Conduent Incorporated · NASDAQ:CNDT
Conduent — Investor Presentation (December 2016)
37 slides from Conduent's investor presentation, Dec 5, 2016
Slide 1: Conduent Investor Presentation
December 5, 2016 Conduent Investor Presentation
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements This presentation contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations,
Slide 3: Today's Agenda
Today’s Agenda 1. Introducing Conduent 2. Strategy to Drive Profitable Growth 3. Financial Review 3
Slide 4: 1. Introducing Conduent
CONDUENT ss 1. Introducing Conduent
Slide 5: Who We Are Today
Who We Are Today Leader in business process services delivering seamless, mission-critical interactions for businesses, governments and their constituents globally ~$6.6B1 ~$630MM1 Revenue driven by long-term Pro Forma Adjusted EBITDA annuity contracts 86% ~94K Annual contract renewal rate Teammates
Slide 6: Unlocking Value Through Separation
Unlocking Value Through Separation Focus Amplify areas of operational strength to capture strategic market opportunities Streamline Realign organization and operating model to drive higher productivity Enhance Drive margin expansion through strategic transformation and targeted growth investments Op
Slide 7: Segments and Service Offerings
Segments and Service Offerings Commercial Industries Public Sector Healthcare Other 44% of Total 2015 Revenue 26% of Total 2015 Revenue 26% of Total 2015 Revenue 4% of Total 2015 Revenue 2.4% Segment Margin 11.6% Segment Margin 9.0% Segment Margin Negative Margin Businesses 7%5% 33% 9% 35% 42% 40% 4
Slide 8: Conduent Investment Proposition
Conduent Investment Proposition 1 Leadership positions in a ~$260B market growing over 6% annually 2 Diverse, marquee client base with strong market share 3 Stable, recurring revenue model and 86% renewal rate 4 Strong margin expansion opportunity driven by portfolio focus, improved productivity and
Slide 9: Large and Growing Addressable Market
Large and Growing Addressable Market Market Size ($B, 2016) Key Growth Drivers Financial Services $62.7 • Trend to outsource key business processes to accelerate Manufacturing $34.0 Market size: performance and innovation $167B • Greater demand for personalized, Comm & Media $33.0 growing at ~6% sea
Slide 10: Marquee Clients In Diverse Portfolio
Marquee Clients In Diverse Portfolio 76 of Fortune 100 Businesses and 500+ Government Entities Count on Us Largest Client Top 10 Clients Top 20 makes up only 4% make up ~20% of revenue managed U.S. healthcare of revenue plans are clients Average Contract 50 of 50 4 of 5 Length1 U.S. states count top
Slide 11: 2. Strategy to Drive Profitable Growth
2. Strategy to Drive Profitable Growth 11
Slide 12: Strategy to Drive Profitable Growth
Strategy to Drive Profitable Growth Strategy Near- and Medium-Term Targets Driving Revenue Invest in Talent and Stabilize and grow revenue • Return to growth by the end of 2018 Growth Go-To-Market Capabilities • Focus on high-return, high-margin growth opportunities • Modest potential M&A in 2017, r
Slide 13: Invest in Talent and Go-To-Market Capabilities
Driving Revenue Growth Invest in Talent and Go-To-Market Capabilities Focus Areas Initiatives Expertise Support talent development through learning platforms and industry-specific training Tools Better leverage existing capabilities and complement with modernized tools to enable greater workforce ef
Slide 14: Differentiate Through Innovation
Driving Revenue Growth Differentiate Through Innovation Value-Add Capabilities Opportunity Ahead • User-centric insights, natural language Personalization technology, social analytics • Increases customer satisfaction and loyalty Analytics Automation • Analysis embedded into the actual Analytics pro
Slide 15: Implement Strategic Cost Transformation
Driving Margin Expansion Implement Strategic Cost Transformation Strategic transformation to drive margin expansion and additional investment capacity Targeting ~$700MM¹ cumulative cost savings through 2018 Key Initiatives Progress To Date Opportunity Ahead Optimize • Delivered ~50 basis points Adj.
Slide 16: Address Legacy Margin Pressures
Driving Margin Expansion Address Legacy Margin Pressures Focus Areas Initiatives Progress To Date • Remediating underperforming accounts through improved Segment Profit ($MM)1,2,4 Customer Care economics and proactive customer engagement % margin • Improving and standardizing performance management
Slide 17: Building A Business For The Long Term
Building A Business For The Long Term Predictable Sustainable Balanced Profitable Consistent, reliable Repeatable, scalable, Risk-appropriate book Indicator of our value to operating and financial reusable solutions of business clients and management performance performance Renewal & Refocus Stabili
Slide 18: 3. Financial Review
CONDUENT ss 3. Financial Review 18
Slide 19: Conduent Historical Performance
Conduent Historical Performance Revenue1 ($MM) Adjusted EBITDA1 ($MM) % margin $6,879 $6,938 $6,778 $872 $809 $5,048 $4,894 $639 $471 $462 10.1% 10.6% $1,687 $1,596 12.7% 11.7% $170 $169 9.4% 9.3% 9.4% 2013A 2014A 2015A 3Q'15 YTD 3Q'16 YTD 3Q'15 3Q'16 2013A 2014A 2015A 3Q'15 YTD 3Q'16 YTD 3Q'15 3Q'1
Slide 20: Adjusted EBITDA to Free Cash Flow
Adjusted EBITDA to Free Cash Flow Free Cash Flow Profile ($MM) 2016 Free Cash Flow Commentary FY 2015 • Impact from Health Enterprise settlement payments expected to Adjusted EBITDA $639 be ~$150mm in 2016 Net Cash Provided by Operating $4931 • Change in receivable factoring program expected to be a
Slide 21: Future Performance Drivers
Future Performance Drivers Our strategic plan is expected to drive top- and bottom-line growth, with cash flow reinvested in high-return opportunities Revenue Goals Margin Goals Free Cash Flow Goals Large and growing market opportunity; Focus portfolio on businesses with Revenue growth and cost savi
Slide 22: Financial Performance Goals
Financial Performance Goals 2017 2018 2019 Renewal and Refocus Stabilization Acceleration Revenue Rate of decline similar to Flat / positive momentum Accelerating momentum Growth 2016 levels A clear plan to Adjusted Growth >5% Growth >10% Continued expansion EBITDA achieve revenue and Adjusted Growt
Slide 23: Strategic Cost Transformation
Strategic Cost Transformation Category Potential Representative Cost Saving Actions Opportunity ($MM) • Workforce / Consulting Savings Up to ~$125 G&A • IT Infrastructure Savings Up to ~$75 • Facilities Cost Reduction Up to ~$35 Procurement • Vendor & Centralized Spend Control Up to ~$65 • Workforce
Slide 24: Capital Structure Overview
Capital Structure Overview Pro Forma Debt Profile ($MM) Credit Profile Unsecured High-Yield Notes • Targeting to reduce leverage ratio over time with Adjusted EBITDA growth and mandatory debt payments 10.5% Senior Notes due 2024: $510 • Liquidity includes $750MM availability under revolver and Float
Slide 25: Disciplined Capital Allocation
Disciplined Capital Allocation Fund Operating Business Needs Operating expenses and capital expenditures for ongoing business Modest mandatory debt repayments Invest in Sustainable Long-Term Growth Tuck-in acquisitions Incremental offering and go-to-market investments Manage to Net Leverage1 Target
Slide 26: Conduent Investment Proposition
Conduent Investment Proposition 1 Leadership positions in a ~$260B market growing over 6% annually 2 Diverse, marquee client base with strong market share 3 Stable, recurring revenue model and 86% renewal rate 4 Strong margin expansion opportunity driven by portfolio focus, improved productivity and
Slide 27: Q&A Session
CONDUENT ss Q&A Session
Slide 28: © 2016 Conduent Business Service, LLC. All rights reserved. Conduent™ and Conduent Design™ are
© 2016 Conduent Business Service, LLC. All rights reserved. Conduent™ and Conduent Design™ are trademarks of Conduent Business Services, LLC in the United States and/or other countries.
Slide 29: Appendix
CONDUENT ss Appendix
Slide 30: Leadership Team
Leadership Team • Served as President, CEO and Board member of IGATE Corporation, Ashok Vemuri prior to its sale to Capgemini Chief Executive Officer • Spent fourteen years at Infosys, a multinational consulting and IT services company, in a variety of leadership and business development roles • Ser
Slide 31: Segment Historical Performance
Segment Historical Performance Commercial Industries1 Commentary $2.9 $3.0 $2.9 • Performance challenges primarily centered in Customer Care offering $2.2 $2.0 • Revenue and margin pressure driven by underperforming contracts 5.9% 5.1% (some of which have been strategically exited), under-investment
Slide 32: Segment Historical Performance
Segment Historical Performance Public Sector1 Commentary $1.8 $1.8 $1.7 • Moderate revenue growth from new transportation offering contracts $1.3 $1.3 • Strong market growth opportunity from increased automation and infrastructure spend 12.6% 11.7% 11.6% 11.3% 12.6% • Industry specific and platform-
Slide 33: Global Delivery Capabilities
Global Delivery Capabilities Global footprint and delivery network serving businesses and governments at scale Teammate Mix Commentary North America LatAm & Caribbean APAC EMEA • ~93,700 teammates globally 10% • ~290 global delivery centers with lower-cost production locations 20% 49% • Diversified
Slide 34: Non-GAAP Financial Measures
Non-GAAP Financial Measures Xerox Corporation (“Xerox”) has previously announced plans to separate its Business Process Outsourcing Business (the “BPS Business”) and its Document Technology and Document Outsourcing Business into two independent, publicly-traded companies (the “Spin-Off”). Following
Slide 35: Non-GAAP Reconciliation: Adjusted Revenue and EBITDA
Non-GAAP Reconciliation: Adjusted Revenue and EBITDA Year Ended Three Months Ended Nine Months Ended Pro Forma LTM ($MM) December 31 September 30 September 30 September 30 2013 2014 2015 2015 2016 2015 2016 2016 Total Revenue $6,879 $6,938 $6,662 $1,571 $1,596 $4,932 $4,894 $6,624 HE Charge (Revenue
Slide 36: Non-GAAP Reconciliation: Free Cash Flow
Non-GAAP Reconciliation: Free Cash Flow Year Ended Three Months Ended Nine Months Ended Pro Forma LTM ($MM) December 31 September 30 September 30 September 30 2013 2014 2015 2015 2016 2015 2016 2016 Adjusted EBITDA $872 $809 $639 $170 $169 $471 $462 $630 Interest Expense1 (117) (118) (69) (15) (11)
Slide 37: © 2016 Conduent Business Service, LLC. All rights reserved. Conduent™ and Conduent Design™ are
© 2016 Conduent Business Service, LLC. All rights reserved. Conduent™ and Conduent Design™ are trademarks of Conduent Business Services, LLC in the United States and/or other countries.