Q4 2019 Earnings Call

Yes.

Good day and welcome to the condo in fourth quarter 2019 earnings call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask a questions. Please note this event is being recorded. I would now like to turn the conference over to Alan Katz vice president of investor relations, please go ahead.

Good evening, ladies and gentlemen and welcome to condo in fourth quarter of 2019 earnings call joining me on today's call is Cliff Skelton and Brian a condo and CFO following our prepared remarks. We will take your questions. This call is also being webcast a copy of the slide used during the call was filed with the SEC this afternoon with those slides as well as a detailed Financial metrics sheet are available for download on the investor relations section of the conduit website. We will also post the transcript later this week during this call, Executives may make comments that contain certain forward-looking statements as defined in a private Securities litigation Reform Act of 1995 that by their nature address matters that are in the future and are uncertain.

these statements

Management's current beliefs assumptions and expectations as of today February 20th 2020 and are subject to a number of factors that may cause actual results to differ materially from those statements.

Information concerning these factors is included in conduits annual report on form 10-K filed with the SEC. We do not intend to update these forward-looking statements as a result of new information or future events or development except as required by law. The information presented today includes non-gaap Financial measures because these measures are not calculated and according to the u.s. Gas they should be in addition to and not as a substitute for the companies reported results prepared in accordance with gaap.

For more information regarding definitions of our non-gaap measures and how we use them as well as limitations as to their usefulness for comparative purposes. Please see our press release which was issued this afternoon off and was furnished to the SEC on form. 8-k with that. I will turn the call over to Cliff for his prepared remarks lifts. Thank you Alan. Good afternoon. Everyone. Welcome to r q 4 and 2019 range call. I'll start today with a quick overview of the Q4 and full-year highlights will then discuss the results of our strategic and operational review Ryan will provide more detail on the financial results and we'll go over twenty twenty guidance and we'll close with some Q&A.

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Revenue for the full year at the top end of the range and adjusted ebitda right near the midpoint of that range based on the guidance that we set when I started a CEO despite signing for the are being weaker than we would have hoped thousand very strong initial signings performance in q1, January new business signings came in stronger than anticipated.

Well these maybe early signs of increased client confidence. It's still too early to call it more than the beginning of our turnaround Journey.

Before we turn to the results of the Strategic review. I want to point out some additional operational highlights last quarter. We announced the launch of our three prong systemic transformation programme with a focus on growth efficiency and quality of delivery. This has and will result in a series of both tactical and strategic projects and as ubiquitous across all of our businesses and projects.

The framework will be used as the execution arm for our strategic and operational review Focus areas.

Some early efforts produce some quick wins. We improved it and delivery performance resulting in quality improvements for our clients in their end users.

You need to see positive proof points in client's satisfaction as well indicated by both anecdotal feedback and our net promoter score rating. These are simply early signs and if not yet developed in a consistent trends.

We brought on several senior people to help Drive change and help us in our transformation initiative as part of our talent rebuilding efforts in addition to our new Chief Information officer and chief Revenue officer month. We've added a new head of HR a new general counsel in several key general managers among others.

We're driving increased engagement with our associate base and developing a culture that prioritizes client satisfaction teamwork and performance intended to result in significant improvements in both client and Associate retention.

We also completed the Strategic and operational review the results of the review as a clear plan to invest in our business for Revenue stabilization, margin expansion and efficiency opportunities in certain businesses and expansion opportunities and others which we believe will result in growth of your attention and new business signings. We have segmented the offerings into three categories, which I will go through in detail on the next slide.

Discussed in previous earnings calls, we believe that a possible divestiture could be a component of improved near-term shareholder value and should be part of our strategic consideration set.

As part of the review We considered divestitures including inbound inquiries and utilize tight criteria to see if selling a business even a business. We feel great about would create more shareholder value through dispatch position, then it would by retaining

Well, we will continue to be opportunistic. We do not necessarily need a divestiture to drive meaningful shareholder value, which is our goal. We believe our current portfolio coupled with our transformation efforts and improved leadership will position as well over time to drive both top-line Andy with a growth

No, let's move to the details of the Strategic view on slide for.

As we mentioned in the past two earnings calls, we undertook this review to determine where to focus our investments into the business and to maximize our value proposition.

you have

Formats in the current valuation assigned by the market we spent six months completing a thorough analysis and evaluated each of our lines of business to ensure that go forward conduent would be well positioned for success.

We took a hard look at what has and has not worked since our spin. We looked at areas. It would benefit from different processes in areas. It would benefit from investment. We would invest to build stronger offerings and to take advantage of Industry Trends and to optimize or enhance other offerings to increase cash flow and to stabilize Revenue this investment will strengthen our portfolio and position the company well for the future,

In terms of funding the transformation we expect to generate meaningful operating cash flow in 2020 and have cash on hand both of which we can use to fund Capital expenditures month. We also have a strong balance sheet with an undrawn revolver and reasonable debt leverage ratios. We will continue to consider possible future divestitures or other funding options as well.

Let's turn to slide 5 to discuss our strategy for the go forward company.

Regarding the spectrum of assets currently within the company we have offerings where we can first drive optimization to increase retention into our margin thus improving productivity wage and better outcomes for our clients second. We have Solutions and services where we can retain and grow through product enhancements and lastly offerings where we can invest in more meaningful amount to expand the current and adjacent markets leveraging new technologies.

The optimized businesses are generally areas of significant scale where we believe that with process improvements Automation and Technology consolidation. We can improve the end-user experience with reduce our cost of delivery expand our margins retain more clients and capture additional volume share.

The businesses where we see the potential to enhance our Solutions in market share with modest investment tend to have strong client relationships and a long history of servicing the markets. We operate in however, we have technology that needs to be refreshed or modernized lastly in the areas of the business where we see opportunities to expand our capabilities may require a more meaningful investment off but we see the payback is significant these businesses augmented with new capabilities. Perhaps supplemented by Modest Acquisitions will address market dynamics and provide additional growth opportunities.

I'll now provide.

a quick example of an expansion business and an optimized business

We've identified Healthcare as an expansion opportunity. We have significant scale across the entire Health Care ecosystem of insurance companies Healthcare Providers, third-party administrators off pharmaceutical companies and employers who provide health insurance for their employees.

We currently leverage our core capabilities to provide services across the healthcare universe.

We provide medical bill review and payment Integrity services to 9 at the top ten health insurers. We offer patient support and clinical trial Administration services to eight of the top-10 Pharma companies wage. We also process over twenty eight million medical bills each year saving our clients billions of dollars per year.

This is tremendous scale in a market that is projected to grow more than 5% Annually. We see an opportunity to leverage our current offerings bundle existing services and create a unique value-add insights and analytics and transact up and down the process value chain to capture competitive market share.

on the other

Set a spectrum transaction processing as an example is currently a fairly labor-intensive and lower margin business with more challenged secular Trends. However long this business provides core capabilities that are critical to Commercial and government organizations alike.

We believe that with with an investment into our Solutions and by leveraging Ai and machine learning tools. We can automate data entry and intake thus creating higher quality more consistency in life cost.

These are just two examples of how we're thinking about allocating Capital into the business.

Along the way it's not just what we intend to deliver in order to grow become more efficient and deliver quality, but it's also how we will deliver. We have established a transformation program focused on Thursday and program management to prioritize and sequence both are systemic efforts, but also the business specific optimize enhance and expand efforts.

This program will allow for better measurement governance execution oversight and capital allocation.

To slide 6 to discuss how we will manage and measure success for this transformation.

With the affirmation strategy as the backdrop. We've begun to launch a series of projects with increasing levels investment as funding increases to grow become more efficient and increase quality the Bellwether metrics necessary to measure the success of these projects will be Top Line shifts and revenue client and Associate retention reputation and reference ability in the office improved quality metrics and improved margins.

In some cases these projects will simply enable us to better operate what we have and in some cases a project or investment will produce a brand new or enhanced product Suite in all cases off. Our mission is to govern and execute a project-oriented fully funded pivot to growth game plan will have more to share on specific project examples in subsequent earnings calls off.

finally

People in Talent matter a lot in addition to hiring a new head of Human Resources will assume assign a senior leader to be uniquely focused on associate attrition and engagement ring Implement better and different hiring practices focused workplace initiatives and Endeavors important to our teammates. So as to retain and motivate thus improving client relationships with as we see attrition decline employee cost should also come down bring up cash to invest back into the business where you tracking all of these initiatives with clear and measurable metrics and kpis with these measurements will be incorporated into our reward and recognition programs.

Overall, I am encouraged and motivated to see this through to completion. It is time to execute what we have planned and complete the project planning and funding allocation for the rest. We believe I have the right strategy and we'll soon have all the right people in place to win.

Well, not turn the call over to Brian to provide an overview of the financials in our outlook for 2020 beginning on slide eight Ryan. Thank you Cliff before I begin. I'll note that throughout this presentation. And then the exhibit on Dix will provide both Gap and adjusted numbers which will provide a clean compared by removing the impact of the divestitures that we have completed.

let's start on slide 8 with a

Overview of the full year Financial results as Cliff mentioned we ended the year with revenue and adjusted ebitda in line with our guidance ranges adjusted revenue for the year, which excludes completed the best years was 4.4 billion down four and a half percent compared with Fleer 2018 and a constant currency basis adjusted Revenue was down 4% and at the top end of our guidance range the clients German primarily by lost business and our commercial and government sectors price pressure from renewals and our commercial and government sectors and volume pressure and the commercial business. These impacts were partially offset by growth from new business in the transportation sector adjusted ebit up for the year, which also excludes the impact from completed investors was approximately 493 million down 7.9% compared with full year 2018 and at the midpoint of guidance.

Well year adjusted ebitda margin was 11.1% representing a 40 basis-point reduction year-over-year year-over-year declines in full-year adjusted ebitda or driven by lower Revenue partially offset by efficiency programs and cost savings and it real estate and other corporate funds.

Operating income for the air was a loss or approximately 2.1 billion primarily driven by Goodwill impairments including an impairment in Q4. Let's move on to our segment summary on select 9 Commercial Avenue for the year. It came in at two point four billion down 6.5% for the year and down 5.8% in constant currency. These declines are primarily driven by lost business volume challenges with a five-digit customer care clients and price pressure associated with one large renewal commercial adjusted ebitda for the air was 542 million down 9.4% for the Year. This was driven by Revenue pressure partially offset by reduced labor. I t and real estate spend adjusted ebitda margins were 22.7% down 80 basis points.

Government revenue for the air was 1.3 billion down six and a half percent for the year well-adjusted, even though it's 423 million down 6.2% for the year the revenue and it should be able to the clients were primarily driven by lost business and price pressure from a large renewal. We had earlier in the year adjusted ebitda margins for the segment where a 33.5% up ten basis points when compared with new year 2018 results.

Transportation revenue for the year grew to $781 million which is up 7.1% or 8.2% in constant currency. This increase was primarily driven by new international Transit busy in increased domestic Towing volumes adjusted ebitda for the segment was $157 Million up 5.4% primarily driven by Revenue growth adjusted ebitda margins. We're 20.1% down 30 basis points compared to 2018.

Unallocated shared infrastructure in corporate cost for the year or $629 million this represents a 3% year-over-year decrease due to reductions in corporate function spend. Let's now turn to slide ten years quarterly and full-year cash results.

Our balance sheet continues to be healthy with $505 billion in cash at the end of the fourth quarter. Our current net leverage ratio came in right around our Target at 2.1 turns and her revolving remains undrawn with approximate $567 million of capacity available as of December 31st for operating cash flow and adjusted free cash flow. We're both strong year-over-year, but fell short of our expectations driven by the timing of a few jobs and higher capex.

Can't expand was fifty-seven million for the quarter or 5.2% of Revenue and was 215 million for the year or 4.8% of Revenue cat box came in nine million lower than 2018. However, as a percent of Revenue capex was about sixty basis points higher adjusted free cash flow was an inflow of 293 million in the quarter $34 million better than the same quarter in 2018 wage, even by working capital actions in quarterly timing adjusted free cash flow for the year was fifty-seven million or a hundred sixty 1 million worse and full-year 2018. This is largely due to lower ibadah non-cash items that are benefiting ibadah, but not cash flow in the timing of some transition service agreement payments.

All right, Justin free-cash-flow excludes the impact of 118 million and payments. We made in 2019 related to the Texas litigation settlement. We recently made the final hundred eighty million payment in January this payment along with normal working capital fluctuations will bring the cash balance down in q1.

Before we get to our 2020 guidance. I'd like to provide some updates on our key sales metrics for the year and the quarter on flight eleven. Our renewal rate for the quarter was 76% The contributors to the lower birth-rate are the loss of an end-user experience contract and medium-sized tolling contract. The renewal rate for the full year was 81% below our Target in ninety percent of that the impact of the California Medicaid contract was approximately five percentage points.

New business tcv signings for the quarter where 209 million down year-over-year will new business signings for the quarter were low. It is also important to note that we had a difficult compared as we signed our largest New Jersey this deal for the year in Q4 2018. Well, the Q4 signings numbers are disappointing as Cliff mentioned. We had a strong start to the year and we expect q1 twenty-twenty new business needs to grow both quarter-over-quarter and year-over-year a large part of the success will be attributable to our end user experience team winning a four year 90 million dollar contract took a former client. We plan to quickly wrap this contract to revenue and we are encouraged to see a former client returning.

let's move on to discuss the

Pipeline I'll note that we have included the total new business pipeline in addition to the rolling 12-month pipeline moving forward will focus on the total view of the new business pipeline movements of birth and Deals going out of the 12-month window can create what seems to be more volatility than what we are actually seeing in reality nonetheless with both pipeline definitions. We are beginning to see a stabilization as of the end of the quarter our total new business pipeline was twenty 1 billion representing a 15% increase from the same quarter in 2018.

We are cursed to see some signs of progress in q1 as we transform our sales organization. Our sales headcount is currently at at highest level since Q2 as we begin to hire and attract new Talent left on the slide 12 to discuss guidance for 2020.

Our 2020 guidance is consistent with the preliminary Outlook. We provided last quarter for 2020. We estimate Revenue will be down between six and eight percent constant currency. We expect adjusted ebitda margins to be relatively flat at the midpoint of our range which is between 10 and 1/2 + 11 and a half percent. We expect the calendar ization of margins to be down fifty basis points in the first half of the year off and up fifty basis points in the second half of the year at the midpoint of guidance lastly, we expect to convert 15 to 20% of adjusted ebitda into adjusted free cash flow in the year. This club rate is being impacted by an additional payroll cycle and 20/20 before we move on to Q&A. I'll note that our guidance excludes any incremental growth Investments as a result of the Strategic review page as Cliff discussed. We see some very attractive investment opportunities within the business, but we're still in the planning phase. We plan to update our Outlook as we fund these high Roi investment opportunities.

We have made some great initial.

Address in the next phase of our transformation and I am looking forward to continuing to show progress in the quarters to come. We will now open up the lines for some questions operator. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star then to our first question will come from Pune to Jane with JPMorgan, please go ahead.

Hey, thanks for taking my question and I think the growth approach place that you shared makes sense, but given that I have all the businesses in there. Should we view this as like a move away from potential Investments?

You know, I I think as I mentioned in the narrative Benny first, thanks for your question. But as I mentioned in the narrative, we want to maintain optionality for sure when we looked when we took it possible divestitures as as a way to increase your home value. It was a pretty simple math equation. If you will in other words, look at the sell ability of the asset minus the disentangling cost minus the tax implications or tax leakage, and we wanted to compare that to what we could do internally to grow that particular asset and of course all assets are not created equal but we wanted to do to grow that particular asset and what we're finding at least at this stage and I, you know want to re-emphasize this stage. We see our ability to grow the assets set that we have compartment at the time. I described in the narrative as a way to create your home value more readily than with selling the asset, but we we we want to remain opportunistic dead.

In in that examination and it's an iterative process for sure.

Shared like Revenue growth margins of some of those individual businesses in each one of those three buckets so we can track how you doing versus vehicle space. Yeah, absolutely as we get this, you know, we we begun to stratify those businesses as I said into the optimize enhance and expand kind of buckets and off we see is the the investment kind of goes 3340 if you will as a percentage of the investment dollars thirty percent 30% and 40% left to right in and I you know, I wouldn't say that the the margins certainly the margins in the in the optimize businesses are lower.

And that's where some of the opportunity is, but we we'd be happy to share that on go forward basis as we developed as those projects are are clear with respect to business cases timelines and deadlines. But yeah, we we would look to in our metrics file include a code of the data based on those businesses on a go-forward basis. Got it. Got it and quickly. I know I'm a news site like monkey new bookings will improve on both sequential as well as on your own your place has driven by uh, when ninety million, when should we expect like the underlying momentum to improve throughout the year as sales and operational Investments begin to generate returns or q1 will be like over Northeast driven by one last deal.

Yeah.

If any of this Cliff, I'll I'll sort of answer that when I would say we we do expect q1 to be strong. The the quotas are somewhat linear and if we continue to see the performance in Q2 and Q3, we see the output in terms of new bookings to be somewhat linear as well, but it's it can be it can turn lumpy. But right now we should be somewhat linear like bookings can be lumpy but you underline momentum should improve it seems absolutely. Absolutely. I Now understand your question. We expect to deliver a year-on-year growth this year for the full year could be lumpy by quarter, but we're off to a strong start. That's right. All right. Thank you.

Got it, and we'll use.

You bet. Thank you. Our next question will come from Shannon cross cross research, please go ahead. Thank you for taking my question. I'm sure you can you give us some idea of the size of the incremental investment that you think you'll be making since it's obviously not necessarily included in in the numbers and and maybe a little bit more specifics as to page where you will be targeting that investment and then also sort of as a follow-up. How are you thinking about the need to refinance some of the debt that's coming due in 20 22 23, just you know, if you can give us an idea of of you know, how you're thinking about approaching that you have some time, but it's it's always good to be prepared. So thank you. So we're still in the planning phase of prioritizing and sequencing the incremental investment, but we're earmarking approximately 100 to 200 million / 2 and 1/2 years and it would likely start in the back half of this year off.

We're working, you know.

Internally on this and with our board we'd expect about 25% to be Outbacks and 75% to be capex or restructuring and once we're through the process will provide an update on a guidance if necessary, but if we just did the math and all of that it would be between 5 and 10 of incremental Outbacks potentially this year and 15 to 30 of incremental capex and restructuring this year if I was linear, but again, we're still working on it and and from a debt maturity perspective the the term loan and revolver return 2022 in December of 2022 and the term loan officers in December of 2023. So we still have some time but we'll start early next year looking at every financing opportunities. And obviously we want to do it well in advance the maturity days off.

Thank you.

All right. Next question will come from Brian Bergen with Calvin, please go ahead.

Hi, yes is actually Geraldine on for Brian. So first can you kind of discuss your outlook for growth across Transportation commercial and government for fiscal year 20?

Sure, so I'll just talk compared to kind of the trends we saw in 2019. So in twenty-twenty we anticipate the transportation growth will dampen as we lap some new business contracts that were robbed last year and is the towing lost that that we referenced in our renewal rules off in government. We anticipate more pressure likely to be down over 10% Revenue off as we get the full year impact of Camus California Medicaid contract rolling off and then for commercial Revenue was down about 6% year-over-year constant currency in nineteen, and we anticipate better performance in that decline moderating. It's 120 as we get the impact that new business and we lapse one of our losses of the prior year and then just on margins we expect margins for the segments to be flat to slightly up as we you know offset the revenue declines overall with with efficiency improvements.

Yeah, and within that transportation business within a transportation business, as you know, there's really for some businesses. They're really not all creating created equal in terms of the dampening or the growth in some quite growing quite happily others, are are are growing a little more slowly or somewhat dampened.

And then when it came to a potential divestitures, were there any potential challenges resulting from other notable assets for sale specifically in state and local health?

No, we we we had many inbound inquiries across the spectrum of our asset set and we found really no no showstoppers or speed bumps in a in there. As I said earlier. It was more of a you know, what what we think we can do internally versus what those assets were worth out on the market and we we like what we have in house.

Hi, great. Thank you guys.

Thank you. Our next question will come from good evening, maybe for Cliff or Brian just given the ongoing wage earning the business and the portfolio. What is the level of visibility to the guidance that you provided on revenue? And then also a Brian maybe you could talk a little bit about the trend line of Revenue off course of the year, you did talk about some of the seasonality on margins, but it would be helpful to get a sense of how the revenue will Trend over the course of the year as well. Okay. Thanks man. So we have visibility to the midpoint of our guys and it aligns with our internal plans or internal budget targets. We still have work to do on the new business side that will drive Revenue in the current year, but we're comfortable with the guidance range we've moved in and we think you know, the you want your business signings that we we believe will see is a good indication of of kind of a strong start to the year on bookings and then you know you think about Revenue as it progressed.

Through the year, we will see we believe we will see the revenue decline as we get into the the last quarter maybe Q3 moderate a bit as we get more impact from your business.

And then you know just as we think about next year and get into twenty Twenty-One. We believe we can improve significantly the rate of decline it maybe even deliver of Revenue if if everything goes as planned and then we would, you know, see growth turning in 2022.

Great. So on that note what level of bookings would you have to see this year and not to put you on the spot but just maybe a sense of the growth in bookings or a dollar number that you have in mind that you could share with us that you would need to generate this year to be able to generate flat Revenue in 2021. Potentially or at least show Improvement relative to 2025. That's a great question. Right the way I look at it is growth in 2021 and 2022 is resident in both retention as well as bookings off and we expect bookings this year to be significantly improved from last year a hundred sixty percent to me more explicit as what we what is what are Target's would say and if we achieve that and I thought well that that's a little bit of a of a wag because it depends on on on expansion versus new bookings. But what what we know we need is a reduction in log.

buses coupled with

Those bookings to to achieve the goal. And so if we stay consistent with what we we are on track to achieve and in 2020 and and Achieve that again next year with various life were modest improvements were we're going to be where we need to be.

Okay and final question on margins, maybe Brian the puts and takes on margins. I realized revenues going to be the key for margin expansion over time. Any I think you want to call out in terms of margins off that can fly some color in terms of how we should expect that to run over the course of the year.

Yeah, first I would say on margins. We have the deal of the revenue Klein, and we also have to bring back some employee costs that we didn't have last year because of the performance in so those things, you know walk off set by efficiency drivers that that that that we're doing and automation. You know, some of the things will do in the optimize businesses and and in the corporate functions that are real estate and I see for how long is the drive savings, but they'll be offset by those other issues, and then as we see margin progress through the year again in my prepared remarks will be down. We believe in the first half at the midpoint of guidance about fifty basis points, and then up fifty basis points in the second half great that's helpful color. Thank you guys. Thank you as a reminder. If you would like to ask you a question, please press six then one. Our next question will come from Ashland Chevy car with City, please go ahead.

Well, thank you actually happened. So the question is.

With regards to the transformational Taylor's chart that you guys put up and I'm wondering how this may be difficult getting the that some of the initiatives that have happened over the over the past few years in terms of getting to a disciplined offering development of democracy positioning, you know processing to him and some of those kind of things seem to be more of the same and maybe maybe there's a Nuance that I'm not necessarily understanding but if you if you don't mind kind of going through, um, how is this different than before it happened to him? So in fact in previous Endeavors here, the the focus was primarily in the technology space and finding ways to frankly get a lot of efficiency through consolidation of hardware, and yep.

hardware and in some cases building out some

Some new software and capabilities. My view would be that we didn't always put the right people in process efforts in play to to enable the utilization of of those technology investor. This is a very different approach. It's not only a very different approach to execution but it's a very different approach to where we intend to spend the money. We've looked at we looked at it from two different angles one angle is the systemic pain points across our sales to service Continuum and where there are hurdles to success whether it's a Solutions architecture or a go-to-market plan off or certain specifics in our sales our operations. We've identified pain points and we've identified solutions for those pain points will result in projects. That's part one part to Thursday will be juxtaposed against the business, um categorization that I mentioned earlier in the narrative where in some cases the business needs are simply more around dead.

Making a business, you know more efficient and driving margins up in some cases.

Is in order to retain clients, it's simply a a tweak to the to the technology to make sure that we're delivering what we've promised in other cases. There's new opportunities to enhance an office and go up and down the value chain with a product where we can steal market share those those were all different approaches. It wasn't that we had we didn't have business cases before we did but the fault of those business cases weren't weren't quite as as rigorous as we as we as we thought before and then finally the execution of the page follow-through love the project set is a very different program. We have an Enterprise project management office. Now, we didn't have that before it's cross-functional but led by the office units. We didn't have that before we have inspection routines metrics. It's a completely different environment than we had before so it and and the efforts are quite different as well.

Got it, and and they kind of work approach to the optimize enhance and expand buckets. And I find it quite useful in terms of how to think of the business seems to correspond to how I think of your business as well. Am I reading too much into it when I if if I had maybe say that the ABS light bucket is one maybe you have the most problems enhance you more problems with regards to growth. So you're more focused on margins theater transportation and Commercial Healthcare offerings might be more developed. Is that a fair way to look at it a little bit more color on how you arrived at these might be useful. Yeah. No, I wouldn't I would not characterize it the way you did necessarily the way I would characterize it is in the optimize business. Think of birth.

Just businesses where we we don't need a new product to win.

The products are fine. What we need is more efficient capabilities. We need to put in a i and machine learning and and self-service and fewer process hand off and with that we drive home value to both our clients and to our margins, but we don't it's not a rebuild. It's a refinement the second bucket the enhancement bucket is these are these are business units and products and offerings where our clients are telling us. Look in order to retain Us in order to grow more with us. You need to do some tweaks to your technology offerings to in mod for them to make sure you stay up with the market if not get ahead of the market. And so that's that's quite a different model. And then the third model is there there in the in the value chain of a particular capability take claims. For example in the healthcare space up and down the the value chain and the process flow there are opportunities to take market share away from the competition if we had a different product.

And so we're looking at that would be an example of of an expand.

Business units so very different but I would not characterize the optimize businesses as problem businesses at all, but more like, you know Improvement or optimize or drive mom or sort of, you know, simplify kinds of businesses.

Got it, that seems movie theater. And if I could squeeze one more in and this maybe maybe just building on a previous question. You have down 68% off it have a projection you basically still keeping margins flattish, which is an accomplishment mean wage. What do you need to see in terms of Revenue growth from exit perspective to make maybe margin Improvement in 2021 Audi A8 believable Target. So in in the next, you know year or two our focus is going to be determined. Hm Revenue around and to make the right Investments. And so we actually see margin relatively range-bound for the next couple of years as we prioritize revenue and as we start to get Revenue wage,

As we start to get Revenue growth.

You know that that's when we'll be able to see margin Improvement in long-term. We see no reason this business can't get to a 15% margin which we view is is industry average. But in the meantime, we need to focus turning around the top line and making the investments in the business understand. Yeah, and as you know, when a lot of sins would be forgiven if we grow Top Line with respect to margin, so that's the that's a mission number one. So that's where we're going home.

This will conclude today's question-and-answer session. I would like to turn the conference back over to Cliff Skelton for any closing remarks.

Well, thank you all for listening today. We're in a quite exciting time here at conduent. We certainly have a lot going on as you just heard. I'm very proud of our team. It's been a difficult year in 2019. I'm proud team for their hard work. I appreciate the support of all of our stakeholders as we go forward. It can to continue this journey in our pivot to grow. So thank you all very much good by the name is now concluded. Thank you for attending today's presentation and you may now disconnect.

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