What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-01 compared with 2022-08-02 · 93 added, 81 removed, 231 unchanged (43% of the section changed)

10 unchanged sentences

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 58,000 associates as of June 30, 2022, servicing customers from service centers in 24 countries.

Headquartered in Florham Park, New Jersey, we have a team of approximately 62,000 associates as of September 30, 2022, servicing customers from service centers in 24 countries.

Our reportable segments correspond to how we organize and manage the business and are aligned to the solutions we offer our clients.

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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 and second quarter of 2022, 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.

Beginning in the first quarter of 2020 and through the third quarter of 2022, 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 six months ended June 30, 2022, our strategy is showing results, including the following:

During the nine months ended September 30, 2022, our strategy is showing results, including the following:

CNDT Q3 2022 Form 10-Q

• Net income of $136 million for the six months ended June 30, 2022 as compared to net income of $1 million for the same period in the prior year.

• New Business annual contract value (ACV) of $180 million increased for the fourth consecutive quarter, with strong contributions of $124 million from the Commercial segment.

• Net Annual Recurring Revenue (ARR) activity metric of $104 million, as compared to $106 million in the same period in the prior year, $102 million in the first quarter of 2022 and positive for the seventh consecutive quarter.

• Annual recurring revenue signings of $207 million for the six months ended June 30, 2022 is substantially unchanged compared to the prior year.

• Renewal TCV of $1,238 million for the six months ended June 30, 2022 is 13% higher than the same period in the prior year.

• Net income of $151 million for the nine months ended September 30, 2022 as compared to net income of $12 million for the same period in the prior year.

• Two of our three segments posting revenue growth for the quarter, including the first quarter of year-over-year revenue growth for the Commercial segment since the spin-off of Conduent as a separate public company.

• New Business annual contract value (ACV) of $191 million in the third quarter increased for the fifth consecutive quarter, with proportional contributions from all segments.

• Annual recurring revenue signings of $296 million for the nine months ended September 30, 2022 is substantially unchanged compared to the prior year.

• Renewal TCV of $1,896 million for the nine months ended September 30, 2022 is 38% higher than the same period in the prior year.

Macroeconomic and Geopolitical Uncertainty

Given the nature of our business and our global operations, the effects of global macroeconomic and geopolitical uncertainty, including COVID-19 pandemic related factors (as discussed in more detail below) could have a materially adverse effect on our business, results of operations and financial condition.

COVID-19 Pandemic

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• Increased sanitation and social distancing for on-site essential associates.

At the end of the second quarter of 2022, we continued to have most of our workforce in either a work-from-home or hybrid environment.

At the end of the third quarter of 2022, we continued to have most of our workforce in either a work-from-home or hybrid environment.

We will continue to assess when to bring associates back to our offices, as appropriate, based on the specific COVID-19 conditions in certain geographies, as well as business requirements.

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Three Months Ended

June 30, 2022 vs.

September 30, 2022 vs.

($ in millions) 2022 2021 $ Change % Change

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Net Income (Loss) $ 15 $ 11 $ 4

CNDT Q2 2022 Form 10-Q

Six Months Ended

June 30, 2022 vs.

Nine Months Ended

September 30, 2022 vs.

($ in millions) 2022 2021 $ Change % Change

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Selling, general and administrative (excluding depreciation and amortization) 332 382 (50) (13) %

Research and development (excluding depreciation and amortization) 3 1 2 n/m

Research and development (excluding depreciation and amortization) 5 3 2 67 %

Depreciation and amortization 168 265 (97) (37) %

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Net Income (Loss) $ 151 $ 12 $ 139

Revenue for the three and six months ended June 30, 2022 decreased, compared to the prior year periods, primarily due to lower federal stimulus revenue in the Government Services segment, lost business from prior years, as well as negative foreign exchange translation impact, particularly the Euro and British pound, partially offset by new business ramp across all segments.

CNDT Q3 2022 Form 10-Q

Revenue for the three and nine months ended September 30, 2022 decreased, compared to the prior year periods, primarily due to lower federal stimulus revenue in the Government Services segment, lost business from prior years, as well as negative foreign exchange translation impact, particularly the Euro and British pound, partially offset by recognition of a $15 million revenue benefit associated with a minimum annual volume commitment contract with a large client, higher interest rates positively impacting our Benefit Wallet business and new business ramp across all segments.

Cost of Services (excluding depreciation and amortization)

Cost of services for the three and six months ended June 30, 2022 decreased, compared to the prior year periods, driven by lost business from prior years, increased operational efficiency and favorable foreign exchange translation impact, slightly offset by an increase in hiring activity to support new deal ramp in the Commercial segment.

Cost of services for the three and nine months ended September 30, 2022 decreased, compared to the prior year periods, driven by lost business from prior years, increased operational efficiency and favorable foreign exchange translation impact.

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

SG&A for the three months ended June 30, 2022 decreased, compared to the prior year period, primarily driven by lower variable employee costs.

SG&A for the six months ended June 30, 2022 decreased, compared to the prior year period, primarily driven by the recovery of $14 million of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter, as well as lower variable employee costs.

SG&A for the three months ended September 30, 2022 decreased, compared to the prior year period, driven by progress in our efficiency initiatives, most notably within shared technology infrastructure, as well as lower variable employee costs.

SG&A for the nine months ended September 30, 2022 decreased, compared to the prior year period, primarily driven by the recovery of $14 million of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter, progress in our efficiency initiatives, most notably within shared technology infrastructure, as well as lower variable employee costs.

Depreciation and Amortization

Depreciation and amortization for the three and six months ended June 30, 2022 decreased, compared to the prior year periods, primarily due to portions of certain customer relationship intangible assets from acquisitions in years past being fully amortized.

CNDT Q2 2022 Form 10-Q

Depreciation and amortization for the three and nine months ended September 30, 2022 decreased, compared to the prior year periods, primarily due to portions of certain customer relationship intangible assets from acquisitions in years past being fully amortized.

Restructuring and Related Costs

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2022 2021 2022 2021

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Refer to Note 7 – Restructuring Programs and Related Costs to the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.

CNDT Q3 2022 Form 10-Q

Interest Expense

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On October 15, 2021, we completed the refinancing of our previously outstanding debt, which extended the maturity profile of our debt.

The increase in Interest expense for the three and six months ended June 30, 2022, compared to the prior year periods, was driven by higher interest rates on our refinanced credit facilities, partially offset by a lower total outstanding debt balance.

The increase in Interest expense for the three and nine months ended September 30, 2022, compared to the prior year periods, was driven by higher interest rates on our refinanced credit facilities, partially offset by a lower total outstanding debt balance.

(Gain) Loss on Divestitures and Transaction Costs

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Litigation Settlements (Recoveries), Net

Litigation settlements (recoveries), net for the six months ended June 30, 2022 primarily consist of $24 million of insurance recoveries recorded in the first quarter of 2022 related to the previously disclosed State of Texas matter.

Litigation settlements (recoveries), net for the nine months ended September 30, 2022 primarily consist of $24 million of insurance recoveries recorded in the first quarter of 2022 related to the previously disclosed State of Texas matter.

Refer to Note 13 – Contingencies and Litigation to the Condensed Consolidated Financial Statements for additional information.

The effective tax rate for the three months ended June 30, 2022 was 99.6%, compared to 38.2% for the three months ended June 30, 2021.

The June 30, 2022 rate was higher than the U.S.

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

The effective tax rate for the three months ended June 30, 2021 was higher than the U.S.

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

CNDT Q2 2022 Form 10-Q

Excluding the impact of discrete tax adjustments, amortization of intangible assets, litigation reserves and restructuring costs, the normalized effective tax rate for the three months ended June 30, 2022 was 46.7%.

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

The normalized effective tax rate for the second quarter of 2022 was higher than the second quarter of 2021 rate due to the geographic mix of income, increase in permanent tax differences and lower adjusted pre-tax income.

The effective tax rate for the six months ended June 30, 2022 was 37.0%, compared to 94.3% for the six months ended June 30, 2021.

The June 30, 2022 rate was higher than the U.S.

The effective tax rate for the three months ended September 30, 2022 was 33.8%, compared to 38.3% for the three months ended September 30, 2021.

The September 30, 2022 rate was higher than the U.S.

statutory rate of 21%, primarily due to charges related to return to provision adjustments for 2021 and charges of valuation allowances partially offset by changes in the geographic mix of income.

The effective tax rate for the three months ended September 30, 2021 was higher than the U.S.

statutory rate of 21%, primarily due to the geographic mix of income, permanent book-tax differences and valuation allowances, partially offset by a benefit attributable to the return to provision adjustment for 2020.

Excluding the impact of discrete tax adjustments, amortization of intangible assets and restructuring costs, the normalized effective tax rate for the three months ended September 30, 2022 was 27.5%.

The normalized effective tax rate for the three months ended September 30, 2021 was 30.4%, predominantly due to excluding the impact of discrete tax adjustments, amortization of intangible assets and restructuring costs.

The normalized effective tax rate for the third quarter of 2022 was lower than the third quarter of 2021 rate primarily due to the geographic mix of income.

The effective tax rate for the nine months ended September 30, 2022 was 36.7%, compared to 58.5% for the nine months ended September 30, 2021.

The September 30, 2022 rate was higher than the U.S.

statutory rate of 21%, primarily due to the geographic mix of income, state and local taxes and permanently non-deductible amounts related to the Midas divestiture transaction, partially offset by the tax benefit of valuation allowances released due to the gain from this divestiture and tax credits.

The effective tax rate for the six months ended June 30, 2021 was higher than the U.S.

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

Excluding the impact of the Midas divestiture, the litigation insurance recoveries, amortization of intangible assets, restructuring costs and certain discrete tax items, the normalized effective tax rate for the six months ended June 30, 2022 was 35.2%.

The normalized effective tax rate for the six months ended June 30, 2021 was 24.7%, predominantly due to excluding the impact of discrete tax adjustments, charges for amortization of intangible assets and restructuring costs.

The normalized effective tax rate for the year-to-date June 30, 2022 was higher than the year-to-date June 30, 2021 rate predominantly due to the geographic mix of income, increase in permanent tax differences and lower adjusted pre-tax income.

The effective tax rate for the nine months ended September 30, 2021 was higher than the U.S.

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

The normalized effective tax rate for the nine months ended September 30, 2021 was 26.8%, predominantly due to excluding the impact of discrete tax adjustments, charges for amortization of intangible assets and restructuring costs.

The normalized effective tax rate for the year-to-date September 30, 2022 was higher than the year-to-date September 30, 2021 rate predominantly due to the geographic mix of income, increase in permanent tax differences and lower adjusted pre-tax income.

We believe it is reasonably possible that unrecognized tax benefits of approximately $3 million will reverse within 12 months due to settlements.

A payment of $8 million was made in June 2022 decreasing unrecognized tax benefits.

In recent years, government agencies and global organizations have had an increased focus on the issues of taxation of multinational corporations.

In March 2022, the Organization for Economic Co-operation and Development (OECD) released the Commentary to the Pillar 2 Model Rules as agreed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

The Pillar 2 Model Rules, released on December 20, 2021, define the scope and key mechanics for the Pillar 2 system of global minimum tax rules.

We are monitoring the development and assessing any potential impact.

We do not anticipate a material impact based on current guidance.

CNDT Q3 2022 Form 10-Q

On August 16, 2022, the Inflation Reduction Act (IRA) was enacted.

The law imposes two new taxes:

(i) 15% corporate alternative minimum tax (CAMT) on adjusted financial statement income of corporations with profits over $1 billion, which is effective for tax years beginning after December 31, 2022, and (ii) a 1% surcharge on corporate stock buybacks of public US companies, which applies to repurchases of stock after December 31, 2022.

We do not expect any material impacts from this tax law change.

Operations Review of Segment Revenue and Profit

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Divestitures includes our Midas business which was sold in the first quarter of 2022.

CNDT Q2 2022 Form 10-Q

Unallocated Costs includes IT infrastructure costs that are shared by multiple reportable segments, enterprise application costs and certain corporate overhead expenses not directly attributable or allocated to our reportable segments.

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See Part I, Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

CNDT Q3 2022 Form 10-Q

Results of financial performance by segment were:

Three Months Ended

September 30,

(in millions) Commercial Government Services Transportation Divestitures Unallocated Costs Total

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Adjusted EBITDA Margin 8.1 % 38.4 % 12.2 % 47.1 % — % 12.5 %

CNDT Q2 2022 Form 10-Q

Six Months Ended

Nine Months Ended

September 30,

(in millions) Commercial Government Services Transportation Divestitures Unallocated Costs Total

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Adjusted EBITDA Margin 8.9 % 34.2 % 14.0 % 51.4 % — % 12.1 %

CNDT Q3 2022 Form 10-Q

(in millions) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Segment Profit (Loss) Reconciliation to Pre-tax Income (Loss) 2022 2021 2022 2021

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(Gain) loss on divestitures and transaction costs 1 — (159) 1

Litigation costs (3) 1 (31) 2

Litigation settlements (recoveries) — — (31) 2

Loss on extinguishment of debt — — — 2

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Commercial Segment

Commercial revenue for the three and six months ended June 30, 2022 was lower compared to the prior year periods, primarily due to the merger of two of our clients resulting in lower volumes as well as unfavorable exchange rate movement and lost business from prior years, partially offset by strong new business ramp.

Commercial revenue for the three months ended September 30, 2022 was higher compared to the prior year period primarily due to recognition of the revenue benefit associated with a minimum annual volume commitment contract with a large client, as well as higher interest rates positively impacting our Benefit Wallet business, partially offset by unfavorable exchange rate movement.

Commercial revenue for the nine months ended September 30, 2022 was lower compared to the prior year periods, primarily due to the merger of two of our clients resulting in lower volumes as well as unfavorable exchange rate movement and lost business from prior years, partially offset by recognition of the revenue benefit associated with a minimum annual volume commitment contract with a large client, higher interest rates positively impacting our Benefit Wallet business and strong new business ramp.

Segment Profit and Adjusted EBITDA

Increases in the Commercial segment profit and adjusted EBITDA margin for the three and six months ended June 30, 2022, compared to the prior year periods, were mainly driven by increased operational efficiency and expense reductions resulting from progress in our efficiency initiatives and higher interest rates positively impacting our Benefit Wallet business, more than offsetting the dynamics of a challenging labor market in both North America and Europe.

CNDT Q2 2022 Form 10-Q

Increases in the Commercial segment profit and adjusted EBITDA margin for the three and nine months ended September 30, 2022, compared to the prior year periods, were mainly driven by increased operational efficiency and expense reductions resulting from progress in our efficiency initiatives, higher interest rates positively impacting our Benefit Wallet business and recognition of the revenue benefit associated with a minimum annual volume commitment contract with a large client more than offsetting the dynamics of a challenging labor market in both North America and Europe.

Government Services Segment

Government Services revenue for the three and six months ended June 30, 2022 decreased, compared to the prior year periods.

Government Services revenue for the three and nine months ended September 30, 2022 decreased, compared to the prior year periods.

This decrease was primarily driven by significantly lower Federal stimulus revenue, while increases in volume, price and new business offset lost business from prior years.

Segment Profit and Adjusted EBITDA

Decreases in the Government Services segment profit and adjusted EBITDA margin for the three and six months ended June 30, 2022, compared to the prior year periods, were mainly driven by lower Federal stimulus revenue.

Decreases in the Government Services segment profit and adjusted EBITDA margin for the three and nine months ended September 30, 2022, compared to the prior year periods, were mainly driven by lower Federal stimulus revenue.

CNDT Q3 2022 Form 10-Q

Transportation Segment

Transportation revenue for the three months ended June 30, 2022 decreased, compared to the prior year period, primarily driven by unfavorable exchange rate movement, particularly the Euro.

Transportation revenue for the six months ended June 30, 2022 decreased, compared to the prior year period, primarily driven by the impact of lower volume and project timing in our International transit business, unfavorable exchange rate movement, particularly the Euro, a one-time revenue benefit in the prior year period and lost business from prior years, partially offset by new business.

Transportation revenue for the three months ended September 30, 2022 increased slightly, compared to the prior year period, primarily driven by increased volumes offsetting the unfavorable exchange rate movement, particularly the Euro.

Transportation revenue for the nine months ended September 30, 2022 decreased, compared to the prior year period, primarily driven by unfavorable exchange rate movement, particularly the Euro, and a one-time revenue benefit in the prior year period.

Segment Profit and Adjusted EBITDA

Transportation segment profit and adjusted EBITDA margin for the three months ended June 30, 2022 was substantially unchanged.

Transportation segment profit and adjusted EBITDA margin decreased for the six months ended June 30, 2022, compared to the prior year period, mainly driven by the impact of lost business, project timing in the International business, and a one-time item benefiting the prior year period, partially offset by new business.

Transportation segment profit and adjusted EBITDA margin for the three months ended September 30, 2022 increased primarily due to progress in our efficiency initiatives.

Transportation segment profit and adjusted EBITDA margin decreased for the nine months ended September 30, 2022, compared to the prior year period, mainly driven by the impact of lost business, a one-time item benefiting the prior year period and the impact of unfavorable exchange rate movement, partially offset by new business.

Revenue, Segment Profit (Loss) and Adjusted EBITDA

The decline in revenue, segment profit and Adjusted EBITDA for the three and six months ended June 30, 2022 was primarily due to the sale of the Midas Suite of products.

The current year includes slightly more than one month of activity versus the prior year, which includes a full six months of activity.

The decline in revenue, segment profit and Adjusted EBITDA for the three and nine months ended September 30, 2022 was primarily due to the sale of the Midas Suite of products.

The current year includes slightly more than one month of activity versus the prior year, which includes a full nine months of activity.

Unallocated Costs

Unallocated Costs for the three and six months ended June 30, 2022 decreased, compared to the prior year periods, primarily due to a portion of the recovery of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter that settled in February 2019 that was allocated to SG&A, progress with our efficiency initiatives and lower variable employee costs.

Unallocated Costs for the three months ended September 30, 2022 were substantially unchanged compared to the prior year period.

Unallocated Costs for the nine months ended September 30, 2022 decreased, compared to the prior year period, primarily due to a portion of the recovery of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter that settled in February 2019 that was allocated to SG&A, progress with our efficiency initiatives and lower variable employee costs.

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

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New business ACV is calculated as TCV divided by the contract term, in months, multiplied by 12 for an annual measure.

For the three months ended September 30, 2022, the Company signed $191 million of new business ACV, an increase for the fifth consecutive quarter, with proportional contributions from all segments.

For the nine months ended September 30, 2022, the Company signed $538 million of new business ACV, down 13% from the prior year, primarily due to $158 million of federal stimulus signings and volume from a large client we no longer include in the sales metrics.

Signing information for the three and nine months ended September 30, 2022 and 2021 is as follows:

CNDT Q3 2022 Form 10-Q

For the three months ended June 30, 2022, the Company signed $180 million of new business ACV, an increase for the fourth consecutive quarter, with strong contributions from the Commercial segment.

While down 30% compared to the corresponding prior year period, the prior year benefited from $85 million of stimulus signings and volume from a large client we no longer include in the sales metrics.

For the six months ended June 30, 2022, the Company signed $347 million of new business ACV, down 26% from the prior year, primarily due to $147 million of stimulus signings and volume from a large client we no longer include in the sales metrics.

Signing information for the three and six months ended June 30, 2022 and 2021 is as follows:

Three Months Ended

June 30, 2022 vs.

September 30, 2022 vs.

($ in millions) 2022 (3)

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$ 107 $ 68 $ 39 57 %

Six Months Ended

June 30, 2022 vs.

Nine Months Ended

September 30, 2022 vs.

($ in millions) 2022 (3)

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(3) Adjusted to remove Midas new business signings.

CNDT Q2 2022 Form 10-Q

The total new business pipeline at the end of June 30, 2022 and 2021 was $22.0 billion and $21.0 billion, respectively.

The total new business pipeline at the end of September 30, 2022 and 2021 was $24.0 billion and $21.0 billion, respectively.

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

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(in millions) Net ARR Activity metric

September 30, 2022 $ 70

June 30, 2022 104

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September 30, 2021 132

June 30, 2021 106

CNDT Q3 2022 Form 10-Q

Capital Resources and Liquidity

As of June 30, 2022 and December 31, 2021, total cash and cash equivalents were $519 million and $415 million, respectively.

As of September 30, 2022 and December 31, 2021, total cash and cash equivalents were $577 million and $415 million, respectively.

We also have a $550 million revolving line of credit for our various cash needs, of which $2 million was used for letters of credit.

In the first quarter of 2022, we repaid $100 million that was outstanding as of December 31, 2021 under our revolving line of credit.

The net amount available to be drawn upon under our revolving line of credit as of June 30, 2022, was $546 million.

As of June 30, 2022, our total debt outstanding was $1.3 billion of which $30 million was due within one year.

The net amount available to be drawn upon under our revolving line of credit as of September 30, 2022, was $548 million.

As of September 30, 2022, our total debt outstanding was $1,272 million of which $33 million was due within one year.

Refer to Note 7 – Debt in the Condensed Consolidated Financial Statements for additional debt information.

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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:

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2022 2021 Better (Worse)

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Operating activities

The net decrease in cash generated from operating activities of $108 million, compared to the prior year period, was primarily related to lower Adjusted EBITDA, higher cash taxes mainly related to the Midas gain and insurance recoveries, higher cash interest and working capital timing, primarily related to Accounts receivable collections timing.

The net decrease in cash generated from operating activities of $65 million, compared to the prior year period, was primarily related to lower Adjusted EBITDA, higher cash tax payments, which are mainly related to the Midas gain, and higher cash interest paid.

These items were partially offset by the $38 million of insurance recoveries related to the previously disclosed State of Texas matter.

CNDT Q2 2022 Form 10-Q

Investing activities

The increase in cash provided by investing activities of $311 million was primarily due to the proceeds from the divestiture of the Midas business, partially offset by increased spending related to modernizing our infrastructure and productivity tools.

The increase in cash provided by investing activities of $313 million was primarily due to the proceeds from the divestiture of the Midas business, partially offset by slightly increased spending related to modernizing our infrastructure and productivity tools.

Financing activities

The increase in cash used in financing activities was primarily related to the repayment of the $100 million borrowed under the revolver partially offset by lower Term loan and Senior note principal payments.

CNDT Q3 2022 Form 10-Q

Sales of Accounts Receivable

We enter into factoring agreements in the normal course of business as part of our cash and liquidity management, to sell certain accounts receivable without recourse to third-party financial institutions.

During the third quarter of 2022, we replaced our previously outstanding factoring agreements with an agreement with a new third-party financial institution with substantially equivalent terms.

The transactions under this agreement are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over, and risk related to, the receivables to the buyer.

Cash proceeds from this arrangement are included in cash flow from operating activities in the Consolidated Statements of Cash Flows.

The net impact from the sales of accounts receivable on net cash provided by (used in) operating activities for the nine months ended September 30, 2022 and 2021 was $35 million and $(21) million, respectively.

Material Cash Requirements from Contractual Obligations

The Company believes its balances of cash and cash equivalents, which totaled $519 million as of June 30, 2022, along with cash generated by operations and amounts available for borrowing under its 2021 Revolving Credit Facility, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

At June 30, 2022, the Company’s material cash requirements include debt, leases and estimated purchase commitments.

The Company believes its balances of cash and cash equivalents, which totaled $577 million as of September 30, 2022, along with cash generated by operations and amounts available for borrowing under its 2021 Revolving Credit Facility, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

At September 30, 2022, the Company’s material cash requirements include debt, leases and estimated purchase commitments.

See Part II, Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on our material cash requirements.

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GAAP) requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Condensed Consolidated Financial Statements and notes thereto.

There have been no significant changes during the six months ended June 30, 2022 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no significant changes during the nine months ended September 30, 2022 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Changes

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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