CONDUENT Inc
For the period ended Dec 31, 2024. Filed Feb 19, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 19, 2025
CNDT$1.42-13.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-21.
0001677703-24-000037
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-19.
0001677703-25-000029
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 203 previous paragraphs and 199 current paragraphs.
122 unchanged; 47 reworded; 26 added; 31 removed; 3 previous and 4 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
processing, payment services and case management. In this segment, we help governments respond to changing rules for eligibility and increasing citizen expectations, modernize legacy technology systems, combat benefits fraud and shift in response to an evolving regulatory environment.
Current report
•Divestitures – In 2024, we completed three divestitures as part of our portfolio rationalization strategy. During the second quarter, we completed the transfer of the BenefitWallet Portfolio for a total purchase price of $425 million and completed the sale of the Curbside Management and Public Safety businesses with a purchase price of $230 million, $50 million of which is deferred to the first half of 2025. During the third quarter, we completed the sale of the Casualty Claims Solutions Businesses with a purchase price of $224 million. Refer to Note 4 – Divestitures and Assets/Liabilities Held for Sale in the Consolidated Financial Statements for additional information.
Current report
•Debt Prepayment – In 2024, we utilized a portion of the proceeds from the closing of our divestitures to voluntarily prepay all of the principal ($502 million)of the Term Loan B and $137 million of the Term Loan A. Refer to Note 10 – Debt in the Consolidated Financial Statements for additional information.
Current report
•Icahn Share Repurchase – During the second quarter of 2024, we entered into a purchase agreement with Carl C. Icahn and certain of his affiliates pursuant to which we purchased an aggregate of approximately 38 million shares of our common stock, at a price of $3.47 per share, for an aggregate purchase price of approximately $132 million. We utilized a portion of the proceeds from the closing of our divestitures to fund the purchase. Refer to Note 16 – Common Stock and Preferred Stock in the Consolidated Financial Statements for additional information.
Current report
•Share Repurchases – In 2024, we completed our previously approved $75 million share repurchase program and bought back a total of 14 million shares of common stock.
Current report
•Leadership Updates – In 2024, we continued to enhance our leadership team and appointed a new Group President of the Commercial segment and a new Head of Government Solutions.
Current report
Financial Information
Current report
Revenue for 2024 decreased 10%, compared to the prior year, over half of which was due to the impact of the BenefitWallet Portfolio transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. In addition to the divestitures impact, lost business across our three segments was partially offset by new business ramp.
Current report
Cost of services for 2024 decreased 5%, compared to the prior year, approximately three quarters of which was primarily driven by the impact of the transfer of the BenefitWallet Portfolio and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. In addition to 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 benefit from reversal of liabilities due to the settlement of the Cognizant matter in the prior year. We expect Cost of services to decline in 2025 as a result of cost actions to be implemented throughout the year.
Current report
SG&A for 2024 decreased 1%, compared to the prior year, primarily driven by the impact of the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. Cost efficiencies were partially offset by costs to transition away from a technology vendor. We expect SG&A to decline in 2025 as a result of cost actions to be implemented throughout the year.
Current report
Depreciation and amortization for 2024 decreased 23% compared to the prior year. This decrease was primarily driven by the impact of the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses, a prior year write-off of capitalized software costs in our Commercial segment totaling $25 million, older assets becoming fully depreciated and planned lower capital investments in the past few years.
Current report
Our 2024 divestitures resulted in gains of $721 million. Additionally, we recorded a $3 million gain adjustment related to a prior year divestiture following the partial settlement of the Skyview matter. This financial statement line also includes professional fees and other costs associated with both consummated and non-consummated transactions totaling $30 million and $10 million in 2024 and 2023, respectively. The 2024 amount also includes a $2 million reimbursement of previously incurred legal fees related to the partial settlement of the Skyview matter. Refer to Note 4 – Divestitures and Assets/Liabilities Held for Sale and Note 15 – Contingencies and Litigation to the Consolidated Financial Statements for additional information on these matters.
Current report
In the fourth quarter of 2024, we implemented an internal reorganization in which we sold a portion of our top tier foreign holding company to a lower tier subsidiary. This transaction and a subsequent tax election to treat the holding company as a partnership resulted in recognition of a built-in capital loss for tax purposes that offset capital gains from divestitures resulting in net tax savings of $59 million. The determination of the tax characteristic of this transaction requires management to make judgments about the application of tax laws and regulations. The United States Internal Revenue Service could determine a different tax treatment that would have an adverse impact on the Company. However, the Company has obtained advice from its third-party advisor concluding that the current tax treatment should prevail on its merits.
Current report
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.
Current report
Government segment revenue for 2024 decreased, compared to the prior year, attributable to lost business, primarily 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, partially offset by new business ramp.
Current report
Transportation revenue for 2024 increased compared to the prior year, primarily driven by the ramp of new business and improved operational performance with fewer delays from extended completion timelines compared to the prior year, partially offset by lost business, a Tolling customer price decrease and lower volumes.
Current report
Transportation segment profit and adjusted EBITDA for 2024 decreased compared to the prior year. This was primarily due to a Tolling contract with decreased price and lower volumes attributable to a portion of the contract not being retained. This was partially offset by improved operational performance and reduced impact from extended implementation timelines compared to the prior year.
Current report
The decrease in revenue, segment profit and Adjusted EBITDA for 2024 was due to the BenefitWallet Portfolio, the Curbside Management and Public Safety Solutions businesses and Casualty Claims Solutions businesses being included for a full year in the prior year period whereas their results were only included until the date of their transfer and sale, as applicable, in 2024.
Current report
The increase in revenue, segment profit and Adjusted EBITDA for 2023 was primarily due to higher interest rates positively affecting the BenefitWallet business in 2023.
Current report
Unallocated Costs for 2024 decreased compared to the prior year primarily due to cost savings from insourcing certain technology functions, lower networking and corporate IT costs and lower depreciation costs as certain data center assets became fully depreciated.
Current report
Signing information for the years ended December 31, 2024 and 2023 is as follows:
Current report
(1)Recurring revenue signings are for new business contracts longer than one year.
Current report
(2)Non-recurring revenue signings are for contacts shorter than one year.
Current report
The net decrease in cash flow provided by operating activities of $139 million was primarily related to lower Adjusted EBITDA due to divestitures and higher cash taxes, partially offset by improved accounts receivable Days Sales Outstanding and lower cash interest expense.
Current report
The increase in cash used in financing activities was mainly driven by the $642 million early repayment of Term Loan B and Term Loan A utilizing funds received from our divestitures. In addition, $132 million was utilized to purchase all of the common shares owned by the Icahn Parties.
Current report
•Loss on extinguishment of debt. This represents write-off of debt issuance costs related to prepayments of debt.
Removed paragraphs (31)
Previous report
•Financial Information and Analysis of Results of Operations;
Previous report
•Portfolio Rationalization – In the March 2023 investor briefing we set an expectation of generating between $500 million to $700 million of after-tax proceeds from divestiture activity, and we have made significant progress this year towards this goal. On September 29, 2023, we entered into an agreement to transfer our BenefitWallet portfolio for approximately $425 million. The portfolio is expected to transfer in multiple phases in the first half of 2024, with an estimated pre-tax gain of approximately $425 million. Also, on December 27, 2023, we entered into a definitive agreement to sell our Curbside Management Solutions and Public Safety Solutions businesses for $230 million plus the assumption of certain liabilities. This transaction is expected to close in the first half of 2024. The after-tax proceeds from these two transactions, plus other anticipated divestitures in 2024 will drive an upward revision of total net proceeds from divestitures to between $600 million and $800 million. Refer to Note 4 – Assets/Liabilities Held for Sale and Divestitures in the Consolidated Financial Statements for additional information.
Previous report
•Disposition and Portfolio Review – On February 8, 2022, we closed a transaction with Symplr Software, Inc. to sell our Midas suite of patient safety, quality and advanced analytics solutions ("Midas business") for cash consideration of $322 million resulting in a pre-tax gain of $166 million. The Midas business represented approximately $7 million, $70 million and $72 million of revenue in 2022, 2021 and 2020, respectively. Refer to Note 4 – Assets/Liabilities Held for Sale and Divestitures in the Consolidated Financial Statements for additional
Previous report
information. During the fourth quarter of 2022, we concluded our long-range planning processes which included a full evaluation of our portfolio of solutions and identified incremental opportunities to streamline the portfolio.
Previous report
•New Business Signings – In 2022 we introduced a new primary signings metric Annual Contract Value ("ACV" as defined in Metrics section below), which provides more focus on the near-term revenue generation of new business signings as compared to the traditional view of TCV. This ACV metric increased sequentially each quarter in 2022, totaling $724 million in 2022, an increase of 16.8% versus 2021 excluding the impact of Government stimulus payments.
Previous report
•Strategic Growth Efforts – During the latter part of 2022, we dedicated a small number of senior associates with the mission to accelerate future revenue growth by selling existing solutions into new and adjacent markets and geographies. The results of this action started to become visible, for example, by the collaboration with a major bank to launch a Digital Payments Hub delivering faster, easier, and more secure payments.
Previous report
•Operational Service Levels – We continued to make significant improvements with our operational and technology service levels, and while we will always believe there is room for improvement in these areas, we have reached a standard consistent with the markets that we operate in. These operational improvements together with the significant progress being made in closing out major litigation cases, positioned us well with a solid foundation to embark on the next chapter of our journey.
Previous report
Revenue for 2023 decreased 4%, compared to the prior year, primarily due to lost business from prior periods and non-repeating items in the prior year including recognition of the revenue benefit associated with an annual minimum volume commitment contract with a large client in our Commercial segment and federal stimulus revenue in our Government segment. These were partially offset by higher interest rates positively impacting our BenefitWallet business and new business ramp in our Government segment.
Previous report
(2)2022 costs represent professional support costs associated with certain strategic transformation programs.
Previous report
The divestiture of the Midas business in the first quarter of 2022 resulted in a pre-tax gain of $166 million. Additionally, this financial statement line item also includes professional fees and other costs associated with both consummated and non-consummated transactions considered by us.
Previous report
In recent months, government agencies and global organizations have had an increased focus on the issues of taxation of multinational corporations. At both the European Union and Organization for Economic Co-operation and Development level, significant developments are anticipated regarding global tax initiatives in 2024. The Company is monitoring such developments and assessing any potential impact and disclosure requirement. We do not anticipate a material impact based on current guidance.
Previous report
Government segment adjusted EBITDA margin for 2023 increased compared to the prior year mainly due to the mix of adjusted EBITDA variances mentioned above on lower revenue.
Previous report
The decline in revenue, segment profit and Adjusted EBITDA for 2023 was primarily due to the sale of the Midas Suite of products in 2022. The prior year included activity through the date of disposition whereas there was no activity in the current year.
Previous report
For the year ended December 31, 2023, the Company signed $639 million of new business ACV, including the May 2023 award of a significant contract in the Transportation segment.
Previous report
For the year ended December 31, 2023, the Company signed $2,257 million of new business TCV, representing a 20% increase compared to the prior year. Renewal TCV for the year ended December 31, 2023 was $2,341 million, a decrease of 5% compared to the prior year due to timing on renewals; however, the renewal rate for the year ended December 31, 2023 was consistent with the prior year.
Previous report
The amounts in the following table exclude the impact of divestitures.
Previous report
(1)New business ARR measures the revenue from recurring services provided to the client for any new business signing. ARR represents the recurring services provided to a customer with the opportunity for renewal at the end of the contract term.
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(2)New business NRR measures the non-recurring revenue for any new business signing, including (i) signing value of any contract with term less than 12 months and (ii) signing value of project-based revenue, not expected to continue long term.
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(3)Adjusted to remove Midas new business signings.
Previous report
The net decrease in cash flow provided by operating activities of $55 million was primarily related to the absence of the $38 million of insurance recoveries related to the State of Texas matter in 2022, higher net cash interest payments, the negative impact of the sales of accounts receivable as described below and higher restructuring payments, all partially offset by lower cash income taxes.
Previous report
The decrease in cash used in financing activities was mainly driven by the repayment of the $100 million borrowed under the revolver in the prior year. This was partially offset by the purchase of treasury stock under our share repurchase program of $27 million, higher scheduled debt repayments and higher taxes paid for settlement of stock-based compensation.
Previous report
We classify assets as held for sale in the period when the following conditions are met: (i) management, having the authority to approve the action, commits to a plan to sell the asset (disposal group); (ii) the asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal group); (iii) an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated; (iv) the sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset (disposal group) beyond one year; (v) the asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Previous report
A long-lived asset (disposal group) that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset (disposal group) until the date of sale.
Previous report
The fair value of a long-lived asset (disposal group) less any costs to sell is assessed each reporting period it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the asset (disposal group), as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale. Upon determining that a long-lived asset (disposal group) meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group in the line items Assets held for sale and Liabilities held for sale, respectively, in the Consolidated Balance Sheets.
Previous report
Refer to Note 4 – Assets/Liabilities Held for Sale and Divestitures to the Consolidated Financial Statements for additional information.
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Interim Goodwill Impairment Evaluation
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In September 2023, we entered into the Purchase Agreement to transfer our BenefitWallet health savings account and medical savings account portfolio (collectively, the "Portfolio"), which is reported within our Commercial segment. Since the Purchase Agreement does not represent a disposition of a business, no goodwill was allocated to the Portfolio related to this transaction.
Previous report
Consequently, the Purchase Agreement was identified as a triggering event for the Commercial reporting unit that required us to evaluate goodwill for impairment. This evaluation resulted in a full impairment of the Commercial reporting unit's goodwill, totaling $287 million. The impairment charge was primarily driven by the Purchase Agreement and was recognized during the quarter ended September 30, 2023. The fair values of the goodwill impairment charge were estimated based on a determination of the implied fair value of goodwill, leveraging the results from the Income Approach and Market Approach. The most significant assumptions used in the goodwill analysis relate to revenue growth rates, discount rate and long-term organic growth rate.
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Adjusted EBITDA and EBITDA Margin
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•Abandonment of Cloud Computing Project. This includes charges in connection with the abandonment of a cloud computing project. The costs include writing off previously capitalized costs and accruing remaining hosting fees that continue to be incurred without any economic benefit.
Previous report
Table of Contents
Reworded paragraphs (47)
Previous wording
The year-over-year comparisons in this MD&A are as of and for the years ended December 31, 2023 and 2022, unless stated otherwise. The discussion of 2022 results and related year-over-year comparisons as of and for the years ended December 31, 2022 and 2021 are found in Item 7 of Part II of our Form 10-K for the year ended December 31, 2022.
Current wording
The year-over-year comparisons in this MD&A are as of and for the years ended December 31, 2024 and 2023, unless stated otherwise.
Previous wording
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, machine learning, automation and advanced analytics to deliver mission-critical business process solutions. Through a dedicated global team of associates, 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.
Current wording
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 56,000 associates, 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.
Previous wording
Headquartered in Florham Park, New Jersey, we have a team of approximately 59,000 people as of December 31, 2023, servicing customers from service centers in 26 countries. In 2023, approximately 11% of our revenue was generated outside the U.S.
Current wording
Headquartered in Florham Park, New Jersey, we have operations in 24 countries as of December 31, 2024. In 2024, approximately 14% of our revenue was generated outside the U.S.
Previous wording
•Commercial– Our Commercial segment provides business process services and customized solutions to clients in a variety of commercial industries. Across the Commercial segment, we operate on our clients’ behalf to deliver mission-critical solutions and services to reduce costs, improve efficiencies and enable revenue growth for our clients and their consumers and employees.
Current wording
•Commercial– Our Commercial segment provides business process services that span our clients' business processes 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 enable revenue growth for our clients and better experiences for their consumers and employees.
Previous wording
•Government– Our Government segment provides government-centric business process services to U.S. federal, state and local and foreign governments for public assistance, healthcare programs and administration, transaction processing and payment services. Our solutions in this segment help governments respond to changing rules for eligibility and increasing citizen expectations.
Current wording
•Government– Our Government segment provides government-centric services and solutions to U.S. federal, state, local and foreign governments for public assistance, healthcare programs and administration, transaction
Previous wording
•Transportation– Our Transportation segment provides systems, support, and revenue-generating solutions to government transportation agency clients. We deliver mission-critical public safety, mobility and digital payment
Current wording
•Transportation– Our Transportation segment provides systems, support, and revenue-generating solutions to government transportation agency clients. We deliver mission-critical tolling, transit and digital payment solutions that streamline operations, increase revenue and reduce congestion while creating safe, seamless experiences for travelers. We help transportation agencies contend with rising urbanization and mobility, the need for system efficiency and an increased focus on transportation infrastructure.
Previous wording
During the first quarter of 2023, we held an investor briefing to communicate the next chapter in the Conduent journey. Our intense emphasis on growth, quality, and efficiency, beginning in the first quarter of 2020, resulted in a strengthened foundation. We remain focused on accelerating growth and enhancing value for our stakeholders and intend to achieve this by doubling down on key themes outlined in the March 2023 investor briefing. We also intend to continue 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 thereby allowing management the bandwidth and increased capital to devote focus to solutions where we believe we have competitive advantages or higher growth expectations.
Current wording
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 on 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.
Previous wording
We believe this renewed focus on our portfolio rationalization strategy will result in a more nimble and faster growing Conduent with modest levels of net leverage, enhanced valuation, and significant excess capital to be deployed over time.
Current wording
We believe this strategy has resulted and will continue to result in a more nimble and faster growing Conduent with modest levels of net leverage, enhanced valuation, and a stronger balance sheet.
Previous wording
•Strategic Growth Efforts – During 2023, we continued to see opportunities in our Government Healthcare segment, particularly with our cloud-native Medicaid Claims solution, and we now have a number of significant implementations underway in the space. Our pipeline of opportunities remains strong in this area. We also continued to make progress with our Immediate Payments offering, laying the marketing and educational foundation with our existing clients, and enhancing our partnership strategy. We were the first organization to execute transactions over the newly implemented FedNow capability and we anticipate an acceleration of new business signings to occur in 2024.
Current wording
•Strategic Growth Efforts – During 2023, we continued to see opportunities in our Government Healthcare segment, particularly with our cloud-native Medicaid Claims solution, and we now have a number of significant implementations underway in the space. Our pipeline of opportunities remains strong in this area. We also continued to make progress with our Immediate Payments offering, laying the marketing and educational foundation with our existing clients, and enhancing our partnership strategy. We were the first organization to
Previous wording
•New Business Signings – While we experienced some softness in New Business Signings in 2023, we successfully attained the highest Total Contract Value ("TCV" as defined in Metrics section below) in several years, with an increase of 20% versus 2022. This was predominantly driven by the $1 billion TCV deal in our Transportation segment, with the State of Victoria, Australia. This is our largest TCV deal in the history of Conduent and continues to grow our international presence. Our New Business pipeline remains strong at approximately $25 billion, with significant opportunities across the portfolio.
Current wording
•New Business Signings – Successfully attained the highest Total Contract Value ("TCV" as defined in Metrics section below) in several years, with an increase of 20% versus 2022. This was predominantly driven by the $1 billion TCV deal in our Transportation segment, with the State of Victoria, Australia. This is our largest TCV deal in the history of Conduent and continues to grow our international presence.
Previous wording
•Return to Shareholders – The Board of Directors authorized a share repurchase program, granting approval for us to repurchase up to $75 million of our common stock over the next three years (see additional information included in Part II, Item 5). Through December 31, 2023, we acquired $27 million worth of our shares under this share repurchase program.
Current wording
•Share Repurchases – The Board of Directors authorized a share repurchase program, granting approval for us to repurchase up to $75 million of our common stock over the next three years. In 2023, 9 million shares were repurchased under this program. This program was completed in September 2024.
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Severance and related costs for 2023 include costs related to the closure of one of our Commercial segment operations in Europe.
Current wording
(1)2023 includes costs related to the closure of one of our Commercial segment operations in Europe.
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(1)2023 costs represent costs incurred for disengagement from a significant IT outsourcing provider.
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(2)Includes costs in 2024 and 2023 incurred for disengagement from a significant IT outsourcing provider.
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Interest expense represents interest on long-term debt and the amortization of debt issuance costs. The increase in Interest expense for 2023, compared to the prior year, was driven primarily by higher interest rates on our variable rate debt, including finance leases and other debt. Refer to Note 11 – Debt to the Consolidated Financial Statements for additional information.
Current wording
Interest expense represents interest on long-term debt and the amortization of debt issuance costs. The decrease in Interest expense for 2024, compared to the prior year, was driven primarily by lower debt balances as we utilized proceeds from divestitures closed in 2024 to voluntarily prepay all of our Term Loan B and a portion of our Term Loan A. Refer to Note 10 – Debt to the Consolidated Financial Statements for additional information.
Previous wording
The goodwill impairment for 2023 is related to the write-down of the carrying value of the Commercial reporting unit. This resulted from the evaluation of goodwill triggered by entering into the Custodial Transfer and Asset Purchase Agreement to transfer our BenefitWallet health savings account and medical savings account portfolio. The goodwill impairment for 2022 related to the write-down of the carrying value of the Commercial reporting unit. Refer to Note 8 – Goodwill and Intangible Assets, Net to the Consolidated Financial Statements for additional information on these impairments.
Current wording
The goodwill impairment for 2024 is related to the write-down of the Transportation reporting unit's goodwill arising from the annual goodwill impairment test. The impairment in 2023 is related to the write-down of the carrying value of the Commercial reporting unit. This resulted from the evaluation of goodwill triggered by entering into the Custodial Transfer and Asset Purchase Agreement to transfer our BenefitWallet Portfolio. Refer to Note 7 – Goodwill and Intangible Assets, Net to the Consolidated Financial Statements for additional information on these impairments.
Previous wording
Litigation settlements (recoveries), net for 2023 primarily consisted of a $26 million reversal of reserves due to the settlement of the Cognizant matter and an $8 million reversal of reserves related to our former student loan business. The amount for 2022 primarily consisted of $24 million of insurance recoveries recorded in the first quarter of 2022 related to the previously disclosed State of Texas matter. Refer to Note 16 – Contingencies and Litigation to the Consolidated Financial Statements for additional information on these matters.
Current wording
Litigation settlements (recoveries), net for 2023 primarily consisted of a $26 million reversal of reserves due to the settlement of the Cognizant matter and an $8 million reversal of reserves related to our former student loan business. There were no individually significant items in 2024. Refer to Note 15 – Contingencies and Litigation to the Consolidated Financial Statements for additional information on these matters.
Previous wording
Other (income) expenses, net for 2023 and 2022 primarily includes interest income on cash investments, accounts receivable factoring fees and foreign currency transaction losses (gains).
Current wording
Other (income) expenses, net for 2024 and 2023 primarily includes interest income on cash investments, accounts receivable factoring fees and foreign currency transaction losses (gains). The increase in 2024 is primarily due to interest income of $8 million related to the partial settlement of the Skyview matter. Refer to Note 15 – Contingencies and Litigation in the Consolidated Financial Statements for additional information.
Previous wording
The 2023 effective tax rate was 10.7%, compared to (43.9)% for 2022. The 2023 rate was lower than the U.S. statutory rate of 21% due to non-deductible expenses, primarily the non-deductible Commercial reporting unit goodwill impairment, geographic mix of income and return to provision adjustments, partially offset by tax benefits related to tax settlements and reversal of reserves. The 2022 rate was negative and lower than the U.S. statutory rate of 21%, primarily due to pre-tax book loss, an increase in taxes due to the geographic mix of income and non-deductible expenses, primarily driven by book and tax basis difference in the Midas divestiture goodwill and the Commercial reporting unit goodwill impairment.
Current wording
The 2024 effective tax rate was 15.5%, compared to 10.7% for 2023. The 2024 rate was lower than the U.S. statutory rate of 21% due to favorable permanent adjustments from the internal reorganization and outside basis on a stock sale partially offset by the non-deductible Transportation reporting unit goodwill impairment, tax reserves and geographic mix of income. The 2023 rate was lower than the U.S. statutory rate of 21%, primarily due to the non-deductible Commercial reporting unit goodwill impairment, geographic mix of income and return to provision adjustments, partially offset by tax benefits related to tax settlements and reversal of reserves.
Previous wording
Excluding the impact of the goodwill impairment, amortization of intangible assets, restructuring, litigation reserve releases and certain discrete tax items, the normalized effective tax rate for 2023 was 107.3%. The rate is anomalous due to small adjusted pre-tax income and tax which is a result of geographic mix of income and valuation allowances against losses in certain jurisdictions resulting in no tax benefit. The 2022 rate was 34.3% excluding the impact of amortization, restructuring, the divestiture of the Midas business, insurance recoveries, goodwill impairment and discrete tax items.
Current wording
Excluding the impact of the internal reorganization, divestitures, goodwill impairment, amortization of intangible assets, restructuring costs and certain discrete tax items, the normalized effective tax rate for 2024 was 21.2%. The 2023 rate was 107.3% excluding the impact of goodwill impairment, amortization of intangible assets, restructuring, litigation reserve releases and certain discrete tax items. The rate was anomalous due to small adjusted pre-tax loss and tax which is a result of geographic mix of income and valuation allowances against losses in certain jurisdictions resulting in no tax benefit.
Previous wording
Divestitures includes our Midas business, which was sold in the first quarter of 2022.
Current wording
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). For the year ended December 31, 2022, Divestitures also includes our Midas business, which was sold in the first quarter of 2022.
Previous wording
The section below provides a comparative discussion of our financial performance by segment between the years ended December 31, 2023 and 2022. See Item 7. MD&A - Operations Review of Segments in our Annual Report on Form 10-K for the year ended December 31, 2022 for a comparative discussion of our consolidated results of operations by segment between 2022 and 2021.
Current wording
The section below provides a comparative discussion of our financial performance by segment between the years ended December 31, 2024 and 2023. The comparative discussion of our financial performance by segment between the years ended December 31, 2023 and 2022 is also included to reflect the impact of reclassifying divested businesses from our Commercial and Transportation segments as described above.
Previous wording
(1) Represents a termination for convenience fee related to the termination of a contract with a significant IT outsourcing provider, which is reported in Cost of Services on the Consolidated Statements of Income.
Current wording
(1) The 2024 amount represents a termination for convenience fee related to the termination of Convergint as a subcontractor for our State of Victoria contract. The 2023 amount represents a termination for convenience fee related to the termination of a contract with a significant IT outsourcing provider. Both the 2024 and 2023 items are reported in Cost of Services on the Consolidated Statements of Income.
Previous wording
Commercial segment revenue for 2023 decreased, compared to the prior year, driven by lost business, lower volumes in certain industries within our client base and non-repeating items in the prior year, partially offset by new business ramp and higher interest rates positively impacting our BenefitWallet business.
Current wording
Commercial segment revenue for 2023 decreased, compared to the prior year, driven by lost business, lower volumes in certain industries within our client base and non-repeating items in the prior year, partially offset by new business ramp.
Previous wording
Commercial segment profit for 2023 increased compared to the prior year and was positively impacted by higher interest rates positively impacting our BenefitWallet business and cost efficiency, partially offset by a write-off of capitalized software totaling $25 million stemming from management’s decision to abandon an internal use software product and a decision by a customer to not implement a product software solution.
Current wording
Commercial segment profit and Adjusted EBITDA for 2024 increased compared to the prior year primarily due to new business ramp and cost efficiencies, partially offset the impact of lost business and lower volumes. Commercial segment profit also benefited from the absence of the prior year impact of a write-off of capitalized software totaling $25 million stemming from management’s decision to abandon an internal use software product and a decision by a customer to not implement a product software solution as well as fully amortized assets.
Previous wording
Cost of services for 2023 decreased 4%, compared to the prior year, primarily driven by the impact of reduced revenue, increased operational efficiency and a $17 million reversal of liabilities due to the settlement of the Cognizant matter described in Note 16 – Contingencies and Litigation to the Consolidated Financial Statements.
Current wording
Government segment profit and Adjusted EBITDA for 2024 decreased compared to the prior year, primarily due to the impact of lost business and the lower volumes mentioned above and the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year, partially offset by cost efficiencies.
Previous wording
Unallocated Costs for 2023 increased compared to the prior year primarily due to the prior year reflecting the recovery of $14 million of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter, and expense credits in the prior year.
Current wording
Unallocated Costs for 2023 increased compared to the prior year primarily due to the prior year reflecting the recovery of $14 million of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter, and vendor credits earned in the prior year.
Previous wording
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 discuss certain key metrics, including Signings and Net ARR Activity below.
Current wording
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. The metrics for all periods presented below have been recast to remove the activity related to the BenefitWallet Portfolio, the Casualty Claims Solutions business and the Curbside Management and Public Safety Solutions businesses.
Previous wording
Signings are defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts. 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 may not provide an accurate measure of renewal performance. The Annual Contract Value ("ACV") for new business is calculated by dividing the TCV by the contract term, in months, and then multiplying by 12 to obtain an annual measure.
Current wording
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.
Previous wording
The total new business pipeline at the end of December 31, 2023 and 2022 was $24.8 billion and $22.6 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 December 31, 2024 and 2023 was $22.2 billion and $22.8 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
The Net ARR Activity metric 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 COVID-related volume impacts and 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 December 31, 2023 and 2022, total cash and cash equivalents were $498 million (of which approximately $143 million was cash in foreign locations) and $582 million (of which approximately $111 million was cash in foreign locations), respectively. We also have a $550 million Revolving Credit Facility for our various cash needs, of which none has been utilized for borrowings and $2 million has been utilized for letters of credit as of December 31, 2023. On February 11, 2022, we repaid the then-outstanding borrowing under the Revolving Credit Facility of $100 million.
Current wording
As of December 31, 2024 and 2023, total cash and cash equivalents were $366 million (of which approximately $140 million was cash in foreign locations) and $498 million (of which approximately $143 million was cash in foreign locations), respectively. We also have a $550 million Revolving Credit Facility for our various cash needs, of which none has been utilized for borrowings and $11 million has been utilized for letters of credit as of December 31, 2024. The amount of borrowings outstanding under the Revolving Credit Facility at each quarter-end may be limited by our leverage covenant. In February 2025, the Company borrowed $50 million under the Revolving Credit Facility for working capital purposes.
Previous wording
As of December 31, 2023, there was a total of $1,263 million of outstanding borrowings under our Term Loan A, Term Loan B and Senior Notes, of which $18 million was due within one year. Additionally, as of December 31, 2023, we had $16 million of finance lease and other debt due within one year. Refer to Note 11 – Debt to the Consolidated Financial Statements for additional information regarding our debt.
Current wording
As of December 31, 2024, there was a total of $608 million of outstanding borrowings under our Term Loan A and Senior Notes, of which $14 million was due within one year. Additionally, as of December 31, 2024, we had $10 million of finance lease and other debt due within one year. Refer to Note 10 – Debt to the Consolidated Financial Statements for additional information regarding our debt.
Previous wording
The decrease in cash provided by investing activities of $266 million was primarily due to the proceeds from the divestiture of the Midas business in the prior year. This was partially offset by planned decreased capital spending in the current year.
Current wording
The increase in cash provided by investing activities of $888 million was primarily due to the proceeds from our 2024 divestitures of $830 million and proceeds from the settlement of the Skyview matter related to notes receivable of $21 million. In addition, there was a planned decrease in capital spending in the current year.
Previous wording
The net impact from the sales of accounts receivable on net cash provided by (used in) operating activities for the years ended December 31, 2023, 2022 and 2021 was $(4) million, $54 million and $(10) million, respectively. The net impact from the sales of accounts receivable represents the difference between current and prior year fourth quarter accounts receivable sales adjusted for the effects of collections prior to the end of the year.
Current wording
The net impact from the sales of accounts receivable on net cash provided by (used in) operating activities for the years ended December 31, 2024, 2023 and 2022 was $7 million, $(4) million and $54 million, respectively. The net impact from the sales of accounts receivable represents the difference between current and prior year fourth quarter accounts receivable sales adjusted for the effects of collections prior to the end of the year.
Previous wording
We believe our balances of cash and cash equivalents, which totaled $498 million as of December 31, 2023, 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.
Current wording
We believe our balances of cash and cash equivalents, which totaled $366 million as of December 31, 2024, 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.
Previous wording
As of December 31, 2023, we had total outstanding debt, including Finance leases, with floating and fixed rates totaling $1,300 million, of which $34 million was due within 12 months. Future interest payments associated with this debt, which has maturities through 2029, are forecast to be $559 million, of which $103 million is due within 12 months. Refer to Note 11 – Debt to the Consolidated Financial Statements for additional information.
Current wording
As of December 31, 2024, we had total outstanding debt, including Finance leases, with floating and fixed rates totaling $646 million, of which $24 million was due within 12 months. Future interest payments associated with this debt, which has maturities through 2029, are forecast to be $192 million, of which $43 million is due within 12 months. Refer to Note 10 – Debt to the Consolidated Financial Statements for additional information.
Previous wording
In the ordinary course of business, we enter into operating lease arrangements for certain equipment and facilities. As of December 31, 2023, total fixed lease payables were $251 million, of which $69 million was due within 12 months. Refer to Note 7 – Leases to the Consolidated Financial Statements for additional information.
Current wording
In the ordinary course of business, we enter into operating lease arrangements for certain equipment and facilities. As of December 31, 2024, total fixed lease payables were $226 million, of which $65 million was due within 12 months. Refer to Note 6 – Leases to the Consolidated Financial Statements for additional information.
Previous wording
We have committed to purchasing certain materials and services to support our operations. The total of these commitments was $312 million as of December 31, 2023, of which $104 million is due within the next 12 months.
Current wording
We have committed to purchasing certain materials and services to support our operations. The total of these commitments was $348 million as of December 31, 2024, of which $147 million is due within the next 12 months.
Previous wording
Based on our quantitative assessments, we concluded that the fair value of our Government and Transportation reporting units exceeded their respective carrying values and, accordingly, we did not record any goodwill impairment charge as a result of our annual quantitative impairment test of goodwill as of October 1, 2023. If we used different assumptions for discount rates or long-term organic growth rates in these annual assessments, our calculated fair values of our reporting units could be higher or lower which could result in a goodwill impairment.
Current wording
Based on our quantitative assessments, we concluded that the fair value of our Government reporting unit exceeded its carrying value and, accordingly, we did not record any goodwill impairment charge as a result of our annual quantitative impairment test of goodwill for this reporting unit. If we used different assumptions for discount rates or long-term organic growth rates in this annual assessment, our calculated fair values of our Government reporting unit could be higher or lower which could result in a goodwill impairment. Refer to Note 7 – Goodwill and Intangible Assets, Net to the Consolidated Financial Statements for additional information on the impairment of the remaining goodwill in our Transportation reporting unit.
Previous wording
We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in our Consolidated Balance Sheets, as well as operating loss and tax credit carryforwards. We follow very specific and detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded in our Consolidated Balance Sheets and provide valuation allowances as required. We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. Gross deferred tax assets of $253 million and $239 million had valuation allowances of $100 million and $102 million at December 31, 2023 and 2022, respectively.
Current wording
We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in our Consolidated Balance Sheets, as well as operating loss and tax credit carryforwards. We follow very specific and detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded in our Consolidated Balance Sheets and provide valuation allowances as required. We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. Gross deferred tax assets of $241 million and $253 million had valuation allowances of $95 million and $100 million at December 31, 2024 and 2023, respectively.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
execute transactions over the newly implemented FedNow capability and we anticipate an acceleration of new business signings to occur in 2024.
Current report — wording carried from elsewhere
Commercial segment revenue for 2024 decreased, compared to the prior year, driven by lost business and lower volumes in certain industries within our client base, partially offset by new business ramp.
Current report — wording carried from elsewhere
Commercial segment profit for 2023 decreased compared to the prior year driven by a write-off of capitalized software totaling $25 million described above. Commercial segment Adjusted EBITDA for 2023 was unchanged from the prior year.
Current report — wording carried from elsewhere
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:
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
solutions that streamline operations, increase revenue and reduce congestion while creating safe, seamless travel experiences for consumers while reducing impact on the environment.
Previous report — wording carried elsewhere
SG&A for 2023 increased 4%, compared to the prior year, primarily driven by the absence of the recovery of $14 million of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter that occurred in 2022.
Previous report — wording carried elsewhere
Depreciation and amortization for 2023 increased 15% compared to the prior year. This increase was primarily driven by the write-off of capitalized software costs totaling $25 million, stemming from management’s decision to abandon an internal use software product and a decision by a customer to not implement a product software solution.