Core Insights - Conduent Inc's shares fell significantly following the release of its third-quarter 2025 earnings, reflecting disappointing financial results [1][2]. Financial Performance - The company reported revenue of $767 million, a decrease of 5% year-over-year, and below the analyst estimate of $794.33 million. Adjusted revenue also stood at $767 million, down 1.8% [2]. - GAAP diluted EPS was a loss of 30 cents, compared to earnings of 72 cents a year earlier. Adjusted EPS reported a loss of nine cents, missing the consensus estimate of a seven cents loss but showing improvement from a 14 cents loss a year earlier [2]. - Adjusted EBITDA increased to $40 million, with a margin expanding to 5.2% from 4.1% in the prior year, indicating operational improvement despite challenging revenue trends [3]. Cash Flow and Debt - Operating cash flow for the quarter was negative $39 million, and adjusted free cash flow was negative $54 million. At the end of the quarter, the company had $264 million in cash and $198 million of unused capacity in its renewed credit facility. Total debt reached $713 million [4]. - The company repurchased approximately 4.7 million shares during the quarter, demonstrating a commitment to returning value to shareholders despite ongoing challenges [4]. Business Developments - New business signings in Annual Contract Value (ACV) reached $111 million, and the Net ARR Activity Metric (TTM) was $25 million, reflecting positive momentum in pipeline and recurring revenue growth efforts [3]. - Highlights included refinancing of its credit facility, payoff of Term Loan A, a new Pay-by-Plate tolling contract, expansion of operations in the Philippines, and integration of GenAI-powered analytics into its finance solutions [6]. Outlook - For the full year 2025, Conduent lowered its adjusted revenue guidance to $3.05 billion–$3.10 billion, down from a prior range of $3.10 billion–$3.20 billion, and below the consensus estimate of $3.129 billion. The adjusted EBITDA margin outlook remains at 5%–5.5% [7]. - CEO Cliff Skelton expressed confidence in the company's strategic trajectory, noting that 87% of the $1 billion capital allocation target has been achieved, and emphasized the firm's ample liquidity through cash reserves and a renewed credit facility [8].

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $767 million, slightly up sequentially and in line with guidance, but down 1.8% year-over-year from $781 million in Q3 2024 [5][11] - Adjusted EBITDA for the quarter was $40 million, up from $32 million in Q3 2024, with an adjusted EBITDA margin of 5.2%, up 110 basis points year-over-year [6][12] - The net leverage ratio increased to 3.2 times due to cash flow items, with total cash on the balance sheet at approximately $264 million [15][16] Business Line Data and Key Metrics Changes - Commercial segment adjusted revenue was $367 million, down 4.7% year-over-year, primarily due to volume declines from the largest client, although the top 25 commercial accounts grew year-over-year [12][13] - Government segment adjusted revenue was down 6.7% at $238 million, attributed to implementation impacts and a client canceling an implementation [13] - Transportation segment adjusted revenue increased by 14.9% year-over-year to $162 million, driven by strong equipment sales in the international transit business [14] Market Data and Key Metrics Changes - New business Annual Contract Value (ACV) signed in Q3 was $111 million, consistent with the prior year, while Year-to-date new business ACV is up 5% compared to the same period in 2024 [10] - The qualified ACV pipeline remains strong at $3.4 billion, up 9% year-over-year, driven by opportunities in the federal space [11] Company Strategy and Development Direction - The company is focused on portfolio rationalization and enhancing its technology capabilities, particularly in AI initiatives [7][19] - A new board member with significant industry experience was added to strengthen the board [8] - The company is revising its commercial go-to-market strategy to improve client penetration and sales execution [21][47] Management Comments on Operating Environment and Future Outlook - Management noted the impact of the government shutdown on deal timing but expressed confidence in achieving adjusted EBITDA margin targets between 5% and 5.5% for the year [18][20] - The company anticipates that once the government shutdown concerns are resolved, cash flow metrics will improve [7][16] - Management remains optimistic about future growth, citing pent-up demand and ongoing sales pipeline expansion [23][24] Other Important Information - The company completed refinancing of its revolving credit facilities, simplifying its balance sheet [15][22] - Adjusted free cash flow for the quarter was negative $54 million, impacted by timing items related to contract amendments and post-implementation phases [16] Q&A Session Summary Question: How much of the pipeline actually closed this quarter? - Management indicated that the government shutdown affected the timing of deal closures, but they expect a gradual improvement as approvals resume [29] Question: How is productivity or quality gains from GenAI being measured? - Management highlighted the use of GenAI in fraud reduction and customer experience improvements, with ongoing evaluations of how to share benefits with clients [30][31] Question: Are there any stranded costs left to tackle? - Management confirmed that they are through the initial phase of stranded costs and are continuously optimizing costs across the organization [35] Question: Are there changes to contract clauses to reduce churn risk? - Management stated that the revenue stream remains unaffected by the government shutdown, and they do not see a need to change the contract model at this time [36] Question: What does the client mix look like for AI endeavors? - Management noted that healthcare is a significant focus area for AI initiatives, with opportunities in both commercial and government sectors [43][44] Question: What are the growth opportunities on the commercial side? - Management emphasized the need for better client penetration and the deployment of new software licensing opportunities to drive growth [46][47]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $767 million, slightly up sequentially and in line with guidance, but down 1.8% year-over-year from $781 million in Q3 2024 [11][12] - Adjusted EBITDA for the quarter was $40 million, up from $32 million in Q3 2024, with an adjusted EBITDA margin of 5.2%, up 110 basis points year-over-year [12][14] - The net leverage ratio increased to 3.2x due to cash flow items, with adjusted free cash flow for the quarter at -$54 million [15][17] Business Line Data and Key Metrics Changes - The commercial segment adjusted revenue was $367 million, down 4.7% year-over-year, primarily due to volume declines from the largest client [12][13] - Government segment adjusted revenue was down 6.7% at $238 million, attributed to implementation impacts and a client canceling an implementation [13] - Transportation segment adjusted revenue increased by 14.9% year-over-year to $162 million, driven by strong equipment sales [14] Market Data and Key Metrics Changes - New business Annual Contract Value (ACV) signed in the quarter was $111 million, consistent with the prior year, while year-to-date new business ACV was up 5% [10] - The qualified ACV pipeline remains strong at $3.4 billion, up 9% year-over-year, driven by government segment opportunities [11] Company Strategy and Development Direction - The company is focused on portfolio rationalization and enhancing its technology capabilities, particularly in AI initiatives [8][19] - A new board member with significant industry experience has been added to strengthen the board [8] - The company is revising its commercial go-to-market strategy to improve client penetration and sales execution [21] Management's Comments on Operating Environment and Future Outlook - Management noted the impact of the federal government shutdown on deal timing but expressed confidence in achieving adjusted EBITDA margin targets [18][20] - The company anticipates that once the shutdown concerns are resolved, cash flow metrics will improve [7][18] - Management remains optimistic about future growth, citing pent-up demand and ongoing sales pipeline expansion [21][23] Other Important Information - The company has refinanced its revolving credit facility, simplifying its balance sheet [7][15] - AI initiatives are being deployed to enhance operational efficiency and reduce fraud, particularly in government programs [22] Q&A Session Summary Question: How much of the pipeline actually closed this quarter? - Management indicated that the government shutdown has delayed some deals, but they expect a gradual release of opportunities as the situation normalizes [29] Question: How is productivity or quality gains from GenAI being measured? - The primary pilot in the government space focuses on fraud reduction, with expectations of spreading these capabilities across Medicaid and SNAP environments [30][31] Question: Are there any specific costs left to tackle from stranded costs? - Management stated that they are through the initial phase of stranded costs and are continuously optimizing costs across the organization [35] Question: Are there changes to contract clauses to reduce churn risk? - Management confirmed that the revenue stream remains unaffected by the government shutdown, and no changes to the contract model are currently planned [36] Question: What does the client mix look like for AI endeavors? - The commercial space has a significant focus on healthcare, while the government space targets Medicaid processing for fraud reduction [44] Question: What are the growth opportunities on the commercial side? - Management is focused on increasing product penetration within existing clients and enhancing the sales pipeline to support growth [46][47]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $767 million, slightly up sequentially but down 1.8% year-over-year from $781 million in Q3 2024 [11][12] - Adjusted EBITDA for the quarter was $40 million, up from $32 million in Q3 2024, with an adjusted EBITDA margin of 5.2%, up 110 basis points year-over-year [12][14] - The net leverage ratio increased to 3.2 times due to cash flow items, with total cash on the balance sheet at approximately $264 million [15][16] Business Line Data and Key Metrics Changes - The commercial segment adjusted revenue was $367 million, down 4.7% year-over-year, primarily due to volume declines from the largest client [12][13] - Government segment adjusted revenue decreased by 6.7% to $238 million, attributed to implementation impacts and a client canceling an implementation [13] - Transportation segment adjusted revenue increased by 14.9% year-over-year to $162 million, driven by strong equipment sales in the international transit business [14] Market Data and Key Metrics Changes - New business Annual Contract Value (ACV) was $111 million, consistent with the prior year, while Year-to-date new business ACV was up 5% compared to the same period in 2024 [10] - The qualified ACV pipeline remains strong at $3.4 billion, up 9% year-over-year, driven by opportunities in the federal space [11] Company Strategy and Development Direction - The company is focused on portfolio rationalization and enhancing its technology capabilities, particularly in AI initiatives [8][22] - A new board member with significant industry experience was added to strengthen the company's strategic direction [8] - The company is revising its commercial go-to-market strategy to improve client penetration and sales execution [21][40] Management's Comments on Operating Environment and Future Outlook - Management noted that the government shutdown has created uncertainty but has not significantly impacted revenue streams [20][33] - The company expects to achieve an adjusted EBITDA margin between 5% and 5.5% for the year, with adjusted revenue guidance between $3.05 billion and $3.1 billion [18] - Management expressed optimism about future growth, citing pent-up demand and ongoing sales pipeline expansion [20][23] Other Important Information - The company completed refinancing of its revolving credit facilities, simplifying its balance sheet [15][22] - Adjusted free cash flow for the quarter was negative $54 million, impacted by timing issues related to contract approvals [16] Q&A Session Summary Question: How much of the pipeline actually closed this quarter? - Management indicated that the government shutdown affected the timing of deal closures, but they expect some acceleration once the situation eases [28] Question: How is productivity or quality gains from GenAI being measured? - The primary pilot in the government space focuses on fraud reduction, with expectations of revenue and expense opportunities from AI initiatives [29][30] Question: Are there specific costs left to tackle from stranded cost areas? - Management stated that they are through the initial phase of stranded costs and are continuously optimizing costs [32] Question: Are there changes to contract clauses to reduce churn risk? - Management confirmed that the revenue stream remains unaffected by the government shutdown, and no changes to the contract model are being made [33] Question: What does the client mix look like for AI endeavors? - The healthcare sector represents a significant portion of opportunities in both commercial and government spaces, with a focus on fraud reduction and efficiency [38] Question: What is the timeframe for adding sales talent? - Management indicated that new sales talent needs to be in place by Q4 2025 to impact performance in 2026 [43]

Financial Performance - Adjusted revenue for Q3 2025 was $767 million, a decrease of 1.8% year-over-year, or 2.2% in constant currency[5, 23] - Adjusted EBITDA for Q3 2025 was $40 million, with an adjusted EBITDA margin of 5.2%, up year-over-year and sequentially[5, 25] - The company expects full year 2025 adjusted revenue to be between $3.05 billion and $3.1 billion, and adjusted EBITDA margin to be between 50% and 5.5%[42] Sales Metrics - New business signings ACV (Annual Contract Value) for Q3 2025 was $111 million, consistent year-over-year[5, 8] - Net ARR (Annual Recurring Revenue) activity impact (TTM - Trailing Twelve Months) was $25 million[5, 11] - New Business ARR Avg Contract Length was 30 years[20] Segment Performance - Commercial segment adjusted revenue was $367 million, a decrease of 4.7% year-over-year[31] - Government segment adjusted revenue was $238 million, a decrease of 6.7% year-over-year[31] - Transportation segment adjusted revenue was $162 million, an increase of 14.9% year-over-year[31] Cash Flow and Balance Sheet - Adjusted Free Cash Flow for Q3 2025 was negative $54 million[37, 41] - The company had $264 million in cash at the end of Q3 2025[36, 41] - Net adjusted leverage ratio was 32x[36, 41] Portfolio Rationalization - The company has deployed 87% of its $1 billion capital target for portfolio rationalization[46]

Financial Performance - For Q3 2025, Conduent reported a net loss of $46 million, compared to a net income of $123 million in Q3 2024, representing a significant decline[14] - Comprehensive loss for Q3 2025 was $50 million, down from a comprehensive income of $137 million in the same quarter last year[14] - Conduent reported a net loss of $46 million for the three months ended September 30, 2025, compared to a net income of $123 million for the same period in 2024, representing a decline of 137%[22] - Total comprehensive loss for the three months ended September 30, 2025, was $50 million, compared to a total comprehensive income of $137 million for the same period in 2024[22] - The company reported an income (loss) before income taxes of $(38) million for Q3 2025, compared to $159 million in Q3 2024[50] - Basic net earnings per share for Q3 2025 were $(0.30), down from $0.75 in Q3 2024, indicating a negative trend in profitability[106] Assets and Liabilities - Total assets decreased to $2.5 billion as of September 30, 2025, down from $2.6 billion at the end of 2024[17] - Cash and cash equivalents fell to $248 million, a decrease of $118 million from $366 million at the end of 2024[17] - Long-term debt increased to $697 million, up from $615 million at the end of 2024, indicating rising financial leverage[17] - The balance of retained earnings (deficit) increased to $(2,577) million as of September 30, 2025, from $(2,418) million as of September 30, 2024, indicating a deterioration in retained earnings[22] - The total other current assets decreased slightly to $258 million as of September 30, 2025, from $261 million at the end of 2024[108] - Total other current liabilities remained stable at $289 million as of September 30, 2025, compared to $290 million at the end of 2024[108] Revenue and Segments - Total consolidated revenue for Q3 2025 was $767 million, a decrease of 5% from $807 million in Q3 2024[38] - Commercial segment revenue decreased to $367 million in Q3 2025 from $385 million in Q3 2024, representing a decline of 4.7%[38] - Government segment revenue decreased to $238 million in Q3 2025 from $255 million in Q3 2024, a decline of 6.7%[38] - Transportation segment revenue increased to $162 million in Q3 2025 from $141 million in Q3 2024, marking a growth of 14.9%[38] - For the nine months ended September 30, 2025, total revenue was $2.272 billion, down from $2.556 billion in the same period of 2024, a decrease of 11.1%[38] Cash Flow and Operating Activities - Net cash used in operating activities for the nine months ended September 30, 2025, was $112 million, compared to a net cash used of $91 million in the same period of 2024[19] - Proceeds from divestitures amounted to $53 million in the nine months ended September 30, 2025, significantly lower than $823 million in the same period of 2024[19] Equity and Stock - The company had treasury stock purchases amounting to $13 million in Q3 2025, compared to $14 million in Q3 2024[22] - Conduent's additional paid-in capital increased to $3,964 million as of September 30, 2025, up from $3,952 million as of September 30, 2024[22] - The company had a total equity of $717 million as of September 30, 2025, down from $881 million as of September 30, 2024[22] - The Company issued 120,000 shares of Series A convertible perpetual preferred stock with a liquidation preference of $120 million, earning quarterly cash dividends at a rate of 8% per year[105] - The Company has not declared any common stock dividends during the periods presented, indicating a focus on retaining earnings[106] Restructuring and Costs - The company incurred restructuring costs totaling $24 million for the nine months ended September 30, 2025, compared to $21 million for the same period in 2024[64] - The company has ongoing restructuring programs aimed at reducing costs and improving productivity, with potential future provisions for new initiatives[62] Debt and Financial Obligations - As of September 30, 2025, the Company had $134 million in outstanding borrowings under its Revolving Credit Facility and utilized $25 million for letters of credit[77] - The Company had a remaining unused capacity of $198 million under the Revolving Credit Facility and $11 million under the Performance Letter of Credit Facility as of September 30, 2025[77] - The Company was in compliance with all debt covenants, including a consolidated first lien net leverage ratio not exceeding 4.50 to 1.00 and a fixed charge coverage ratio of at least 2.50 to 1.00[79] - The Company recognized a loss on extinguishment of debt of $1 million for the three months ended September 30, 2025, related to the voluntary repayment of Term Loan A[78] Market Conditions and Challenges - The company has faced challenges related to geopolitical events and macroeconomic conditions, impacting its operational performance and market competitiveness[7] Other Financial Information - The Company recognized an expense related to defined contribution plans of $4 million for the nine months ended September 30, 2025[91] - The balance of Accumulated Other Comprehensive Loss (AOCL) was $(441) million as of September 30, 2025, reflecting a change from $(472) million at December 31, 2024[93] - The Company believes it has recorded adequate provisions for various claims and litigation as of September 30, 2025, but the ultimate outcome remains unpredictable[94] - The Company had outstanding forward exchange contracts with gross notional values of $239 million as of September 30, 2025, with approximately 81% maturing within three months[81] - The fair value of the Company's long-term debt was estimated at $697 million as of September 30, 2025, compared to a fair value of $676 million as of December 31, 2024[88] - The Company had $546 million of outstanding surety bonds and $131 million of outstanding letters of credit as of September 30, 2025, to secure performance obligations[104]

Financial Performance - Q3 2025 revenue was $767 million, a decrease of 5.0% year-over-year from $807 million in Q3 2024[5] - Adjusted EBITDA for Q3 2025 was $40 million, representing a 25.0% increase compared to $32 million in Q3 2024[7] - Adjusted EBITDA margin improved to 5.2%, up 110 basis points from 4.1% in the prior year[5] - Revenue for Q3 2025 was $767 million, a decrease of 4.95% from $807 million in Q3 2024[20] - Adjusted Revenue for Q3 2025 was $767 million, down from $807 million in Q3 2024, reflecting a decrease of approximately 4.95%[47] - Adjusted Net Income for Q3 2025 was $(11) million, compared to $(24) million in Q3 2024, showing an improvement of 54.17%[47] - Adjusted Operating Income for Q3 2025 was $(8) million, compared to $(11) million in Q3 2024, reflecting an improvement of 27.27%[48] - Comprehensive loss for Q3 2025 was $50 million, compared to a comprehensive income of $137 million in Q3 2024[21] - Net loss for Q3 2025 was $46 million, compared to a net income of $123 million in Q3 2024, representing a significant decline[20] Cash Flow and Liquidity - Cash flow from operating activities was $(39) million, a decline of 200.0% compared to $(13) million in Q3 2024[5] - The company maintained a cash balance of $264 million and $198 million in unused capacity under its credit facility at the end of the quarter[6] - Cash and cash equivalents decreased to $248 million as of September 30, 2025, down from $366 million at the end of 2024[23] - Free Cash Flow for Q3 2025 was $(60) million, compared to $(29) million in Q3 2024, and for the nine months ended September 30, 2025, it was $(171) million versus $(153) million in 2024[50] - Operating Cash Flow for Q3 2025 was $(39) million, a decrease from $(13) million in Q3 2024, and for the nine months ended September 30, 2025, it was $(112) million compared to $(91) million in 2024[50] Business Operations and Strategy - New business signings for the quarter totaled $111 million in annual contract value (ACV)[4] - The company achieved 87% of its $1 billion capital allocation target to date, focusing on cash generation and expanding pipeline opportunities[3] - The company announced the integration of generative AI into government solutions to enhance service delivery and combat fraud[8] - Conduent expanded its operations in the Philippines with a new facility to support customer experience management solutions[10] - New Business Annual Contract Value (ACV) metrics indicate potential growth opportunities, although specific figures were not disclosed[26] Costs and Expenses - Total operating costs and expenses increased to $805 million in Q3 2025 from $648 million in Q3 2024, marking a rise of 24.2%[20] - The company reported a significant loss on divestitures and transaction costs, netting $1 million in Q3 2025 compared to a gain of $188 million in Q3 2024[20] - The company incurred transaction costs of $2 million in Q3 2025, down from $7 million in Q3 2024[50] - Direct response costs related to a cyber event amounted to $25 million in Q3 2025, which were not present in Q3 2024[48] - Direct response costs related to cyber event payments were $7 million in Q3 2025, with an additional $9 million incurred in the nine months ended September 30, 2025[50] Assets and Liabilities - Total assets decreased to $2.5 billion as of September 30, 2025, compared to $2.6 billion at the end of 2024[23] - Long-term debt increased to $697 million as of September 30, 2025, up from $615 million at the end of 2024[23] Taxation - Adjusted Effective Tax Rate for Q3 2025 was 44.7%, significantly higher than 12.5% in Q3 2024, while for the nine months ended September 30, 2025, it was 29.0% compared to 19.7% in 2024[49] - The effective tax rate for Q3 2025 was (19.5)%, compared to 22.2% in Q3 2024, indicating a significant shift in tax liabilities[49] - Adjusted Effective Tax Rate adjustments for Q3 2025 included $17 million, compared to $39 million in Q3 2024[47] Other Financial Metrics - Adjusted Diluted EPS for Q3 2025 was $(0.09), compared to $(0.14) in Q3 2024, while for the nine months ended September 30, 2025, it was $(0.34) compared to $(0.36) in 2024[49] - The company reported a loss before income taxes margin of (5.0)% for Q3 2025, compared to a profit margin of 19.7% in Q3 2024[49] - The company reported a loss on extinguishment of debt of $1 million in Q3 2025, consistent with the previous year[47] - The company experienced a goodwill impairment charge, which is part of the adjustments made to financial measures[37] - Total non-GAAP adjustments for Q3 2025 included a positive impact of 0.10 on Diluted EPS, while for the nine months ended September 30, 2025, it was 0.41[49]

Core Insights - Conduent Incorporated reported its Q3 2025 financial results, highlighting a 5.0% decline in revenue year-over-year, with adjusted revenue down 1.8% [2][3][4] - The company achieved a significant increase in adjusted EBITDA, which rose by 25.0% year-over-year, reflecting improved operational efficiency [3][8] - New business signings remained consistent year-over-year, particularly in the Public Sector, despite challenges such as government funding cycles and a federal government shutdown [3][4] Financial Performance - Revenue for Q3 2025 was $767 million, compared to $807 million in Q3 2024 [3][4] - Adjusted EBITDA for the quarter was $40 million, with an adjusted EBITDA margin of 5.2%, up from 4.1% in the prior year [3][8] - GAAP net loss for the quarter was $(46) million, a significant decrease from a net income of $123 million in the same period last year [3][4] Operational Highlights - The company maintained a cash balance of $264 million and had $198 million in unused capacity under its renewed credit facility [5] - Conduent repurchased approximately 4.7 million shares of common stock during the quarter [5] - The company has achieved 87% of its $1 billion capital allocation target through portfolio rationalization efforts [3][4] Future Outlook - For FY 2025, Conduent projects adjusted revenue between $3,050 million and $3,100 million, with an adjusted EBITDA margin target of 5.0% to 5.5% [9] - The company continues to focus on cash generation and expanding its pipeline opportunities, particularly within its existing client base [3][4]

Core Insights - Conduent Incorporated has launched a new GenAI-powered reportable event detection solution aimed at improving event identification in the healthcare sector [1] - The solution is built on Microsoft Azure OpenAI, enhancing the ability of healthcare companies to maintain high standards of patient safety [1] Company Overview - Conduent Incorporated is a global technology-driven business solutions and services company [1] - The new solution represents a significant advancement in the company's offerings, particularly in the healthcare industry [1] Industry Impact - The introduction of this solution is critical for healthcare companies as it addresses the need for improved patient safety measures [1] - The use of advanced technology like GenAI indicates a trend towards more innovative solutions in the healthcare sector [1]

Core Points - Conduent Business Services, LLC experienced a data breach that was discovered on January 13, 2025, affecting its network operations [3] - An unauthorized third party accessed Conduent's network between October 21, 2024, and January 13, 2025, potentially obtaining sensitive personal information [3] - The law firm Edelson Lechtzin LLP is investigating claims related to the data breach and is considering a class action lawsuit for affected individuals [4] Company Overview - Conduent provides digital process solutions to enhance operations for businesses and government agencies [2] Incident Details - The cybersecurity incident led to disruptions in Conduent's network, prompting immediate security measures and an investigation [3] - The compromised files may have included personal information such as names, Social Security numbers, medical information, and health insurance details [3] Legal Actions - Edelson Lechtzin LLP is actively investigating the situation and seeking legal remedies for individuals whose data may have been compromised [4]