Good morning and welcome to the Unisys Corporation fourth quarter and full year 2025 financial results conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Michaela Pewarski, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, thank you for joining us. Yesterday afternoon, Unisys Corporation released its fourth quarter and full year 2025 financial results. Joining me to discuss those results are Michael Thomson, our CEO and President, and Debra McCann, our CFO. As a reminder, today's call contains estimates and other forward-looking statements within the meaning of the securities laws. We caution listeners that these statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed on this call. These items can be found in the forward-looking statements section of yesterday's earnings release furnished on Form 8-Ks and in our most recent Form 10-Ks 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, that exclude certain unusual or non-recurring items such as post-retirement expense, cost reduction activities, and other expenses that the company believes are not indicative of its ongoing operations. While we believe these measures provide a more complete understanding of our financial performance, they are not intended to be a substitute for GAAP. Reconciliations for non-GAAP measures are provided in the slides for today's call, which are available on our investor website. With that, I would like to turn the call over to Michael.

Good morning, and thank you for joining us to discuss the company's fourth quarter and full year 2025 financial results. I want to start off with three clear messages that we hope you take away today. First, we continue to execute against a consistent operating strategy, which is yielding improved profitability and free cash flow as we continue to advance our pension removal strategy. Second, the market perception of Unisys Corporation and our solution continues to advance among our clients, prospects, partners, and industry analysts. And third, which relates to a subject I know is top of mind for everyone, we believe artificial intelligence is poised to become a powerful driver of long-term demand in the solutions that are core to Unisys Corporation as a designer, orchestrator, and enabler of modern IT ecosystem. Before discussing AI, I want to discuss my first message of how consistent execution of our strategy is translating into financial results. Fourth quarter revenue grew 5% year over year, resulting in a slight improvement in our full year revenue projections coming in above our revised midpoint. Our non-GAAP operating margin was 18% in the quarter and 9.1% for the year, exceeding the top end of our upwardly revised projections and representing 30 basis points of annual improvement. We had a high degree of confidence in achieving the fourth quarter weighting of our license and support revenue, and we met those expectations. Full year L&S revenue exceeded our original expectations by nearly $40 million, making this the third consecutive year of substantial upside in our highest margin profit center. Our actions to streamline corporate costs reduced SG&A as a percent of revenue by nearly 300 basis points over the past three years. We generated $128 million of full year pre-pension free cash flow in 2025, up 55% from the prior year and above the $110 million we expected. We have strong liquidity with over $400 million cash on the balance sheet at year end, up almost $40 million year over year. We increased our year-end cash balance while net leverage, including pension, has improved to 2.8x compared to 3.0x at 2024. Our liquidity also improved despite using $50 million of cash as part of the discretionary contribution to our U.S. pensions. Our total contributions have reduced our global pension deficit by $300 million to $450 million at year end and lowered future expected contributions by more than the interest on the incremental debt we raised, improving near-term cash flows. We also executed another annuity purchase, which removed approximately $320 million of gross U.S.-defined benefit pension liabilities in 2025. This, coupled with our liability duration matching strategy, which has successfully removed substantially all market volatility from the total future contributions, keeps us on a fixed path for full removal of the U.S.-defined benefit pension plan. I want to shift to my second message, which is that awareness and perception of Unisys Corporation and our solutions continues to advance. We are seeing this evidenced by our wins and our pipeline. 2025 was an especially large renewal year, and our team successfully signed $1.7 billion of renewal TCV, securing a large portion of our recurring revenue base. Over $1 billion of renewal TCV was signed in the fourth quarter alone, which included closing a three-year extension and improved economics with our largest DWS client, who has been with us for nearly three decades. This field services renewal spans the U.S., Canada, and Latin America and secures the necessary scale for us to provide affordable field services across our client base. Multiyear renewals can be a catalyst for expansion within client accounts by integrating new solutions that support enhanced client centricity and improved overall margin profile. We capitalized on these opportunities in the fourth quarter, which was our largest quarter of new scope signings in recent years. Almost all of our largest renewals during the quarter included new scope, evidencing improved perception within our existing client base. For example, during the quarter, we signed a five-year renewal with one of the largest public university systems in the United States for cloud transformation, migration and modernization services, and expanded scope to include centralized application management across campuses, and a center of excellence that will leverage AI agents to standardize and modernize application management, streamlining processes for both students and staff. As we discussed last quarter, we have seen some competitors price aggressively to prioritize revenue over profitability and delivery quality. While that contributed to a few significant renewal losses and presents several hundred basis points of growth headwinds for 2026, we are confident our investments in our core areas of the portfolio will continue to drive market and wallet share gains and will both reduce client costs and extend the scope of our delivery for our clients. In our wins and pipeline, we are seeing more instances of clients placing increased value on delivery quality and viewing it as a real differentiator. For example, in the fourth quarter, we won back a public sector client in Australia with a large scope for DWS solutions after they experienced a decline in delivery quality with one of our competitors. This win sets a powerful new foundation for our business in the region and provides a global playbook for showcasing delivery differentiation. We also added several new logo opportunities to our DWS and CA&I pipeline, from Chief Information Officers who moved to new organizations and engaged us immediately to participate in their transformations because they know we are a true partner with all the necessary skills to modernize and reliably manage complex IT ecosystems post-transformation. We are also achieving new heights in recognition and awareness among industry analysts that influence client decisions selecting IT solution providers. During 2025, we built upon several years of advancing awareness and recognition within the analyst community, again increasing our total report placements by over 20%, including two new leader recognitions. In the fourth quarter, we received a very significant recognition from Gartner, which elevates Unisys Corporation to a global leader position in their Outsourced Digital Workplace Services Magic Quadrant for the first time. Magic Quadrant reports are the culmination of rigorous fact-based research evaluating completeness of vision and ability to execute and provide a wide-range view of the relative position of providers. In addition, in its companion Critical Capabilities for Digital Workplace Services report, Gartner ranked Unisys Corporation as the number one overall provider for the North American market and the number one global provider for both service desks and device management capabilities. This acknowledgment is already helping us access more opportunities, giving us an edge, especially relative to three of our largest competitors that fell out of the leader quadrant. Unisys Corporation was also named to Forbes list of America's Best Midsize Employers in 2026, which comes on the heels of being named Time Magazine's World's Best Companies in 2025. Our culture is reflected in our below-average voluntary attrition, which was 11.4% for the year. As we look to the future, I want to discuss why we view AI as a powerful long-term driver of demand for our solutions and how we have invested in solution development and delivery skills to capitalize on it. As I said earlier, Unisys Corporation ultimately develops, enables, and orchestrates the IT ecosystem. In all three of our segments, we provide solutions that enable emerging technology throughout the enterprise and are agnostic to the placement of AI, software, or hardware that make up our clients' environment. As the industry heads into a major multiyear AI infrastructure build-out to supply the technology needed for broad AI adoption, there is a growing shortage of skilled technicians that will provide the design and service layer for modernization and post-modernization support. Importantly, demand for services will grow regardless of whether clients develop custom AI agents on private infrastructure, leverage standard capabilities from software providers and hyperscalers within private or public clouds, or a combination of both within hybrid environments. For us, the scale and reach of AI goes beyond the software and extends to physical AI. The scale and skills of our field service organizations present a unique market opportunity for us. We are already beginning to support private AI builds for OEM partners, requiring liquid cooling skills, complementing the work we already do in maintaining critical hybrid infrastructure such as servers and storage in data centers, or IoT devices in everything from conference rooms to restaurants. We will also continue expanding our existing use of agentic AI and expect AI agents to continue to be layered throughout our managed service offerings, orchestrating increasingly complex and automated workflows. Clearly, AI is adding complexity to managing the IT estate. Tokenization costs are high, business cases are challenging, and measuring returns on investments is difficult. We expect all these factors to increase client reliance on external providers. Unisys Corporation can reduce the cost of AI adoption for clients by developing solutions that can be leveraged across a large base of clients with standardized architectures for faster deployment. In 2025, we launched Service Experience Accelerator, an agentic AI framework for delivering next-generation service desk. SEA is now in production with some of our largest clients, and we are enhancing our solution to improve its ability to handle input ambiguity. We plan to roll this out to about one-third of our existing client base during 2026, which establishes a growing base of leverageable technology to support long-term expansion, continued delivery optimization, and enhanced quality. In CA&I, we are advancing our intelligent operations architecture with an integrated framework for rapidly developing, deploying, and orchestrating AI agents to streamline IT operations and aid in financial operation decision-making, especially as it pertains to design and compute. Our alliance partners offer a significant and relatively untapped opportunity to scale distribution and continue raising awareness in the market. Hyperscalers are eager to promote solutions that use their cloud platforms, tools, and models to drive AI adoption and the development of their AI-enabled cloud ecosystem. For example, in CA&I, we are standardizing our SOC managed service delivery with Microsoft Sentinel and Defender Threat Detection as its main components. We are powering the service layer with AI agents, which helped us engage with Microsoft on development and discussions about joint promotion. Many of our key enterprise software partners are also seeking to accelerate uptake of their AI capabilities. As another example, we are a high-volume user of AgentForce internally, which we adopted to optimize our field service dispatch, and we are engaging with Salesforce to explore how we can jointly offer our internal framework as a service to some of their other clients and prospects. These examples illustrate the repeatable playbooks we developed across our portfolio that we think will help us capitalize on AI-related demand, strengthen our partnerships, and ultimately accelerate our growth in XL&S solutions. In the ECS segment, we continue to be highly confident in the enduring value of our ClearPath Forward ecosystem despite hypothetical threats posed by AI developers. AI coding capabilities do not replicate decades of development required to integrate processes, code, equipment, and environments with unmatched latency, availability, redundancy, and security. Our core platform offers an unmatched combination of speed, resilience, and most importantly, security, which is of critical importance to the financial services, government agencies, healthcare, and travel transportation companies we serve. Replicating these benefits would require parsing our unified platform into numerous functions and a wholesale reorganization of business processes with minimal benefit, bringing with it significant business risk. At the same time, we continue investing in our core platforms, which are already cloud compatible. We are enhancing our value-added products such as Data Exchange and ePortal, which unlock valuable data and allow it to move across environments and applications, powering AI and analytics. These solutions represent increased extensibility and ecosystem expansion that establishes ClearPath Forward as a pillar of a modern AI-enabled enterprise solution, advancing digital transformation. At the same time, we are leveraging AI to help us quickly assess work skills, identify gaps and vulnerabilities, as well as assist in cross-training and upskilling talent for the future. We are beginning to leverage our internal engineering expertise into advisory engagements with ECS clients. And while quantum computing may not be imminent in the short term, we are beginning to see tangible client engagement for quantum advisory services we introduced early in 2025. With that, now I will turn the call over to Debra to go through our financial results in more detail.

Thank you, Michael, and good morning, everyone. As a reminder, my discussion today will reference slides from the supplemental presentation posted on our site. I will discuss total revenue growth, both as reported and in constant currency, and segment growth in constant currency only. I will also provide information excluding license and support for XLNS to allow investors to assess the progress we are making outside the portion of ECS revenue and profit recognition that is tied to license renewal timing, which can be uneven between quarters. To echo Michael's comments, our results reflect consistent execution of our business strategy and effective de-risking of our future pension contributions, making our financial performance and liquidity stronger and more predictable for investors. We have seen an ongoing positive shift in how we engage with partners, clients, and industry experts; we think much of that is related to our agility in adopting artificial intelligence within delivery and solution framework. And we expect AI to be a strong long-term driver of demand for our largest solutions. Looking at our results in more detail, you can see on Slide 6 fourth quarter revenue was $575 million, up 5.3% year over year as reported and 2.7% in constant currency, driven by the timing of L&S renewals. For the full year, revenue was $1.95 billion, down 2.9% as reported and 3.3% in constant currency, slightly above the midpoint of our revised guidance range. Excluding license and support solutions, revenue was $388 million in the fourth quarter, $1.52 billion for the full year, both of which were down 3.9% in constant currency. I will now discuss segment revenue performance in constant currency terms shown on Slide 8. Fourth quarter Digital Workplace Solutions revenue of $126 million was flat sequentially to third quarter and down 3.7% year over year. For the full year, DWS revenue was $508 million, down 3.1%. Both fourth quarter and full year segment revenue were impacted by PC-related revenue declines, including lower third-party hardware and PC field services volumes. As we mentioned last quarter, Microsoft's extension of Windows 10 support has led to some clients delaying upgrade projects or pushing out purchases of new PCs required for compatibility with Windows 11, and recently higher PC prices due to memory chip shortages have compounded delays. However, we expect PC price increases to benefit us over time as they increase the significance of device costs within client budgets, potentially leading to incremental interest in our device subscription service, which provides intelligent forecasting and planning and a more flexible and predictable cost model. TCE-related declines were partially offset by growth in higher value infrastructure field services in areas such as enterprise storage and network infrastructure, which typically have lower volumes but higher margin and profit associated with them. As we mentioned before, we believe the PC volume declines have stabilized. Fourth quarter Cloud, Applications and Infrastructure Solutions revenue was $191 million, a decline of 4.1% year over year. For the full year, 4.8% to $733 million. Similar to what we saw in earlier quarters of 2025, the fourth quarter was impacted by a lower volume of short-term project work at U.S. public sector clients due to federal funding disruptions that have created budget uncertainty in the public sector. This remained a prominent factor in the fourth quarter, the first half of which experienced the federal government shutdown. We were pleased to still be able to secure multiyear renewals in both CA&I and DWS solutions with several of our largest U.S. public sector clients, some including new scope. Enterprise Computing Solutions revenue was $237 million in the fourth quarter, up 14% year over year. Full year segment revenue was $629 million, relatively flat to 2024. Within this segment, L&S solutions revenue was $186 million in the fourth quarter, up 19.8%, bringing full year L&S revenue to $428 million in line with our increased expectations. Fourth quarter revenue for specialized services and next-generation compute solutions, the XLNS solutions within ECS, was flat sequentially and down 3.7% year over year against a stronger prior year comparison. Full year SS&C revenue grew 4.9% year over year, due to increased project work and business process solutions volumes at financial services clients in Europe, Latin America, and Asia Pacific. Total company TCV was $2.2 billion for the full year, driven by strong growth in XLNS renewal signings and new scope bookings with existing clients. Full year new business TCV totaled $491 million, down 38% year over year, primarily driven by elongated sales cycles with prospective clients and hesitancy in the public sector. Full year new business TCV includes an approximate $200 million adjustment to reflect a mutually agreed determination of a first quarter 2025 new logo signing in DWS where contractual terms were not aligned. We were pleased with this outcome as it averts the risk of future profit dilution while preserving a positive relationship with a large prospective client that we anticipate will invite Unisys Corporation to bid should they seek new proposals for any portion of this work or for other Unisys Corporation solutions. Trailing twelve-month book-to-bill was 1.1x for the total company and 1.2x for our XLNS solutions. We ended the year with a backlog of $3.2 billion, up 12% sequentially and 11% from the prior year. Moving to Slide 9, fourth quarter gross profit was $195 million and gross margin was 33.9%, up 180 basis points from the prior year due to L&S revenue growth over a relatively stable cost base. XLNS gross profit was $51 million in the fourth quarter, a 13.2% margin. While this was 540 basis points lower than 18.6% in the third quarter, the majority of the margin compression was due to the aggregate impact of incremental cost reduction charges and the timing of variable compensation. Full year gross profit was $549 million, a 28.2% gross margin compared to 29.2% in the prior year period, driven by an increased proportion of lower margin L&S hardware relative to the prior year, which we expect to be more normalized in 2026. Full year XLNS gross profit was $255 million, a 16.8% gross margin compared to 17.6% in the prior year period, which includes approximately 40 basis points of incremental cost reduction expenses. Overall, we were pleased with XLNS' profitability considering some of the revenue headwinds we faced this year. And we expect lower cost reduction charges and greater efficiency gains in 2026 supported by workforce and technology investments made in 2025. I will now discuss segment gross profit as shown on Slide 10. DWS segment gross margin was 10.5% in the fourth quarter, compared to 15.9% in the prior year period. Nearly 400 basis points of the year-over-year margin decline was driven by one-time items, including transition costs. Full year DWS gross margin was 14.5%, compared to 15.7% in the prior year. Over time, we expect a continued long-term shift towards these higher value infrastructure field services, which typically are at a higher margin. CA&I segment gross margin was 20.7% in the fourth quarter, up 210 basis points year over year due to workforce and labor market optimization, increased automation, and AI use in solution development and delivery, as well as an 80 basis points one-time benefit. Full year CA&I gross margin was 20.2%, relatively flat to the prior year. At a high level, strong delivery gains have been able to offset the slower pace of investment and project work at U.S. public sector clients. Looking ahead, we are pushing the pace of solution development and standardization in the CA&I segment and sustaining a focus on workforce optimization and rapid adoption of the latest AI models and tools to support additional efficiency gains. ECS segment gross margin was 65.9% in the fourth quarter, up 270 basis points year over year; full year gross margin was 55.5%, a 250 basis point decline related to increased hardware revenue mix which should normalize in 2026. Moving to Slide 11. Fourth quarter non-GAAP operating profit margin was 18%, driven by the higher concentration of L&S revenue in the fourth quarter. For the full year, non-GAAP operating profit margin was 9.1%, above the top end of our upwardly revised guidance range. The sustained strength of the trends in our L&S solutions again contributed more profit than we anticipated. Over the past two years, we have also diligently executed on a detailed plan to streamline our corporate real estate and central IT costs. We have been able to reduce SG&A by 13% or nearly $60 million. We expect to again lower SG&A in 2026 in absolute dollar terms by at least $10 million to $20 million as we receive a full-year benefit from savings, and most of the costs to achieve them are behind us. Fourth quarter net income was $19 million and $63 million on a non-GAAP basis, translating to diluted earnings per share of $0.25 and non-GAAP earnings per share of $0.86. For the full year, GAAP net loss was $340 million or a diluted loss of $4.79 per share. This included an approximate $228 million one-time noncash expense related to a pension annuity purchase occurring in the third quarter. Full year non-GAAP net income was $68 million; non-GAAP earnings per share was $0.93. Turning to Slide 13. Capital expenditures totaled approximately $20 million in the fourth quarter and $78 million for the full year, relatively flat to 2024. As a reminder, a significant portion of capital expenditure relates to our L&S software, and there is no change to our overall capital-light strategy. Pre-pension free cash flow, which is free cash flow prior to pension and post-retirement contributions, was $113 million in the fourth quarter, $128 million for the full year, which exceeded our expectation for $110 million. This is the result of a stronger profit performance and more favorable working capital relative to our assumptions. Full year free cash flow was negative $218 million and includes a $250 million discretionary pension contribution, and $95 million of required U.S. and non-U.S. post-retirement contributions. Moving to Slide 14, our cash balance was $414 million at year end, $377 million at the end of 2024. Our cash balance increased by $37 million year over year, which is primarily due to our strong pre-pension free cash flow, as well as some positive impacts from foreign exchange on cash balances and hedge settlements. As a reminder, our change in cash balance includes a $50 million discretionary pension contribution, which was funded by approximately $100 million of incremental borrowing as well as $50 million of cash from the balance sheet. Our liquidity position is strong with no major $750 million at 2024 or $300 million improvement. $250 million of improvement in our global pension deficit was driven by our discretionary contribution, with the remaining approximately $50 million resulting from $95 million of planned contributions to our global plan. On Slide 16, you can see a detailed projection of our expected cash contributions. We are forecasting approximately $350 million of remaining cash contributions to our global pension plans in aggregate through 2029, reflecting stability from the actions we took to remove volatility in our U.S. qualified defined benefit plans. Moving to Slide 17, we have provided an updated projection of how expected future contributions and the benefits we disperse to pensioners are expected to impact our U.S. qualified defined benefit plan deficit both with and without annuity purchase assumptions, and the implied cost of full removal at 2029. At the bottom, we have also included our expected deficit reduction in all other plans. However, it is important to remember that while international contributions are negotiated every few years and very stable, the international deficit is impacted by asset returns and has more volatility. These projections are meant to provide a directional indication only of the relative conversion of contributions to leverage reduction in a given year, and will also change if contributions shift between years. Turning to Slide 18, I will now discuss our financial guidance for the full year and the additional assumptions we provide. We expect total company revenue to decline between 6.5%–4.5% in constant currency, which based on February 1 foreign exchange rates equates to a reported revenue decline of 3.8%–1.8%. Guidance assumes XLNS revenue decline of 7%–4.5% in constant currency. We also expect full year L&S revenue of $415 million at a gross margin of approximately 70%. We also continue to expect 2027 and 2028 L&S revenues to average $400 million per year, continue to see artificial intelligence as a driver of consumption and adoption of value-added products within the ecosystem, and have detected no change in client commitment to our platform. As a reminder, the timing and exact amount of L&S revenue can be difficult to forecast with precision and it depends on the renewal timing, term, and client consumption levels among other factors. We expect non-GAAP operating profit margin to be between 9%–11% for the full year, which reflects the higher margin percentage in L&S, 100–200 basis points of improvement in ex L&S gross margin, and another modest reduction in operating expense in absolute dollar terms. Looking specifically at the first quarter, we expect approximately $415 million of total company revenue on a reported basis and assume approximately $60 million of license and support revenue. Based on renewal timing during the year, the first quarter is expected to be the lowest L&S revenue quarter, and we expect an approximate weighting of 30% of L&S revenue in the first half of the year, and 70% in the second half, with the third quarter likely the largest quarter of L&S revenue. Based on these assumptions, we expect first quarter non-GAAP operating margin to be slightly positive. We expect a number of noncash expenses impacting GAAP net income and earnings per share in 2026, including pension annuity purchases and streamlining certain legal entities expected in the second half, which we will guide on a quarterly basis. Also, as a reminder, in 2025, we removed hedges on our intercompany balances, which could create noncash FX gains as the U.S. dollar strengthens, or losses if the U.S. dollar weakens. These are difficult to guide due to constantly changing rates, but will impact quarterly GAAP net income. Full year free cash flow is expected to be approximately negative $25 million, which translates to positive $67 million of pre-pension free cash flow. This assumes approximate payments of $85 million in capital expenditure dollars, $70 million of cash taxes, $70 million of net interest payments, $30 million in other payments, primarily restructuring, and $92 million of post-retirement contributions, consisting of $87 million of pension contributions and $5 million of other post-retirement contributions. Approximately $17 million of the pension and post-retirement contributions are expected in the first quarter. We are confident that we have the liquidity we need to comfortably support our pension contributions. We are focused on continuing to increase our efficiency and profitability during this period and maximize our underlying cash generation levels, investment, and capital return. Before we open the line for questions, Michael has a few additional remarks.

Thank you, Debra. I wanted to take a moment to address our 2026 guidance. I am proud of what we have achieved in 2025, but disappointed that we did not overcome all of the industry headwinds impacting our XLNS revenue. For 2026, our expectations for mid-single-digit decline in XL&S solutions reflects an intentional deeper push into the adoption of emerging technology within our existing base of clients and the macro headwinds impacting discretionary spend in 2025 that we expect to linger through 2026, as we mentioned last quarter. Relative to 2024 year end, we have a more expansive book-to-bill ratio, more expected full year revenue already contracted and in backlog. And there is less embedded risk from assumptions for timing of revenue ramp on contracted new business. Similarly, for profitability, the majority of the required efficiency gains have already been actioned or identified. Achieving our 2026 guidance range keeps us on a path to potential full removal of the U.S.-defined benefit pension obligations by 2029, after which U.S. pension contributions would cease, and we expect a host of new possibilities for investments and capital return. Based on our interactions with existing and prospective clients, and the sequential growth in pipeline activity so far this year, we believe we will achieve positive XLNS revenue growth in 2027. With that, operator, you can open up the line for questions.

We will now begin the question and answer session. The first question today comes from Rod Bourgeois with Deep Dive Equity Research. Please go ahead.

Okay. Thank you. Hey, I will start with an AI question. So I want to ask, how are AI and automated code modernization tools influencing the road map that you have and the demand for ClearPath Forward? We have clearly seen some recent concerns that COBOL refactoring may affect IBM's mainframe business, so I want to ask how you are assessing the implications of that trend for the ClearPath Forward platform. Thanks.

Great. Hey, Rod. Thanks for the question. Certainly very timely with the communications that we have all seen. Look, the code factoring component of the dialogue that is, I guess, the issue du jour is not really new. Maybe the tools that we are using are new, but we have been talking about code factoring for a long, long time, years in fact. And, you know, you referenced IBM here and I think they have a piece out as well kind of reacting to that. It is really only a part of the story and it really is talking about, in my opinion, the enhancement of the platform. I mean, the code modernization is kind of the easy part. That does not change the engineering challenge of running the mission-critical workloads at scale and doing it securely. I mean, really, it is about the architecture redesign, the runtime replacement, transaction processing integrity, the hardware tuning and years of performance tuning that is embedded in the platform. Cofactoring does none of that. Right? It really is just about the kind of modernization of what I would consider to be above the enterprise level of the core. So from a strategic perspective, you know, internally, we talk about ClearPath Forward 2050. I mean, that is kind of the time frame that we are looking out for that ecosystem. And we think net-net it is going to be a positive to kind of drive more demand to the platform. Think of it as kind of the automation of above the enterprise level and giving our clients more and more flexibility to that. And I guess secondarily, I would say that the other area that it is really important for is the continual kind of documentation of the code base, etcetera, testing and really reverse, right? Kind of doing scripts in current languages and maybe refactoring them back to COBOL into kind of a legacy mindset. So the reality is we do not view that as any change from the strategy that we are currently on. And I think if you look at, you know, what we have encountered, you know, I mentioned in my prepared remarks, three straight years of roughly $40 million of improvement against our expectations in that business. That is a byproduct of longer contracts being signed, additional consumption being signed and the tooling that we have done over the course of the last say five years in that ecosystem has really positioned it to be AI-enabled. So I do not think it has really changed our strategy at all. And we see it as a continuation of the ability to kind of automate around the enterprise platform layer.

So, Michael, I just want to take an extra second on that. I mean, what you are saying is that the cofactoring threat—I think what you said was automation above the enterprise level—actually adds to the usage of your platform. Can you just add more color on that point?

Yeah. Look, I think in general, what we have been targeting and what we have been seeing is to put tools above the enterprise platform that allows for analysis and data extract, data movement across platforms, etcetera. And so using kind of AI agents and, I will say, refactoring of code above that enterprise level really just continues to enable the use of the data. And remember, the dataset that we are talking about are standardized datasets and decades worth of data embedded in there. Right? So if you are really trying to enhance a large language model, the key is really access of that data. Not necessarily what code it is written in to get there. So the easier we can make that, the more customized or localized we can make that interface, and through the use of these particular agents, I think will be beneficial and cause more use of data, not less.

Got it. Then just a question about the outlook for bookings in 2026. Last year had a significant load of renewal activity but at the same time, over the last couple of years, you have invested to win new logos. So I am just—I want to get a perspective on your latest pipeline and sales effort and what the outlook is for your bookings activity and your bookings mix? I mean, will the mix shift toward, you know, existing client scope expansion where I think you had some positive commentary? What is the outlook for the bookings mix for 2026? Thanks.

Yes. Thank you, Rod. Great question and appreciate the opportunity to expand on that a little bit. So you are right. I mean, we signed $1.7 billion of renewals in 2025. That clearly took a lot of the team and the clients' focus to kind of get that behind us, which was great. We have got a really strong backlog and frankly a higher backlog position going into 2026 than we had going into 2025 in relation to that. But the corollary or knock-on to that is when you are doing that renegotiation on renewals, typically, clients are not talking about new scope opportunities. Right, because you are really focused on what that renewal looks like. So on the heels of that, and we mentioned in our prepared remarks that when we have done those renewals we have actually embedded into that some new scope. So as you know, we think of new business as new scope and new logo. So I would say two things. One, our focus on new logo expansion in 2026 is enhanced because we have got a lot more, I will say, bandwidth to really get after that because the renewal cycle is a little smaller this year—probably about a third of what it was last year. So we will have some more focus there. And then secondarily, and more importantly I think is the new scope expansion opportunities in the existing base will allow us to grow that new business as well. So I think you are right in looking at kind of that new business and I bucketed that way intentionally. It is not just about new logo, it is really about the proliferation of new scope opportunities whether that is in our existing base or whether that is with new logo clients. We talk about having roughly a $31 billion TAM in our existing base for new scope opportunities. So that is, you know, a really important element to our growth trajectory of the future.

Alright. Thank you.

The next question comes from Mayank Tandon with Needham. Please go ahead.

Thank you. Good morning. Michael, you mentioned the longer sales cycles and some of the competitive pricing dynamics. So maybe if you could just provide a little bit more detail around how you counter some of that competitive pricing. And of course, you cannot control the overall market discretionary spending slowdown. But how do you maybe counter that?

Yes. Thank you for the question. Super important, right? Look, when we think about the sales cycles in general, I would say 2025 was really tough just because of all of the macros and kind of the adoption of new technology—people a little uncertain around how much to adopt, where to adopt it. Uncertainties around whether it was tariff-related or, again, other macro-related issues, geopolitical, etcetera, I think that weighed on the longevity of the contracting cycle a little bit more than the mechanics of, you know, what we typically see and I would say some of that is already starting to ease. We have got a pretty good jump-off point for Q1 as far as our pipeline is concerned, our discussions with clients in regards to that. In fact, just anecdotally, I had some correspondence with hopefully a future client that is talking about setting kind of record pace in their renewal cycle, really trying to expedite the use of that. So I think those were a little bit more macro than they are process-oriented from our perspective. But clearly, we have done a lot from the embedding of tools and technologies and process changes, qualifications of the pipeline, and also kind of how we are approaching opportunities to enhance and streamline the first touchpoint to contract closure. So, you know, we are very focused on trying to do everything we can to shorten that cycle, and be very prescriptive about how we approach clients and who we approach for what. So there definitely are some elements embedded in that. As far as pricing is concerned, look, it has always been a very competitive pricing environment. I think what has made it a little bit more competitive is you have got this pause, I guess, or the hesitancy to grow in some of the industry, right? We have seen our traditional industry CAGRs from, say, 4.5% or some percent CAGR growth down to flat, which means you have got a lot of folks chasing a smaller pie. Right? And so from our perspective, we rarely want to have or even start a discussion that talks about commodity pricing and race to the bottom. Right. All of our go-to-market approach is around enhanced experience and value and quality. Right? And we mentioned a couple of the renewals that we did not win. And I mentioned those in Q2 and in Q3. We need to maintain pricing discipline. We know what the value and the market-based pricing is for what we deliver, and we think we are delivering value in advance of that market pricing. So we should be able to get at least market-based pricing, and so not trying to, you know, just compete on price. If the client does not see the value we offer, obviously, that is going to be a longer-term problem anyway. Right? So our point is really to get in front of that early, make sure we can illustrate the value that we bring to our clients, and we have plenty of qualms to support that. So that is kind of how we are addressing the market on both of those fronts.

That is very helpful. And just a very quick follow-up for Debra, maybe. Debra, you know, given the guidance range, I am just curious as you entered this year, have you built in a little bit more buffer in your expectations given some of the uncertainty and macro headwinds? Or would you say you basically aligned your guidance with your historical strategy? And in that context, what dictates whether you come in at the low end of the range or the high end? Like, what are some of the factors we should be considering?

Right. Yes. I think, you know, we definitely, as Michael talked about some of the revenue pressure, some of the industry headwinds, is what we considered as we did the guidance. So I think the things to look for are, you know, at some of those macro factors, you know, alleviate—is what we assumed, that later in the year some of those factors alleviate. We had some—we, as Michael talked about, the mix of new logo is planned to have a lot more new logos this year as far as renewals. So as we are doing that, we think the Gartner Magic Quadrant will help. And so if we, you know, sell new logos kind of faster, that will be another element to look for that would increase, you know, what we put out there as our guidance. But we have kind of built in all these headwinds through most of 2026.

Look, I would say too, like, we absolutely took in a different approach to our guidance this year. It is not last year's same exact strategy. We saw obviously the PC refresh cycle we were expecting that never came to fruition. And so we have kind of backed that off and looked at trajectory a little bit when we talk about that cycle. Clearly, we have got the hardware cost components and we think that that is going to have some opportunities for DSS. But I would say in general, there was a little bit more of a conservative approach to the way we set guidance. But I want to just be really clear. Related to the top line, you know, I think from a bottom line perspective, we have been very consistent in our ability to execute bottom line improvement. We are also calling for another, say, 150-ish basis points of bottom line improvement—good line of sight to that. But we definitely took into consideration the kind of market hesitancy that we have seen. We have kind of carried that through the first half of the guidance. And I think we wanted—as you know, we kind of pride ourselves on the level of transparency that we put out on a regular basis as it pertains specifically to our guidance. And we really kind of went through element by element to say, hey, is this an area where we feel really good about and kind of how to get there. So a little bit of a different approach on the top line. I would say in general, just taking out some of the things that we thought were going to happen that did not happen in 2025 and expect that as they pick up throughout the year—kind of a midyear convention on that?

Great. Thank you so much, Michael and Debra.

Sure. Thank you. Appreciate it.

You are welcome. Thanks.

The next question comes from Maggie Nolan with William Blair. Please go ahead.

Wanted to look ahead a little bit. You talked about several things that you are working on in the script that would help accelerate XLNS revenue growth. And I am just wondering what leading indicators we can watch to assess this progress, and then what is kind of a realistic timeline—especially given some of the first half pressures you just outlined—what is the realistic timeline for seeing some level of growth acceleration?

Great. Thanks, Maggie, for the question. And a really good one and intuitive here too. I would say to you, clearly our new business kind of conversion rate is, I will say, the earliest indicator on the top line. So I look at that question in two ways. One is really about the top-line expansion and the growth. And the other is about the deployment of our embedded technology, right, when we talk about enhancing the capabilities of our bottom line, right? So pushing that technology out to our existing client base we think will add some ability for us to grow top line through the use of, as I mentioned earlier, new scope opportunities within those accounts. Just know that that also comes with a little bit of a headwind. Right? So leaning into the adoption—and one of the examples I gave was the Service Experience Accelerator adoption that we are looking to push out to a third of our existing installed base. Well, when we push that out, there is going to be some pricing pressure on that top line because clearly it is—the agentic service desk that we are using is a lower cost of delivery and some of that we have to share with our client base. So you are pushing out this technology, which is going to put a little bit of a headwind pressure on. We think we are going to overcome that headwind with the expansion of the opportunity embedded in that client, and the addition of new logos to that base as well. So those are the things that we think are really going to support that XLNS growth rate—that is a DWS example. On the flip side, when I think about CA&I and the example there, we talked about the intelligent operations platform and really adding those agentic agents to expand our scope within the construct of the hybrid infrastructures that we and manage. Frankly, when we think about the current drivers, probably misquote this, I need to change it, but I think there was a recent McKinsey report out where we talked about a $300 billion to $400 billion TAM in what I would consider to be the above-layer automation of AI agents. Right? And we saw a lot of noise in the market around software and service implementers for software. That is not what we do. Right? Like, we are more an orchestration on that. But when we think about the application of AI agents above the SaaS-level enterprise software—that is what we do. That automation component both to help with transition and to actually orchestrate and manage post-orchestration of the IT ecosystem—that actually allows us to participate a little more fully in what used to be just solution implementers of ERPs or CRMs or HCMs, where they are taking that customization layer or that integration layer and moving it above the enterprise stack—that is an area we do play in that we historically have not. Right? So I think it gives us a lot more opportunity to participate in that legacy TAM and in this future TAM on both CA&I and DWS.

That is very helpful. Thank you. For my second question, just on margins, could you maybe distill for us the main puts and takes on margins in the next year, just kind of excluding the SG&A efficiencies you have gained, assuming that there is not incremental efficiency to drive there in the near term, beyond what you have already outlined? The efficiencies that we will be annualizing?

Yeah. Look, I mean, I think we have been fairly consistent from our perspective where we think those are coming from. Primarily, it is the application of emerging technology, right. The embedding of AI into our delivery platform allows us to deliver in a much more efficient manner. So clearly, there is going to be a margin benefit from doing that. And as I mentioned, some of that margin benefit comes in the form of a revenue share, if you will, right, giving some of that back to the clients. But clearly, a portion of that stays embedded in our delivery platforms. And as we then add to that platform through the use of top-line growth, there is going to be obviously additional margin pull-through from that point of view. So I would say it is primarily in the application of emerging technology. There are still opportunities for us to be more efficient. There are still opportunities for us to continue to look at, I will say, upskilling or right skilling or right shoring components of what we do, and we continue to look at those opportunities as far as the delivery workforce is concerned. But again, the adoption of a digital workforce working alongside our human workforce—we are kind of working both sides of that equation. And then I would say lastly, when you think about the mix shift as we continue to push more and more into some of these newer elements of our solution. And I will just pick on field services as a very practical example. As we continue to shift the mix of what we are actually supporting with those field service technicians, whether that is liquid cooling, whether that is hybrid infrastructure, whether that is high-end storage—those are just higher margin elements of work for the same technician, moving away from some of the more traditional PC break/fix. So I think those three elements would be what I would point to as the real drivers of where we should expect to see margin improvement, which is again why I think we are really confident in the ability to execute it because a lot of the technology is obviously already embedded, and we are already moving it into production. And again, I think we have put a track record out there—almost 600 basis points improvement over the last three years in XL&S gross margin. Right? So we are looking for another 150 basis points there in 2026.

Thank you.

The next question comes from Anna Goskow with Bank of America. Please go ahead.

Hi, thanks very much. So first question is on the L&S revenue outlook. Do sense your kind of historical pattern of being conservative and then beating and raising. So back in October—when I think it was October—when you had the ClearPath kind of webinar for us, you had talked about a $400 million CAGR for the next three years, and it looks like you are already kind of beating that with the $415 million expected for this year. But then I think you did comment that you still expect about $400 million 2027–2028. So just wanted to understand. I understand there are license renewals in there, but it seems that the driver is AI in terms of consumption. So I wanted to understand what your thinking or expecting with regard to the impact of AI being a continued driver of consumption?

Great. Thank you, Anna, for that call and that call-out. I am going to reiterate a comment I made in an earlier point. We did revisit kind of the way we were putting our guidance together. And this is another good example of that. And so you saw that we actually put out here $415 million of L&S revenue, even though a little while ago we were talking about an average of $400 million over that three-year period and we carried that average, you know, up. Right? I think we started that in maybe in the $360 million to $370 million range, moved it to $390 million, moved it to $400 million. And are still saying $400 million in those out years. So—and you are exactly right also that the driver of that has been consumption and use much more so than, you know, just the license renewal schedule. And we do think that that is the AI comment that I made earlier in regards to Rod's question. Right? The more tools and techniques and processes that we can build and put on the front end of that ecosystem or that platform, the more consumption of that data and, obviously, the more value that orients to the platform and to, frankly, to our clients and to us. So we do expect that trend to continue, which is why we increased that CAGR average for those out years. And I would just note too that the $40 million beat over the last three years, which you kindly pointed out as well. You see the $415 million kind of take some of that now into our guidance to go, okay, you know, this has been a pattern here of continued consumption. So we wanted to bake some of that in so that we are not—sometimes it is just bad to continually overperform than it would be to underperform. So we are trying to do a better job at making sure that some of that overperformance that we have seen and expect to continue to see is baked into the numbers.

Okay. So but for 2027–2028, you just have not really adjusted that yet for—I mean, any of us that are following the AI space or the AI impacts. I mean, consumption levels should continue to increase. Is that fair?

Yeah. Look, I would say it is too far out for us to adjust multiple-year-out consumption estimates. But I would say if history is indicative of the future, then yes, we would expect as we go further down the road that we will revisit that estimate. But for now, we felt pretty comfortable with—it is already a $10 million to $15 million step-up from what we were chatting about before. So you can assume there is some consumption baked in there.

Okay, great. And then Debra, so just on some of the balance sheet stuff. So I just want to make sure I am understanding on the free cash flow guide, which is a use of 25. So that is largely your expected all-in use of cash. Right? So if I just do the simple arithmetic on your current cash balance, going to be approximately $25 million lower at the end of 2026.

That is correct. And pre-pension that translates to pre-pension of $67 million, you know, compared to the $128 million this year.

Right. And then the slides on the pension outlook are great. Thank you very much. So it is really clarifying. So then if I look at the slide on potential annuity purchases, you really gave us the estimates of what the deficit is going to be. So at the end of the day, whether you purchase an annuity or not, your pension deficit is going to be down roughly in the $50 million range. Right? So net-net, like your net debt is going to be lower at the end of the year because your cash is only going down by, like, 25, but your pension deficit is going down by at least 50. Is that right way to—

—down by that. Yes.

—shows that debt reduction. Deficit value. It is not dollar for dollar, but you will see continual improvement in the deficit and in net leverage.

Okay. And then the annuity purchases would are noncash.

Right. We use the plan assets to reduce the plan liabilities.

Correct? Okay. Okay. And then so yeah, I know you worked really hard last year to do the bond issuance and you know, it came at a rate that was a little higher than you probably preferred and your plan at some point is to refinance those lower? Obviously, like the market overall is pretty messy right now. So those bonds are trading below par. Have you thought about using some of your cash to buy back some of that debt at this point? Because it is a pretty attractive rate.

Yeah. I mean, we always look at everything. But, I mean, at this point, you know, we are always looking to conserve cash, right, given the pension obligations, given everything. But we are always looking at everything, but it is not, you know, something at this exact moment we are planning to do.

Okay. So the preference is just to keep, like, a solid cash balance. It sounds like.

Yes.

Okay. Great. Okay. Well, thank you very much.

You are welcome.

Continued into 2026 we are hopeful by kind of midyear that we will get back to kind of our normalcy as it pertains to kind of public sector work that we are doing. In fact, we signed a big deal recently in Australia public sector that was—in one case we had a win back from a competitor and another we expanded a relationship there that was pretty significant in the region. So we are optimistic.

Okay. Thank you. That was all for me.

Thank you, Anna.

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