Research News and Market Data on CNDT
August 07, 2024
Key Q2 2024 Highlights
- Revenue: $828M
- Adj. Revenue(1): $811M
- Pre-tax Income: $300M
- Adj. EBITDA Margin(1): 3.6%
- New Business Signings ACV(2): $142M
- Net ARR Activity Metric(2) (TTM): $(49)M
FLORHAM PARK, N.J., Aug. 07, 2024 — Conduent (NASDAQ: CNDT), a global technology-led business process solutions and services company, today announced its second quarter 2024 financial results.
Cliff Skelton, Conduent President and Chief Executive Officer stated, “We are pleased to report that our Adjusted Revenue and Adjusted EBITDA exceeded expectations, with upside from here. Meanwhile, as anticipated, Q2 represented the low point in our previously communicated growth trajectory. Commercial sales were stronger on both a year-over-year and sequential basis and although Government sales is off to a slower than anticipated start to the year, our overall sales pipeline remains strong as does our balance sheet.”
“Our strategy also remains on track. Targeted divestitures and a balanced use of capital have allowed us to reduce debt and share count, and will allow us to reduce capital intensity and improve cash conversion over time. Our streamlined portfolio and the infusion of new and proven leadership position us well for the future as we advance our solution sets and leverage our strong culture.”
Key Financial Q2 2024 Results
| ($ in millions, except margin and per share data) | Q2 2024 | Q2 2023 | Current Quarter Y/Y B/(W) |
| Revenue | $828 | $915 | (9.5)% |
| Adjusted Revenue(1) | $811 | $851 | (4.7)% |
| GAAP Net Income (Loss) | $216 | $(7) | n/m |
| Adjusted EBITDA(1) | $29 | $64 | (54.7)% |
| Adjusted EBITDA Margin (1) | 3.6% | 7.5% | (390) bps |
| GAAP Income (Loss) Before Income Tax | $300 | $(7) | n/m |
| GAAP Diluted EPS | $1.07 | $(0.04) | n/m |
| Adjusted Diluted EPS(1) | $(0.14) | $0.01 | n/m |
| Cash Flow from Operating Activities | $(41) | $(10) | (310.0)% |
| Adjusted Free Cash Flow(1) | $(55) | $(26) | (111.5)% |
Performance Commentary
During the second quarter of 2024, the company completed the transfer of the BenefitWallet portfolio, receiving the remaining $261 million of the aggregate purchase price of $425 million.
The divestiture of the Curbside Management and Public Safety businesses was announced on December 28, 2023 and closed on April 30, 2024 with a purchase price of $230 million, $61 million of which is deferred over the next nine months.
The company entered into a definitive agreement to sell its Casualty Claims Solutions business on May 3, 2024 for $240 million in cash, subject to certain purchase price adjustments, which is expected to close during the third quarter of 2024.
Also, during the second quarter of 2024, the company used the proceeds from the completed divestitures to prepay $300 million of principal of the Term Loan B.
On June 8, 2024 Conduent entered into a share purchase agreement to repurchase all of the shares of the company’s common stock beneficially owned by Carl Icahn and affiliates. The aggregate purchase price for the repurchase from Carl Icahn and affiliates was approximately $132 million.
Pre-tax income (loss) for the second quarter of 2024 was $300 million versus $(7) million in the prior year period. This increase is primarily driven by the gain on the transfer of the BenefitWallet portfolio and the sale of the Curbside Management and Public Safety businesses.
Second quarter’s Adjusted EBITDA of $29 million and Adjusted EBITDA Margin of 3.6% exceeded the company’s expectations.
Revenue and Adjusted Revenue for the second quarter of 2024 also exceeded the company’s expectations.
Conduent’s liquidity position remains strong with long-dated debt maturities and a modest net leverage ratio.
In the second quarter of 2024, the company repurchased approximately 43.3 million shares of its common stock in connection with its ongoing share repurchase program, including approximately 38 million shares of its common stock repurchased from Carl Icahn and affiliates, as mentioned above.
Additional Q2 2024 Performance Highlights
Conduent achieved several milestones in technology-led solutions, operational excellence and culture, including:
- Recognized as a Leader in Multi-Process HR Transformation Services for Large Enterprises by NelsonHall;
- Named to Newsweek’s Top 100 Global Most Loved Workplaces® for 2024 for second consecutive year;
- Selected to provide Business Intelligence and Data Management technology services to Colorado Department of Health Care Policy and Financing;
- Implemented technologies for South Carolina Department of Social Services to combat fraud and enhance security for its EBT program;
- Significantly expanded relationship with one of the largest health insurance companies in the U.S. including both CXM and multichannel communications solutions; and
- Implemented Express Lanes tolling system for Virginia Department of Transportation.
FY 2024 Outlook(2,3)
| FY 2023 Actuals | FY 2024 Outlook(2,3) | |
| Adj. Revenue(1) | $3,466M | $3,325M – $3,375M |
| Adj. EBITDA(1) / Adj. EBITDA Margin(1) | $264M / 7.6% | 4% – 5% |
(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) 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 7, 2024 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 13747159.
The international dial-in is 1-201-689-8337. The international conference ID is also 13747159.
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 13747159.
The telephone recording will be available until August 21, 2024.
About Conduent
Conduent delivers digital business solutions and services spanning the commercial, government and transportation spectrum – creating valuable 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 55,000 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 disbursing approximately $100 billion in government payments annually, enabling 2.3 billion customer service interactions annually, empowering millions of employees through HR services every year and processing nearly 13 million tolling transactions every day. Learn more at www.conduent.com.
Non-GAAP Financial Measures
We have reported our financial results in accordance with accounting principles generally accepted in the U.S. (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 Condensed 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 press release, any exhibits or attachments to this release, and other public statements we make may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “expectations,” “in front of us,” “plan,” “intend,” “will,” “aim,” “should,” “could,” “forecast,” “target,” “may,” “continue to,” “looking to continue,” “endeavor,” “if,” “growing,” “projected,” “potential,” “likely,” “see,” “ahead,” “further,” “going forward,” “on the horizon,” “as we progress,” “going to,” “path from here forward,” “think,” “path to deliver,” “from here,” and similar expressions (including the negative and plural forms of such words and phrases), 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 or any attachment to 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 portfolio rationalization plans; our share repurchases; strength of our sales pipeline and balance sheet; our growth strategy; expectations regarding our trajectory toward top line growth, sequential margin improvement, less capital intensity and improved cash flow conversion; statements regarding portfolio divestitures, such as the sale of our Casualty Claims Solutions business, including all statements regarding anticipated timing of closing of and receipt of proceeds related to such divestitures; Conduent’s liquidity position remaining strong; progress that we’re making towards our billion dollars of deployable capital; and our projected financial performance for the full year 2024 and 2025, including all statements made under the section captioned “FY 2024 Outlook” within this release. These statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, many of which are outside of our control, that could cause actual results to differ materially from those expected or implied by such forward-looking statements contained in this press release, any exhibits to this press release and other public statements we make.
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: risks related to pending dispositions, including the company’s ability to realize the benefits anticipated from the sale of our Casualty Claims Solutions business to MedRisk, including as a result of a delay or failure to obtain certain required regulatory approvals or the failure of any other condition to the closing of the transaction such that the closing of the transaction is delayed or does not occur; unexpected costs, liabilities or delays in connection with the proposed transaction, the significant transaction costs associated with the proposed transaction, negative effects of the announcement, pendency or consummation of the transaction on the market price of our common stock or operating results, including as a result of changes in key customer, supplier, employee or other business relationships, the risk of litigation or regulatory actions, our inability to retain and hire key personnel, the risk that certain contractual restrictions contained in the definitive transaction agreement during the pendency of the proposed transaction could adversely affect our ability to pursue business opportunities or strategic transactions; risks related to recently completed dispositions including the transfer of our BenefitWallet HSA, MSA and flexible spending account portfolio and the sale of our Curbside Management and Public Safety Solutions businesses, including but not limited to our ability to realize the benefits anticipated from such transactions, unexpected costs, liabilities or delays in connection with such transactions, and the significant transaction costs associated with such transactions; 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 wars in the Ukraine and Middle East), macroeconomic conditions, natural disasters and other factors in a particular country or region on our workforce, customers and vendors; 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; expectations relating to environmental, social and governance considerations; utilization of our stock repurchase program; 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; risks related to divestitures and acquisitions; 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 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; our ability to receive dividends or other payments from our subsidiaries; 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 2023 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
Giles Goodburn
Conduent
+1-203-216-3546