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Conduent CEO To Resign Amid Falling Revenue And Battle With Carl Icahn
Conduent saw a 39-percent drop in new business signings, lost a $140 million contract with the state of California, and their largest customer reduced volume last quarter, leading to lower revenues, and prompting the company to point guidance lower for the year, the company said in an earnings call.
In the midst of a public spat with activist investor Carl Icahn, Conduent CEO Ashok Vemuri announced Wednesday that he is stepping down as soon as the board hires a replacement, which he expects to happen by the third quarter.
“It has been my privilege to lead as Conduent’s first CEO,” Vemuri said during an earnings call that also served to announce his resignation. “Conduent has made significant progress since the separation by becoming a public company, driving transformation, laying the foundation to become a digital transformation company, as well as to a great extent, resolving the legacy issues that we inherited … as we enter the next phase of transformation, the board and I both thought it was a good time to bring in new leadership, a new leader and for the CEO transition to become effective.”
Vemuri’s departure comes as Florham Park, N.J.-based business process services company has been dealing with falling revenues and a lower earnings outlook.
The news also comes as the Xerox spin-off came under fire in April from resigning board member Michael Nevin – an Icahn employee – who questioned Vemuri’s decision-making after the CEO was offered and accepted a seat on grocery store chain Kroger’s board of directors.
“Ashok, with (Conduent board) Chairman (William) Parrett’s acquiescence, determined to take this board seat only a few short months after negative disclosures by Conduent resulted in the evaporation of almost half the company’s stock market valuation in a matter of weeks,” Nevin wrote in the letter.
Nevin also criticized company leadership around failing to resolve a Medicaid fraud lawsuit brought by the state of Texas that could have saddled the company with $2 billion in damages.
Conduent fought back against Nevin’s criticism saying his letter was part of an attempt by Carl Icahn to take over the company’s board. Nevin’s later filed another letter that said that was not the case, as the two sides again traded accusations.
Yesterday, the company posted disappointing first quarter earnings, with $1.16 billion for the quarter, down 3.3 percent year over year. The company also posted a $308 million loss in net income for an earnings per share loss of $1.49. Conduent said it has adjusted its revenue outlook for the year from growth of 1.5 percent to a 3 to 4 percent loss.
Conduent said new business signings were down 39 percent in the first quarter, the company also lost a $140 million contract with the state of California, and its largest customer reduced its sales volume which in turn hurt revenue.
Conduent shares closed 2 percent lower yesterday to 12.50, down sharply from a 52-week high of $23.59.