Conduent Q2 Earnings Call Highlights
Key Points
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- 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.
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%.
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.
Transportation Exit and Capital Structure
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.
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.
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.
Segment Results and Cost Actions
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.
Sales Pipeline, AI and Outlook
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.
About Conduent (NASDAQ:CNDT)
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.
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