Good morning everyone and welcome to the Unisys Corporation First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Should After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Courtney Hogan, Vice President of Investor Relations. Ma’am, please go ahead.

Thank you, operator. Good morning, everyone. This is Courtney Holben, Vice President of Investor Relations. Thank you for joining us. Yesterday afternoon Unisys released its first quarter 2022 financial results. I'm joined this morning to discuss those results by Peter Alt, our Chair and CEO, and Mike Thomson, our CFO. Before we begin, I'd like to cover a few details. First, today's conference call and the Q&A session are being webcast via the Unisys investor website. Second, you can find the earnings press release and the presentation slides that we will be using this morning to guide our discussion, as well as other information relating to our first quarter performance on our investor website, which we encourage you to visit. Third, today's presentation, which is complimentary to the earnings press release includes some non-GAAP financial measures. The non-GAAP measures have been reconciled to the related GAAP measures, and we've provided reconciliations within the presentation. Although appropriate under generally accepted accounting principles, the company's results reflect charges that the company believes are not indicative of its ongoing operations. And that can make its profitability and liquidity results difficult to compare to prior periods, anticipated future periods or to its competitors results. These items consist of post retirement and cost reduction and other expense. Management believes each of these items can distort the visibility of trends associated with the company's ongoing performance. Management also believes that the evaluation of the company's financial performance can be enhanced by use of supplemental presentation of its results that exclude the impact of these items in order to enhance consistency and comparativeness with prior or future period results. The following measures are often provided and utilized by the company's management analysts and investors to enhance comparability of year-over-year results as well as to compare results to other companies in our industry, non-GAAP operating profit, non-GAAP net income and non GAAP diluted earnings per share, free cash flow and adjusted free cash flow, EBITDA and adjusted EBITDA and constant currency. For more information regarding these metrics and related adjustments, please see our earnings release in our form 10-Q. From time to time, Unisys may provide specific guidance or color regarding its expected future financial performance. Such information is effective only on the day given. Unisys generally will not update, reaffirm or otherwise comment on any such information except as Unisys deems necessary and then only in a manner that complies with Regulation FD. And finally, I’d like to remind you that all forward-looking statements made during this conference call are subject to various risks and uncertainties that could cause the actual results to differ materially from our expectations. These factors are discussed more fully in the earnings release and in the company’s SEC filings. Copies of those SEC reports are available from the SEC and along with the other materials I mentioned earlier on the Unisys Investor website. And now, I’d like to turn the call over to Peter.

Good morning, everyone. And thank you for joining us to discuss our first quarter results. Our strategy is gaining traction. Clients and prospects are responding positively to our expanded and enhanced solution portfolio demonstrated by increased ACV and pipeline year-over-year. First quarter financial results were impacted by anticipated ECS renewal timing and the exiting of non-strategic DWS contracts in 2021. But we're largely in line with our expectations. Broad market knowledge of our higher value offerings is growing and we expect our marketing and sales efforts to further increase awareness and differentiation. While there is still work to be done to achieve our goals for the year, we are encouraged by the significant increase in new business signed in the first quarter and are excited by the prospects for the business. Mike will provide detail on our financial performance. But first I'll give some insight into the business. Starting with digital workplace solutions or DWS. We expanded and enhanced this business significantly in 2021. To offer higher growth and higher margin user experience based solutions. We are winning contracts with new clients looking to transform the digital workplace with DWS ACV growing 65% year-over-year in the quarter. While our financial results in the quarter were impacted by non-strategic contracts exited in 2021. Given the robust industry demand for GWS, we believed there is significant opportunity with new clients. During the quarter, we continue to upgrade our solutions to better meet client needs. We matured our experience model office or XMO offering and now have multiple clients under management with several others in implementation stages. We are also integrating increased automation into our offerings, including within experience as a service and Power Suite. For instance, in our Power Suite collaboration, security and governance tool, we are automating end user compliance to…

Thank you, Peter. And good morning everyone. My discussion today I'll refer to both GAAP and non-GAAP results. As a reminder, reconciliations of these metrics are available in our earnings materials. As Peter highlighted, our strategy for 2022 is beginning to gain traction. We're encouraged by the significant year-over-year increase and new business signings in the quarter, and we expect momentum to accelerate in the second half of the year as a result of our marketing and selling initiatives that are designed to increase awareness and differentiation of our expanded and enhanced solution portfolio. We expect our focus on our go to market efforts to translate into improved revenue growth and profitability over the course of 2022 and into 2023. Our reported financial results are generally in line with our expectations for the quarter. And we believe that the excitement felt internally and externally about our solutions and our strategy is beginning to manifest itself into positive momentum. This momentum is not necessarily reflected in the year-over-year compares as revenue and profitability in the quarter were impacted by a few known headwinds, specifically the anticipated clear path forward contract renewal timing, and the DWS private label field service contracts that we exited in 2021. Neither of these elements impacts our long term strategic objectives. That being said, I'll highlight the impact as I walked through our financial results. Starting with revenue, which we had indicated on our last quarterly call, was expected to be down low double digits year-over-year and ended up being down 12.4% year-over-year roughly in line with this expectation. On a constant currency basis revenue declined 10.3% year-over-year, which was better than consensus estimates, which do not explicitly account for currency. ECS revenue was slightly better than internal expectations for the quarter at $121 million due to…

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

Ladies and gentlemen, at this time we'll begin the question and answer session. [Operator Instructions]. We'll pause momentarily to assemble the roster. And our first question today comes from Rod Bourgeois from DeepDive Equity Research. Please go ahead with your question.

Great. Thank you. Hey, so you had previously conveyed that your clear path forward license renewals would be soft. And they were and that definitely weighed on revenues and margins. But not really a surprise there. So going into the report, knowing those timing factors, we were most interested in hearing about your sales and marketing progress and your bookings results. So I don't want to read too much into the bookings ACV growth of 43%. But I also don't want to miss what's underneath that year-over-year bookings growth. And also what drove the big jump in your sales pipeline and just seemingly over the last three months. So can you -- can you characterize the composition of the increased ACV and also of the recently increased pipeline? Specifically, it would be helpful to know, if there were an abnormal amount of large deals that drove the ACV and pipeline increases? Or if you're, your improved revenue and bookings pattern is a function of a pretty diverse set of deals. Can you just characterize what's happening in the composition there?

Yes, Rod. This is Peter, thanks for the questions. And I guess, let me let me try to take it in order. With respect to the revenue, you're exactly right. So the revenue number was not actually a surprise, if we actually look at what we had forecasted, which was kind of low teens in terms of year-on-year decline became 12.4. And when you look at the currency situation, that the currency went against us, our revenue actually beat the expectations of our analysts as a whole. So we really clicked on the revenue side, we came in, kind of as expected. And that's true, by the way with respect to the clear path forward portion of revenue. So the clear paths portion of revenue and the clear path forward drove the year-on-year declines in revenue was at was actually slightly higher than we what we anticipated. So we're there were no surprise, it wasn't higher by much. But that's, that's why we really don't have a surprise on the revenue side. With respect to the sales side, I guess I'll cover profit. Now you didn't, didn't raise it. We did have some surprises on the profit side. And those were negative surprises, those were largely driven by three contracts in our cloud infrastructure space, that where we had software development glitches. Two of those three were dependent pretty much solely on subcontractors. And we're taking the one time write offs now. We'll deal with those subcontractors later. One of those was, was frankly, not a subcontractor issue. It was ours. But it was one specific contract. It shouldn't be a surprise to anybody on this call that we devoted substantial resources in the fourth quarter of last year to acquire CompuGain. And that acquisition of CompuGain was meant to…

Hey, Rod, it's Mike. And Peter gave a pretty detailed answer there. And I think you probably got most pieces of your question, I would like to just address specifically one other element, no real abnormal deals in the mix. I think the size of the deals are as expected and consistent with what we thought. Peter gave you a good rundown on the mix. And I guess the point I would call out is similar to his and that it, didn't you I think that we are really looking forward to we're seeing the experience play. We're seeing clients take the full suite of our offerings in the DWS side, it's in the application development world within C&I. So we're certainly encouraged by that. We have a lot of work left to do. We're still in some of the early stages in regards to the work with third party advisors and industry analysts and growing that pipeline. So we're certainly not saying that we're on the downhill slide on all this. There's a lot of work left to be done there. But I'm certainly encouraged by both the number of deals, the size of the deals and the type of work that we're doing solidifying the strategy and the mix shift that we've been looking for. So hopefully, that gives you a good sense.

Now, that's really helpful. Thanks for that that color. And can I just as a quick follow up, are you pursuing and winning sole source deals? Or are most of these deals in your pipeline competitive bids?

Right, so it kind of depends on the size, Rod. I would say that a pretty large proportion of our signings right now, our expansion extensions. And in that world, they tend to be sole source. When you look at the new logos, smaller new logo deals can be sole source, when you look at larger deals, the majority of the larger deals are competitively bid.

Got it. Got it. And then and then just a final clarification that I'm getting questions on, given. So I wanted just to clarify the revenue tracking to the lower end of the guidance range for the year, is that due to DWS traditional client softness or due to the weaker than expected license renewals early in the year or both?

Yes, look, I think when we gave that guidance Rod, we obviously knew about the DWS equity contract. And we knew about the renewal schedule. So in my mind, it's a little more indicative of the point Peter made around the existing client base and their conversion, appetite, right? Because when you're converting, or you're, you're taking that client on that journey, it's a quicker transition than a new logo. And so the selling motion on the new logos a little longer, we're still in some of the earlier stages on the marketing and selling campaign. So that's, that's taking a little longer than we expected. And so you can't recover that aspect of new logos that you've been designing Q1, in Q2, three and four, right, you just don't have enough time to convert it to in your revenue. So good news, bad news. Good news obviously we're seeing it in the pipeline, the TCVs, the ACV. So the future looks aligned to where we thought it would be. The bad news is you have a little bit of add in your revenue impact, because the duration of the transition time.

Yes. And Rod, just to follow up on Mike's comments, which is exactly right. I mean, the Wall Street Journal just came out and the Washington Post with, with the contraction of the economy in the first quarter in the U.S. And, I do want to look at our mix of business, obviously for us to thrive, we have got to sign new revenue, new logos, new expansion, there's everybody in our business has to do that. But when you look at our revenue profile, which is slide nine of the deck that you guys have, 80% of our revenue is in recurring services or technology. So we're not we're not a recession proof business, nobody is. But having 80% of our revenue in recurring services and technology is not a terrible thing. When you have some questions as to the economy's health.

And ladies and gentlemen, our next question comes from Jon Tanwanteng from CJS Securities. Please go ahead with your question.

Hi guys, thanks for taking my questions. My first one is, I was wondering actually how much of the guidance I mean, going towards the lower range of FX, because you noted that it was a pretty big headwind in Q1. So your expectations for the rest of the year and how much of that is showing up in the guidance?

Yes, Jon? Hey, good question. Look, as you know our guidance is annual guidance. And the softness in Q1, as you also know was expected primarily due to the two elements we noted on the headwind. So I think the tamping down or the looking at the lower end of that guidance range is much more indicative of just the selling cycle, the selling motion, our continued traction and the fact that it's probably more low new logo driven than conversion. have a base and it just takes a little longer to get that in your revenue. You sign one of these contract, new logo in the back half of the year, you really get no new logo revenue in year for that contract or very little by the time you get through transition. And so I think, again as Peter noted the change here and the reason for shooting at the lower end of that guidance range is really the mix shift of how our new offerings are being digested. And it seems like the new logo aspect of that is a bigger portion than we thought it would be. And the conversion aspect, we have to tie that into contract renewals as opposed to kind of mid contract conversion. So that's really where we're at.

Understood. Thanks, Mike. Second, just in terms of the backlog, I know you've expectations for that increase in the second half of the year, should we continue to be to expect that to be pressured by shorter durations? I think, Peter you mentioned the transition of SaaS is probably the prime reason for that. If that's the case, does it make more sense to give a one year backlog number as opposed to ACV? Or total backlog?

Yes, Jon it's funny, you say that that's something we've been chatting about internally, as well. So may have something along that line in subsequent quarter, you're exactly right in the construct of the length of the deal, the duration of the deal. Certainly, that causes pressure in both TCV number in total, as well as the backlog component, which is really why we emphasize ACV have been emphasizing ACV for a couple of quarters now. We've kind of seen this trend. And interestingly enough that statistic that Peter just threw out about the 65% in the quarter, and roughly 50% for the year, it starts to feel a lot more like a SaaS type business. I mean, you take out the technology component that is always a little bit lumpy. But the rest of it starts to feel a lot more like that the duration certainly is, is mimicking that, that style. So certainly something we're considering Jon, and maybe we can chat offline and get some more thoughts from you on that and bake that into our logic as well.

Okay, got it. And then the last one for me just any change in the competitive environment at all. I know a lot of your competitors had Eastern Europe operations, obviously the macro may be forcing your people to be become more aggressive, just any thoughts on what you're seeing out there?

Yes, that's a great question, Jon. And it's not a simple question. So I'll try to divide it in a few places. On Eastern Europe, we did not and obviously do not have any associates in either Russia or Ukraine. We don't have any Russian based clients. We don't have any Ukrainian base clients. So for us, it was not really a question of, of leaving Russia because we were never there in the first place. That said, we have a facility of scale in Budapest, in Hungary. And that and I will tell you, what are the things that we have geared off is our recruiting in that Budapest facility. As you may know, there were something about 120,000 IT professionals in Ukraine at the time of the beginning of the invasions, some of them have stayed, some of them are leaving. So we were looking at them from all for all sorts of reasons, to bring them on board and join our company. That's probably the largest effect that that has had obviously, our teams have been engaged in assisting the refugees as well, with respect to kind of the broader markets in We're seeing that markets kind of play out a bit as expected. So I would not say that we're yet seeing any significant effect in Europe from the invasion.

And our next question comes from --

If I missed the back half of that question, I apologize, but was there more to it because I'm happy to discuss anything you want other [indiscernible].

Ladies and gentlemen, our next question comes from Matthew Galinko from Maxim Group, please go ahead with your question.

Oh, good morning. Thanks for taking my question. I guess for the deal you referenced that went across I think it started with an ECS customer that took on C&I and DWS. Did the scope of that contract start off broad or was that something you were able to pick up along the way?

The scope of that contract started that relationship as I mentioned, it has been an ECS relationship, it's a good relationship, part of what we have been doing as a company. And really started in 2020 when we readjusted our balance sheet, was really to invest both organically and inorganically, in what we consider kind of the next generation of digital workplace services or solutions and the next for us the next generation of cloud solutions. So again starting in 2020 and picking up dramatically in 2021. We have been doing what I would consider moving into the front end of the DWS world and really catching up in the cloud world, to be frank. And I think we're doing both of those very smartly. So I think we've kind of caught up in the cloud world and where we need to be and I believe we're at the forefront of DWS. So in both of those areas, we think we are very competitive. And we think we bring a lot of value for our clients. And one of the things we're doing is taking those solutions to our existing clients. In this case, that was an existing ECS client. And so we said, hey we got a bunch more stuff. And we were able to have good discussions about how those would add value to that client. And then we added the DWS and the C&I to the existing ECS relationship. It's a great example. And it's a, it's a large scale Latin American financial institution. It's a great example of kind of adding or we call it cross selling, but really taking an ECS, DWS and C&I client and really bringing to them opportunities from the other parts of the country.

Thanks, that's helpful. And I guess a follow up to that cross selling topic. I guess, is that or as you think of the opportunity to take existing customers and sort of that extract more wallet value or bring more solutions? Do you see that as the lower hanging fruit to cross sell as opposed to bringing existing kind of legacy DWS clients to, higher value solutions?

Yes, I'll take that just for a minute. And then, and then let Mike follow through because it's kind of critical to Mike’s new role, which starts on Monday. But at a big level, one of the things again, we moved last year during COVID we were also evolving the company pretty significantly, right? So not only did we invest in these, in these new solutions, but we also changed the operating dynamics as a company. And one of the things we did was to create a commercial organization that really had one face to the client, so that it was not a DWS lead and the C&I lead, and an ECF lead, but for one client executive, and that one client executive was really charged with selling the entirety of what we have. So we talked about cross selling, I use the term first. But the reality is, it's units we selling, right. It's selling everything that we have. And we do think that that is an important part of our future. And it takes a little while to get done. I will tell you, it's not something that happens immediately when you explain it to our team. But I think we're making progress on it. And I think in Mike's new role he's going to make more progress on it. Right

Yes. And Matt, thanks for the questions. Look at, I guess the short answer is, it's clearly easier from a perspective of the doors ajar, you're already doing work in there, we have wonderful NPS score. So they already like what we're doing. And I don't want to come across callous, right, it's not just cross selling, it's really just getting our head off and looking at opportunities to bring richer solutions to help our clients succeed. And it happens to come from another business unit or segment embedded in our offerings. So it's certainly something that we're looking at. And frankly, the, the amount or penetration that we currently have in that vein is roughly about 30%. So 30% of our C&I clients have some level of DWS component to it, and vice versa. And that's pretty consistent across the board. So there's a pretty good opportunity to do that. And then if you couple that, Matt with the acquisitions that we've done, so you've got three acquisitions that we've completed, well, they all have client bases, and if you recall, they weren't really duplicative of our client bases. So it opens up opportunities in that regard is well and clearly the ability to have that dialogue is a lot easier than it is on a new logo. So hopefully I gave you more color.

And our next question comes from Joe Vafi from Canaccord Genuity. Please go ahead with your question.

Good morning. This is [indiscernible] on for Joe, thanks for taking our question here. Yes. You mentioned that you're able to price deals to accommodate the cost pressures. How much room do you think you have there? If these pressures intensify considerably as the year progresses? Thank you.

Yes, I think that's a great question. And I think that was the second half of Jon’s question that I never got to. So thanks very much for, for talking about it. I think that our guidance was about 9.5% to 10.5% for the year, I think you heard Mike kind of say we were, we were pointing more towards the lower part of that and the higher part of that, and that's really the reason. So as we look at wage inflation, as we look at the battle for talent, I think we're doing a good job of limiting attrition, you see our last 12 months attrition is out is an 18.6%. And when you compare that to the industry base of the data I have, that is kind of the industry is actually kind of merging at somewhere around 19% to 21%. So we're a little below industry average there. But it's clearly it's a percent and a half higher than it was pre pandemic. So that's adding to cost too. But it's not just inflation. It's the training and the acquisition costs. So I think we're all being a little careful on the margins, I think, I think you're seeing that industry wise, and kind of saying that the increase in margins might be a little at the lower end of expectations. And I think that's one of the reasons you're seeing us and others do that. So we still expect healthy margins. Those are good numbers for us. And they've done this for us historically. But I think we're being a little cautious on the margin side. I hope that helps.

Yes, thank you.

And ladies and gentlemen, with that will be concluding today's question and answer session. I'd like to turn the floor back over to management for any closing remarks.

So this is Peter, again, I would like to thank everybody I know that call ran a little longer than expected today. And I want to thank everybody for staying on the call, we obviously have a lot to tell, and that that telling is not going to end with the end of this call. So we look forward to after on discussions with both analysts and shareholders or prospective shareholders. I think you'll continue to find that very, very welcoming to discuss the company we have a lot to talk about. And we're proud of the progress we have made. I also want to say as I did in my opening remarks, my real appreciation for Mike and in his role as CFO and my great expectation of the job he's going to do in COO and then again to welcome Debra McCann to that CFO position going forward, with that thanks very much for staying on the call.

Ladies and gentlemen, with that we'll end today's conference call. We thank you for joining today's presentation. You may now disconnect your lines