Conduent NASDAQ: CNDT reported improved profitability and cash flow in the first quarter of 2026 while outlining a broader plan to reduce costs, sharpen its commercial focus and use artificial intelligence to support margin expansion.
Chief Executive Harsha Agadi, who said he has been in the role for 115 days, told investors that the company’s priorities remain unchanged from its prior earnings call: reducing the cost structure, converting pipeline to growth, optimizing the portfolio, increasing speed and accountability, and enforcing financial discipline.
“We executed well on reducing our cost structure,” Agadi said, pointing to an adjusted EBITDA margin of 6.8% in the quarter. He said Conduent has engaged two external advisers as part of a detailed cost review and has identified “significant potential opportunities.”
“Our initial assessment is that we can reduce $100 million of cost in the next 18 months,” Agadi said. “This, ladies and gentlemen, is just the beginning.” He reiterated his view that Conduent should be capable of adjusted EBITDA margins above 10%.
Revenue Declines, But Adjusted EBITDA Improves
Chief Financial Officer Giles Goodburn said first-quarter revenue was $723 million, down 3.7% from $751 million in the same period last year. Adjusted EBITDA rose to $49 million from $37 million a year earlier, while adjusted EBITDA margin increased 190 basis points year over year to 6.8%. Goodburn said the quarter benefited from several discrete items that contributed about 64 basis points to adjusted EBITDA margin.
By segment, commercial revenue fell 10.2% to $361 million. Goodburn said volume declines at one of Conduent’s largest commercial clients accounted for about 36% of the segment’s revenue decline, with the remainder attributed to lost business, partially offset by new wins. Commercial adjusted EBITDA rose $3 million year over year to $43 million, and segment margin improved to 11.9%.
Government segment revenue rose 4.6% to $226 million, supported by new business, higher volumes in government healthcare and price increases across several clients. Government adjusted EBITDA was $59 million, with margin of 26.1%, up 850 basis points year over year. Goodburn said revenue drivers, AI initiatives and efficiency programs contributed to the improvement.
Transportation revenue increased 2.3% to $136 million, driven by new business, higher volumes and foreign exchange. The segment posted negative adjusted EBITDA of $4 million, which Goodburn attributed to additional post-implementation expense isolated to one transportation contract.
Conduent ended the quarter with approximately $251 million in cash. Adjusted free cash flow was negative $15 million, which Goodburn described as a significant improvement from the prior-year period. Net leverage remained at 2.8 times, and capital expenditures were 2.2% of revenue.
Sales Wins and Pipeline Growth
Conduent signed $114 million of new business annual contract value in the quarter, up 5% from the first quarter of 2025 and marking the sixth consecutive quarter of year-over-year growth. Agadi said the wins included more than $48 million in the commercial segment, including contracts with three long-standing healthcare clients, and more than $66 million in the public sector segment, driven by a $23 million government Medicaid claims deal.
Goodburn said the company’s trailing four-quarter ACV metric was up nearly 5% from a year earlier. The government segment was up 60% on that basis, while the commercial segment reversed a declining trend. Conduent also signed three new logos and 14 new capabilities during the quarter.
The company’s qualified ACV pipeline stood at $3.5 billion, up 10% year over year. Goodburn said the government pipeline was up 27%, while the commercial pipeline was 25% stronger than the prior quarter.
Agadi said Conduent’s go-to-market strategy now emphasizes cross-selling to existing clients, restructuring sales incentives, defending large accounts, winning new logos and establishing a deal desk. In commercial markets, he said the company is narrowing its focus to healthcare and financial services. In the public sector, Conduent has re-engaged in federal opportunities focused on health and human services and other target agencies.
AI Initiatives Target Fraud, Service and Productivity
Agadi used part of the call to detail Conduent’s AI initiatives, saying the company has “not been standing still” in the area. He said Conduent has deployed machine learning models for payment fraud detection and is now using generative AI and rules-based AI to improve account takeover detection. The company is also looking to expand those tools into other fraud vectors.
In customer and citizen interaction, Agadi said Conduent previously used interactive voice response, chatbots and analytics to improve cost and service. The company has since added GenAI agent assist to reduce handle time and expanded “Connie,” its branded GenAI chatbot, to support personalized benefits experiences in human capital solutions.
During the question-and-answer session, Agadi said AI is especially important in commercial markets, where “if you don’t innovate, you will not survive.” He said Conduent is focused on borrowing or partnering with AI-driven companies rather than building everything internally, with the goal of improving reliability, consistency and cost.
Goodburn added that AI has already had tangible effects, citing fraud detection that produced “significant cost savings” in the government segment and Connie’s use in benefits enrollment, where he said the company saw a higher interaction rate than in prior years.
2026 Guidance and Portfolio Optimization
Conduent maintained a 2026 revenue guidance range of $2.8 billion to $2.9 billion and adjusted EBITDA guidance of $160 million to $190 million. Goodburn said the company expects government and transportation revenue to grow in 2026, with deterioration isolated to the commercial segment. He attributed the commercial pressure to softer volumes at some clients and business lost over the past 12 to 18 months.
For 2027, Conduent said it expects flat to positive revenue growth, adjusted EBITDA of $190 million to $220 million and positive cash generation.
Agadi also said Conduent believes proceeds from identified divestitures in 2026 should exceed $200 million. In response to an analyst question, he said management is focused on obtaining those proceeds and that potential uses could include reducing debt, repurchasing stock or reinvesting in the business.
“What that does is gives us optionality,” Agadi said.
He said two businesses have been identified and marketed, while the company has also received inbound interest in other businesses. However, Agadi noted that improving performance in some areas has caused management to reconsider whether certain assets should be sold.
Agadi closed the call by saying Conduent is “well on its way to improving margins, right-sizing the portfolio, and increasing the growth rate.” The company plans to host an investor day on Sept. 23, 2026, in New York City.
About Conduent NASDAQ: CNDT
Conduent Incorporated is a global provider of diversified business process services with a focus on delivering digital platforms and automation solutions. The company serves clients across a variety of industries including healthcare, transportation, public sector, financial services and human resources. By combining technology-enabled services with data analytics and artificial intelligence, Conduent helps organizations streamline operations, enhance customer experiences and improve overall efficiency.
Key offerings from Conduent encompass customer engagement and transaction processing, digital payment solutions, eligibility and enrollment services for health and welfare programs, and workforce management tools.
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