Slide 1: Conduent Q2 2018 Earnings Results
August 8, 2018 Conduent Q2 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: Q2 2018 Overview
Q2 2018 Overview Key Quarterly Highlights • Q2 2018 revenue down (3.3)% (adjusting for ASC 606 and 2017 divestitures); flat excluding strategic decisions • Adjusted diluted EPS(1) of $0.29; up 81.3% yr/yr • Adjusted EBITDA of $166M, up 8.5% yr/yr; Adjusted EBITDA margin of 12.0%, up 130 bps yr/yr •
Slide 4: Strategic Transformation
Strategic Transformation Progress and Outlook Real Estate Footprint • Remain on-target for cumulative 2018 transformation 12,400 462 11,036 goal of ~$700M 379 319 9,164 • Reduced real estate locations (15.8)% yr/yr and reduced total square feet (17.0)% yr/yr Real Estate Locations Total Square Feet (
Slide 5: Segment Summary - Q2 2018
Segment Summary - Q2 2018 Commercial Public Sector (adjusting for impact of ASC 606)(1) (adjusting for impact of ASC 606)(1) • Revenue excluding strategic decisions, up 1% yr/yr • Revenue excluding strategic decisions, flat yr/yr ◦ Revenue down (3.1)% ◦ Revenue down (1.2)% • Adj. EBITDA margin impro
Slide 6: Q2 2018 Signings, Pipeline and Renewal Rate
Q2 2018 Signings, Pipeline and Renewal Rate $1,947M 99% Total Contract Value (TCV) Signings Renewal Rate • TCV up 57% yr/yr, driven by increased renewal wins • Renewals: $1,575M, grew 168% yr/yr driven primarily • Largest renewal quarter in Conduent history by commercial clients • Book-to-bill great
Slide 7: Financials
Financials CONDUENT ss
Slide 8: Q2 2018 Earnings
Q2 2018 Earnings (in millions) Q2 2018 Q2 2017 B/(W) Q2 2017 B/(W) Comments Q2 2018 vs Q2 2017 Yr/Yr adjusted for Yr/Yr adjusted for 606, 606, Divestitures Divestitures (1) ASC 606, 2017 divestitures and strategic Revenue $1,387 $1,496 ($109) $1,434 ($47) decisions Gross Margin 18.9% 16.2% +270 bps
Slide 9: Commercial Segment
Commercial Segment Quarterly Revenue and Profit (adjusting for ASC 606)(1) Q2 2018 Segment Highlights(1) • Revenue declined (3.1)% yr/yr, impacted by $869 $834 $823 $856 $854 strategic decisions $808 ◦ Excluding strategic decisions, revenue up 1% yr/yr ◦ Improved yr/yr revenue driven by contract 8.3
Slide 10: Public Sector Segment
Public Sector Segment Quarterly Revenue and Profit (adjusting for ASC 606)(1) Q2 2018 Segment Highlights(1) • Revenue down (1.2)% yr/yr, impacted by prior year strategic actions $591 $581 $583 $585 $558 $574 ◦ Excluding strategic actions, flat yr/yr • Transportation up 4.0% yr/yr and up 3.0% sequent
Slide 11: Other Segment
Other Segment Quarterly Revenue and Profit (adjusting for ASC 606 and 2017 divestitures)(1) Q2 2018 Segment Highlights(1) $24 $19 $21 $11 $8 $5 • Revenue declined (73.7)% yr/yr and Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 (37.5)% sequentially as education business run-off accelerated Segment Profit
Slide 12: Cash Flow
Cash Flow (in millions) Q2 2018 YTD 2018 Key Messages: • Improvement in operating cash flow Net income (loss) $11 ($39) Depreciation & amortization 117 234 driven by working capital Stock-based compensation 12 19 Deferred tax benefit (39) (47) Restructuring payments (20) (32) • YTD Adjusted free cas
Slide 13: Capital Structure Overview
Capital Structure Overview Debt Structure ($ in millions) Credit Metrics (in millions) 3/31/2018 6/30/2018 Adjusted(6) FY 2018E interest expense ~$115M Total Cash(1) $563 $1,003 $1,003 Preferred dividend (annual) ~$10M Debt Redemption — — (570) Target net leverage ratio ~2.0x Deferred Comp Cash (92)
Slide 14: Divestiture Update
Divestiture Update Signed(1) Divestitures • Actuarial and HR Consulting: ~$278M FY 2017 Revenue • Select Local Government Services: ~$113M FY Revenue Closed Divestitures • Commercial Vehicle Operations: closed June 28, 2018; ~$70M FY 2017 Revenue • Off-Street Parking: closed July 10, 2018; ~$43M FY
Slide 15: FY 2018 Guidance
FY 2018 Guidance FY 2018E Revenue $5.41 — $5.61B (constant currency)(1) Adj. EBITDA(2) $662 — $688M Guidance remains unchanged since Adj. EBITDA Margin(2) 11.8 — 12.7% Analyst Day Adj. Free Cash Flow(2) $166 — $241M % of Adj. EBITDA 25 — 35% (1) Year-over-year revenue comparison at constant currency
Slide 16: CEO Closing Remarks
CEO Closing Remarks 16
Slide 17: Digital Interactions: Client Success Stories
Digital Interactions: Client Success Stories 17
Slide 18: Q&A
Q&A 18
Slide 19: Appendix
Appendix 19
Slide 20: Signings & Renewal Rate
Signings & Renewal Rate(1) ($ in millions) Q1' 17 Q2' 17 Q3' 17 Q4' 17 Q1' 18 Q2' 18 Total Contract Value $931 $1,244 $1,047 $1,730 $1,428 $1,947 New Business $530 $657 $390 $683 $406 $372 Renewals $401 $587 $657 $1,047 $1,022 $1,575 Annual Recurring Revenue Signings $143 $130 $92 $168 $93 $86 Non-R
Slide 21: 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 Expected to be ~$115M for the full year, given TLB repricing, bond tender and interest rate Interest
Slide 22: 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. Renewal Rate = Annual recurring revenue (ARR) on contracts that are renewed
Slide 23: 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 24: 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: • R
Slide 25: 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 26: Non-GAAP Reconciliation: Adj. Net Income (Loss) & Adj. EPS
Non-GAAP Reconciliation: Adj. Net Income (Loss) & Adj. EPS Three Months Ended June 30, 2018 2017 (in millions, except EPS. Shares in thousands) Net Income (Loss) Diluted EPS Net Income (Loss) Diluted EPS GAAP as Reported From Continuing Operations $ 11 $ 0.04 $ (4) $ (0.03) Adjustments: Restructurin
Slide 27: Non-GAAP Reconciliation: Adj. Effective Tax Rate
Non-GAAP Reconciliation: Adj. Effective Tax Rate Three Months Ended June 30, 2018 Three Months Ended June 30, 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 Continuin
Slide 28: Non-GAAP Reconciliation: Adjusted Operating Income / Margin
Non-GAAP Reconciliation: Adjusted Operating Income / Margin Previously Reported (in millions) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 GAAP Revenue From Continuing Operations $ 1,387 $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 GAAP Pre-tax Income (Loss) From Continuing Operations
Slide 29: 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) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 GAAP Revenue From Continuing Operations $ 1,387 $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 ASC 606 adjustment — —
Slide 30: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation: Adjusted EBITDA Previously Reported (in millions) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Reconciliation to Adjusted Revenue GAAP Revenue From Continuing Operations $ 1,387 $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 Adjusted Revenue $ 1,387 $ 1,420 $ 6,0
Slide 31: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation: Adjusted EBITDA(1) Adjusted for 606 and Divestitures(1) (in millions) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Reconciliation to Adjusted Revenue GAAP Revenue From Continuing Operations $ 1,387 $ 1,420 $ 6,022 $ 1,493 $ 1,480 $ 1,496 $ 1,553 ASC 606 adjustment
Slide 32: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Previously Reported (in millions) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Commercial Industries Segment GAAP revenue $ 808 $ 854 $ 3,475 $ 879 $ 845 $ 856 $ 895 Segment profit $ 47 $ 44 $ 181 $ 73 $ 49 $ 33 $ 26 Segment depreciation
Slide 33: Non-GAAP Reconciliation: Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Adjusted for 606 and Divestitures(1) (in millions) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Commercial Industries Segment GAAP revenue $ 808 $ 854 $ 3,475 $ 879 $ 845 $ 856 $ 895 ASC 606 adjustment — — (93) (23) (22) (22) (26) Segmen
Slide 34: Non-GAAP Reconciliation: Segment Adjusted EBITDA Continued
Non-GAAP Reconciliation: Segment Adjusted EBITDA(1) Continued Adjusted for 606 and Divestitures(1) (in millions) Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Other Segment Segment GAAP revenue $ 5 $ 8 $ 139 $ 12 $ 36 $ 42 $ 49 ASC 606 adjustment — — (5) (1) (1) (1) (2) Less revenue from d
Slide 35: Non-GAAP Reconciliation: Adj. Free Cash Flow
Non-GAAP Reconciliation: Adj. Free Cash Flow Three Months Ended June 30, Six Months Ended June 30, (in millions) 2018 2017 2018 2017 Operating Cash Flow $ 98 $ 67 $ 60 $ (40) Cost of additions to land, buildings and equipment (43) (20) (76) (37) Proceeds from sales of land, buildings and equipment 1
Slide 36: Non-GAAP Reconciliation: Adjusted Cash
Non-GAAP Reconciliation: Adjusted Cash (in millions) As of June 30, 2018 As of December 31, 2017 Cash and cash equivalents $ 993 $ 658 Deferred compensation payments and adjustments 9 17 Deferred compensation payable (99) (116) Adjusted cash and cash equivalents $ 903 $ 559 36
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.
Slide 38: CONDUENT ss
CONDUENT ss