Okay, so we're going live with Unisys. I'm going to give it a couple of seconds for the audience to pop in it before we kick it off. Okay, so welcome to the Sidoti & Company June Small Cap Conference, and thank you for joining us today. Next up, we have Unisys ticker UIS. I'm Anja Soderstrom, Senior Equity Analyst here at Sidoti & Company, covering the name. It's my pleasure to have the CEO, Peter Altabef, with me today. Welcome, Peter. Thank you. This will be conducted as a fireside chat, and I will kick it off, but feel free to submit your own questions in the Q&A section at the bottom of your screen, and I will incorporate those questions as well. And with that, let's get started. So, Peter, maybe first give a company overview on a high level of Unisys and the solutions you provide and who your clients are and who you compete with. Well, great. Thank you. First of all, thank you for inviting me. Fireside chat is a little dangerous right now because I'm calling from Dallas, and we don't need any more fires. It's hot enough in Dallas today. But thanks for doing it, and I look forward to the one-on-one meetings with some of your participants later in the day. Unisys is an IT solutions company, so we're very much in the information technology path. We do both software development for clients. We have our proprietary software, and we also do services. We divide our company really into four segments, of which three are SEC reporting segments. Each of the three represents about 30% of revenue, and then the fourth, which is not an SEC segment, represents about 10%. So the first three segments are what we call our Digital Workplace, and that is all things related to assisting our clients in assisting their people to operate productively. So you can think of laptops, or you can think of phones, or you can think of wearables. How does it have the right software? You think of video conferencing. How does it have that software and hardware maintained and up to date? It is an area where artificial intelligence is moving very, very quickly, especially in the support area and one in which we're moving quickly with it. We're seen as a leader in the digital workplace area, and the third-party administrators typically put us right at the top of those Magic Quadrants. The second area is around what we call Cloud, Applications & I nfrastructure, also about a third of our revenue. That is really cloud management, cloud modernization of apps that are going to the cloud, as well as private cloud and hybrid cloud. So there you see us working with clients primarily in the government space, in financial services, in travel and transportation, and in technology. And then the third of those three segments is what we call Enterprise Computing Solutions, or ECS. Again, that's about a third of our—or about 30% of our revenue. That has almost two pieces to it, Anja. But part of that, it's all around proprietary solutions. Some of that is software licenses, maintenance, and support, and some of that is services related to those. ClearPath Forward, which is an operating system that we developed, represents the majority of that revenue. It's highly profitable and very good cash flow. But coming on is AI and quantum-related solutions. Unisys Logistics Optimization is something that we would consider in that category as well. It's a proprietary solution that really uses both AI and quantum in helping our clients in the logistics industry, and we've had those clients for 40 years. Okay, great. Thank you. That was a good overview. You all talk a lot about the License and Support versus Ex- License and Support. Can you explain what that means and why you break it out and why it's a valuable business for you? Sure. So License and Support is a subset of our ECS business. So if you think of ECS as 30%-33% of our business, License and Support makes up about 20 of those 30-33 points. So it's about a fifth of the revenue of the company. The majority of that is related to ClearPath Forward. And the license piece of that, because most of those clients are banks or financial institutions or governments, those clients tend not to purchase that on a SaaS basis because their cost of capital is much less than anybody else's. So they prefer to purchase that on a license basis: 2, 3, 5 years, etc. And so what that means is, from a revenue standpoint, we take the licensed portion of L&S, S meaning support, into revenue when we sign those deals. That means that those renewals and transactions, sometimes for more revenue, sometimes for less, hit our balance sheet in a very lumpy way. Depending on when you sign those, you can have more or less of that revenue in a year or in a quarter. So because that is a fifth of our revenue, we've kind of put it to the side and said, "It's really important. It's great business, but it's inherently lumpy." And so look at the rest of the company and how the rest of the company is growing, and we'll tell you what to expect as far as we know on the License and Support side. That is very stable revenue. It's very stable profitability, but it's lumpy from quarter to quarter and even from year to year. Okay, so let's talk about the Ex- L&S solutions, which is an important element of your long-term strategy as you scale in your IT services revenue, which is everything else outside of License and Support or what you call Ex- L&S solutions. Can you talk about how these IT services are differentiated and how you've been managing to transform them and return them to growth? Well, that's a great question. It's differentiated in a couple of, maybe three different ways. So first is, as I mentioned, when we look at that work, we look at the kinds of solutions we provide. And then those tend to be in that digital workplace area where we are extremely well thought of and really a leader globally in that space. So that is a way we differentiate. We also are moving very quickly in that space to enhance those solutions with artificial intelligence. So we have taken the approach that rather than charge separately for AI-enabled enablement, we're simply building it right into our solutions. We think long-term that's the way the market will go for all of this. And so it is really ubiquitous inside our company now. And AI is one of the tools that is really moving digital workplace very, very quickly. And so we intend to keep our lead in that and to extend it. When we think of cloud and applications, as I said, a lot of our business is with governments, mainly foreign governments, as well as state and local. And what we find there is their budgets are less susceptible to quarterly ups and downs. Their budgets tend to be set on an annual basis, and they are fully appreciative of the fact that governments have tended to be perceived as slower to adopt new technologies. So they're really trying to catch up in digitization. And again, they're using AI to catch up. So we think that's a very, very exciting place for us to be. And then on ECS, our solutions such as Unisys Logistics will largely not be sold based on License and Support and will be sold based on a SaaS model. That means that the revenue from Unisys Logistics will almost exclusively be in Ex- L&S. That, as I said, is a growth area for us. Not only are we using AI there, but we're also using what we call quantum annealing, which is real quantum, and it is very, very powerful. We feel very good about that solution. Okay, and then looking ahead, what do you think growth in your Ex- L&S solutions looks like, and what are you seeing that indicates you can sustain growth in that segment? Well, so for a company like Unisys, with about 151 years of history, there are some elements of that Ex- L&S business where that is, if you will, older solutions. And those older solutions tend to be stagnant in terms of revenue or even decreasing a little bit. One of the things we have done is, over the past two years, really refresh that entire base. So even clients that are used to seeing us with older solutions are no longer seeing that. We are moving those clients very quickly into newer solutions. So for us, we had strong growth in 2023 in that segment of Ex- L&S. We expect strong growth in 2024, and we expect the profitability of that to increase. Because we talk about Ex- L&S, which includes some legacy stuff, that has historically been a bit of a drag on profitability. But as we convert them into newer solutions, that drag goes away. Okay, thank you. You talked a lot about AI already, but what does the increasing focus on that mean for Unisys and how are you approaching that for your clients and for your own adoption? It's really important for us. I'm sure you're hearing that throughout this conference. But let me put it in context for Unisys. So Unisys historically has been what I would categorize as an engineering-based IT solutions company. We've never been particularly good at your mess for less, which is kind of the way IT solutions has been for a while. So we don't really believe in that. We really believe in engineering a better mousetrap. And so by that, the fact that artificial intelligence is heavily engineering-based, you're seeing companies, I think there was a company today in our space that announced a $1.3 billion acquisition of, surprise, surprise, an engineering company. But we already have that. And so for us to use those engineering skills and turn AI into an organic part of every piece of the company is, we think, pretty powerful. We have 122 AI-driven projects in the company right now. 122. Those involve putting AI into our client solutions. Those involve putting AI into our delivery engine so we can deliver solutions more effectively. Those involve looking at functions such as HR and finance and legal and building them in to create lower cost basis for our SG&A. We are really all in on that. Our secret sauce is the fact that we really have this enormous engineering capability. Nowhere does that seem more apparent than in DWS or Digital Workplace because it's an early adopter and in solutions such as Unisys Logistics. Okay, and what do you see among your customers in terms of their capacity to take on AI and quantum computing in terms of their hardware and capacity? And there's a big demand now for the chips and NVIDIA and all others are sort of boosting their production. But is that sort of a bottleneck for your customers maybe? And you will see that also become more widely adopted later on for you? Well, I think it's actually a bottleneck for everybody. I think the industry has moved very quickly to provide tools for application developers to use AI enablement developed. The productivity increases are extensive. But you train people and then you have trouble getting your hands on all of the chips. The benefit we have is very strong relationships on the supply chain. And so we have extremely strong relationships in supply chain. So we've been able to position ourselves somewhat advantageously that way. And even to the extent that I think it has not significantly inhibited our ability to grow. With respect to our clients, we're an interesting company, Anja. As you know, if I look at our top 50 clients, we have an average tenure with those clients, average tenure of more than 20 years. So that doesn't mean we don't have new clients. In those top 50, we have clients that we got last year or earlier this year. But we have a very, very loyal customer base because we do good work. And what that means is that in a world where there's so much noise, in a world where everybody is talking about AI and everybody's talking about new solutions, that historical strong relationship with our clients does not guarantee that we get new work. It does not guarantee we get new projects. It doesn't even guarantee that our clients will use our products. But it does pretty much guarantee that we have earned an audience because we've been there so long. And getting an audience with your clients, having the opportunity to talk to them is really three quarters of the game. And so it's a very, very important asset of ours. It's one that we take very seriously because we have to continue to earn their trust. But we get those meetings, and that's very important when we have an environment with all that noise out there. Okay, thank you. And you already mentioned your logistics optimization solutions. It's a specific AI-driven solution. Can you share more about the offering and why you think you're well positioned to successfully scale it within the logistics market? And also maybe mention who you compete directly against with that. Yeah, it's an interesting market. We have been in the logistics business for more than 40 years. And if we have a specialty, it is with airline cargo. So now airline cargo, think about the bottom of an airplane. We're not talking about passenger luggage, which is a minority of airline bottom. It's mostly package goods that an airline is moving through third-party logistics companies or for other third-party freight organizations. It's a very, very important part of the value prop. And if you think about the bottom of an airline, it's not flat, right? It's curved. And the containers in airlines are of an unusual shape. So when you think about how to maximize the filling of those containers, the speed of filling of those containers, the volume, it's something that people really have never been able to optimize. You don't have the time to spend days and days optimizing containers. So you do the best you can. Now, we have taken not only artificial intelligence, but also quantum annealing. We can actually optimize the speed and the packing of those containers. As everybody knows, airlines have time matters to them. The cost of fuel matters to them. We have now finished our initial pilot with a major airline cargo organization, and we have better than expected results. So that is an area where we're using 40 years of clients. We're using our reputation in the space. We're going beyond AI and using quantum annealing to get results faster. And we're very excited about it. It's also an unusual space. So you talked about competitors. Most of the companies that have done airline cargo logistics tend to be smaller private organizations. And they simply don't have access to the kind of engineering skills or quantum computing that we have. So it's a very interesting space because we expect to be very successful. And I don't want to say we don't have any competitors. That's not true. But we stand out as a company of scale in that environment. Okay, interesting. Let's move over to financials a little bit and talk about your profitability. You have a number of opportunities to improve that. What are the largest opportunities you see there? Really, really coming from three areas. So as I mentioned, as we have begun to really aggressively move our clients from legacy solutions to more modern solutions, the profitability of those clients has increased. So we have gone from more marginal profitability on some legacy solutions to enhanced profitability. So we've increased, and we're on a path to continue to increase about 200 basis points a year, which is our estimate of profitability in those solutions. In addition to that, and part of that 200 basis points comes from lowering costs. So in addition to increasing the gross margin of that work, we're lowering the cost associated with that. Some of that is because of AI. Some of that is because of labor pyramids. We're being more effective at managing our workforce. And some of that is from lowering the cost of SG&A. If you put lower cost and higher margin, that's a pretty solid base. Then when you add increasing revenue on top of that, you get even more progress. Okay, and let's talk about the cash flow then. You will have to begin making cash contributions to your U.S. pension plans next year. You laid out a plan to fund this by improving the free cash flow. Can you walk us through the pathway to improve free cash flow to meet these obligations? You also set some free cash flow targets for 2026 if you want to go with those. Yeah, so our cash flow last year exceeded expectations. And we do have what I think is a very solid plan to get enhanced cash flow. And cash flow this year is expected to be better than last year. And then it's expected to grow for the next several years. And the elements there are pretty basic. It's not anything too fancy. We have a number of costs, Anja, that are just going away. So when we look at our legal expenses and expected legal costs, the largest of that is a suit that we have brought where we're the plaintiff. We're not the defendant. There are no counterclaims against us. We're just the plaintiff. And so that will be winding down. We think that the trial will be over the course of this year. And so we just don't think we could have those costs going forward. Now, we have not in our targets included any benefits from that suit. So again, we think that is being conservative. But just the cost will go down. One of the burdens of being a 150-year-old company is things that happened 50 years ago. And so we have had some environmental costs that also simply just go away. So we have a very good view, we think, about our future environmental costs and almost all of that. Think of manufacturing from 50 or 100 years ago and think of environmental cleanups. So that is at the kind of tail end of what we have had to spend. So some part of our cash flow is not actually enhanced cash flow. It is simply costs that are going away. In addition to that, as I mentioned, as our business gets more profitable and as our costs go down, the cash flow is almost dollar for dollar. The amount of money we put into R&D in this business is relatively fixed in the sense that we know what it is. So as we get more profitable from lowering costs and increasing revenue, all of that comes into cash flow as well. And we've got a pretty good track record of delivering on that. So we expect that to continue. Okay, and then more broadly on the pension, can you talk about what these contributions look like over the coming years and how the strategy you have been executing to manage these pension liabilities? Well, again, so part of the legacy benefit of the company is this remarkable engineering talent and many, many patents. And part of the negative part of that is we still have a legacy pension plan. That pension plan, we talk about it, it's really two kinds. It's a non-U.S. plan, which is relatively modest and relatively not a majority of the cost. The majority of the cost to us has been the U.S. defined benefit plan. And that plan, we do expect to make payments really in 2025 and thereafter until about 2032, 2033 when they're expected to go to zero. By 2033, all of these payments go to zero. So as our expectation. So while you might think of that as paying a bit of a mortgage where you're paying the principal and interest at the same time, and eventually it just goes away. So for us, that's largely between this year through 2033. Again, there is some variability, especially to the U.S. contributions. But we report very specifically on that every quarter. We put diagrams in there, and we have a very clear plan of how much we expect it to cost us and where the revenue and profit will come from that will allow us to pay that off. Outside of that pension, we have very little debt as a company. The only fixed debt we have, we have no ABL outstanding at all. And the only fixed debt we have, which is a fixed and which is due in 2027. And we'll probably refinance that between now and then. So we really don't have any substantial debt other than what we expect to contribute to the pension over time. Cash flow, we have about $400 million in the bank, which is a little less, but almost the same amount as the fixed debt. Okay, thank you. There's been a number of recent headlines on two of your primary competitors. What are the implications of these developments for Unisys? Well, so one of those headlines is about a competitor based in Europe. The other is just rumors about two competitors that are based in the U.S. So nothing substantiated on them. What I would say is our business plan is very set. We know what we have to do. We know the areas we have to grow in. And I hate to say it doesn't matter what happens to those competitors, but we know our job. What I would say, though, is if any of those rumors are correct, those companies will have a great deal of change to manage. And that is change to manage about how they're organized, how they operate. And folks focused on managing internal change don't have the same bandwidth to manage their solutions for their customers. And we don't have that issue. We're really focused on managing solutions for our customers and not so much on internal stuff. We think that's an advantage for us. We're going to continue to work that advantage. Thank you. Just there's a lot of macroeconomic headwinds and uncertainties out there. What are you seeing in terms of that and the customer sentiment when you talk to your customers? Are there any specific verticals that are better than others? Yeah, so Anja, that's a great question too. I already mentioned if we think about the things we do, about 30% of our revenue is in each of those top three segments, about 10% in business process. If we think about geography, about 45% of our revenue comes from the U.S. and Canada, about 30% from EMEA, and about 12.5% each from Latin America and from Asia Pacific. So that's a pretty diverse I mean, a majority of our revenue is not in the U.S., but 45% is. That's a pretty good balance. So at any one moment, you may have one economy or one region doing better than the others. But we're pretty well diversified. And we think that is a strength. Similarly, when you think about our clients, about a third of our revenue is in financial services clients. About a third comes from governments. And about a third comes from non-financial service, non-governments. Think travel and transportation. Think high-tech companies. Think manufacturing. So again, we're pretty diversified. So whether it is the things we do, the places we do it, or the types of clients we have, we think that no one can actually foresee where there will be more or less disruption. But we like that diversification. The one area where it's an interesting area, and I talked about it earlier, about 20% of our revenue comes from shorter-term projects. And about 80%, actually 77% of our revenue comes from longer-term contracts. Well, that's an advantage because in recessionary periods, the shorter-term discretionary work tends to be more at risk. In periods where you don't have a recession and in periods where you have more discretionary spend, that 23% of our revenue that is shorter-term tends to be higher profit. I would actually like us to grow that 23% to about 30% and go from a 23%-77% mix to a 30%-70% mix. I actually think as we grow that mix of shorter-term projects, we'll get higher revenue. That's the one area where I think our model can develop. I think it will develop into a more profitable model. Okay, great. Thank you. Time is up. Before we close it down, I first want to thank you for joining us today. I know you have a pretty full one-on-one schedule. If anyone at the call would like to follow up with you, they can reach out either to us at Sidoti or the company directly to set up a follow-up meeting. I would like to hand it over to you, Peter, before we close it for some closing remarks on sharing with the investors the most important things about Unisys offers investors who may be considering taking a position in Unisys. Well, thank you, Anja. I think you actually talked about one of them just now. We are very client-centric, and we're very investor-centric. So we will absolutely have calls and have meetings with any of your clients to think about learning more about the companies. That's number one. Number two, I think companies like ours that are in the technology space that have focused on engineering are having a moment. I mean, this really is a sea change in the power of engineered solutions. AI is all about engineering. It's all about getting the data right. It's all about getting data lakes right. It's all about advanced large language and large action models. That's really engineering specific. It's not your mess for less. So we are very excited about our prospects. We're excited about the conversations we're having with our clients and prospects. We've signed more new business in the first quarter than in all of last year in terms of new logos. So we think this is a good time to be interested in the company. I can tell you the company's people are very excited about what we're doing. So that's all good. Okay, sounds good. Thank you so much, Peter and Unisys, and everyone who participated. Have a good rest of your day. Thanks, Anja.