Conduent (NASDAQ: CNDT), a global technology-led business process
solutions and services company, today announced its first quarter
2024 financial results.
Cliff Skelton, Conduent President and Chief
Executive Officer stated, “Q1 2024 is a continued reflection of
progress in our portfolio performance overlaid by timing
considerations and variations across our segments. While Revenue
exceeded expectations and Adjusted EBITDA/Margin were broadly in
line with expectations, sales performance lagged due to the timing
of several opportunities between Q1 and Q2. The diversity of our
portfolio is further evidenced by a strong quarter in
Transportation, improvement in Commercial and some softness in
Government.”
“Earlier today we announced the closure of the sale
of our Curbside Management and Public Safety businesses. In
addition, we expect to finalize the BenefitWallet transaction in
May. We will continue to rationalize our portfolio to enable future
growth with efficient and effective capital deployment.”
“Finally, as previously stated, 2024 represents
what we believe to be the trough in our growth turnaround. With the
continued backing of our strong client base, partnerships with some
of the leading global technology firms such as Microsoft and
Oracle, and 57,000 dedicated associates, we expect continued
progress along our 3-year journey and that progress is directly in
line with our plan.”
Key Financial Q1 2024 Results
($ in millions, except margin and per share
data) |
Q1 2024 |
Q1 2023 |
Current Quarter Y/Y B/(W) |
Revenue |
$921 |
$922 |
(0.1)% |
GAAP Net Income (Loss) |
$99 |
$(6) |
n/m |
Adjusted EBITDA(1) |
$69 |
$90 |
(23.3)% |
Adjusted EBITDA Margin (1) |
7.5% |
9.8% |
(230) bps |
GAAP Income (Loss) Before Income Tax |
$127 |
$(8) |
n/m |
GAAP Diluted EPS |
$0.46 |
$(0.04) |
n/m |
Adjusted Diluted EPS(1) |
$(0.09) |
$0.00 |
n/m |
Cash Flow from Operating Activities |
$(37) |
$(12) |
(208)% |
Adjusted Free Cash Flow(1) |
$(60) |
$(37) |
(62)% |
Performance CommentaryDuring the
first quarter of 2024, we completed the first tranche of the
BenefitWallet portfolio transfer, receiving $164 million as the
pro-rata share of the purchase price. Following the completion of
the second tranche on April 11, 2024, we expect the third and final
tranche of the BenefitWallet portfolio transfer to be completed by
the end of the second quarter of 2024.
As a result of the completion of the first and
second tranches of the BenefitWallet portfolio transfer, we prepaid
$259 million of principal of our Term Loan B.
Other portfolio rationalization efforts include the
closure of the sale of the Curbside Management and Public Safety
businesses.
Pre-tax income (loss) for the first quarter of 2024
was $127 million versus $(8) million in the prior year period. This
increase is primarily driven by the gain on the transfer of the
BenefitWallet portfolio.
Q1 2024 Adjusted EBITDA of $69 million and Adjusted
EBITDA Margin of 7.5% were in line with our expectations.
Revenue for the first quarter of 2024 was
substantially unchanged versus the prior year.
Conduent's nearly $1.0 billion total liquidity
position remains strong with long-dated debt maturities and a
modest net leverage ratio.
In the first quarter, we repurchased approximately
4.8 million shares of our common stock in connection with our
ongoing share repurchase program.
Additional Q1 2024 Performance
Highlights
Conduent achieved several milestones in
technology-led solutions, operational excellence and culture,
including:
- Collaborated in
partnership with Microsoft on an initiative across the Conduent
portfolio to drive innovation using Microsoft Azure OpenAI
Services;
- Recently partnered
with Oracle to streamline transaction processing by the migration
of on-premises Oracle Exadata environment to the cloud with Oracle
Database@Azure;
- Recognized as a Leader
in CX Services Transformation NEAT - Cost Optimization Focus by
NelsonHall;
- Named "GovTech Top 100
Company" for the third consecutive year; and
- Named Newsweek
America's Greatest Workplaces for Women and Diversity 2024.
FY 2024 Outlook(2,3)
|
FY 2023 Actuals |
FY 2024
Outlook(2,3) |
|
|
|
Revenue |
$3,722M |
$3,600M - $3,700M |
|
|
|
Adj. EBITDA(1) / Adj.
EBITDA Margin(1) |
$378M / 10.2% |
8% - 9% |
|
|
|
Adj. Free Cash Flow(1) as
% of Adj. EBITDA(1) |
(1.3)% |
5% - 10% |
(1) Refer to Appendix for definition and complete
Non-GAAP reconciliations of Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Diluted EPS and Adjusted Free Cash Flow.
(2) Refer to Appendix for definition.
(3) Refer to Appendix for additional
information regarding non-GAAP outlook. FY 2024 Outlook is not
adjusted for completed or anticipated divestiture activity or use
of such proceeds.
Conference CallManagement will
present the results during a conference call and webcast on
May 1, 2024 at 9:00 a.m. ET.
The call will be available by live audio webcast
along with the news release and online presentation slides at
https://investor.conduent.com/.
The conference call will also be available by
calling 877-407-4019 toll-free. If requested, the conference ID for
this call is 13745034.
The international dial-in is 1-201-689-8337. The
international conference ID is also 13745034. A recording of the
conference call will be available by calling 1-877-660-6853 three
hours after the conference call concludes. The replay ID is
13745034.
The telephone recording will be available until May
15, 2024.
About Conduent
Conduent delivers digital business solutions and services spanning
the commercial, government and transportation spectrum – creating
valuable outcomes for its clients and the millions of people who
count on them. The Company leverages cloud computing, artificial
intelligence, machine learning, automation and advanced analytics
to deliver mission-critical solutions. Through a dedicated global
team of approximately 57,000 associates, process expertise and
advanced technologies, Conduent’s solutions and services digitally
transform its clients’ operations to enhance customer experiences,
improve performance, increase efficiencies and reduce costs.
Conduent adds momentum to its clients’ missions in many ways
including disbursing approximately $100 billion in government
payments annually, enabling 2.3 billion customer service
interactions annually, empowering millions of employees through HR
services every year and processing nearly 13 million tolling
transactions every day. Learn more at www.conduent.com.
Non-GAAP Financial MeasuresWe have
reported our financial results in accordance with accounting
principles generally accepted in the U.S. (U.S. GAAP). In addition,
we have discussed our financial results using non-GAAP measures. We
believe these non-GAAP measures allow investors to better
understand the trends in our business and to better understand and
compare our results. Accordingly, we believe it is necessary to
adjust several reported amounts, determined in accordance with U.S.
GAAP, to exclude the effects of certain items as well as their
related tax effects. Management believes that these non-GAAP
financial measures provide an additional means of analyzing the
results of the current period against the corresponding prior
period. However, these non-GAAP financial measures should be viewed
in addition to, and not as a substitute for, our reported results
prepared in accordance with U.S. GAAP. Our non-GAAP financial
measures are not meant to be considered in isolation or as a
substitute for comparable U.S. GAAP measures and should be read
only in conjunction with our Consolidated Financial Statements
prepared in accordance with U.S. GAAP. Our management regularly
uses our non-GAAP financial measures internally to understand,
manage and evaluate our business and make operating decisions.
Providing such non-GAAP financial measures to investors allows for
a further level of transparency as to how management reviews and
evaluates our business results and trends. These non-GAAP measures
are among the primary factors management uses in planning for and
forecasting future periods. Compensation of our executives is based
in part on the performance of our business based on certain of
these non-GAAP measures. Refer to the "Non-GAAP Financial Measures"
section attached to this release for a discussion of these non-GAAP
measures and their reconciliation to the reported U.S. GAAP
measures.
Forward-Looking Statements
This press release, any exhibits or attachments to
this release, and other public statements we make may contain
"forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. The words “anticipate,” “believe,”
“estimate,” “expect,” "plan," “intend,” “will,” “aim,” “should,”
“could,” “forecast,” “target,” “may,” "continue to," “endeavor,”
"if,” “growing,” “projected,” “potential,” “likely,” "see,"
"ahead," "further," "going forward," "on the horizon," and similar
expressions (including the negative and plural forms of such words
and phrases), as they relate to us, are intended to identify
forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. All statements other
than statements of historical fact included in this press release
or any attachment to this press release are forward-looking
statements, including, but not limited to, statements regarding our
financial results, condition and outlook; changes in our operating
results; general market and economic conditions; statements
regarding portfolio divestitures, such as the transfer of the
BenefitWallet portfolio and the sale of the Curbside Management and
Public Safety Solutions businesses, including all statements
regarding anticipated timing of closing of such divestitures;
Conduent's liquidity position remaining strong; statements
regarding our portfolio rationalization plan, including continuing
to rationalize our portfolio to enable future growth with efficient
and effective capital deployment; 2024 representing what we believe
to be the trough in our growth turnaround; and expectations of
continued progress along our 3-year journey being directly in line
with our plan; and our projected financial performance for the full
year 2024 and 2025, including all statements made under the section
captioned “FY 2024 Outlook” within this release. These statements
reflect our current views with respect to future events and are
subject to certain risks, uncertainties and assumptions, many of
which are outside of our control, that could cause actual results
to differ materially from those expected or implied by such
forward-looking statements contained in this press release, any
exhibits to this press release and other public statements we
make.
Important factors and uncertainties that could
cause our actual results to differ materially from those in our
forward-looking statements include, but are not limited to: risks
related to pending dispositions, including the transfer of the
Company's BenefitWallet's portfolio and the sale of the Company's
Curbside Management and Public Safety Solutions businesses,
including but not limited to the Company's ability to realize the
benefits anticipated from such transactions, unexpected costs,
liabilities or delays in connection with such transactions, and the
significant transaction costs associated with such transactions;
government appropriations and termination rights contained in our
government contracts; the competitiveness of the markets in which
we operate; our ability to renew commercial and government
contracts, including contracts awarded through competitive bidding
processes; our ability to recover capital and other investments in
connection with our contracts; our reliance on third-party
providers; risk and impact of geopolitical events and increasing
geopolitical tensions (such as the wars in the Ukraine and Middle
East), macroeconomic conditions, natural disasters and other
factors in a particular country or region on our workforce,
customers and vendors; our ability to deliver on our contractual
obligations properly and on time; changes in interest in outsourced
business process services; claims of infringement of third-party
intellectual property rights; our ability to estimate the scope of
work or the costs of performance in our contracts; the loss of key
senior management and our ability to attract and retain necessary
technical personnel and qualified subcontractors; our failure to
develop new service offerings and protect our intellectual property
rights; our ability to modernize our information technology
infrastructure and consolidate data centers; expectations relating
to environmental, social and governance considerations; utilization
of our stock repurchase program; the failure to comply with laws
relating to individually identifiable information and personal
health information; the failure to comply with laws relating to
processing certain financial transactions, including payment card
transactions and debit or credit card transactions; breaches of our
information systems or security systems or any service
interruptions; our ability to comply with data security standards;
developments in various contingent liabilities that are not
reflected on our balance sheet, including those arising as a result
of being involved in a variety of claims, lawsuits, investigations
and proceedings; risks related to divestitures and acquisitions;
risk and impact of potential goodwill and other asset impairments;
our significant indebtedness and the terms of such indebtedness;
our failure to obtain or maintain a satisfactory credit rating and
financial performance; our ability to obtain adequate pricing for
our services and to improve our cost structure; our ability to
collect our receivables, including those for unbilled services; a
decline in revenues from, or a loss of, or a reduction in business
from or failure of significant clients; fluctuations in our
non-recurring revenue; increases in the cost of voice and data
services or significant interruptions in such services; our ability
to receive dividends or other payments from our subsidiaries; and
other factors that are set forth in the “Risk Factors” section, the
“Legal Proceedings” section, the “Management's Discussion and
Analysis of Financial Condition and Results of Operations” section
and other sections in our 2023 Annual Report on Form 10-K, as well
as in our Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K filed with or furnished to the Securities and Exchange
Commission. Any forward-looking statements made by us in this
release speak only as of the date on which they are made. We are
under no obligation to, and expressly disclaim any obligation to,
update or alter our forward-looking statements, whether because of
new information, subsequent events or otherwise, except as required
by law.
Media Contacts:Sean Collins,
Conduent, +1-310-497-9205, sean.collins2@conduent.com
Investor Contacts:Giles Goodburn,
Conduent, +1-203-216-3546, ir@conduent.com
CONDUENT
INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF
INCOME (LOSS) (UNAUDITED)
|
|
Three Months Ended March 31, |
(in millions, except per share data) |
|
|
2024 |
|
|
|
2023 |
|
Revenue |
|
$ |
921 |
|
|
$ |
922 |
|
|
|
|
|
|
Operating Costs and Expenses |
|
|
|
|
Cost of services (excluding depreciation and amortization) |
|
|
735 |
|
|
|
720 |
|
Selling, general and administrative (excluding depreciation and
amortization) |
|
|
116 |
|
|
|
111 |
|
Research and development (excluding depreciation and
amortization) |
|
|
2 |
|
|
|
2 |
|
Depreciation and amortization |
|
|
62 |
|
|
|
61 |
|
Restructuring and related costs |
|
|
9 |
|
|
|
29 |
|
Interest expense |
|
|
27 |
|
|
|
27 |
|
(Gain) loss on divestitures and transaction costs, net |
|
|
(161 |
) |
|
|
2 |
|
Litigation settlements (recoveries), net |
|
|
4 |
|
|
|
(21 |
) |
Loss on extinguishment of debt |
|
|
2 |
|
|
|
— |
|
Other (income) expenses, net |
|
|
(2 |
) |
|
|
(1 |
) |
Total Operating Costs and Expenses |
|
|
794 |
|
|
|
930 |
|
|
|
|
|
|
Income (Loss) Before Income Taxes |
|
|
127 |
|
|
|
(8 |
) |
|
|
|
|
|
Income tax expense (benefit) |
|
|
28 |
|
|
|
(2 |
) |
Net Income (Loss) |
|
$ |
99 |
|
|
$ |
(6 |
) |
|
|
|
|
|
Net Income (Loss) per Share: |
|
|
|
|
Basic |
|
$ |
0.46 |
|
|
$ |
(0.04 |
) |
Diluted |
|
$ |
0.46 |
|
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
CONDUENT
INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
|
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
Net Income (Loss) |
|
$ |
99 |
|
|
$ |
(6 |
) |
Other Comprehensive Income (Loss),
Net(1) |
|
|
|
|
Currency translation adjustments, net |
|
|
(11 |
) |
|
|
17 |
|
Unrecognized gains (losses), net |
|
|
— |
|
|
|
1 |
|
Other Comprehensive Income (Loss), Net |
|
|
(11 |
) |
|
|
18 |
|
|
|
|
|
|
Comprehensive Income (Loss), Net |
|
$ |
88 |
|
|
$ |
12 |
|
__________
(1) All amounts are net of tax. Tax effects
were immaterial.
CONDUENT
INCORPORATEDCONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except share data in thousands) |
|
March 31, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
415 |
|
|
$ |
498 |
|
Accounts receivable, net |
|
|
600 |
|
|
|
559 |
|
Assets held for sale |
|
|
192 |
|
|
|
180 |
|
Contract assets |
|
|
166 |
|
|
|
178 |
|
Other current assets |
|
|
216 |
|
|
|
240 |
|
Total current assets |
|
|
1,589 |
|
|
|
1,655 |
|
Land, buildings and equipment, net |
|
|
186 |
|
|
|
197 |
|
Operating lease right-of-use assets |
|
|
188 |
|
|
|
191 |
|
Intangible assets, net |
|
|
31 |
|
|
|
32 |
|
Goodwill |
|
|
643 |
|
|
|
651 |
|
Other long-term assets |
|
|
421 |
|
|
|
436 |
|
Total Assets |
|
$ |
3,058 |
|
|
$ |
3,162 |
|
Liabilities and Equity |
|
|
|
|
Current portion of long-term debt |
|
$ |
33 |
|
|
$ |
34 |
|
Accounts payable |
|
|
167 |
|
|
|
174 |
|
Accrued compensation and benefits costs |
|
|
175 |
|
|
|
183 |
|
Unearned income |
|
|
94 |
|
|
|
91 |
|
Liabilities held for sale |
|
|
56 |
|
|
|
58 |
|
Other current liabilities |
|
|
324 |
|
|
|
328 |
|
Total current liabilities |
|
|
849 |
|
|
|
868 |
|
Long-term debt |
|
|
1,083 |
|
|
|
1,248 |
|
Deferred taxes |
|
|
43 |
|
|
|
30 |
|
Operating lease liabilities |
|
|
155 |
|
|
|
157 |
|
Other long-term liabilities |
|
|
81 |
|
|
|
84 |
|
Total Liabilities |
|
|
2,211 |
|
|
|
2,387 |
|
|
|
|
|
|
Series A convertible preferred stock |
|
|
142 |
|
|
|
142 |
|
|
|
|
|
|
Common stock |
|
|
2 |
|
|
|
2 |
|
Treasury stock, at cost |
|
|
(44 |
) |
|
|
(27 |
) |
Additional paid-in capital |
|
|
3,941 |
|
|
|
3,938 |
|
Retained earnings (deficit) |
|
|
(2,752 |
) |
|
|
(2,849 |
) |
Accumulated other comprehensive loss |
|
|
(446 |
) |
|
|
(435 |
) |
Total Conduent Inc. Equity |
|
|
701 |
|
|
|
629 |
|
Non-controlling Interest |
|
|
4 |
|
|
|
4 |
|
Total Equity |
|
|
705 |
|
|
|
633 |
|
Total Liabilities and Equity |
|
$ |
3,058 |
|
|
$ |
3,162 |
|
|
|
|
|
|
Shares of common stock issued and outstanding |
|
|
206,685 |
|
|
|
211,509 |
|
Shares of series A convertible preferred stock issued and
outstanding |
|
|
120 |
|
|
|
120 |
|
Shares of common stock held in treasury |
|
|
13,665 |
|
|
|
8,841 |
|
|
|
|
|
|
|
|
|
|
CONDUENT
INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
|
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
Cash Flows from Operating Activities: |
|
|
|
|
Net income (loss) |
|
$ |
99 |
|
|
$ |
(6 |
) |
Adjustments required to reconcile net income (loss) to cash flows
from operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
62 |
|
|
|
61 |
|
Contract inducement amortization |
|
|
1 |
|
|
|
1 |
|
Deferred income taxes |
|
|
13 |
|
|
|
(8 |
) |
Amortization of debt financing costs |
|
|
1 |
|
|
|
1 |
|
Loss on extinguishment of debt |
|
|
2 |
|
|
|
— |
|
(Gain) loss on divestitures and sales of fixed assets, net |
|
|
(164 |
) |
|
|
— |
|
Stock-based compensation |
|
|
3 |
|
|
|
2 |
|
Changes in operating assets and liabilities |
|
|
(54 |
) |
|
|
(63 |
) |
Net cash provided by (used in) operating
activities |
|
|
(37 |
) |
|
|
(12 |
) |
Cash Flows from Investing Activities: |
|
|
|
|
Cost of additions to land, buildings and equipment |
|
|
(13 |
) |
|
|
(11 |
) |
Cost of additions to internal use software |
|
|
(8 |
) |
|
|
(11 |
) |
Proceeds from divestitures |
|
|
164 |
|
|
|
— |
|
Net cash provided by (used in) investing
activities |
|
|
143 |
|
|
|
(22 |
) |
Cash Flows from Financing Activities: |
|
|
|
|
Payments on debt |
|
|
(175 |
) |
|
|
(10 |
) |
Treasury stock purchases |
|
|
(17 |
) |
|
|
— |
|
Taxes paid for settlement of stock-based compensation |
|
|
(5 |
) |
|
|
(7 |
) |
Dividends paid on preferred stock |
|
|
(2 |
) |
|
|
(2 |
) |
Net cash provided by (used in) financing
activities |
|
|
(199 |
) |
|
|
(19 |
) |
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
|
|
(2 |
) |
|
|
2 |
|
Increase (decrease) in cash, cash equivalents and restricted
cash |
|
|
(95 |
) |
|
|
(51 |
) |
Cash, Cash Equivalents and Restricted Cash at Beginning of
Period |
|
|
519 |
|
|
|
598 |
|
Cash, Cash Equivalents and Restricted Cash at End of
period(1) |
|
$ |
424 |
|
|
$ |
547 |
|
___________
(1) Includes $9 million and $21 million
restricted cash as of March 31, 2024 and 2023, respectively, that
were included in Other current assets on their respective Condensed
Consolidated Balance Sheets.
Appendix
Definitions
Net ARR Activity Metric (TTM)
Projected Annual Recurring Revenue for contracts
signed in the prior 12 months, less the annualized impact of any
client losses, contractual volume and price changes, and other
known impacts for which the company was notified in that same time
period, which could positively or negatively impact results. The
metric annualizes the net impact to revenue. Timing of revenue
impact varies and may not be realized within the forward 12-month
timeframe. The metric is for indicative purposes only. This metric
excludes COVID-related volume impacts and non-recurring revenue
signings. This metric is not indicative of any specific 12 month
timeframe.
New Business Annual Contract Value
(ACV): (New Business TCV / contract term) multiplied by
12.
New Business Total Contract Value
(TCV): Estimated total future revenues from contracts
signed during the period related to new logo, new service line or
expansion with existing customers.
TTM: Trailing twelve months.
PBT: Profit before tax.
Non-GAAP Financial Measures
We have reported our financial results in
accordance with accounting principles generally accepted in the
U.S. (U.S. GAAP). In addition, we have discussed our financial
results using non-GAAP measures.
We believe these non-GAAP measures allow investors
to better understand the trends in our business and to better
understand and compare our results. Accordingly, we believe it is
necessary to adjust several reported amounts, determined in
accordance with U.S. GAAP, to exclude the effects of certain items
as well as their related tax effects. Management believes that
these non-GAAP financial measures provide an additional means of
analyzing the results of the current period against the
corresponding prior period. However, these non-GAAP financial
measures should be viewed in addition to, and not as a substitute
for, the Company’s reported results prepared in accordance with
U.S. GAAP. Our non-GAAP financial measures are not meant to be
considered in isolation or as a substitute for comparable U.S. GAAP
measures and should be read only in conjunction with our
Consolidated Financial Statements prepared in accordance with U.S.
GAAP. Our management regularly uses our non-GAAP financial measures
internally to understand, manage and evaluate our business and make
operating decisions, and providing such non-GAAP financial measures
to investors allows for a further level of transparency as to how
management reviews and evaluates our business results and trends.
These non-GAAP measures are among the primary factors management
uses in planning for and forecasting future periods. Compensation
of our executives is based in part on the performance of our
business based on certain of these non-GAAP measures.
A reconciliation of the following non-GAAP
financial measures to the most directly comparable financial
measures calculated and presented in accordance with U.S. GAAP are
provided below.
These reconciliations also include the income tax
effects for our non-GAAP performance measures in total, to the
extent applicable. The income tax effects are calculated under the
same accounting principles as applied to our reported pre-tax
performance measures under Accounting Standards Codification 740,
which employs an annual effective tax rate method. The noted income
tax effect for our non-GAAP performance measures is effectively the
difference in income taxes for reported and adjusted pre-tax income
calculated under the annual effective tax rate method. The tax
effect of the non-GAAP adjustments was calculated based upon
evaluation of the statutory tax treatment and the applicable
statutory tax rate in the jurisdictions in which such charges were
incurred.
Adjusted Net Income (Loss), Adjusted
Diluted Earnings per Share, Adjusted Weighted Average Common Shares
Outstanding, and Adjusted Effective Tax Rate
We make adjustments to Net Income (Loss) before
Income Taxes for the following items, as applicable, to the
particular financial measure, for the purpose of calculating
Adjusted Net Income (Loss), Adjusted Diluted Earnings per Share,
Adjusted Weighted Average Common Shares Outstanding, and Adjusted
Effective Tax Rate:
- Amortization of acquired intangible
assets. The amortization of acquired intangible assets is driven by
acquisition activity, which can vary in size, nature and timing as
compared to other companies within our industry and from period to
period.
- Restructuring and related costs.
Restructuring and related costs include restructuring and asset
impairment charges as well as costs associated with our strategic
transformation program.
- Goodwill impairment. This represents
goodwill impairment charges related to entering the agreement to
transfer the BenefitWallet portfolio.
- (Gain) loss on divestitures and
transaction costs, net. Represents (gain) loss on divested
businesses and transaction costs.
- Litigation settlements (recoveries),
net represents settlements or recoveries for various matters
subject to litigation.
- Loss on extinguishment of debt. This
represents write-off related debt issuance costs related to
prepayments of debt.
- Other charges (credits). This includes
Other (income) expenses, net on the Consolidated Statements of
Income (loss) and other insignificant (income) expenses and other
adjustments.
- Divestitures. Revenue and Adjusted
EBITDA of divested businesses are excluded.
The Company provides adjusted net income and
adjusted EPS financial measures to assist our investors in
evaluating our ongoing operating performance for the current
reporting period and, where provided, over different reporting
periods, by adjusting for certain items which may be recurring or
non-recurring and which in our view do not necessarily reflect
ongoing performance. We also internally use these measures to
assess our operating performance, both absolutely and in comparison
to other companies, and in evaluating or making selected
compensation decisions.
Management believes that the adjusted effective
tax rate, provided as supplemental information, facilitates a
comparison by investors of our actual effective tax rate with an
adjusted effective tax rate which reflects the impact of the items
which are excluded in providing adjusted net income and certain
other identified items, and may provide added insight into our
underlying business results and how effective tax rates impact our
ongoing business.
Adjusted Operating Income and Adjusted
Operating Margin
We make adjustments to Costs and Expenses and
Operating Margin for the following items, as applicable, for the
purpose of calculating Adjusted Operating Income and Adjusted
Operating Margin:
- Amortization of acquired intangible
assets.
- Restructuring and related costs.
- Interest expense. Interest expense
includes interest on long-term debt and amortization of debt
issuance costs.
- Goodwill impairment.
- Loss on extinguishment of debt.
- (Gain) loss on divestitures and
transaction costs, net.
- Litigation settlements (recoveries),
net.
- Other charges (credits).
- Divestitures.
We provide our investors with adjusted operating
income and adjusted operating margin information, as supplemental
information, because we believe it offers added insight, by itself
and for comparability between periods, by adjusting for certain
non-cash items as well as certain other identified items which we
do not believe are indicative of our ongoing business, and may also
provide added insight on trends in our ongoing business.
Adjusted EBITDA and EBITDA
Margin
We use Adjusted EBITDA and Adjusted EBITDA Margin
as an additional way of assessing certain aspects of our operations
that, when viewed with the U.S. GAAP results and the accompanying
reconciliations to corresponding U.S. GAAP financial measures,
provide a more complete understanding of our on-going business.
Adjusted EBITDA represents income (loss) before interest, income
taxes, depreciation and amortization and contract inducement
amortization adjusted for the following items. Adjusted EBITDA
Margin is Adjusted EBITDA divided by revenue.
- Restructuring and related costs.
- Goodwill impairment.
- Loss on extinguishment of debt.
- (Gain) loss on divestitures and
transaction costs, net.
- Litigation settlements (recoveries),
net.
- Other charges (credits).
- Divestitures.
Adjusted EBITDA is not intended to represent cash
flows from operations, operating income (loss) or net income (loss)
as defined by U.S. GAAP as indicators of operating performance.
Management cautions that amounts presented in accordance with
Conduent's definition of Adjusted EBITDA and Adjusted EBITDA Margin
may not be comparable to similar measures disclosed by other
companies because not all companies calculate Adjusted EBITDA and
Adjusted EBITDA Margin in the same manner.
Free Cash Flow
Free Cash Flow is defined as cash flows from
operating activities as reported on the consolidated statement of
cash flows, less cost of additions to land, buildings and
equipment, cost of additions to internal use software, and proceeds
from sales of land, buildings and equipment. We use the non-GAAP
measure of Free Cash Flow as a criterion of liquidity. We use Free
Cash Flow as a measure of liquidity to determine amounts we can
reinvest in our core businesses, such as amounts available to make
acquisitions and invest in land, buildings and equipment and
internal use software, after required payments on debt. In order to
provide a meaningful basis for comparison, we are providing
information with respect to our Free Cash Flow reconciled to cash
flow provided by operating activities, which we believe to be the
most directly comparable measure under U.S. GAAP.
Adjusted Free Cash Flow
Adjusted Free Cash Flow is defined as Free Cash
Flow from above plus adjustments for litigation insurance
recoveries, transaction costs, taxes paid on gains from
divestitures and litigation recoveries, proceeds from failed
sale-leaseback transactions and certain other identified
adjustments. We use Adjusted Free Cash Flow, in addition to Free
Cash Flow, to provide supplemental information to our investors
concerning our ability to generate cash from our ongoing operating
activities; by excluding these items, we believe we provide useful
additional information to our investors to help them further
understand our ability to generate cash period-over-period as well
as added information on comparability to our competitors. Such as
with Free Cash Flow information, as so adjusted, it is specifically
not intended to provide amounts available for discretionary
spending. We have added certain adjustments to account for items
which we do not believe reflect our core business or operating
performance, and we computed all periods with such adjusted
costs.
Revenue at Constant Currency
To better understand trends in our business, we
believe that it is helpful to adjust revenue to exclude the impact
of changes in the translation of foreign currencies into U.S.
Dollars. We refer to this adjusted revenue as “constant currency.”
Currency impact is determined as the difference between actual
growth rates and constant currency growth rates. This currency
impact is calculated by translating the current period activity in
local currency using the comparable prior-year period's currency
translation rate.
Non-GAAP Outlook
In providing the Full Year 2024 outlook for
Adjusted EBITDA we exclude certain items which are otherwise
included in determining the comparable U.S. GAAP financial
measure. A description of the adjustments which historically
have been applicable in determining Adjusted EBITDA is reflected in
the table below. In addition, "Full Year 2024 Outlook", is not
adjusted for completed or anticipated divestiture activity or use
of such proceeds. We are providing such outlook only on a non-GAAP
basis because the Company is unable without unreasonable efforts to
predict with reasonable certainty the totality or ultimate outcome
or occurrence of these adjustments for the forward-looking period,
which can be dependent on future events that may not be reliably
predicted. Based on past reported results, where one or more of
these items have been applicable, such excluded items could be
material, individually or in the aggregate, to reported results.
Full Year 2024 Outlook for Adjusted Free Cash Flow is provided as a
factor of expected Adjusted EBITDA, and such outlook is only
available on a non-GAAP basis for the reasons described above. For
the same reason, we are unable to provide a GAAP expected adjusted
tax rate, which adjusts for our non-GAAP adjustments.
Non-GAAP Reconciliations: Revenue
at Constant Currency, Adjusted Net Income (Loss), Adjusted
Effective Tax, Adjusted Operating Income (Loss) and Adjusted EBITDA
were as follows:
|
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
REVENUE |
|
|
|
|
Revenue |
|
$ |
921 |
|
|
$ |
922 |
|
Adjustment: |
|
|
|
|
Foreign currency impact |
|
|
(2 |
) |
|
|
3 |
|
Revenue at Constant Currency |
|
$ |
919 |
|
|
$ |
925 |
|
|
|
|
|
|
ADJUSTED NET INCOME (LOSS) |
|
|
|
|
Net Income (Loss) |
|
$ |
99 |
|
|
$ |
(6 |
) |
Adjustments: |
|
|
|
|
Amortization of acquired intangible assets(1) |
|
|
1 |
|
|
|
2 |
|
Restructuring and related costs |
|
|
9 |
|
|
|
29 |
|
Loss on extinguishment of debt |
|
|
2 |
|
|
|
— |
|
(Gain) loss on divestitures and transaction costs, net |
|
|
(161 |
) |
|
|
2 |
|
Litigation settlements (recoveries), net |
|
|
4 |
|
|
|
(21 |
) |
Other charges (credits) |
|
|
(2 |
) |
|
|
(1 |
) |
Total Non-GAAP Adjustments |
|
|
(147 |
) |
|
|
11 |
|
Income tax adjustments(2) |
|
|
32 |
|
|
|
(3 |
) |
Adjusted Net Income (Loss) |
|
$ |
(16 |
) |
|
$ |
2 |
|
|
|
|
|
|
ADJUSTED EFFECTIVE TAX |
|
|
|
|
Income (Loss) Before Income Taxes |
|
$ |
127 |
|
|
$ |
(8 |
) |
Adjustments: |
|
|
|
|
Total Non-GAAP Adjustments |
|
|
(147 |
) |
|
|
11 |
|
Adjusted PBT |
|
$ |
(20 |
) |
|
$ |
3 |
|
|
|
|
|
|
Income tax expense (benefit) |
|
$ |
28 |
|
|
$ |
(2 |
) |
Income tax adjustments(2) |
|
|
(32 |
) |
|
|
3 |
|
Adjusted Income Tax Expense (Benefit) |
|
|
(4 |
) |
|
|
1 |
|
Adjusted Net Income (Loss) |
|
$ |
(16 |
) |
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
CONTINUED |
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
ADJUSTED OPERATING INCOME (LOSS) |
|
|
|
|
Income (Loss) Before Income Taxes |
|
$ |
127 |
|
|
$ |
(8 |
) |
Adjustments: |
|
|
|
|
Total non-GAAP adjustments |
|
|
(147 |
) |
|
|
11 |
|
Interest expense |
|
|
27 |
|
|
|
27 |
|
Adjusted Operating Income (Loss) |
|
$ |
7 |
|
|
$ |
30 |
|
|
|
|
|
|
ADJUSTED EBITDA |
|
|
|
|
Net Income (Loss) |
|
$ |
99 |
|
|
$ |
(6 |
) |
Income tax expense (benefit) |
|
|
28 |
|
|
|
(2 |
) |
Depreciation and amortization |
|
|
62 |
|
|
|
61 |
|
Contract inducement amortization |
|
|
1 |
|
|
|
1 |
|
Interest expense |
|
|
27 |
|
|
|
27 |
|
EBITDA |
|
|
217 |
|
|
|
81 |
|
Adjustments: |
|
|
|
|
Restructuring and related costs |
|
|
9 |
|
|
|
29 |
|
(Gain) loss on divestitures and transaction costs, net |
|
|
(161 |
) |
|
|
2 |
|
Litigation settlements (recoveries), net |
|
|
4 |
|
|
|
(21 |
) |
Loss on extinguishment of debt |
|
|
2 |
|
|
|
— |
|
Other charges (credits) |
|
|
(2 |
) |
|
|
(1 |
) |
Adjusted EBITDA |
|
$ |
69 |
|
|
$ |
90 |
|
___________
(1) Included in Depreciation and amortization
on the Consolidated Statements of Income (Loss).
(2) The tax impact of Adjusted Pre-tax income
(loss) from continuing operations was calculated under the same
accounting principles applied to the 'As Reported' pre-tax income
(loss), which employs an annual effective tax rate method to the
results and without regard to the adjustments listed.
Non-GAAP Reconciliations:
Adjusted Weighted Average Shares Outstanding, Adjusted Diluted EPS,
Adjusted Effective Tax Rate, Adjusted Operating Margin and Adjusted
EBITDA Margin were as follows:
|
|
Three Months Ended March 31, |
(Amounts are in whole dollars, shares are in thousands and margins
and rates are in %) |
|
|
2024 |
|
|
|
2023 |
|
ADJUSTED DILUTED EPS(1) |
|
|
|
|
Weighted Average Common Shares Outstanding |
|
|
209,160 |
|
|
|
218,410 |
|
Adjustments: |
|
|
|
|
Restricted stock and performance units / shares |
|
|
— |
|
|
|
— |
|
Adjusted Weighted Average Common Shares
Outstanding |
|
|
209,160 |
|
|
|
218,410 |
|
|
|
|
|
|
Diluted EPS from Continuing Operations |
|
$ |
0.46 |
|
|
$ |
(0.04 |
) |
Adjustments: |
|
|
|
|
Total non-GAAP adjustments |
|
|
(0.70 |
) |
|
|
0.05 |
|
Income tax adjustments(2) |
|
|
0.15 |
|
|
|
(0.01 |
) |
Adjusted Diluted EPS |
|
$ |
(0.09 |
) |
|
$ |
— |
|
|
|
|
|
|
ADJUSTED EFFECTIVE TAX RATE |
|
|
|
|
Effective tax rate |
|
|
21.9 |
% |
|
|
20.8 |
% |
Adjustments: |
|
|
|
|
Total non-GAAP adjustments |
|
|
0.3 |
% |
|
|
14.2 |
% |
Adjusted Effective Tax
Rate(2) |
|
|
22.2 |
% |
|
|
35.0 |
% |
|
|
|
|
|
ADJUSTED OPERATING MARGIN |
|
|
|
|
Income (Loss) Before Income Taxes Margin |
|
|
13.8 |
% |
|
(0.9)% |
Adjustments: |
|
|
|
|
Total non-GAAP adjustments |
|
(15.9)% |
|
|
1.3 |
% |
Interest expense |
|
|
2.9 |
% |
|
|
2.9 |
% |
Margin for Adjusted Operating Income |
|
|
0.8 |
% |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
ADJUSTED EBITDA MARGIN |
|
|
|
|
|
|
|
|
EBITDA Margin |
|
|
23.6 |
% |
|
|
8.8 |
% |
Total non-GAAP adjustments |
|
|
(16.1 |
)% |
|
|
1.0 |
% |
Adjusted EBITDA Margin |
|
|
7.5 |
% |
|
|
9.8 |
% |
|
|
|
|
|
|
|
|
|
__________
(1) Average shares for the 2024 and 2023
calculation of adjusted EPS excludes 5.4 million shares associated
with our Series A convertible preferred stock and includes the
impact of preferred stock dividend of approximately $2 million and
$2 million for the three months ended March 31, 2024 and 2023,
respectively.
(2) The tax impact of Adjusted Pre-tax income
(loss) from continuing operations was calculated under the same
accounting principles applied to the 'As Reported' pre-tax income
(loss), which employs an annual effective tax rate method to the
results and without regard to the Total Non-GAAP adjustments.
(3) Adjusted for the full impact from revenue
and income/loss from divestitures for all periods presented.
Free Cash Flow and Adjusted Free Cash Flow
Reconciliation:
|
|
Three Months Ended March 31, |
(in millions) |
|
|
2024 |
|
|
|
2023 |
|
Operating Cash Flow |
|
$ |
(37 |
) |
|
$ |
(12 |
) |
Cost of additions to land, buildings and equipment |
|
|
(13 |
) |
|
|
(11 |
) |
Cost of additions to internal use software |
|
|
(8 |
) |
|
|
(11 |
) |
Free Cash Flow |
|
$ |
(58 |
) |
|
$ |
(34 |
) |
Free Cash Flow |
|
$ |
(58 |
) |
|
$ |
(34 |
) |
Transaction costs |
|
|
3 |
|
|
|
1 |
|
Vendor finance lease payments |
|
|
(5 |
) |
|
|
(4 |
) |
Adjusted Free Cash Flow |
|
$ |
(60 |
) |
|
$ |
(37 |
) |
Grafico Azioni Conduent (NASDAQ:CNDT)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Conduent (NASDAQ:CNDT)
Storico
Da Set 2023 a Set 2024