Conduent(US:CNDT)2020-05-08 05:14Financial Data and Key Metrics Changes - Q1 2020 revenue was approximately $1.1 billion, down 6% year-over-year, primarily due to client attrition and COVID-19 impacts [37][38] - Adjusted EBITDA decreased 21% year-over-year to $96 million, with an adjusted EBITDA margin of 9.1%, a reduction of 180 basis points [38] - The net impact of COVID-19 on top-line revenue was estimated at approximately $14 million in Q1, affecting primarily commercial and transportation businesses [33][34] Business Line Data and Key Metrics Changes - Commercial business revenue declined 6.5%, driven by prior business loss and COVID-19 impacts, with adjusted EBITDA down 17.3% [39] - Government business revenue declined by 10.8%, but adjusted EBITDA increased by 11.2%, with margins improving due to the runoff of lower-margin contracts [40] - Transportation segment revenue grew 2.7%, primarily from new transit business, but faced volume declines due to COVID-19 [40] Market Data and Key Metrics Changes - Increased volumes in government services, particularly in SNAP and unemployment benefits, were noted, while transportation business volumes are expected to decline significantly in Q2 [20][35] - The government services business is expected to see continued growth due to increased enrollment in health benefits and support programs [20][21] Company Strategy and Development Direction - The company is focusing on efficiency, client retention, and quality improvement as part of its strategic plan to weather the current economic storm [25][29] - Plans to reduce real estate costs and shift to a more remote work model are being considered, with potential long-term savings identified [78][79] - The company remains opportunistic regarding divestitures and is implementing a transformation program to enhance operational efficiency [25][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19 but expressed optimism about the company's ability to adapt and grow, particularly in government services [30][31] - The company anticipates a 10% downward impact on revenue in Q2 due to COVID-19, with expectations of recovery as the economy opens up [59][66] - Management emphasized the importance of maintaining strong client relationships and improving service quality to drive future growth [14][30] Other Important Information - The company signed $324 million in new business in Q1, a 44% increase year-over-year, with a strong pipeline of opportunities [12][42] - The balance sheet remains healthy with $413 million in cash and a net leverage ratio of 2.7 turns [46] - Operating cash flow for the quarter was an outflow of $192 million, primarily due to tax litigation payments [48] Q&A Session Summary Question: Can you provide more color on the type of work that you are seeing in new business signings? - Management indicated that Q1 signings were primarily long-term contracts, including significant deals in government healthcare and transportation [53][54] Question: How should we think about the impact of COVID-19 on Q2? - Management expects a 10% downward impact on revenue in Q2, primarily driven by transportation business declines, but anticipates some offset from government services [58][66] Question: What are the cost impacts expected in Q2? - Management is implementing a $100 million cost initiative, with half being temporary and the other half aimed at long-term reductions [63] Question: How will new signings translate into revenue? - Revenue realization from new signings will vary, with some contracts generating revenue quickly while others may take several months [68][69] Question: What lessons have been learned regarding workforce structure? - Management is exploring a more remote work model to reduce real estate costs, with a focus on maintaining service quality [78][79]