Conduent Incorporated reports 70.1% EBITDA decline in 2018 and 10.4% Revenue decline
02/20/2019 • About Conduent Incorporated (
$CNDT) • By InTwits
Conduent Incorporated reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Conduent Incorporated is a company in decline: 2018 revenue growth was -10.4%, 5 years revenue CAGR was -4.8%
- EBITDA Margin is quite volatile: 3.4% in 2018, 10.1% in 2017, -8.7% in 2016, 1.9% in 2015, 13.7% in 2014
- Conduent Incorporated has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.0%. At the same time it's a lot of higher than industry average of 6.1%.
- CAPEX is quite volatile: $440m in 2018, $247m in 2017, $242m in 2016, $186m in 2015, $213m in 2014
- In the last 5 years the company invested considerably less than D&A: $946m vs. $2,955m. In 2018 this situation was still the same: CAPEX was 224 while D&A was 460
- The company has unprofitable business model: ROIC is -5.2%
- It operates with high leverage: Net Debt/EBITDA is 4.5x while industry average is 2.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 10.4%. Revenue decline showed acceleration in 18Q4 - it was 14.1% YoY. Revenue decline was accelerating on average at -2.5 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.6 pp from 20.0% to 21.7% in 2018.
Gross Margin increased slightly on 1.0 pp from 21.5% to 22.5% in 2018. During the last 5 years Gross Margin bottomed in 2015 at 10.3% and was growing since that time. SG&A as a % of Revenue showed almost no change in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During 2014-2018 SBC as a % of Revenue bottomed in 2015 at 0.29% and was growing since that time.
Net Income margin dropped on 10.7 pp from 3.0% to -7.7% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 Conduent Incorporated had CAPEX/Revenue of 4.2%. Conduent Incorporated showed small growth in CAPEX/Revenue of 1.4 pp from 2.8% in 2015 to 4.2% in 2018. Average CAPEX/Revenue for the last three years was 3.1%. Conduent Incorporated has spent a lot to CAPEX (123% of EBITDA) which didn't stop revenue from falling.
Accounts receivable as a % of Revenue decreased on 3.8 pp from 18.3% to 14.5% in 2018. Accounts payable as a % of Revenue increased on 2.6 pp from 2.9% to 5.5% in 2018.
Return on investment
The company operates at negative ROIC (-5.2%) and ROE (-12.2%). ROIC decreased on 7.3 pp from 2.1% to -5.2% in 2018. ROE dropped on 17.5 pp from 5.3% to -12.2% in 2018.
Leverage (Debt)
Debt level is 4.5x Net Debt / EBITDA and 8.6x Debt / EBITDA. Net Debt / EBITDA jumped on 2.2x from 2.3x to 4.5x in 2018. Debt dropped on 24.0% while cash jumped on 14.9%.
Conduent Incorporated has no short term refinancing risk: cash is higher than short term debt (1,374.5%).
Average interest expence charged on company's debt was 7.1% in 2018.
The company paid
$10 despite negative Net Income of $-416 in 2018.
Management team
Ashok Vemuri is a Conduent Incorporated's CEO. Ashok Vemuri is a founder and has spent 2 years with the company. CEO total compensation was
$7,066,017 in 2018 which included
$1,000,000 salary. Conduent Incorporated's CFO is Brian Webb-Walsh. Brian Webb-Walsh has 2 years tenure at the company.
0.75% of the company is owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 82,000 employees. The number of employees decreased on 8.9%. Average revenue per employee in 2018 was
$65,768 and it decreased slightly on 1.7%.
Financial and operational results
FY ended 12/31/2018
Conduent Incorporated ($CNDT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 6,938 | 6,662 | 6,408 | 6,022 | 5,393 | -10.4% |
| Gross Profit | 1,138 | 685 | 910 | 1,292 | 1,211 | -6.3% |
| SG&A | 659 | 699 | 686 | 611 | 560 | -8.3% |
| EBITDA | 949 | 125 | -556 | 609 | 182 | -70.1% |
| EBIT | 162 | -475 | -1,169 | 114 | -278 | -343.9% |
| Interest expence | 107 | 69 | 40 | 137 | 112 | -18.2% |
| Tax | -24 | -238 | -244 | -193 | 21 | |
| Net Income | -81 | -414 | -983 | 181 | -416 | -329.8% |
| Stock Based Compensation | 28 | 19 | 23 | 40 | 38 | -5.0% |
Balance Sheet
|
|---|
| Cash | 159 | 140 | 390 | 658 | 756 | 14.9% |
| Accounts Receivable | 1,375 | 1,246 | 1,286 | 1,104 | 782 | -29.2% |
| Accounts Payable | 242 | 264 | 164 | 138 | 230 | 66.7% |
| Short Term Debt | 2,508 | 1,156 | 28 | 82 | 55 | -32.9% |
| Long Term Debt | 43 | 37 | 1,913 | 1,979 | 1,512 | -23.6% |
Cash flow
|
|---|
| Capex | 216 | 186 | 188 | 132 | 224 | 69.7% |
| Dividends | | | | 10 | 10 | 0.0% |
| Acquisitions | 306 | | | | | |
Ratios
|
|---|
| Revenue growth | 0.9% | -4.0% | -3.8% | -6.0% | -10.4% | |
| EBITDA growth | -6.4% | -86.8% | -544.8% | -209.5% | -70.1% | |
|
|---|
| Gross Margin | 16.4% | 10.3% | 14.2% | 21.5% | 22.5% | 1.0% |
| EBITDA Margin | 13.7% | 1.9% | -8.7% | 10.1% | 3.4% | -6.7% |
| EBIT Margin | 2.3% | -7.1% | -18.2% | 1.9% | -5.2% | -7.0% |
| SG&A, % of revenue | 9.5% | 10.5% | 10.7% | 10.1% | 10.4% | 0.2% |
| SBC, % of revenue | 0.4% | 0.3% | 0.4% | 0.7% | 0.7% | 0.0% |
| Net Income Margin | -1.2% | -6.2% | -15.3% | 3.0% | -7.7% | -10.7% |
| CAPEX, % of revenue | 3.1% | 2.8% | 2.9% | 2.2% | 4.2% | 2.0% |
|
|---|
| ROIC | | -6.6% | -19.9% | 2.1% | -5.2% | -7.3% |
| ROE | | -7.8% | -23.2% | 5.3% | -12.2% | -17.5% |
| Net Debt/EBITDA | 2.5x | 8.4x | | 2.3x | 4.5x | 2.2x |
| Interest coverage ratio (ICR) | 1.5x | | | 0.8x | |
| Interest expence / Average debt | 4.2% | 3.7% | 2.6% | 6.8% | 7.1% | 0.3% |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | 0.0% |
| Employees | | | 96,000 | 90,000 | 82,000 | -8.9% |
| Revenue/Employee, th. $ | | | 67 | 67 | 66 | -1.7% |
Conduent Incorporated ($CNDT) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,420 | 1,387 | 1,304 | 1,282 | | -8.6% | -7.3% | -11.9% | -14.1% |
| EBITDA | 95 | 206 | -117 | -6 | | -31.2% | 44.1% | -168.4% | -103.8% |
| Net Income | -50 | 11 | -237 | -140 | | | | | -167.3% |
Balance Sheet
|
|---|
| Cash | 553 | 993 | 586 | 756 | | 116.9% | 221.4% | 25.2% | 14.9% |
| Short Term Debt | 81 | 43 | 49 | 55 | | 76.1% | -27.1% | -31.0% | -32.9% |
| Long Term Debt | 1,972 | 2,001 | 1,528 | 1,512 | | -5.0% | -3.4% | -23.3% | -23.6% |
Ratios
|
|---|
| Gross Margin | 21.5% | 18.9% | 19.2% | 22.9% | | 4.8% | 2.6% | 1.5% | 0.1% |
| EBITDA Margin | 6.7% | 14.9% | -9.0% | -0.5% | | -2.2% | 5.3% | -20.5% | -10.9% |
| Net Income Margin | -3.5% | 0.8% | -18.2% | -10.9% | | -3.1% | 1.1% | -17.0% | -24.9% |
Peers in Data Processing & Outsourced S
Below we provide Conduent Incorporated benchmarking against other companies in Data Processing & Outsourced S industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.7% | 11.8% | 7.5% |
|---|
| Conduent Incorporated ($CNDT) | | -4.0% | -3.8% | -6.0% | -10.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 39.3% | 39.6% | 39.5% | 39.5% | 41.0% |
|---|
| Conduent Incorporated ($CNDT) | 16.4% | 10.3% | 14.2% | 21.5% | 22.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.6% | 21.2% | 21.3% | 21.1% | 19.4% |
|---|
| Conduent Incorporated ($CNDT) | 13.7% | 1.9% | -8.7% | 10.1% | 3.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.0% |
|---|
| Conduent Incorporated ($CNDT) | 3.1% | 2.8% | 2.9% | 2.2% | 4.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 13.8% | 13.1% | 11.7% | 10.7% | 12.1% |
|---|
| Conduent Incorporated ($CNDT) | | -6.6% | -19.9% | 2.1% | -5.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.4x | 0.5x | 1.4x | 2.3x | 2.0x |
|---|
| Conduent Incorporated ($CNDT) | 2.5x | 8.4x | | 2.3x | 4.5x |
