Q4 2024 Conduent Inc Earnings Call
Speaker Change: Greetings, and welcome to the Conduit Q4 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
A question and answer session will follow the formal presentation.
Speaker Change: You may be placing the question cued any time by pressing star 1 on your telephone keypad as a reminder. This conference is being recorded It's not my pleasure to turn the call over to your host Giles Goodburn vice president investor relations. Please go ahead Giles
Giles Goodburn: Thank you operator and thanks everyone for joining us today to discuss Condwell's fourth quarter and full year 2024 earnings.
Speaker Change: I'm joined today by Cliff Skelton, our President and CEO, and Steve Wood, our CFO.
Giles Goodburn: We hope you had a chance to review our press release issued earlier this morning.
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.
Giles Goodburn: This information, as well as the detailed financial metrics package, are available on the Investor Relations section of the Conduit website.
During this call, we may make statements that are forward-looking.
Giles Goodburn: Information concerning these factors is included in Conduon's annual report on Form 10k filed with the SEC.
Giles Goodburn: 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.
Giles Goodburn: The information presented today includes non-GAAP financial measures. Because these measures are not calculated in accordance with the U.S. GAAP, they should be viewed in addition to, and not as a substitute for, the company's reported results.
Giles Goodburn: For more information regarding definitions of unknown gap measures and how we use them, as well as the limitations to their usefulness for comparative purposes, please see our press release.
Cliff Skelton: And now, I'd like to turn the call over to Cliff.
Cliff Skelton: Thank you, Giles, and welcome, everyone, to our Q4 and 2024 end-of-year earnings.
Cliff Skelton: In line with our previous earnings, Steve will take you through the quarter and a backward view of the year as it relates to the detailed numbers. I'll then follow up with some forward-looking expectations.
Cliff Skelton: Look, as you know, our year was characterized by some intense focus on culling the herd, as they say, for several reasons.
Cliff Skelton: We believe this portfolio was, and perhaps continues to be, too wide, resulting in cost in the center that's too high, in a scenario where certain underperforming assets can drag the whole down.
Cliff Skelton: That's notwithstanding the fact that many growth companies typically have more scale and depth and we're progressing towards both.
Cliff Skelton: The good news is that we were able to divest several assets at good multiples, allowing us to pay down the bulk of our debt and buy out the icon group, thus streamlining both our strategy and our game plan.
We said 2024 would be a trough, and it was.
Cliff Skelton: That said, Q4 adjusted revenue improved sequentially again, and both Q4 and year-end adjusted EBITDA margins finished on the high end of expectations.
In 2024, timing pushed revenue around a little.
Cliff Skelton: Thus, finishing a little under expectations at $800 million and $3.176 billion, respectively, while again adjusted EBITDA margins finish strong at $32 million and $124 million, respectively, at 4% and 3.9%.
Cliff Skelton: Net A.R. was strong for the quarter and the year, characterized by improved retention, while new business A.C.V. was up quarter over quarter. However, due to the weak start to the year, we finished a little lower than 2023 on a full year basis.
Cliff Skelton: As with others, we measure sales in new logo, new capability, and add-on sales.
Cliff Skelton: 2024 was strong on a year-over-year basis in new capability sales representing further penetration of our portfolio, but somewhat weaker in the new logo category.
Cliff Skelton: There's much more to talk about, but why don't I turn it over to Steve for the details on the quarter and the year. Steve?
Steve Wood: Thanks, Cliff. As we have done in the past, we are reporting both gap and non-gap numbers. The reconciliations are in our filings and in the appendix of the presentation. Let's turn to slides 5 and 6 to discuss our key sales metrics.
Steve Wood: In the fourth quarter, our primary sales metric, new business ACV, was flat versus the prior year at $137 million.
Steve Wood: and sequentially up from Q3, but slightly down against our internal expectations and how I've guided the expected full year outcome in my comments in prior quarters.
Steve Wood: No alarms here. A couple of deals didn't close in Q4, but we're off to a good start in 2025, and one in which we expect to achieve a meaningful increase over Q1 2024.
Steve Wood: For the full year, ACV was down 20% as compared to 2023. The year lacked a mega deal, such as the large transit contract we signed in 2023.
Steve Wood: New Business TCV was lower in 2024 as compared to 2023.
Steve Wood: Again, with the predominant cause being the billion-dollar, 15-year deal that we signed in 2023 for our Australian transit contract in the state of Victoria, where we continue to make good progress on our solution implementation.
Cliff Skelton: We've made several meaningful changes to the configuration of our sales approach through 2024, and the early signs are good, as we are off to a strong start in 2025, which Cliff will talk more about later.
Speaker Change: Let's turn to slide 7 now and go over our full year 2024 P&L metrics.
Speaker Change: Revenue for 2024 was $3.176 billion as compared to $3.32 billion in 2023, down 4.3%, slightly below our expectations due to a couple of discrete drivers.
Speaker Change: Adjusted EBITDA was $124 million for the full year in 2024, as compared to $247 million in 2023, and our adjusted EBITDA margin was 3.9%, which was towards the top end of our expectations.
Speaker Change: Let's now turn to slide 8 and go over the segment results.
Speaker Change: Commercial segment adjusted revenue for the full year was $1.606 billion, down 3.7% as compared to 2023.
Speaker Change: but adjusted EBITDA was up 2.4% year-over-year and the adjusted EBITDA margin of 10.5% was up 60 basis points year-over-year.
Speaker Change: The gap between lost business and project runoff and new business sales ramp has continued to narrow during the year and as we've said previously we see the segment coming closer to flat during 2025 and then growing as we exit 2025.
Speaker Change: We've seen increased appetite from our clients to move more work offshore, and while that mutes our top-line growth a little, it's accretive to margin.
Speaker Change: In 2024, we made decisions to add around 2,500 additional seats of capacity in some of our offshore geos, and this will become available to us during the first half of 2025.
Speaker Change: Government segment adjusted revenue for the full year was down around 10% at $984 million.
Speaker Change: Adjusted EBITDA was $210 million, down 35% year-over-year, with the adjusted EBITDA margin of 21.3%, down around 8 points.
Speaker Change: I laid this out in our second quarter earnings, where I said we'd be 7-8% down on revenue year over year in 2024, with three discrete drivers, which are all lapped by the second quarter of 2025.
Speaker Change: Firstly, there was the effect of the large government healthcare contract, where the contract was terminated for reasons other than performance, and that drove around four and a half points of decline year over year. We will lap this effect in the second quarter of 2025.
Speaker Change: Secondly, there was the effect of lower SNAP volumes in our government payments business, as fewer states continued with the supplemental programs due to the change in funding structure, as well as a lost client.
Speaker Change: That represented around two and a half points of decline and is fully worked into our run rate now.
Speaker Change: Thirdly, there was a downward pricing adjustment on a large state eligibility program that started to take effect in the second quarter of 2024, and that was approximately a point of decline year over year, with that effect being lapped midway through Q2 2025.
Speaker Change: The remainder of the top-line revenue impact was timing of revenue on implementations and new business.
Speaker Change: The prior year also benefited from a portion of a legal settlement of $17 million.
Speaker Change: Transportation segment adjusted revenues grew 5% year-over-year to $586 million, while adjusted EBITDA was down $19 million and the segment was break-even in 2024.
Speaker Change: The implementation ramp in our Australia Transit project contributed 15 points of revenue growth, offset with loss of scope and a pricing adjustment on a large domestic tolling contract, which was 12 points of reduction in revenue.
Speaker Change: There was a significant negative adjusted EBITDA impact from the net of those two revenue items.
Speaker Change: And this was partially offset with improvements in operational performance and SLAs.
Speaker Change: Finally, our unallocated costs decreased around 3% in 2024, mainly around a series of initiatives on our technology costs.
Speaker Change: Let's turn to slide 9 and discuss the balance sheet and cash flow.
Speaker Change: We ended the year with approximately $377 million of total cash on balance sheet, and our $550 million revolving credit facility was largely undrawn.
Speaker Change: Through our divestiture program, which generated approximately $780 million of after-tax proceeds, we repurchased 52 million shares and prepaid $639 million against our term loans, including $100 million in the fourth quarter.
Speaker Change: Sequentially, our net leverage ratio went up slightly from the prior quarter to 1.6 turns.
Speaker Change: I've said before that this will go up for the next couple of quarters as we annualize the divested adjusted EBITDA in the calc, partially offset by the sequential recovery in adjusted EBITDA as we work through our stranded cost and efficiency programs.
Speaker Change: Once this work is completed during the second half of 2025, you'll see this net leverage ratio returning to around 1.5 turns, and then moving more towards the one turn we've previously outlined in our midterm outlook as we exit 2025.
Speaker Change: Capital expenditure for the full year was 2.2% of revenue, as we continue to find ways to optimize our spend.
Speaker Change: Let's turn to slide 10 and look at our outlook for 2025.
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Speaker Change: This has been our North Star as we have narrowed our portfolio through divestitures.
Speaker Change: focusing and reorganizing our business around assets we believe we can grow, significantly reducing our debt and our share count, strengthening our balance sheet, and bringing in new growth-oriented leaders for the next phase of the journey.
with modest adjustments, we're where I expected us to be.
Speaker Change: and we're entering 2025 with a midpoint to our 2025 Adjusted Revenue Guide having the business flat as compared to 2024. Overall, we expect adjusted revenues in 2025 to be in the range of $3.1 billion to $3.25 billion.
Speaker Change: In terms of how that plays out across the quarters, we'd expect the business to be down year over year in the first half of 2025, between three and four percent, with most of that being in the first quarter due to some of those items that I highlighted in the government segment.
Speaker Change: second quarter will be close to flat and then growing in the second half of the year.
Speaker Change: At the midpoints for adjusted revenue for the segments, we expect commercial to grow approximately 2%, government to be down 4%, and transportation to grow 1%.
Speaker Change: We expect sequential improvement as we go through the year, both from ramping revenue, the lapping of the revenue headwinds I talked about earlier, as well as our cost and efficiency programs.
Speaker Change: The background to this guide is that we're anticipating broadly stable macroeconomic conditions.
Speaker Change: Our commercial segment has around 40% of its revenue oriented to the healthcare vertical, and we continue to believe that cost pressures there will drive opportunities in outsourcing.
Speaker Change: Our government segment is predominantly centered on state and local government, where we provide technology, eligibility, and payment programs that support essential services for their constituents.
Speaker Change: We expect Adjusted Free Cash Flow to be in the range of $0 to $40 million, with the width of that range being driven by milestone timing on some of our large implementation projects.
Speaker Change: We expect CAPEX to be approximately $80 million, or around 2.5% of revenue.
Speaker Change: Restructuring charges will be around $20 million lower than 2024, at approximately $25 million, and our interest expense reflects the current level of debt.
Cliff Skelton: That concludes our outlook for 2025, and I'll hand it back to Cliff for his broader view of the business. Cliff? Thanks, Steve. Overall, we're pleased with the quarter and where we are in the journey. I'd like to open with a few things that are front of mind, though.
Cliff Skelton: First, we're on track for those 2025 exit rates Steve and I have been discussing, which will represent that shift from years of negative, albeit lessening, growth since the spin, to positive growth.
Cliff Skelton: We have assets that, without significant investment, are a drag to EBITDA, which we will disposition.
Cliff Skelton: and we have assets that have scarcity value on the outside but may not have the characteristics we think are crucial to our growth and our cash flow imperatives.
Cliff Skelton: While divestitures can take a lot of bandwidth consumption from many of us, we've proven that we can demand good multiples.
Cliff Skelton: and use of proceeds to significantly shore up the balance sheet and debt profile.
Cliff Skelton: Third, well there's plenty of noise out there regarding the new administration in Washington.
Cliff Skelton: and what it might mean for corporations, especially BPO companies and companies with a government profile.
Cliff Skelton: Let me just say that we continue to see outsourcing demand as clients continue to emphasize efficiency.
Cliff Skelton: We also see continued appetite for offshoring in the CX space with utilization of AI. It does not appear as though that trend will change in the commercial space.
Cliff Skelton: Meanwhile, in the public sector businesses, we believe as the federal government pursues a smaller footprint.
Work will continue to flow to the private sector.
Cliff Skelton: As you know, our public sector businesses are primarily centered at the state and local level, and if anything, our belief is that costs may shift to states forcing even more state outsourcing, especially as it relates to Medicaid administration.
Cliff Skelton: One area we think crosses over both commercial and government is something the new administration is focused on, and that is Medicaid fraud.
Cliff Skelton: We believe our FastCap solution, which finds and helps eliminate duplicate payments and fraudulent payments, can help, and we're looking to market that tool to states.
Cliff Skelton: We also think Medicaid eligibility work could potentially increase in volume.
Cliff Skelton: The same goes for Unemployment Benefit Administration where decisions at the executive level could create further outsourcing of unemployment services Which is with Social Security distribution one of the few areas we serve the federal government
Cliff Skelton: Finally, as state and local governments potentially offset lower federal subsidies.
Cliff Skelton: They will need new sources of revenue, which plays well into our transportation businesses.
Cliff Skelton: These days cyber security is always on the front burner and we take any and all attempts to access our systems as of utmost importance from a protection point of view.
Cliff Skelton: Like with every technology and tech-enabled company, there is risk, but we continue to believe that our systems are very secure, enabled by partnerships with the best data and infrastructure security firms available. This is a top priority for executive leadership, for our people, and for our board of directors.
Cliff Skelton: Finally, regarding AI, we continue to leverage GenAI across our portfolio, especially in the fraud space for end-user validation, the customer service portals, and our human capital solution businesses.
Cliff Skelton: And of course, like many, we use new Gen AI capabilities in our customer experience business for language smoothing and translation, as well as for improving the end customer experience.
Cliff Skelton: I recently heard a tech CEO categorizing AI and the AI narrative for companies into three categories.
Cliff Skelton: One, those that hype it thinking it adds value to their brand.
Cliff Skelton: to those technology companies like Microsoft and Google and others that enable it for other companies.
Cliff Skelton: And three, those companies that embrace it and opportunistically leverage it for efficiency and quality improvement for their customers.
Cliff Skelton: We're definitely in the third category and will continue as we have been to use AI as a market expander across all of our product sets.
Cliff Skelton: such as finance, accounting, and procurement, and all of our end-user environments.
Cliff Skelton: Now, regarding our segments, commercial has rebounded well from a slow 2023 as Steve mentioned.
Client retention is improved.
Cliff Skelton: Sales, especially new logo and new capability sales, had a very strong Q2 through Q4 and we're in a good spot for a strong jump-off in 2025.
Cliff Skelton: Our geo-strategy and client needs also seem to be lining up in concert as we had hoped for.
Cliff Skelton: We also said early on that as we focus aggressively on growth and market opportunities, that we need a new talent.
Cliff Skelton: We've done exactly that with a new group president over commercial, one new general manager over a good portion of commercial, and several new client partner leaders as we shift to an enterprise focus as opposed to a product focus when working with our largest clients.
Cliff Skelton: As Steve mentioned, we expect commercial to grow about 2% in 2025.
Cliff Skelton: which is quite impressive given that full-year revenue in 2024 was down 3.7%.
Cliff Skelton: In the public sector, specifically in government, 2024 represented a perfect storm between slow RFP schedules and our internal changes in leadership.
Cliff Skelton: We defended the castle, so to speak, in terms of renewals.
Cliff Skelton: 2025 represents a year with a pipeline that is substantially higher than last quarter and we're in a solid position with current clients.
Cliff Skelton: Clearly, the government sector held us back in 2024, but we expect some modulation of those headwinds of snap reductions and the large contract loss that terminated for non-performance related issues that Steve referred to.
All this allowing 2025 to be a year of rebuild.
Cliff Skelton: We're bullish about government going forward, especially given the pipeline opportunities and the margins they represent.
Cliff Skelton: Across the public sector, we have new leadership at the group president level, a new GM for government, a new GM for road usage charging, and two new heads of sales for both public sector and government.
Cliff Skelton: We're off to a good and optimistic start in the public sector, including transportation. We're now on the other side of difficult starts in New York tolling and state of Victoria transit.
Cliff Skelton: We expect a good year from transportation, with another year of growth.
Steve Wood: Overall, as Steve said, 2025 exit rates represent our North Star and we remain on course and speed to hit those numbers.
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Steve Wood: Our associate engagement and retention is as good as it's been in years, and our client satisfaction, or NPS scores, achieved all-time high levels in 2024.
again.
with Debt Levels Low, A Solid Balance Sheet.
Improved client and associate retention.
Steve Wood: several AI projects starting to take hold, improved sales pipelines, new talent, and a continued effort to further streamline our portfolio, we feel well positioned for a solid 2025 with exit parameters characterized by growth and continued margin expansion.
Steve Wood: As always, thanks to our teammates for their hard work, thanks to our clients for their business, and thank you all for joining us today. I'll now turn it over to the operator for questions. Operator?
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1.
Speaker Change: Our first question today is coming from Pat McCann from Noble Capital. Your line is now live.
Thanks very much, and congrats on all the progress.
Speaker Change: generative of revenue and just kind of what are some of the technology developments that maybe are yet tangible that we could really dive into that you've made in, you know, over 20, you know, over the course of 2024.
Cliff Skelton: Hey Pat, this is Cliff. Thank you. There's a couple examples. First of all, as you know, AI is never something you can do in a vacuum. It takes a lot of digital transformation to utilize it the way we need to, and we've been underway with that for...
Cliff Skelton: several years now. One of the couple areas anyway that we we've already started to generate revenue and and reduction in expense, one would be an account takeover for fraud.
Cliff Skelton: in our payments business, where we're now getting early warning signs on when an account is about to be taken over using Gen AI, and it's drastically reducing our fraud counts.
Cliff Skelton: support where it can actually digitize and robotize if you will
Speaker Change: dot org. Just waiting on the thing that we have to do.
Speaker Change: Some language modulation and some language translation work underway so that we can actually do more offshore with fewer accent issues that typically are experienced for end-users. Those are some areas we're using today.
Speaker Change: Your commercial clients typically have on average about one and a half solutions per client with the company and there's an opportunity to sort of grow the wallet share with your clients. I was wondering.
Speaker Change: particularly helpful in that matter. Just wondering, you know, how you attack that to even just grow your wallet share with your existing clients.
Speaker Change: Yeah, I mean it's a great point. This is something I've been attempting to address for several years now. We haven't yet cracked the code. We believe we're over the target now. As you said, anywhere between 1.5 and 1.8 products per client, depending on the size of the client.
in the commercial space.
Speaker Change: We think that wallet share availability is quite profound. We've built out a client-partner program under our new
Speaker Change: group president for commercial Mike McDaniel who's who's done this at several other companies and our belief is that
with a client-partner program that looks at the breadth
of Opportunity in the Commercial Space.
and goes to market with those clients.
Speaker Change: with full understanding that there are many more things we can do for them and we don't product push, we actually look at their problems and try and solve them at an enterprise level with these client partners.
Excellent. Thanks. I'll jump back in the queue.
Thanks.
Speaker Change: Thank you. Next question is coming from Gauti Sri from Singular Research, your line is now live.
Hi, good morning guys. Can you hear me?
Yes.
Thank you. Thanks for taking my questions.
Speaker Change: Yeah, absolutely. We're deep into, as you know, with the divestitures, there was always going to have to be a level of stranded cost that we would have to deal with and take that to the business. And so we've got that stranded cost work well underway, and that's led on top of our usual attempts to continue to be more efficient.
Thank you.
Speaker Change: forecast is on towards the higher end. Is that further plans to reduce debt or what's the capital allocation in FY25?
Speaker Change: I think at this stage we're getting into a zone where we're
Speaker Change: increasingly comfortable about the amount of debt that we have on our balance sheet.
Speaker Change: You know, we've got a little bit more of the divestiture proceeds to come in in in April 2025
Speaker Change: and so I think you've often heard Cliff and I say that we're going to be balanced.
in terms of our approach towards
Speaker Change: capital allocation. But I think I would tell you that as we continue to see EBITDA sequentially recovering during 2025 and getting us towards those exit rate notions, I think we're increasingly comfortable about the level of debt that we have in the company. Yeah, I agree.
Speaker Change: In terms of expectations for new business signings, I know you said the new logos has been slightly disappointing. How will that contribute to the net ARR growth in F25? Any new markets or segments being targeted for growth? You know, you highlighted the AI segment.
Thank you.
all of our segments to go after.
Speaker Change: As it transpired, that wasn't the case in 2024. The pipeline in government turned out to be weaker than we initially thought at the beginning of the year, but I think we enter this year with good, strong pipelines across all three segments and an expectation that we're going to get.
Speaker Change: Both a good mix. I mean add-on is always the largest contributor towards ACV in any sales year
and Clifford Skelton, Stephen Wood, Giles Goodburn
Speaker Change: Those add-on revenues are the ones that book in year we call it impact revenue So we think that's really important as well. The other thing to remember about that net ARR number is It's it's not indicative of when the revenue is going to book. It's an indicate. It's indicative of the fact that the revenue
Speaker Change: or retention is going to happen at some point in time.
Speaker Change: but timing can vary depending on the size of the deal.
Speaker Change: and the uniqueness of the deal and the on-boarding speed of the deal. That all will dictate when the revenue boards. But generally speaking, it's an indicator of the future.
Giles Goodburn: Yeah, and Gashi, I'd add on one final comment to that, and Cliff nailed it in the sense that it's a dual metric, right? It represents what we sell, but it also has an element of retention inside of the metric.
Speaker Change: That's higher retention and that's a contributor towards that net ARR activity metric continuing to be positive and strong.
Thank you.
Speaker Change: Our final question. In terms of government, I know you've mentioned that the focus is mostly on the state level, but in terms of are you expecting or experiencing talks or project delays, is that why the
Speaker Change: The forecast is for a pickup in the second half of FY25.
Speaker Change: The sort of factors in terms of 2025 being down for government were all laid.
Speaker Change: Some time ago, and I talked about them in the second quarter earnings last year in terms of those kind of three discreet factors There was the health care contract
and the government segment building a path to growth.
But it's it's going to be down in the first
Speaker Change: It's going to be down across the year because it's just not.
Not enough time to build over.
Speaker Change: our expectation all along is being we expect all three segments to be growing. You've got to outrun those weak sales from 2024. You didn't really ask it this way, Gush, but I think you alluded to the federal government and the moves being made by Doge and others and remember we're primarily a state and local business in government and most of the communication we're hearing
Speaker Change: from the Feds is that the attempts are to not affect end-user recipients with respect to any of the things that we do. So we believe that, if anything, some of that volume will increase in the business that we have in the state and local business.
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Thank you. Thanks, Kashi.
Speaker Change: Thank you. Next question today is coming from Mark Riddick from Sidotian Company. Your line is now live.
Good morning, gentlemen.
Hey Mark
How are you?
Thank you. Thank you.
Speaker Change: Very good, very good. You, in your prepared remarks, made a commentary that sort of hinted at some ongoing looks at portfolio rationalization and other potential things that you might be looking at. Are there any things that we should be thinking about as far as sort of anything that might be either imminent or you think this is going to be something that we'll sort of be looking
throughout the year.
Speaker Change: No, look, I mean, we've consistently talked about this portfolio and how this company was founded in the ACS days, and the breadth of the portfolio lends itself to just too many things trying to be run at once.
Speaker Change: and ultimately like when you have that many things some of those products and capabilities are going to lag.
There are some assets that we have.
that have both scarcity value.
Speaker Change: on the outside, primarily because with scale they can be a much better business that we would also look to disposition. So, our strategy hasn't changed at all.
Speaker Change: It just takes time. There's a lot of bandwidth consumption associated with divestitures and trying to run a public company with quarterly earnings, et cetera, you just can't dive into that all at once. And we think an all-in, do it all at once is probably not the right way to.
right way to pursue the issue.
Speaker Change: Okay, excellent. And then, you made mention in one of the earlier questions around sort of comfort levels of leverage, and certainly you've made a lot of progress, certainly over the last...
Speaker Change: a couple of years. With that being said, there was an authorization that you completed during the course of the year. Last year, I was wondering if there was any thoughts or appetite levels as to potential for another share repurchase authorization going forward.
© The Bulletproof Executive 2013
Speaker Change: I think I'll kind of go back to the previous comment that I made. I think we're getting increasingly comfortable with our debt levels. There's a little bit left on the authorization to pay down debt. In the fourth quarter, I did say we paid down $125 million, which was the remaining authorization. We paid down $100 million.
Speaker Change: You know, no alarms to the difference between those two numbers.
Speaker Change: But I think as we get increasingly comfortable with the level of debt as we see EBITDA continuing to sequentially improve through 2025, I think we'll continue to be agile about how we think about capital allocation.
Speaker Change: Yeah, Mark, your two questions kind of go hand-in-glove vis-a-vis any potential divestiture for disposition activities.
Speaker Change: and what we might do with the cash. And obviously, we want to be balanced and stay open-minded on it.
Speaker Change: We want to we want to get rid of businesses that are you know sort of airfoils on the overall corporation
Speaker Change: And we have some in mind, some targeted right now. And we want to look at opportunities where there may not be synergies across the business, where, you know, there's scarcity of value on the outside. And the use of those proceeds...
Speaker Change: could be varied. I would anticipate that we would, we don't think there's a ton of internal capital allocation needs. There is some in government.
Speaker Change: that we would look to pursue and after that there's only so many things you can do with it and you know, obviously a share repurchase and and debt reduction would be a front of mind, but we're going to be open-minded.
Speaker Change: And then the last one for me, you made mention of, and I really appreciate all the commentary around some of the...
Speaker Change: Some of the opportunities you may have in front of you regarding shifting of responsibilities from federal to state, local levels, and the like. I was wondering if you could talk a little bit about the pricing environment.
Speaker Change: Is there anything that you can share there as to maybe whether it's sort of a magnitude of how you look at the pricing component in your growth assumptions of the segments or maybe what you're seeing out there? Thanks.
Speaker Change: I think we're seeing, you know, I think the kind of underlying assumptions as we thought about planning for sort of 2025 and 2026.
How we see our costs.
and I think we've been...
Speaker Change: We've had some success clearly over the last couple of years in terms of driving price in, certainly in our commercial business.
in our government segment.
We're typically more in fixed price.
type of arrangements is pretty common in public sector businesses.
and I think the other thing that we're focusing on...
Speaker Change: to continue to drive margin is this notion of shifting, you know, more work offshore.
Speaker Change: There's a lot of opportunity right now with some of our larger clients to move more work into some of the geos, and we've been expanding our capacity to be able to take on that work.
Speaker Change: That's quite a creative the margin as we go forward and so I think I think it's not directly related to your question But I you know, I think you know, we're
Speaker Change: Ultimately, I think we've done a pretty decent job over the last couple of years in terms of making sure that we're getting price and value for the level of service and the complexity of what the company does.
Speaker Change: And, Mark, I would say, look, in the five years that I've been here, the price comes to bear.
all the time.
Speaker Change: But, if you talk to other CEOs in the BPO space, I think they'll say the same thing. It's the juxtaposition of price, quality, and relationship.
Speaker Change: and quality in relationship, meaning trust, most of the time will trump price, number one. Sometimes it won't and you've got to reduce your price to get the deal, but oftentimes when you get, when it's a lower price going in, you can make up for it with change orders.
Speaker Change: So, we look at it as a moving target. The most important item for us is creating the trust and relationships with the potential clients and the clients we have. Price is almost always secondary to that.
Thank you very much.
Thanks, Mark.
Speaker Change: Thank you. We've reached the end of our question and answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.