Conduent(US:CNDT)2024-02-14 16:52Financial Data and Key Metrics Changes - Adjusted revenue for Q4 2023 was $953 million and $3.7 billion for the full year, with adjusted EBITDA of $103 million and $378 million respectively, exceeding expectations for both periods [19][51] - Full year revenue declined by 3.3% to $3.72 billion compared to $3.85 billion in 2022, with adjusted EBITDA margin remaining stable at 10.2% [59][60] - The net leverage ratio was 2.1x, within the target range of 2 to 2.5x, with total liquidity of $1.1 billion [33] Business Line Data and Key Metrics Changes - The Commercial segment revenues were $1.93 billion, down 3% year-over-year, while adjusted EBITDA improved by 21% to a margin of 14.2% [29][30] - Government segment adjusted EBITDA declined by 1.8% year-over-year, with a margin of 29.7%, impacted by prior year stimulus volumes [31] - Transportation segment adjusted EBITDA was $41 million, down from $84 million in 2022, with a margin of 5.9% due to extended implementation timelines [32] Market Data and Key Metrics Changes - Annual Contract Value (ACV) for the full year was down 13%, primarily in the Commercial segment which saw a 29% decline, while Government and Transportation segments grew their ACV by approximately 8% [25] - Total Contract Value (TCV) increased by 20% to $2.257 billion, marking the best achievement since the company became Conduent [8] Company Strategy and Development Direction - The company is focused on a three-year journey to rationalize its portfolio, aiming for a $3 billion revenue company with reduced debt and enhanced valuation by 2025 [11][18] - Plans include divestitures expected to generate approximately $600 million to $800 million in net proceeds, with a focus on a more agile and higher-growth organization [75][79] Management's Comments on Operating Environment and Future Outlook - Management noted that 2023 was stronger than anticipated but highlighted the need for improvement in sales and cash generation [9] - The outlook for 2024 anticipates adjusted revenues to decline by about 2%, with challenges in the Commercial and Government segments due to macroeconomic pressures [70][72] Other Important Information - The company repurchased approximately 6.6 million shares at an average price of about $3, with $48 million remaining under the share repurchase authority [35] - The company expects to generate $1 billion in deployable capital by the end of 2025, which is approximately 130% of its current market capitalization [82] Q&A Session Summary Question: What are the expectations for revenue in 2024? - The company expects adjusted revenues in 2024 to be in the range of $3.6 billion to $3.7 billion, representing a year-over-year decline of around 2% [70] Question: How will divestitures impact the financial outlook? - The divestiture program is expected to generate approximately $495 million of after-tax proceeds, with additional transactions anticipated to close in the second half of 2024 [75][78] Question: What are the anticipated challenges in the Commercial segment? - The Commercial segment is expected to face a decline of 2% to 3% due to client decisions and macroeconomic pressures affecting certain industries [71]