What Conduent (CNDT) Said on Its Q3 Earnings Call

Key Points

• Revenue declined, but profitability improved: Q3 continuing-operations revenue fell to $534 million from $605 million a year earlier, while adjusted EBITDA rose to $36 million and its margin expanded to 6.7% from 5.1%.
• Converting pipeline into sales remains the key challenge: Conduent had a qualified pipeline of about $2.9 billion, but new-business ACV signed in Q3 fell to $61 million from $70 million a year earlier. Contract losses, including the departure of its largest commercial client, weighed on revenue.
• Conduent maintained its 2026 outlook of $2.15 billion–$2.25 billion in revenue and $140 million–$170 million in adjusted EBITDA. It completed a refinancing extending its revolving facilities to 2029 and expects the temporary cash-flow impact from a factoring pause to be resolved by year-end.

Conduent NASDAQ: CNDT reported lower third-quarter revenue but improved profitability as cost reductions helped offset contract losses, and executives said converting a growing sales pipeline into revenue remains the company’s primary challenge.

Revenue from continuing operations fell to $534 million from $605 million a year earlier, though it rose from the second quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $36 million from $31 million, while the adjusted EBITDA margin expanded to 6.7% from 5.1%.

“Pipeline alone does not create value, conversion does,” President and CEO Harsha Agadi said on the earnings call. He said the company must win more opportunities, retain existing clients and execute successfully on new business.

Conduent maintained its 2026 outlook for revenue of $2.15 billion to $2.25 billion and adjusted EBITDA of $140 million to $170 million. The figures exclude discontinued operations, including the transportation segment.

Sales Pipeline Grows as Revenue Declines

The company signed $61 million in new business annual contract value, or ACV, during the third quarter, down from $70 million a year earlier. Year-to-date new business ACV totaled $249 million, including approximately $144 million in commercial and $105 million in government.

Conduent entered the fourth quarter with approximately $2.9 billion in qualified new business ACV pipeline. CFO Giles Goodburn said the commercial pipeline was just under $400 million, up 27% since the beginning of the year, while the government pipeline was $2.5 billion, up 8.5%.

Government contract awards have taken longer, extending deal cycles, Goodburn said. Agadi said the company had roughly 30 proposals awaiting approval, representing $380 million, and executives expect procurement activity to pick up following the election cycle.

Commercial revenue fell 16% to $308 million, driven by contract losses and lower volumes, predominantly in customer experience management. Goodburn said Conduent’s largest commercial client ended its contract during the quarter, an outcome already incorporated into the company’s outlook.

Asked when new wins would contribute to results, Agadi said they were already flowing through to revenue but had been offset by client losses. He said churn was beginning to decline following the large client’s departure.

Government revenue was $226 million, down from $238 million, reflecting completed implementation projects, lost business and lower client volumes. Its adjusted EBITDA margin rose 230 basis points to 27.9%, helped by cost-efficiency programs.

Cash Flow and Refinancing

Conduent ended the quarter with approximately $295 million in cash and reported negative adjusted free cash flow of $117 million. Goodburn said a temporary pause in a lender-provided factoring program during refinancing negotiations had a significant effect on cash flow.

Had factoring been conducted at a normalized level, the company would have been close to breakeven free cash flow for the quarter, Goodburn said. He expects the effect to be resolved by the end of the fourth quarter.

On Oct. 23, Conduent completed a refinancing that extended its revolving credit facilities to May 2029 and brought total commitments to $447 million. The facility is scheduled to decrease by $80 million by year-end as the company divests transportation assets and reduces working-capital requirements.

Goodburn said the company expects adjusted EBITDA margins to improve to double digits and positive free cash flow to emerge during its 2026–2028 plan. It also expects its adjusted net leverage ratio, temporarily elevated to 2.9 times at quarter-end, to fall to 1.5 times in 2028 and improve to one time thereafter.

Divestitures and Cost Cuts

Conduent completed the sale of its Public Transit business to Modaxo on Oct. 1 for a headline price of $164 million and expects to complete the sale of its Tolling business shortly. Agadi said the full exit from transportation would generate $234 million in gross proceeds.

The CEO said Conduent has identified $106 million of its $120 million cost-savings target and realized $55 million. The program includes organizational simplification, vendor and real estate optimization, technology modernization and automation.

The company also reached an agreement to resolve class-action litigation arising from a January 2025 cyber event. Agadi said the settlement remains subject to court approval and is expected to be fully funded by insurance.

About Conduent (NASDAQ:CNDT)

Conduent Incorporated NASDAQ: CNDT provides business process services and technology solutions to government agencies and commercial organizations. Its services are designed to help clients manage complex administrative processes, improve customer interactions and modernize operations through digital tools and automation.

The company's offerings include transportation and mobility services, such as electronic tolling, transit fare collection and traffic-management solutions; government services, including public benefits administration, payment processing and constituent support; and commercial services covering customer experience, claims and benefits administration, human resources and other business processes.

Conduent was established as an independent company following its separation from Xerox in 2017.

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