CNDT - Earnings call transcript Q2 2018

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Operator

Good morning and welcome to the Conduent Q2 2018 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.

Now I would like to turn the conference over to Alan Katz, Conduent's Head of Investor Relations. sir. ahead, go Please

Alan Katz

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

on call me Walsh, Joining 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 site. the your of our Relations the being we Conduent download questions. with prepared this and A webcast. available This Web SEC is

this week. We post will transcript later also the

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

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

Ashok?

Ashok Vemuri

for Brian cover second the you operational a thank and making call. performance joining everyone, company. I XXXX will morning, interactions are we digital earnings creating quarter our towards progress Good market-leading our financial and and and

take your We presentations. will following questions our then

to into our want address contract tolling the been a second of our government the prevent a turning Before on the highlights state I in that to has recently agreements specifics. press from agency. quarter, going matter the us Confidentiality performance around with

system, ramp that will the a new arise updated issues tolling that statewide However, system. a involves transitioning legacy new phase multiple of to I particularly in integrated start-up and implementation the tend to one and note of systems

these contractual efficiently our the have resolve commitments. resources all necessary issues capability We to are dedicating to meet and

track our We making a towards good States performance timelines. in are an to agreed in automated United strong upon the and tolling address confident progress with our issue this ability are across industry-leader space the record, and are mutually

results adjusting and accounting slide for our impact to now the divestitures. overview to I our for begin let's performance an results, our the quarter. of our last second will be new quarter, Similar three on XXXX the standards Turning with second quarter comparing of

continued investing on our platform-based the focused selling We digital strong in and interactions offerings. quarter. We our second in remain and performance

top the progress and And so on both lines. bottom

operating back the quarter EBITDA to again past over It by our quarter quarters compared was grow future. margins this revenue up end. in adjusted growth. taken, our the growth Adjusted the basis for will the the by to this of organic outlook the well into gives for improved was terms year achievements. from flat versus again last total grew adjusted and EBITDA In a year, our XX%. demonstrating baseline confidence as revenue progress year half Adjusted towards on noteworthy margin revenue highlights, us ago. actions us to the Flat XXX of XXX a sustainable as two Profitability I up gives company quarterly points of several sustainable, to the X.X% year have strategic continued focus also quarter points profitable reiterate with basis we

prior we our and size, the we our are experience Our as global was digital is deliver a showing quarterly sales higher in footprint, expense and revolver. our and growing the portfolio. benefits our clearly We customer risks. will remediation the meaningfully vision across notes profit improvement the our trend tender on XX.X% efforts value program a clients the digital moving address actions on experience of achieved offerings; of our had users. largest negotiate We higher reprised forward. history happy These offerings. win of our than result such and thereby completed reducing loans client we term of and increase and that expertise to focus lower to one and transformation technology well-equipped contract imperatives best-in-class margin this This we and to offer portfolio focused senior signings typical clients are of With quarters $X billion associated including a our particularly of shared a able deal notable three-year of launched to that and with is our platform absolute a interest signing for largest to customers. contracts this TCV This announce price our tenure are in the global shorter

and and we We continue us offerings drive which a to growth will interactions differentiated in provide with meaningful solution invest set. expect digital best-in-class our

as growth our public growth trajectory standalone held our most designed our We Day revenue outlook long-term for key we our detailed on solutions of business. our on a business interactions, core an units. Analysts as updated Given view We provided digital a first business of around company. are core and driver each stream managing this see a

Finally, progress plans. we made divestiture our meaningful on

Analysts We off-street have commercial our two our business. Day business since vehicle divestitures closed and including operations our parking

HR consulting in business near-term. actuarial close our and We expect on of to the the sale

$XXX local signed an that also and progress divest million group the in on care revenue We divestitures in $XXX businesses generated proceeds customer million. which contracts. revenue transaction approximately signed of after-tax to close million of expect $XXX be XXXX a and making standalone announced to QX. we expect for in closed from additional the to select government also of all agreement We're We now this

have with buyer will core This core launched are quarter seamless and positions We am are a technology this another growth the strong in by the clients' we is interaction be in a Overall, yet making competitive our needs potential ensure offerings meet powered to organic and and near on progress and the that with are to for right company year-over-year this our digital I ensure the we by outside transition. satisfied businesses. the parties process our front. working finding us platforms final step business rightsizing revenue future. to driven

our contributor square our on remain consolidation goals. Now estate this this target quarter. with and real IT cost on progress Data on deliver XXXX. consolidating program track footprint almost four. end initiative. down We $XXX let on year strategic me a total down of savings network We remains locations consolidation QX XX% year. transformation center on for through our from XXXX large transformation highlights in to footage our million share with efforts I'm are track compared slide XX% total the and of our made some additional cumulative the by

technology systems in as best and Conduent breed invest client-facing We systems, enterprise to a as state-of-the-art order such payroll fully systems. well of cash and VI continue as system procure modernized enterprise internal unified to to pay

more productive efficient and the tools become a to leveraging company. latest CRM more smarter, are We

We and have also made of spend progress overall absolute and revenue as dollars flat a percent on SG&A last compared management. to expense in our year. down was

We within G&A are while functions marketing to focused and on continuing sales invest costs line. in the remaining

go five, our update quick through a slide to on segment I will Moving performance.

again grew our line on penetration, selling this reported was meaningful improve business we Commercial benefit quarter. expanded showed actions. commercial basis up service saw cross to year-over-year for our continued down interactions revenue with X% XXX platforms. Our adjusted Profitability of but digital and margins when a the as business of strategic EBITDA improvement points uptake X% adjusted

per was X% $XX,XXX employee of productivity up revenue result, year-over-year. a As

European which of well revenue, accounts growth new with also commercial several for business, today for client Europe. positioned in Our XX% is signings

our performed deployment. margin efficiencies, was strategic decline down has the increases, has the by impact year-over-year about profit out during EBITDA Revenue improvement. flat of business points but basis operational a X%, of Day. continued actions. sector price improved and Analyst shown The new margins as consistent technology flattened with revenue public outlook including result and given Our Adjusted recent was XXX

result, revenue be to continues industry-leading with per approximately year metric. last year X% was a $XXX,XXX productivity compared of up and an As

of billion quarter Moving a six, signing had of terms sales company's the QX history QX; X.XX in XXXX. our slide I in with will signings increase We XX% pipeline. and signing discuss performance the in highest to compared TCV,

supporting past next our X.X, outlook growth this increased book-to-bill Our quarter for to year.

are was technology by higher have risks signings coal XXX and are business focus New margins operational million. drive deals client acceptable our underpinned of higher value business. with that These platforms,

extremely pipeline front the by our go-to-market of conversion which term, and to growth of putting function pipeline demonstrates heartened new in quarter, one our clients. margin of engagement in that also our client business new rate. higher is we potential we deals are existing towards of yielding and sales results driven last with as right better client This over growth is I'm team; Our by of X this talent higher and XX% for XXX our see; quarters our exactly strategy the new rate in immediate with prospective traction, renewal the business confident and conversion the next business gaining signings. our investments expect the first a I'm in and step will reflect strong is two, quarter, several engagement compared see sales pipeline that billion the We teams. new driven the by by up goals,

win a member plan Europe, at This to major health help a client company their we capture footprint their automation modernizes continue segment, one In market share in provide consumer was and in four-year of renewals clearly a the experience largest outcome. demonstrated clients. driving where win one improve business, a the the XX a space, Aside a of industry. large In with our largest In professional digitization learning win to for This healthcare other Conduent ability client in financial satisfaction its hospitality had services significant and and awarded competitive renewal client notable firms, from Conduent our to-date, in better client's we the industrial add-on this achieve California. the for new world's a was based engagement. transform business and wins automation we the commercial the grow highly our services our contract quarter. significant omni-channel and space several and top Conduent had and

vendor suite where major and management modernization will for maintain As and wins We design the collection healthcare expanded part provide system. the win, were state development new space, In government work our had payment technology previously large experience. content for contract on this as several citizen's services. support sector. of administration public an including transportation fare the services as modernizing the a agency, well transit In awarded the technology is completed we international automated we to space, numerous in we a our U.S-based that Medicaid innovative we project a learning and

of renewals, that conditions. terms with we of clients our extension terms pricing health and secured increased more included In one favorable enterprise an and

results, litigation, such matters. company. to defend responsibility our our in We that understand pending continue in all I a to I ourselves as recap regard will public Before vigorously note we

disclosures past, the on filings. in we will done have any timely material our developments make we through As

sixth we growth. Let margin have quarter expansion quarterly me shown and our the This consecutive recap year-over-year EBITDA is progress. adjusted know that

future. goals. organic right positions year-over-year long-term business our the for well on are XXXX We margin in clearly sector business and revenue The towards in back-half our into encouraging, the the and and public commercial of the our growth improvement is story us track

progress to growth We business. our program strengthen EBITDA a drive adjusted in platform-based to for on and areas targets. in for balance that, more offerings Operating line discussed will our is our announced and recently in LLC, at expectations, divestiture up CEO new and growth our then for our some expense. brief Group and continue a will our take I us as financials prior to invest our Day, position the we and in long-term lower us our key we profit government to And have believe achieve leadership Analyst growth Conduent allowed our new interest make it will Transportation has detail; Brian? through identified transportation business, Brian, technology and with With finally, Q&A. to sheet that us Executive we Chief remarks the opening

Brian Walsh

Ashok. you, Thank

and quarter, factors comparables. several financials impact last our As will Day, have I reminded at everyone will Analyst our year-over-year XXXX that

in those our results accounting in throughout after postage numbers how revenue. the standard. XXX we and in presentation recognition the revenue XXXX standard well impacts completed change adjusting will deferred divestitures recognize provide and exhibits the as GAAP for appendix, the we of adoption and accounting that QX such, this pass-through As year-over-year we for revenue the This primarily

not have on and for results parking XX these vehicle June respectively. completed the off-street and We adjusted operations we of which business, divestitures July commercial business XX

to expect historical results. these We other our move of segment the starting into reported the third financials with businesses quarter

constant adoption, overview the divestitures X.X% that Now impact for financial after currency organic for the of XXXX would let's results growth walk-through year-over-year the be show of divestitures approximately of begin by reported, down been We this year. quarter X% of will down quarter revenue standard $X.X still was able expect our the basis. the an and billion the adjusting for to as have fourth and and of on P&L. a XXX, accounting revenue we XXXX about QX slide eight year-over-year. XXX second the X.X% with impact down and in about Adjusting quarter on a Revenue

with declined in contracts. revenue XXX Adjusted margin been mentioned was points. margin operating impact progress further have remarks, Gross an of the basis for the would and pricing improving remediate improved. on continued improvement increased of from impact Adjusted transformation the year-over-year investments. $XXX decisions, increased contract adjusted was quarter EBITDA divestitures. reported, improvement initiative his while adjusting increase an the adjusted transformational Ashok million, gross XXX As excluding XX.X%, This reflects our an our margin SG&A strategic year-over-year, flat. in and the year-over-year on XXXX as of and basis. improving initiative XX%, grew driven the as and reported and X.X% primarily X.X% margin This of quarter and in remediation EBITDA by was to despite both

restructuring of with Moving below $XX million, and compared with were year, last line the full-year reduction our cost a QX line, operating margin of million $XX in guidance.

was primarily the Dallas business. commercial on $XX we divestitures financing primarily facility. of the XXXX, by term result associated gain about Our due gain dale had and associated re-pricings. costs associated our with the sale increased Interest $XX loan in transaction vehicle $X a of gain expense a primarily our quarter, the operations the cost deferred In million, of with as million acceleration the with of QX of million, to

The line as expense million some increased settlements in by we had other legal XX favorable QX XXXX.

driven quarter Our divestiture and was pre-tax $XX gain $XX net the or was costs. business, income in operations operating quarter an per share. by the restructuring income million, million $X.XX our in vehicle of GAAP improvement, on the lower million commercial second income the $XX improvement of

was million provision $XX prior-year to share, our compared with be this We year taxable expect and per and compared planning. we of operations of tax longer XX% now lower offset and ability the be XX.X%, note result period certain by impact This XX.X% vehicle with Adjusted have million, tax the a in to commercial adjusted EPS rate as we increase of result period, was B between adjusted will to foreign Our our expect $X.XX full-year the in QX net rate was expected to quarter tax of compared divestiture. XX% with credits as result provision. the that tax a adjusted income applicable the guilty $XX corporate as the tax expect tax of prior tax utilize XXXX. to associated up and income rate income. I no $X.XX a was year levels as the gain the the partially an federal

year-over-year and QX will last of The we the of other I through into standard. out are As were sector results our the segments the XXXX impact quarter, and the results, go commercial compare did public for I businesses and to XXXX the in QX divested adjusting that moved segment accounting comparison. XXX

contracts. provide strategic long commercial Year-over-year, decline results. exit X%. of Turning was QX nine, decisions by and to revenue we declined This non-profitable an slide to accounts segment commercial driven overview

have grown we strategic X% year-over-year. would Excluding decisions,

trending remediation X.X% EBITDA our savings adjusted driven segment plan. Our including by revenue growth XX.X% initiative, and grew transformation increases increased is through efforts. XX.X% EBITDA Adjusted and basis cost Segment by increased year-over-year, by contract this XXX margin in primarily profit according price to year-over-year. our points of

Our profit despite making is we business. improvement the in are continued investment the

platform-based We are especially interaction digital well-positioned and relationships, focused offers. on to increasingly win and expand those

slide of sector results and Now contract have the Revenue let's public move in declined year-on-year the X% segment impact decisions on as to continue strategic losses. we XX. to

with have revenue our QX business. impact was XXXX. would driven sequentially, compared up Excluding transportation by the strategic been flat actions, of Revenue X%

transportation was Our other X% international X% as and and business transit sequentially year-over-year projects ramp up we contracts.

sector driven adjusted public adjusted this pressure cost public up profile points. year savings segment Our by EBITDA had losses was XXX while in quarter result with initiative, at public our XX.X%. improved strategic contract points actions. the this margin a would that XX.X%, up margins and as profit segment basis The Last the was discussed up the margins business of we we and business time, XXX EBITDA basis see of sector sector

the that revenues provided then also improve around. an outlook were flattened would We margins turn and and

of quarter our have I'm goals. made this of team these into This we achieving the that that in meeting the proud evidence has progress hard is performance. put work

segment. slide to let's our review XX, other on Moving

is only in a As which run student other now off. segment holds our the reminder loan business

in XXX The was the and businesses XXXX excluding million and year-over-year and both quarter, of quarter. impact a also show $X we slide divestitures. the in the loss from from results impact charts However, divested the $XX the million XXXX. revenue reports without the XXX with while include divestitures was QX in segment as million segment this reported $X Segment decrease on

to fully by We ahead loan end the exit QX. This of exit plan. is expect business the of student

of from lying This three XXXX with We million over compared XXXX. an milestone high an operations risk overview capital. $XX an in down flow have represents Cash million driven cash working will exit important activities in of was some an QX next inflow primarily non-core by to shedding of flow provides Slide two $XX unprofitable XX inflow in and business. the quarters. our

of performance was and $XX the not of continue now to X between in the flow But revenue with the free the cash cash X.X% compared CapEx strong increase revenue. our have in expect X.X% quarter quarter. for or does outlook of million CapEx be An to We year. last $XX million We this guidance. year. in around flow change our for

compared adjusted $XX million the in million Our and our year. last Dallas first of site $XX that free with was $XX compared driven QX free flow of XXXX. received was by the was $XX the XXXX. from This million million both in CapEx with half up Year-to-date flow cash the sale cash quarter higher our we

our dispersed will employees of compensation the the strong portion plan. participants be held two a million cash flow continue deferred for And cash In result to planned largest XXXX. $X of to will performance we termination flow free Our us positions to the commitment. first quarters so of our free full-year We distributed. well throughout for QX, do cash

to past, it be have discussed I adjusted operating As flows flow cash of free accordingly. in this cash will flow, reported out the our

We working million in out adjusted vehicle tax in free balance flow quarter the received divestiture on, pretax billion. commercial resulting of as from of end business $XXX In cash expenses are addition of sale related other we proceeds that operations the an and $X over our of of number payments are divestitures well. given cash

I slide update capital structure. an will our to Turning XX, provide on

as deferred cash cash adjusted adjusted was million discussed the the just plan of $XXX as excludes cash of compared million cash QX, balance well restricted associated end which I $XXX XXXX. compensation with the at During with QX

undrawn. quarter, it $XX additional revolver launched and moving tendering. we term A, the the interest our completed or save which expense discussed, will bonds with This $X will million remains us QX notes XX.X% in repricing an million in $XXX This senior loan of Ashok our also As our we loan tender annually. second lower QX in early million about approximately by XX% repriced In annually our term forward. B, and

Looking will the not our million. from would tender, commercial mind this that business our adjusted $XXX and any billion. we or And at just either signed operations cash from in includes structure vehicle balance proceeds the be balance $X.X only be the does the other adjusted of post divestures Keep include under that capital proceeds debt closed.

reported ratio at as X.X leverage would X.X with the Our turns paid be of for turns. that tender end the adjusted about the leverage Adjusting including we at is QX. premium our compared net X.X turns

We $XXX million continue to acquisitions. expect for potential to use cash approximately of

past operations we of business very We June our near-term. closed our consulting commercial business expect Moving parking XX. two over July divestitures several would on the the of of on sale completed XX, on to our off-street to slide weeks. sale We HR in close XX vehicle and the on business the our and actuarial

expect million expect In the to signed an this third excluding divestitures We million This also signed which XX closed cost in have the we adjusted week, address. the million close stranded will business million our to services generated in of XXXX. of generated revenue $XXX we that and and of business of revenue total, EBITDA we quarter. of government $XX $XXX agreement approximately end sell local by that earlier XXXX

of total expect divestitures of We from these where $XXX tax post businesses. million approximately million proceeds $XXX the pre-tax

would $XX revenue to associated we've of be our with bringing As revenue discussed standalone million overhead the approximately divested customer total, approximately $XXX cost million. from from million billion. are businesses excluding In be stranded $X previously, business looking to $XX takeout, adjusted total we are total also care EBITDA to the divesting divest we

that in June. XX, Day can Slide our remains on see I our note guidance XXXX from I'll unchanged close, Before you Analyst

$X.X between to revenue basis. a We expect and on cost currency $X.X be billion and billion XXXX

be between adjusted expect million EBITDA to and We $XXX $XXX million.

million. between and to XXX expected and a be of adjusted XXX between our flow EBITDA free cash or is XX% Finally million XX%

delayed, that While divestiture consulting the offset our government expect business HR and to this been business of local of our closing has benefit. the we actuarial

these We will our update when close necessary ranges we guidance if divestitures.

in and of Ashok QX I pleased outlook with our will take that it on our today for for the progress I'm are terms We in your and capital questions. performance the now we've before made some turn additional well-positioned divestitures the year over structure. comments

Ashok Vemuri

you, Thank Brian.

managing during few Day, past view Analyst you Conduent with its and company is essential key shared dimension first and they perform. work A differentiation. we reliance about aspects quarters as and for serve. service the the how our I of have basis on business on our wide our clients creates the Over supporting of interacting for its is with value At operations our and core while technology-led our delivery of Conduent clients people range a model the core, technology think how we

these offerings digital experiences and clients model our immediate and around three and operational solutions intelligent. Increasingly platforms client data solutions. standardization that honest business for drive become for enable building interaction Our developing build These dimensions, our both requiring individualized and personalized on knowledge framing are and are technology and service scalability have greater insights. needs

of specific shared on of now and with best-in-class will on solutions illustrate earl minimal this. are wins We disruption. few have technology advantage know-how that our a I platform-based process quickly this allows implement service incumbency offerings call domain to recent take elaborate achieve us to to I further the risk digital the our and are scale to and solutions. bringing people, of market that leveraging This are and to process

by significantly the at solution First By customer a experience of new supported hospitality client its digital we a engagement our engagement. digitally ecosystem. have offering, will customers the enhance that enabled this win large experience transitioned introducing is alliance into existing range of across through technologies our

intelligence modernize speed and to while a support and combined class best have our Omni-channel enabling understanding experience automation, in in operations. client's delivering scalability artificial We human and

continued facing was fleet. serve unit per as its client it cost to to grow higher Our

solution digital model health minimal get then towards operations. existing business to with transformative Our pivot risk disruption and may a

demonstrated ability renewal transformation. example our competitive company, major Another we California-based where health to a our the business highly at is foster plan win

and accurate have solution Over providers, the plan will members, and and and with tools. operations experience. model The exchange to an next digital technology enabling administration integrated platform data ecosystem implemented, claims analytics our platform's we will months, member state-of-the-art client experience block administration, new processing, across-the-board around and Once prevents fraud. a XX leakage, deploy improves along and automation an end-to-end enables provider access omnichannel

automation and turnaround drive administration reduce costs. transaction will solution the thereby manual reducing as handoffs, time as and well addition, In lowering

example Turning rapid transit transportation technology where we bus an of collection international our three the state's transit expanded technology agency, payment to an all space, in the fare across we've smartcard for contact-less our lines automated extended system.

the simple experience. technology transit any replace fare shorter to board system's Our payment fares. to automated works and contact-less with thanks transaction This up new Ridership line card a to riders allows cash old lines with is tap-and-go improved processing.

a time few we access making leveraging service new look digital platforms continuously leverage Q&A. streamline performance now, enables lines fleet control progress including demand. receiving open spikes freestanding to towards inspector Thank in to machines, These for interruptions and three real-time call technology, I response that to organization as improve you. bus a the at let's speak create Our to the are at the help gates. our shared terminals, This and new capabilities are at opportunity during quicker performance. long-term both provide that fleet just automated field In achieve I service are focus examples management All ticket And our payment the well system that the their closing, have our the to financial near-term both clients business. want hand and on as analyst transform we existing to the validators, equipment, vending shareholder replaces as all value. day, tasks also efficiency, highlight

Operator

thank Yes, you.

morning's the question We question-and-answer from will with session. Bryan comes Bergin now Cowen. [Operator first And this begin Instructions]

Bryan Bergin

by? can program Thank the costs, timing cost the on about on you're And XXXX? Hi may areas ask to now, that those restructuring, areas expected you you. guys. going through And talk your an I Good as as service morning. to stranded are how update that far far wanted outperformance? remove the potential in of

Brian Walsh

morning, Bryan. Good Sure.

end year, inside and this out them $XXX million the track say it be for continues than for of million to about so we're we'll this we IT completed year. tracking is areas estate two contribute beyond we're that, a real to by of will big those focus the getting first the that to is So achieved year. is anticipated. real incremental on continue $XXX outperform, and complete initially program XX% of year, contributor, at on quarters, of to this been year-end. and estate this beyond both I has more and

of the post expect six closing to overhead stranded to terms overhead able address In we the stranded costs. months be costs,

by year roughly, next million based rest timelines. the of $XX on it out, of this by the will year end out first-half of be the then our be and expected the So, will end

so to first-half goes that and $XX expect we away. a of million the next stranded then in $XX million overhead problem to have And of year,

Bryan Bergin

Okay, financials litigation. somewhat lot then any Just what pressured I resources public can far how factor margins We on questions say, be here how limited in? a follow-up, tolling update may that. insurance both? as provide implications to accrual increased there you here determined, received work regarding expectations? appreciate the the you trying is And may understand the And as understand complete the I contract, but versus that the imply and to somewhat of you that my the does on then can from

Brian Walsh

was the the the that original at done XXXX in [ph] first on $XX analysis based done accrual so Yes, fast time. million Texas on five lawsuit,

there's on And encourage our in as review the it disclosures our required we'll We his mentioned everyone GAAP. remarks, as XX-Q full every in when update to continue by to read this would I information. regarding material litigation. prepared disclosure the Ashok quarter

In financials remediate to one working as we we comment don't terms our EBTIDA. flow, contract. I around situation. confirmed specific the tolling guidance what cash and obviously typically We're on of adjusted free contract, the will the revenue, But just on say,

don't this on meet at guidance. anticipate an having our to impact our ability it So time we

Bryan Bergin

thank Okay, you.

Operator

Needham. next from question And comes the Thank you. Tandon with Mayank

Mayank Tandon

does that you, actually not signed you Brian, guidance, we guidance, Thank ones, guidance, make include change would this. sure to I in divestitures but other updated words, to just the morning. that… and only but closed on be the the didn't understand clear or want The good

Brian Walsh

and signed the both includes closed divestitures. it No,

so HR even signed we're extra is close we we've in local update actually revenue delayed things up offset EBITDA, picking then. government so some consulting And a each guidance the closing is if divestiture And divestiture is delayed, we is and now a other. or the in QX, we'll the those expect an though month required of when change that to and because time there close difference and

Mayank Tandon

just the been business ultimately to progressing? these little for of course, Ashok, it's wins. to numbers? hear actually Got start obviously does wins sales do it, you. investing you thank the that to a And bit then and tide about still in start some You've productivity? down And of now, great Ashok; turn? Could Right talk see of marketing, more bookings year-over-year. some that is new up when obviously start we show in the to deal sales how When

Ashok Vemuri

both or in the happen. people sales, client in farmers Yes, to mining so the continues investments the hunters engagement and the in

that deal it's in the for I I and our pivot is making digital large for the deals, and deals the expertise signs the think testimony talent our signed platforms. of renewal and fact the successfully in our pipeline, showcase team, the early using as just have into new rate, that we well reflected reflected the the that, we And to both to smaller client. large to the as capabilities is we think business interactions productivity are their

you of will of pudding the work to institutionalize is good to be Now, the such get pipeline Once get But signings, the the on we as obviously the And which revenue. team pipeline if and progress. see The gets know. is into sales that has and are beginning news here the to first kind is able into pipeline this signings proof step that increased, the in we're more the deals, a converted has then sign. generate going, we increased.

people feedback towards that the definitely from the of usual conversion this has that into to when quarters revenue. positive. have conversations in with as changed past. the happen builds I are few we the clients used changed the direction meet a audience my But go more being we more we think team, the I clearly more outcomes. driven signs for are have has the to terms I in And encouraging, The is and all right, meet attraction

Mayank Tandon

if from interest Should Brian, further million cash And as the comes can we do That's think about one of in as de-lever the these and squeeze helpful. $XX in your be just you more I implies divestitures? on in, benchmark expect for three quarters able well, the debt; using I to or that now the guidance year as expense sort in four. be next

Brian Walsh

premium tender turns. for. So, $XX there's the and We below. turns at about little we're tender. also only through at leverage spent right paid net on target, two leverage closed we the and and expect the the And our $XXX proceeds, unaccounted with We're target, a million million we've our so of signed divestitures, said million $XXX X.X we is

I forecast next this and much hikes two more year. when So forecast. next That year, interest the rate year, Right de-leveraging. for look more now, anticipate hikes too wouldn't is two we our at million rate $XX assumes

that's in what for at so we're looking XXXX. terms interest of And

Mayank Tandon

Thank Great. you.

Operator

Thank comes you. Shannon Cross Capital. next the question And Cross from with

Shannon Cross

Cross Research. Hi. Cross It's from Shannon

things as to vary sales about going sure productivity rate, there over I'm to Thanks. it curious well, any rate, think are follow-up. have to wanted I'm is renewal quarters. renewal a specific increase ask And the it I'm if to you And what in you but Just can high a that's I XX% But question clearly driving the in then put now changes? rate. the try what place

Ashok Vemuri

is industry-leading. clearly rate so renewal Yes, XX% of

sort few put is ability proactively One being -- place, are more solution. timelines capabilities stronger to of in before a client more the a in front go I the there getting is into the factors are that bundle comprehensive this. delivery, renewal of renewal way drive think and

we I a matter we fact experts positioning base. think subject into client lot that our more have are the existing that

continue this renewal high So rates. ability is of sustain to a these to resulting in our combination

Shannon Cross

And talk and the million divestitures? when divestitures. terms traction move still in good you you then of of acquisitions, you work terms think there. what market through in of obviously But sort targeted you quickly great. how are And you've seeing And Okay, your do opportunities? about pricing you'll $XXX it's obviously, made I the think

Ashok Vemuri

we regard that are looking acquisitions, we buying to a and definitely So interested to because they with capability for have this bridge have. the IP of technology gap are we looking We're in sustainable. before, set not said assets. not contracts We're

make as diligence financials, look those accretive practical So it pragmatic are are. well of be that if they order But technology-related some valuations, our out some assets, the that we of in there. both are that investments due the find in money to we the to you why to Clearly, interesting they a in are of of at sometimes where process the hard is a actually use good assets in way I and as are we appropriate going extremely is have. for comprehend

Shannon Cross

So accretive, I you'll point? only at at this look assume,

Ashok Vemuri

could with no paying intention want go software I valuations traction best at regard and a I at capability clearly the we digital marketplace, if situation buck to where think the really the look We The also of where non-sustainable, other. we is companies this to having clearly in that, the in to where it have will But beginning be space sort don't gap said to. accretiveness lenses, from I multiple which for is how going, we're interaction have of to become pivot which to victims make quickly get for. look and is we is one, market

Shannon Cross

Thank you.

Operator

from Thank you. Montreal. with question Bachman of comes Keith Bank next the And

Keith Bachman

renewal 'XX, And new on it, signings thanks calendar can with need was signings, weak. and both I are Cal do where had on you signings, the talked start XX the very you I you your And And wanted signings enough quite renewals Hi, interesting, you still is the revenue pick that the this current or given talk strong you grow mean could and, about thought non-reoccurring deck signing. signings backdrop but much. of year business backdrop business pretty annual slide grow were disclosure call are growth question is, when about signings. up? my meaningfully. I that by you your actually to the your frankly, Ashok, what very good down recurring 'XX new page

So the really you up see, before just think pick signings to you wanted growth? need new business to can about do

Ashok Vemuri

cross order Yes, And installed renewals is need us component in to drive up-sell of signings but our growth, renewals. to you business this overall level new opportunity and base. do in important gives strong an the

there my strong to until Unless have I installed So opportunity particular having given and there business in my also the we or are to which cross said a the two new very rich, are new business is the don't renewals portfolio, this. sustenance in stages for continuation need of and up-sell and traction have, drive in to case base that signings. growth. business particular And that, we and I elements have that

transactions business which the pipeline. of don't that to do not kind are want, et that want does or business, it we is have have real, world to of number is is of pipeline in do we one that reflective long you the a parts don't or it cetera. have deals A are So tenure

quality believe manageable They well I mitigated. is good. are are are risk are at level a It's manageable, So transactions. they the that pipeline These real.

So the into finally growth and into conversion we are what given, fact, guidance have many the we that we're that two revenue the flat staying signings of pipeline at in mentioned. do with confidence me after quarters, Brian we current from given this is our is fact that the this gives years back-half as many which now to year, signings, after the of of is which rate in focus on. revenue given able have that, And quarters the why

As we growth 'XX in to sound on pivot well that is as the expect footing.

very, are So important, important. strong. And very short to new growth is is, as is renewals yes, answer business your track record renewals question

we begins begin from and as New into converting the the to business pipeline signings into see to will signings revenue happen. signings, off traction

Keith Bachman

to chase normalize that a just cognizant Thank try bit sell you thank services and you. strategic businesses not. the away decisions. growth a And whether the implicitly related you of businesses have trying strategic tend those choices any to others normalized deals that's business that for and the those me. or you IT for for little for If as that rates normalized about business when intend understand to about so and that Okay, to question, you related decisions everyday more because strategic there lot I that's you still and clearly is something specifically else therefore to during of answer. you a cycle, growth walk follow-up course face companies those for decisions, it within or talk there's growth I'm is from when sell

Brian Walsh

basis we that's decisions where their tale clients clients And and remediate year monetize can we about them, a growth. about returning to organic X% on and we strategic point and that to to and all can get XXX, profitable divestitures we what XXX a we we the refer not try excluding when small decisions we strategic in expect long are when own be those there the access renew growth we that to excluding adjust we at a divestures and of so we talk that our them decisions very QX it's for excited decided we excited in we when this by lot talk and an strategic we contracts to flat, remediate lap

Keith Bachman

there a XX growth basis overlapped narrative the won't will of And so and will on on be the won't the Okay. an won't rather? any, be CY for a therefore, strategic be or follow-up because part actual normalized Brian, just decisions everything be you basis

Ashok Vemuri

Correct, the that the lower end comes and comes our we business at that off X.X% for part at presented the part of core growth that X% we'd M&A in from is range and be of to we Day on of that of organic. said through then XXXX that Analyst

Keith Bachman

thanks, cheers. Many

Operator

comes question the And next you. from Jim with Suva Citi. Thank

Jim Suva

yet million off I so get guidance? a $XXX and of those to very company mentioned EBITDA shock your contracts adjusted of comments rid much. Thank to sales your if about prepared would believe you be your say and did full-year of you off then you in

Ashok Vemuri

over million the to business, sort $XXX Brian. of is then handed our to So care back driven and just customer the investments correct standalone to you

Brian Walsh

would we signed deal we yet when because a not have so And deal for keep for don't but from EBITDA sign an, have costs we are not that our have adjusted that taken that taken as of we in adjust once money a yet business that's guidance guidance it our perspective out the an we business. historically during loses and out on mind

Jim Suva

clarification. Okay, great thanks so much the for

Operator

Frank Thank you. Atkins question next from the of And SunTrust.

Frank Atkins

my taking for questions. Thanks

sense First get what of is talent wanted platform, to can you retain if ask attract a out to question are and is there I the I delivery could of where delivery mix on global give update where and you of us an and talent? headcount seeing the kind doing and

Ashok Vemuri

increase so a particular cetera, be the center we're the with shoring Philippines, our drug and and doing skill which percentage et our Yes, Romania four a with way other on is like as India, actually cater clients. centers our delivery find this platform hubs global as and begins is to a traction have particular field distinct starting Guatemala or to or Jamaica it effect we

people centers hiring to are world. these who have our support are business capabilities technology the process We across and in

that analytic capability or in more more find we mobility As and interactions the of capability that a that moving towards is we're increasingly the digital more markets we serve.

we being to development believe investing they both bring talents where there investing that well hire that we to capable from for of talent those set so are the to neighboring perspective in in are So will business and a both training ideas it, North center more technology, client are in ecosystem they bring have we which making investing because of is the these are as our facing as a well the a be innovation if we as in From lot example as of cycle and that expect investments clearly up set good university Carolina, table. retention our that's in effective perpetuating the developed. from people we into can the

locations of model who there. beginning moved we grow. at of in I delivery be generate the in acquisition global have value right. look in think talent some actually as and terms in I my this I high actually hire the used and in is at capabilities. down cost to time The move model If So, the will that higher cost the locations, I done point to centers, work the to both But for have margin high company people pricing to higher has clearly a it's

Frank Atkins

where or And of the opportunities helpful. about was little That secondarily then analytics implement outside you additional see can to capabilities? great. you bit United layers revenue And a set Okay, opportunity digital talk States?

Ashok Vemuri

said U.S., before, the our focus is Western have on So countries Europe as four outside essentially here. I

in working are U.K. We

We and the working Germany, France, in are Netherlands.

Whether it's company, is and there. between a bank, as and into base in government. process We card can that installed auto the We state States whether see United think dollars and transit have the it I this? I clearly data know technology evident much across do. economic probably we whether or and to about as intelligence an an amount clients, it's is in. the we -- How look monies We having monies of you whether some looking at from And us, the insights deals opportunities is as not conduit for the amount clients of with the intelligence. covering flows our it's data. the these countries credit possible whether Europe whether are for as insight are looking of with everybody a we is is board and card most of sector, insights, And perspective. that are there I it's government mined we and conversation a the being we from have the the that necessarily of that is is spent if hitherto and in intelligence. conversations local probably agency, for it of much the a a technology process manufacturer, pipe mean four are extract Everybody

rely is the opportunity technology out the the which for So and for and a drive productivity in for We've more on, for their headroom is the common the gotten insight, intelligence, efficiency higher. rely And stacks, on extracting time, thereby very, a very traction companies into to fairly opportunities and the this. most more of us generic that is the putting processes invest or opportunity mine automating The continue this immediacy will for repetitive can very this operations that, us. automated be actually large. large. very, very are cost very, much -- we processes strong and by At to

large. I very So high. do in very few basis the on from are overall the And with ecosystem end-to-end that me -- There as do. the we is think is perspective way that this this an very, a particular capability this players for the just headroom particular

Frank Atkins

great. in can Okay, you the touch couple that can brings I Thank to and And table? appointments briefly recent you in much. on leadership areas more, the just very if what squeeze

Ashok Vemuri

capability, We has run a business LLC for pivot Good technology definitely a a brings we have large tolling Yes, margins. Transportation so business our and you the same the He very think transportation very business or spotlight, that us with safety, a organizations public business. right in is for strong we the is on shine a strong if have to or we -- And ours. being transit that a well situation strong government. business allows significant will, as ourselves Conduent and of to of growth, to inclusive us; beyond that just is definitely healthy CEO he done for a amount business. able hire very person. the And be

join group us. of for executive government a are fortunate as us have business; another focus in -- area for We to very our chief Marcus great

in space. a this growth the ton attract that highlight think definitely have to and We federal not is necessarily for a leg grow. on the both of investment opportunity, under will -- again the government opportunity it light a right the being business as talent We competitive got shining

Operator

Stanley. you. And Brian Thank Essex the next with Morgan from comes question

Brian Essex

question. thank my Hi, good taking afternoon you morning, or good and for

XXX anticipate the on stand wondering new your force side? does could on the Where maybe better think I of point, of going At when on the bit And sales like? we force this movement. that have on if little little maturity Ashok, north what XXX? the that spoken business sales force to now XXX sales you follow-up headcount or and I was before contribution XXX might is a maybe you

Ashok Vemuri

- XXX now, so around XXX Brian. Yes, it's

from number which we've around perspective, bandwagon folks eight drive ready performance. let's of say, that to summer they So been 'XX. or it's these months, hiring for on most -- and are at a maturity from, to means basically of demonstrate higher been a have the better six least this now And right

sales pipeline, in step which growth the is the is team So effective, towards seeing growing. first that the is whether

the have tenure, So right they people, the months We probably that these in. finish we their be people six doing need things. of tells a kicking as they're me lot should right that more they

So sales I where is. my feel about confident team

a is know, you sales previous As as team quarter. as good its

job a things where out just is pounding the pavement. have it and churning to So you keep

news expertise. a the a industry. We've organization delineate from from when actually other sales matter subject amount client those of that and people its is to We've generating hired partners, people The great are move good we hired vertical traction.

we a ones delivery, to the in will -- to our in what work, yield and who key client and always back are renewals make, that can done The to why on that made so say, still made I will to it's this across go that technology this this important means, and we've scars I've fact have where I person before, the show are can know go we said our but that a results. high. the is hire lot are reason to -- investments I I've have relate As okay, right the the the people And sit this still delivery that beginning where client wrong. compliance my think

as as I've summer know, quarter. but to always in last your I this better, So as last as time, I you're of compared feel said you the at is good point sales year, feel

all So sales keep time. the we engine our to have churning

Brian Essex

of you customers represents super on of Right. for just bulk care would in us how going trickle follow-up carved find how find to kind to contracts thank that of more bit able platform And to more or a of so a to home? be the up sales of can helpful, your right may be That's many have little that. for Any terms you a make out these customer that able indication maybe and might may contracts. they longer be be this maybe be give a the you is as you home many to --

Brian Walsh

contracts. is made up of the probably $XXX So million XX

have the look for If for our find preference portfolio. we to other at portfolio. we will, options buyer find a We are trying buyer the is full to but whole to a

Brian Essex

Very helpful, thank you.

Operator

JPMorgan. Thank you. And Jain the Puneet comes with question next from

Puneet Jain

Yes, signings; hi, investments? over a a businesses your platform-based my way decline there of material thanks cutoff impact that Is focus taking higher in quantify is on your question. margin on revenue business for driver [ph] of to new

Brian Walsh

are look our XX% at look you done, if and we you our at platform-based. do of signings If divestitures once will what business, the be

the they the are the part, healthier, and revenue So signings for most they faster, time margin they're are meeting our platform-based. guidelines,

Puneet Jain

higher it the was now looking for for for, year. are But of type is rate it. margins what or you the than like, Got work cutoff last

Brian Walsh

towards Yes, drives our the the for cutoff margin targets company. long-term

want to EBITDA adjusted XX%, over XX.X%, So we XX% margins. be

we And so the are when targets margin at deals, at. we look those look

Puneet Jain

Got loan and or student to what be like down it. included in going numbers? with down the you business EPS in it are And will cash associated seems adjusted XQ, that wind to that going be wind expenses free is flow

Brian Walsh

segment of down to $X out have $X wind debt net is out be the in million that to QX, plan and amount, then down for adjusted other a it And we wind loans million profit, servicing QX of it take expense. expect would activities and we're into $X the million each lower have complete. we'll to quarter. going goes about not million QX anymore, be but if to The of EBITDA, and report business, $X We costs to

it So earnings it be of be out would adjusted and out included it be in adjusted cash adjusted But of flow. EBITDA. free would would

Puneet Jain

Got it, thank you.

Operator

for conference out the Thank reach directly concludes participating. any company to for feel you. This follow-ups. Thanks the free to call. Please

You disconnect your may now lines.

Conduent (CNDT) 8 Aug 182018 Q2 Earnings call transcript