Unisys at Midwest Ideas Conference: Strategic Moves for Growth

Unisys Corporation (NYSE:UIS) outlined its strategic initiatives at the 16th Annual Midwest Ideas Conference on Tuesday, 26 August 2025. The company highlighted its focus on growth and financial stability, emphasizing both opportunities and challenges. Key discussions included capital restructuring and leveraging AI to enhance service delivery.

Key Takeaways

• Unisys operates in a $1.6 trillion IT services market with high single-digit growth.
• The company aims to terminate its US qualified defined benefit plans within 3-5 years.
• Significant AI-driven initiatives are underway to boost efficiency and reduce costs.
• Unisys achieved a 600 basis point gross margin expansion since 2022 in its XLNS solutions.
• The company plans to execute $600 million in annuity purchases over the next two years.

Financial Results

• Revenue: Approximately $2 billion in 2024.
• Adjusted EBITDA: Nearly $300 million.
• Free Cash Flow: Over $50 million.
• SG&A Savings: Expected $30-40 million reduction to benefit next year.
• Legal Settlement: $25 million received on July 1.
• Pension Deficit: Reduced from $500 million to $250 million.
• Gross Margin Expansion: Achieved 600 basis points since 2022, targeting 150 bps annually in XLNS solutions.

Operational Updates

• Segments: Unisys operates in three segments—Cloud Applications & Infrastructure Solutions, Digital Workplace Solutions, and Enterprise Computing Solutions (ECS), each contributing roughly a third of the total revenue.
• ClearPath Forward: This proprietary software operating system within ECS accounts for two-thirds of the segment’s revenue.
• New Logos: There has been a significant increase in new logo total contract value compared to the prior three years, driven by investments in innovation, marketing, and sales.
• Alliance Partners: Unisys is expanding collaborations with technology partners to enhance co-selling efforts.
• AI Implementation: The company is focusing on AI to improve service delivery efficiency, with initiatives like the Service Experience Accelerator.

Future Outlook

• Pension Plan Termination: Unisys plans to terminate its US qualified defined benefit plans within the next three to five years, with an estimated cost of $250-300 million.
• Annuity Purchases: Plans to execute $600 million of annuity purchases in the next two years to further reduce liabilities.
• Growth Strategy: The company is focusing on new logo acquisition and expanding addressable markets, with an emphasis on emerging technologies, including AI.
• Capital Allocation: Future cash flows will be used for deleveraging, investing in organic growth and M&A opportunities, and potentially returning capital to shareholders.

Q&A Highlights

• AI Concerns: Unisys addressed potential AI implementation errors, emphasizing the importance of high-quality, up-to-date training data and human oversight.
• Free Cash Flow: The company discussed the potential for increased free cash flow upon pension elimination, which would be allocated towards debt reduction, business investments, and potential shareholder returns.
• ClearPath Forward Event: An upcoming event will provide a deeper understanding of the ClearPath Forward business, including client case studies and industry trends.

Readers are encouraged to refer to the full transcript for a comprehensive understanding of Unisys’s strategic directions and financial details.

Full transcript - 16th Annual Midwest Ideas Conference:

Operator: Your next presentation is Unisys traded on the New York Stock Exchange with ticker UIS. Representing them today is VP and trader, Shabalag Gupta, and VP and IR, Michelle Perwoski.

Michelle Perwoski, VP and IR, Unisys: Hi, everybody. Thanks for joining us to learn more about Unisys. We’re going to start with a quick overview of the company and then we’ll move on to, you know, a quick discussion of the strategy and we’ll end up with Shalab who’s going to talk about some of the recent pension actions that we’ve taken to really accelerate removal of liabilities from the pension and ultimately the full plan itself, which we expect to be able to do in the next three to five years. But let me quickly go through kind of who we are as a company. We’re a global IT services company.

We operate in a $1,600,000,000,000 market that’s growing kind of high single digits. And on this slide, you’ll see some of the client priorities and how varied they are and how critical they are to the enterprise and governments and higher education. And we’ll get into some of the solutions that, you know, we provide to help drive innovation in AI, data governance, manage cybersecurity risk, you know, all the things you see on this slide. We’re about 16,000 employees, 8,000 engineers. We have 100 roughly technology partners that we leverage when we architect our solutions and deliver them for our clients.

We have about 700 clients and we serve more than 50 countries and we are roughly $2,000,000,000 in revenue, you know, just shy of $300,000,000 in adjusted EBITDA and, you know, a little more than $50,000,000 in free cash flow we generated in 2024. And, you know, I think one thing that really sets us apart within the industry is the the depth of our client relationships. We’re a 150 year old company, and our top 50 clients have been with Unisys for more than twenty years on average. And these are some of the largest public sector financial services and commercial enterprises in the world, which you’ll see on this slide. This is just, you know, a select listing of some of the clients whose names we’re able to share with you so you can kind of get a sense of the quality of organization that the organizations that we work with.

We are organized in three segments. The first is cloud applications and infrastructure solutions. So within that segment, we are providing services like managed cloud services where we are maybe migrating workloads to the cloud, managing clients’ infrastructure across hybrid environments, whether that is in public cloud, private cloud, on premise. We also have application development. So we help clients modernize legacy enterprise applications.

We may build new ones. We may implement software and kind of custom engineer platforms that software powers. So there’s a good base of application developers and that came to the company in large part through an acquisition we made, you know, sometime around 2020. We also do cybersecurity. That’s a big area of growth for, you know, the industry and for this segment.

So we help clients design things like their SOC centers of excellence. We have solutions and partnerships with companies like a CrowdStrike where we’re helping them deploy the solutions. And then we manage that on an ongoing basis. So a lot of our revenue is recurring in this segment. And same in digital workplace, which you can think of as largely outsourced of IT support for service desk where, you know, employees need have issues with technology and field services where we’re going out in the field and, you know, servicing technology.

We have a very large field services organization. It’s unique and many of the players in our space don’t have that. And I think it kind of sets us apart. And in some cases, we will even work with them on contracts where they can’t provide those capabilities. We also manage devices, the tech stacks on the device, the experience, the technology experience that whether that’s in office with workplace kind of conference room technology, whether that’s on a factory floor with a technology vending machine.

There’s all kinds of technology that we touch in the workplace. I’m going to move on to enterprise computing. That’s our third segment. Roughly, each of these is a third of our revenue, roughly. Enterprise computing is a bit unique in that two thirds of that segment is a proprietary software operating system called ClearPath Forward that is ours, and it’s, you know, deployed at a global kind of base of, you know, really blue chip companies, banks, governments.

And they use this operating system for transaction processing, whether that’s running their mortgage processing, running their airline reservation systems or cruise line reservation systems, processing tax returns. So there’s a number of applications for this technology. But in general, these clients are using it for mission critical workloads that really need to beyond kind of 20 fourseven uptime all the time. They can’t fail. They need to be very secure.

There’s sensitive data on there. And they need to be able to process a very large number of transactions. That part of the business is something that we’ll go into more in a couple of slides. The rest of that segment, about a third of the enterprise computing segment is specialized services where those systems are legacy. We have modernized them, but certain elements and aspects of them are very unique and companies having to maintain a base of employees that understand those systems can be difficult.

So we provide services where we will manage that infrastructure that’s running our systems. We also have some proprietary industry applications that run on ClearPath Forward that we have developed over decades. For example, a cargo management system or applications in retail banking and clients in those industries in which we have deep expertise and which ClearPath is supporting will also use our applications as well as their own that they have built. So this is just a quick this bar chart kind of shows you the revenue and kind of gross margin in the past couple of years of that one third of that ECS segment ClearPath, which we call license and support. And some of the characteristics of why clients choose to continue using ClearPath Forward.

Security, they built up customization over decades. It’s extremely expensive to try to migrate off or maybe move certain workloads into the cloud. The cloud has gotten more expensive. But really, we’ve made it easier to modernize around ClearPath and that business is incredibly sticky. One thing to understand about those contracts, about 85% of L and S renewal is license revenue.

That is recognized upfront for a full multiyear contract in the quarter in which that renewal signed and the remaining 15% to 20% that support is recognized over the term of the contract. So it does create some lumpiness depending on when certain clients actually sign that renewal and which clients are renewing in a given year. But there are some really great trends going on in this business. These contracts are for a certain term as well as certain MIPS, so consumption. And clients are using these systems more and more over the past, you know, years.

That trend has really picked up. And that means more revenue for Unisys. And so if you think of an airline running a reservation system, there’s more, people changing seats on an app and reticketing that seat. That’s driving consumption or companies pulling data, valuable data off of our systems to move it into a data lake and run analysis that’s driving consumption. So when a client kind of hits their consumption, if it’s before the end of their term, they will renew early.

And that means you get another four year term or three year term of revenue six months or a year sooner. So turning back to kind of the services portion of the business, this is kind of an overview of some of the partners we work with in each of our segments to give you a sense, high quality, some of the best tech companies out there. We’re always evolving our partner ecosystem to make sure we’re bringing the best technology to our clients. And this slide is just a quick, you know, kind of timeline to give you a sense, and I’m not going to really spend time on this now, but I think it will help you understand some of the things you see in our financials and some of the positive things we’ve achieved with our rebranding of the company, reorganization, expanding our alliance partner program, and really moving up the rankings with industry analysts and advisors, and investing in innovation and returning you know, the business to a point where it is attracting, you know, new logos to the company, which are providing a strong pipeline of expansion for the future. And this is just, you know, some of the accolades we get from the industry analysts, and you can see kind of how many new and improved rankings we’ve received just over the past, you know, year or so.

So turning to the strategy for growing the XL and S business, this is very much a land and expand strategy. So like I mentioned, we’ve really reinvigorated new logo growth at the company. I believe we signed more new logo TCV, which is total contract value last year than we did in the three prior years combined. So it’s really been a strong inflection. And I think that’s due to the investments that we’ve really been making in innovation, marketing, sales, all of these things to the analysts and advisors to really bring more awareness and visibility to kind of the transformed Unisys after making some of those acquisitions we made in 2020 into higher growth areas of the market and really educating people about who we are today as a company.

The alliance partners, as I mentioned, that’s really key to the strategy of making sure that we’re bringing emerging disruptors to our clients that we’re expanding how we market and co sell with these partners. And as we talked about on our last earnings call, we’re starting to see more of a two way street with many of our partners where they’re coming to us and pulling us into deals that are in their pipeline versus the other way around. So that’s I think a really positive sign that some of the innovation that we’re delivering with things like service experience accelerator are which is a framework for our next generation service desk in DWS or intelligent operations in CA and I. Our technology partners are beginning to see Unisys as an asset that can bring new capabilities to their clients. Elevating awareness and relevance and continuing to invest in sales remains a big focus.

Expanding our addressable markets, whether that is in the mid market or broadening the types of things that we do. Those are all kind of elements of just getting into more parts of the market with our solutions. And really, we’re looking at doing that, especially in specific industries going deeper and kind of building broad relationships with those mid market clients who maybe a larger competitor can’t give as much time and attention to we can really give that white glove service, but bring that global scale and reach. Enabling emerging technologies, so, you know, developing scalable, flexible AI embedded solutions, leveraging our capabilities, our partners’ capabilities, our industry knowledge, that’s a key part of our growth strategy and modernizing edge. So leveraging our scaled application factory and partner ecosystem to kind of help modernize application layers, adopt AI on the edge, elevate the customer experience.

So that’s all a very important focus area of our innovation. I just want to briefly touch on AI. I think it’s one important point I want to make is I really do think Unisys gets a disproportionate benefit from AI. There’s a potential for us now to kind of compete with some of the much larger players in our space whose business models have historically kind of centered around having hundreds of thousands of employees and kind of billing for their time. Now we can and I think Service Experience Accelerator is like a great example of this.

We can significantly increase the delivery of Service Desk in an automated kind of fashion to improve the experience for the employee and to reduce our costs and improve our delivery efficiency. And we in general, for us, AI means that we can scale delivery of our innovation without needing to have 200,000 employees. And so I think that’s allowing us to it means that competing for these very large contracts is no longer out of reach. If we’re bringing that innovation, you know, we have the technology that we can now scale that more efficiently. And then this slide, you know, just covers kind of the clear path forward strategy.

And quickly, that’s just continuing to evolve our applications and certain capabilities to get data from our systems to power front end applications in the enterprise to really bridge skills gaps with our specialized services and support. So all of these things are really going to drive consumption on our platforms, but also make them stickier because it’s bringing more capabilities and kind of making it a more modern experience to use our operating system so that there’s no push factor of I can’t get my data, I can’t use it to power my applications. We’re increasing the mobility of that. We’re making sure clients have Unisys associates who can bridge skills gaps for them. And we’re continuing to innovate with new industry solutions and applications that run on ClearPath as well.

Gross margin expansion. So moving to margin expansion, we’re basically targeting 150 bps annual gross margin expansion in our XLNS solutions. Since 2022, we’ve achieved 600 basis points of expansion. And that’s a combination of mix shift and improving delivery efficiency, whether that is workforce optimization, leveraging lower cost labor markets, upskilling and reskilling employees and backfilling internally. So all of that workforce optimization, leveraging technology to get more efficient automation, strategic account management.

So it’s a combination of that shift into the higher margin, faster growing areas of the market and improving that efficiency largely I think going forward. That’s going to be more technology led. And then this slide talks about the levers to improve our free cash flow. We have an SG and A program that we have been diligently executing. We’ve taken significant costs, probably 30,000,000 to $40,000,000 out of our SG and A base that will get a full year of benefit next year.

And we also have had the past few years legal environmental costs that have been unusual in nature that are winding down and a couple one time inflows here that we also expect, one of which we got on the $25,000,000 legal settlement on July 1. And we have about $30,000,000 that we’ll get in ’twenty six or ’twenty seven when we complete the remediation of an environmental site. This is just a recap of of kind of the the strategy we went through, and I’m gonna pass it over to Shalab now to just quickly go through the the pension items.

Shalab Gupta, VP and Trader, Unisys: Alright. Which which button is it?

Michelle Perwoski, VP and IR, Unisys: This one? To the right. Right.

Shalab Gupta, VP and Trader, Unisys: This one? Yeah. All right. All right. You know, back in June, we refinanced an upside of a debt and to address some of the pension overhangs.

But before I get there, I just want to spend a few minutes on our strategic objectives. So what we did in June was part of our long term capital structure objectives. So specifically when you look at these objectives, the foremost, the first and foremost is reducing the size of The US qualified defined benefit plans and ultimately over time remove those plans. That’s one of the key objectives for us as far as capital structure is concerned. Additionally, we want to reduce the uncertainty of our cash flows, the volatility that we have.

Part of it is driven by was driven by pensions. So that’s the key objective is to reduce that volatility. At the same time, we want to maintain strong cash balances and liquidity. And that’s very important to get us through any macroeconomic headwinds. So it’s important for that.

The next one is improving net leverage ratio and credit rating. That’s really important for us because right now we are at the credit rating are limited in terms of what we can do as far as capital structure is concerned taking out pensions etcetera. As our ratings improve with the improved leverage ratios, we should be able to borrow and retire our pensions. That will completely remove the overhang we have in pensions. As our debt capacity improves, we should be able to then invest more in our growth.

And as the growth improves and cash flow improves, we should be then in a position to return some of the capital to the shareholders. So that is our long term objective to get to a point where we have sufficient liquidity, sufficient cash leverage capacity for us to be able to return capital to the shareholders. Now coming back specifically to the transaction, back in June we issued $700,000,000 of senior secured notes. Part of it was to refinance our existing $485,000,000 notes, which were maturing in 2027, but we took that opportunity to refinance it at the present moment. And we upsized it by $200,000,000 We took $50,000,000 of cash from the balance sheet and contributed $250,000,000 to the pension plans.

That reduced the deficit in the pension plans, The U. S. Contribution U. S. Defined benefit contribution of pension plans from 500,000,000 down to $250,000,000.

At the same time, we also extended our asset backed revolver, maturity of that revolver so that it’s in line with the extended debt. Our next steps for us is to execute annuity purchases. And the rationale for executing annuity purchases is it reduces our liabilities, and I’ll get to it a little bit later, but it helps us to ultimately remove the pension plan at a much lower cost. So it’s important for us to get to executing annuity purchases. And finally, where we need to get to is generate sufficient cash flows.

And as cash flows, as our EBITDA improves over the next few years and our debt goes down, we’ll have lot less leverage and would have capacity to fully remove the pension plan. So these are, you know, I won’t go through this. The only point I want to make on this leverage detailed slide is the fact that when we increased the debt by $200,000,000, we contributed to the pension plan. The rating agencies, the way they look at it, they look at our leverage. They combine funded debt with pension debt.

So literally, it’s taking $200,000,000 of funded debt and reducing $200,000,000 of pension debt. So no net impact on leverage. Actually leverage came down a little because we took $50,000,000 of cash from the balance sheet and contributed to the pension plan. So net leverage actually reduced the leverage actually reduced a little gross leverage, but net leverage remained the same. So what are the benefits of us contributing this $250,000,000 into the pension plan?

So the additional thing that we did when we actually contributed the $250,000,000 into the pension plan was also change the investment philosophy in the pension plan. We took all the assets instead of targeting higher returns on the assets. We took those assets and literally hedged the liabilities. The benefit of that is that going forward, we would not see the volatility in contributions at all going forward. Very little de minimis volatility in contributions.

That’s really important because we heard from our investors that they cannot stomach volatility of contributions back because it could be significant headwind given our cash flows. So in addition to removing the volatility, it reduces the deficit. So deficit in The US qualified plants is now two fifty instead of 500. It also enables us to do annuity purchases. If we had not contributed the two fifty, we would not have been able to do annuity purchases depending because it’s a threshold that is we have to achieve to be able to do annuity purchases.

By contributing the two fifty, we were able to get to that threshold. And as I mentioned to you before, as we do annuity purchases and we plan to do about $600,000,000 of annuity purchases in the next two years, starting this year and next year, what that will do is that will deduce or lower the liabilities and ultimately reduce the cost to terminate the pension plans. Now this transaction, when you look at this transaction, by contributing $250,000,000 to the pension plan, it reduced our future cash contributions. So if you were to calculate the impact on cash flows of these reduced contributions and netting it with higher interest rates, There was a $70,000,000 benefit over the five year period to cash flows. So our cash flows, reduction in contribution to the pension plan more than offset the increase in interest expense for incremental debt.

So with that, we are we think I mean, and again, on July 24, we had given the details in terms of over the next five years what happens to our gap deficit and what happens to contributions. And based upon that, we also said that in next three to five years, we would be in a position to terminate the pension plan because the deficit, cost of terminating these pension plans would be roughly $250,000,000 to $300,000,000 which if we are generating the cash flows that we are projecting, we should be able to either from cash flows or from incremental debt to be able to terminate these pension plans. That’s all I had. Any questions? Any questions?

Unidentified speaker: Yeah. So I, you know, I was looking online, and those numbers aren’t always totally accurate. But looking at the compounded annual growth rates that you guys provided with the percentage of your revenue streams that it comprises, I ended up calculating from those numbers around a 6.1% compounded annual growth rate. If I put a 0% growth rate for that third part of the business right there that it’s just, like, being maintained and it comprises the software and all that kind of stuff. And I know that you were talking a lot about the AI potentially decreasing costs and particularly decreasing personnel costs.

The thing that I’m a little bit confused about though is that because there’s a lot of specialized support and specialized engineering and it’s such like a like a very very important thing for people to always be able to rely upon their cloud solutions and their software solutions to be going no matter the time of day, no matter what’s going on. Do you think that like implementing possibility for little errors to come through when people are counting on you most?

Shalab Gupta, VP and Trader, Unisys: Again, AI is we are not new to AI. We have implemented AI. It’s not called agentic AI, but we have been doing AI for the last several years. So it’s not that that’s something not new for us. Again, what’s what’s new is the buzzwords of agentic AI that that everyone talks about.

And and again, we are looking at various ways to implement those agentic AIs as well. The big benefit for us is reduction in delivery costs. That is the biggest benefit that that we get. Yes, when we implement these customers or clients are always looking for cost breaks, right, or price breaks. But effectively, the benefit is from delivery savings.

Michelle Perwoski, VP and IR, Unisys: Yeah. I mean, I think that’s you’re you’re making a valid point. You’re saying we’re using more AI in the delivery and, you know, there’s still human oversight. I think it’s just about making the employees more productive. I do think training data that is up to date, fulsome, not redundant, doesn’t have gaps in the knowledge, like, is the, you know, thing that everybody is, like, striving to create and that bad training data is more errors in it and issues with it is, you know, a big challenge for enterprise adoption because it’s leading to like hallucinations.

And I think a lot of clients not finding being able to achieve the ROI that they thought they could when they, you know, started that pilot or deployed that thing. So, you know, I think that is why we’re so excited about the knowledge management capabilities that we’ve been developing in DWS because we do see eventually like broader potential applications for that. But, you know, in DWS for automating some of that service desk, you know, that’s really deployed in the client’s network leveraging their data. It’s not like training off the internet or anything. And we have created capabilities like, if there’s an issue with somebody’s computer in the office in Asia and then it pops up in the office in The United States or somebody else.

If one of our, you know, agents help somebody handle that, our we’re using generative AI to help them resolve that. We’re using generative AI to, like, create a knowledge article about, like, how to resolve this issue and to get that into the training data that then the automated, you know, agents are learning off

Unidentified speaker: of. Yeah.

Michelle Perwoski, VP and IR, Unisys: And to kind of constantly be in taking, you know, information from the device performance and from, you know, what’s going on with with people around the organization. Yeah. And to identify gaps in knowledge like where we need to create content or this is out of date. So we are doing a lot of work around that. And I think that, you know, this service has not been perfect even with people and the challenges, the tools that they they have.

So even when you have like a person trying to help someone resolve an issue, it it might not be, you know, might have a long handle time or, you know, they might take up a lot of that employee’s time and and distract them. So, you know, we view AI as just like something that can help our people Yeah. Be more productive, but we’re not gonna like go have AI like generate, like like, go do the application development by itself.

Unidentified speaker: Well, it’s really difficult too because, I mean, the amount of savings and the benefits this could have to your guys’ business, I mean, it’s obvious how how great it could be. Just speaking from a from a place of experience when I was working at a financial institution and we were trying to use generative AI for IT help and that kind of stuff. Having a small training set caused a lot of hallucinations, hallucinations. And I’m so excited for the for the technology and I think it’s gonna be Having fantastic. But I I just get a little bit worried right in the back of my head that that something could go wrong and, you know, this is

Michelle Perwoski, VP and IR, Unisys: Were you guys what were you using? Like, a copilot or

Unidentified speaker: It it was it was something developed. Third party I mean, I I didn’t sign an NDA, so I can’t even talk, but I worked at US Bank. And we had Okay. And we had a generative AI sort of like assistant that dealt with our IT stuff. Yeah.

And we would go to that for all of our questions and sometimes we would get completely wrong information just because it didn’t have too much training data. Yeah.

Michelle Perwoski, VP and IR, Unisys: But Yeah. And I’m guessing it was probably static data. Yeah. That like wasn’t constantly being cleansed and stuff like that. And and that I like me agreeing that is a big challenge.

Shalab Gupta, VP and Trader, Unisys: It’s the quality of the data. Quality of the data is really important. So one of the things that we we strive for is cleansing the data, having having quality data, knowledge base, etcetera, to make sure that what you put out is is accurate.

Michelle Perwoski, VP and IR, Unisys: Yeah. And then on like the front end, you know, the interface really with the end user, like, upon the employees, like the chatbot. Yep. And it uses like natural language processing. So I could say like, hey, my computer broke or someone else might say like, my computer is not working.

Or they might be speaking in another language and it like understands, you know, this person saying this and that sounds a lot like this issue and, you know, things like that. So I think we feel like we’re getting closer. We’re not there yet to like delivering on that promise of having, you know, automated customer service that can understand and adapt and give you that the right answer when you need it to actually, you know, solve that problem so you can, like, get back to work.

Unidentified speaker: Yeah. My understanding is excited to see where it goes because the potential is really really

Michelle Perwoski, VP and IR, Unisys: up. Yeah.

Unidentified speaker: Let’s just say there’s 300,000,000 in EBITDA out of six years, which hopefully is very low. But talk to me about free cash flow generation without any pensions gone. What is available for equity holders?

Shalab Gupta, VP and Trader, Unisys: I mean, right now our debt is significant, 1,200,000,000.0 if you include the pension debt. Right? Pension goes away. It uses the cash flow that we generate over the next few years. Currently our forecast is what is $100,000,000 of pre pension cash Yeah, 100,000,000.

Michelle Perwoski, VP and IR, Unisys: Then we raise it to $110,000,000

Shalab Gupta, VP and Trader, Unisys: Yeah, something that’s roughly $100,000,000 if and and our EBITDA is roughly what is $2.82

Michelle Perwoski, VP and IR, Unisys: Yes. So that’s what what it is today.

Shalab Gupta, VP and Trader, Unisys: That’s what it’s today.

Michelle Perwoski, VP and IR, Unisys: That Did not have the pension contributions. And we hope to improve that. We’ve really improved our free cash flow conversion. The environmental and the kind of legal, those were big drags.

Shalab Gupta, VP and Trader, Unisys: Yeah. Because we still have about $80,000,000 of CapEx. So our free cash flow is $100,000,000 on $280,000,000 of EBITDA. If we have six years out, we have EBITDA of $300,000,000 and we are generating 130,000,000 $140,000,000 of free cash flows. First step would be, I mean, there are a few things we will have to do.

First of all, take care of the pensions. It’s out five years, we still have $250,000,000 to $300,000,000 of requirement to take care of pension. So part of the cash flows, either cash flows or incremental debt would be required to take care of the pensions. And beyond that, it’s more about initially more about reducing debt, right, because it’s still going to be highly levered at that point in time. So lowering debt, looking at M and A opportunities, investing in organic growth and then obviously also looking at, as I mentioned to you in one of the objectives is to return capital to the shareholders.

So it’s a combination of all of those things that we’ll be looking at in terms of how to utilize that cash flows.

Michelle Perwoski, VP and IR, Unisys: But are you asking specifically about

Unidentified speaker: like our return? We live we now are six years ahead and and there’s no pension. Yeah. Your your free cash flow yield is probably about 50% compared

Shalab Gupta, VP and Trader, Unisys: to Right.

Unidentified speaker: You’re trading right now.

Michelle Perwoski, VP and IR, Unisys: Yeah. I mean, today our pre pension free cash flow is one ten. So you’re and we’re saying EBITDA maybe grows 30 I billion mean, that seems like a that’s your base case scenario that you’re you’re choosing. But yeah. Right.

Yeah. But I’m saying today, it’s it’s it’s one ten. Yeah. The pension contributions, you know, are

Shalab Gupta, VP and Trader, Unisys: are Right. So so if you say the pension contributions are done, pension is pension overhang is done. The cash would be utilized to delever because we still have I’m assuming at that point, we still have significant leverage, delever, invest in the business, and and that will be a discussion as to what opportunities do we have to invest in the business, whether we do M and A or organic growth. And at the same time, we’ll be looking at returning capital to shareholders at that point in time.

Michelle Perwoski, VP and IR, Unisys: Yeah. But just also one one other thing I wanted to touch on, the interest is going up. So there is gonna be a shift. Like, we’re basically shifting pension contributions into and converting it into interest. Yep.

Because we’re we we issued some debt to put to fund the pension. So the contributions came down, interest went up. So actually, you know, this year relative to next year, you know, that incremental interest does impact your pre pension free cash flow. So that’s Right. Just a shift of those

Shalab Gupta, VP and Trader, Unisys: That’s two why I said, I mean, years out, we probably would want to reduce our debt because the interest cost is significant. So we reduce the debt, and then then we look at what are the opportunities. And then, like, every company looks at your the growth.

Michelle Perwoski, VP and IR, Unisys: You’re just trying to get a free cash flow yield. Right? Like it’d be

Shalab Gupta, VP and Trader, Unisys: Yes, that’s currently 110,000,000 I mean, if we have $300,000,000 of EBITDA, we’re looking at $140,000,000 $150,000,000 of free cash flows. And majority of a big chunk of that free cash flow is coming from our ClearPath Forward business, which is a 17% margin business.

Michelle Perwoski, VP and IR, Unisys: And we’ll be doing a event sometime in the next two months, probably probably before earnings, but hopefully a little earlier in the cycle than we did the pension event to to allow you to kind of get a deeper understanding of ClearPath Forward, some client case studies. You know, we’ve been talking a lot about the upside that has has been delivered from that business. So, you know, we wanna help you understand kind of what clients what is ClearPath? What are clients using it for? You know, what is a threat from AI?

All of these kind of bigger questions as well. And and to really give you some tangible client examples and case studies and help you understand that broader ecosystem that’s really driving consumption through those platforms. You know, look out for an invitation to that. Anything else before we wrap? Great.

Shalab Gupta, VP and Trader, Unisys: Thank you. Thank you.

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