Conduent Reports Fourth Quarter and Full Year 2018 Results

FLORHAM PARK, NJ, February 20, 2019 – Conduent (NYSE: CNDT), a digital interactions company, today announced its fourth quarter and full year 2018 financial results.

“We made solid progress on a number of fronts in 2018 and are executing to our strategy,” said Ashok Vemuri, CEO of Conduent. “Our new business efforts are gaining traction particularly with our digital platforms and solutions driving signings growth of 6% in the fourth quarter.  In addition, we have successfully resolved the Texas litigation, completed our non-core divestitures and exceeded our three-year transformation target, allowing us to now focus solely on growing the core business.”

Full Year 2018 Results

Full year 2018 revenue was $5,393 million, down (10.4)% compared to 2017. Adjusting for the impact of the 606 accounting standard and excluding divestitures completed in Q3 2017 and 2018, revenue was down (3.8)% compared with 2017.

Pre-tax income was $(395) million compared to $(16) million in 2017. The company reported full year 2018 GAAP net income of $(416) million compared to $181 million in 2017. Diluted EPS from continuing operations was $(2.06) versus $0.81 in 2017, driven primarily by the Q4 2017 tax reform impact, litigation costs, and an impairment associated with the sale of the portfolio of customer care contracts.

Full year adjusted operating income was $419 million, with an adjusted operating margin of 7.8% as compared to adjusted operating income of $418 million, with an adjusted operating margin of 6.9% in 2017. Adjusted EBITDA was $640 million, with an adjusted EBITDA margin of 11.9%, as compared to $672 million, with an adjusted EBITDA margin of 11.2% in 2017.  Further adjusting for the impact of the 606 accounting standard and excluding divestitures completed in Q3 2017 and 2018, Adjusted EBITDA improved 7.0% compared with 2017.

The company reported adjusted diluted EPS from continuing operations in 2018 of $1.05 compared to $0.85 in 2017.

Conduent had cash flow from operations of $283 million during 2018 and ended the year with a cash balance of $756 million.  Total debt was $1,567 million as of December 31, 2018.

Headcount of approximately 82,000 as of December 31, 2018 compared with approximately 90,000 as of December 31, 2017.

Total contract value (TCV) signings of $5,445 million for the year were up 26% compared with 2017, driven primarily by a 67% increase in renewal TCV.

Fourth Quarter 2018 Results

Fourth quarter 2018 revenue was $1,282 million, down (14.1)% compared to Q4 2017. Adjusting for the impact of the 606 accounting standard and excluding divestitures completed in Q3 2017 and 2018, revenue was down (3.7)% compared with Q4 2017.

Pre-tax income was $(143) million compared to $4 million in Q4 2017. GAAP operating margin as reported was (11.2)% compared to 0.3% in Q4 2017. The company reported Q4 2018 GAAP net income of $(140) million compared to $208 million in Q4 2017. Diluted EPS from continuing operations was ($0.69) versus $0.98 in the same period last year, driven primarily by the Q4 2017 tax reform impact, divestiture transaction costs, litigation costs, and an impairment associated with the sale of the portfolio of customer care contracts.

Fourth quarter adjusted operating income was $101 million, with an adjusted operating margin of 7.9% as compared to adjusted operating income of $130 million, with an adjusted operating margin of 8.7% in Q4 2017.  Adjusted EBITDA was $156 million, with an adjusted EBITDA margin of 12.2%, as compared to $188 million, with an adjusted EBITDA margin of 12.6% in Q4 2017.  Further adjusting for the impact of the 606 accounting standard and excluding divestitures completed in Q3 2017 and 2018, Adjusted EBITDA improved 0.6% compared with Q4 2017.

The company reported adjusted diluted EPS from continuing operations of $0.26 compared to $0.31 in Q4 2017.

Conduent had cash flow from operations of $253 million during the fourth quarter of 2018 compared to $236 million in the Q4 2017.

Total contract value (TCV) signings of $1,527 million for the quarter were up 7% compared with Q4 2017, due to a 6% and 8% year-over-year increase in new business and renewal signings respectively. New business TCV growth included contracts with a large insurance carrier to provide end-to-end workers compensation services and a large global transit agency to provide automated ticketing services.

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