Conduent Reports Third Quarter 2019 Results

Earnings/Financial Corporate United States
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Key Quarterly Financial and Operational Highlights

FLORHAM PARK, NJ, November 6, 2019 - Conduent (NYSE: CNDT), a services and solutions company, today announced its third quarter 2019 financial results. 

"Over the last 90 days, the team has started to build on the foundational work that was developed over the past three years," said Conduent CEO, Cliff Skelton. "While our efforts on growing new business signings will not lead to immediate results, we are focused on driving improvement in both sales and operational performance. We hope to see the team's hard work manifest in our leading indicators in the near-term."

"In conjunction with our Board, we also are making progress on the strategic and operational review," Skelton continued.  "We anticipate completion of the review in late Q4 2019 or early Q1 2020 and would aim to begin taking action on any potential divestitures in the first half of 2020. The focus of this review is to create shareholder value by looking at potentially divesting assets that we believe have a scarcity value in the market and potentially may command a premium, while seeking to simplify the remaining company to take advantage of strong market opportunities and growth prospects." 

Third Quarter 2019 Results

Third quarter 2019 revenue was $1,098 million, down (15.8)% compared to Q3 2018. Excluding divestitures completed in 2018, revenue was down (3.9)% compared with Q3 2018 or (3.5)% in constant currency.

Pre-tax income was $(14) million compared to $(252) million in Q3 2018. GAAP operating margin as reported was (1.3)% compared to (19.3)% in Q3 2018. The company reported Q3 2019 GAAP net income of $(16) million compared to $(237) million in Q3 2018. Diluted EPS from continuing operations was ($0.09) versus ($1.16) in the same period last year. 

Third quarter adjusted operating income was $72 million, with an adjusted operating margin of 6.6% as compared to adjusted operating income of $104 million, with an adjusted operating margin of 8.0% in Q3 2018.  Adjusted EBITDA was $127 million, with an adjusted EBITDA margin of 11.6%, as compared to $157 million, with an adjusted EBITDA margin of 12.0% in Q3 2018.  Further adjusting for the impact of all divestitures, Adjusted EBITDA declined (10.6)% compared with Q3 2018 while adjusted EBITDA margin decreased (80) bps.

The company reported adjusted diluted EPS from continuing operations of $0.16 compared to $0.28 in Q3 2018.

Conduent had cash inflow from operations of $18 million during the third quarter of 2019 compared to cash outflows of $(30) million in Q3 2018.

Total contract value (TCV) signings of $746 million for the quarter were up 1.0% compared with Q3 2018, due to an (11.0)% decrease in new business signings and an 8.0% increase in renewal signings.  The renewal rate for the quarter was 93%, up 300 bps compared to Q3 2018. Note, this compare excludes divestitures.

Financial Outlook

(in millions)

 

FY 2018 Reported

Completed Divestiture Impact (3)

Adjusted FY 2018(4)

Updated

FY 2019 Guidance

 

 

 

 

 

 

 

 Revenue            (constant currency)(1,2)

 

$5.39B

$752M

$4.64B

Down (5) - (4)%

 

 

 

 

 

 

 

Adj. EBITDA Margin(2)

 

11.9%

 

11.5%

10.8% - 11.6%

 

 

 

 

 

 

 

Adj. Free Cash Flow(2)

as a % of Adj. EBITDA

 

34.1%

 

 

~20%

 

 Note: Please refer to the "Non-GAAP Outlook" in Appendix for certain non-GAAP information regarding outlook

(1) Year-over-year revenue growth comparison at constant currency

(2) Refer to Appendix for Non-GAAP reconciliations of adjusted EBITDA / margin and adjusted FCF and for impact from completed divestitures. FY 2019 FCF adjusted for Texas-related litigation impact

(3) Includes all completed divestitures

(4) Adjusted for 2018 and 2019 completed divestitures referenced in Appendix.

Brian Webb-Walsh, CFO of Conduent, stated, "We had an in-line quarter with revenue and adjusted EBITDA results slightly ahead of our internal expectations.  We are reaffirming our 2019 revenue and adjusted EBITDA margin guidance and continue to focus on balancing cost savings with investment in our processes, people, and technology."

Conference Call

Management will present the results during a conference call and webcast on November 6, 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 0612634.

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 November 6, 2019. The replay ID is 10132425.

For international calls, please select a dial-in number from:

https://services.choruscall.com/ccforms/replay.html

About Conduent  

Conduent delivers mission-critical ​services and solutions on behalf of businesses and governments – creating exceptional outcomes for its clients and the millions of people who count on them. Through people, process and technology, Conduent solutions and services automate processes, improve efficiencies, reduce costs and enable revenue growth. It’s why most Fortune 100 companies and over 500 government entities depend on Conduent every day to manage their essential interactions and move their operations forward.

Conduent’s differentiated services and solutions improve experiences for millions of people every day, including two-thirds of all insured patients in the U.S., 11 million employees who use its HR Services, and nearly nine million people who travel through toll systems daily. Conduent’s solutions deliver exceptional outcomes for its clients including $16 billion in medical bill savings, up to 40% efficiency increase in HR operations, and up to 40% improvement in processing costs, while driving higher end-user satisfaction. Learn more at www.conduent.com.

Non-GAAP 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 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.

Forward-Looking Statements

This release and any attachments to this release 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. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements.

Important factors and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements include, but are not limited to: our ability to successfully manage the leadership transition and strategic and operational review and the potential for disruptions to our business from the transition and strategic and operational review; government appropriations and termination rights contained in our government contracts; our ability to renew commercial and government contracts, including 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, including those for unbilled services; a decline in revenues from, or a loss of, or a reduction in business from, 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 Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with or furnished to the Securities and Exchange Commission. Any forward-looking statements made by us in this release 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.

# # #

Media Contacts:

Sean Collins, Conduent, +1-310-497-9205, sean.collins2@conduent.com

 

Investor Contacts:

Alan Katz, Conduent, +1-973-526-7173, alan.katz@conduent.com

Rebecca Koar, Conduent, +1-862-308-7105, rebecca.koar@conduent.com

 

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Sean Collins
Conduent
+1-310-497-9205
Alan Katz
Conduent Investor Relations
+1-973-526-7173
Rebecca Koar
Conduent Investor Relations
+1-862-308-7105