Key Quarterly Financial and Operational Highlights
FLORHAM PARK, NJ, May 8, 2019 - Conduent (NYSE: CNDT), a digital interactions company, today announced its first quarter 2019 financial results.
“This quarter, we continued to make investments in our operating and go-to-market model,” said Ashok Vemuri, CEO of Conduent. “We continued to show margin expansion despite facing growth challenges and pressure on our top line. The strong team we have built, the markets we operate in and our loyal client base, establishes a strong foundation upon which to build.”
First quarter 2019 revenue was $1,158 million, down (18.5)% compared to Q1 2018. Excluding divestitures completed in 2018, revenue was down (4.3)% compared with Q1 2018.
Pre-tax income was $(338) million compared to $(54) million in Q1 2018 driven primarily by a $284 million goodwill impairment as a result of the loss of customer contracts, lower than expected new business and higher costs of delivery within our Transportation business, which was found to be below its carrying value. GAAP operating margin as reported was (29.2)% compared to (3.8)% in Q1 2018. The company reported Q1 2019 GAAP net income of $(308) million compared to $(50) million in Q1 2018. Diluted EPS from continuing operations was ($1.49) versus ($0.26) in the same period last year, driven primarily by the goodwill impairment.
First quarter adjusted operating income was $69 million, with an adjusted operating margin of 6.0% as compared to adjusted operating income of $105 million, with an adjusted operating margin of 7.4% in Q1 2018. Adjusted EBITDA was $123 million, with an adjusted EBITDA margin of 10.6%, as compared to $161 million, with an adjusted EBITDA margin of 11.3% in Q1 2018. Further adjusting for the impact of all divestitures, Adjusted EBITDA improved 1.7% compared with Q1 2018 while adjusted EBITDA margin increased 70 bps.
The company reported adjusted diluted EPS from continuing operations of $0.14 compared to $0.22 in Q1 2018.
Conduent had cash outflow from operations of $(49) million during the first quarter of 2019 compared to $(38) million in Q1 2018.
In the quarter, Conduent continued to drive operating efficiencies, while investing in sales, API and technology infrastructure. Efficiency initiatives included the continued focus on Accu-shoring, with 52% of the global workforce now located in low-cost countries. The company is approximately 45 percent through its ~$200 million client-facing technology investment through the end of Q1 2019 and began its second large data center migration, which is scheduled to be completed by the end of May 2019.
Several go-to-market initiatives were recently launched, including a consolidation of the Commercial business under a single leader, the launch of a large deals group and the development of a new business incubator, focused on finding, developing and graduating the next set of growth engine business offerings.
Total contract value (TCV) signings of $952 million for the quarter were down (26.4)% compared with Q1 2018, due to a (38.7)% and (21.5)% year-over-year decrease in new business and renewal signings respectively.
Financial and Strategic Outlook
Conduent provided the following update to guidance ranges for FY 2019:
|(in millions)||FY 2018 Reported||Divestiture Impact(3)||Adjusted FY 2018(4)||Updated
FY 2019 Guidance
|Revenue (constant currency)(1)||$5.39B||$752M||$4.64B||Down (3) - (4)%|
|Adj. EBITDA Margin(2)||11.9%||11.5%||12 - 13%|
|Adj. Free Cash Flow(2)
% of Adj. EBITDA
Note: Please refer to the "Non-GAAP Outlook" below for certain information concerning outlook.
Brian Webb-Walsh, CFO of Conduent stated, “We successfully closed on HSP, our first acquisition, and are already seeing strong demand for this technology offering from both new and existing clients. Our balance sheet remains strong and we are continuing to make investments in order to drive growth and profit improvement. We are focused on improving sales conversion, are shifting to the next phase of transformation and will address stranded costs associated with the divestitures that we completed over the past year.”
Management will present the results during a conference call and webcast on May 8, 2019 at 5 p.m. ET.
The call will be available by live audio webcast with the news release and online presentation slides at https://investor.conduent.com/.
The conference call will also be available by calling 1-877-883-0383 (international dial-in 1-412-902-6506) at approximately 4:45 p.m. ET. The entry number for this call is 6541992.
A recording of the conference call will be available by calling 1-877-344-7529, or 1-412-317-0088 one hour after the conference call concludes on May 8, 2019. The replay ID is 10130906.
For international calls, please select a dial-in number from:
Conduent creates digital platforms and services for businesses and governments to manage millions of interactions every day for those they serve. We are leveraging the power of cloud, mobile and IoT, combined with technologies such as automation, cognitive and blockchain to elevate every constituent interaction, driving modern digital experiences that are more efficient, helpful and satisfying.
Conduent’s differentiated offerings touch millions of lives every day, including two-thirds of all insured patients in the U.S. and nearly nine million people who travel through toll systems daily. Whether it’s digital payments, claims processing, benefit administration, automated tolling, customer care or distributed learning - Conduent serves a majority of the Fortune 100 companies and more than 500 government entities. Learn more at www.conduent.com.
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 non-GAAP measures. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods' results against the corresponding prior periods' results. These non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on certain non-GAAP measures. Refer to the "Non-GAAP Financial Measures" section attached to this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measures.
This Report and any exhibits to this Report may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Such factors include, but are not limited to: government appropriations and termination rights contained in our government contracts; our ability to renew commercial and government contracts awarded through competitive bidding processes; our ability to recover capital and other investments in connection with our contracts; our ability to attract and retain necessary technical personnel and qualified subcontractors; our ability to deliver on our contractual obligations properly and on time; competitive pressures; our significant indebtedness; changes in interest in outsourced business process services; our ability to obtain adequate pricing for our services and to improve our cost structure; claims of infringement of third-party intellectual property rights; the failure to comply with laws relating to individually identifiable information, and personal health information and laws relating to processing certain financial transactions, including payment card transactions and debit or credit card transactions; breaches of our information systems or security systems or any service interruptions; our ability to estimate the scope of work or the costs of performance in our contracts; our continuing emphasis on and shift toward technology-led digital transactions; customer decision-making cycles and lead time for customer commitments; our ability to collect our receivables for unbilled services; a decline in revenues from or a loss or failure of significant clients; fluctuations in our non-recurring revenue; our failure to maintain a satisfactory credit rating; our ability to attract and retain key employees; increases in the cost of telephone and data services or significant interruptions in such services; our failure to develop new service offerings; our ability to modernize our information technology infrastructure and consolidate data centers; our ability to comply with data security standards; our ability to receive dividends or other payments from our subsidiaries; changes in tax and other laws and regulations; changes in government regulation and economic, strategic, political and social conditions; changes in U.S. GAAP or other applicable accounting policies; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section and other sections in our 2018 Annual Report on Form 10-K, as well as in our Current Reports on Form 8-K filed with the Securities and Exchange Commission. Any forward-looking statements made by us in this report speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.
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Sean Collins, Conduent, +1-310-497-9205, firstname.lastname@example.org