XXX higher experience XX.X%, with to the profit XX.X% year-over-year improved gross low gross was DWS increased throughout well focus up to as by million, made and points gross solutions. gross and as improvements efficiencies XXX basis in Cloud up based on C&I year year-over-year. profit improvements These fourth to margin quarter year Infrastructure C&I up XXX year, margin fourth were basis points profit increases margin XX.X%.

down fourth gross year-over-year. timing XX.X%. gross was I quarter profit gross Full the XX.X% year points profit mentioned, Although, revenue margin margin basis flat ECS year-over-year million XX.X% full to increased and XXX to was increased year due to gross $XXX.X ECS

As ECS of overall would our expected benefit pressure modest and to a which expansion the future, to in but on a put company reminder, segment be gross our in the ECS services targeted growth margins is offerings, is through margins. profit

into operating to expected Non-GAAP we We stronger but basis also profit, was margin, XXX operating profit was I in again the down profitability fourth our anticipated X.X%, profit XXX up XX.X% items quarter. saw due operating the margin than the year a basis than little was million, $XXX.X year-over-year in and stronger bit the up year points to had revenue we fourth points entering full improvement to a going non-GAAP mentioned, our which and non-GAAP significant full which in quarter. quarter,

XXXX. are as growth, well to drag we previously our for at have at we continued to the absorb our XXXX from our the showing to top on we anticipating efforts factors, a expect our X.X% ClearPath margin Forward of range. to the schedule renewal we operating these context as spite operating of solutions efficiency talent continue competitive also guidance benefits margin we non-GAAP as floor strategy all in and in our go-to-market anticipated higher through improvement The development a XX.X% investing setting our on profit, the even acquisitions of the market. retain continued efforts are profit highly of XXXX impact made slight discussed, margin support will of benefit successful margins in the integration and pressures we and In As within attract to required still investing advancement labor shift and

in noted significant to derisk have throughout of calls sheet, balance XXXX in the resulted million $XXX billion of continue $XXX As versus charges per such or our undertaken during fourth removing XXXX. The liabilities diluted efforts removed million share we addition pension in in XXXX, the have per derisking the required $X.XX of to liabilities or settlement of to share pretax of $X.XX gross we efforts year, our charges including approximately quarter in $X.X successful during $XXX non-cash diluted XXXX. million approximately

As for million million year, $XX.X from diluted versus non-GAAP XX% million per $XXX.X period. a was loss $X.XX year XXXX net million or operations representing $X.XX versus share share in per year income XXXX, diluted EPS the per $XXX.X per XXXX non-GAAP in Full $X.XX continuing result, year share or diluted versus EPS. increase our prior and in the net in full was $XXX.X diluted $X.XX share was a full non-GAAP diluted

million improvement $XXX.X EBITDA adjusted our profit year-over-year margin. non-GAAP was million similar to year-over-year XX.XX%. non-GAAP which relative EBITDA XX.XX% in in XXX adjusted and of our EBITDA to and to to saw above Full based all profit, XXXX, in the margin basis As versus we to was XX% year results. adjusted XX.X% This revenue XXXX operating significant full drivers on range, as year increased with midpoint points guidance increased full year operating $XXX.X and XX.X%

adjusted margin, and For margin, improvement with is as result, XXXX respect XXXX, as we in metric expect a XX%. to non-GAAP similar our for we noted, this to EBITDA XX% profit operating guidance

employ on and solutions light enhance and integrating offerings best-in-class We to continue our capital focus to strategy optimize our costs. development our

approximately declined million capital full million. Our $XX year to expenditures year-over-year XXXX $XXX

wins. to million XXXX, million new increase expect to our and $XXX between in be recent $XXX support However, anticipated we logo and contract

cash our excited also first up cash report million time million XXXX positive was significant year improvement line was in full up to flow to full cash year a free flow $XXX.X year $XXX.X are expectations internal We $XXX.X Full including being with free to for adjusted the flow in million and since million. $XX.X flow, free year-over-year XXXX. cash

we ongoing While guidance completed don’t for free in modest optimization the removal pension provide on the XXXX, this required to flow, our charges margin expect improvement in cash contributions XXXX see the improvements, in remaining and the we pension of cash metric associated anticipated we with plan. significant qualified our program U.S. given

$XX $XX million expected cash taxes cash to and of capital approximately in approximately million, is we payments XXXX. that program to be million $XX working between be expecting associated million, interest $XX remaining million to $XX expect a are optimization decline in million, We use the to cash actions and $XX million is expected to to with in $XX lastly, the completed we

$XXX As XXXX the million. by decreased a relative approximately our as $XXX position pension million XXXX, year-end deficit of our of end to global to of

Additionally, years. Qualified XX, next Plans actuarial required as XX of no for based XXXX, Defined our least Pension assumptions on the cash contributions at calculations the Benefit and future U.S. are for December

$XX of from XXXX plans million down require approximately to approximately Our this to stepping contributions XXXX. per XXXX, $XX in at point year other million

we also Our healthy low, remains a and net cash leverage balance. have

medium-term as Excluding over our our our call the cash efforts the ahead. strategy than year million XXXX is we the are to the needs. Plan, and Benefit and to our capital up, the forward U.S. will is the into company translating guidance Peter. back leverage continue look We more significant performance. in Peter? end our deficit wrap of see executing Defined that, of net With balance in to Qualified our our $XXX and across goals I achieving Pension XXXX for working our To times improvement energized see against double financial X.X turn

Peter Altabef

please questions? open With Mike. that, we Operator, you, call the for Thank can

Operator

from Please Our question Bourgeois comes Equity Research. first ahead. from Instructions] go [Operator Rod DeepDive you. Thank

Rod Bourgeois

capabilities. kind I in made Talk a growth three year, about leadership in some your in overhang then you the second second in If last year front you of last and years, happened which sales what’s now your over half Difficulty] more the on your seems. branding building ramping given and segments first of investment investments, it you new at your the are prior a seemed half [Technical effort look thing, moved it kind the progress in pension started of of for the an mode growth was changes into

as So my question get with branding getting several that you is guess out the sense and benefits your background is, sales in are is efforts? are these of to you deal flow now that seeing just the from branding the down years. magnitude or the the of expected and and most results over from returns through you coming from am I couple the the that months next timing road Thanks. trying on of particularly look the I a sales the efforts

Peter Altabef

it, a making great thanks thanks That’s and and for is Peter. This your also question Rod. Hey, for observations.

that of a with We the dramatically did improved more take lay going out in little picture balance on and an XXXX. transforming, the was company and XXXX were able and organization sheet we to a to that powerful we balance sheet, year bigger that. if our So really that we strategy how a bit is forward at execute look

terms What and executing of saw to cost we margin go-to-market the was throughout cost changing looked the meant about business May with the really to fleshing also resulting XXXX, effort of equation of started actually our you out it and the part organization XXXX, lot that to and leadership our we business of As that go-to-market you both those year. and it the XXXX the noted inside then a then now, required outside of in new and the units April came leaders in execute the that expansion the and talk majority context, outside units, the rest expansion in new in those best for from team organization the savings. on in that create margin savings the January organization get of to right, strategy on

saw So that. the was results what the beginning really of you fourth of quarter in the

TCV, You saw a our of signings dramatic a higher in more dramatic increase increase saw new you margin a capabilities. ACV, lot in of

picking up the higher to indices from work. improvement in so picking what rather expect year one from years those to signing pipeline we improvement the go-to-market up. next improvement come last The fact every will of are most What of last from savings, automation that of and the of new like next-generation is old savings is the margin savings mean, The kind from the of So About kind margin our by because that of not looks fashioned start margin and most communications. savings, deliver. want didn’t you things have that. will just our but margin question, are is of and We come simply to I your we you want capability margin savings. continued AI, until multiyear half to market else half About labor improvement actually to -- the We this savings answer really in three of had the to or came can place. technologies. the marketing until that didn’t everything we strategy element in knew we is effective start

helps, of With piece. year. the that changes That’s first this underway well help fourth year, made on now firms hope of final the really significant marketing, those we in in is I the to of the last we That in three months that’s communication, and advertising. six very quarter Rod. going all really us outside hired

Rod Bourgeois

chain us QX sort kind what the ago, the effect headwinds, were exits And then, your three lag had seemed ramped a of even I pricing in and XXXX those somewhat disruptions, in getting update give branding of sales for fronts? you we were helpful. and to supply months where some related on of thinking, line Very if some in be contract temporary to even go you three back some place. in headwinds with just on where up, those Thanks. wrestling and are headwinds, your challenges what ago, maybe months assuming Can an outlook headwind getting you you today efforts where on are

Peter Altabef

Yeah.

question. Rod, So, also a that’s great

split Let’s categories. different the of couple headwinds into a up

are On quarter I that, the we the issues we third seeing in in general, we say chain, that have would supply the supply -- seeing chain were and that might thought last longer. not we

just are seeing them. We not

the headwinds sense supply having of So at that a think effect. having I point. None not us really broad the chain effect material you a this listed is are in on material

I think to exception that The labor. related has the is of really eliminated. that to of cost all been rule

of know services, is for but which all you are And variety factors, that -- we and with where but labor through keeping our and still majority are increase increasing general. industry, said, people that, also although we labor, a So below think demand as we we it, an of good in we thing a that’s IT we doing a referrals managing seeing compensation, entry in level turnover from a cost. amount not the company are get recruiting, there’s IT coming for as also the market services is increasing our an increasing increase just in overall

we in we So effective being that. are think

and for obvious C&I occasion only are not that. labor DWS to strong very is, is there and was headwind for segments for up revenue, good for is if of the make the news we Mike year the one manage have licensing rise is, remaining but respect With that us, to to talked our not ECS other profit. So The numbers carefully. to a I this year about to expected headwind wanted the that last this it and really affects as affects say revenue year cost it as two that so really

Mike Thomson

the could to license in come I we add we Yeah. that on and to starts is ECS and XXXX. services expectation things earlier have that revenue if well, as as into comment, XXXX And that with get like, years, that, revenue Rod, and XXXX just Peter, XXXX line seen in just back ECS

on headwind, of, two high my you is it’s just remain renewed. the that we get XXX% that the that that the the piece, has pretty in pretty in aware rates staffing in Rod, of cost are been bring think, pricing to to the in those steady, rising know, coin the four forward of as we And I I certainly So business. there, people temporary to well are nature, and be think, be at prepared Remarks picked right or least held in licenses that sense well. seem Peter I happy renewal schedule maybe which as have the side he’s components able mentioned but

pipeline looking So clearly certainly increase. I we of are make start already in the targeting and continue a will backlog I year-over-year. XXXX have and half investments increase we mentioned, to pretty seeing that through we the XX% solid we forward made think and that’s about that are beyond to front been go-to-market

the or up as increasing margin have maybe the well, still XX points So this over we points basis basis but well. as operating but way dramatically along XXX as right? moving as XXX point are really the focus investments -- the the still done we that lifting to in not So to year, almost of that shift the last all to growth, focused heavy earlier and on really months

today pretty where good have feel going. we done are I what So we and

Operator

Our Galinko next Please comes ahead. question Maxim. from Matt go from

Matt Galinko

complete question your end XXXX And growth first to with to you are still Thanks. on secondarily, what the feeling To morning. guidance. to good you year. extent platform, bucket? put with do bulk inorganic to organic inorganic the see add pretty like sounds you expected a done there? Hey. the that of guess, -- the it what in versus you Good M&A do or are doing cross-selling you be about is, in revenue vis-à-vis year the Maybe for some Congrats is I opportunities are talked

Peter Altabef

Matt. Thanks, Yeah.

thing the December. inorganic we a That closed in did acquisition was very was important by us. on revenue is acquisition the not I largest organic mind for that, keep until CompuGain, versus think, to one

is So that be with we in we acquisition closed did program we revenue -- to Those active space, which over on the tend DWS moving two as changes company where and way those with much we that the that are had on the are Mike, for because acquisitions inorganic. we were is the good focusing thoughts to XXXX. those balance in exactly clear. remains we and C&I is on acquisitions. so that, three in revenue a respect that and opportunities XXXX. there that organic, changes areas the what look clarification of in continuing in are the decade any and are revenue top question That is, sheet Then wasn’t acquisitions simply approach to with had CompuGain Those considered of we first treating certain XXXX, the future acquisitions, done respect to further we largely or opportunities. is it to made because respect that that and support did was the a the came in acquisitions With cross-selling to of from pretty up, requiring build With we our revenue forward. revenue -- amount from is it? on taken and all acquisitions came

Mike Thomson

I Perfectly wouldn’t change stated Peter. a thing.

Matt Galinko

workforce. just you closer of industry think, to All wanting one Great. follow in get And up, maybe levels right. maybe mentioned, standard your I to turnover

along as do those far have lines. you I you What to there? benchmark using go and think something feel the you mentioned are to you how get

Peter Altabef

Yeah.

turnover think to response Matt, confused the I the my that, intended to average was already to believe involuntary I I that we we earlier below was and say rate. may answer What So, have Rod answer. are in

the other than That was XXXX what effective have involuntary of average slightly we reporting we think competitors. we better year it our tell doesn’t based for the because right in turnover But to It’s the XX.X%. manage industry our matters matter, to yourself. and we than seen full extent, turnover for IT the really what believe now. you how So hard is some turnover off services is are lower

lower us, our it’s than Importantly XXXX. rate also for in turnover

that we So rate operating below turnover we saw are pre-pandemic. still at the

rate some think XXXX. expect might we So I all that in increase

keep a rate turnover activity, We ability that operations don’t our I to affecting are of as that grow. doing has outlined, at to lot or under point, we this But see control.

Matt Galinko

in one quick Thanks. could last just one If I there. sneak

in referenced M&A a workforce. how like that pipeline? that XX% execute credentials thought increase sounded I ability in that was into on organic to if translate workforce was curious an of I much how -- and I your development think am versus that does you your cloud metric current the have pretty nice And increase?

Peter Altabef

of have XXXX that we of you tell was that of much versus Unisys M&A a is did exceeded University, HR at how I for call that and we may significant goal. split organic, significant organically would we part goal year the work Mike, the certifications with but our in from entered what which very Yeah. the team, we

all that if are of was of we So data majority the vast guess organic. more But, Mike, it, on going that, I am have counting not you to do any that?

Mike Thomson

brought work. to in seen of a that don’t KPIs have you year anything that’s that the about about I more a that that little that track I the and based throughout to development, And something, it it’s continue have very we of agree, we in and our or not trends those bit would base to as making were place obviously, you Unisys those it but metrics of here. far as opportunity on other some Matt, Peter obviously D&I certifications. And good mentioned the people about was around we our Yeah. in just that as we the have I improvement as specific, we think, when associate outside the some in provide the it the like, aspect also upskilling talked well talked investments know, the our have it are fact happen been piece better know, and for leadership late. in solution, and process only of was prepared the certification we stuff, remarks making, and his reporting acquisitions

Peter Altabef

Yeah.

on Matt. Mike what Just picking said, up

the that people certification internally. from another one almost It’s It growth. of are opportunities filled Those has is been indications better. job because more how exclusively new and who of to One for moving job the is positions amount next the are pays us It effective are that it’s job, has more generation. process of open better.

the on correctly way our certifications is certifications getting to of and are people we seeing as reasons advance. So a that that even exceeded really one role aggressive

mentioned, XX% in that to jumped three last XX%, XXXX So in XXXX. openings, and and in came look XX% at of if fills we XXXX from internal years the I our as

pointed inside So think, we out, attrition reasons those that’s their are people the to ability kept of certifications down working, because are one seeing the as company. and I Mike have advance

Operator

Securities. Tanwanteng Our question from ahead. go comes from Please Jon CJS next

Jon Tanwanteng

then, could. is renewal, QX both again, Hey, heading the year. if license little and that more you a any renewal renewals just was to bigger of guys. ending than question, on just was the and pull Thank color Mike, in still I simply you grow from the in services you performance my And first a wondering, next for congrats taking one to second, the or revenue XXXX expected, all? expect first did decline? ECS do strong My license you even ECS within you year, on while

Mike Thomson

Jon. Sure,

yeah. So --

There particular I say than really So you in the client typically in in those pull-in, they XXXX XXXX the a want about were say, out to I that XXXX to that if look level. were regards then my value, remarks lower some because regards to just know, those XXXX years was early little due. ECS. both back as of when bit up thought. hesitate earlier generated the in some renewals regardless and will prepared it’s pull-forward, to But talked And XXXX. renewal jumps extent schedule contracts I renewal I to ECS in that general

those So were in cadence contracts know really are I the and the those as it’s of which well. contracts, length you as aware signed

Sometimes turns a three five. a year into contract

a this contract. I in seven-year signed we at a one that year contract was five-year think earlier had

both the that in in segment is the and your volume, a what for the of in there focus you regards comment. growth continue base still of definitely part mentioned have we as of second as desire total. Services to product grow to the well kind in is clearly, So,

flavors. growth segment calling total are services that and and about as of fact, in in a when you for XXXX expansion couple the for the we it’s expansion, comes know, services In different XXXX,

above system, the of look of areas you that are within Some growth services services from other of for are related migration when through at expansion the and security are operating managed services operating forward services that modernization it system are also is apps development, we clients clip everything services layer a but the that addressing also above running it on application expansion. of areas lens perspective that system, that operating

keenly a that topline, renewal focused particular I having the on did component are the lower know, ECS margins cycle XX%. on services but of Peter very earlier, north not as that only growing but mentioned, still impact and of you has as So segment,

little overall, of profile. that. of pressure a So the total are look it bit we in company margin you growth the still has on if at margin spite also But feeling

So [Technical of that. it other those growing augments segments a how sense are Difficulty] you of gives two

captured your that components. So, hopefully, Jon, both

Jon Tanwanteng

does. next be total is Thank leads my the actually to -- it margins, question, are you. which is services this implied weaker going And just to year? that what well pretty given It in improvement renewables

Mike Thomson

we out can that John, FD Reg will something go back certainly it’s I front that. of back and at to to can maybe have What, to make on you cleared. in get will I and I look well, website sure right on offline the me. that But we it have get put so and don’t as

Peter Altabef

shouldn’t company doesn’t are Mike we you operate important But that has Mike mean and hand, or revenue. else. because is and we company, up, really with these the made, the we just changes that, between following in way That revenue it three the just everything you as we reasons Jon, anybody mean really doesn’t which have not operating the off services don’t one that of And segregate -- to now segments. hand, the to in Yeah. doesn’t tech it’s mean, I based that

the revenue to of fair what us produce. of three for are segments in terms game those looking segments And all the so we to is in

that is number will to tech So and doesn’t way more than the leading -- a just approach. That and get you we were the we services not and relevant segment is are a approach to mean if that operating it we that have company you. gone

Mike Thomson

Yeah. dig And able are look, while up it we am I to chatting here.

roughly, about expecting are of increase segment. is house So the that from side we what the X% in Jon, services

Operator

question Vafi Canaccord. go Please next from Joseph Our comes ahead. from

Joseph Vafi

we XXXX. Congrats could talk just Great was about if guys. progress on I wondering Hey, in that. growth.

that growth if and think, and could headcount does about We have quick growth have or lot C&I, there is with grow I labor. maybe in revenue there a is line headcount How maybe linear follow-up. leverage been a you and DWS down, like now you in to for in now break especially talking then to

Peter Altabef

Yeah.

So, I at take follow-up. Joe, first will and that then Mike let

an our of of been that active a has labor really has the revenue. things been One percent efforts focus decrease the of as cost of to

just of because little automation trickier, will goal we that. getting using are by revenue. to that real go between I nature software cost we cost as more direct about automation drive the segments, from it’s you between continue up will, although In so than work. a dependent measuring, than the DWS and of are saw, some away in in if down affect of our largely take be of that development C&I the the or ECS, general we to all principle cost the that -- becoming XX in of countercyclical the link and revenue to percent kind is efficiency drive we down of because a to cost of on different it’s a of whether if at would really three and just services we and in or And labor about little Mike, is and follow back ECS of correlation say year, look you ECS, larger on labor if we that C&I revenue are are going is, will, about a think XXXX. efforts, If it But areas was as of DWS, in think of to the tide XX.X% C&I bit and the growth revenue and really direct DWS, that and what you ways AI, of XXXX last labor continue you labor one a services and to labor comes FY in That’s is those. that two AI ago, then more then or separating, percentage of there’s years you as and well of X.X% XX.X%, so software decreased in more if really less. to our a we

Mike Thomson

got I Look, the you and right, both otherwise. segment think, Peter, No. Yeah. by all have components

I revenue not would that for same the XXXX is and the we just Joe, growth our say mentioned. that, all and Peter headcount in is So, moving reasons clearly beyond, in nearly look the at manner

happening think to and happen. is there continue leverage I So do will

and we you are and both that’s improvement where exactly not want to and margin fully gross continue perspective be are why DWS in from speaking to. that’s what seeing an C&I reason are We really the you automation

certainly to that, flat So total which benefits we tells Peter so that as of will linear be mentioned And workforce not periods, you to linear. model even don’t continue it’s some perspective. and/or and so cost more think the a see will be as in declining over leverage from is comparison I the those headcount levered

Joseph Vafi

great. that at Sure. guidance maybe -- Got could may renew is this there mean, any there not, on Thanks there’s chance the heritage point? that but it. in or at this a are That’s contracts point, any year? a roll they still anything this built lot. there is And then, I off

Mike Thomson

guidance last only that we actually already one our we is had two of was that Yeah. renewed, in concerns and that that being Yes. or those I one other mentioned year had Look, contracts in that of No. -- signed. QX we have with we there any are

So I as far that renewals the concerned. we as are don’t concerned think are are there any about

QX, of or related handful kind label type service and mentioned, then, frankly, work. As exited oilfield we that POS the white in kind I were of

the healthy, clients. ton experience pretty can those So we that the be is, what renewal feel as expect renewal really but that the not don’t client far value only pipe our base journey renewals have and it’s a to base good as we are on to here of concerned and in we really show

we basis. So pretty a feel on good forward go about that

Operator

Our ahead. next question Anja from comes Sidoti. from Soderstrom go Please

Anja Soderstrom

the good my for Thank taking Hi. questions XXXX. and on performance in you congratulations

in you are you down? you talking are were what follow-up at? to active What in how expected the What see you are private M&A, terms to looking and given public are the So continue that. first the come seeing seeing valuations has a there, the -- on you about in the just market market be had of

Peter Altabef

Yeah.

That’s is but are saw we seeing Peter. So, kind in question. decrease Anja, the valuations continuation a seeing a almost of the this valuations And of we a year, are we Board. great last the across relative

the scale valuations forward you than the I again to area find mean closer get we general That needed program changing as especially standpoint is, price the be And are the indication closer the in works part DWS have more look to relative had since looking We a last less and price in is the that little the we a more of the to of the because DWS, made like to in they cloud we that more deals by little and lower made exactly we at last With expensive is was the expensive months, an what is terms balance So growing market make. cloud of we although an looking one you a a than we CompuGain respect have the acquisition that’s down acquisitions for sheet where comparable cloud acquisition cloud, we the in believe expensive are terms slowly still the been after our really do at, less company. DWS said, December expensive. is in get kinds solution is and acquisitions, profitable. of XX think now and forward in for great is we could ever in if we to acquisitions From an us, have with our that acquisition bit, to been year started we XXXX. set, powerful analysis. prices that they we because right the go that careful, opportunity historically we up the

of application development AI the for increase think before is that of and CompuGain particular work as lot world and portion and cloud now. of the and growth that acquisition a cloud had us where work. all although capability And applications in of know an talent some It’s you we dramatic in a a of is I revenue area it’s the CompuGain, capability. whole in new All is

organization exactly because about So we that it cloud of filled was more a grow. and but was it that expensive, our little very are needs enthusiastic ability related, to the

that’s of long helpful. kind what but at, answer, Anja. that’s So looking I hope Little we winded are

Mike Thomson

Yeah. And Peter if I…

Peter Altabef

-- And please. Mike any yeah,

Mike Thomson

looking Yeah. slide add just IP in some in are of skill the solutions and that based the what those some solutions lot on, to regards really for and more Yeah. one of of high. is I things are based a based we to wanted that valuations drives M&A

So and where we regards are example set like to we talking about being things really in a our enhanced CompuGain apps skill development great that.

more feel transactions other both it’s the which some right? the still you don’t in you preceding the We in solution our engineers about, after. elements cloud really and in quite multiples of team, So really the you where pretty a portfolio, development of that as some you as DWS the more analysts about that itself, are IP have about it’s pulling Although, and seen oriented is bad have good see. little cloud the and that

Peter Altabef

Yeah. exactly hopefully Anja, your answer right. on follow-up that or that Mike, did question? any that’s

Anja Soderstrom

for you. No. That Thank me. question. answers all That my was

Peter Altabef

you. Thank

Operator

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

Peter Altabef

thank morning. call attending the much. I very to want this everyone Thanks for

and This answered is different very be As came we, a that question that the little company a might I your I bear. very, Mike it from than think first Rod. average

a to it. based XXXX XXXX, -- very deliberate strategy are to is made a have very really the we changes performance we in execution the believe marching in all strong in a be And very we the XXXX, multiyear approach. We and on

that you us guided and remain on very all being we we hope we people really for journey down habit understand about excited metrics we march thank available for in part a to are of the call pathway. and for to very and are been analysts, taking this I With We XXXX. and the pleased pathway want that kind really of and and this time to habit you That’s thank for us of that. made that you. following are our continuing We personally investor us, I with our to continues the doing to respect

We will have one-on-ones calls. and

quarter. talking that, Our you you strengthen, With Investor hearing website next we Operator, we will the end forward to continues of that, but look and absent to all to from call. and

Operator

concluded. conference attending now you The has Thank for today’s presentation.

disconnect. now may You

Unisys (UIS) 22 Feb 222021 Q4 Earnings call transcript