CONDUENT Inc

Previous wording

During the second quarter of 2024 we have achieved the following:

Current wording

During the third quarter of 2024 we achieved the following:

Previous wording

•Used the proceeds from the divested businesses to voluntarily prepay $300 million of the Term Loan B.

Current wording

•Used the proceeds from the divested businesses to voluntarily prepay the entire remaining outstanding balance of $38 million of the Term Loan B and voluntarily prepaid $37 million of the Term Loan A.

Previous wording

Revenue for the three months ended June 30, 2024 decreased compared to the prior year period primarily due to the impact of the Benefit Wallet Transfer and the sale of The Curbside Management and Public Safety Solutions businesses. Lost business in all three segments contributed to the decrease and was partially offset by new business ramp, particularly in our Transportation segment.

Current wording

Revenue for the three months ended September 30, 2024 decreased compared to the prior year period, approximately two thirds of which was due to the impact of the Benefit Wallet 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, particularly in our Commercial and Transportation segments.

Previous wording

Revenue for the six months ended June 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the Benefit Wallet Transfer, the sale of the Curbside Management and Public Safety Solutions businesses and lost business in our Commercial and Government segments partially offset by new business ramp, including the State of Victoria contract, stronger volumes and improved operational execution in our Transportation segment.

Current wording

Revenue for the nine months ended September 30, 2024 decreased, compared to the prior year period, approximately three quarters of which was due to the impact of the Benefit Wallet Transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. Excluding the divestitures impact, lost business across our three segments was partially offset by new business ramp, including the State of Victoria contract.

Previous wording

Cost of services for the three months ended June 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the Benefit Wallet Transfer and the sale of the Curbside Management and Public Safety Solutions businesses.

Current wording

Cost of services for the three months ended September 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the Benefit Wallet 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 cost optimizations contributed to the decline.

Previous wording

Cost of services for the six months ended June 30, 2024 decreased slightly, compared to the prior year period, primarily driven by the impact of the Benefit Wallet Transfer and the sale of the Curbside Management and Public Safety Solutions businesses partially offset by the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period described in Note 16 – Contingencies and Litigation to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K.

Current wording

Cost of services for the nine months ended September 30, 2024 decreased, compared to the prior year period, over half of which was primarily driven by the impact of the Benefit Wallet 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 cost optimizations contributed to the decrease and were partially offset by the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period described in Note 16 – Contingencies and Litigation to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K.

Previous wording

SG&A for the three months ended June 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the sale of the Curbside Management and Public Safety Solutions businesses.

Current wording

SG&A for the three months ended September 30, 2024 was unchanged, compared to the prior year period.

Previous wording

SG&A for the six months ended June 30, 2024 increased, compared to the prior year periods, driven by costs to transition away from a technology vendor, partially offset by the impact of the sale of the Curbside Management and Public Safety Solutions businesses.

Current wording

SG&A for the nine months ended September 30, 2024 increased, compared to the prior year periods, primarily driven by costs to transition away from a technology vendor, partially offset by the impact of the sales of the Curbside Management and Public Safety Solutions business.

Previous wording

Depreciation and amortization for the three and six months ended June 30, 2024 decreased, compared to the prior year periods due to the impact of the sale of the Curbside Management and Public Safety Solutions businesses and lower capital investments, partially offset by the current year write-off of an abandoned internal use software asset in our Commercial segment.

Current wording

Depreciation and amortization for the nine months ended September 30, 2024 decreased, compared to the prior year period due to the impact of the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses, the prior year write-off of an internal use software asset in our Commercial segment as noted above and lower capital investments.

Previous wording

Restructuring and related costs for the six months ended June 30, 2024 decreased compared to the prior year period. The decrease is primarily driven by severance and related costs due to the closure of one of our Commercial segment operations in Europe in the prior year period.

Current wording

Restructuring and related costs for the nine months ended September 30, 2024 decreased compared to the prior year period. The decrease is primarily driven by severance and related costs due to the closure of one of our Commercial segment operations in Europe in the prior year period as well as lower facilities downsizing costs in the current year.

Previous wording

Interest expense represents interest on long-term debt and the amortization of debt issuance costs. Interest expense for the three and six months ended June 30, 2024 decreased, compared to the prior year periods primarily due to voluntary prepayments of the Term Loan B with proceeds from divestitures.

Current wording

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, 2024 decreased, compared to the prior year periods primarily due to voluntary prepayments of the entire Term Loan B balance outstanding and a portion of the Term Loan A balance with proceeds from divestitures.

Previous wording

The completion of the BenefitWallet Transfer resulted in a gain of $261 million and $425 million for the three and six months ended June 30, 2024, respectively. 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 three and six months ended June 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.

Current wording

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.

Previous wording

Litigation settlements (recoveries), net for the six months ended June 30, 2023 primarily consisted of a $26 million reversal of reserves due to the settlement of the Cognizant matter.

Current wording

Litigation settlements (recoveries), net for the nine months ended September 30, 2023 primarily consisted of a $26 million reversal of reserves due to the settlement of the Cognizant matter.

Previous wording

The effective tax rate for the three months ended June 30, 2024 was 28.2%, compared to (3.3)% for the three months ended June 30, 2023. The June 30, 2024 rate was higher than the U.S. statutory rate of 21%, primarily due to state and local taxes, geographic mix of income, and other nondeductible permanent differences, partially offset by tax benefit of valuation allowances released due to the gain from divestitures and tax credits.

Current wording

The effective tax rate for the three months ended September 30, 2024 was 22.2%, compared to 7.8% for the three months ended September 30, 2023. The September 30, 2024 rate 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.

Previous wording

Excluding the impact of the gain from divestitures, restructuring costs, amortization of intangibles, valuation allowance release and other discrete tax adjustments, the normalized effective tax rate for the three months ended June 30, 2024 was 23.6%. The normalized effective tax rate for the three months ended June 30, 2023 was 42.2%, primarily due to excluding the impact of restructuring costs, amortization of intangible assets and other discrete tax adjustments. The normalized effective tax rate for the three months ended June 30, 2024 was lower than the rate for the three months ended June 30, 2023 due to the geographic mix of income.

Current wording

Excluding the impact of the gains from divestitures, restructuring costs, amortization of intangibles, valuation allowance and other discrete tax adjustments, the normalized effective tax rate for the three months ended September 30, 2024 was 12.5%. The normalized effective tax rate for the three months ended September 30, 2023 was (6.1)%, primarily due to excluding the impact of restructuring costs, amortization of intangible assets and goodwill impairment. The normalized effective tax rate for the three months ended September 30, 2024 was higher than the rate for the three months ended September 30, 2023 primarily due to higher pre-tax loss and the geographic mix of income.

Previous wording

The effective tax rate for the six months ended June 30, 2024 was 26.3%, compared to 9.2% for the six months ended June 30, 2023. The June 30, 2024 rate was higher than the U.S. statutory rate of 21%, primarily due to state and local taxes, geographic mix of income, and other nondeductible permanent differences, partially offset by tax benefit from valuation allowances and audit settlement reserve releases.

Current wording

The effective tax rate for the nine months ended September 30, 2024 was 25.2%, compared to 7.8% for the nine months ended September 30, 2023. The September 30, 2024 rate 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 favorable permanent difference on gain from divestitures, tax benefit from valuation allowances and audit settlement reserve releases.

Previous wording

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, the normalized effective tax rate for the six months ended June 30, 2024 was 23.1%. The normalized effective tax rate for the six months ended June 30, 2023 was 40.5%, primarily due to excluding the impact of the amortization of intangible assets, restructuring costs and litigation reserve releases. The normalized effective tax rate for the six months ended June 30, 2024 was lower than the six months ended June 30, 2023 rate primarily due to the geographic mix of income.

Current wording

Excluding the impact of the gains from divestitures, restructuring costs, amortization of intangible assets, litigation reserve, audit settlement reserve release, valuation allowance and other discrete tax items, the normalized effective tax rate for the nine months ended September 30, 2024 was 19.7%. The normalized effective tax rate for the nine months ended September 30, 2023 was (158.4)%, primarily due to excluding the impact of goodwill impairment, amortization of intangible assets, restructuring costs, litigation reserve releases and certain discrete tax items. The September 30, 2023 rate was anomalous due to the small adjusted pre-tax loss and tax, which was a result of geographic mix of income and valuation allowances against losses in certain jurisdictions resulting in no tax benefit. The normalized effective tax rate for the nine months ended September 30, 2024 was higher than the rate for the nine months ended September 30, 2023 primarily due to the geographic mix of income and higher pre-tax loss.

Previous wording

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 the Company's financial results of operations for the current period. The Company is continuing monitoring legislative developments, as well as additional guidance from countries that have enacted legislation. We anticipate further legislative activity and administrative guidance in 2024.

Current wording

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 the Company's financial results of operations for the current period. The Company continues to monitor legislative developments, as well as additional guidance from countries that have enacted legislation.

Previous wording

Divestitures includes our BenefitWallet and Curbside Management and Public Safety Solutions businesses, which have been reclassified from our Commercial and Transportation segments, respectively.

Current wording

Divestitures includes our BenefitWallet and 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).

Previous wording

Commercial revenue for the three and six months ended June 30, 2024 declined compared to the prior year periods, driven by lost business and lower volumes, partially offset by new business ramp.

Current wording

Commercial revenue for the three months ended September 30, 2024 declined compared to the prior year period, driven by lower volumes, partially offset by new business ramp outpacing lost business.

Previous wording

Commercial segment profit and adjusted EBITDA for the six months ended June 30, 2024 are substantially unchanged compared to the prior year period, with new business and cost efficiencies offsetting lost business and lower volumes. Commercial segment profit also benefited slightly from the impact of lower depreciation.

Current wording

Commercial segment profit and adjusted EBITDA for the three and nine months ended September 30, 2024 increased compared to the prior year periods primarily due to new business ramp and cost efficiencies, partially offset by the impact of lost business and lower volumes. Commercial segment profit also benefited from the impact of lower depreciation due to the prior year write-off of internal use software and fully amortized assets.

Previous wording

Government revenue for the three and six months ended June 30, 2024 decreased, compared to the prior year periods, primarily driven by lost business and lower volumes, partially offset by the ramping of new business and a non-repeating item in the prior year period.

Current wording

Government revenue for the three and nine months ended September 30, 2024 decreased, compared to the prior year periods, primarily driven by lost business in our Government Healthcare business and lower volumes in our Government Services business due to the change in funding mechanism for the Electronic Benefits Transfer ("EBT") programs.

Previous wording

Government segment profit and adjusted EBITDA for the three and six months ended June 30, 2024 decreased compared to the prior year periods primarily due to lost business, lower volumes and the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period and unfavorable revenue mix.

Current wording

Government segment profit and adjusted EBITDA for the nine months ended September 30, 2024 decreased compared to the prior year periods primarily due to the impact of lost business, lower volumes and the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period and unfavorable revenue mix.

Previous wording

Transportation revenue for the three and six months ended June 30, 2024 increased compared to the prior year periods, primarily driven by the ramping of new business, including the State of Victoria contract, higher volumes, improved operational performance and less impact from extended implementation timelines compared to the prior year period, partially offset by the non-retained portion of a Tolling contract.

Current wording

Transportation revenue for the nine months ended September 30, 2024 increased compared to the prior year period, primarily driven by the ramp of new business and improved operational performance with fewer delays from extended implementation timelines compared to the prior year period, partially offset by lost business, the price decline noted above and lower volumes.

Previous wording

Transportation segment profit and adjusted EBITDA for the three and six months ended June 30, 2024 decreased primarily due to the non-retained portion of a Tolling contract, partially offset by improved operational performance and less impact from extended implementation timelines compared to the prior year period.

Current wording

Transportation segment profit and adjusted EBITDA for the three and nine months ended September 30, 2024 were slightly lower due to the non-retained portion of a Tolling contract, partially offset by improved operational performance and reduced impact from extended implementation timelines compared to the prior year period.

Previous wording

The decrease in revenue, segment profit and Adjusted EBITDA for the three and six months ended June 30, 2024 was due to the BenefitWallet portfolio and the Curbside Management and Public Safety businesses being included in the full three and six months of the prior year period whereas their results were only included until the date of their transfer and sale, respectively, in 2024.

Current wording

The decrease in revenue, segment profit and Adjusted EBITDA for the three and nine months ended September 30, 2024 was due to the BenefitWallet portfolio, the Curbside Management and Public Safety Solutions businesses and Casualty Claims Solutions businesses being included in the full three and nine months of the prior year period whereas their results were only included until the date of their transfer and sale, as applicable, in 2024.

Previous wording

Unallocated Costs for the three and six months ended June 30, 2024 decreased compared to the prior year periods primarily due to lower technology costs and lower employee-related healthcare expenses.

Current wording

Unallocated Costs for the three and nine months ended September 30, 2024 decreased compared to the prior year periods primarily due to lower technology costs.

Previous wording

Signing information for the three and six months ended June 30, 2024 and 2023 is as follows:

Current wording

Signing information for the three and nine months ended September 30, 2024 and 2023 is as follows:

Previous wording

(3)Adjusted to remove Curbside Management and Public Safety new business signings.

Current wording

(3)Adjusted to remove Curbside Management and Public Safety Solutions businesses and Casualty Claims Solutions business new business signings.

Previous wording

The total new business pipeline at the end of June 30, 2024 and 2023 was $21.8 billion and $19.0 billion, respectively. Total new business pipeline is defined as total new business TCV pipeline of deals in all sell stages. This extends past the next twelve-month period to include total pipeline, excluding the impact of divested business as required.

Current wording

The total new business pipeline at the end of September 30, 2024 and 2023 was $21.2 billion and $21.4 billion, respectively. Total new business pipeline is defined as total new business TCV pipeline of deals in all sell stages. This extends past the next twelve-month period to include total pipeline, excluding the impact of divested business as required.

Previous wording

Net ARR Activity is a metric that is defined as Projected Annual Recurring Revenue 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.

Current wording

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.

Previous wording

As of June 30, 2024 and December 31, 2023, total cash and cash equivalents were $300 million and $498 million, respectively. We also have a $550 million revolving line of credit for our various cash needs, of which $3 million was used for letters of credit. The net amount available to be drawn upon under our revolving line of credit as of June 30, 2024, was $547 million.

Current wording

As of September 30, 2024 and December 31, 2023, total cash and cash equivalents were $393 million and $498 million, respectively. We also have a $550 million revolving line of credit for our various cash needs, of which $11 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, 2024, was $539 million.

Previous wording

As of June 30, 2024, our total principal debt outstanding was $833 million, of which $33 million was due within one year. Refer to Note 7 – Debt in the Condensed Consolidated Financial Statements for additional debt information.

Current wording

As of September 30, 2024, our total principal debt outstanding was $753 million, of which $26 million was due within one year. Refer to Note 7 – Debt in the Condensed Consolidated Financial Statements for additional debt information.

Previous wording

The net increase in cash used in operating activities of $56 million, compared to the prior year period, was primarily due to lower adjusted EBITDA, slightly higher accounts receivable days sales outstanding and lower days payable outstanding. These were partially offset by lower cash income tax and interest payments. We expect cash tax payments to increase significantly in the second half of 2024 resulting from payments on gains related to our divestitures.

Current wording

The net increase in cash used in operating activities of $58 million, compared to the prior year period, was primarily due to lower Adjusted EBITDA and a decrease in days payable outstanding, partially offset by lower interest payments. We expect significant cash tax payments in the fourth quarter of 2024 due to gains on divestitures.

Previous wording

Investing cash flow increased by $595 million mainly due to $599 million of proceeds received from the transfer of the BenefitWallet Portfolio and the sale of the Curbside Management and Public Safety Solutions businesses.

Current wording

Investing cash flow increased by $825 million mainly due to $823 million of proceeds received from the divestitures.

Previous wording

The increase in cash used in financing activities was primarily driven by the voluntary prepayment of $464 million of debt using the proceeds received for the transfer of the BenefitWallet Portfolio and the sale of the Curbside Management and Public Safety businesses as well as the repurchase of $168 million of treasury stock, including the $132 million purchased from the Icahn Parties.

Current wording

The increase in cash used in financing activities was due to the voluntary prepayment of $539 million of debt using the proceeds received from the recent divestitures, as well as the repurchase of $182 million of treasury stock, including the $132 million purchased from the Icahn Parties.

Previous wording

The net impact from the sales of accounts receivable on net cash provided by (used in) operating activities for the six months ended June 30, 2024 and 2023 was $(16) million and $(24) million, respectively.

Current wording

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, 2024 and 2023 was $(4) million and $(14) million, respectively.

Previous wording

The Company believes its balances of cash and cash equivalents, which totaled $300 million as of June 30, 2024, along with cash generated by operations and amounts available for borrowing under its 2021 Revolving Credit Facility, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

Current wording

We believe our balances of cash and cash equivalents, which totaled $393 million as of September 30, 2024, along with cash generated by operations and amounts available for borrowing under our 2021 Revolving Credit Facility, will be sufficient to satisfy our cash requirements over the next 12 months and beyond.

Previous wording

There have been no significant changes during the six months ended June 30, 2024 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

There have been no significant changes during the nine months ended September 30, 2024 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

We reported 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.

Current wording

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.