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| Statement |
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| Fourth, better cash flow conversion rates and an enhanced valuation |
| On the other hand, TCV, total contract value, an indication of future long-term growth, exhibited the best achievement since we became Conduent, up 20% to $2,257 billion |
| New business ramp, including the 3 large deals we signed in Q4 2022, combined with stronger government payment volumes, drove the better performance, but not quite enough to outrun the known loss business from prior years |
| Increased BenefitWallet revenue contributed to this margin improvement, along with operational efficiencies, and this was partially offset by lower volumes and nonrepeating items from the prior year |
| Our Q4 Transportation results posted year-over-year revenue growth and a stronger adjusted EBITDA versus Q4 2022 |
| Commercial segment adjusted EBITDA improved 21% year-over-year, and the adjusted EBITDA margin of 14.2% was up 290 basis points year-over-year |
| Again, all these measurements exceeded our expectations for Q4 and the full year |
| We experienced stronger-than-anticipated performance in our Government segment, offsetting some softness in both our Commercial and Transportation segments, which I'll cover as I discuss the individual segment results later |
| Meanwhile, revenue retention in 2023 was slightly better year-over-year |
| Our team moved 59,000 associates worked very hard in 2023 to improve every aspect of our performance against that competitive landscape, and I'm proud of what we accomplished |
| Net-net, 2023 from a financial perspective was stronger than most of our recent predictions but certainly had room to improve in both sales and cash generation |
| We finished the year with results coming in slightly stronger than how I messaged in our last earnings update, topping both our Q4 and modified full year guide |
| We expect an adjusted EBITDA margin expansion of between 200 and 300 basis points will be achieved through a series of margin expansion levers, again, for which we have multiple parts |
| With continued focus on client retention, further enhanced in a more focused portfolio of assets, we are confident we can achieve this growth |
| Our net ARR activity metric, our combined measure of wins, losses, pricing effects and other contractual changes has continued to remain positive |
| New business TCV was strong in 2023, growing 20% as compared to full year 2022 |
| Our Commercial segment is still experiencing longer decision-making cycles and cautious buying behavior, but finished the year stronger than it started, up 35% versus Q4 2022 |
| Whether it's in the financials or the culture improvements or the industry recognition or the strong improvement in our client relationships, we made significant progress |
| The adjusted EBITDA margin of 29.7% was up 90 basis points year-over-year |
| For the Government segment, full year 2023 revenue performed better than expected, declining 4.9% as compared to 2022 |
| Our current sales pipeline sits at close to $25 billion of total contract value, our highest ever |
| On one hand, we're positioned to capture more opportunities than most because of our diversity |
| Our Commercial segment backlog heading into 2024 is not quite as strong because of the lighter sales year in the first half of 2023, but the pipeline is improving, and revenue typically ramps quicker here than in the other 2 segments |
| Our total liquidity position remains strong with a combined $1.1 billion in cash and available revolving credit facility |
| Segment 2025 exit growth rates remain intact as previously stated, and this will still be an organization generating in excess of $3 billion of revenue |
| Again, the mission is to land on a $3 billion-ish, 3% to 5% growing company with reduced debt and an enhanced valuation at that 2025 exit |
| As you might recall, our main focus is to keep that net ARR number positive and increasing to the new normal |
| Additionally, we are targeting a further $50 million of annualized cost savings from a combination of efficiencies across the organization as we continue to streamline and rightsize our central costs, facilities and technology footprints |
| But Q4 and 2023 with large finished pretty strong for us |
| When compared to the outlook we presented in Q3 earnings, we exceeded expectations across adjusted revenue, EBITDA and EBITDA margins |
| Statement |
|---|
| New business ramp and add-on sales fell slightly short of outpacing loss business for the year, primarily due to the soft new business environment in 2023 in certain areas of the Commercial segment |
| Transportation segment results were negatively impacted from transitioning certain clients on large, long-running implementations through go-live |
| And the adjusted EBITDA margin of 5.9% was down 590 basis points year-over-year |
| Additionally, we're anticipating some incremental volume headwinds in our Government Services business as the funding mechanism for summer EBT programs has changed in 2024, with funding now split between state and federal sources |
| However, sales really, especially in the commercial space, created a sequential reduction in our net ARR number |
| This caused more of a drag on revenue and margins during the year than we originally anticipated |
| We expect the Commercial segment to be down between 2% and 3% due to a couple of client decisions in the CX space related to their geographic mix of business as well as some uncertainty in volumes in certain industries, including travel, logistics and telecom |
| Revenue for 2023 was $3.72 billion as compared to $3.85 billion in 2022, down 3.3% or 3.6% in constant currency |
| But it did add headwind to our sales performance |
| For the full year, Commercial segment revenues were $1.93 billion, down 3% as compared to 2022 |
| Transportation segment revenues declined 1.8% in 2023 as compared to 2022 |
| The balance of the impact on revenue was lower volumes from some large clients, predominantly in the CX space in certain industries, including travel, logistics and telecom |
| Lastly, we expect the Government segment to be down between 3% and 4% |
| But much like many of our commercial competitors experienced, market buying trends were slower in 2023 |
| Based on some discrete items we are anticipating in the first quarter, we expect the adjusted EBITDA margin to be below our full year guided range |
| The Q4 2023 net ARR activity metric was down sequentially, primarily due to the roll-off of a strong ARR performance in Q4 2022 and lighter signings in certain areas of the Commercial segment during 2023 |
| For the full year, ACV was down 13% as compared to 2022, with most of this impact in the Commercial segment, where ACV was down 29% |
| In terms of our expectations for Q1, which will only have a small fragment of divestiture impact in it, we expect revenue to be down between 2% and 3% |
| In the fourth quarter, our primary sales metric, new business ACV, was down $42 million versus the prior year at $152 million, roughly flat sequentially against the third quarter and in line with what we expected, absenting the volume of larger deals in the Government segment, which were a feature of our Q4 2022 ACV results when we signed 3 large deals |
| Government segment adjusted EBITDA declined by 1.8% year-over-year, driven by the impact of the onetime government stimulus volumes in 2022 and lost business, partially offset with the benefit from a portion of a legal settlement of $17 million as well as stronger government payment volumes |
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