UNISYS CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this quarterly report. Overview For the three months ended June 30, 2025, the company reported net loss attributable to Unisys Corporation of $20.1 million, or $0.28 per diluted share, compared with a loss of $12.0 million, or $0.17 per diluted share, for the three months ended June 30, 2024. The net loss for the three months ended June 30, 2025 included a loss on debt extinguishment of $6.8 million. For the six months ended June 30, 2025, the company reported net loss attributable to Unisys Corporation of $49.6 million, or $0.70 per diluted share, compared with a loss of $161.5 million, or $2.34 per diluted share, for the six months ended June 30, 2024. The net loss for the six months ended June 30, 2024 included $132.3 million of a U.S. pension plan settlement loss. On June 27, 2025, the company completed a private offering of $700.0 million aggregate principal amount of its 10.625% Senior Secured Notes due 2031 (the 2031 Notes). The net proceeds from the issuance of the 2031 Notes, together with cash on hand, were used to repurchase for cash any and all of its outstanding 6.875% Senior Secured Notes due November 1, 2027 (the 2027 Notes) tendered in a concurrent tender offer, to satisfy and discharge the remaining 2027 Notes not tendered in the concurrent tender offer (which will be redeemed on or about November 1, 2025), and for the payment of related premiums, fees and expenses. Additionally, the company used the net proceeds from the issuance of the 2031 Notes, together with cash on hand, to fund a portion of the company’s U.S. defined benefit pension plans deficit and postretirement liabilities totaling $250 million. Concurrently with the issuance of 2031 Notes, the company amended its existing amended and restated secured revolving credit facility (the Amended and Restated ABL Credit Facility) to extend the maturity from October 2027 to June 2030 and modified certain other terms and covenants. Results of operations Company results Three months ended June 30, 2025 compared with the three months ended June 30, 2024 Revenue for the three months ended June 30, 2025 was $483.3 million compared with $478.2 million for the three months ended June 30, 2024, an increase of 1.1% from the prior-year period. Foreign currency fluctuations had a negligible impact on revenue in the current period compared with the prior-year period. License and Support (L&S) represents software license and related support services, primarily ClearPath Forward®, within the company's Enterprise Computing Solutions (ECS) segment. For the three months ended June 30, 2025, L&S revenue was $87.6 million compared to $82.1 million for the three months ended June 30, 2024, an increase of 6.7%. The increase was primarily driven by the timing of software license renewals. Excluding License and Support (Ex-L&S) measures exclude revenue, gross profit and gross profit margin in connection with software license and related support services within the ECS segment. Ex-L&S revenue for the three months ended June 30, 2025 was $395.7 million compared with $396.1 million for the three months ended June 30, 2024, a decrease of 0.1%. Revenue from international operations for the three months ended June 30, 2025 was $287.8 million compared with $273.8 million for the three months ended June 30, 2024, an increase of 5.1%. Foreign currency had a negligible impact on international revenue in the current period compared with the prior-year period. Revenue from U.S. operations for the three months ended June 30, 2025 was $195.5 million compared with $204.4 million for the three months ended June 30, 2024, a decrease of 4.4%. During the three months ended June 30, 2025, the company recognized net cost-reduction charges of $3.2 million. The net charges related to workforce reductions were $1.5 million and were comprised of: (i) a charge of $4.1 million for severance costs and (ii) a credit of $2.6 million for changes in estimates. The company recorded net charges of $1.7 million comprised of a charge of $3.2 million for an asset write-off, a charge of $0.1 million for other expenses related to cost reduction efforts and a net credit of $1.6 million for net foreign currency gains related to exiting foreign countries. During the three months ended June 30, 2024, the company recognized net cost-reduction charges and other costs of $0.6 million. The net credit related to workforce reductions was $0.7 million and was comprised of: (i) a credit of $1.0 million for changes in estimates and (ii) a charge of $0.3 million for severance costs. The company recorded charges of $1.3 million comprised of $1.2 million for net foreign currency losses related to exiting foreign countries and $0.1 million for other expenses related to other cost-reduction efforts. 25 The charges (credits) were recorded in the following statement of income (loss) classifications: Three Months Ended June 30, (In millions) 2025 2024 Cost of revenue $ 5.6 $ 0.4 Selling, general and administrative (0.9) (1.1) Research and development 0.1 0.1 Other (expense), net (1.6) 1.2 Total $ 3.2 $ 0.6 Gross profit and gross profit margin were $130.0 million and 26.9% in the three months ended June 30, 2025, respectively, compared with $129.9 million and 27.2% for the three months ended June 30, 2024, respectively. Ex-L&S gross profit and gross profit margin for the three months ended June 30, 2025 were $69.7 million and 17.6%, respectively, compared with $74.2 million and 18.7% for the three months ended June 30, 2024, respectively. The decrease was primarily driven by higher cost reduction charges, partially offset by improvement within the company's operating segments. Selling, general and administrative expense in the three months ended June 30, 2025 was $93.6 million (19.4% of revenue) compared with $101.4 million (21.2% of revenue) for the three months ended June 30, 2024. The decrease was primarily driven by lower expense due to realized benefits from the company’s previous cost reduction actions and reduced professional services expense. Research and development expense for the three months ended June 30, 2025 and 2024 was $6.1 million and $4.9 million, respectively. For the three months ended June 30, 2025, the company reported an operating profit of $30.3 million compared with an operating profit of $23.6 million in the three months ended June 30, 2024. The increase was primarily driven by reduction in selling, general and administrative expense, as discussed above. Interest expense for the three months ended June 30, 2025 and 2024 was $8.2 million and $7.9 million, respectively. Other (expense), net was expense of $22.1 million for the three months ended June 30, 2025 compared with expense of $9.4 million for the three months ended June 30, 2024. Other (expense), net for the three months ended June 30, 2025 included a loss on debt extinguishment of $6.8 million related to the repurchase, satisfaction and discharge of the 2027 Notes. See Note 5 of the Notes to Consolidated Financial Statements for details of other (expense), net. The company had no income or loss before income taxes for the three months ended June 30, 2025 due to the factors discussed above. For the three months ended June 30, 2024, income before income taxes was $6.3 million. The provision for income taxes was $20.0 million for the three months ended June 30, 2025 compared with a provision of $18.8 million for the three months ended June 30, 2024. The change in the tax provision was primarily driven by the geographic distribution of income. The effective tax rate for the three months ended June 30, 2025 is not a meaningful measure due to the lack of pre-tax income or loss. The effective tax rate for the three months ended June 30, 2024 was 298.4% primarily driven by U.S. operating losses with no tax benefit as the deferred tax assets are subject to a full valuation allowance, non-creditable withholding taxes in the U.S. and jurisdictions with no valuation allowance that are subject to tax. The company evaluates quarterly the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting such amount, if necessary. The company records a tax provision or benefit for those international subsidiaries that do not have a full valuation allowance against their deferred tax assets. Any profit or loss recorded for the company’s U.S. operations will have no provision or benefit associated with it due to the company’s valuation allowance, except with respect to refundable tax credits and withholding taxes not creditable against future taxable income. As a result, the company’s provision or benefit for taxes may vary significantly period to period depending on the geographic distribution of income. The realization of the company’s net deferred tax assets is primarily dependent on the ability to generate sustained taxable income in various jurisdictions. Judgment is required to estimate forecasted future taxable income, which may be impacted by future business developments, actual results, strategic operational and tax initiatives, legislative, and other economic factors and developments. 26 It is at least reasonably possible that the company’s judgment about the need for, and level of, existing valuation allowances could change in the near term based on changes in objective evidence such as further sustained income or loss in certain jurisdictions, as well as the other factors discussed above, primarily in certain jurisdictions outside of the United States. As such, the company will continue to monitor income levels and mix among jurisdictions, potential changes to the company’s operating and tax model, and other legislative or global developments in its determination. It is reasonably possible that such changes could result in a material impact to the company’s valuation allowance within the next 12 months. Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in that period and could have a significant impact on that period’s earnings. The net loss attributable to Unisys Corporation for the three months ended June 30, 2025 was $20.1 million, or $0.28 per diluted share, compared with a net loss of $12.0 million, or $0.17 per diluted share, for the three months ended June 30, 2024. The net loss for the three months ended June 30, 2025 included a loss on debt extinguishment of $6.8 million related to the repurchase, satisfaction and discharge of the 2027 Notes. Six months ended June 30, 2025 compared with the six months ended June 30, 2024 Revenue for the six months ended June 30, 2025 was $915.4 million compared with $966.0 million for the six months ended June 30, 2024, a decrease of 5.2% from the prior-year period. The decrease was primarily due to the timing of software license renewals and lower volume with clients. Foreign currency fluctuations had a 1 percentage-point negative impact on revenue in the current period compared with the prior-year period. For the six months ended June 30, 2025, L&S revenue was $158.7 million compared to $175.3 million for the six months ended June 30, 2024, a decrease of 9.5%. The decrease was primarily driven by the timing of software license renewals. Ex-L&S revenue for the six months ended June 30, 2025 was $756.7 million compared with $790.7 million for the six months ended June 30, 2024, a decrease of 4.3%. The decrease was primarily driven by lower volume with clients. Revenue from international operations for the six months ended June 30, 2025 was $534.0 million, compared with $549.3 million for the six months ended June 30, 2024, a decrease of 2.8% from the prior-year period. Foreign currency had a 3 percentage-point negative impact on international revenue in the six months ended June 30, 2025 compared with the six months ended June 30, 2024. Revenue from U.S. operations for the six months ended June 30, 2025 was $381.4 million, compared with $416.7 million for the three months ended June 30, 2024, a decrease of 8.5% from the prior-year period. During the six months ended June 30, 2025, the company recognized net cost-reduction charges and other costs of $2.0 million. The net charges related to workforce reductions were $1.2 million and were comprised of: (i) a charge of $5.2 million for severance costs and (ii) a credit of $4.0 million for changes in estimates. The company recorded net charges of $0.8 million comprised of a charge of $3.2 million for an asset write-off, a charge of $0.3 million for other expenses related to cost-reduction efforts and a net credit of $2.7 million for net foreign currency gains related to exiting foreign countries. During the six months ended June 30, 2024, the company recognized net cost-reduction charges and other costs of $6.9 million. The net charges related to workforce reductions were $5.9 million and were comprised of: (i) a charge of $9.7 million for severance costs and (ii) a credit of $3.8 million for changes in estimates. The company recorded a net charge of $1.0 million comprised of a charge of $1.7 million for net foreign currency losses related to exiting foreign countries and a net credit of $0.7 million for changes in estimates related to other cost-reduction efforts. 27 The charges (credits) were recorded in the following statement of income (loss) classifications: Six Months Ended June 30, (In millions) 2025 2024 Cost of revenue $ 5.1 $ 1.4 Selling, general and administrative (0.4) 2.7 Research and development — 1.1 Other (expense), net (2.7) 1.7 Total $ 2.0 $ 6.9 Gross profit and gross profit margin were $237.5 million and 25.9% in the six months ended June 30, 2025, respectively, compared with $265.9 million and 27.5% in the six months ended June 30, 2024, respectively. The decrease was primarily driven by the decrease in revenue previously discussed and higher cost reduction charges, partially offset by delivery improvement and labor cost savings initiatives. Additionally, prior year gross profit margin was impacted by a benefit from the resolution of a contractual dispute with a former client. Ex-L&S gross profit and gross profit margin for the six months ended June 30, 2025 were $133.9 million and 17.7%, respectively, compared with $145.4 million and 18.4% for the six months ended June 30, 2024, respectively. The decrease was primarily driven by higher cost reduction charges, partially offset by delivery improvement and labor cost savings initiatives. Additionally, prior year Ex-L&S gross profit margin was impacted by a benefit from the resolution of a contractual dispute with a former client. Selling, general and administrative expense in the six months ended June 30, 2025 was $190.4 million (20.8% of revenue) compared with $213.6 million (22.1% of revenue) in the prior-year period. The decrease was primarily driven by lower expense due to realized benefits from the company’s previous cost reduction actions and reduced professional services expense. Research and development expense for the six months ended June 30, 2025 and 2024 was $11.7 million and $11.0 million, respectively. For the six months ended June 30, 2025, the company reported an operating profit of $35.4 million compared with an operating profit of $41.3 million for the prior-year period. The decrease was primarily driven by lower gross profit, partially offset by lower selling, general and administrative expense as discussed above. Interest expense for the six months ended June 30, 2025 was $16.4 million compared with $15.8 million for the six months ended June 30, 2024. Other (expense), net was expense of $39.0 million for the six months ended June 30, 2025 compared with expense of $151.5 million for the six months ended June 30, 2024. Other (expense), net for the six months ended June 30, 2025 included a loss on debt extinguishment of $6.8 million related to the repurchase, satisfaction and discharge of the 2027 Notes. Other (expense), net for the six months ended June 30, 2024 included $132.3 million of a U.S. pension plan settlement loss, partially offset by a net gain of approximately $14.9 million related to a favorable judgment received in a Brazilian services tax matter. See Note 5 of the Notes to Consolidated Financial Statements for details of other (expense), net. Subsequent to June 30, 2025, the company ceased its use of foreign currency forward contracts previously used to reduce its exposure to market risks from changes in foreign currency exchange rates. The loss before income taxes for the six months ended June 30, 2025 was $20.0 million compared with a loss of $126.0 million for the six months ended June 30, 2024. The loss for the six months ended June 30, 2025 included a loss on debt extinguishment of $6.8 million related to the repurchase, satisfaction and discharge of the 2027 Notes. The loss for the six months ended June 30, 2024 included $132.3 million of a U.S. pension plan settlement loss. The provision for income taxes was $30.6 million for the six months ended June 30, 2025 compared with a provision of $35.8 million for the six months ended June 30, 2024. The change in the tax provision was driven by the geographic distribution of income. The effective tax rate for the six months ended June 30, 2025 and 2024 was (153.0)% and (28.4)%, respectively, primarily driven by U.S. operating losses with no tax benefit as the deferred tax assets are subject to a full valuation allowance, non-creditable withholding taxes in the U.S. and jurisdictions with no valuation allowance that are subject to tax. Net loss attributable to Unisys Corporation for the six months ended June 30, 2025 was $49.6 million, or $0.70 per diluted share, compared with a net loss of $161.5 million, or $2.34 per diluted share, for the six months ended June 30, 2024. The net loss for the six months ended June 30, 2025 included a loss on debt extinguishment of $6.8 million related to the repurchase, satisfaction and discharge of the 2027 Notes. The net loss for the six months ended June 30, 2024 included $132.3 million of a U.S. pension plan settlement loss net of tax. 28 The following table represents Ex-L&S and L&S financial measures: Three Months Ended June 30, Six Months Ended June 30, (In millions, except for numbers presented as percentages) 2025 2024 2025 2024 L&S revenue $ 87.6 $ 82.1 $ 158.7 $ 175.3 Ex L&S revenue 395.7 396.1 756.7 790.7 Total revenue $ 483.3 $ 478.2 $ 915.4 $ 966.0 L&S gross profit $ 60.3 $ 55.7 $ 103.6 $ 120.5 Ex-L&S gross profit 69.7 74.2 133.9 145.4 Total gross profit $ 130.0 $ 129.9 $ 237.5 $ 265.9 L&S gross profit percent 68.8 % 67.8 % 65.3 % 68.7 % Ex-L&S gross profit percent 17.6 % 18.7 % 17.7 % 18.4 % Total gross profit percent 26.9 % 27.2 % 25.9 % 27.5 % Segment results The company’s reportable segments are as follows: • Digital Workplace Solutions (DWS), which provides workplace solutions featuring intelligent workplace services, proactive experience management and collaboration tools to support business growth; • Cloud, Applications & Infrastructure Solutions (CA&I), which provides digital transformation in the areas of cloud migration and management, applications and infrastructure transformation and modernization solutions; and • Enterprise Computing Solutions (ECS), which provides solutions that harness secure, high-intensity enterprise computing and enable digital services through software-defined operating environments. The company evaluates the performance of the segments based on segment revenue and segment gross profit. Segment revenue and segment gross profit are exclusive of certain activities and expenses that are not allocated to specific segments including the business activities related to the company’s United Kingdom business process outsourcing consolidated joint venture and certain expenses such as cost reduction charges, amortization of purchased intangibles and unusual and nonrecurring items that are not allocated to specific segments. These amounts are combined within other revenue and other gross profit (loss) to arrive at consolidated revenue and consolidated gross profit (loss). See Note 15 of the Notes to Consolidated Financial Statements for the reconciliations of segment revenue to total consolidated revenue and segment gross profit to total consolidated loss before income taxes. Three months ended June 30, 2025 compared with the three months ended June 30, 2024 A summary of the company’s operations by segment is presented below: Total Segments DWS CA&I ECS (In millions, except for numbers presented as percentages) Three Months Ended June 30, 2025 Revenue $ 463.5 $ 138.1 $ 185.2 $ 140.2 Gross profit percent 29.6 % 16.9 % 20.8 % 53.5 % Three Months Ended June 30, 2024 Revenue $ 456.7 $ 132.1 $ 193.9 $ 130.7 Gross profit percent 28.7 % 16.2 % 20.7 % 53.3 % DWS revenue was $138.1 million for the three months ended June 30, 2025 and $132.1 million for the three months ended June 30, 2024, an increase of 4.5%. The increase in revenue was primarily driven by new business, including higher hardware revenue. Foreign currency fluctuations had a negligible impact on DWS revenue in the current period compared with the prior-year period. Gross profit percent was 16.9% in the current period compared with 16.2% in the prior-year period. The increase in gross profit was primarily driven by delivery improvement and labor cost savings initiatives. 29 CA&I revenue was $185.2 million for the three months ended June 30, 2025 and $193.9 million for the three months ended June 30, 2024, a decrease of 4.5%. The decrease in revenue was primarily driven by lower volume with clients in the public sector. Foreign currency fluctuations had a negligible impact on CA&I revenue in the current period compared with the prior-year period. Gross profit percent was 20.8% in the current period compared with 20.7% in the prior-year period. ECS revenue was $140.2 million for the three months ended June 30, 2025 and $130.7 million for the three months ended June 30, 2024, an increase of 7.3%. The increase in revenue was primarily driven by the timing of software license renewals and integrated systems purchases, as well as higher volume in specialized managed services. Foreign currency fluctuations had a 1 percentage-point negative impact on ECS revenue in the current period compared with the prior-year period. Gross profit percent was 53.5% in the current period compared with 53.3% in the prior-year period. Six months ended June 30, 2025 compared with the six months ended June 30, 2024 A summary of the company’s operations by segment is presented below: Total Segments DWS CA&I ECS (In millions, except for numbers presented as percentages) Six Months Ended June 30, 2025 Revenue $ 877.4 $ 256.7 $ 361.8 $ 258.9 Gross profit percent 27.9 % 15.7 % 20.2 % 50.8 % Six Months Ended June 30, 2024 Revenue $ 916.7 $ 264.4 $ 382.3 $ 270.0 Gross profit percent 28.7 % 15.3 % 20.1 % 54.0 % DWS revenue was $256.7 million for the six months ended June 30, 2025 and $264.4 million for the six months ended June 30, 2024, a decrease of 2.9%. The decrease in revenue was primarily driven by lower volume with clients, partially offset by revenue from new business with new and existing clients, as compared to the prior-year period. Foreign currency fluctuations had a 2 percentage-point negative impact on DWS revenue in the current period compared with the prior-year period. Gross profit percent was 15.7% in the current period compared with 15.3% in the prior-year period. The increase in gross profit was primarily driven by delivery improvement and labor cost savings initiatives. CA&I revenue was $361.8 million for the six-months ended June 30, 2025 and $382.3 million for the six months ended June 30, 2024, a decrease of 5.4%. The decrease in revenue was primarily driven by lower volume with existing clients. Foreign currency fluctuations had a 1 percentage-point negative impact on CA&I revenue in the current period compared with the prior-year period. Gross profit percent was 20.2% in the current period compared with 20.1% in the prior-year period. ECS revenue was $258.9 million for the six months ended June 30, 2025 and $270.0 million for the six months ended June 30, 2024, a decrease of 4.1%. Foreign currency fluctuations had a 2 percentage-point negative impact on ECS revenue in the current period compared with the prior-year period. Gross profit percent was 50.8% in the current period compared with 54.0% in the prior-year period. The decrease in revenue and gross profit was primarily driven by the timing of software license renewals. Total Contract Value and Backlog Total Contract Value (TCV) represents the initial estimated revenue related to contracts signed in the period without regard for early termination or revenue recognition rules. Changes to contracts and scope are treated as TCV only to the extent of the incremental new value. New Business TCV represents TCV attributable to expansion and new scope for existing clients and new logo contracts. L&S TCV is driven by software license renewals, and as such, changes in timing or terms of renewals can lead to fluctuations from period to period. Measuring TCV involves the use of estimates and judgments and the extent and timing of conversion of TCV to revenue may be impacted by, among other factors, the types of services and solutions sold, contract duration, the pace of client spending, actual volumes of services delivered as compared to the volumes anticipated at the time of contract signing, and contract modifications, including terminations, over the lifetime of a contract. Backlog represents the estimated amount of future revenue to be recognized under contracted work, which has not yet been delivered or performed. The timing of conversion of backlog to revenue may be impacted by, among other factors, the timing of execution, the extension or early termination of existing contracts with or without penalty, adjustments to estimates in pricing or volumes for previously included contracts, seasonality and foreign currency exchange rates. 30 The following table summarizes the company’s TCV metrics. Three Months Ended June 30, Six Months Ended June 30, (In millions, except numbers presented as percentages) 2025 2024 % Change 2025 2024 % Change Ex-L&S New Business (i) $ 122 $ 215 (43) % $ 459 $ 399 15 % Ex-L&S Renewals 266 144 85 % 342 225 52 % L&S Renewals 49 103 (52) % 70 208 (66) % Total TCV $ 437 $ 462 (5) % $ 871 $ 832 5 % (i) New Business relates to expansion and new scope for existing clients and new logo contracts. Total TCV was $437 million for the three months ended June 30, 2025 and $462 million for the three months ended June 30, 2024, a decrease of 5% primarily driven by a shift in timing in Ex-L&S New Business, partially offset by Ex-L&S renewals. Total TCV was $871 million for the six months ended June 30, 2025 and $832 million for the six months ended June 30, 2024, an increase of 5% primarily driven by an increase in Ex-L&S New Business and Ex L&S renewals. Backlog was $2.92 billion as of June 30, 2025 compared to $2.79 billion as of June 30, 2024, an increase of 5%. The company believes that actual revenue reflects the most relevant measure necessary to understand the company’s 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. Financial condition The company’s principal sources of liquidity are cash on hand, cash from operations and its revolving credit facility, discussed below. The company and certain international subsidiaries have access to uncommitted lines of credit from various banks. The company believes that it will have adequate sources of liquidity to meet its expected cash requirements for at least the next twelve months. Cash and cash equivalents at June 30, 2025 were $300.8 million compared to $376.5 million at December 31, 2024. As of June 30, 2025, $257.6 million of cash and cash equivalents were held by the company’s foreign subsidiaries and branches operating outside of the U.S. The company may not be able to readily transfer approximately one-fifth of these funds out of the country in which they are located as a result of local restrictions, contractual or other legal arrangements or commercial considerations. At June 30, 2025, the deferred tax liability on undistributed earnings was $29.8 million. Transfers of international cash and cash equivalents to the U.S. will require the company to pay withholding or other taxes on a portion of the amount transferred. At June 30, 2025, the company maintained cash balances in various operating accounts in excess of federally insured limits. The company monitors this risk by evaluating the creditworthiness of the financial institutions. During the six months ended June 30, 2025, cash used for operations was $282.9 million compared to cash provided by operations of $26.5 million during the six months ended June 30, 2024, primarily driven by cash contributions to the company's defined benefit pension plans, including a discretionary contribution of $250 million to its U.S. defined benefit pension plans, and changes in working capital. Cash used for investing activities during the six months ended June 30, 2025 was $10.0 million compared to cash used for investing activities of $46.8 million during the six months ended June 30, 2024. Net proceeds of foreign exchange forward contracts were $30.5 million for the six months ended June 30, 2025 compared with net purchases of $5.6 million in the prior-year period. Proceeds from foreign exchange forward contracts and purchases of foreign exchange forward contracts represent derivative financial instruments used to reduce the company’s currency exposure to market risks from changes in foreign currency exchange rates. In the current period, the investment in marketable software was $23.6 million compared with $25.7 million in the prior-year period and capital additions of properties and other assets were $16.8 million compared with $15.4 million in the prior-year period. Cash provided by financing activities during the six months ended June 30, 2025 was $190.3 million compared to cash used for financing activities of $11.9 million during the six months ended June 30, 2024, primarily driven by the net proceeds received from the issuance of the 2031 Notes, partially offset by the repurchase of the 2027 Notes, both of which are described below. 31 At June 30, 2025, total debt was $698.4 million compared to $493.2 million at December 31, 2024. The increase in total debt as of June 30, 2025, is primarily due to the issuance of the 2031 Notes, partially offset by the redemption of the 2027 Notes. Senior Secured Notes due 2031 In June 2025, the company completed a private placement offering of $700.0 million aggregate principal amount of the 2031 Notes. The 2031 Notes will pay interest semiannually on January 15 and July 15, commencing on January 15, 2026. The 2031 Notes are fully and unconditionally guaranteed on a senior secured basis by Unisys Holding Corporation, Unisys AP Investment Company I and Unisys NPL, Inc., each a Delaware corporation that is directly or indirectly wholly owned by the company (the Subsidiary Guarantors). The net proceeds from the issuance of the 2031 Notes, together with cash on hand, were used to finance the company’s tender offer to purchase for cash any and all of its outstanding 2027 Notes and solicitation of consents from holders of the 2027 Notes to amendments to the indenture governing the 2027 Notes (the Tender Offer) and the payment of related premiums, fees and expenses. The company also used the net proceeds from the issuance of the 2031 Notes to redeem, on or about November 1, 2025, any 2027 Notes that remain outstanding following the Tender Offer, as explained under the Senior Secured Notes due 2027 section below, and to fund, together with cash on hand a portion of the company’s U.S. defined benefit pension plans deficit and postretirement liabilities. The 2031 Notes and the guarantees by the Subsidiary Guarantors rank equally in right of payment with all of the existing and future senior debt of the company and the Subsidiary Guarantors and senior in right of payment to any future subordinated debt of the company and the Subsidiary Guarantors. The 2031 Notes and the guarantees are structurally subordinated to all existing and future liabilities (including preferred stock, trade payables and pension liabilities) of the subsidiaries of the company that are not Subsidiary Guarantors. The 2031 Notes and the guarantees are secured by liens on substantially all assets of the company and the Subsidiary Guarantors, other than certain excluded assets (the collateral). The liens securing the 2031 Notes on certain Asset Based Lending (ABL) collateral are subordinated to the liens on ABL collateral in favor of the ABL secured parties, subject to certain limitations and permitted liens. The company may, at its option, redeem some or all of the 2031 Notes at any time on or after January 15, 2028 at a redemption price determined in accordance with the redemption schedule, plus accrued and unpaid interest, if any. Prior to January 15, 2028, the company may, at its option, redeem some or all of the 2031 Notes at any time, at a price equal to 100% of the principal amount of the 2031 Notes redeemed plus a “make-whole” premium, plus accrued and unpaid interest, if any. The company may also redeem, at its option, up to 40% of the 2031 Notes at any time prior to January 15, 2028, using the proceeds of certain equity offerings at a redemption price of 110.625% of the principal amount thereof, plus accrued and unpaid interest, if any. On or after January 15, 2028, the company may, on any one or more occasions, redeem all or part of the 2031 Notes at specified redemption premiums, declining to par for any redemptions on or after January 15, 2030. Prior to January 15, 2028, the company may redeem up to 10% of the aggregate principal amount of the 2031 Notes during each calendar year, commencing in 2025, at a purchase price equal to 103% of the principal amount of the 2031 Notes, plus accrued and unpaid interest, if any. The indenture relating to the 2031 Notes contains covenants that limit the ability of the company and its restricted subsidiaries (as defined therein) to, among other things: (i) incur additional indebtedness and guarantee indebtedness; (ii) pay dividends or make other distributions or repurchase or redeem its capital stock; (iii) prepay, redeem or repurchase certain debt; (iv) make loans and investments (including investments by the company and the Subsidiary Guarantors in subsidiaries that are not guarantors); (v) sell assets; (vi) create or incur liens; (vii) enter into transactions with affiliates; (viii) enter into agreements restricting its subsidiaries’ ability to pay dividends; and (ix) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to several important limitations and exceptions. If the company experiences certain kinds of changes of control (as defined in the indenture), it must offer to purchase the 2031 Notes at 101% of the principal amount of the 2031 Notes, plus accrued and unpaid interest, if any. In addition, if the company sells assets under certain circumstances, it must apply the proceeds of such asset sales towards an offer to repurchase the 2031 Notes at a price equal to par plus accrued and unpaid interest, if any. The indenture also provides for events of default, which, if any of them occur, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding 2031 Notes to be due and payable immediately. The company estimates that the interest expense on an annual basis, including the amortization of debt issuance costs, related to the 2031 Notes will be approximately $76.9 million. Senior Secured Notes due 2027 On June 11, 2025, the company commenced the Tender Offer. The purchase price offered per $1,000 principal amount of 2027 Notes pursuant to the Tender Offer was $1,006.25, which included an early tender premium of $30.00 per $1,000 principal amount of 2027 Notes. Concurrent with the closing of the issuance of the 2031 Notes, the company paid an aggregate amount of $488.6 million, including $3.0 million of early tender premium and $5.1 million of accrued interest through June 27, 2025, to purchase $480.1 million of aggregate principal amount outstanding of the 2027 Notes tender in the Tender Offer. 32 On June 27, 2025, the company satisfied and discharged the indenture relating to the 2027 Notes, issued a notice of redemption for its remaining outstanding principal amount, and deposited U.S. government securities with the trustee of the 2027 Notes to cover the remaining outstanding aggregate principal amount of $4.9 million, plus accrued but unpaid interest on the 2027 Notes to be redeemed to, but not including, the redemption date. As a result of the satisfaction and discharge, the indenture relating to the 2027 Notes ceased to be of further effect except as to rights of registration of transfer or exchange of 2027 Notes, which survive until all 2027 Notes have been canceled and the rights, protections and immunities of the trustee, as expressly provided for in the indenture relating to the 2027 Notes. The satisfaction and discharge of the 2027 Notes resulted in a loss on debt extinguishment of $6.8 million, reported in other (expense), net, which included the write-off of unamortized debt issuance costs of $3.8 million and an early tender premium of $3.0 million paid to repurchase a portion of the 2027 Notes. Asset Based Lending (ABL) Credit Facility Concurrently with the issuance of the 2031 Notes, the company entered into an amendment of the company’s Amended and Restated ABL Credit Facility that extended the maturity date from October 2027 to June 2030 and modified certain other terms and covenants. The secured revolving credit facility continues to provide for revolving loans and letters of credit up to an aggregate amount of $125.0 million (with a limit on letters of credit of $40.0 million), with an uncommitted accordion feature provision allowing for the aggregate amount available to be increased up to $155.0 million upon the satisfaction of certain specified conditions. Availability under the credit facility is subject to a borrowing base calculated by reference to the company’s receivables. At June 30, 2025, the company had no borrowings and $8.3 million of letters of credit outstanding. Availability under the credit facility was $99.1 million, net of letters of credit issued. Any borrowings under the facility will be subject to variable interest rates. The Amended and Restated ABL Credit Facility is subject to a springing maturity, under which the Amended and Restated ABL Credit Facility will immediately mature 91 days prior to any date on which contributions to pension funds in the United States in an amount in excess of $100.0 million are required to be paid unless the company is able to meet certain conditions, including that the company has the liquidity (as defined in the Amended and Restated ABL Credit Facility) to cash settle the amount of such pension payments, as applicable, no default or event of default has occurred under the Amended and Restated ABL Credit Facility, the company’s liquidity is above $130.0 million and the company is in compliance with the then applicable fixed charge coverage ratio on a pro forma basis. The Amended and Restated ABL Credit Facility is guaranteed by Unisys Holding Corporation, Unisys NPL, Inc. and Unisys AP Investment Company I, each of which is a U.S. corporation that is directly or indirectly owned by the company (the subsidiary guarantors). The facility is secured by the assets of the company and the subsidiary guarantors, other than certain excluded assets, under a security agreement entered into by the company and the subsidiary guarantors in favor of Bank of America, N.A., as agent for the lenders under the credit facility. The company is required to maintain a minimum fixed charge coverage ratio if the availability under the Amended and Restated ABL Credit Facility falls below the greater of 10% of the lenders’ commitments under the facility and $12.5 million. The Amended and Restated ABL Credit Facility contains customary representations and warranties, including, but not limited to, that there has been no material adverse change in the company’s business, properties, operations or financial condition. The Amended and Restated ABL Credit Facility includes restrictions on the ability of the company and its subsidiaries to, among other things, incur other debt or liens, dispose of assets and make acquisitions, loans and investments, repurchase its equity, and prepay other debt. These restrictions are subject to several important limitations and exceptions. Events of default include non-payment, failure to comply with covenants, materially incorrect representations and warranties, change of control and default under other debt aggregating at least $50.0 million, subject to relevant cure periods, as applicable. At June 30, 2025, the company has met all covenants and conditions under its various lending and funding agreements. For at least the next 12 months, the company expects to continue to meet these covenants and conditions. Pension and Postretirement Benefits At the end of each year, the company estimates its future cash contributions to its global defined benefit pension plans based on year-end pension data, assumptions and agreements. For the six months ended June 30, 2025, the company made cash contributions totaling $287.2 million, which included a discretionary contribution of $250 million to its U.S. defined benefit pension plans. The discretionary contribution was funded approximately through $200 million from the net proceeds of issuance of the 2031 Notes and $50 million from cash on hand. As a result, the company’s pension and postretirement liabilities and projected future required cash contributions were reduced. The company also made strategic changes to its underlying investments in its U.S. qualified defined benefit pension plans, 33 leading to a future expected decrease in the return on plan assets to 5.0% compared to an expected return of 7.0% as of December 31, 2024. For the remainder of 2025, the company expects to make cash contributions of approximately $55 million primarily to its U.S. defined benefit pension plans, resulting in total 2025 expected cash contributions of approximately $342 million to its global defined benefit pension plans, which are comprised of approximately $314 million for the company’s U.S. defined benefit pension plans and approximately $28 million for the company’s international defined benefit pension plans. Based on current legislation, global regulations, recent interest rates and expected returns, the company estimates future total cash contributions to its global defined benefit pension plans of approximately $82 million in 2026, compared with previous estimate of $122 million. For the six months ended June 30, 2024, the company made cash contributions of $10.3 million primarily to its international defined benefit pension plans. In 2024, the company made cash contributions of $21.9 million primarily to its international defined benefit pension plans. If the company is not able to generate sufficient cash flows from operations, it may need to obtain additional funding in order to make these contributions. Any material deterioration in the value of the company’s global defined benefit pension plan assets, as well as changes in pension legislation, volatility in the capital markets, discount rate changes, asset return changes, or changes in economic or demographic trends, could require the company to make cash contributions in different amounts and on a different schedule than previously estimated. The company will continue to evaluate opportunities for additional reduction of its global defined benefit pension obligations in future periods depending on overall market conditions. As a result of the company’s significant accumulated other comprehensive losses associated with its pension and postretirement plans, any future group annuity contract purchase could result in material non-cash settlement losses, if executed. From time to time, the company may explore a variety of 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 in the open market or in privately negotiated transactions depending upon availability, market conditions and other factors. The company does not have any off-balance sheet arrangements that are material or reasonably likely to become material to its financial condition or results of operations. Critical accounting policies and estimates There have been no significant changes to the company’s critical accounting policies and estimates as reported in its Annual Report on Form 10-K for the year ended December 31, 2024. 34 Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no material change in the company’s assessment of its sensitivity to market risk since its disclosure in its Annual Report on Form 10-K for the year ended December 31, 2024.