What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-05 · 132 added, 67 removed, 140 unchanged (59% of the section changed)

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We serve as a trusted business partner in both the front office and back office, enabling personalized, seamless interactions on a massive scale that improve end-user experience.

Headquartered in Florham Park, New Jersey, we have a team of approximately 59,000 associates as of March 31, 2021, servicing customers from service centers in 24 countries.

Headquartered in Florham Park, New Jersey, we have a team of approximately 59,000 associates as of June 30, 2021, servicing customers from service centers in 23 countries.

Our reportable segments correspond to how we organize and manage the business and are aligned to the industries in which our clients operate.

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We continue to transform our business through an intense focus on growth, quality, and efficiency – utilizing a programmatic and project management approach.

Beginning in the first quarter of 2020 and through the first quarter of 2021, we have expanded the focus of our transformation initiative to include both efficiency and growth initiatives, aimed to position the company to pivot to revenue growth and margin expansion over time.

Beginning in the first quarter of 2020 and through the second quarter of 2021, we have expanded the focus of our project portfolio to include both efficiency and growth initiatives, aimed to position the company to pivot to revenue growth and margin expansion over time.

We intend to drive portfolio focus, operating discipline, sales and delivery excellence and innovation, complemented by tightly aligned investments to achieve this mission and purpose.

Our strategy is designed to deliver value by delivering profitable growth, expanding operating margins and deploying a disciplined capital allocation strategy.

During the three months ended March 31, 2021, our strategy is showing results, including the following:

• Revenue of $1,028 million for the three months ended March 31, 2021 was a decline of 2.2%, a significantly improved trend compared with the same quarter last year.

• Significantly lower net loss of $11 million for the three months ended March 31, 2021 as compared to a net loss of $49 million for the same period in the prior year.

During the three and six months ended June 30, 2021, our strategy is showing results, including the following:

• Revenue of $1,026 million and $2,054 million for the three and six months ended June 30, 2021, respectively, was an increase of 1.0% and a decrease of less than 1.0%, respectively, a significantly improved trend compared with the same periods last year.

• Positive net income of $12 million and $1 million for the three and six months ended June 30, 2021, respectively, as compared to net loss of $51 million and $100 million for the same periods in the prior year.

• Strong new business signings results:

CNDT Q2 2021 Form 10-Q

◦ New business total contract value (TCV) signings of $356 million for the three months ended March 31, 2021, representing an increase of 10% compared to that of the prior year period.

◦ Annual recurring revenue signings of $95 million for the three months ended March 31, 2021, an increase of 67% compared to that of the prior year period.

• The Company has shown year-over-year operational progress, including a reduction of the number of technology related incidents and outages, improvements in associate satisfaction survey results and increases in performance incentives from customers.

◦ New business total contract value (TCV) signings of $775 million for the three months ended June 30, 2021, representing an increase of 24% compared to that of the prior year period.

◦ Annual recurring revenue signings of $115 million for the three months ended June 30, 2021, an increase of 10% compared to that of the prior year period.

• The Company has shown year-over-year operational progress, including an improvement to technology platform uptime, improvements in associate satisfaction survey results and increases in performance incentives from customers.

• The Company redeemed the remainder of its previously outstanding $34 million Senior Notes.

COVID-19 Pandemic

Throughout the COVID-19 pandemic, we have continued to provide critical and best-in-class services to our customers and their end-users, while ensuring the health and safety of our greatest assets - our associates.

To address the potential impact to our business over the near-term, our Business Continuity team established a proactive plan in the first quarter of 2020 that has continued into the first quarter of 2021, which includes:

• Supporting our associates with a number of specific initiatives, including making improvements to our policies to extend short-term disability, providing extra supplemental sick leave coverage and introducing a hardship leave policy.

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As the world increasingly becomes vaccinated, we will evolve our approach to various initiatives or take additional actions to meet the needs of our employees, customers and their end-users and the Company to continue to provide our mission-critical services and solutions.

CNDT Q2 2021 Form 10-Q

Financial Review of Operations

Three Months Ended

March 31, 2021 vs.

June 30, 2021 vs.

($ in millions) 2021 2020 $ Change % Change

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Selling, general and administrative (excluding depreciation and amortization) 125 111 14 13 %

Research and development (excluding depreciation and amortization) 1 — 1 n/m

Depreciation and amortization 86 115 (29) (25) %

Restructuring and related costs 8 29 (21) (72) %

Interest expense 13 15 (2) (13) %

(Gain) loss on divestitures and transaction costs (1) 2 (3) (150) %

Litigation costs 1 14 (13) (93) %

Loss on extinguishment of debt 2 — 2 n/m

Other (income) expenses, net — (1) 1 (100) %

Total Operating Costs and Expenses 1,007 1,080 (73)

Income (Loss) Before Income Taxes 19 (64) 83

Income tax expense (benefit) 7 (13) 20

Net Income (Loss) $ 12 $ (51) $ 63

Six Months Ended

June 30, 2021 vs.

($ in millions) 2021 2020 $ Change % Change

Revenue $ 2,054 $ 2,067 $ (13) (1) %

Operating Costs and Expenses

Cost of services (excluding depreciation and amortization) 1,559 1,627 (68) (4) %

Selling, general and administrative (excluding depreciation and amortization) 251 227 24 11 %

Research and development (excluding depreciation and amortization) 1 1 — — %

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Interest expense 26 32 (6) (19) %

Loss on divestitures and transaction costs 2 4 (2) (50) %

(Gain) loss on divestitures and transaction costs 1 6 (5) (83) %

Litigation costs 2 20 (18) (90) %

Loss on extinguishment of debt 2 — 2 n/m

Other (income) expenses, net — 1 (1) (100) %

Total Operating Costs and Expenses 2,044 2,182 (138)

Loss Before Income Taxes (9) (51) 42

Income (Loss) Before Income Taxes 10 (115) 125

Income tax expense (benefit) 9 (15) 24

Net Loss $ (11) $ (49) $ 38

Net Income (Loss) $ 1 $ (100) $ 101

CNDT Q2 2021 Form 10-Q

Revenue for the three months ended March 31, 2021 decreased, compared to the prior year period, primarily due to lost business from prior years and the effect of the COVID-19 pandemic across our Commercial Industries and our Transportation segments.

These were partially offset by higher revenue due to increased volumes in our Government Services Solutions service offering within our Government Services segment, primarily increased payments activity because of Federal stimulus, and the ramp of new business.

Revenue for the three months ended June 30, 2021 increased by 1%, compared to the prior year period, primarily due to lesser impacts of the COVID-19 pandemic across our Transportation and Commercial Industries segments, increased volumes in our Government Services Solutions offering within our Government Services segment, primarily increased payments activity because of Federal stimulus, and the ramp of new business.

These increases were partially offset by lost business from prior years.

Revenue for the six months ended June 30, 2021 decreased by less than 1%, compared to the prior year period, primarily due to lost business from prior years and the effect of the COVID-19 pandemic across our Commercial Industries and our Transportation segments, which had only a minimal impact on the first quarter of 2020.

These unfavorable impacts were partially offset by increased volumes in our Government Services Solutions service offering within our Government Services segment, primarily increased payments activity because of Federal stimulus, and the ramp of new business.

Cost of Services (excluding depreciation and amortization)

Cost of services for the three months ended March 31, 2021 decreased, compared to the prior year period, driven by loss of business and lower volumes as well as increased operational efficiency, which led to reductions in information technology, labor and real estate costs.

Cost of services for the three months ended June 30, 2021 decreased, compared to the prior year period, driven by lost business from prior years as well as increased operational efficiency, which led to reductions in information technology, labor and real estate costs.

Cost of services for the six months ended June 30, 2021 decreased, compared to the prior year period, driven by lost business from prior years and lower volumes as well as increased operational efficiency, which led to reductions in information technology, labor and real estate costs.

Also contributing to the decline were lower costs to support volume loss resulting from the effect of the COVID-19 pandemic.

Selling, General and Administrative (SG&A) (excluding depreciation and amortization)

SG&A for the three months ended March 31, 2021 increased, compared to the prior year period, driven by an increase in certain employee-related costs, partially offset by reductions in real estate, corporate overhead and labor costs, as well as savings from lower travel and marketing expenses.

SG&A for the three and six months ended June 30, 2021 increased, compared to the prior year periods, driven by an increase in certain employee-related costs and growth in the sales organization and higher recruiting expenses.

Depreciation and Amortization

Depreciation and amortization for the three and six months ended June 30, 2021 decreased, compared to the prior year periods, primarily due to a portion of certain customer relationship intangible assets being fully amortized in the first quarter of 2021.

Restructuring and Related Costs

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Three Months Ended

June 30, Six Months Ended

(in millions) 2021 2020 2021 2020

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(1) Represents professional support costs associated with certain strategic transformation programs.

CNDT Q2 2021 Form 10-Q

Refer to Note 5 – Restructuring Programs and Related Costs to the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.

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Interest expense represents interest on long-term debt and the amortization of debt issuance costs.

The decrease in Interest expense for the three months ended March 31, 2021, compared to the prior year period, was driven primarily by lower interest rates and a lower Term Loan A principal balance.

Additionally, the three months ended March 31, 2020 included interest expense attributable to the drawdown on our Senior Revolving Credit Facility (Revolver) in March 2020, which was repaid in December 2020.

The decreases in Interest expense for the three and six months ended June 30, 2021, compared to the prior year periods, was driven primarily by lower interest rates, a lower Term Loan A principal balance and the May 1, 2021 repayment of the previously outstanding $34 million Senior Notes.

Additionally, the three and six months ended June 30, 2020 included interest expense attributable to the drawdown on our Senior Revolving Credit Facility (Revolver) in March 2020, which was repaid in December 2020.

Refer to Note 6 – Debt in the Condensed Consolidated Financial Statements for additional information.

Loss on Divestitures and Transaction Costs

The costs included in the three months ended March 31, 2021 consist of professional fees and other costs related to certain consummated and non-consummated transactions considered by the Company.

CNDT Q1 2021 Form 10-Q

(Gain) Loss on Divestitures and Transaction Costs

These costs consist of professional fees and other costs related to certain consummated and non-consummated transactions considered by the Company.

Litigation Costs

Net litigation costs for the three months ended March 31, 2021 primarily consist of reserves for various matters that are subject to litigation;

the three months ended March 31, 2020 amount also included costs related to certain reimbursement matters with our former parent company, Xerox Corporation.

Net litigation costs for the three and six months ended June 30, 2021 primarily consist of reserves for various matters that are subject to litigation;

the three and six months ended June 30, 2020 amount also included costs related to certain reimbursement matters with our former parent company, Xerox Corporation.

Refer to Note 11 – Contingencies and Litigation to the Condensed Consolidated Financial Statements for additional information.

The effective tax rate for the three months ended March 31, 2021 was negative 23.4%, compared to 3.9% for the three months ended March 31, 2020.

The March 31, 2021 rate was negative as compared to the U.S.

statutory rate of 21%, primarily due to pre-tax loss and tax expense resulting from geographic mix of income, valuation allowances and tax charges recognized on employee equity award vesting partially offset by tax credits.

The effective tax rate for the three months ended March 31, 2020 was lower than the U.S.

statutory rate of 21%, primarily due to the geographic mix of income, valuation allowances, and tax charges recognized on employee equity award vesting partially offset by tax credits.

Excluding the impact of valuation allowances, equity award vesting, amortization of intangible assets and restructuring costs, the normalized effective tax rate for the three months ended March 31, 2021 was 23.4%.

The normalized effective tax rate for the three months ended March 31, 2020 was 33.3%, predominantly due to excluding the impact of valuation allowances, vesting of equity awards, amortization of intangible assets and restructuring costs.

The normalized effective tax rate for the three months ended March 31, 2021 was lower than the comparable 2020 rate due to foreign earnings mix, increased income in the U.S.

and favorable change in U.S.

taxation of foreign income.

The effective tax rate for the three months ended June 30, 2021 was 38.2%, compared to 20.3% for the three months ended June 30, 2020.

The June 30, 2021 rate was higher than the U.S.

statutory rate of 21%, primarily due to geographic mix of income, other non-deductible permanent differences, valuation allowances and tax audit reserves, partially offset by tax credits.

The June 30, 2020 rate was slightly lower than the U.S.

statutory rate of 21%, primarily due to the geographic mix of income.

Excluding the impact of discrete tax adjustments, amortization of intangible assets and restructuring costs, the normalized effective tax rate for the three months ended June 30, 2021 was 25.7%.

The normalized effective tax rate for the three months ended June 30, 2020 was 32.5%, predominately due to excluding the impact of amortization and restructuring costs.

The normalized effective tax rate for the three months ended June 30, 2021 was lower than the three months ended June 30, 2020 rate predominantly due to earnings mix.

The effective tax rate for the six months ended June 30, 2021 was 94.3% compared with 13.0% for the six months ended June 30, 2020.

The June 30, 2021 rate was higher than the U.S.

statutory rate of 21% primarily due to geographic mix of income, other non-deductible permanent differences, valuation allowances, and tax audit reserve partially offset by tax credits.

The June 30, 2020 rate was lower than the U.S.

statutory rate of 21% primarily due to the geographic mix of income, valuation allowances, and tax charges recognized on the vesting of employee equity awards partially offset by tax credits.

Excluding the impact of discrete tax adjustments, amortization of intangible assets and restructuring, the normalized effective tax rate for the six months ended June 30, 2021 was 24.7%.

The normalized effective tax rate for the six months ended June 30, 2020 was 32.8%, predominantly due to excluding the impact of valuation allowances, vesting of equity awards, charges for amortization of intangible assets and restructuring.

The normalized effective tax rate for the six months ended June 30, 2021 was lower than the six months ended June 30, 2020 rate predominantly due to earnings mix.

The Company believes it is reasonably possible that unrecognized tax benefits of approximately $14 million will reverse within 12 months due to an anticipated audit settlement.

CNDT Q2 2021 Form 10-Q

Operations Review of Segment Revenue and Profit

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Adjusted EBITDA Margin 10.0 % 29.0 % 17.6 % — % — % 10.8 %

Six Months Ended

(in millions) Commercial Industries Government Services Transportation Other Unallocated Costs Total

Revenue $ 1,029 $ 656 $ 369 $ — $ — $ 2,054

Segment profit (loss) $ 64 $ 197 $ 38 $ — $ (165) $ 134

Segment depreciation and amortization $ 52 $ 13 $ 17 $ — $ 27 $ 109

Adjusted EBITDA $ 116 $ 210 $ 55 $ — $ (138) $ 243

% of Total Revenue 50.1 % 31.9 % 18.0 % — % — % 100.0 %

Adjusted EBITDA Margin 11.3 % 32.0 % 14.9 % — % — % 11.8 %

Revenue $ 1,092 $ 621 $ 354 $ — $ — $ 2,067

Segment profit (loss) $ 67 $ 160 $ 30 $ 3 $ (160) $ 100

Segment depreciation and amortization $ 55 $ 13 $ 18 $ — $ 27 $ 113

Adjusted EBITDA $ 122 $ 173 $ 48 $ (4) $ (133) $ 206

% of Total Revenue 52.8 % 30.1 % 17.1 % — % — % 100.0 %

Adjusted EBITDA Margin 11.2 % 27.9 % 13.6 % — % — % 10.0 %

Commercial Industries Segment

Commercial Industries revenue for the three months ended March 31, 2021 decreased, compared to the prior year period, due to COVID-19 related volume declines in our Business Operations Solutions service offering and reduced revenue from our HSA offering "Benefit Wallet" (within our HRLS business), as well as lost business from prior years.

Commercial Industries revenue for the three months ended June 30, 2021 decreased, compared to the prior year period, due to lost business from prior years, partially offset by higher volumes as the impacts from COVID-19 were lesser in the second quarter of 2021 as many regions began to loosen restrictions.

CNDT Q2 2021 Form 10-Q

Commercial Industries revenue for the six months ended June 30, 2021 decreased, compared to the prior year period, due to COVID-19 related volume declines in our Business Operations Solutions service offering and reduced revenue from our HSA offering "Benefit Wallet" (within our HRLS business) as a result of Federal Reserve initiated interest rate reductions, as well as lost business from prior years.

Segment Profit and Adjusted EBITDA

Decreases in the Commercial Industries segment profit and adjusted EBITDA margin for the three months ended March 31, 2021, compared to the prior year period, were mainly driven by overall revenue declines.

Adjusted EBITDA margin remained relatively flat compared with the prior year period as a result of efficiency program progress.

Increases in the Commercial Industries segment profit and adjusted EBITDA margin for the three months ended June 30, 2021, compared to the prior year period, were mainly driven by the result of progress in our efficiency initiatives and one-time contract exit costs in the second quarter of 2020.

Commercial Industries segment profit decreased and adjusted EBITDA margin increased for the six months ended June 30, 2021, compared to the prior year period, mainly driven by overall revenue declines, partially offset by the result of progress in our efficiency initiatives and one-time contract exit costs in the second quarter of 2020.

Government Services Segment

Government Services revenue for the three months ended March 31, 2021 increased, compared to the prior year period, primarily driven by COVID-19 related volume increases.

Government Services revenue for the three months ended June 30, 2021 increased, compared to the prior year period, primarily driven by COVID-19 related volume increases.

These increases were partially offset by lost business from prior years.

The increased volumes from the COVID-19 pandemic were largely driven by the increases in the Supplemental Nutrition Assistance Program (SNAP) volumes and Pandemic SNAP volumes.

Government Services revenue for the six months ended June 30, 2021 increased, compared to the prior year period, primarily driven by COVID-19 related volume increases.

These increases were partially offset by lost business from prior years.

The increased volumes from the COVID-19 pandemic was largely driven by the increases in the Supplemental Nutrition Assistance Program (SNAP) volumes and Pandemic SNAP volumes, an increase in the number of citizens to which we distribute unemployment insurance benefits, and additional unemployment insurance benefit distributions as a result of Federal stimulus.

Within the unemployment benefit business, we generate revenue based on the amount of spending by card holders.

CNDT Q1 2021 Form 10-Q

Segment Profit and Adjusted EBITDA

Increases in the Government Services segment profit and adjusted EBITDA margin for the three months ended March 31, 2021, compared to the prior year period, were mainly driven by increased revenue and expense reductions from efficiency program progress.

Increases in the Government Services segment profit and adjusted EBITDA margin for the three and six months ended June 30, 2021, compared to the prior year period, were mainly driven by increased COVID-19 related volume increases at strong margins and expense reductions resulting from progress in our efficiency initiatives.

Transportation Segment

Transportation revenue for the three months ended March 31, 2021 decreased, compared to the prior year period, primarily driven by COVID-19 related impacts and lost business from prior years, partially offset by the ramp of new business.

The COVID-19 related impacts were primarily driven by volume pressure in Curbside Management Solutions service offering and Public Safety service offerings.

Transportation revenue for the three and six months ended June 30, 2021 increased, compared to the prior year period, primarily driven by the impact of loosening of numerous COVID-19 related restrictions, particularly in the United States, and the ramp of new business, partially offset by lost business from prior years.

Segment Profit and Adjusted EBITDA

Transportation segment profit and adjusted EBITDA margin increased for the three months ended March 31, 2021, compared to the prior year period, mainly driven by efficiency program progress and temporarily beneficial revenue mix, partially offset by slightly lower revenue.

Transportation segment profit and adjusted EBITDA margin decreased for the three months ended June 30, 2021, compared to the prior year period, mainly driven by unfavorable revenue mix in the quarter and short term cost savings in the prior year.

Transportation segment profit and adjusted EBITDA margin increased for the six months ended June 30, 2021, compared to the prior year period, mainly driven by progress in our efficiency initiatives and beneficial revenue mix.

CNDT Q2 2021 Form 10-Q

Segment Profit (Loss) and Adjusted EBITDA

Our Other segment did not have any segment profit for the three months ended March 31, 2021.

The segment profit in the prior year period was primarily due to an adjustment to the then remaining California Medicaid Management Information System settlement liability of $7 million as a result of the contract expiration in March 2020.

This benefit was removed from adjusted EBITDA for segment reporting purposes due to its non-recurring nature.

The segment profit in the 2020 period was primarily due to an adjustment to the then remaining California Medicaid Management Information System settlement liability of $7 million as a result of the contract expiring in March 2020.

This benefit was excluded from adjusted EBITDA for segment reporting purposes due to its non-recurring nature.

Unallocated Costs

Unallocated Costs for the three months ended March 31, 2021 increased, compared to the prior year period.

This was primarily driven by increases in certain employee costs, partially offset by efficiency program progress.

Unallocated Costs for the three and six months ended June 30, 2021 increased, compared to the prior year period.

This was primarily driven by increases in certain employee costs, partially offset by progress in our efficiency initiatives.

Signings are defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts.

TCV is the estimated total contractual revenue related to signed contracts, excluding the impact of divested business as required.

TCV signings are defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts.

For the three months ended March 31, 2021, the Company signed $356 million of new business, representing a 10% increase compared to the prior year period.

Renewal TCV for the three months ended March 31, 2021 was $273 million, a decrease of 47% compared to the prior year period, primarily as a result of fewer renewal opportunities in the quarter.

The Company continues to build the size and strength of the newly centralized sales team.

CNDT Q1 2021 Form 10-Q

The amounts in the following table exclude divestitures.

TCV is the estimated total contractual revenue related to signed contracts.

TCV signings is defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts.

For the three months ended June 30, 2021, the Company signed $775 million of new business, representing a 24% increase compared to the prior year period.

This increase was driven by the signing of large contracts in the Transportation and Governments segments.

Renewal TCV for the three months ended June 30, 2021 was $825 million, a decrease of 10% compared to the prior year period, primarily as a result of fewer renewal opportunities in the quarter.

The Company continues to scale the centralized Sales and Account Management functions to deliver on our growth objectives.

For the six months ended June 30, 2021, the Company signed $1,131 million of new business, representing a 19% increase compared to the prior year period.

Renewal TCV for the six months ended June 30, 2021 was $1,098 million, a decrease of 23% compared to the prior year period, primarily as a result of fewer renewal opportunities in the quarter.

Three Months Ended

March 31, 2021 vs.

June 30, 2021 vs.

($ in millions) 2021 2020 $ Change % Change

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$ 152 $ 76 $ 76 100 %

Six Months Ended

June 30, 2021 vs.

($ in millions) 2021 2020 $ Change % Change

New business TCV $ 1,131 $ 947 $ 184 19 %

Renewals TCV 1,098 1,427 (329) (23) %

Total Signings $ 2,229 $ 2,374 $ (145) (6) %

Annual recurring revenue signings (1)

$ 210 $ 162 $ 48 30 %

Non-recurring revenue signings (2)

$ 279 $ 120 $ 159 133 %

(1) Recurring revenue signings are for new business contracts longer than one year.

(2) Non-recurring revenue signings are for contracts shorter than one year.

The total new business pipeline at the end of both March 31, 2021 and 2020 was $21.0 billion.

CNDT Q2 2021 Form 10-Q

The total new business pipeline at the end of June 30, 2021 and 2020 was $21.0 billion and $22.0 billion, respectively.

Total new business pipeline is defined as total new business TCV pipeline of deals in all sell stages.

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Capital Resources and Liquidity

As of March 31, 2021, and December 31, 2020, total cash and cash equivalents were $389 million and $450 million, respectively.

As of June 30, 2021 and December 31, 2020, total cash and cash equivalents were $397 million and $450 million, respectively.

The Company also has a $750 million Revolver for its various cash needs, of which $7 million was used for letters of credit.

The net amount available to be drawn upon under our Revolver as of March 31, 2021, was $743 million.

As of March 31, 2021, our total debt outstanding was $1.5 billion of which $89 million was due within one year.

Refer to Note 6 – Debt and Note 17 - Subsequent Event in the Condensed Consolidated Financial Statements for additional debt information.

The net amount available to be drawn upon under our Revolver as of June 30, 2021, was $743 million.

As of June 30, 2021, our total debt outstanding was $1.4 billion of which $89 million was due within one year.

Refer to Note 6 – Debt in the Condensed Consolidated Financial Statements for additional debt information.

In order to provide financial flexibility and finance certain investments and projects, we may continue to utilize external financing arrangements.

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The following table summarizes our cash flows, as reported in our Condensed Consolidated Statement of Cash Flows in the accompanying Condensed Consolidated Financial Statements:

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2021 2020 Better (Worse)

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Net cash provided by (used in) financing activities $ (87) $ 114 (201)

Historically the Company generates the majority of its cash from operating activities in the latter part of the year.

Operating activities

The net improvement in cash used in operating activities of $190 million, compared to the prior year period, was primarily related to the absence of the 2020 Texas Litigation payment of $118 million, improved collections of Accounts receivable of $44 million, other working capital timing of $36 million primarily related to Accounts payable and other current liabilities and annual management incentive payments, partially offset by lower income tax net refunds of $9 million.

CNDT Q1 2021 Form 10-Q

The net improvement in cash used in operating activities of $221 million, compared to the prior year period, was primarily related to the absence of the 2020 Texas Litigation payment of $118 million, improved collections of Accounts receivable and other working capital timing of $126 million, partly offset by higher cash used on product software and deferred contract costs for new business activities of $9 million and higher income tax net payments of $14 million.

Investing activities

The increase in cash used in investing activities of $6 million was primarily due to increased spending for capital expenditures.

The increase in cash used in investing activities of $11 million was primarily due to increased spending related to modernizing our infrastructure and productivity tools.

Financing activities

The decrease in cash from financing activities was primarily related to the $150 million draw down from our $750 million revolving credit facility in March 2020, which was repaid in December 2020.

The increase in cash used in financing activities was primarily related to the absence of the March 2020 $150 million draw down from our $750 million revolving credit facility, which was subsequently repaid in December 2020.

Additionally, we repaid the previously outstanding $34 million of Senior Notes on May 1, 2021 and made higher scheduled payments on Term loans of $18 million in 2021.

CNDT Q2 2021 Form 10-Q

Market Risk Management

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis