Unisys Achieves Significant Growth in 3Q24
Unisys Continues Strong New Business Signings and Raises Profitability Guidance
- Revenue growth of 7.0% year over year (YoY), an 8.2% increase in constant currency.
- Gross profit margin reached 29.2%, representing an impressive increase of 870 bps YoY; Excluding License and Support (Ex-L&S), gross profit margin was 17.9%, reflecting an upturn of 390 bps YoY.
- Operating profit margin improved to 1.5%, a rise of 520 bps YoY; non-GAAP operating profit margin was 9.9%, up 980 bps YoY.
- Generated cash from operations amounting to $32.0 million, compared to cash used in operations of $(4.1) million for the third quarter of 2023 (3Q23), alongside free cash flow of $14.2 million, in contrast to $(25.7) million for 3Q23.
- New Business Total Contract Value (TCV) surged by 50% YoY, primarily fueled by a significant increase in new logo signings.
- Unisys has raised its 2024 non-GAAP operating profit margin guidance from 5.5%-7.5% to 6.5%-8.5%.
Unisys Corporation (NYSE: UIS) has shared its impressive financial results for the third quarter of 2024 (3Q24). The Chair and CEO of Unisys, Peter A. Altabef remarked, "Our strong year-over-year growth in New Business signings continues to demonstrate the increased demand for Unisys' innovative solutions. We are experiencing substantial growth in our AI solutions and are actively engaging with clients to enhance their AI strategies and projects, leading to robust sequential growth in our pipeline."
Furthermore, Deb McCann, Unisys Chief Financial Officer, affirmed, "We are reaffirming full-year revenue guidance while raising our expectations for profitability and cash generation. Our continued efforts to drive annual profitability improvements, reflecting our effective delivery and operational efficiency initiatives, have fortified our liquidity position, with cash reserves increasing to $374 million and extending our ABL credit facility through October 2027."
Financial Highlights
The accompanying financial tables contain detailed reconciliations of the GAAP to non-GAAP measures presented, which excludes financial guidance where reconciliation is impractical.
Third Quarter 2024 Results
The revenue showcased a healthy growth of 7.0% YoY and an 8.2% rise in constant currency, primarily attributed to the timing of software license renewals. The Ex-L&S revenue experienced a slight decline of 1.3% YoY, a marginal 0.1% decrease in constant currency.
Gross profit margin surged 870 bps YoY, driven largely by the timing of software license renewals. The Ex-L&S gross profit margin improved by 390 bps YoY due to delivery efficiency and labor cost savings initiatives. The prior year's Ex-L&S profit margin saw negative adjustments tied to a previously exited contract.
Operating profit margin increased by 520 bps YoY, prompted by a higher gross profit margin alongside a reduced professional services expense, moderately offset by a non-cash goodwill impairment charge of $39.1 million related to the Digital Workplace Solutions segment.
Net loss attributed to Unisys Corporation also absorbed an additional $29.0 million tax accrual set for specific foreign subsidiaries no longer retaining indefinite reinvestment of earnings.
Financial Highlights by Segment
DWS revenue experienced a 7.1% decrease YoY, with a 6.2% decline in constant currency, primarily shaped by reduced discretionary volume with clients. The DWS reported a gross profit margin of 16.3%, reflecting a 150 bps YoY increase, attributed to delivery modernization initiatives.
In contrast, CA&I's revenue saw a modest decrease of 1.5% YoY, with a 1.3% drop in constant currency. CA&I's gross profit margin stabilized at 16.3%, up by 100 bps YoY, mainly driven by cost-saving measures.
Notably, ECS revenue surged by 29.2% YoY, translating to a 32.7% increase in constant currency, with its gross profit margin peaking at 60.0%, reflecting a remarkable 980 bps YoY increase. This growth in revenue was largely a result of the timing of licensing software renewals.
Balance Sheet and Operational Strength
As of September end, Unisys boasts a strong balance sheet with a cash position of $373.7 million, down from $387.7 million at year-end 2023. Current assets summed up to approximately $947.1 million, showcasing diligent asset management practices.
The operational metrics indicate solid cash generation as evidenced by 2024's operating cash flow, allowing the organization to enhance its long-term financial sustainability and operational investments.
2024 Financial Guidance
Looking ahead, Unisys emphasizes its commitment to maintaining full-year revenue growth. The company has revised its revenue growth outlook in constant currency to between -1.5% to +1.5%.
The non-GAAP operating profit margin is now projected to range between 6.5% to 8.5%, up from previously issued guidance between 5.5% and 7.5%.
Frequently Asked Questions
What were Unisys' key financial metrics for 3Q24?
Unisys achieved a revenue growth of 7.0% YoY with a gross profit margin of 29.2% and an operating profit margin of 1.5%.
How did the Digital Workplace Solutions segment perform?
DWS revenue experienced a decline of 7.1% YoY, but its gross profit margin was 16.3%, showing a year-over-year improvement.
What financial guidance did Unisys provide for 2024?
The company expects revenue growth in constant currency to be between -1.5% and +1.5%, while increasing its non-GAAP operating profit margin guidance to 6.5% to 8.5%.
What were some of the challenges highlighted in the earnings report?
Unisys faced challenges such as a decline in Ex-L&S revenue by 1.3% YoY and certain adjustments affecting past profit margins.
What is Unisys’ strategy moving forward?
Unisys aims to enhance its operational efficiency and drive growth through AI solutions and an increase in new logo signings to attract new clients.
