Conduent Announces Fourth Quarter and Full-Year 2016 Results; Reaffirms Long-Term Outlook

Successfully Completed Spin-Off from Xerox; Listed as Independent Company on NYSE

- Fourth quarter and full-year financial results represent operations while still part of Xerox Corporation

- FY 2016 revenues of $6.408 billion, adjusted revenues of $6.491 billion; Q4 2016 revenues of $1.514 billion, adjusted revenues of $1.597 billion

- FY 2016 Profit (Loss) Before Income Tax of ($1.227 billion), which includes $935 million goodwill impairment charge and $161 million NY MMIS charge. FY 2016 adjusted EBITDA of $635 million, adjusted EBITDA margin of 9.8%; Q4 2016 adjusted EBITDA of $172 million, adjusted EBITDA margin of 10.8%

- FY 2016 GAAP EPS (Loss) of ($4.85), adjusted EPS of $1.06; Q4 2016 GAAP EPS (Loss) of ($4.69), adjusted EPS of $0.29

- Long-term financial outlook remains unchanged from December 5, 2016 Investor Event

FLORHAM PARK, N.J., Feb. 22, 2017 /PRNewswire/ -- Conduent CNDT, a leading provider of diversified business process services, today announced fourth quarter and full-year 2016 financial results reflecting its last period as part of Xerox Corporation.

"In 2016, we were focused on executing a successful separation from Xerox to become a stand-alone public company," said Ashok Vemuri, CEO of Conduent. "As we move into 2017, we are aligning our go-to-market and capital allocation strategies with the competitive requirements of our industry. Our near-term focus is on strengthening client relationships, completing the build-out of our management structure, and continuing the success of our strategic transformation program critical in reaching our margin expansion goals."

Fourth Quarter 2016 Results

Fourth quarter 2016 GAAP revenues were $1.514 billion. Operating margin was (3.4) percent. The company reported a GAAP EPS (Loss) of ($4.69) which includes the impact from the goodwill impairment charge of $935 million, $828 million net of income tax ($4.08 per share), and the NY MMIS charge of $161 million, $98 million net of income tax ($0.48 per share).  

Fourth quarter adjusted revenues were $1.597 billion. Adjusted operating margin was 6.8 percent. Adjusted EBITDA was $172 million, with an adjusted EBITDA margin of 10.8 percent.  The company reported adjusted earnings per share of $0.29.

Conduent generated $146 million in cash flow from operations during the fourth quarter and ended 2016 with a cash balance of $390 million. Total debt was approximately $2.0 billion as of December 31. In early January, the company borrowed an additional $100 million on its Term Loan B.

Full-Year 2016 Results

Full-year 2016 GAAP revenues were $6.408 billion. Operating margin was 3.0 percent. The company reported a GAAP EPS (Loss) of ($4.85), which includes the impact from the goodwill impairment charge of $935 million, $828 million net of income tax ($4.08 per share), and the NY MMIS charge of $161 million, $98 million net of income tax ($0.48 per share).

Full-year adjusted revenues were $6.491 billion. Adjusted operating margin was 5.5 percent. Adjusted EBITDA was $635 million, with adjusted EBITDA margin of 9.8 percent. The company reported adjusted earnings per share of $1.06.

Conduent generated $108 million in cash flow from operations for the full-year 2016. 

Financial and Strategic Outlook

Conduent's long-term financial outlook remains unchanged from what was outlined at the December 2016 Investor Event, and the company is continuing to execute against its strategic transformation program.

"The strategic transformation continues to progress as expected. Our efforts extend throughout the organization and are focused on multiple aspects of the business, including modernizing platforms, refocusing our innovation group, and expanding verticalization in our core markets," said Brian Webb Walsh, Conduent CFO. "These initiatives will strengthen our foundation for the future."

Conference Call

Management will present the results during a conference call and webcast at 10 a.m. Eastern.    

The call will be available by live audio webcast along with the news release and online presentation slides at https://investor.conduent.com/.

The conference call will also be available by calling 877-883-0383 (international dial-in 412-902-6506) at approximately 9:45 a.m. ET.  The conference ID for this call is 6913733.

A recording of the conference call will be available by calling 877-344-7529, or 412-317-0088 after 1:30 p.m. ET on February 22, 2017. The replay ID is 10100028. For international calls, please select a dial-in number from: https://services.choruscall.com/ccforms/replay.html. The telephone recording will be available until 7:00 p.m. ET on March 15, 2017.

About Conduent  

Conduent is a leading provider of diversified business process services with leading capabilities in transaction processing, automation, analytics and constituent experience. We work with both government and commercial customers in assisting them to deliver quality services to the people they serve.

We manage interactions with patients and the insured for a significant portion of the U.S. healthcare industry. We are the customer interface for large segments of the technology industry and the operational and processing partner of choice for public transportation systems around the world.

Whether it's digital payments, claims processing, benefit administration, automated tolling, customer care or distributed learning – Conduent manages and modernizes these interactions to create value for both our clients and their constituents. Learn more at www.conduent.com.

Forward Looking Statements

This news release contains "forward-looking statements" that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about the business process outsourcing industry and our business and financial results. Forward-looking statements often include words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Important factors that could cause our actual results to differ materially from those in our forward-looking statements include:

  • government regulation, economic, strategic, political and social conditions and the following factors;
  • competitive pressures;
  • changes in interest in outsourced business process services;
  • our ability to obtain adequate pricing for our services and to improve our cost structure;
  • the effects of any acquisitions, joint ventures and divestitures by us;
  • our ability to attract and retain key employees;
  • our ability to attract and retain necessary technical personnel and qualified subcontractors and their ability to deliver or perform as expected;
  • termination right, audits and investigations associated with government contracts;
  • a decline in revenues from or a loss or failure of significant clients;
  • our ability to estimate the scope of work or the costs of performance in our contracts;
  • the failure to comply with laws relating to individually identifiable information and personal health information and laws relating to processing certain financial transactions, including payment card transactions and debit or credit card transactions;
  • our ability to deliver on our contractual obligations properly and on time;        
  • our ability to renew commercial and government contracts awarded through competitive bidding processes;
  • increases in the cost of telephone and data services or significant interruptions in such services;
  • changes in tax and other laws and regulations;
  • changes in U.S. GAAP or other applicable accounting policies; and other  factors that are set forth  in the "Risk Factors" section; the "Legal Proceedings" section, The "Management Discussion and Analysis of Financial Condition and Results of Operations" section and other sections of the Conduent Incorporated Form 10 Registration Statement, as well as in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

This list of important risk factors is not intended to be exhaustive.  Conduent is under no obligation to, and expressly disclaims any obligation to, update any forward-looking statements as a result of new information or future events or developments, except as required by law.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. Any forward-looking statements made by us in this current report speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

Non-GAAP Financial Measures

We have reported our financial results in accordance with U.S. generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the non-GAAP measures described below. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods' results against the corresponding prior periods' results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Refer to the "Non-GAAP Financial Measures" section attached to this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measure.

Xerox® and Xerox and Design® are trademarks of Xerox in the United States and/or other countries. Conduent is a trademark of Conduent Incorporated in the United States and/or other countries.

Non-GAAP Financial Measures

We have reported our financial results in accordance with U.S. generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the non-GAAP measures described below, consistent with Xerox's historical presentation. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods' results against the corresponding prior periods' results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Also, non-GAAP measures are footnoted, where applicable in each slide herein.

These Non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP. A reconciliation of the following Non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth as part of the Appendix to this presentation.

In connection with the preparation of our financial statements for the fiscal year ended December 31, 2016, during the fourth quarter, we performed our annual goodwill impairment test.  Following the completion of the impairment test, we determined that we will record a non-cash goodwill impairment charge of $935 million (approximately $828 million after-tax or ($4.08) per share) in our Commercial Sector reporting unit.  Subsequent to the goodwill impairment charge, the Commercial Sector reporting unit's goodwill balance is approximately $908 million. This non-cash charge is attributable primarily to weaker than expected Commercial Sector revenues and operating profits, including in the fourth quarter of 2016. We do not expect to make any current or future cash expenditures as a result of this impairment.

We are in discussions with the State of New York regarding the status and scope of the Health Enterprise platform project, which evolved to include options to not fully complete the project. Based on those discussions, we believe it is probable that we will not fully complete the implementation of the platform in New York.  As a result of these developments, we will record a pre-tax charge of approximately $161 million (approximately $98 million after-tax or ($0.48) per share) in our fourth-quarter 2016 results reflecting estimated asset impairments, wind down costs and other impacts from this project. The charge includes approximately $115 million for the write-off of receivables and other related assets and non-cash impairment charges, with the remainder of the charge expected to be cash outflows in future quarters for wind down and related costs. 

Late in the third quarter of 2015, we determined that we would not fully complete Health Enterprise Medicaid platform implementation projects in California and Montana and recorded a charge of $389 million. The charge included a $116 million reduction to revenues with the remaining $273 million recorded to cost of outsourcing.

As a result of the significant impact of the Goodwill Impairment, NY MMIS Charge and HE Charge on our reported revenues, costs and expenses as well as key metrics for the period, we discuss our 2016 and 2015 results using non-GAAP financial measures that exclude the impact of these items, as discussed below.

Adjusted Net Income (Loss), Adjusted Earnings per Share, and Adjusted Effective Tax Rate.  

We make adjustments to Income (Loss) before Income Taxes for the following items, for the purpose of calculating Adjusted Net Income (Loss), Adjusted Earnings per Share, and Adjusted Effective Tax Rate.

In 2016, we adjusted Income (Loss) before Income Taxes for the Goodwill Impairment charge of $935 million recorded during the fourth quarter 2016.

Also in 2016, we adjusted Income (Loss) before Income Taxes for the New York Health Enterprise (NY MMIS) charge of $161 million recorded during the fourth quarter 2016. In 2015, we adjusted Income (Loss) before Income Taxes for the Health Enterprise (HE) charge of $389 million recorded during the third quarter 2015.

In addition to the items discussed above, for the quarter and full year ended December 31, 2016 and 2015 we Adjusted Net Income (Loss), Earnings per Share and Effective Tax Rate for the following items:

  • Amortization of intangible assets. The amortization of intangible assets is driven by acquisition activity, which can vary in size, nature and timing as compared to other companies within our industry and from period to period.
  • Restructuring and related costs.  Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our Strategic Transformation program.
  • Separation costs.  Separation costs are expenses incurred in connection with separation from Xerox Corporation into a separate, independent, publicly traded company. Separation costs primarily relate to third-party investment banking, accounting, legal, consulting and other similar types of services related to the separation transaction as well as costs associated with the operational separation of the two companies.
  • Other expenses, net, excluding third party interest expense.  Other expenses, net includes losses (gains) on sales of businesses and assets, currency (gains) losses, net, litigation matters and all other expenses, net.

Adjusted Revenue, Costs and Expenses and Margin – Adjusted Operating Income. We make adjustments to Revenue, Costs and Expenses and Margin for the following items, for the purpose of calculating Adjusted Operating Income.

In 2016, we adjusted Income (Loss) before Income Taxes for the Goodwill Impairment charge of $935 million recorded during the fourth quarter 2016.

As a result of the nature and the significant impact of the NY MMIS and HE charges on our reported revenues, costs and expenses, as well as key metrics for the period, we discussed our 2016 and 2015 Adjusted Operating Income after excluding the impact of the NY MMIS and HE charges. In 2016, we Adjusted Operating Income by adjusting Income (Loss) before Income Taxes for the fourth quarter NY MMIS charge of $161 million, which included an $83 million reduction in revenues. In 2015, we Adjusted Operating Income by adjusting Income (Loss) before Income Taxes for the third quarter HE charge of $389 million, which included a $116 million reduction in revenues.

In addition to the items discussed above, for the three months and year ended December 31, 2016 and 2015 we Adjusted Operating Income for the following items:

  • As defined above in Adjusted Net Income (Loss), Adjusted Earnings per Share, and Adjusted Effective Tax Rate: 
    • Amortization of intangible assets.
    • Restructuring and related costs. 
    • Separation costs. 
  • We also adjust Operating Income for:
    • Related Party Interest. Includes interest payments to former parent.
    • Other expenses, net.  Including third party interest, losses (gains) on sales of businesses and assets, currency (gains) losses, net, litigation matters and all other expenses, net.

Adjusted Revenues

As a result of the nature and the significant impact of the NY MMIS and HE charges on our reported revenues, we discussed our 2016 and 2015 revenues excluding the impact of the NY MMIS and HE charges. For the fourth quarter and full year 2016, we reduced revenues by $83 million for NY MMIS. For the third quarter and full year 2015, we reduced revenues by $116 million to reflect the reduction in HE revenues.

Adjusted EBITDA

We use Adjusted EBITDA to provide additional information that is useful to understand the financial covenants contained in the Company's credit facility and indenture. We also use Adjusted EBITDA as an additional way of assessing certain aspects of our operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our core business. Adjusted EBITDA represents Income (loss) before Income Taxes adjusted for the following items:

  • As defined above in Adjusted Net Income (Loss), Adjusted Earnings per Share, and Adjusted Effective Tax Rate section or Adjusted Revenue, Costs and Expenses and Margin – Adjusted Operating Income section:
    • The fourth quarter of 2016 Goodwill Impairment Charge and NY MMIS charge. 
    • The third quarter 2015 HE charge.
    • Amortization of intangible assets.
    • Restructuring and related costs. 
    • Separation costs. 
    • Related Party Interest. Includes interest payments to former parent.
    • Other expenses, net.  Including third party interest, losses (gains) on sales of businesses and assets, currency (gains) losses, net, litigation matters and all other expenses, net.
  • We also adjust EBITDA for:
    • Depreciation
    • NY MMIS depreciation
    • HE amortization

Adjusted EBITDA is not intended to represent cash flows from operations, operating income (loss) or net income (loss) as defined by U.S. GAAP as indicators of operating performance and are not necessarily comparable to similarly-titled measures reported by other companies. Management cautions that amounts presented in accordance with Conduent's definition Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies calculate Adjusted EBITDA in the same manner.

Adjusted Other Segment Revenue and Profit

As a result of the nature and the significant impact of the NY MMIS and HE charges on our Other Segment Revenue and Profit, we discuss Other Segment Revenue and Profit excluding the impact of the NY MMIS and HE charges. In 2016, we adjusted Other Segment by adjusting for the fourth quarter NY MMIS charge of $161 million, which included an $83 million reduction in revenues. In 2015, we Adjusted Other Segment by adjusting for the third quarter HE charge of $389 million, which included a $116 million reduction in revenues.

Free Cash Flow

Free Cash Flow is defined as cash flows from operating activities as reported on the consolidated statement of cash flows, less cost of additions to land, buildings and equipment, cost of additions to internal use software and capital lease additions, plus proceed from sales of land, building and equipment. We use the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in land, buildings and equipment and internal use software, make principal payments on debt, or amounts we can return to our stockholders through dividends and/or stock repurchases. In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow for the three months and year ended December 31, 2016, reconciled for each such period to cash flow provided by operating activities, which we believe to be the most directly comparable measure under GAAP.

Constant Currency

To better understand trends in our business, we believe that it is helpful to adjust revenue to exclude the impact of changes in the translation of foreign currencies into U.S. Dollars. We refer to this adjusted revenue as "constant currency."  Currency impact can be determined as the difference between actual growth rates and constant currency growth rates.

 

Conduent Incorporated

Condensed Consolidated Statements of Income (Unaudited)




Three Months Ended
December 31,




Year Ended
December 31,



(in millions, except per-share data)


2016


2015


% Change


2016


2015


% Change

Revenues













Outsourcing


$

1,502



$

1,717



(13)

%


$

6,358



$

6,609



(4)

%

Related party


12



13



(8)

%


50



53



(6)

%

Total Revenues


1,514



1,730



(12)

%


6,408



6,662



(4)

%

Costs and Expenses













Cost of outsourcing


1,383



1,432



(3)

%


5,462



5,937



(8)

%

Related party cost of services


8



11



(27)

%


36



40



(10)

%

Research and development


6



13



(54)

%


31



52



(40)

%

Selling, administrative and general


169



177



(5)

%


686



699



(2)

%

Restructuring and related costs


44



(1)




*


101



159



(36)

%

Amortization of intangible assets


80



63



27

%


280



250



12

%

Goodwill impairment


935






*


935






*

Separation costs


10






*


44






*

Related party interest


(4)



11



(136)

%


26



61



(57)

%

Other expenses, net


24



16



50

%


34



38



(11)

%

Total Costs and Expenses


2,655



1,722



54

%


7,635



7,236



6

%

(Loss) Income Before Income Taxes(1)


(1,141)



8




*


(1,227)



(574)



114

%

Income tax benefit


(190)



(1)




*


(244)



(238)




*

(Loss) Income from Continuing Operations


(951)



9




*


(983)



(336)



193

%

Loss from discontinued operations, net of tax




(14)



(100)

%




(78)



(100)

%

Net Loss


$

(951)



$

(5)




*


$

(983)



$

(414)



137

%



























Basic (Loss) Earnings per Share:













Continuing operations


$

(4.69)



$

0.04




*


$

(4.85)



$

(1.65)




*

Discontinued operations




(0.07)




*




(0.39)




*

Total Basic Loss per Share


$

(4.69)



$

(0.03)




*


$

(4.85)



$

(2.04)




*

Diluted (Loss) Earnings per Share:














Continuing operations


$

(4.69)



$

0.04




*


$

(4.85)



$

(1.65)




*

Discontinued operations




(0.07)




*




(0.39)




*

Total Diluted (Loss) per Share


$

(4.69)



$

(0.03)




*


$

(4.85)



$

(2.04)




*


* Percent change not meaningful.

(1)     Referred to as "Pre-Tax (Loss) Income" throughout the remainder of this document.

 

Conduent Incorporated

Condensed Consolidated Balance Sheets (Unaudited)


(in millions, except share data in thousands)


December 31,
2016


December 31,
2015

Assets





Cash and cash equivalents


$

390



$

140


Accounts receivable, net


1,286



1,246


Related party notes receivable




248


Other current assets


241



240


Total current assets


1,917



1,874


Land, buildings and equipment, net


283



280


Intangible assets, net


1,144



1,425


Goodwill


3,889



4,872


Other long-term assets


476



607


Total Assets


$

7,709



$

9,058


Liabilities and Equity





Short-term debt and current portion of long-term debt


$

28



$

24


Related party notes payable




1,132


Accounts payable


164



264


Accrued compensation and benefits costs


269



249


Unearned income


206



227


Net payable to former parent company


124




Other current liabilities


611



845


Total current liabilities


1,402



2,741


Long-term debt


1,913



37


Pension and other benefit liabilities


172



153


Deferred taxes


619



764


Other long-term liabilities


173



201


Total Liabilities


4,279



3,896







Series A Convertible Preferred Stock


142









Common stock


2




Additional paid-in capital


3,812




Former parent company investment




5,343


Accumulated other comprehensive loss


(526)



(181)


Total Equity


3,288



5,162


Total Liabilities and Equity


$

7,709



$

9,058







Shares of common stock issued and outstanding


202,875




 

 

Conduent Incorporated

Condensed Consolidated Statements of Cash Flows (Unaudited)




Three Months Ended
December 31,


Year Ended
December 31,

(in millions)


2016


2015


2016


2015

Cash Flows from Operating Activities:





Net loss


$

(951)



$

(5)



$

(983)



$

(414)


Adjustments required to reconcile net income to cash flows from operating activities:









Depreciation and amortization


196



134



613



600


Goodwill impairment


935





935




Provision for receivables


1



2



4



4


Deferred tax expense


(4)



(115)



(4)



(115)


Net loss on sales of businesses and assets


1



25



2



100


Stock-based compensation


6



(14)



24



19


Restructuring and asset impairment charges


28



(1)



73



159


Payments for restructurings


(9)



(6)



(46)



(19)


Contributions to defined benefit pension plans


(2)



(2)



(6)



(8)


Decrease (increase) in accounts receivable


113



208



(27)



239


Increase in other current and long-term assets


(20)



(13)



(90)



(86)


Increase (decrease) in accounts payable and accrued compensation


94



67



(60)



22


(Decrease) increase in other current and long-term liabilities


(46)



37



(210)



228


Net change in income tax assets and liabilities


(197)



172



(117)



(236)


Other operating, net


1



(1)






Net cash provided by operating activities


146



488



108



493


Cash Flows from Investing Activities:









Cost of additions to land, buildings and equipment


(63)



(35)



(149)



(158)


Cost of additions to internal use software


(8)



(7)



(39)



(27)


Proceeds from sale of businesses






(53)



939


Acquisitions, net of cash acquired




(2)



(1)



(197)


Proceeds from investments


11





11




Net proceeds (payments) on related party notes receivable


205



(13)



248



(37)


Other investing, net




2



(1)



2


Net cash provided by (used in) investing activities


145



(55)



16



522


Cash Flows from Financing Activities:









Net proceeds on debt


1,896



5



1,902



28


Net payments on debt


(14)



(6)



(32)



(293)


Net payments on related party notes payable


(1,106)



(107)



(1,132)



(91)


Net transfers to former parent


(804)



(348)



(588)



(672)


Excess tax benefits from stock-based compensation




3





6


Restricted cash - related party


(18)





(18)




Other financing


1







(1)


Net cash (used in) provided by financing activities


(45)



(453)



132



(1,023)


Effect of exchange rate changes on cash and cash equivalents


(4)



(3)



(6)



(11)


Increase (decrease) increase in cash and cash equivalents


242



(23)



250



(19)


Cash and cash equivalents at beginning of period


148



163



140



159


Cash and Cash Equivalents at End of Period


$

390



$

140



$

390



$

140


 

 

Net (Loss) Income and EPS Reconciliation



Three Months Ended


Year Ended



December 31, 2016


December 31, 2015


December 31, 2016


December 31, 2015

(in millions)


Net Income (Loss)


EPS


Net Income (Loss)


EPS


Net Income (Loss)


EPS


Net Income (Loss)


EPS

Reported (loss) income from continuing operations


$          (951)


$  (4.69)


$                 9


$    0.04


$          (983)


$  (4.85)


$          (336)


$  (1.65)

Adjustments:

















   Goodwill impairment


935




-




935




-



   NY MMIS charge


161




-




161




-



   Amortization of intangible assets


80




63




280




250



   Restructuring and related costs


44




(1)




101




159



   HE charge


-




-




-




389



   Separation costs


10




-




44




-



   Other expenses, net excluding third party interest(1)


13




15




20




30



   Income tax adjustments(2)


(231)




(28)




(335)




(318)



Adjusted


$               61


$    0.29


$               58


$    0.28


$             223


$    1.06


$             174


$    0.83

Weighted average shares for adjusted EPS(3)




211,247




211,247




210,774




210,774


(1)    Excludes third party interest expense of $11 million and $1 million for the three months ended December 31, 2016 and 2015, respectively and $14 million and $8 million for the year ended December 31, 2016 and 2015, respectively.

(2)     Refer to Effective Tax Rate reconciliation







(3)     Average shares for the calculations of adjusted EPS include 5.9 million of shares associated with our Series A convertible preferred stock. No dividends were declared or paid by Conduent in 2016.


















 

 

Effective Tax Rate Reconciliation



Three Months Ended


Three Months Ended



December 31, 2016


December 31, 2015

(in millions)


Pre-Tax
Income (Loss)


Income Tax
(Expense)
Benefit


Effective Tax
Rate


Pre-Tax
Income (Loss)


Income Tax
(Expense)
Benefit


Effective Tax
Rate

Reported from continuing operations


$            (1,141)


$                 (190)


16.7%


$               8


$                  (1)


-12.5%

Non-GAAP adjustments(1)


1,243


231




77


28



Adjusted(2)


$                102


$                     41


40.2%


$             85


$                  27


31.8%
















Year Ended


Year Ended



December 31, 2016


December 31, 2015

(in millions)


Pre-Tax
Income (Loss)


Income Tax
(Expense)
Benefit


Effective Tax
Rate


Pre-Tax
Income (Loss)


Income Tax
(Expense)
Benefit


Effective Tax
Rate

Reported from continuing operations


$           (1,227)


$                  (244)


19.9%


$           (574)


$               (238)


41.5%

Non-GAAP adjustments(1)


1,541


335




828


318



Adjusted(2)


$                314


$                      91


29.0%


$             254


$                   80


31.5%















(1)     Refer to Net (Loss) Income reconciliation for details.











(2)     The tax impact of Acjusted Pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported Pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 

 

Operating Income / Margin Reconciliation



Three Months Ended


Three Months Ended



December 31, 2016


December 31, 2015

(in millions)


Pre-Tax Profit (Loss)


Revenue


Margin


Pre-Tax Profit (Loss)


Revenue


Margin

Reported from continuing operations


$        (1,141)


$    1,514


-75.4%


$                  8


$    1,730


0.5%

Adjustments:













   Goodwill impairment


935






-





   NY MMIS


161


83




-





   Amortization of intangible assets


80






63





   Restructuring and related costs


44






(1)





   Separation costs


10






-





   Related party interest


(4)






11





   Other expenses, net(1)


24






16





Adjusted Operating Income/Margin


$              109


$    1,597


6.8%


$                97


$    1,730


5.6%














(1)  Includes third party interest expense of $11 million and $1 million for the three months ended December 31, 2016 and 2015, respectively.
















Year Ended


Year Ended



December 31, 2016


December 31, 2015

(in millions)


Pre-Tax Profit (Loss)


Revenue


Margin


Pre-Tax Profit (Loss)


Revenue


Margin

Reported from continuing operations


$         (1,227)


$    6,408


-19.1%


$             (574)


$    6,662


-8.6%

Adjustments:













   Goodwill impairment


$              935






$                   -





   Amortization of intangible assets


280






250





   NY MMIS


161


83




-





   Restructuring and related costs


101






159





   Separation costs


44






-





   Related party interest


26






61





   HE charge


-






389


116



   Other expenses, net(1)


34






38





Adjusted Operating Income/Margin


$              354


$    6,491


5.5%


$              323


$    6,778


4.8%


(1)  Includes third party interest expense of $14 million and $8 million for the year ended December 31, 2016 and 2015, respectively.

 

 

Adjusted Revenue and EBITDA








Q4


Q1


Q2


Q3


Q4


FY


FY

(in millions)


2015


2016


2016


2016


2016


2015


2016

Reconciliation to Adjusted Revenue















Total Revenue as reported


$  1,730


$  1,685


$  1,613


$  1,596


$   1,514


$  6,662


$   6,408

   NY MMIS charge


-


-


-


-


83


-


83

   HE charge


-


-


-


-


-


116


-

Adjusted Revenue


$  1,730


$  1,685


$  1,613


$  1,596


$   1,597


$  6,778


$   6,491
















Reconciliation to Adjusted EBITDA















Pre-tax income (loss) as reported from continuing operations


$          8


$     (54)


$     (34)


$          2


$ (1,141)


$   (574)


$ (1,227)

   Depreciation


31


32


29


31


36


126


128

   Amortization


103


118


104


104


159


474


485

   Goodwill impairment


-


-


-


-


935


-


935

   Restructuring and related costs


(1)


26


23


8


44


159


101

   Separation costs


-


3


16


15


10


-


44

   Related party interest expense


11


10


10


10


(4)


61


26

   NY MMIS charge


-


-


-


-


161


-


161

   NY MMIS depreciation


-


-


-


-


(52)


-


(52)

   HE charge


-


-


-


-


-


389


-

   HE depreciation


-


-


-


-


-


(34)


-

   Other expenses, net(1)


16


11


-


(1)


24


38


34

Adjusted EBITDA


$     168


$     146


$     148


$     169


$       172


$     639


$       635

Adjusted EBITDA Margin


9.7%


8.7%


9.2%


10.6%


10.8%


9.4%


9.8%
















(1)     Includes third party interest expense as follows:


$         1


$         1


$         1


$         1


$         11


$         8


$         14

 

 

Other Segment Revenue and Profit Reconciliation


















Q4


Q1


Q2


Q3


Q4


FY


FY

(in millions)


2015


2016


2016


2016


2016


2015


2016

Reconciliation to Other Segment Adjusted Revenue















Other Segment revenue as reported


$   94


$  108


$   97


$   92


$        4


$   289


$   301

NY MMIS charge


-


-


-


-


83


-


83

HE charge


-


-


-


-


-


116


-

Adjusted Other Segment Revenue


$   94


$  108


$   97


$   92


$      87


$   405


$   384
















Reconciliation to Other Segment Adjusted Profit















Segment profit as reported


$ (20)


$  (16)


$ (37)


$ (21)


$ (171)


$ (489)


$ (245)

NY MMIS charge


-


-


-


-


161


-


161

HE charge


-


-


-


-


-


389


-

Adjusted Other Segment Profit


$ (20)


$  (16)


$ (37)


$ (21)


$   (10)


$ (100)


$   (84)

 

 

Free Cash Flow Reconciliation



Three Months Ended


Year Ended



December 31, 2016


December 31, 2016

(in millions)





Cash flows from operations


$                                146


$                            108

Cost of addition to LB&E


(63)


(149)

Cost of addition to internal use software and other


(9)


(40)

Free Cash Flow


$                                   74


$                            (81)

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/conduent-announces-fourth-quarter-and-full-year-2016-results-reaffirms-long-term-outlook-300411544.html

SOURCE Conduent Incorporated

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