Conduent(US:CNDT)2021-08-06 02:42Financial Data and Key Metrics Changes - Conduent's revenue for Q2 2021 was $1.26 billion, up 1% year-over-year, marking the first quarter of year-over-year revenue growth since the spin-off in January 2017 [8][20] - Adjusted EBITDA was $128 million, equating to a 12.5% margin, which is an increase of 170 basis points year-over-year [8][21] - New business sales reached $775 million in total contract value, up 24% compared to the previous high sales quarter of Q2 2020 [8][10] - Annual recurring revenue (ARR) for Q2 2021 was $115 million, up 10% year-over-year [10] Business Line Data and Key Metrics Changes - The Commercial segment revenue declined by 3.3%, while adjusted EBITDA increased by 4% with a margin of 10.7%, up 70 basis points year-over-year [22] - Government segment revenues grew by 2.1%, driven by stimulus volumes and new business ramp, with adjusted EBITDA increasing by 23% and margins improving by 590 basis points [23] - Transportation segment revenue grew by 12.1%, but adjusted EBITDA decreased by 13.8%, with a margin of 13.5%, down 410 basis points year-over-year [24] Market Data and Key Metrics Changes - The Government Payments business saw increased volumes due to stimulus-related activities, contributing to overall revenue growth [20] - The Transportation segment signed a significant 10-year $178 million deal with the UK Department of Transport, indicating strong market demand [12] Company Strategy and Development Direction - The company is focused on refinancing its debt, which remains a top priority for 2021, with expectations to complete this in the coming months [18][27] - Conduent is investing in AI and automation technologies to enhance its service offerings and maintain competitiveness in the market [51][52] - The company is optimistic about the second half of 2021, with a strong sales pipeline and improved operational performance [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing recovery and growth trajectory, despite potential headwinds from the pandemic and legacy losses [48] - The company anticipates a normalization of adjusted EBITDA margins in Q4 2021 as government stimulus effects taper off [30][31] - Management highlighted the importance of improving sales performance and retention as key drivers for future growth [42][49] Other Important Information - Conduent received recognition as Supplier of the Year from GM, reflecting its operational excellence [15] - The company ended the quarter with $403 million in cash and a net leverage ratio of two turns, indicating a healthy balance sheet [26] Q&A Session Summary Question: Can you talk about Commercial and what's going on there in terms of lost business versus growth? - Management noted that while Commercial sales lagged behind Government and Transportation, they expect a strong Q3 and are seeing improvements in net ARR metrics [34][36] Question: What is driving the add-on business growth? - The growth in add-on business is attributed to increased client confidence and improved account management strategies [39][40] Question: How much of the growth is due to market growth versus improved win rates? - Management indicated that improved performance and retention are key factors, rather than overall market growth [42][43] Question: How are you responding to industry peers investing in automation and AI? - The company is also investing in AI and automation incrementally and is exploring adjacent opportunities for potential M&A [51][52] Question: Can you characterize clients' willingness to sign deals currently? - Management observed an increasing propensity to buy, particularly in the public sector, with consistent demand for RFPs [56][57] Question: Which geographies are under-penetrated and present attractive opportunities? - The Transportation business sees significant international opportunities, particularly in Europe and South America [58]