FLORHAM PARK, NJ, February 20, 2020 – Conduent (NASDAQ: CNDT), a business process services and solutions company, today announced its fourth quarter and full year 2019 financial results and the conclusion of its strategic and operational review.
Cliff Skelton, Conduent CEO, stated, “We finished the year in-line with the outlook that we set when I began as CEO in August. We have continued to make progress on our Company transformation, focusing on the three pillars of growth, quality, and efficiency. We are building a strong team and are attracting top-tier talent to the organization to help drive change and improve our market positioning.”
Skelton continued, “Along with our board, we have also completed our strategic and operational review. As a result, we have identified a go-forward investment strategy to drive revenue stabilization and sales growth, efficiency opportunities, and increased quality, leveraging a diversified and prioritized approach. We considered potential divestitures and given the attractiveness of the businesses in our portfolio, we did not find proposals to be sufficiently compelling at this time. We believe our current portfolio coupled with our transformation efforts and improved leadership, will position us well over time to drive both top-line and EBITDA growth.”
Performance Commentary and Strategic Update
FY 2019 results were in line with prior Company guidance, with adjusted revenue near the top end of the guidance range and Adjusted EBITDA near the mid-point of the guidance range. Despite signings for the year being weaker than desired, the Company is seeing strong initial signings performance in Q1 2020. While these early signs of increased client confidence are encouraging, it is still only a preliminary indication.
Since August 2019, the Company has been engaged in a strategic and operational review. Conduent concluded the review resulting in a plan to invest in certain businesses for revenue stabilization, margin expansion and efficiency opportunities in certain offerings and to invest for growth opportunities in other high-potential offerings.
The Company has also established a go-forward transformation initiative to drive growth, quality, and efficiency. The Company developed a standard set of key performance metrics to align with these three pillars and is modifying how it measures and rewards. The Company also continued to make progress in operational improvements, including in IT and delivery performance. Conduent has hired additional key employees in senior-level positions, has launched a client retention program, and is re-defining the brand and go-to-market approach.
Key Financial Fourth Quarter 2019 Results
- Revenue of $1,099 million, down (14.3)% year-over-year.
- Adjusted Revenue, excluding divestitures, down (6.7)% year-over-year, or (6.5)% in constant currency.
- Q4 2019 GAAP net loss of $(581) million compared to $(140) million in Q4 2018.
- Adjusted EBITDA, which excludes the impact of divestitures, was $130 million, down (13.3)% year-over-year. Adjusted EBITDA margin also excluding divestitures, was 11.8%, down (90) bps year-over-year.
- Pre-tax income was ($635) million compared to ($143) million in Q4 2018. This includes a goodwill impairment charge of $601 million in Q4 2019.
- Diluted EPS from continuing operations was ($2.76) versus ($0.69) in the same period last year.
- The Company reported adjusted diluted EPS from continuing operations of $0.18 compared to $0.26 in Q4 2018.
- The Company had cash inflow from operations of $348 million during the fourth quarter of 2019 compared to cash inflows of $253 million in Q4 2018.
Key Financial Full Year 2019 Results
- Full year 2019 revenue was $4,467 million down (17.2)% compared to 2018.
- Adjusted revenue, excluding divestitures, was $4,431 million, down (4.5)% compared with 2018 or (4.0)% in constant currency.
- The Company reported 2019 GAAP net loss of ($1,934) million compared to ($416) million in 2018.
- Adjusted EBITDA for full year 2019, which excludes the impact of divestitures, was $493M, down (7.9)% when compared to the prior full year. Adjusted EBITDA margin, which excludes the impact of divestitures, was 11.1%, down (40) bps Y/Y when compared to the prior full year.
- Pre-tax income was ($2,106) million compared to ($395) million in 2018. This includes goodwill impairment charges totaling $1,952 million throughout the year.
- Diluted EPS from continuing operations was ($9.29) versus ($2.06) in 2018.
- The Company reported adjusted diluted EPS from continuing operations of $0.62 compared to $1.05 in 2018.
- The Company had cash inflow from operations of $132 million during the year 2019 compared to cash inflows of $283 million in 2018.