8-K: Conduent Reports Mixed Q1 2025 Results: Revenue Declines, CFO Departs, But Optimism Remains
Quarterly Report 7 May 2025 8:01 AM
Conduent's Q1 2025 results show a revenue decline but improved EBITDA margins, a CFO departure, and reaffirmation of full-year outlook.
Summary
- Conduent Incorporated released its first quarter 2025 financial results on May 7, 2025.
- Revenue was $751 million, down 18.5% year-over-year, but adjusted revenue was $751 million, down 8.5% year-over-year.
- The company reported a pre-tax loss of $(56) million, compared to a profit of $127 million in the prior year.
- Adjusted EBITDA was $37 million with a margin of 4.9%, exceeding internal expectations.
- New business signings ACV was $109 million, and the Net ARR Activity Metric (TTM) was $116 million.
- The company reaffirmed its FY 2025 outlook, projecting adjusted revenue between $3.1 billion and $3.25 billion and an adjusted EBITDA margin between 4.5% and 5.5%.
- Giles Goodburn was appointed as the new Chief Financial Officer, succeeding Stephen Wood, both changes effective May 2, 2025.
- The company is targeting more than $1 billion in deployable capital through portfolio rationalization efforts.
- Conduent is focused on efficiency and cost reduction initiatives, including expanding its digital customer experience and implementing fraud prevention tools.
- The company is also working on modernizing fare collections and infrastructure for transportation clients.
Sentiment
Score: 6
Explanation: The sentiment is moderately positive. While revenue declined, the company exceeded EBITDA expectations, reaffirmed its full-year outlook, and is making progress on strategic initiatives. The CFO departure is a concern, but the appointment of a successor is a positive step.
Positives
- Adjusted EBITDA margin exceeded expectations at 4.9%.
- New business signings and Net ARR Activity Metric improved year-over-year.
- Portfolio rationalization efforts are on track to achieve more than $1 billion in deployable capital.
- The company's liquidity position remains strong with $293 million in cash and a largely undrawn $550 million revolving credit facility.
- Conduent is implementing innovative solutions like the Congestion Relief Zone in New York City and AI-based fraud prevention tools.
- The company secured a $92 million contract with the Alaska Department of Health to operate and modernize the state's MMIS.
- Conduent is expanding its digital customer experience for a leading global logistics company.
Negatives
- Revenue decreased by 18.5% year-over-year, with adjusted revenue down 8.5%.
- Pre-tax income decreased significantly due to the gain on the transfer of the BenefitWallet portfolio in the prior year period.
- Cash Flow from Operating Activities and Adjusted Free Cash Flow were down year-over-year.
- GAAP Net Income (Loss) was $(51) million versus $99 million in the prior year.
- GAAP Diluted EPS was $(0.33) versus $0.46 in the prior year.
- Adjusted Diluted EPS was $(0.13) versus $(0.09) in the prior year.
Risks
- The company faces risks related to government appropriations and termination rights in government contracts.
- There are competitive pressures in the markets where Conduent operates.
- The company relies on third-party providers.
- Geopolitical events and macroeconomic conditions could impact the workforce, customers, and vendors.
- Conduent faces risks related to delivering on contractual obligations and changes in interest in outsourced business process services.
- There are risks related to intellectual property rights, estimating the scope of work, and retaining key personnel.
- The company faces risks related to data security, cybersecurity threats, and compliance with data security standards.
- Recently completed divestitures pose risks related to realizing anticipated benefits and unexpected costs.
- The company has significant indebtedness and faces risks related to maintaining a satisfactory credit rating.
- The cyber event in January 2025 poses risks to Conduent's business, operations, and reputation.
Future Outlook
Conduent reaffirmed its FY 2025 outlook, projecting adjusted revenue between $3.1 billion and $3.25 billion and an adjusted EBITDA margin between 4.5% and 5.5%. The company also provided 2025 exit rates of $3.2 billion to $3.3 billion in revenue and approximately 8% EBITDA.
Management Comments
- Cliff Skelton, Conduent President and Chief Executive Officer stated, Conduent had a good start to 2025, especially amidst the broad uncertainty in the macro-economic landscape.
- Our results are in line with internal expectations and consistent with our 2025 outlook with respect to Adjusted Revenue, and Adjusted EBITDA margins exceeded expectations.
- New business signings and our Net ARR Activity Metric, both signals of future growth, improved on a year-over-year basis.
- Operating cash flow comparison was negatively influenced by several one-time events in 2024 which when normalized, was better versus Q1 2024.
- Fortunately, while macro-economic and geopolitical environments affect everyone, most of our business segments are somewhat insulated from trade and government efficiency challenges, and in some cases, may benefit from opportunities.
- Our portfolio rationalization efforts are being reinvigorated with additional opportunities and are on track toward achieving more than $1B in deployable capital.
- Finally, we remain confident in achieving our previously stated 2025 exit rate targets we outlined two years ago.
Industry Context
Conduent's focus on digital transformation, AI-driven solutions, and government efficiency aligns with broader industry trends. The company's efforts to modernize transportation infrastructure and prevent fraud in government benefits are also relevant to current market needs.
Comparison to Industry Standards
- Conduent's adjusted EBITDA margin of 4.9% is lower than some of its competitors in the business process outsourcing industry, such as Accenture (approximately 15%) and Genpact (approximately 16%).
- However, Conduent's focus on portfolio rationalization and cost efficiencies could lead to improved margins in the future.
- The company's new business signings ACV of $109 million indicates a positive trend in securing new contracts, but it is important to compare this metric to industry benchmarks to assess Conduent's competitive position.
- Conduent's efforts to implement AI-based fraud prevention tools align with industry trends, as many companies are investing in AI to improve efficiency and reduce costs.
Management Changes
Role | Previous Person | New Person | Effective Date | Reason |
---|---|---|---|---|
Chief Financial Officer | Stephen Wood | Giles Goodburn | May 02, 2025 | Departure of previous CFO |
Stakeholder Impact
- Shareholders: Mixed results with revenue decline but improved EBITDA margins.
- Employees: Potential impact from efficiency and cost reduction initiatives.
- Customers: Focus on improving customer experience through digital transformation.
- Suppliers: Potential impact from portfolio rationalization efforts.
- Creditors: Strong liquidity position and reaffirmed financial outlook.
Next Steps
- Continue portfolio rationalization efforts to achieve more than $1 billion in deployable capital.
- Focus on efficiency and cost reduction initiatives.
- Expand digital customer experience and implement fraud prevention tools.
- Modernize fare collections and infrastructure for transportation clients.
- Monitor and mitigate risks related to government contracts, geopolitical events, and cybersecurity threats.
Key Dates
Date | Description |
---|---|
March 2020 | Giles Goodburn served as the Company's Head of Investor Relations and Corporate FP&A from March 2020 until May 2025. |
January 2025 | Reference to a cyber event that took place in January 2025. |
May 02, 2025 | Stephen Wood departed the Company and Giles Goodburn was appointed as Chief Financial Officer. |
May 07, 2025 | Conduent released its first quarter 2025 earnings and conducted an earnings call. |
June 1, 2025 | Mr. Goodburn will be granted a one-time off-cycle long term incentive plan award valued at $280,000 on or about June 1, 2025. |
Keywords
Conduent, financial results, earnings, CFO, revenue, EBITDA, contracts, technology, business process solutions, government, transportation
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