Slide 1: Conduent Q4 2018 Earnings Results
February 20, 2019 Conduent Q4 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: Key Q4 & FY 2018 Highlights
Key Q4 & FY 2018 Highlights Q4 2018 $1.28B $156M $259M FY 2018 $5.39B $640M $218M Revenue Adj. EBITDA(1) Adj. FCF(1) • Revenue and Adjusted EBITDA in-line with guidance; Adjusted Free Cash Flow above guidance • Divestiture plan fully executed with the close of select stand alone call center contract
Slide 4: Successful Execution of Plan
Successful Execution of Plan Strategic Initiatives Undertaken Execution of Plan from FY 2016 $1 Billion $476M Divestitures Debt Pay Down (10.5% Senior Concluded Notes) Adj. EBITDA Margin 9.8% to 11.9% 51% Expansion 42% Accu-shored Real Estate sq. ft Low Cost Three-year Reduced Countries Cumulative ~
Slide 5: Q4 / FY 2018 Signings, Pipeline, Renewal Rate
Q4 / FY 2018 Signings, Pipeline, Renewal Rate Q4 2018 Q4 2018 $1,527M $5,445M 93% 95% Total Contract Value (TCV)(1) Signings Renewal Rate • Q4 total signings up 7.4% yr/yr • Reflects continued strength in client relationships • Q4 Renewals of $906M with significant contribution from • Strong executi
Slide 6: Progress on Our Digital Experience Focus
Progress on Our Digital Experience Focus Digital Interactions Evolving BPO Value Chain • Conduent sits at the intersection of Intelligent Platforms and Digital Experience 3 billions of mission-critical interactions everyday Data aggregation and analytics Cross-platform integration • Clients want to
Slide 7: Financials
CONDUENT Pe Financials
Slide 8: Q4 2018 Earnings
Q4 2018 Earnings (in millions) Q4 2018 Q4 2017 B/(W) Q4 2017 B/(W) Comments Q4 2018 vs Q4 2017 Yr/Yr adjusted for Yr/Yr adjusted 606, for 606, Divestitures (1) Divestitures Flat excluding FX, ASC 606, 2017 & 2018 Revenue $1,282 $1,493 ($211) $1,331 ($49) divestitures and strategic decisions Gross Ma
Slide 9: FY 2018 Earnings
FY 2018 Earnings (in millions) FY 2018 FY 2017 B/(W) FY 2017 B/(W) Comments FY 2018 vs FY 2017 Yr/Yr adjusted for 606, Yr/Yr adjusted for Divestitures (1) 606, Divestitures Flat excluding FX, ASC 606, 2017 & 2018 Revenue $5,393 $6,022 ($629) $5,607 ($214) divestitures and strategic decisions Gross M
Slide 10: Q4 and FY 2018 Segment Summary
Q4 and FY 2018 Segment Summary (in millions) Q4 Full Year Revenue(1) Adj EBITDA(1) Revenue(1) Adj EBITDA(1) 2017 2018 2017 2018 2017 2018 2017 2018 Commercial $ 659 $ 649 $ 176 $ 165 $ 2,593 $ 2,547 $ 656 $ 597 Government $ 345 $ 337 $ 103 $ 116 $ 1,407 $ 1,351 $ 437 $ 451 Transportation $ 188 $ 189
Slide 11: Cash Flow
Cash Flow (in millions) Q4 2018 FY 2018 FY 2018 Key Messages: Net income (loss) ($140) ($416) • Operating cash flow improvement Depreciation & amortization 115 460 primarily driven by working capital Stock-based compensation 8 38 Deferred tax benefit 15 (75) (Gain) loss on extinguishment of debt — 1
Slide 12: Capital Structure Overview
Capital Structure Overview Debt Structure ($ in millions) Credit Metrics FY 2019E interest expense ~$90M 12/31/2017 9/30/2018 12/31/2018 (in millions) Preferred dividend (annual) ~$10M Total Cash(1) $667 $595 $765 Target net leverage ratio ~2.0x Deferred Comp Cash (99) (77) — Average remaining matur
Slide 13: FY 2019 Guidance
FY 2019 Guidance Includes No Additional M&A FY 2018 Divestiture Adjusted FY (in millions) Reported Impact (3) 2018(4) FY 2019 Guidance Revenue (constant currency)(1) $5.39B $752M $4.64B Up 0.5 - 1.5% $590 - $610M Adj. EBITDA(2) $640M $105M $535M Up 10 - 14% Adj. EBITDA Margin(2) 11.9% 11.5% 12.5 - 1
Slide 14: Q&A
Q&A 14
Slide 15: Appendix
Appendix 15
Slide 16: Signings & Renewal Rate
Signings & Renewal Rate(1) Excluding Divestiture Impact ($ in millions) Q1' 17 Q2' 17 Q3' 17 Q4' 17 Q1' 18 Q2' 18 Q3' 18 Q4' 18 Total Contract Value $836 $1,142 $928 $1,422 $1,293 $1,887 $738 $1,527 New Business $496 $602 $349 $584 $367 $346 $264 $621 Renewals $340 $540 $579 $838 $926 $1,541 $474 $9
Slide 17: Definitions
Definitions TCV = Total contract value Annual Recurring Revenue Signings = Includes new business TCV. New Business TCV = Annual recurring revenue signings multiplied by the contract term plus non-recurring revenue signings. Pipeline = TCV pipeline of deals in all sell stages over a rolling 12 months
Slide 18: 2019 Modeling Considerations
2019 Modeling Considerations Outlook Commentary FY 2019E Revenue Outlook (vs. FY 2018 "Baseline") Up 0.5% - 1.5% (including HSP impact), weighted towards 2H 2019 FY 2019E Adjusted EBITDA Seasonality Expect typical seasonality, excluding stranded cost impacts Restructuring costs Expected to be $40 -
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 investors
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 Segment and 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 correspond
Slide 22: Non-GAAP Reconciliation: Adj. Net Income (Loss) & Adj. EPS
Non-GAAP Reconciliation: Adj. Net Income (Loss) & Adj. EPS Three Months Ended December 31, Years Ended December 31, 2018 2017 2018 2017 Net Income Net Income Net Income Net Income (in millions, except EPS. Shares in thousands) (Loss) Diluted EPS (Loss) Diluted EPS (Loss) Diluted EPS (Loss) Diluted E
Slide 23: Adjusted for 606 and Divestitures Net Income and EPS
Three Months Ended December 31, Years Ended December 31, Adjusted for 606 and Divestitures(3) Adjusted for 606 and Divestitures(3) 2018 2017 2018 2017 Net Income Net Income Net Income Net Income (in millions, except EPS. Shares in thousands) (Loss) Diluted EPS (Loss) Diluted EPS (Loss) Diluted EPS (
Slide 24: Non-GAAP Reconciliation: Adj. Effective Tax Rate
Non-GAAP Reconciliation: Adj. Effective Tax Rate Three Months Ended December 31, 2018 Three Months Ended December 31, 2017 Pre-Tax Income Income Tax Effective Tax Pre-Tax Income Income Tax Effective Tax (in millions) (Loss) (Benefit) Expense Rate (Loss) (Benefit) Expense Rate GAAP as Reported From C
Slide 25: Non-GAAP Reconciliation: Adjusted Operating Income / Margin
Non-GAAP Reconciliation: Adjusted Operating Income / Margin (As Reported) Previously Previously Reported Reported (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 GAAP Revenue From Continuing Operations $ 1,493 $ 1,420 $ 1,387 $ 1,304 $ 1,282 $ 6,022 $ 5,393 GAAP Pre-tax Income
Slide 26: Non-GAAP Reconciliation: Adjusted Revenue and Operating Income / Margin
Non-GAAP Reconciliation: Adjusted Revenue and Operating Income / Margin(1) (Adjusted results: Adjusts 2017 for comparable results to 2018 reported) Adjusted for 606 and Divestitures(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 GAAP Revenue From Continuing Operations $ 1,4
Slide 27: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation: Adjusted EBITDA Previously Previously Reported Reported (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Reconciliation to Adjusted Revenue GAAP Revenue From Continuing Operations $ 1,493 $ 1,420 $ 1,387 $ 1,304 $ 1,282 $ 6,022 $ 5,393 Adjusted Revenue $
Slide 28: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation: Adjusted EBITDA(1) (Adjusted results: Adjusts 2017 for comparable results to 2018 reported) Adjusted for 606 and Divestitures(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Reconciliation to Adjusted Revenue GAAP Revenue From Continuing Operations $
Slide 29: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Commercial Industries Segment GAAP revenue $ 682 $ 653 $ 626 $ 619 $ 649 $ 2,685 $ 2,547 Segment profit $ 154 $ 110 $ 120 $ 127 $ 143 $ 563 $ 500 Segment depreciation and amortiz
Slide 30: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Other Segment GAAP revenue $ 261 $ 256 $ 240 $ 163 $ 107 $ 1,137 $ 766 GAAP Segment profit (loss) $ 30 $ 36 $ 37 $ 10 $ (3) $ 144 $ 80 Segment depreciation and amortization 3 3 3
Slide 31: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Adjusted for 606 and Divestitures(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Commercial Industries Segment GAAP revenue $ 682 $ 653 $ 626 $ 619 $ 649 $ 2,685 $ 2,547 ASC 606 adjustment (23) — — — — (92) — Segment Reven
Slide 32: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Adjusted for 606 and Divestitures(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Transportation Segment GAAP revenue $ 198 $ 176 $ 180 $ 184 $ 189 $ 767 $ 729 ASC 606 adjustment (10) — — — — (42) — Segment Revenue Adjusted
Slide 33: Non-GAAP Reconciliation: Segment Adjusted EBITDA Continued
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Continued (Adjusts all periods for full divestiture impact) Adjusted for 606 and Divestitures(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Other Segment Segment GAAP revenue $ 261 $ 256 $ 240 $ 163 $ 107 $ 1,137 $ 766 AS
Slide 34: Non-GAAP Reconciliation: Segment Adjusted EBITDA Continued
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Continued (Adjusts all periods for full divestiture impact) Adjusted for 606 and Divestitures(1) (in millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2017 FY 2018 Shared IT / Infrastructure & Corporate Costs (Corporate) Corporate GAAP revenue $
Slide 35: Non-GAAP Reconciliation: Adj. Free Cash Flow
Non-GAAP Reconciliation: Adj. Free Cash Flow Three Months Ended December 31, Years Ended December 31, (in millions) 2018 2017 2018 2017 Operating Cash Flow $ 253 $ 236 $ 283 $ 300 Cost of additions to land, buildings and equipment (60) (39) (179) (96) Proceeds from sales of land, buildings and equip
Slide 36: Non-GAAP Reconciliation: Adjusted Cash
Non-GAAP Reconciliation: Adjusted Cash As of September 30, As of December 31, As of December 31, (in millions) 2018 2018 2017 Cash and cash equivalents $ 586 $ 756 $ 658 Deferred compensation payments and adjustments 22 99 17 Deferred compensation payable (99) (99) (116) Adjusted cash and cash equiv
Slide 37: © 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.