Slide 1: Conduent Q1 2018 Earnings Results
May 9, 2018 Conduent Q1 2018 Earnings Results
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements This report 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 historical
Slide 3: Q1 2018 Overview
Q1 2018 Overview Key Quarterly Highlights • Revenue flat (adjusting for ASC 606, divestitures and strategic decisions) - demonstrates improvement in core business • Strong Adjusted EBITDA margin expansion with meaningful profitability improvement in both segments • TCV signings of $1.4B up 53% yr/yr
Slide 4: Strategic Transformation
Strategic Transformation Progress and Outlook Real Estate Footprint Down 25% yr/yr Down 20% yr/yr • Remain on-target for cumulative 2018 transformation 11,979 goal of ~$700M 442 332 9,533 • Remediated last of six large Customer Care contracts ◦ Received price increase (improves profitability in 2018
Slide 5: Segment Summary - Q1 2018
Segment Summary - Q1 2018 Commercial Public Sector (adjusting for impact of ASC 606)(1) (adjusting for impact of ASC 606)(1) • Revenue excluding strategic decisions, up 3% yr/yr • Revenue excluding strategic decisions down (4)% yr/yr ◦ Revenue down (2)% ◦ Revenue down (6)% • Adj. EBITDA margin impro
Slide 6: Q1 2018 Signings, Pipeline and Renewal Rate
Q1 2018 Signings, Pipeline and Renewal Rate(1) $1,428M 94% Total Contract Value (TCV) Signings Renewal Rate • TCV up 53% yr/yr, driven by increased renewal activity • Renewals: $1,022M, grew 155% yr/yr driven primarily partially offset by new business signings decline by commercial clients • Reflect
Slide 7: Financials
Financials CONDUENT ss
Slide 8: Q1 2018 Earnings
Q1 2018 Earnings (in millions) Q1 2018 Q1 2017 B/(W) Q1 2017 B/(W) Comments Q1 2018 vs Q1 2017 Yr/Yr adjusted for Yr/Yr adjusted 606, for 606, Divestitures (1) Divestitures Decline driven by ASC 606, Revenue $1,420 $1,553 ($133) $1,484 ($64) divestitures and strategic actions Gross margin 17.7% 16.7
Slide 9: Commercial Segment
Commercial Segment Quarterly Revenue and Profit Q1 2018 Segment Highlights(1) (adjusting for ASC 606)(1) • Revenue declined (2)% yr/yr, impacted by strategic decisions $869 $834 $823 $856 $854 ◦ Excluding strategic decisions, revenue up 3% yr/yr ◦ Improved revenue trajectory driven by contract 6.0%
Slide 10: Public Sector Segment
Public Sector Segment Quarterly Revenue and Profit Q1 2018 Segment Highlights(1) (adjusting for ASC 606)(1) • Revenue down (6)% yr/yr, impacted by prior year strategic actions and contract losses $591 $581 $583 $585 $558 ◦ Excluding strategic actions, down (4)% yr/yr • Health Enterprise reclassified
Slide 11: Other Segment
Other Segment Quarterly Revenue and Profit (adjusting for ASC 606 and divestitures)(1) Q1 2018 Segment Highlights(1) $24 $19 $21 $11 $8 • Revenue declined (67)% yr/yr and (27)% Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 sequentially as education business run-off Segment accelerated Profit (Loss)(1) $— $1 $2
Slide 12: Cash Flow
Cash Flow (in millions) Q1 2017 Q1 2018 B/(W) Yr/Yr Q1 2018 Commentary: Net loss ($6) ($50) ($44) Depreciation & amortization 125 117 (8) • Improvement in operating cash flow Stock-based compensation 6 7 1 driven by working capital Deferred tax benefit (6) (8) (2) Restructuring payments (9) (12) (3)
Slide 13: Capital Structure Overview
Capital Structure Overview Debt Structure ($ in millions) Credit Metrics (in millions) 12/31/2017 3/31/2018 FY 2018E interest expense ~$135M Total Cash $658 $553 Preferred dividend (annual) ~$10M Deferred Comp Cash (99) (92) Target net leverage ratio <2.5x Adjusted Cash(1) 559 461 Average remaining
Slide 14: Divestiture Update
Divestiture Update Q2 2018 Signed(1) Divestitures • Off-Street Parking FY 2017 Revenue: ~$43M (Transportation) • HR Consulting & Actuarial Services FY 2017 Revenue: ~$278M (HRS) Expected Financial Impact (from Q2 2018 divestitures signed to-date) • FY 2017 Revenue: ~$321M • FY 2017 Adjusted EBITDA:
Slide 15: FY 2018 Guidance
FY 2018 Guidance Updated for Signed Divestitures Signed Q2 2018 Impact from Prior FY 2018 Divestiture impact(5) Adjustments to Adjusted Guidance (assumes close Updated FY 2018 (in millions) FY 2017 FY 2017(4) FY 2017 date 6/30/2018) Guidance Revenue $6,022 ($225) $5,797 $5,600- $5,800 ~$160 $5,440 -
Slide 16: CEO Closing Remarks
CEO Closing Remarks 16
Slide 17: Conduent: A Digital Interactions Company
Conduent: A Digital Interactions Company 17
Slide 18: Conduent's Core Businesses: Five Dimensions
Conduent’s Core Businesses: Five Dimensions Facet Core Business Attractiveness - High volume, repeatable, unique, secure 1. Individualized - Sticky, front-office capability - Employees, Retirees (BenefitWallet) interactions at massive - Citizens (payments) - Deep, decades-long expertise in specific
Slide 19: Q&A
Q&A 19
Slide 20: Appendix
Appendix 20
Slide 21: Signings & Renewal Rate
Signings & Renewal Rate(1) ($ in millions) Q1' 17 Q2' 17 Q3' 17 Q4' 17 Q1' 18 Total Contract Value $931 $1,244 $1,047 $1,730 $1,428 New Business $530 $657 $390 $683 $406 Renewals $401 $587 $657 $1,047 $1,022 Annual Recurring Revenue Signings $143 $130 $92 $168 $93 Non-Recurring Revenue Signings $92
Slide 22: 2018 Modeling Considerations
2018 Modeling Considerations Outlook Commentary Profitability Typical seasonality tends to be weighted toward 2H (as seen in FY 2017) Restructuring costs Expected to be $50M - $75M for the full year Interest Expense Expected to be ~$135M for the full year, given TLB repricings and interest rate expe
Slide 23: Definitions
Definitions TCV = Total contract value Annual Recurring Revenue Signings = Only includes new business TCV. New Business TCV = Annual recurring revenue signings multiplied by the contract term plus non-recurring revenue signings. Renewal Rate = Annual recurring revenue (ARR) on contracts that are ren
Slide 24: 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 investors
Slide 25: 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 Operating Income and Adjusted Operating Margin: • A
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures Segment and Consolidated Adjusted EBITDA and EBITDA Margin We use Adjusted EBITDA and 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.
Slide 27: Non-GAAP Reconciliation: Adj. Net Income (Loss) & Adj. EPS
Non-GAAP Reconciliation: Adj. Net Income (Loss) & Adj. EPS Three Months Ended March 31, 2018 2017 (in millions, except EPS) Net Income (Loss) Diluted EPS Net Income (Loss) Diluted EPS GAAP as Reported From Continuing Operations $ (50) $ (0.26) $ (10) $ (0.06) Adjustments: Amortization of acquired in
Slide 28: Non-GAAP Reconciliation: Adj. Effective Tax Rate
Non-GAAP Reconciliation: Adj. Effective Tax Rate Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 Pre-Tax Income Income Tax Pre-Tax Income Income Tax (in millions) (Loss) (Benefit) Expense Effective Tax Rate (Loss) (Benefit) Expense Effective Tax Rate GAAP as Reported From Continu
Slide 29: Non-GAAP Reconciliation: Adj. Revenue and Adj. Operating Income / Margin
Non-GAAP Reconciliation: Adj. Revenue and Adj. Operating Income / Margin Previously Reported (in millions) Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 GAAP Revenue From Continuing Operations $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 GAAP Pre-tax Income (Loss) From Continuing Operations (54
Slide 30: Non-GAAP Reconciliation: Adjusted Revenue and Operating Income / Margin
Non-GAAP Reconciliation: Adjusted Revenue and Operating Income / Margin(1) Adjusted for 606 and Divestitures(1) (in millions) Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 GAAP Revenue From Continuing Operations $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 ASC 606 adjustment — (166) (41) (39) (
Slide 31: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation: Adjusted EBITDA Previously Reported (in millions) Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Reconciliation to Adjusted Revenue GAAP Revenue From Continuing Operations $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 Adjusted Revenue $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,4
Slide 32: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation: Adjusted EBITDA(1) Adjusted for 606 and Divestitures(1) (in millions) Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Reconciliation to Adjusted Revenue GAAP Revenue From Continuing Operations $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 ASC 606 adjustment $ — $ (166) $ (
Slide 33: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Previously Reported (in millions) Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Commercial Industries Segment GAAP revenue $ 854 $ 3,475 $ 879 $ 845 $ 856 $ 895 Segment profit $ 44 $ 181 $ 73 $ 49 $ 33 $ 26 Segment depreciation and amortization 3
Slide 34: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Adjusted for 606 and Divestitures(1) (in millions) Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Commercial Industries Segment GAAP revenue $ 854 $ 3,475 $ 879 $ 845 $ 856 $ 895 ASC 606 adjustment — (93) (23) (22) (22) (26) Segment Revenue Adjust
Slide 35: Non-GAAP Reconciliation: Segment Adjusted EBITDA Continued
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Continued Adjusted for 606 and Divestitures(1) (in millions) Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Other Segment Segment GAAP revenue $ 8 $ 139 $ 12 $ 36 $ 42 $ 49 ASC 606 adjustment — (5) (1) (1) (1) (2) Less revenue from divestitures —
Slide 36: Non-GAAP Reconciliation: Adj. Free Cash Flow
Non-GAAP Reconciliation: Adj. Free Cash Flow Three Months Ended March 31, (in millions) 2018 2017 Operating Cash Flow $ (38) $ (107) Cost of additions to land, buildings & equipment (33) (17) Proceeds from sales of land, buildings and equipment (6) (8) Vendor financed capital leases — (12) Deferred
Slide 37: Non-GAAP Reconciliation: Adjusted Cash
Non-GAAP Reconciliation: Adjusted Cash (in millions) As of March 31, 2018 As of December 31, 2017 Cash and cash equivalents $ 553 $ 658 Deferred compensation payments and adjustments 7 17 Deferred compensation payable (99) (116) Adjusted cash and cash equivalents $ 461 $ 559 37
Slide 38: Conduent trademark notice
© 2017 Conduent Inc. All rights reserved. Conduent and Conduent Agile Star are trademarks of Conduent Inc. in the United States and/or other countries.
Slide 39: Conduent
CONDUENT ss