Conduent(US:CNDT)2020-02-26 23:28Financial Performance - Conduent's total revenues for 2019 were $4.5 billion, with the Commercial Industries segment contributing $2.4 billion (53.4%), Government Services segment $1.3 billion (28.3%), and Transportation segment $0.8 billion (17.5%)[32][33][34]. - The company's consolidated revenue for 2019 was $4,467 million, a decrease of 17.2% from $5,393 million in 2018[340]. - Total operating costs and expenses increased to $6,573 million in 2019, up from $5,788 million in 2018, reflecting a rise of 13.6%[340]. - The company reported a pre-tax goodwill impairment charge of $1.952 billion in 2019, significantly impacting financial results[340]. - Net loss for 2019 was $1,934 million, compared to a loss of $416 million in 2018, indicating a substantial decline in profitability[340]. - Basic earnings per share from continuing operations were $(9.29) in 2019, compared to $(2.06) in 2018, reflecting a worsening financial position[340]. - The company experienced unanticipated losses in Q1 and Q2 2019, leading to a downward revision of long-term forecasts across all reporting units[332]. Market and Business Operations - The company estimates its addressable market size in the global business process service industry at over $200 billion in 2019[25]. - Conduent's active Health Savings Account (HSA) accounts reached approximately 1 million, with $2.7 billion of assets under management as of December 31, 2019[46]. - The company supports 11 million traveler transactions per day via electronic tolling and processes over 40% of Supplemental Nutrition Assistance Program (SNAP) payments[18]. - Conduent's Government Services segment provides business process services to U.S. federal, state, and local governments, helping them respond to changing rules and increasing citizen expectations[33]. - Conduent provides medical management and fiscal agent care management services to Medicaid programs across 23 states, Puerto Rico, and the District of Columbia, optimizing costs and improving patient health outcomes[50]. - The company disburses over $80 billion annually in government payment solutions, including SNAP and child support, across 33 states with various electronic payment programs[51]. - Conduent processes $11 billion in child support payments more efficiently, contributing to significant cost reductions for enforcement agencies[62]. - The company manages 46% of U.S. toll services, processing 11 million traveler transactions daily, highlighting its leadership in the transportation sector[71]. Strategic Initiatives - Conduent's transformation plan focuses on Growth, Quality, and Efficiency, with a strategic emphasis on hiring top talent and upgrading technology[24]. - The company aims to enhance efficiency through standardized processes and a singular operating model, measuring success by adjusted EBITDA margin and associate retention[30]. - In 2019, Conduent centralized its sales team to improve focus and client relationships, measuring success through revenue retention and new business signings[28]. - The company is undergoing a data center consolidation process to improve service delivery and operational efficiency[29]. - Conduent's strategy includes optimizing, enhancing, and expanding its service offerings, with a focus on healthcare and transportation sectors for future growth[66][68]. - The company is investing in modernizing its information technology infrastructure, including new systems and processes, with a focus on consolidating data centers and enhancing cybersecurity[174]. Workforce and Talent Management - The company has a workforce of 67,000 associates across 23 countries, with 44% located in North America[84]. - Conduent emphasizes an engaged workforce as its most important asset, focusing on innovation and teamwork[85]. - The company is increasing hiring in geographic areas outside the United States, which may expose it to geopolitical and exchange rate risks[167]. Risks and Challenges - Conduent derives significant revenue from government contracts, which are subject to appropriation of funds and can be terminated at the government's discretion[100]. - A substantial portion of revenue comes from competitive bidding processes, which impose significant costs and risks[101]. - The company faces significant competition, and failure to compete effectively could materially impact its financial condition[110]. - The company has recorded significant goodwill impairment charges, indicating potential future risks to earnings[113]. - The company has significant indebtedness, which could adversely affect its results of operations and financial condition, limiting its ability to obtain additional financing and increasing vulnerability to economic conditions[115]. - The company's ability to generate cash for debt payments depends on future operational performance, which is subject to various uncontrollable factors[116]. - The integrity and security of the company's data systems are critical, as they are subject to cybersecurity threats that could impair service obligations[139]. - The company has implemented security systems to protect customer data, but remains susceptible to cybersecurity breaches, which could adversely affect operations and financial condition[142]. - Significant capital may be required to address ongoing cybersecurity threats and to protect against potential security breaches[144]. - The shift towards technology-led digital transactions may impact the timing and type of customer contracts, potentially affecting short-term revenues[151]. - Lengthening decision-making cycles from customers could adversely affect contract commitments and revenue timing[153]. - The company faces risks related to the collection of receivables, which could materially affect operations and cash flows if clients fail to pay[155]. - Loss of significant clients or revenue reductions could materially impact the company's financial condition[158]. - Non-recurring revenue may fluctuate, impacting predictability and certainty in revenue generation[159]. - The company must maintain a satisfactory credit rating to ensure liquidity and access to capital markets, with potential downgrades posing risks[161]. - Failure to develop new service offerings and protect intellectual property could lead to a decline in customer retention and revenues[171]. Property and Infrastructure - As of December 31, 2019, the company managed a property portfolio of approximately 6.6 million square feet, with an annual operating cost of about $157 million[186]. - The company resolved approximately 1.6 million square feet of surplus properties as part of its strategic transformation program by the end of 2019[187]. Debt and Financial Obligations - The company's total debt as of December 31, 2019, was approximately $1,539 million, with $1,505 million carrying variable interest rates[321]. - The consolidated weighted-average interest rates for the company's total debt in 2019 were approximately 3.42% for Term A Loan, 5.48% for Term B Loan, and 10.91% for Senior Notes[321]. - The terms of the company's indebtedness impose restrictive covenants that limit operational flexibility and the ability to engage in potentially beneficial actions[118]. - A breach of any restrictive covenants could result in an event of default, leading to accelerated repayment obligations[121]. - The company's credit facility interest rates are tied to LIBOR, which is being phased out, potentially impacting borrowing costs[122].