FLORHAM PARK, N.J., Aug. 06, 2020 — Conduent (NASDAQ: CNDT), a business process services and solutions company, today announced its second quarter 2020 financial results.
Cliff Skelton, Conduent CEO, stated “We continued to make progress in the second quarter as a result of the hard work from our associates and support from our clients. Our Government segment performed particularly well this quarter, driven by larger volumes in the Government payments space and our Transportation business proved to be more resilient than anticipated. New business signings showed significant growth on top of last quarter’s strong results and our pipeline is now stronger than it has been in a long time. The business, excluding the headwinds and tailwinds of COVID-19, also performed well and operations improved compared to the prior year period. This progress is the result of deliberate actions to drive improved quality, efficiency and growth, even in light of COVID-19. We remain focused on positioning the company for long-term growth, while taking the time to build a sustainable base of business.”
Q2 2020 Performance Commentary
Revenue for the quarter beat expectations due to better than expected results in the Government and Transportation segments. Revenue compared with Q2 2019 was lower driven by prior year lost business and COVID-19 related impacts. Higher than expected activity in our Government business was primarily driven by increased volumes in our Supplemental Nutrition Assistance Program and Pandemic Supplemental Nutrition Assistance Program (SNAP and P-SNAP) and Unemployment Insurance pre-paid cards offerings. Although still below historical pre-COVID-19 levels, the tolling business recovered more quickly and the remainder of the Transportation segment was impacted slightly less than expected. The Commercial business was negatively impacted by COVID-19 in the Transaction Processing, Healthcare, and Human Resource Services offerings.
Additional highlights from Q2 2020 include strong sales performance with $623M in new business signings, a 90% increase over Q2 2019 and a 92% increase over Q1 2020. This represents the strongest signings quarter for the company since its spin-off as a standalone public company(1). Signings included a diverse mix of deals spanning our offerings across the Commercial, Government, and Transportation segments.
The company is also on target to overachieve on the FY 2020 $100M cost reduction program, which includes both temporary actions, such as furloughs, reduced vendor and travel spend, reduced temporary facility operating spend and other permanent actions, such as optimizing spans and layers, reducing real estate spend and leveraging shared services capabilities. The company continues to focus on “Growth,” “Quality,” and “Efficiency” projects as part of its strategic transformation program, resulting in improved client performance optimization, client retention programs, and enhanced service level agreement (SLA) monitoring.
Key Financial Second Quarter 2020 Results
- Revenue of $1,016 million, down (8.6)% year-over-year, or (8.3)% in constant currency.
- Q2 2020 GAAP net loss of $(51) million compared to $(1,029) million in Q2 2019.
- Adjusted EBITDA of $110 million, down (3.5)% year-over-year. Adjusted EBITDA margin was 10.8%, up 50 bps year-over-year.
- Pre-tax income was ($64) million compared to ($1,119) million in Q2 2019.
- Diluted EPS from continuing operations was ($0.25) versus ($4.94) in the same period last year.
- Adjusted diluted EPS from continuing operations was $0.12 compared to $0.13 in Q2 2019.
- Cash inflow from operations was $74 million during Q2 2020 compared to cash outflows of $(185) million in Q2 2019.
- Adjusted Free Cash Flow, was an inflow of $40 million during Q2 2020 compared to Adjusted Free Cash Flow outflows of $(116) million in Q2 2019.
Brian Webb-Walsh, CFO, stated “Our focus on delivering for clients while managing our costs is clearly showing in our results. We performed well in the second quarter and our business showed resiliency in the face of the COVID-19 pandemic. We also now expect to overachieve on our $100M cost program for 2020. Given current trends, we anticipate Q3 2020 revenue to be $960 million to $1.01 billion and an Adjusted EBITDA margin of between 10.0% and 11.5% in Q3 2020.”
(1) Excluding Divestitures