Conduent Incorporated · NASDAQ:CNDT
Conduent — FY2016 Earnings Presentation
27 slides from Conduent's earnings presentation, Feb 22, 2017
Slide 1: Conduent Q4 & FY 2016 Earnings Results
February 22, 2017 Conduent Q4 & FY 2016 Earnings Results Exhibit 99.2
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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, assumption
Slide 3: Conduent Focus & Vision
Conduent Focus & Vision Strong client relationships and positioning in the market Invest in people, technology, and processes to remain a market leader Strategic transformation program well underway and on-track Reaffirming financial goals from December investor event
Slide 4: FY 2016 Overview
FY 2016 Overview Successful separation and listing on NYSE (NYSE: CNDT) Launched Conduent as stand-alone company Made progress in securing key management hires Continued progress on strategic transformation initiative 1 Please refer to Appendix for Non-GAAP reconciliations of adjusted revenue, adjus
Slide 5: Sources of Transformation Savings through FY 2018
Sources of Transformation Savings through FY 2018 Strategic Transformation Progress and outlook Near-term priorities continue to be optimizing, driving efficiency and taking out costs across IT, facilities and G&A Contract remediation remains a key opportunity Continue to balance reinvestment and ma
Slide 6: Future Performance Drivers
Future Performance Drivers Revenue Goals Margin Goals Large and growing market opportunity; target areas of focus Focus portfolio on businesses with most attractive return profiles Our strategic plan is expected to drive top- and bottom-line growth, with cash flow reinvested in high-return opportuni
Slide 7: Financials
conouent gS Financials
Slide 8: FY 2016 Performance
FY 2016 Performance FY 2016 Financial Metrics – GAAP ($ in millions, except per share amounts) FY 2015 FY 2016 B/(W) Yr/Yr Revenue $6,662 $6,408 (3.8%) Pretax loss ($574) ($1,227) NM Net loss ($336) ($983) NM EPS loss ($1.65) ($4.85) NM FY 2016 Financial Metrics – Non-GAAP1 ($ in millions, except pe
Slide 9: Q4 2016 Earnings
Q4 2016 Earnings 1Please refer to Appendix for Non-GAAP reconciliations of adjusted revenue, adjusted gross margin, adjusted operating income/margin, adjusted tax rate, adjusted net income and adjusted EPS Adjusted Operating margin 5.4%, up 60 bps from 2015 GAAP EPS ($4.85) Adj. EPS $1.06 (in millio
Slide 10: Segment Performance
Segment Performance Revenue in $M % Segment Margin Q4 2016 Commentary Profit performance not improving as quickly as expected Impacted by delayed ramp of new business and lower volumes Focus on cost transformation, contract remediation and bidding new business with appropriate profitability and risk
Slide 11: Segment Performance
Segment Performance Dollar values for graphs are in millions 1Please refer to appendix for Non-GAAP reconciliations of adjusted revenue and adjusted operating income/margin 2Other segment includes Health Enterprise clients in AK, CA, MT, ND, NH, NY, our Student Loan business, non-allocated corporate
Slide 12: Cash Flow
2016 Free Cash Flow impacted by: Restructuring payments ($46M) Separation payments ($44M) Montana and California HE exits ($155M) Reduction in factoring program ($130M) Lease buyouts associated with separation ($47M), primarily in LB&E Cash Flow (in millions) Q4 2016 FY 2016 Net loss ($951) ($983) D
Slide 13: Capital Structure Overview
12/31/16 12/31/16 Pro Forma5 Cash $390 $329 Total Debt1 $1,941 $2,041 10.5% Senior Notes due 2024 $510 $510 Term Loan A2 due 2021 $7006 $7006 Term Loan B2 due 2023 $750 $850 Revolving Credit Facility3 due 2021 $0 $0 Capital Leases $43 $43 Current net leverage ratio4 2.4x 2.7x Capital Structure Overv
Slide 14: Unchanged Financial Performance Goals
Unchanged Financial Performance Goals 2017 Renewal and Refocus 2018 Stabilization 2019 Acceleration Rate of decline similar to 2016 levels Flat / positive momentum Accelerating momentum Organic investment with modest tuck-in M&A Increasing organic and inorganic investments 20 - 30% of Adjusted EBITD
Slide 15: Q&A
Q&A
Slide 16: Appendix
conouent gS Appendix
Slide 17: FY 2016 Earnings
FY 2016 Earnings (in millions) FY 2016 B/(W) Yr/Yr Comments GAAP revenue $6,408 ($254) Lower volumes, contract run-off, Student Loan Adjusted revenue1 6,491 (287) Excludes NY, CA, MT HE charges Gross margin 14.2% 390 bps Reflects 2016 NY MMIS charge; 2015 CA and MT HE charges Adjusted gross margin1
Slide 18: 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 described below, consistent with Xerox’s historical presentation. We believe th
Slide 19: Non-GAAP adjustments: NY MMIS and HE charges
Also in 2016, we adjusted Income (Loss) before Income Taxes for the New York Health Enterprise (NY MMIS) charge of $161 million recorded during the fourth quarter 2016. In 2015, we adjusted Income (Loss) before Income Taxes for the Health Enterprise (HE) charge of $389 million recorded during the th
Slide 20: Adjusted EBITDA
Adjusted EBITDA We use Adjusted EBITDA to provide additional information that is useful to understand the financial covenants contained in the Company’s credit facility and indenture. We also use Adjusted EBITDA as an additional way of assessing certain aspects of our operations that, when viewed wi
Slide 21: Non-GAAP Reconciliation: Net Income
Non-GAAP Reconciliation: Net Income (in millions) Net Income (Loss) EPS Net Income (Loss) EPS Net Income (Loss) EPS Net Income (Loss) EPS Reported (loss) income from continuing operations (951) $ (4.69) $ 9 $ 0.04 $ (983) $ (4.85) $ (336) $ (1.65) $ Adjustments: Goodwill impairment 935 - 935 - NY MM
Slide 22: Non-GAAP Reconciliation: Effective Tax Rate
Non-GAAP Reconciliation: Effective Tax Rate (in millions) Pre-Tax Income (Loss) Income Tax (Expense) Benefit Effective Tax Rate Pre-Tax Income (Loss) Income Tax (Expense) Benefit Effective Tax Rate Reported from continuing operations (1,141) $ (190) $ 16.7% 8 $ (1) $ -12.5% Non-GAAP adjustments (1)
Slide 23: Non-GAAP Reconciliation: Operating Income
Non-GAAP Reconciliation: Operating Income (in millions) Pre-Tax Profit (Loss) Revenue Margin Pre-Tax Profit (Loss) Revenue Margin Reported from continuing operations (1,141) $ 1,514 $ -75.4% 8 $ 1,730 $ 0.5% Adjustments: Goodwill impairment 935 - NY MMIS 161 83 - Amortization of intangible assets 80
Slide 24: Non-GAAP Reconciliation: Revenue and Adjusted EBITDA
Non-GAAP Reconciliation: Revenue and Adjusted EBITDA Q4 Q1 Q2 Q3 Q4 FY FY (in millions) 2015 2016 2016 2016 2016 2015 2016 Reconciliation to Adjusted Revenue Total Revenue as reported 1,730 $ 1,685 $ 1,613 $ 1,596 $ 1,514 $ 6,662 $ 6,408 $ NY MMIS charge - - - - 83 - 83 HE charge - - - - - 116 - Adj
Slide 25: Non-GAAP Reconciliation: Other Segment Revenue and Profit
Non-GAAP Reconciliation: Other Segment Revenue and Profit Q4 Q1 Q2 Q3 Q4 FY FY (in millions) 2015 2016 2016 2016 2016 2015 2016 Reconciliation to Other Segment Adjusted Revenue Other Segment revenue as reported 94 $ 108 $ 97 $ 92 $ 4 $ 289 $ 301 $ NY MMIS charge - - - - 83 - 83 HE charge - - - - - 1
Slide 26: Non-GAAP Reconciliation: Free Cash Flow
Non-GAAP Reconciliation: Free Cash Flow Three Months Ended Year Ended December 31, 2016 December 31, 2016 (in millions) Cash flows from operations 146 $ 108 $ Cost of addition to LB&E (63) (149) Cost of addition to internal use software and other (9) (40) Free Cash Flow 74 $ (81) $
Slide 27: Conduent
CONDUENT s