What happened
Shares of analytics and automation software company Conduent (CNDT 2.24%) were on a tear this morning, up an astonishing 73% at 11:10 a.m. EDT on Friday after the company reported a surprise profit Thursday night.
Heading into earnings, analysts had forecast Conduent would report a $0.05 per share loss on sales of $925.5 million for fiscal Q2. In fact, the company earned $0.12 per share (albeit on a pro forma basis), and did more than $1 billion in quarterly sales.
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So what
In its earnings release, Conduent called its sales "well-above expectations," even though these sales were actually 9% below Q2 2019 levels. Perhaps more important, though, Conduent noted that new contract signings in the quarter (indicative of future revenue growth) were their strongest ever, up 90% year over year.
As for earnings, on the one hand, it's worth emphasizing that the $0.12 "profit" Conduent reported was only a pro forma number. Calculated according to generally accepted accounting principles (GAAP), it showed a loss of $0.25 per share. Still, even this loss was a vast improvement over the $4.94 loss per share Conduent reported a year ago.
And free cash flow for the quarter turned positive: $55 million not counting capitalized software costs, or $38 million with them. Either way you figure it, this was a big improvement over Q2 2019, when Conduent's negative free cash flow exceeded $200 million.
Now what
Conduent did not provide financial guidance for the current quarter, or the current fiscal year, saying only that it is "on target to overachieve on the FY 2020 $100M cost reduction program."
For what it's worth, though, analysts are forecasting a $0.05 per share profit (probably pro forma) for Q3, and sales of $962.5 million, both down from a year ago.
