Conduent (CNDT) Q2 2024 earnings summary

Executive summary

• Q2 2024 adjusted revenue was $811M and adjusted EBITDA was $29M (3.6% margin), both exceeding expectations despite year-over-year declines, driven by lost business in Commercial and Government segments and reduced scope in Transportation, partially offset by new business ramp.

• Net income reached $216M, a significant turnaround from a $7M loss in Q2 2023, mainly due to gains from divestitures.

• Portfolio rationalization and divestitures are progressing, with 66% of the $1B capital target deployed, supporting deleveraging and share repurchases, including all shares formerly owned by Carl Icahn.

• Commercial sales improved sequentially, while government segment lagged; new business signings reached $142M, and the sales pipeline remains robust.

• The company is transforming into a smaller, technology-led business solutions provider, focusing on Business Process as a Service, Government, and Transportation Solutions.

Financial highlights

• Adjusted revenue declined 4.7% year-over-year to $811M; adjusted EBITDA margin dropped to 3.6% from 7.5% in Q2 2023.

• GAAP net income was $216M, up from a $7M loss; diluted EPS was $1.07 versus $(0.04) last year; adjusted diluted EPS was $(0.14).

• Operating cash flow and adjusted free cash flow were negative in Q2 2024, reflecting lower EBITDA and working capital changes.

• Net leverage decreased to 1.7x, with $307M cash on hand and $547M available under the revolving credit facility.

• CapEx was 3.6% of revenue in Q2 2024.

Outlook and guidance

• Full-year 2024 adjusted revenue expected at $3,325M–$3,375M, down 3–5% year-over-year; adjusted EBITDA margin guided at 4–5%.

• Q3 adjusted revenue expected at $815M–$825M, with EBITDA margin of 3.75–4.25%.

• 2025 exit rate targets include further margin expansion, lower capital intensity, and net leverage around 1x.

• Management expects significant cash tax payments in the second half of 2024 due to divestiture gains.