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Did Unisys beat or miss consensus estimates last quarter?

- **L&S Growth Acceleration**: Full-year L&S guidance raised to $430 million, with $400 million average annual target for 2026-2028. 
- **AI-Driven Margin Expansion**: Ex-L&S gross margin improved 70 bps YoY to 18.6%, with automation reducing delivery costs. 
- **Pension De-risking Progress**: $320 million U.S. pension liabilities removed via annuity purchase, with $600 million target by end-2026. 
- **Free Cash Flow Target**: On track to meet $110 million pre-pension free cash flow for 2025. 
- **Public Sector Challenges**: U.S. government shutdown delays project work, but renewals remain strong with improved margins. 
- **Competitive Pricing Pressure**: Attrition on unprofitable renewals reflects disciplined margin focus. 


**【CEO Summary】**
- **Revenue Growth and L&S Expansion**: Total revenue for Q3 2025 was $460 million, with L&S revenue at $83 million (down 20% YoY). Full-year L&S guidance increased to $430 million, with a $400 million average annual target for 2026-2028. Ex-L&S revenue was $377 million (down 3.9% YoY). 
- **AI-Driven Efficiency**: AI solutions are reducing delivery costs, enabling margin improvements. For example, DWS's service desk automation achieved 40% deflection of human support and a 28% increase in user engagement. 
- **Pension Progress**: Annually purchased $320 million of U.S. pension liabilities, bringing total annuity purchases to $600 million target by end-2026. 
- **Client Renewals**: Total contract value (TCV) for renewals year-to-date is $2 billion (book-to-bill of 1.1x), with Ex-L&S renewals up 78% YoY. 
- **Market Challenges**: Ex-L&S growth constrained by PC refresh delays, public sector project pauses, and competitive pricing pressure. 

**【CFO Financial Commentary】**
- **GAAP Results**: Q3 GAAP net loss was $309 million (including $228 million non-cash pension expense). Non-GAAP operating profit was $25 million (5.4% margin). 
- **Cash Flow**: Pre-pension free cash flow was $51 million (Q3) and $15 million YTD. Full-year pre-pension free cash flow target remains $110 million. 
- **Balance Sheet**: Cash balance of $322 million as of Q3, with no debt maturities until 2031. 
- **Pension Deficit**: U.S. pension deficit reduced to $470 million (from $500 million at year-end 2024), with $360 million of planned contributions through 2029. 
- **Margins**: Ex-L&S gross margin improved 70 bps YoY to 18.6%, driven by lower cost charges and workforce optimization. ECS gross margin declined due to L&S renewal timing. 

**【Q&A Highlights】**
- **AI Impact**: AI is reducing delivery costs (e.g., DWS automation saves 24% in abandonment rates) and driving L&S consumption growth (+$40 million YoY). However, competitive pricing pressure limits top-line growth. 
- **Revenue Timing**: Q3 Ex-L&S shortfall ($390 million vs. $377 million) due to hardware pass-through delays and public sector uncertainty. Q4 expects $570 million revenue with $185-190 million L&S. 
- **Public Sector Dynamics**: U.S. government shutdown delayed project work, but renewals remain strong (e.g., $125 million DWS renewal with improved margins). Non-discretionary public sector work (e.g., justice systems) shows resilience. 
- **Pricing Strategy**: Disciplined approach to renewals, refusing to cut prices below profitability threshold. Attrition rate on unprofitable renewals is acceptable. 
- **2026 Outlook**: Liquidity position strong ($322 million cash, undrawn $125 million ABL). L&S growth and margin expansion will drive free cash flow. Public sector project work expected to remain constrained for 2-3 quarters. 


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