10-Q: Unisys Reports Q1 2026 Results, Net Loss Widens

Unisys Corporation reported a net loss of $35.8 million for the first quarter of 2026, an increase from the $29.5 million loss in the same period last year, with revenue showing a modest increase.

Summary

• Unisys Corporation reported a net loss attributable to the company of $35.8 million for the first quarter ended March 31, 2026, compared to a net loss of $29.5 million for the same period in 2025.
• Revenue for the first quarter of 2026 increased by 1.3% to $437.6 million, up from $432.1 million in the first quarter of 2025.
• The company experienced a decrease in License and Support (L&S) revenue, which fell by 7.9% to $65.5 million, primarily due to the timing of software license renewals.
• Excluding L&S revenue, the company's revenue increased by 3.1% to $372.1 million, driven by positive foreign currency fluctuations and delivery improvements in the Cloud, Applications & Infrastructure Solutions (CA&I) segment.
• Gross profit increased to $112.5 million from $107.5 million, with the gross profit margin improving to 25.7% from 24.9% year-over-year.
• Selling, general, and administrative expenses decreased to $91.5 million from $96.8 million.
• Operating profit improved to $16.2 million from $5.1 million in the prior year's quarter.
• Interest expense significantly increased to $18.5 million from $8.2 million, largely due to the issuance of new senior secured notes.
• The provision for income taxes was $13.7 million for the first quarter of 2026, compared to $10.6 million for the same period in 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the widening net loss and increased interest expenses, despite modest revenue growth and improved gross margins in key segments.

Positives

• Revenue increased by 1.3% to $437.6 million.
• Excluding License and Support (L&S) revenue, revenue grew by 3.1% to $372.1 million.
• Gross profit increased to $112.5 million, and gross profit margin improved to 25.7%.
• Ex-L&S gross profit margin increased to 19.5% from 17.8%.
• Selling, general, and administrative expenses decreased to $91.5 million.
• Operating profit improved to $16.2 million from $5.1 million.
• The company met all covenants and conditions under its lending and funding agreements.
• Total Contract Value (TCV) increased by 33% to $274 million.
• Backlog increased to $2.96 billion from $2.89 billion.

Negatives

• Net loss attributable to Unisys Corporation widened to $35.8 million from $29.5 million.
• Loss per diluted share increased to $0.50 from $0.42.
• License and Support (L&S) revenue decreased by 7.9% to $65.5 million.
• Interest expense more than doubled to $18.5 million due to new debt issuance.
• Cash used for operating activities was $4.4 million, compared to cash provided by operations of $33.3 million in the prior year.

Risks

• The company faces risks related to maintaining its installed base and selling new solutions and services.
• There is a risk in effectively anticipating and responding to rapid technological innovation, including artificial intelligence.
• Cybersecurity incidents, security breaches, and other disruptions to IT systems pose a risk.
• Adverse effects of volatile, negative, or uncertain economic, geopolitical, and political conditions, as well as acts of war, terrorism, natural disasters, or widespread outbreaks of infectious diseases are risks.
• Risks associated with working with government and public sector clients and the inherent risks in the government contracting environment.
• The company faces aggressive competition.
• Attracting, retaining, and developing skilled employees is a risk.
• Achieving expected profitability or revenue levels from commercial contracts is a risk.
• Managing the pricing, performance, and capabilities of third-party suppliers is a risk.
• The company must meet its underfunded defined benefit pension plan obligations.
• Maintaining its credit rating or accessing financing markets is a risk.
• Compliance with the terms of its credit agreement and senior secured notes indenture is critical.
• Protecting or enforcing intellectual property rights and defending against infringement claims are risks.
• Adapting to an evolving international trade and tariff environment is a risk.
• Managing business and financial risks in the completion of acquisitions or dispositions.
• Compliance with global legal and regulatory requirements is a risk.
• Legal risks related to artificial intelligence and other machine learning technologies integrated into services and solutions.
• Exposure to legal proceedings, investigations, compliance, and environmental matters.
• Meeting global sustainability standards and expectations, achieving sustainability goals, and complying with sustainability laws and regulations.
• Maintaining an effective system of internal controls over financial reporting and disclosure controls and procedures.
• Mitigating a decrease in the value of assets and impairment of goodwill or intangible assets.
• The company's ability to use its net operating loss carryforwards and certain other tax attributes may be limited.

Future Outlook

The company expects to continue to meet covenants and conditions under its lending and funding agreements for at least the next twelve months. Expected cash contributions to global defined benefit pension plans are approximately $97 million for 2026 and $105 million in 2027. The company may explore additional debt and equity sources for liquidity and capital needs and may redeem, tender for, or repurchase its securities.

Management Comments

• The company believes that actual revenue reflects the most relevant measure necessary to understand its results of operations, but TCV can be a useful leading indicator of the company's ability to generate future revenue over time and backlog can be a useful metric and indicator of the company's estimate of contracted revenue to be realized in the future, in each case subject to certain inherent limitations as explained above.
• TCV and backlog should not be relied upon as substitutes for, or considered in isolation from, measures in accordance with generally accepted accounting principles in the United States of America.

Industry Context

StockSavvy.ai notes that Unisys's Q1 2026 results reflect ongoing challenges in the IT services sector, particularly concerning the transition from traditional software license and support models to recurring revenue services. The increase in Ex-L&S revenue and gross profit margin indicates progress in this strategic shift, but the widening net loss and increased interest expense highlight the financial pressures companies in this space face.

Comparison to Industry Standards

• The increase in Ex-L&S gross profit margin to 19.5% from 17.8% suggests improved operational efficiency and cost management, which is a positive trend in the competitive IT services market.
• The company's focus on digital transformation services (Cloud, Applications & Infrastructure Solutions) aligns with broader industry trends, where companies like Accenture and IBM are also heavily investing.
• The decline in License and Support revenue is a common challenge for legacy technology providers as they shift towards subscription-based models, a trend observed across many software and hardware companies.
• The significant increase in interest expense due to new debt issuance is a concern, especially when compared to companies with stronger balance sheets or lower debt levels, such as Microsoft or Google, which have substantial cash reserves and minimal debt.

Legal Proceedings

• The company is involved in a wide range of lawsuits, claims, investigations, and proceedings arising in the ordinary course of business, including matters related to commercial and government contracts, labor and employment, employee benefits, environmental matters, intellectual property, and non-income tax matters.
• Given the evolving landscape of cybersecurity, privacy, AI, and data protection laws, the company and its clients are subject to actions or proceedings in various jurisdictions.
• The company's Brazilian operations are involved in litigation, including governmental assessments for indirect taxes and disputes with former employees and contract labor.
• Unreserved tax-related matters in Brazil, including interest, are estimated to be approximately $101 million as of March 31, 2026.
• An estimated environmental liability for a former predecessor company site is approximately $19 million, with an expected recovery of approximately $33 million.

Stakeholder Impact

• Shareholders: The widening net loss and increased loss per share may negatively impact shareholder value.
• Employees: The company has initiated cost-reduction actions, including workforce reductions, which could affect employee morale and job security.
• Creditors: The company's increased debt levels and interest expenses could be a concern for creditors.
• Suppliers: No specific impact mentioned, but operational changes and cost-saving measures could indirectly affect supplier relationships.

Next Steps

• The company will continue to evaluate opportunities for additional reduction of its global defined benefit pension obligations.
• The company may explore additional debt and equity sources to fund its liquidity and capital needs.
• The company may, from time to time, redeem, tender for, or repurchase its securities.

Key Dates

Recommendation

While the company shows some positive operational improvements in its core services (Ex-L&S) and a reduction in SG&A expenses, the widening net loss, increased interest expense due to new debt, and the continued decline in legacy revenue streams (L&S) present significant headwinds. The company's ability to generate sustainable profitability remains a concern. Therefore, a 'hold' recommendation is appropriate, pending further evidence of sustained operational improvement and debt reduction.

Keywords

Unisys, 10-Q, Quarterly Report, Financial Results, Net Loss, Revenue, Gross Profit, Operating Income, Technology Services, Enterprise Computing, Digital Workplace Solutions, Cloud Solutions, Debt, Pension Obligations