Conduent Incorporated (NASDAQ:CNDT) Q1 2023 Results Conference Call May 3, 2023 9:00 AM ET Company Participants Giles Goodburn - Vice President of Investor Relations Cliff Skelton - President and CEO Steve Wood - CFO Operator Greetings, and welcome to the Conduent First Quarter 2023 Earnings Announcement. At this time, all participants are in a listen only mode [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Giles Goodbur ...

Part I — Financial Information This section provides a comprehensive overview of the company's financial performance, condition, and cash flows, along with management's analysis, market risk disclosures, and internal controls [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Conduent reported a 5% revenue decline to $922 million and a net loss of $6 million in Q1 2023, with negative operating cash flow and a stable balance sheet [Condensed Consolidated Statements of Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20%28Loss%29) This statement details the company's revenue, operating costs, and net income/loss for the specified periods Condensed Consolidated Statements of Income (Loss) | Financial Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Revenue** | **$922 million** | **$967 million** | | Total Operating Costs and Expenses | $930 million | $757 million | | Income (Loss) Before Income Taxes | $(8) million | $210 million | | **Net Income (Loss)** | **$(6) million** | **$136 million** | | **Diluted EPS** | **$(0.04)** | **$0.61** | - The significant decrease in Net Income year-over-year is primarily due to a **$163 million gain on divestitures** recorded in Q1 2022, which was absent in Q1 2023[10](index=10&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets | Balance Sheet Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $526 million | $582 million | | Total current assets | $1,587 million | $1,625 million | | **Total Assets** | **$3,571 million** | **$3,571 million** | | Total current liabilities | $918 million | $923 million | | Long-term debt | $1,277 million | $1,277 million | | **Total Liabilities** | **$2,512 million** | **$2,512 million** | | **Total Equity** | **$1,059 million** | **$1,059 million** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | **$(12) million** | **$11 million** | | Net cash provided by (used in) investing activities | **$(22) million** | **$273 million** | | Net cash provided by (used in) financing activities | **$(19) million** | **$(110) million** | | Increase (decrease) in cash | $(51) million | $173 million | - The significant year-over-year decrease in investing cash flow was due to **$323 million in proceeds from divestitures** received in Q1 2022. The decrease in operating cash flow was primarily due to the absence of a **$38 million insurance recovery** received in the prior year period[49](index=49&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail a $7 million revenue adjustment, segment performance declines, a $29 million restructuring charge, and a $26 million litigation settlement benefit - An out-of-period adjustment was recorded in Q1 2023 to correct a revenue recognition error from a Government contract originating in 2020. This resulted in a **$7 million reduction to revenue and income before taxes**[1](index=1&type=chunk)[32](index=32&type=chunk) - The company completed the sale of its Midas business in Q1 2022 for **$322 million**, generating a pre-tax gain of **$166 million**[69](index=69&type=chunk) - Restructuring costs increased to **$29 million** in Q1 2023 from **$9 million** in Q1 2022, driven by severance, data center consolidation, and other termination costs[73](index=73&type=chunk)[97](index=97&type=chunk) - A settlement with Cognizant was reached on March 30, 2023, resulting in a **$17 million benefit to Cost of Services** and a **$26 million benefit in Litigation settlements (recoveries), net** during the first quarter[143](index=143&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 5% revenue decline to $922 million in Q1 2023, segment performance, decreased new business signings, and sufficient liquidity despite negative operating cash flow [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2023 revenue decreased 5% to $922 million due to various factors, while cost of services declined and SG&A and restructuring costs increased Results of Operations | Metric | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | **$922M** | **$967M** | **(5)%** | | Cost of services | $720M | $755M | (5)% | | SG&A | $111M | $102M | 9% | | Restructuring costs | $29M | $9M | 222% | | **Net Income (Loss)** | **$(6)M** | **$136M** | **n/m** | - The increase in SG&A was driven by the absence of a **$14 million recovery of defense costs** related to the State of Texas matter that was recorded in Q1 2022[2](index=2&type=chunk) - The effective tax rate was **20.8% for Q1 2023**, compared to **35.2% for Q1 2022**. The normalized effective tax rate increased to **35.0%** from **29.6%** due to the geographic mix of income[176](index=176&type=chunk)[196](index=196&type=chunk) [Operations Review of Segment Revenue and Profit](index=25&type=section&id=Operations%20Review%20of%20Segment%20Revenue%20and%20Profit) All three segments experienced revenue declines in Q1 2023, with Commercial profit improving, Government stable, and Transportation profit significantly decreasing Operations Review of Segment Revenue and Profit | Segment | Revenue Q1 2023 | Revenue Q1 2022 | Adjusted EBITDA Q1 2023 | Adjusted EBITDA Q1 2022 | | :--- | :--- | :--- | :--- | :--- | | Commercial | $508M | $512M | $65M | $54M | | Government | $264M | $286M | $83M | $83M | | Transportation | $150M | $162M | $3M | $17M | - Commercial segment profit and EBITDA margin increased, mainly driven by higher interest rates positively impacting the Benefit Wallet business[201](index=201&type=chunk) - Government revenue decline was primarily driven by non-repeating federal stimulus revenue, lost business, and an out-of-period adjustment[244](index=244&type=chunk) - Transportation revenue and profit decreased due to extended completion timelines for client requirements in the Transit solutions service offering[178](index=178&type=chunk)[203](index=203&type=chunk) [Metrics](index=27&type=section&id=Metrics) New business ACV signings decreased 25% to $125 million in Q1 2023, while the total new business pipeline grew to $23.2 billion Signings Metric | Signings Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | New business ACV | $125M | $167M | (25)% | | New business TCV | $244M | $464M | (47)% | | Renewals TCV | $390M | $936M | (58)% | | **Total Signings** | **$634M** | **$1,400M** | **(55)%** | - The Net ARR Activity metric for the trailing twelve months ending March 31, 2023 was **$108 million**[226](index=226&type=chunk) - The total new business pipeline increased to **$23.2 billion** as of March 31, 2023, compared to **$22.0 billion** at the end of Q1 2022[225](index=225&type=chunk) [Capital Resources and Liquidity](index=28&type=section&id=Capital%20Resources%20and%20Liquidity) The company maintained $526 million in cash and $1.3 billion in debt as of March 31, 2023, with sufficient liquidity from cash and available credit - Cash and cash equivalents were **$526 million** at March 31, 2023[226](index=226&type=chunk)[257](index=257&type=chunk) - Total outstanding debt was **$1,277 million**, with **$38 million** due within one year[250](index=250&type=chunk) - The company has a **$550 million revolving credit facility**, with **$548 million available** to be drawn upon as of March 31, 2023[76](index=76&type=chunk)[226](index=226&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages foreign currency exchange rate risk using derivative instruments, with no material changes to its market risk disclosures this quarter - The company uses derivative instruments, primarily forward contracts, to hedge foreign currency exchange rate fluctuations[77](index=77&type=chunk)[260](index=260&type=chunk) - There were no material changes to the quantitative and qualitative disclosures regarding market risk from the company's 2022 Annual Report on Form 10-K[261](index=261&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[238](index=238&type=chunk) - No changes occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[265](index=265&type=chunk) Part II — Other Information This section covers legal proceedings, risk factors, equity security sales, and exhibits [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings, including ongoing litigation and settlements, are detailed by reference in Note 12 of the financial statements - Information regarding legal proceedings is detailed in Note 12 – Contingencies and Litigation in the Condensed Consolidated Financial Statements[237](index=237&type=chunk)[264](index=264&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes have been made to the risk factors as previously reported in the Annual Report on Form 10-K for the year ended December 31, 2022[263](index=263&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2023, the company did not issue any unregistered securities, and there were no issuer purchases of its equity securities - The company did not issue any securities in unregistered transactions during the quarter ended March 31, 2023[240](index=240&type=chunk)[267](index=267&type=chunk) - There were no issuer purchases of equity securities during the quarter ended March 31, 2023[271](index=271&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including corporate governance documents, award agreements, and CEO/CFO certifications - The report includes a list of filed exhibits, such as the Restated Certificate of Incorporation, Amended By-Laws, various award agreements, and required CEO/CFO certifications[241](index=241&type=chunk)

Part I [Business](index=6&type=section&id=Item%201.%20Business) Conduent is a global technology-led business process solutions company providing services to commercial, government, and transportation sectors, focusing on Growth, Efficiency, and Quality to drive shareholder value - Conduent delivers mission-critical services for businesses and governments, serving **80% of Fortune 100 companies** and over **600 government and transportation agencies**[19](index=19&type=chunk) - As of December 31, 2022, the company employed approximately **62,000 associates globally**, with **41% in North America** and the remainder in delivery centers across Asia Pacific, Latin America, the Caribbean, and Europe[24](index=24&type=chunk)[25](index=25&type=chunk) - The company's strategy is centered on three pillars: Growth (measured by revenue retention and new business), Efficiency (measured by associate retention and Adjusted EBITDA margin), and Quality (measured by SLA performance and client satisfaction)[26](index=26&type=chunk)[27](index=27&type=chunk) 2022 Revenue by Segment | Segment | Revenue (in millions) | Percentage of Total Revenue | | :--- | :--- | :--- | | Commercial | $1,992 | 52% | | Government | $1,150 | 30% | | Transportation | $709 | 18% | [Our Business and Strategic Focus](index=6&type=section&id=Our%20Business%20and%20Strategic%20Focus) Conduent provides technology-led business process solutions, managing 1.3 billion customer interactions in 2022, with a strategic focus on Growth, Efficiency, and Quality - In 2022, Conduent managed approximately **1.3 billion customer service interactions** and processed nearly **12 million daily tolling transactions**[21](index=21&type=chunk)[22](index=22&type=chunk) - The company's systems process **43% of all Supplemental Nutrition Assistance Program (SNAP) payments** in the U.S[23](index=23&type=chunk) - Strategic growth efforts in 2022 led to a **10% increase in add-on sales** compared to 2021, and the number of top 100 clients with multiple service lines grew from **73 to 90**[30](index=30&type=chunk) - Efficiency efforts have improved the Net Promoter Score (NPS) by **30 points** over the past three years[29](index=29&type=chunk) [Segments and Service Offerings](index=9&type=section&id=Segments%20and%20Service%20Offerings) The company operates through three segments: Commercial (CXM, BOS, Healthcare, HCS), Government (healthcare, digital payments), and Transportation (road usage, transit, public safety) - The Commercial segment is the largest, representing **52% of total 2022 revenues**, providing solutions like CXM, BOS, Healthcare, and HCS[40](index=40&type=chunk)[44](index=44&type=chunk) - The Government segment, **30% of 2022 revenues**, provides solutions for government healthcare programs in 46 states and disburses **$106 billion annually** for federally sponsored programs[41](index=41&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) - The Transportation segment, **18% of 2022 revenues**, manages **48% of transactions** for the top 10 U.S. tolling agencies and processed over **8.7 million citation payments** in 2022[42](index=42&type=chunk)[55](index=55&type=chunk)[58](index=58&type=chunk) [Competition and Intellectual Property](index=13&type=section&id=Competition%20and%20Intellectual%20Property) Conduent competes with large multinational providers and specialized firms based on technology, performance, price, and service, protecting its portfolio of 607 U.S. patents and 57 registered trademarks - Key competitors include large service providers (Accenture, Cognizant), traditional BPO companies (Genpact), HR providers (Alight), healthcare specialists (Gainwell, Optum), and transportation firms (TransCore, Verra Mobility)[66](index=66&type=chunk)[69](index=69&type=chunk) - As of December 31, 2022, the company holds approximately **607 U.S. patents** and has **31 pending applications**, also owning **57 registered trademarks** in the United States[69](index=69&type=chunk)[71](index=71&type=chunk) [People and Culture](index=14&type=section&id=People%20and%20Culture) As of year-end 2022, Conduent had approximately 62,000 associates globally, emphasizing diversity, equity, and inclusion, and investing in employee development - The global workforce of approximately **62,000** is distributed with **41% in North America** and the rest primarily in Asia Pacific, Latin America, the Caribbean, and Europe[72](index=72&type=chunk) - The company has received multiple diversity and inclusion awards, including being recognized as a Best Place to Work for Disability Inclusion and named to Forbes' America's Best 500 Employers for Diversity 2022[74](index=74&type=chunk)[78](index=78&type=chunk) - In 2022, employees completed about **2.7 million learning assets** on the company's digital platforms[75](index=75&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces operational, legal/compliance, and financial risks, including government contract dependence, cybersecurity threats, and significant indebtedness [Business, Economic, Market and Operational Risks](index=19&type=section&id=Business%2C%20Economic%2C%20Market%20and%20Operational%20Risks) Significant operational risks include government contract termination, competitive bidding, reliance on third-party providers, and disruptions from geopolitical events or the COVID-19 pandemic - A significant portion of revenue comes from government contracts, which are subject to appropriation, termination rights, and audits, posing risks of revenue loss and penalties[96](index=96&type=chunk) - The business is exposed to risks from geopolitical events, macroeconomic conditions, and natural disasters, particularly in regions with a significant workforce like the U.S., India, and the Philippines[99](index=99&type=chunk) - The COVID-19 pandemic continues to negatively impact the business through disruptions to service delivery, challenges with work-from-home models, and adverse effects on customer demand[114](index=114&type=chunk) [Legal, Compliance and Data Security Risks](index=24&type=section&id=Legal%2C%20Compliance%20and%20Data%20Security%20Risks) The company is subject to stringent data privacy laws (HIPAA, GDPR) and cybersecurity threats, with non-compliance or breaches leading to legal action and reputational damage - The company handles sensitive personal and health data, making it subject to stringent regulations like **HIPAA and GDPR**, where failure to comply can result in significant penalties[118](index=118&type=chunk) - **Cybersecurity threats** such as hacking, malware, and phishing are prevalent and could lead to service interruptions, data misappropriation, litigation, and significant financial damages[122](index=122&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk) - The company is subject to various legal proceedings concerning securities, contracting, intellectual property, and employment laws, which could result in substantial payments and reputational harm[130](index=130&type=chunk) [Financial Risks](index=27&type=section&id=Financial%20Risks) Financial stability is challenged by a $358 million goodwill impairment in 2022, substantial indebtedness with restrictive covenants, and pressures on pricing and cost management - A **goodwill impairment charge of $358 million** was recorded for the Commercial reporting unit as of December 31, 2022, triggered by lower-than-expected contract signings and a softening business pipeline[133](index=133&type=chunk) - The company has **significant indebtedness** with restrictive covenants that could limit its ability to obtain additional financing, dedicate cash flow to operations, and compete effectively[136](index=136&type=chunk)[139](index=139&type=chunk) - Profitability is dependent on the ability to secure adequate pricing for services and improve cost structures, which is challenged by competitive pressures and rising labor costs[145](index=145&type=chunk)[147](index=147&type=chunk) [Properties](index=32&type=section&id=Item%202.%20Properties) As of December 31, 2022, Conduent's property portfolio comprised approximately 5.6 million square feet across 193 leased and 4 owned facilities, actively managing its real estate footprint - The company's property portfolio totals approximately **5.6 million square feet** with an annual operating cost of about **$138 million**[155](index=155&type=chunk) - In 2022, **0.5 million square feet** of leased property became surplus due to efficiency initiatives, and the company successfully resolved this surplus space during the year[156](index=156&type=chunk) [Legal Proceedings](index=32&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 16 – Contingencies and Litigation to the Consolidated Financial Statements - Details on legal proceedings are available in Note 16 of the financial statements[157](index=157&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Conduent's common stock trades on Nasdaq under "CNDT", with no dividends paid in 2022, and future earnings intended for business operations and growth - The company's common stock trades on the **Nasdaq under the symbol "CNDT"**[160](index=160&type=chunk) - **No dividends were paid** on common stock in 2022, and the company intends to retain future earnings for business growth[162](index=162&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, revenue decreased by 7% to $3.9 billion, resulting in a net loss of $182 million due to a goodwill impairment, despite progress in new business ACV and operational service levels [Financial Information and Analysis of Results of Operations](index=37&type=section&id=Financial%20Information%20and%20Analysis%20of%20Results%20of%20Operations) For 2022, revenue decreased by 7% to $3,858 million, leading to a net loss of $182 million, primarily due to a $358 million goodwill impairment, offset by lower SG&A and a divestiture gain Consolidated Results of Operations (2022 vs. 2021) | Metric (in millions) | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $3,858 | $4,140 | (7)% | | Cost of services | $3,018 | $3,138 | (4)% | | SG&A | $440 | $544 | (19)% | | Goodwill impairment | $358 | $0 | n/m | | (Gain) on divestitures, net | ($158) | $3 | (5,367)% | | Net Income (Loss) | ($182) | ($28) | (550)% | - The **7% revenue decrease** was primarily due to lower federal stimulus revenue, lost business, the Midas business divestiture, and negative foreign exchange impacts[180](index=180&type=chunk) - A **goodwill impairment charge of $358 million** was recorded in 2022 related to the Commercial reporting unit[188](index=188&type=chunk) - The divestiture of the Midas business resulted in a **pre-tax gain of $166 million**[189](index=189&type=chunk) [Operations Review of Segments](index=40&type=section&id=Operations%20Review%20of%20Segments) In 2022, Commercial segment profit increased despite slight revenue decline, while Government and Transportation segments saw revenue and profit decreases due to stimulus reduction and exchange rates Segment Performance (2022 vs. 2021) | Segment (in millions) | 2022 Revenue | 2021 Revenue | 2022 Adjusted EBITDA | 2021 Adjusted EBITDA | | :--- | :--- | :--- | :--- | :--- | | Commercial | $1,992 | $2,017 | $226 | $193 | | Government | $1,150 | $1,307 | $331 | $437 | | Transportation | $709 | $746 | $84 | $106 | - **Commercial segment profit increased**, driven by the **BenefitWallet business** and operational efficiencies, despite a slight revenue decline[201](index=201&type=chunk)[203](index=203&type=chunk) - **Government segment revenue and profit decreased** primarily due to significantly lower federal stimulus revenue compared to the prior year[204](index=204&type=chunk)[205](index=205&type=chunk) [Metrics](index=42&type=section&id=Metrics) New business ACV increased by 1% to $732 million, and TCV rose by 11% to $1,887 million, while renewal TCV decreased by 13% due to timing, with Net ARR Activity at $114 million Signings (2022 vs. 2021) | Metric (in millions) | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | New business ACV | $732 | $726 | 1% | | New business TCV | $1,887 | $1,705 | 11% | | Renewals TCV | $2,477 | $2,835 | (13)% | | Total Signings | $4,364 | $4,540 | (4)% | - The total new business pipeline increased to **$22.6 billion** at the end of 2022, up from **$21.4 billion** at the end of 2021[215](index=215&type=chunk) - The **Net ARR Activity metric** for the trailing twelve months ending December 31, 2022 was **$114 million**[217](index=217&type=chunk) [Capital Resources and Liquidity](index=44&type=section&id=Capital%20Resources%20and%20Liquidity) As of December 31, 2022, Conduent had $582 million in cash, with operating cash flow at $144 million, and believes its liquidity is sufficient to meet obligations for the next twelve months Cash Flow Summary (2022 vs. 2021) | Cash Flow (in millions) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $144 | $243 | | Net cash from investing activities | $173 | ($142) | | Net cash from financing activities | ($131) | ($132) | - Total cash and cash equivalents increased to **$582 million** at year-end 2022 from **$415 million** at year-end 2021[218](index=218&type=chunk) - Material cash requirements include **$1,335 million in total debt**, **$271 million in lease payables**, and **$112 million in purchase commitments** as of year-end 2022[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) [Critical Accounting Estimates and Policies](index=46&type=section&id=Critical%20Accounting%20Estimates%20and%20Policies) Critical accounting estimates include revenue recognition, income taxes, loss contingencies, and goodwill valuation, with a $358 million impairment charge recorded for the Commercial unit in Q4 2022 - Key critical accounting estimates include revenue recognition, **goodwill valuation**, income taxes, and loss contingencies[236](index=236&type=chunk)[237](index=237&type=chunk) - The annual goodwill impairment test as of October 1, 2022, did not result in an impairment, however, a subsequent review in Q4 for the Commercial reporting unit was triggered by lower-than-expected contract signings and a softening business pipeline[251](index=251&type=chunk)[252](index=252&type=chunk) - The Q4 2022 goodwill impairment assessment for the Commercial reporting unit resulted in a pre-tax impairment charge of **$358 million**[252](index=252&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign currency and interest rate risks, managing them with derivatives, with $762 million of its $1,335 million debt carrying variable interest rates - The company manages foreign currency and interest rate risk through operating activities and derivative instruments[262](index=262&type=chunk) - A **10% appreciation or depreciation** of the U.S. Dollar against all currencies would impact the cumulative translation adjustment portion of equity by approximately **$75 million**[264](index=264&type=chunk) - As of year-end 2022, **$762 million of the company's total debt** carried variable interest rates, exposing it to interest rate fluctuations, out of **$1,335 million total debt**[265](index=265&type=chunk) [Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2022, including the independent auditor's report highlighting the goodwill impairment assessment as a critical audit matter - The independent auditor, PricewaterhouseCoopers LLP, issued an **unqualified opinion** on the financial statements and the effectiveness of internal control over financial reporting[269](index=269&type=chunk) - The auditor identified the **goodwill impairment assessment** for the Commercial reporting unit as a **critical audit matter** due to the significant judgments and assumptions made by management regarding revenue growth, discount rates, and long-term growth rates[278](index=278&type=chunk)[279](index=279&type=chunk) Key Financial Statement Data (as of Dec 31, 2022) | Metric (in millions) | 2022 | 2021 | | :--- | :--- | :--- | | **Income Statement** | | | | Revenue | $3,858 | $4,140 | | Net Loss | ($182) | ($28) | | **Balance Sheet** | | | | Total Assets | $3,571 | $4,036 | | Total Liabilities | $2,512 | $2,762 | | Total Equity | $917 | $1,132 | [Controls and Procedures](index=96&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures, as well as internal control over financial reporting, were effective as of December 31, 2022, with no material changes in Q4 - The principal executive officer and principal financial officer concluded that **disclosure controls and procedures were effective** as of December 31, 2022[485](index=485&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of December 31, 2022, a conclusion audited and confirmed by PricewaterhouseCoopers LLP[487](index=487&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees](index=97&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) This section incorporates by reference information from the 2023 Proxy Statement regarding directors, executive compensation, security ownership, related party transactions, and accountant fees - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and accountant fees is incorporated by reference from the forthcoming 2023 Proxy Statement[490](index=490&type=chunk)[494](index=494&type=chunk)[495](index=495&type=chunk)[496](index=496&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=98&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and all exhibits filed with the Form 10-K report, including CEO and CFO certifications - This part contains the index to financial statements, financial statement schedules, and a list of all exhibits filed with the Form 10-K[497](index=497&type=chunk)[498](index=498&type=chunk)

February 14, 2023 Cautionary Statements Forward-Looking Statements This document contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "plan," "intend," "will," "aim," "should," "could," "forecast," "target," "may," "continue to," "if," "growing," "projected," "potential," "likely," "see", "ahead", "further," "going forward," "on the horizon," and similar expressions, as they relate to us, are intend ...

Conduent Incorporated (NASDAQ:CNDT) Q4 2022 Earnings Conference Call February 14, 2023 5:00 PM ET Company Participants Giles Goodburn - Vice President, Investor Relations Cliff Skelton - President and Chief Executive Officer Steve Wood - Chief Financial Officer Operator Greetings, and welcome to the Conduent Fourth Quarter 2022 Earnings Announcement. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Giles Goodburn, Vice Presi ...

Financial Data and Key Metrics Changes - Adjusted revenue for Q3 2022 was $977 million, down 4.1% year-over-year from $1.02 billion in Q3 2021, or down 2.7% in constant currency [36] - Adjusted EBITDA was $105 million, down 11.8% year-over-year, with an adjusted EBITDA margin of 10.7%, down 100 basis points from the previous year [38] - New business Annual Contract Value (ACV) signings were strong at $191 million, marking one of the best Q3 performances [10] Business Line Data and Key Metrics Changes - Commercial segment adjusted revenues were $504 million, up 2.2% year-over-year, with adjusted EBITDA of $68 million, up 70% compared to Q3 2021 [39] - Government segment adjusted revenues were $291 million, down 15.9% year-over-year, with adjusted EBITDA of $88 million, down approximately 34% year-over-year [41][42] - Transportation segment revenues were $182 million, up 1.1% year-over-year, with adjusted EBITDA of $25 million, up 13.6% compared to Q3 2021 [43] Market Data and Key Metrics Changes - The net ARR activity metric was positive for the seventh consecutive quarter but down sequentially due to a renewal price adjustment and a contract termination in the government segment [30] - The combined impact of discrete items on the net ARR metric was $75 million, which was anticipated and factored into revenue expectations for the government segment [31] Company Strategy and Development Direction - The company is focusing on integrating sales and marketing teams to leverage existing client relationships and expand market share [16] - A strategic growth team has been established to penetrate new industries and enhance technology-led solutions [17] - The company is rolling out digital payments capabilities, particularly in the public sector, to improve client revenue generation [18] Management's Comments on Operating Environment and Future Outlook - Management expects economic headwinds to be slightly stronger than tailwinds in Q4 2022 and into 2023, with a challenging year ahead [23] - The company anticipates demonstrating a transition from substantial decline to flat or slightly up business in the next year [23] - Management emphasized the importance of executing implementations with precision to capitalize on large deals in the pipeline [22] Other Important Information - The company ended the quarter with $587 million in total cash and a strong liquidity position, with a net leverage ratio of 1.7 turns [44][45] - Capital expenditure as a percentage of revenue decreased to 2.8% during the quarter [46] - The company expects adjusted revenue for 2023 to be flat overall, with modest growth in commercial and transportation segments offset by a decline in government [53] Q&A Session Summary Question: How has macro uncertainty impacted client behavior and deal cycles? - Management noted that macroeconomic influences have not negatively impacted the pipeline, which is stronger than ever, particularly in government and transportation sectors [60] - Some delays in deal cycles were observed in the government space, but overall implementation timelines are being closely managed [62] Question: Can you provide more details on the net ARR metric? - The net ARR metric is performing as expected, with recent declines attributed to anticipated client losses, and management remains optimistic about future growth in this area [64][66]

November 1, 2022 Conduent Q3 2022 Earnings Results Cautionary Statements Forward-Looking Statements This document contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "plan," "intend," "will," "aim," "should," "could," "forecast," "target," "may," "continue to," "if," "growing," "projected," "potential," "likely," "further," "going forward," "on the horizon,"and similar expressions, as they relate t ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-Q _______________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-37817 CONDUENT INCORPORATED ____________________________________________ ...

Conduent Incorporated (NASDAQ:CNDT) Q2 2022 Earnings Conference Call August 2, 2022 5:00 PM ET Company Participants Giles Goodburn - Vice President, Investor Relations Cliff Skelton - President and CEO Steve Wood - CFO Conference Call Participants Zachary Ajzenman - Cowen Operator Greetings, and welcome to Conduent's Second Quarter 2022 Earnings Announcement. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Giles Goodburn, V ...

Financial Performance - Revenue for Q2 2022 was $928 million, a decrease of 9.5% compared to $1,026 million in Q2 2021[7] - Net income for Q2 2022 was a loss of $3 million, compared to a net income of $12 million in Q2 2021[9] - The company reported a comprehensive loss of $40 million for Q2 2022, compared to a comprehensive income of $15 million in Q2 2021[9] - Net income for the six months ended June 30, 2022, was $136 million, compared to a net loss of $1 million for the same period in 2021[16] - The company reported a net income of $136 million for the six months ended June 30, 2022, compared to a net income of $1 million in the same period of 2021[122] - Net income for the three months ended June 30, 2022, was a loss of $12 million, compared to a net income of $12 million in the same period of 2021[120] Revenue Breakdown - Total consolidated revenue for Q2 2022 was $928 million, a decrease of 9.5% from $1,026 million in Q2 2021[42] - Commercial segment revenue for Q2 2022 was $470 million, down 3.7% from $488 million in Q2 2021[58] - Government Services segment revenue for Q2 2022 was $279 million, a decrease of 17% from $336 million in Q2 2021[58] - Transportation segment revenue for Q2 2022 was $179 million, down 3.2% from $185 million in Q2 2021[58] - New business annual contract value (ACV) reached $180 million, marking an increase for the fourth consecutive quarter, with $124 million contributed from the Commercial segment[115] - New business Annual Contract Value (ACV) for Q2 2022 was $180 million, a decrease of 30% compared to $257 million in Q2 2021[166] Cash Flow and Liquidity - Cash and cash equivalents increased to $519 million as of June 30, 2022, up from $415 million at the end of 2021[14] - Cash flows from operating activities showed a net cash outflow of $5 million for the six months ended June 30, 2022, down from a cash inflow of $103 million in 2021[16] - Cash flows from investing activities resulted in a net cash inflow of $242 million, significantly improved from a net cash outflow of $69 million in the prior year[16] - Total cash and cash equivalents as of June 30, 2022, were $519 million, an increase from $415 million at the end of 2021[171] Debt and Liabilities - Long-term debt decreased to $1,272 million from $1,383 million at the end of 2021, indicating a reduction of 8%[14] - The company had no outstanding borrowings under its Revolving Credit Facility as of June 30, 2022, with a net available amount of $546 million[70] - Total debt outstanding as of June 30, 2022, was $1.3 billion, with $30 million due within one year[172] Expenses and Costs - Total operating costs and expenses for Q2 2022 were $923 million, down from $1,007 million in Q2 2021, reflecting a 8.4% reduction[7] - Research and development expenses were $2 million in Q2 2022, slightly up from $1 million in Q2 2021[7] - The company incurred $166 million in losses on divestitures and sales of fixed assets during the six months ended June 30, 2022[16] - The company recorded restructuring and related costs of $18 million for the six months ended June 30, 2022, compared to $19 million for the same period in 2021[66] Asset Management - The company’s total assets decreased to $3,900 million as of June 30, 2022, down from $4,036 million at the end of 2021[14] - The company’s retained earnings deficit improved to $(2,220) million from $(2,351) million at the end of 2021[14] - The balance of retained earnings (deficit) as of June 30, 2022, was $(2,220) million, reflecting a decrease from $(2,217) million at the end of March 31, 2022[21] Market and Operational Insights - The company continues to evaluate the impact of COVID-19 on its operations, with estimates subject to change as new information becomes available[29] - The company has maintained a proactive plan throughout the COVID-19 pandemic to ensure the health and safety of its associates[116] - The company is engaged in restructuring programs aimed at optimizing its employee base and reducing costs, with total restructuring costs of $11 million for the three months ended June 30, 2022[130] Legal and Compliance - The Company is involved in various claims and lawsuits, which could materially affect its results of operations, cash flows, and financial position[85] - The Company has recorded adequate provisions for potential liabilities as of June 30, 2022, but litigation outcomes remain unpredictable[86] - The Company is defending against a class action lawsuit seeking unspecified monetary damages related to alleged violations of federal securities laws[87] Other Financial Metrics - Adjusted EBITDA for Q2 2022 was $87 million, down from $128 million in Q2 2021, reflecting a decrease of about 32.0%[149] - Adjusted EBITDA margin for Q2 2022 was 9.4%, compared to 12.5% in Q2 2021, reflecting a decrease of about 3.1 percentage points[149] - The decline in revenue and adjusted EBITDA for Q2 2022 was primarily due to the sale of the Midas Suite of products, which affected the current year’s results[160]