Conduent Incorporated · NASDAQ:CNDT
Conduent — Q1 2017 Earnings Presentation
27 slides from Conduent's earnings presentation, May 10, 2017
Slide 1: Conduent Q1 2017 Earnings Results
May 10, 2017 Conduent Q1 2017 Earnings Results
Slide 2: Forward-Looking Statements
Forward-Looking Statements This report contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and
Slide 3: Q1 2017 Overview
Q1 2017 Overview • On target for continued adjusted EBITDA growth and margin improvement as guided on Q4 2016 call • Strategically repriced Term Loan B • Successfully stood up new company and most corporate functions in 90 days • Streamlining operations and go-to-market strategy • Focused on establi
Slide 4: Segments & Operational Highlights
Segments & Operational Highlights Commercial • Revenue decline as expected, segment margin up yr/yr • Diversified book of business across both verticals and service lines • Leadership hires • Focus on profitability and streamlining 4 % of total Q1' 17 revenue Public Sector • Revenue decline as expec
Slide 5: Bookings & Renewal Rate
Bookings & Renewal Rate Annual Recurring Revenue (ARR) Signings • Positive momentum, up 11% yr/yr led by wins in Hi- Tech, Industrial and Retail vertical Non-Recurring Revenue (NRR) Signings • Up 12% versus Q1 2016 Total Contract Value (TCV) Signings • Total TCV down 37% yr/yr • New Business: $530M
Slide 6: Facets of Change
Facets of Change 6 From To 1. Client Relationships Mile-wide, Inch deep Inch-wide, Mile Deep 2. Workplace and Culture Disparate Unified 3. Infrastructure Fragmented Integrated 4. Reputation and Brand Unknown Respected 5. Operations, Process, Information Diverse, Antiquated Modern, Cutting Edge
Slide 7: Financials
Financials 7
Slide 8: Q1 2017 Earnings
Q1 2017 Earnings 1Please refer to Appendix for Non-GAAP reconciliations of adjusted operating income/margin, adjusted EBITDA/margin, adjusted tax rate, adjusted net income and adjusted EPS 2Q1 2016 Interest expense include $10M in Related-party interest Adjusted Operating margin 5.4%, up 60 bps from
Slide 9: Commercial Segment
Commercial Segment ($ in millions) Q1' 16 Q1' 17 Yr/Yr Revenue $1,007 $923 (8%) Segment Profit 26 29 12% Segment Margin % 2.6% 3.1% 50 bps Segment Highlights • Revenue decline impacted by contract run-off and lower volumes across the Healthcare Payer, Comms & Media and Hi-Tech verticals • Qtr/Qtr ma
Slide 10: Public Sector Segment
Revenue By Business (% of segment total) Public Sector Segment ($ in millions) Q1' 16 Q1' 17 Yr/Yr Revenue $571 $549 (4%) Segment Profit 61 61 —% Segment Profit Margin % 10.7% 11.1% 40 bps Segment Highlights • Revenue decline driven by State & Local and Government Healthcare partially offset by grow
Slide 11: Other Segment
Other Segment ($ in millions) Q1' 16 Q1' 17 Yr/Yr Revenue $107 $81 (24%) Segment Loss1 (16) (1) NM Segment Margin % (15.0%) (1.2%) 1,380 bps Revenue in $M Segment Highlights • Improvement across both the Education business and Health Enterprise driven by NY MMIS • Expect quarterly variability given
Slide 12: Strategic Transformation
Strategic Transformation ($ in millions) Savings FY 2017 Cumulative Target ~$430 FY 2018 Cumulative Target ~$700 Progress and Outlook • Transformation program remains on track • 2017 priorities include driving operational efficiency, right-sizing our real-estate footprint and optimizing our G&A spen
Slide 13: Cash Flow
· Q1 2017 Commentary: • Working capital use of ($209M) in-line normal seasonality • Capex ~1.5% of revenue but still expecting ~2.5% for full-year • Cash from financing includes: • Net debt increase of $174M • Payment to Xerox of $161M Cash Flow (in millions) Q1 2016 Q1 2017 Net loss ($23 ) ($6 ) De
Slide 14: Capital Structure Overview
12/31/2016 3/31/2017 Cash $390 $255 Total Debt1 1,941 2,115 Term Loan A2, 5 due 2021 694 699 Term Loan B2 due 2023 750 848 10.5% Senior Notes due 2024 510 510 Revolving Credit Facility3 due 2021 0 70 Capital Leases 43 42 Current net leverage ratio4 2.4x 2.9x Capital Structure Overview Debt Structure
Slide 15: 2017 Guidance
2017 Guidance FY 2016 FY 2017E Revenue $6.408B Down 4.5-6.5% (CC1) Adjusted EBITDA $635M Up 5-6% Free Cash Flow ($81M) 20-30% of Adj. EBITDA 15 1 Constant currency based on foreign exchange rates as of the prior-year period
Slide 16: Q&A
Q&A 16
Slide 17: Appendix
Appendix 17
Slide 18: Bookings & Renewal Rate
Bookings & Renewal Rate 18 ($ in millions) Q1' 16 Q2' 16 Q3' 16 Q4' 16 Q1' 17 Total Contract Value $1,488 $2,158 $1,546 $1,660 $931 New Business 643 527 633 724 530 Renewals 845 1,631 913 936 401 Annual recurring revenue bookings $129 $112 $166 $182 $143 Non-recurring revenue bookings $83 $140 $104
Slide 19: 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 to better understand the tr
Slide 20: Adjusted EBITDA
Adjusted EBITDA We use Adjusted EBITDA 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. GAAP financial measures, provide a more complete understanding of our core business. We a
Slide 21: Non-GAAP Reconciliation: Net Income (Loss) & EPS
Non-GAAP Reconciliation: Net Income (Loss) & EPS Three Months Ended March 31, 2017 Three Months Ended March 31, 2016 (in millions, except EPS) Net Income (Loss) EPS Net Income (Loss) EPS Reported from Continuing operations $ (10 ) $ (0.06 ) $ (23 ) $ (0.12 ) Adjustments: Amortization of intangible a
Slide 22: Non-GAAP Reconciliation: Effective Tax Rate
Non-GAAP Reconciliation: Effective Tax Rate Three Months Ended March 31, 2017 Three Months Ended March 31, 2016 (in millions) Pre-Tax Income (Loss) Income Tax Expense (Benefit)(2) Effective Tax Rate Pre-Tax Income (Loss) Income Tax Expense (Benefit)(2) Effective Tax Rate Reported from Continuing ope
Slide 23: Adjusted Operating Income and Margin Reconciliation
(in millions) Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016 Reported Revenue $ 1,553 $ 1,514 $ 1,596 $ 1,613 $ 1,685 Reported Pre-tax Loss(1) (22 ) (1,141 ) 2 (34 ) (54 ) Reported Margin (1.4 )% (75.4 )% 0.1 % (2.1 )% (3.2 )% Reported Revenue $ 1,553 $ 1,514 $ 1,596 $ 1,613 $ 1,685 NY MMIS adjustment — 83
Slide 24: Non-GAAP Reconciliation: Adjusted EBITDA
Non-GAAP Reconciliation: Adjusted EBITDA Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016 (in millions) Pre-tax loss as reported from continuing operations $ (22 ) $ (1,141 ) $ 2 $ (34 ) $ (54 ) Depreciation 31 36 31 29 32 Amortization 94 159 104 104 118 Goodwill impairment — 935 — — Restructuring and relate
Slide 25: Non-GAAP Reconciliation: Other Segment Revenue, Profit (Loss) and Margin
Non-GAAP Reconciliation: Other Segment Revenue, Profit (Loss) and Margin 25 Three Months Ended Three Months Ended March 31, 2017 December 31, 2016 (in millions) Revenue Loss Margin Revenue Loss Margin Reported from continuing operations $ 81 $ (4 ) (4.9 )% $ 4 $ (173 ) n/a Adjustments: NY MMIS — 8 8
Slide 26: Non-GAAP Reconciliation: Free Cash Flow
Non-GAAP Reconciliation: Free Cash Flow 26 (in millions) Three Months Ended March 31, 2017 Three Months Ended March 31, 2016 Operating Cash Flow $ (106 ) $ (117 ) Cost of additions to land, buildings & equipment (17 ) (30 ) Cost of additions to internal use software (8 ) (9 ) Vendor financed capital
Slide 27: All rights reserved. Conduent and Conduent Agile Star are trademarks of Conduent Business Services,
© 2017 Conduent Business Services, LLC. All rights reserved. Conduent and Conduent Agile Star are trademarks of Conduent Business Services, LLC in the United States and/or other countries.