Key Q2 2023 Highlights
- Revenue and Adj. Revenue(1): $915M
- Pre-tax Income (Loss): $(7)M
- Adj. EBITDA Margin(1): 10.2%
- New business signings ACV(2): $208M
- Net ARR Activity Metric(2) (TTM): $137M
FLORHAM PARK, N.J., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Conduent ( CNDT), a global technology-led business process solutions company, today announced its second quarter 2023 financial results.
Cliff Skelton, Conduent President and Chief Executive Officer stated, “Our Q2 performance exceeded our expectations especially with respect to Revenue, EBITDA, Net ARR and New Business signings. Q2 included a large new logo win in Transportation, allowing us to record the highest quarter in New Business TCV and ACV since Q4 2017. As an example of our non-financial success in Q2, we are proud to be recognized again, but now globally, as one of Newsweek’s Top 100 Global Most Loved Workplaces for 2023.
Reflecting on our March 2023 Investor Presentation, we announced several key pillars for success as we execute toward our medium term strategic and financial objectives. First, we described a portfolio rationalization effort as a next step. That program is now in full swing. Second, we said that a key growth area was our Government Healthcare Business, specifically our MMIS Cloud-enabled offering. We are proud to now be underway on several implementations, including our largest deal to date, the State of Texas, and are in contract negotiations with another large state program. That pipeline remains strong. Finally, we described our opportunities in Digital Payments — specifically real-time payments. We are now the first and only BPO provider to process transactions through the recently announced US Federal Reserve’s FedNowSM Service. We are in full execution mode with the commitments we made in March, allowing us to be a more agile and focused provider.”
Key Financial Q2 2023 Results
| ($ in millions, except margin and per share data) | Q2 2023 | Q2 2022 | Current Quarter Y/Y B/(W) |
| Revenue | $915 | $928 | (1.4)% |
| Adjusted Revenue(1) | $915 | $928 | (1.4)% |
| GAAP Net Income (Loss) | $(7) | $— | n/m |
| Adjusted EBITDA(1) | $93 | $87 | 6.9% |
| Adjusted EBITDA Margin (1) | 10.2% | 9.4% | 80 bps |
| GAAP Income (Loss) Before Income Tax | $(7) | $5 | (240)% |
| GAAP Diluted EPS | $(0.04) | $(0.01) | (300)% |
| Adjusted Diluted EPS(1) | $0.01 | $0.03 | (67)% |
| Cash Flow from Operating Activities | $(10) | $(16) | 38% |
| Adjusted Free Cash Flow(1) | $(26) | $(31) | 16% |
Performance Commentary
ACV of $208M and TCV of $1,361M were driven by the $1 billion TCV signing with the State of Victoria, Australia in our Transportation segment.
Both client retention and strong sales had a positive impact on our Net ARR Metric at $137M for Q2 2023, up 31% versus the prior year, and up 26% sequentially.
Revenue and Adjusted Revenue for Q2 2023 were ahead of expectations. Commercial volumes were impacted by softness in certain industries in our client base, while increased interest rates positively impacted our BenefitWallet business.
Pre-tax income (loss) was $(7)M versus $5M in the prior year period.
Adjusted EBITDA of $93M and Adjusted EBITDA Margin of 10.2% were also ahead of expectations, and higher than the prior year period.
Conduent's $1.1 billion total liquidity position remains strong with long dated debt maturities and a modest net leverage ratio.
In the quarter we repurchased 266,765 shares in connection with our previously announced shared repurchase program.
Q2 2023 Highlights
Conduent achieved several milestones in technology-led solutions, operational excellence and culture, including:
- Became first BPS provider to offer U.S. Federal Reserve's FedNowSM Service for instant payments;
- Selected to implement new transit ticketing system in Victoria, Australia;
- Introduced Rapid Assistance Solution to help agencies expedite disbursement of emergency relief funds;
- Broadened Healthcare Payer portfolio with new innovative AI-driven provider data management solution;
- Named as a Leader in Healthcare Payer Operational Transformation by NelsonHall;
- Demonstrated commitment to ESG through updated report including SASB and TCFD disclosures;
- Recognized by Forbes as one of America’s Best 500 Employers for Diversity for the third year in a row;
- Named to Newsweek's Top 100 Global Most Loved Workplaces 2023; and
- Recognized as Best Place to Work for Disability Inclusion for the second consecutive year.
FY 2023 Outlook(4)
| FY 2022 Actuals | FY 2023 Outlook(4) | |
| Adj. Revenue(1) | $3,851M | $3,700M - $3,800M |
| Adj. EBITDA(1) / Adj. EBITDA Margin(1) | $394M / 10.2% | 10.0% - 10.8% |
| Adj. Free Cash Flow(2) as % of Adj. EBITDA(1) | 1.5%(3) | 15% - 20%(3) |
(1) Refer to Appendix for definition and complete Non-GAAP reconciliations of Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Diluted EPS and Adjusted Free Cash Flow.
(2) Refer to Appendix for definition.
(3) Normalized for the impact of payment of deferred payroll taxes primarily related to the CARES Act of $27M in 2022, Adjusted Free Cash Flow as a percentage of Adjusted EBITDA is approximately 8% in 2022. Adjusted Free Cash Flow for 2023 includes an outstanding US Federal tax refund of $29M expected to be received in 2023.
(4) Refer to Appendix for additional information regarding Non-GAAP Outlook.
Conference Call
Management will present the results during a conference call and webcast on August 2, 2023 at 9:00 a.m. ET.
The call will be available by live audio webcast along with the news release and online presentation slides at https://investor.conduent.com/.
The conference call will also be available by calling 877-407-4019 toll-free. If requested, the conference ID for this call is 13739455.
The international dial-in is 1-201-689-8337. The international conference ID is also 13739455.
A recording of the conference call will be available by calling 1-877-660-6853 three hours after the conference call concludes. The replay ID is 13739455.
The telephone recording will be available until August 16, 2023.
About Conduent
Conduent delivers digital business solutions and services spanning the commercial, government and transportation spectrum – creating exceptional outcomes for its clients and the millions of people who count on them. The Company leverages cloud computing, artificial intelligence, machine learning, automation and advanced analytics to deliver mission-critical solutions. Through a dedicated global team of approximately 60,000 associates, process expertise, and advanced technologies, Conduent’s solutions and services digitally transform its clients’ operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs. Conduent adds momentum to its clients’ missions in many ways including delivering 43 percent of nutrition assistance payments in the U.S., enabling 1.3 billion customer service interactions annually, empowering millions of employees through HR services every year and processing nearly 12 million tolling transactions every day. Learn more at www.conduent.com.
Non-GAAP Financial Measures
We have reported our financial results in accordance with U.S. generally accepted accounting principles (U.S. 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 U.S. 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 results of the current period against the corresponding prior period. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, our 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 Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. 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 of these 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 U.S. 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,” "plan," “intend,” “will,” “aim,” “should,” “could,” “forecast,” “target,” “may,” "continue to," "if,” “growing,” “projected,” “potential,” “likely,” "see," "ahead," "further," "going forward," "on the horizon," and similar expressions, as they relate to us, are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. All statements other than statements of historical fact included in this press release are forward-looking statements, including, but not limited to, statements regarding our financial results, condition and outlook; changes in our operating results; general market and economic conditions; our pipeline remaining strong; our belief that our partnership with BNY Melon to initiate transactions through the recently announced FedNowSM Service utilizing our Integrated Payments Hub will provide breakthrough real time payments and distribution capabilities for our clients, their end users and future potential clients; our continued focus on shareholders, clients and our associates; our long-term game plan; and our projected financial performance for the full year 2023, including all statements made under the section captioned “FY 2023 Outlook” within this release. These statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied herein as anticipated, believed, estimated, expected or intended or using other similar expressions.
In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this press release, any exhibits to this press release and other public statements we make. 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: 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 reliance on third-party providers; risk and impact of geopolitical events and increasing geopolitical tensions (such as the war in Ukraine), macroeconomic conditions, natural disasters and other factors (such as pandemics, including coronavirus) in a particular country or region on our workforce, customers and vendors; conditions abroad, including local economics, political environments, fluctuating foreign currencies and shifting regulatory schemes; relying on third party providers; our ability to deliver on our contractual obligations properly and on time; changes in interest in outsourced business process services; claims of infringement of third-party intellectual property rights; our ability to estimate the scope of work or the costs of performance in our contracts; the loss of key senior management and our ability to attract and retain necessary technical personnel and qualified subcontractors; our failure to develop new service offerings and protect our intellectual property rights; our ability to modernize our information technology infrastructure and consolidate data centers; the continuing effects of the COVID-19 pandemic on our business, operations, financial results and financial condition, which is dependent on developments which are uncertain and cannot be predicted; expectations relating to environmental, social and governance considerations expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business; we cannot guarantee that our stock repurchase program will be utilized to the full value approved or that it will enhance long-term stockholder value and repurchases we consummate could increase the volatility of the price of our common stock and could have a negative impact on our available cash balance; the failure to comply with laws relating to individually identifiable information and personal health information; the failure to comply with 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 comply with data security standards; developments in various contingent liabilities that are not reflected on our balance sheet, including those arising as a result of being involved in a variety of claims, lawsuits, investigations and proceedings; changes in tax and other laws and regulations; risk and impact of potential goodwill and other asset impairments; our significant indebtedness and the terms of such indebtedness; our failure to obtain or maintain a satisfactory credit rating and financial performance; our ability to receive dividends or other payments from our subsidiaries; our ability to obtain adequate pricing for our services and to improve our cost structure; 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; increases in the cost of voice and data services or significant interruptions in such services; changes in government regulation and economic, strategic, political and social conditions; volatility of our stock price and the risk of litigation following a decline in the price of our stock; economic factors such as inflation, the level of economic activity and labor market conditions, as well as rising interest rates; 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 2022 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 because of new information, subsequent events or otherwise except as required by law.
Media Contacts:
Sean Collins, Conduent, +1-310-497-9205, [email protected]
Investor Contacts:
Giles Goodburn, Conduent, +1-203-216-3546, [email protected]
| CONDUENT INCORPORATED | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in millions, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenue | $ | 915 | $ | 928 | $ | 1,837 | $ | 1,895 | ||||||||
| Operating Costs and Expenses | ||||||||||||||||
| Cost of services (excluding depreciation and amortization) | 704 | 727 | 1,424 | 1,482 | ||||||||||||
| Selling, general and administrative (excluding depreciation and amortization) | 118 | 113 | 229 | 215 | ||||||||||||
| Research and development (excluding depreciation and amortization) | 1 | 2 | 3 | 3 | ||||||||||||
| Depreciation and amortization | 57 | 53 | 118 | 114 | ||||||||||||
| Restructuring and related costs | 13 | 11 | 42 | 20 | ||||||||||||
| Interest expense | 27 | 18 | 54 | 37 | ||||||||||||
| (Gain) loss on divestitures and transaction costs, net | 3 | 3 | 5 | (160 | ) | |||||||||||
| Litigation settlements (recoveries), net | (1 | ) | (3 | ) | (22 | ) | (31 | ) | ||||||||
| Other (income) expenses, net | — | (1 | ) | (1 | ) | — | ||||||||||
| Total Operating Costs and Expenses | 922 | 923 | 1,852 | 1,680 | ||||||||||||
| Income (Loss) Before Income Taxes | (7 | ) | 5 | (15 | ) | 215 | ||||||||||
| Income tax expense (benefit) | — | 5 | (2 | ) | 79 | |||||||||||
| Net Income (Loss) | $ | (7 | ) | $ | — | $ | (13 | ) | $ | 136 | ||||||
| Net Income (Loss) per Share | ||||||||||||||||
| Basic | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | 0.61 | |||||
| Diluted | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | 0.60 | |||||
| CONDUENT INCORPORATED | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in millions) | 2023 | |||||||||||||||
