Financial Data and Key Metrics Changes - Adjusted revenue for Q1 2025 was $751 million, down 8.5% year-over-year from $821 million in Q1 2024, primarily driven by the government segment [15][18] - Adjusted EBITDA for the quarter was $37 million, compared to $36 million in Q1 2024, with an adjusted EBITDA margin of 4.9%, up 50 basis points year-over-year [15][16] - New business annual contract value (ACV) increased by 14% year-over-year to $109 million, with total contract value (TCV) up 96% to $280 million [13][14] Business Line Data and Key Metrics Changes - Commercial segment adjusted revenue was $402 million, down 4.1% year-over-year, with adjusted EBITDA down 11% and EBITDA margin at 10%, down 70 basis points [16][17] - Government segment adjusted revenue decreased by 16% to $216 million, with adjusted EBITDA down 31% to $38 million and an EBITDA margin of 17.6% [17][18] - Transportation segment adjusted revenue was $133 million, down 7.6% year-over-year, but adjusted EBITDA improved to $6 million from $1 million in Q1 2024, with an EBITDA margin of 4.5% [19] Market Data and Key Metrics Changes - Qualified ACV pipeline increased by 16% year-over-year to $3.2 billion, with both government and commercial segments showing significant growth [14] - The company reported a strong sales pipeline and improved retention in the government business, indicating potential for future growth [29] Company Strategy and Development Direction - The company is focused on portfolio rationalization to enhance growth and reduce costs, having completed three divestitures in 2024 generating nearly $800 million in net proceeds [11][12] - The strategy includes targeting additional assets for divestiture expected to generate another $350 million in proceeds, surpassing the $1 billion target [11][12] - Investments in AI and fraud prevention capabilities are being emphasized, particularly in government services, to drive efficiency and reduce fraud [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving revenue guidance despite macroeconomic uncertainties, citing minimal exposure to tariffs and a strong pipeline of government contracts [8][24] - The company expects Q2 2025 revenue to be sequentially higher than Q1 but slightly below Q2 2024, with adjusted EBITDA margin projected between 4% and 4.5% [26][27] - Management highlighted opportunities in government efficiency and fraud reduction as key growth areas, particularly in Medicaid and SNAP programs [30][34] Other Important Information - The company ended the quarter with approximately $293 million in cash and a largely undrawn $550 million revolving credit facility [21] - Adjusted free cash flow for the quarter was negative $74 million, an improvement compared to Q1 2024 [21] - The company incurred $3 million in expenses related to a cyber event, with $22 million accrued for potential notification requirements [20] Q&A Session Summary Question: How does the push for government efficiency create opportunities for the company? - Management explained that while federal funds for entitlements are distributed through states, the administrative costs present opportunities for the company to help states improve efficiency and reduce fraud [40][41][43] Question: Can you elaborate on the cyber event and its impact? - Management confirmed that all costs related to the cyber event are accounted for, with no significant operational impact, and ongoing examination of data is in progress [46][47] Question: Have there been any regulatory hurdles in deploying AI solutions? - Management stated that there have been no regulatory hurdles encountered in deploying AI, particularly in sensitive government applications [52][53] Question: What criteria are used for identifying assets for divestiture? - Management indicated that the focus is on identifying assets with scarcity value and maximizing returns from divestitures while balancing debt reduction and reinvestment [58][59] Question: What feedback is being received from state and local contacts regarding opportunities? - Management noted a mixed response from states, with some actively seeking to reduce fraud and improve efficiency, while others are more cautious [71][72]

Financial Data and Key Metrics Changes - Adjusted revenue for Q1 2025 was $751 million, down 8.5% year over year from $821 million in Q1 2024, primarily driven by the government segment [15][19] - Adjusted EBITDA for the quarter was $37 million, slightly up from $36 million in Q1 2024, with an adjusted EBITDA margin of 4.9%, an increase of 50 basis points year over year [15][19] - New business annual contract value (ACV) increased by 14% year over year to $109 million, with total contract value (TCV) up 96% to $280 million [13][14] Business Line Data and Key Metrics Changes - Commercial segment adjusted revenue was $402 million, down 4.1% year over year, with adjusted EBITDA down 11% and EBITDA margin at 10%, down 70 basis points [16][18] - Government segment adjusted revenue decreased by 16% to $216 million, with adjusted EBITDA down 31% to $38 million and an EBITDA margin of 17.6% [18][19] - Transportation segment adjusted revenue was $133 million, down 7.6% year over year, but adjusted EBITDA improved to $6 million from $1 million in Q1 2024, with an EBITDA margin of 4.5% [20] Market Data and Key Metrics Changes - Qualified ACV pipeline increased by 16% year over year to $3.2 billion, with both government and commercial segments showing significant growth [14] - The company reported a strong sales pipeline and improved retention in the government business, indicating a positive outlook for future growth [30] Company Strategy and Development Direction - The company is focused on portfolio rationalization, having completed three divestitures in 2024 that generated nearly $800 million in net proceeds, with plans for further asset sales in 2025 [11][12] - The strategy includes leveraging government opportunities, enhancing AI capabilities, and improving operational efficiencies to drive growth [30][38] - The company aims to reduce debt and increase profitability through capital deployment from divestitures, targeting an optimized portfolio with two operating units [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving guidance numbers for 2025 despite macroeconomic uncertainties, citing minimal exposure to tariffs and a strong government business pipeline [7][24] - The company expects Q2 2025 revenue to be sequentially higher than Q1 but slightly below Q2 2024, with adjusted EBITDA margin projected between 4% and 4.5% [26] - Management highlighted opportunities in fraud reduction and government efficiency initiatives as key growth drivers [36][38] Other Important Information - The company ended the quarter with approximately $293 million in cash and a largely undrawn $550 million revolving credit facility [22] - Adjusted free cash flow for the quarter was negative $74 million, an improvement compared to Q1 2024 [22] - The company incurred $3 million in expenses related to a cyber event, with no material operational impact reported [21][49] Q&A Session Summary Question: Can you elaborate on how government efficiency efforts create opportunities for the company? - Management explained that while federal funds for entitlements are distributed through states, the administrative costs present opportunities for the company to help states improve efficiency and reduce fraud [41][45] Question: What was the impact of the cyber event? - Management confirmed that all costs related to the cyber event are accounted for, with no significant operational impact, and ongoing examination of data is in progress [48][49] Question: Have there been any regulatory hurdles in deploying AI solutions? - Management stated that there have been no regulatory hurdles encountered in deploying AI, particularly in sensitive government or healthcare applications [54][55] Question: What criteria are used for identifying assets for divestiture? - Management indicated that the focus is on identifying assets with scarcity value and maximizing returns from divestitures while balancing debt reduction and reinvestment [60][62] Question: What feedback is being received from state and local contacts regarding opportunities? - Management noted a mixed response from states, with some actively seeking efficiency improvements while others are more cautious, but overall, there is a strong interest in fraud reduction initiatives [73][75]

Financial Performance - Adjusted Revenue was $751 million, a decrease of 8.5% year-over-year (or 8.1% in constant currency) [5, 27] - Adjusted EBITDA was $37 million with a margin of 4.9%, a 2.8% year-over-year increase [5, 29] - Adjusted Free Cash Flow was negative $74 million [40] Sales Metrics - New business signings ACV reached $109 million [5, 13] - New Business TCV was $53 million [13] - Net ARR Activity Impact (TTM) was $116 million [5, 15] Portfolio Rationalization - $778 million of net proceeds were generated from three divestitures executed in 2024 [9] - 85% of the $1 billion capital target has been deployed [8, 9] - Up to $350 million of net proceeds are expected from additional portfolio rationalization opportunities [9] Segment Performance - Government segment revenue was $216 million, a decrease of 16.3% year-over-year [36] - Commercial segment revenue was $402 million, a decrease of 4.1% year-over-year [36] - Transportation segment revenue was $133 million, a decrease of 7.6% year-over-year [36] Outlook - FY 2025 Adjusted Revenue is projected to be between $3.1 billion and $3.25 billion [47] - FY 2025 Adjusted EBITDA Margin is expected to be between 4.5% and 5.5% [47] - FY 2025 Adjusted Free Cash Flow is projected to be between $0 million and $40 million [48]

Part I — Financial Information [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, show a net loss of $51 million, a significant decrease from the $99 million net income in the prior-year period, primarily due to lower revenue and the absence of a large gain on divestitures seen in 2024. Total assets decreased slightly to $2.53 billion from $2.60 billion at year-end 2024. The company experienced a net cash outflow from operations of $58 million [Condensed Consolidated Statements of Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) For the first quarter of 2025, Conduent reported a net loss of $51 million, or ($0.33) per diluted share, compared to a net income of $99 million, or $0.46 per diluted share, for the same period in 2024. The decline was driven by a revenue decrease to $751 million from $921 million and a $3 million loss on divestitures compared to a $161 million gain in the prior year Q1 2025 vs Q1 2024 Income Statement Highlights | Metric (in millions, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $751 | $921 | | Income (Loss) Before Income Taxes | $(56) | $127 | | Net Income (Loss) | $(51) | $99 | | Diluted Net Income (Loss) per Share | $(0.33) | $0.46 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Conduent's total assets were $2.53 billion, a slight decrease from $2.60 billion at December 31, 2024. Total liabilities also decreased to $1.59 billion from $1.61 billion. Consequently, total equity declined to $804 million from $843 million over the same period Balance Sheet Summary | Metric (in millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $277 | $366 | | Total Assets | $2,532 | $2,599 | | Total Liabilities | $1,586 | $1,614 | | Total Equity | $804 | $843 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash used in operating activities was $58 million, compared to $37 million in Q1 2024. Investing activities used $17 million, a sharp contrast to the $143 million provided in the prior year, which included proceeds from divestitures. Financing activities used $10 million, significantly less than the $199 million used in Q1 2024, which included debt repayments and treasury stock purchases. Overall cash and cash equivalents decreased by $84 million Q1 2025 vs Q1 2024 Cash Flow Summary | Cash Flow Activity (in millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(58) | $(37) | | Net cash provided by (used in) investing activities | $(17) | $143 | | Net cash provided by (used in) financing activities | $(10) | $(199) | | Increase (decrease) in cash | $(84) | $(95) | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key accounting policies and events. Revenue disaggregation shows declines across all segments, with total revenue falling to $751 million from $921 million YoY, largely impacted by 2024 divestitures. The company incurred $4 million in restructuring costs and recorded a $3 million loss on divestitures. A subsequent event in April 2025 involved the acquisition of the remaining 20% interest in Conduent Victoria Ticketing System Pty Ltd. for $5 million - In Q1 2025, the company updated the presentation of disaggregated revenue by major service offering within the Commercial segment, with prior periods revised to reflect this change[33](index=33&type=chunk) - Estimated revenue from remaining performance obligations as of March 31, 2025, was approximately **$1.4 billion**, with **74%** expected to be recognized over the next two years[41](index=41&type=chunk) - In April 2025, the Company acquired the remaining **20%** interest in Conduent Victoria Ticketing System Pty Ltd for **$5 million**, making it a wholly-owned subsidiary[90](index=90&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 18% YoY revenue decline to $751 million primarily to the impact of 2024 divestitures. Excluding divestitures, lost business and lower commercial volumes were key factors. A significant event was a January 2025 cyberattack, which resulted in $25 million of direct response costs, increasing SG&A expenses. The company continues its portfolio rationalization strategy and highlights progress in its Government segment with an AI-powered fraud prevention tool. Net ARR Activity, a key forward-looking metric, improved to $116 million for the trailing twelve months - The company continues to execute its three-year strategy focused on growth, portfolio rationalization, and balanced capital allocation, aiming to complete its commitment of deploying **$1 billion** of capital through further rationalization in 2025[97](index=97&type=chunk)[99](index=99&type=chunk) - A cyber event in January 2025 resulted in unauthorized access and data exfiltration. While operational impact was not material, the company incurred and accrued material non-recurring expenses for the response[99](index=99&type=chunk)[100](index=100&type=chunk)[102](index=102&type=chunk) - Revenue for Q1 2025 decreased by **$170 million (18%)** YoY, with approximately **54%** of the decline attributed to the impact of businesses divested in 2024[104](index=104&type=chunk)[105](index=105&type=chunk) [Operations Review of Segment Revenue and Profit](index=26&type=section&id=Operations%20Review%20of%20Segment%20Revenue%20and%20Profit) In Q1 2025, all core segments saw revenue declines. Commercial revenue fell to $402 million due to lower volumes. Government revenue dropped to $216 million from lost business. Transportation revenue decreased to $133 million. Adjusted EBITDA margins were 10.0% for Commercial, 17.6% for Government, and 4.5% for Transportation. Unallocated costs increased, driven by $25 million in cyber event response costs, partially offset by a $9 million legal cost recovery Q1 2025 Segment Performance | Segment (in millions) | Revenue | Adjusted EBITDA | Adjusted EBITDA Margin | | :--- | :--- | :--- | :--- | | Commercial | $402 | $40 | 10.0% | | Government | $216 | $38 | 17.6% | | Transportation | $133 | $6 | 4.5% | | Divestitures | $0 | $0 | N/A | | Unallocated Costs | N/A | $(47) | N/A | | **Total** | **$751** | **$37** | **4.9%** | - Commercial segment profit and Adjusted EBITDA decreased due to lower volumes and higher fixed overhead, despite cost efficiencies[121](index=121&type=chunk) - Government segment profit and Adjusted EBITDA decreased due to lost business and service level dispute reserves, partially offset by cost savings from AI-driven fraud prevention[123](index=123&type=chunk) - Unallocated costs increased primarily due to **$25 million** in direct response costs for the cyber event, partially offset by a **$9 million** insurance recovery for a prior legal matter[127](index=127&type=chunk) [Metrics](index=28&type=section&id=Metrics) The company's key performance metrics showed mixed results in Q1 2025. New business Annual Contract Value (ACV) signings increased 14% YoY to $109 million. However, total signings (TCV) decreased slightly by 3% to $523 million due to lower renewals. The total new business pipeline grew to $3.2 billion from $2.7 billion a year ago. The Net ARR Activity metric, a trailing twelve-month indicator of net revenue impact, showed significant positive momentum, rising to $116 million as of March 31, 2025 Q1 2025 Signings vs Q1 2024 | Signings ($ in millions) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | New business ACV | $109 | $96 | 14% | | New business TCV | $280 | $143 | 96% | | Renewals TCV | $243 | $395 | (38)% | | **Total Signings** | **$523** | **$538** | **(3)%** | - The total new business pipeline increased to **$3.2 billion** at the end of Q1 2025, compared to **$2.7 billion** at the end of Q1 2024[133](index=133&type=chunk) Net ARR Activity Trend (Trailing 12 Months) | Quarter End | Net ARR Activity (in millions) | | :--- | :--- | | March 31, 2025 | $116 | | December 31, 2024 | $92 | | September 30, 2024 | $46 | | June 30, 2024 | $(47) | | March 31, 2024 | $6 | [Capital Resources and Liquidity](index=29&type=section&id=Capital%20Resources%20and%20Liquidity) As of March 31, 2025, Conduent had $277 million in cash and cash equivalents and $540 million available under its revolving credit facility. Total principal debt stood at $657 million. The company believes its current liquidity is sufficient to meet obligations for at least the next twelve months. The net cash used in operating activities increased to $58 million in Q1 2025 from $37 million in Q1 2024, primarily due to a one-time tax refund received in the prior year - As of March 31, 2025, the company had total cash and cash equivalents of **$277 million** and a net available revolving credit facility of **$540 million**[136](index=136&type=chunk) - Total principal debt outstanding was **$657 million** as of March 31, 2025, with **$26 million** due within one year[138](index=138&type=chunk) - The decrease in cash from financing activities was mainly due to a **$164 million** voluntary debt prepayment in Q1 2024 using divestiture proceeds, which did not recur in Q1 2025[143](index=143&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risk from foreign currency exchange rates, which it manages through operational activities and derivative financial instruments. There have been no material changes to the company's market risk disclosures or financial risk management strategies since the 2024 Annual Report - The company is exposed to foreign currency exchange rate fluctuations and uses derivative instruments, primarily forward contracts, to hedge these risks[156](index=156&type=chunk) - There have been no material changes to the quantitative and qualitative disclosures regarding market risk from the Annual Report on Form 10-K for the year ended December 31, 2024[158](index=158&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. There were no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[159](index=159&type=chunk) - No changes occurred in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[160](index=160&type=chunk) Part II — Other Information [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the information on contingencies and litigation from Note 12 of the financial statements. Key ongoing litigation includes the case of Skyview Capital LLC v. Conduent Business Services, LLC, related to a 2019 business sale, where appeals are ongoing - The report refers to Note 12 for details on legal proceedings, which discusses the ongoing litigation with Skyview Capital LLC and other contingencies[163](index=163&type=chunk)[82](index=82&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The report highlights the significant risk of cybersecurity threats to the company's data systems and network infrastructure. It explicitly references the January 13, 2025, cyber event where a threat actor gained unauthorized access and exfiltrated client-associated files. The company warns that such incidents could lead to liability, reputational damage, and service interruptions, and that preventative measures may not be sufficient against increasingly sophisticated attacks - The company emphasizes its susceptibility to hacking, malware, and other cyber-attacks, which could expose it to liability, impair its reputation, and disrupt service obligations[165](index=165&type=chunk)[166](index=166&type=chunk) - The January 13, 2025, cyber event is cited as an example of these risks, where an operational disruption occurred and a threat actor exfiltrated a set of files associated with a limited number of clients[169](index=169&type=chunk) - The company acknowledges that because attack techniques are constantly changing, its preventative measures may be insufficient, and it may be unable to anticipate or fully remediate such incidents in a timely manner[167](index=167&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2025, Conduent did not issue any unregistered securities. Additionally, there were no share repurchases made by the company or its affiliates during this period - The Company did not issue any securities in unregistered transactions during the quarter ended March 31, 2025[171](index=171&type=chunk) - There were no share repurchases during the three months ended March 31, 2025[172](index=172&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) The company disclosed that during the first quarter of 2025, none of its directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - During Q1 2025, no directors or officers adopted, terminated, or modified a Rule 10b5-1 trading plan or other non-Rule 10b5-1 trading arrangement[175](index=175&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements, forms of award agreements under the 2021 Performance Incentive Plan, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - Exhibits filed include various award agreements, a letter agreement with Michael McDaniel, and CEO/CFO certifications[177](index=177&type=chunk)

[Key Q1 2025 Highlights and CEO Commentary](index=1&type=section&id=Key%20Q1%202025%20Highlights) Conduent started 2025 strongly, meeting Adjusted Revenue and exceeding Adjusted EBITDA margin expectations, with improved new business signings and Net ARR Activity Metric indicating future growth - CEO Cliff Skelton noted a good start to 2025, with results in line with the 2025 outlook for **Adjusted Revenue** and exceeding expectations for **Adjusted EBITDA margins**[3](index=3&type=chunk) - Key indicators of future growth, **New Business Signings** and the **Net ARR Activity Metric**, both showed year-over-year improvement[3](index=3&type=chunk) - Portfolio rationalization efforts are on track to achieve over **$1 billion** in deployable capital[3](index=3&type=chunk) Q1 2025 Key Metrics | Metric | Value | | :--- | :--- | | Revenue and Adj. Revenue | $751 million | | Pre-tax Income (Loss) | $(56) million | | Adj. EBITDA Margin | 4.9% | | New Business Signings ACV | $109 million | | Net ARR Activity Metric (TTM) | $116 million | [Key Financial Q1 2025 Results and Performance Commentary](index=2&type=section&id=Key%20Financial%20Q1%202025%20Results) Conduent's Q1 2025 saw GAAP Revenue decline 18.5% and a net loss of $(51) million, while Adjusted EBITDA and its margin improved, and liquidity remained strong Q1 2025 Financial Performance vs. Q1 2024 ($ in millions, except margin and per share data) | Metric | Q1 2025 | Q1 2024 | Y/Y Change | | :--- | :--- | :--- | :--- | | Revenue | $751 | $921 | (18.5)% | | Adjusted Revenue | $751 | $821 | (8.5)% | | GAAP Net Income (Loss) | $(51) | $99 | n/m | | Adjusted EBITDA | $37 | $36 | 2.8% | | Adjusted EBITDA Margin | 4.9% | 4.4% | 50 bps | | GAAP Diluted EPS | $(0.33) | $0.46 | n/m | | Adjusted Diluted EPS | $(0.13) | $(0.09) | (44.4)% | | Cash Flow from Operating Activities | $(58) | $(37) | (56.8)% | | Adjusted Free Cash Flow | $(74) | $(60) | (23.3)% | - The decrease in Pre-tax income from **$127 million** in Q1 2024 to **$(56) million** in Q1 2025 was primarily driven by the gain on the transfer of the BenefitWallet portfolio in the prior year[6](index=6&type=chunk) - The company maintained a strong liquidity position with **$293 million** of cash and a largely undrawn **$550 million** revolving credit facility[6](index=6&type=chunk) - **Adjusted EBITDA** and **Adjusted EBITDA Margin** were ahead of expectations and increased year-over-year[7](index=7&type=chunk) [Additional Q1 2025 Performance Highlights](index=3&type=section&id=Additional%20Q1%202025%20Performance%20Highlights) Conduent achieved key operational and technological milestones in Q1 2025, including new GenAI tools, the NYC Congestion Relief Zone, and significant contract wins - Implemented the Congestion Relief Zone in New York City, managing toll transactions and payment processing[8](index=8&type=chunk) - Launched a fraud prevention tool using traditional and GenAI to prevent account take-over fraud in government benefits payments[8](index=8&type=chunk) - Introduced 'Conni,' an innovative GenAI virtual assistant to improve customer experience across Conduent platforms[8](index=8&type=chunk) - Secured major contracts, including a **$92 million** contract with the Alaska Department of Health, a new fare collection system for Lima, Peru, and deployments of its Maven system in Oklahoma and Ireland[8](index=8&type=chunk) [FY 2025 Outlook](index=4&type=section&id=FY%202025%20Outlook) Conduent projects full-year 2025 Adjusted Revenue between $3,100 million and $3,250 million, with an Adjusted EBITDA Margin of 4.5% to 5.5% Full-Year 2025 Financial Outlook (in millions, except margin) | Metric | FY 2024 Actuals | FY 2025 Outlook | | :--- | :--- | :--- | | Adj. Revenue | $3,176 | $3,100 - $3,250 | | Adj. EBITDA Margin | 3.9% | 4.5% - 5.5% | [Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited Q1 2025 financial statements present the company's net loss, balance sheet changes, and cash flow from operations [Condensed Consolidated Statements of Income (Loss)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) Conduent reported Q1 2025 revenues of $751 million and a net loss of $(51) million, a significant shift from Q1 2024 due to a prior-year divestiture gain Q1 2025 Income Statement Highlights (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $751 | $921 | | Total Operating Costs and Expenses | $807 | $794 | | (Gain) loss on divestitures, net | $3 | $(161) | | Income (Loss) Before Income Taxes | $(56) | $127 | | Net Income (Loss) | $(51) | $99 | | Diluted EPS | $(0.33) | $0.46 | [Condensed Consolidated Balance Sheets](index=12&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Conduent's balance sheet reported total assets of $2,532 million, total liabilities of $1,586 million, and total equity of $804 million Balance Sheet Summary (in millions) | Metric | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $277 | $366 | | Total current assets | $1,185 | $1,252 | | Total Assets | $2,532 | $2,599 | | Total current liabilities | $723 | $744 | | Long-term debt | $625 | $615 | | Total Liabilities | $1,586 | $1,614 | | Total Equity | $804 | $843 | [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw net cash used in operating activities of $(58) million, with investing activities using $(17) million and financing activities using $(10) million, leading to an $84 million decrease in cash Cash Flow Summary (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(58) | $(37) | | Net cash provided by (used in) investing activities | $(17) | $143 | | Net cash provided by (used in) financing activities | $(10) | $(199) | | Increase (decrease) in cash, cash equivalents and restricted cash | $(84) | $(95) | [Non-GAAP Financial Measures and Reconciliations](index=14&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section defines and reconciles non-GAAP financial measures like Adjusted Revenue, Adjusted EBITDA, and Adjusted Free Cash Flow, providing a clearer view of business trends - The company uses **non-GAAP measures** to help investors understand business trends by excluding items such as amortization, restructuring costs, divestiture impacts, and litigation settlements[14](index=14&type=chunk)[30](index=30&type=chunk) - Key non-GAAP measures include **Adjusted Revenue**, **Adjusted EBITDA**, **Adjusted Diluted EPS**, and **Adjusted Free Cash Flow**[33](index=33&type=chunk)[37](index=37&type=chunk)[42](index=42&type=chunk) Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions) | | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Income (Loss)** | **$(51)** | **$99** | | Income tax expense (benefit) | (5) | 28 | | Depreciation and amortization | 48 | 62 | | Interest expense | 12 | 27 | | Restructuring and related costs | 4 | 9 | | (Gain) loss on divestitures, net | 3 | (161) | | Direct response costs - cyber event | 25 | — | | Other Adjustments & Divestitures | (3) | (28) | | **Adjusted EBITDA** | **$37** | **$36** | Reconciliation of Operating Cash Flow to Adjusted Free Cash Flow (in millions) | | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Operating Cash Flow** | **$(58)** | **$(37)** | | Capital Expenditures | (18) | (21) | | **Free Cash Flow** | **$(76)** | **$(58)** | | Adjustments (Transaction costs, cyber event payments, etc.) | 2 | (2) | | **Adjusted Free Cash Flow** | **$(74)** | **$(60)** |

Core Insights - Conduent Incorporated reported a strong start to 2025, with results aligning with internal expectations despite macroeconomic uncertainties [2] - The company achieved improvements in new business signings and Net Annual Recurring Revenue (ARR) metrics, indicating potential future growth [2] - Conduent's portfolio rationalization efforts are on track to achieve over $1 billion in deployable capital [2] Financial Performance - Q1 2025 revenue was $751 million, down 18.5% from $921 million in Q1 2024 [3] - Adjusted revenue for Q1 2025 was $751 million, an 8.5% decrease from $821 million in Q1 2024 [3] - GAAP net loss for Q1 2025 was $(51) million compared to a net income of $99 million in Q1 2024 [3] - Adjusted EBITDA for Q1 2025 was $37 million, a 2.8% increase from $36 million in Q1 2024, with an adjusted EBITDA margin of 4.9% [3][5] - Operating cash flow was $(58) million, a decline of 56.8% year-over-year [3] Business Highlights - New business signings for the quarter amounted to $109 million [7] - The Net ARR Activity Metric for the trailing twelve months was $116 million [7] - Conduent's liquidity position remained strong with $293 million in cash and a largely undrawn $550 million revolving credit facility [4] Outlook - The company projects adjusted revenue for FY 2025 to be between $3.1 billion and $3.25 billion, compared to $3.176 billion in FY 2024 [8] - Adjusted EBITDA margin for FY 2025 is expected to be between 4.5% and 5.5% [9]

Financial Performance - Total revenue for 2024 was $3,356 million, a decrease of 9.8% from $3,722 million in 2023[295]. - Operating costs and expenses totaled $2,852 million in 2024, down from $4,054 million in 2023, reflecting a significant reduction in costs[295]. - Net income for 2024 was $426 million, compared to a net loss of $296 million in 2023, indicating a strong recovery[295]. - The company reported a loss on divestitures and sales of fixed assets of $724 million in 2024[302]. - Conduent's total equity increased to $843 million in 2024, up from $633 million in 2023, indicating a growth of approximately 33%[300]. - Total assets decreased to $2,599 million in 2024 from $3,162 million in 2023, reflecting a reduction of approximately 18%[300]. - Total liabilities decreased to $1,614 million in 2024, down from $2,387 million in 2023, marking a reduction of approximately 32%[300]. - Cash and cash equivalents declined to $366 million in 2024, down from $498 million in 2023, representing a decrease of about 26%[300]. - The company generated $795 million in net cash from investing activities in 2024, primarily due to proceeds from divestitures[302]. - The company experienced a goodwill impairment of $28 million in 2024, significantly lower than the $287 million impairment in 2023[295]. Revenue Segmentation - The Commercial segment generated revenue of $1,606 million, accounting for 50.6% of total revenues excluding divestitures, while the Government segment revenue was $984 million, representing 31.0%[34][35]. - Conduent's transportation segment revenue reached $586 million, making up 18.4% of total revenues excluding divestitures[36]. - Approximately $85 billion is disbursed annually through the company's Government Service Solutions, including benefit card programs[50]. - The company generates revenue from its Human Capital Solutions based on the number of employees and retirees supported, as well as transaction fees for client life events[46]. - The company generates revenue in its Business Operations Solutions through various pricing models, including per item handled and outcome-based pricing[42]. Market Position and Client Base - Conduent's addressable market size in the global business process services industry is estimated to be $210 billion in 2024[30]. - The company serves nearly half of the Fortune 100 companies, including 9 of the top 10 U.S. health insurers and 6 of the top 10 U.S. banks[26]. - A significant portion of Conduent's revenues is derived from government contracts, which are subject to funding appropriations and can be terminated at the government's discretion[89]. - Approximately 14% of the company's 2024 revenues were generated from operations outside the United States[94]. Operational Efficiency and Technology - In 2024, Conduent launched a dedicated GenAI program with over 20 prioritized use cases to enhance operational efficiency and client outcomes[27]. - The company processed over 13 million tolling transactions daily, contributing to reduced congestion and improved operational efficiency for transportation agencies[21]. - The company processed nearly 450 million claims in its Government Healthcare Solutions segment[48]. - The company is undertaking a long-term project to modernize its IT infrastructure, which carries risks of operational disruptions and increased costs[104]. Workforce and Culture - Conduent's global workforce consists of approximately 56,000 associates, with nearly 40% located in North America[22]. - Conduent completed approximately 1.63 million learning assets in 2024, indicating a strong engagement in employee development programs[70]. - Conduent was recognized as one of Newsweek's Top 100 Global Most Loved Workplaces in 2024, reflecting a strong emotional connection between associates and the company[71]. - The company received multiple awards for workplace culture, including America's Best 500 Employers for Diversity from Forbes for four consecutive years (2021-2024)[69]. - The company's overall culture score remained in the top 10% of similar-sized companies according to Comparably, indicating a positive workplace environment[71]. - The company has a focus on diversity and inclusion, receiving top rankings for LGBT+ inclusion and disability inclusion in various regions[69]. Risks and Compliance - The company faces significant competition, with some competitors having greater financial and marketing resources, which may pressure pricing and terms[90]. - The company is exposed to potential liabilities and reputational harm related to environmental, social, and governance considerations[106]. - The company faces risks associated with the use of artificial intelligence, including potential legal liabilities and reputational damage, necessitating ongoing investment in governance and security resources[109]. - Compliance with evolving AI regulations, such as the European Union's AI Act, may increase operational costs and pose unpredictable risks[110]. - The company is subject to numerous laws regarding the protection of individually identifiable information, including HIPAA and GDPR, with significant penalties for non-compliance[111]. - Cybersecurity threats pose risks to the company's operations, potentially leading to unauthorized access and significant reputational damage[115]. - The company's insurance coverage may not fully protect against all potential liabilities, which could adversely affect its financial condition[123]. Financial Management and Debt - The company has a significant amount of debt, which could adversely affect its results of operations and financial condition[129]. - The company's ability to make payments on and refinance its indebtedness depends on its future cash generation from operations, financings, or asset sales[131]. - The consolidated weighted-average interest rates for total debt in 2024 were 9.37% for Term Loan A, 6.20% for Senior Notes, and 8.70% for finance lease obligations[275]. - A 10% increase in market interest rates would decrease the fair values of fixed-rate financial instruments by approximately $15 million[275]. Strategic Initiatives - The company aims to achieve profitable growth and expand operating margins through a disciplined capital allocation strategy, focusing on growth, efficiency, and quality[24]. - The Board of Directors authorized a three-year stock repurchase program for up to $75 million, completed in September 2024[108]. - The company may selectively pursue strategic acquisitions, investments, and joint ventures, which pose risks that could affect its reputation and financial results[126].

Financial Data and Key Metrics Changes - Q4 adjusted revenue was $800 million, and full-year revenue was $3.176 billion, down 4.3% from $3.32 billion in 2023 [11][17] - Adjusted EBITDA for Q4 was $32 million, with a margin of 4%, while full-year adjusted EBITDA was $124 million, with a margin of 3.9% [11][17] - New business Annual Contract Value (ACV) was flat year-over-year at $137 million, but down 20% for the full year compared to 2023 [14][15] Business Line Data and Key Metrics Changes - Commercial segment adjusted revenue for 2024 was $1.606 billion, down 3.7% year-over-year, but adjusted EBITDA increased by 2.4% with a margin of 10.5% [18] - Government segment adjusted revenue decreased by around 10% to $984 million, with adjusted EBITDA down 35% and a margin of 21.3% [19][22] - Transportation segment adjusted revenues grew by 5% year-over-year to $586 million, but adjusted EBITDA was breakeven [23] Market Data and Key Metrics Changes - The company experienced a strong finish in new business sales and improved client retention, with net ARR activity at $92 million [16] - The government segment faced challenges due to the termination of a large healthcare contract and lower SNAP volumes, impacting revenue [21][22] Company Strategy and Development Direction - The company is focused on portfolio rationalization, divesting underperforming assets to streamline operations and improve margins [8][36] - There is an emphasis on leveraging AI for operational efficiency and enhancing service offerings, particularly in fraud detection and document automation [58][45] - The company anticipates stable macroeconomic conditions and expects adjusted revenues in 2025 to be between $3.1 billion and $3.25 billion [29][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2025, expecting a recovery in adjusted EBITDA margins and a return to growth after a challenging 2024 [28][49] - The company is preparing for a stronger first half of 2025, with expectations of improved sales pipelines across all segments [76][77] - Management highlighted the importance of operational excellence and cybersecurity as top priorities moving forward [42][43] Other Important Information - The company ended the year with approximately $377 million in cash and a largely undrawn $550 million revolving credit facility [25] - Capital expenditures for the year were 2.2% of revenue, with plans to optimize spending further [27] Q&A Session Summary Question: Progress on AI-enabled technology in public health - Management highlighted several AI applications, including fraud detection in payments and document automation in healthcare [56][58] Question: Strategy to grow wallet share with existing clients - The company is implementing a client partner program to better address client needs and increase product offerings [60][64] Question: Margin improvement drivers - Margin improvements are primarily driven by cost reductions and operational efficiencies [70][71] Question: Capital allocation plans for FY 2025 - Management indicated a balanced approach to capital allocation, with a focus on debt reduction and potential share repurchases [72][100] Question: Expectations for new business signings and market targeting - The company expects a better ACV sales year in 2025, with strong pipelines across all segments [74][76] Question: Government segment project delays - Management clarified that anticipated declines in the government segment are due to previously identified factors, not administrative changes [82][84] Question: Ongoing portfolio rationalization - The company is actively looking at divestitures to streamline operations and improve focus [93][95] Question: Pricing environment and growth assumptions - Management noted a focus on maintaining pricing while enhancing service quality and relationships with clients [103][107]

Company Performance - Conduent reported a quarterly loss of $0.15 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.09, and compared to earnings of $0.03 per share a year ago, indicating an earnings surprise of -66.67% [1] - The company posted revenues of $800 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 1.17%, and down from $953 million in the same quarter last year [2] - Over the last four quarters, Conduent has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Future Outlook - The immediate price movement of Conduent's stock will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the coming quarter is -$0.08 on $800 million in revenues, and -$0.02 on $3.28 billion in revenues for the current fiscal year [7] - The estimate revisions trend for Conduent is mixed, resulting in a Zacks Rank 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Industry Context - The Outsourcing industry, to which Conduent belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, suggesting that the industry's outlook can materially impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Q4 2024 revenue was $800 million, a decrease of 16.1% year-over-year, while full year revenue totaled $3,356 million, down 9.8% from the previous year[4] - Adjusted EBITDA margin for Q4 2024 was 4.0%, down 400 basis points from 8.0% in Q4 2023, with full year adjusted EBITDA margin at 3.9%, a decrease of 350 basis points from 7.4%[4] - The company reported a pre-tax income of $504 million for FY 2024, a significant increase from a loss of $332 million in FY 2023, primarily driven by gains from divestitures[7] - Revenue for Q4 2024 was $800 million, a decrease of 16.1% from $953 million in Q4 2023[21] - Net income for Q4 2024 was a loss of $12 million compared to a profit of $6 million in Q4 2023, resulting in a net income per share loss of $0.09[21] - Total operating costs and expenses for Q4 2024 were $882 million, down 7.8% from $957 million in Q4 2023[21] - The company reported a goodwill impairment of $28 million in Q4 2024, compared to $287 million in the full year 2023[21] - Adjusted Revenue for Q4 2024 was $800 million, down from $953 million in Q4 2023, representing a decrease of 16.1%[48] - Adjusted Net Income for Q4 2024 was a loss of $21 million, compared to a loss of $17 million in Q4 2023[48] - Adjusted EBITDA for Q4 2024 was $32 million, down from $68 million in Q4 2023, indicating a decline of 52.9%[49] - Adjusted Operating Income for Q4 2024 was a loss of $15 million, compared to an income of $13 million in Q4 2023[49] Cash Flow and Liquidity - Full year 2024 cash flow from operating activities was $41 million, a decline of 66.4% compared to $122 million in FY 2023[4] - The company experienced a net cash outflow of $27 million in Q4 2024, contrasting with an inflow of $64 million in Q4 2023[26] - Cash and cash equivalents decreased to $366 million as of December 31, 2024, from $498 million a year earlier[24] - Free Cash Flow for Q4 2024 was $47 million, compared to $93 million in Q4 2023, while the full year showed a negative free cash flow of $(106) million versus $(4) million in 2023[51] - Adjusted Free Cash Flow for Q4 2024 was $62 million, unchanged from Q4 2023, while the full year adjusted free cash flow was $(59) million compared to $(5) million in 2023[51] - Operating Cash Flow for Q4 2024 was $41 million, down from $122 million in Q4 2023, with a full year operating cash flow of $(50) million compared to $89 million in 2023[51] Divestitures and Business Development - New business signings for Q4 2024 amounted to $137 million, contributing to a total annual contract value (ACV) of $485 million for FY 2024[3] - The company completed three divestitures in 2024, generating total proceeds of $879 million, which included $425 million from the BenefitWallet portfolio and $224 million from the Casualty Claims Solutions Business[5] - Conduent completed a $75 million share repurchase program, buying back 52 million shares, including approximately 38 million shares from Carl Icahn and affiliates[8] Future Outlook - The company anticipates FY 2025 adjusted revenue to be between $3,100 million and $3,250 million, with an expected adjusted EBITDA margin of 4.5% to 5.5%[10] - The company provided a non-GAAP outlook for Full Year 2025, indicating expected Adjusted EBITDA and Adjusted EBITDA Margin, but could not predict foreign currency impacts accurately[47] Tax and Equity - Adjusted Effective Tax Rate adjustments included a tax benefit of $63 million for Q4 2024, compared to a tax benefit of $11 million in Q4 2023[48] - The effective tax rate for Q4 2024 was 85.4%, a decrease from 272.1% in Q4 2023, with a full year effective tax rate of 15.5% compared to 10.7% in 2023[50] - The company reported a total equity increase to $843 million as of December 31, 2024, from $633 million in 2023[24] Shareholder Information - The weighted average common shares outstanding for Q4 2024 were 160,374 thousand, down from 213,625 thousand in Q4 2023, while the full year average was 182,513 thousand compared to 216,779 thousand in 2023[50]