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Image source: The Motley Fool. Monday, Aug. 10, 2026 at 9:00 a.m. ET Vice President, Investor Relations - Nick Goel Chief Executive Officer - Harsha Agadi Chief Financial Officer - Giles Goodburn Operator: Greetings, and welcome to the Conduent Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nick Goel, Vice President, Investor Relations. Thank you. You may begin. Nick Goel: Good morning, everyone. Welcome to Conduent's Second Quarter 2026 Earnings Call. With me today are Harsha Agadi, our CEO; and Giles Goodburn, our CFO. Harsha will provide an overview of the business, and Giles will cover our financial performance in greater detail. We hope you have had a chance to review our press release issued earlier this morning. A copy of the press release and slides used during this call were filed with the SEC on Form 8-K. This information is also available on the Investor Relations section of our website. During this call, we will make forward-looking statements. These statements reflect management's current beliefs, assumptions and expectations, which may change over time. Actual results could differ materially from those statements due to a number of factors. Information concerning these factors is included in our 10-K and 10-Q filings with the SEC. Unless otherwise stated, the information presented today reflects our continuing operations. It does not include the divestitures announced during this quarter. It includes non-GAAP financial measures, which should be viewed in addition to and not as a substitute for our GAAP results. For more information regarding the definitions of our non-GAAP measures, how we use them and the limitations to their usefulness for comparative purposes, please see our press release. And now I would like to turn the call over to Harsha. Harsha Agadi: Good morning, everyone, and thank you for joining us. 6 months into my role as CEO, I have a clear view of where we stand as a company, where we need to improve and most importantly, where I believe we have significant opportunity to create value. Over the past several months, I've spent a lot of time listening to clients, engaging with associates across our business and reviewing our operations firsthand. My perspective was reinforced this spring at Elevate 2026, our client event in Chicago, where we heard directly from nearly 100 clients and partners, representing a diverse range of Fortune 100 companies about what matters most to them, greater speed: simpler operations, continued innovation and consistent execution. Those conversations also reinforced that the 5 priorities we established at the beginning of the year remain the right ones: increasing speed and accountability, enforcing financial discipline, reducing our cost structure, optimizing our portfolio and converting pipeline into growth. Today, I'll provide an update on the progress we're making against each of these priorities. Before I do, a brief comment on the quarter. Our second quarter results were in line with our expectations. As a result of the 2 divestitures we announced during the quarter, we are updating our full year guidance to reflect the impact of those transactions. Now let me start with our first priority, increasing speed and accountability. Over the past several months, we continued simplifying our structure and how we operate, strengthening accountability and aligning the organization around our highest priorities. We've also strengthened our leadership team to improve operational efficiency and support our transformation. Approximately 80% of our senior leadership team is either new to Conduent or has taken on expanded responsibilities, bringing their deep experience and proven leadership across the industries we serve. We're also beginning a phased return-to-office approach, starting with locations where we have significant workforce. We believe that greater in-person collaboration will enable faster decision-making, stronger collaboration and better outcomes for our clients. These actions are creating a simpler, more agile and more efficient Conduent, one that is better positioned to deliver consistently for our clients and shareholders. Our second priority is enforcing financial discipline. We continue to strengthen financial discipline across the organization with tighter controls around hiring, discretionary spending and capital allocation while increasing oversight of cash and liquidity across the business. These actions contributed to a meaningful improvement in our cash performance with cash usage essentially flat compared with the prior quarter. While we have more work to do, this is an important step in improving our cash generation and strengthening our financial flexibility. Our third priority is reducing our cost structure. Throughout the quarter, we continued simplifying the organization, reducing structural costs and redirecting investments towards the capabilities that will create the greatest long-term value. We continue to make good progress against the approximately $100 million annualized cost savings program we announced in the first quarter and remain on track to implement the majority of this program this year. The program spans all businesses and corporate functions with a focus on optimizing technology spend, rightsizing certain roles, reducing duplication, eliminating bureaucracy and simplifying our operating model across the enterprise. The fourth priority is optimizing our portfolio. We are taking a disciplined approach guided by a simple framework: fix, sell and grow. We will fix businesses where we see a clear path to improving performance, sell businesses that are no longer aligned with our long-term strategy and grow the businesses where we have the strongest competitive advantages and the greatest opportunities to create long-term value. During the quarter, we announced the sale of our transit business to Modaxo and the sale of our tolling business to Quarterhill. Together, these transactions complete our exit from the transportation business significantly reduce off-balance sheet financial obligations and further simplify our portfolio. We expect both transactions to close by the end of 2026. With these transactions, we now expect to generate approximately $234 million in gross proceeds in addition to retaining a 7% equity interest in Quarterhill whose current market capitalization is approximately CAD 300 million. This exceeds the commitment we made in the first quarter to generate at least $200 million through portfolio actions. We intend to use the majority of these proceeds to reduce debt, further strengthening our balance sheet and financial profile and providing us with greater optionality to invest in high-return growth opportunities. These actions also sharpen our strategic focus, allowing us to concentrate our capital, resources and management attention on the remaining businesses where we believe we can create the greatest value for our clients and shareholders. Portfolio optimization is not a onetime event. It is an ongoing discipline that will help us build a simpler, more focused and high-performing Conduent while maximizing long-term shareholder value. Our final priority and the fifth priority is converting pipeline into growth. During the quarter, we continued to build momentum through a more focused go-to-market approach. The progress is reflected in the strength of our pipeline. Across our commercial and government segments, we have approximately $3 billion in qualified new business opportunities, which has grown sequentially over the past several quarters. While there is more work to do, the continued growth in our pipeline reinforces our confidence that the actions we've taken to improve execution, sharpen our market focus and strengthen our client relationships are beginning to deliver. At the same time, it's important to recognize that there is a natural timing difference between winning new business and seeing the full revenue impact. As we've discussed previously, some contracts continue to roll off, and we also continue to see volume declines in certain existing client programs. Our focus is not simply replacing revenue, but improving the quality of our portfolio by winning business in areas where we have a stronger competitive differentiation and a better long-term growth potential. This is a natural part of our transformation as we shape the portfolio toward higher-value opportunities and differentiated solutions. Those trends are reflected in the client momentum we saw during the quarter. In Commercial, I'm pleased to let you know we have sold approximately $100 million of new business in the first 2 quarters. We also continue expanding into adjacent markets with new capabilities that create additional avenues for growth. I'll share a few examples. We signed a new pension risk transfer administration engagement with Securian, expanding our position in the growing retirement administration market with a differentiated end-to-end solution. Trillium Health Resources selected our Health Services Plus platform to support claims processing, provider, data management and member services, validating the investments we've made in our health care platform and reinforcing our ability to deliver integrated solutions for health care organizations. We also expanded our relationship with Avis Budget Group through a new vehicle citation offering, leveraging multiple solutions from across our businesses. Importantly, this establishes a new scalable offering that can be applied across organizations, managing large vehicle fleets, opening an attractive adjacent market for Conduent. We're also seeing continued expansion with several leading U.S. health care payers, reflecting the strength of our relationships and our ability to deliver additional value across our portfolio of solutions. Turning to our Government business, we have sold approximately $89 million of new business in the first 2 quarters, and we continue to demonstrate the value of our expertise in modernizing mission-critical public programs. Let me share some examples. During the quarter, we implemented a modernized state-of-the-art Medicaid platform for the state of New Mexico, replacing a 24-year-old legacy system with a single integrated platform that enables faster, more efficient claims processing and improved access to care and continuity of service for approximately 900,000 Medicaid members. We also secured a multiyear renewal in Virginia to continue operating and modernizing the Commonwealth's Medicaid systems, enabling the transition to a more integrated platform designed to improve access to information, strengthen fraud prevention and enhance program performance for approximately 1.6 million enrolled Virginians. And we continued advancing electronic benefits transfer modernization by completing pilot or production deployments of chip-enabled EMV technology in 3 states with a fourth state scheduled to roll out by the end of the summer. Together with enhanced fraud prevention capabilities, these technologies are helping states better protect benefits while improving security for program participants. Beyond the wins we've announced, our qualified pipeline remains extremely strong. While the timing of individual awards can vary, the breadth and the quality of our pipeline reinforces our confidence in our ability to continue converting pipeline into sustainable growth. The client momentum we're seeing is supported by attractive long-term market fundamentals. Our go-forward portfolio addresses a large and growing market of approximately $200 billion, expanding at an estimated annual rate of about 4%. We believe Conduent is extremely well positioned to capture this opportunity because organizations increasingly need partners that can modernize complex operations through integrated end-to-end solutions, not isolated point products. That is where Conduent stands apart. We combine deep operational expertise with technology automation and AI to transform mission-critical business processes for our clients. That differentiation is becoming even more important as organizations look to adopt AI increasingly. Clients recognize that AI is not about deploying stand-alone tools or running disconnected pilots. The real opportunity lies in embedded AI into the workflows and business processes that power their operations. Because we manage those processes on behalf of our clients, we bring the domain expertise, operational knowledge and technology capabilities needed to implement AI in ways that deliver measurable business outcomes. We are methodically embedding AI across the full cycle of our solutions from customer and constituent interactions to core business operations and enterprise productivity, and we're already seeing tangible results. One sterling example is Conni, our AI-powered digital assistant now embedded within our Life@Work health and wellness platform. Today, Conni resolves approximately 86% of employee inquiries without human intervention while reducing live agent interaction by more than 20%. We're now taking the next step by infusing Conni into Agentic AI capabilities and expanding those capabilities into new use cases. One example is our personalized Agentic AI-powered Navigator, the next evolution of Conni, which helps simplify complex health care interactions by transforming confusing health care information into personalized guidance for members and providers. That innovation is already being recognized in the marketplace. Recently, Conduent was selected as a winner of UnitedHealthcare's 2026 Global Innovation Challenge for its personalized Agentic AI-powered Navigator. Selected from 40 participating companies, this recognition clearly validates our superior ability to apply AI to solve real customer problems while improving business outcomes for our clients. Internally, we're also deploying Microsoft Copilot and AI-assisted software development tools to help our engineering teams accelerate development, improve productivity and bring new capabilities to market more quickly. Together, these investments demonstrate how we're combining deep domain expertise with practical AI innovation to help clients modernize operations, improve outcomes and create sustainable long-term value. The bottom line is this. We are executing with greater discipline, and we're beginning to see the results. We are redefining what clients and investors should expect from Conduent, a simpler, more focused company with stronger execution, greater financial discipline and a clear path to sustainable, profitable growth. While there is always more work ahead, I am extremely optimistic about where we're headed and confident we're building a stronger, high-performing company with significant opportunities. With that, I'll turn the call over to our Chief Financial Officer, Giles Goodburn. Giles Goodburn: Thanks, Harsha. As we have done in the past, we're reporting both GAAP and non-GAAP numbers. The reconciliations are in our filings and in the appendix of the presentation. Firstly, let me start by stating the results we are reporting today reinforce our conviction around our transformation journey Harsha laid out at the beginning of the year. However, when interpreting our second quarter GAAP and non-GAAP financial statements, you will see they are influenced by a number of factors related to this transformation, specifically discontinued operations and anticipated stranded costs from divestiture activity and the early consulting costs incurred to achieve the cost efficiency targets, the benefits of which will become resident in future quarters. All of these factors are important steps towards our transformation destination. During the quarter, as Harsha mentioned, we announced the sale of both our transit and tolling solutions, which will complete our exit from the transportation business. The transactions collectively represent a strategic shift that will have a major effect on the company's operations and financial results and hence, meet the criteria for discontinued operations presentation. Unless otherwise indicated, the financial disclosures and related information and commentary provided herein relate to the company's continuing operations, which exclude the Transportation segment. All prior periods have been restated to reflect discontinued operations. These transactions are a key milestone in our strategic journey that once closed, will generate gross proceeds of $234 million, plus a 7% equity stake in Quarterhill, the acquirer of our tolling business. 2025 revenue and EBITDA for the Transportation segment was $609 million and $18 million, respectively, thus transacting at an adjusted EBITDA multiple in the mid-teens, significantly higher than where Conduent currently trades. The transactions will also provide other strategic financial benefits. Our off-balance sheet financial instruments, surety bonds and letters of credit will be reduced by approximately 80%, leaving roughly $125 million, predominantly supporting the Government segment. The working capital intensity of the company will also be reduced as will the capital expenditure requirements. And importantly, the proceeds will allow us flexibility to address the capital structure with an emphasis on delevering the organization. Turning to the quarter. Let's discuss our key sales metrics on Slides 5 and 6. We signed $99 million of new business ACV in the quarter compared to $111 million in Q2 2025, but a sequential improvement versus Q1 2026. This quarter, the ACV one will drive a larger proportion of recurring revenue than we have seen in recent quarters and our Commercial segment new capability ACV, expanding our relationships with existing clients is the highest it's been for several years. The trailing 4-quarter ACV metric is up versus this time last year, and we expect to resume a sequential increase next quarter. At the midpoint of the year, we have signed $188 million of new business ACV, equal to the first 6 months in 2025. However, this year, we have closed 12% more annual recurring revenue signings and 7% more nonrecurring revenue signings than we did in the prior year. With the changes to our go-to-market strategy taking shape and driving a stronger pipeline, our expectation is that we have a stronger finish to 2026 than in 2025. Our qualified ACV pipeline remains strong at $3 billion, which is up 11% year-over-year. Both Commercial and Government segments are up year-over-year with our Commercial segment pipeline growing 48% since the beginning of 2026. Q2 was a strong quarter for renewal activity with $617 million of TCV, including several large health care clients in both our government and commercial segments. Let's turn to Slide 7 and 8 and review our Q2 P&L metrics. Revenue for the quarter was $531 million compared to $603 million in Q2 2025, down 11.9%. Adjusted EBITDA for Q2 2026 was $16 million as compared to $23 million in Q2 2025, and our adjusted EBITDA margin of 3% is down 80 basis points year-over-year. Included in these adjusted EBITDA numbers is approximately $4 million in 2026 and $6 million in 2025 of stranded costs related to the former transportation segment, which we will address once the transactions have closed. Turning the page. Q2 2026 Commercial segment revenue was $316 million, down 13% as compared to Q2 2025. The decline here is driven by contract losses and volume declines, predominantly in our customer experience management offering, including our largest commercial client whose contract with us will end in the third quarter and is already incorporated in our outlook. Commercial adjusted EBITDA was $24 million, a decrease of $3 million year-over-year, and the adjusted EBITDA margin of 7.6% was up 20 basis points year-over-year. While we incurred a couple of negative discrete items in the quarter, the results from our cost efficiency programs drove a stronger margin performance. Government segment revenue for the quarter was $215 million versus $238 million in Q2 2025. The drivers here were lost business and the timing of implementation activity of our state-of-the-art Medicaid platform in the government health care portfolio, creating a temporary dip in revenue. As Harsha mentioned, we finalized the New Mexico implementation early in the quarter, which completed the revenue recognition for this project, and we are now focused on ramping up the implementation of our new Virginia contract, which will drive new revenue in the second half of this year. Adjusted EBITDA was $51 million and adjusted EBITDA margin of 23.7%, down 150 basis points year-over-year. The revenue impacts as well as favorable reserve releases in the prior year were the drivers. Unallocated costs were $59 million for Q2 2026, a reduction of almost 10% versus Q2 2025, reflecting the continued progress with our cost efficiency programs in the corporate functions. Let's turn to Slide 7 and discuss the balance sheet and cash flow. We ended Q2 2026 with approximately $240 million in cash on the balance sheet and negative adjusted free cash flow of $8 million for the quarter. Although adjusted free cash flow remained negative for the first half of the year, it improved by $81 million compared to the same period last year, primarily due to achieving payment milestones in our Government and former transportation segments. Our adjusted net leverage ratio of 2.1 turns this quarter excludes EBITDA from discontinued operations, but includes the proportion of cash proceeds we expect to receive from the divestitures at closing. And our capital expenditure for the quarter was 2.6% of revenue, in line with our expectations. Turning to Slide 11 (sic) [ Slide 10 ] . You will see we have recalibrated our guide for 2026 to exclude our discontinued operations. Our revenue guide for 2026 is now a range of $2.15 billion to $2.25 billion, and our adjusted EBITDA guide is between $140 million and $170 million, which at the midpoint is a 7% adjusted EBITDA margin. That concludes the financial review of Q2 2026, and I'll now hand it back to Harsha. Harsha? Harsha Agadi: Thanks, Giles. Before we open the line for questions, I'd like to leave you with one final thought. Transforming a company of Conduent's scale takes time, but it's very predictable. While our financial performance this quarter does not yet fully reflect the full impact of the actions we have taken, we're making steady progress on the priorities that will create long-term value. This quarter marked an important milestone in that journey. The 2 portfolio transactions we announced further reshape Conduent, strengthen our strategic focus and demonstrate our commitment to disciplined execution and thoughtful capital allocation. At Investor Day later this year, we'll share the next phase of that journey, including a more comprehensive view of our long-term strategy, portfolio priorities, capital allocation framework and growth opportunities we see across our markets. We look forward to sharing more with you then. Operator, we're now ready to take questions. Operator: [Operator Instructions] Our first question comes from the line of Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Congratulations on executing on your initiatives. A couple of quick questions here regarding margins. Government segment margins improved meaningfully. How much of that improvement is structural because of the health care platform scalability versus maybe some temporary efficiencies or onetime items? And then excluding transportation, what is the realistic medium-term adjusted EBITDA margins for the remaining business? And I was just wondering if your previous goal of achieving 10% margins is still the appropriate framework? Or has the portfolio simplification changed that outlook? Harsha Agadi: So my reaction to your questions are the following. In this space, Commercial and Government, we really need to be -- and I'm looking at the segments individually, and I'm keeping transportation aside just for discussion purposes. We need to be in the mid- to higher double-digit margins. Then we minus the SG&A, that's the central SG&A, bringing us to a greater than 10% margin. So that goal remains unchanged. When you look at our benchmarking, our peers, they're able to do this. We need to do this. We need to do even better, even quicker, in my opinion. On the Government side, there are 2 things happening. Anna Sever, our leader for the Government business is rapidly implementing AI in multiple areas. We don't go around talking too much about it and maybe we should. So I'm just going to give you one small example. We have a new fraud tool designed and owned by us called VeriSight, assisted by Microsoft in the food stamp eligibility program that incorporates significant AI capabilities to identify patterns of potential fraudulent activity. The issue we face in the U.S. today is a tremendous amount of fraud. So our focus and investment in AI is to help the governments of the United States, whether it's state local or federal, using AI to trap fraud and save money for the various stakeholders. So I'm actually now receiving calls from State Attorney General, Secretary of State, the governors of the state, thanking us for starting to implement some of this code. The other thing that Anna is doing for the margins to start changing quite rapidly in the government is a change in the headcount in how she's organized. And if you remember, 6 months ago when I came in, we had a different leader, and Anna Sever has been now in this job about 4 months, and she's taking very rapid actions to change the business. So that would be my answer. So the outlook remains unchanged in terms of 10-plus percentage across the entire business. Michael Kupinski: Got you. And just a follow-up on your AI comments. Do you expect AI to become more of a measurable contributor to revenue growth? Obviously, you've concentrated on the cost efficiency initiatives, but I was just wondering if that is a prospect as well factored into your outlook? Harsha Agadi: Yes. I think it's going to be a very big difference in terms of how we are executing. So I'm going to just give you some examples, again, in the Government side, and I can also go on the Commercial side. Where AI is being used today is internally, porting, taking old code and porting it to new code. Second, we have a lot of requirements that governments ask us to fulfill. The validation of these requirements we're using AI tools. Third, testing scenarios. Fourth, quality code checks. The biggest issue I saw as I walked into Conduent is the speed to implementation. Sometimes when you sign up new business, it was taking 9 months, 10 months, we're compressing the time to go live, which then -- and we're using AI to do that, which then means revenue accretion will be faster, accuracy in terms of our operations increases. And I'd say the clients' happiness space increases because they're having true added value. Now what this might result in is reduction of some of our cost structure because of this automation, which might ripple through the entire company. If you look at our number of employees that I began with, we have definitely dropped the number of employees in the company as each month has gone by more rapidly as time is going. Operator: Our next question comes from the line of Gowshi Sri with Singular Research. Gowshihan Sriharan: Can you all hear me? Harsha Agadi: We can hear you. Gowshihan Sriharan: Okay. With the largest commercial client kind of rolling off, what does the client concentration on the remaining book look like? I know you mentioned this $100 million commercial wins. What does the client accounts look like? And is that improving with the next biggest clients? Harsha Agadi: Yes. So first of all, this client rolling off -- and if you remember, I was Chairman of the Board before I became CEO. So the previous CEO had mentioned it to the Board about a year ago that this large client had announced that they were wanting to roll off, and they have been rolling off. So that continues. Having said that, we have a reasonably diversified portfolio, but we do have depth, particularly in certain areas like banking and lending, health care, so on and so forth. So we don't have the exposure that we've had with this one client. So I think I feel pretty good going forward. Meanwhile, Kimberly Marshall, who runs our commercial sales side and George Wehbe, who runs commercial operations, they are making sure that they continue to bulk up step-by-step on the number of services we're offering existing clients. Going back a couple of calls, the number of services we offer clients today is somewhere between 12 and 15. But guess what, a client buys from us, 1.4 services. Our service density to clients is low, and we are intending to increase it. That's one side of it. The other side is we're also going to go beyond the U.S. to increase our geography in where we start selling, whether it's Canada, whether it's Western Europe, whether it's Australia, it makes sense. There is a cost differential that we can take advantage of our large back offices in India, Philippines and Guatemala. So to me, going forward, I don't see the risk that we're experiencing with the one large client. Gowshihan Sriharan: And just my follow-up. On the CapEx side, as you build out this next-generation Medicaid provider enrollment, does that require a CapEx step-up in 2027? Or is there anything you're deferring to protect this year's cash? Giles Goodburn: Gowshi, it's Giles. So no significant step-up. That's right. It's just part of the normal course and speed of the CapEx that we've allocated to the business and the continual investments that we're making in what we believe is a market-leading technology stack in the government space. If anything, I think overall, as you look at the CapEx in -- across the company, we should see a tick down from both the transportation segment divesting as well as just more prudent allocation of capital across the business. Gowshihan Sriharan: And if I could sneak in one last question for Harsha. Now that you've had 6 months to review, what are the buckets that are still in the fix versus sell? Any color on how you're thinking about that? Harsha Agadi: Sure. So to begin with, as we've announced, the sale of the transportation business, transit and tolling. And just to remind everybody, we had committed to at least $200 million, and it looks like we're going to come out at about $234 million plus 7% in Quarterhill. Meanwhile, and one more thing. The amount of cash we're going to release out of the transportation sale is close to our market cap. I think people need to really understand there is so much value inside Conduent. It's not reflecting in the stock price yet. Now on top of that, we have continuous inbounds on various parts of our business. As CEO, my job is to never say no and look at optionality and take a look at businesses for sale. The good news is George and Anna, our leaders in Commercial and Government want to give no excuses for me to sell. So they're moving ahead with changing the margin structure as rapidly as they can. But having said that, if somebody came to me and said, here's 20x EBITDA, 15x EBITDA, I think my CFO is going to press very hard for me to be not wanting to look at the deal. So there are a couple of small pockets of businesses we might look at. One additional thing for investors to know, as an executive team, we're going through a detailed review of our strategy, and that includes front and center where AI fits into our strategy. We're going to be including our entire Board in the exercise, and it will be presented at the end of September at our Investor Day. So to me, on the fix, sell, grow, maybe there's another business or 2. But I will tell you this, Giles, our CFO, has an arm that is focused on looking at every inbound call. We get inbound calls on a regular basis. So we will continue to look at optionality. But what it just shows me is 2 small businesses, not very large, selling them, the value realization is close to the market cap of the company. So to me, there's more that we might be able to do to unlever the company. Operator: Our next question comes from the line of Marc Riddick with Sidoti & Company. Marc Riddick: I wanted to piggyback on the leverage conversation. And maybe you could sort of discuss what your general views are as far as comfort levels of leverage or potential ranges that you might be targeting. So with the prepared commentary and remarks, the post -- with the proceeds getting down to about a little over 2x. Maybe you could talk a little bit about how you see or where you want to be longer term on leverage levels? And then I have a follow-up after that. Giles Goodburn: Yes, Marc. So I think once we've got the transaction done, the leverage comes down to that kind of 2 range. I think as well, once we start to see the benefits of some of the activities, the transformation activities we've got going on, reducing the cost, growth in the top line, reduced CapEx, it enable us a little bit more flexibility to drive that leverage down further. So I think certainly, from my perspective, I'd like to be -- as you look out the next sort of 18 months to 2 years, I'd like to be in the sort of 1x levered range. But we've got work to do to get there, but we're on the right path to addressing that. Marc Riddick: Okay. And then that actually leads to sort of where I was going with the next. Maybe you can talk a little bit about some of the areas you may be targeting as far as the $100 million of cost savings. I mean I know you've already made commentary around a lower employee count that you're already seeing, but maybe you can sort of talk maybe as to sort of at least sort of generalities as to where you're looking for those savings to come from? Harsha Agadi: Yes. I think 60% to 70% is headcount, 30% to 40% is relooking at our tech stack. So the combination of the 2 is going to give us that. Of that, we have already identified a little more than half. We've already executed a small chunk, and there's more to execute. So to me, and this is all clear in our heads as a team. The biggest move that's happening, if you ask me, is in the commercial segment. So you should see margins change in the Commercial segment probably faster than anywhere because commercial has a lower margin and a much higher potential and a much larger business. So we're seeing that. The other area that we're looking at is right shoring. So again, the centralized SG&A has to be reduced and people are working through that as well. We have 2 firms, professional firms working with us, one on the cost side as well as how we approach sales. And then the second firm is focused purely on the technology. And between the 2, we're working aggressively. I told my team at the end of this year, my intention is to not have any consultants inside Conduent. This is my goal that after this year, we're done. We've rightsized, margins are in the right step and the business starts growing the way we need it to grow. Marc Riddick: Okay. Great. And then last one for me. I was wondering if you could -- in your prepared remarks, you discussed meeting with clients and some of the takeaways there. Maybe you could just sort of give us sort of general views and thoughts as to some of the potential upside or maybe some of the things that were maybe new learnings or what have you or anything of those -- along those lines that you would be most optimistic about from those meetings? Harsha Agadi: Sure. The first, I would say, major change that has happened in how we dialogue. And by the way, I did not know this until my team started recognizing it and telling me this is different. I dialogue with many of our CEOs of our clients directly. One, it's not hard to reach them. Two, they actually want to hear from me. Three, they actually, at times, don't know we have 15 services. So I'm going to give you small examples. I've spoken to more than one bank CEO in the top 10 banks in the United States. And they're like, "Oh, you have lockbox services, you do document digitization, et cetera, et cetera." So they are excited. The second is they're now inviting us to meetings and this is not an RFP methodology. So they will invite us to a meeting where I as CEO, our Head of Commercial Sales, Kimberly Marshall, our CFO might be present or our Treasurer, including there'll be a number of other folks in line management, meeting a bank starting with the CEO as well as a number on the other side. So we're sitting across from each other, trying to figure out how we can partner together. So the bank I'm referring to, I will not take the name. One of the things we're looking at is how do we work together when we have a few hundred billion dollars of payments going on in the government space. How can we get more efficient for us and more efficient for the client. So there's a fair amount of dialogue. The other is Conduent Elevate, which is a mini convention we had in Chicago. We had huge client attendance. What did surprise me, we hadn't had one in a while. And guess what? We have a lot of interaction now. As we're going through the RFP process, I directly participate with the Head of Procurement. I'll give you an example. There was a call with the -- I will not name the client, but you can figure it out, the largest health insurer in the country. And they had 60 CEOs. I was the only CEO asking questions. And guess what? Hence, we connected, and we're going further and further into the RFP process. This is the kind of dialogue. I don't shy. I connect. And my team jokingly said, let's not underestimate who Harsha knows. It's better to go ask him and see if we can get us up. So we are being very aggressive in the marketplace. We're not sitting back because we're determined until I have revenue growing positive and double-digit margins, job is not done. Operator: Ladies and gentlemen, that concludes our time allowed for questions, and we'll conclude our call today. We thank you for your interest and participation. You may now disconnect your lines. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Conduent (CNDT) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Revenue: $531 million in Q2 2026, down 11.9% year-over-year from $603 million in Q2 2025. Adjusted EBITDA: $16 million in Q2 2026, down from $23 million in Q2 2025; adjusted EBITDA margin of 3%, down 80 basis points year-over-year. Commercial Segment Revenue: $316 million in Q2 2026, down 13% year-over-year. Commercial Segment Adjusted EBITDA: $24 million, down $3 million year-over-year; adjusted EBITDA margin of 7.6%, up 20 basis points year-over-year. Government Segment Revenue: $215 million in Q2 2026, down from $238 million in Q2 2025. Government Segment Adjusted EBITDA: $51 million; adjusted EBITDA margin of 23.7%, down 150 basis points year-over-year. Unallocated Costs: $59 million in Q2 2026, a reduction of almost 10% versus Q2 2025. Cash Position: Approximately $240 million in cash on the balance sheet at the end of Q2 2026. Adjusted Free Cash Flow: Negative $8 million for Q2 2026; improved by $81 million in the first half of the year compared to the same period last year. Capital Expenditure: 2.6% of revenue for the quarter. New Business ACV: $99 million signed in Q2 2026, compared to $111 million in Q2 2025; $188 million signed in the first half of 2026, equal to the first six months of 2025. Qualified Pipeline: Approximately $3 billion in qualified new business opportunities, up 11% year-over-year. Renewal Activity: $617 million of total contract value (TCV) in Q2 2026. 2026 Revenue Guidance: Recalibrated to a range of $2.15 billion to $2.25 billion, excluding discontinued operations. 2026 Adjusted EBITDA Guidance: Recalibrated to a range of $140 million to $170 million, excluding discontinued operations. Warning! GuruFocus has detected 3 Warning Signs with CNDT. Is CNDT fairly valued? Test your thesis with our free DCF calculator. Release Date: August 10, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Conduent Inc (NASDAQ:CNDT) completed the sale of its Transit and Tolling businesses, generating $234 million in gross proceeds plus a 7% equity stake in Quarterhill, exceeding its $200 million portfolio action commitment and significantly reducing off-balance sheet obligations. The company's qualified new business pipeline reached approximately $3 billion, up 11% year-over-year, with the Commercial segment pipeline growing 48% since the start of 2026. Conduent Inc (NASDAQ:CNDT) signed $99 million in new business ACV in Q2 2026, with a sequential improvement from Q1 and a higher proportion of recurring revenue, including notable wins with Securian, Trillium Health Resources, and Avis Budget Group. The company is making strong progress on its $100 million annualized cost savings program, with 60-70% from headcount reductions and 30-40% from technology optimization, already driving margin improvements in the Commercial segment. Conduent Inc (NASDAQ:CNDT) is leveraging AI to enhance operational efficiency and client value, exemplified by its Conni digital assistant resolving 86% of employee inquiries without human intervention and winning UnitedHealthcare's 2026 Global Innovation Challenge for its agentic AI-powered navigator. The company's adjusted free cash flow improved by $81 million in the first half of 2026 compared to the prior year, reflecting better cash management and payment milestones in Government and former Transportation segments. Conduent Inc (NASDAQ:CNDT)'s Q2 2026 revenue declined 11.9% year-over-year to $531 million, driven by contract losses and volume declines, particularly in the Commercial segment's customer experience management offering. The company's largest Commercial client contract will end in Q3 2026, which is already incorporated in the outlook but will continue to pressure revenue. Adjusted EBITDA margin decreased to 3% in Q2 2026, down 80 basis points year-over-year, with Government segment margins down 150 basis points due to revenue impacts and prior-year favorable reserve releases. The company's adjusted free cash flow remained negative at -$8 million for the quarter, and the full-year 2026 guidance was recalibrated to exclude discontinued operations, reflecting ongoing transformation challenges. Conduent Inc (NASDAQ:CNDT) continues to face a natural timing difference between winning new business and realizing revenue impact, with some contracts rolling off and volume declines in existing client programs. The company incurred approximately $4 million in stranded costs related to the former Transportation segment in Q2 2026, which will need to be addressed post-closing of the divestitures. Q: What is the realistic medium-term adjusted EBITDA margin for the remaining business, and is the previous goal of achieving a 10% margin still the appropriate framework after the portfolio simplification?A: Harsha Agadi (CEO) stated that the goal of achieving greater than 10% margins remains unchanged. He emphasized that the Commercial and Government segments need to reach mid-to-higher double-digit margins before subtracting central SG&A costs. He noted that peers in the industry achieve this and that Conduent needs to do it even faster, highlighting rapid AI implementation and organizational changes in the Government segment as key drivers. Q: With the largest Commercial client rolling off, what does client concentration look like on the remaining book, and is it improving?A: Harsha Agadi (CEO) explained that the company has a reasonably diversified portfolio with depth in areas like banking, lending, and healthcare, and does not have the same exposure risk as with the departing client. He noted that the company is focused on increasing "service density" by selling more of its 12-15 services to existing clients (currently averaging only 1.4) and expanding geographically beyond the US to Canada, Western Europe, and Australia. Q: As you build out the next-generation Medicaid platform, does that require a CapEx step-up in 2027, or are you deferring anything to protect this year's cash?A: Giles Goodburn (CFO) confirmed there is no significant step-up in CapEx required. The investments are part of the normal course of business. He added that overall CapEx across the company should tick down due to the Transportation segment divestiture and more prudent capital allocation. Q: Now that you've had six months to review, what are the buckets that are still in the "fix" versus "sell" categories?A: Harsha Agadi (CEO) stated that while the Transportation exit is complete, the company receives continuous inbound interest for various parts of the business. He noted there might be "another business or two" that could be considered for sale, but the leaders of Commercial and Government are working to improve margins to make selling unnecessary. He emphasized that the value realized from selling two small businesses was close to the company's market cap, highlighting the potential for further value creation. Q: What are your general views on comfort levels of leverage or potential target ranges?A: Giles Goodburn (CFO) stated that after the divestiture transactions close, leverage will come down to the "two-dot range." He expressed a goal to reach the "one-time levered range" over the next 18 months to two years, driven by the benefits of cost reduction, top-line growth, and reduced CapEx. Q: Could you talk about the general areas you are targeting for the $100 million of cost savings?A: Harsha Agadi (CEO) detailed that 60% to 70% of the savings will come from headcount reductions and 30% to 40% from re-evaluating the technology stack. He noted that more than half of the savings have been identified, with a small portion already executed. He expects the Commercial segment to see the fastest margin improvement due to its lower starting margin and higher potential, and he aims to complete the right-sizing and have no consultants inside Conduent by the end of the year. Q: Could you give us general views on the upside or new learnings from your client meetings, such as the ELEVATE conference?A: Harsha Agadi (CEO) shared that he now directly dialogues with CEOs of major clients, who are often unaware of the full breadth of Conduent's 15 services. He cited examples of top-10 bank CEOs being excited about services like lockbox and document digitization. He also mentioned that Conduent is being invited to non-RFP partnership meetings and that his direct participation in the RFP process, such as with the largest health insurer, has helped advance deals. He emphasized an aggressive market approach until revenue growth and double-digit margins are achieved. Q: Do you expect AI to become a more measurable contributor to revenue growth, and is that factored into your outlook?A: Harsha Agadi (CEO) said AI will be a "very big difference" in execution. He explained that AI is being used internally for code porting, requirement validation, testing, and quality checks, which compresses the time to go live for new business. This faster implementation leads to faster revenue accretion and improved accuracy. He also noted that AI-driven automation is resulting in a reduction of the company's cost structure and employee count. Q: How much of the Government segment's margin improvement is structural versus temporary, and what is the outlook?A: Harsha Agadi (CEO) highlighted that the Government segment leader, Anna Sever, is rapidly implementing AI, including a new fraud detection tool called VeriSight, which is generating interest from state officials. He also noted she is making rapid changes to the organization's headcount. He reiterated that the overall company goal of achieving 10-plus percent margins remains unchanged. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in Conduent Inc.? Here are five stocks we like better. Q2 results declined year over year: Continuing-operations revenue fell 11.9% to $531 million, while adjusted EBITDA dropped to $16 million and the margin decreased to 3%. Conduent is exiting transportation: Planned sales of its transit and tolling businesses are expected to generate about $234 million in gross proceeds, most of which will be used to reduce debt, while cutting related financial instruments by roughly 80%. 2026 guidance was reset after the divestitures: Conduent now expects revenue of $2.15 billion to $2.25 billion and adjusted EBITDA of $140 million to $170 million; management is also pursuing approximately $100 million in annual cost savings and highlighted a $3 billion qualified sales pipeline. Hidden Gems: 3 Value Stocks to Watch for Strong 2025 Returns Conduent (NASDAQ:CNDT) reported second-quarter 2026 results that management said were in line with its expectations, while outlining portfolio divestitures, cost-reduction efforts and a revised full-year outlook reflecting the planned exit from transportation operations. Revenue from continuing operations totaled $531 million in the quarter, down 11.9% from $603 million a year earlier. Adjusted EBITDA was $16 million, compared with $23 million in the prior-year period, while adjusted EBITDA margin declined 80 basis points year over year to 3%. → MarketBeat Week in Review – 08/03 - 08/07 Chief Financial Officer Giles Goodburn said the quarter’s reported results were affected by the company’s transformation efforts, including discontinued operations, anticipated stranded costs from divestitures and consulting costs related to its efficiency initiatives. Continuing-operations results exclude Conduent’s transportation segment, with prior periods restated accordingly. During the quarter, Conduent announced agreements to sell its transit business to Modaxo and its tolling business to Quarterhill. The transactions are expected to close by the end of 2026 and will complete the company’s exit from transportation. → Quantum Earnings Week: Winners and Losers Are Finally Emerging The company expects the sales to generate approximately $234 million in gross proceeds and retain a 7% equity interest in Quarterhill. Conduent said it intends to use the majority of the proceeds to reduce debt. Goodburn said the transactions also are expected to reduce off-balance-sheet financial instruments, including surety bonds and letters of credit, by about 80%, leaving roughly $125 million primarily supporting the government segment. Conduent’s transportation business generated $609 million of revenue and $18 million of EBITDA in 2025, according to Goodburn. He said the divestitures also should reduce working-capital intensity and capital-expenditure requirements. → Take-Two’s Q1 Results Leave GTA 6 Bulls Stuck in the Fog of War The company ended the second quarter with approximately $240 million of cash and negative adjusted free cash flow of $8 million. However, adjusted free cash flow improved by $81 million in the first half from a year earlier, primarily due to payment milestones in the government and former transportation businesses. Its adjusted net leverage ratio was 2.1 times, excluding discontinued-operations EBITDA but including expected divestiture cash proceeds. Commercial segment revenue fell 13% to $316 million. The decline reflected contract losses and volume reductions, mainly in customer experience management, including Conduent’s largest commercial client. The contract with that customer is expected to end in the third quarter and is already included in the company’s outlook. Commercial adjusted EBITDA declined by $3 million year over year to $24 million, though the segment’s adjusted EBITDA margin increased 20 basis points to 7.6%. Goodburn said cost-efficiency initiatives supported the margin improvement despite certain negative discrete items. Government segment revenue was $215 million, down from $238 million a year earlier. The decline was attributed to lost business and the timing of implementation activity for a Medicaid platform. Conduent completed its New Mexico Medicaid implementation early in the quarter and expects its Virginia Medicaid contract implementation to contribute new revenue in the second half of 2026. Government adjusted EBITDA was $51 million, with a 23.7% adjusted EBITDA margin, down 150 basis points from the prior year. Goodburn cited the revenue effects and favorable reserve releases in the prior-year quarter. Unallocated costs declined almost 10% year over year to $59 million. Chief Executive Officer Harsha Agadi said Conduent remains on track to implement the majority of its previously announced approximately $100 million annualized cost-savings program this year. The initiative includes optimizing technology spending, right-sizing roles, reducing duplication and simplifying operations. In response to an analyst question, Agadi said roughly 60% to 70% of the expected savings are associated with headcount and 30% to 40% with reviewing the company’s technology stack. Conduent signed $99 million of new-business annual contract value, or ACV, during the second quarter, compared with $111 million a year earlier but above the first-quarter level. For the first half, new-business ACV was $188 million, equal to the first six months of 2025. The company said annual recurring revenue signings were up 12% and non-recurring revenue signings increased 7% from the prior-year period. Its qualified ACV pipeline stood at approximately $3 billion, up 11% year over year. Commercial pipeline increased 48% from the start of 2026. The company also reported $617 million of total contract value in second-quarter renewals, including several large healthcare clients. Agadi highlighted several commercial and government wins, including a pension risk transfer administration engagement with Securian, a Health Services Plus platform agreement with Trillium Health Resources, and a vehicle-citation offering expansion with Avis Budget Group. In government, the company implemented New Mexico’s Medicaid platform, renewed a Virginia Medicaid systems contract and deployed chip-enabled electronic-benefits-transfer technology in three states, with a fourth rollout planned by the end of summer. The company also discussed AI initiatives, including its Connie digital assistant within the Life@Work health and wellness platform. Agadi said Connie resolves about 86% of employee inquiries without human intervention and has reduced live-agent interaction by more than 20%. Conduent is expanding the technology into agentic AI capabilities and other uses, while also deploying Microsoft Copilot and AI-assisted software-development tools internally. For 2026, Conduent revised its guidance to exclude discontinued transportation operations. The company now expects revenue of $2.15 billion to $2.25 billion and adjusted EBITDA of $140 million to $170 million, representing a 7% adjusted EBITDA margin at the midpoint. Agadi said the company’s longer-term objective of achieving more than a 10% consolidated margin remains unchanged. He said Conduent plans to provide a more detailed view of its strategy, portfolio priorities, capital-allocation framework and growth opportunities at an investor day later this year. 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. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Conduent Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Barrett Business Services (BBSI) came out with quarterly earnings of $0.52 per share, missing the Zacks Consensus Estimate of $0.56 per share. This compares to earnings of $0.7 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -7.14%. A quarter ago, it was expected that this human resources management company would post a loss of $0.15 per share when it actually produced a loss of $0.13, delivering a surprise of +13.33%. Over the last four quarters, the company has surpassed consensus EPS estimates just once. Barrett, which belongs to the Zacks Outsourcing industry, posted revenues of $2.29 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 0.08%. This compares to year-ago revenues of $2.23 billion. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Barrett shares have added about 10.7% since the beginning of the year versus the S&P 500's gain of 13%. While Barrett has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Barrett was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.76 on $2.41 billion in revenues for the coming quarter and $1.88 on $9.36 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Outsourcing is currently in the bottom 14% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Conduent (CNDT), another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 10. This company is expected to post quarterly loss of $0.14 per share in its upcoming report, which represents a year-over-year change of -7.7%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Conduent's revenues are expected to be $702 million, down 6.9% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report Conduent Inc. (CNDT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

FLORHAM PARK, N.J., July 28, 2026--(BUSINESS WIRE)--Conduent Incorporated (Nasdaq: CNDT), a global technology-driven business solutions and services company, plans to report its second-quarter 2026 financial results on Monday, Aug. 10, 2026 before market open. Management will present the results during a conference call and webcast at 9:00 a.m. ET. The call will be available by live audiocast along with the news release and online presentation slides at https://investor.conduent.com. The conference call will also be available by calling 877-407-4019 toll free. If requested, the conference ID is 13761624. The international dial-in is +1 201-689-8337. The international conference ID is also 13761624. A recording of the conference call will be available by calling 877-660-6853 after the conference call concludes. The access ID for the recording is 13761624. The call recording will be available until Aug. 24, 2026. We look forward to your participation. About Conduent Conduent delivers digital business solutions and services spanning the commercial, government and transportation spectrum – creating valuable outcomes for its clients and the millions of people who count on them. The Company leverages cloud computing, artificial intelligence, machine learning, automation and advanced analytics to deliver mission-critical solutions. Through a dedicated global team of approximately 48,000 associates, process expertise and advanced technologies, Conduent’s solutions and services digitally transform its clients’ operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs. Conduent adds momentum to its clients’ missions in many ways including disbursing approximately $80 billion in government payments annually, enabling approximately 2.0 billion customer service interactions annually, empowering millions of employees through HR services every year and processing over 14 million tolling transactions every day. Learn more at www.conduent.com. Note: To receive RSS news feeds, visit www.news.conduent.com. For open commentary, industry perspectives and views, visit https://x.com/Conduent, http://www.linkedin.com/company/Conduent or http://www.facebook.com/Conduent. Trademarks Conduent is a trademark of Conduent Incorporated in the United States and/or other countries. Other names may be trademarks of their respective owners. View source version on businesswire.com: https://www.businesswire.com/news/home/20260728775764/en/ Contacts Media Contacts: Remy Kaul, Conduent, [email protected] Investor Relations Contact: Conduent, [email protected]

Conduent Will Also Receive a 7% Interest in Quarterhill Inc. Conduent Bolsters Financial Position Tolling Agreement Follows Recently Announced Agreement to Sell Its Public Transit Business FLORHAM PARK, N.J., June 30, 2026--(BUSINESS WIRE)--Conduent Incorporated (Nasdaq: CNDT), a global technology-driven business solutions and services provider, today announced that it has entered into a definitive agreement to sell its Tolling business (a division of Conduent Transportation) to Quarterhill Inc. (TSX: QTRH) (OTCQX: QTRHF), a leading global provider of intelligent transportation system solutions. The sale has a purchase price of $70 million in cash, and Quarterhill will assume most liabilities associated with the business, including all surety bond obligations, further improving Conduent’s financial profile. The structure of the transaction enhances Conduent’s financial flexibility and reduces exposure to non-core obligations. The transaction is expected to close before the end of 2026. This agreement follows a separate transaction, announced in May, to sell the Public Transit business, also part of Conduent’s Transportation division, which is similarly expected to close before the end of 2026. Together, these transactions simplify Conduent’s portfolio and increase focus on its core businesses, enhancing the predictability and durability of Conduent’s earnings profile. "This Tolling transaction, alongside the previously announced Public Transit agreement, advances our strategy to simplify our portfolio, sharpen focus on our core businesses, and strengthen our financial foundation," said Harsha V. Agadi, Conduent President and Chief Executive Officer. "We are continuing our strategic journey to enhance long-term value creation, including simplifying our business, strengthening the balance sheet, and increasing sustainable free cash flow. "With more than four decades of experience in tolling, Quarterhill is extremely well positioned to support the Conduent Tolling team and its clients. As we move toward closing, we remain committed to delivering outstanding quality and performance for all Transportation clients while ensuring smooth transitions for both clients and associates." As part of the transaction, Conduent will also receive a 7% interest in Quarterhill Inc. along with registration rights and board observer rights, providing potential upside participation in future value creation. With operations in the United States and United Kingdom, Conduent’s Tolling business provides mission‑critical technology that enables all‑electronic tolling, roadside and back‑office processing, image review, violation enforcement, and analytics. It supports more than 14 million tolling transactions per day. Additional details of the transaction are outlined in Conduent’s 8-K filed with the U.S. Securities and Exchange Commission (SEC) today. About ConduentConduent delivers digital business solutions and services spanning the commercial, government and transportation spectrum – creating valuable outcomes for its clients and the millions of people who count on them. The Company leverages cloud computing, artificial intelligence, machine learning, automation and advanced analytics to deliver mission-critical solutions. Through a dedicated global team of approximately 48,000 associates, process expertise and advanced technologies, Conduent’s solutions and services digitally transform its clients’ operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs. Conduent adds momentum to its clients’ missions in many ways including disbursing approximately $80 billion in government payments annually, enabling approximately 2.0 billion customer service interactions annually, empowering millions of employees through HR services every year and processing over 14 million tolling transactions every day. Learn more at www.conduent.com. About QuarterhillQuarterhill is a global leader in the Intelligent Transportation System (ITS) industry, advancing mobility through smart infrastructure solutions that reduce congestion, improve roadway safety, and create more sustainable travel. Each year, Quarterhill's platforms process billions of transactions, perform compliance and safety inspections on millions of commercial vehicles, and enable transportation agencies worldwide to optimize thousands of lanes of traffic to improve travel for everyone. Leveraging advanced artificial intelligence and machine learning technologies, Quarterhill's platform delivers automation and predictive insight to help agencies manage transportation networks more efficiently. By working in close partnership with governments, communities, and industry leaders, Quarterhill is building today's connected roadways while shaping the next generation of intelligent, resilient mobility. Quarterhill is listed on the TSX under the symbol QTRH and on the OTCQX Best Market under the symbol QTRHF. Learn more at www.quarterhill.com. Note: To receive RSS news feeds, visit www.news.conduent.com. For open commentary, industry perspectives and views, visit https://x.com/Conduent, https://www.linkedin.com/company/Conduent, or https://www.facebook.com/Conduent. TrademarksConduent is a trademark of Conduent Incorporated in the United States and/or other countries. Other names may be trademarks of their respective owners. Forward-Looking StatementsThis press release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. 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. All statements other than statements of historical fact included in this press release are forward-looking statements, including, but not limited to, all statements regarding the sale of Conduent’s Tolling business, including that such transaction will be consummated and the timing of such consummation, expectations regarding our strategy to simplify our portfolio, sharpen our focus, strengthen our financial foundation, and drive value for our shareholders, clients and employees. 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 contained in this press release, any exhibits to this press release and other public statements we make. Important factors and uncertainties that could cause actual results to differ materially from those in our forward-looking statements include, but are not limited to: Conduent’s ability to realize the benefits anticipated from the sale of its Tolling business, including as a result of a delay or failure to obtain certain required regulatory approvals or the failure of any other condition to the closing of the transaction such that the closing of the transaction is delayed or does not occur; unexpected costs, liabilities or delays in connection with the proposed transaction; the significant transaction costs associated with the proposed transaction; negative effects of the announcement, pendency or consummation of the transaction on the market price of our common stock or operating results, including as a result of changes in key customer, supplier, employee or other business relationships; the risk of litigation or regulatory actions; our inability to retain and hire key personnel; the risk that certain contractual restrictions contained in the definitive transaction agreement during the pendency of the proposed transaction could adversely affect our ability to pursue business opportunities or strategic transactions; and other factors that are set forth in the "Risk Factors" and other sections of our Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with or furnished to the Securities and Exchange Commission. Any forward-looking statements made by us in this press release 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20260630433084/en/ Contacts Media Contact: Remy Kaul, Conduent, [email protected] Investor Relations Contact: Conduent, [email protected]

TORONTO, June 30, 2026 /CNW/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX: QTRH) (OTCQX: QTRHF), a leading technology innovator providing next-generation, AI-driven Intelligent Transportation System ("ITS") solutions, today announced that it has entered into a definitive asset purchase agreement (the "Agreement") to acquire substantially all of the assets (the "Transaction") of the tolling solutions business of Conduent Business Services, LLC and certain of its affiliates (collectively, "Conduent", and Conduent's tolling business, the "Business"). The Transaction is expected to approximately triple Quarterhill's tolling revenue upon closing and create a leading tolling platform with greater scale, long-term backlog visibility and enhanced capabilities across electronic tolling, back-office operations and roadside systems. All dollar figures included herein are presented in United States dollars, unless otherwise noted. Upon closing of the Transaction, Quarterhill and the Business are expected to have approximately $2 billion of combined backlog1, providing strong visibility into future contracted revenue. On a pro-forma combined basis after planned synergies, the combined business would have generated more than $400 million of revenue annually with an adjusted EBITDA margin between 10% and 15%.2 "This is a transformational transaction for Quarterhill, and one the Board enthusiastically supports," said Rusty Lewis, Chairman of Quarterhill's Board. "Conduent's tolling solutions business brings scale, long-term agency relationships, proven technology capabilities and deep tolling expertise in a core market. The Board has full confidence in the management team to bring these businesses together, and we believe the combined platform will be better positioned to serve transportation agencies, expand profitability and create sustainable, long-term value for shareholders." "This acquisition materially advances our strategy to build a larger, more focused and more profitable ITS platform," said Chuck Myers, CEO of Quarterhill. "With greater scale, enhanced backlog visibility and meaningful Adjusted EBITDA3 contribution after anticipated day-one synergies, we believe Quarterhill will have a stronger foundation for long-term growth." The Conduent Tolling Business provides end-to-end tolling solutions for government transportation agencies primarily across the United States and the United Kingdom, including electronic toll collection, Open Road Tolling, All Electronic Tolling, vehicle detection and classification, automated license plate recognition, payment processing, customer care, invoicing, video processing, analytics, and related back-office and roadside functions. Quarterhill expects to work closely with Conduent to support a smooth transition for customers and employees following closing. Transaction DetailsUnder the terms of the Agreement, Quarterhill and certain of its affiliates will acquire substantially all of the assets, and assume certain liabilities, of the Business for aggregate consideration consisting of (i) $70.0 million in cash, subject to customary adjustments, plus (ii) common shares in the capital of Quarterhill (the "Shares") representing 7.0% of the issued and outstanding Shares on closing of the Transaction. The Company expects to fund the cash portion of the consideration through debt. As a condition to the closing of the Transaction, Quarterhill and Conduent will enter into a customary registration rights agreement pursuant to which, among other things, the Shares issued as consideration in connection with the Transaction will be subject to a 6 month contractual lock-up for the first 50% of such Shares and a 12 month lock-up for the remaining 50% of such Shares, subject to customary exceptions, and Conduent will be granted certain registration rights with respect to such Shares for so long as the Company Group beneficially owns, or exercises control or direction over, at least four percent of Quarterhill's then-outstanding common shares . The Shares will also be subject to any applicable resale restrictions under Canadian securities laws and the rules of the Toronto Stock Exchange (the "TSX"). Completion of the Transaction is subject to a number of closing conditions customary for a transaction of this nature, including TSX approval, and the satisfaction of other customary conditions precedent. The Transaction is expected to close in Q4 of 2026. There can be no assurance that the Transaction will be completed on the terms described herein or at all. AdvisorsAlixPartners is acting as financial advisor to Quarterhill in connection with the Transaction, DLA Piper US LLP and DLA Piper (Canada) LLP are acting as legal advisors to Quarterhill. Jefferies Group LLC is acting as financial advisor to Conduent in connection with the Transaction. About QuarterhillQuarterhill is a global leader in the Intelligent Transportation System (ITS) industry, advancing mobility through smart infrastructure solutions that reduce congestion, improve roadway safety, and create more sustainable travel. Each year, Quarterhill's platforms process billions of transactions, perform compliance and safety inspections on millions of commercial vehicles, and enable transportation agencies worldwide to optimize thousands of lanes of traffic to improve travel for everyone. Leveraging advanced artificial intelligence and machine learning technologies, Quarterhill's platform delivers automation and predictive insight to help agencies manage transportation networks more efficiently. By working in close partnership with governments, communities, and industry leaders, Quarterhill is building today's connected roadways while shaping the next generation of intelligent, resilient mobility. Quarterhill is listed on the TSX under the symbol QTRH and on the OTCQX Best Market under the symbol QTRHF. For more information, please visit: www.quarterhill.com Forward-looking InformationThis news release contains forward-looking information and forward-looking statements within the meaning of applicable Canadian securities laws (collectively, "forward-looking statements"). Forward-looking statements relate to future events, conditions or future financial performance of Quarterhill based on future economic conditions and courses of action. All statements other than statements of historical fact may be forward-looking statements. Such forward-looking statements are often, but not always, identified by the use of any words such as "seek", "anticipate", "budget", "plan", "goal", "expect", "believe" and similar expressions. In particular, this news release contains forward-looking statements pertaining to, but not limited to, the following: completion of the Transaction and the terms thereof; the expected financing sources for the Transaction; expectations on the impact of the Transaction on the Company's revenue base and backlog; pro-forma combined financial information of the Company and Business on closing of the Transaction; statements with respect to the Company's integration plans with respect to the Business and Conduent; the expected closing of the Transaction and the timing thereof; Transaction benefits to the Company and its customers and shareholders, expectations, synergies, strategic goals, results of operations, impacts on revenue and adjusted EBITDA, performance, industry trends and growth opportunities; and the Company's strategic direction. Although the forward-looking statements contained in this news release are based upon assumptions which management of the Company believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward looking statements contained in this news release, the Company has made assumptions regarding, but not limited to: the receipt and timing of obtaining regulatory and third party approvals for the Transaction; assumptions around the calculation of backlog, including contractual extensions, terms and execution; the Company's ability to execute on its business plan and to achieve the anticipated benefits and synergies from the Transaction; successful integration of the Business following closing of the Transaction; that the Company will be able to access capital, including debt, on acceptable terms; general economic and industry trends; operating assumptions relating to the Company's operations; demand for the Company's products and services; cost estimates for fixed price contracts; successful contract negotiation; and the other assumptions set forth in the Company's most recent annual information form available under the Company's profile on SEDAR+ at www.sedarplus.ca. The Company's actual results could differ materially from those anticipated in the forward-looking statements, as a result of numerous known and unknown risks and uncertainties and other factors including, but not limited to: the risk that the Transaction may not be completed as expected or at all; timing and receipt of applicable regulatory approvals for the Transaction; the expected benefits of the Transaction and additional revenues or synergies may not materialize; inability of the Company to obtain sufficient financing for the completion of the Transaction; unexpected costs or liabilities related to the Transaction; general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates, stock market volatility; reliance on key management personnel; risks related to competition within the Company's industry and relating to technological advances; litigation risks; cyber-security risks; fixed price contracts may result in unexpected costs to the Company; and the other risks set forth in the Company's most recent annual information form and management's discussion and analysis for the three and twelve months ended December 31, 2025 available under the Company's profile on SEDAR+ at http://www.sedarplus.ca. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. Readers are cautioned that the foregoing lists of important factors are not exhaustive, and they should not unduly rely on the forward-looking statements included in this news release. All forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Quarterhill has no intention, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. This news release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about the Company's prospective backlog, revenue and Adjusted EBITDA, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this news release was made as of the date of this news release and was provided for the purpose of describing the anticipated effects of the Transaction on the Company's business operations. Quarterhill's actual results, performance or achievement could differ materially from those expressed in, or implied by, such FOFI. The Company disclaims any intention or obligation to update or revise any FOFI contained in this news release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this news release should not be used for purposes other than for which it is disclosed herein. Non-IFRS Financial MeasuresThis news release contains financial measures, including "backlog" and "Adjusted EBITDA". These financial measures do not have any standardized meaning under International Financial Reporting Standards ("IFRS") ‎and therefore may not be comparable to similar measures presented by other companies. Readers are cautioned that these ‎non-IFRS measures should not be construed as an alternative to other measures of financial performance calculated in ‎accordance with IFRS. These non-IFRS measures provide additional information that the Company's management believes is meaningful ‎in describing the Company's operational performance, liquidity and capacity to fund capital expenditures and other ‎activities. Management of the Company believes that the presentation of these non-IFRS measures provide useful information to investors ‎and shareholders as the measures provide increased transparency and the ability to better analyze performance against ‎prior periods on a comparable basis. Pro Forma Information Certain information in this news release, including combined revenue and Adjusted EBITDA, is presented on a "pro forma" basis, giving effect to the Transaction as if completed at the beginning of the applicable period, including certain anticipated synergies and adjustments. It is presented for illustrative purposes only, is based on assumptions and estimates management believes reasonable, is not prepared in accordance with IFRS, and has not been audited or reviewed by the Company's auditors. Anticipated synergies are management estimates and may not be realized as expected, or at all. This information is not indicative of the results the Company would have reported had the Transaction been completed as of the dates indicated, nor of future results, and readers should not place undue reliance on it. Adjusted EBITDA Margin We use the non-IFRS financial measure "Adjusted EBITDA margin" to mean net income (loss) adjusted for (i) income taxes; (ii) finance expense or income; (iii) amortization and impairment of intangibles; (iv) impairment of goodwill; (v) other charges and other one-time items; (vi) depreciation of right-of-use assets and property, plant and equipment; (vii) stock-based compensation; (viii) foreign exchange (gain) loss; (ix) other income which includes equity in earnings from joint ventures; and (x) changes in fair value of derivative liability as a percentage of revenue. Adjusted EBITDA margin is a non-IFRS ratio, calculated as Adjusted EBITDA divided by revenue. The most directly ‎comparable IFRS measure to Adjusted EBITDA is net income (loss). ‎ Backlog We use the non-IFRS measure "backlog" to represent the total value of contracted work that has not yet been completed, including projects with a high degree of certainty under existing contracts, expected contract extensions, or awards where final contract execution is reasonably assured. View original content:https://www.prnewswire.com/news-releases/quarterhill-to-acquire-conduent-tolling-solutions-business-302814102.html

Image source: The Motley Fool. Monday, May 11, 2026 at 5 p.m. ET Chief Executive Officer — Harsha V. Agadi Chief Financial Officer — Giles Goodburn Harsha Agadi, our CEO; and Giles Goodburn, our CFO. We hope you've had a chance to review our press release issued earlier today. This call is being webcast and a copy of the slides used during this call as well as the press release were filed with the SEC this afternoon on Form 8-K. This information as well as the detailed financial metrics package are available on the Investor Relations section of the Conduent website. During this call, we may make statements that are forward-looking. These forward-looking statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. Information concerning these factors is included in Conduent's annual report on Form 10-K filed with the SEC. We do not intend to update these forward-looking statements as a result of new information or future events or developments, except as required by law. This information presented today includes non-GAAP financial results -- financial measures. Because these measures are not calculated in accordance with U.S. GAAP, they should be viewed in addition to and not as a substitute for the company's reported results. For more information regarding definitions of our non-GAAP measures and how we use them as well as the limitations to their usefulness for comparative purposes, please see our press release. And now I'd like to turn the call over to Harsha. Harsha Agadi: Thank you, Josh. I want to welcome all our investors, analysts and colleagues around the world to the call. I am confident you will be encouraged by what you will hear as we discuss Conduent's first quarter results and the steps we've taken to improve the pace and discipline of our execution. I want to say good morning, good afternoon and good evening to our 48,000 Conduent colleagues across the globe. I have now been CEO for 115 days and continue to hear from our clients about all your efforts on their behalf. Thank you, and we will keep working to enhance our client operations. As I speak, with our clients, they value a combination of our technological capabilities and the human connection our employees demonstrate to make services seamless and predictable, each and every time. Again, thank you and keep driving innovation for our clients. My commentary today will focus on 3 areas: First, I will give you an update on the priorities I laid out on the Q4 call. To be clear, the priorities remain unchanged. The 5 priorities are: reduce our cost structure, convert pipeline to growth, optimize the portfolio, increase speed and accountability, and enforce financial discipline. Second, I will provide an update on our AI initiatives in both public sector and commercial. Finally, I will share some details on deals won in the quarter that, in aggregate, exceed $100 million. In the Q4 earnings call, I had highlighted 5 priorities for Conduent. In Q1, we executed well on reducing our cost structure. We reported adjusted EBITDA margins of 6.8%, a marked improvement to last year. In addition, we have initiated a detailed review of our cost structure, engaging two external advisers, and through this work, identified significant potential opportunities. Our initial assessment is that we can reduce $100 million of cost in the next 18 months. This, ladies and gentlemen, is just the beginning. As I highlighted in the Q4 earnings call, I believe that Conduent should have EBITDA margins north of 10%. Our pipeline continues to grow at a robust pace, and with the changes we have made in Commercial leadership and improvements we have made in our go-to-market strategy, we should see an improvement in pipeline conversion in the back half of the year. Our go-to-market strategy now across the company is focused on five approaches. The first is cross-selling to our existing clients. Second is the restructuring of our sales incentives. Third is larger defense. Fourth is winning new logos and fifth is the establishment of a deal desk. As it relates to Commercial, the go-to-market changes include a much narrower focus on the health care and financial services sectors. Meaningful relationships with CEOs across the Commercial landscape and an increased focus on innovative solutions, solving client pain points. In public sector, we have reengaged in the Federal space to focus on health and human services as well as other target agencies. This aligns with the current administration's focus on greater efficiencies as they deliver cost-effective services for the citizens of the United States. We believe we are well positioned to compete for these opportunities. For portfolio optimization, I continue to be confident that we can achieve improvements in margins and efficiency of our business as we focus our business and prioritize investment in growth segments. As you will see in a later slide, we believe proceeds from identified divestitures in 2026 should be north of $200 million. Regarding speed and accountability. First, we simplified our leadership team. Second, we have developed new processes to make quicker decisions, resulting in speed of implementation post contract timing. This should allow us to reduce working capital and generate revenues and ultimately, cash flow from more quickly. And my final priority is to enforce financial discipline, which is evidenced by not only the 6.8% adjusted EBITDA margins in Q1 and but also increased rigor on capital expenditures and cash management, which helped deliver a $50 million improvement in operating cash flows year-over-year. I want to give a little more color today on our AI initiatives, past, present and future. At Conduent, we deliver end-to-end business process solutions using technology with our deep domain expertise, which positions us to use AI as a differentiator. On this slide, we have laid out 3 use cases we have developed AI against. As we look at the examples here across the top, it shows problems we've sold with AI. First is fraud and risk management. Initially, we deployed machine learning models for payment fraud detection. We currently have deployed GenAI plus rules-based AI to improve account takeover detection, and we're also expanding into other fraud vectors to manage risk. In the future, we believe we can take these AI solutions and scale them into other forms of fraud prevention. In customer and citizen interaction, we initially implemented IVR for routing and cell service as well as chat bots and analytics to drive improvements in cost and service. We have now added GenAI assistant, Agent Assist to reduce handle time. We have also expanded Conni, our very own branded GenAI chatbot to power a personalized benefits experience in the Human Capital Solutions space. In the future, we're working to deploy other Agentic AI solutions driving more autonomous conversational experiences. As we move to the third column, we see a combination of workforce and productivity-enhancing solutions, including AI, assisted coding and further scaling of these tools in the future. I want to be clear, Conduent has not been standing still as it relates to AI, we are implementing AI as appropriate in solutions, and we are using AI to improve our own cost structure. In conclusion, I want to highlight our sales wins for Q1. As a company, we had $114 million in sales wins. These wins highlight our capabilities and our deep client relationships. Commercial segment signed more than $48 million of new business in Q1, including significant contracts with 3 long-standing health care clients, demonstrating Conduent's continued strength in this sector. In the Public Sector segment, we signed more than $66 million in new business in Q1. This was driven by a large deal in the government Medicaid claims for $23 million in new business. Now I will hand it over to Giles for the detailed financial review. Giles Goodburn: Thanks, Harsha. As we've done in the past, we're reporting both GAAP and non-GAAP numbers. The reconciliations are in our filings and in the appendix of the presentation. Let's discuss our key sales metrics on Slide 6 and 7. We signed $114 million of new business ACV in the quarter, up 5% versus Q1 2025 and the sixth consecutive quarter of year-over-year growth, driven by our Commercial and Government segments, both of which increased year-over-year. Our trailing 4-quarter ACV metric is up almost 5% versus this time last year, with the Government segment up 60% in this metric versus Q1 2025 and our Commercial segment reversing a declining trend, which we anticipate will continue in Q2, where we continue to see strong demand from our existing client base. Q1 ARR, annual recurring revenue, for the quarter was softer than we would have liked. However, Commercial posted a strong year-over-year increase, while the Government segment, which is influenced by mix and timing of deals, was heavily weighted towards nonrecurring revenue this quarter. Importantly, in the quarter, we renewed a government health care client for up to 14 years, inclusive of additional NRR revenue to implement our market-leading SaaS and cloud-based Medicaid claims and financial management solutions. While this is a multiyear implementation, we classify implementations as nonrecurring revenue. Notably in the quarter, we completed the implementation and went live with the same fully integrated market-leading solution with another of our large Government State Health Care clients. Other key notable wins in the quarter included new capability and add-on work for existing health care clients in our Commercial segment and add-on work related to the H.R.1 working families tax credit legislation for existing clients in the Government segment. Within the quarter, we signed 3 new logos and 14 new capabilities. Our qualified ACV pipeline remains strong at $3.5 billion, which is up 10% year-over-year. The strength here is driven by our Government segment, which is up 27% year-over-year and we are making progress with our Commercial segment pipeline, which is 25% stronger than it was last quarter. Let's turn to Slide 8 and review our Q1 2026 P&L metrics. Revenue for the quarter was $723 million compared to $751 million in Q1 2025, down 3.7%. Consistent with last quarter, revenue grew in 2 of our 3 segments. Our Government segment grew 4.6% and our Transportation segment grew 2.3%, both are sequentially higher than Q4 2025. Adjusted EBITDA for Q1 2026 was $49 million as compared to $37 million in Q1 2025, and our adjusted EBITDA margin of 6.8%, is up 190 basis points year-over-year, and up 30 basis points sequentially. The quarter benefited from a few discrete items, which contributed approximately 64 basis points for the quarter. Let's turn to Slide 9 and review the segment results. Q1 2026 Commercial segment revenue was $361 million, down 10.2% as compared to Q1 2025. The continuation of volume declines in one of our largest Commercial clients drove approximately 36% of this revenue decline. The remainder was attributed to lost business, partially offset with new business wins. Commercial adjusted EBITDA was $43 million, an increase of $3 million year-over-year, and the adjusted EBITDA margin of 11.9% was up 190 basis points year-over-year. Our cost efficiency programs and stronger operational performance in our BPaaS and integrated digital solutions offerings drove the year-over-year increase. Government segment revenue for the quarter was up 4.6% at $226 million. The drivers here were new business and higher volumes in our Government Healthcare segment and price increases across several clients in the Government portfolio. Adjusted EBITDA was $59 million, with adjusted EBITDA margin of 26.1%, up 850 basis points year-over-year. The revenue drivers as well as our AI initiatives and efficiency programs drove the significant improvement here. This includes one of the discrete items I mentioned earlier which contributed 150 basis points to the Government quarter. Transportation segment revenue was $136 million for the quarter, an increase of 2.3%, while adjusted EBITDA was negative $4 million for the quarter. New business, higher volumes and FX drove the stronger revenue versus Q1 2025. Year-over-year adjusted EBITDA decline was driven by additional post-implementation expense isolated to one of our Transportation contracts. Unallocated costs of $49 million for Q1 2026, an increase of 4.3% versus Q1 2025. The continued progress with our cost efficiency programs in the corporate functions and a reduction in 2025 variable compensation, one of the discrete items I mentioned earlier, partially offset the recovery of legal costs benefiting the prior year period. Let's turn to Slide 10 and discuss the balance sheet and cash flow. We ended Q1 2026 with approximately $251 million of cash on the balance sheet and negative adjusted free cash flow of $15 million, a significant improvement versus Q1 2025. Our net leverage ratio remained at 2.8 turns this quarter and our capital expenditure for the quarter was 2.2% of revenue, with Q1 typically the low point of the year. Turning to Slide 11. You will see our guide for 2026 and initial expectations for 2027. Our revenue guide for 2026 is a range of $2.8 billion to $2.9 billion. We anticipate both our Government and Transportation segments will post positive revenue growth in 2026 with the deterioration isolated to the Commercial segment. Our adjusted EBITDA guide is between $160 million and $190 million. The drivers here are the continuation of AI and our cost efficiency programs, price increases and stronger operational performance across the portfolio. The quarterly cadence of adjusted EBITDA for 2026 begins with a strong start to Q1, followed by a softer Q2 and then similar margins to Q1 in the second half of the year. Looking out to 2027, we anticipate flat to positive revenue growth, adjusted EBITDA of between $190 million and $220 million with positive cash generation. That concludes the financial review of Q1 2026, and I'll now hand it back to Harsha. Harsha? P id="1944359854" name="Harsha Agadi" type="E" /> Thank you, Giles. As you have heard today, Conduent is well on its way to improving margins, rightsizing the portfolio and increasing the growth rate. we are repositioning the company to be a growth company with double-digit EBITDA margins and sustainable free cash flow. We will do this through disciplined management and prudent investment in AI and other tools to enhance productivity and customer experience. I want to let you know that our Investor Day will be on September 23, 2026 in New York City. I look forward to seeing you there. I am looking forward to a strong finish to 2026 and a strong start in 2027 with all our initiatives in place. Thank you Operator, please open the call for questions. Operator: [Operator Instructions] Our first question is from Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: On the last call, you mentioned a competitive moat and high growth as important elements for deciding fixed sell or grow businesses. And how are you weighing the impact of AI on the moat around software compared to the growth of the rate of -- the growth rate of the industry? Harsha Agadi: Sure. So the answer might vary between Commercial versus government versus transportation. On the Government side, just so you're aware, the contracts are generally longer and much more lasting and sticky. And so to me, as technology changes, as long as we are adept and using state-of-the-art technology, which, by the way, some of the state governments are appreciating it. Our recent implementation in some states have been -- we've gotten kudos. I think we will continue to see a lot of sticky business on the Government side. On the Transportation side, the growth may not be at the same pace, but as urban development increases and urban density, I think there is ample opportunity there. On the Commercial side, if you don't innovate, you will not survive. And therefore, we are focused on our internal AI experiments we are no longer building things. We are either borrowing or partnering with AI-driven companies to do experiments quickly where we increase reliability of the answer, consistency of the service and not to mention it lowers our own cost. So to us, we've started to take a very innovative approach. Another way to look at this is small firms that have high great technology may not have a blue chip customer list. If we partner with them, they might help us to further our own implementation. At the same time, we can share in the customer, therefore, bringing a total solution for that customer. So to me, I think on the Government side, there is a fair amount of a moat. On the Commercial side, technology is what's going to kind of really protect us. Michael Kupinski: You highlighted a sizable qualified pipeline. What are you seeing in terms of conversion rates and sales cycle duration, particularly in the Government and Transportation side, and additionally, could you talk about the average lead time of getting services online? Giles Goodburn: Yes. Mike, it's Giles here. So from a government and transportation standpoint, I wouldn't say there's any real change in our win rates. It does vary as far as RFPs coming on and when some of those RFPs actually get signed due to, I would say, some uncertainty at the Federal Administration level. which does cause some contracts that we're engaged on pushing out to the right, but not necessarily going away. We're still winning our fair share, which is important. And similar goes for the Transportation segment. As far as cycles to actually sign in to or sales cycles to revenue, clearly, it's a lot quicker in a lot of the Commercial spaces to ramp from sign to revenue. We see a little bit of that in the Government space on some of the more traditional BPO type activities. But generally, I'd say there's a longer cycle from signed to revenue generation as we think about the process that the state and federal clients have to go through to get to sign -- from a signed contract to revenue on our books. Harsha Agadi: Yes. There is an additional piece. I think today's senior leadership team in the company is directly interfacing with a lot of CEOs as opposed to just the Chief Procurement Officer or the Head of HR. And what is happening with that is instead of us actually responding to an RFP, which we are, but now we're getting inbound calls. So recently, I got a request from a CEO of a $5 billion company wanting an urgent project done using our data analytics capabilities, and our digital capabilities. So what is happening is that conversations are now going at a much higher decimal and at a much higher level. So the whole chemistry is changing. One other thing if implementation is taking 7 months, 6 months, 8 months, we have now KPIs coming in place. I as CEO, I'm actually going to track, how can we reduce implementation time by 30 days, 60 days and therefore, start having revenue traction even earlier than estimated. So this is an organization that needs to move fast. If you look at my priorities, I think pace of play is very, very important to us right now. Operator: Our next question is from Gowshi Sri with Singular Research. Gowshihan Sriharan: On your FY '26 revenue guidance, it implies $150 million to $250 million step down. Can you help us understand how much of that step down is driven by [indiscernible] as of the underlying organic volume, particularly in Commercial. So just give a revenue base that actually looks like? Harsha Agadi: Gowshi, I'm sorry, we lost you there for a second. Can you repeat that, please? Gowshihan Sriharan: So the revenue for '26 is around -- a step down of around $150 million to $250 million. Can you understand -- help us understand much of that is due to portfolio disbursals versus softness in the organic volume? Giles Goodburn: Yes. So I think, firstly, Gowshi, it's important to reiterate that we're going to see -- we anticipate to see revenue growth in both the Government segment and the Transportation segment. So this -- the deterioration in revenue, the reduced guide is really confined to the Commercial space where it's a combination of softer volumes in some of our clients and then clients that we've lost over the last, I would say, 12 to 18 months. Gowshihan Sriharan: Okay. And then when are you -- with the portfolio optimization, would you be -- and you said you're actively marketing business in the cell bucket, without getting into specifics, can you give us a sense of how many of the processes are still active right now? And whether the scale of those proceeds have changed from the original framework that we discussed in the prior years? Harsha Agadi: Okay. Giles will answer it, and then I'll add a little. Go ahead. Giles Goodburn: Yes. So we've got a couple that we're working on. I'd say proceeds for those 2 roughly what we thought we would get when we look back sort of 6 to 9 months. So no real change there, just some complexity around some of the things that we've got to get through with the buying entities. And then that's certainly as how we think about it for 2026. And then beyond that, there are other things that we're considering in the portfolio as well. Harsha Agadi: Yes. So what I would say is where we stand today, we are reasonably confident with our numbers and where we are in the process. So I'm pleased to say that I can say today, our goal is to exceed $200 million in proceeds. In addition to that, we have received some inbounds on some other businesses. The interesting dilemma I face as CEO is some of these businesses are changing performance as we speak. It's getting better. So we're kind of rethinking carefully is business for sale or not. I have to give credit to our broad team. They're moving quickly on changing the numbers. We have strong internal discipline on managing margins and managing revenue of individual businesses, and it's starting to make a difference. But having said that, we clearly have two businesses identified, marketed as well as we are estimating the proceeds to be such as we have discussed earlier in the call. Operator: Our next question is from Marc Riddick with Sidoti & Company. Marc Riddick: I wanted to touch a little bit on the -- well, maybe we start with the potential of $200 million in divestitures. Can you talk a little bit as far as prioritization of proceeds from that? And then we can sort of branch off into a couple of other things there. Harsha Agadi: Yes. Here's what I would say. My focus at the moment is obtaining the $200 million-plus. So that is my singular focus. Now what that does, as you know, is gives us optionality and optionality could be the following. It could be buying some of our debt down. It could be buying some of our stock. It could be reinvesting some of it in our businesses. And I am very metric-oriented and numbers oriented. So we're examining that. And frankly, we are discussing with some bondholders just to get their expert advice as to how to approach all of this once we get the money. So we are still thinking it through, but it's a nice problem to have once we get the money. Marc Riddick: Okay. I appreciate the commentary there. So maybe we can shift gears on. As far as AI, I think you mentioned in the prior call sort of ballpark where you felt you were as far as percentage of revenue? And maybe you could talk sort of a little bit about what you're seeing there and what your goals may be as to what's directly connected to AI or AI related, I suppose? Harsha Agadi: Yes. I don't think I will look at it as a percent of revenue yet. But here, I will give you, first of all, when I look at AI, there are actually 5 layers that make up AI that most of us know. You start with the chip, the data center, the cloud, large language modules and eventually on top of that is app development. Three examples I can give you right away that we're using AI for. The first one is fraud detection, particularly in the Government space because we're making a lot of payments, and we need to ensure we're not making the wrong payments. Now interestingly, we have it working rather well. And now we're going to actually start shifting that use case to our financial institutions as well. The second on the call centers or what you would also say multichannel contact centers. We have one real-time translation. You can speak any language, it translates back and forth. Second is auto quality assurance. Third is training simulation, where somebody who's answered the call, they're given a training lesson how to do better. And then finally, we talked about Conni, our own GenAI persona, our own brand that is actually involved in dealing with our human capital solutions. So look, AI is a solution to reducing cost, increasing accuracy. But one of the things I'm running into rightly so with a lot of the clients, and I'm talking to CEOs of large health care companies as well as large service companies, and they keep emphasizing for us, the human connection of what you offer is as important as AI. So for us, balancing the 2, you're only as good to the client as the last call you received. So executing well consistently is very, very important. But I think as time goes by, we will start assigning specifically use case and examples and savings because for us to get to double-digit margins and sustain, it's not just rightsizing or right shoring the cost, but also implementing AI very carefully in certain areas of our business that's very meaningful to the client as well as to us. Giles Goodburn: Mark, just to give you some tangible impacts that AI has had over the last, I would say, 6 months for us in a couple of situations. One, I talked a little bit about this last quarter, is the fraud detection where some of that fraud in our P&L. We've seen significant cost savings with the deployment of that AI capability, which has really helped out in the Government segment. Secondly is the GenAI agent assistant, Conni, which we've deployed in our Human Capital Solutions business, which essentially helps clients, employees make better health choices as you go through the benefit enrollment program. We saw a considerably higher interaction rate between employees and Conni than we've ever had without Conni in prior years as we've been through that enrollment process. So two examples there where our AI investments are having significant impacts not only on our P&L, but for our clients as well. Marc Riddick: Great. And maybe last one for me. You touched on a couple of client verticals in prepared remarks and a couple of the questions already around Federal as well as Health Care a little bit. Are there any other client verticals as far as in your -- I guess, was it 115 days in the chair that you've seen thus far that you either maybe have been surprised by or encouraged by? Are there any particular client verticals that you think that stand out a little bit to you in the time that you've been there? Harsha Agadi: Yes. Here's what I would say. I have dealt with some of the Government clients and Transportation. And actually, they've been very constructive and transparent of how we work together. So I'm very pleasantly surprised. What is also very interesting to me is the number of CEOs of our Commercial clients who've made direct outreach to me looking for solutions. So this is what gives me the confidence that our sales pipeline is growing and is turning. We have new leadership in Commercial. We have George, who is running the operations. We have Kimberly, who is running the entire sales side for Commercial, both reporting to me directly. We have an internal rigor of a revenue call every week with all hands on deck. So we're actually starting to see the needle move. So to me, I expected maybe more roadblocks on the revenue side, and it's starting to look more and more positive. And I think we need to move at a very fast pace to embrace the opportunities in front of us. Here's the other thing. We're doing a lot of work in the United States. We should be looking at other English-speaking democracies, just to keep it simple, like Canada, England or in Australia to start increasing the same levels of service we provide U.S. Federal and U.S. State Governments. Operator: This concludes today's conference call. We thank you again for your participation. You may now disconnect your lines. Harsha Agadi: Thank you. Before you buy stock in Conduent, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Conduent wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Conduent (CNDT) Q1 2026 Earnings Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Revenue: $723 million, down 3.7% from Q1 2025. Adjusted EBITDA: $49 million, up from $37 million in Q1 2025. Adjusted EBITDA Margin: 6.8%, up 190 basis points year over year. Commercial Segment Revenue: $361 million, down 10.2% from Q1 2025. Government Segment Revenue: $226 million, up 4.6% from Q1 2025. Transportation Segment Revenue: $136 million, up 2.3% from Q1 2025. Operating Cash Flow Improvement: $50 million year over year. New Business ACV: $114 million, up 5% from Q1 2025. Cash on Balance Sheet: $251 million. Net Leverage Ratio: 2.8 turns. Capital Expenditure: 2.2% of revenue. 2026 Revenue Guidance: $2.8 billion to $2.9 billion. 2026 Adjusted EBITDA Guidance: $160 million to $190 million. Warning! GuruFocus has detected 4 Warning Signs with CNDT. Is CNDT fairly valued? Test your thesis with our free DCF calculator. Release Date: May 11, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Conduent Inc (NASDAQ:CNDT) reported a significant improvement in adjusted EBITDA margins, reaching 6.8% in Q1 2026, up from the previous year. The company identified potential cost reduction opportunities of $100 million over the next 18 months, indicating a strong focus on improving operational efficiency. Conduent Inc (NASDAQ:CNDT) achieved $114 million in sales wins during Q1 2026, highlighting strong client relationships and capabilities. The government segment showed a robust performance with a 4.6% revenue increase, driven by new business and higher volumes. AI initiatives are being actively implemented, with notable success in fraud detection and customer interaction improvements, enhancing both cost efficiency and client service. Revenue for Q1 2026 was $723 million, down 3.7% compared to Q1 2025, with declines in the commercial segment. The commercial segment experienced a 10.2% revenue decline, attributed to volume declines and lost business. Annual recurring revenue (ARR) was softer than expected, particularly in the government segment, due to a mix of non-recurring revenue. The transportation segment faced challenges with post-implementation expenses affecting adjusted EBITDA. There is uncertainty in the sales cycle duration and conversion rates, particularly in the government and transportation sectors, due to federal administration delays. Q: How is Conduent weighing the impact of AI on its competitive moat and growth rate across different sectors? A: Harshavardhan Agadi, CEO: In the government sector, contracts are long-term and sticky, and as long as we use state-of-the-art technology, we maintain a strong position. In transportation, growth opportunities exist with urban development. In the commercial sector, innovation is crucial for survival, and we are partnering with AI-driven companies to enhance service reliability and reduce costs. Q: What are the conversion rates and sales cycle durations, particularly in the government and transportation sectors? A: Giles Goodburn, CFO: There is no significant change in win rates, but some contracts are delayed due to federal administration uncertainties. The sales cycle is quicker in commercial spaces, while government contracts take longer due to their processes. We are also focusing on reducing implementation times to generate revenue faster. Q: Can you explain the revenue step-down in FY26 and the impact of portfolio dispersals versus organic volume softness? A: Giles Goodburn, CFO: The revenue decline is mainly in the commercial segment due to softer volumes and client losses over the past 12-18 months. We expect growth in the government and transportation segments. Q: What is the prioritization of proceeds from the anticipated $200 million in divestitures? A: Harshavardhan Agadi, CEO: Our focus is on obtaining the $200 million, which provides optionality for debt reduction, stock buybacks, or reinvestment in our businesses. We are consulting with bondholders to determine the best approach once the funds are secured. Q: How is AI contributing to Conduent's operations and client interactions? A: Harshavardhan Agadi, CEO: AI is used for fraud detection, real-time translation in call centers, and our GenAI persona, Conni, in human capital solutions. AI helps reduce costs and increase accuracy, but maintaining human connection is equally important for client satisfaction. For the complete transcript of the earnings call, please refer to the full earnings call transcript.