cndt-20240331


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

_______________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37817

CONDUENT INCORPORATED

(Exact Name of Registrant as specified in its charter)

New York

81-2983623

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

100 Campus Drive,

Suite 200,

Florham Park,

New Jersey

07932

(Address of principal executive offices)

(Zip Code)

(844) 663-2638

(Registrant’s telephone number, including area code)

_________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	CNDT	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Small reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


Class		Outstanding at April 30, 2024
Common Stock,	$0.01 par value	204,583,488


						CNDT Q1 2024 Form 10-Q


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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ("Form 10-Q") and any exhibits to this Form 10-Q may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the "Litigation Reform Act"). These forward-looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available. The words “anticipate,” “believe,” “estimate,” “expect,” "plan," “intend,” “will,” “aim,” “should,” “could,” “forecast,” “target,” “may,” "continue to," "endeavor," "if,” “growing,” “projected,” “potential,” “likely,” "see," "ahead," "further," "going forward," "on the horizon," and similar expressions (including the negative and plural forms of such words and phrases), as they relate to us, are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, many of which are outside of our control, that could cause actual results to differ materially from those expected or implied by such forward-looking statements and could materially adversely affect our business, financial condition, results of operations, cash flows and liquidity.

Important factors and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements include, but are not limited to: risks related to pending dispositions, including the transfer of the Company’s BenefitWallet’s HSA, MSA and flexible spending account portfolio (the “BenefitWallet Transfer”) and the sale of the Company’s Curbside Management and Public Safety Solutions businesses, including but not limited to the Company’s ability to realize the benefits anticipated from such transactions, unexpected costs, liabilities or delays in connection with such transactions, and the significant transaction costs associated with such transactions; government appropriations and termination rights contained in our government contracts; the competitiveness of the markets in which we operate and our ability to renew commercial and government contracts, including contracts awarded through competitive bidding processes; our ability to recover capital and other investments in connection with our contracts; risk and impact of geopolitical events and increasing geopolitical tensions (such as the wars in the Ukraine and Israel), macroeconomic conditions, natural disasters and other factors in a particular country or region on our workforce, customers and vendors; our reliance on third-party providers; our ability to deliver on our contractual obligations properly and on time; changes in interest in outsourced business process services; claims of infringement of third-party intellectual property rights; our ability to estimate the scope of work or the costs of performance in our contracts; the loss of key senior management and our ability to attract and retain necessary technical personnel and qualified subcontractors; our failure to develop new service offerings and protect our intellectual property rights; our ability to modernize our information technology infrastructure and consolidate data centers; expectations relating to environmental, social and governance considerations; utilization of our stock repurchase program; the failure to comply with laws relating to individually identifiable information and personal health information; the failure to comply with laws relating to processing certain financial transactions, including payment card transactions and debit or credit card transactions; breaches of our information systems or security systems or any service interruptions; our ability to comply with data security standards; developments in various contingent liabilities that are not reflected on our balance sheet, including those arising as a result of being involved in a variety of claims, lawsuits, investigations and proceedings; risks related to divestitures and acquisitions; risk and impact of potential goodwill and other asset impairments; our significant indebtedness and the terms of such indebtedness; our failure to obtain or maintain a satisfactory credit rating and financial performance; our ability to obtain adequate pricing for our services and to improve our cost structure; our ability to collect our receivables, including those for unbilled services; a decline in revenues from, or a loss of, or a reduction in business from or failure of significant clients; fluctuations in our non-recurring revenue; increases in the cost of voice and data services or significant interruptions in such services; our ability to receive dividends and other payments from our subsidiaries; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Form 10-Q as well as in our 2023 Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q and Current Report on Form 8-K filed (or furnished) with the Securities and Exchange Commission (the "SEC"). Any forward-looking statements made by us in this Form 10-Q speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether because of new information, subsequent events or otherwise, except as required by law.


						CNDT Q1 2024 Form 10-Q


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CONDUENT INCORPORATED

FORM 10-Q

March 31, 2024

TABLE OF CONTENTS


		Page
Part I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Income (Loss)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Shareholders' Equity	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20


Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30

Part II — Other Information

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

For additional information about Conduent Incorporated and access to our Annual Reports to Shareholders and SEC filings, free of charge, please visit our website at https://investor.conduent.com/. Any information on or linked from the website is not incorporated by reference into this Form 10-Q.


						CNDT Q1 2024 Form 10-Q


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PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED)

CONDUENT INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


	Three Months Ended March 31,
(in millions, except per share data)		2024		2023
Revenue		$	921	$	922

Operating Costs and Expenses
Cost of services (excluding depreciation and amortization)		735		720
Selling, general and administrative (excluding depreciation and amortization)		116		111
Research and development (excluding depreciation and amortization)		2		2
Depreciation and amortization		62		61
Restructuring and related costs		9		29
Interest expense		27		27

(Gain) loss on divestitures and transaction costs, net		(161)		2
Litigation settlements (recoveries), net		4		(21)
Loss on extinguishment of debt		2		—
Other (income) expenses, net		(2)		(1)
Total Operating Costs and Expenses		794		930

Income (Loss) Before Income Taxes		127		(8)

Income tax expense (benefit)		28		(2)
Net Income (Loss)		$	99	$	(6)



Net Income (Loss) per Share:
Basic		$	0.46	$	(0.04)
Diluted		$	0.46	$	(0.04)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


						CNDT Q1 2024 Form 10-Q


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CONDUENT INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended March 31,
(in millions)		2024		2023
Net Income (Loss)		$	99	$	(6)
Other Comprehensive Income (Loss), Net(1)
Currency translation adjustments, net		(11)		17


Unrecognized gains (losses), net		—		1

Other Comprehensive Income (Loss), Net		(11)		18

Comprehensive Income (Loss), Net		$	88	$	12

__________

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

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


						CNDT Q1 2024 Form 10-Q


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CONDUENT INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(in millions, except share data in thousands)	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	415	$	498
Accounts receivable, net	600		559
Assets held for sale	192		180
Contract assets	166		178
Other current assets	216		240
Total current assets	1,589		1,655
Land, buildings and equipment, net	186		197
Operating lease right-of-use assets	188		191
Intangible assets, net	31		32
Goodwill	643		651
Other long-term assets	421		436
Total Assets	$	3,058	$	3,162
Liabilities and Equity
Current portion of long-term debt	$	33	$	34
Accounts payable	167		174
Accrued compensation and benefits costs	175		183
Unearned income	94		91
Liabilities held for sale	56		58
Other current liabilities	324		328
Total current liabilities	849		868
Long-term debt	1,083		1,248
Deferred taxes	43		30
Operating lease liabilities	155		157
Other long-term liabilities	81		84
Total Liabilities	2,211		2,387

Contingencies (See Note 12)
Series A convertible preferred stock	142		142

Common stock	2		2
Treasury stock, at cost	(44)		(27)
Additional paid-in capital	3,941		3,938
Retained earnings (deficit)	(2,752)		(2,849)
Accumulated other comprehensive loss	(446)		(435)
Total Conduent Inc. Equity	701		629
Noncontrolling Interest	4		4
Total Equity	705		633
Total Liabilities and Equity	$	3,058	$	3,162

Shares of common stock issued and outstanding	206,685		211,509
Shares of series A convertible preferred stock issued and outstanding	120		120
Shares of common stock held in treasury	13,665		8,841

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


						CNDT Q1 2024 Form 10-Q


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CONDUENT INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended March 31,
(in millions)	2024		2023
Cash Flows from Operating Activities:
Net income (loss)	$	99	$	(6)
Adjustments required to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization	62		61
Contract inducement amortization	1		1
Deferred income taxes	13		(8)


Amortization of debt financing costs	1		1
Loss on extinguishment of debt	2		—
(Gain) loss on divestitures and sales of fixed assets, net	(164)		—
Stock-based compensation	3		2

Changes in operating assets and liabilities:
Accounts receivable	(52)		42
Other current and long-term assets	(23)		(33)
Accounts payable and accrued compensation and benefits costs	(10)		(65)

Other current and long-term liabilities	(6)		(9)
Net change in income tax assets and liabilities	37		2
Net cash provided by (used in) operating activities	(37)		(12)
Cash Flows from Investing Activities:
Cost of additions to land, buildings and equipment	(13)		(11)

Cost of additions to internal use software	(8)		(11)

Proceeds from divestitures	164		—
Net cash provided by (used in) investing activities	143		(22)
Cash Flows from Financing Activities:


Payments on debt	(175)		(10)


Treasury stock purchases	(17)		—
Taxes paid for settlement of stock-based compensation	(5)		(7)
Dividends paid on preferred stock	(2)		(2)

Net cash provided by (used in) financing activities	(199)		(19)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2)		2
Increase (decrease) in cash, cash equivalents and restricted cash	(95)		(51)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	519		598
Cash, Cash Equivalents and Restricted Cash at End of period(1)	$	424	$	547

___________

(1)Includes $9 million and $21 million of restricted cash as of March 31, 2024 and 2023, respectively, that were included in Other current assets on their respective Condensed Consolidated Balance Sheets.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


						CNDT Q1 2024 Form 10-Q


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CONDUENT INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)


	Three Months Ended March 31, 2024
(in millions)	Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		AOCL(1)		Non-controlling Interest		Shareholders' Equity
Balance at December 31, 2023	$	2	$	(27)	$	3,938	$	(2,849)	$	(435)	$	4	$	633
Dividends - preferred stock, $20/share	—		—		—		(2)		—		—		(2)
Stock incentive plans, net	—		—		3		—		—		—		3
Treasury stock purchases	—		(17)		—		—		—		—		(17)

Comprehensive Income (Loss):
Net Income (Loss)	—		—		—		99		—		—		99
Other comprehensive income (loss), net	—		—		—		—		(11)		—		(11)
Total Comprehensive Income (Loss), Net	—		—		—		99		(11)		—		88
Balance at March 31, 2024	$	2	$	(44)	$	3,941	$	(2,752)	$	(446)	$	4	$	705


	Three Months Ended March 31, 2023
(in millions)	Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		AOCL(1)		Non-controlling Interest		Shareholders' Equity
Balance at December 31, 2022	$	2	$	—	$	3,924	$	(2,543)	$	(466)	$	—	$	917
Dividends - preferred stock, $20/share	—		—		—		(2)		—		—		(2)
Stock incentive plans, net	—		—		2		—		—		—		2
Treasury stock purchases	—		—		—		—		—		—		—

Comprehensive Income (Loss):
Net Income (Loss)	—		—		—		(6)		—		—		(6)

SEC Form 10-Q filed by Conduent Incorporated