Conduent Incorporated · NASDAQ:CNDT
Conduent — Q4 2019 Earnings Presentation
29 slides from Conduent's earnings presentation, Feb 20, 2020
Slide 1: Conduent Q4 2019 Earnings Results
February 20, 2020 Conduent Q4 2019 Earnings Results
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements This document contains “forward-looking statements”, as defined in the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historica
Slide 3: Key Highlights
Key Highlights • Adj. Revenue: at top end of guidance ranges ▪ Q4'19 $1,099M; down (6.7)% Y/Y (ex divestitures), down (6.5)% in CC ▪ FY'19 $4,431M; down (4.5)% Y/Y (ex divestitures), down (4.0)% in CC Q4 / FY • Adj. EBITDA: in-line with mid-point of guidance range Financials(1) ▪ Q4'19 $130M, down (
Slide 4: Strategic & Operational Review Completed
Strategic & Operational Review Completed Next steps to strengthen go-forward Company: • Investment Criteria for Business Units: ◦ Optimize / Enhance / Expansion • Program management approach: ◦ Disciplined transformation project plan / initiatives: ▪ Growth ▪ Quality ▪ Efficiency • Possible Funding
Slide 5: Conduent Growth Approach
Conduent Growth Approach Optimize Enhance Expand Increase retention and margin Retain and grow through Expand into current and adjacent markets through productivity and better client product enhancements leveraging new technologies outcomes End-user Engagement Gov't Healthcare Commercial Healthcare
Slide 6: Transformational Pillars Next Steps
Transformational Pillars Next Steps GOALS STRATEGY SELECT METRICS • Disciplined offering Growth development Revenue Retention • Brand & go-to-market Retain every client, sell new repositioning business, market leadership • Expand salesforce talent New Business Signings • Client retention program • S
Slide 7: Financials
Financials CONDUENT ss
Slide 8: FY 2019 P&L Metrics
FY 2019 P&L Metrics Revenue(1) Adj. Operating Income(1) $5,000M $4,641M $4,431M $400M $321M $277M (4.5)% Y/Y (13.7)% Y/Y $2,500M (4.0)% in CC $200M $—M $—M FY '18 FY '19 FY '18 FY '19 GAAP: $5,393M $4,467M GAAP: $(395)M $(2,106)M Adj. EBITDA(1) $750M • Revenue(1): down due to client attrition, price
Slide 9: FY 2019 P&L by Segment
FY 2019 P&L by Segment Revenue(1) Adj EBITDA(1) Contributions 5% Y/Y (6)% Y/Y $157M Transportation, $781M $423M 7.1% Y/Y 8.2% in CC (9)% Y/Y $542M $493M $(629)M Commercial, $2,385M Government, $1,263M (6.5)% Y/Y (5.8)% in CC Commercial Government Transportation Unallocated Adjusted Shared EBITDA (6.
Slide 10: Q4 / FY 2019 Cash Flow and Balance Sheet
Q4 / FY 2019 Cash Flow and Balance Sheet FY Cash Balance Balance Sheet $57M ($ in millions) 12/31/2018 12/31/2019 $765M Total Cash (3) $765 $505 $(118)M $(19)M $505M Total Debt(3) 1,567 1,514 $(180)M Term Loan A(4,5) due 2022 705 664 Term Loan B(4) due 2023 833 824 10.5% Senior Notes due 2024 34 34
Slide 11: Key Sales Metrics
Key Sales Metrics TCV Signings and Renewal Rate New Business (ARR and NRR) $1,800M 120% $300M 92% 92% 93% $1,200M 76% 90% $200M $57M $906M 60% $600M 60% $100M $49M $485M $43M $42M $727M $512M $506M $140M $32M $621M $84M $328M $52M $71M $74M $225M $234M $209M $—M 30% $—M Q4' 18 Q1' 19 Q2' 19 Q3' 19 Q
Slide 12: FY 2020 Guidance
FY 2020 Guidance Completed FY 2019 Adjusted FY FY 2020 $ in Millions Divestiture Reported 2019(4) Guidance Impact(3) Revenue $4.47B $(36)M $4.43B Down (6) - (8)% (Constant Currency)(1,2) Adj. EBITDA / Adj. EBITDA $494M $(1)M $493M / 11.1% 10.5% - 11.5% Margin(2) Adj. Free Cash Flow(2) as % of 12% 15
Slide 13: Q&A
Q&A 13
Slide 14: Appendix
Appendix 14
Slide 15: Modeling Considerations
Modeling Considerations Metric 2020 Guidance Taxes Expect $50M - $60M in cash taxes for FY 2020 and adjusted tax rate of 29 - 32% Restructuring Expect ~$50M for FY 2020 Interest Expect $70M - $75M for FY 2020 depending on interest rates Texas Litigation Payments Final $118M paid in January 2020 15
Slide 16: Q4 2019 P&L Metrics
Q4 2019 P&L Metrics Revenue(1) Adj. Operating Income(1) $1,500M $150M $1,178M $1,099M $98M $1,000M $100M (6.7)% Y/Y (24.0)% Y/Y $74M (6.5)% in CC $500M $50M $—M $—M Q4 '18 Q4 '19 Q4 '18 Q4 '19 GAAP: $1,282M $1,099M GAAP: $(143)M $(635)M Adj. EBITDA(1) $200M • Revenue(1): down due to client attrition
Slide 17: Q4 2019 P&L by Segment
Q4 2019 P&L by Segment Revenue(1) Adj EBITDA(1) Contributions (5)% Y/Y (3)% Y/Y $38M Transportation, $202M $113M 6.9% Y/Y 7.4% in CC (12)% Y/Y $145M $130M $(166)M Commercial, $604M (7.1)% Y/Y Government, $292M (6.8)% in CC Commercial Government Transportation Unallocated Adjusted Shared EBITDA (13.4
Slide 18: Definitions
Definitions TCV: Total contract value. Signings are defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts. Total Contract Value (TCV) is the estimated total contractual revenue related to signed contracts. Excludes the impact of divest
Slide 19: Non-GAAP Financial Measures
Non-GAAP Financial Measures Non-GAAP Financial Measures We have reported our financial results in accordance with U.S. generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the non-GAAP measures. We believe these non- GAAP measures allow investor
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Revenue, Adjusted Operating Income and Adjusted Operating Margin. We make adjustments to Revenue, Costs and Expenses and Margin for the following items (as defined above), for the purpose of calculating Adjusted Revenue, Adjusted Operating Income and Adjusted Ope
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures Consolidated Adjusted EBITDA and EBITDA Margin We use Adjusted EBITDA and Adjusted EBITDA Margin as an additional way of assessing certain aspects of our operations that, when viewed with the U.S. GAAP results and the accompanying reconciliations to corresponding U.S. GAA
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Free Cash Flow Free Cash Flow is defined as cash flows from operating activities as reported on the consolidated statement of cash flows, less cost of additions to land, buildings and equipment, cost of additions to internal use software, tax payments related to divestitu
Slide 23: Non-GAAP Reconciliations: Adjusted Revenue, Net Income, Tax, Operating Income and EBITDA
Non-GAAP Reconciliations: Adjusted Revenue, Adjusted Net Income (Loss), Adjusted Effective Tax, Adjusted Operating Income (Loss) and Adjusted EBITDA (in millions) Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 FY 2018 ADJUSTED REVENUE Revenue $ 1,282 $ 1,158 $ 1,112 $ 1,098 $ 1,099 $ 4,467 $ 5,393
Slide 24: CONTINUED
CONTINUED (in millions) Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 FY 2018 ADJUSTED EFFECTIVE TAX Income (Loss) Before Income Taxes $ (143) $ (338) $ (1,119) $ (14) $ (635) $ (2,106) $ (395) Adjustment: Total Non-GAAP Adjustments 224 387 1,162 66 691 2,306 702 Adjusted PBT (Before Adjustment fo
Slide 25: CONTINUED
CONTINUED (in millions) Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 FY 2018 ADJUSTED EBITDA Income (Loss) From Continuing Operations $ (140) $ (308) $ (1,029) $ (16) $ (581) $ (1,934) $ (416) Income tax expense (benefit) (3) (30) (90) 2 (54) (172) 21 Depreciation and amortization 115 115 112 115
Slide 26: Non-GAAP Reconciliations: Adjusted Shares, Diluted EPS, Tax, Margins
Non-GAAP Reconciliations: Adjusted Weighted Average Shares Outstanding, Adjusted Diluted EPS, Adjusted Effective Tax, Adjusted Operating Margin and Adjusted EBITDA Margins for the Non-GAAP reconciliations (Amounts are in whole dollars, shares are in thousands and margins are in %) Q4 2018 Q1 2019 Q2
Slide 27: CONTINUED
CONTINUED (Margins are in %) Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 FY 2018 ADJUSTED OPERATING MARGIN Income (Loss) Before Income Taxes Margin (11.2)% (29.2)% (100.6)% (1.3)% (57.8)% (47.1)% (7.3)% Adjustments: Total non-GAAP adjustments 17.5 % 33.5 % 104.5 % 6.1 % 62.9 % 51.6 % 13.0 % Inte
Slide 28: Non-GAAP Reconciliation: Adj. Free Cash Flow
Non-GAAP Reconciliation: Adj. Free Cash Flow Three Months Ended Year Ended December 31, December 31, (in millions) 2019 2018 2019 2018 Operating Cash Flow $ 348 $ 253 $ 132 $ 283 Cost of additions to land, buildings and equipment (39) (60) (148) (179) Proceeds from sales of land, buildings and equip
Slide 29: © 2017 Conduent Inc. All rights reserved. Conduent and Conduent Agile Star are trademarks
© 2017 Conduent Inc. All rights reserved. Conduent and Conduent Agile Star are trademarks of Conduent Inc. in the United States and/or other countries.