Conduent(CNDT) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED) This section provides unaudited condensed consolidated financial statements, including income, balance sheets, cash flows, equity, and detailed explanatory notes Condensed Consolidated Statements of Income (Loss) This statement details the company's revenues, net income (loss), and earnings per share for the reported periods Condensed Consolidated Statements of Income (Loss) (Unaudited) (in millions, except per share data) | (in millions, except per share data) | June 30, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------ | | Three Months Ended: | | | | Revenue | $754 | $828 | | Net Income (Loss) | $(40) | $216 | | Basic Net Income (Loss) per Share | $(0.26) | $1.10 | | Diluted Net Income (Loss) per Share | $(0.26) | $1.07 | | Six Months Ended: | | | | Revenue | $1,505 | $1,749 | | Net Income (Loss) | $(91) | $315 | | Basic Net Income (Loss) per Share | $(0.59) | $1.54 | | Diluted Net Income (Loss) per Share | $(0.59) | $1.51 | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents net income (loss) and other comprehensive income (loss) to arrive at total comprehensive income (loss) Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (in millions) | (in millions) | June 30, 2025 | June 30, 2024 | | :------------ | :------------ | :------------ | | Three Months Ended: | | | | Net Income (Loss) | $(40) | $216 | | Other Comprehensive Income (Loss), Net | $24 | $(17) | | Comprehensive Income (Loss), Net | $(16) | $199 | | Six Months Ended: | | | | Net Income (Loss) | $(91) | $315 | | Other Comprehensive Income (Loss), Net | $35 | $(28) | | Comprehensive Income (Loss), Net | $(56) | $287 | Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (Unaudited) (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Total Assets | $2,488 | $2,599 | | Total Liabilities | $1,569 | $1,614 | | Total Equity | $777 | $843 | | Cash and cash equivalents | $275 | $366 | Condensed Consolidated Statements of Cash Flows This statement reports the cash generated and used by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) (in millions) | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(73) | $(78) | | Net cash provided by (used in) investing activities | $15 | $553 | | Net cash provided by (used in) financing activities | $(30) | $(681) | - Proceeds from divestitures significantly decreased from $599 million in 2024 to $53 million in 2025 for the six months ended June 30[19] Condensed Consolidated Statements of Shareholders' Equity This statement details changes in the company's equity accounts, including net income, other comprehensive income, and treasury stock - Total Conduent Inc. Equity decreased from $843 million at December 31, 2024, to $777 million at June 30, 2025[17] - Net Income (Loss) for the six months ended June 30, 2025, was $(91) million, a significant decrease from $315 million in the prior year[22] - Treasury stock purchases for the six months ended June 30, 2025, were $(8) million, substantially lower than $(169) million in the prior year[22] Note 1 – Basis of Presentation This note describes the company's business operations and the accounting principles used in preparing the financial statements - Conduent delivers digital business solutions and services across commercial, government, and transportation sectors, leveraging cloud computing, AI, machine learning, automation, and advanced analytics[25] - The unaudited interim Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and SEC regulations, consistent with reporting interim financial information[26] Note 2 – Recent Accounting Pronouncements This note outlines recently adopted and upcoming accounting standards and their expected impact on financial disclosures - Adopted FASB guidance on segment reporting (November 2023), effective for fiscal years beginning after December 15, 2023, which impacted disclosures but not the Condensed Consolidated Financial Statements[29] - New FASB guidance on income tax disclosures (December 2023), effective after December 15, 2024, and disaggregation of income statement expenses (November 2024), effective after December 15, 2026, are disclosure-related and will not impact results of operations, financial position, or cash flows[30][31] Note 3 – Revenue This note provides disaggregated revenue information by segment and details future revenue recognition from performance obligations Disaggregated Revenue by Segment (in millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Commercial | $365 | $388 | $767 | $807 | | Government | $238 | $245 | $454 | $503 | | Transportation | $151 | $141 | $284 | $285 | | Divestitures | $0 | $54 | $0 | $154 | | Total Consolidated Revenue | $754 | $828 | $1,505 | $1,749 | - Estimated revenue expected to be recognized in the future related to unsatisfied or partially satisfied performance obligations at June 30, 2025, was approximately $1.5 billion, with 71% expected over the next two years[41] Note 4 – Segment Reporting This note presents financial data for the company's operating segments, including revenue and profit (loss) details Segment Profit (Loss) and Revenue (in millions) | Segment | Three Months Ended June 30, 2025 Revenue | Three Months Ended June 30, 2025 Profit (Loss) | Three Months Ended June 30, 2024 Revenue | Three Months Ended June 30, 2024 Profit (Loss) | | :---------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Commercial | $365 | $7 | $388 | $14 | | Government | $238 | $49 | $245 | $38 | | Transportation | $151 | $0 | $141 | $(3) | | Total (excl. Divestitures & Unallocated) | $754 | $56 | $774 | $49 | | Divestitures | $0 | $0 | $54 | $8 | | Unallocated Costs | $0 | $(67) | $0 | $(71) | | Total Consolidated | $754 | $(11) | $828 | $(14) | - Unallocated Costs for the six months ended June 30, 2025, included $25 million of Direct response costs related to the January 2025 Cyber Incident[49] Note 5 – Divestitures This note details the sales of various business units, including cash proceeds and recognized gains - The Casualty Claims Solutions business was sold on September 1, 2024, for $224 million cash, resulting in a $194 million gain[52][53] - The Curbside Management and Public Safety Solutions businesses were sold on April 30, 2024, for $181 million cash and a $50 million note, generating a $103 million gain[54][55] - The BenefitWallet Portfolio was transferred in tranches from March to May 2024 for $425 million cash, resulting in a $425 million gain[57][58] Note 6 – Restructuring Programs and Related Costs This note outlines the company's restructuring activities and associated costs aimed at operational optimization Restructuring Program Activity (in millions) | Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Severance and Related Costs | $7 | $7 | | Termination and Other Costs | $4 | $8 | | Asset Impairments | $1 | $2 | | Total Net Current Period Charges | $12 | $17 | - Restructuring programs aim to optimize the employee base, reduce real estate footprint, and improve productivity[60] Note 7 – Debt This note details the company's long-term debt obligations, available credit, and compliance with debt covenants Long-term Debt (in millions) | Debt Type | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Term loan A due 2026 | $82 | $88 | | Senior notes due 2029 | $520 | $520 | | Finance lease obligations | $44 | $26 | | Other | $15 | $12 | | Principal debt balance| $661 | $646 | | Less: current maturities | $(28) | $(24) | | Total Long-term Debt | $628 | $615 | - As of June 30, 2025, the Company had $540 million available under its $550 million revolving credit facility[66] - The Company was in compliance with all debt covenants as of June 30, 2025[67] Note 8 – Financial Instruments This note describes the company's use of derivative instruments to hedge foreign currency exchange rate fluctuations - The Company uses derivative instruments, primarily forward contracts, to hedge foreign currency exchange rate fluctuations[68] - As of June 30, 2025, outstanding forward exchange contracts had gross notional values of $208 million, with approximately 78% maturing within three months[69] Note 9 – Fair Value of Financial Assets and Liabilities This note presents the fair value measurements of financial assets and liabilities, including derivative instruments and long-term debt Financial Assets and Liabilities Accounted for at Fair Value (in millions) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Assets: Foreign exchange contracts - forward | $3 | $0 | | Liabilities: Foreign exchange contracts - forward | $0 | $(2) | - The fair value of Long-term debt was estimated using Level 2 inputs (quoted market prices for identical or similar instruments)[76] Note 10 – Employee Benefit Plans This note details the expenses related to the company's defined contribution plans and the immaterial impact of defined benefit plans - The Company recognized an expense related to its defined contribution plans of $4 million for the six months ended June 30, 2025, down from $6 million in the prior year[78] - The balance sheet and income statement impacts of any remaining defined benefit plans are immaterial[78] Note 11 – Accumulated Other Comprehensive Loss ("AOCL") This note provides a breakdown of the components of accumulated other comprehensive loss, including currency translation adjustments and cash flow hedges Accumulated Other Comprehensive Loss (AOCL) (in millions) | Category | December 31, 2024 | Other comprehensive income (loss) (6 months ended June 30, 2025) | June 30, 2025 | | :------- | :---------------- | :--------------------------------------------------------------- | :------------ | | Currency Translation Adjustments | $(478) | $33 | $(445) | | Gains (Losses) on Cash Flow Hedges | $1 | $2 | $3 | | Defined Benefit Pension Items | $5 | $0 | $5 | | Total | $(472) | $35 | $(437) | Note 12 – Contingencies and Litigation This note discusses the company's involvement in various legal matters, including lawsuits and contractual obligations secured by bonds and letters of credit - The Company is involved in various claims, lawsuits, investigations, and proceedings, and believes it has recorded adequate provisions for these matters[81] - In the Skyview Capital LLC lawsuit, the Appellate Division ruled predominantly in CBS's favor in June 2025, dismissing Skyview's fraud claim and affirming summary judgment on certain CBS counterclaims[86] - As of June 30, 2025, the Company had $566 million of outstanding surety bonds and $120 million of outstanding letters of credit to secure contractual obligations[89] Note 13 – Preferred Stock This note describes the outstanding Series A convertible perpetual preferred stock, including its liquidation preference and dividend rate - The Company has 120,000 shares of Series A convertible perpetual preferred stock outstanding, with an aggregate liquidation preference of $120 million and an 8% annual cash dividend rate[90] Note 14 – Earnings (Loss) per Share This note presents the basic and diluted net earnings (loss) per share for the reported periods Net Earnings (Loss) per Share (in millions, except per share data) | (in millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | $(0.26) | $1.10 | $(0.59) | $1.54 | | Diluted | $(0.26) | $1.07 | $(0.59) | $1.51 | Note 15 – Supplementary Financial Information This note provides a detailed breakdown of other current liabilities, including accrued expenses and cyber event-related costs Other Current Liabilities (in millions) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Accrued liabilities to vendors | $145 | $156 | | Litigation related accruals | $5 | $8 | | Current operating lease liabilities | $51 | $52 | | Restructuring liabilities | $10 | $15 | | Income tax payable | $0 | $3 | | Other taxes payable | $13 | $16 | | Accrued interest | $5 | $5 | | Direct response costs - cyber event liabilities | $22 | $0 | | Other | $44 | $35 | | Total Other Current Liabilities | $295 | $290 | Note 16 – Subsequent Events This note discloses significant events occurring after the balance sheet date, such as new tax legislation - On July 4, 2025, the 'One Big Beautiful Bill Act' was signed into law, enacting tax reform, and the Company is evaluating its full effects on its estimated annual effective tax rate and cash tax position[95] ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's analysis of the company's financial condition, operational results, liquidity, and future outlook, including strategic progress and key metrics Overview This section describes Conduent's core business, global operations, and strategic focus on digital business solutions - Conduent delivers digital business solutions and services across commercial, government, and transportation sectors, leveraging cloud computing, AI, machine learning, automation, and advanced analytics[99] - The company operates in 24 countries with approximately 53,000 associates, focusing on enhancing customer experiences, improving performance, increasing efficiencies, and reducing costs for clients[99][100] Executive Summary This section highlights the company's strategic focus on growth, portfolio rationalization, capital allocation, and recent achievements - The company's strategy focuses on accelerating growth, enhancing stakeholder value through key growth areas, portfolio rationalization, and a balanced capital allocation approach[102] - Conduent aims to complete its $1 billion deployable capital commitment and demonstrate revenue growth in the remaining portfolio of businesses in 2025[104] - Q2 2025 achievements include expanding presence in the Philippines, relaunching the Vector platform in the cloud, and strengthening a major Transportation segment partnership[106] Cyber Event This section details the January 2025 cyber event, its operational impact, and potential future risks - On January 13, 2025, the Company experienced a cyber event involving unauthorized access to a limited portion of its environment and exfiltration of personal information associated with clients' end-users[104][105] - Operations were restored quickly, but material non-recurring expenses were incurred in Q1 2025 for potential notification requirements[104][107] - Future risks from the cyber event include potential impacts related to litigation, reputational harm, and regulatory actions[108] Financial Information and Analysis of Results of Operations This section provides an overall analysis of the company's financial performance, highlighting key changes in revenue and net income Key Financial Performance Changes (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :----- | :------------------------------- | :------------------------------- | :------- | :------- | | Revenue | $754 | $828 | $(74) | (9)% | | Net Income (Loss) | $(40) | $216 | $(256) | | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | Revenue | $1,505 | $1,749 | $(244) | (14)% | | Net Income (Loss) | $(91) | $315 | $(406) | | Revenue This section analyzes the decrease in revenue, primarily attributing it to divestitures and lower commercial volumes - Revenue decreased for both the three and six months ended June 30, 2025, primarily due to the impact of divestitures (BenefitWallet Transfer and sales of Curbside Management, Public Safety Solutions, and Casualty Claims Solutions businesses), accounting for approximately 73% and 63% of the respective decreases[112][113] - Excluding divestitures, the decrease was attributed to lost business and lower Commercial volumes, partially offset by new business ramp and positive impacts from a Transit Solutions contract amendment[112][113] Cost of Services (excluding depreciation and amortization) This section explains the decrease in cost of services due to divestitures, reduced revenues, and cost optimizations - Cost of services decreased for both the three and six months ended June 30, 2025, primarily due to the impact of divestitures[114] - Excluding divestitures, the decline was driven by lower expenses on reduced revenues and cost optimizations[114] Selling, General and Administrative ("SG&A") (excluding depreciation and amortization) This section analyzes the decrease in SG&A expenses, driven by corporate efficiencies and legal cost recovery, partially offset by cyber event costs - SG&A for the three months ended June 30, 2025, decreased primarily due to cost efficiencies in corporate functions[115] - SG&A for the six months ended June 30, 2025, decreased due to a $9 million recovery of legal costs and corporate efficiencies, partially offset by $25 million of direct response costs related to the January 2025 Cyber Event[116] Depreciation and Amortization This section explains the decrease in depreciation and amortization due to prior-year write-offs and divestitures, partially offset by new project amortization - Depreciation and amortization decreased for both the three and six months ended June 30, 2025, primarily due to the absence of a prior-year write-off of an abandoned internal use software asset and the sales of divested businesses[117] - These decreases were partially offset by increased amortization of deferred contract costs related to new projects that went live in 2025[117] Restructuring and Related Costs This section details the company's restructuring expenses, including severance, termination, and asset impairment costs Restructuring and Related Costs (in millions) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Severance and related costs | $6 | $3 | $7 | $7 | | Data center consolidation costs | $0 | $2 | $0 | $3 | | Termination, insourcing and asset impairment costs | $2 | $3 | $5 | $7 | | Total | $8 | $8 | $12 | $17 | Interest Expense This section explains the decrease in interest expense due to voluntary debt prepayments made in the prior year - Interest expense decreased for both the three and six months ended June 30, 2025, primarily due to voluntary prepayments of the entire Term Loan B balance and a portion of the Term Loan A balance in 2024 using divestiture proceeds[119] (Gain) Loss on Divestitures and Transaction Costs This section reports the gains or losses recognized from business divestitures and associated transaction costs (Gain) Loss on Divestitures and Transaction Costs (in millions) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30 | $4 | $(347) | | Six Months Ended June 30 | $7 | $(508) | - The significant gains in 2024 were primarily from the BenefitWallet Transfer ($261 million for three months, $425 million for six months) and the sale of Curbside Management and Public Safety businesses ($108 million for both periods)[120] Litigation Settlements (Recoveries), Net This section reports the net impact of litigation settlements and recoveries, noting their immateriality for the periods - Litigation settlements (recoveries), net for the six months ended June 30, 2025, were $2 million, compared to $5 million in 2024, and were not material for the periods presented[111][121] Income Taxes This section discusses the effective tax rates and factors influencing them, including valuation allowances and recent tax legislation Effective Tax Rate (%) | Period | June 30, 2025 | June 30, 2024 | | :----- | :------------ | :------------ | | Three Months Ended | (5.7)% | 28.2% | | Six Months Ended | 3.1% | 26.3% | - The lower effective tax rates in 2025 were primarily due to valuation allowances and geographic mix of income[122][125] - The 'One Big Beautiful Bill Act' signed on July 4, 2025, is being evaluated for its full effects on the estimated annual effective tax rate and cash tax position[128] Operations Review of Segment Revenue and Profit This section provides a detailed review of revenue and profit performance across the company's Commercial, Government, and Transportation segments Segment Profit (Loss) and Adjusted EBITDA (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment Profit (Loss) | $(11) | $(14) | $(47) | $(7) | | Adjusted EBITDA | $37 | $35 | $74 | $104 | Commercial Segment This section analyzes the Commercial segment's revenue and profit decline, influenced by lower volumes and higher technology overhead - Commercial segment revenue and profit declined for both the three and six months ended June 30, 2025, driven by lower volumes, partially offset by new business ramp[135][136] - Profit was also impacted by higher fixed technology overhead, partially offset by cost efficiencies and lower depreciation[136] Government Segment This section examines the Government segment's revenue decrease due to implementation impacts and lost business, with profit growth from cost efficiencies - Government revenue decreased for both periods due to implementation impacts and lost business, though new business is starting to outpace losses[137][138] - Segment profit and Adjusted EBITDA increased for the three months due to cost efficiencies and AI-driven fraud prevention activities[139] Transportation Segment This section details the Transportation segment's revenue and profit increase, driven by a contract amendment and congestion charging solutions - Transportation revenue increased for the three months ended June 30, 2025, due to a contract amendment with a Transit Solutions customer and congestion charging solutions[141] - Segment profit and Adjusted EBITDA increased for both periods due to these revenue drivers and the absence of costs to transition a non-retained Road Usage Charging contract[143] Divestitures This section reports the cessation of revenue and profit from the Divestitures segment following the completion of all sales in 2024 - Revenue, segment profit, and Adjusted EBITDA from the Divestitures segment decreased to zero for both periods in 2025, reflecting the completion of all divestitures in 2024[144] Unallocated Costs This section explains the decrease in unallocated costs due to corporate efficiencies, partially offset by cyber event-related expenses - Unallocated Costs decreased for both the three and six months ended June 30, 2025, primarily due to corporate cost efficiencies[145][146] - The six-month period included a $9 million recovery of legal costs, partially offset by $25 million in direct response costs related to the January 2025 Cyber Event[146] Metrics This section presents key business metrics, including new business signings and net Annual Recurring Revenue (ARR) activity Signings This section provides details on new business and renewal signings, along with the total new business pipeline Signings Information (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | New business ACV | $150 | $141 | $259 | $237 | | New business TCV | $331 | $273 | $611 | $416 | | Renewals TCV | $469 | $242 | $712 | $637 | | Total Signings | $800 | $515 | $1,323 | $1,053 | - Total new business pipeline at June 30, 2025, was $3.3 billion, up from $3.1 billion in 2024[151] Net ARR Activity This section tracks the company's net Annual Recurring Revenue (ARR) activity over the trailing twelve months Net ARR Activity (Trailing Twelve Months, in millions) | Period | Net ARR Activity metric | | :------------- | :---------------------- | | June 30, 2025 | $63 | | March 31, 2025 | $116 | | December 31, 2024 | $92 | | September 30, 2024 | $46 | | June 30, 2024 | $(47) | Capital Resources and Liquidity This section discusses the company's cash position, debt, available credit, and ability to meet future cash requirements - As of June 30, 2025, total cash and cash equivalents were $275 million, and $540 million was available under the revolving credit facility[154] - Total principal debt outstanding was $661 million as of June 30, 2025[155] - Management believes current cash, projected cash flow from operations, and the revolving credit facility will provide sufficient financial resources for at least the next twelve months[156] Cash Flow Analysis This section analyzes changes in cash flows from operating, investing, and financing activities Cash Flow Summary (in millions) | Cash Flow Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Better (Worse) | | :------------- | :----------------------------- | :----------------------------- | :------------- | | Operating Activities | $(73) | $(78) | $5 | | Investing Activities | $15 | $553 | $(538) | | Financing Activities | $(30) | $(681) | $651 | - The decrease in investing cash flow was mainly due to lower proceeds from divestitures in the first half of 2025 compared to 2024[159] - The decrease in financing cash used was due to reduced debt prepayments and treasury stock purchases compared to the prior year[160] Sales of Accounts Receivable This section reports the net impact of accounts receivable sales on operating cash flows - The net impact from sales of accounts receivable on operating cash flows for the six months ended June 30, 2025, was $(11) million, an improvement from $(16) million in 2024[163] Material Cash Requirements from Contractual Obligations This section outlines the company's significant contractual cash obligations and its plans to meet them - Material cash requirements include debt, leases, and estimated purchase commitments, which the company expects to satisfy with current liquidity and cash generated by operations[164][165] Critical Accounting Estimates and Policies This section confirms no significant changes to the company's critical accounting estimates and policies from the prior annual report - There have been no significant changes to the company's critical accounting estimates and policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[167] Recent Accounting Changes This section refers to Note 2 for details on recently adopted and upcoming accounting standards - Refer to Note 2 – Recent Accounting Pronouncements for information on accounting standards adopted and those not yet required to be adopted, and their expected impact[168] Non-GAAP Financial Measures This section explains the company's use of non-GAAP measures like Adjusted EBITDA to provide additional insights into business performance - The company uses non-GAAP financial measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, to provide investors with a better understanding of business trends and to compare results[169][170] - Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation and amortization, and contract inducement amortization, adjusted for specific items like restructuring costs, divestiture gains/losses, and cyber event costs[172][177] ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed to market risk from foreign currency exchange rates, which it manages through operating and financing activities, and derivative financial instruments. No material changes to these risk management strategies were reported during the period - The Company is exposed to market risk from foreign currency exchange rates and manages this exposure using derivative financial instruments, primarily forward contracts[174] - There have been no material changes to the Company's financial risk management strategies with respect to foreign currency risk during the reporting period[175][176] ITEM 4 — CONTROLS AND PROCEDURES Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[178] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[179] PART II — OTHER INFORMATION This section covers additional disclosures not included in the financial statements, such as legal proceedings, risk factors, and equity security sales ITEM 1 — LEGAL PROCEEDINGS This section incorporates by reference the detailed information on legal proceedings from Note 12 – Contingencies and Litigation in the Condensed Consolidated Financial Statements - Information on legal proceedings is incorporated by reference from Note 12 – Contingencies and Litigation[180] ITEM 1A — RISK FACTORS This section highlights that there have been no material changes to previously reported risk factors, except for an expanded discussion on cybersecurity threats. It emphasizes the company's vulnerability to security breaches, the evolving nature of cyber-attacks, and the potential adverse impacts on operations, reputation, and financial condition, including the January 2025 Cyber Event - No material changes to risk factors were reported, except for an expanded discussion on cybersecurity threats[181] - The company's data systems, information systems, and network infrastructure are susceptible to hacking and other cybersecurity threats, which could expose it to liability, impair its reputation, or disrupt service obligations[182][183] - The January 2025 Cyber Event, involving unauthorized access and data exfiltration, poses potential future risks including litigation, reputational harm, and regulatory actions[186] ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company did not issue any unregistered securities during the quarter ended June 30, 2025. It repurchased 2,681,373 shares of common stock for $2.70 per share in June 2025 under a new $50 million share repurchase program authorized by the Board of Directors on May 20, 2025 - No unregistered securities were issued during the quarter ended June 30, 2025[188] - The Company repurchased 2,681,373 shares of common stock at an average price of $2.70 per share in June 2025[189] - A new three-year share repurchase program, authorizing up to $50 million of common stock repurchases, was approved by the Board of Directors on May 20, 2025[189] ITEM 3 — DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[190] ITEM 4 — MINE SAFETY DISCLOSURES The company reported no mine safety disclosures - No mine safety disclosures were reported[191] ITEM 5 — OTHER INFORMATION No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - None of the Company's directors or officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[192] ITEM 6 — EXHIBITS This section lists all exhibits filed with the Form 10-Q, including various agreements, corporate documents, certifications (CEO/CFO), and Inline XBRL data - Exhibits include the Custodial Transfer and Purchase Agreement, Restated Certificate of Incorporation, Amended and Restated By-Laws, APIP Share Award Agreements, CEO/CFO Certifications, and Inline XBRL data[196]