Good morning and welcome to the Unisys Corporation fourth quarter and full year 2025 financial results conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Michaela Pewarski, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, thank you for joining us. Yesterday afternoon, Unisys Corporation released its fourth quarter and full year 2025 financial results. Joining me to discuss those results are Michael Thomson, our CEO and President, and Debra McCann, our CFO. As a reminder, today's call contains estimates and other forward-looking statements within the meaning of the securities laws. We caution listeners that these statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed on this call. These items can be found in the forward-looking statements section of yesterday's earnings release furnished on Form 8-Ks and in our most recent Form 10-Ks and 10-Q filed with the SEC. We do not assume any obligation to review or revise any forward-looking statements in light of future events. We will also refer to certain non-GAAP financial measures, such as non-GAAP operating profit, that exclude certain unusual or non-recurring items such as post-retirement expense, cost reduction activities, and other expenses that the company believes are not indicative of its ongoing operations. While we believe these measures provide a more complete understanding of our financial performance, they are not intended to be a substitute for GAAP. Reconciliations for non-GAAP measures are provided in the slides for today's call, which are available on our investor website. With that, I would like to turn the call over to Michael.

Good morning, and thank you for joining us to discuss the company's fourth quarter and full year 2025 financial results. I want to start off with three clear messages that we hope you take away today. First, we continue to execute against a consistent operating strategy, which is yielding improved profitability and free cash flow as we continue to advance our pension removal strategy. Second, the market perception of Unisys Corporation and our solution continues to advance among our clients, prospects, partners, and industry analysts. And third, which relates to a subject I know is top of mind for everyone, we believe artificial intelligence is poised to become a powerful driver of long-term demand in the solutions that are core to Unisys Corporation as a designer, orchestrator, and enabler of modern IT ecosystem. Before discussing AI, I want to discuss my first message of how consistent execution of our strategy is translating into financial results. Fourth quarter revenue grew 5% year over year, resulting in a slight improvement in our full year revenue projections coming in above our revised midpoint. Our non-GAAP operating margin was 18% in the quarter and 9.1% for the year, exceeding the top end of our upwardly revised projections and representing 30 basis points of annual improvement. We had a high degree of confidence in achieving the fourth quarter weighting of our license and support revenue, and we met those expectations. Full year L&S revenue exceeded our original expectations by nearly $40,000,000 making this the third consecutive year of substantial upside in our highest margin profit center. Our actions to streamline corporate costs reduced SG&A as a percent of revenue by nearly 300 basis points over the past three years. We generated $128,000,000 of full year pre-pension free cash flow in 2025, up 55% from the…

Thank you, Michael, and good morning, everyone. As a reminder, my discussion today will reference slides from the supplemental presentation posted on our site. I will discuss total revenue growth, both as reported and in constant currency, and segment growth in constant currency only. I will also provide information excluding license and support for XLNS to allow investors to assess the progress we are making outside the portion of ECS revenue and profit recognition is tied to license renewal timing, which can be uneven between quarters. To echo Michael's comments, our results reflect consistent execution of our business strategy and effective de-risking of our future pension contributions, making our financial performance and liquidity stronger and more predictable for investors. We have seen an ongoing positive shift in how we engage with partners, clients, and industry experts; we think much of that is related to our agility in adopting artificial intelligence within delivery and solution framework. And we expect AI to be a strong long-term driver of demand for our largest solutions. Looking at our results in more detail, you can see on Slide 6 fourth quarter revenue was $575,000,000, up 5.3% year over year as reported and 2.7% in constant currency, driven by the timing of L&S renewals. For the full year, revenue was $1,950,000,000, down 2.9% as reported and 3.3% in constant currency, slightly above the midpoint of our revised guidance range. Excluding license and support solutions, revenue was $388,000,000 in the fourth quarter, $1,520,000,000 for the full year, both of which were down 3.9% in constant currency. I will now discuss segment revenue performance in constant currency terms shown on Slide 8. Fourth quarter Digital Workplace Solutions revenue of $126,000,000 was flat sequentially to third quarter and down 3.7% year over year. For the full year, DWS revenue…

Thank you, Debra. I wanted to take a moment to address our 2026 guidance. I am proud of what we have achieved in 2025, but disappointed that we did not overcome all of the industry headwinds impacting our XLNS revenue. For 2026, our expectations for mid-single-digit decline in XL&S solutions reflects an intentional deeper push into the adoption of emerging technology within our existing base of clients and the macro headwinds impacting discretionary spend in 2025 that we expect to linger through 2026, as we mentioned last quarter. Relative to 2024 year end, we have a more expansive book-to-bill ratio, more expected full year revenue already contracted and in backlog. And there is less embedded risk from assumptions for timing of revenue ramp on contracted new business. Similarly, for profitability, the majority of the required efficiency gains have already been actioned or identified. Achieving our 2026 guidance range keeps us on a path to potential full removal of the U.S.-defined benefit pension obligations by 2029, after which U.S. pension contributions would cease, and we expect a host of new possibilities for investments and capital return. Based on our interactions with existing and prospective clients, and the sequential growth in pipeline activity so far this year, we believe we will achieve positive XLNS revenue growth in 2027. With that, operator, you can open up the line for questions.

We will now begin the question and answer session. The first question today comes from Rod Bourgeois with Deep Dive Equity Research. Please go ahead.

Okay. Thank you. Hey, I will start with an AI question. So I want to ask, how are AI and automated code modernization tools influencing the road map that you have and the demand for ClearPath Forward? We have clearly seen some recent concerns that COBOL refactoring may affect IBM's mainframe business, so I want to ask how you are assessing the implications of that trend for the ClearPath Forward platform. Thanks.

Great. Hey, Rod. Thanks for the question. Certainly very timely with the communications that we have all seen. Look, the code factoring component of the dialogue that is, I guess, the issue du jour is not really new. Maybe the tools that we are using are new, but we have been talking about code factoring for a long, long time, years in fact. And, you know, you referenced IBM here and I think they have a piece out as well kind of reacting to that. It is really only a part of the story and it really is talking about, in my opinion, the enhancement of the platform. I mean, the code modernization is kind of the easy part. That does not change the engineering challenge of running the mission critical workloads at scale and doing it securely. I mean, really, it is about the architecture redesign, the runtime replacement, transaction processing integrity, the hardware tuning and years of performance tuning that is embedded in the platform. Cofactoring does none of that. Right? It really is just about the kind of modernization of what I would consider to be above the enterprise level of the core. So from a strategic perspective, you know, internally, we talk about ClearPath Forward 2050. I mean, that is kind of the time frame that we are looking out for that ecosystem. And we think net-net it is going to be a positive to kind of drive more demand to the platform. Think of it as kind of the automation of above the enterprise level and giving our clients more and more flexibility to that. And I guess secondarily, I would say that the other area that it is really important for is the continual kind of documentation of the code base, etcetera, testing and really reverse, right? Kind of doing scripts in current languages and maybe refactoring them back to COBOL into kind of a legacy mindset. So the reality is we do not view that as any change from the strategy that we are currently on. And I think if you look at, you know, what we have encountered, you know, I mentioned in my prepared remarks, three straight years of roughly $40,000,000 of improvement against our expectations in that business. That is a byproduct of longer contracts being signed, additional consumption being signed and the tooling that we have done over the course of the last say five years in that ecosystem has really positioned it to be AI-enabled. So I do not think it has really changed our strategy at all. And we see it as a continuation of the ability to kind of automate around the enterprise platform layer.

So, Michael, I just want to take an extra second on that. I mean, what you are saying is that the cofactoring threat—I think what you said was automation above the enterprise level—actually adds to the usage of your platform. Can you just add more color on that point?

Yeah. Look, I think in general, what we have been targeting and what we have been seeing is to put tools above the enterprise platform that allows for analysis and data extract, data movement across platforms, etcetera. And so using kind of AI agents and, I will say, refactoring of code above that enterprise level really just continues to enable the use of the data. And remember, the dataset that we are talking about are standardized datasets and decades worth of data embedded in there. Right? So if you are really trying to enhance a large language model, the key is really access of that data. Not necessarily what code it is written in to get there. So the easier we can make that, the more customized or localized we can make that interface, and through the use of these particular agents, I think will be beneficial and cause more use of data, not less.

Got it. Then just a question about the outlook for bookings in 2026. Last year had a big load of renewal activity but at the same time, over the last couple of years, you have invested to win new logos. So I am just—I want to get a perspective on your latest pipeline and sales effort and what the outlook is for your bookings activity and your bookings mix? I mean, will the mix shift toward, you know, existing client scope expansion where I think you had some positive commentary? What is the outlook for the bookings mix for 2026? Thanks.

Yes. Thank you, Rod. Great question and appreciate the opportunity to expand on that a little bit. So you are right. I mean, we signed $1,700,000,000 of renewals in 2025. That clearly took a lot of the team and the clients' focus to kind of get that behind us, which was great. We have got a really strong backlog and frankly a higher backlog position going into 2026 than we had going into 2025 in relation to that. But the corollary or knock-on to that is when you are doing that renegotiation on renewals, typically, clients are not talking about new scope opportunities. Right, because you are really focused on what that renewal looks like. So on the heels of that, and we mentioned in our prepared remarks that when we have done those renewals we have actually embedded into that some new scope. So as you know, we think of new business as new scope and new logo. So I would say two things. One, our focus on new logo expansion in 2026 is enhanced because we have got a lot more, I will say, bandwidth to really get after that because the renewal cycle is a little smaller this year—probably about a third of what it was last year. So we will have some more focus there. And then secondarily, and more importantly I think is the new scope expansion opportunities in the existing base will allow us to grow that new business as well. So I think you are right in looking at kind of that new business and I bucketed that way intentionally. It is not just about new logo, it is really about the proliferation of new scope opportunities whether that is in our existing base or whether that is with new logo clients. We talk about having roughly a $31,000,000,000 TAM in our existing base for new scope opportunities. So that is, you know, a really important element to our growth trajectory of the future.

Alright. Thank you.

The next question comes from Mayank Tandon with Needham. Please go ahead.

Thank you. Good morning. Michael, you mentioned the longer sales cycles and some of the competitive pricing dynamics. So maybe if you could just provide a little bit more details around how you counter some of that competitive pricing. And of course, you cannot control the overall market discretionary spending slowdown. But how do you maybe counter that?

Yes. Thank you for the question. Super important, right? Look, when we think about the sales cycles in general, I would say 2025 was really tough just because of all of the macros and kind of the adoption of new technology—people a little uncertain around how much to adopt, where to adopt it. Uncertainties around whether it was tariff-related or, again, other macro-related issues, geopolitical, etcetera, I think that weighed on the longevity of the contracting cycle a little bit more than the mechanics of, you know, what we typically see and I would say some of that is already starting to ease. We have got a pretty good jump-off point for Q1 as far as our pipeline is concerned, our discussions with clients in regards to that. In fact, just anecdotally, I had some correspondence with hopefully a future client that is talking about setting kind of record pace in their renewal cycle, really trying to expedite the use of that. So I think those were a little bit more macro than they are process-oriented from our perspective. But clearly, we have done a lot from the embedding of tools and technologies and process changes, qualifications of the pipeline, and also kind of how we are approaching opportunities to enhance and streamline the first touchpoint to contract closure. So, you know, we are very focused on trying to do everything we can to shorten that cycle, and be very prescriptive about how we approach clients and who we approach for what. So there definitely are some elements embedded in that. As far as pricing is concerned, look, it has always been a very competitive pricing environment. I think what has made it a little bit more competitive is you have got this pause, I guess, or the hesitancy to…

That is very helpful. And just a very quick follow-up for Debra, maybe. Debra, you know, given the guidance range, I am just curious as you entered this year, have you built in a little bit more buffer in your expectations given some of the uncertainty and macro headwinds? Or would you say you basically aligned your guidance with your historical strategy? And in that context, what dictates whether you come in at the low end of the range or the high end? Like, what are some of the factors we should be considering?

Right. Yes. I think, you know, we definitely, as Michael talked about some of the revenue pressure, some of the industry headwinds, is what we considered as we did the guidance. So I think the things to look for are, you know, at some of those macro factors, you know, alleviate—is what we assumed, that later in the year some of those factors alleviate. We had some—we, as Michael talked about, the mix of new logo is planned to have a lot more new logo this year as far as renewals. So as we are doing that, we think the Gartner Magic Quadrant will help. And so if we, you know, sell new logo kind of faster, that will be another element to look for that would increase, you know, what we put out there as our guidance. But we have kind of built in all these headwinds through most of 2026.

Look, I would say too, like, we absolutely took in a different approach to our guidance this year. It is not last year's same exact strategy. We saw obviously the PC refresh cycle we were expecting that never came to fruition. And so we have kind of backed that off and looked at trajectory a little bit when we talk about that cycle. Clearly, we have got the hardware cost components and we think that that is going to have some opportunities for DSS. But I would say in general, there was a little bit more of a conservative approach to the way we set guidance. But I want to just be really clear. Related to top line, you know, I think from a bottom line perspective, we have been very consistent in our ability to execute bottom line improvement. We are also calling for another, say, 150-ish basis points of bottom line improvement—good line of sight to that. But we definitely took into consideration the kind of market hesitancy that we have seen. We have kind of carried that through the first half of the guidance. And I think we wanted—as you know, we kind of pride ourselves on the level of transparency that we put out on a regular basis as it pertains specifically to our guidance. And we really kind of went through element by element to say, hey, is this an area where we feel really good about and kind of how to get there. So a little bit of a different approach on top line. I would say in general, just taking out some of the things that we thought were going to happen that did not happen in 2025 and expect that as they pick up throughout the year—kind of a midyear convention on that?

Great. Thank you so much, Michael and Debra.

Sure. Thank you. Appreciate it.

You are welcome. Thanks.

The next question comes from Maggie Nolan with William Blair. Please go ahead.

Wanted to look ahead a little bit. You talked about several things that you are working on in the script that would help accelerate XLNS revenue growth. And I am just wondering what leading indicators we can watch to assess this progress, and then what is kind of a realistic timeline—especially given some of the first half pressures you just outlined—what is the realistic timeline for seeing some level of growth acceleration?

Great. Thanks, Maggie, for the question. And a really good one and intuitive here too. I would say to you, clearly our new business kind of conversion rate is, I will say, the earliest indicator on top line. So I look at that question in two ways. One is really about the top-line expansion and the growth. And the other is about the deployment of our embedded technology, right, when we talk about enhancing the capabilities of our bottom line, right? So pushing that technology out to our existing client base we think will add some ability for us to grow top line through the use of, as I mentioned earlier, new scope opportunities within those accounts. Just know that that also comes with a little bit of a headwind. Right? So leaning into the adoption—and one of the examples I gave was the Service Experience Accelerator adoption that we are looking to push out to a third of our existing installed base. Well, when we push that out, there is going to be some pricing pressure on that top line because clearly it is—the agentic service desk that we are using is a lower cost of delivery and some of that we have to share with our client base. So you are pushing out this technology, which is going to put a little bit of a headwind pressure on. We think we are going to overcome that headwind with the expansion of the opportunity embedded in that client, and the addition of new logos to that base as well. So those are the things that we think are really going to support that XLNS growth rate—that is a DWS example. On the flip side, when I think about CA&I and the example there, we talked about the intelligent operations…

That is very helpful. Thank you. For my second question, just on margins, could you maybe distill for us the main puts and takes on margins in the next year, just kind of excluding the SG&A efficiencies you have gained, assuming that there is not incremental efficiency to drive there in the near term, beyond what you have already outlined? The efficiencies that we will be annualizing?

Yeah. Look, I mean, I think we have been fairly consistent from our perspective where we think those are coming from. Primarily, it is the application of emerging technology, right. The embedding of AI into our delivery platform allows us to deliver in a much more efficient manner. So clearly, there is going to be margin benefit from doing that. And as I mentioned, some of that margin benefit comes in the form of a revenue share, if you will, right, giving some of that back to the clients. But clearly, a portion of that stays embedded in our delivery platforms. And as we then add to that platform through the use of top-line growth, there is going to be obviously additional margin pull-through from that point of view. So I would say it is primarily in the application of emerging technology. There are still opportunities for us to be more efficient. There are still opportunities for us to continue to look at, I will say, upskilling or right skilling or right shoring components of what we do, and we continue to look at those opportunities as far as the delivery workforce is concerned. But again, the adoption of a digital workforce working alongside our human workforce—we are kind of working both sides of that equation. And then I would say lastly, when you think about the mix shift as we continue to push more and more into some of these newer elements of our solution. And I will just pick on field services as a very practical example. As we continue to shift the mix of what we are actually supporting with those field service technicians, whether that is liquid cooling, whether that is hybrid infrastructure, whether that is high-end storage—those are just higher margin elements of work for the same technician, moving away from some of the more traditional PC break/fix. So I think those three elements would be what I would point to as the real drivers of where we should expect to see margin improvement, which is again why I think we are really confident in the ability to execute it because a lot of the technology is obviously already embedded, and we are already moving it into production. And again, I think we have put a track record out there—almost 600 basis points improvement over the last three years in XL&S gross margin. Right? So we are looking for another 150 basis points there in 2026.

Thank you.

The next question comes from Anna Goskow with Bank of America. Please go ahead.

Hi, thanks very much. So first question is on the L&S revenue outlook. Do sense your kind of historical pattern of being conservative and then beating and raising. So back in October—when I think it was October—when you had the ClearPath kind of webinar for us, you had talked about a $400,000,000 CAGR for the next three years, and it looks like you are already kind of beating that with the $415,000,000 expected for this year. But then I think you did comment that you still expect about $400,000,000 2027–2028. So just wanted to understand. I understand there are license renewals in there, but it seems that the driver is AI in terms of consumption. So I wanted to understand what your thinking or expecting with regard to the impact of AI being a continued driver of consumption?

Great. Thank you, Anna, for that call and that call-out. I am going to reiterate a comment I made in an earlier point. We did revisit kind of the way we were putting our guidance together. And this is another good example of that. And so you saw that we actually put out here $415,000,000 of L&S revenue, even though a little while ago we were talking about an average of $400,000,000 over that three-year period and we carried that average, you know, up. Right? I think we started that in maybe in the $360,000,000 to $370,000,000 range, moved it to $390,000,000, moved it to $400,000,000. And are still saying $400,000,000 in those out years. So—and you are exactly right also that the driver of that has been consumption and use much more so than, you know, just the license renewal schedule. And we do think that that is the AI comment that I made earlier in regards to Rod's question. Right? The more tools and techniques and processes that we can build and put on the front end of that ecosystem or that platform, the more consumption of that data and, obviously, the more value that orients to the platform and to, frankly, to our clients and to us. So we do expect that trend to continue, which is why we increased that CAGR average for those out years. And I would just note too that the $40,000,000 beat over the last three years, which you kindly pointed out as well. You see the $415,000,000 kind of take some of that now into our guidance to go, okay, you know, this has been a pattern here of continued consumption. So we wanted to bake some of that in so that we are not—sometimes it is just bad to continually overperform than it would be to underperform. So we are trying to do a better job at making sure that some of that overperformance that we have seen and expect to continue to see is baked into the numbers.

Okay. So but for 2027–2028, you just have not really adjusted that yet for—I mean, any of us that are following the AI space or the AI impacts. I mean, consumption levels should continue to increase. Is that fair?

Yeah. Look, I would say it is too far out for us to adjust multiple-year-out consumption estimates. But I would say if history is indicative of the future, then yes, we would expect as we go further down the road that we will revisit that estimate. But for now, we felt pretty comfortable with—it is already a $10,000,000 to $15,000,000 step-up from what we were chatting about before. So you can assume there is some consumption baked in there.

Okay, great. And then Debra, so just on some of the balance sheet stuff. So I just want to make sure I am understanding on the free cash flow guide, which is a use of 25. So that is largely your expected all-in use of cash. Right? So if I just do the simple arithmetic on your current cash balance, going to be approximately $25,000,000 lower at the end of 2026.

That is correct. And pre-pension that translates to pre-pension of $67,000,000, you know, compared to the $128,000,000 this year.

Right. And then the slides on the pension outlook are great. Thank you very much. So it is really clarifying. So then if I look at the slide on potential annuity purchases, you really gave us the estimates of what the deficit is going to be. So at the end of the day, whether you purchase an annuity or not, your pension deficit is going to be down roughly in the $50,000,000 range. Right? So net-net, like your net debt is going to be lower at the end of the year because your cash is only going down by, like, 25, but your pension deficit is going down by at least 50. Is that right way to—

—down by that. Yes.

Yes. Okay. Yep. So it is down by about that much, but in the next three years, 2027–2029, $180,000,000, $137,000,000. It is all on that chart 17.

Okay.

Yeah. I mean, every contribution—

Right. Correct.

—shows that debt reduction. Deficit value. It is not dollar for dollar, but you will see continual improvement in the deficit and in net leverage.

Okay. And then the annuity purchases would are noncash.

Right. We use the plan assets to reduce the plan liabilities.

Correct? Okay. Okay. And then so yeah, I know you worked really hard last year to do the bond issuance and you know, it came at a rate that was a little higher than you probably preferred and your plan at some point is to refinance those lower? Obviously, like the market overall is pretty messy right now. So those bonds are trading below par. Have you thought about using some of your cash to buy back some of that debt at this point? Because it is a pretty attractive rate.

Yeah. I mean, we always look at everything. But, I mean, at this point, you know, we are always looking to conserve cash, right, given the pension obligations, given everything. But we are always looking at everything, but it is not, you know, something at this exact moment we are planning to do.

Okay. So the preference is just to keep, like, a solid cash balance. It sounds like.

Yes.

Okay. Great. Okay. Well, thank you very much.

You are welcome.

Continued into 2026 we are hopeful by kind of midyear that we will get back to kind of our normalcy as it pertains to kind of public sector work that we are doing. In fact, we signed a big deal recently in Australia public sector that was—in one case we had a win back from a competitor and another we expanded a relationship there that was pretty significant in the region. So we are optimistic.

Okay. Thank you. That was all for me.

Thank you, Anna.

This concludes our question and answer session and concludes our conference call today. Thank you for attending today's presentation. You may now disconnect.