Unisys Corporation — 2023 Form 10-K
Business context and reporting period. Unisys is a global IT solutions and services provider, with Digital Workplace Solutions (DWS), Cloud, Applications & Infrastructure Solutions (CA&I), and Enterprise Computing Solutions (ECS) as its reportable segments. This annual filing covers the fiscal year ended December 31, 2023; it does not provide a separate fourth-quarter summary in the supplied text.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $2,015.4 million | $1,979.9 million |
| Gross profit / margin | $551.3 million / 27.4% | $529.6 million / 26.7% |
| Operating income | $76.9 million | $52.2 million |
| Interest expense | $30.8 million | $32.4 million |
| Net loss attributable to Unisys | $430.7 million; diluted loss per share $6.31 | $106.0 million; diluted loss per share $1.57 |
| Cash from operating activities | $74.2 million | $12.7 million |
| Cash and cash equivalents at year-end | $387.7 million | $391.8 million |
| Total debt at year-end | $504.2 million | $513.1 million |
| Total assets / (deficit) equity | $1,965.4 million / $(138.4) million | $2,065.6 million / $21.8 million |
Revenue increased 1.8%. Services revenue was $1,665.9 million and technology revenue was $349.5 million. International operations generated $1.13 billion, approximately 56% of revenue. Segment revenue and gross profit percentages were: DWS $546.1 million and 14.0%; CA&I $531.0 million and 15.4%; ECS $648.0 million and 61.2%. Segment figures exclude $290.3 million of other revenue from consolidated revenue.
The filing does not present free cash flow as a defined metric. Cash used for investing activities was $69.6 million and cash used for financing activities was $17.3 million. Approximately $232.2 million of year-end cash was held by foreign subsidiaries; the company states that roughly one-third may not be readily transferable out of the countries where held.
Material changes versus 2022
- Net loss widened to $430.7 million from $106.0 million, primarily reflecting $348.9 million of pension settlement losses in 2023 versus none in 2022. The losses followed two annuity purchases totaling approximately $516 million, transferring obligations for about 12,550 U.S. retirees.
- Gross margin improved to 27.4% from 26.7%, and operating income rose to $76.9 million from $52.2 million. Management cited lower cost-reduction charges and improved CA&I gross profit.
- DWS revenue rose to $546.1 million from $509.9 million, while its gross margin was unchanged at 14.0%. CA&I revenue rose to $531.0 million from $520.3 million and gross margin improved to 15.4% from 9.1%. ECS revenue declined to $648.0 million from $669.7 million and gross margin fell to 61.2% from 64.5%, primarily due to timing of software license renewals.
- Operating cash flow increased to $74.2 million from $12.7 million, which management attributed primarily to working-capital improvements. Cost-reduction charges decreased to $9.3 million from $54.9 million.
Outlook, risks and unusual items
- Outlook and liquidity: Management expects adequate liquidity for at least the next 12 months. It estimates defined-benefit pension contributions of approximately $21 million in 2024, approximately $110 million in 2025, and approximately $770 million in aggregate from 2026 through 2033. These estimates may change with market returns, discount rates, regulation, and other assumptions. No specific consolidated revenue or earnings guidance is provided in the supplied filing text.
- Debt and refinancing: The company has $485 million face value of 6.875% senior secured notes due November 2027 and says it expects to refinance them before maturity or explore other funding sources. Its revolving ABL facility matures in October 2025; at year-end there were no borrowings, $7.1 million of letters of credit, and $88.6 million of availability. The facility includes a pension-related springing maturity provision.
- Orders: Firm order backlog was $3.0 billion at year-end, versus $2.9 billion a year earlier; approximately $1.3 billion, or 44%, was expected to convert to revenue in 2024. Separately, remaining performance obligations were approximately $0.9 billion, with about 33% expected to be recognized by the end of 2024. Backlog may be canceled in some circumstances.
- Legal and regulatory matters: Unreserved Brazilian tax-related matters, excluding those assessed as remote, were estimated at approximately $119 million, inclusive of related interest. A January 2024 Dutch court judgment awarded approximately $8 million against a subsidiary; appeal rights ran through April 30, 2024. The company was discussing a potential non-scienter-based settlement with SEC staff regarding cybersecurity disclosures and controls; resolution was uncertain. A putative securities class action was dismissed in February 2024 with leave to amend. The filing says provisions were considered adequate, but adverse outcomes could be material.
- Other significant risks: The company cites cyberattacks, client retention and contract profitability, competition, economic and foreign-exchange exposure, government contracting, talent needs, pension funding, and its ability to adapt to AI and other technology shifts. It disclosed a 2022 cyberattack that exfiltrated software source code, while reporting no material financial or strategic effect from cybersecurity risks as of year-end 2023.
- Controls and accounting judgments: Previously identified material weaknesses in disclosure and financial reporting controls were reported as remediated; management and the auditor concluded controls were effective at December 31, 2023. No goodwill impairment was recorded, but CA&I and DWS fair values exceeded carrying values by 10% and 16%, respectively. The auditor identified DWS goodwill valuation as a critical audit matter.
Most important facts for investors to verify
- Whether operating cash flow and margins can improve enough to support pension contributions and refinancing needs, particularly as contributions are forecast to rise sharply from 2025 onward.
- Progress toward refinancing the 2027 notes and maintaining ABL availability, covenants, and liquidity under the pension-related springing maturity terms.
- Whether backlog converts as expected, and whether ECS license-renewal timing and CA&I/DWS growth assumptions support goodwill valuations.
- Developments in the SEC matter, securities litigation, Brazilian tax disputes, and environmental contingencies, including any changes to recorded provisions.
- How management’s revenue and cash-generation performance compares with its stated strategy of growing higher-margin offerings; the filing provides no specific company-wide revenue or earnings guidance.