Conduent (CNDT) Q3 2024 earnings summary

Executive summary

• Q3 2024 adjusted revenue was $781 million and adjusted EBITDA was $32 million at a 4.1% margin, meeting or slightly exceeding expectations, fully adjusted for completed divestitures.

• Q3 2024 revenue was $807 million, with net income of $123 million, reflecting sequential improvement and performance in line with expectations.

• New business signings totaled $111 million ACV, with strong commercial sales offset by softness in government and transportation segments; net ARR activity (TTM) was $46 million.

• Completed the sale of the Casualty Claims Solutions business for $224 million cash; proceeds used to prepay $75 million in term loans.

• Leadership strengthened with three new senior hires and continued improvement in client retention rates.

Financial highlights

• Q3 2024 adjusted revenue was $781 million, down 6% year-over-year from $831 million in Q3 2023, in line with expectations after divestitures.

• Q3 2024 revenue was $807 million, down 13% year-over-year; adjusted EBITDA was $32 million, down from $60 million in Q3 2023; adjusted EBITDA margin was 4.1% versus 7.2% a year ago.

• Q3 net income was $123 million versus a net loss of $289 million in Q3 2023; GAAP diluted EPS was $0.72, compared to $(1.34) last year; adjusted diluted EPS was $(0.14).

• Adjusted free cash flow was $(6) million; capital expenditure was 2.5% of revenue in Q3.

• Net leverage ratio decreased to 1.4x, with $404 million in cash at quarter-end and $75 million in debt repaid in Q3.

Outlook and guidance

• Full-year 2024 adjusted revenue is expected to be $3,185–$3,215 million, about 3% down year-over-year at the midpoint.

• Adjusted EBITDA margin is guided to 3.75%–4%, toward the top end of the previous range.

• Adjusted free cash flow is expected to be around negative $50 million, mainly due to billing milestone timing in public sector contracts.

• Mid-term (2025 exit) targets: $3.0–$3.3 billion adjusted revenue, 8%–9% adjusted EBITDA margin, and net leverage near 1.0x.

• Portfolio rationalization strategy expected to create a more nimble, faster-growing company with modest net leverage and excess capital.