Unisys CEO: AI, Data Analytics Driving Growth Despite ‘Incrementally Cautious’ Clients

‘Unisys is continuing to focus on our next-generation solutions, and we are also seeing more interest from our clients in areas of growing importance to them, such as artificial intelligence, cybersecurity, and data analytics. These conversations are leading to new growth opportunities, including land and expand opportunities with the next-generation solutions,’ says Unisys Chairman and CEO Peter Altabef.

Unisys expects a focus on next-generation such as AI and data analytics and higher-margin solutions to overcome persistent macroeconomic headwinds for the remainder of 2023.

The Blue Bell, Pa.-based IT services and consulting company, ranked No. 31 on CRN’s 2022 Solution Provider 500, had a strong start to the year with a solid quarter of revenue growth and margin expansion, which is putting the company on track to meet its full-year financial guidance, Unisys Chairman and CEO Peter Altabef told financial analysts Tuesday during the company’s fiscal first quarter 2022 financial analyst conference call.

“Unisys is continuing to focus on our next-generation solutions, and we are also seeing more interest from our clients in areas of growing importance to them, such as artificial intelligence, cybersecurity, and data analytics,” he said. “These conversations are leading to new growth opportunities, including land and expand opportunities with the next-generation solutions.”

Unisys stock shot up 25 percent Wednesday to $4.25.

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This is happening while macroeconomic uncertainty during the first fiscal quarter is making some clients “incrementally cautious” of new investments, Altabef said. It is also making Unisys’ financial services clients be cautious in general, he said.

“Overall, our revenue base is resilient as our solutions are largely supportive of our clients’ mission-critical systems,” he said. “Our renewable rates remain strong, and our revenue is benefiting from strong signings in the back half of 2022. We also saw an increased volume of small and mid-sized new logo opportunities with faster sales cycles and ramps to revenue and healthy new scope signings with our existing clients.”

Overall Unisys revenue growth of 16 percent was driven in part by a near doubling of the company’s license and support revenue due to the timing of license renewals concentrated during the first quarter as was expected, Altabef said.

“We believe there is a growing appreciation in the marketplace and with existing clients for Unisys as an innovative partner who can collaborate to solve a company’s most critical challenges,” he said.

In the aggregate, Unisys’ pipeline for next-generation solutions is over 15 percent larger than a year ago, Altabef said.

“Modern workplace remains an area of high priority for our clients,” he said. “At the end of the first quarter, the pipeline for these solutions has grown more than 100 sequentially. As we move pass the pandemic, providing an employee experience that can sustain more permanent hybrid and remote work models is one of the highest priorities of many of our clients, especially as they look to find efficiencies through decreasing real estate footprints, improving productivity, and retaining talent.”

As Unisys continues to strengthen its business units, it is increasingly selective of the margin profile of the work it chooses to take on, Altabef said.

“We continue to remain focused on right-sizing margin-dilutive legacy contracts as they came up for renewal, and are optimistic we can continue to secure fair price increases while preserving our long-standing client relationships,” he said. “We are also lowering our delivery cost through workforce optimization and evolving our talent acquisition approach to increase the speed and lowering the cost of fulfillment. We’re deploying our internal talent marketplace that leverages machine learning and artificial intelligence, which will allow us to better utilize internal talent, reduce external hiring, and ultimately lower the cost of delivery.”

Looking ahead to the second quarter, the cadence of Unisys’ license and support revenue caused by renewal timing means the company’s overall revenue will likely decline by low double digits year-over-year. Unisys also expects a modest non-GAAP operating loss in the range of $5 million to $10 million driven by the timing of license and support renewals.

As a result, Unisys expects to achieve its full year guidance.

For its fiscal first quarter 2023, which ended March 31, Unisys recorded revenue of $516.4 million, up 15.6 percent from the $446.7 million the company reported for first fiscal quarter 2022. That beat analyst expectations by $33.47 million, according to Seeking Alpha.

That included service revenue of $403.9 million, up 3.0 percent, and technology revenue of $112.5 million, up more than 100 percent.

From a technology point of view, Unisys’ DWS (digital workplace solutions) revenue was $131.0 million, up from last year’s $124.8 million; CA&I (cloud, applications, and infrastructure solutions) revenue was $126.0 million, down slightly from $129.1 million; ECS (enterprise computing solutions) revenue was $188.2 million, up from $120.6 million, and other revenue was $71.2 million, almost even with last year’s $72.2 million.

For the quarter, Unisys reported a GAAP net loss of $175.4 million or $2.58 per share, significantly higher than last year’s net loss of $57.3 million or 85 cents per share.

On a non-GAAP basis, Unisys reported net income of $34.7 million or 51 cents per share, up from last year’s net loss of $27.3 million or 41 cents per share.