Conduent(US:CNDT)2022-11-02 01:13Financial Data and Key Metrics Changes - Adjusted revenue for Q3 2022 was $977 million, down 4.1% year-over-year from $1.02 billion in Q3 2021, or down 2.7% in constant currency [36] - Adjusted EBITDA was $105 million, down 11.8% year-over-year, with an adjusted EBITDA margin of 10.7%, down 100 basis points from the previous year [38] - New business Annual Contract Value (ACV) signings were strong at $191 million, marking one of the best Q3 performances [10] Business Line Data and Key Metrics Changes - Commercial segment adjusted revenues were $504 million, up 2.2% year-over-year, with adjusted EBITDA of $68 million, up 70% compared to Q3 2021 [39] - Government segment adjusted revenues were $291 million, down 15.9% year-over-year, with adjusted EBITDA of $88 million, down approximately 34% year-over-year [41][42] - Transportation segment revenues were $182 million, up 1.1% year-over-year, with adjusted EBITDA of $25 million, up 13.6% compared to Q3 2021 [43] Market Data and Key Metrics Changes - The net ARR activity metric was positive for the seventh consecutive quarter but down sequentially due to a renewal price adjustment and a contract termination in the government segment [30] - The combined impact of discrete items on the net ARR metric was $75 million, which was anticipated and factored into revenue expectations for the government segment [31] Company Strategy and Development Direction - The company is focusing on integrating sales and marketing teams to leverage existing client relationships and expand market share [16] - A strategic growth team has been established to penetrate new industries and enhance technology-led solutions [17] - The company is rolling out digital payments capabilities, particularly in the public sector, to improve client revenue generation [18] Management's Comments on Operating Environment and Future Outlook - Management expects economic headwinds to be slightly stronger than tailwinds in Q4 2022 and into 2023, with a challenging year ahead [23] - The company anticipates demonstrating a transition from substantial decline to flat or slightly up business in the next year [23] - Management emphasized the importance of executing implementations with precision to capitalize on large deals in the pipeline [22] Other Important Information - The company ended the quarter with $587 million in total cash and a strong liquidity position, with a net leverage ratio of 1.7 turns [44][45] - Capital expenditure as a percentage of revenue decreased to 2.8% during the quarter [46] - The company expects adjusted revenue for 2023 to be flat overall, with modest growth in commercial and transportation segments offset by a decline in government [53] Q&A Session Summary Question: How has macro uncertainty impacted client behavior and deal cycles? - Management noted that macroeconomic influences have not negatively impacted the pipeline, which is stronger than ever, particularly in government and transportation sectors [60] - Some delays in deal cycles were observed in the government space, but overall implementation timelines are being closely managed [62] Question: Can you provide more details on the net ARR metric? - The net ARR metric is performing as expected, with recent declines attributed to anticipated client losses, and management remains optimistic about future growth in this area [64][66]