優利系統 (UIS) 2026年第3季法說會：隨 TCV 成長上修營收財測指引

重點摘要

• 第三季營收年增 2.5% 至 4.72 億美元，按固定匯率計算成長 0.6%，主要受科技解決方案與服務 (TS&S) 業務成長帶動，且 ClearPath 業績優於公司原先預期。
• Non-GAAP 營業利益率增加 180 個基點至 7.2%。調整後 EBITDA 增至 6,000 萬美元，利潤率達 12.7%。
• 總合約價值 (TCV) 達 5.94 億美元，年增 43%、季增 41%。新業務 TCV 年增 78% 至 2.21 億美元。
• 優利系統 (Unisys) 今年第二度調升 2026 年固定匯率營收財測，目前預期衰退 3% 至 1.5%，相較於先前預估的衰退 5% 至 3.5%。
• 管理層重申全年 ClearPath 營收約為 4.25 億美元、Non-GAAP 營業利益率為 9% 至 11%，自由現金流約為負 2,500 萬美元。
• 公司表示，續約業務中因 AI 帶來的定價壓力已大致反映在更新後的合約基底中。代理型服務、資料治理與 AI 基礎架構現場服務等領域正湧現新機會。

核心財務業績

年初至今 TCV 為 13 億美元，年增 22%，其中包括新業務 TCV 5.71 億美元，年增 61%。過去 12 個月公司整體的訂單出貨比為 1.2 倍，TS&S 則為 1.3 倍。

業務與營運表現

數位工作場所解決方案營收為 1.3 億美元，按固定匯率計算成長 1.7%。新業務與硬體營收增加，部分抵銷了先前客戶流失的影響。毛利率自 16.2% 下降至 9.5%，反映客戶流失、硬體組合變動，以及大型新客戶的建置與交付成本。

雲端、應用程式與基礎架構解決方案創造了 1.8 億美元營收，按固定匯率計算下滑 1.2%。衰退幅度較去年同期改善逾 5.5 個百分點。受交付效率改善帶動，毛利率增加 100 個基點至 20.6%。

企業運算解決方案營收按固定匯率計算成長 2.7% 至 1.41 億美元。受軟體授權佔比提升帶動，ClearPath 毛利率從去年同期的 56.6% 升至 73.1%。專業服務與次世代運算解決方案營收成長 8.6% 至 5,600 萬美元。

各業務組合的新業務簽約額均有成長。優利系統表示，已擴大或續約與海尼根 (Heineken)、美國某州政府機構、某美國大型國防承包商、墨西哥某全球性銀行及亞太地區某旅遊科技供應商的合作。合格新業務商機案源連續第三季呈現季增，主要由公共部門、金融服務以及旅遊和交通運輸領域帶動。

管理層表示，AI 正在壓低同等範疇續約合約的定價，同時在資料就緒、治理、代理型 AI 編排及資料中心現場服務方面創造新機會。優利系統正擴大其代理型服務台平台，並建構涵蓋液冷、安裝、佈線、網路與儲存設備及日常維護的資料中心能力。

管理層財測

修訂後的財測意味著第四季營收約為 5.7 億美元，其中約 2.05 億美元來自 ClearPath。由於 ClearPath 營收集中入帳，管理層預期第四季 Non-GAAP 營業利益率將落在 10% 中高段。

優利系統仍預期 2027 與 2028 年 ClearPath 年均營收約為 4 億美元。該公司亦預期 2026 年全球退休金提撥額約為 9,700 萬美元。

風險與觀察重點

• 第四季現金流部分取決於 ClearPath 續約與款項收回的時機。若在季末簽約，可能會將現金收入推遲至 2027 年第一季。
• 先前已確認的客戶流失仍是營收逆風。管理層預期過往客戶流失的影響將在 2027 年下半年開始跨過基期。
• 裝置生命週期管理硬體雖有助於擴展客戶，但若由優利系統採購設備，其利潤率百分比通常較低。
• DWS 的獲利能力仍受到過渡成本、AI 相關培訓與部署投資，以及代理型服務台推廣的影響。
• 非必要專案預算持續面臨嚴格審查，而記憶體相關硬體成本上升亦在影響客戶的支出優先順序。
• 全年業績能否達標，取決於第四季交易能否順利談成，以及權重極高的 ClearPath 續約進度。

分析師問答焦點

管理層表示，TS&S 維持持續成長的主要障礙，在於過去客戶流失的殘留影響，以及新交易轉換認列的時機。TS&S 續約重置已大致完成，而客戶流失帶來的基期比較壓力應會在 2027 年下半年趨緩。

新增 TCV 通常需要三至六個月的過渡期才會開始認列營收。管理層表示，合約通常會在 12 至 18 個月內達到其正常利潤率水準，近期簽署的服務業務預期將有助於提升利潤率。

在 ClearPath 方面，管理層對預期的第四季續約展現高度信心，因為該系統屬於關鍵任務系統。主要的不確定性在於時程：即使營收在第四季認列，12 月簽約仍可能導致相關現金回款延遲至下一季度。

優利系統亦將資料中心現場服務視為正在發展的商機。該公司憑藉其全球交付能力，正透過 Refroid Technologies、超大規模雲端業者 (hyperscalers)、原始設備製造商 (OEM) 及白牌合作關係，爭取建置、部署與維護相關業務。

完整電話會議逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Good day, and welcome to the Unisys Corporation Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Daniel Ferry, Vice President of Corporate Development and Investor Relations. Please go ahead.

Daniel Ferry

Thank you, operator. Good morning, everyone. Thank you for joining us. Yesterday afternoon, Unisys released its third quarter 2026 financial results. Joining me to discuss those results are Mike Thomson, our CEO and President; and Deb McCann, our Chief Financial Officer.

As a reminder, today's call contains estimates and other forward-looking statements within the meaning of securities laws. We caution listeners that these statements are subject to risks and uncertainties that could cause actual results to differ materially. These items can be found in the forward-looking statements section of yesterday's earnings release furnished on Form 8-K and our most recent Form 10-K and 10-Q filed with the SEC.

We do not assume any obligation to review or revise any forward-looking statements in light of future events. We will also refer to certain non-GAAP financial measures such as non-GAAP operating profit and adjusted EBITDA. These measures exclude certain unusual and non-recurring items such as post-retirement expense, cost reduction activities and other expenses that the company believes are not indicative of ongoing operations.

We believe these measures provide a more complete understanding of our financial performance, but they are not intended to be a substitute for GAAP. Reconciliations for non-GAAP measures are provided in the slides for today's call and are available on our investor website.

With that, I'd like to turn the call over to Mike.

Michael Thomson

Thank you, Dan. Good morning, everyone, and thank you for joining us to discuss the company's third quarter 2026 results. The year continues to move in the right direction with the third quarter building on a solid first half. Revenue and non-GAAP profit both finished above the expectations we shared in July, driven by both Technology Solutions and Services, or TS&S and ClearPath.

Given our results to date and our fourth quarter expectations, we're once again raising our full year total company revenue guidance to negative 3% to negative 1.5% in constant currency, an improvement from negative 5% to negative 3.5%. This marks the second increase of our revenue guidance this year.

ClearPath remains on track to achieve the higher $425 million annual revenue expectation we provided in July, and our efficiency initiatives continue to deliver positive results, keeping us on track for the full year profit and free cash flow expectations we provided at the beginning of the year.

New business signings remained strong, up 78% year-over-year and 15% sequentially, building on a positive second quarter. We continue delivering our AI-infused solutions to clients, building on AI skills across our workforce and broadening our platforms with a growing repository of AI-based automations that help clients adopt quickly and shorten the time to value.

That includes our ClearPath ecosystem, where we're advancing our tooling to make it easier for our clients to connect ClearPath data to their enterprise AI workloads. These investments turn current demand into lasting higher-value client relationships.

As we've discussed for several quarters, AI is changing how IT services are delivered and priced. Clients' continued adoption of AI affects our business in a few ways. From a revenue perspective, we experienced pricing headwinds on same scope renewal work, but at the same time, AI has opened up new markets and opportunities for us to pursue. Opportunities like field services for data centers, data readiness and governance and the orchestration of Agentic AI, including autonomous workflow execution, model routing and hosting and data and tool integration as well as token economics.

On the delivery side of the equation and across nearly every part of our portfolio, AI is transforming the way we deliver. In addition to strong new business signings, this was also our largest renewal quarter so far this year, and clients did more than extend existing solutions. Many added scope, new service areas and in some cases, new geographies, which are testaments to the quality of our service delivery and the breadth of our portfolio.

We signed roughly $1.4 billion of TS&S renewals in 2025 and expect about half of that in 2026. This will put us at approximately $2 billion across the two years, at which point we'll have been through the majority of our contracted base. In many of those renewals, we offset AI-related deflation with added scope, which helped protect the economics of the relationship.

With most of that behind us, the pricing reset that came with AI-driven efficiency is largely complete and new business is now building on a refreshed base. We have better visibility into our run rate and a clearer path back to growth. The headwinds tied to the historical client losses begin to lap in the back half of next year and absent those, we'd be growing above market this year.

Turning to the details of the third quarter. Revenue grew 2.5% year-over-year or 0.6% in constant currency, ahead of the expectations we gave last quarter, with TS&S also up 2.6% or 0.9% in constant currency. Growth in new business with existing clients more than offset lower volumes from previously identified client attrition. We again saw higher hardware volume, including components tied to our Device Life Cycle Management, or DLM, and an uptick in project work in our non-ClearPath ECS business. Clients continue to move forward with project-related AI initiatives even as budgets remain carefully managed.

Non-GAAP operating profit improved by 180 basis points year-over-year, reflecting the results of ongoing investments in technology, our workforce and higher-value solutions. Total contract value signed in the quarter was $594 million, up 43% year-over-year and 41% sequentially. New business TCV was $221 million, up 78% year-over-year, 15% sequentially and 61% year-to-date. In DWS and CA&I, new business signings grew by double digits, both sequentially and year-over-year and were margin accretive.

New business is a measure that will ultimately return those segments to revenue growth and stronger profitability. ES&S renewal TCV was $275 million, up 40% sequentially and up 20% year-over-year against a difficult comparison since 2025 was our largest renewal year. Win rates on follow-on work with existing clients also remains above our historical levels, consistent with what we have seen throughout the year.

Several of these quarter wins illustrate improved win rates and new business. Heineken, a global beverage company we already support in the Americas, selected us through a competitive global sourcing process to run its end-user service desk worldwide. We will deliver a single standardized service desk across its operating companies, more than doubling the number we serve today under one governance and delivery model.

The win spans both of our core businesses since we also extended our existing cloud and infrastructure agreement with them. Heineken chose us for our service management maturity, our AI-enabled and conversational AI capabilities and our willingness to work within its preferred technology ecosystem rather than requiring proprietary tools.

A U.S. state agency that we've served for more than eight years renewed ahead of expiration. We run its data centers and public cloud environments, manage identity and access and support its modernization work, so the renewal reflects the breadth of what we do for this client, not just a single service. The client's decision was based on our service delivery excellence and client satisfaction.

We saw a similar pattern with our major U.S. defense contractor, which renewed a broad IT outsourcing engagement spanning our DWS and CA&I segments. We won the competitive bid by positioning ourselves as a trusted adviser through executing measurable operational improvements and consistent delivery execution. The renewal also expands our role. We are extending operating hours and business continuity services.

In Mexico, a leading global bank we've supported for more than 17 years, signed a 3-year managed services renewal covering field services across its nationwide network of 600 branches and 4,000 ATMs. We provide remote support, dedicated on-site teams in major cities, dispatch-based support, asset control and smart locker services, and we do it using the client's own tools and processes rather than requiring our own.

We maintained overall pricing with standard cost of living adjustments, adjusted scope as the client's branch footprint changed and added reporting and analytics that give the client better visibility today and lay the groundwork for automation and AI. The renewal reflects our ability to adapt as our clients' operating model and regulatory requirements evolve.

In Asia Pacific, a global travel technology provider added two additional airports to the on-site engineering work we began earlier this year. That work grew out of our long-standing support for one of the clients' technologies businesses, and it now includes dedicated engineers who keep passenger processing equipment running in the airports we serve. It's a clear example of our land-and-expand strategy, second expansion in consecutive quarters built on our airport technology expertise and regional presence.

Our qualified new business pipeline has now grown sequentially for three consecutive quarters, fueled by new opportunities within our existing client base. Sequential pipeline growth is across all segments, led by public sector, financial services and travel and transportation. The pattern fits the broader environment as demand is the strongest where the work is mission-critical or regulated and slower where spending is tied to discretionary projects.

Client demand in the quarter was broadly consistent with what we described last quarter. Budgets remain carefully managed and discretionary programs without a near-term payback are still being scrutinized. But within our client base, project work and AI-related initiatives continue to progress.

As we noted last quarter, memory-driven hardware costs are still weighing on the clients' budgets and continue to steer IT leaders toward our Device Life Cycle Management services. The hardware itself carries lower margins, but DLM is how we earn the life cycle, manage services and service desk the work that follows. We believe our model is also structurally less exposed than many of our peers to the discretionary project layer that is most affected when budgets tighten.

Most of what we do is contracted managed services on operating budgets for systems that must run every day and approximately half of our revenue is generated outside the U.S. For example, our clients cannot defer spend associated with passenger boarding or state revenue processing systems because they want to buy GPUs or memory this quarter. As the capital flow into AI infrastructure, that infrastructure still must be installed, cooled, maintained and very few providers have the global footprint to do that at scale.

On AI, we continue to move from capability to client outcomes and the common thread in our platforms for delivery, leveraging the library of reusable assets and repeatable methods that carry from one client to the next. Our agentic service desk delivered through our Service Experience Accelerator platform continued to expand its live client base in the quarter with launches at a U.K. construction and infrastructure client, a global industrial holding group and a manufacturing client.

The platform is also moving beyond IT. At a global commercial real estate services client, we replaced a legacy tool with ServiceNow HR service delivery and built AI-enabled onboarding workflows.

At a global quick service restaurant client, coordinated agents diagnose root cause and orchestrate resolution across support towers often before the restaurant staff reports the issue. Because the platform adopts each user's existing permissions and enforces them before the AI reasons, autonomous resolution can expand across functions without running into data governance limits, which matters to our regulated industry clients.

As AI absorbs routine Level 1 issues, we're also upskilling our service desk teams towards knowledge-based roles where the output is judgment, decisions and system improvement. AI is embedded across our solutions, so most of its contribution today is indirect through delivery efficiency and the value of the solutions themselves alongside a small number of direct AI-driven offerings.

Our approach is consultative. We use AI and the client's own data to solve specific problems as an orchestrator and a future state service provider. We remain model agnostic by design. Clients concerned about sovereignty, data leakage or IP protection are steered towards open weight models and private environments, while more complex problems go to frontier models, and our role is to help clients achieve the desired outcome by orchestrating the right combination of model and infrastructure based on our depth in operating hybrid infrastructure.

Our go-to-market is also increasingly partner influenced and relationship-led. We're engaging with clients earlier in our rapid value assessments that we discussed last quarter, which provides valuable insight into our skills and early return on their AI investment and opens the door for new business. Opportunities that originate with our alliance partners also continue to take increasing share of the pipeline.

In data center field services, a growing focus for us, we announced a partnership in August with Refroid Technologies. It combines their direct-to-chip and immersion cooling, cooling distribution and load band technologies with our global field services for deployment, commissioning, validation, workforce enablement and life cycle support.

In AI infrastructure, the constraint is increasingly the skilled expertise to deploy and maintain it, and this partnership builds on the momentum we described last quarter. We're also adding skills and capacity such as liquid cooling to our field service teams to support data center build-out and break fix. The work extends beyond cooling to rack and stack installation, cabling, network and storage equipment and ongoing maintenance following the build-out.

In security, we integrated Microsoft Security Copilot into our managed detection and response solutions, delivering through our global security operations center alongside Defender and Sentinel. AI agents now automate phishing triage, threat intelligence analysis and incident investigation with a full audit trail. As Agentic AI widens the attack surface, we treat zero trust, identity and post-quantum readiness as foundational to our other offerings.

ClearPath revenue was $84 million for the quarter, up 2% year-over-year and down 1% in constant currency, ahead of the approximately $80 million we expected. We are reaffirming our expectations for full year ClearPath revenue of $425 million, and we continue to expect average annual ClearPath revenue of approximately $400 million in 2027 and 2028.

We hosted our ClearPath Client Conference in London in September, where we demonstrated the next generation of development and AI capabilities and the response was overwhelmingly positive. Building on the core operating systems release and AI developer toolkit we introduced earlier this year, which ease the integration of ClearPath data with third-party AI applications, we're positioning ClearPath as a data backbone for AI.

We're enabling AI at the AB Suite layer, which we believe will lead to growth in MIPS and workloads and ePortal 13 reaches general availability later in November. We continue to see increased usage of the ClearPath ecosystem and AI continues to act as a tailwind to consumption and rising interest in our digital sovereignty reinforces the value of the platform's control and resiliency characteristics.

Third-party recognition continues to broaden. Nelson Hall again named us a leader in its 2026 NEAT evaluation for AI-enabled cloud infrastructure managed services, citing our intelligent operation and Agentic AI innovation as our Unisys Intelligence accelerator platform. In digital workplace, powered by our Service Experience Accelerator Platform, ISG named us a leader across five regions in its 2026 Future of Work study, Everest Group named us a leader and a star performer in its 2026 Digital Workplace Services Peak Matrix for North America, and Avasant named us a leader for the fifth consecutive year with its highest rating for future proofing.

As we kick off the fourth quarter, we continue to receive recognition from ISG for our agentic and generative AI services and the XLA Institute awarded us a Level 4 performance, which is the highest level awarded in its inaugural experience management maturity assessment.

None of this happens without our people. We continue to invest in enhancing AI skills across the company and aligning those skills with demand. Recently, we were named to Business Insider's 2027 list of America's most Innovative businesses. We were also named to TIME's 2026 list of India's Best Employers and for the first time ever, the Wall Street Journal 2026 America's Top 100 Most Loved Workplaces, which reflects the strength of our global workforce and the focus on innovation. That strength is also evident in our trailing 12-month attrition rate of 11.9%, reflecting the positive culture at Unisys.

With that, I'll turn the call over to Deb to discuss our financial performance in more detail.

Debra McCann

Thank you, Mike, and good morning, everyone. As a reminder, my discussion today will reference the supplemental slides on our website. I will discuss the total revenue growth, both as reported and in constant currency and segment growth in constant currency only. I will also provide information on Technology Solutions and Services or TS&S, to allow investors to assess the progress we are making outside of ClearPath where software license revenue and profit recognition are tied to renewal timing and can be uneven between quarters.

As a reminder, ClearPath revenue constitutes about 2/3 of the Enterprise Computing segment. As Mike discussed, the third quarter came in ahead of the outlook we provided last quarter, and it was accompanied by another quarter of strong new business signings. Revenue exceeded our expectations, led by TS&S and non-GAAP operating profit margin of 7.2% was above the approximate 4% we guided.

We took another meaningful step toward removing our U.S. pension with the annuity purchase we completed in the quarter. Together with the visibility we have into the fourth quarter, these results support the increase to our full year revenue guidance and our reaffirmed profit guidance.

Looking at our results in more detail, you can see on Slide 7 that third quarter revenue was $472 million, an increase of 2.5% year-over-year as reported and 0.6% in constant currency. This was more than $20 million above the outlook we provided last quarter, driven primarily by TS&S, which generated $387 million of revenue, an increase of 2.6% compared to the prior year or 0.9% in constant currency. The increase was primarily driven by new business with existing clients, partially offset by lower volume from known client attrition. That compares to the $370 million we expected.

ClearPath revenue for the quarter was $84 million, slightly ahead of the $80 million expectation we outlined last quarter. On a year-to-date basis, total revenue for the company was up 0.5% as reported or down 3.1% in constant currency. And TS&S revenue was up 2.6% as reported or down 1.1% in constant currency.

Staying on Slide 7, I will now discuss third quarter revenue by segment in constant currency terms. Digital Workplace Solutions revenue of $130 million increased 1.7%, primarily driven by new business and higher hardware revenue, partially offset by the client attrition we have discussed in prior quarters. Hardware, including components associated with our Device Life Cycle Management offering, or DLM, can carry lower margins when Unisys procures the devices but DLM increases the stickiness of client relationships and provides an entry point for expanding into higher-value services.

Cloud Applications and Infrastructure Solutions revenue was $180 million, a year-over-year decline of 1.2%. The rate of decline has improved by more than 5.5 points compared to the third quarter of last year. The decline reflects client attrition partially offset by new business and higher volumes with existing clients.

Enterprise computing solutions revenue was $141 million, up 2.7% year-over-year. ClearPath revenue of $84 million was slightly above our expectations. Specialized Services and Next-Generation Compute Solutions or SS&C, which make up the remainder of the segment, generated $56 million of revenue and was up 8.6% year-over-year. The increase was primarily driven by higher specialized project work in Business Process Solutions.

Year-to-date, we have signed $1.3 billion of TCV, up 22%, including $571 million of new business TCV, an increase of 61% compared to the first 9 months of last year. Trailing 12-month book-to-bill is 1.2x for the total company and 1.3x for TS&S. We exited the quarter with backlog of $2.92 billion, up 3% year-over-year, primarily driven by CA&I, whose backlog was up double digits.

Moving to Slide 9. Third quarter gross profit was $126 million, and gross margin was 26.7%, up 120 basis points from 25.5% last year. The improvement was primarily driven by the mix embedded in the ClearPath license renewals, partially offset by higher cost reduction charges.

TS&S gross profit was $64 million and gross margin was 16.6%, down 200 basis points year-over-year, primarily driven by higher cost reduction charges. During the third quarter, gross profit margin and TS&S gross profit margin benefited by approximately 50 and 70 basis points, respectively, from a first quarter transaction within the company's U.K. business process outsourcing consolidated joint venture.

As we disclosed earlier, we will see the same size dollar benefit in the fourth quarter as this transaction is expected to generate gross profit benefit of approximately $3 million quarterly and $12 million for the full year 2026. On a year-to-date basis, gross margin for the total company is 25.7%, relatively flat year-over-year and TS&S gross margin is 18.5%, up 50 basis points from 18% last year.

Turning to segment gross profit. DWS gross margin was 9.5% compared to 16.2% in the prior year. The decline reflects known client attrition, hardware mix and continued implementation and delivery costs on the transition of a large new client we signed in the first quarter, which I discussed last quarter. We view these investments as foundational to future expansion and to demonstrating agentic service desk at scale.

CA&I gross margin was 20.6%, up 100 basis points year-over-year, primarily driven by delivery improvements. ECS gross margin was 55.5%, up more than 900 basis points from 46.2% last year, primarily driven by the mix embedded in the ClearPath license renewals. Within the segment, ClearPath gross margin was 73.1% compared to 56.6% last year as we had a higher mix of software licenses versus hardware this year compared to the prior year.

Moving to Slide 10. Third quarter GAAP operating profit was $24 million compared to a GAAP operating loss of $34 million in the prior year period, which included a $55 million noncash goodwill impairment charge. Non-GAAP operating profit was $34 million, a margin of 7.2%, up 180 basis points from 5.4% in the prior year and well above the approximate 4% outlook we provided last quarter, driven by higher ClearPath margins.

Year-to-date, non-GAAP operating profit margin is 5.7% compared to 5.3% last year. Third quarter net loss was $201 million, translating to a diluted loss of $2.76 per share. On an adjusted basis, net loss was $8.5 million or a diluted loss per share of $0.12. The third quarter included a noncash pension settlement expense of $151 million, net of tax related to the annuity purchase. As we have previously discussed, this is an important element of our pension removal strategy.

Turning to Slide 11. Adjusted EBITDA was $60 million in the quarter, a margin of 12.7%, up 220 basis points from 10.5% last year. Year-to-date, adjusted EBITDA is $160 million or 11.5% of revenue compared to 10.9% in the prior year period. Capital expenditures totaled approximately $22 million in the quarter and $66 million year-to-date. As a reminder, about half of our annual capital expenditures are relatively fixed levels of solution development for our ClearPath ecosystem.

Cash used for operations was $36 million and free cash flow was negative $58 million compared to positive $20 million in the prior year period, which included the receipt of a onetime $25 million legal settlement. The decline also reflects the semiannual interest payment of $37 million on our 2031 senior secured notes, which, as a reminder, now falls in the first and third quarters and the timing of ClearPath's renewals and the associated collections.

In the third quarter, we made cash contributions of $30 million to our global pension plans and $0.6 million to post-retirement benefit plans. Pre-pension and post-retirement free cash flow was negative $27 million compared to positive $51 million last year, and adjusted free cash flow was negative $19 million compared to positive $30 million.

Moving to Slide 12. Our cash balance was $264 million as of September 30 compared to $414 million at year-end. Our cash balances are impacted by the timing of interest and pension and post-retirement payments as well as cash collections related to ClearPath. Also, as we have said before, with the fourth quarter being our largest ClearPath quarter, the timing of renewals late in the quarter could move cash between the fourth quarter and first quarter of 2027.

Our liquidity remains solid. Our $125 million asset-based revolver remains undrawn, and we have no meaningful debt maturities before 2031. At year-end, our global pension deficit was approximately $450 million. Based on market conditions and our year-to-date pension contributions, we estimate that as of September 30, our global pension deficit has improved by approximately $30 million to $40 million from year-end. Our net leverage ratio, including the year-end pension deficit is approximately 3.2x compared to 3.7x a year ago.

I will now provide an update on our global pension plans. During the quarter, we completed an annuity purchase that transferred approximately $200 million of projected U.S. defined benefit pension liabilities and a similar amount of plan assets to a third-party insurer. This transaction resulted in the noncash settlement expense I mentioned, which reflects accelerating accumulated actuarial losses associated with the participants transfer and is excluded from our non-GAAP results.

Although annuity purchases do not materially impact the deficit, they reduce our gross pension liabilities and ongoing maintenance costs and allow us to remove those liabilities at a lower cost than at full plan termination. Because the annuity purchases are funded with plan assets, they do not impact company cash. Including this transaction, we have reduced approximately $520 million of U.S. qualified defined benefit plan liabilities since July 2025 toward our approximate $600 million target, and we expect to complete an additional pension transaction in the first half of 2027 to substantially achieve this objective.

Each year-end, we provide more detailed estimated projections for our pension deficit and expected global cash pension contributions relative to our quarterly updates. These projections change based on factors, including funding regulations and actuarial assumptions. We expect approximately $9 million of global pension contributions in the fourth quarter, resulting in total 2026 contributions of approximately $97 million. We estimate that our aggregated expected cash contributions in 2027 through 2029 remain essentially unchanged from our year-end projections.

As we have discussed, the actions we took in 2025 to increase fixed income allocations in our U.S. plans substantially removed the volatility from our expected U.S. contributions. And because plan assets now move in step with plan liabilities, changes in interest rates have a minimal impact on our U.S. contributions and deficit. With continued operational and financial execution, we expect to be positioned for the potential full removal of our U.S. defined benefit pension plans in the next 3 to 4 years, after which U.S. pension contributions would cease.

Turning to Slide 14. I will now discuss our full year financial guidance and additional color. We are increasing our full year revenue guidance to a decline of 3% to 1.5% in constant currency from the decline of 5% to 3.5% we reaffirmed last quarter. Based on September 30 foreign exchange rates, this equates to reported revenue decline of negative 0.4% to positive 1.1%. Guidance assumes TS&S revenue constant currency decline of 3% to 1% and a full year ClearPath revenue of approximately $425 million, unchanged from last quarter.

We also continue to expect average annual ClearPath revenue of approximately $400 million in 2027 and 2028. Our 2026 revised guidance implies fourth quarter total company revenue of approximately $570 million, which assumes approximately $205 million of ClearPath revenue. We are reiterating our full year non-GAAP operating profit margin guidance of 9% to 11%, implying fourth quarter non-GAAP operating margin in the mid- to high teens due to the concentration of ClearPath revenue we expect.

Our expectation for full year free cash flow is unchanged at approximately negative $25 million, which translates to approximately $75 million of pre-pension and post-retirement free cash flow. This assumes approximate payments of $85 million in capital expenditures, $70 million in cash taxes, $70 million of net interest payments, $45 million in aggregate legal, environmental and restructuring payments and approximately $100 million of pension and post-retirement contributions.

We are focused on continuing to increase our operational efficiency and profitability to maximize our underlying cash generation for investment and capital return.

I will now pass it back to Mike for a few additional remarks.

Michael Thomson

Thanks, Deb. To reiterate, we're pleased with our results this quarter, which reflects steady execution of our strategy. As we look ahead, our priorities are consistent with what we've outlined in prior quarters, working through the TS&S renewal cycle, which is largely behind us, expanding within our client base and investing where we think demand is heading in agentic services, AI infrastructure and the ClearPath ecosystem.

Thank you for participating in today's call. Operator, you may now open up the line for questions.

Operator

[Operator Instructions] The first question today comes from Rod Bourgeois with DeepDive Equity Research.

分析師問答

Rod Bourgeois

Yes. So I want to start with the growth in TS&S. It's nice to see that, that growth got back to slightly positive year-over-year. The question I have is, at what point should we expect TS&S to really be able to sustain that steadily positive growth? And can you speak to the main enablers of that growth and also the challenges that you still see there?

Michael Thomson

Rod, thanks for the question. Much appreciated. Yes, we were really pleased with the quarter and the growth that we saw in the quarter. I think consistent with what we have been saying historically, there's a couple of factors really at play for, I'll say, ongoing kind of growth inflection point in that business.

In general, obviously, we got to see since we're talking growth rates, how we close out the year. We will certainly give an update on that when we get into Q4 and give guidance for next year. So part of that is really about closing the deals in the fourth quarter and how that's going to inflect on growth.

The two, I would say, prevailing things that we've talked about historically is really lapping the attrition from client losses from exiting at the end of '25 or early in '26, right? We had mentioned that those ultimately lap in the back half of next year. So that's kind of a point of contention there as far as lapping those existing ones.

And then ultimately, we're talking about the refresh base, right? And I think that's probably the better underlying contribution to how that reset comes into play. And when I think about that reset base, we had a very high significant reset, and we're basically through that, right? So we had a huge reset over last year as far as renewals are concerned, we did about $1.4 billion in TS&S. We have roughly another $600 million anticipated this year.

So that base behind us. We've basically come through that cycle and the lapping of those clients are kind of the barriers to that growth. As I mentioned in my prepared remarks and as you've seen this quarter, if not for that, we'd be growing right now at above market. So we like what we're seeing in the backlog. We like what we're seeing from a TCV perspective in that business, and we like the conversations that we're having with clients. We've talked about the increased book-to-bill already. and we've talked about the backlog growth consecutively.

So feel good about the trajectory, got a couple of things that we have to overcome, which will roll off in the back half of next year. And then we've got to execute Q4 closing of new deal. So those are the primary reasons.

Rod Bourgeois

Okay. Great. And I'd like as a follow-up to dive deeper into the DWS margin decline. So what I want to ask about is how much of the DWS margin challenge is due to intentional investments like in the next-generation data center work and the agentic help desk and so on? How much of the margin challenge is due to those intentional investments versus headwinds from things like client attrition and the hardware mix and so on? Can you help us demarcate between what's intentional and what's a margin challenge that you have to sort through?

Michael Thomson

Yes. I don't know that I could give the actual percentage mix of those elements, Rob. But what I will say is, obviously, the client attrition we've talked about and that runoff continues to kind of decline in its impact.

I would say the larger portion would be the combination of mix and intentional investment. We've talked about the investment in the deployment of our Agentic service desk, right? And the fact that we will be about 40% through our client base by the end of this year in delivery. So it gives you a sense of how that's being rolled out and the investment there.

There's investment in staffing and training that's aligned to our AI-first strategy. So that's certainly intentional, and we've gotten really pretty deep in the associate base with that training. So we feel really good about where we are. And I would say the lion's share of that is behind us as well.

And then, of course, as we deploy these Agentic service desks at scale, we continue through transition of large new logos. And so there's always learnings from that, that we continue to invest in because we think it's really foundational to that expansion. Look, the thing I would say to you that's the most encouraging in my mind is that forward-looking indicator on the DWS new business. TCV is up -- 183% year-over-year in the quarter, and that's margin accretive. So that's really what's going to rebuild that segment's revenue and profitability.

And again, feel really good about that. And so as we have a mix here, especially in DWS, where our Device Life Cycle Management is kind of the flagship that's carrying our services to these clients, depending on the proportional hardware or third-party components of that, that's dilutive to our margin percent, but accretive to margin dollars. And so -- and we see that as the gateway to our other services.

So again, feel really good about the direction of where we're going. The timing is really predicated on kind of the roll-off of those attrited clients and then the deployment of that service desk to our entire base.

Rod Bourgeois

That's helpful detail. Can you tell us the new business in DWS being margin accretive? Why is it margin accretive? Is it that it's a low hardware mix? Or are there other factors?

Michael Thomson

No. Look, I think the hardware mix that we're looking at is going to be fairly consistent between the current year and what we're expecting in next year. It's our services portion of that hardware mix that is becoming more accretive.

Operator

The next question comes from Matt Dezort with William Blair.

Matt Dezort

This is Matt on for Maggie Nolan. Congrats on the quarter. New TCV signings obviously remain impressive. I think they accelerated in the quarter. Just how should investors think about the composition of that new work that you're signing and the cadence that you expect that to convert to revenue over the next 12 months? Or how we should think about that timing? And then the margin composition of that TCV as well would be helpful.

Michael Thomson

Great. Thanks, Matt, for the question. I appreciate the time. So look, we're very pleased with the TCV signings. As you noted, our new business TCV up almost over 78% for the year, 15% quarter-over-quarter. So really strong.

I think it's probably indicative too of what we're seeing in the market. We continue now to start to see -- I think it's really a byproduct of educated consumers. The value that the AI is now bringing is being much more focused in areas of business improvement as opposed to, hey, we're going to try to replace our entire stack with an agentic AI component. So I really think it is ongoing and indicative of how we should continue to see the market recovery from a services perspective, and we fully expect to win our share of that.

I think when you think about the conversion of that TCV to revenue for the second part of your question, there's typically kind of an integration period or an installation period for this. Figure that's like a three to six month transition to get us into revenue recognition, which is again why we think about the back half of next year as being that catalyst for that inflection point.

And then ultimately, the margin anticipated on that new business, as I mentioned on the tail end of Rod's question, the services that we're performing are higher-margin services, if you will. So we expect that, again, as we get to normal run rate. So there's a difference between the time it takes for revenue accretion and then run rate margin, right? So typically, you've got a shorter time to get to revenue, that three to six month period and starting to get to run rate.

And then over the course of that deal, most of our work, as you know, is managed services in, say, three year contracts when we're talking about TS&S. Normally, you're in the 12 to 18 months by the time you're at run rate margin profile on those accounts. So there's a little staggering of those two. But net-net, for the contracts we're signing, we expect margin accretion based on the type of work that we're doing.

Matt Dezort

Got it. That's helpful. And then can I ask about the fourth quarter ClearPath Forward expectations? I guess, how much of the $205 million, if any, is already signed? And I guess, what's your level of confidence in these renewals versus 90 days ago? And then what's assumed in that $205 million across pricing, consumption and then just split across software and services?

Michael Thomson

Okay. I'll give you some of that, some of which is kind of difficult to get to, I think. Well, first off, it's not software and services. It's all software when we talk about that component piece of the $205 million. That's the licensing component traditionally is what we're talking about. There are some services elements to that, but that comes in over time, not upfront as far as the revenue recognition is concerned.

The confidence level we have in the ClearPath signings and the visibility is extremely high. This is very consistent with what we do every year, as Deb mentioned in her prepared remarks. So clear visibility into it. Most of these deals actually are tied to calendar year-end. So when we think about this, it's not unusual that they come in, in -- frankly, in December. We do try when we're negotiating these to change that trajectory for future renewals because it's always difficult to have something backloaded at the back end of the year, especially when we talk about the cash collection. Most of the cash collection is within 90 days of the signing of the contract, sometimes shorter than that. So we like to sign those earlier in the quarter so that we get the cash in year as well.

Very little concern about if they're signing, it's really when they sign, right? These are mission-critical systems that go dark upon nonrenewal, right? So a very high degree of confidence as it pertains to the P&L component of that. And then the only mix would be whether or not it slides later into the quarter and then that cash pushes into Q1 as opposed to being recognized in Q4. So I think I've picked off all of those questions. But if I miss one, please feel free to reiterate.

Operator

[Operator Instructions] The next question comes from Anja Soderstrom with Sidoti.

Anja Soderstrom

I'm just curious with the cash flow target for 2026. How dependent -- what does that assume in terms of the ClearPath renewals? You're saying some of that might happen late in the quarter and the cash collection might not happen until next year. So how should we think about that in terms of cash flow?

Michael Thomson

Deb, do you want to take that one?

Debra McCann

Yes. So thank you, Anja. Yes, I mean our assumption is that we do get the majority of the cash from those signings in Q4. And so as Mike mentioned, that's the revenue we're very -- have a high degree of confidence, sometimes the cash depending on when it signs, but we are assuming that --that cash comes in, in Q4 because it typically does, right? And so -- but there is that risk. But we would -- but that's to still get it. So we are saying we're still on track to that negative $25 million.

Anja Soderstrom

Okay. And then how should we think about the cash flow for 2027?

Debra McCann

Yes, we're not right now going to give 2027 guidance on that. But the -- yes, so really not much to say on 2027 at this point.

Michael Thomson

Yes. We'll do that, obviously, when we do Q4 and we close out, we'll give guidance for the year, and Deb will do her normal walk of all the expectations of cash going into '27.

Anja Soderstrom

Right. Okay. And then have you seen any sort of changes in sort of the sentiment of demand picture given the high interest rates? Or does that not really affect your demand picture?

Michael Thomson

Yes. Look, I mean, obviously, interest rates have been bouncing around. Expectation is that they're going to increase. And clearly, that could have an impact on client demand, right, from availability for CapEx. But just as a reminder, the work that we do for our clients is nondiscretionary work for the most part, right?

And so we don't see that as having a tremendous impact on the primary work we do for our clients. You think about our makeup, it's about 80% of our backlog or our revenue is coming from our backlog, which is on longer-term managed services contracts. So the impact that, that has is largely on project work and the funding for discretionary project work, which is limited to our application to our clients right now.

So it's not a huge factor from our perspective in our concepts. And if you think about the knock-on impact that it would have had historically to pensions, we mitigated that over a year ago when we aligned our pension investment strategy to rates, right? So the rate component of that movement has been mitigated from a contribution point of view. So not tremendously influential in kind of how we're dealing with the demand from our clients.

Operator

[Operator Instructions] The next question comes from Matthew Galinko with Maxim.

Matthew Galinko

I was hoping you could maybe expand a little bit on the pipeline you're seeing for data center field services. How has that kind of evolved to this point in the year? And maybe as a follow-up, if you could give any maybe early indication of how midterm elections and maybe change of control in some states might impact how you see that pipeline converting?

Michael Thomson

Matt, thanks for the question and joining the call. And they're great questions. Look, I think, obviously, we've talked a lot about this. We think this is a real opportunity for us in a multitude of ways. I discussed in my prepared remarks, our partnership with Refroid Technologies, which is really about a different avenue for us getting into the build side of these data centers, right, to kind of follow where some of those dollars are going. We also have some white label relationships where we're the installation arm in relation to that.

So we're looking at a whole different set of point of entry into that business, right, from an infrastructure management point of view. Clearly, working through some of our alliance partners, specifically the hyperscalers, which are highly engaged in this. So I would say I like how the discussions are developing, and it's kind of a new motion for us to get after different entry points into the build side of this. We're usually coming in on the run side or the break/fix side. And it's a whole different construct of how we go to market and who we go to market with. So the orchestration there has been a little new motion for us.

But again, I like where it's developing, and you're seeing us now have conversations with, again, kind of the hypervisor side, the building communities, some of the manufacturing components and then our traditional kind of OEM touch points. So going pretty well.

As far as the election is concerned, look, I mean, we're agnostic really to the elements of who's kind of in office per se. But the market likes stability. And I think our clients would like stability and the fact that there's a lot more balance per se in the legislative component of the makeup of the Congress probably sets us on a pretty defined path.

Clearly, data center builds was a component piece of that election. But our view is that is going to shift, right? So if state A decides that they have a negative perception of that build and state B decides they want to invoke on that. We think the build is going to continue. It's just a matter of kind of what state it resides in and/or whether or not it's in the U.S. or remote. But as you know, we've got a global footprint, and we're prepared to support this type of work effort regardless of where it ultimately gets built. So from our point of view, the investment continues to happen, and it might just be a geography switch.

Operator

This concludes our question-and-answer session and concludes our conference call today. Thank you for attending today's presentation. You may now disconnect.