Conduent Incorporated · NASDAQ:CNDT
Conduent — Q2 2019 Earnings Presentation
26 slides from Conduent's earnings presentation, Aug 8, 2019
Slide 1: Conduent Q2 2019 Earnings Results
August 8, 2019 Conduent Q2 2019 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: Introduction to Cliff Skelton
Introduction to Cliff Skelton Background and Experience • Joined June 2019 as President and COO • Named interim CEO and Board member August 6th 2019 • Seasoned technology and operations executive in both Government and Corporate America • CIO, COO, and P&L experience for technology, business service
Slide 4: Opportunity for Improvement
Opportunity for Improvement Revise Pillars of Approach Mechanisms Stronger Foundation • Improved performance People • Improved stability • Reduced outages Processes • Reduced downtime Technology • Enhanced security • Focus on high quality talent, • Improving foundation will • Company focused on and
Slide 5: Q2 2019 Earnings
Q2 2019 Earnings As Reported Adjusted (1) (in millions) Q2 2019 Q2 2018 Q2 2019 Q2 2018 B/(W) Comments Adj Q2 2019 vs Adj Q2 2018 Yr/Yr New business more than offset by lost business Revenue $1,112 $1,387 $1,112 $1,149 ($37) and pricing impact Adjusted operating income(1) $63 $109 $63 $68 ($5) Adjus
Slide 6: Q2 2019 Segment Summary
Q2 2019 Segment Summary (in millions) Revenue(1) Adj EBITDA(1) B/(W) Q2 19 Q2 18 Yr/Yr Q2 19 Q2 18 Yr/Yr Commercial $ 592 $ 626 (5.4)% $ 129 $ 145 (11.0)% Government $ 326 $ 341 (4.4)% $ 109 $ 108 0.9 % Transportation $ 194 $ 180 7.8 % $ 43 $ 35 22.9 % Other $ — $ 2 —% $ — $ (3) —% Shared IT / Infra
Slide 7: Signings & Renewal Rate
Signings & Renewal Rate(1) Excluding Divestiture Impact ($ in millions) Q1' 18 Q2' 18 Q3' 18 Q4' 18 Q1' 19 Q2' 19 Total Contract Value $1,293 $1,887 $738 $1,527 $952 $813 New Business $367 $346 $264 $621 $225 $328 Renewals $926 $1,541 $474 $906 $727 $485 Annual Recurring Revenue Signings $81 $79 $65
Slide 8: Cash Flow
Cash Flow (in millions) Q2 2019 Key Messages: Q2 2019 Q2 2018 Net income (loss) ($1,029) $11 • Cash outflow primarily driven by Texas Depreciation and amortization 112 116 settlement payment and other working capital movements Stock-based compensation 7 12 Deferred income taxes (95) (39) Goodwill im
Slide 9: Capital Structure Overview
Capital Structure Overview Debt Structure Credit Metrics ($ in millions) 12/31/2018 6/30/2019 FY 2019E interest expense ~$90M Total Cash(1) $765 $285 Preferred dividend (annual) ~$10M Total Debt(2) 1,567 1,540 Target net leverage ratio ~2.0x Term Loan A(3), (5) due 2022 705 686 Average remaining mat
Slide 10: FY 2019 Guidance
FY 2019 Guidance Completed Updated FY 2018 Divestiture Adjusted FY (in millions) Reported Impact (3) 2018(4) FY 2019 Guidance Revenue $5.39B $752M $4.64B Down (5) - (4)% (constant currency)(1, 2) Adj. EBITDA Margin(2) 11.9% 11.5% 10.8% - 11.6% Adj. Free Cash Flow(2) $218M 20% - 25% % of Adj. EBITDA
Slide 11: Q&A
Q&A 11
Slide 12: Appendix
Appendix 12
Slide 13: 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 14: 2019 Modeling Considerations
2019 Modeling Considerations Outlook Commentary FY 2019E Revenue (1) Outlook (vs. FY 2018 "Baseline") Down (5) - (4)% in constant currency including HSP impact FY 2019E Adjusted EBITDA (1) Seasonality Expect typical seasonality, excluding stranded cost impacts Restructuring costs Expected to be ~$60
Slide 15: 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 16: 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 17: 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 18: 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 19: Non-GAAP Reconciliations: Adjusted Revenue, Net Income, Tax, Operating Income and EBITDA
Non-GAAP Reconciliations: Adjusted Revenue, Adjusted Net Income (Loss), Adjusted Effective Tax, Adjusted Operating Income (Loss) and Adjusted EBITDA (in millions) Q2 2019 Q1 2019 FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 ADJUSTED REVENUE Revenue $ 1,112 $ 1,158 $ 5,393 $ 1,282 $ 1,304 $ 1,387 $ 1,420
Slide 20: CONTINUED
CONTINUED (in millions) Q2 2019 Q1 2019 FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 ADJUSTED EFFECTIVE TAX Income (Loss) Before Income Taxes $ (1,119) $ (338) $ (395) $ (143) $ (252) $ 54 $ (54) Adjustment: Total Non-GAAP Adjustments(3) 1,162 387 702 224 334 18 126 Adjusted PBT (Before Adjustment for Di
Slide 21: CONTINUED
CONTINUED (in millions) Q2 2019 Q1 2019 FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 ADJUSTED EBITDA Income (Loss) From Continuing Operations $ (1,029) $ (308) $ (416) $ (140) $ (237) $ 11 $ (50) Income tax expense (benefit) (90) (30) 21 (3) (15) 43 (4) Depreciation and amortization 112 115 460 115 113 1
Slide 22: Non-GAAP Reconciliations: Adjusted Shares, Diluted EPS and Margins
Non-GAAP Reconciliations: Adjusted Weighted Average Shares Outstanding, 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 2019 Q1 2019 FY 2018 Q4
Slide 23: CONTINUED
CONTINUED (Margins are in %) Q2 2019 Q1 2019 FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 ADJUSTED OPERATING MARGIN Income (Loss) Before Income Taxes Margin (100.6)% (29.2)% (7.3)% (11.2)% (19.3)% 3.9 % (3.8)% Adjustments: Total non-GAAP adjustments(2) 104.5 % 33.5 % 13.0 % 17.5 % 25.6 % 1.3 % 8.9 % Inte
Slide 24: Non-GAAP Reconciliation: Adj. Free Cash Flow
Non-GAAP Reconciliation: Adj. Free Cash Flow Three Months Ended Six Months Ended June 30, June 30, (in millions) 2019 2018 2019 2018 Operating Cash Flow $ (185) $ 98 $ (234) $ 60 Cost of additions to land, buildings and equipment (23) (43) (76) (76) Proceeds from sales of land, buildings and equipme
Slide 25: Non-GAAP Reconciliation: Adjusted Cash
Non-GAAP Reconciliation: Adjusted Cash (in millions) As of June 30, 2019 As of December 31, 2018 Cash and cash equivalents $ 276 $ 756 Deferred compensation payments and adjustments — 99 Deferred compensation payable — (99) Adjusted cash and cash equivalents $ 276 $ 756 Restricted cash at end of per
Slide 26: © 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.