Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Unisys Corporation Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference call over to Ms. Michaela Pewarski, Vice President of Investor Relations. Ms. yours, is floor the ma'am. Pewarski,

Michaela Pewarski

laws. its Good Thank to Pewarski, us. discuss This results. released estimates Michaela those Deb results Altabef, These everyone. We most President our you, that earnings our Yesterday joined of of morning statements could also ability differ the forming the our in beliefs on the our expectations. in Unisys found joining materially and will operator. that furnished Vice XX-Q for and SEC. Investor wish basis is Q&A the estimate you financial section cause to release for results control Peter Certain are items morning, Relations. statements to call statements beyond the this or quarter second Mike in statements to today's by filed precisely. Chair factors as listeners the afternoon, in this our participate I'm our President our securities recent This expectations, the many forward-looking and McCann, XX-K of and can Thomson, conference and with Forms current and call meaning of contain today's assumptions forward-looking CEO; within forward-looking who CFO; X-K from Thank other caution and COO, be Form include session.

statement, obligation herein review to this any or particular assume including of light in referenced by future forward-looking any not, statement do events. We revise

and of more of provide be they We or expense and other or believe We performance. these as retirement understanding expenses, items EBITDA unusual reduction indicative a certain its financial operations such activities ongoing as that such will company measures as our may non-GAAP also be adjusted operating profit to the referring non-GAAP are certain believes post nonrecurring. cost measures complete excludes financial not

presentation. Form have website available intended presentation measures the provided accompanying turn have GAAP measures, that, on a on furnished GAAP. our filed been to The we However, are substitute Peter. and X-K related morning. over the within to these be today's for With to our slides reconciled to non-GAAP call like are this not the these measures and were reconciliations I'd The non-GAAP

Peter Altabef

Michaela. quarter thank discuss we second enter results. another to quarter We Good joining as better-than-expected the Thank year. profit, well you for morning, of Unisys' you, positioning and half XXXX us of the revenue and second us into had

Excluding to Revenue our which or revenue micro we renewal license between Specialized & Next-Gen expand support the or continue market Workplace, DP&A, years, timing and SS&C year-over-year and year Digital Services and & our on experienced pipeline in next-generation based Applications expansion. solutions. Compute Platforms margin and which and solutions, Modern solutions, fluctuate inside certain growth includes

year-over-year. Second the approximately in margin higher quarter revenue and XX% solutions grew growth

strong than larger for and of We're is XX% generative future ago, providing Our concepts next-gen a of opportunities a growth. seeing pipeline foundation AI. proof year a growing involving number

and Hyperscalers enhance and adapting companies development. are new to our teams release AI continuing enterprise solutions technologies, tools to our are which next-generation software

call decline a timing quarter Solutions Computing reported our Looking which company ECS constant Decline, license X.X% within of revenue and due or L&S driven lower currency. to segment was million, ClearPath closely Enterprise expected, was at second in Total $XXX X.X% of SS&C in and and well by more Forward Digital the Application revenue Cloud performance. renewals. portion as was of or DWS, rest Workplace business, as our our by solutions segment, the of performance segment, or Solutions better-than-expected This includes business the partially process ECS solutions. we the our and was CA&I, Ex-L&S offset Infrastructure which as our

project-based benefiting year-over-year expansion achieved much in DWS year-over-year currency. and application quarter X.X% signings ECS specialized revenue modernization. generate work currency. and in segments XX.X% with year-over-year quarter. increase We strong continuation quarter. of streams in a in constant increased X.X% services, Contract million, revenue the in CA&I, $XXX X.X% of constant levels like are growth both was revenue grew a ex-L&S first currency quarter from SS&C constant Second within the of months of solutions and felt of solutions the SS&C next-generation the our in first from X

and clients clients a to Services' which to cautious logo are signings. to concerns Financial remain make on around was due and lingering new headwind commercial decisions slow new investments conditions, inflation macroeconomic

levels clients activity picked with in general up However, June.

from unchanged trailing ex-L&S last quarter. book-to-bill XX-month Our was X.Xx,

the our contract quarter due Excluding anticipated and value, A significant down The declined X% L&S, the is lighter of with which TCV due timing, by that portion new to lower or remainder declines signings of the TCV, total X% a year-over-year. this was for sequentially to was second year-over-year quarter was fact renewals. quarter logos and were renewal year expected.

DP&A expanded We last year. new scopes several strong, solutions. and remains clients the existing of New had XX% signings TCV versus expanded second within growing within CA&I, incorporated quarter that or sizable

protect and this with institution's data, and For operational integrate cloud savings, The CSU's will reduced security State supports University, a CSU. cloud of new modernization their the technology security education renewal efficiencies, across cost agreement Unisys technical debt. a cloud system States transformation the X-year includes which administrative the from more agreement multiple for benefits include undertake and contract services will cloud additional higher XX California instance, than and enhance reduction largest a campuses of of years. signed projects innovation better data client in ERP and now and we United system, the student Unisys XX for to cybersecurity

Supplier after institution in years We also U.S. financial running. receiving footprint our DP&A for expanded large Year with X a their recognition of the services the

cloud communications clients regional the a lines. In with client's their their to we additional of our expanded will support work Unisys and business acquired DWS, aspects Canadian company bank migration technology branches. recently maintenance one of telecom financial for that support large services XXX integration across a

global and include a upgrade As devices. In telco services manage leading technology Unisys dozen for will part our relationship of our to this migration expanded services. mail standardized than technology ECS, company a project, clients' cloud voice we with a more vendors,

L&S refreshes ClearPath clients. strengthening relationships signed and contracts with including several one also services technology to We our managed important clients, financial new of work including largest services Forward support

also geographies EMEA, to several DWS which collaborative innovation the are initiatives to and in other in has expanding led these workplace modern We third launched sessions client engagements quarter.

Our Ex-L&S pipeline also growing year-over-year. progressed, XX% as accelerated XX% the and sequentially quarter

opportunities. Growth approximately sequentially We've was new strongest XX% logo in year a net in $X pipeline, up XX% ago. the new and logo added versus billion

the expect review sales speed We XX teams months and our agility new built was around targeting and increasing see on We're clients basis is evident in aligned contribute solutions This to move point bookings proposal spear pipeline versus where being of the to process Next-Gen today most are pipeline XX% and those we opportunities the sequential growth, opportunity. year to logo the which funnel. prospective the through our and of long-term our X as period. prior a XX% through growth

more Ex-LA's. pipeline is Next-Gen This pipeline as by which was and XX% software new experience management unified we agreements more in or leverages driven logo and on refer sequentially year-over-year. interest grew power suite solution, service. based experience-level Modern a our to experience our than offering Workplace than doubled as

or DSS, added opportunities several subscription and device device sizable also manager. asset to We services related

DevSecOps. opportunities response, range detection Our including notable across in uptick of DP&A management, and identity pipeline saw digital consulting security a a and advisory

and also development. advanced actively application our proprietary clients. Across DP&A cargo Within existing represents significant growing Logistics portal saw with numerous and leverages SaaS the business and industry new Logistics working transportation Unisys are believe and optimization a logistics client a and data, managed solutions We unveiled for Unisys and solution pilots artificial ECS, application AI services also generative seeing and we intelligence. that opportunities market we computing, data units, is We interest incorporating our industry. opportunity expertise. are services complex real-time on delivers IT AI quantum

this DWS, working Our well area ecosystem engineering to expertise data growing In that interactions. portfolio deliver automation generative us chatbot of with solutions, solutions in human-like position our partner of on AI we're clients demand. more incorporate capabilities, in

design in AI DWS CA&I, and generative generative client DWS. in with us to include to diverse an workloads. related strategy, support and which having client capabilities, In our base both development design, services advantage we're combined core and footprint within providing AI experience innovation Our our cognitive AI in chatbot discussions gives infrastructure

that We deploy clients services to future have lakes, vector purpose-built strong AI. related databases and engineering fabric are helping well for data for data also data position us capabilities generative which AI,

Studio Across than more IDC, as from and at Microsoft and a the Connecting well being and such prominent using advisors than Vertex and we E&Y, AI services platforms analysts as advisors generative Google Adobe. XXX more or year's event, and Amazon, data for are is XX which Turnout company, last was Forrester, industry have such ISG access featured that AI business. attended initiated different attendees influential as partners, built Salesforce, Advisor from our firms. our was HFS, of and We Analyst number and and with Gartner, analysts PaLM our important Everest, event solutions of our Copilot, included firms ServiceNow June Snowflake, AWS, XXX to Deloitte, NelsonHall. by by as double

recommendations. technology to Because decision-makers insights providers, evaluate when industry look this service group for often and they

and the make strategy our to able about educate one-on-one solutions. event, connections key were and meet influencers we and During these

Turning to profitability.

gross CA&I and of to across margin DWS, improvement quarter QX second was XX% Ex-L&S The 'XX. Our in XX.X% margin SS&C. broad-based expanded and

and points was down the bolstering to XXX labor tools points our rapidly quarter. client from overall and quickly. our level, ability At improve meet to basis first to company expectations leveraging demand, continue we which basis We talented the XXX match efficiencies, roles technology advanced are further fill year-over-year

include redesign, rotations geographies. developed team moves to efficiency and Our additional elements workforce role to has transformation such plans low-cost as account

now QX the up services, a quarter prior year. in XX% XX% over the XX% same is Excluding quarter. XX% of in were increase markets, field in all from low-cost last countries, headcount hires low-cost of

lowest down XXXX. XX-month of was XXXX. attrition the of quarter was XX% the had quarter, in trailing in have month we from the of the second Voluntary since Our XX.X% XX.X% monthly attrition June rate December annualized, voluntary second in

have believe industry, labor experience a meaningful reduced are on easing of talent. due associate While the having our in investments retaining we in our part across impact the to voluntary attrition levels market,

We training, and for onboarding associates channels implemented one have new enhanced processes leader recognize another's successes. to

inclusion, and retention in continue in have our or We diversity, talent result. also a acquisition and both as to improve DEI, and equity metrics invested

Forbes. Deb off detail. more in global recognized up our year make a We field year. associate of from And are now XX.X% for population, services, to Equality I'll Employer discuss U.S. associate for it third up hand that, now Index. XX.X% year, inclusion by by were XX.X% With groups recently of Women our ago. Best And a work women from to a underrepresented results to disability financial consecutive best XX.X% as up ethnic place the the last Excluding population, our for Disability

Debra McCann

Thank good and you, today non-GAAP metrics. financial include My discussion morning, certain Peter, everyone. will

segment reconciliations are portion I provide this the stated, and As a revenue reported, metrics Investor includes our of to license Unless Relations posted allow information, all including growth, timing constant we on of solutions available our are making as to those excluding in on the except isolate figures progress for reminder, revenue ECS, materials of in investors the are of currency. which both supplemental otherwise we earnings which discuss also renewals will outside evaluate area. to L&S based in the business uneven site.

that quarter it exceeded highlighted, Peter As was our results of another expectations.

showcased improve margins we solutions at awareness generative which and a Next-Gen AI continuing Analyst pipeline, our June build The growth. our Days momentum for Ex-L&S Investor to innovation sign building for in advance are positive capabilities. future Solutions, and are our is revenue go-to-market and and our initiatives also Advisors our We

a second decline million, $XXX in currency. company totaled of the quarter, X.X% decline year-over-year For a X.X% or constant revenue

year-over-year first X.X% driven by totaled and Ex-L&S and renewals driven a segment a expected quarter. This increase constant performance solutions X.X% those weighting of renewals the million, and variability the year-to-year. or our license $XXX Year-to-date currency, in was in in inside the by as improving from renewals of our ECS year in revenue increase L&S

quarter revenue will that I I and X.X% segment X.X% note rates constant segments, speak in currency, as revenue in Excluding provide I'll and X.X% grew by second year-to-date L&S, X.X% Please X.X% growth DWS segment. detail in revenue in constant quarter about the while discuss now grew year-over-year revenue grew quarter. currency. currency constant second terms.

recent Growth public in caution segment commercial scope clients year-over-year in driven some XX% services see new to continue clients we of for quarter, first the segment financial quarter. our Like clients, we by X.X% account a sector expanded certain existing declined Revenue versus signed year CA&I with revenue was revenue. with with modestly ago. which financial or engagements that CA&I increased and quarters. primarily the

more was offset by strength sector this in growth than next-generation commercial solutions. clients However, with our in DP&A CA&I

segment includes license support and Specialized renewal year-over-year, which Support by and the XX.X%. anticipated the timing, revenue, SS&C Services Licenses driven Compute Next-Gen though and XX% portion grew segment declined ECS and of

in L&S timing to of Second XX.X% the due license the quarter revenue was $XX renewals. down million quarter, year-over-year

terms However, assumptions. was than expected this timing, due relative and better original in volumes decline small to variations our to

expectation the in of in services with is revenue wins in negotiated from our rising during SS&C Life offset The segment, Our price and prior partially first ClearPath year revenue. comprises clients, quarters L&S offset for ECS among which SS&C, and were revenue to year-over-year renewals others. sector the growth signed rest L&S quarter financial quarter was labor by lower on driven increases XX.X% costs. Notable unchanged. for Strength Sciences, public the Forward renewals

we growth these lap expect As slower begin as a reminder, benefits. to half in the of back some we SS&C

where quarter first renewals This decline our by the versus and above of contracts the driven $X.X This a billion $X.X renewal the were was the specifically of to decline which in our solutions year. indicative XX% expected within Ex-L&S quarter. process Second DWS two quarter. of timing end the dynamic not large billion at in be backlog was is of the timing signed business BPS solutions, by end rates, within are

pleased Looking X% total full our to are reaffirming performance year of are X%. guidance our for with range we company negative ahead, and revenue negative year-to-date

to We the negative of X% in revenue positive expect to X%. continue Ex-L&S range

a pathway midpoint above achieve results year-to-date, revenue the ranges. Based on these our of see we to

approximately expect year full revenue. in $XXX to L&S million continue We

of As we revenue XXXX. Day, our million annual June XXXX we through mentioned expect L&S at $XXX Investor from average

over of and Forward most core from have of and reminder, ClearPath a layers the complex maintenance built comes operating on which As our ECS revenue our L&S clients licensing many application related services system operations our to decades. run

plans. Forward, of is Given into clients' and ClearPath performance our application the we of the L&S our ecosystems these and complexity renewal security visibility revenue sticky and good have

predict renewal budgeting reaching on based limits. clients early between However, shift timing difficult as years quarters can can to precision renew consumption when and or even with be or can their processes

Moving on to margins. gross

renewals. quarter was The the of gross by quarter of XX.X% decline second the was versus margin XX.X% XXXX. driven second in L&S Our timing high-margin

year-over-year, to and to by gross basis gross level L&S, Excluding XXXX, on improvements. labor revenue. XX%, up of costs, XX.X% of in XX the was XX.X%, impacted Touching efficiencies of labor contracting delivery driven labor briefly staffing gross basis quarter advance also been results our first from This the which was initiatives period prior year expansion the efficiencies reflecting point in better relative and margin represents points XXX sequential ongoing of had pricing. related due DWS margin segment to our improvement a by utilization margins,

elevated delivery points. an CA&I improvement included associated costs efficiencies gross XX.X% X.X% year margin certain to or basis labor expanded X,XXX our with of Improvement in CA&I from and included contracts. prior organization

the labor basis expect our gross DWS optimization contingent labor, seeing ECS than focus and DWS aggregate to revenue. improvement points a on of our XX.X% in margin pyramid, we gross L&S from in more of automation and and lower CA&I was due ago from are margin to continue and XXX segments. year XX.X%, increased good CA&I down We of results use

Moving on profitability. to total company

the both quarter margin levels X.X%, lower non-GAAP X% was of L&S year. due renewals in the Our quarter down the year prior primarily during to operating from and

last year-to-date operating X.X% was Our X.X% non-GAAP year. margin versus

EBITDA versus adjusted or in of quarter 'XX. XX.X% quarter of Second or second was revenue revenue million XX.X% $XX million $XX

were relatively as Second were L&S due quarter revenue lower consistent operating declines to year-over-year. expenses

revenue compared XX% was EBITDA million revenue or of of $XXX to first XXXX. XX% the for adjusted half or $XXX million Year-to-date, of

a million million compared $XX ago. to year GAAP loss of net quarter loss a $XX Second was

reduction million per was $X.XX share $X.XX. This of million expenses, of other net of loss XXXX $XX expense, or net quarter $X tax, non-GAAP of of cost retirement Excluding million $XX or earnings of our per million and to income second compares net loss non-GAAP $XX share. a

have We the We results to X.X% flow our full quarter, of million This period. adjusted $XXX year-to-date, guidance free in down in EBITDA year quarter the $XX Like and the in achieve and year are of prior operating margin midpoint negative prior in $XX to were X% expenditures to million these from compares of non-GAAP pathway year-to-date guidance, generated ranges. achieve X% year the on we our million of second quarter $XX cash million to a profitability respectively. to Capital XX.X%. revenue the and $XX million above negative and for margin $XX million track periods. and

The by collections. year-over-year technology variance driven of largely the timing was

XXXX million. be We which at to continue $XX approximately to cash of in second in as were XX, with as expect million prior flow we free at flow, of million free year flow line $XX balances up June define cash XXXX. from cash to quarter free full Pre-pension postretirement contributions and $XXX the million Cash was million $XXX year-to-date. $XX end the negative

leverage net as including end. of the ratio, plans X.Xx all was quarter benefit defined Our

are strong. balance Our liquidity and positions sheet

X.XXX% value a million do and is senior with $XXX until not facility our secured ABL million undrawn. XXXX Our notes $XXX face November mature

the ahead caused decline the the during in timing, which Looking year revenue third year-over-year quarter third the revenue lightest L&S with expect year. L&S is to $XX revenue of million, overall by due low the of quarter, to be to digits expected mid-single L&S to to renewal we company cadence the approximately quarter

third approximately by the operating renewals. to We quarter million $XX of driven million, expect loss of timing modest a L&S non-GAAP $XX

a guidance margins. us revenue the to pathway results achieve above year for gives full both and outlook our quarter third The midpoint of

Lastly, our U.S. our briefly plans. cash to I expected defined qualified touch contributions on will benefit

which of the conditions XX-year our estimate provide estimate higher contributions is XX, assumptions. of market $XXX detailed This and opening we continue year-end conditions, to projections actuarial of than are to first June line we regulations upon $XXX based our as questions. XXXX. mostly and a it a to that million. the quarter be begin closing benefit through $XXX market as As expected once still to contribution Cash cash for million year-end, to for would our now comments contributions, U.S. XXXX some financial over will plans $XXX million funding Based and compares to million. for reminder, on before defined at qualified change year XX-year estimate $XXX XXXX in Peter I million turn

Peter Altabef

Thank you, Deb.

for open the Q&A, Before with momentum up never been having our our that we wanted as positive team with has has meeting leadership and few over months, share past I evident. to been conversations more clients,

exhibiting portfolio. clients Our their more with openness we to across eager expanding questions. relationships our line With please how open are and are discuss that, operator, to for the Unisys up are innovating

Operator

Instructions]. [Operator

The from come Research. have of Equity DeepDive first will question we Bourgeois Rod

Rod Bourgeois

guys. All Yes. right,

So results there some helpful wanted projections? I point, thinking at Analyst projections. prospects on your business the about out you're you laid Day, latest financial and on some shared ask this the to how are longer-term updates in at changes seeing you're that any Based your the financial June longer-term and if

Peter Altabef

is and question actually trickier for appears it reason. I name and question for a the my different sympathize both your a last challenging. Rod, Peter. can be this it's very much Thanks name, But last than

because in haven't to And update those we And tell and that that out then can June. have the numbers -- Those numbers So is as said, over put maintained there And had time. always we they hard Investor I a were and That changed. don't to we time. companies don't set long-term it's them position on over you, anything and update reason them the for since long-term Day the burden have have estimates. numbers really number. long-term just really we

changes or really remarks, in of some the of continued none dialogue we pickup long-term our my months we board in first as quarter, in quarter the activity kind in did beginning of the just of with X of said That our conferences, perspective. activity July. the has in that across I see But But the clients. year. similar were to kind look at the As

So helpful. that's I hope

Rod Bourgeois

about though, activity, earlier pickup on June I front? in maybe earlier a some And you up your that Yes, I on obstacles. the wanted on see activity, last a pickup going the is logo did point, to mention I'm helpful. in definitely if by whether new shoot think, the just after in pickup to activity. that's had ask question of to green it a you been picked expand more dimensioning much how could macro that color occurring little or macro and impacted bit

Peter Altabef

over more it Yes, I'll kind for cover answer. that detailed of and to then hand Mike a

think us. of that I some is

is of the Some industry. that

kind And we're the internally. of kind some way of of is that really organized

of take let's those each separately. So

thinking in a in on many us, among top a from benefit now, think an University because client to So our when We I mentioned and way change category and generative of relationship having the period referring long our California junior we years. AI. clients. That in are the XX here State at of than years. fact a we -- of XX average have mentioned people puts like I that XX specifically we're that AI tenure I'm has you tenure technology, and that longer it the our a is real discussion That for trust clients have about the been dramatic my

take have have an of particular right that for and audience, an relationships we we kind certainly granted. win we We don't to audience. with the don't and necessarily earned any clients The get deal, have our

I that's big us. for advantage So think a

in put of time our it But best forward, a to foot an that's So have us allows advantage. best foot put forward. we our change, make sure

into With a of as areas, enter lot contracts. around Hesitancy to some in especially a respect on. long-term to the industry going whole, willingness change

and our anything than of comes it business, his the some we're see existing us and we position big it but the I to for really some because number how to But is of under in negative both the you approaching related renewal is are clients, You leadership, X% made over going slightly see cycle changes, I'll pipeline. think our I to pretty organization we've new larger turn well at Mike and the down X%, and but it clients to and deals. us else that some negative more sales think TCV teams, when

us billion big is adding deal. us. in we've And the a done pipeline quarter. for for Now, big a That's that $X last number of

if about we're seeing. some things things could some Mike, so the you talk And doing the we're of and of

Michael Thomson

all Peter. the And there, in question. last thanks analyst in been Yes. strong. Advisor billion to Rod, our the Rod, has perspective, Next-Gen go-to-market think, I I inviting for over been to and talked a his our that from have interest Great. Good Analyst about from talk Day, in opportunities. solutions, nailed big We in looking deal is more think feedback right? increase really about to Unisys So the bulk is activities Look, Thanks, more quarter that The very of at adviser comment and Peter a you. the pipeline community $X it the for strong. and us. The

I been think take-up strong as the has well. awareness

these take the at really branding year end of initiative their to November. that And contracts lot QX last of As just in in cycle. we X you launched a tail know, months XX

And think really activity what so I through starting increased from pipeline. that come seeing just is to now you're that

win As it, it we about the rates. in pipeline pipeline, not that you the we only see level right? that the enhanced know, pipeline continue good analysis before pretty right, fact qualified vetted, the has expect to feel growth And So of pipeline. gets in but that, some that we'll to is

certainly market up. activity pick the in and continues to Next-Gen are solutions the Our resonating

And we maybe like evolution the of X that what the XX that kind of we're months come of starting feel to started we're I benefit through. it's to seeing get into where ago. cycle So

to in the where we better last back of won those impact kind relationship year and in You're a clients with their of we're way they're getting deals of expanding also half seeing the know us.

So hold. that think point, starting it's strategy is Rod, really take the to just I proof the

Rod Bourgeois

much Nice. increases more now report, you're but In one declined costs points, I productivity can labor you by basis labor productivity. citing on sequentially XXXX your if and think I had year-to-year. earnings And ask noted XX bigger labor year-end

And the experienced? much on now so that how jump is the left cause can you more labor main in you've share on that productivity And front? room

Peter Altabef

as let a Yes. emphasis that that area well. one say major do Mike of will Rod, that's I'll for I ours.

me the rate -- teams to because heard work And our about down, our as productivity is ongoing. the that you Mike done retrain by new attrition helps don't talk have have come in down getting and statistics. people around You attritional beyond getting the door. labor HR many rate But

So you're seeing are middle a improve that from is effort continue Mike? it. the the we where of in quarter-to-quarter. and But downs ups are cycle. take There to it and to long-term

Michael Thomson

for Rod, Peter. thanks Again, the Thanks, Yes. question.

have noted say X.X there put place point it mobility about in So -- the talent look, right the again, labor of about big attrition, you and it. the his continual So points I'll X.X their is last from look, automation, view commentary, the do of that continual of continual to and to with noted that whole make the a that talent other host part of course of and improvement over a platforms we've shoring, of kind there's that was But and right? hiring we've in And aspects up. Peter talked a of and Peter things points marketplace kind the mentioned the that the into sequentially, of number X XX re-skilling. that's months.

company opportunity the we're are a at It's that, big you're jump I of And But very there's pretty there. aspect DNA. right, of for part relation from be will that a calling we're And overall still improvement numbers. in mentioned to perspective have they continually the about It think I full ongoing. of our I still is points that know the don't a movements. right? X.X X.X think year year-over-year. significant end And points of they

rate that run still our go, the to margin but opportunity some working continuing we've DNA, that profile. key obviously improvement. that gross seen is still maintaining significant through marked and in and enhance then And to embedding So that

Operator

The next Joseph come Vafi will have question from Canaccord. we of

Joseph Vafi

-- Nice I Next-Gen at you see the just a you quarter. And to follow-ups. the on gross the remind just in that Ex-L&S couple margin -- portfolio currency again portfolio? -- profile then the Next-Gen growth portfolio traditional the your if us have look versus on margin We of constant can broadly,

Debra McCann

Peter, did you want to...

Peter Altabef

No, you, hand to I was it going to Deb. over

Debra McCann

Yes.

the margins us. focus it's big that's and So higher, why a Next-Gen are for

we haven't to of at we expansion in So Next-Gen for that in And margins that XXXX. Day, what XX% is did targeting that get been those talking basis to the range much it's by about Investor as points year out we to XX a we're for. actuals to we're expanding, about lay still set have and that looking that get

Joseph Vafi

capital about it. intensity what of the the And portfolio of versus that then some Got others? Next-Gen

Debra McCann

Yes.

few So we CapEx big for X% A been that expect run capital of percentage we've the try just clients for years investing a having as reduce expect to revenue. of of to related strategy -- still kind necessarily capital to on extra in to the amount we're a of don't with business. and ensuring we while our cautious focus -- being the CapEx-light past still about that

we So don't changing see Next-Gen the that with solutions.

Joseph Vafi

renewals you that one I that may there not that this may renewals are does look doesn't out little last cycle. Is my that work at there couple renewals, years that's the terms in for -- economically then obviously, And on some And this add of But were reasons. there, point know -- we a question. at It macro of just terms the just decided bit weren't renewing if it. on of help, maybe of at there of are ago, just out a more any renewal that -- of the renewals in be point? variety a Got worth you of some extra. the

Michael Thomson

our renegotiation profile I happy from going pricing are no. where I away that side, that of see question. the we point portfolio traditional that The left out is those quality last a that to for call no the say view some the about We the you'd like in we're one would renewals answer margin -- the very take we what's had I'll profile. their successful legacy that's And contracts some on of margin think margin with gateway just cetera, if in the there short of as like. about where Joe, is been et talking thanks on our on fine. I we've that, a you're on. it Next-Gen, work on based profile. contracts There are concerns is Deb, mentioned either the from effort in walked work business

So than little still a And this the tidbit back I on year. said renewal well. in was a just rate. front Deb of have half differently, renewals as renewals the we back year over it mentioned the mean just happens to half XX% year remarks, her more in a higher or have last the of prepared this half

set And back B, A, larger a in we're and help backlog we happy of ultimately help renewals. with play, as our has then year future. what's the should we're the there. So it's those good to regards having D, think pricing coming power which renewals well. of out to those our the a gateway and C, half TCV into book-to-bill

Operator

Sidoti. And next, have Anja of we Soderstrom

Anja Soderstrom

should technology we how collections been regards have the already. addressed flow? cash in to them think of of the But free timing about forecasting Most

Debra McCann

Hi, Anja.

the As positive it as negative quarter cash X.X. know, far XX, was this flow, as quarter, Xst you free

is similar so year-to-date, year, as it's XXXX, was And our XX, saying that. what mentioned, to flow. we're And negative. to we cash flow will cash holding be The full free that still free which we're

collections, a technology the by driven So as -- is lot collections. exactly of specifics as that's timing far that on of technology

are cash that so 'XX, you going quarters. collections has where to skewed foresee, the in we're order free of timing And that really as right, the we're be in flow similar get to expecting next see in can to what negative those to timing

Peter Altabef

Peter. add would if could. this that, Anja, to I I is

we're As focused cash we're obligations Day, pension positive And healthy cash flow. free years, on on a Investor light focused flow into free the number especially very know very in future. the building extend June in the you of we from as multiple

don't when a it to Vafi's though be I kind still business what's even higher that expect and To have is tell lower extent, CapEx you that both of expect it not those, that is you effort version of we a CapEx. us. focus can a focus Next-Gen traditional infrastructure of because I costs traditional is we because and an business, it some we of obviously, So which, solutions. than mentioned Next-Gen about increase answer, in would on it solutions. CapEx that Deb's decrease the capital in major L&S is Joe And question right of think solutions, think next-generation

on focused quite flow. we're really cash intently So

can you so that. And see us in expect, as June, to we discussed working term improving long on

Anja Soderstrom

when the did quarter? has the said the that hear continued Okay. I And end into towards quarter the of right third picked activity you you up that

Peter Altabef

pipeline in of, of activity Again, not dialogue in you're of discussions get obviously a the July And work word. our is to our would take and grew us. pipeline the question really broad and quarter. have prospects numbers, do we're clients level that we with last us terms is July in have But the funnel suggesting the obviously, how through good interest for pipeline do now results. terms And say, We we and to the seeing the not closer. and Yes. have I that

seeing say good would about I June that in we is feel we're So and what continuing. that

Operator

The next Arun BNP we of Paribas. Seshadri will come have question from

Arun Seshadri

Just maybe clarification for Deb. one

you flow cash didn't there saw for you of I sort path you you the commentary upside free noticed Any -- provide like additional cash that? line. free reiterated revenue on guidance, was guidance, flow and For in a say I and can your the EBITDA exactly think

Debra McCann

Not so much.

pretty out So I number. we've that within typically similar cash laid puts to that flow think up number, and there's of free what we takes that makes -- but lots

the to -- and revenue the more -- it's think is I little of I precision predict the think versus more free So and margin. cash little a a challenging flow

will we're anticipate flow, right, So side. the challenging revenue our -- of we're in a on that on success completely flow from higher having when that goal and you're cash little long-term cash we not free to with the to able margin, in able the Day improvement the free timing at we're more goal given and create the in. out are that and seeing revenue the going that ultimate and the perspective. Investor is higher that say flow, cash -- is it's momentum these pushing being -- on we the And margin come margin of the and laid we've that free the some eventually for drive although that Next-Gen collections solutions, to a are they're But which

free is out, cash laid us. Peter a flow As very big priority for

Arun Seshadri

margin, on gross jump it. Got broadly And quarter. then very Ex-L&S nice this

do how to sort balance And nonrecurring -- expect of trend see we understand sort of or ex-L&S margin to jump? should for there Just you onetime was of at all consider that the of year? that anything in wanted you gross how the margin the gross sort

Debra McCann

Right.

to higher some should quarter the some margin there So the the that it yes, expenses what as gross to do that last contracts we're elevated -- we to did due point that we Ex-L&S some similar second we But increase. had seeing. were of mention number troubled the in be commentary, basis XX%, of of led

talking it's -- huge really necessarily There's not there $X think sequential, number. right? not I about, here can and shift a So numbers we're million right? that

each those the we linear. saying combined improving are is which it all margins improvement it's leading. mean be are like said, where think lot quarter looking and and going that fully of making necessarily price our be solutions, Next-Gen So to is up. and more doesn't I efficiency But going But I contracting we're a in those in not of improvement I'm at improvements to

total goal be where I think you going. is at kind we laid where and see of can is can But puts operating Sometimes, takes. that company margin the that and look out there we're some still

Arun Seshadri

It for takeaway Is business quarter. there's then the I the that like in Ex-L&S -- there it. understood lastly the wanted just that sounds decline. mechanics was Got there? less just to I just main TCV, And make me, sure of renewing traditional the

Peter Altabef

Ex-L&S the is that right? Peter. huge, the quarter-on-quarter. not This if is Again, at So you was X% X% TCV look and Yes. year-on-year number

really not And So deals I'm really you term. at kinds And that based technical a on across hesitancy renewal the again, for as that's it's cycle. although the us, statistically not last got not it's have been a significant, somewhat around using industry, change. think think, in on number, I we I the a look modest based there year, when in we that huge I relatively said, and But board of some -- again, signing. has think, a somewhat

Michael Thomson

to I just if Peter, add that Arun. too, can

half So just this and in of perspective, the I had those a much your year to on half front is expecting the that year in comment from about XX% cycles. we're of think back based it, TCV spot renewal to renewal pretty more be on the

or of renewal And XX%. rate half excess the the is north again, year. it's heavier in So just back this of

Operator

of have a Maxim Matthew Galinko next, And we from question Group.

Matthew Galinko

Just Forward. ClearPath wanted you I mentioned think -- to and wins managed services

ask wins for on color just anything takeaways? So to more a you to they those? wanted Were I you could just -- How competitive referenced? those that little add

Peter Altabef

of more And I'll again, to services defer little on SS&C around managed is ClearPath that in Mike a of line But for that. ECS. our specifics much Forward,

to focus has which make for sure years several be software now providing to not it only and support, are our in actually so more at been that areas tends is of And that we the we through a really of SS&C. services a the do a but that provide And broad-based hard around applications. how section, also we're managed looking emphasis one license

that, Mike? seen and on grow. we some So to that progress we expect have

Michael Thomson

for Thanks Mike. it's Matt, the question.

managed necessarily growth think was really not solutions, I industry ECS, Forward. driven to ClearPath about of Peter in by talking was it services when due some our

And both of think the was other So on things in and where I managed the intention have you to financial those deep some as what we I to takeaway industry within CTF solutions, kind it want right? believe you that. some that I of transportation don't aware, that a as volume-based growth some was, travel have we of industry kind expanding services can and services that areas managed you're side. well don't that's of and which a be related give experience ECS, there the impression service was that's what the from component heard relationships,

answers that question. hopefully, So your

Peter Altabef

on top only we CA&I that proprietary two around is ECS think services And with our ClearPath behalf that's Yes. And of Forward, solutions of clients. as opposed ClearPath Forward more things can are and be we some ClearPath ECS if ECS that of industries The specializes those solutions be with will, ECS. independent. teams. well on of about Forward the solutions about our opportunities But managed of There team, industry top team on solutions services Forward. different these to The opportunities in Forward. as generic you or on those be as whether lead on managed Matt, specific our be way to be some industry one clear, creating many to solutions, independent both which the or have just tend sides which to deals ClearPath is CA&I and really the they team more focused ClearPath not can sit

Operator

Instructions]. questions appears at we that [Operator further no have this It time.

our call We will go for At over time, I turn Sir? conference any ahead Peter remarks. session. and closing back the question-and-answer like conclude to Mr. Altabef to this would

Peter Altabef

call, thank Day call. Mike, involvement Thanks, remarks. investor And level of we also you very participating to call Yes. our call. my And analyst much. both your engagement the the I'd thank of you many mentioned in for that. I participated want the everybody for We analyst like June Analyst was also to And attended. had industry you as on investor the very call this and in questions we and really well the really, analyst industry Like know, really in appreciate. analyst all of call course,

we develop. and we continue have you be really and dialogue available that to the each to of continue to So appreciate

our thank very behalf much of you So on team.

Operator

the thank is rest care, a you, time we also team. wonderful and concluded. you and this lines. The of And Thank your time, call have your everyone. the conference may you, disconnect sir, Take again, for management At to day. now

Unisys (UIS) 2 Aug 232023 Q2 Earnings call transcript