Conduent(US:CNDT)2026-02-12 15:00Financial Data and Key Metrics Changes - Adjusted revenue for full year 2025 was $3.04 billion, down 4.2% from $3.18 billion in 2024 [13] - Adjusted EBITDA for the year was $164 million, compared to $124 million in 2024, with an adjusted EBITDA margin of 5.4%, up 150 basis points year-over-year [14][15] - Adjusted free cash flow was -$130 million for the year, with Q4 adjusted free cash flow at positive $28 million [18][19] Business Line Data and Key Metrics Changes - Government segment adjusted revenue was down 6.3% at $922 million, but grew 1.8% in Q4 year-over-year [16] - Transportation segment adjusted revenue was $609 million for the year, an increase of 3.9%, with adjusted EBITDA margin at 3%, up 300 basis points versus 2024 [17] - Commercial segment adjusted revenue was $1.5 billion, down 5.9% compared to 2024, with adjusted EBITDA margin at 10.2%, down 30 basis points year-over-year [15][16] Market Data and Key Metrics Changes - New business annual contract value (ACV) signed in Q4 was $152 million, up 11% versus Q4 2024, with full year 2025 new business ACV at $517 million, up 6% versus 2024 [11] - Government segment new business ACV was up 50%, and transportation segment was up 14% versus 2024 [11] - Qualified ACV pipeline stands at $3.2 billion, up 4% year-over-year, driven by a 29% increase in the government segment [12][13] Company Strategy and Development Direction - The company aims for consistent year-over-year revenue and EBITDA growth, supported by strong free cash flow generation [5] - Key priorities include faster decision-making, financial discipline, lowering cost structure, rationalizing the portfolio, and improving conversion rates of the ACV pipeline [7][9] - The company is focused on organic revenue growth and will categorize businesses as fix, sell, or grow [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current environment as a turnaround story, emphasizing transparency and accountability [6][20] - The company is committed to improving operational efficiency and capital allocation to enhance margins and free cash flow [8][19] - Management expects to provide a more detailed update on financial performance and strategic initiatives in the upcoming Q1 call [20] Other Important Information - The company plans to host an Analyst Day in New York City to discuss strategy and execution plans [6] - Unallocated costs decreased by 10.2% versus 2024, driven by cost efficiency programs [18] Q&A Session Summary Question: Metrics for evaluating business units for fix, sell, or grow decisions - Management will consider growth metrics, predictable EBITDA margins, capital allocation needs, and competitive moats when evaluating business units [24][25] Question: Philosophy on maintaining business units with operational overlaps - The company will focus on core competencies and avoid being everything to everyone, emphasizing a disciplined approach to service offerings [29][33] Question: Evidence of revamped go-to-market strategy impacting commercial performance - While there is momentum in public sector businesses, commercial segment growth is still a work in progress, with expectations for improvement in 2027 [41][42] Question: Exposure to AI disruptors and technology threats - Approximately 15%-20% of the business may be exposed to AI disruptors, with a focus on partnering with technology firms to enhance capabilities [62] Question: Free cash flow expectations for 2026 - Management is focused on improving free cash flow and expects to provide more precise goals in future updates [71] Question: Status of portfolio rationalization - Portfolio rationalization is a high priority, with ongoing reviews and potential opportunities being explored [73]