Q2 2025 Unisys Corp Earnings Call
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I would now like to turn the conference over to Micaela Polaski. Please go ahead.
Thank you operator, good morning, everyone. Thank you for joining US yesterday afternoon, Unisys released its second quarter 2025 financial results joining me to discuss those results are Mike Thompson, our CEO and President and dead Mccann our CFO.
As a reminder, today's call contains estimates and other forward looking statements within the meaning of the securities laws.
We caution listeners that current expectations assumptions and beliefs, forming the basis of these statements include factors beyond our ability to control or precisely estimate this could cause results to differ materially from expectations.
These items can be found in the forward looking statements section of yesterday's earnings release furnished on form 8-K and in our most recent forms 10-K, and 10-Q filed with the SEC we.
We do not assume any obligation to review or revise any forward looking statements in light of future events.
We will also refer to certain non-GAAP financial measures such as non-GAAP operating profit or adjusted EBITDA that excludes certain items such as post retirement expense cost reduction activities in other expenses. The company believes are not indicative of its ongoing operations as they may be unusual or nonrecurring. We believe these measures.
I will provide a more complete understanding of our financial performance. However, they are not intended to be a substitute for GAAP.
Reconciliations for non-GAAP measures are provided within the presentation.
Slides for today's call are available on our investor website, and with that I'd like to turn the call over Tonight.
Thank you Mikael and good morning, everyone. Thank you for joining us to discuss the company's second quarter 2025 financial results.
Before I discuss the quarter I want to briefly touch on the meaningful steps, we've taken to accelerate our path to removing our U S qualified defined benefit pension plans.
In June we issued $700 million of senior secured notes refinanced our existing debt and used $200 million of proceeds and $50 million of existing cash to make a $250 million discretionary pension contribution which reduced our U S deficit dollar for.
Dollar.
We then shifted our asset allocation within the plans to primarily fixed income securities that match asset and liability movement, essentially removing market and interest rate volatility in our U S contributions.
We believe removing significant pension volatility simplifies our story and improves our ability to attract new investors.
The actions we've taken are accretive to cash flows over the next five years and the reduction in our five year contribution exceeds the interest expense on incremental borrowings.
Our discretionary contribution will also allow us to continue to remove liabilities through additional annuity purchases, both lowering the cost of future premiums and full plan removal as well as accelerating the timeline for full removal.
These steps reflect our commitment to enhancing long term shareholder value, while protecting financial flexibility and allowing for continued investment supporting innovation and growth.
We discussed all of these actions in more detail and provided updated projections for our contributions and deficit. During a July 24th webcast that is available on our investor website.
Turning now to our results second quarter reported revenue increased 12% on a sequential basis and 10% in our <unk> solutions in part due to some acceleration of revenue expected in the third quarter.
Total company revenue was also up 1% year over year as reported and in constant currency. This exceeds the expectations, we shared last quarter.
We again benefited from our strong 2024, new business signings and saw a sequential improvement in project work business process solution volumes and revenue related to the PC cycle.
Second quarter <unk> revenue was also stronger than anticipated driven by both increased consumption and some accelerated integrated system purchases.
We were pleased with the growth in the digital workplace segment, which had faced some headwinds in recent quarters from volume declines and lower margin field services.
Those declines have stabilized and we continue to see increases in higher value infrastructure field services, such as enterprise storage and network services.
We expect increases in those volumes in the second half to drive year over year growth as we lap PC service volumes declines, especially in the fourth quarter.
While some of the items, we benefited from in the second quarter are expected to moderate in the third quarter, we have a clear line of sight to achieving the full year <unk> targets implied in our revised revenue guidance and we are raising our outlook for full year profitability.
We're pleased with the results this quarter, especially in light of continued headwinds in the industry stemming from the ongoing macroeconomic and geopolitical uncertainty.
As we look to the second half our updated guidance does embed some incremental impact from elongated decision, making and slower ramp up of implementations or transitions.
While this is shifting some <unk> revenue out of the current year, we're not seeing any impact to the total expected revenue generation over the life of these contracts are any contraction in our ability to expand these relationships in the future.
We are encouraged by the recent progress on trade negotiations and why we're not building improved client sentiment into our outlook. These trade resolutions should reduce uncertainty and help expedite client investment decisions.
Looking at client signings, we saw a slight increase in sequential total contract value or DCD based on higher renewal levels offsetting a decline in new business signings, which is coming off a strong first quarter.
Importantly, our first half new business <unk> was up 15% compared to the first half of 2024.
Project work made up a larger portion of our new business signings during the quarter and as a reminder, this work is generally shorter duration with lower absolute contract value, but moves to revenue recognition more quickly.
Improved project levels are not attributable to a single factor some clients are shifting budget towards windows 11 upgrades and refreshes.
Others are moving forward on overdue workday de prioritized for AI pilots and some are simply resumed project flows that had been paused during renewal negotiations on their larger long term services contracts.
We're also converting follow up opportunities on new logos, we added in 2024, and we continue to have a good pipeline behind those as we've said before the precise timing of renewals and new business signings can be uneven and we did see some signing shift out of the second quarter due to typical complexities and negotiating long.
<unk> long term contracts, we expect contract signings on most of these by the end of the quarter, which would lead to improved new business T. C. D. In the back half of the year.
I want to share a few client wins from the second quarter that help illustrate how we're expanding within the key clients across our segments.
And digital workplace solutions, we're expanding it support to three hospitals recently acquired by a U S not for profit hospital system.
Under our existing scope, we provide support for around 200000 end users, including frontline health care providers and support integration of several acquisitions each year.
And cloud application and infrastructure solutions, we're expanding data center management services with a global financial institution, adding two additional data centers in Asia Pacific to support increasing transaction volumes in their card services business. We also extended our existing agreements for data center.
Management and the network services, we provide in 58 countries globally.
In enterprise computing solutions will be leading a project to upgrade core banking systems to the next generation of clear path forward systems.
This is a large scale transformation, including new data center adopting networking standards and building a new architecture designed for reuse and scalability all crucial to maintaining service and 24 hour support for roughly 50 million customers checking and savings accounts.
Shifting the discussion to our solution portfolio, we continue to invest in innovation and operationalize them AI to scale our delivery.
We see an outsized benefit from AI as it begins to shift our delivery from a labor augmented by technology model to one that is led by technology and augmented by labor.
It gives us the ability to scale delivery and shrink the size advantage historically held by larger competitors, which makes it easier to penetrate the market with differentiated solutions.
In digital workplace solutions, our device subscription service or DSS provides an early example of how we can combine AI with unique datasets domain expertise and specialized services to attract some of the largest organizations to unisys.
Similar momentum is building within our service experience accelerator or SCA, the technology framework powering our next generation service desk.
SCA harnesses generative and Atlantic AI service data analytics, and intelligent workflow automation to provide highly automated omnichannel service desk within a client's trusted network.
FCA is resonating with clients and prospects in part because of its differentiated knowledge management capabilities, which enhances the accuracy and efficiency of issue resolution.
One of the biggest impediments to AI adoption is the cost and challenge of building and maintaining quality training data for AI models, which is leading to hallucinations and pressuring business cases for deployment.
<unk> uses our custom developed machine learning models, along with <unk> to automate the cleansing of low quality or outdated information identifying knowledge gaps and self generating content in response to new issues, increasing the efficiency and effectiveness of virtual agents.
FCA is in production for several clients and while it's early days, we're seeing end to end automation resolution increase from an average of 15% to 40% translate into a better client experience, while lowering the cost of high quality delivery.
We're currently pursuing multiple patents for the IP related to these differentiated capabilities.
And field services, we are continuing to scale, our specialized capabilities in high value infrastructure services, including high end storage networking and liquid cooling.
We have a robust pipeline in these higher margin opportunities and expect demand for these services to grow alongside the underlying demand for data center and private cloud capacity.
And cloud applications and infrastructure solutions, we're leveraging our centralized application capabilities and hybrid multi cloud capabilities to execute transformation at scale for some of the largest global enterprises and governmental agencies.
We recently shared two client stories that highlight the transformations. We've led for two of our Premier clients Omnicom and Benjamin Moore.
I encourage you to take a look at the videos and marketing materials on our website to hear more about our impact directly from the CIO of those organizations.
We have a robust pipeline and cloud services and are continuing to enhance our cloud managed services and our data center managed services, which we collectively refer to as intelligent operations.
This unified Foundation is our framework for delivering seamlessly integrated AI ops to manage hybrid infrastructure environments and Leverages best in class partner technology, coupled with Unisys accelerators.
The result is a highly automated intelligence driven delivery model that enhances performance and resilience, while driving efficiency and cost optimization at scale.
Cyber security continues to be an area of focus and urgency for our clients and we continue to evolve our offerings for soft transformation cyber recovery continuous threat exposure management digital identity and access management managed detection and response and secure network access service.
Yes.
And ECS, we are advancing our clear path forward 2050 strategy to expand our proprietary ecosystem to enable the modernization of hybrid infrastructure and applications and unlock valuable data residing on our platforms as well as increasing the speed of deploying security encryption algorithm.
To respond to dynamic threats.
We recently.
<unk> migrated several clients to the newest version of our E portal, which connects to structured data on our platforms to front end applications to power insights throughout the enterprise.
Our clear path forward strategy enables us to maximize value by integrating our platform evolution, while delivering features and capabilities specifically requested by clients and provides cross selling opportunities.
Alongside solution development, we continue to advance our alliance partner strategy.
One element is going deeper into a smaller set of alliance partners to forge, a more impactful and mutually beneficial relationship.
Some of our larger alliance partners are starting to view solutions, such as DSS and specialized field services as additive capabilities. Our partners can provide to their clients and they are bringing us into some of their pipeline opportunities.
Last month, we received three prestigious award that Dell Tech World signaling our growth influence with one of our largest alliance partners. This included being named <unk> 2025, Global Alliance growth partner of the year.
We are also expanding our access to addressable markets by adding partners that increase the range of solutions, we can offer to better help clients leverage their existing technology or provide them lower cost alternatives.
<unk> partnerships with easy Vista and fresh works are one example that we discussed last quarter and in the second quarter, we expanded our DSS offering into Apple devices and are exploring expansion into peripheral devices beyond Pcs.
We're continuing to see increased awareness and recognition with both industry analyst and advisors.
In Q2, we appeared in seven major industry reports and received new and improved rankings in state and local and higher education digital services.
We were named a leader in New report on attack surface management retained our designation as a leader in data Center security and innovator in application services and improved our position in applied AI services.
And digital workplace, we received best service improvement initiatives award from the help desk Institute.
And finally, I'm, especially proud that Newsweek recently named US one of the global top 100, most loved workplaces.
This recognition highlights our dedication to fostering a dynamic empowered workforce, which is apparent in our very low trailing 12 month attrition rate of 11, 7%.
With that I'll turn the call over to Deb to discuss our results in more detail.
Thank you, Mike and good morning, everyone. As a reminder, in my discussion today will reference slides from a supplemental presentation posted on our website I will discuss total revenue growth, both as reported and in constant currency and sales growth in constant currency only.
Ill also provide information excluding license and support revenue for axon asked to allow investors to assess the progress we are making outside the portion of the ECS, where revenue and profit recognition is tied to license or normal timing, which can be uneven between quarters.
Pleased with the sequential improvement, we were able to achieve unless the top top and bottom lines, allowing us to raise our non-GAAP operating margin guidance and pre pension free cash flow expectations for.
Our top line, we tempered our growth outlook to reflect macroeconomic related uncertainty impacting the broader industry as well as some shift in timing of backlog conversion.
At the same time many of our most innovative solutions support the type of efficiency goals being broadly prioritize and are resonating with clients looking at our results in more detail you can see on slide four second quarter revenue was $483 million, an increase of one 1% year over year or.
At one point they are a percent in constant currency, excluding license and support second quarter revenue was $396 million essentially flat year over year, ending constant currency, we exceeded the sequential growth we expected starting the quarter with revenue up eight 5% in constant currency and $6 five person.
<unk> and <unk> solutions, we continue to expect a stronger back half with a higher weighting of license and support renewals and improvement in our <unk> solutions.
We have visibility into more upfront revenue and project work associated with certain signings primarily in the fourth quarter does some of this is subject to final deal terms that can impact revenue recognition.
Our updated revenue guidance range accounts for some of this revenue to be recognized over time I will now discuss our segment revenue, which you can find on slide four in constant currency terms.
Digital workplace solutions revenue was $138 million.
<unk>, 6% increase compared to the prior year period year to date revenue was down one 4% year over year due to the higher volumes of PC related field services in the prior year period, but we are pleased with the segment's 13% sequential growth in the second quarter.
Growth was driven by 2020 for new business and ramping volumes and high end storage field services, while PC related services have stabilized and project work related to Windows 11 upgrades has began to materialize.
Quarter also benefited from some accelerated PC hardware revenue, which we expect to result in a slight sequential decline in third quarter segment revenue.
Good applications and infrastructure solutions revenue was $185 million in the second quarter.
Four 9% decline compared to the prior year period.
This segment has our highest public sector exposure, where client sentiment remains somewhat muted due to funding and geopolitical concerns we saw some lower volumes at clients, where project ended and new investments are being approached cautiously. However, the segment revenue grew 2% sequentially and we expect the year over year growth to inflect positively.
In the fourth quarter, we are encouraged by the strength of C&I pipeline growth as many of our new opportunities coming from public sector clients, including in higher education, which could be a sign of easing pressures. These.
These opportunities span projects and multiyear contracts in cloud transformation datacenter management application services and security.
Enterprise computing solutions revenue was $140 million in the second quarter, an increase of eight 2% compared to the prior year period within the segment <unk> revenue was $88 million up seven 7% year over year in constant currency. This exceeded the $70 million he had expected for the quarter.
Due to some acceleration of revenue we expected in the third quarter, which included integrated systems sales.
Increased client consumption provide an additional benefit extending the favorable trend from recent quarters.
Specialized services and next generation compute solutions revenue grew nine 3% on some higher volumes and project work and business process solutions, some of which we expect to moderate in the back half.
Trailing 12 month book to Bill is 1.0 times for both the total company and our XR solutions, which is relatively flat sequentially, we exited the quarter with a backlog of $2 $9 billion up 5% year over year. As we mentioned previously 2025 is the hiring of a year as much of that GCB concentrated.
In the fourth quarter. So we expect this to be a low point of the year for both backlog and book to Bill.
Moving to slide six second quarter gross profit was $139 26, 9% gross margin compared to 27, 2% last year.
<unk> gross profit was $70 million and gross margin was 17, 6% down 110 basis points on a year over year basis, we discuss gross margins on a GAAP basis and higher restructuring items in the second quarter were fully responsible for compression and excellent gross margin in the quarter excluding <unk>.
Structuring charges Exxon as gross margin would be relatively flat compared to the prior year.
Ill now touch briefly on segment gross profit.
Gws gross margin was 16, 9% in the quarter.
70 basis points year over year, and up 270 basis points from the first quarter.
This was driven by delivery improvements, especially in field services, where we have made significant investments to modernize our platform and are benefiting from the ramp up of higher margin infrastructure volumes.
<unk> gross margin was 28% in the second quarter up 10 basis points year over year, we continue to focus on workforce optimization initiatives achieving synergies within our recently centralized application capabilities and are increasing our use of automation NII. These initiatives have helped us maintain profitability.
Despite some of the revenue headwinds in this segment.
ECS first margin was 53, 5% in the second quarter up slightly from 53, 3% in the prior year, leaving.
Moving to slide seven second quarter non-GAAP operating profit margin was seven 6% up from six 1% in the prior period, driven by higher <unk> revenue as well as improved operational efficiency opt.
Operating expenses in the second quarter declined six 2% year over year and are down 10% in the first half driven by savings from the ongoing execution of our SG&A reduction initiatives, which are nearing a later stages and should give us close to a full year benefit in 2026.
Second quarter, adjusted EBITDA was $61 million and adjusted EBITDA margin was 12, 7%, representing a 50 basis point margin expansion year over here.
Second quarter net income was negative $20 million translating to diluted loss of 28 cents per share adjusted net income was $14 million for the quarter, our diluted earnings per share of <unk> 19.
Going forward, we expect increased volatility in GAAP net income and earnings per share due to foreign exchange gains and losses. This is due to actions we have taken to unwind currency hedges on intercompany loans. This will not impact adjusted net income. These hedges have historically offset currency impact in our income statement.
Cause volatility in our cash balances. This change in hedging strategy reflects our priority to reduce cash volatility to support the execution of our pension strategy.
Turning to slide eight capital expenditures totaled approximately $20 million in the second quarter and $40 million year to date relatively flat year over year. As a reminder, a significant portion of capital expenditure relates to relatively steady levels of solution development for our LMS platforms, while we maintain a.
Capital light strategy in our axon a solutions sale.
Pension and free cash flow in the second quarter, which is free cash flow prior to pension and postretirement contributions was negative $58 million driven by some fluctuations in working capital.
Back to reverse in the third quarter.
Free cash flow was a negative $337 million in the second quarter compared to negative $19 million in the prior year period. This reflects the $250 million discretionary contribution that we made to our U S qualified defined benefit plans in June as well as approximately $28 million of our previously communicated.
2025 contributions.
Moving to slide nine cash balances were $301 million as of June 30th compared to $377 million at year end, reflecting our use of $50 million cash on hand, as part of our $250 million discretionary pension contribution.
$100 million of that contribution with proceeds from our Upsized senior notes issuance of $700 million, which was also used to extinguish our existing $485 million of senior secured notes.
This transaction has shored up our solid liquidity position.
Standing our largest maturity to 2031 and renewing our $125 million asset back revolver, which remains undrawn.
These actions, our net leverage neutral and including all pension obligations. Our net leverage ratio was three four times relatively stable on a year over year basis.
$301 million cash balance and our free cash flow does not include the $25 million legal settlement proceeds received on July 1st I'll now provide an update on our global pension plans each.
Each year and we provide detailed estimated projections for expected global cash pension contributions and GAAP deficit relative to our quarterly updates. These projections change based on factors, including funding regulations and actuarial assumptions.
We estimate that as of June 30th our global pension deficit is approximately $500 million down from $750 million at year end.
Secondly, 55 $9 of additional planned contributions to our global pension in 2025, which includes both U S and international.
Mike discussed we shifted the investment strategy within our U S plans, Germany substantially all contribution volatility going forward, we expect the aggregate of our planned contributions through 2029 to move less than 3%, although there could be some movement between years.
You can find updated annual forecast and expected contributions to our global pension for the next five years on slide 16.
Turning to slide 10, I will now discuss our financial guidance for the full year.
Were updating our total company revenue growth guidance range of negative 1% to positive 1% in constant currency.
Based on foreign exchange rates as of the end of the second quarter. This equates to reported revenue growth of negative <unk>, 5% to positive one 5% an increase compared to our expectation last quarter.
Mike mentioned, we have a resilient base of diverse and recurring revenue. So there are some modest headwinds that have continued to impact Exxon as constant currency growth.
Our guidance now assumes XL on a constant currency to be relatively flat on a year over year basis. So still positive on a reported basis at quarter end currency exchange rate.
We are increasing our assumption for LMS revenue by $20 million to approximately $430 million for the full year.
This reflects continued strength in client consumption as well as higher levels of hardware. We continue to expect approximately $409 of <unk> revenue in 2026 as a reminder, the timing and exact amount of <unk> revenue can be difficult to forecast with precision for a given quarter. It depends on the renewal time.
And size, which can change based on client budgeting decisions consumption levels and duration preferences among other factors.
We're pleased to be raising our full year non-GAAP operating profit margin guidance range to 8% to 9% from our prior range of six five to eight 5%, reflecting the higher <unk> mix and improved operational efficiency.
We also expect to execute one or more annuity purchase transactions this year to remove up to $400 million of U S pension liabilities subject to market conditions.
Would result in a settlement loss of up to $290 million impacting GAAP net income and earnings per share.
This is a noncash expense of accumulated other losses associated with the pensioners being transferred to a third party, which requires accelerating that portion of amortizing pension expense.
For 2025, we now expect approximately $110 million of pre pension free cash flow.
Our cash outlook assumes most of the incremental <unk> revenue will be collected in the first quarter of 2026.
We also now expect net interest payments totaling $3 million, reflecting a shift of our second half interest payment into January as a result of our recent refinancing.
Surely we continue to expect capital expenditures of approximately $95 million cash taxes of approximately $70 million and a net positive $10 million inflow from environmental legal restructuring and other payments. This is inclusive of the $25 million one time payment we received in July related.
Our favorable legal settlement negotiated in the fourth quarter of last year.
We will also make approximately $55 million.
Of additional pension contributions in the second half or $27 million per quarter.
Looking specifically at the third quarter, we expect approximately $390 million, that's telling us revenue.
Going off a stronger than expected sequential comparison based on renewal timing third quarter. Alan S. Revenue is expected to be approximately $95 million for total company. We expect a year over year reported revenue decline in the low single digits and non-GAAP operating margin to be in the mid single digits.
While our guidance implies a strong inflection in the fourth quarter growth, we have a high level of visibility into a very strong increase in <unk> revenue and profit and an exon asked the vast majority of 2025 revenue is already in backlog new visitors is continuing to ramp and we expect increased sales services volumes and upfront components on our <unk>.
Back half signings all of these factors will contribute to what we expect to be a strong positive inflection in fourth quarter revenue growth. Operator, you may now open the line for questions.
Thank you we will now begin the question and answer session.
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The first question, we have is from Rod bourgeois of deep Dark equity research. Please go ahead.
Okay, guys and thank you for the detailed update on on top of the call.
Call that you did recently on the pension front, which was the result of very helpful. I wanted to start just by asking if you can break down the components of the change in your new revenue guidance for 2025, if you can just break down the specifics there that'd be helpful.
Hey, Rod it's Mike. Thanks for the question I appreciate it and I. Appreciate you joining the previous call as well very helpful to have your questions and embedded into our dialogue here. So I appreciate that.
Look I think in general the tempering of that guidance.
It was largely related to the macro was right just budget uncertainty as you know.
No. We're we're pretty heavily weighted in C&I in public sector, and pushing and public sector and higher Ed and that that's the area, where we're seeing some of that I'll say muting of contract decisions Deb mentioned in her prepared remarks, which I think is important to note that we're continuing to see.
<unk> pipeline. So we hope that that pressure is easing and that we'll see some of the relief.
From from this kind of buildup that we've seen over the last I don't know 18 to 24 months in general.
I think.
We all feel from an industry perspective that there's a little bit of a backlog there.
Certainly some of the discussions recently on the trade elements et cetera are getting certainty back into the market. We think will really eased out but that's the the primary issue from a macro point of view.
Tied to that I would say there was a there's a component piece related to a backlog conversion right. So we sign a contract and there is a transition period and that transition period can also be a little muted right from the converting that backlog how many countries. We bring on what services, we bring on first et cetera. So I think so.
Some of that I'll say hesitancy in the market, where we're also seeing in in a little bit of our backlog conversion, but importantly, I'll note that that has no bearing on the overall contract value that we're going to see or the term on that contract. So we expect it all to come in in the same manner that we sided it's.
Really just how quickly it ramps and then lastly, as we looked at things in the Q. There is a revenue recognition component of of contracts that were currently negotiating which again, we feel like they're kind of in in call perspective from our point of view.
Those contracts have elements to them that could be upfront or over time from a revenue recognition perspective. So we thought it important to at least have our guidance reflect the overtime view of those particular contracts as opposed to an up upfront view and so those are real.
The three primary reasons, why we tempered that guidance, but the flip side of that is increasing our profitability and increasing our.
Pre pension free cash flow value, we feel really good about the continued strength, we're seeing in <unk> and the pull through there and again those other elements in our in our view are timing elements not realization elements.
Okay, great and it sounds like it sounds like there's some green shoots happening in the Dws segment. There had been some struggles in that business and in recent quarters on volumes and it sounds like there's some turn there can you elaborate also on the dws volumes and also your.
Progress in ramping the high performance compute business as well thanks.
Yeah, Thanks again for the questions.
You're exactly right I mean, we've had several quarters of kind of a pressure on the traditional field service or PC work in that business. We've seen those volumes from our PC service perspective kind of level off.
And we're encouraged that we're seeing some of this PC refresh continued to come in the conversion to Windows 11, I think is helping that so that's one byproduct of the I'll say the traditional component of that and we continue to see increases on the field services high in store.
<unk> and network services, so that volume, we're seeing continually ramp.
Again, we think that that is aligned to not only what we've got in the pipeline for four contracts, we sign but aligned to what we're seeing from an industry perspective, as we continue to build out these data centers from.
Supporting our Beihai in the light right. So there's a lot more high end type field services work and we're really well positioned to take advantage of that largely because of a lot of work. We've done over the last 18 to 24 months getting our field service technicians trained up to handle a lot of that high end <unk>.
George and then lastly, the back part of your question in relation to high end compute our LMS business. Obviously continues to outperform we've outperformed in 2023 24 again here in 2025.
And we're not really calling down anything from the future years. So 26 is still being projected at 400 million. So we're seeing advanced consumption.
In that business, we continue to have good pricing power in that business. We continue to modernize our CP up infrastructure, our clear path forward infrastructure really to support that enhanced data analytics and use of the of.
The data on our platform so that continues to be.
Really strong from our perspective, and you should expect Rod that we're gonna do similar to the Investor Education sessions that we did in Q2 in relation to pension and capital structure, we're going to do one for clear path forward to just try to help educate the investor community more on really the.
Strength of that business, because <unk> margins are 70% and again continues to outperform.
Very helpful. Thank you.
Thanks, Rob.
The next question we have is from <unk>. Please go ahead.
Great and thank you for taking my questions.
I said, one that had about the LMS and the growth for next year and the implications for the margins and cash flow data. It seems like you still expect that to be around 400.
Yes, Tanya that's correct, we're still calling for that to be 400, but again if history is indicative of the future. We hope that that will continue right outperformed 'twenty three 'twenty four and 'twenty five.
And again the consumption is the story there.
Okay.
Most of that study is in this year has come from them increased consumption and not really pulling from from next year.
Yeah, that's correct, yeah, and again I think that's been a very consistent trend and I again, I think it's consistent in the sense that there's this data layer right. When we talk about the application of AI and the utilization of of this dataset well we have this tremendous long standing.
Dataset embedded in our platforms that we're seeing this continued use or additional use from the clear path forward ecosystem and don't forget too that those ecosystems as they get refreshed are more than just the production environment right. Typically there is a test environment a development environment.
We talked about a little bit of a pull forward.
In relation to an integrated system that was shipped in Q2 that we thought would have been shipped in Q3 that is a hardware software component integrated package. So theres a little bit of improvement in Q2 that came from Q3, but again, we've taken those elements up I think.
Deb keep me honest here, but I think we originally started the year at 390 and now we're calling for 30 correct. So the so the increase in that is really all consumption based even though there is a little shift quarter to quarter, Yeah and also at Investor Day, we were saying more around that 360 average per year and you clearly outperformed as he said.
Okay.
Okay. Thank you and also what's your ability to add new logos in this kind of environment.
Look we're pretty happy with.
<unk> that we're seeing from a new logo perspective, we've talked a little bit about the muted aspect of people actually like getting to the point of signing the contract.
We're really happy with the pipeline I mean remember our new business is up 15%.
First half this year versus first half last year.
So we feel really good about what's in that pipeline and really good about the new logo are dws offerings. We talk about DSS, we talk about intelligent operations or service experience accelerate are all resonating in the market all real value propositions.
From from a client perspective. These are complex long term contracts three to five years in general.
And they're in their multi vu from our perspective, usually have a component of CA and I and dws in them and they just take a good amount of time to work through the logistics, but where we're seeing again a strong pipeline.
<unk> pipeline in the areas, where we think we're differentiated and where we're still bullish on our growth in new logo for the year.
Okay. Thank you I'll get back into queue.
Thanks Tanya.
Ladies and gentlemen, just a final reminder, if you wish to ask a question you May Press Star and then one.
We will pause a moment to sue if you have any further questions.
At this time, we have no further questions and that concludes the Q&A.
Q&A session.
I'd like to turn the conference back over to Mark Thompson for any closing remarks.
Thank you operator before we wrap up I want to emphasize three key points. We hope you took away from today's call first we're increasing our profitability outlook. As a result of continued upside in our <unk> solutions and successful implementation of operational efficiency initiatives, including AI adoption.
Second while we're not immune to some of the macro uncertainty weighing on the industry growth. The impacts are primarily timing and we've got a clear line of sight to achieving our full year objectives and finally, the steps we've taken to transform our capital structure have removed substantially all volatility in our U S pension contributions and they provide.
A more defined path of reducing leverage and ultimately removing our U S qualified pension obligations in the next three to five years. So thank you for spending time with us today and the great questions and we look forward to speaking with you again next quarter with that operator, you can close out the call.
Thank you ladies and gentlemen that concludes this conference. Thank you for joining US you may now disconnect your lines.