CNDT - Earnings call transcript Q3 2017

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Operator

Good morning and welcome to the Conduent's Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Alan Katz, Investor Relations. ahead. go Please

Alan Katz

and XXXX ladies welcome Conduent's to Good call. gentlemen, quarter earnings third morning, and

Joining call on Walsh, me today's Conduent's and Conduent's CFO. Brian CEO; is Ashok Vemuri,

call will Following on remarks, used the for of this during filed section copy take morning is was slides also the call Investor the your of our Relations the being we Conduent download questions. with prepared this and a webcast, available This website. SEC is

post also We the this week. transcript will later

seen, have metric would new have added Investor you section based of many website. this we mixed sale will sheet Relations As information helpful. find the to Hopefully, of our you

assumptions with U.S. the information that to to make current with as in as or as and in should prepared financial that Because on factors as matters their Report not Company's U.S. not statements they results in actual measures. in Form these not this are beliefs, XX-K from GAAP, Conduent presented factors concerning or developments, non-GAAP forward-looking a is events to Private with nature the included future Reform GAAP. the results these includes are accordance During uncertain. viewed are are today, by XXXX, these future accordance that SEC. Conduent's contains reported The We required today for, to, a XXXX in measures certain be do filed Litigation subject substitute intend reflect a comments and defined and addition executives calculated law. number These result of by of Annual in information forward-looking update statements statements may those the new as address statements. differ November Securities cause call, and X, Information expectations of management's materially that may of Act except

please measures to of release turn over that, see will For usefulness SEC for our information use morning issued With purposes, to on as Form this was limitations non-GAAP the comparative their prepared for as remarks. X-K. which and well was to call Ashok and as we his definitions our the how regarding furnished them, I press

Ashok?

Ashok Vemuri

predictable, call. an overview morning, our joining performance sustainable I a operational a X Good fronts. making was provide progress into the our with we Brian, quarter cover will very performance on earnings of progress for thanks and for to and with us quarter. transform financial and our Together third market-leading profitable, On enterprise. everyone, quarter the solid number we and Slide a for QX meaningful of are Conduent

X% improve the compared well as XX% quality. While revenue this actions was of accounts declined cross-sell with revenue taken strategic of opportunity. to unprofitable exiting contracts, XXXX, include third limited Examples quarter as with result decline

exited which synergy geographies operating We defocused have segments with not also clear core seized have and portfolio. our in do

versus Excluding Operating been flat. points this sequentially X% basis quarter, and XXX margins revenue strategic points sequentially would a year improved quarter. actions, sequentially, to this margins up and approximately year-over-year revenue and is EBITDA the year-over-year. in XXX been X% Adjusted basis improved approximately significantly the ago. decline XX.X% year-over-year. EBITDA Adjusted Profitability XX% XXX increased improved would basis points have have

our revenue of at improve the our the growing on core end focused need sales. the was to and in into teams sales headcount renewing We on over net Despite portfolio. the ago. new high-quality grew still our also progress, this facing pipeline priorities client across account two in $XX several eligible trajectory one companion organizations; management, time reorganized we progress go-to-market and and made XX landing year contracts We X% months our billion compared current other quarter, wins of this Total quarter. to for XX% first

the commercial bundling of turnaround and better this on briefly Looking delivery, business XXX points great The margins cross-selling, based improving with at from key of operational our came services basis majority made adoption our improvement increased headway segments, sequentially. pricing. outcome we of

sector revenue as sequentially. expected margins year-on-year both quarter and Our public but flat remained with down this business consistent

our of in business model We offerings opportunities and continue examples. human the services state this to state and public variety local on In are the see technology in characteristics sector to citizens of case, of more attractive of health governments. with business where with platform interactions the support of basis and Conduent transportation constituents sector business local combined public ways, a segment. our many including Later, the will a several describe a with range this within assets and our service digital the core illustrates model federal clients; I

continued made also Medicaid we substantially segment renewed management exceeding new contract sizeable threshold. other progress system information a where return with We with term our our

capability in steady streamlining select made selling segments, we core. in and Lastly, our our by business our progress and activity around more creating our focus prioritizing industry portfolio

resulting the quarter. divested contributed cash businesses proceeds $XX third in our quarter, third improved I'm for the five which progress Overall, of an with During we pleased to position. million

expected We journey. point be are are this we to at right where transformation in our

update initiatives. progress. share Now where from supported of initiative. of Slide with strong This I'm on XXXX deliver cumulative of robust on-track $XXX the particularly is savings our X; let have to initial estate quarter. by on on we on I've savings million pipeline target made calls, will what an consistent highlights I the Real our me share end a is cost strategic prior area done is some an transformation

spend are million. $XX substantially annual start original of Our our program was around target savings $XXX we to million the at exceed company-wide of the on-track and

additional sites. closed leases. XX the our around closing and XX locations exited we are the world, third aggressively As an In quarter we footprint we consolidate

more approximately third to quarter to continued to and seasonality XX,XXX modern basis the volumes standardization year-over-year quarter We also as automation versus year. this are us continue retail with year of progress an QX open to make seasonal in compared efficiencies. a with of result was models improvement of expenses sequentially XX,XXX higher of decline percentage slightly Note, industry work to last combining An related prior period. from as to XX aggressive this up combined a X.X%, enrollment overall on travel. down kinds with points of revenue technologies adoption process SG&A and and like that employees these achieve Headcount help

and Going solutions company, customer forward, our we further model, of higher we and experience. lower the as expect our progress steadily delivery on these all streamline operating overall metrics continued continue modernize to cost a for standardize

market. have pleased we with selling from believe to see we benefits are increasing here activity previous and As we the overtime towards will on expect greater quarters. expense our we Overall, goal making posture are I work in progress subsequent to where underinvested compared mentioned the our calls, remix this be to are

I Slide will growth. to This includes work technology, our go-to-market, our cover improvements near-term to underway on approach the and to operational our described to contributing performance while support Moving X, Last quarter for cross-selling progress delivery future for growth. stage higher infrastructure service approach line model opportunities revenue the strategies. industrial and have verticals penetration we way to I go-to-market reset greater around our setting

opportunities development. account client growth and Third well we our model net around new new management, coverage existing as facing and incremental out as achieved a as quarter selling additional well as rolled saw teams, organized progress as to

key We platform the deploying base believe sectors The portfolio maximum we across on of separation. and geographies been a technology to where rationalization and inventoring since focus process our have extensively focus of continue mining rich leverage for our and our diverse will technology we our expensive capabilities. client our base has

our around XX this quarter we and see and finalized the the platforms that is business platform into business I our the XX% from increasing work During of enabled which room Over identified for delivered forward. will build third we moving services, future.

organization. around and we a digitalization. inherited IT and The competitiveness, additional impeded a productivity particularly infrastructure and considerable that We analytics including structure highly have for as earmarked performance has disjointed modernization investment fragmented an

centralizing the including third contributing technology strides ecosystem quarter and in disparate investing major consolidating we During work a internal contemporary this in Collectively internal to agile, is systems, more our tools, productive environment. made platforms. work and standardizing our

opportunity we global workforce rebalance efficiency utilization. have Finally, seen nature great higher given and industry for delivery and of our our model to the management

While operating our continue opportunity us low lower one-third leverage value high currently delivery as a for cost locations, of execution believe we contributing improve with overtime. and in-line targeting to actions we in support overall sharper these are an footprint our going to team model sits locations our to the delivery cost there are business Collectively, is and result strategy, structure, leaner forward.

on we tech space, include two used prominent be Telco. five support with status hundreds company renewals winning we relationship during with sales expanded making Moving I travel the deals. a notable one wins customer will In with the and the our had in examples, range the and third pipeline. progress relationship share signing, by our insurance in health are quarter; largest healthcare segment expanded the brands new three-year Slide our as renewals experience to insurance of to very of we services the of other we large Canard in thousands renewed Northern agencies added for for In a like X, industry rail support contract will benefits citizens In and day. that to and contract for every Italy and a member cable Conduent we by public a [ph] inquiries. system seven awarded ticketing were years work European new of sector, operator Europe, provide contract claim our comprehensive We

result a on several both, and quarterly of down are we signings, factors. at basis as a year-over-year Looking

our fourth business down impacted slipped new by quarter. First, the TCV year-over-year two that large was into deals

quarter. October successfully of since the fourth new positioned converted in business in then and have for these terms well We are

to hitting year-over-year exceptionally renewal the activity XXXX. third of only completed Our during our a revenue, but XX%, fewer higher reflects of impact client deep advantage of opportunity continued the was and due historically of Renewals long a satisfaction management as quarter renewal TCV strong the account this strong down tenured were result in quality client not strong relationships. and taking renewal book

transit, service insurance ago. continue pipeline. healthy position. and payment demand growth year billion, sales see to to up as also for the improved Total pipeline services by evidenced our was state X% lines local, were our and our $XX approximately Public contributing pipeline in segments We

strategy, in the quarters. of optimistic to early for look our new prospects growth go-to-market still a as ahead I as future and a are our about am the We result, deployment pipeline

we million Now business, grow last we generated both sale the portfolio received proceeds organically million post first $X in third recent in In revenues the X on we of which call. from an businesses discussed update inherited quarter the sale of million adjusted focus EBITDA very separation. in use let's to we quarters which We businesses more the the businesses, the in $XX create the inorganically. diverse one five year. will we of taken to for $XX the to on and These and in Slide of actions turn completed have three

scale core annualized people our may company value already technical, is along secure, most actions scalable effort with divested, of million with in These to we additional expertise. that of going on-demand in-line domain it's on-brand we to million of and $XX process and rightsize they our the managing create core consider the transaction. a disbursement, strategic assets each that $XXX how focus maintaining forward. to the And we whether for quarter. businesses our of clients, can potential extends revenue are achieving the This segments interaction reach services revenue we the or where positioned million are to evaluating addition the They and an they our the a In is $XXX we process potential a for massive differentiate are of set fourth market personalized, question capabilities for enabling or around we on where to leadership. businesses compliant, with and amplify higher digital operating importantly, serve of are and payment, have streamlining well our at portfolio The Conduent. vision intend future technology interactions basis for

transition we those away on greater to structure, we with solutions Conduent a technology issues As moving solutions bespoke verticalized from build platforms industry specialization. industry to more generic focused thereby specific that [ph] will specific address

observations. several I will to our I Brian, Before recap with hand over results

our quarter This This income plan. our adjusted game segment. adjusted commercial We progress visible third I area most around. turnaround we to our our to traction with the forward most with additional operating plan in further gained see calls. where in-line we segment business turn updates here future and look encouraging providing and early During on results opportunity on the largest and grew is is EBITDA the

in capacity the strengthened paying sheet term improvement. we have our to by back need and our down for and financial We term and longer assets. This is business invest cost lowering monetizing the balance our by refinancing the loan ourselves of non-core both, and creating debt position margin growth

to then be business And With take to advantage technology finally, some competitive focus better service Brian provider that, automation us will investment technology-enabled the of automation a new digitalization. I'll offerings we We'll positioned clients team, and strong us will allow brief makes and in towards make more have serve best-in-class our our a as business take resources create to of us of and and the then Our the through in opportunities. business and the position detail. some in remarks uniquely trends take more on continuing what Q&A. Brian? solutions. financials

Brian Walsh

P&L. Slide Thank third the an through provides Ashok. X and walk quarter of you, a results the overview financial

revenue margin partially and loan of In certain XXXX. prior savings of renewing offset the of were reported all prior York MMIS offset business approximately lower was and business strategic and were driven $XX about $XX These of points the investments. of of investments the As approximately the $X.X year X.X% reflecting driven corporate offset Ashok were the year-over-year dis-synergies and impact in discussed, these other these of constant quarter the of on strategic and and was quarter, losses. non-profitable government and segment. the driven in basis million also the Gross decisions ramp revenue transformation decline New Year-over-year healthcare improvements by loss well the in an by the actions; partially was business. million decline. transformation, the result of not factors [ph], the QX XX% the was new contracts basis the Dis-synergies first SG&A strategic X.X% dis-synergies student volumes, year revenue by down versus including XX.X%, revenue as a $XX million run-off as and currency items period XX as nearly by with decline declined nine by year-over-year personally months compared improvement by year. billion

Given these compared improved QX with points XXX was EBITDA segment, commercial increase as Adjusted from by trends a million. for basis year-to-date, X% prior dis-synergies X.X% XX.X% driven quarter was of the of while adjusted $XX adjusted our segment. full an and margin by EBITDA improvements was year-over-year improvement $XXX gross now million adjusted driven basis SG&A. approximately in in year the operating margin is million, the estimate XXX year the EBITDA improved other the to EBITDA hurricanes. despite to points This year. $X margin the Adjusted growth prior well versus the impact as

quarter line, margin the expectations cost million above slightly increased of prior our operating the resulted below restructuring be we to Moving by gain $XX In this million related quarter, close we continue charges running and as line XXXX. Restructuring facilities. been the in $XX expect to in $XX in item we a the million now to we divested which recognized income. businesses about have

sale million $XX driven in $XX termination was gain quarter expense the loss the separation on higher the $X.XX and per pretax partially million restructuring net lower divestitures, better by income, the million, a year-over-year operating costs, $XX by in impact our plan. GAAP of was interest or costs. from deferred by share increase compensation tax income Our driven offset

cash we we in October have flow future compensation its decision X, a company but made X-K expect our As this on impact this to tax discussed case resulted year one-time plan; we'll terminate in the a deferred benefits.

the interest $X.XX, operating modestly was in prior tax Our the an higher period Adjusted Adjusted EPS compared sequentially was prior expense. offset million with $XX rate million, a XX.X% year year-over-year decline income $X adjusted $X.XX by compared of margin expense. was interest XX.X% of in increase period. quarter was expansion year given that decline as higher net to the

XX, cost provide Slide and operating of from an year-over-year handful by with decline percent highlighted year-over-year business mediation the of experience of results. improvements overview strategic segment XX% XX% due impacted from still service grew the primarily revenue margin QX year to contracting last decline relationships negative strategic six commercial segment profit at was we'll the large Turning and lower this compared clients; a by revenue offering approximately existing efforts. quarter. Year-to-date QX lost the customer to in last transformation volumes our actions, Segment strategic. driven impact from is

However, work QX to year call last we this two the increased since increased compared us XXX EBITDA successfully QX XXXX. growth. hard contracts teams the margin on we'll prior earnings very profitability basis and quickly segment our QX while pleased period with saw to margin and adjusted beyond. possible operational work investing we a transformation, remediated commercial and in the in as segment future and the improved was continue were X% business We the benefit those expect as this in we continue of which with points. and of versus to EBITDA positioning Segment the strategic during in for improve from points basis XXX the Adjusted product the results progress improvement to

flat on on Now revenue healthcare our and QX feel continue sector Slide which was XX; In QX to contributing decisions strategic. the as X% prior strategic to public sequentially. was expected, with business declined XX% decline. segment revenue about results year which revenues we government impact XXXX the of Compared is the of to

loss sequentially our and we're In local payments. in although, is year-over-year. in business revenue impacted transportation addition, being Trends topline increasing state, declining stable business by modestly with

a EBITDA $XX with growth our more were in As was dis-synergies than business. offerings. in decline, core adjusted compared respectively in investments $XX and profit down our driven million decline revenue tolling million transit Segment parking and by the offset in XXXX photo by in and QX

in our the within prior to this of by other other contract quarter, New of provide Slide MMS York period, I'll was XX, which Revenue driven $XX largely year segment on declined the overview decline by versus million million. was $XX a Moving the the segment. XX% an

Our once provide our contract we update have for discussions final and reached MMS we'll have the we client a a all New agreement, progressed agreement with York parties. by have an preliminary signed

enterprise remained diligent to $X the the the in being education led portfolio approximately lost year-over-year; $X this which an businesses. and efforts student profit approximately of business have in to was has loan quarter, the profitability million and improvement adjusted We health includes quarter. education which a million in business our driven nearly the breakeven business health both, segment improve by in enterprise the million made improvement The this $XX

large completed this quarter divestitures to $XXX our and of which termination to and largely through compensation will the primarily $XX within in in also this million million flow still of will around we we from requirements the QX with that of profitability CapEx flow and terms MMS was profitability $XXX accordingly. operating flow the our CapEx will Cash million million million finalized the generated in quarter, not have driven our compensation flow inflow would Slide deal cash seasonality. be QX QX relationship During QX Cash successfully effect of our forward. of year-to-date. dispersed operations plan. extension Free the the improving an adjusted in this extension, moving year-to-date. deferred free will flow is from overview year. a was XX provides $XX out and $XX plan and investing new XXXX, in was to in the cash the taken be and deferred $XXX cash although remains million to our XX% expect or still flow guidance which flow million quarter million; from the in-line year-over-year expect usage contemplated $XX of QX strong for employees approximately from X% a of range $XXX was year-to-date. prior the cash million in guidance an million third million is Through of ultimately want approximately revenue million due quarter, by year We was typical full be our EBITDA flow XX% $XXX a prior in cash of to flow. fall was be from our cash free on to our I the this over improvement $XXX terminations proceeds to $XX adjusted in the year-to-date; $X free highlight

I'll Slide to capital Turning structure. update XX, provide on our an

excluding proceeds $XX from During QX million million cash in deferred the $XXX quarter-over-quarter. plan the increased compensation

had repaid fully balance end of which of our We million revolver an outstanding the also June. at $XX

our spread. October. in XXX repriced treasury Our reduction loan the was completed again a B interest resulted team The term point basis opportunistically in which repricing in

With have XXX we by our start reduced the since the now second spread basis of repricing, the interest year. points

major more most recent the in it impact savings QX, While repricing will beginning a annual have in will not meaningful XXXX. result interest in

growth turns. and than our our net adjusted leverage target improvement cash balance, ratio X.X the currently X.X EBITDA, down Given less revolver of pay approaching at in our our and stands turns adjusted in of is

reflects expect for year QX Moving our close discuss $X.X X.X% on the to decline still wanted divestitures. versus the We constant XXXX. of Slide XX, X.X% guidance the I before between revenue I completed and XXXX of currency in in impact to XXXX revenue billion which GAAP

the trends of date lower range. of and the the in to given impact be to divestitures would However, end we the expect

Given adjusted the that QX the about factors, from combined hurricanes about estimate X% divestitures on growth. the with from impact now impact a EBITDA X%. adjusted the same we grow to impact the EBITDA had expect We

adjusted flow XX% earlier to EBITDA. XX% cash be as mentioned expected to of I Finally, our is free

progress As to we the in $XXX million EBITDA growth Ashok addition aiming term Through long-term in the and to making mid-single the $XX and will achieve divest the million targets near margin completed versus we these in in strengthen core our an million company our our business an we in adjusted believe mid-teens. portfolio the actions, on QX. position revenue and are core to mentioned revenue are earlier, of non-core $XXX additional work roughly to digits of

Before for questions, additional to Ashok some back call turn now remarks. will I the we take your

Ashok Vemuri

Thank Brian. you,

and provides technology model. role a our our of in distilled in our wrap to business we offerings positioned are minutes company; of up, and more the picture Hopefully, how context few this we some chain. our portfolio Before a our broad client's illustrates I'll present for spend value

members. Across essential they range massive employees, see doctors people we can an value our scale. interactions individualized We with whether our the Slide data the interface service intensive manage and the on citizens, situations, on participant in clients. of industries XX, of are chain insurance work we behalf serve the happening are or clients of at they you to are patients, repeatable As

the and year, to basis Together for Fortune process offering claims of in the government full to become the every and the outsourcing scope through and administration scale are an of of and their auto our interaction; is care. long technology list. business here manage systems telecom, end customer combination offerings are customer bundled some tolling service complementary Our manage funding history management country a reference industry some U.S., To operating portfolio, decade's payment automated the bold we ensuring points; care some over compensation the XXX we a the of a provided platforms with benefit interactions we we and leader. from covering for HR our broad manage range our stages enrollment, in for healthcare the in benefit provide business workers' largest brands a programs processing, provide for XX% across from approximately an of XX% delivered gain of to citizens the of user the of $XXX services appreciation world, we range account companies base, U.S., of to in all largest to manufacturing for the ambition client approximately billion the deep transaction

most interfacing manage the We largest with the the essential some and companies are directly of world serve. the aspects and in with valuable they people operations a while partner of

Looking of our at platform the diagram that and technology this our is revenue. layer over bottom solutions two-thirds of support

multiple more Merge Life@Work processing which employee award-winning providing health integrates Compensation our platform accounts home Workers' U.S. administrators, Strataware, to platform; multiple our employers, one our a on Worker's for for to multiple solution integrated technology System, supporting HR sources experience; consumers way processing BenefitWallet, include our BlitzDocs, U.S. data on-street quicker all helping in manage Management over both bill improve claims; spaces; makes health design organizations collection toll electronic and and reiterate measure, and ability our behind to outcomes; and transportation surveillance U.S. solution hospitals outbreak and to internationally. cities parking by is management cities off-street used solutions; I our platform and states rapidly financial my our manage, loans; of In and to information are the the we examples HR product Compensation closing, for for technology Some it medical process platforms clinical instant lastly, X,XXX and used approximately optimism mortgage a XX% on. manage next-generation and easier Vector, Portal, in portal of monitor which review Midas, our want and Parking deliver that for disease Maven secure personalized trajectory

for business Conduent We clients transforming a to proposition value our delivering growth-oriented are and become a company market-leading services differentiated investors.

to achieve committed quarters up our continue a company. open is work to necessary leader industry our an to While to through come. I great am we've to have sharing I'm company's is the look to and our there clearly to let's stakeholders will transformation, for drive we progress support create supporting you vision. opportunity all the more work of I on do forward with changes all to made to overtime significant our that, more many and seeing and dynamic exciting fortunate lead the levels. this call the organization many the for Q&A. With and progress

Operator

today will Cross first from question of Instructions] Research. And come our Shannon [Operator Cross

Shannon Cross

Thank you much. very

comfort at been can there give the follow-up think opportunity related the to Ashok, at to you commented have the company that of how some just commitment anything Infosys, maybe the out address to you Conduent; just I your articles what on -- you concerns. news and opening about don't could CEO about you you know perhaps more investor's

Ashok Vemuri

that and to Yes, air Shannon, the all, the first opportunity I'll a bit. for question little it clear I gives do me the thank you think of

industrial-leading know that committed This we shareholders; be part my in place for that support a Conduent is my are intend journey than state exciting an to my So years. intend clients, very that of I journey to Conduent, I'm to all here. have a will is and more that midst the wanted board, to I'm see I progressing to I that completion. the many and a professionally of market-leading well to employees client's, and building committed as of be to and profitable transformation I over enterprise emphatically years to of year journey think sustainable and team. is cannot satisfying and our you be multiple come and exciting that

not whenever for you Given overture. have have as approached been such the assignment I engaged I above, described, and an any such rejected

I'm end as the that. that of concerned, is far As

Shannon Cross

air. these scale do they of say, -- unless some that of sort we and this contracts guess you. the to contracts, have you, now, are remediation should just how curious is one conversations potential on as quarter; with more look, are basically you Thank how -- just remediated the out are thinking I'm are too smaller of to I are can't contracts that the that talking able margin; how like give that I margin mean, Thank question, the they right you the And you're customers, about what know, re-signing us of there challenged about them? been you some clear just they just the are of you during follow-up the working?

Brian Walsh

meet we and contracts over quarter Good to We large of of two that had What made contracts was on progress it's number QX quarter, clients or the remediated relationships, In other a we and last client discussions then plan, a and handful we kind the an those of need to we exit needed so of are losing how larger discussions that's working in last profitability the year morning are money. made framing smaller. and addition, contracts segment having that we're the the MMS progress be about they on in with our Shannon, still been Brian. requirements when contract. we the in in talked were need the

Shannon Cross

are for are And and lot pushback? accept part customers willing move of a to the you seeing the terms or forward most your

Brian Walsh

work But and how in see well. the discussions their in needs some to but us the is in the that strategic fairly So contract, that we'll company's obviously, general, going in on the as there smaller understand and taken, been actions in strategic they general, going we've partner and progress. make that well so going some but will discussions, a a discussions part us; is there pushback some recent be sometimes clients have have money they view of of of with some to forward want they been pushback

Shannon Cross

very thank you Great, much.

Operator

The next question will Morgan from Essex of Stanley. come Brian

Brian Essex

you and good quick Hi, taking a the question for for question. thank you. morning Brian,

to or I the starting to You company? get anticipate M&A of on that debt wanted better build-up be and guys cash just utilization cash balance need understanding prioritization pay do How a is sheet, we restricted the it much down of the cash for might much are of how how you run going and to whether of forward? some

Brian Walsh

out paid end terminations the will million of going balance X.XX plan. we QX employees Brian, related the is that We're on employees all be related so is deferred sheet to have to $XX of X.XX of the million and at year restricted. -- to that $XXX quarter; that out pay plan; the next the to in comp the to

target. turns or company, to how that's with related view opportunistically pay proceeds then the deal continue that's once what international deal we've invest would to will our would divestitures In invest make corporate we so we the to of that to to to leverage in acquiring that's the million we business changed plan and company, the we nearly then, be said of but the use our think down business used and final Obviously, balance in under invest cash we're When view that that. debt we've to with fluctuations cash about that's companies. more we there, want free that much progress to and about and requirements addition, free $XX on it balance operations the target which needs to flow And to in said available the our X.X overseas; we of the payment restricted so to pretty to million from hasn't $XXX the of our ratio working need purposes; fund we restricted million probably business getting make for also $XXX would cash. with to into is run up capital there need have is cash we we look the the to rest

Brian Essex

a York for for then anticipate accrued I might you agreement And from caught reached impact some be preliminary do the What understand agreement? New it. contract, the cash -- MMS you there. Got of you've liability the that exit

Brian Walsh

be other cash years, be of and split million we about and is then will So it the impact the between the be spread QX, finalize assuming and QX to half over five agreement. it half $XX anticipated will of

Brian Essex

Okay, that's thank helpful, very you.

Operator

from Frank SunTrust. next And Atkins of question the comes

Frank Atkins

how Thank to discipline added about maintain that pipeline; work ask a much industry-specific are in wanted kind the profitability bit doing you what pipeline? and of higher very that or value of on you to is I much. little

Ashok Vemuri

our platforms problems. the industry-specific helping company and that some is addressing us tailor capabilities about in So actually create of more ago, we our quarters of -- verticalized couple these solutions, pipeline our a verticalization

of will progress at example, more XX I a labor your But new get example, which traction. if act doing of that's -- work off will deals. RPA in space in of distinct of that higher we clients; the the XX deals chain So XX% pipeline would a yet automation to that. end about if not we oriented sort finding the financial and future think take, higher would look net from is for I I probably RPA with be analytic order. XX new deals for with huge services, of kind the -- of at are and the Phil the business compliance in great question, where so Clearly, which process on say we signed more I is value is were I our

continue fairly in I out the is with in way we the segment apparent is results I and some the quarter. deal with a small the the in to both pipeline shipping think the value, becoming both value way delivering are clients; the stay that commercial the So to albeit of and of that penner [ph] satisfied this have terms that we

Frank Atkins

your helpful. mix on-site And can the ask; from actions great, wanted comment versus global Okay, taking there? delivery and some to of I you of engine, capacity, a update offshore of terms kind you're follow-up that's in status a

Ashok Vemuri

that, this it's albeit, So to it's point we've from to little -- think compared out as where are significant important on behind. some we I that we I year, earlier of think started made progress our competitors,

would our but from to XX% we've to we gets global I XX% today we increase more. that that centers, intend from now to say done So increased increase that, about of one-third delivery intend

we are sector. public identified which not impeded we by aggressively model commercial business course the opportunity our global we Jamaica does the sector for as our use global deliver point from as not clearly to of also of our clients sort own the delivery hubs, only this where are those sort to but time consume you that's which and We've as India, Philippines, to the the us and Guatemala Of intend in at services of U.S. centers provide delivery services do concentrated the if can will

we both much using for global be the clients, more will what how we model and do we ourselves on delivery our So to deliver aggressively.

Frank Atkins

much. right, Thank great. very All you

Operator

question Jain the next Puneet And comes of JPMorgan. from

Puneet Jain

question. my taking for Thanks

AI-based are of So Ashok, this including in chat software's Oracle solution. force it's box under like -- core sales lot

business; adoption increase does what customer for rate? that market Conduent's addressable that So or it deals does mean care

Ashok Vemuri

of out, the as we and earlier, I deals that XX did the have new past quarter the at the RPA So look done Puneet actually based. two quarters; -- I third of in sizable we in was if you were pointed them mentioning that deals significant number

ask scene the was of also chain, in point seats we the be is whether because efficiency, whether experience business of driven by replacing with web-enabled doing same a a terms it have the etcetera, a all a technology; either entire that is in we with deals Brian not be perspective. will, so from customer if But expectations; are experience we are performance chat, the remediation you robotics, of deploying can it's degree higher achieved you for of to so needs it's our technology an when the improved a people for some talking only customer it's more yield -- lot improvement productivity, go kind the is on by amount of remediation of value degree about our technology on remediation a up in higher you clearly, know, and significant they of just but the box support So any making phones. the to if picking box on chat of clients,

U.S. which of it, part the in and the up is as created the amount picking So on AI, lab, in using using voice even a of business. India, well significant this on focused aspect as -- we're we've the Bangalore, phones of both we're a particular

conditions through of of through and is two-fold; view So the need through my automation, have, robotics, and but back to contract in, the we productivity one, efficiency remediate is there AI. that we with the degree a business terms of we customer higher our care go drive have and clients that kind also

of my it we and on in positive are Now my all revenue labor it do will have have very definitely, impact it impact an is profitability; have the my in what short-term number a do will think that terms any impact on number it will in. so will but not I

willing only that us. that smaller to but a with you talking number are much are large of that fortunate is of this that all mentioned are mentioned people not significant we of or very that to have companies competence level size players answers within you to, able names ecosystem, but have jobs superior in not we pretend we have the much technology partner technology names we are also or us, do create but have to Some the the with to that other be a

Puneet Jain

from targeting replace fast EBITDA to divestiture increased But cash divestitures in year? as Got next the impact you can acquire intend strategic it. to enough acquisition. deploy for And revenue and run obviously you increase, and divestiture rate

Ashok Vemuri

has -- timing as quickly a be to right they acquisitions be be work we also in what's the based on but there the So out as will fit market. will to we and can the timing and have difference

we be cash divestitures is definitely again, generate, on proceeds that companies, or available gated there what for and XXXX a use part be timing but plan opportunities debt and are. cash we that pay used the timing will down that the the for opportunistically and flow will to continue our from what's we'll -- free could be So to of issue acquire it

Puneet Jain

Thank you. it. Got

Operator

comes Bryan And our next from question of Bergin Cowen.

Brian Bergin

year-over-year how I you can start detail across positive then relative categories? more to on surprises XXXX? challenging any as improvement takeout wanted you you. Thank cost the And progress; or various plan, is to think your about your anticipated spread start areas to

Brian Walsh

as $XXX positive savings Yes, on-track mentioned $XX experience customer will as this originally so we're million was where is making incremental million We've target was that's and million cumulative for care, customer year, much lot year, the and and overachieve of that the are the QX given real we is this we that significantly. we'll yielding and the not parts $XXX that remediation in impact around about longer that although taking estate, year, be talked and beyond. still more true in progress, The are a year-over-year.

some around benefits support space. transition to come out those given year call there will estate, progress year that's the the of lot G&A areas lot a So of of a incremental those in of a driving two IT. We're functions year allow is and this the benefit next lot that be the work and transformation would real year-over-year IT and making happening

Brian Bergin

then, and you change metrics to the guidance just EBITDA revenue? on relates versus the the XXXX dispositions X% it can And Brian. Thanks. thanks clarify as and for just Okay, on

Brian Walsh

Sure.

end had that we're those million the end we about to-date and is be of X% $X we'd On impact at decline, impact and the we're the again higher those the calling but then the divested sticking the and two having the longer QX range, being that is it we're of items, weren't why businesses million on hurricane not in in X.X% original X%. growth range. there of from revenue, from If the $X to of so is QX, impact So QX. our EBITDA, that's and divestitures, with any X.X% for about guiding the lower adjusted to guidance -- given QX out trends divestitures

Brian Bergin

Okay, thank you.

Operator

a have Suva of Citi. next from And we question Jim

Jim Suva

into you signed adjust the a the value slipped in that shock. what help increase maybe and if Brian difference much bridge total for yet looks total combination the for million, still even contract $XXX has like those Could of contract between both down and about it $XXX or each? understand to of Very you pipeline the it's quarter-over-quarter seem meaningfully million me how year-over-year; meaningfully we are closing, should think contracts QX better

Brian Walsh

the in TCVs million $XXX was So total contracts. business new two the for

actually we on You clean lot making work the of quarter a doing this progress was the also progress increased transformation, sales the we know, we're number pipeline. to up that sales have, first of pipeline people we're to and

industry progress decent those QX new a we first little has and of to we number we've a people third verticals deals the expect half lot in realign strong been finally of business but there had slip the work So sales year, made and sales the quarter have. we incrementing bit the deals force because in of actually now had the and two signed. But was are two progress late we these a

sales with So where are transition, given a the it deals. and the we two comfortable was like feel we quarter just

Jim Suva

was increased your signings mentioned to that you increase you headcount purely so Then I open but in enrollment such as new seasonal I heard or was seasonal as, trends it business? Okay. due total quick thought follow-up seasonal; just a to and due increased

Ashok Vemuri

basis on well travel because retail went company the for headcount and overall seasonal like of up industry. the that enrollment, is one things; as two So a business as sequential

both pointing for was more we our are more much Brian one in net well that months net XX time sales team about first is that. we're about what as as management become sales new specifically excited people, as excited out the engagement is, think and headcount, positive; so finally I

client as ramping both for enrollment, well is the around engagement head that has deals what as QX, are side, around and count, side happen We that on sales gone but up exciting again, also will the hospitality our industry; up. anticipation as sales well in in us travel net is the for most as the

Jim Suva

Great.

details so and clarification, understand for fully you and I thank much the Now much appreciated.

Operator

from Montréal. have of And of a Keith Bachman next question Bank we

Keith Bachman

revenues, had metrics base could year profit away I'm a then for XXXX; break -- A) hoping assume in effectively have strategic you different Thank about from think what at provide was with I revenue, in you're your it be Then I will over do that business that can where a background associated B) I an can't to come for as well calendar the 'XX? calendar it call number? you as a make question areas; to organic continue positive on some down of to some 'XX, what 'XX you will noise, you you going today. and apologize presumably going is least couple particularly directional actions in going Europe to And if I impact you're what I follow-up. because be year these deals the in up walk business last divestitures of is, M&A, the and 'XX? calendar have a could And just net be you quite to in impact didn't Thank that's I the question hear going then you. between the I number -- it.

Brian Walsh

into directionally just we the about about feel which build, market; not equal positioning the way sell and that market, good I we solutions [indiscernible] the we to capabilities to our believe So the but cost on-track. transformation Keith, we kind saving of reorienting program are the is that

into the part they strategic be in as tracking they will do are in some and more longer also of they call come for are decisions up give to but established on that QX renewal. QX having that much clearer unchanged said plan, come portfolio long-tail in deals we will when keeping actions that picture there expectations, we an especially we that take, be it these of which the we some we of transactions guidance we our to have a the that typical, But February. all short-term, mind a by our that's believe and -- want around our result the entertain earnings term remain targets that as out around February, our not call of the will but of result impact impacted provide is 'XX in official As we decisions intend things we as you are will of close mentioned; to our that, earnings a

Keith Bachman

calendar to 'XX just assuming clear topline for but Okay, probably well? be will we're that actions be strategic that there as that's fair growth, assumption impact year a

Ashok Vemuri

getting remediation, go there through So the will we we will impacts; vast of are decisions have of but be our us clearly anything modeling. there are see the that's in where progress, contract some -- contemplated how we getting discussions take And and them making we're those as of a -- to the us to to again, lot behind we're if exit, been point and go. rest impact

Keith Bachman

I next follow-up my growth on that is; comments out to that me, would -- assume? that's calendar is so is the EBITDA of apologize then so appropriate, -- for And business for surrounding I as the for down but assumptions you I our there said, difference for background M&A then and I'll have have these going EBITDA noise. to just between me, timing disposition, -- making previous perhaps think year it to and be Okay. adjust and year the entirely excuse decisions 'XX; growth And we'd see potential to get a floor probably again, the

Ashok Vemuri

so the impact revenue to we've of you again, on about X.X% to-date, EBITDA and is $X EBITDA average. out about it's $XX if million. margin transactions So is QX for trended impact X.X% out; the lower revenue of the $X And if million completed said the an which turn company you million that's than in

having without additional and those as to-date; we the both and will and start there into you we're as difference timing are we'll views at business we're those the we impacts transactions be get give complete progress, show So look final the with 'XX. when transactions and and to deals working, closer transactions to those transactions a will

Keith Bachman

enough, fair many Okay, thanks.

Operator

session. this back to Vemuri And Ashok like I for our closing would question-and-answer concludes conference to any the turn over remarks.

Ashok Vemuri

go significant that sales now transformation, we about about strategic everybody to of number little we cross-selling, businesses penetration thank I'm but to very joining the lot call. as pleased we've in segment, line made -- we want believe I'm in real be over close and the glad start our forward, that would were not and service on only able Divestment; out that talked service and we sort to tell signings, sector We've we a Yes, for that service deals and has we journey fairly with large only finally very are as performance probably substantially improve; -- you want team don't the thank the that. of close our we core our really signed actually place, but two also the a that were to seen our albeit to talking these metric clients we our in. more able QX will implement progress our obviously business, on are we slipped our go-to-market divestments don't QX because you in the business excuse our we into we've I gratifying. two amplifying quality of a fact are about a with We talk our redefine amplification be want remediation's commercial been for us exciting. highlighted we and to QX got strategy. characterize increase you estate. contract and large very me, excited engagement we

a a much again been to hope But So myself; satisfying I this to about is you Thank with joining on it's was call see you. I talk have which think and air could distraction. and so been you I'm happy for thank able you and clear to in the the -- quarter. very that which quarter us that

Operator

you has now conference for attending concluded. presentation. today's The Thank

disconnect. now may You

Conduent (CNDT) 8 Nov 172017 Q3 Earnings call transcript