Slide 1: Conduent Investor Presentation
Conduent NYSE: CNDT Investor Presentation
Slide 2: Cautionary Statements
Cautionary 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,
Slide 3: Conduent Overview
Conduent Overview Leader in business process services delivering seamless, mission-critical interactions for businesses, governments and their constituents globally ~$6.4B ~$635M1 Revenue driven by long-term Adjusted EBITDA annuity contracts 86% ~96K Annual contract renewal rate Teammates globally ~
Slide 4: Large and Growing Addressable Market
Large and Growing Addressable Market Strong Client Base Market Size ($B, 2016) • 76 of Fortune 100 companies Financial Services $62.7 • 27 countries rely on our Manufacturing $34.0 transportation solutions Market size: $167B • All top 20 managed U.S. Comm & Media $33.0 growing at healthcare plans ~6
Slide 5: Segments and Service Offerings
Segments and Service Offerings Commercial Industries Public Sector Healthcare Other 41% of Total 2016 Revenue 27% of Total 2016 Revenue 26% of Total 2016 Revenue 6% of Total 2016 Revenue 2.2% Segment Margin 12.9% Segment Margin 9.4% Segment Margin Negative Margin Businesses 5% ~10% ~30% ~35% ~10% ~4
Slide 6: FY 2016 Performance
FY 2016 Performance Adjusted Revenue1 $6,778 $6,491 FY 2016 Financial Metrics – GAAP ($ in millions, except per B/(W) FY 2015 FY 2016 share amounts) Yr/Yr $1,730 $1,685 $1,613 $1,596 $1,597 Revenue $6,662 $6,408 (3.8%) Pretax loss ($574) ($1,227) NM 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 FY 2015 FY 2016 Net
Slide 7: Strategic Transformation
Strategic Transformation Progress and outlook (in millions) Savings • Near-term priorities continue to be optimizing, FY 2017 Cumulative Target ~$430 driving efficiency and taking out costs across IT, FY 2018 Cumulative Target ~$700 facilities and G&A • Contract remediation remains a key opportunity
Slide 8: Unchanged Financial Performance Goals
Unchanged Financial Performance Goals 2017 2018 2019 Renewal and Refocus Stabilization Acceleration Revenue Rate of decline similar to Flat / positive momentum Accelerating momentum Growth 2016 levels Adjusted Growth >5% Growth >10% Continued expansion EBITDA Growth Organic investment with Increasin
Slide 9: Financials
Financials CONDUENT ss
Slide 10: Q4 2016 Earnings
Q4 2016 Earnings B/(W) (in millions) Q4 2016 Yr/Yr Comments GAAP revenue $1,514 ($216) NY MMIS, volumes, contract run-off, Student Loan Adjusted revenue1 1,597 (133) Gross margin 8.1% (850 bps) Reflects the NY MMIS charge Adjusted gross margin1 17.8% 120 bps SAG $169 $8 Adjusted operating income1 $1
Slide 11: FY 2016 Earnings
FY 2016 Earnings B/(W) (in millions) FY 2016 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 12: Segment Performance
Segment Performance Commercial Industries Q4 2016 Commentary • Profit performance not improving as quickly as expected $2,896 $2,690 • Impacted by delayed ramp of new business and lower volumes $664 • Focus on cost transformation, contract remediation and bidding $699 $667 $660 2.4% 2.2% new busines
Slide 13: Segment Performance
Segment Performance Public Sector Q4 2016 Commentary • Revenue trend stable in 2016, but Q4 declined as the ramp- $1,727 $1,731 up of new business was more than offset by contract run-off 14.1% 13.3% 13.6% 12.4% • Margin improvement driven by benefit from strategic 10.4% transformation and other pro
Slide 14: Cash Flow
Cash Flow (in millions) Q4 2016 FY 2016 Net loss ($951) ($983) Depreciation & amortization 196 613 Goodwill impairment 935 935 • 2016 Free Cash Flow impacted by: Stock-based compensation 6 24 Restructuring payments (9) (46) o Restructuring payments ($46M) Restructuring and asset impairment charges 2
Slide 15: Capital Structure Overview
Capital Structure Overview Debt Structure ($ in millions) Credit Metrics / Statistics 12/31/16 12/31/16 Expected Annual Cash Interest Expense $155 - 165M Pro Forma5 Cash Preferred dividend (annually) ~$10M $390 $329 Target Net Leverage Ratio <2.5x Total Debt1 $1,941 $2,041 Average Maturity on Outsta
Slide 16: Appendix
Appendix 16
Slide 17: 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 described below, consistent with Xerox’s historical
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 mi
Slide 19: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 ope
Slide 20: Non-GAAP Reconciliation: Net Income
Non-GAAP Reconciliation: Net Income Three Months Ended Year Ended December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Net Income Net Income Net Income Net Income (in millions) (Loss) EPS (Loss) EPS (Loss) EPS (Loss) EPS Reported (loss) income from continuing operations $ (951) $
Slide 21: Non-GAAP Reconciliation: Effective Tax Rate
Non-GAAP Reconciliation: Effective Tax Rate Three Months Ended Three Months Ended December 31, 2016 December 31, 2015 Pre-Tax Income Tax Pre-Tax Income Tax Income (Expense) Effective Income (Expense) Effective (in millions) (Loss) Benefit Tax Rate (Loss) Benefit Tax Rate Reported from continuing ope
Slide 22: Non-GAAP Reconciliation: Operating Income
Non-GAAP Reconciliation: Operating Income Three Months Ended Three Months Ended December 31, 2016 December 31, 2015 Pre-Tax Pre-Tax (in millions) Profit (Loss) Revenue Margin Profit (Loss) Revenue Margin Reported from continuing operations $ (1,141) $ 1,514 -75.4% $ 8 $ 1,730 0.5% Adjustments: Goodw
Slide 23: 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 24: 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 25: 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) 25
Slide 26: © 2017 Conduent Business Services, LLC. All rights reserved. Conduent and Conduent Agile Star
© 2017 Conduent Business Services, LLC. All rights reserved. Conduent and Conduent Agile Star are trademarks of Conduent Busi ness Services, LLC in the United States and/or other countries.