Crocotta Energy : Investor Presentation - December 2019

Conduent

Investor

Presentation

Q3 2019

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements", as defined in the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about the business process outsourcing industry and our business and financial results. Forward-looking statements often include words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words

and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf.

Important factors and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements include, but are not limited to: our ability to successfully

manage the leadership transition and strategic and operational review, and the potential for disruptions to our business from the transition and strategic and operational review; government appropriations and termination rights contained in our government contracts; our ability to renew commercial and government contracts, including contracts awarded through competitive bidding processes; our ability to recover capital and other investments in connection with our contracts; our ability to attract and retain necessary technical personnel and qualified subcontractors; our

ability to deliver on our contractual obligations properly and on time; competitive pressures; our significant indebtedness; changes in interest in outsourced business process services; our ability to obtain adequate pricing for our services and to improve our cost structure; claims of infringement of third-party intellectual property rights; the failure to comply with laws relating to individually identifiable information, and personal health information and laws relating to processing certain financial transactions, including payment card transactions and debit or credit card transactions; breaches of our information systems or security systems or any service interruptions; our ability to estimate the scope of work or the costs of performance in our contracts; our continuing emphasis on and shift toward technology-led digital transactions; customer decision-making cycles and lead time for customer commitments; our ability to collect our receivables, including those

for unbilled services; a decline in revenues from, or a loss of, or a reduction in business from, or failure of significant clients; fluctuations in our non-recurring revenue; our failure to maintain a

satisfactory credit rating; our ability to attract and retain key employees; increases in the cost of telephone and data services or significant interruptions in such services; our failure to develop new service offerings; our ability to modernize our information technology infrastructure and consolidate data centers; our ability to comply with data security standards; our ability to receive dividends

or other payments from our subsidiaries; changes in tax and other laws and regulations; changes in government regulation and economic, strategic, political and social conditions; changes in U.S.

Cautionary Statements 1

GAAP or other applicable accounting policies; and other factors that are set forth in the "Risk Factors" section, the "Legal Proceedings" section, the "Management's Discussion and Analysis of

Financial Condition and Results of Operations" section and other sections in our 2018 Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and Current Reports on

Form 8-K filed with or furnished to the Securities and Exchange Commission. Any forward-looking statements made by us in this presentation speak only as of the date on which they are made.

We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward- looking statements, whether as a result of new information, subsequent events or otherwise.

NON-GAAP FINANCIAL MEASURES

We have reported our financial results in accordance with U.S. generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using non-GAAP measures. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to

adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods' results against the corresponding prior periods' results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing such non-

GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on certain of these non-GAAP measures.

Moving Customer Operations Forward

We deliver mission-critical services and solutions on behalf of businesses and governments - creating exceptional outcomes for our clients and the millions of people who count on them.

Introduction 2

Automating processes

Improving efficiencies

Enabling growth

Reducing costs

Improving end-user outcomes, satisfaction and loyalty

Introduction 3

Who We Are

Among the Largest Business Services Company in the Market

C O M M E R C I A L

Delivering end-to-endbusiness-to-business and business- to-consumer solutions that transform the way our clients operate and facilitate interactions for our clients end users.

Core Offerings

•	End-User Engagement •	Document Management
•	HR Services	•	Transaction Processing
•	Workers Comp	•	Banking Operations
	Management	•	Finance, Accounting, &
•	Healthcare Solutions		Procurement
•	Digital Payments

~54%

of revenue (1)

G O V E R N M E N T

Providing business process services to U.S. federal, state and local and foreign governments and agencies to streamline operations and improve the citizen experience.

Core Offerings

•	Child Support	•	Case Management
	Solutions		Solutions
•	Payment Solutions	•	Eligibility and
•	Government		Enrollment Solutions
	Healthcare Solutions

~29%

of revenue (1)

T R A N S P O R T A T I O N

Integrating innovative technologies, advanced analytics and end-user-focused solutions to deliver safer and more efficient experiences for travelers and real-time revenue management for governments and agencies.

Core Platform Offerings

•	Roadway Charging &	•	Curbside Management
	Management	•	Public Safety
•	Transit

~17%

of revenue (1)

(1) 9 months as of 9/30/2019. Revenue adjusted to exclude divestitures.

Three Business Segments Poised for Long-term Growth

Introduction 4

C O M M E R C I A L

Our Clients

Majority of the Fortune 100

19 of top 20 Health Insurers

9 of top 10 Pharma Companies

6 of top 10 Automakers

7 of top 10 U.S. Banks

Scale

70% U.S. Insured Patients touched by CNDT $775B B2B Payments

50%+ of U.S. Workers Comp Transactions

Leading Provider of Health Spending Accounts with 1.1M BenefitWallet HSAs

10M+ employees with CNDT HR Services

G O V E R N M E N T

Our Clients

Partners in 41 States

150+ Payment Service Programs in 30+ States

54+ million registered government payment cards

Scale

$40B in Gov't Healthcare Provider Payments Processed per Year

$3.6B Gov't Payment Transactions

43% U.S. Child Support Payments

55% SNAP Payments

T R A N S P O R T A T I O N

Our Clients

1 out of 4 US public safety systems are implemented

44% of US parking systems are managed

Scale

48% U.S. Toll Transactions

$2.4B toll transactions processed per year

11 Million people travel through toll systems daily

Conduent by the Numbers

Enterprise Snapshot

FINANCIAL SNAPSHOT:

FY 2019 GUIDANCE MID POINT ( 1 )

STRONG OPERATIONAL

FOUNDATION ( 2 )

ATTRACTIVE BALANCE SHEET

1. • CASH GENERATION
2. Revenue and EBITDA mid-point of guidance ranges exclude Divestitures.
3. As of 9/30/19.
4. FY2019 Guidance projects Adj EBITDA conversion of ~20%.
5. FY2019 Guidance midpoint cashflow (~100M) divided by basic market cap per FactSet ($1.6B) as of 11/8/19.
6. Leverage as of 9/30/19.

Introduction 5

$4.4B		~$495M		~$100M
Revenue		Adj. EBITDA		Adj. FCF

68k		>1k		35
Employees		Patents		Business Areas

~20% ~6.3% 2.5X

Adj. EBITDA toFCF Yield(4)Net Leverage Ratio(5) FCF Conversion(3)

Path to Growth 6

Undergoing a Strategic & Operational Review

Expect to complete comprehensive Strategic and Operational review in late Q4'19 or early Q1'20

Any potential divestitures would be determined upon the completion of the review and would expect to be executed throughout FY 2020

Use of potential proceeds and capital allocation plan is part of the comprehensive review

Focus of strategic review:

• Key theme is simplification
• Among the potential outcomes could be monetizing assets that fit one or more of these criteria:
• 1. Have scarcity value and could potentially command higher value outside of CNDT, or
  2. Are under-performing and not aligned with go-forward investment strategy, or
  3. Complicate Conduent's value proposition
• Intention of the exercise is to create a go-forward company that contains businesses which are capable of growing top- and bottom-line results

Complementary Portfolio of

Segments and Platforms

7

Complementary Portfolio 8

Conduent Services & Solutions

Commercial Healthcare

Contact Center

Payer	Provider	Pharma &	Medical Claims	Phone	Email	Chat	Self-service
		Life Sciences	Management
HR Services				Transaction Processing

Health &	Wealth &	HR	Learning &	Customer	Document &	Payments	Finance, Accounting
Wellness	Retirement	Management	Development	Communications	Data Management	Processing	& Procurement

TransportationGovernment

		P
Roadway	Transit	Curbside	Public	Payments Child	Case	Eligibility &	Government
Usage		Management	Safety	Support	Management	Enrollment	Healthcare

Complementary Portfolio 9

Millions of People Count on CNDT

25M	2.5M	10M	11M	185M
cardholders	contact center	global	daily travelers	insured
with modern	interactions	employees and	through	patients
digital payment	every day	participants	electronic tolling	in the U.S.
solutions		supported		(2/3 of all
				insured)

Complementary Portfolio 10

Significant Opportunity to Unlock Value Across Business Segments

		CONDUENT 1	PEER GROUP
		Key performance metrics		$729B
		Revenue: $2.6B
	C O M M E R C I A L	Adj. EBITDA: $598M
		EV/EBITDA Multiple2: ~15x	Addressable Market 3, 4, 5, 6
		Adj. EBITDA: $451M		$155B
	G O V E R N M E N T
		Key performance metrics
		Revenue: $1.4B
			EV/EBITDA Multiple2: ~12x	Addressable Market 3, 4, 5, 6
		Key performance metrics		$20B
		Revenue: $729M
	T R A N S P O R T A T I O N	Adj. EBITDA: $149M	EV/EBITDA Multiple2: ~13x	Addressable Market 3, 6

1. Conduent FY 2018 Results, excludes corporate costs
2. Next Full Year EV/EBITDA for public companies as of 11/19/19.
3. 2020 Addressable Market. Source Gartner, IDC, Conduent Internal and Nelson Hall
4. (i) Commercial includes - Healthcare (payer, provider, PLS), C&I, Financial Services, Europe, Payments (Cross border, KYC and Reg-Tech) and Digitization
5. (ii) Government includes - GHS, State Services and Federal, Payments (Healthcare)
6. Geos considered (i) Commercial - as per respective segments (ii) Government - US (iii) Transportation - Global

Path to Growth

11

Path to Growth

12

Investment in transformation to enhance margins

Well positioned to capitalize on macro-trendoutlook

Expansion of service offerings among existing customer base in each business unit

Opportunistic approach to growing innovative technology & service capabilities

Path to Growth 13

Continue Investing into the Business

Continued investments and modernization efforts underway to maintain and grow leadership position in $150B market growing 5% annually

CLIENT FACING PLATFORMS

~$200M investment over 3 years to modernize client facing digital platforms in Healthcare, payments, transportation, human resource, and other industry specific services. Will have invested $110M by 2019 EOY.

BACK OFFICE IT INFRASTRUCTURE

Continued progress in upgrading IT infrastructure to improve performance, security, and service delivery for our clients. Focus on innovating via:

• Centralized Command Center
• Advanced Monitoring
• Advanced Automation & Machine Learning

Market size and growth rate source: Conduent Internal Data; 2015 Nelson Hall BPO market forecast

Roadmap to Enhanced Client Delivery

20192020

Path to Growth 14

2021

People	• Command center

Process	• Change management

Technology	• Advanced monitoring
• Technology investments

• Enterprise architecture
• Incident management
• Release management
• Problem management
• Network modernization
• Datacenter migrations
• Expanding public cloud

• Continued optimizations
• Process refinement
• Datacenter migrations
• Expanding public cloud

While continuing our product and platform innovation showcased in our innovation center

Upgrading Operating Model to Position for Growth

Path to Growth 15

SALES

Levers for improved top-line:

1. Client renewals,
2. New service & solution sales to existing clients, and
3. Sales to new logos.

• Hired Chief Sales Officer and top- grading talent
• De-coupledsales and delivery organizations
• Simplified sales org model, value proposition, and go-to-market approach

QUALITY

An improved foundation to drive client satisfaction, reduce SLA penalties, and enable new service sales to existing clients.

• Top-gradedtechnology talent, including our Chief Information Officer
• Improving command center with state-of-the-art monitoring tools and processes
• Instituted improved technology infrastructure process routines
• Revitalized enterprise program management governance routines

EFFICIENCY

Efficiencies to improve our cost structure and make us more nimble.

• Transformation programs being established to "lean-out" important processes
• Simplified management organizational model
• Enhancing "Sales-to-Service" continuum to prevent cost and scope creep
• Improving employee morale to reduce attrition

Leveraging people, processes, and technology to enhance sales, quality, and efficiency

Attractive Financial Profile and

Disciplined Capital Allocation

16

Q3 2019 and FY 2018 Segment Summary(1)

Financials 17

Q 3 2 0 1 9 S E G M E N T C O M M E N TA RY

		Q 3
	R E V E N U E	A D J .
	E B I T D A
($M)	2019	2018	2019	2018
Commercial	577	620	133	150
Government	320	338	106	112
Transportation	201	184	47	39
Other(2)	-	-	-	(5)
Shared IT /	-	-	(159)	(154)
Infrastructure &
Corporate Costs(3)
Total	$1,098	$1,142	$127	$142

F Y

R E V E N U E	A D J .
E B I T D A
2018	2017	2018	2017
$2,550	$2,593	$598	$656
1,351	1,407	451	437
729	725	149	154
11	75	(16)	18
-	-	(647)	(745)
$4,641	$4,800	$535	$520

Commercial

• Adjusted revenue down (7)% yr/yr; FY adj. EBITDA margin 23.1%.
• Revenue decline driven by lost business, price pressure, and volume pressure.

Government

• Adjusted revenue down (5)% yr/yr; FY adj. EBITDA margin 33.1%.
• Revenue decline driven by price and scope changes associated with large renewal that occurred earlier in 2019 and lost business

Transportation

• Adjusted revenue up 9% yr/yr; FY adj. EBITDA margin 23.4%.
• Revenue increase driven by new international business and volume.

Shared IT / Infrastructure & Corporate Costs

• Increased 3.2% yr/yr. Continued progress on cost transformation initiatives not enough to offset increased unallocated IT costs.

1. Segment revenue excludes impact from ASC 606 and divestitures.
2. Revenue and adj. EBITDA from divestitures moved to Other segment.
3. Majority of stranded costs moved to Unallocated Corporate Costs and expected to be addressed in 2019 and 2020.

Financials 18

Strong Cash Flow Generation Amid Digital Investment

(in millions)	Q 3 2 0 1 9	F Y 2 0 1 8
Net income (loss)	($16)	($416)
Depreciation & amortization	115	460
Stock-based compensation	5	38
Deferred tax benefit	(8)	(75)
Goodwill impairment	-	-
(Gain) loss on extinguishment of debt	-	108
Changes in operating assets and liabilities	(82)	118
Other(1)	4	50
Operating Cash Flow	$18	$283
Purchase of LB&E(2) and other	(45)	(224)
Proceeds from sales of LB&E	-	13
Net proceeds/payments for divestitures/acquisitions	1	670
Other investing, net	-	1
Investing Cash Flow	($44)	$460
Cash from Financing	($21)	($637)
Effect of exchange rates on cash and cash equivalents	(2)	(8)
Change in cash, restricted cash and cash equivalents	(49)	98
Beginning cash, restricted cash and cash equivalents	285	667
Ending Cash, Restricted Cash and Cash Equivalents(3)	$236	$765
Memo: Adjusted Free Cash Flow(4)	($27)	$218
Better / (Worse) vs prior year period	$5	$5

Q 3 2 0 1 9 K E Y M E S S A G E S

• Q3 Adj. Free Cash Flow $(27)M; better $5M Y/Y
• Q3 Capex of 4.1% revenue

1. Includes (gain) loss from investments, amortization of debt financing costs, (gain) loss on divestitures and transaction costs, contract inducement amortization and Other operating, net
2. Includes cost of additions to land, building and equipment (LB&E) and internal use software
3. Includes restricted cash that is included in Other current assets on the Condensed Consolidated Balance Sheets of the Q3 2019 10-Q and the FY 2018 10-K, respectively.
4. Refer to Appendix for Non-GAAP reconciliations.

Financials 19

Strong, Flexible Balance Sheet

	D E B T S T R U C T U R E ( $ M )	1 2 / 3 1 / 2 0 1 7 1 2 / 3 1 / 2 0 1 8	9 / 3 0 / 1 9	C R E D I T M E T R I C S H E A LT H C H E C K
					• Net leverage target: ~2.0x by YE
	Total Cash(1)	$667	$765	$236
	• Revolver remains undrawn(6)
	Deferred Comp Cash	(99)	-	-	• Texas settlement payments of $20M in Q1, $98M in Q2, and $118M to be
					paid in January 2020
	Restricted Cash	(9)	(9)	(8)
							D E B T M AT U R I T Y
	Adjusted Cash	$559	$756	$228
					$900M
	Total Debt(2)	$2,061	$1,567	$1,518
	$800M
	Term Loan A(3),(5) due 2022	732	705	667	$700M
					$600M
	Term Loan B(3) due 2023	842	833	827
	$500M
	10.5% Senior Notes due 2024	510	34	34
	$400M
					$300M
	Capital Lease	33	26	17
					$200M
	Current Net Leverage Ratio(4)	2.2x	1.2x	2.5x
	$100M
					$0M
(1) Total cash includes restricted cash				2019	2020	2021	2022	2023	2024

1. Total debt excludes deferred financing costs
2. Revolving credit facility and Term Loan A interest rate is Libor + 175 bps; Term Loan B is Libor + 250 bps effective June 28, 2018
3. Net debt (total debt less adjusted cash) divided by TTM Adjusted EBITDA. Adjusted ratio uses Adjusted total Debt.
4. Includes initial EUR 260M borrowing (now 282M EUR) converted at end of quarter exchange rates; reflects appreciation of the EUR and amortization.
5. $671M of available capacity under Revolving Credit Facility as of 9/30/2019.

Financials 20

FY 2019 Guidance

	F Y 2 0 1 8 R E P O R T E D	A D J F Y 2 0 1 8 1	F Y 2 0 1 9 G U I D A N C E 4
Revenue	$5.39B	$4.64B	Down (5) - (4)%
Constant Currency2
Adj. EBITDA Margin	11.9%	11.5%	10.8 - 11.6%
Adj. Free Cash Flow3	$218M
FCF % of Adj. EBITDA3	34.1%		~20%

1. Adjusted to remove impacts of completed divestitures. Refer to Appendix for Non-GAAP reconciliations.
2. Year-over-yearrevenue growth comparison at constant currency implies $4.39B to $4.43B
3. FY 2019 FCF adjusted for Texas-related litigation impact
4. Includes no additional M&A or divestitures

Appendix

1- Example Solution Set Deep Dives

2- Non GAAP Reconciliations

21

Appendix 22

Commercial Healthcare Services & Solutions

Services &

Appendix

Solutions

Payer	Provider	Pharma &	Medical Claims
		Life Sciences	Management

On behalf of the healthcare industry,	•	Member Engagement	•	Midas Health Analytics •	Patient Access Solutions	•	Medical Bill Review
we deliver mission-critical		•	Eligibility & Authorizations	•	Clinical & Quality	•	Patient & Provider	•	Injury & Loss Reporting
administration, clinical support and	•	Core Administration			Management		Engagement Solutions	•	24/7/365 Nurse Triage
medical management solutions			Processing		•	Community Health	•	Clinical Trial Support	•	Utilization Review
across the health ecosystem to
	•	Audit & Compliance			Solutions
reduce costs, increase compliance
and enhance utilization, while		•	Payment Integrity
improving health outcomes and
experience for members and patients.
.
Conduent	Infection		Comparative	Case		Patient	Data Curation
Analytics	Surveillance	Analytics		Management	Safety	& Dashboards

Enabling Technology

End User	Mobility	Artificial	Automation
Experience		Intelligence

Appendix 23

Contact Center Services & Solutions

Contact Center

Phone

Email

Chat

Self-service

On behalf of businesses and governments, we deliver mission-critical contact center services ensuring personalized, empathetic end-user experiences in the channel of choice, to reduce costs, enable scale, and revenue growth, while driving speed to resolution and customer satisfaction.

Inquiry Types
•	Sales	•	Claims	•	Insurance Claims
•	Product Inquiries	•	Reservations & Modifications
•	Retention
•	Billing Inquires	•	Workforce Management
•	Tech Support
•	Loyalty	•	Social Media Monitoring
•	Customer Service
	Management

Enabling Technology

Digital Process	Mobile	Artificial	Analytics	Automation
Optimization		Intelligence

Appendix 24

HR Services & Solutions

Services &

Solutions

On behalf of global organizations and governments, we deliver mission-critical,technology-enabled HR services and solutions that improve business processes across the employee journey to maximize business performance,

while increasing employee satisfaction, engagement and overall wellbeing.

Health &

Wellness

• RightOpt
• BenefitWallet
• Health & Welfare Administration
• Compliance Management
• Annual Enrollment Management

Wealth &	HR	Learning &
Retirement	Management	Development
•	Defined Benefit	•	Recruitment &	•	Learning
	Administration		Onboarding		Administration &
•	Defined Contribution		Administration		Delivery
	Administration	•	Workforce & Talent	•	Learning Content
•	Financial Wellness		Management		Design & Curation
•	Non-Qualified Plan	•	Payroll Administration	•	Employee
	Administration	•	Separation &		Engagement &
•	Total Rewards		Severance Solution		Communications

• BenefitWallet

Employee Experience

Enabling

Technology	Life@Work	Conduent	Artificial	Analytics	Automation	AR/VR	Case
		Access Point	Intelligence				Management

Appendix 25

Transaction Processing Services & Solutions

Services &

Solutions

On behalf of businesses and governments, we transform business processes by automating and streamlining mission-critical operations through the latest technology solutions, to drive efficiencies, improve security and enable revenue growth, while creating a seamless end user experience.

Customer Communications

• Multichannel Communications
• Interactive Engagement Technologies
• Customer Experience Management

Document &	Payments	Finance, Accounting
Data Management	Processing	& Procurement
•	Digital Mailroom	•	Lock Box	•	Source-to-Pay
•	Workflow	•	Consumer	•	Order-to-Cash
	Automation		Mortgage Services	•	Record-to-Report
•	Content	•	Consumer Finance
	Management		Services

Enabling Technology

Digital Process	Transaction-	Artificial	Analytics	Automation	Blockchain
Automation	Intensive	Intelligence
	Processing

Appendix 26

Transportation Solutions

Solutions

On behalf of government agencies and authorities in the transportation industry, we deliver mission-critical mobility and payment solutions that improve automation, interoperability, and decision- making to streamline operations, increase revenue, and reduce congestion while creating safer communities and seamless travel experiences for consumers.

Curbside Management		Public Safety		Roadway Charging		Transit
					& Management
•	Citation & Permit	•	Photo Enforcement	•	Tolling	•	Fare Collection
	Administration	•	Data Analytics	•	Congestion	•	Intelligent Mobility
•	Enforcement	•	Violations		Management	•	CAD/AVL
•	Asset & Resource		Processing
	Management

• Business Intelligence & Data Analytics
• Curbside Demand Management

Enabling Technology

Digital Process	Mobility	Artificial	Analytics	AR/VR	Automation
Optimization		Intelligence

Appendix 27

Government Services

Services &

Solutions	Government	Payments	Child Support	Labor, Workforce and
	Healthcare Solutions	Solutions	Services	General Government
				Solutions

On behalf of federal, state and local governments, we deliver mission-critical services and solutions that reduce costs, increase program participation, and improve compliance for agencies while providing intuitive, easy-to-use tools for the people and communities they serve.

•	Medicaid Management	•	Electronic Benefits	•	Child Support Enforcement	•	Information Technology
	Modules		Transfer (EBT) solutions		Systems (CSES)		Solutions (cloud, hosting,
•	Provider Management		(payment cards, analytics,	•	Child Support Payment		maintenance and
	Services		mobile apps)		Cards		operations)
•	Medical Business	•	Intelligent Analytics Portal	•	State Disbursement Unit	•	Parks and Recreation
	Intelligence	•	Electronic Payment		(SDU) Solutions		Solutions
•	Pharmacy Benefits	•	Solutions	•	ExpertPay™ Portal	•	Utilities Solutions
	Management	e-Childcare	• Print and Mail Services	•	Human Resource, Benefits
•	Maven Disease Tracking	•	Federal programs-Direct		and Learning Solutions
•	Child Care Credentialing
•	Eligibility, Enrollment and		Express Card	•	End user experience
		and Case Management
	Verification Solutions						services

• Case Management

Enabling Technology

Portals	Mobile apps	Artificial	Cognitive	Automation	Digital Process	End User
		Intelligence	Analytics		Optimization	Experience

Appendix 28

Non-GAAP Financial Measures

Non-GAAP Financial Measures

We have reported our financial results in accordance with U.S. generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the non-GAAP measures. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with U.S. GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods' results against the corresponding prior periods' results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on certain of these non-GAAP measures.

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

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

Adjusted Revenue

We make adjustments to Revenue for the following items:

• ASC 606 adjustment.
• Divestitures completed in 2019, 2018, and 2017.

We provide our investors with adjusted revenue information, as supplemental information, because we believe it offers added insight, by itself and for comparability between periods, by adjusting for certain non-cash items as well as certain other identified items which we do not believe are indicative of our ongoing business, and may also provide added insight on trends in our ongoing business.

Appendix 29

Non-GAAP Financial Measures

Adjusted EBITDA and EBITDA Margin- We use Adjusted EBITDA and Adjusted EBITDA Margin as an additional way of assessing certain aspects of our operations that, when viewed with the U.S. GAAP results and the accompanying reconciliations to corresponding U.S. GAAP financial measures, provide a more complete understanding of our on-going business. Adjusted EBITDA represents Income (loss) before Interest, Income Taxes, Depreciation and Amortization and Contract Inducement Amortization adjusted for the following items (which are defined above). Adjusted EBITDA margin is Adjusted EBITDA divided by adjusted revenue (as defined below):

• Restructuring and related costs. Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our strategic transformation program.
• (Gain) loss on divestitures and transaction costs. Represents (gain) loss on divested businesses and transaction costs.
• Litigation costs (recoveries), net. Litigation costs (recoveries), net represents reserves for the State of Texas litigation, Student Loan Service exposures and certain terminated contracts that are subject to litigation.
• Goodwill impairment. This represents Goodwill impairment charge related to the loss of certain Transportation segment customer contracts, lower expected new Transportation segment customer contracts and higher costs
• of delivery.
• (Gain) loss on extinguishment of debt. Represents premium on debt extinguishment and write down of the associated unamortized discount and issuance costs.
• Other (income) expenses, net. Other (income) expenses, net includes currency (gains) losses, net and all other (income) expenses, net.
• NY MMIS charge (credit) / HE charge (credit). Costs associated with the Company not fully completing the State of New York Health Enterprise Platform project and the Health Enterprise Medical Platform projects in California and Montana
• Other charge (credit). This comprises other (income) expenses, net, costs associated with the Company not fully completing the State of New York Health Enterprise Platform project and the Health Enterprise Medical platform projects in California and Montana and other adjustments.
• ASC 606 adjustment.
• Divestitures completed in 2019, 2018, and 2017.

Adjusted EBITDA is not intended to represent cash flows from operations, operating income (loss) or net income (loss) as defined by U.S. GAAP as indicators of operating performance. Management cautions that amounts presented in accordance with Conduent's definition of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by other companies because not all companies calculate Adjusted EBITDA and EBITDA Margin in the same manner.

Adjusted Government Services Segment Revenue and Profit- We adjusted Government Services Segment revenue, profit and margin for the NY MMIS and HE charges as we believe it offers added insight, by itself and for comparability between periods, for items which we do not believe are indicative of our ongoing business.

Free Cash Flow- Free Cash Flow is defined as cash flows from operating activities as reported on the consolidated statement of cash flows, less cost of additions to land, buildings and equipment, cost of additions to internal use software, tax payments related to divestitures, vendor financed capital lease and proceeds from sales of land, buildings and equipment. We use the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions and invest in land, buildings and equipment and internal use software and make required principal payments on debt. In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow reconciled to cash flow provided by operating activities, which we believe to be the most directly comparable measure under U.S. GAAP.

Adjusted Free Cash Flow- Adjusted free cash flow is defined as free cash flow from above plus deferred compensation payments, transaction costs, costs related to Texas litigation, and certain other identified adjustments.

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

Appendix 30

Non-GAAP Reconciliations: Adjusted Revenue and Adjusted EBITDA

( $ I N M I L L I O N S )		Q 3 2 0 1 7		F Y 2 0 1 7		Q 3 2 0 1 8		F Y 2 0 1 8		Q 3 2 0 1 9
Reconciliation to Adjusted Revenue
Revenue	$	1,480	$	6,022	$	1,304	$		5,393	$		1,098
Adjustments:
ASC 606 adjustment		(39)		(166)		-			-			-
2017 divestitures(1)		(14)		(59)		-			-			-
2018 divestitures(1)		(246)		(997)		(162)			(752)			-
Adjusted Revenue	$	1,181	$	4,800	$	1,142		$	4,641	$		1,098
Reconciliation to Adjusted EBITDA
Income (Loss) from Continuing Operations	$	(17)	$	177	$	(237)	$		(416)		$	(16)
Adjustments:
Interest expense		35		137		22			112			20
Income tax expense (benefit)		30		(193)		(15)			21			2
Depreciation and amortization		122		495		113			460			115
Contract inducement amortization		1		2		-			3			1
Restructuring and related costs		27		101		31			81			8
Goodwill impairment		-		-		-			-			-
(Gain) loss on divestitures and transaction costs		(16)		(42)		54			42			3
Litigation costs (recoveries), net		6		(11)		78			227			2
(Gain) loss on extinguishment of debt		-		-		108			108			-
Separation costs		2		12		-			-			-
Other (income) expenses, net		(9)		(7)		4			5			(8)
NY MMIS charge (credit)		1		9		(1)			(2)			-
HE charge (credit)		(3)		(8)		-			(1)			-
ASC 606 adjustment		(2)		(11)		-			-			-
2017 divestitures(1)		(2)		(7)		-			-			-
2017 divestitures depreciation and amortization		-		1		-			-			-
2018 divestitures(1)		(38)		(121)		(15)			(98)			-
2018 divestitures depreciation and amortization		(2)		(14)		-			(7)			-
Adjusted EBITDA	$	130	$	520	$	142	$		535	$		127
Adjusted EBITDA Margin		11.0%		10.8%		12.4%			11.5%			11.6%

(1) Adjusted for the full impact from revenue and income/loss from divestitures for all periods presented.

Appendix 31

Non-GAAP Reconciliations: Adjusted Free Cash Flow

		Q 3		F Y		Q 3		F Y		Q 3
( $ I N M I L L I O N S )		2 0 1 7		2 0 1 7		2 0 1 8		2 0 1 8		2 0 1 9
Operating Cash Flow	$	104	$	300	$	(30)	$	283	$	18
Cost of additions to land, buildings and equipment		(20)		(96)		(43)		(179)		(33)
Proceeds from sales of land, buildings and equipment		-		33		-		13		-
Cost of additions to internal use software		(11)		(36)		(17)		(45)		(12)
Tax payment related to divestitures		-		-		30		90		(1)
Vendor financed capital leases		-		(16)		-		(14)		-
Free Cash Flow	$	73	$	185	$	(60)	$	148	$	(28)
Transaction costs		-		-		15		33		1
Transaction costs tax benefit		-		-		-		(5)		-
Debt buyback tax benefit		-		-		-		(26)		-
Deferred compensation tax benefit		-		-		-		(31)		-
Deferred compensation payments and adjustments		7		28		13		99		-
Adjusted Free Cash Flow	$	80	$	213	$	(32)	$	218	$	(27)