Unisys (UIS) 28th Annual Needham Growth Conference Virtual summary

Financial performance and segment outlook

• ECS/L&S segment maintains stable 70% margins, with annual revenue around $400 million and strong cash flow.

• FY24 revenue was ~$2B, with adjusted EBITDA of ~$290M and free cash flow of ~$55M.

• Ex-L&S gross margin improved to 17.6% in FY24, with overall gross margin at 29.2%.

• IT services (DWS and CA&I) have margin profiles in the low- to mid-20% range, with opportunities for further improvement through efficiency and technology adoption.

• Recurring revenue mix is about 80%, providing stability, though consulting work could increase margins at the cost of consistency.

AI integration, digital strategy, and competitive positioning

• AI is viewed as a net benefit, driving consumption by leveraging decades of structured data for analytics and telemetry.

• Generative and agentic AI are embedded in service desk solutions, automating knowledge management and improving client support.

• Focus on digital agility, AI-driven automation, and cloud transformation to enable smarter decisions and fuel growth in a $1.6T global IT services market growing at 8.4% CAGR through 2029.

• Recognized by industry analysts and partners for leadership in digital workplace, cloud, AI, and cybersecurity services.

• DWS and CA&I segments face competition from major IT service providers, but differentiated solutions and recent recognition in Gartner's Magic Quadrant support strong positioning.

Growth opportunities and market dynamics

• CA&I segment has a larger addressable market ($600B) and higher growth potential (10%-12% CAGR) compared to DWS ($150B, 5%-8% CAGR).

• Company-wide normalized growth is targeted at 3%-5% CAGR, with some segments expected to outperform.

• Expanding addressable markets, especially in the mid-market, and modernizing client applications with AI and edge technologies.

• Targeting ~150bps annual Ex-L&S gross margin expansion through higher-value solutions, AI-driven efficiency, and contract optimization.

• The company aims to shift its revenue mix to include more consulting for higher margins.