Conduent's Sales Performance and Optimistic Outlook
2023-07-30
Conduent, a leading provider of business process services, recently held its Q1 2023 earnings announcement, where the company's president and CEO, Cliff Skelton, along with CFO Steve Wood, provided a comprehensive overview of the company's financial results and business update.
During the meeting, the company's sales performance and outlook for the future emerged as the most interesting topic of discussion. Skelton expressed satisfaction with improvements in client retention and the company's ability to achieve growth within their target range. Wood analyzed the Q1 sales results, stating that they were in line with expectations and projected sales growth for 2023. Although Q1 sales were lighter compared to the previous year due to a slower build in the pipeline and a tough comparison from a strong Q1 2022, the company remains optimistic about enhanced sales performance in Q2 and beyond. They highlighted promising late large opportunities in Q2 and Q3 and emphasized a strong overall pipeline with significant opportunities in government healthcare and real-time payments.
The market outlook for Conduent is positive and optimistic. The company's full-year 2023 guidance remains unchanged, indicating confidence in their annual segment-level growth trajectories. They believe that all three businesses have multiple paths to achieving their revenue targets. In the second quarter of 2023, the company expects adjusted revenue to be in the range of $900 million to $910 million, with a slightly lower adjusted EBITDA margin. However, they anticipate cost initiatives to positively impact margin in the second half of the year. Overall, the company exceeded expectations in the first quarter, and management expresses confidence in the company's progress and future prospects.
Several key drivers of Conduent's business were discussed during the meeting. These include improvements in client retention, exceeding internal expectations in EBITDA through expense favorability and a one-time legal settlement, changes in the transportation business driven by client milestones and operational discipline, new business sales performance, a strong pipeline across all segments, a consistent capital allocation appetite, significant opportunities in government healthcare and real-time payments, portfolio rationalization opportunities, progress in culture, diversity, and being a great place to work, and a strong client base. The economic slowdown has not affected the appetite for outsourcing in the commercial sector or the number of requests for proposals (RFPs) in the public sector, but decision-making and contract timelines have become slower.
Conduent's plans for its products and services include improving client retention and achieving steady growth. The company is focused on enhancing operational discipline and level setting the project portfolio in the transportation business. They expect new business sales to improve, particularly in Q2 and Q3, with promising opportunities in the public sector. The company's overall pipeline is strong and building across all segments. Despite the economic slowdown, the company's sales appetite remains unaffected, but decision-making and contract timelines have become slower.
During the meeting, the most important Key Performance Indicators (KPIs) discussed were client retention, EBITDA, new business sales, and the overall pipeline. The company expressed satisfaction with improvements in client retention, indicating their success in maintaining strong relationships with existing clients. They also exceeded their internal expectations for EBITDA, attributing the favorable performance to expense management and a one-time legal settlement. However, new business sales were lower compared to the previous year, but the company expects enhanced sales performance in the upcoming quarters with some opportunities being pushed to Q2 and beyond.
Conduent's outlook for the quarter and year is positive and optimistic. The full-year 2023 guidance ranges are unchanged, and there are no material changes to the view of the annual segment-level growth trajectories. The company believes that all three businesses have multiple paths to achieving their full-year revenue targets. While the second quarter is expected to have slightly lower adjusted revenue, the company remains on course for the full year and expects the impact of cost initiatives to be mildly accretive to margin in the second half of the year. Overall, the company's outlook for the quarter and year is aligned with their planned full-year outcomes for 2023.
The participants of the Conduent Q1 2023 earnings call were Giles Goodburn, Vice President of Investor Relations, Cliff Skelton, President and Chief Executive Officer, and Steve Wood, Chief Financial Officer. Goodburn opened the call and introduced the participants, Skelton provided an overview of the company's results and business update, and Wood discussed the financials and provided the financial outlook.
The call highlighted the positive growth in volume, particularly in the government and commercial businesses. Conduent also mentioned client-driven revenue milestone changes and a prior period adjustment that impacted the results. However, they expressed confidence in the volume trends and expected them to contribute to the remainder of 2023.
Overall, the call provided valuable insights into Conduent's financial performance and future prospects. Investors and analysts interested in more details were encouraged to reach out to the company.