Q1 2024 Conduent Inc Earnings Call

Operator: Greetings and welcome to the Conduent First Quarter 2024 Earnings Announcement. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Giles Goodburn, Vice President of Investor Relations. Thank you. Please go ahead.

Greetings and welcome to the conduit first quarter 2024 earnings announcement at this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

Charles Coburn: It is now my pleasure to introduce your host Charles could burn Vice President of Investor Relations. Thank you. Please go ahead.

Giles Goodburn: Thank you, Operator, and thanks everyone for joining us today to discuss Conduents' first quarter of 2024. We hope you had a chance to review our press release issued earlier this morning. Joining me today is Cliff Skelton, our President and CEO, and Steve Wood, our CFO. Today's agenda is as follows.

Charles Coburn: Thank you operator, and thanks, everyone for joining us today to discuss <unk> first quarter 2024 earnings we hope you've had a chance to review our press release issued earlier this morning.

Charles Coburn: Joining me today is cliff Skelton, our president and CEO and Steve Wood, our CFO.

Giles Goodburn: Cliff will provide an overview of our results and a business update. Steve will then walk you through the financials for the quarter as well as provide a financial outlook. We will then take questions and Cliff will then provide his closing comments.

Charles Burn: Today's agenda is as follows Cliff will provide an overview of our results and a business update Steve will then walk you through the financials for the quarter as well as providing our financial outlook. We will then take Q&A and Cliff will then provide his closing comments.

Giles Goodburn: This call is being webcast, and a copy of the slides used during this call, as well as the press release, were filed with the SEC this morning on Form 8K. This information, as well as the detailed financial metrics package, is available on the Investor Relations section of the Conduent website. During this call, we may make statements that are forward-looking. These forward-looking 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 from those statements.

Charles Burn: This call is being webcast and a copy of the slides during this call as well as the press release was filed with the FCC. This morning on form 8-K.

Charles Burn: This information as well as the detailed financial metrics package are available on the Investor Relations section of the conduit websites.

Charles Burn: During this call we may make statements that are forward looking.

Giles Goodburn: Information concerning these factors is included in Conduent's 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 developments, except as required by law. The information presented today includes non-GAAP financial measures. Because these measures are not calculated in accordance with US GAAP, they should be viewed in addition to and not as a substitute for the company's reported results. For more information regarding the definitions of our non-GAAP measures and how we use them, as well as the limitations to their usefulness for comparative purposes, please see our press release.

Charles Burn: These forward looking 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 from those statements.

Charles Burn: Information concerning these factors is included in <unk> annual report on Form 10-K filed with the SEC.

Charles Burn: We do not intend to update these forward looking statements as a result of new information or future events or developments, except as required by law.

Charles Burn: The information presented today includes non-GAAP financial measures because these measures are not calculated in accordance with U S. GAAP. They should be viewed in addition to and not as a substitute for the company's reported results for.

Charles Burn: For more information regarding definitions of our non-GAAP measures and how we use them as well as the limitations to their usefulness for comparative purposes. Please see our press release.

Giles Goodburn: And now, I would like to turn the call over to Cliff.

Charles Burn: And now I would like to turn the call over to Cliff.

Clifford A. Skelton: Thank you, Giles. Good morning, everyone, and welcome to Conduent's Q1 2024 earnings call. Today, we're happy to report that we have analyst Q&A at the end of our session, as Giles mentioned, as well as a normal report from myself and our CFO, Steve Wood. Q1 marks yet another quarter on our journey. That, like others, fought through things like COVID, the shift to a largely work-from-home model, and the many changing winds in the economic stage. As Stephen and I have previously discussed, we're very clear on what we have to do to take this company from what was an operational turnaround to a more narrow, nimble, and growing company. We've said a couple of things before.

Clifford A. Skelton: Thank you Jos and good morning, everyone and welcome to <unk> Q1, 2024 earnings call.

Clifford A. Skelton: Today, we're happy to report that we have analyst Q&A at the universe session as Jos mentioned.

Clifford A. Skelton: As long as the normal report from myself and our CFO Steve what.

Clifford A. Skelton: Q1 marks yet another quarter on our journey.

Clifford A. Skelton: But like others fought through things like Covid, the shift to a largely work from home model and the many changing wins and the economic stage as Stephen I've previously discussed.

Clifford A. Skelton: We're very clear eyed on what we have to do to take this company from what was an operational turnaround.

Clifford A. Skelton: Two a more narrow nimble and growing company.

Clifford A. Skelton: We've said a couple of things.

Clifford A. Skelton: One, rationalization of our portfolio will help us reduce drag and create bandwidth. It will also free up capital for the purpose of reducing debt, buying back our stock, and other opportunities. We said there would be pain before the game.

Clifford A. Skelton: And rationalization of our portfolio will help us reduce drag.

Clifford A. Skelton: Great bandwidth.

Clifford A. Skelton: It will also free up capital from the purpose of reducing debt buying back our stock and other opportunities.

Clifford A. Skelton: We said there would be pain before game.

Clifford A. Skelton: The timing of divestitures is not perfect, and some margin deterioration will take place in the near term and then expand to normality. 2024, in our plan, is the lowest in both revenue and EBITDA, exacerbated by an average average sales year, if you will, in 2023, a phenomenon experienced by many of our competitors as well. Our growth trajectory expectations in 2025 and 2026 will require different talent. We're making progress in mitigating that.

Clifford A. Skelton: The timing of divestitures is not perfect.

Clifford A. Skelton: And some margin deterioration will take place in the near term and then expand to normality.

Clifford A. Skelton: 'twenty 'twenty four and our plan.

Clifford A. Skelton: This is the trough year in both revenue and EBITDA.

Clifford A. Skelton: Exacerbated by an average average sales here if you will in 2023, a phenomenon experienced by many of our competitors as well.

Clifford A. Skelton: Our growth trajectory expectations in 2025, and 2026 will require different talent.

Clifford A. Skelton: We're making progress in mitigating that.

Clifford A. Skelton: More to come in our next earnings report on that subject. Suffice it to say that we're adding and changing talent at the senior levels of the company. We have to revitalize our sales engine, which we are doing. While timing is always a factor and Q1 performance lagged, the first half of the year will be reasonably strong, again, while we must execute well. It doesn't take a lot of examination to understand the growth enabled by a different talent base.

Clifford A. Skelton: To come in our next earnings on that subject.

Clifford A. Skelton: Suffice it to say that we're adding and changing talent at the senior levels of the company.

Clifford A. Skelton: Yeah.

Clifford A. Skelton: We have to revitalize our sales engine, which we are doing.

Clifford A. Skelton: While timing is always a factor in Q1 performance lagged the first half of the year will be reasonably strong.

Clifford A. Skelton: Again, while we must execute well.

Clifford A. Skelton: It doesn't take a lot of examination to understand that growth.

Clifford A. Skelton: By a different talent base, a stable operating platform.

Clifford A. Skelton: Cast generated by divestitures and the interlock cost take out, Of course, with reduced debt, makes for a more valuable company. That's the journey we're one third into. So, what about the Q1 numbers? Q1 was a strong revenue quarter for us, at $921 million, exceeding expectations. As you may recall, Steve guided Q1 revenue to be down 2% to 3% year over year, and we were essentially flat. He got it adjusted, even by a margin, to be below our full year guided range.

Clifford A. Skelton: Cash generated by divestitures and the interlock cost take outs.

Clifford A. Skelton: Of course with reduced debt makes.

Clifford A. Skelton: It makes for a more valuable company. That's the journey, we're one third into.

Clifford A. Skelton: So.

Clifford A. Skelton: What about the Q1 numbers.

Clifford A. Skelton: Q1 was a strong revenue quarter for us at $921 million exceeding expectations.

Clifford A. Skelton: As you May recall, Steve guided Q1 revenue to be down 2% to 3% year over year, and we were essentially flat.

Clifford A. Skelton: He guided adjusted EBIT margin to be below our full year guided range and that's where we landed at seven 5% inline with expectations.

Clifford A. Skelton: And that's where we landed at 7.5%, in line with expectations. Now, for what it's worth, the year-over-year EBITDA comparison is a little misleading because of a one-time item in Q1 of 2023. Without which, we'd have been in striking distance of flat year over year. While we're quite pleased with our revenue and EBITDA performance, we're less pleased with the timing of sales. Q1 Missed Expectations, primarily driven by the timing of new business ARR.

Clifford A. Skelton: Now for what it's worth so year over year EBITDA compares a little misleading because of a onetime item in Q1 of 2023.

Clifford A. Skelton: Without which we would have been in striking distance to flat year over year.

Clifford A. Skelton: While we are quite pleased with our revenue and EBITDA performance, we're less pleased with the timing of sales.

Clifford A. Skelton: Q1 missed expectations, primarily driven by the timing of new business a R. R.

Clifford A. Skelton: As you know, we've talked about sales in three categories: new logos, new capability, and add-ons. We definitely saw some new logo and new capability business slip to Q2, but the engine is now moving us in the right direction.

Clifford A. Skelton: As you know we've talked about sales in three categories.

Clifford A. Skelton: New logos, new capability and add on.

Clifford A. Skelton: We definitely saw some new logo and new capability business slipped to Q2.

Clifford A. Skelton: The engine is now moving us in the right direction.

Clifford A. Skelton: We have and are developing partnerships with other outsourcing firms in the CX space, especially to drive sales. Our client partnership teams are beginning to penetrate that white space in our portfolio, and we're teamed up with partners such as Microsoft and Virgin AI across the BPO and CX arenas to enhance quality, throughput, and efficiency. With respect to net AR, that number was still positive at 17 million, but lower than desired.

Clifford A. Skelton: We have and are developing partnerships with other outsourcing firms in the CX space, especially to drive sales or client partnership teams are beginning to penetrate that white space in our portfolio.

Clifford A. Skelton: And we're teamed up with partners such as Microsoft Virgin AI across our PPO and CX arenas to enhance quality throughput and efficiency.

Clifford A. Skelton: With respect to net a R that number was still positive at $17 million, but lower than desired.

Clifford A. Skelton: And that's not worrisome given the Q1 to Q2 timing and the fact that this trailing 12 month number can be unduly influenced in either direction by a large deal rolling off. Steve's going to talk about that further, as well as implications for Q2. As I mentioned, we believe the first half sales should be reasonably strong, with some tailwinds in our commercial business, especially, some weakness in our government business, and kind of down the fairway in transportation.

Clifford A. Skelton: That's not worrisome given the Q1 to Q2 timing and the fact that this trailing 12 month number can be unduly influenced in either direction by a large deal rolling off.

Clifford A. Skelton: He is going to talk about that further as well as implications for Q2.

Clifford A. Skelton: As I mentioned, we believe the first half sales should be reasonably strong.

Clifford A. Skelton: Some tail winds in our commercial business, especially.

Clifford A. Skelton: Some weakness in our government business.

Clifford A. Skelton: Kind of down the fairway and transportation.

Clifford A. Skelton: NetNet With the kind of diverse platform we have here at Conduent, the cycles often offset one another, and thus far, 2024 reflects those offsets. Last year, we had some weakness in commercial and strengthened government. This year, the opposite. Regardless, the lumpiness is sometimes accompanied by luck, unluck, and one-timers that can often skew the narrative.

Clifford A. Skelton: Net net with the kind of diverse platform, we have here at conduit.

Clifford A. Skelton: The cycles, often offset one another and thus far 2024 reflects those offsets.

Clifford A. Skelton: Last year, we had some weakness in commercial and strengthen government.

Clifford A. Skelton: This year the opposite.

Clifford A. Skelton: Regardless of Lumpiness is sometimes accompanied by luck unlock and one timers that can often skew the narrative.

Clifford A. Skelton: Now, speaking of narratives, Steve will get deeper on the subject in his remarks, but the divestiture activities associated with our rationalization efforts and the resulting financial reporting will take on a new reporting challenge of its own, as these divestitures monetize in the P&L. We will be transparent on revenue, EBITDA, and cash. But as I mentioned, margins in a given divested business can vary considerably. Transcribed by https://otter.ai. Thus, we may, or must pay attention to the timing expectation.

Clifford A. Skelton: Now speaking of narratives, Steve will get deeper on this subject in his remarks, but the divestiture activities associated with our rationalization efforts.

Clifford A. Skelton: And the resulting financial reporting will take on a new reporting challenges of its own.

Clifford A. Skelton: As these divestitures monetize in the P&L.

Clifford A. Skelton: We will be transparent on the revenue EBITDA and cash.

Clifford A. Skelton: As I mentioned margins in a given divested business can vary considerably.

Clifford A. Skelton: Specially in this high interest rate era.

Clifford A. Skelton: Thus, we may we must pay attention to the timing expectations.

Clifford A. Skelton: Weathering the cyclical variation will be important as 2020, excuse me, as 2024 finishes, setting the new baseline for the future. Therefore, as you can imagine, there will be some challenges in comparing the remainder of 2024 to previous years.

Clifford A. Skelton: Whether in this cyclical variation will be important as 2021 excuse me as 2024 finishes setting the new baseline for the future remain co.

Clifford A. Skelton: Therefore, as you can imagine there will be some challenges in comparing the remainder of 2024 to previous years, but this is the foundation for our future and part of the plan.

Clifford A. Skelton: But this is the foundation for our future and part of the plan. Regarding divestiture activities, there's a lot going on. We closed our curbside management and public safety business in a sale to Mendaxo for $230 million plus debt.

Clifford A. Skelton: Regarding divestiture activities there is a lot going on.

Clifford A. Skelton: We closed our curbside management and public safety business in a sale of the <unk> for $230 million plus debt.

Clifford A. Skelton: As part of Constellation Software, Medaxo is a global collection of technology companies passionate about changing the face of public transportation. We will begin the transition ASAP, and we will partner up in the process. We're also well on our way to closing the benefit wallet asset transfer and expect the final tranche to transfer this. We've definitely been busy in the M&A arena. There's more to examine and more to do on that portion of our journey. Thus far, we've used proceeds for debt repayment and will continue to do so in the near term with increasing optionality over time.

Clifford A. Skelton: As part of constellation software and <unk> as a global collection of technology companies passionate about changing the face of public transportation.

Clifford A. Skelton: We will begin the transition to Asia, and we will partner up in the process.

Clifford A. Skelton: We're also well on our way to closing the benefit wallet asset transfer and expect the final tranche to transfer this month.

Clifford A. Skelton: We've definitely been busy in the M&A arena, there is more to examine and more to do on that portion of our journey.

Clifford A. Skelton: Thus far we've used proceeds for debt repayment and we'll continue to do so in the near term with increasing optionality over time.

Clifford A. Skelton: We're also around $44 million into our prescribed $75 million stock buyback plan previously discussed. We remain committed to reaching the outlook performance previously discussed, particularly on the top line. Again, we must continue to improve on the new logo and new capability sales going forward. And we'll continue our disciplined approach to cost containment while bringing in some new senior talent. We will stay focused on EBITDA margins as we drive out stranded costs and modify how we work so that we optimize our cost structure.

Clifford A. Skelton: We're also around $44 million into our prescribed $75 million stock buyback plan previously discussed.

Clifford A. Skelton: We remain committed to reaching the outlet performance previously discussed.

Clifford A. Skelton: Particularly on topline.

Clifford A. Skelton: Again, we must continue to improve on the new logo new capability sales going forward.

Clifford A. Skelton: And we will continue our disciplined approach to cost containment, while bringing in some new senior talent.

Clifford A. Skelton: We will stay focused on EBITDA margins as we drive that stranded cost and modify how we work so that we optimize our cost structure.

Clifford A. Skelton: Profitable growth is a mission, and we've learned that there is always a cost refinement opportunity in a transaction-driven company. We also see partnerships in Gen AI as becoming even more important in the future. Despite some of the hype you see in the marketplace, real progress is being made. As you may be aware, we collaborated with Microsoft on an initiative to drive innovation using Microsoft Azure Open AI services. We now have three projects underway, all showing progress, and promise, and we hope to go live on all three in the near term.

Clifford A. Skelton: Profitable growth is emission and we've learned that there is always cost refinement opportunity in a transaction driven company.

Clifford A. Skelton: We also see partnerships and Jane AI is becoming even more important in the future.

Clifford A. Skelton: Despite some of the hype you see in the marketplace real progress is being made.

Clifford A. Skelton: As you may be aware, we collaborated with Microsoft on an initiative to drive innovation.

Clifford A. Skelton: Using Microsoft Azure open AI services, we now have three projects underway, all showing progress and promise and hope to go live on all three in the near term.

Clifford A. Skelton: As always the efficiency improvement becomes even more important in a more focused narrower company.

Clifford A. Skelton: As always, efficiency improvement becomes even more important in a more focused, narrower company. In addition to teaming with Microsoft, we've partnered with Oracle regarding our electronic benefits and tolling platform database with Oracle, now in the Azure cloud. Think of this as a multi-cloud or cloud within a cloud.

Clifford A. Skelton: In addition to teaming with Microsoft we partner with Oracle regarding our electronic electronic benefits and tolling platform database with Oracle now in the Azure cloud.

Clifford A. Skelton: Think of this as a multi cloud or cloud within our cloud now that technology providers are becoming less proprietary and more dedicated to joint outcomes for their clients.

Clifford A. Skelton: Now the technology providers are becoming less proprietary and more dedicated to joint outcomes for their clients. This Oracle Database Cloud, now running in Azure, allows for reduced latency, reduced complexity, and a more efficient model on a unit cost basis. We also continue to achieve recognition for our culture and our products and our services. Nelson Hall placed us as a leader in customer experience services transformation. And for the third year in a row, we're in the GovTech top 100. Finally, Newsweek recognized Conduent as one of America's greatest workplaces for women and diversity in 2024.

Clifford A. Skelton: This Oracle database cloud now running in Azure allows for reduced latency.

Clifford A. Skelton: Reduced complexity and a more efficient model on a unit cost basis.

Clifford A. Skelton: We also continue to achieve recognition for our culture and our products and our services.

Clifford A. Skelton: Nelson Hall placed us as a leader in customer experience services transfer formation.

Clifford A. Skelton: And for the third year in a row, where in the Gov Tech top 100.

Clifford A. Skelton: Finally, Newsweek recognized <unk> as one of America's greatest workplace for women and diversity in 2024.

Clifford A. Skelton: Now this journey is just that, a journey with puts and takes. We have more work to do, as I mentioned, but we're on the flight path to the growth zone we previously laid out. Our associates, 57,000 of them, work hard every day for our clients. Our client base is loyal. That client base includes roughly half of the Fortune 100.

Clifford A. Skelton: Now, let's journey is just that a journey with puts and takes.

Clifford A. Skelton: We have more work to do as I mentioned, but we're on a flight path to the gross zone, we previously laid out.

Clifford A. Skelton: Our associates 57000 of them work hard every day for our clients.

Clifford A. Skelton: Our client base is loyal.

Clifford A. Skelton: That client base includes roughly half of the fortune 100.

Clifford A. Skelton: Yeah.

Clifford A. Skelton: Now we have the products. We have the people. We will soon have more of the talent we need. We just have to stay the course, and we will. Thank you for being here. I'll now turn it over to Steve Wood for the financial details.

Clifford A. Skelton: Now we have the products.

Clifford A. Skelton: We have the people.

Clifford A. Skelton: We will soon have more of the talent we need.

Clifford A. Skelton: We just have to stay the course and we will.

Speaker Change: Thank you for being here I will not now.

Speaker Change: Now I'll turn it over to Steve Wood for the financial details.

Stephen Henry Wood: Thanks Cliff.

Stephen Henry Wood: As we have done in the past, we are reporting both GAAP and non-GAAP numbers. The reconciliations are in our filings and in the appendix of the presentation. Now, let's turn to slide 5.

Stephen Henry Wood: I've done in the past, we are reporting both GAAP and non-GAAP numbers, the reconciliation or in our filings and in the appendix of the presentation, let's turn to slide five.

Stephen Henry Wood: Before we launch into a discussion on the quarter itself, I want to highlight again the progress that we're making towards our billion dollars of deployable capital exiting 2025 that we've previously laid out to you in our investor briefing and again in our Q4 earnings update earlier this year. As Cliff mentioned, we announced earlier today that we have closed the sale of our public safety and curbside management business. We're closing in on a third transaction that we'd expect to close within the quarter, and that will take us somewhere near the midpoint of the range we'd earmarked for you for after-tax divestiture proceeds. To date, we've deployed around 30%, or $300 million, of our $1 billion target against debt prepayment and share repurchase. And I'll cover more of this detail in a minute in my presentation.

Stephen Henry Wood: Before we launch into a discussion on the quarter itself I want to highlight again, the progress that we're making towards our $1 billion of deployable capital exiting 2025.

Stephen Henry Wood: We've previously laid out to you in our investor briefing in again in our Q4 earnings update earlier this year.

Stephen Henry Wood: As Cliff mentioned, we announced earlier today that we have closed the sale of our public safety and curbside management businesses.

Stephen Henry Wood: We're closing in on a third transaction that we would expect to close within the quarter and that will take us somewhere near the midpoint of the range. We damn box for you for after tax divestiture proceeds.

Stephen Henry Wood: To date, we've deployed around 30% or $300 million of our $1 billion target against debt prepayment and share repurchases.

Stephen Henry Wood: I'll cover more of this detail in a minute in my presentation.

Stephen Henry Wood: Suffice to say, we're where we said we'd be, vis-a-vis this key component of our overall strategy, as we narrow our business around a core set of solutions that we believe can deliver long-term growth. As a result of these transactions, our reported numbers will start to deviate from the whole code guide that we laid out at the beginning of the year. And so I want to outline the approach that we're going to take for the balance of the year.

Stephen Henry Wood: Suffice to say, we're where we said we'd be vis vis this key component of our overall strategy.

Stephen Henry Wood: As we narrow our business around a core set of solutions that we believe can deliver long term growth.

Stephen Henry Wood: As a result of these transactions our reported numbers will start to deviate from the Holdco guide that we laid out at the beginning of the year.

Stephen Henry Wood: And so I want to outline the approach that we're going to take for the balance of the year.

Stephen Henry Wood: In terms of how we report and guide the remainder of 2024, how we lay out the quarterly progression, as well as how we continue to reassert the medium-term outlook that we talked about in our investor briefing last year and again in our Q4 earnings call last quarter. Firstly, the approach that we're intending to take for this quarter is to compare Q1 performance on a whole basis. There's only a small fragment of benefit wallet assets that weren't retained during Q1. With the first transfer happening on March 7th.

Stephen Henry Wood: In terms of how we reported guide the remainder of 2024.

Stephen Henry Wood: We lay out the quarterly progression.

Stephen Henry Wood: As well as how we continue to reassert our medium term outlook that we talked about in our investor briefing last year and again in our Q4 earnings call last quarter.

Stephen Henry Wood: Firstly.

Stephen Henry Wood: The approach that we're intending to take for this quarter is to compare Q1 performance on a holdco basis.

Stephen Henry Wood: There's only a small fragment of benefit wallet assets that weren't retained during Q1.

Stephen Henry Wood: With the first transfer happening on March 7th and.

Stephen Henry Wood: And so there's about a net $3 million negative impact on the quarter, top and bottom line, as we think about Q1 performance against last year. When we come to Q2, and for the remainder of the year, we'll be backing out the completed divestitures and reporting on an adjusted basis, with our normal reconciliations back to GAP in our filings and in the appendix of our presentation. Later in this presentation, I'll give you our expectations as to how this will look for Q2 on an adjusted basis, consistent with our past practice of guiding the upcoming quarter.

Stephen Henry Wood: So there's about a net $3 million negative impact in the quarter top and bottom line as we think about Q1 performance against last year.

Stephen Henry Wood: When we come to Q2.

Stephen Henry Wood: And for the remainder of the year, we'll be backing out the completed divestitures on reporting on an adjusted basis with a normal reconciliations back to GAAP in our filings and in the appendix of our presentations.

Stephen Henry Wood: Later in this presentation I will give you our expectations as to how this will look for Q2 on an adjusted basis consistent with our past practice of guiding the upcoming quarter.

Stephen Henry Wood: In our Q2 earnings, we'll be updating our full year guidance to be on an adjusted basis, considering completed divestitures and expected progress on removing stranded costs, which is underway. It's important to note here that we will continue to work on the removal of stranded costs throughout 2024 and into 2025, and so the annualization of these won't be fully reflected in our numbers until the back end of 2025. Finally, we'll continue to provide you with an updated walk to our 2025 exit rate. So you can bridge between our Actuals, our 2024 Guide, and the 2025 Exit Rate Outlook we've laid out. Now, let's get into the slides.

Stephen Henry Wood: And our Q2 earnings we will be updating our full year guidance to be on an adjusted basis.

Stephen Henry Wood: <unk> completed divestitures and expected progress on removing stranded costs, which is underway.

Stephen Henry Wood: It's important to note here that we will continue to work on removal of stranded costs throughout 2024 and into 2025.

Stephen Henry Wood: And so the annualized nation of fees won't be fully reflected in our numbers until the back end of 2025.

Stephen Henry Wood: Finally, we will continue to provide you with an updated walk through our 2025 exit rates. So you can bridge between actuals and our 2020 for Guy.

Stephen Henry Wood: On the 2025 exit rate outlook, we've laid out.

Stephen Henry Wood: Turning to slide six and reviewing our key sales metrics, as Cliff mentioned earlier, Q1 did turn out lighter than we expected in terms of new business sales, with ACV coming in at $99 million, as compared to 125 million in the 2023 forecast. We did have some deals earmarked to close in Q1 that have pushed into Q2 or later. As a result of this, we're expecting sequentially to be stronger in the second quarter at approximately 150 million ACV. I'm putting us at approximately 250 million ACV for the first half.

Stephen Henry Wood: Let's get into the slides turning to slide six and reviewing our key sales metrics.

Stephen Henry Wood: As Cliff mentioned earlier Q1 did turn out lighter than we expected in terms of new business sales with ACD coming in at $99 million.

Stephen Henry Wood: As compared to $125 million in the 2023 compare.

Stephen Henry Wood: We did have some deals earmarked to close in Q1 that are pushed into Q2 or later.

Stephen Henry Wood: As a result of this we're expecting sequentially to be stronger in the second quarter at approximately $150 million of ACP.

Stephen Henry Wood: And putting us at approximately $250 million of HCV for the first half of the year.

Stephen Henry Wood: This will still be behind our pacing for 2023 because, in Q2 2023, as a reminder, we booked our large transit contract with the state of Victoria in Australia, which yielded 65 million ACV. Our full year expectation for ACV attainment is around 650 million, and that's about 2% higher than 2023. Despite the softer performance in Q1, there are some encouraging signs. We're seeing renewed urgency to address cost through outsourcing, both in the CX and BPAS spaces, where we play strongly with a broad set of offerings.

Stephen Henry Wood: This will still be behind our pacing for 2023, because in Q2 2023 as a reminder, we booked a large transit contract with the state of Victoria in Australia, which yielded $65 million of HCV.

Stephen Henry Wood: Our full year expectation on ACD attainment is around $650 million and thats about 2% higher than 2023.

Stephen Henry Wood: Despite the softer performance in Q1, there are some encouraging signs, we're seeing renewed urgency to address costs through outsourcing.

Stephen Henry Wood: And the CX and be passed spaces, where we play strongly with a broad set of offerings and we expect this to translate into more opportunities as we go through 2024.

Stephen Henry Wood: And we expect this to translate into more opportunities as we go through 2024. The net ARR activity metric, our combined measure of wins, losses, pricing effects, and other contractual changes, was positive this quarter, but substantially lower at 17 million. There's going to be a roller coaster effect emerging in this metric as we go through this year that is worth spending a few minutes explaining. Based on the above Fourier sales outcome, we expect the metric to stand at around 100 million by the end of 2020. However, there was pronounced asymmetry in our notified losses last year, with them being far more weighted towards the back half of the year.

Stephen Henry Wood: The net IRR activity metric or couldnt buy measure of wins losses pricing effects and the other contractual changes was positive this quarter, but substantially lower at $17 million.

Stephen Henry Wood: That's going to be a roller coaster effect emerging in this metric as we go through this year that is worth spending a few minutes explaining.

Stephen Henry Wood: Based on the above full year sales outcome, we expect the metric to stand at around $100 million by the end of 2024.

Stephen Henry Wood: However that was pronounced a symmetry and on notified losses last year with them being far more weighted towards the back half of the year.

Stephen Henry Wood: And additionally, the effect of the Australia transit deal, which yielded around 48 million ARR in the second quarter of last year. What you're going to see is this net ARR activity metric going negative in the second quarter and then recovering strongly in the third and fourth quarters, firstly, as the Australia transit deal rolls out of the trailing 12 months.

Stephen Henry Wood: And Additionally, the effect of the Australia transit deal, which yielded around $48 million of AI era in the second quarter of last year.

Stephen Henry Wood: What youre going to see is this net productivity metric going negative in the second quarter, and then recovering strongly in the third and fourth quarters.

Stephen Henry Wood: Firstly as the Australia transit deal Rolls out the trailing 12 months.

Stephen Henry Wood: And then as the more elevated losses in the back half of 2023 also roll out of the metric. As I said, the full year expectation is that we exit the year with this metric standing at around 100 million, and that's the important number to anchor on. This is based on our current view of conduit before we take out the vestibule.

Stephen Henry Wood: And that is the more elevated losses in the back half of 2023 also rollouts of the metric.

Stephen Henry Wood: As I said full year expectation is that we exit the year with this metric standing at around $100 million and Thats the important number to anchor rock.

Stephen Henry Wood: This is based on our current view of contour and before we take out divestitures. However, I don't believe that divestitures will have a material impact on the shape of this roller coaster effect as we progressed through 2024.

Stephen Henry Wood: However, I don't believe that divestitures will have a material impact on the shape of this roller coaster effect as we progress through 2024. As a reminder, this trailing 12-month measure does not predict the timing of revenue but is based on the timing of notification, and as such, it will fluctuate, as you have just seen from quarter to quarter. Turning to slide 7, we've covered many of the metrics on the previous slide, but just a couple of extra points are here to comment on.

Stephen Henry Wood: As a reminder, this trailing 12 month measure does not predict the timing of revenue, but it is based on the timing of notification.

Stephen Henry Wood: Such will fluctuate as you've just seen from quarter to quarter.

Stephen Henry Wood: Turning to slide seven we've covered many of the metrics on the previous slide, but just a couple of extra points us to comment on.

Stephen Henry Wood: It was a lighter quarter on renewals, but our win rate remained solid. NRR sales performance was more in line with expectations. And, as I said earlier, it was the new business ARR deals that slipped and drove the lower revenue. Our average contract length in the quarter was 2.5 years, reflecting the lack of large recurring deals in the quarter.

Stephen Henry Wood: It was a lighter quarter of renewals, but our win rate remains solid.

Stephen Henry Wood: And our sales performance was more in line with expectations and I said earlier it was the new business <unk> deals that slipped and drove the lower outcome.

Stephen Henry Wood: Our average contract length in the quarter was $2 five years, reflecting the lack of large recurring deals in the quarter.

Stephen Henry Wood: Now let's turn to slide 8 and discuss our Q1 2024 financial results. Revenue for Q1 2024 was $921 million as compared to $922 million in Q1 2023, essentially flat and down very slightly on a constant currency basis. I'll cover the segment level hydraulics in a minute, but the overall view is that we continue to make progress with flattening the historic revenue decline and moving the business through a transition phase and then towards a trajectory of growth. We're not quite there yet, but we're getting closer.

Stephen Henry Wood: Now, let's turn to slide eight and discuss our Q1 2020 full financial results.

Stephen Henry Wood: Revenue for Q1, 2024 was $921 million as compared to $922 million in Q1, 2023, essentially flat and down very slightly on a constant currency basis.

Stephen Henry Wood: I'll cover the segment level hydraulics in a minute but.

Stephen Henry Wood: But the overall view is that we continue to make progress with flattening the historic revenue declines and moving the business through a transition phase and then towards the trajectory of growth, we're not quite there yet, but we're getting closer.

Stephen Henry Wood: You'll see when we dive into the segments that transportation had a better quarter. We're full bore on our large transit implementation in Australia. And so there's a strong contribution from implementation revenues associated with that. New business revenue grew, including the impact of the transit deal, exceeded lost business rolling off, but there was a slight drag from volumes, mainly in commercial. Adjusted EBITDA was $69 million for the quarter as compared to $90 million in Q1 2023.

Stephen Henry Wood: You'll see when we dive into the segments that transportation had a better quarter.

Stephen Henry Wood: With full bull on a large transit implementation in Australia, and so theres a strong contribution from implementation revenues associated with that.

Stephen Henry Wood: New business revenue ramped, including the impact of the transit deal exceeded lost business rolling off but there was a slight drag from volumes mainly in commercial.

Stephen Henry Wood: And the adjusted EBITDA margin of 7.5% was down 230 basis points year over year as compared to Q1 2023. Most of that related to the booking last year in the first quarter of a favorable legal settlement for $17 million, which we called out at the time. In the quarter itself, there weren't any large unusual items.

Stephen Henry Wood: Adjusted EBITDA was $69 million for the quarter as compared to $19 million in Q1 2023.

Stephen Henry Wood: On the adjusted EBITDA margin of seven 5% was down 230 basis points year over year as compared to Q1 2023.

Stephen Henry Wood: Most of that related to the booking last year in the first quarter of a favorable legal settlement for $17 million, which we called out at the time.

Stephen Henry Wood: In the quarter itself that worked any large unusual items, but you will see when we cover the segments in a minute. There was some variation that driven by mix and other factors.

Stephen Henry Wood: But you'll see when we cover the segments in a minute, there was some variation there driven by mix and other factors. So let's now turn to slide nine and go over the segment results. For Q1 2024, commercial segment revenues were $483 million, down 4.9% as compared to Q1 2023. There was about a $3 million headwind in that number because of the beginning of the transfer of the benefit wallet assets at the end of the first quarter this year, which reduced our float revenue with an offset due to higher interest rates this year as compared to last.

Stephen Henry Wood: So, let's now turn to slide nine and go over the segment results.

Stephen Henry Wood: For Q1, 2024 commercial segment revenues were $483 million down four 9% as compared to Q1 2023.

Stephen Henry Wood: That's about a $3 million headwind in that number because of the beginning of the transfer of the benefit while at assets at the end of the first quarter of this year, which reduced our float revenue with an offset due to higher interest rates this year as compared to loss.

Stephen Henry Wood: Other than that, the top line story for the commercial segment this quarter is one of working off the effect of some prior year lost business. We expect the growth gap to narrow due to improving sales performance and the segment to come closer to flat as we exit 2024. Adjusted EBITDA for the commercial segment in Q1 2024 was 70 million, up 7.7% as compared to Q1 2023, and the adjusted EBITDA margin of 14.5% was up 170 basis points year over year, driven by operational efficiency with an offset, as noted above, due to the start of the roll-off of the benefit wallet asset.

Stephen Henry Wood: Other than that the top line story for the commercial segment. This quarter is one of working off the effect of some prior year loss of business.

Stephen Henry Wood: We expect the growth gap to narrow due to improving sales performance and the segment coming closer to flat as we exit 2024.

Stephen Henry Wood: Adjusted EBITDA for the commercial segment in Q1, 2024 was $70 million up seven 7% as compared to Q1 2023, and the adjusted EBITDA margin of 14, 5% was up 170 basis points year over year.

Stephen Henry Wood: Driven by operational efficiency with an offset as noted above due to the start of the roll off of the benefit wallet assets.

Stephen Henry Wood: Clearly as we complete this divestiture youll see a reset in the commercial margins due to the high margin nature of the benefit wallet business and.

Stephen Henry Wood: Clearly, as we complete this divestiture, you'll see a reset in the commercial margins due to the high margin nature of the benefit wallet business. And this will be partially offset over time through our work to remove stranded costs and drive other operational efficiencies and improved operating leverage and margin mix as the segment begins to move to growth. Unrelated to the commercial segment EBITDA, but still highly relevant to the overall picture, in Q2, you'll begin to see lower interest expense as we're deploying the proceeds from this divestiture to reduce debt.

Stephen Henry Wood: And this will be partially offset over time through our work to remove stranded costs and drive other operational efficiencies and improved operating leverage and margin mix as the segment begins to move to growth.

Stephen Henry Wood: Unrelated to the commercial segment, EBITDA, but still highly relevant to the overall picture in.

Stephen Henry Wood: In Q2, Youll begin to see lower interest expense as we are deploying the proceeds from this divestiture to reduce debt.

Stephen Henry Wood: For the government segment, Q1 2024 revenues were $258 million, down 2.3% as compared to Q1 2024. The decreases were primarily due to some lost business from the prior year, slightly lower volumes in our government payments business, partially offset by new business ramp-up, and the effect of a prior year item that was non-replacement. Adjusted EBITDA for the government segment in Q1 2024 was €55 million, down 33

Stephen Henry Wood: For the government segment, Q1, 2024 revenues with $258 million down two 3% as compared to Q1 2023.

Stephen Henry Wood: The decreases were primarily due to some lost business from prior year.

Stephen Henry Wood: Slightly lower volumes in our government payments business, partially offset by new business ramp and the effect of a prior year item that was non repeating.

Stephen Henry Wood: Adjusted EBITDA for the government segment in Q1, 2024 was $55 million down 33, 7% year over year.

Stephen Henry Wood: As noted on the prior slide, this compare included the benefit last year from the portion of a legal settlement recognized in cost of services for $17 million. That item aside, the remainder of the variation in margin is driven by the slightly lower payment volume. Transportation segment revenues in Q1 2024 were 180 million, up 20% year over year. The implementation ramp from our large transit project in Australia accounted for around 19 million of this year-over-year impact.

Stephen Henry Wood: As noted on the prior slide this compare included the benefit last year from the portion of a legal settlement recognized in cost of services for $17 million.

Stephen Henry Wood: That's item aside the remainder of the variation in margin is driven by the slightly lower payment volumes.

Stephen Henry Wood: Transportation segment revenues in Q1, 2020 for over $180 million up 20% year over year.

Stephen Henry Wood: The implementation ramp from a large transit project in Australia accounted for around $19 million this year over year impact.

Stephen Henry Wood: The balance of the improvement in the quarter was both better add-on revenue performance and the non-recurrence of the project re-timing that occurred on some of our implementations this time last year. For the transportation segment, adjusted EBITDA for the quarter was $8 million, as compared to $3 million in Q1 2023. And the adjusted EBITDA margin was 4.4%. The predominant driver was the lack of the same impact last year on this project retiming with an offset from a slightly less favorable revenue.

Stephen Henry Wood: The balance of the improvement in the quarter was both better add on revenue performance as well as the non recurrence of the project timing that occurred on some of our implementations. This time last year.

Stephen Henry Wood: For the transportation segment adjusted EBITDA for the quarter was $8 million as compared to $3 million in Q1 2023.

Stephen Henry Wood: On the adjusted EBITDA margin was four 4%.

Stephen Henry Wood: The predominant driver was the lack of the same impact last year on this project timing with an offset from a slightly less favorable revenue mix.

Stephen Henry Wood: Let's turn to slide 10 and discuss the balance sheet and cash flow. Our total liquidity position remains strong, with close to a billion dollars in cash and available revolving credit facilities. We ended the quarter with approximately $424 million of total cash on the balance sheet, and our $550 million revolving credit facility is almost completely unused at this point. Our net leverage ratio decreased slightly to two times, and it's comfortably inside our current target range of two to two and a half times.

Stephen Henry Wood: Let's turn to slide 10, and discuss the balance sheet and cash flow.

Stephen Henry Wood: Our total liquidity position remains strong with close to $1 billion in cash and available revolving credit facility.

Stephen Henry Wood: We ended the quarter with approximately $424 million of total cash on balance sheet.

Stephen Henry Wood: And a $550 million revolving credit facility.

Stephen Henry Wood: Almost completely unused at this point.

Stephen Henry Wood: Our net leverage ratio decreased slightly to two turns and is comfortably inside our current target range of two to two and a half tons.

Stephen Henry Wood: Notwithstanding our recent prepayments against our term loan B, which I'll talk about in a minute, we have no significant debt repayments until 2026. Capital expenditure in the quarter was 2.6% of revenue, and we expect it to be about 3% of revenue or slightly below that as we progress through 2024, although individual quarters may fluctuate slightly. As a reminder, we updated this metric last year to include capital spent on product software, which hits operating cash flow. We received the final $22 million of our federal tax refund related to 2018 during the quarter. In the quarter, we repurchased 4.8 million shares at an average price of $3.48.

Stephen Henry Wood: Notwithstanding our recent pre payments against our term loan B, which I'll talk about in a minute we have no significant debt repayments until 2026.

Stephen Henry Wood: Capital expenditure in the quarter was two 6% of revenue and we expect it to be about 3% of revenue was slightly below that as we progress through 2020 full although individual quarters may fluctuate slightly.

Stephen Henry Wood: As a reminder, we updated this metric last year to include capital spent on product software, which hit operating cash flow.

Stephen Henry Wood: We received the final $22 million of our federal tax refund related to 2018 during the quarter.

Stephen Henry Wood: In the quarter, we repurchased four 8 million shares at an average price of $3 48.

Stephen Henry Wood: As you will see from our filings, we also prepaid $164 million against our Term Loan B at the end of the quarter. And subsequent to that, in April, we prepaid a further $95. In aggregate, we have current approval to repay debt up to $464 million from the initial proceeds of the divestiture program announced, and we will continue to provide further updates as necessary as we continue with the divestiture program. Let's now turn to slide 11 and cover our outlook for 2024.

Stephen Henry Wood: As you will see from our filings, we also prepaid $164 million against our term loan b at the end of the quarter.

Stephen Henry Wood: And subsequent to that in April we prepaid a further $95 million.

Stephen Henry Wood: In aggregate, we have current approval to repay debt up to $464 million from the initial proceeds of the divestiture program announced and we will continue to provide further updates as necessary as we continue with the divestiture program.

Stephen Henry Wood: Let's now turn to slide 11 and cover our outlook for 2024.

Stephen Henry Wood: Firstly, it's important to reiterate that we continue to execute on the financial framework I laid out last March in our investor briefing, and the key message that Cliff and I are both conveying is confidence in our path to deliver the billion dollars of deployable capital by the end of 2025.

Stephen Henry Wood: Firstly it is important to reiterate that we continue to execute on the financial framework I laid out last March in our investor briefing.

Stephen Henry Wood: And the key message that cliff and I are both conveying is confidence in our path to deliver the $1 billion of deployable capital by the end of 2025.

Stephen Henry Wood: Associated with the revenue growth and margin targets we outlined. Turning to the Outlook itself, you'll see that our whole code guidance that we gave in our Q4 earnings presentation remains how we think about the business. Will we stay the course as is for the remainder of 2024?

Stephen Henry Wood: Associated with the revenue growth and margin targets, we outlined.

Stephen Henry Wood: Turning to the outlook itself, you'll see that our holdco guidance that we gave in our Q4 earnings presentation remains how we think about the business will be going to stay the course as is for the remainder of 2024.

Stephen Henry Wood: But as you heard me say earlier, this is the last quarter that it makes sense for us to give you this whole code view. Next quarter, we will be withdrawing and modifying our guide to show you the adjusted view of our business without the divestitures we've announced that will close in 2024. And this will become the basis of our 2024 guidance. In a minute, I'll give you a range for Q2 as a marker, but as I said, more detail to come in the Q2 earnings call. Slide 12 is important.

Stephen Henry Wood: But as you heard me say earlier. This is the last quarter that it makes sense for us to give you. This whole co view next quarter, we will be withdrawing this and modifying our guy to show you. The adjusted view of our business without divestitures, we've announced that will close in 2024.

Stephen Henry Wood: And this will become the basis of our 2024 guidance in a minute I'll give you a range for Q2 was a marker, but as I said more detail to come into Q2 earnings call.

Stephen Henry Wood: Slide 12 is important.

Stephen Henry Wood: Because it gives you the walk from where we are now to that exit rate in 2025 and remains how we think about the journey we're on over the next 20 months or so. And on that slide, you can see the various pieces of the work we have to do. The loss of emitters from the divested businesses will drive what Cliff described as a trough in 2024, and you'll see that recovering as we progress through 2024 and 2025 and work our way into the 100 million of cost efficiency related to stranded costs and other simplifications that we'll be able to make to our operating structure as we continue to narrow the focus of the business. Add to that our expectations of revenue growth as we move through And you'll get back to that midterm out.

Stephen Henry Wood: Because it gives you the walk from where we are now to that exit rate in 2025 and remains how we think about the journey. We're on over the next 20 months or so.

Stephen Henry Wood: On that slide you can see the various piece parts of the world we have to do.

Stephen Henry Wood: The loss of EBITDA from the divested businesses will drive what Cliff described as a trough in 2024.

Stephen Henry Wood: And Youll see that recovering as we progress through 2024, and 2025 and work our way into the $100 million of cost efficiency related to stranded costs.

Stephen Henry Wood: Simplifications that we'll be able to make to our operating structure as we continue to narrow the focus of the business.

Stephen Henry Wood: Add to that our expectations of revenue growth as we move through 2025.

Stephen Henry Wood: And opportunities to drive margin expansion as we continue to work on our mix of business and Youll get back to that mid term outlook.

Stephen Henry Wood: And again, to reiterate, we're well on our way to generating the billion dollars of deployable capital, with around 30% of that already deployed against debt prepayment and share repo. In terms of Q2, adjusted for the two divestitures completed, we expect adjusted revenue to be in the range of $795 million to $810 million. And seasonally, it's also usually the low point of our installed base of revenue.

Stephen Henry Wood: And again to reiterate we are well on our way to generating the $1 billion of deployable capital with around 30% of that already deployed against debt prepayment and share repurchase.

Stephen Henry Wood: In terms of Q2 adjusted for the two divestitures completed we expect.

Stephen Henry Wood: Adjusted revenue to be in the range of $795 million to $810 million.

Stephen Henry Wood: And seasonally it's also usually the low point of our installed base of revenue.

Stephen Henry Wood: And we would expect the adjusted EBITDA margin for the second quarter to be in the low single-digit percentage, as we are early in our work to remove stranded costs. Clearly, you will see this move up as we go through the quarters, as I mentioned earlier. Finally, as we've started to pay down debt, you'll also see our interest expense line reduce in the second quarter, and annually, based on the approximate 450 million of approval that we have to pay down debt, we will see a saving on the interest expense line of approximately $45 million annualized at current interest rates.

Stephen Henry Wood: And we would expect adjusted EBITDA margin for the second quarter to be in the low single digit percentages.

Stephen Henry Wood: As we are early in our work to remove stranded costs.

Stephen Henry Wood: Clearly you will see this move up as we go through the quarters as I mentioned earlier.

Stephen Henry Wood: Finally, as we've started to pay down debt, you'll also see our interest expense line reduce in the second quarter and.

Stephen Henry Wood: And annually based on the approximate $450 million of approval, but we have to pay down debt.

Stephen Henry Wood: We will see a saving on interest expense line of approximately $45 million annualized at current interest rates.

Stephen Henry Wood: There's a lot going on here, but we hope we've laid out the pieces for you in enough detail, clearly with more to come in Q2 earnings. Additionally, we've got a busy conference schedule in the New York area in the second quarter, so continue as you do to reach out to Giles and the team for more information on that. That concludes my financial remarks for the quarter. Operator, I'll hand it back.

Speaker Change: A lot going on here.

Speaker Change: But we hope we have laid out the pieces for you in enough detail clearly with more to come in Q2 earnings.

Speaker Change: Additionally, we've got a busy conference schedule in the New York carrier in the second quarter. So continue issue due to reach out to Giles and the team for more information on that.

Speaker Change: That concludes my financial remarks for the quarter, operator, I'll hand, it back to you.

Operator: Thank you. The floor is now open to questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key.

Speaker Change: Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the Q2 participants using speaker equipment. It may be necessary to pick up the handset before pressing the starkey.

Speaker Change: Lastly, you please limit yourself to two or three questions in the queue. Once again Thats Star One to register a question at this time.

Operator: We do ask that you please limit yourself to 2 or 3 questions in the queue. Once again, that's star 1 to register a question at this time. The first question is coming from Pat McCann of Noble Capital Markets. Please go ahead.

Speaker Change: The first question is coming from Pat Mccann of Noble capital markets. Please go ahead.

Speaker Change: Okay.

Pat McCann: Thanks for taking my questions, guys. My first question is, really, for Cliff: how are you feeling about the performance of the new business signings, as well as the overall macro trends, particularly through the lens of how the economy affects the commercial sector?

Pat McCann: Thanks for taking my questions guys. My first question is.

Pat McCann: Really for Cliff how are you feeling about the performance of all of the new business signings as well as the overall macro trends.

Pat McCann: Particularly through the lens of how the economy affects the commercial segment.

Pat McCann: Got it thanks for the question, we haven't done Q&A in a while so thanks for being a little easy on us as we get going again.

Clifford A. Skelton: Pat, thanks for the question. We haven't done a Q&A in a while. So thanks for being a little easy on us as we get going again. The listen, I 2023 felt a little tight in terms of the macro trends and propensity to buy. And it feels like it's starting to loosen up. In 2024, the propensity to buy seems to be loosening up, cost reduction efforts from our clients and the client base are becoming more profound, and we're seeing that start to open up.

Clifford A. Skelton: Listen I 2023 talk a little tight in terms of the macro trends and propensity to buy.

Pat McCann: It's feeling like it's starting to loosen up.

Pat McCann: In 2024, and the propensity to buy seems to be loosening up cost reduction efforts from our clients and the client base is becoming more profound and we're seeing that start to open up and we had a slow start as we mentioned, Steve and I, both mentioned, but we see we see Q2 being strong in the remainder of the year and being strong so I'm feeling pretty positive.

Clifford A. Skelton: Now, we had a slow start, as we mentioned, Steve and I both mentioned, but we see Q2 being strong and the remainder of the year being strong. So I'm feeling pretty positive about it. Like I said, we had a slow start, but we're positive about the rest of the year, and we do see the macro trends becoming more favorable.

Pat McCann: <unk> about it.

Pat McCann: Like I said, we had a slow start but we're positive about the rest of the year and we do see the macro trends becoming more favorable.

Clifford A. Skelton: And then, to turn over to the financials, could you comment on what we should expect for progression over the rest of the year when it comes to divestiture activity and debt retirement?

Speaker Change: Excellent and then turn it over to the financials all could you comment on.

What we should expect for progression over the rest of the year when it comes to divestiture activity.

Speaker Change: And debt retirement.

Clifford A. Skelton: Let me start with the activities for the remainder of the year and just say, you know, obviously, we can't get into specifics. But I can say we're not done, and we're still in the heat of the battle on M&A activities. Steve can comment on the use of proceeds and timing.

Speaker Change: Let me start with our activities for the remainder of the year and just say you know obviously, we can't get into specifics, but I can say, we're not done and we're still in the heat of the battle on.

Speaker Change: On M&A activities, Steve can comment here on use.

Pat McCann: Use of proceeds and timing.

Stephen Henry Wood: Yeah, so I think that the way that we think about it is the way that we've laid it out in the midterm outlook slide. We've talked about, essentially, the quantum of revenue that we see being divested, the margin characteristics that we see being divested, and the proceeds that we've already announced, which is around $495 million of after-tax proceeds. And you heard in my remarks that we're expressing a degree of confidence that we can get into around the midpoint of the range of $600 to $800 that we earmarked and is, essentially, our waterfall to the progression of $1 billion of deployable capital.

Stephen Henry Wood: So I think the way that we think about it is the way that we've laid it out in the midterm outlook slide we've talked about essentially the quantum of revenue that we see being divested the margin characteristics that we see being divested.

Stephen Henry Wood: The proceeds that we've already announced which is around $495 million.

Stephen Henry Wood: After tax proceeds and you heard in my remarks that we're expressing a degree of confidence that we can get into around the midpoint of the range of 600 to 800 that we that we aim often is.

Stephen Henry Wood: Essentially our waterfall to the progression of $1 billion of deployable capital.

Stephen Henry Wood: And I would say at this point Cliff mentioned that the early priority is debt repayment. We have an amount approved of somewhere in the region of $450 million. And so we'll be working through that. And then, clearly, we'll be talking further later in the year on how we think about capital allocation when that becomes pertinent against divestitures as we continue to make progress. But that's how we're thinking about it.

Stephen Henry Wood: And I would say at this point Cliff mentioned the early priority is debt repayment we have.

Stephen Henry Wood: On the Mt improved.

Stephen Henry Wood: Somewhere elevation of $450 million.

Stephen Henry Wood: So we'll be we'll be working through that and then clearly we will be talking further and later in the year on how we think about capital allocation when that becomes putting them together.

Stephen Henry Wood: Stitches as we as we continue on the progress.

Stephen Henry Wood: How we're thinking about it lots of activity pad, obviously and it will continue through the rest of the year.

Clifford A. Skelton: Lots of activity, Pat, obviously, and it'll continue through the rest of the year.

Pat McCann: Gotcha. And if I could ask just one more quick follow-up to that, and then I'll pass the floor along, just when it comes to the M&A environment, when you're looking to make more divestitures, how do you view the current environment, specifically when it comes to, I guess, getting fair value for the businesses you would be divesting, you know, how is that looking right now?

Pat McCann: Gotcha, and then if I could ask just one more quick follow up to that and then I'll pass the floor along just.

Pat McCann: When it comes to the M&A environment when it when your when Youre looking to make more divestitures, how do you view the current environment, specifically when it comes to.

Pat McCann: Getting fair value for the businesses you'd be divesting, how how is that looking right now.

Clifford A. Skelton: You know, look, I think, I don't think there's ever been a situation where we were worried about valuations and fair value. I think it was, it's been pretty consistent, even when money was tighter, as it is starting to loosen up here a little bit, or at least conceivably start to loosen up. The whole PE environment is starting to open up, and the appetite is increasing, so inbounds are voluminous, if you will, and opportunities are quite strong.

Pat McCann: Look I think I don't think theres ever been a situation, where we were worried about valuations and fair value I think it was its been pretty consistent even when money was tighter as it is it's starting to loosen up here, a little bit or at least.

Clifford A. Skelton: Conceivably start starting to loosen up the whole <unk> environment is starting to starting to open up and.

Clifford A. Skelton: The appetite is increasing.

Clifford A. Skelton: No.

Clifford A. Skelton: Bounds.

Clifford A. Skelton: Our voluminous if you will and opportunities are quite strong. So you know as well as I do what's happening in the economy and the home private equity kind of landscape. It's feeling it's feeling more sanguine and were seeing that but from a valuation perspective, we haven't seen any much inconsistency with Steve.

Clifford A. Skelton: So, you know, as well as I do about what's happening in the economy and the whole private equity kind of landscape, it's feeling more sanguine, and we're seeing that. But from a valuation perspective, we haven't seen much inconsistency with Steve. Any thoughts on that?

Speaker Change: Any thoughts on that.

Stephen Henry Wood: What I would add to that is, as you'll have seen from what we're doing, we're divesting really quite discreet assets within the portfolio, and Conduent's got a lot of assets in the portfolio. It's a very broad portfolio of assets that were put together over a period of time, and so our approach is to target things that, I would say, have scarcity value on the outside. And also potentially don't create the 1 plus 1 equals 3 internally in terms of being synergistic to the way that we think about cross-sell and how we sort of build the Remainco portfolio for the business.

Speaker Change: What I would add to that as youll have seen from what we're doing as well.

Stephen Henry Wood: We're divesting really quite discrete assets within the portfolio of contracts got a lot of assets in the portfolio, it's a very broad portfolio.

Stephen Henry Wood: Of assets that we'll put together over a period of time and so.

Stephen Henry Wood: Our approach is to target things that.

Stephen Henry Wood: I would say half.

Stephen Henry Wood: How scarcity value on the outside.

Stephen Henry Wood: And also potentially don't create the one plus one equals three internally in terms of being synergistic to the way that we think about cross sell and how we sort of build the remain co portfolio for the business.

Stephen Henry Wood: And so because we've been very targeted and because the assets are more discreet, I think we're pleased with the valuations that we're getting for the assets and then clearly we're divesting these at multiples that are considerably above where we are and I think as we go along that journey, clearly you'll continue to see us targeting these discrete assets where we expect to get strong multiples for them because the alternative to that is we'll keep them in the portfolio.

Stephen Henry Wood: And so because we've been very targeted and because the assets are more discrete I think we're pleased with the with the valuations that we're getting from the for the assets and then clearly.

Stephen Henry Wood: We're divesting these at multiples that are considerably above where we.

Stephen Henry Wood: Where we are and I think as we go along that journey clearly.

Stephen Henry Wood: Youll continue to see us targeting.

Stephen Henry Wood: These discrete assets, where we expect to get strong multiples of them because the alternative to that is we'll keep within the portfolio.

Clifford A. Skelton: Yeah, just one more topping to that, Pat. We said a year ago that our criteria for what we would consider divesting was based on several different things. One was scarcity value, as Steve just said. One was sort of growth versus anchor inside of our own portfolio. And how fast, you know, everything's growable, but how fast is it growable or recoverable? And then finally, from a technology perspective, where do we have technology that we could capitalize on internally versus synergistically capitalizing externally? It always went into the, into the, into the math equation as we considered what we might or might not divest and what we might or might not keep in a raincoat.

Stephen Henry Wood: Just one topic that patent we said a year ago that our criteria for what we would consider divesting was based on several different things one was scarcity value as Steve just said, one was sort of growth versus anchor inside of our own portfolio.

Clifford A. Skelton: And how fast you know everything's growable, but how fast does it grow bore recoverable and then finally.

Clifford A. Skelton: From a technology perspective, where do we have technology that we could capitalize on internally versus synergistically capitalized externally and all those went into the <unk>.

Clifford A. Skelton: The math equation as we considered what we might or might not divest and what we might or might not keeping remain co.

Pat McCann: Most helpful. I appreciate it. And I will pass the floor along. Thanks. Thank you, Pat.

Speaker Change: Excellent most helpful. I appreciate it and I will pass the floor along thanks guys.

Speaker Change: Thanks Pat.

Operator: Again, that's Star 1 if you'd like to register a question at this time. The next question is coming from Michael Matheson of Singular Research. Please go ahead.

Pat McCann: Again, Thats star one if you'd like to register a question at this time. The next question is coming from Michael Mattson of singular research. Please go ahead.

Michael Matheson: Good morning, you guys.

Michael Matheson: Michael. Michael. Hi, congratulations on executing the divestitures. You're marching right along and looking very good.

Operator: Michael.

Michael Matheson: Hi, congratulations on executing the divestitures, you're marching right, along and it looks pretty good.

Clifford A. Skelton: My questions kind of relate to revenue opportunities for RemainCo. You mentioned you have a collaboration, actually, three of them underway with Microsoft. I just want to clarify, is that related to your payments business? And do you see that particular collaboration is driving cost reductions or revenue opportunities by offering more capabilities? I'm kind of curious what that's really driving towards.

Clifford A. Skelton: My question's kind of relate to revenue opportunities for remain co.

Clifford A. Skelton: You mentioned you have a collaboration actually three of them underway with Microsoft I. Just wanted to clarify is that related to your payments business. These collaborations and do you see that particular collaboration is driving.

Clifford A. Skelton: Driving cost reductions or revenue opportunities by offering more capabilities.

Clifford A. Skelton: Kind of curious what that's really driving towards.

Clifford A. Skelton: Yeah, so thanks Michael. The collaboration that you're referring to is specific to Microsoft and Gen-AI and utilizing their platform in a co-marketing partnership and a go-to-market partnership as well as using that technology. And we have three very strong pilots underway. One is in document management. We would think of that as our claims process, mostly in health care. We've got a big one around customer experience. Like many in the industry, they see real opportunities with Gen AI in terms of voice to text and all kinds of different streamlining opportunities in the customer experience arena and utilizing Gen AI to solve problems so you don't need a human.

Speaker Change: Yeah, Thanks, Michael that the collaboration that you're.

Clifford A. Skelton: You're referring to is specific to Microsoft and Jen AI and utilizing their platform.

Clifford A. Skelton: Co marketing partnership and our go to market partnership as well as utilizing that technology and we have three very strong pilots underway.

Clifford A. Skelton: One is in document management, we would think of that as our.

Clifford A. Skelton: Our claims process, mostly in health care.

Clifford A. Skelton: We've got a big one around.

Clifford A. Skelton: Customer experience like many in the industry people see real opportunities with Gen. AI in terms of you know.

Clifford A. Skelton: <unk> voice to text and and all kinds of different streamlining opportunities in the customer experience arena and utilizing.

Clifford A. Skelton: Utilizing <unk> to solve problems. So you don't need a human.

Clifford A. Skelton: When you refer to payments, the one endeavor we're underway with in the payment industry is fraud reduction. We think Gen AI can help us very significantly in fraud reduction and in determining early signs of fraud through the volumes of data that the compute can digest and then feed information to our associates so that we can get a lot, and we can early turn those fraud opportunities before they actually manifest. And so that's the one payment area where our partnership with Microsoft is driving AI improvement.

Clifford A. Skelton: When you when you refer to payments the one the one endeavor were underway within the payment industry is on fraud reduction.

Clifford A. Skelton: We think G&A G&A I can help us very significantly in fraud reduction in determining early signs of fraud through the the volumes of data on that.

Clifford A. Skelton: The compute can digest and then feed information to our associates. So that we can we can get a lot. We can early turn those fraud opportunities before they actually manifest and so that's the one payment area, where we have our partnership with Microsoft is driving AI improvement.

Speaker Change: Great. Thanks for all that detail if I could just turn to one of the other partnerships. So you amount announced with Oracle moving your tolling database to the cloud I heard a reference to unit cost savings just to put some flesh on that what percent savings did you achieve.

Clifford A. Skelton: Great, thanks for all that detail. If I could just turn to one of the other partnerships you announced with Oracle, moving your tolling database to the cloud. I heard a reference to unit cost savings. Just to put some flesh on that, what percent savings did you achieve?

Clifford A. Skelton: You know, it's probably not a question I can answer with specificity or should answer with specificity, but let me explain what the partnership with Micro with Oracle inside of Azure is doing for us. It is speeding up the process and reducing latency in the cloud by taking Oracle's database in the cloud into Azure's cloud and then allowing our processing speed to increase by a significant amount. By a significant margin, I don't think it's probably not prudent for me to say exactly what that marginal improvement is or what the unit cost savings is.

Clifford A. Skelton: It's probably not not.

Clifford A. Skelton: A question I can answer with specificity or shouldn't answer with specificity, but let me what what's the partnership with Microsoft with Oracle inside of Azure.

Clifford A. Skelton: Is doing for us is.

Clifford A. Skelton: <unk> is speeding up the process and reducing latency.

Clifford A. Skelton: In the cloud by taking Oracle's database in the cloud into Azure cloud and then, allowing our processing speed to increase by a significant margin.

Clifford A. Skelton: But, you know, obviously, if you can go faster, you can go cheaper. And so that's the model we're pursuing, but it's, but it's incremental. There's no breakthrough here. It's all incremental. It's a continuum.

Clifford A. Skelton: I I don't it's probably not prudent for me to say exactly what that marginal improvement is or what the unit cost savings is but obviously if we can go if you can go faster you can go cheaper and so that's the model we're pursuing.

Clifford A. Skelton: But it's but it's incremental.

Clifford A. Skelton: There is no breakthrough here, it's all incremental it's a continuum.

Speaker Change: Okay, great well, thanks, again and congratulations again.

Michael Matheson: Great. Well, thanks again and congratulations. You bet. Thanks, Michael.

Speaker Change: You bet. Thanks, Michael Thank you.

Michael Matheson: Thank you. The next question is coming from Marc Riddick of Sidoti <unk> Company. Please go ahead.

Mark Riddick: Thank you. The next question is coming from Mark Riddick of Sidotian Company. Please go ahead.

Mark Riddick: Okay.

Mark Riddick: Hey, good morning.

Clifford A. Skelton: I wanted, I wanted to sort of dig into a little bit of the commentary around the cost reduction efforts and the urgency that you're seeing maybe from customers. I was wanting to spend a little time talking about that and maybe sort of how, you know, that, you know, how that sort of plays into your expectation of driving sales.

Mark Riddick: Hey, Mark I wanted I wanted to sort of.

Clifford A. Skelton: Dig into a little bit up on the commentary around the.

Clifford A. Skelton: The cost reduction.

Clifford A. Skelton: Efforts and the urgency that you're seeing maybe from customers I was wondering if you spend a little time talking about that and maybe sort of how you know that.

Clifford A. Skelton: How that sort of plays into your expectations on driving sales.

Clifford A. Skelton: It looks like.

Clifford A. Skelton: Every, every CEO and CFO that I'm familiar with is looking for efficiency. I mean, we wouldn't be doing our job if we weren't. But especially as the economy is forward thinking.

Clifford A. Skelton: Every every CEO and CFO that I'm familiar with is.

Clifford A. Skelton: He is looking for.

Clifford A. Skelton: <unk> I mean, we wouldn't be doing our jobs, if we weren't.

Clifford A. Skelton: But especially as the economy is.

Clifford A. Skelton: The forward thinking.

Clifford A. Skelton: People are starting to think, well, when this thing starts slowing down a little bit, I'm going to have to start reducing costs. And a lot of folks are thinking about outsourcing. We're seeing a lot of that in the healthcare industry, for example, where pressure is increasing, and they're starting to free up on ways to outsource. Countries they might not have imagined going to before, they're starting to consider going to from an offshoring perspective.

Clifford A. Skelton: People are starting to see when this thing started slowing down a little bit I'm going to have to start reducing cost and a lot of folks are thinking about outsourcing, we're seeing a lot of that in the health care industry. For example, where is where pressure is increasing.

Clifford A. Skelton: And they are starting to they're starting to free up on ways to outsource countries. They might not have imagined going to before they are starting to consider going to from a from an offshoring perspective. So we're just that feeds right into our sweet spot in terms of outsourcing, but like everybody else. We're in the same boat.

Clifford A. Skelton: So we're just, that feeds right into our sweet spot in terms of outsourcing. But like everybody else, we're in the same boat internally in terms of driving efficiencies and unit cost reduction. So the bottom line is we're seeing our clients and potential clients think about how we can help them either consolidate outsource vendors, go to countries we're not in today, and reduce their costs and improve their own unit costs so that they can drive at least the improvement, if nothing else.

Clifford A. Skelton: In terms of driving.

Clifford A. Skelton: Efficiencies.

Clifford A. Skelton: Unit cost reduction so the bottom line is we're seeing our clients and potential clients think about how we can help them either consolidate outsourced vendors go to countries, where we're not in today and.

Clifford A. Skelton: And reduce their cost and improve their own unit cost.

Clifford A. Skelton: So that they can drive EBITDA.

Clifford A. Skelton: At least.

Clifford A. Skelton: Improvement if nothing else.

Speaker Change: That's very helpful. Thank you.

Clifford A. Skelton: That's very helpful, thank you. And then switching gears, I was wondering about one of the comments about the behavior of certain industries as far as within the commercial that you're seeing. Were there any particular call-outs that were maybe performing better than others as far as industry verticals, or how should we think about the different differentiation of that?

Clifford A. Skelton: Switching gears I was wondering what.

Clifford A. Skelton: One of the comments was around.

Clifford A. Skelton: There are certain industries as far as within commercial.

Clifford A. Skelton: Youre seeing were there any particular call outs that were maybe performing better than others as far as industry verticals or how should we we think about the different differentiation of activity.

Clifford A. Skelton: Well, I mean, look, obviously, technology continues to be growing as fast as you can imagine. We're seeing some tightening in health care travel. And in sort of the logistics areas, where they're a lot more focused on cost reductions, and as I said earlier, the appetite for offshoring, the appetite for outsourcing, is increasing. So those are the three areas where we see opportunities for conduit because of the challenges we're seeing in those three industries.

Speaker Change: Well I mean look.

Clifford A. Skelton: Obviously technology continues to be.

Clifford A. Skelton: Growing.

Clifford A. Skelton: As fast as you can imagine we're seeing some tightening in health care.

Clifford A. Skelton: Travel.

Clifford A. Skelton: And sort of the logistics areas, where there are a lot more focused on cost reductions and the as I said earlier the appetite for off shoring the appetite for outsourcing is increasing so those are the three areas where we see.

Clifford A. Skelton: Opportunities for conduit.

Clifford A. Skelton: Because of the challenges we're seeing in those three industries.

Clifford A. Skelton: Okay.

Mark Riddick: Okay, great. And then I guess the last one for me is sort of a big picture question around interest rates and expectations, you know, now relative to maybe six months ago. Are you getting a sense as far as how that is affecting client behavior as of yet? Or are you seeing any changes that are specifically tied to those changes in expectations?

Speaker Change: Okay, Great and then I guess the last one for me, it's sort of a big picture question.

Mark Riddick: Around interest rates and expectations now relative to maybe six months ago.

Mark Riddick: Are you getting.

Mark Riddick: Our sense as far as how that is.

Mark Riddick: First in client behavior as of yet or are you seeing any any changes that are specifically tied to it.

Mark Riddick: Those those changes of expectations.

Speaker Change: Well look I'll, let Steve filling any gaps, but I don't you know like I said, I think anticipation of both interest rates and.

Clifford A. Skelton: Well, I look, I'll let Steve fill in any gaps. But I don't, you know, like I said, I think anticipation of interest rates and any kind of Fed move seems to be on the margins affecting outsourcing appetite. But we're not we're not other than that, how interest rates affect our own P&L, which Steve touched on in his remarks, and, and the selling of our benefit wallet asset. We don't see anything monumental from a, you know, a landscape perspective going on with interest rates that are affecting us. Steve, I don't know if you've got any thoughts on that.

Steve: Any kind of fed moves.

Steve: It seems to be on the margins affecting outsourcing appetite, but we're not we're not other than that with no interest rates affect our own P&L.

Clifford A. Skelton: Steve touched on in his remarks.

Clifford A. Skelton: And in the selling of our benefit wallet asset.

Steve: We don't see.

Steve: There is nothing monumental.

Steve: From a from a.

Clifford A. Skelton: Landscape perspective going on with interest rates that reflect Steve I don't know if you've got any thoughts on that.

Stephen Henry Wood: The only other thing I can think to add by way of comment is that I think this, you know, I talked about this renewed urgency that we're seeing for to try and drive cost efficiency. And so, you know, at some level, I think that that could be an indicator, as you suggested, that maybe, and I think a lot of thought processes have changed around the sort of forward look of the interest rate environment and maybe it being a bit higher for a bit longer and therefore the need to drive cost efficiency.

Steve: The only other the only other thing I can think to add.

Stephen Henry Wood: But by way of comment there is I think this I talked about this renewed urgency that we're seeing for to try and drive cost efficiency.

Stephen Henry Wood: And so at some level I think that that could be in.

Stephen Henry Wood: Indicators you suggested that maybe.

Stephen Henry Wood: Yeah thought processes have changed around around the sort of forward look of the.

Stephen Henry Wood: Interest rate environment, and maybe being a bit higher for a bit longer and therefore, the need to drive cost efficiency.

Stephen Henry Wood: That urgency is good for us because we play into a lot of those opportunities at all and I will be passing the CX businesses, but without wanting to be the person is trying to predict where that's going to go I think that maybe those you can tie those two things together.

Stephen Henry Wood: That urgency is good for us because we play into a lot of those opportunities in our BPAS and our CX businesses, but without wanting to be the person that's trying to predict where that's going to go, I think maybe you can tie those two things together.

Speaker Change: Great. Thank you so much.

Mark Riddick: Thank you so much.

Speaker Change: Thanks, Bob.

Speaker Change: Thank you at this time I would like to turn the floor back over to Mr. Skelton for closing comments.

Operator: Thank you. At this time, I would like to turn the floor back over to Mr. Skelton for closing comments.

Clifford A. Skelton: Thank you, Donna. Listen, I'll leave you all with a couple of thoughts, just to reiterate what Steve and I both said during our remarks. We outlined our plan a year ago, and we're on it, as it was described a year ago. That said, we have to execute, and we have been executing. We need to continue to execute over the course of the next two years, especially the remainder of 2024 and 2025. We have to continue to divest these non-RemainCo assets.

Skelton: Thank you Donna.

Clifford A. Skelton: I'll leave you with a couple of thoughts just to reiterate what Steve and I. Both said during our remarks, we outlined our plan a year ago.

Clifford A. Skelton: And we're on it as it was described a year ago.

Clifford A. Skelton: That said, we have to execute and we have been executing we need to continue to execute over the course of the next two years, especially the remainder of 2024 and into 2025.

Clifford A. Skelton: We have to continue to divest these non remain co assets, it's very important that we continue to execute on our plan.

Clifford A. Skelton: It's very important that we continue to execute on our plan and not drag our feet, and we won't. But we're gonna do it the right way for the right valuation. We've got to sell, we've got to sell more, we've got to partner more, and we've got to grow. And that's the path we're on. We're bringing in talent to help us do that, and so you're more likely to come there when we get to Q2.

Clifford A. Skelton: And not dragging our feet, there and we want but we're going to do it the right way for the right valuation.

Clifford A. Skelton: We've got to sell we're going to sell more we're going to partner more and we've got to grow and that's the course, Ron we're bringing in talent to help us do that.

Clifford A. Skelton: And so youre going to more to come there when we get to Q2.

Clifford A. Skelton: As Steve mentioned, we've got stranded costs to take up. The one thing we know how to do here at Conduent is manage expenses and take costs. And then, and probably most importantly, we've gotta meet client demand, and we've gotta retain clients. And that's getting better, but ultimately, the most important thing we do is take care of our clients. So all that's very simple to say. It's motherhood and apple pie in many ways, but it's not always that easy to do.

Clifford A. Skelton: As Steve mentioned, we've got stranded cost to take out the one thing we know how to do here at conduit.

Clifford A. Skelton: As managed expenses and take costs out and we're on that and then finally and probably most importantly, we've got to meet client demand and we've got to retain clients and that's getting better but it's ultimately the most important thing. We do is take care of our clients. So all of that's very simple to say his mother and Apple pie in many ways, but it's not.

Clifford A. Skelton: It was that easy to do we're getting there.

Clifford A. Skelton: We're getting there, and I appreciate everybody paying attention to our company. And thank you all for joining us today.

Clifford A. Skelton: And I appreciate everybody paying attention to our company and thank you all for joining today.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Operator: Ladies and gentlemen. This concludes today's event you may disconnect your lines of log off the webcast at this time and enjoy the rest of your day.

Operator: Okay.

Operator: [music].