Conduent(CNDT) - 2025 Q2 - Quarterly Results

Company Overview Introduction Conduent Incorporated announced Q2 2025 financial results, exceeding adjusted EBITDA and margin expectations, with improved new business signings - Conduent Incorporated announced its second-quarter financial results on August 6, 2025[2] - CEO Cliff Skelton stated the company made progress in Q2, with adjusted EBITDA and adjusted EBITDA margin exceeding expectations, and revenue meeting guidance with slight sequential growth[3] - New business signings improved both year-over-year and quarter-over-quarter, supported by a strong business pipeline[3] - Investments in technology platforms and client relationships accelerated performance in the transportation sector[3] - Government and legislative decisions may create additional opportunities for the government sector, as the company continues portfolio rationalization expected to positively impact margins and cash flow[3] About Conduent Conduent is a global technology-driven business process solutions company, providing digital services for commercial, government, and transportation sectors - Conduent is a global technology-driven business process solutions and services company, providing digital solutions for commercial, government, and transportation sectors[14] - The company leverages technologies such as cloud, artificial intelligence, machine learning, automation, and advanced analytics to deliver mission-critical solutions[14] - Conduent has approximately 53,000 employees, processing about $85 billion in government payments, 2.3 billion customer service interactions annually, and over 13 million toll transactions daily[14] Q2 2025 Financial Performance Key Q2 2025 Highlights Conduent achieved $754 million in revenue and adjusted revenue in Q2 2025, with a pre-tax loss of $38 million, an adjusted EBITDA margin of 4.9%, and new business signed ACV of $150 million | Metric | Amount ($ million) | | :--- | :--- | | Revenue and Adjusted Revenue | $754 | | Pre-tax Income (Loss) | $(38) | | Adjusted EBITDA Margin | 4.9% | | New Business Signed ACV | $150 | | Net ARR Activity Metric (TTM) | $63 | Detailed Financial Results Conduent's Q2 2025 saw revenue decline, a GAAP net loss, but improved adjusted EBITDA and cash flow performance year-over-year | Metric ($ million) | Q2 2025 | Q2 2024 | YoY Change B/(W) | | :--- | :--- | :--- | :--- | | Revenue | $754 | $828 | (8.9)% | | Adjusted Revenue | $754 | $774 | (2.6)% | | GAAP Net Income (Loss) | $(40) | $216 | n/m | | Adjusted EBITDA | $37 | $24 | 54.2% | | Adjusted EBITDA Margin | 4.9% | 3.1% | 180 bps | | GAAP Pre-tax Income (Loss) | $(38) | $300 | n/m | | GAAP Diluted EPS | $(0.26) | $1.07 | n/m | | Adjusted Diluted EPS | $(0.13) | $(0.14) | 7.1% | | Operating Cash Flow | $(15) | $(41) | 63.4% | | Adjusted Free Cash Flow | $(30) | $(55) | 45.5% | Performance Commentary Conduent maintained strong liquidity in Q2 2025, reported a pre-tax loss primarily due to prior-year divestiture gains, and saw adjusted EBITDA and margin exceed expectations - Conduent's liquidity position remained strong at the end of Q2, with the $550 million revolving credit facility largely undrawn[6] - The Q2 2025 pre-tax loss of $38 million compares to $300 million in the prior year, primarily due to gains from the divestiture of the BenefitWallet portfolio and the sale of Curbside Management and Public Safety businesses in the prior period[6] - Q2 2025 adjusted EBITDA was $37 million, with an adjusted EBITDA margin of 4.9%, both higher than the prior year and exceeding expectations[7] - Conduent repurchased approximately 2.7 million shares of common stock during Q2 2025[8] Operational Highlights Conduent achieved several operational milestones in Q2 2025, including expanding financial and procurement solutions with AI, implementing SNAP EBT account lock/unlock features in 12 states, and receiving supplier awards - Partnered with Fairmarkit to expand financial and procurement solutions using its AI-driven technology, including generative AI, to optimize procurement workflows and complement Conduent's FastCap® financial analytics[9] - Implemented a technology feature in the 12th U.S. state allowing SNAP beneficiaries to lock and unlock their EBT accounts using Conduent's ConnectEBT mobile app and cardholder portal to help prevent fraud[9] - Recognized as a Supplier of the Year by General Motors for the fourth time, acknowledging performance in key areas such as safety, innovation, and resilience[9] - Named a Leader in two NelsonHall HR & Talent Transformation Services NEAT evaluations for Benefits Administration and Experience-Led HR Transformation in 2025[9] - Included in Newsweek's Top 100 Most Loved Workplaces Globally for the third consecutive year in 2025[9] - Deployed new EMV (Europay, Mastercard, and Visa) contactless ticketing systems for Gestione Governativa Navigazione Laghi in Italy, among the first EMV contactless systems for boat transportation in the country[9] FY 2025 Outlook Conduent projects FY 2025 adjusted revenue between $3.1 billion and $3.2 billion, with an adjusted EBITDA margin expected to be between 5.0% and 5.5%, an increase from the 3.9% actual in FY 2024 | Metric | FY 2024 Actual | FY 2025 Outlook | | :--- | :--- | :--- | | Adjusted Revenue | $3,176M | $3,100M - $3,200M | | Adjusted EBITDA / Adjusted EBITDA Margin | $124M / 3.9% | 5.0% - 5.5% | Financial Statements (GAAP) Condensed Consolidated Statements of Income (Loss) In Q2 2025, Conduent reported $754 million in revenue, a net loss of $40 million, and a diluted loss per share of $0.26, reflecting a decline in revenue and a shift from net income to loss year-over-year | ($ million, 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 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $754 | $828 | $1,505 | $1,749 | | Operating Costs and Expenses | $792 | $528 | $1,599 | $1,322 | | Pre-tax Income (Loss) | $(38) | $300 | $(94) | $427 | | Income Tax Expense (Benefit) | $2 | $84 | $(3) | $112 | | Net Income (Loss) | $(40) | $216 | $(91) | $315 | | Diluted Income (Loss) Per Share | $(0.26) | $1.07 | $(0.59) | $1.51 | Condensed Consolidated Statements of Comprehensive Income (Loss) Conduent reported a net loss of $40 million and other comprehensive income, net of $24 million, resulting in a net comprehensive loss of $16 million for Q2 2025, compared to a net income and comprehensive income in the prior year | ($ million) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $(40) | $216 | $(91) | $315 | | Other Comprehensive Income (Loss), Net of Tax | $24 | $(17) | $35 | $(28) | | Comprehensive Income (Loss), Net of Tax | $(16) | $199 | $(56) | $287 | Condensed Consolidated Balance Sheets As of June 30, 2025, Conduent's total assets were $2.488 billion, a decrease from $2.599 billion at December 31, 2024, with total liabilities at $1.569 billion and total equity at $777 million | ($ million, except share data) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | $275 | $366 | | Total Current Assets | $1,147 | $1,252 | | Goodwill | $617 | $609 | | Total Assets | $2,488 | $2,599 | | Liabilities and Equity | | | | Total Current Liabilities | $697 | $744 | | Long-Term Debt | $628 | $615 | | Total Liabilities | $1,569 | $1,614 | | Total Equity | $777 | $843 | | Total Shares (Issued and Outstanding) | 159,157 thousand shares | 161,829 thousand shares | Condensed Consolidated Statements of Cash Flows In Q2 2025, Conduent reported $15 million in cash outflow from operating activities, $32 million in cash inflow from investing activities, and $20 million in cash outflow from financing activities, with cash and cash equivalents at period-end of $294 million | ($ million) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $(15) | $(41) | $(73) | $(78) | | Net Cash from Investing Activities | $32 | $410 | $15 | $553 | | Net Cash from Financing Activities | $(20) | $(482) | $(30) | $(681) | | Effect of Exchange Rate Changes | $4 | $(4) | $5 | $(6) | | Cash and Cash Equivalents, End of Period | $294 | $307 | $294 | $307 | Non-GAAP Financial Measures & Reconciliations Non-GAAP Definitions and Rationale Conduent utilizes non-GAAP financial measures, such as adjusted revenue and adjusted EBITDA, to provide investors with a clearer understanding of business trends and performance comparisons by adjusting for certain non-cash or non-recurring items - The company uses non-GAAP financial measures to help investors better understand business trends and to better understand and compare performance[15][30] - Non-GAAP measures adjust certain amounts reported under U.S. GAAP to exclude specific items and their related tax impacts, which may be recurring or non-recurring and do not necessarily reflect ongoing operating performance[15][30][34] - Management regularly uses non-GAAP financial measures internally to understand, manage, and evaluate the business and make operating decisions[15][30] - Non-GAAP measures include adjusted revenue, adjusted EBITDA, adjusted diluted earnings per share, free cash flow, and adjusted free cash flow, among others[33][40][42][43] - Adjustments typically include amortization of acquired intangible assets, restructuring and related costs, goodwill impairment, divestiture gains/losses and transaction costs, litigation settlements, loss on extinguishment of debt, direct response costs for cyber incidents, and other expenses[37][38][45] - Free cash flow is defined as cash flow from operating activities less additions to land, buildings, and equipment and internal use software, plus proceeds from the sale of land, buildings, and equipment[42] - Adjusted free cash flow further adjusts free cash flow for litigation insurance proceeds, transaction costs, divestiture gains and litigation settlement-related taxes, gains from failed sale-leaseback transactions, and other specific adjustments[43] Non-GAAP Outlook The company provides non-GAAP outlooks for adjusted EBITDA and adjusted EBITDA margin for FY 2025, as the overall or final results of certain adjustment items cannot be reasonably determined without unreasonable effort - The company provides non-GAAP outlooks for adjusted EBITDA and adjusted EBITDA margin for FY 2025 because the overall or final results of these adjustment items cannot be reasonably determined for the forecast period[46] - The outlook for adjusted revenue is also provided on a non-GAAP basis, using period-end foreign currency exchange rates, as the impact of foreign currency on revenue cannot be accurately predicted[46] Non-GAAP Reconciliations This section provides detailed reconciliation tables for non-GAAP financial measures, including adjusted revenue, adjusted net income (loss), adjusted effective tax rate, adjusted operating income (loss), adjusted EBITDA, adjusted diluted EPS, adjusted operating margin, adjusted EBITDA margin, and free cash flow Adjusted Revenue Reconciliation | ($ million) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $754 | $828 | $1,505 | $1,749 | | Adjustment: Divested Businesses | — | $(54) | — | $(154) | | Adjusted Revenue | $754 | $774 | $1,505 | $1,595 | | Foreign Currency Impact | $(1) | $1 | $3 | $(1) | | Revenue at Constant Currency | $753 | $775 | $1,508 | $1,594 | Adjusted Net Income (Loss) Reconciliation | ($ million) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $(40) | $216 | $(91) | $315 | | Total Non-GAAP Adjustments | $15 | $(333) | $48 | $(480) | | Income Tax Adjustments | $7 | $92 | $7 | $124 | | Adjusted Net Income (Loss) | $(18) | $(33) | $(36) | $(73) | Adjusted EBITDA Reconciliation | ($ million) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $(40) | $216 | $(91) | $315 | | Income Tax Expense (Benefit) | $2 | $84 | $(3) | $112 | | Depreciation and Amortization | $48 | $51 | $96 | $113 | | Contract Inducement Amortization | $1 | — | $1 | $1 | | Interest Expense | $12 | $19 | $24 | $46 | | EBITDA Pre-Divestitures | $23 | $370 | $27 | $587 | | Adjusted EBITDA | $37 | $24 | $74 | $60 | Free Cash Flow and Adjusted Free Cash Flow Reconciliation | ($ million) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating Cash Flow | $(15) | $(41) | $(73) | $(78) | | Additions to Land, Buildings, and Equipment | $(15) | $(18) | $(29) | $(31) | | Additions to Internal Use Software | $(5) | $(7) | $(9) | $(15) | | Free Cash Flow | $(35) | $(66) | $(111) | $(124) | | Transaction Costs | $3 | $8 | $7 | $11 | | Direct Response Payments for Cyber Incident | — | — | $2 | — | | Vendor Finance Lease Payments | $(3) | $(4) | $(7) | $(9) | | Gain from Failed Sale-Leaseback Transaction | $5 | — | $5 | — | | Divestiture and Litigation Settlement Related Tax Payments | — | $7 | — | $7 | | Adjusted Free Cash Flow | $(30) | $(55) | $(104) | $(115) | Additional Information Conference Call Details Conduent will host a conference call and webcast on August 6, 2025, at 9:00 AM ET to discuss financial results, with details provided for accessing the live event and replay - Management will present results via conference call and webcast on August 6, 2025, at 9:00 AM ET[11] - The webcast is available at https://investor.conduent.com/, and the toll-free dial-in is 877-407-4019 with conference ID 13754400[11] - A replay of the conference call will be available within three hours after the call by dialing 1-877-660-6853 with replay ID 13754400, valid until August 20, 2025[12][13] Forward-Looking Statements This press release contains forward-looking statements regarding the company's future financial performance, operating conditions, and outlook, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations - This press release contains "forward-looking statements" concerning the company's financial performance, condition, and outlook, as well as changes in operating results, market, and economic conditions[16] - These statements are subject to various risks, uncertainties, and assumptions, many of which are beyond the company's control, that could cause actual results to differ materially from expectations[16] - Important risks and uncertainties include government contract terms, market competitiveness, reliance on third-party suppliers, geopolitical events, cybersecurity threats (such as the cyber incident in January 2025), risks related to divested businesses, goodwill impairment, significant indebtedness, and failure to comply with laws and regulations[17][18] - The company undertakes no obligation to update or revise any forward-looking statements, except as required by law[18] Media and Investor Contacts This section provides contact information for Conduent's media and investor relations - Media Contact: Sean Collins, Phone: +1-310-497-9205, Email: sean.collins2@conduent.com[19] - Investor Contact: David Chen, Email: ir@conduent.com[19]