CONDUENT Inc

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Note 1 –Basis of Presentation

References herein to “we,” “us,” “our,” the “Company” and “Conduent” refer to Conduent Incorporated and its consolidated subsidiaries unless the context suggests otherwise.

Description of Business

Conduent Incorporated is a New York corporation, organized in 2016. Conduent delivers digital business solutions and services spanning the commercial, government and transportation spectrum – creating valuable outcomes for its clients and the millions of people who count on them. The Company leverages 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, Conduent's solutions and services digitally transform its clients’ operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs.

Basis of Presentation

The unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. The December 31, 2024 Condensed Consolidated Balance Sheet was derived from the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments necessary for a fair statement of the financial position, results of operations and cash flows have been made. These adjustments consist of normal recurring items. The interim results of operations are not necessarily indicative of the results of the full year. These financial statements should be read in conjunction with the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Use of Estimates

Preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to fair values of financial instruments, goodwill and intangible assets, income taxes and contingent liabilities, among others. The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Summary of Significant Accounting Policies

The Company's significant accounting policies are described in Note 1 – Basis of Presentation and Summary of Significant Accounting Policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

During 2025, there have been no changes to the Company's significant accounting policies as described therein.

Note 2 –Recent Accounting Pronouncements

New Accounting Standards Adopted

Segment Reporting: In November 2023, the Financial Accounting Standards Board ("FASB") issued final guidance that expands reportable segment disclosures, particularly incremental segment expense disclosures. This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. As the guidance is disclosure related, adoption did not have any impact on the Company's Condensed Consolidated Financial Statements. The required additional disclosure is included in Note 4 – Segment Reporting.

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New Accounting Standards To Be Adopted

Income Taxes: In December 2023, the FASB issued final guidance designed to improve income tax disclosures, particularly disclosures around business entities' income tax rate reconciliation and income taxes paid. The guidance requires consistent categories and greater disaggregation of information in the reconciliation of an entity's statutory tax rate to its effective tax rate and information about income taxes paid disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024. The required disclosure will be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. As the guidance is disclosure related, adoption will not have any impact on the Company's results of operations, financial position or cash flows.

Disaggregation of Income Statement Expenses: In November 2024, the FASB issued final guidance designed to enhance financial reporting by requiring public business entities to disclose additional details regarding specific expense categories in the notes to the financial statements for both interim and annual periods. The new guidance is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The Company is not early adopting this guidance. As the guidance is disclosure related, adoption will not have any impact on the Company's results of operations, financial position or cash flows.

Note 3 –Revenue

Disaggregation of Revenue

In 2024, revenue from the BenefitWallet Portfolio and the Casualty Claims Solutions business were reclassified to the Divestitures segment from the Commercial segment. In addition, in 2024, revenue from the Curbside Management and Public Safety businesses was reclassified to the Divestitures segment from the Transportation segment. All prior periods presented have been recast to reflect these changes.

During the first quarter of 2025, the Company updated the presentation of disaggregated revenue by major service offering within the Commercial segment. This change had no impact on disaggregated revenue by reportable segment or the timing of revenue recognition. All prior periods presented have been recast to reflect this change.

The following table provides information about disaggregated revenue by major service offering and reportable segment and the timing of revenue recognition. Refer to Note 4 – Segment Reporting for additional information on the Company's reportable segments and Note 5 – Divestitures for additional information on the Company's divestitures.

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There have been no changes to the major service offerings within the Government and Transportation segments as disclosed in Note 2 - Revenue in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. As noted above, the Company has updated the presentation of its major service offerings within the Commercial segment. These major service offerings are described as follows:

Customer Experience Management: The Company delivers a full range of customer contact services including customer care, technical support, loyalty management, and outbound and inbound sales, handling many complex interactions and representing the brands of its clients. The Company creates better experiences across the customer lifecycle through a variety of channels including chat, email, voice and virtual agent to help customers where and how they want to engage. Through omni-channel communications, automation and analytics, as well as labor efficiencies, the Company helps its clients drive revenue growth, enable scale, and gain cost reductions and other operational efficiencies. The Company serves marquee clients across multiple sectors, including the financial services, healthcare and life sciences, logistics, technology, telecom, travel and hospitality sectors, helping to resolve complex issues for their customers with empathy and effectiveness.

Business Process as a Service ("BPaaS"): The Company helps its clients digitally transform business processes and drive efficiency, automation and scale across essential business functions. The Company streamlines client operations through its deep industry experience, understanding of its clients’ needs and the latest technology solutions to reduce costs, improve security, performance and accuracy, and enable revenue growth, while enhancing the end-user experience. The Company's portfolio of BPaaS solutions spans payment integrity, finance, accounting, and procurement, human capital, legal and compliance, and bank and lending.

Integrated Digital Solutions: The Company drives efficiencies for clients with more digitized processes across the customer and document lifecycle through automation, data analytics and AI-powered solutions. This helps to shorten time to decisions on items like claims and applications while lowering costs, reducing manual effort, improving data accuracy, providing omnichannel communications and enhancing the overall customer experience. The Company's solutions span: document and claims processing; health plan administration; scanning and digitization of mailrooms, data and documents; omnichannel digital and physical communications, including print and mail and solutions focused specifically in the pharmaceutical and banking industries.

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Contract Balances

The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets are the Company’s rights to consideration for services provided when the right is conditioned on something other than passage of time (for example, meeting a milestone for the right to bill under the cost-to-cost measure of progress). Contract assets are transferred to Accounts receivable, net when the rights to consideration become unconditional. Unearned income includes payments received in advance of performance under the contract, which are realized when the associated revenue is recognized under the contract.

The following table provides information about significant movements in contract assets (current and long-term) for the six months ended June 30, 2025 and 2024:

(1)Of which $2 million and $7 million are included in Other long-term assets as of June 30, 2025 and 2024, respectively.

The following table provides information about significant movements in unearned income balances (current and long-term) for the six months ended June 30, 2025 and 2024:

(1) Of which $66 million and $69 million were recognized during the six months ended June 30, 2025 and 2024, respectively, that related to the Company's unearned income as of December 31, 2024 and 2023, respectively.

(2) Of which $60 million and $57 million are included in Long-term unearned income as of June 30, 2025 and 2024, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially satisfied at June 30, 2025 was approximately $1.5 billion. The Company expects to recognize approximately 71% of this revenue over the nexttwo years and the remainder thereafter.

Note 4 –Segment Reporting

The Company's reportable segments correspond to how it organizes and manages the business, as defined by the Company's Chief Executive Officer, who is also its Chief Operating Decision Maker ("CODM"), and are aligned to the industries in which the Company's clients operate. The Company's segments involve the delivery of business process services and include service arrangements where it manages a customer's business activity or process.

Divestitures includes the Company's BenefitWallet Portfolio, for which the Company completed the transfer in the second quarter of 2024, its Curbside Management and Public Safety Solutions businesses, which it sold in the second quarter of 2024, and its Casualty Claims business which it sold in the third quarter of 2024. Refer to Note 5 – Divestitures for additional information.

The Company's CODM evaluates the Company's financial performance based on Segment profit (loss) for itsthree reportable segments - Commercial, Government and Transportation. The Company's CODM uses Segment profit (loss) information to monitor budget versus actual results and then uses this information to help make informed decisions about future resource investment, potential restructuring of segments to enhance overall company performance, and future divestitures and acquisitions.

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The Company's CODM does not evaluate operating segments using discrete asset information as a significant portion of the assets is managed at the total company level.

•Commercial: The Commercial segment provides business process services that span its 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, the Company operates on its clients’ behalf to deliver mission-critical solutions and services to reduce costs, improve efficiencies and enhance performance for the Company's clients and deliver better experiences for their consumers and employees.

•Government: The 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, the Company helps 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: The 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, the Company's solutions help reduce congestion and greenhouse emissions, while creating seamless travel experiences for consumers throughout transportation ecosystems.

Selected financial information for the Company's segments is as follows:

(1)Total excludes Divestitures and Unallocated Costs.

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(1)Total excludes Divestitures and Unallocated Costs.

Other operating expense shown above is primarily comprised of third-party legal fees and other miscellaneous expenses.

The following is a reconciliation of Segment profit (loss) to Income (loss) before income taxes:

(1)Divestitures profit is Income (loss) before income taxes excluding certain non-operating income and expenses.

(2)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 the reportable segments. Included in the three and six months ended June 30, 2025 periods are $0 million and $25 million, respectively, of Direct response costs related to the January 2025 Cyber Incident as well as a $0 million and $9 million, respectively, insurance recovery related to the 2019 Texas Matter.

Refer to Note 3 – Revenue for additional information on disaggregated revenues of the reportable segments.

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Note 5 –Divestitures

The Company entered into various agreements to transfer or sell certain portfolios and businesses in 2024. Each of these transactions is described below.

Divestiture of Casualty Claims Solutions Business

On May 3, 2024, the Company entered into a definitive agreement to sell the Company’s Casualty Claims Solutions business (collectively referred to as the "Casualty Disposal Group") to MedRisk, Inc. ("MedRisk"). On September 1, 2024, the sale was completed and MedRisk paid Conduent $224 million of cash consideration, subject to certain post-closing adjustments. These adjustments were finalized in the first quarter of 2025 and were not material.

The Company recorded a gain on the sale of $194 million, less costs to sell of $8 million, which was recorded in Gain (loss) on divestitures and transaction costs. Additionally, the Company recorded $33 million of income tax expense related to the divestiture.

The Casualty Disposal Group generated revenue and income (loss) before income taxes as follows:

Divestiture of Curbside Management and Public Safety Solutions Businesses

In December 2023, the Company signed a definitive agreement to sell its Curbside Management and Public Safety Solutions businesses (collectively referred to as the "Curbside Disposal Group") to Modaxo, a division of Constellation Software Inc. ("Modaxo"), for $230 million (plus the assumption of certain indebtedness), subject to customary purchase price adjustments.

On April 30, 2024, Conduent completed the sale of this business. The Company received $181 million of cash consideration and a $50 million non-interest bearing note payable to the Company that was due and paid on April 30, 2025. Additionally, the Company received reimbursement for payments made by the Company related to finance lease liabilities and related costs and reimbursement for the purchase of certain equipment made by the Company on the buyer's behalf. In 2024, the Company recorded a gain on the sale of $103 million less costs to sell of $5 million, which was recorded in Gain (loss) on divestitures and transaction costs. The Company recorded $28 million of income tax expense in connection with the divestiture.

The Curbside Disposal Group generated revenue and income (loss) before income taxes as follows:

Transfer of BenefitWallet Portfolio

In September 2023, the Company entered into a Custodial Transfer and Asset Purchase Agreement to transfer its BenefitWallet health savings account and medical savings account portfolio (collectively, the "BenefitWallet Portfolio") to HealthEquity, Inc. for an aggregate purchase price of $425 million, subject to customary purchase price adjustments.

The BenefitWallet transfer closed in multiple tranches from March to May 2024 and the Company received total aggregate cash consideration of $425 million as the tranches closed. The Company recorded a gain on the transfer of $425 million, less costs to sell of $11 million. Additionally, the Company recorded $102 million of income tax expense in connection with the transfer of the BenefitWallet Portfolio. The cash consideration and gain on the transfer of the BenefitWallet Portfolio recorded in the second quarter of 2024 were $261 million and $261 million, respectively. The Company recorded $63 million of income tax expense in connection with the transfer of the BenefitWallet Portfolio in the second quarter of 2024.

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The BenefitWallet Portfolio generated revenue and income (loss) before income taxes as follows:

Note 6 –Restructuring Programs and Related Costs

The Company engages in a series of restructuring programs related to exiting certain activities, downsizing its employee base, outsourcing certain internal functions and engaging in other actions designed to reduce its cost structure and improve productivity. The implementation of the Company's operational efficiency improvement initiatives has reduced the Company's real estate footprint across all geographies and segments resulting in lease right-of-use ("ROU") asset impairments and other related costs. Also included in Restructuring and related costs are incremental, non-recurring costs related to the consolidation of the Company's data centers, which totaled $0 million and $2 million for the three months ended June 30, 2025 and 2024, respectively, and $0 million and $4 million for the six months ended June 30, 2025 and 2024, respectively. Management continues to evaluate the Company's businesses and, in the future, there may be additional provisions for new plan initiatives and/or changes in previously recorded estimates as payments are made, or actions are completed.

Costs associated with restructuring, including employee severance and lease termination costs, are generally recognized when it has been determined that a liability has been incurred, which is generally upon communication to the affected employees or exit from the leased facility. In those geographies where the Company has either a formal severance plan or a history of consistently providing severance benefits representing a substantive plan, it recognizes employee severance costs when they are both probable and reasonably estimable. Asset impairment costs related to the reduction of the Company's real estate footprint include impairment of operating lease ROU assets and associated leasehold improvements.

A summary of the Company's restructuring program activity during the six months ended June 30, 2025 and 2024 is as follows:

(1)Represents amounts recognized within the Condensed Consolidated Statements of Income (Loss) for the years shown.

(2)During the six months ended June 30, 2024, the Company incurred $2 million of costs for bringing certain technology functions in-house. There wereno such costs incurred in the six months ended June 30, 2025. These costs are included in the above table in Termination and other costs.

No restructuring and related costs are allocated to the segments.

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Note 7 –Debt

Long-term debt was as follows:

As of June 30, 2025, the Company hadno outstanding borrowings under its $550 million revolving credit facility (the "Revolver"). Additionally, the Company utilized $10 million of the Revolver to issue letters of credit as of June 30, 2025. The net Revolver available to be drawn upon as of June 30, 2025 was $540 million.

In connection with voluntary prepayments of the Term Loan B made in 2024, the Company wrote-off related debt issuance costs of $3 million and $5 million, which is included in Loss on extinguishment of debt in the Condensed Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2024, respectively.

At June 30, 2025, the Company was in compliance with all debt covenants related to the borrowings in the table above.

Note 8 –Financial Instruments

The Company is a global company that is exposed to foreign currency exchange rate fluctuations in the normal course of its business. As a part of the Company's foreign exchange risk management strategy, the Company uses derivative instruments, primarily forward contracts, to hedge the funding of foreign entities which have a non-dollar functional currency, thereby reducing volatility of earnings or protecting fair values of assets and liabilities.

At June 30, 2025 and December 31, 2024, the Company had outstanding forward exchange contracts with gross notional values of $208 million and $203 million, respectively. At June 30, 2025, approximately 78% of these contracts mature within three months,8% in three to six months,10% in six to twelve months and 4% in greater than twelve months. Most of these foreign currency derivative contracts are designated as cash flow hedges and did not have a material impact on the Company's condensed consolidated balance sheet, income statement or cash flows for the periods presented.

Refer to Note 9 – Fair Value of Financial Assets and Liabilities for additional information regarding the fair value of the Company's foreign exchange forward contracts.

Note 9 –Fair Value of Financial Assets and Liabilities

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP established a hierarchy framework to classify the fair value based on the observability of significant inputs to the measurement. The levels of the fair value hierarchy are as follows:

Level 1: Fair value is determined using an unadjusted quoted price in an active market for identical assets or liabilities.

Level 2: Fair value is estimated using inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.

Level 3: Fair value is estimated using unobservable inputs that are significant to the fair value of the assets or liabilities.

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Summary of Financial Assets and Liabilities Accounted for at Fair Value on a Recurring Basis

The following table represents assets and liabilities measured at fair value on a recurring basis. The basis for the measurement at fair value in all cases was Level 2.

Summary of Other Financial Assets and Liabilities

The estimated fair values of other financial assets and liabilities were as follows:

The fair value amounts for Cash and cash equivalents, Restricted cash, Accounts receivable, net and Short-term debt approximate carrying amounts due to the short-term maturities of these instruments.

The fair value of Long-term debt was estimated using quoted market prices for identical or similar instruments (Level 2 inputs).

Note 10 –Employee Benefit Plans

The Company has post-retirement pension, savings and investment plans in several countries, including the U.S., India and the Philippines. In many instances, employees participating in defined benefit pension plans that have been amended to freeze future service accruals were transitioned to an enhanced defined contribution plan. In these plans, employees are permitted to contribute a portion of their salaries and bonuses to the plans. The Company, at its discretion, matches a portion of employee contributions.

The Company recognized an expense related to its defined contribution plans of $2 million and $2 million for the three months ended June 30, 2025 and 2024, respectively, and $4 million and $6 million for the six months ended June 30, 2025 and 2024, respectively. The balance sheet and income statement impacts of any remaining defined benefit plans are immaterial for all periods presented in these Condensed Consolidated Financial Statements.

Note 11 –Accumulated Other Comprehensive Loss ("AOCL")

Below are the balances and changes in AOCL(1):

(1)All amounts are net of tax. Tax effects were immaterial.

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Note 12 –Contingencies and Litigation

As more fully discussed below, the Company is involved in a variety of claims, lawsuits, investigations and proceedings concerning a variety of matters, including: governmental entity contracting, servicing and procurement law; intellectual property law; employment law; commercial and contracts law; the Employee Retirement Income Security Act ("ERISA"); and other laws and regulations. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company assesses its potential liability by analyzing its litigation and regulatory matters using available information. The Company develops its view on estimated losses in consultation with outside counsel handling its defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in the Company's determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts in excess of any accrual for such matter or matters, this could have a material adverse effect on the Company's results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. The Company believes it has recorded adequate provisions for any such matters as of June 30, 2025. Litigation is inherently unpredictable, and it is not possible to predict the ultimate outcome of these matters.

Additionally, guarantees, indemnifications and claims arise during the ordinary course of business from relationships with suppliers, customers and non-consolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specified triggering events occur. Nonperformance under a contract could trigger an obligation of the Company. These potential claims include actions based upon alleged exposures to products, real estate, intellectual property such as patents, environmental matters and other indemnifications. The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the outcome of these claims. However, while the ultimate liabilities resulting from such claims may be significant to results of operations in the period recognized, management does not anticipate they will have a material adverse effect on the Company's Condensed Consolidated Financial position or liquidity. As of June 30, 2025, the Company had accrued its estimate of liability incurred under its indemnification arrangements and guarantees.

Litigation Against the Company

Skyview Capital LLC and Continuum Global Solutions, LLC v. Conduent Business Services, LLC: On February 3, 2020, plaintiffs Skyview Capital LLC and Continuum Global Solutions LLC (collectively "Skyview") filed a lawsuit in the Supreme Court of the State of New York, County of New York against Conduent Business Services, LLC, a wholly-owned subsidiary of the Company ("CBS"). The lawsuit relates to the sale of a portion of CBS's select standalone customer care call center business to plaintiffs, which sale closed in February 2019. Under the terms of the sale agreement, CBS received approximately $23 million in principal amount of promissory notes from plaintiffs (the "Notes"). The lawsuit alleges various causes of action in connection with the acquisition, including: indemnification for breaches of representations and warranties; indemnification for breaches of covenants; and fraud. Plaintiffs alleged that their obligation to mitigate damages and their contractual right of set-off permitted them to withhold and deduct from any amounts that are owed to CBS under the Notes, and plaintiffs sought a judgment that they had no obligation to pay the Notes. On August 20, 2020, CBS filed counterclaims against Skyview seeking the outstanding balance on the Notes, the amounts owed for operating certain Jamaica-based call centers on plaintiffs' behalf pending closing (the "Jamaica Deferred Closing"), other obligations under a transition services agreement and its amendments (the "TSAs"), and late rent payment obligations. CBS also moved to dismiss Skyview’s claims in 2020. In May 2021, the court denied the motion and allowed the claims to proceed. Fact and expert discovery concluded and the parties filed summary judgment motions in July 2023. On December 8, 2023, the court rendered its decision on the parties’ cross-motions for summary judgment, finding there were certain material issues of fact that required trial on Skyview's fraud claim, and also entering partial summary judgment for each side. On January 5, 2024, CBS filed a notice of appeal with the New York Supreme Court, Appellate Division, First Department ("Appellate Division") with respect to the portion of the ruling that did not grant the summary judgment motion of CBS in its entirety and that granted certain limited relief in favor of Skyview. On January 23, 2024, Skyview filed its own notice of appeal, challenging the decision granting a portion of CBS’s counterclaims.

In July 2024, Skyview informed CBS of its intention to sell a portion of its call center business. The parties reached an agreement on August 8, 2024, under which, contemporaneously with the closing of such a transaction, Skyview would pay the outstanding principal plus interest due on the outstanding Notes, fully discharging Skyview's obligations under the Notes, and would pay certain of CBS's litigation costs.

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On September 24, 2024, Skyview and the buyer announced a signed and binding asset purchase agreement. Following regulatory review, the transaction closed in December 2024, at which point Skyview paid CBS approximately $33 million, representing all outstanding principal and interest due on the Notes and reimbursement of certain litigation costs. As a result, CBS dismissed its two counterclaims related to the Notes.

In May 2025, the Appellate Division heard arguments on the parties’ 2024 cross-appeals and issued a ruling in June 2025, finding predominantly in CBS’s favor. Specifically, the Appellate Division reversed the trial court’s denial of summary judgment as to Skyview’s fraud claim and dismissed such claim in its entirety (along with Skyview’s request for punitive damages). In addition, the Appellate Division reversed the grant of summary judgment to Skyview on its breach of contract claim, finding there to be issues of fact for trial. No trial date has yet been set. With respect to CBS’s counterclaims, the Appellate Division (i) affirmed the grant of summary judgment on the counterclaims concerning the TSAs and late rent payment amounts and (ii) instructed the trial court to hold a hearing to resolve the final amount owed by Skyview to CBS on the Jamaica Deferred Closing counterclaim. The Appellate Division further found that the maximum amount that Skyview would have been entitled to set off against its liability on the Notes was $5 million (the limit set forth in the sale agreement).

The trial court accordingly entered judgment on the TSA and late rent payment counterclaims on June 23, 2025, which is pending final entry by the County Clerk.

On July 3, 2025, Skyview filed a motion to reargue the Appellate Division’s decision and, alternatively, for leave to appeal to the New York Court of Appeals.

CBS continues to deny all of plaintiffs' allegations, believes that it has strong defenses to all of plaintiffs’ claims, and will continue to defend the litigation vigorously. The Company is not able to determine or predict the ultimate outcome of this proceeding or reasonably provide an estimate or range of estimates of the possible outcome or loss, if any, in excess of currently recorded reserves.

Other Contingencies

Certain contracts, primarily in the Company's Government and Transportation segments, require the Company to provide a surety bond or a letter of credit as a guarantee of performance. As of June 30, 2025, the Company had $566 million of outstanding surety bonds issued to secure its performance of contractual obligations with its clients, and $120 million of outstanding letters of credit issued to secure the Company's performance of contractual obligations to its clients as well as other corporate obligations. In general, the Company would only be liable for these guarantees in the event of default in the Company's performance of its obligations under each contract. The Company believes it has sufficient capacity in the surety markets and liquidity from its cash flow and its various credit arrangements to allow it to respond to future requests for proposals that require such credit support.

Note 13– Preferred Stock

Series A Preferred Stock

In December 2016, the Company issued 120,000 shares of Series A convertible perpetual preferred stock with an aggregate liquidation preference of $120 million and an initial fair value of $142 million. The convertible preferred stock earns quarterly cash dividends at a rate of 8% per year ($9.6 million per year). Each share of convertible preferred stock is convertible at any time, at the option of the holder, into 44.9438 shares of common stock for a total of 5,393,000 shares (reflecting an initial conversion price of approximately $22.25 per share of common stock), subject to customary anti-dilution adjustments.

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Note 14 –Earnings (Loss) per Share

The Company did not declare any common stock dividends in the periods presented.

The following table sets forth the computation of basic and diluted earnings (loss) per share of common stock:

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Note 15 –Supplementary Financial Information

The components of Other assets and Other liabilities were as follows:

Note 16 –Subsequent Events

Tax Reform

On July 4, 2025, the President of the United States signed into law the One Big Beautiful Bill Act, which contains certain provisions enacting tax reform. The Company is evaluating the full effects of the legislation on its estimated annual effective tax rate and cash tax position.

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