• Q4 Adjusted Revenue: $800 million.
• Full Year 2024 Revenue: $3.176 billion, down 4.3% from 2023.
• Q4 Adjusted EBITDA Margin: 4%.
• Full Year 2024 Adjusted EBITDA: $124 million, with a margin of 3.9%.
• New Business ACV for Q4: $137 million, flat year-over-year.
• Full Year 2024 Commercial Segment Revenue: $1.606 billion, down 3.7% year-over-year.
• Commercial Segment Adjusted EBITDA Margin: 10.5%, up 60 basis points year-over-year.
• Government Segment Revenue: $984 million, down around 10% year-over-year.
• Government Segment Adjusted EBITDA Margin: 21.3%, down around 8 points year-over-year.
• Transportation Segment Revenue Growth: 5% year-over-year to $586 million.
• Total Cash on Balance Sheet: $377 million.
• Net Leverage Ratio: 1.6 times.
• Capital Expenditure for 2024: 2.2% of revenue.
• 2025 Revenue Outlook: $3.1 billion to $3.25 billion.
• 2025 Adjusted EBITDA Margin Outlook: 4.5% to 5.5%.
• 2025 CapEx Expectation: Approximately $80 million or around 2.5% of revenue.

• Warning! GuruFocus has detected 6 Warning Signs with CNDT.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Conduent Inc (NASDAQ:CNDT) successfully divested several assets at good multiples, allowing them to pay down debt and streamline their strategy.
• Q4 adjusted revenue improved sequentially, and both Q4 and year-end adjusted EBITDA margins finished on the high end of expectations.
• Net ARR was strong for the quarter and the year, characterized by improved retention and increased new business ACV quarter-over-quarter.
• The Commercial segment showed a solid sales year with good early momentum into 2025, and adjusted EBITDA was up 2.4% year over year.
• Conduent Inc (NASDAQ:CNDT) has made significant progress in leveraging AI across its portfolio, particularly in fraud detection and document automation, which is generating revenue and reducing expenses.

Negative Points

• Full year 2024 revenue was down 4.3% compared to 2023, slightly below expectations due to discrete drivers.
• New business TCV was lower in 2024 compared to 2023, primarily due to a large contract signed in 2023.
• Government segment adjusted revenue for the full year was down around 10%, with adjusted EBITDA down 35% year over year.
• The Transportation segment faced a significant negative adjusted EBITDA impact due to loss of scope and pricing adjustments on a large domestic tolling contract.
• The company experienced a weak start to 2024, finishing the year with lower ACV compared to 2023, and new logo sales were weaker than expected.

Q & A Highlights

Q: Can you provide examples of how Conduent is implementing AI to generate revenue? A: Clifford Skelton, CEO, explained that AI is being used in several areas, such as fraud detection in payments, document automation in healthcare, and end-user support in human capital solutions. These implementations have started generating revenue and reducing expenses.

Q: What is the strategy for increasing wallet share with existing Commercial clients? A: Clifford Skelton, CEO, mentioned the introduction of a client partner program led by new leadership. This program aims to address client needs at an enterprise level rather than focusing on specific products, thereby increasing the number of solutions per client.

Q: Is the improvement in EBITDA margins primarily driven by cost reductions and operational efficiencies? A: Stephen Wood, CFO, confirmed that margin improvements are largely due to addressing stranded costs from divestitures and ongoing efficiency efforts.

Q: What are the expectations for new business signings and net ARR growth in 2025? A: Stephen Wood, CFO, stated that 2025 is expected to be a stronger year for ACV sales with robust pipelines across all segments. The focus will be on add-on sales, new logos, and new capabilities, supported by improved client retention.

Q: Are there any imminent portfolio rationalization plans? A: Clifford Skelton, CEO, indicated that while the company continues to evaluate its portfolio for potential divestitures, these actions take time and are not pursued all at once. The focus is on disposing of assets that do not align with growth and cash flow objectives.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.