Conduent Reaffirms 2017 Guidance and Reports Second Quarter 2017 Financial Results; Grows New Business Signings and Improves Profitability

FLORHAM PARK, N.J., Aug. 9, 2017 /PRNewswire/ -- Conduent (NYSE: CNDT), the world's largest provider of diversified business services, today announced its second quarter 2017 financial results.

Financial and Operational Highlights

    --  Revenue of $1,496 million
    --  Net loss of ($4) million, GAAP EPS ($0.03); Adj. net income of $36
        million, Adj. EPS $0.16
    --  Adjusted EBITDA of $157 million, up 6% year-over-year
    --  Strong cash flow from operations of $67 million and free cash flow of
        $69 million
    --  New business Total Contract Value (TCV) of $657 million, up 25%
        year-over-year
    --  Expect to meet $430 million of cumulative strategic transformation
        savings targets by end of FY 2017

"Our second quarter demonstrated meaningful progress towards building a profitable and growing company. We delivered adjusted earnings in line with our expectations, advanced our cost savings initiatives, implemented our new go-to-market strategy and continued streamlining our operations," said Ashok Vemuri, CEO of Conduent. "While we still have work ahead of us, particularly in our customer experience offering, we continue to drive operational excellence and deliver best-in-class service and experiences for our clients. We believe we are well positioned to achieve our strategic transformation goals and are making steady progress on creating a One Conduent culture."

Second Quarter 2017 Results

Second quarter 2017 revenues were $1,496 million, down 7% compared to Q2 2016. Pre-tax loss was ($11) million compared to ($34) million in Q2 2016. The company reported EPS of ($0.03) versus ($0.05) in the same period last year.

Second quarter adjusted operating income was $88 million, with an adjusted operating margin of 5.9% as compared to $77 million, with an adjusted operating margin of 4.8% in Q2 2016. Adjusted EBITDA improved 6% to $157 million, with an adjusted EBITDA margin of 10.5%, as compared with $148 million, with an adjusted EBITDA margin of 9.2% in Q2 2016. The company reported adjusted earnings per share of $0.16 compared to $0.30 in Q2 2016.

Conduent generated $67 million in cash flow from operations during the second quarter and ended the quarter with a cash balance of $309 million. Total debt was $2,130 million as of June 30, 2017.

Headcount of approximately 89,000 as of June 30, 2017 compared with approximately 96,000 as of December 31, 2016.

Total TCV signings of $1,244 million for the quarter were down 42% compared with Q2 2016, driven by lower renewal signings primarily as a result of fewer renewal opportunities compared with Q2 2016. New business TCV was $657 million, up 25% compared with Q2 2016 as a result of key wins and expansion of business with both commercial and public sector clients.

Financial and Strategic Outlook Unchanged

Conduent is reaffirming the following guidance ranges for FY 2017:


    (in millions)   FY 2016        FY 2017E
    ------------    -------        --------

    Revenue                 $6,408              Down 4.5-6.5% (CC)

    Adjusted EBITDA           $635                        Up 5%-6%

    Free Cash Flow           $(81)          20-30% of Adj. EBITDA


    Note: Please refer to the
     "Non-GAAP Outlook" in the
     Non-GAAP section below for
     certain non-GAAP
     information concerning
     outlook
    ---------------------------

"Our 2017 financial targets remain unchanged as we continue to balance our cost savings and investment strategy," said Brian Webb-Walsh, Conduent CFO. "We have made solid progress in stabilizing our Other segment and still expect this segment to be break-even by mid-2018. While our revenue trajectory is under pressure, new business signings growth has been strong the last two quarters, which we expect will help improve our revenue trend over the medium term. In addition, free cash flow meaningfully improved compared with last year and we expect to see continued margin expansion in the back half of the year. Overall, we executed on our plan this quarter and believe we are well positioned for the second half of the year."

Conference Call

Management will present the results during a conference call and webcast on August 9, 2017 at 10 a.m. Eastern.

The call will be available by live audio webcast 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 3476574.

A recording of the conference call will be available by calling 877-344-7529, or 412-317-0088 one hour after the conference call concludes on August 9, 2017. The replay ID is 10109939.

About Conduent

Conduent (NYSE: CNDT) is the world's largest provider of diversified business services with leading capabilities in transaction processing, automation and analytics. The company's global workforce is dedicated to helping its large and diverse client base deliver quality services to the people they serve. These clients include 76 of the Fortune 100 companies and over 500 government entities.

Conduent's differentiated offerings touch millions of lives every day, including two-thirds of all insured patients in the U.S. and nearly nine million people who travel through toll systems daily. 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 its clients and their constituents. Learn more at www.conduent.com.

Non-GAAP 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 non-GAAP measures. 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. 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 Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the primarily 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 measures.

Forward Looking Statements

This report and any exhibits to this Report may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "intend," "will," "should" and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Such factors include, but are not limited to: termination rights contained in our government contracts; our ability to renew commercial and government contracts awarded through competitive bidding processes; our ability to recover capital and other investments in connection with our contracts; our ability to attract and retain necessary technical personnel and qualified subcontractors; our ability to deliver on our contractual obligations properly and on time; competitive pressures; our significant indebtedness; changes in interest in outsourced business process services; our ability to obtain adequate pricing for our services and to improve our cost structure; claims of infringement of third-party intellectual property rights; 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; breaches of our security systems and service interruptions; our ability to estimate the scope of work or the costs of performance in our contracts; our ability to collect our receivables for unbilled services; a decline in revenues from or a loss or failure of significant clients; fluctuations in our non-recurring revenue; our failure to maintain a satisfactory credit rating; our ability to attract and retain key employees; increases in the cost of telephone and data services or significant interruptions in such services; our failure to develop new service offerings; our ability to receive dividends or other payments from our subsidiaries; changes in tax and other laws and regulations; changes in government regulation and economic, strategic, political and social conditions; 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's Discussion and Analysis of Financial Condition and Results of Operations" section and other sections in our 2016 Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission. Any forward-looking statements made by us in this 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.

Media Contacts:
Sean Collins, Conduent, +1-310-497-9205, sean.collins2@conduent.com

Investor Contacts:
Alan Katz, Conduent, +1-973-526-7173, alan.katz@conduent.com
Tyler Scott, Conduent, +1-973-526-7171, tyler.scott@conduent.com


                                                              CONDUENT INCORPORATED

                                          CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


                                  Three Months Ended                          Six Months Ended

                                       June 30,                                   June 30,

    (in millions, except per-
     share data)                  2017                 2016                    2017                 2016
    -------------------------     ----                 ----                    ----                 ----

    Revenues

    Revenue                               $1,485                                      $1,598                $3,027           $3,271

    Related party                   11                             15                                22          27

    Total Revenues                        $1,496                                      $1,613                $3,049           $3,298
                                          ------                                      ------                ------           ------

    Costs and Expenses

    Cost of services                      $1,245                                      $1,348                $2,532  2,760

    Related party cost of
     services                        8                             10                                15          19

    Research and development         3                              8                                 7          18

    Selling, general and
     administrative                153                            170                               322         353

    Restructuring and related
     costs                          36                             23                                54          49

    Amortization of intangible
     assets                         61                             62                               122         137

    Interest expense                34                              1                                70           2

    Related party interest           -                            10                                 -         20

    Separation costs                 1                             16                                 6          19

    (Gain) on sale of asset       (24)                             -                             (24)          -

    Other (income) expenses, net  (10)                           (1)                             (22)          9
                                   ---                            ---                               ---         ---

    Total Costs and Expenses     1,507                          1,647                             3,082       3,386
                                 -----                          -----                             -----       -----

    Loss before Income Taxes      (11)                          (34)                             (33)       (88)

    Income tax benefit             (7)                          (24)                             (19)       (55)
                                   ---                            ---                               ---         ---

    Loss from Continuing
     Operations                    (4)                          (10)                             (14)       (33)

    Income from discontinued
     operations, net of tax          -                             -                                4           -
                                   ---                           ---                              ---         ---

    Net Loss                                $(4)                                      $(10)                $(10)           $(33)
                                             ===                                        ====                  ====             ====


    Basic Earnings (Loss) per
     Share:

    Continuing operations                $(0.03)                                    $(0.05)              $(0.09)         $(0.17)

    Discontinued operations          -                             -                             0.02           -
                                   ---                           ---                             ----         ---

    Total Basic Loss per Share           $(0.03)                                    $(0.05)              $(0.07)         $(0.17)
                                          ======                                      ======                ======           ======


    Diluted Earnings (Loss) per
     Share:

    Continuing operations                $(0.03)                                    $(0.05)              $(0.09)         $(0.17)

    Discontinued operations          -                             -                             0.02           -
                                   ---                           ---                             ----         ---

    Total Diluted Loss per Share         $(0.03)                                    $(0.05)              $(0.07)         $(0.17)
                                          ======                                      ======                ======           ======


                                                                   CONDUENT INCORPORATED

                                       CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


                                            Three Months Ended                         Six Months Ended

                                                 June 30,                                  June 30,

    (in millions)                            2017               2016                    2017                2016
    ------------                             ----               ----                    ----                ----

    Net Loss                                         $(4)                                     $(10)                 $(10)   $(33)


    Other Comprehensive Income (Loss),
     Net:

    Translation adjustments, net               14                         (22)                              26         (15)

    Unrealized (loss) gains, net                -                         (1)                               2            1

    Changes in defined benefit plans,
     net                                      (1)                           1                                -           1
                                              ---                          ---                              ---         ---

    Other Comprehensive Income (Loss),
     Net                                       13                         (22)                              28         (13)


    Comprehensive Income (Loss), Net                   $9                                      $(32)                   $18    $(46)
                                                      ===                                       ====                    ===     ====


                                 CONDUENT INCORPORATED

                   CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


    (in millions,
     except share
     data in
     thousands)                      June 30, 2017             December 31, 2016
    -------------                    -------------             -----------------

    Assets

    Cash and cash
     equivalents                                        $309                        $390

    Accounts
     receivable,
     net                                     1,374                          1,286

    Net receivable
     from former
     parent
     company                                    39                              -

    Other current
     assets                                    264                            241
                                               ---                            ---

    Total Current
     Assets                                  1,986                          1,917

    Land,
     buildings and
     equipment,
     net                                       262                            283

    Intangible
     assets, net                             1,023                          1,144

    Goodwill                                 3,921                          3,889

    Other long-
     term assets                               456                            476

    Total Assets                                      $7,648                      $7,709
                                                      ======                      ======

    Liabilities
     and Equity

    Short-term
     debt and
     current
     portion of
     long-term
     debt                                                $59                         $28

    Accounts
     payable                                   106                            164

    Accrued
     compensation
     and benefits
     costs                                     247                            269

    Unearned
     income                                    196                            206

    Net payable to
     former parent
     company                                     -                           124

    Other current
     liabilities                               604                            611
                                               ---                            ---

    Total Current
     Liabilities                             1,212                          1,402

    Long-term debt                           2,071                          1,913

    Pension and
     other benefit
     liabilities                               171                            172

    Deferred Taxes                             592                            619

    Other long-
     term
     liabilities                               143                            173
                                               ---                            ---

    Total
     Liabilities                             4,189                          4,279
                                             -----                          -----


    Series A
     Convertible
     Preferred
     Stock                                     142                            142


    Common stock                                 2                              2

    Additional
     paid-in-
     capital                                 3,828                          3,812

    Retained
     deficit                                  (15)                             -

    Accumulated
     other
     comprehensive
     loss                                    (498)                         (526)
                                              ----                           ----

    Net Equity                               3,317                          3,288
                                             -----                          -----

    Total
     Liabilities
     and Equity                                       $7,648                      $7,709
                                                      ======                      ======


    Shares of
     common stock
     issued &
     outstanding                           209,355                        202,875

    Shares of
     Series A
     convertible
     preferred
     stock issued
     & outstanding                             120                            120


                                                            CONDUENT INCORPORATED

                                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


                                   Three Months Ended                         Six Months Ended

                                        June 30,                                  June 30,

    (in millions)                  2017                2016                    2017                2016
    ------------                   ----                ----                    ----                ----

    Cash Flows from Operating
     Activities:

    Net loss                                $(4)                                     $(10)              $(10)    $(33)

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

    Depreciation and amortization   130                           134                              255       282

    Deferred tax (benefit) expense (25)                           19                             (31)       24

    Gain on investments             (4)                          (3)                             (7)      (3)

    Amortization of debt financing
     costs                            2                             -                               4         -

    Net (gain) loss on sales of
     businesses and assets         (25)                            1                             (32)        1

    Stock-based compensation         12                             6                               18        10

    Restructuring and related
     costs                           34                            20                               46        45

    Payments for restructuring     (13)                         (13)                            (22)     (20)

    Contributions to defined
     benefit pension plans          (2)                          (1)                             (4)      (3)

    Provision for receivables       (1)                            1                              (1)        3

    Decrease (increase) in
     accounts receivable             41                            28                             (69)    (113)

    Increase in other current and
     long-term assets              (13)                         (40)                            (46)     (66)

    Decrease in accounts payable
     and accrued compensation      (36)                         (73)                            (85)    (139)

    Decrease in other current and
     long-term liabilities         (37)                         (79)                            (54)     (90)

    Net change in income tax
     assets and liabilities           7                          (51)                             (2)     (76)

    Other operating, net              1                             -                               1         -
                                    ---                           ---                             ---       ---

    Net cash provided by (used in)
     operating activities            67                          (61)                            (39)    (178)
                                    ---                           ---                              ---      ----

    Cash Flows from Investing
     Activities

    Cost of additions to land,
     buildings and equipment       (20)                         (25)                            (37)     (55)

    Proceeds from sales of land,
     buildings and equipment         33                             -                              33         -

    Cost of additions to internal
     use software                   (7)                         (11)                            (15)     (20)

    Proceeds from sale of
     businesses, net of
     adjustments                      -                            3                                -     (53)

    Net payments on related party
     notes receivable                 -                            3                                -        -

    Other investing, net              -                          (1)                               -        -
                                    ---                          ---                              ---      ---

    Net cash provided by (used in)
     investing activities             6                          (31)                            (19)    (128)
                                    ---                           ---                              ---      ----

    Cash Flows from Financing
     Activities

    Proceeds on long term debt,
     net of issuance costs          (8)                            2                              297         4

    Payments on debt                (9)                          (6)                           (153)     (12)

    Net payments on related party
     notes payable                    -                         (36)                               -     (27)

    Net transfers from (payments
     to) former parent                -                          151                            (161)      362

    Proceeds from exercise of
     stock options                    1                             -                               3         -

    Dividends paid on preferred
     stock                          (3)                            -                             (5)        -

    Other financing                   -                          (1)                             (6)      (1)
                                    ---                          ---                              ---       ---

    Net cash (used in) provided by
     financing activities          (19)                          110                             (25)      326
                                    ---                           ---                              ---       ---

    Effect of exchange rate
     changes on cash and cash
     equivalents                      -                          (1)                               2         -
                                    ---                          ---                              ---       ---

    Increase (decrease) in cash
     and cash equivalents            54                            17                             (81)       20

    Cash and cash equivalents at
     beginning of period            255                           143                              390       140
                                    ---                           ---                              ---       ---

    Cash and Cash Equivalents at
     End of Period                          $309                                       $160                $309      $160
                                            ====                                       ====                ====      ====

Non-GAAP Financial Measures

We have reported our financial results in accordance with U.S. GAAP. In addition, we have discussed our results using non-GAAP measures.

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 Condensed 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, and providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. 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.

A reconciliation of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided below.

These reconciliations also include the income tax effects for our non-GAAP performance measures in total, to the extent applicable. The income tax effects are calculated under the same accounting principles as applied to our reported pre-tax performance measures under ASC 740, which employs an annual effective tax rate method. The noted income tax effect for our non-GAAP performance measures is effectively the difference in income taxes for reported and adjusted pre-tax income calculated under the annual effective tax rate method. The tax effect of the non-GAAP adjustments was calculated based upon evaluation of the statutory tax treatment and the applicable statutory tax rate in the jurisdictions in which such charges were incurred.

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:

    --  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 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 the separation from Xerox Corporation into a separate, independent,
        publicly traded company. These 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 (income) expenses, net. Other (income) expenses, net includes
        losses (gains) on sales of business and assets, currency (gains) losses,
        net, litigation matters and all other (income) expenses, net.
    --  NY Medicaid Management Information System (NY MMIS). Costs associated
        with the company not fully completing the State of New York Health
        Enterprise platform project.
    --  Health Enterprise (HE charge). Cost associated with not fully completing
        the Health Enterprise Medical platform implementation projects in
        California and Montana.
    --  Gain on sale of asset (2017 only).

Adjusted Operating Income and Operating Margin

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

    --  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 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 the separation from Xerox Corporation into a separate, independent,
        publicly traded company. These 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.
    --  Interest expense. Interest expense includes interest on long-term debt
        and amortization of debt issuance costs.
    --  Related Party Interest. Interest payments to former parent.
    --  Other (income) expenses, net. Other (income) expenses, net includes
        losses (gains) on sales of business and assets, currency (gains) losses,
        net, litigation matters and all other (income) expenses, net.
    --  NY MMIS. Costs associated with the company not fully completing the
        State of New York Health Enterprise platform project.
    --  HE charge. Costs associated with not fully completing the Health
        Enterprise Medical platform implementation projects in California and
        Montana.
    --  Gain of sale of asset (2017 only).

Adjusted EBITDA and EBITDA Margin

We 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 on-going business. Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation and amortization adjusted for the following items:

    --  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 the separation from Xerox Corporation into a separate, independent,
        publicly traded company. These 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 (income) expenses, net. Other (income) expenses, net includes
        losses (gains) on sales of business and assets, currency (gains) losses,
        net, litigation matters and all other (income) expenses, net.
    --  NY MMIS. Costs associated with the company not fully completing the
        State of New York Health Enterprise platform project.
    --  HE charge. Costs associated with not fully completing the Health
        Enterprise Medical platform implementation projects in California and
        Montana.
    --  Gain on sale of asset (2017 only).

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 performances. Management cautions that amounts presented in accordance with Conduent's definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies calculate Adjusted EBITDA in the same manner.

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, capital lease additions and the gain on sale of an asset in 2017. 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. In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow reconciled to cash flow provided by operating activities, which we believe to be the most directly comparable measure under U.S. 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 is the difference between actual growth rates and constant currency growth rates.

Non-GAAP Outlook

In providing outlook for adjusted EBITDA we exclude certain items which are otherwise included in determining the comparable GAAP financial measure. A description of the adjustments which historically have been applicable in determining adjusted EBITDA are reflected in the table below. We are providing such outlook only on a non-GAAP basis because the Company is unable to predict with reasonable certainty the totality or ultimate outcome or occurrence of these adjustments for the forward-looking period, such as amortization, restructuring, separation costs, NY MMIS, HE charge, and certain other adjusted items, which can be dependent on future events that may not be reliably predicted. Based on past reported results, where one or more of these items have been applicable, such excluded items could be material, individually or in the aggregate, to reported results.


    Net Income (Loss) and EPS Reconciliation:


                                                    Three Months Ended              Three Months Ended
                                                       June 30, 2017                   June 30, 2016
                                                                                       -------------

    (in millions, except
     earnings per share)                      Net Income              EPS    Net Income                EPS
                                                (Loss)                         (Loss)
    ---                                          -----                          -----

    GAAP as Reported From
     Continuing Operations                                  $(4)                          $(0.03)              $(10)   $(0.05)

    Adjustments:
    ------------

    Amortization of
     intangible assets                                61                                        62

    NY MMIS                                            1                                         -

    Restructuring and
     related costs                                    36                                        23

    Separation costs                                   1                                        16

    (Gain) on sale of
     asset                                          (24)                                        -

    Other (income)
     expenses, net                                  (10)                                      (1)

    Less: Income tax
     adjustments(1)                                 (25)                                     (27)

    Adjusted Net Income
     (Loss) and EPS                                          $36                             $0.16                 $63      $0.30
                                                             ===                                                  ===


    (shares)
    -------

    Weighted average
     common shares
     outstanding                                                         204                               203

    Restricted stock and
     performance shares                                                    3                                 3

    8% Convertible
     preferred stock                                                       -                                5

    Adjusted Weighted
     Average Shares
     Outstanding(2)                                                      207                               211
                                                                         ===                               ===


    (1)  Reflects the income tax
     (expense) benefit of the
     adjustments. Refer to Effective Tax
     Rate reconciliation for details.

    (2) Average shares for the 2017
     calculation of adjusted EPS exclude
     5 million shares associated with
     our Series A convertible preferred
     stock and includes the impact of
     the preferred stock quarterly
     dividend of $3 million for the
     three months ended June 30, 2017.
     Average shares for the 2016
     calculation of adjusted EPS include
     5 million shares associated with
     our Series A convertible preferred
     stock and excludes the impact of
     the preferred stock quarterly
     dividend.


    Effective Tax Rate Reconciliation:


                                                       Three Months Ended                                Three Months Ended
                                                         June 30, 2017                                      June 30, 2016

    (in millions)                      Pre-Tax           Income Tax          Effective Tax       Pre-Tax                Income Tax    Effective Tax
                                       Income             (Benefit)              Rate             Income                (Benefit)         Rate
                                       (Loss)              Expense                                (Loss)                 Expense
    ---                                 -----              -------                                -----                  -------

    GAAP as Reported
     From Continuing
     Operations                                  $(11)                                     $(7)                             (63.6)%                 $(34)    $(24)    (70.6)%

    Non-GAAP
     adjustments(1)                           65                          25                                                      100                     27

    Adjusted(2)                                    $54                                       $18                                33.3%                   $66        $3        4.5%
                                                   ===                                       ===                                                        ===       ===


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

    (2) The tax impact of Adjusted Pre-Tax Income (Loss) 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
                                                         June 30, 2017                                    June 30, 2016

    (in millions)                             Profit (Loss)              Revenue Margin         Profit (Loss)               Revenue    Margin
    ------------                              ------------               ------- ------         ------------                -------    ------

    GAAP as Reported(1)                                        $(11)                    $1,496                                 (0.7)%           $(34)  1,613        (2.1)%

    Adjustments:

    Amortization of
     intangible assets                                   61                                                              62

    NY MMIS                                               1                                                               -

    Restructuring and related
     costs                                               36                                                              23

    Separation costs                                      1                                                              16

    Interest expense                                     34                                                               1

    Related party interest                                -                                                             10

    (Gain) on sale of asset                            (24)                                                              -

    Other (income) expenses,
     net                                               (10)                                                            (1)                    -
                                                        ---                                                             ---

    Adjusted Operating
     Income/Margin                                               $88                     $1,496                                   5.9%             $77       $1,613        4.8%
                                                                 ===                     ======                                                    ===       ======


    (1) Pre-Tax Loss and revenue
     from continuing operations.


    Adjusted EBITDA / Margin Reconciliation:


    (in millions)                            Three Months         Three Months            Year Ended
                                                 Ended                Ended           December 31, 2016
                                             June 30, 2017        June 30, 2016
    ---

    GAAP Revenue As
     Reported                                              $1,496                                       $1,613            $6,408

    NY MMIS charge                                       -                         -                               83

    Adjusted Revenue                                       $1,496                                       $1,613            $6,491
                                                           ======                                       ======            ======

    Reconciliation to
     Adjusted EBITDA
    -----------------

    GAAP Net Loss From
     Continuing
     Operations                                              $(4)                                       $(10)           $(983)

    Interest expense                                    34                          1                                14

    Related party
     interest                                            -                        10                                26

    Income tax benefit                                 (7)                      (24)                            (244)

    Depreciation                                        34                         29                               128

    Amortization                                        96                        104                               485

    EBITDA                                                   $153                                         $110            $(574)
                                                             ====                                         ====             =====

    EBITDA Margin                                    10.2%                      6.8%                           (8.8)%

    EBITDA                                                   $153                                         $110            $(574)

    Goodwill impairment                                  -                         -                              935

    Restructuring and
     related costs                                      36                         23                               101

    Separation costs                                     1                         16                                44

    NY MMIS                                              1                          -                              161

    NY MMIS depreciation                                 -                         -                             (52)

    (Gain) on sale of
     asset                                            (24)                         -                                -

    Other (income)
     expenses, net                                    (10)                       (1)                               20

    Adjusted EBITDA                                          $157                                         $148              $635
                                                             ====                                         ====              ====

    Adjusted EBITDA
     Margin                                          10.5%                      9.2%                             9.8%


    Free Cash Flow Reconciliation:


    (in millions)                  Three Months Ended         Year Ended
                                      June 30, 2017       December 31, 2016
    ---                               -------------       -----------------

    Operating
     Cash Flow                                        $67                           $108

    Cost of
     additions to
     land,
     buildings &
     equipment                                   (20)                       (149)

    Cost of
     additions to
     internal use
     software                                     (7)                        (39)

    Proceeds on
     sale of
     asset                                         33                            -

    Vendor
     financed
     capital
     leases                                       (4)                         (1)

    Free Cash
     Flow                                             $69                          $(81)
                                                      ===                           ====

View original content with multimedia:http://www.prnewswire.com/news-releases/conduent-reaffirms-2017-guidance-and-reports-second-quarter-2017-financial-results-grows-new-business-signings-and-improves-profitability-300501871.html

SOURCE Conduent Incorporated