Conduent (CNDT) Q3 2024 earnings summary

Executive summary

• Q3 2024 adjusted revenue was $781M, with adjusted EBITDA of $32M at a 4.1% margin, meeting or slightly exceeding expectations, and reflecting a 46.7% year-over-year decline due to lost business and divestitures.

• Q3 2024 GAAP net income was $123M, up from a loss of $289M in Q3 2023, driven by divestiture gains and improved cost structure.

• New business signings ACV reached $111M, with net ARR activity (TTM) at $46M; commercial segment outperformed while government and transportation faced headwinds.

• Completed three major divestitures in 2024, generating $865M in gross proceeds and $780M in net proceeds, with 75% of the $1B capital target deployed to debt prepayment and share repurchases.

• Leadership strengthened with new senior hires in commercial and government segments, and client retention rates improved.

Financial highlights

• Q3 2024 revenue was $807M, down 13.4% year-over-year; adjusted revenue was $781M, down 6.0% year-over-year, in line with expectations after divestitures.

• Adjusted EBITDA was $32M, down from $60M in Q3 2023; adjusted EBITDA margin was 4.1%, down from 7.2% a year ago.

• GAAP diluted EPS was $0.72, compared to $(1.34) last year; adjusted diluted EPS was $(0.14) in Q3 2024.

• Net leverage ratio improved to 1.4x, with $393M–$404M in cash and a largely undrawn $550M revolver.

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

Outlook and guidance

• FY 2024 adjusted revenue expected between $3,185M and $3,215M, about 3% down year-over-year at the midpoint.

• Adjusted EBITDA margin for FY 2024 projected at 3.75%–4.0%, compared to 7.4% in FY 2023.

• Adjusted free cash flow for FY 2024 projected at approximately $(50)M, mainly due to timing of billing milestones in public sector contracts.

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

• Cash, projected cash flow, and credit facility expected to meet business obligations for at least the next 12 months.