BLUE BELL, PA — Unisys Corporation (NYSE: UIS) released its financial results for the second quarter of 2024, showing modest revenue growth and significant wins in new business contracts. The company posted a revenue increase of 0.3% year-over-year (YoY) and a 0.5% rise in constant currency. Excluding License and Support (Ex-L&S) revenue remained flat YoY, with a slight increase in constant currency.
Gross profit margins improved notably, rising by 290 basis points to 27.2%. The Ex-L&S gross profit margin also saw a boost, climbing 270 basis points to 18.7%. Operating profit margin stood at 4.9%, while the non-GAAP operating profit margin was 6.1%.
“Unisys had another strong quarter of new logo signings, which more than doubled sequentially for the third consecutive quarter,” said Unisys Chair and CEO Peter A. Altabef. “Overall New Business Total Contract Value (TCV) grew double-digit year-over-year, which we believe signals strong marketplace momentum for our solution portfolio and recognition of the innovation we are bringing to our clients.”
Unisys CFO Deb McCann highlighted the financial improvements, saying, “Our second quarter Ex-L&S gross profit margin improvement of 270 basis points compared to the prior year extends a track record of execution against our plan to improve profitability. Looking ahead for the second half of the year, we anticipate sequential revenue growth and operating profit and cash flow improvement as New Business signings begin to generate revenue and we further benefit from our operating efficiency initiatives.”
Second Quarter 2024 Segment Results
The company’s Digital Workplace Solutions (DWS) segment saw a revenue decline of 2.1% YoY, but this was better than expected due to a slower decline in discretionary volume. The gross profit margin for DWS improved by 260 basis points to 16.2%, driven by delivery modernization and efficiency initiatives.
Cloud and Infrastructure (CA&I) revenue increased by 1.3% YoY, with a gross profit margin improvement of 90 basis points to 17.8%, primarily due to labor cost savings initiatives.
Enterprise Computing Solutions (ECS) revenue rose by 2.2% YoY, with a gross profit margin of 55.9%, an increase of 180 basis points. This was mainly driven by the timing of software license renewals and growth in managed services.
Balance Sheet and Cash Flows
Free cash flow declined by $43.2 million YoY in the second quarter of 2024 and by $31.8 million for the first half of the year, primarily due to the timing of collections and other working capital fluctuations.
Financial Guidance
Unisys reiterated its full-year 2024 revenue growth and profitability guidance. The company expects revenue growth in constant currency to be between -1.5% and 1.5%, with a non-GAAP operating profit margin of 5.5% to 7.5%. This guidance implies reported revenue growth of -1.7% to 1.3% based on recent exchange rates and assumes Ex-L&S full-year revenue growth of 1.5% to 5.0%, with L&S revenue around $375 million.
Buy, Sell, or Hold?
For investors, Unisys presents a nuanced picture. The company’s ability to secure new business signings and improve profitability is a positive sign. The improvement in gross profit margins and operational efficiencies also bodes well for future performance. However, the modest overall revenue growth and decline in free cash flow are areas of concern.
Given these factors, Unisys is a Hold. The company’s strategic wins and improved margins offer promise, but the flat revenue growth and cash flow issues suggest caution. Investors should monitor the company’s ability to convert new business signings into sustained revenue growth and continue its efficiency initiatives. While Unisys shows operational resilience, market conditions and execution will be key determinants of future performance.
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