Conduent Reports Third Quarter 2024 Financial Results
Key Q3 2024 Highlights
Revenue: $807M
Adj. Revenue(1): $781M
Pre-tax Income: $159M
Adj. EBITDA Margin(1): 4.1%
New Business Signings ACV(2): $111M
Net ARR Activity Metric(2) (TTM): $46M
FLORHAM PARK, N.J., Nov. 06, 2024 (GLOBE NEWSWIRE) -- Conduent Incorporated (NASDAQ:CNDT), a global technology-led business process solutions and services company, today announced its third quarter 2024 financial results.
Cliff Skelton, Conduent President and Chief Executive Officer stated, "All in all, Q3 was a sequentially improved quarter where we met or exceeded Revenue and EBITDA expectations. Our Commercial segment continued to exhibit enhanced performance helping to offset a sales lag in our Government segment. We added several new leaders to our senior team which, when accompanied by continued sequential momentum, will help us finish the year strong."
"We described a course of action and a set of expectations early in 2023, and we continue to hit our 'marks' along the way remaining exactly in line with that previously committed growth trajectory and sequentially expanding margins. Importantly, while our 2024 program of divestitures is complete with transition activities in place, our portfolio remains broad and we continue to see opportunities to further maximize shareholder return."
Key Financial Q3 2024 Results
($ in millions, except margin and per share data)
Q3 2024
Q3 2023
Current Quarter Y/Y B/(W)
Revenue
$807
$932
(13.4)%
Adjusted Revenue(1)
$781
$831
(6.0)%
GAAP Net Income (Loss)
$123
$(289)
n/m
Adjusted EBITDA(1)
$32
$60
(46.7)%
Adjusted EBITDA Margin (1)
4.1%
7.2%
(310) bps
GAAP Income (Loss) Before Income Tax
$159
$(313)
n/m
GAAP Diluted EPS
$0.72
$(1.34)
n/m
Adjusted Diluted EPS(1)
$(0.14)
$(0.09)
(55.6)%
Cash Flow from Operating Activities
$(13)
$(11)
(18.2)%
Adjusted Free Cash Flow(1)
$(6)
$(35)
82.9%
Performance CommentaryDuring the third quarter of 2024, the company completed the sale of the Casualty Claims Solutions business, receiving $224 million in cash consideration subject to certain post-closing adjustments.
Also, during the third quarter of 2024, the company used a portion of the proceeds from the divested businesses to voluntarily prepay the entire remaining outstanding balance of $38 million of the Term Loan B and $37 million of the Term Loan A.
Pre-tax income (loss) for the third quarter of 2024 was $159 million versus $(313) million in the prior year period. This increase is primarily driven by the gain on the sale of the Casualty Claims Solutions business and a goodwill impairment in the prior year period.
The third quarter Adjusted EBITDA of $32 million and Adjusted EBITDA Margin of 4.1% exceeded the company's expectations and was sequentially higher than the prior quarter.
Revenue and Adjusted Revenue for the third quarter of 2024 were also in line with the company's expectations.
Conduent's liquidity position remains strong with long-dated debt maturities and a modest net leverage ratio.
In the third quarter of 2024, the company repurchased approximately 3.9 million shares of its common stock in connection with its previously approved $75 million share repurchase program, which has now been completed.
Additional Q3 2024 Performance Highlights
Conduent achieved several milestones in technology-led solutions, operational excellence and culture, including:
Appointed a new Group President of the Commercial segment and a new President of Government Solutions;
Achieved Leader status across all five categories in the NelsonHall 2024 NEAT Report for Healthcare Payer Operational Transformation;
Named "Best Place to Work for Disability Inclusion" for third consecutive year;
Recognized by Forbes for fourth consecutive year as one of America's Best Employers for Diversity;
Announced open payments fare collection for Venice and Paris regions allowing transit passengers to pay with contactless credit/debit cards and digital wallets. 22 cities now use Conduent open payments for transit;
Received a contract award from the Wisconsin Department of Children and Families to design, develop and implement a modernized child support system to transform service delivery for children and families across the state; and
Awarded a new three-year contract with a leading global logistics provider for our FastCap® Finance Analytics solution.
FY 2024 Outlook(2,3)
FY 2023 Actuals
FY 2024 Outlook(2,3)
Adj. Revenue(1)
$3,320M
$3,185M - $3,215M
Adj. EBITDA(1) / Adj. EBITDA Margin(1)
$247M / 7.4%
3.75% - 4.0%
(1) Refer to Appendix for definition and complete non-GAAP reconciliations of Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Diluted EPS and Adjusted Free Cash Flow.
(2) Refer to Appendix for definition.
(3) Refer to Appendix for additional information regarding non-GAAP outlook.
Conference CallManagement will present the results during a conference call and webcast on November 6, 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 13748951.
The international dial-in is 1-201-689-8337. The international conference ID is also 13748951.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 13748951.
The telephone recording will be available until November 20, 2024.
About Conduent Conduent delivers digital business solutions and services spanning the commercial, government and transportation spectrum, creating valuable outcomes for its clients and the millions of people who count on them. The Company leverages cloud computing, artificial intelligence, machine learning, automation and advanced analytics to deliver mission-critical solutions. Through a dedicated global team of approximately 55,000 associates, process expertise and advanced technologies, Conduent's solutions and services digitally transform its clients' operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs. Conduent adds momentum to its clients' missions in many ways including disbursing approximately $100 billion in government payments annually, enabling 2.3 billion customer service interactions annually, empowering millions of employees through HR services every year and processing nearly 13 million tolling transactions every day. Learn more at www.conduent.com.
Non-GAAP Financial 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 Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. Providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on certain of these non-GAAP measures. Refer to the "Non-GAAP Financial Measures" section attached to this release for a discussion of these non-GAAP measures and their reconciliation to the reported U.S. GAAP measures.
Forward-Looking Statements
This press release, any exhibits or attachments to this release, and other public statements we make may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "expectations," "in front of us," "plan," "intend," "will," "aim," "should," "could," "forecast," "target," "may," "continue to," "looking to continue," "endeavor," "if," "growing," "projected," "potential," "likely," "see," "ahead," "further," "going forward," "on the horizon," "as we progress," "going to," "path from here forward," "think," "path to deliver," "from here," and similar expressions (including the negative and plural forms of such words and phrases), as they relate to us, are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. All statements other than statements of historical fact included in this press release or any attachment to this press release are forward-looking statements, including, but not limited to, statements regarding our financial results, condition and outlook; changes in our operating results; general market and economic conditions; our portfolio rationalization plans; our share repurchases; strength of our sales pipeline and balance sheet; our growth strategy; expectations regarding our trajectory toward top line growth, sequential margin improvement, less capital intensity and improved cash flow conversion; statements regarding portfolio divestitures, such as the sale of our Casualty Claims Solutions business; Conduent's liquidity position remaining strong; progress that we're making towards our billion dollars of deployable capital; and our projected financial performance for the full year 2024 and 2025, including all statements made under the section captioned "FY 2024 Outlook" within this release. These statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, many of which are outside of our control, that could cause actual results to differ materially from those expected or implied by such forward-looking statements contained in this press release, any exhibits to this press release and other public statements we make.
Important factors and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements include, but are not limited to: risks related to recently completed dispositions including (i) the transfer of our BenefitWallet health savings account, medical savings account, and flexible spending account portfolio, (ii) the sale of our Curbside Management and Public Safety Solutions businesses and (iii) the sale of our Casualty Claims Solutions business, including but not limited to our ability to realize the benefits anticipated from such transactions, unexpected costs, liabilities or delays in connection with such transactions; government appropriations and termination rights contained in our government contracts, the competitiveness of the markets in which we operate and the significant transaction costs associated with such transactions; our ability to renew commercial and government contracts, including contracts awarded through competitive bidding processes; our ability to recover capital and other investments in connection with our contracts; our reliance on third-party providers; risk and impact of geopolitical events and increasing geopolitical tensions (such as the wars in Ukraine and the 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,
Investor Contacts:Giles Goodburn, Conduent, +1-203-216-3546,
CONDUENT INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions, except per share data)
2024
2023
2024
2023
Revenue
$
807
$
932
$
2,556
$
2,769
Operating Costs and Expenses
Cost of services (excluding depreciation and amortization)
656
724
2,068
2,148
Selling, general and administrative (excluding depreciation and amortization)
115
115
346
344
Research and development (excluding depreciation and amortization)
1
2
4
5
Depreciation and amortization
44
81
157
199
Restructuring and related costs
4
7
21
49
Interest expense
16
28
62
82
Goodwill impairment
—
287
—
287
(Gain) loss on divestitures and transaction costs, net
(188
)
3
(696
)
8
Litigation settlements (recoveries), net
1
—
6
(22
)
Loss on extinguishment of debt
1
—
6
—
Other (income) expenses, net
(2
)
(2
)
(4
)
(3
)
Total Operating Costs and Expenses
648
1,245
1,970
3,097
Income (Loss) Before Income Taxes
159
(313
)
586
(328
)
Income tax expense (benefit)
36
(24
)
148
(26
)
Net Income (Loss)
$
123
$
(289
)
$
438
$
(302
)
Net Income (Loss) per Share:
Basic
$
0.75
$
(1.34
)
$
2.28
$
(1.42
)
Diluted
$
0.72
$
(1.34
)
$
2.22
$
(1.42
)
CONDUENT INCORPORATEDCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Net Income (Loss)
$
123
$
(289
)
$
438
$
(302
)
Other Comprehensive Income (Loss), Net(1)
Currency translation adjustments, net
13
(18
)
(14
)
3
Unrecognized gains (losses), net
1
(1
)
—
—
Other Comprehensive Income (Loss), Net
14
(19
)
(14
)
3
Comprehensive Income (Loss), Net
$
137
$
(308
)
$
424
$
(299
)
(1) All amounts are net of tax. Tax effects were immaterial.
CONDUENT INCORPORATEDCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share data in thousands)
September 30, 2024
December 31, 2023
Assets
Cash and cash equivalents
$
393
$
498
Accounts receivable, net
528
559
Assets held for sale
—
180
Contract assets
152
178
Other current assets
372
240
Total current assets
1,445
1,655
Land, buildings and equipment, net
174
197
Operating lease right-of-use assets
174
191
Intangible assets, net
15
32
Goodwill
642
651
Other long-term assets
391
436
Total Assets
$
2,841
$
3,162
Liabilities and Equity
Current portion of long-term debt
$
26
$
34
Accounts payable
133
174
Accrued compensation and benefits costs
193
183
Unearned income
115
91
Liabilities held for sale
—
58
Other current liabilities
360
328
Total current liabilities
827
868
Long-term debt
718
1,248
Deferred taxes
54
30
Operating lease liabilities
141
157
Other long-term liabilities
78
84
Total Liabilities
1,818
2,387
Series A convertible preferred stock
142
142
Common stock
2
2
Treasury stock, at cost
(210
)
(27
)
Additional paid-in capital
3,952
3,938
Retained earnings (deficit)
(2,418
)
(2,849
