CNDT

Conduent Inc. Q2 2026 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended June 30, 2026. Conduent Inc. provides digital business solutions and services across commercial and government sectors. The reporting period is defined by a major strategic shift: the Company entered into definitive agreements to sell its entire Transportation segment (Public Transit and Tolling businesses), classifying these operations as Discontinued Operations. Consequently, financial results for continuing operations exclude the Transportation segment, and prior periods have been recast to reflect this change.

Key Financial Metrics

Note: Net Loss includes a $31 million impairment charge related to the Tolling divestiture within Discontinued Operations.

Material Changes vs. Prior Period

• Revenue Decline: Continuing operations revenue decreased 12% in Q2 and 8% YTD compared to the prior year. This was primarily driven by the loss of the largest Commercial segment customer and lower volumes, partially offset by new business ramp-up.
• Restructuring Costs: Restructuring and related costs increased significantly to $20 million in Q2 (up from $8 million in Q2 2025) due to the launch of the "2026 Restructuring Program," aimed at achieving $100 million in annual savings.
• Discontinued Operations Impact: The reclassification of the Transportation segment resulted in a $47 million net loss for Q2 2026, largely driven by a $31 million pre-tax impairment loss on the Tolling business assets held for sale.
• Segment Performance:
  • Commercial: Revenue fell to $316 million (Q2) due to contract losses. Segment profit remained flat at $7 million.
  • Government: Revenue fell to $215 million (Q2). Segment profit decreased to $39 million from $49 million in the prior year.

Guidance, Outlook, and Risks

• Divestiture Progress: The Company expects to close the sales of the Public Transit business (to Modaxo) and Tolling business (to Quarterhill Inc.) before the end of 2026. The Tolling deal includes a 7% equity stake in Quarterhill Inc., introducing new market and liquidity risks.
• Restructuring Outlook: The 2026 Restructuring Program is expected to cost between $30 million and $50 million total, with completion targeted for the first half of 2027.
• Cyber Event: The Company continues to manage the aftermath of the January 2025 Cyber Event. While $25 million in direct response costs were accrued in 2025, litigation and regulatory investigations remain ongoing. The Company believes insurance will cover costs exceeding the initial accrual up to policy limits.
• Liquidity: Management believes cash on hand ($228 million) and the revolving credit facility ($190 million available) are sufficient to meet obligations for the next 12 months. In July 2026, the Company borrowed an additional $183 million under its credit facility.

Investor Verification Checklist

• Divestiture Closing: Verify the expected closing dates and final consideration for the Public Transit and Tolling sales, including the valuation of the Quarterhill Inc. equity stake.
• Customer Concentration: Assess the impact of losing the largest Commercial customer and the timeline for replacing that revenue with new business.
• Restructuring Execution: Monitor the actual costs incurred versus the $30-$50 million estimate for the 2026 Restructuring Program and the realization of the targeted $100 million in annual savings.
• Cyber Liability: Track developments in the consolidated data breach litigation and any potential costs exceeding the $25 million already accrued and the insurance coverage limits.
• Debt Covenants: Confirm continued compliance with debt covenants, particularly given the recent draw-down of the revolving credit facility and the ongoing restructuring costs.