Unisys Corp (UIS) Q1 2021 Earnings Call Transcript

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Unisys Corp (UIS 2.79%)
Q1 2021 Earnings Call
May 6, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Unisys Corporation First Quarter 2021 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Courtney Holben, Vice President of Investor Relations. Please go ahead.

Courtney Holben -- Vice President of Investor Relations

Thank you operator. Good afternoon, everyone. This is Courtney Holben, Vice President of Investor Relations. Thank you for joining us. Earlier today, Unisys released its first quarter 2021 financial results. I'm joined this afternoon to discuss those results by Peter Altabef, our Chairman and CEO; and Mike Thomson, our CFO.

Before we begin, I'd like to cover a few details. First, today's conference call and the Q&A session are being webcast via the Unisys Investor website. Second, you can find the earnings press release and the presentation slides that we will be using this afternoon to guide our discussion as well as other information relating to our first quarter performance on our investor website, which we encourage you to visit. Third, today's presentation, which is complementary to the earnings press release, includes some non-GAAP financial measures. The non-GAAP measures have been reconciled to the related GAAP measures and we've provided reconciliations within the presentation. Although appropriate under Generally Accepted Accounting Principles, the Company's results reflect charges that the company believes are not indicative of its ongoing operations and that can make its profitability and liquidity results difficult to compare to prior periods, anticipated future periods or to its competitors' results,

These items consist of post-retirement, debt exchange and extinguishment, cost reduction and other expense. Management believes each of this items can start the visibility of trends associated with the Company's ongoing performance. Management also believes that the evaluation of the Company's financial performance can be enhanced by use of supplemental presentation of its results that exclude the impact of these items in order to enhance consistency and comparativeness with prior or future period results. The following measures are often provided and utilized by the company's management, analysts and investors to enhance comparability of year-over-year results, as well as to compare results to other companies in our industry, non-GAAP operating profit, non-GAAP diluted earnings per share, free cash flow and adjusted free cash flow, EBITDA and adjusted EBITDA and constant currency. For more information regarding these metrics and related adjustments, please see our earnings release and our Form 10-Q.

From time-to-time, Unisys may provide specific guidance or color regarding its expected future financial performance. Such information is effective only on the date given. Unisys generally will not update, reaffirm or otherwise comment on any such information, except as Unisys deems necessary and then only in a manner that complies with Regulation FD.

And finally, I'd like to remind you that all forward-looking statements made during this conference call are subject to various risks and uncertainties that could cause the actual results to differ materially from our expectations. These factors are discussed more fully in the earnings release and in the company's SEC filings. Copies of those SEC reports are available from the SEC and along with the other materials I mentioned earlier on the Unisys Investor website.

And now I'd like to turn the call over to Peter.

Peter Altabef -- Chairman and Chief Executive Officer

Good afternoon, everyone and thank you for joining us to discuss our first quarter results. At our Investor Day in January 2021, we laid out goals related to further strengthening our balance sheet, transforming our organizational structure, improving margins and cash flow, enhancing and expanding our solution portfolio, growing revenue and enhancing our associate experience.

During the first quarter, we made progress on each of these. I will provide some detail on the organization, our solutions and our associate experience, and Mike will discuss the rest of these points, including the significant improvement to profitability and cash flow that we made during the quarter.

In the first quarter of 2021, we transitioned to our new segment structure, which targets Digital Workplace Services or DWS, Cloud & Infrastructure or C&I, and ClearPath Forward or CPF. This was a key step to implementing the strategy we developed in 2020 and laid out in our Investor Day. We are now running the business and reporting our financials on this basis.

We have also built out the leadership team of these businesses and the company overall. We hired Leon Gilbert, our new Head of DWS in February and brought on Gene Chao, our new Head of ClearPath Forward in April. Wendy Reynolds-Dobbs joined as our new DEI leader in March, and she will also co-lead our ESG efforts. Dwayne Allen, our new Chief Technology Officer, joined us in April and will partner with our business unit leaders to innovate new solutions that expand and enhance our portfolio. Finally, last week Maureen Sweeny, our new Chief Revenue Officer came on board. Maureen will work across our businesses to leverage capabilities, identify key opportunities and help drive growth. More information on each of these leaders is available on our website.

With the significant strengthening of our balance sheet last year, we now have the levers to fully execute on our strategy. These new leaders and the team already in place are doing just that. As we discussed at our Investor Day, our plan over the next three years is to grow margin, cash flow and revenue. We expect to achieve this in part to our DWS transformation including expansion and enhancement of our offering portfolio and shifting to experience-based solutions.

Additionally, we expect to continue our momentum in C&I with a focus on higher margin cloud offerings. Within CPF, we are targeting growth in CPF services, which is the highest margin services in the company, supporting all of this, our improvements to operational efficiency. While we will maintain a focus on revenue, margin, and cash flow at all times, as we execute on the strategy we have expected to see earlier progress with margin and cash flow.

These metrics are already benefiting from efficiency improvements and reduced pension contributions have further improved cash flow. We expect our DWS transformation and growth in cloud and CPF services to drive further profitability and cash flow improvements as well as increasing revenue growth rates in 2022 and 2023. Within DWS during the quarter, we improved efficiency and margin by reducing our total cost of labor and with automation and artificial intelligence.

As of the beginning of April, we have moved all of our service desk clients onto our AI enabled cloud-based InteliServe Contact Center platform. We expanded our solution management and experience based talent and offerings within DWS, which will help drive revenue growth. In the quarter, we signed a contract with a global publishing company in EMEA for service desk support, field services and asset management, in which we will automate and streamline global user support to help improve the user experience for our client's associates. Within C&I, we're helping clients in their journey to private, public and hybrid clouds with a particular emphasis in the public and highly regulated sectors. This is higher margin business than our legacy infrastructure work, and we've begun to see the benefits of this in our improved segment profitability. We're also pursuing increased cloud operations management and monitoring as well as development and monetization of clients cloud-based applications. These represent opportunities for additional profitability improvements and revenue growth.

As an example, we are migrating in significant U.S. State Government IT Services Agency to the Oracle, Microsoft Azure and AWS Clouds as part of an initiative to modernize services to citizens at a lower cost and improve reliability, cybersecurity and cost effectiveness of key state administrative operations. During the first quarter of 2021, we signed seven contracts for additional work associated with these transformation efforts and have several more opportunities in the pipeline with this client. Similarly, during the quarter, we also signed a new scope contract with California State University or CSU, the nation's largest higher education system.

As a part of this new contract, Unisys will be providing financial, security, and cloud operations to offer the client greater agility to execute digital cloud strategy that better serve the campuses and improve the student experience for nearly 500,000 students. ClearPath Forward, we've a slightly different approach than with DWS and C&I. ClearPath Forward is already operating at attractive margins with license and ClearPath Forward Services representing the highest-margin revenue of the company. So, our strategy here is focus more on growing CPF services revenue, while maintaining the stability we have seen in the ClearPath Forward license space.

To do this, we're implementing a coordinated strategy to better leverage our technology solutions, while utilizing our deep client relationships to identify areas where those clients can benefit from additional ClearPath Forward services. Specifically, we're targeting growth in both managed services and application services revenue. As contracts renew, we're also aligning maintenance pricing to market, as an example of our expanding relationship with an existing ClearPath Forward client to provide new ClearPath Forward application services.

During the first quarter, we began work on a new scope contract with a European National Government Agency. The managers processing and payment for public pensions for about 2 million people. Unisys is now also providing ClearPath Forward consulting services to make their ClearPath Forward System more scalable and more interoperable with other systems. Within the framework of our new business unit structure and based on the strategies I just described, we're evolving our solutions portfolio in very specific areas to complement our current capabilities, and enhance our margin profile and future revenue growth. This evolution will be the result of build, acquire, and partner activities. In cases where it's most efficient to do so, our enhanced balance sheet gives us the flexibility to pursue inorganic opportunities in a way we've not been able to in the past.

As we consider such opportunities within DWS, we initially expect to focus on relatively small scale companies that have solutions that would further enhance our experience based strategy. Within C&I, we'll look for opportunities that help us scale the business and leverage our solutions more broadly. As we drive all of these operational strategies forward, we're also aiming to enhance the experience of our associates. In addition to being the right thing to do, to support our people and to make Unisys a place they are increasingly proud to call home, we believe that this can also help us achieve a number of other important goals, including accelerating recruiting, bolstering retention and being a more attractive partner and supplier for our clients.

We're actively working to create new opportunities to enhance diversity, equity, and inclusion in our workplace and throughout our team. Likewise, our continuing efforts related to ESG are important to our clients, associates, partners, and investors alike, and, we'll continue to develop and target ESG opportunities, which Unisys has been doing in quantifiable ways since 2006.

In conclusion, we're making progress toward the goals we laid out at the beginning of this year, some shorter-term and some longer-term. There is an excitement at the company as we do so, and I'd like to thank our associates for their ongoing enthusiasm and efforts to help us drive the business forward.

With that, I'll turn it over to Mike to discuss our financial results. Mike?

Mike Thomson -- Senior Vice President and Chief Financial Officer

Thank you, Peter, and good afternoon everyone. In my discussion today I'll refer to both GAAP and non-GAAP results. As a reminder, reconciliations of these metrics are available in our earnings materials. As Peter highlighted, we made significant progress on both our strategic and financial goals during the first quarter. Peter discussed a number of items on the strategic front and so I'll focus more on the financial accomplishments including margin and cash flow improvements, positioning the company for improved revenue growth and strengthening our balance sheet. Starting first with margins, we saw significant improvements year-over-year in the quarter. Non-GAAP operating profit increased 75% year-over-year to $51 million and non-GAAP operating profit margin increased 440 basis points year-over-year to 10%. Gross margin improved in each of DWS, C&I, and ClearPath Forward. DWS gross profit increased 157% year-over-year to $19 million with DWS gross margins up 860 basis points to 13%. C&I gross profit increased from a negative $3 million in the prior year period to a positive $12 million with C&I gross margin up 1240 basis points to 10%. ClearPath Forward gross profit was up 3% year-over-year to $103 million with ClearPath Forward gross margins up 290 basis points year-over-year to 61%.

The margin improvements were driven in part by progress against our previously outlined goals for efficiency improvements in 2021. We noted on our last call that we were targeting between $130 million and $160 million in run rate savings exiting 2021, and we have completed a significant portion of the actions required to achieve this with a total of approximately $100 million of run rate savings in place as of the end of the first quarter. We took additional charges related to these efforts in the first quarter of $8 million and we expect less than $10 million of additional charges throughout the remainder of the year to complete this program.

The improvements to non-GAAP operating profit also flowed through to adjusted EBITDA, which increased 30% year-over-year to $94 million. Adjusted EBITDA margin increased 440 basis points year-over-year to 18% and non-GAAP EPS increased significantly to $0.46 from $0.02 in the prior year period. This margin expansion also contributed to significant year-over-year improvements in cash flow.

Cash used in operations improved $335 million year-over-year to $43 million and adjusted free cash flow improved $52 million to a negative $24 million. A large portion of the improvement to operating cash flow and free cash flow was attributable to reduced pension contributions. CapEx was roughly flat year-over-year at $28 million and as a reminder, it is typical for us to start the year with a negative cash flow given the timing of our cash generation and usage.

We expect the momentum with cash flow to continue over the year. Our expected CapEx spend for the year is between $120 million and $130 million and we anticipate cash taxes to be approximately $45 million to $55 million. Additionally, as we noted at our Investor Day in January, working capital is currently at a run rate use of approximately $20 million to $30 million, which we expect to improve over time. As a result of all this, we expect free cash flow positivity for the full year 2021. We had expected profitability to be the key driver of improvement in the first quarter, as we were anticipating a modest year-over-year revenue decline.

The total company revenue was down $5.6 million or 1.1% year-over-year driven by a decline of approximately $16 million in field services, travel and transportation and BPO processing activities.

Cloud & Infrastructure revenue remained strong increasing 19% year-over-year to $123 million and the cloud aspect of this business increased 31% year-over-year. Additionally, C&I revenue in US and Canada, grew 24% year-over-year. ClearPath Forward continues to demonstrate stability and opportunities for growth. ClearPath Forward revenue was down 2% year-over-year, largely driven by currency and the divestiture of some low margin third party contracts, which contributed to the improvement in ClearPath Forward gross profit and margin that I mentioned earlier.

The decline in field services that I noted contributed to the 12% year-over-year revenue decline in DWS, which was also in part due to the fact that this segment has a large base of legacy solutions, which have lower growth than the experience based solutions to which we are transition. Peter highlighted a number of the key steps that we took in the quarter to progress our DWS transformation and we expect over time to continue to see improved performance out of this segment.

Overall, our first quarter results were in line with or slightly ahead of our internal expectations and be consensus on all key metrics. Looking to the rest of the year, we would remind you that we expect ClearPath Forward license revenue to be split 55% and 45% between the first and second half of the year with the third quarter expected to be the lightest of the year and the fourth quarter expected to be the strongest. This quarterly revenue timing will also impact profitability as ClearPath Forward costs are distributed relatively evenly throughout the year.

As a result of this, our first quarter results and our expectations for the remainder of the year, we're reaffirming our guidance ranges for the full year of 0% to 2% year-over-year revenue growth. Non-GAAP operating profit margin of 9% to 10% and adjusted EBITDA margin of 17% in the quarter to 18% in the quarter, Total company backlog, which now includes license revenue given our new segment structure was $3.4 billion as of the end of the first quarter relative to $3.6 billion as of the end of the year. Of the $3.4 billion, we expect $380 million to be converted to revenue in the second quarter. The Company's legacy BPO businesses and the ClearPath Forward renewal schedules were the largest contributors to the sequential decline in backlog.

Additionally, the weighted average length of contracts signed during the first quarter of 2021 has been shorter than the weighted to average length of contract signed in 2020, which means that the backlog is expected to convert to revenue more quickly, which is positive for near-term growth. We expect revenue and backlog to improve over the course of the year as we continue to implement our strategy to enhance our solutions portfolio with a particular focus on DWS in the short term, which enables a gradual move up the revenue and margin stack.

We're currently building out our segment go to market materials that support our strategy and we expect our new material will be in the market this quarter. Additionally, we expect an increase in demand for cloud transformation and increased opportunities in managed services, application development, and application modernization in both C&I and ClearPath Forward to further drive improvement in revenue and backlog.

Turning to the balance sheet, we continue to make significant progress on our pension obligations. As we disclosed during the first quarter, the signing of the American Rescue Plan Act in March has resulted in changes to our pension contribution requirements. Based on our current calculations, we are not required to make any additional contributions to the U.S. Qualified Defined Benefit Pension Plans in the future. As a result, we no longer expect to make the $200 million voluntary contributions we've previously discussed, leaving us with even stronger expectations for liquidity and near-term cash flow than we had at year-end.

We may in the future elect to make voluntary contributions in order to implement additional de-risking opportunities or strategies. As we've discussed, we've been targeting a reduction in gross pension liabilities of $1.2 billion, the domestic portion of this program has been completed with approximately $550 million of liabilities removed. The final two actions to achieve are $1.2 billion target relate to transferring $650 million of gross pension liabilities from two of our international plans to multi-employer collective foundations. Our work to complete these transactions was done at the end of the first quarter and we expect to receive final approvals and complete these transactions in the second quarter. Instead of the first and which point, we will have achieved our goal of removing $1.2 billion of gross pension liabilities. As a reminder, we are required to recognize non-cash settlement charges for each plan as we removed these liabilities. The amount of the charge related to the second quarter activity will be approximately $215 million.

Before I turn the call back to Peter, I'd like to thank the Unisys team for their ongoing efforts to help implement our new strategy and continue our Company's transformation. We're off to an exciting start in 2021, with strong profitability and cash flow and we look forward to continuing to drive results over the remainder of the year.

With that, I'll turn the call back over to Peter. Peter?

Peter Altabef -- Chairman and Chief Executive Officer

Thank you, Mike, very much. And with that we'll open up the call to a discussion, as well as questions. So Cole if you'd open up the call and let's get to it.

Questions and Answers:

Operator

Certainly. And we will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Jon Tanwanteng with CJS Securities. Please go ahead.

Jonathan Tanwanteng -- CJS Securities -- Analyst

Hi, good afternoon guys. Thanks for taking my questions and nice quarter. Just wanted to clarify a couple of points. Mike, did you say you expect backlog did grow from here as a sequentially or is that just over the course of the year at some point?

Mike Thomson -- Senior Vice President and Chief Financial Officer

Yeah. We're looking, Jon, hey, thanks for the question. We're looking for growth in the second quarter both in the quarter and year-to-date and we're looking for backlog growth for the full year as well. So I guess the answer would be both in the quarter and the year, Jon.

Jonathan Tanwanteng -- CJS Securities -- Analyst

Got it. That's great to hear. And I was just wondering how sustainable the margin -- the operating margin is in your services business as we go through the year? Are there any changes to the profile as you get through different projects or [indecipherable] revenue will fluctuate. Any color on that would be helpful?

Mike Thomson -- Senior Vice President and Chief Financial Officer

Yeah, look, as you know, Jon, that the services margin aspect of our business is pretty solid, right. So what would -- at around a little bit is the technology aspect of that. So, as I noted in my prepared remarks in the third quarter, we will have a lighter tech quarter, but as far as the services margins go, we feel pretty strongly that they are very sustainable. I think you've seen from us over the last three quarters consistent improvement in that and a big step-up in this quarter and we expect to maintain and continue to grow those services margins along the lines is what we discussed in January at the Investor Day.

Jonathan Tanwanteng -- CJS Securities -- Analyst

Got it. And you usually give kind of like a ballpark percentage of revenue, that you expecting technology per quarter or per half. Do you have that kind of clarity at this point in time?

Mike Thomson -- Senior Vice President and Chief Financial Officer

Yeah. So we're calling for was 55% in the first half and 45% in the second half, Jon with Q3 being the lowest quarter, Q4 being the highest from -- and again, it's 55, 45 and pretty flat for the year from a technology licensing perspective, just the modeling purposes.

Jonathan Tanwanteng -- CJS Securities -- Analyst

Okay, got it. And then finally just high level, benefited from the stimulus bill with the pensions. Is there any benefit for you coming in the potential infrastructure bill? I know there's funding going to a variety of end-markets that you serve. I'm wondering if you have any insight as to whether that was so to you guys at all.

Peter Altabef -- Chairman and Chief Executive Officer

Yes, maybe I'll take that for a minute. And Jon, I want to add my thanks to Mike, and thanks for recognizing the quarter. We feel very good about the results we had this quarter and we're on track of course for this year, as well as the plan that we rolled out in January. This infrastructure bill is at least in its current form is defining infrastructure in a much broader way than in prior bills [indecipherable]. So cyber security, broadband access are all front and center in this bill as active integral parts.

Given our focus in the United States on the public sector, which we define as state and local anything other than Federal, we see opportunities around cyber security, around increased evolution to new platforms for state and local, that we think that the infrastructure bill if passed in a fulsome way would help us given our Public Sector visibility.

Jonathan Tanwanteng -- CJS Securities -- Analyst

Okay, great, thank you. Yeah

Mike Thomson -- Senior Vice President and Chief Financial Officer

Jon, I know you didn't ask this aspect of it, and Peter gave the infrastructure piece of it. But I just wanted to maybe throw in the tax piece of it as well in case that's on your mind or on the mind of some of the other analyst here. We do not expect any negative issues in regards to any of the discussions from a tax perspective. As you know, we've got quite a bit of DTAs, we have about $1 billion worth of DTAs, that will shelter about $3.5 billion of income. So we're not expecting really any fallout from any of the items being discussed, whether it's the corporate tax rate. The guilty tax rate or the dialog on the B taxes. So I think we're really no change in regard to that as well.

Jonathan Tanwanteng -- CJS Securities -- Analyst

Got it. That's good to know. Maybe one final one, if I could. The well-publicized supply chain issues on just on technology and semiconductors, all of that. Is that limiting your ability to deliver a hardware associated with your services at all or is that not much of an issue -- as much of issue as it might have been just given migration to cloud and offloading that capacity?

Peter Altabef -- Chairman and Chief Executive Officer

Yes, that's exactly right, Jon. It is not as much of an issue for us. Obviously certain sectors like the automobile sector are being hit very directly. We have not seen significant availability issues in the hardware that we're providing to clients. There's some, but nothing significant.

Jonathan Tanwanteng -- CJS Securities -- Analyst

Okay, great. Thank you.

Mike Thomson -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

And our next question will come from Joseph Vafi with Canaccord. Please go ahead.

Joseph Vafi -- Canaccord Genuity -- Analyst

Hey guys, good afternoon. Good results. It's just kind of looking at some of the segment performance for the quarter and thinking about the strategy moving forward, and clearly C&I doing well and looks like it's the emerging growth driver of the new segment recording, and how do you see kind of ROI on sales and marketing expense relative to the three segments now and where you're prioritizing that? And then I have a follow up. Thanks.

Peter Altabef -- Chairman and Chief Executive Officer

Yes, so Joe, I'll probably take that to start. And thanks very much for the congratulations again. We feel very -- when we go back to our January strategy, the bulk of the revenue growth we expect will come from DWS, from Cloud & Infrastructure and from the services segment of ClearPath Forward. I will tell you that we feel very good about all three of those, a few months into this. So you see some reduction in Digital Workplace Services revenue year-to-year. We expect DWS revenue to pick up and we expect it to be positive for the full year. In fact, we expect all three of those to be positive for the full year.

Again relatively modest revenue, but we expect to pick up the losses from DWS. We expect the pipeline for DWS to increase markedly over the course of the year, we have visibility of some large deals that will come out in the third and fourth quarter, we feel very good about our positioning for those. So I would tell you that piece of our strategy, which is that we really expect over time. We have a larger and larger share of DWS very much in play. On Cloud & Infrastructure, we had a little bit of a head start in that compared to DWS. So Leon Gilbert, who is leading the DWS team, joined us in February; Mike Morrison, who is leading Cloud & Infrastructure has been here for several years, and I think you're seeing a little more maturity in the Cloud & Infrastructure, particularly those cloud numbers of course, this quarter.

On ClearPath Forward, I would tell you again new leader who I mentioned Gene Chao started in March for us. Very, very interesting perspective on the CPF business, we have a good view from January about where to take the services revenue, and I think Gene is looking very hard at opportunities to increase the software revenue on ClearPath Forward. Early days on that, but really like the vitality that he is bringing to that entire segment for us. So we really feel that we're on track. Joe with where we expected to be at this point.

Joseph Vafi -- Canaccord Genuity -- Analyst

Got it. Thanks, Peter. And then so if we think about some of the ongoing restructurings and what that means to margin combined with I guess, it's fair to say there's $200 million that kind of quote unquote freed up relative to the Congressional American Rescue Plan Act, as we think about that cash deployment back in the business, feels like M&A maybe the right place, but would love to hear your thoughts.

Peter Altabef -- Chairman and Chief Executive Officer

Well, first of all, it is not burning a hole in our pocket, we do not feel any urgency to spend it, because we have it. You're right, with the passage of the Act, as Mike laid out, we no longer expect to make the $200 million of contributions and we're very grateful for that. So we really feel like, as I said in my comments, we can really active all levers down. We have looked hard at the businesses that will change the most for us and that is DWS and the cloud piece of Cloud & Infrastructure over time, some of the work we did last year with McKenzie and then with Alex Partners really kind of looked at how that business is or those two have to evolve over the next few years.

We've been very specific in terms of that analysis, we actually have created bundles of offerings in both DWS and cloud and we're looking at how we get to complete those bundles over the next couple of years, that is a classic build by partner analysis and I can tell you that we expect to do all three with respect to the buy analysis. If we look at current pricing and the multiples of the different kinds of businesses, I would tell you the pricing for DWS businesses is a little less aggressive than the pricing for some cloud businesses right now, that would be very consistent with our strategy, we're seeing some of the players in the industry de-emphasizing that a little bit. We intend to rush into that void. It's a very good business for us.

So I think you'll see us focus in DWS on specific acquisitions probably smaller acquisitions that really will fill specific niche solutions for us. But, we think those solutions will have a multiplier effect on our ability to grow revenues and market share in DWS. So given that multiplier effect, we think we're in a very good shape to be an efficient acquirer. Situation is a little different in that the asking prices are a little higher, and again, it's a little more mature in terms of our next generation offerings in cloud, but we do expect over time to make some cloud acquisitions. Those will largely be for filling in scale where we believe that we have subscale in some of our offerings or some of our geography or some of our advisory services. So I think that's the way we'll approach the cloud acquisitions.

Joseph Vafi -- Canaccord Genuity -- Analyst

Great, thanks Peter. Yeah, that makes sense. I could, I could see Unisys really kind of becoming a big scale player in what we called DWS as you know perhaps that opportunity is one that others aren't focused on as much though. Thanks so much for the color. Great results.

Peter Altabef -- Chairman and Chief Executive Officer

Thank you, Joe.

Mike Thomson -- Senior Vice President and Chief Financial Officer

All right. Thanks, Joe.

Operator

And our next question will come from Matthew Galinko with Sidoti. Please go ahead.

Matthew Galinko -- Sidoti -- Analyst

Hey, thanks for taking my question. Maybe just as a follow-up to the question around supply chain and component shortages, I realized, we're still in the early days of that, but I'm curious if there any macro push toward Dom or extra macro push toward cloud migration from just customers and whether that could be any catalyst for you in any segment. Thanks.

Peter Altabef -- Chairman and Chief Executive Officer

Yeah. Why don't I take that first Mike and then hand it over to you for your perspective as well. If you don't mind.

Mike Thomson -- Senior Vice President and Chief Financial Officer

Yeah.

Peter Altabef -- Chairman and Chief Executive Officer

And it's one of several right. So it's hard to imagine people need more push to the cloud at this point, right. So COVID-19 already accelerated people who really did not want to bear the cost or the people involved in managing their own data centers. So that was a push. The work from home effort that came along with COVID also acted to push people more toward the cloud. The advances in what we're doing around Digital Workplace Services, which is making the employees of our clients, at least as productive anywhere they are, a lot of our DWS work ultimately revolves around having capabilities for the client, which has to be available anywhere with very, very low latency around the world, and that largely means putting it into the cloud.

So I think you've had a bunch of reasons why people were accelerating to the cloud already. Supply chain issues I think do it on -- in two ways. First, obviously you're not as concerned about the availability of servers, et cetera. And secondly is around security. There is obviously managing a secure environment that is being hosted by AWS or Azure or Google or someone else. You still need to manage it very carefully and we obviously do for our clients. But, there is a second element of that which is kind of the core supply chain of, are you buying hardware that has the right provenance? And how do you determine the right providence of the hardware you buy? And of the software that needs to run it in a network environment? So I think what you're finding here is, our willingness to let the big cloud public providers do that work, and especially mid-sized companies not have to work about -- worry about that provenance. So, I do agree that over time that's an added element, especially around the security side of that. Mike, your thoughts please.

Mike Thomson -- Senior Vice President and Chief Financial Officer

Yeah. And Matt thanks for the question. Look, I think Peter you covered the main elements there. May be the only other component that we didn't cover is just the cost of the materials themselves, right. We are seeing supply chain increases there from availability cost. Peter talked about security and the complexity. So look Matt, I mean you know from our perspective, we've been pursuing a capital-light strategy for probably three years or four years now, and this really just plays into that one. We're having discussions with clients that we're thinking about the cloud three, five years out. Now those discussions are around one year out now or certainly in the near term. So I think all of the things that Peter mentioned in the prelude here are really just another catalyst to get folks on the cloud adoption or digitization and as you know, that fits very nicely into our strategy and our business plan.

Peter Altabef -- Chairman and Chief Executive Officer

And I would just add exactly to what Mike just said. Our-- back in 2016, we decided that we were going to cut our, -- one of the things that makes Unisys distinctive is this area that we would have security built into all our solutions. Obviously ClearPath Forward is the most secure operating environment, stealth is a part of that security environment for us both internally as well as with clients directly, but it even goes beyond that. We really focus on making sure our clients have the most secure environment, they have or they can have.

As you are seeing ransomware become a pandemic, a plague whatever word you want to use, in the IT world, it's hard to overstate where rents and where is gone. It's attracting local governments, it's affecting state governments, it's affecting private organizations around the world. And so again when you have a, where does the bug stop, having more of your environment in the public cloud, it doesn't protect you 100% from rents and ware. We know that ransomware can affect data wherever it is, but it does allow individual companies to really focus on making sure that within the scope of their control they have the best possible most secure systems, they have backed up, they have resiliency and they can really handle a ransomware attack.

So I think again in the bigger cyber security claim and specifically about what Unisys brings to the table. I think you are seeing, folks say I'm going to put this in the cloud, I'm going to focus my ransomware capabilities on what I am retaining as well as making sure I have it protected in the cloud. That helps us and you're seeing some of that in the cloud growth that we showed this quarter.

Matthew Galinko -- Sidoti -- Analyst

Great. Thanks for the comprehensive answer. Nice quarter.

Mike Thomson -- Senior Vice President and Chief Financial Officer

Thanks, Matt.

Peter Altabef -- Chairman and Chief Executive Officer

Thank you, Matt.

Operator

And our next question will come from Rod Bourgeois with DeepDive Equity Research. Please go ahead.

Rod Bourgeois -- DeepDive Equity Research -- Analyst

Hey, guys. Hey, very nice progress on profitability and I should also say that I'm liking the three new reporting segments. It seems to lay out your trends in a clear way and for me it just ties your financials better to how I look at Unisys in the marketplace. So, nice work on the story there. Hey, I have a question about the Growth Revival Plan in the Digital Workplace Business. You mentioned rolling out some new material there and so on. Can you give us some flavor on the DWS messages that you're taking to the market to revive its growth and clearly there is a plan to move to the end-user experience value proposition? Can you just talk about the messages that you're rolling out in the actual market?

Peter Altabef -- Chairman and Chief Executive Officer

Yes. It's a great question, Rod, and thanks for being supportive of the segments. I agree with you. It's one of those things. Mike and I talked about it for a long time last year. And it's one of those things that when you finally do it, it's kind of obvious, right? But it wasn't obvious until you made the decision, but having done it really looks pretty obvious. And I do believe it gives investors more clarity into how to look at the company especially as we become more normal as the pension obligation is further and further in the rearview mirror. With respect to DWS, as I mentioned earlier to Joe's question, it's a very important part of our future. We have -- we are one of the things you're seeing in the margin uplift is the efficiencies and economies that we have gotten that really show up this quarter, but have not been at this quarter, I think. We've been planning for those for a long time and certainly, a lot of the work we did last year was in preparation for the numbers you're seeing.

With respect to the revenue side of the house, as I said, we have really a very detailed map of exactly what capabilities out. The market is changing and things a year for now, not could be the same as they are now, but we do think we have a lot of industry understanding of the marketplace. We do expect to be a full leader in the marketplace both in fact of size, as well as in geographic reach, and as well as capabilities. So, we feel very bullish about that space, I believe, as I mentioned, also to Joe's question you will begin to see us take a leader role in acquisitions in DWS, probably before we do it in cloud just because we are so focused on exactly what we need to grow revenues over time. And there is a very good pipeline for cloud or DWS opportunities out there. So, we think our timing is very fortuitous, but we're bullish about the space.

Rod Bourgeois -- DeepDive Equity Research -- Analyst

Got it.

Mike Thomson -- Senior Vice President and Chief Financial Officer

And look.

Rod Bourgeois -- DeepDive Equity Research -- Analyst

Yeah, sure.

Mike Thomson -- Senior Vice President and Chief Financial Officer

I was just going to add a couple a little elements there, Rod and thanks so much for the question. You know how we feel about the space and as Peter mentioned, we've got people exiting this space and we think it's really an opportunity for us to be a dominant player there. But maybe specifically to your -- to your question, we're talking about this mess. In the context of not only the EUS to EUX transition, which we've talked about quite a bit. But it's really about the holistic view of where our clients can be a year from now, three years from now and us being able to take them on that journey. And it's about the deepening of our solutions, whether that's a new gas or VDI or UM or type areas, but this is an area that we think is really right for the taking, and as you heard us say in the January Investor Day materials, we want to be the dominant player in this space and we're putting a lot of focus on that.

Rod Bourgeois -- DeepDive Equity Research -- Analyst

Got it. Very helpful. Hey, and a more general question about demand trends. Are you seeing an uptick in add-on work at your existing accounts as -- particularly as we get through some of the COVID crisis challenges? Are you just seeing a general uptick in -- in add-ons? And I know you mentioned that the duration was down in the backlog. Could additional add-on work be part of that or is that a different dynamic that's driving the lower duration in the backlog?

Peter Altabef -- Chairman and Chief Executive Officer

Well, I'll take that and start and then again let Mike finish. Absolutely it is. When you are talking, for instance, about the segment of ours that had the most growth this quarter, which was Cloud & Infrastructure, and specifically cloud, in Cloud & Infrastructure. A lot of that work came from existing clients. Some of that were migrating from private clouds to public clouds. Some of that were setting up very vigorous hybrid clouds, but not all of it was new logo. So, very much so those deep relationships that we think that's stronger during COVID-19, are playing out very specifically in what you call add-on or extension work.

And again even in DWS to go back to that question, Rob, the fact that we have such a strong base in what we would call, end-user services is a big advantage to us. Not all of the end user experience work has to come from new engagements. It can come from that installed base of clients. So when we think about seamless collaboration and UCaaS, workplace as a service, intelligent workplace, modern device management, all of the things that are really integral to end user experience, those are things that we're doing in some way, when you're talking about end user services, but not to the same extent as where the market is going and where we're going. So we do think this idea of extending existing relationships is very much an integral part of our future.

Mike Thomson -- Senior Vice President and Chief Financial Officer

Yeah, Rod, and I would echo that and really just say specifically within public sector within our Cloud & Infrastructure business, we've seen a quite a bit of that add-on work as you call it. In fact, a lot of the contracts that we're getting are really unsolicited opportunities, right. And that's the beauty of the long-term relationships that we've got with blue-chip clients. And you're there, you walk in the halls and they need other work done. So from our perspective, the more wholesome our solutions can be, the more of that we think we'll get right and that's really been a core tenant to our strategy really for a couple of years now, that's not necessarily new here. But as we expand our -- and deepen our solutions, we think there's a lot more of that, right, because they are paying others for it at this point. So it's a good opportunity for us to expand our wallet with existing clients as well.

Rod Bourgeois -- DeepDive Equity Research -- Analyst

Good stuff. Thanks, got it.

Mike Thomson -- Senior Vice President and Chief Financial Officer

Thank you, Rod.

Operator

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Peter for any closing remarks.

Peter Altabef -- Chairman and Chief Executive Officer

Well, thanks very much. I'd like to thank Courtney and Mike for joining me on the call today. We really appreciate the level of questions we've gotten. We think those help, explain what's going on in the business beyond our prepared remarks. We also think that would help to explain the business is the refreshed Investor Relations website, that we have put up, which actually went up after the investor call in February. So we hope that you spent some time on that. We think you'll find that helpful, and increasingly transparent, which is one of our goals. We also are available to you by phone, and obviously through Zoom calls, and at some point in the year, through in-person meetings as well, which we also look forward too.

So I'd like to thank everybody and on behalf of Mike and Courtney, look forward to visiting with you again next quarter.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Courtney Holben -- Vice President of Investor Relations

Peter Altabef -- Chairman and Chief Executive Officer

Mike Thomson -- Senior Vice President and Chief Financial Officer

Jonathan Tanwanteng -- CJS Securities -- Analyst

Joseph Vafi -- Canaccord Genuity -- Analyst

Matthew Galinko -- Sidoti -- Analyst

Rod Bourgeois -- DeepDive Equity Research -- Analyst

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