Conduent Inc.

11/07/2025 | Press release | Distributed by Public on 11/07/2025 07:05

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. Our MD&A is presented in seven sections:
•Overview;
•Financial Information and Analysis of Results of Operations;
•Metrics;
•Capital Resources and Liquidity;
•Critical Accounting Estimates and Policies;
•Recent Accounting Changes; and
•Non-GAAP Financial Measures.
The MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying Notes.
Overview
We deliver digital business solutions and services spanning the commercial, government and transportation spectrum - creating valuable outcomes for our clients and the millions of people who count on them. We leverage cloud computing, artificial intelligence ("AI"), machine learning, automation and advanced analytics to deliver mission-critical solutions. Through a dedicated global team of approximately 53,000 associates, as well as process expertise and advanced technologies, our solutions and services digitally transform our clients' operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs.
Headquartered in Florham Park, New Jersey, we have operations in 24 countries as of September 30, 2025.
Our reportable segments correspond to how we organize and manage the business and are aligned to the industries in which our clients operate. These three segments are:
•Commercial- Our Commercial segment provides business process services that span our clients' businesses end-to-end from the front-office to the back-office for a variety of commercial industries. These solutions are both cross-industry and industry-specific in nature. Across the Commercial segment, we operate on our clients' behalf to deliver mission-critical solutions and services to reduce costs, improve efficiencies and enhance performance for our clients and deliver better experiences for their consumers and employees.
•Government - Our Government segment provides government-centric business process services and solutions to U.S. federal, state, local and foreign governments for public assistance, healthcare programs and administration, transaction processing, payment services and case management. In this segment, we help governments respond to changing rules for eligibility and keep pace with increasing citizen expectations, modernize legacy technology systems, combat benefits fraud and shift in response to an evolving regulatory environment.
•Transportation - Our Transportation segment provides government agencies and transportation authorities around the world with systems, support and revenue-generating solutions serving toll and fare collections as well as mobility and digital payments that help streamline operations and increase revenue to government transportation agencies. With an expanded focus on sustainability and enhancing the quality of life for citizens and communities around the world, our solutions help reduce congestion and greenhouse emissions, while creating seamless travel experiences for consumers throughout transportation ecosystems.
CNDT Q3 2025 Form 10-Q
Executive Summary
Our intense emphasis on growth, quality, and efficiency, beginning in the first quarter of 2020, resulted in a strengthened foundation. Building on this solid foundation, during 2023, we held an investor briefing outlining our three-year strategy. We continue to execute this strategy and remain focused on accelerating growth and enhancing value for our stakeholders. We intend to achieve this by doubling down on key themes outlined in the 2023 investor briefing including focusing on key growth areas within each of our businesses, continuing our portfolio rationalization strategy, divesting certain solutions which have either scarcity value outside of Conduent or are capital intensive relative to their growth opportunity, and taking a balanced approach to allocating capital including internal investments in our solutions, pre-paying debt and repurchasing common shares.
This strategy has resulted and will continue to result in a nimbler and faster-growing Conduent with modest levels of net leverage, stronger free cash flow, and higher margins, which we believe will enhance our valuation. 2025 is the final of year of our three-year period. As we end 2025, we will update investors on how we finished versus that plan and on further targets for 2026 and beyond.
During the third quarter of 2025 we achieved the following:
•Successfully completed refinancing of the Company's revolving credit facility and paid off the Term Loan A.
•Announced the integration of the Generative AI ("GenAI") and other advanced AI technologies into the Company's Government solutions offerings to improve the disbursement of critical government benefits, enhance the citizen experience, and combat fraud in programs like Medicaid and SNAP.
•Awarded a contract by the Richmond Metropolitan Transportation Authority to implement a Pay-by-Plate toll collection system supporting the transition to all-electronic tolling designed to streamline traffic for a faster, safer, and more enjoyable driving experience.
•Announced an expansion of the Company's Philippines operations and opened a facility in Lipa-Malvar to support customer experience management solutions for a leading U.S. healthcare company.
•Expanded its FastCap® Finance Analytics solution by integrating GenAI-powered contract and spend analytics capability that enables it to expedite contract intake, verify contract compliance, and identify procurement savings and tariff-related financial exposures more efficiently and more accurately.
•Teamed with the State of Delaware to launch Conduent's Maven® Disease Surveillance & Outbreak Management System, helping it to monitor, report, and better understand public health threats and infectious disease outbreaks.
Cyber Event
On January 13, 2025, the Company experienced an operational disruption and learned that a threat actor gained unauthorized access to a limited portion of the Company's environment (the "January 2025 Cyber Event"). Upon detection, the Company activated its cybersecurity response plan with the help of external cybersecurity experts to contain, assess, and remediate the incident. The Company restored the affected systems and returned to normal operations within days, and in some cases, hours. The disruption did not have a material impact to the Company's operations.
As part of its ongoing investigation, the Company determined that the threat actor exfiltrated a set of files associated with a limited number of the Company's clients. Due to the complexity of the files, the Company engaged cybersecurity data mining experts to conduct a detailed analysis of the affected files to identify the personal information contained therein. This detailed analysis confirmed that the data sets contained a significant number of individuals' personal information associated with our clients' end-users. Upon completion of this time intensive data analysis, the Company notified impacted clients concerning their affected end-users. The Company is working with affected clients to determine next steps as required by federal and state law, including individual and regulatory notifications that began in October 2025 and are anticipated to be concluded by early 2026. To the Company's knowledge, the exfiltrated data has not been released on the dark web or otherwise publicly. The Company has also notified federal law enforcement authorities of the incident.
CNDT Q3 2025 Form 10-Q
While the Company did not experience material impacts to its operating environment or costs from the event itself, the Company incurred and accrued $25 million of non-recurring expenses in the first quarter of 2025 related to the event based on the notification requirements described above. We have made cash disbursements of $9 million through September 30, 2025 and expect to make an additional $16 million of cash disbursements by the end of the first quarter of 2026 related to these notification requirements. Any notification expense in excess of these amounts up to the coverage limit are anticipated to be covered by the cyber insurance policy that the Company maintains.
It is possible that future risks and uncertainties resulting from the January 2025 Cyber Event, including those related to impacted data, litigation, reputational harm, and regulatory actions, could adversely affect the Company's financial condition or results of operations. See also Part II, Item 1A (Risk Factors).
Financial Information and Analysis of Results of Operations
Three Months Ended
September 30, 		2025 vs. 2024
(in millions) 2025 2024 $ Change % Change
Revenue $ 767 $ 807 $ (40) (5) %
Operating Costs and Expenses
Cost of services (excluding depreciation and amortization) 631 656 (25) (4) %
Selling, general and administrative (excluding depreciation and amortization) 96 115 (19) (17) %
Research and development (excluding depreciation and amortization) 1 1 - - %
Depreciation and amortization 48 44 4 9 %
Restructuring and related costs 12 4 8 200 %
Interest expense 12 16 (4) (25) %
(Gain) loss on divestitures and transaction costs, net 1 (188) 189 n/m
Litigation settlements (recoveries), net - 1 (1) n/m
Loss on extinguishment of debt 1 1 - - %
Other (income) expenses, net 3 (2) 5 n/m
Total Operating Costs and Expenses 805 648 157
Income (Loss) Before Income Taxes (38) 159 (197)
Income tax expense (benefit) 8 36 (28)
Net Income (Loss) $ (46) $ 123 $ (169)
CNDT Q3 2025 Form 10-Q
Nine Months Ended
September 30, 		2025 vs. 2024
(in millions) 2025 2024 $ Change % Change
Revenue $ 2,272 $ 2,556 $ (284) (11) %
Operating Costs and Expenses
Cost of services (excluding depreciation and amortization) 1,866 2,068 (202) (10) %
Selling, general and administrative (excluding depreciation and amortization) 316 346 (30) (9) %
Research and development (excluding depreciation and amortization) 3 4 (1) (25) %
Depreciation and amortization 144 157 (13) (8) %
Restructuring and related costs 24 21 3 14 %
Interest expense 36 62 (26) (42) %
(Gain) loss on divestitures and transaction costs, net 8 (696) 704 n/m
Litigation settlements (recoveries), net 2 6 (4) (67) %
Loss on extinguishment of debt 1 6 (5) (83) %
Other (income) expenses, net 4 (4) 8 n/m
Total Operating Costs and Expenses 2,404 1,970 434
Income (Loss) Before Income Taxes (132) 586 (718)
Income tax expense (benefit) 5 148 (143)
Net Income (Loss) $ (137) $ 438 $ (575)
Revenue
Revenue for the three months ended September 30, 2025 decreased, compared to the prior year period, with roughly 67% of the decrease attributable to the divestiture of the Casualty Claims Solutions business. Excluding the divestiture impact, the decline was driven by lower revenue in Commercial, reflecting lost business and volume decreases with select clients, and anticipated reductions in certain benefit programs in our Government segment, partially offset by new business ramp and higher equipment sales within the Transportation segment.
Revenue for the nine months ended September 30, 2025 decreased, compared to the prior year period, approximately 63% of which was due to the impact of the BenefitWallet Transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. Excluding the divestitures impact, lost business and lower volumes contributed to the decrease and were partially offset by new business ramp, higher equipment sales and positive impacts from a contract amendment with a Transit Solutions customer within the Transportation segment.
Cost of Services (excluding depreciation and amortization)
Cost of services for the three and nine months ended September 30, 2025 decreased, compared to the prior year periods, primarily due to the impact of the BenefitWallet Transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. Excluding the divestitures impact, lower expenses on lower revenues and continued cost optimization initiatives across segments contributed to the decline.
Selling, General and Administrative ("SG&A") (excluding depreciation and amortization)
SG&A for the three months ended September 30, 2025 decreased, compared to the prior year period, primarily driven by cost efficiencies in our corporate functions. This decrease was partially offset by the increase in medical expenses resulting from higher claims.
SG&A for the nine months ended September 30, 2025 decreased, compared to the prior year period, primarily driven by a $9 million benefit from the recovery of legal costs from one of our insurance carriers related to the previously disclosed State of Texas matter that settled in February 2019 as well as cost efficiencies in our corporate functions. These were partially offset by $25 million of direct response costs related to the January 2025 Cyber Event.
CNDT Q3 2025 Form 10-Q
Depreciation and Amortization
Depreciation and amortization for the three months ended September 30, 2025 increased, compared to the prior year period, driven by completed capital investments being placed into service. These increases were partially offset by lower depreciation and amortization from the sale of the Casualty Claims Solutions business.
Depreciation and amortization for the nine months ended September 30, 2025 decreased, compared to the prior year period, primarily due to the absence of a write-off of an abandoned internal use software asset in our Commercial segment in the prior year and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. These decreases were partially offset by increased amortization of deferred contract costs related to new projects that went live in 2025.
Restructuring and Related Costs
We engage in a series of restructuring programs related to optimizing our employee base, reducing our real estate footprint, exiting certain activities, outsourcing certain internal functions, consolidating our data centers and engaging in other actions designed to reduce our cost structure and improve productivity. The following are the components of our Restructuring and related costs:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in millions) 2025 2024 2025 2024
Severance and related costs $ 7 $ 2 $ 14 $ 9
Data center consolidation costs - 1 - 4
Termination, insourcing and asset impairment costs 5 1 10 8
Restructuring and related costs $ 12 $ 4 $ 24 $ 21
Refer to Note 6 - Restructuring Programs and Related Costs to the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.
Interest Expense
Interest expense represents interest on long-term debt and the amortization of debt issuance costs. Interest expense for the three and nine months ended September 30, 2025 decreased, compared to the prior year periods, primarily due to the 2024 voluntary prepayments of the entire Term Loan B balance outstanding and a portion of the Term Loan A balance with proceeds from divestitures. The remaining Term Loan A balance was repaid at the execution of Amendment No. 3 to the Credit Facility.
(Gain) Loss on Divestitures and Transaction Costs
The completion of the BenefitWallet Transfer resulted in a gain of $425 million for the nine months ended September 30, 2024. The completion of the sale of the Curbside Management and Public Safety businesses in the second quarter of 2024 resulted in a gain of $108 million for the nine months ended September 30, 2024. The completion of the sale of the Casualty Claims Solutions business in the third quarter of 2024 resulted in a gain of $195 million for the three and nine months ended September 30, 2024. Additionally, professional fees and other costs related to these consummated and certain other non-consummated transactions considered by the Company are included in this financial statement line item for all periods.
Litigation Settlements (Recoveries), Net
Litigation settlements (recoveries), net for the nine months ended September 30, 2025 and 2024 were not material.
Income Taxes
The effective tax rate for the three months ended September 30, 2025 was (19.5)%, compared to 22.2% for the three months ended September 30, 2024. The September 30, 2025 rate was lower than the U.S. statutory rate of 21%, due primarily to valuation allowances and geographic mix of income.
The effective tax rate for the three months ended September 30, 2024 was higher than the U.S. statutory rate of 21% primarily due to state and local taxes, geographic mix of income, and other discrete tax items, partially offset by a favorable permanent difference on gains from divestitures.
CNDT Q3 2025 Form 10-Q
Excluding the impact of amortization, restructuring, divestiture, valuation allowances and discrete tax items, the normalized effective tax rate for the three months ended September 30, 2025 was 44.7%. The normalized effective tax rate for the three months ended September 30, 2024 was 12.5%, due primarily to excluding the impact of gain from divestitures, restructuring costs, amortization of intangibles, valuation allowance release and other discrete tax adjustments.
The effective tax rate for the nine months ended September 30, 2025 was (3.4)%, compared to 25.2% for the nine months ended September 30, 2024. The September 30, 2025 rate was lower than the U.S. statutory rate of 21%, primarily due to valuation allowances and geographic mix of income.
The effective tax rate for the nine months ended September 30, 2024 was higher than the U.S. statutory rate of 21%, primarily due to state and local taxes and geographic mix of income, partially offset by a favorable permanent difference on gain from divestitures, tax benefit from valuation allowances and audit settlement reserve releases.
Excluding the impact of amortization, restructuring, divestiture, reserves for the Direct response costs - cyber event, valuation allowances and discrete tax items, the normalized effective tax rate for the nine months ended September 30, 2025 was 29.0%. The normalized effective tax rate for the nine months ended September 30, 2024 was 19.7%, primarily due to excluding the impact of the gain from divestitures, restructuring costs, amortization of intangible assets, litigation reserve releases, audit settlement reserve release, valuation allowance and other discrete tax items.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBA") was signed into law in the U.S. The legislation contains certain provisions related to the full expensing of U.S. research and development costs and other depreciable property. The legislation also includes changes to the determination of the amount of U.S. interest expense that is deductible for U.S. tax purposes. The acceleration of deductions as a result of anticipated elections the Company will make for the current year following the OBBA has increased current year forecasted net operating loss ("NOL"). The NOL has created a deferred tax asset that required a valuation allowance for U.S. GAAP purposes that was increased in the third quarter of 2025. The NOL may carryforward indefinitely.
In 2021, the Organization for Economic Cooperation and Development released model rules for a 15% global minimum tax, known as Pillar Two. This alternative minimum tax is treated as a period cost beginning in 2024 and does not have a material impact on our financial results of operations for the current period. We continue to monitor legislative developments, as well as additional guidance from countries that have enacted legislation.
Operations Review of Segment Revenue and Profit
Our financial performance is based on Segment Profit (Loss) and Segment Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the following three segments:
•Commercial;
•Government; and
•Transportation.
Divestitures include our BenefitWallet Portfolio and our Casualty Claims Solutions businesses (both of which were reclassified from our Commercial segment) and our Curbside Management and Public Safety Solutions businesses (which was reclassified from our Transportation segment).
Unallocated Costs includes IT infrastructure costs that are shared by multiple reportable segments, enterprise application costs and certain corporate overhead expenses not directly attributable or allocated to our reportable segments.
Results of our financial performance were:
CNDT Q3 2025 Form 10-Q
Three Months Ended
September 30,
Commercial Government Transportation Divestitures Unallocated Costs Total
(in millions) Reportable Segments
2025
Segment revenue $ 367 $ 238 $ 162 $ - $ - $ 767
Segment profit (loss) $ 17 $ 48 $ (3) $ - $ (70) $ (8)
Segment depreciation and amortization $ 20 $ 13 $ 7 $ - $ 8 $ 48
Adjusted EBITDA $ 37 $ 61 $ 4 $ - $ (62) $ 40
% of Total Revenue 47.9 % 31.0 % 21.1 % - % - % 100.0 %
Adjusted EBITDA Margin 10.1 % 25.6 % 2.5 % - % - % 5.2 %
2024
Segment Revenue $ 385 $ 255 $ 141 $ 26 $ - $ 807
Segment profit (loss) $ 15 $ 50 $ (6) $ 3 $ (70) $ (8)
Segment depreciation and amortization $ 20 $ 10 $ 6 $ 1 $ 7 $ 44
Adjusted EBITDA $ 35 $ 60 $ - $ 4 $ (63) $ 36
% of Total Revenue 47.7 % 31.6 % 17.5 % 3.2 % - % 100.0 %
Adjusted EBITDA Margin 9.1 % 23.5 % - % 20.4 % - % 4.5 %
Nine Months Ended
September 30,
Commercial Government Transportation Divestitures Unallocated Costs Total
(in millions) Reportable Segments
2025
Segment revenue $ 1,134 $ 692 $ 446 $ - $ - $ 2,272
Segment profit (loss) $ 40 $ 125 $ (5) $ - $ (215) $ (55)
Segment depreciation and amortization $ 64 $ 34 $ 23 $ - $ 23 $ 144
Direct response costs - cyber event $ - $ - $ - $ - $ 25 $ 25
Adjusted EBITDA $ 104 $ 159 $ 18 $ - $ (167) $ 114
% of Total Revenue 49.9 % 30.5 % 19.6 % - % - % 100.0 %
Adjusted EBITDA Margin 9.2 % 23.0 % 4.0 % - % - % 5.0 %
2024
Segment Revenue $ 1,192 $ 758 $ 426 $ 180 $ - $ 2,556
Segment profit (loss) $ 48 $ 130 $ (15) $ 35 $ (213) $ (15)
Segment depreciation and amortization $ 68 $ 34 $ 19 $ 13 $ 21 $ 155
Adjusted EBITDA $ 116 $ 164 $ 4 $ 48 $ (192) $ 140
% of Total Revenue 46.6 % 29.7 % 16.7 % 7.0 % - % 100.0 %
Adjusted EBITDA Margin 9.7 % 21.6 % 0.9 % 20.4 % - % 5.5 %
CNDT Q3 2025 Form 10-Q
(in millions) Three Months Ended
September 30, 		Nine Months Ended
September 30,
Adjusted EBITDA and Segment Profit (Loss) Reconciliation to Income (Loss) Before Income Taxes 2025 2024 2025 2024
Adjusted EBITDA $ 40 $ 36 $ 114 $ 140
Reconciling items:
Segment depreciation and amortization (48) (44) (144) (155)
Direct response costs - cyber event - - (25) -
Segment Profit (Loss) $ (8) $ (8) $ (55) $ (15)
Reconciling items:
Amortization of acquired intangible assets (1) (1) (2) (4)
Restructuring and related costs (12) (4) (24) (21)
Interest expense (12) (16) (36) (62)
Loss on extinguishment of debt (1) (1) (1) (6)
Gain (loss) on divestitures and transaction costs, net (1) 188 (8) 696
Litigation (settlements) recoveries, net - (1) (2) (6)
Other income (expenses), net (3) 2 (4) 4
Income (Loss) Before Income Taxes $ (38) $ 159 $ (132) $ 586
Commercial Segment
Revenue
Commercial revenue for the three and nine months ended September 30, 2025 declined, compared to the prior year periods, primarily due to lower volumes, partially offset by new business ramp that outpaced lost business and a multi-year licensing agreement with an existing customer.
Segment Profit and Adjusted EBITDA
Commercial segment profit and adjusted EBITDA for the three months ended September 30, 2025 increased, compared to the prior year period, primarily due to a multi-year licensing agreement with an existing customer, partially offset by higher fixed technology overhead.
Commercial segment profit and adjusted EBITDA for the nine months ended September 30, 2025 decreased, compared to the prior year period, primarily due to the revenue drivers noted above and higher fixed technology overhead, partially offset by cost efficiencies and the impact of lower depreciation due to the prior year write-off of internal use software and fully amortized assets.
Government Segment
Revenue
Government revenue for the three and nine months ended September 30, 2025 decreased, compared to the prior year periods, primarily due to contract losses, lower volumes and impacts related to the completion or extension of several implementations. These declines were partially offset by ramp of new business.
Segment Profit and Adjusted EBITDA
Government segment profit for the three months ended September 30, 2025 decreased, compared to the prior year period, primarily due to contract losses and lower volumes, partially offset by rate increases on contract renewals and lower expenses, driven by our fraud prevention activities in our Government Services business resulting from investments in AI.
Government adjusted EBITDA for the three months ended September 30, 2025 was relatively flat compared to the prior year period. Government adjusted EBITDA Margin for the three months ended September 30, 2025 improved significantly compared to the prior year period, increasing by 210 basis points, due to margin improvement initiatives and our fraud prevention activities resulting from investment in AI as noted above.
CNDT Q3 2025 Form 10-Q
Government segment profit and adjusted EBITDA for the nine months ended September 30, 2025 decreased, compared to the prior year period, primarily due to contract losses and lower volumes, partially offset by cost efficiencies and lower expenses driven by AI-enabled fraud prevention activities.
Transportation Segment
Revenue
Transportation revenue for the three months ended September 30, 2025 increased, compared to the prior year period, primarily due to equipment sales to a large Transit Solutions customer, increased volumes and favorable exchange rate movement. These factors were partially offset by lower activity across certain smaller projects.
Transportation revenue for the nine months ended September 30, 2025 increased, compared to the prior year period, primarily due to revenue drivers mentioned above, including a contract amendment with a Transit Solutions customer. The amended agreement included additional consideration, and a cumulative catch-up adjustment was recorded in connection with such amendment. These increases were partially offset by a higher proportion of the non-retained portion of a Road Usage Charging contract.
Segment Profit and Adjusted EBITDA
Transportation segment profit and adjusted EBITDA for the three and nine months ended September 30, 2025 increased due to the revenue drivers mentioned above and the absence of costs to transition the non-retained portion of a Road Usage Charging contract.
Divestitures
Revenue, Segment Profit and Adjusted EBITDA
The decrease in revenue, segment profit and Adjusted EBITDA for the three and nine months ended September 30, 2025, as compared to the prior year periods, was due to the transfer of the BenefitWallet portfolio, and the sales of the Curbside Management and Public Safety Solutions businesses and Casualty Claims Solutions businesses in 2024.
Unallocated Costs
Unallocated Costs for the three months ended September 30, 2025 decreased, compared to the prior year period, primarily due cost efficiencies in our corporate functions. This decrease was partially offset by the increase in medical expenses resulting from higher claims.
Unallocated Costs for the nine months ended September 30, 2025 also decreased, compared to the prior year period, primarily due to a $9 million recovery of legal costs from one of our insurance carriers related to the previously disclosed State of Texas matter that settled in February 2019, as well as cost efficiencies in our corporate functions. These factors were partially offset by $25 million of direct response costs related to the January 2025 Cyber Event.
Metrics
Metrics
We use metrics to evaluate our business, determine the allocation of our resources, make decisions regarding corporate strategies and evaluate forward-looking projections and trends affecting our business. We disclose these metrics to provide transparency in our performance trends. We present certain key metrics, including Signings and Net ARR Activity below.
Signings
Signings are defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts. Total Contract Value ("TCV") is the estimated total contractual revenue related to signed contracts. TCV signings is defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts. Due to the inconsistency of when existing contracts end, quarterly and yearly comparisons are not a good measure of renewal performance. New business Annual Contract Value ("ACV") is calculated as TCV divided by the contract term, in months, multiplied by 12 for an annual measure.
CNDT Q3 2025 Form 10-Q
Signing information for the three and nine months ended September 30, 2025 and 2024 is as follows:
Three Months Ended
September 30, 		2025 vs. 2024
($ in millions) 2025
2024(3)
$ Change % Change
New business ACV $ 111 $ 111 $ - - %
New business TCV $ 246 $ 235 $ 11 5 %
Renewals TCV 213 659 (446) (68) %
Total Signings $ 459 $ 894 $ (435) (49) %
Annual recurring revenue signings(1)
$ 64 $ 63 $ 1 2 %
Non-recurring revenue signings(2)
$ 55 $ 50 $ 5 10 %
Nine Months Ended
September 30, 		2025 vs. 2024
($ in millions) 2025
2024(3)
$ Change % Change
New business ACV $ 365 $ 348 $ 17 5 %
New business TCV $ 850 $ 651 $ 199 31 %
Renewals TCV 925 1,296 (371) (29) %
Total Signings $ 1,775 $ 1,947 $ (172) (9) %
Annual recurring revenue signings(1)
$ 183 $ 155 $ 28 18 %
Non-recurring revenue signings(2)
$ 225 $ 230 $ (5) (2) %
___________
(1)Recurring revenue signings are for new business contracts longer than one year.
(2)Non-recurring revenue signings are for contracts shorter than one year.
(3)Adjusted to remove new business signings of the BenefitWallet Portfolio, Curbside Management and Public Safety Solutions businesses and Casualty Claims Solutions business.
The total new business pipeline at the end of September 30, 2025 and 2024 was $3.4 billion and $3.1 billion, respectively. Total new business pipeline is defined as total new business ACV pipeline of deals at or beyond the qualified prospect stage. Beginning in the first quarter of 2025, we transitioned our measure of sales pipeline from TCV to ACV to align with our primary sales metric and have recast all prior period comparatives to reflect this change. This extends past the next twelve-month period to include total pipeline, excluding the impact of divested business as required.
Net ARR Activity
Net ARR Activity is a metric that is defined as Projected Annual Recurring Revenue ("ARR") for contracts signed in the prior 12 months, less the annualized impact of any client losses, contractual volume and price changes, and other known impacts for which the Company was notified in that same time period, which could positively or negatively impact results. The metric annualizes the net impact to revenue. Timing of revenue impact varies and may not be realized within the forward 12-month timeframe. The metric is for indicative purposes only. This metric excludes non-recurring revenue signings. This metric is not indicative of any specific 12-month timeframe.
The Net ARR activity metric for the trailing twelve months for each of the prior five quarters was as follows:
(in millions) Net ARR Activity metric
September 30, 2025 $ 25
June 30, 2025 63
March 31, 2025 116
December 31, 2024 92
September 30, 2024 46
CNDT Q3 2025 Form 10-Q
Capital Resources and Liquidity
As of September 30, 2025 and December 31, 2024, total cash and cash equivalents were $248 million and $366 million, respectively. We also have a $357 million revolving line of credit for our various cash needs. As of September 30, 2025 we had $134 million outstanding borrowings under this revolving line of credit and an additional $25 million was used for letters of credit. The net amount available to be drawn upon under our revolving line of credit as of September 30, 2025, was $198 million.
As of September 30, 2025, our total principal debt outstanding was $717 million, of which $16 million was due within one year. Refer to Note 7 - Debt in the Condensed Consolidated Financial Statements for additional debt information.
To provide financial flexibility and finance certain investments and projects, we may continue to utilize external financing arrangements. However, we believe that our cash on hand, projected cash flow from operations, sound balance sheet and our revolving line of credit will continue to provide sufficient financial resources to meet our expected business obligations for at least the next twelve months.
Cash Flow Analysis
The following table summarizes our cash flows, as reported in our Condensed Consolidated Statement of Cash Flows in the accompanying Condensed Consolidated Financial Statements:
Nine Months Ended September 30,
(in millions) 2025 2024 Better (Worse)
Net cash provided by (used in) operating activities $ (112) $ (91) $ (21)
Net cash provided by (used in) investing activities $ (6) $ 761 (767)
Net cash provided by (used in) financing activities $ - $ (781) 781
Operating activities
The net increase in cash used in operating activities of $21 million, compared to the prior year period, was primarily due to lower Adjusted EBITDA due to the divestitures, unfavorable working capital trends and January 2025 Cyber Event related cash outflows. These unfavorable changes were partially offset by lower cash interest expense.
Investing activities
Investing cash flow decreased by $767 million mainly due to the proceeds received from the BenefitWallet Portfolio transfer and the Curbside Disposal Group and Casualty Disposal Group divestitures in 2024. The 2025 period includes $50 million of cash received related to the non-interest bearing note from the Curbside Disposal Group divestiture.
Financing activities
The decrease in cash used in financing activities was due to the voluntary prepayment of $539 million of debt using the proceeds received from the divestitures noted above in 2024. Additionally, the prior year included $182 million of treasury stock purchases under the share repurchase program that was completed in September 2024, including $132 million purchased from Carl Icahn and certain of his affiliates. The 2025 period includes a $50 million drawdown on our revolving line of credit and $20 million of treasury stock purchases under our current share repurchase program.
CNDT Q3 2025 Form 10-Q
Sales of Accounts Receivable
We have entered into a factoring agreement in the normal course of business as part of our cash and liquidity management, to sell certain accounts receivable without recourse to a third-party financial institution. The transactions under this agreement are treated as sales and are accounted for as reductions in accounts receivable because the agreement transfers effective control over, and risk related to, the receivables to the buyer. Cash proceeds from this arrangement are included in cash flow from operating activities in the Condensed Consolidated Statements of Cash Flows.
The net impact from the sales of accounts receivable on net cash provided by (used in) operating activities for the nine months ended September 30, 2025 and 2024 was $(12) million and $(4) million, respectively.
Material Cash Requirements from Contractual Obligations
We believe our balances of cash and cash equivalents, which totaled $248 million as of September 30, 2025, along with cash generated by operations and amounts available for borrowing under our revolving credit facility, will be sufficient to satisfy our cash requirements over the next 12 months and beyond.
At September 30, 2025, the Company's material cash requirements include debt, leases and estimated purchase commitments. See Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information on our material cash requirements.
Critical Accounting Estimates and Policies
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Condensed Consolidated Financial Statements and notes thereto.
There have been no significant changes during the nine months ended September 30, 2025 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Changes
See Note 2 - Recent Accounting Pronouncements for information on accounting standards adopted during the current year, as well as recently issued accounting standards not yet required to be adopted and the expected impact of the adoption of these accounting standards.
Non-GAAP Financial Measures
We report our financial results in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). In addition, within this Form 10-Q Part I Item 2 we have discussed our financial results using non-GAAP measures.
We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with U.S. GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that these non-GAAP financial measures provide an additional means of analyzing the results of the current period compared to the corresponding prior period. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on certain of these non-GAAP measures.
CNDT Q3 2025 Form 10-Q
A reconciliation of the non-GAAP financial measure Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP is provided in the "Operations Review of Segment Revenue and Profit" section above.
Adjusted EBITDA and Adjusted EBITDA Margin
We use adjusted EBITDA and adjusted EBITDA Margin as an additional way of assessing certain aspects of our operations that, when viewed with the U.S. GAAP results and the accompanying reconciliations to corresponding U.S. GAAP financial measures, provide a more complete understanding of our on-going business. Adjusted EBITDA Margin is adjusted EBITDA divided by revenue. Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation and amortization and contract inducement amortization adjusted for the following items:
•Amortization of acquired intangible assets. This is driven by acquisition activity, which can vary in size, nature and timing as compared to other companies within our industry and from period to period.
•Restructuring and related costs. This includes restructuring and asset impairment charges as well as costs associated with our strategic transformation program.
•Goodwill impairment. This represents goodwill impairment charges arising from annual or interim goodwill testing.
•(Gain) loss on divestitures and transaction costs. This represents (gain) loss on divested businesses and transaction costs.
•Litigation settlements (recoveries), net. This represents settlements or recoveries for various matters subject to litigation.
•Loss on extinguishment of debt. This represents write-off of debt issuance costs related to prepayments of debt.
•Direct response costs - cyber event. This represents costs related to investigating, remediating and responding to the cyber event that occurred in January 2025.
•Other charges (credits). This includes Other (income) expenses, net on the Condensed Consolidated Statements of Income (Loss) and other adjustments.
Adjusted EBITDA is not intended to represent cash flows from operations, operating income (loss) or net income (loss) as defined by U.S. GAAP as indicators of operating performance. Management cautions that amounts presented in accordance with Conduent's definition of adjusted EBITDA and adjusted EBITDA Margin may not be comparable to similar measures disclosed by other companies because not all companies calculate adjusted EBITDA and adjusted EBITDA Margin in the same manner.
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