CNDT - Earnings call transcript Q1 2022

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Operator

Greetings, and welcome to the Conduent First Quarter 2022 Earnings Announcement. [Operator Instructions]. It is now my pleasure to introduce your host, Giles Goodburn, Vice President of Investor Relations. Thank you. Giles, you may begin.

Giles Goodburn

thanks, Quarter joining XXXX and discuss today operator, First Conduent's Earnings. you, everyone, us for to Thank We hope you press release had a chance earlier afternoon. to this issued review our

detailed take your financial the copy on and available Skelton, Joining you the during as is Cliff through After questions. then the a on will outlook. well of website. for agenda This being our Relations financial business Investor Steve overview with the webcast. the follows: Wood, the quarter Conduent This as this an SEC the as results call President is this metrics me of of A financials will as our Cliff providing is we as walk X-K. package press well filed and our as Form today provide used are the were update. Today's section CFO. will a CEO; that, afternoon release slides well information and call as Steve

During not are from forward-looking and statements should substitute non-GAAP accordance these addition statements to cause measures result as are new materially this current of results U.S. are for Information forward-looking. results. calculated viewed a information statements. financial We in company's number expectations management's with and forward-looking Form not make these not events These may a today do actual and beliefs, as assumptions law. filed reported required factors by except in GAAP, the these or on with The to future measures. to factors call, they in is update XX-K developments, that reflect to a information as differ of intend or annual may presented that be concerning Because includes included Conduent's those subject statements we report the SEC.

Cliff. see our well their our as for comparative and use the non-GAAP please For definitions how turn purposes, usefulness now like the And more measures I'd we to over limitations information to of to press regarding release. them as call

Clifford Skelton

and review. Thanks, Conduent's everyone afternoon, earnings to today. joining Giles. everyone, QX Good appreciate welcome We us

to Turning X. Slide

from Wood through to with that Steve margin. $XXX to important today, us take is quarter. we an going $XXX hear details, fact achieved going a million EBITDA had You're but we solid XX.X% million you several EBITDA the revenue, the in in earned and things starting

Importantly, in best, sales it fact, XX% value best of spin was the up year-over-year quarter sequentially. million, for total $XXX first the since XX% and contract one at

we'll when We the also had which see an into we details value, in get a improvement contract minute. in annual

decided may all Slide the across press I'm of including, Steve's X general. what and row After and can Year received business. This other made the separate analysts. a one of detailed You to, see that we on other company lot from that you presentation points the GM through of limited not you fine have advisory Supplier in year financials, our our second X business in releases the to recognition, the to demonstrates industry in take segments going have our significant the we recognition accolades for improvement we also of on read firms a great but and of Transportation

a effort focus at of this for on sale. will to will both remaining around this set companies. disciplined We're a rationale is we decision. expectation that point X public and the we entities. going through talk both the X will great Our excited about this about spin think what I'm Conduent be what other segments for very outcome Transportation in versus routines approaching We're of become

I'll year him over results it full and financial and outlook the for the reaffirm talk and separation. and Steve, turn and about the take then to through let quarter, Transportation me sales the our more back let you details come for that, with XXXX, So of

the we'll at take end. course, questions Of

So Steve, from here? don't you it take why

Stephen Wood

Cliff. Thanks,

the are done GAAP in adjust As to The divestiture. that This practice. past, non-GAAP the filings for and we out appendix our in non-GAAP reporting the we is in like numbers. both Midas certain similar measures have the of to reconciliations presentation. past I point are and would

X Let's turn to our metrics. Slide and key discuss sales

Commercial Cliff versus sales It up XXXX. sequentially segments first XX% QX both year-over-year quarter and strongly Transportation we mentioned, sequentially. TCV up XXXX. As over a had Both overall our XX% also QX for strongest was attainment, our increase and were

segment but pipeline its late-stage strong. was lower, Government slightly Our of deals remains

launched and XX% long-term we sales an over focus In enhanced primary and revenue QX contract New a with the XXXX. model up annual balance further business incentivize compensation sales on optimize to changed value. these needs models was integrated XXXX, to outcomes ARR also near-term between our

As we value, define total contract a term. as TCV, divided reminder, by ACV or

view, as view this effects While longer net changes, XXXX, XXXX. was ACV see government our sixth The XXXX well that positive to combined ACV our XX% compared reduced has contractual upcoming client apples-to-apples QX. in in another these and of you the sales stimulus large grew losses, a item volume a the activity we the metrics. this slide so our XX% ACV. was other effect QX of Under quarter. same the onetime as presents impact as trend ARR for as our driven the on following pricing can measure volumes for The in wins, sales no compared metric breakout, more to record by QX metric, onetime Removing

quarter-to-quarter. will XX-month this of our appendix as trailing of presentation. the fluctuate this notification covered does of revenue, timing from predict reminder, but not is in the definition the on metric a is full based and As of A measure such, timing

Slide to Turning X.

has have and effect returned ACV are encouraging, and normalized now business to the NRR stimulus. new our on ARR government trends of off Our we more levels run

large demonstrating Conduent and as and our strong business renewing contract average We average. satisfaction of in several clients had commitment near length agreements quarter busy renewing somewhere process to with which years, and their X.X quarter, partner. is million the a first Our $XXX another their was long-term TCV, their

we calls, in quarters individual noted As of have variation timing have before significant renewals. due prior can to

headwind the compared portion XXXX $XXX Adjusted contained roll-off the up our XXXX. was XXXX. carriers previously basis quarter. related was $XXX discuss we year-over-year disclosed up XXXX EBITDA our and insurance for of QX the onetime legal revenue with margin, compared our from to X defense guided financial compared $X.XX ahead item the call. XXXX a million quarter, year-over-year Adjusted the recovery for and the as margin matter. to of Removing Removing results. year Slide And to would XX.X% The million X.X% full been guided that, to in reduction $XX adjusted QX the costs billion points related internal this recent XX of we was in XXXX and QX to would resulted not year-over-year. $XXX settlement a of item, approximately government X% of than $XX X.X% adjusted in was for how part in a expectations as the have QX down as year-over-year of QX our earnings turn the slightly quarter, million. let's XXXX, million as slightly to which a margin million stimulus have how EBITDA the better slightly of for QX in EBITDA was quarter Now

and segment results. Slide to turn over now the go X Let's

do and revenues as segment not pleased from than years. $XXX long-planned, losses as will from with segment adjusted expansion. We made, Commercial we're existing Commercial QX decline. while begins business to an Commercial revenue of to reduction to acknowledging were in new the and revenue we spin, a of ramp client from This more has growth flat offset quarter anticipate year-over-year impact return in that wins since For has always sustained year-over-year merger-related been revenue year-over-year declined QX there prior a the us small is path progress million that at more the XXXX, a showing the result is first segment the margin

X.X% efficiency million, across segment. and to a segment of on confident adjusted in more margin about I'll up Adjusted reflect However, points $XX as outcome, XX QX basis QX the compared guidance. EBITDA was year which initiatives for XXXX we talk XX.X% remain we full the year-over-year, minute the Commercial the on was operational in by year as up full XXXX, EBITDA driven further

business in a revenues of XX% of year-over-year. the down timing $XX offset For revenue with segment the year-over-year. expect business basis We EBITDA unchanged X.X% in which stimulus prior reflecting $XXX our the to $XXX revenues stimulus down of a runoff in comes the on up that with QX operational would of $XX the year-over-year. down QX segment of were compared of down segment, Transportation the XX function impact segment losses underlying year-over-year onetime late was benefited early were XX% adjusted million, the year. item prior coupled been did was the million, the efficiency XXXX year-over-year, million, in EBITDA X.X% the time Government QX XXXX initiatives. government Transportation government that first quarter, million the partially Government The impact, to XXXX have points be QX Removing The of volumes, Adjusted QX year frame, was XXXX. QX, new strong runoff majority and quarter. base in ramp, for substantially margin

do international revenue in some these quarters into understood, moved certain were XXXX. which projects catch We addition later to the within these expect up current to well In in items, in our timing of businesses year.

full unchanged. Transportation outlook revenue Our year remains for

EBITDA margin for in $XX a QX a the million, segment that Transportation with margin EBITDA QX point We We comments XXXX. the XXXX percentage benefiting level. approximately EBITDA adjusted onetime as high segment, XXX with it year-over-year. compared XX.X% EBITDA a compare. high line the was margin adjusted quarters, And don't the points basis of quarter The from the fall-through guide EBITDA revenue in of adjusted basis as the XX.X%, margins prior down For item margin was revenue. difference year did recovering to points in was XX% to Transportation XXXX, to later at down anticipate XXX on adjusted with previous drove

is be year to margins slightly the Transportation segment, basis. However, than or prior year expectation year on in at our a better full full for

discuss to cash Let's Slide XX the and turn sheet and flow. balance

Our ended $XXX with on remains liquidity of have position. we cash the quarter strong and We sheet. balance the position million a cash healthy,

which solutions, a in cash consideration do our resulting we and as CapEx be of turns, payments drawn debt quarter, net under $XXX capital of of below On over expect our we this percentage we not with be year, to $XXX to material. During ratio normal of sale million credit revenue decreased reflecting of to of which suite expected leverage certain cash Overall course X.X quarter, of the as And subject our expect X the of XX the range in we was higher the adjustments, will turns. revolving Midas to the which to is our February year. customary normalize flow timing facility. million QX what to working closed finalize expect repaid this X.X

noted are we segment Cliff indexing separate public his as the a As prepared Transportation in towards company. remarks, spinning

will our on provide develop, the clearly X as with their we work flexibility additional plans. respect with structure. As we the to on we those cash plans and believe color prudent through to capital think debt hand we overall term, those it leverage is retain about how In short entities,

XX XXXX guidance. turn review Let's our to Slide and

guidance are components year XXXX full our of We point. this reconfirming all at

adjusted $X.XXX billion $X.XXX billion. expect be to the in range of XXXX revenues to in We

disposition of of As excludes the Midas a reminder, the business. this impact the

changes material called annual XXXX view growth to year out trajectories no have of update. We our we full earnings in our segment-level the

feed Our full to revenue are start sales ramp year. our strong on of in into with second businesses year our track commitments, year meet their view half a that all should is X the that the to

QX ends QX sequentially $XXX However, year-over-year of the we adjusted to impact in an in million. enrollment QX, clients, to yearly the in health revenue for annual year. overall stimulus QX government specifically starts open the of care to of $XX this In range of which do XXXX, approximately QX, lower QX than $XXX is expect There million our the in QX the roll-off be is million. component of following to which relates cycle also and sequential trend

related earlier Additionally, long-planned roll into with also that client that I from activity rubric. revenue items the segment off mentioned the a Commercial plays an the of merger-related to in existing

remaining EBITDA below play recent to at year in the our adjusted our the EBITDA XXXX, restructuring of the Act. out how slightly financial talked at still review margins on talk to adjusted slightly Similarly, it CapEx paying of range. announcement. our finishing changing to about XX% charges. year earnings we range and similarly That starting under adjusted and for or the Transportation We the the portion further cash outlook XXXX flow, deferred Cliff the inclusive full year off hand call, free of concludes expect them above or are taxes back CARES to we payroll guided to I'll the approximately guided to Cliff? not convert or QX We expect about

Clifford Skelton

Thanks, Steve.

So recognition, can proud revenue, we've sales. we're the industry made you recognition, imagine, and of with client as really EBITDA, margin progress

versus and looked As our We entities importance significant the spin at indexing opposed of our spinning covered we we release, to including previous to press I as is at advantages tax or of a a analysis announcement either primarily This for but segment, we're press the a were earnings consider sale. spin. spin separate made point releases in X create where we mentioned, of said sale, to in the business time. public sale this the that Transportation a on closely going in Transportation is

conclusion it goes process Our an with to to it. sense that kick make was off with didn't anticipation the that and official all bankers sell

reminder, Again, fantastic and unique has of simply dedicated others that valuable this we shareholders possible. It and opportunity to manner of grow. opportunistically and technology. It in take with our behalf tax-efficient opportunity this the own software great on team and value. integrate business to ability most decided few this growth other the the and payments clients and has to has years advantage is we've like last a business. retain As has scarcity It value. It a technology

of highly have serving focusing truly that the Government will the become experienced industry-leading, will extensive the ourselves focused itself pure-play other clients and more in business assets, transit, only public spin rates phenomenal margins, to are may efforts intensity. a favorable set could and Transportation The safety. on play a and X our can spin company create surface areas grow tolling, companies. While business into and entertained, we industry that become a address an very scale, will parking different be to and urban entities. commercial, government global opportunities Transportation and of up with set of health lower industry X multimodal process The leader, will market with all to It capital with solid needs. good international range a team, Commercial payment cash lean Conduent care focused business of their mobility. assets monetization and and and will It company, conversion and address solutions be a technology market-leading smart then cities dynamics public

as opportunities we right business. Conduent with We're to customer models the is Now about. payments, that we in an and claims both create service the like should positive companies, for government Transportation talked position the state areas local experience toward growth, of when spun remaining lots leading for technology new that segment outcome and going both that other previously a things see around uniquely solutions, our and service, Commercial trending combined business and the with be

product-by-product report that quarterly the lot done get detailed we're corporate on on approach companies. early a this done separation of in project disciplined to likely up along the We'll Fortune to of can and the certainly work to can way have integration basis. before that a Many all assured and and the how for very Board you you of how leadership teams, about have year we and from should in and of investors our effectively. focus process. expect progress this very so be kind work have efficiently or will a in rigorous routines you going folks the be up so Board monthly Transportation in to XXX person-by-person, create confidence these or And to We're there's stand our this our outcome, to Directors very on a the a functions, now do several working approach we we us be it. now. how here, how business we'll that Now we of And divide

work So do. a work. as just we very we're go right about have do team as the to positive that I've of you And can lot go to There's this. tell, said,

associates for for like we a shareholders Thank As us spot thank to today. our motivated. good Conduent our their I'd you and joining is continued always, in and our are support. clients, all

up we'll Now some open the lines questions. for Operator?

Operator

Instructions]. [Operator

Our question first comes from Jain JPMorgan. with Puneet

Puneet Jain

revenue to the you, in you Transportation later expect delayed back below So think, this quarter quarters in this that of But came Steve, you in work our come said expectations. some year. I

the your some in ramp full significant what and implies confidence in XQ. and a improving And guidance, how expect have rates you basis like you work much also, sequential year So XQ have, that in back trend that for a you the what of given coming visibility up guidance on QX, business?

like So half that also Transportation Does you is second coming that sequential second that ramp year? the the depend half? also volume expect in in back on of this

Stephen Wood

Yes, for that. Puneet, thanks

the QX I place QX, project compare, is year that well FX So of the all, prior mean, took something in also come prior that that of back. some year the gave in QX of yes, of -- element we and drag effects about it. it most onetimer thinking that challenge existed to losses, expect do first The were understood, component the an look, the in the

it of Some the in second come back will quarter.

starting come Some of is some the about tolling that step-up mentioned of into about year. for latter we constant the our On that to up. the get remember a into place. really my line. really, had in in basis, expect starting the year-over-year coming QX close XXXX last One take to of somewhere currency back yes, contracts are of year sequential large the sort ramp, those QX, is X build be we'll flat run that it of Because part of to a expectation catch the and revenue thing on the Transportation top basis. sales rate on latter half a back, some it and that projects year. But and some Thinking to you do the are we to second business is ramp as the quarters will year that good of of with in now

in building So good sequentially also it. a sales of the obviously, as that we of ramp what is with effect effect got through go and strong see we've you're to this into the again. of year the QX quarter And going in Transportation then feeding sort QX quarter

So right confident my now, seeing remarks, on us year that on full a our any on reason I'm business to outcomes. basis. We basis, overall year back of the prepared remain to for view, change our view going full revenue not a segment-level the full is year

Clifford Skelton

primarily Steve and going bit that, of expected have said, as seeing. timing Puneet, gone And international the more business. lumpiness it's in and -- see QX either going But you're that's QX. so business. little the way transit recover. it's little Yes, the tolling leveled par to the out transit, in course a consistent we It's we're for that in between could The always a to

Puneet Jain

potential Transportation impact Does spin-off. terms there you distractions customer create the can terms we business any of in Like unit then of capabilities? just cross-selling with business potential think Understood. in about of others. should business? about from if upcoming actions, those of of if into Transportation talk dis-synergies that not were also a And And also but your in internal capabilities one accounts, how near-term spin-off, in

Clifford Skelton

if few need public project segments There's this sure There the and very, across project very the to we -- infrastructure We're We So look some a Transportation. dis-synergies. no on already the great decide work, to a take business. will. comments clients stand is question. really need only We'll work early that There environment. team segregate. see very dis-synergies, will opportunity. from the that up stand-alone We any at that? make we to of have and But that to do we how place we'll established it's new functions up. to is go in see the lot in are you a corporate as few It's process. we've company cross-functional see those to at Steve, look to a and be upside divide a

Stephen Wood

would echo No, that. I

go segmented I there already. costs public are with think is well a that business running And obviously internally, company. beyond fact the quite the certain that

Clifford Skelton

on to base. complete press client Puneet. bit, the And a obviously, response were We pile Yes. little our almost said from release we -- separate to in where going frankly, just we was, positive

And see see for focus, so enhanced see compares, management peer operating they this. all as focused positives they model, capital easier this they more see they management tailored

So got growth opportunity, from a us. to client upside for perspective just do the and work. We all a go it's

Operator

Bryan from is question next Cowen. Our Bergin with

Zachary Ajzenman

is Bergin. Ajzenman on This Zack for Bryan

up underlying to bigger Transportation, the it Maybe there. dig feel get about better bit lumpiness. growth there's build. growth each outlook looking to for business, pieces the understanding maybe the sustainable perhaps of wanted sustainable a outlook you Also a Just on across base in perhaps will of it a kind a talk could give us some rolling more But sustainable picture. can of

So wind on ongoing legacy within perhaps downs any you business. remind can us the loss

Clifford Skelton

Yes. Yes.

single execute low partnerships. being versus upside public looked described. now kind lot space alluded company upside blue on tuck-ins looked to, to looked at And payments, like We very at of then margins. potential growth at on that digits basis, at business sky. of look, looked on we Today, looked the we we of close that just at looked imagine, potential looked So right But compares. single do. in things of implications, or a and in -- to looked clearly spin base spin I gray those. a see We as the the a And of versus the able we that's those which growth you current in integrated we We that where We sale. sky to low low a we significant rates rates tack-ons we just closely, we're or I potential haven't to at obviously, envisioned with tax like any as opportunity. fact sale. We partnerships digits. both strategy We that with there's think, without very might both the the at teens of said, transportation I see stand-alone

not I'm that if question. So sure answered your

low what rates the doing. first is years Low base on the in both business of the enhancement growth we single-digit spin. repeating, see teens with margin, X upside again, So opportunity

Zachary Ajzenman

That's if too, But were into perhaps helpful. And seen that quarter on any announcements out bookings, status slippage We've out recent deal called on was like, months. on obviously some the update last and some perhaps, that of in it the pushed deals sounds XQ? there some pushouts, kind expected other more on as characterization anything back-ended. overhang willingness in the is broadly an client pace to still is was of more client the perhaps here of to COVID it to of sign deals. be decision-making? transport, that relates Curious And

Clifford Skelton

ago client we frankly, was what There's state decisions. the been renewed had that of transport on one about attrition. all worried attrition. client cleaned hoped large is lot that And in get I large, X But In to where we the which their second terms all attrition. and renew. making And years Yes. we've finished we half didn't by has not going client puck know to of question, really a of has were just your up

Transportation into slid the Commercial was in we There so terms lot With QX, deals associated one the most retention a in with And confidence of of business business. those as respect in deals increased were client that Transportation of well. have to business.

it's And across -- QX, so still high even QX and we QX that QX have QX. to to confidence timing

even I slipped in QX that in really to some and to was those would that, had good to of pretty in expect we so quarter had we a sales, say And QX QX. solid QX a XX% the from XX% sales But of QX. have great quarter we notwithstanding

Steve? more So there. come to

Stephen Wood

baked just expectations thing talked But QX. to The Yes. what expectations. those the about Cliff our deals only said year, In QX into there we in sales. some around fact exceeded QX, that that pushed and there we from were I'd that reiterate we the

So to sales in off terms a our we're of good start yet.

Clifford Skelton

be not just But dominated that would Zack, be to clear. Transportation, by

-- Some in the most those space. are commercial of those of

Operator

like time. There the Clifford to over you. at any Thank for this questions are turn Skelton to closing I'd comments. further floor no back

Clifford Skelton

everybody you, joining. Thank I operator. appreciate

a to As we That really bandwidth quarter. really you around spinning important to clarity for our can our and see announcement is think, team. our in important focus and clients the clarity think it's, and is good We project the us. really to

think you we're I get for right have confidence of should going that remainder as the investors year. this the to

for Thanks. of the So has and everybody joining. appreciate remainder day great I time your thank today, you all a hope today. I

Operator

This concludes today's conference.

lines your your Thank disconnect may You time. at this you for participation.

Giles Goodburn	VP, Corporate FP&A and IR
Clifford Skelton	President, CEO & Director
Stephen Wood	EVP, CFO & Principal Accounting Officer
Puneet Jain	JPMorgan Chase & Co.
Zachary Ajzenman	Cowen and Company

Conduent (CNDT) 4 May 222022 Q1 Earnings call transcript