Conduent ((CNDT)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Conduent presented a mixed bag of results, highlighting both achievements and challenges. The company showcased notable successes in its Transportation segment and advancements in AI initiatives. However, it also faced hurdles with revenue declines in its Commercial and Government segments, along with a negative free cash flow. While efforts to expand sales and improve margins are underway, significant challenges remain on the horizon.
Transportation Segment Growth
The Transportation segment was a bright spot for Conduent, with adjusted revenue reaching $162 million for the quarter, marking a 14.9% increase year-over-year. This growth was fueled by strong equipment sales in the international transit business, contributing to both revenue and EBITDA improvements.
AI Initiatives and Software Licensing
Conduent is making strides in AI, as evidenced by its new software licensing with built-in AI capabilities. This move underscores the company’s transition from being solely a services provider to owning proprietary intellectual property. Additionally, the launch of an AI experience center in New Jersey highlights their commitment to innovation.
New Business Growth
The company reported a 5% increase in new business total contract value (TCV), reaching $246 million. The Transportation business, in particular, saw a remarkable 320% year-to-date increase in sales compared to 2024, signaling robust growth potential.
Improved EBITDA and Margin
Conduent’s adjusted EBITDA for the quarter was $40 million, reflecting a year-over-year increase. The adjusted EBITDA margin improved to 5.2%, up from 4.1% in Q3 2024, indicating progress in operational efficiency.
Commercial Segment Revenue Decline
The Commercial segment faced challenges, with adjusted revenue declining by 4.7% to $367 million compared to Q3 2024. This decrease was primarily due to volume declines in the company’s largest Commercial client.
Government Segment Revenue Decline
The Government segment also experienced a downturn, with adjusted revenue falling by 6.7% to $238 million. This decline was attributed to the completion of several implementations and delays in current projects.
Negative Free Cash Flow
Conduent reported a negative adjusted free cash flow of $54 million for the quarter. This was impacted by timing issues related to contract amendments and billing approvals from federal government agencies.
Revenue Decline
Overall, Conduent’s adjusted revenue for Q3 2025 was $767 million, down 1.8% year-over-year from $781 million in Q3 2024. This decline reflects broader challenges in the Commercial and Government segments.
Forward-Looking Guidance
Looking ahead, Conduent remains optimistic about its growth prospects. The company reported sequential growth in adjusted revenue and aims to achieve an adjusted EBITDA margin target of between 5% and 5.5% for the year. Despite the challenges, Conduent expects adjusted revenue to range between $3.05 billion and $3.1 billion, with a growing qualified ACV pipeline driven by the Government segment.
In summary, Conduent’s earnings call revealed a mixed performance with significant achievements in the Transportation segment and AI initiatives, but also highlighted challenges in the Commercial and Government segments. While the company faces hurdles such as negative free cash flow and revenue declines, its strategic efforts to expand sales and improve margins offer a promising outlook for the future.