Slide 1: Conduent Q2 2020 Earnings Results
August 6, 2020 Conduent Q2 2020 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. The words “anticipate,” “believe,” “estimate,” “expect,” “plan,” “intend,” “will,” "aim," “s
Slide 3: Cautionary Statements: Non-GAAP Financial Measures
Cautionary Statements 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 non-GAAP measures. We believe these non-GAAP measures allow investors to better
Slide 4: Client and employee testimonials
"Conduent rose to the occasion of being "I am beyond grateful for your at the forefront in these troubling and partnership throughout this year's challenging times and came out better. runout! Thank you for working late Yes, all these efforts and the rewards nights and weekends to ensure that we tha
Slide 5: Q2 2020 Highlights
Q2 2020 Highlights • Q2 Revenue and Adj EBITDA above expectations ◦ Revenue of $1,016M; Adj. EBITDA(1) of $110M ◦ Revenue performance led by Government Services (Payments) volumes and lower than anticipated volume pressure on Transportation ◦ Adj EBITDA performance led by revenue performance and cos
Slide 6: Continued Sales Momentum
Continued Sales Momentum TCV Signings Select Wins $2,000M COMMERCIAL New logo with leading commercial healthcare payer, $1,000M $912M providing managed care services and leveraging HSP $485M $512M $515M acquisition $506M $623M $328M $234M $209M $324M $—M Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 GOVERNMENT
Slide 7: COVID-19 Business Update
COVID-19 Business Update Q2 2020 COVID-19 Revenue Impact COVID-19 Related Government Business Performance Commercial Government Transportation ~1.4M ~25% New cards SNAP Volume distributed for Increase(1) Unemployment ~$(44)M ~$45M ~$(36)M claims • Commercial: Pressure in Transaction Processing (redu
Slide 8: Cost Savings Update
Cost Savings Update % of Total Cost Savings(1) Other • Expect to significantly overachieve FY 2020 15% annual cost savings target of $100M+ (targeting 60/40 permanent vs temporary) Travel 5% • Temporary actions include travel, furloughs, Permanent reduced vendor spend, etc. Labor 3rd Party 10% 45% •
Slide 9: Transformation Update
Transformation Update GROWTH EFFICIENCY QUALITY • Segmented business for • Hired operations lead to further • Command center and proactive investment and growth tactics consolidate shared services monitoring continues to reduce leading to better capital and operations and drive efficiency / outages
Slide 10: Financials
Financials CONDUENT ss 10
Slide 11: Q2 2020 P&L Metrics
Q2 2020 P&L Metrics Revenue Adj. Operating Income(1) $1,500M (8.6)% Y/Y $75M (8.3)% in CC $63M $1,112M ~(5.5)% ex COVID $55M $1,016M $1,000M $50M (13.0)% Y/Y $500M $25M $—M $—M Q2 '19 Q2 '20 Q2 '19 Q2 '20 GAAP: $1,112M $1,016M GAAP: $(1,119)M $(64)M Adj. EBITDA(1) • Revenue: ◦ Decline driven by prio
Slide 12: Q2 2020 P&L by Segment
Q2 2020 P&L by Segment Revenue Adj. EBITDA(1) Contributions (5)% Y/Y Transportation, $165M 18% Y/Y $39M (14.9)% Y/Y (14.4)% in CC $120M (27)% Y/Y $96M $110M Commercial, $520M $(145)M (12.2)% Y/Y Government, $331M (11.6)% in CC Commercial Government Transportation Unallocated Adjusted 1.5% Y/Y Shared
Slide 13: Q2 2020 Cash Flow and Balance Sheet
Q2 2020 Cash Flow and Balance Sheet Balance Sheet ($ in millions) 12/31/2019 6/30/2020 Total Cash (2) $505 $437 • Q2 Adj. Free Cash Flow(1): $40M Total Debt(2) 1,514 1,649 • Q2 Capex(6) as % of revenue: 3.5% Term Loan A(3,4) due 2022 664 648 Term Loan B(3) due 2023 824 820 (7) • Net leverage ratio o
Slide 14: Q3 2020 Expectations
Q3 2020 Expectations Q3 2020E Q3 2020E REVENUE Adj. EBITDA MARGIN $960M - $1,010M 10% - 11.5% 14
Slide 15: Q&A
Q&A CONDUENT ss 15
Slide 16: Appendix
Appendix 16
Slide 17: Modeling Considerations
Modeling Considerations Metric FY2020 Commentary • FY2020 Cash income taxes: reduced to ~$30M in cash income taxes, including ~$6M benefit related to CARES Act Taxes • Payroll taxes: ~$55M of estimated payroll tax withholding will be deferred to 2021/2022 based on current employment levels Restructu
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, Operating Income, EBITDA
Non-GAAP Reconciliations: Adjusted Revenue, Adjusted Net Income (Loss), Adjusted Effective Tax, Adjusted Operating Income (Loss) and Adjusted EBITDA (in millions) Q2 2020 Q1 2020 FY 2019 Q4 2019 Q3 2019 Q2 2019 Q1 2019 ADJUSTED REVENUE Revenue $ 1,016 $ 1,051 $ 4,467 $ 1,099 $ 1,098 $ 1,112 $ 1,158
Slide 24: Continued
CONTINUED (in millions) Q2 2020 Q1 2020 FY 2019 Q4 2019 Q3 2019 Q2 2019 Q1 2019 ADJUSTED EFFECTIVE TAX Income (Loss) Before Income Taxes $ (64) $ (51) $ (2,106) $ (635) $ (14) $ (1,119) $ (338) Adjustment: Total Non-GAAP Adjustments 104 72 2,306 691 66 1,162 387 Adjusted PBT (Before Adjustment for D
Slide 25: Continued
CONTINUED (in millions) Q2 2020 Q1 2020 FY 2019 Q4 2019 Q3 2019 Q2 2019 Q1 2019 ADJUSTED EBITDA Income (Loss) From Continuing Operations $ (51) $ (49) $ (1,934) $ (581) $ (16) $ (1,029) $ (308) Income tax expense (benefit) (13) (2) (172) (54) 2 (90) (30) Depreciation and amortization 115 117 459 117
Slide 26: Non-GAAP Reconciliations: Adjusted Diluted EPS and 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 %) Q2 2020 Q1 2020 FY
Slide 27: Continued
CONTINUED (Margins are in %) Q2 2020 Q1 2020 FY 2019 Q4 2019 Q3 2019 Q2 2019 Q1 2019 ADJUSTED OPERATING MARGIN Income (Loss) Before Income Taxes Margin (6.3)% (4.9)% (47.1)% (57.8)% (1.3)% (100.6)% (29.2)% Adjustments: Total non-GAAP adjustments 10.2 6.9 51.6 62.9 6.1 104.5 33.5 Interest expense 1.5
Slide 28: Non-GAAP Reconciliation: Adj. Free Cash Flow
Non-GAAP Reconciliation: Adj. Free Cash Flow (in millions) Q2 2020 Q1 2020 FY 2019 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Operating Cash Flow $ 74 $ (192) $ 132 $ 348 $ 18 $ (185) $ (49) Cost of additions to land, buildings and equipment (19) (11) (148) (39) (33) (23) (53) Proceeds from sale of land, build
Slide 29: Conduent trademarks and copyright notice
© 2020 Conduent Inc. All rights reserved. Conduent and Conduent Agile Star are trademarks of Conduent Inc. in the United States and/or other countries.