What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-03 · 130 added, 53 removed, 175 unchanged (51% of the section changed)

9 unchanged sentences

As a global technology-led business process solutions company, we deliver digital business solutions and services spanning the commercial, government and transportation spectrum – creating exceptional outcomes for our clients and the millions of people who count on them.

We leverage cloud computing, artificial intelligence, machine learning, automation and advanced analytics to deliver mission-critical services.

Through a dedicated global team of associates, process expertise, and advanced technologies, our solutions and services digitally transform our clients’ operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs.

We add momentum to our clients’ missions in many ways including delivering 43 percent of nutrition assistance payments in the U.S., enabling 1.3 billion customer service interactions annually, empowering millions of employees through HR services every year and processing nearly 12 million tolling transactions every day.

Headquartered in Florham Park, New Jersey, we have a team of approximately 59,000 associates as of March 31, 2023, servicing customers from service centers in 25 countries.

Headquartered in Florham Park, New Jersey, we have a team of approximately 57,000 associates as of June 30, 2023, servicing customers from service centers in 25 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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This renewed portfolio focus will result in a more nimble and faster growing Conduent with modest levels of net leverage, enhanced valuation, and significant excess capital to be deployed over time.

During the second quarter of 2023 we achieved the following:

• Signed our largest TCV deal in the history of Conduent within our Transportation segment, growing our international presence in Australia;

• Positioned our digital payments offering, in partnership with BNY Mellon, to leverage the newly released FedNow SM capability and provide enhanced real-time payment coverage to our clients;

• Had significantly less client attrition in the quarter, progressing towards the 3% to 5% range articulated in the investor briefing, and drove our Net ARR activity metric higher;

• Continued to make progress in our portfolio rationalization strategy;

• On May 16, 2023, the Board of Directors authorized a share repurchase program, granting approval for us to repurchase up to $75 million of our common stock over the next three years.

See additional information included in Part II, Item 2.

Macroeconomic and Geopolitical Uncertainty

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Three Months Ended

March 31, 2023 vs.

June 30, 2023 vs.

(in millions) 2023 2022 $ Change % Change

7 unchanged sentences

Interest expense 27 18 9 50 %

(Gain) loss on divestitures and transaction costs, net 2 (163) 165 n/m

(Gain) loss on divestitures and transaction costs, net 3 3 — — %

Litigation settlements (recoveries), net (1) (3) 2 (67) %

4 unchanged sentences

Net Income (Loss) $ (7) $ — $ (7)

Revenue for the three months ended March 31, 2023 decreased, compared to the prior year period, primarily due to non-repeating federal stimulus revenue, lost business in our Government and Commercial segments, extended completion timelines to meet client requirements in the Transit solutions division of our Transportation segment and the impact of an out of period adjustment in our Government segment further described below, partially offset by higher interest rates positively impacting our Benefit Wallet business and new business ramp.

In the first quarter of 2023, the Company identified an error and recorded an out-of-period adjustment to correct the recognition of revenue on a Government segment contract that originated in 2020 and impacted all quarterly periods through December 31, 2022.

This adjustment resulted in a reduction to revenue and income (loss) before income taxes of $7 million.

CNDT Q2 2023 Form 10-Q

Six Months Ended

June 30, 2023 vs.

(in millions) 2023 2022 $ Change % Change

Revenue $ 1,837 $ 1,895 $ (58) (3) %

Operating Costs and Expenses

Cost of services (excluding depreciation and amortization) 1,424 1,482 (58) (4) %

Cost of services for the three months ended March 31, 2023 decreased, compared to the prior year periods, primarily driven by the impact of reduced revenue and a $17 million reversal of liabilities due to the settlement of the Cognizant matter described in Note 12 – Contingencies and Litigation to the Condensed Consolidated Financial Statements.

Selling, general and administrative (excluding depreciation and amortization) 229 215 14 7 %

Research and development (excluding depreciation and amortization) 3 3 — — %

Depreciation and amortization 118 114 4 4 %

Restructuring and related costs 42 20 22 110 %

Interest expense 54 37 17 46 %

(Gain) loss on divestitures and transaction costs, net 5 (160) 165 n/m

Litigation settlements (recoveries), net (22) (31) 9 (29) %

Other (income) expenses, net (1) — (1) n/m

Total Operating Costs and Expenses 1,852 1,680 172

Income (Loss) Before Income Taxes (15) 215 (230)

Income tax expense (benefit) (2) 79 (81)

Net Income (Loss) $ (13) $ 136 $ (149)

Revenue for the three months ended June 30, 2023 decreased moderately, compared to the prior year period, primarily due to lost business from prior periods, lower volumes in our Commercial segment and prior year non-repeating federal stimulus revenue in our Government segment, partially offset by higher interest rates positively impacting our Benefit Wallet business, new business ramp and higher volumes in our Government segment.

Revenue for the six months ended June 30, 2023 decreased, compared to the prior year period, primarily due to prior year non-repeating federal stimulus revenue, lost business in our Government and Commercial segments, extended completion timelines to meet client requirements in the Transit solutions division of our Transportation segment and the impact of an out of period adjustment in our Government segment in the first quarter of 2023, partially offset by higher interest rates positively impacting our Benefit Wallet business and new business ramp.

Cost of Services (excluding depreciation and amortization)

Cost of services for the three months ended June 30, 2023 decreased, compared to the prior year period, due to favorable revenue mix.

Cost of services for the six months ended June 30, 2023 decreased, compared to the prior year period, primarily driven by the impact of reduced revenue and a $17 million reversal of liabilities due to the settlement of the Cognizant matter described in Note 12 – Contingencies and Litigation to the Condensed Consolidated Financial Statements.

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

SG&A for the three months ended March 31, 2023 increased, compared to the prior year period, driven by the absence of 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 that occurred in 2022.

SG&A for the three months ended June 30, 2023 increased, compared to the prior year period, driven by higher variable employee costs and expense credits in the prior year, partially offset by cost efficiencies.

SG&A for the six months ended June 30, 2023 increased, compared to the prior year period, driven by the absence of 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 that occurred in 2022.

CNDT Q2 2023 Form 10-Q

Depreciation and Amortization

Depreciation and amortization for the three months ended March 31, 2023 was unchanged from the prior year.

This reflects new depreciation from recent capital expenditures being offset by run-off of depreciation on older assets.

Depreciation and amortization for the three and six months ended June 30, 2023 increased compared to the prior year periods, driven by completed capital investments being placed into service.

Restructuring and Related Costs

We engage in a series of restructuring programs related to optimizing our employee base, reducing our real estate footprint, exiting certain activities, outsourcing certain internal functions, consolidating our data centers and engaging in other actions designed to reduce our cost structure and improve productivity.

In addition, during the three months ended March 31, 2023, the Company also incurred $4 million of professional support costs associated with bringing certain technology functions in-house.

During the three and six months ended June 30, 2023, the Company incurred $2 million and $6 million, respectively, of professional support costs associated with bringing certain technology functions in-house.

The following are the components of our Restructuring and related costs:

Three Months Ended

June 30, Six Months Ended

(in millions) 2023 2022 2023 2022

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

The severance and related costs included costs related to the closure of one of our Commercial segment operations in Europe.

Severance and related costs for the six months ended June 30, 2023 include costs related to the closure of one of our Commercial segment operations in Europe.

Refer to Note 6 – 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 increase in Interest expense for the three months ended March 31, 2023, compared to the prior year periods, was driven by higher interest rates on our credit facilities, partially offset by a lower total outstanding debt balance.

The increase in Interest expense for the three and six months ended June 30, 2023, compared to the prior year periods, was driven by higher interest rates on our credit facilities, partially offset by a lower total outstanding debt balance.

(Gain) Loss on Divestitures and Transaction Costs

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Additionally, professional fees and other costs related to certain consummated and non-consummated transactions considered by the Company are included in this financial statement line item for both years.

CNDT Q1 2023 Form 10-Q

Litigation Settlements (Recoveries), Net

Litigation settlements (recoveries), net for the three months ended March 31, 2023 primarily consist of a $26 million reversal of reserves due to the settlement of the Cognizant matter.

Litigation settlements (recoveries), net for the three months ended March 31, 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 six months ended June 30, 2023 primarily consist of a $26 million reversal of reserves due to the settlement of the Cognizant matter.

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.

Refer to Note 12 – Contingencies and Litigation to the Condensed Consolidated Financial Statements for additional information.

The effective tax rate for the three months ended March 31, 2023 was 20.8%, compared to 35.2% for the three months ended March 31, 2022.

The March 31, 2023 rate approximates the U.S.

statutory rate of 21%.

The effective tax rate for the three months ended March 31, 2022 was higher than the U.S.

CNDT Q2 2023 Form 10-Q

The effective tax rate for the three months ended June 30, 2023 was (3.3)%, compared to 99.6% for the three months ended June 30, 2022.

The June 30, 2023 rate was lower than the U.S.

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

The effective tax rate for the three months ended June 30, 2022 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.

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, 2023 was 42.2%.

The normalized effective tax rate for the three months ended June 30, 2022 was 46.7%, predominantly due to 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, 2023 was lower than the three months ended June 30, 2022, primarily due to the geographic mix of income.

The effective tax rate for the six months ended June 30, 2023 was 9.2%, compared to 37.0% for the six months ended June 30, 2022.

The June 30, 2023 rate was lower than the U.S.

statutory rate of 21%, primarily due to the geographic mix of income, valuation allowances, and state and local taxes on pre-tax losses.

The effective tax rate for the six months ended June 30, 2022 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 divestiture transaction, partially offset by the tax benefit of valuation allowances released due to the gain from divestiture and tax credits.

Excluding the impact of restructuring costs, litigation reserve releases, valuation allowance and certain discrete tax items, the normalized effective tax rate for the three months ended March 31, 2023 was 35.0%.

The normalized effective tax rate for the three months ended March 31, 2022 was 29.6%, predominantly due to 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 three months ended March 31, 2023 was higher than the three months ended March 31, 2022 due to the geographic mix of income.

Excluding the impact of the amortization of intangible assets, restructuring costs and litigation reserve releases, the normalized effective tax rate for the six months ended June 30, 2023 was 40.5%.

The normalized effective tax rate for the six months ended June 30, 2022 was 35.2%, predominantly due to 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, 2023 was lower than the six months ended June 30, 2022 due to the geographic mix of income and lower adjusted pre-tax income.

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

At both the European Union and Organization for Economic Co-operation and Development level, significant legislative developments are anticipated regarding global tax initiatives in the second half of this year.

The Company is monitoring such developments and assessing any potential impact and disclosure requirement.

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

Operations Review of Segment Revenue and Profit

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Adjusted EBITDA Margin 9.8 % 28.0 % 13.4 % — % — % 9.4 %

Six Months Ended

(in millions) Commercial Government Transportation Divestitures Unallocated Costs Total

Revenue $ 979 $ 534 $ 324 $ — $ — $ 1,837

Segment profit (loss) $ 81 $ 140 $ (5) $ — $ (149) $ 67

Segment depreciation and amortization $ 56 $ 20 $ 21 $ — $ 19 $ 116

Adjusted EBITDA $ 137 $ 160 $ 16 $ — $ (130) $ 183

% of Total Revenue 53.3 % 29.1 % 17.6 % — % — % 100.0 %

Adjusted EBITDA Margin 14.0 % 30.0 % 4.9 % — % — % 10.0 %

Revenue $ 982 $ 565 $ 341 $ 7 $ — $ 1,895

Segment profit (loss) $ 50 $ 145 $ 24 $ 2 $ (131) $ 90

Segment depreciation and amortization $ 50 $ 16 $ 17 $ — $ 23 $ 106

Adjusted EBITDA $ 100 $ 161 $ 41 $ 2 $ (108) $ 196

% of Total Revenue 51.8 % 29.8 % 18.0 % 0.4 % — % 100.0 %

Adjusted EBITDA Margin 10.2 % 28.5 % 12.0 % 28.6 % — % 10.3 %

CNDT Q2 2023 Form 10-Q

(in millions) Three Months Ended

June 30, Six Months Ended

Segment Profit (Loss) Reconciliation to Pre-tax Income (Loss) 2023 2022 2023 2022

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Commercial Segment

Commercial revenue for the three months ended March 31, 2023 was lower compared to the prior year period primarily due to the final impact of the merger of two of our clients disclosed in the second quarter of 2022 resulting in lower volumes, partially offset by higher interest rates positively impacting our Benefit Wallet business.

Commercial revenue for the three and six months ended June 30, 2023 was substantially unchanged compared to the prior year periods, with higher interest rates positively impacting our Benefit Wallet business, lower volumes in certain industries of our client base, and new business substantially offsetting lost business.

Segment Profit and Adjusted EBITDA

Increases in the Commercial segment profit, adjusted EBITDA and adjusted EBITDA margin for the three months ended March 31, 2023, compared to the prior year period, were mainly driven by higher interest rates positively impacting our Benefit Wallet business.

CNDT Q1 2023 Form 10-Q

Increases in the Commercial segment profit, adjusted EBITDA and adjusted EBITDA margin for the three and six months ended June 30, 2023, compared to the prior year periods, were mainly driven by higher interest rates positively impacting our Benefit Wallet business and cost efficiency.

Government Segment

Government revenue for the three months ended March 31, 2023 decreased, compared to the prior year period.

This decrease was primarily driven by non-repeating federal stimulus revenue, lost business from prior years and the out of period adjustment mentioned above, partially offset by the ramping of new business in Government Healthcare solutions and higher volumes in Government services solutions.

Government revenue for the three months ended June 30, 2023 decreased compared to the prior year period primarily driven by lost business from prior years and non-repeating federal stimulus revenue in the second quarter of 2022, partially offset by the ramping of new business in Government Healthcare solutions, including the recognition of revenue that was previously constrained, and higher volumes in Government services solutions.

Government revenue for the six months ended June 30, 2023 decreased, compared to the prior year period, primarily driven by lost business from prior years, non-repeating federal stimulus revenue in the prior year and an out of period adjustment in Q1 2023, partially offset by the ramping of new business in Government Healthcare solutions, including the recognition of revenue that was previously constrained, and higher volumes in Government services solutions.

Segment Profit and Adjusted EBITDA

Government segment profit and adjusted EBITDA for the three months ended March 31, 2023 were substantially unchanged compared to the prior year period with the $17 million reversal of reserves due to the settlement of the Cognizant matter being offset by the out of period adjustment and lower revenue.

Adjusted EBITDA margin improved due to the Cognizant matter partially offset by the out of period adjustment and the non-repeating federal stimulus revenue.

Government segment profit, adjusted EBITDA and adjusted EBITDA margin for the three months ended June 30, 2023 were substantially unchanged compared to the prior year period with increased depreciation negatively impacting profit.

The high margin non-repeating federal stimulus revenue in the second quarter of 2022 and lost business from prior years was offset by the fall through of the revenue recognized due to the recognition of revenue that was previously constrained, margin on higher volumes and cost efficiency.

Government segment profit and adjusted EBITDA for the six months ended June 30, 2023 were substantially unchanged compared to the prior year period with increased depreciation negatively impacting profit.

The $17 million reversal of reserves due to the settlement of the Cognizant matter, margin on higher volumes, fall through of the recognition of revenue that was previously constrained and cost efficiency, were offset by lost business, the high margin non-repeating federal stimulus revenue in the prior year and the out of period adjustment in the first quarter of 2023.

Adjusted EBITDA margin improved due to the substantially unchanged adjusted EBITDA resulting from items mentioned above on lower revenue.

CNDT Q2 2023 Form 10-Q

Transportation Segment

Transportation revenue for the three months ended March 31, 2023 decreased compared to the prior year period, primarily driven by extended completion timelines to meet client requirements in our Transit solutions service offering, which affected the recognition timeframe for revenue.

Transportation revenue for the three months ended June 30, 2023 decreased compared to the prior year period, primarily driven by the completion of smaller projects and lower revenue recognition from larger implementations in our Transit solutions service offering and lost business from prior years, partially offset by new business.

Transportation revenue for the six months ended June 30, 2023 decreased compared to the prior year period, primarily driven by extended completion timelines to meet client requirements in our Transit solutions service offering, which affected the recognition timeframe for revenue, the completion of smaller projects in our Transit solutions service offering and lost business from prior years, partially offset by new business.

Segment Profit and Adjusted EBITDA

Transportation segment profit, adjusted EBITDA and adjusted EBITDA margin for the three months ended March 31, 2023 decreased primarily due to extended completion timelines to meet client requirements in our Transit solutions service offering.

Transportation segment profit, adjusted EBITDA and adjusted EBITDA margin for the three months ended June 30, 2023 decreased primarily due to the completion of smaller projects and lower revenue recognition from larger implementations in our Transit solutions service offering and lost business from prior years.

Transportation segment profit, adjusted EBITDA and adjusted EBITDA margin for the six months ended June 30, 2023 decreased primarily due to extended completion timelines on our larger implementations to meet client requirements, which affected the recognition timeframe for revenue and the completion of smaller projects in our Transit solutions service offering.

Revenue, Segment Profit (Loss) and Adjusted EBITDA

The decline in revenue, segment profit and Adjusted EBITDA for the three months ended March 31, 2023 was due to the sale of the Midas Suite of products.

The decline in revenue, segment profit and Adjusted EBITDA for the three and six months ended June 30, 2023 was due to the sale of the Midas Suite of products.

The prior year included activity through the date of disposition whereas there was no activity in the current year.

Unallocated Costs

Unallocated Costs for the three months ended March 31, 2023 increased compared to the prior year period primarily due to the prior year reflecting the recovery of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter, partially offset by progress with our efficiency initiatives.

Unallocated Costs for the three months ended June 30, 2023 increased compared to the prior year period primarily due to technology supplier credits in the prior year, partially offset by progress with our efficiency initiatives.

Unallocated Costs for the six months ended June 30, 2023 increased compared to the prior year period primarily due to the prior year reflecting the recovery of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter and technology supplier credits in the prior year, partially offset by progress with our efficiency initiatives.

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 March 31, 2023, the Company signed $125 million of new business ACV.

For the three and six months ended June 30, 2023, the Company signed $208 million and $333 million of new business ACV, respectively.

Included in these amounts is ACV related to the May 2023 award of a significant contract in the Transportation segment.

CNDT Q2 2023 Form 10-Q

Signing information for the three months ended March 31, 2023 and 2022 is as follows:

Signing information for the three and six months ended June 30, 2023 and 2022 is as follows:

Three Months Ended

March 31, 2023 vs.

June 30, 2023 vs.

($ in millions) 2023 (3)

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$ 354 $ 82 $ 272 332 %

Six Months Ended

June 30, 2023 vs.

($ in millions) 2023 (3)

$ Change % Change

New business ACV $ 333 $ 347 $ (14) (4) %

New business TCV $ 1,605 $ 860 $ 745 87 %

Renewals TCV 1,058 1,238 (180) (15) %

Total Signings $ 2,663 $ 2,098 $ 565 27 %

Annual recurring revenue signings (1)

$ 172 $ 208 $ (36) (17) %

Non-recurring revenue signings (2)

$ 421 $ 144 $ 277 192 %

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

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(3) Adjusted to remove Midas new business signings.

The total new business pipeline at the end of March 31, 2023 and 2022 was $23.2 billion and $22.0 billion, respectively.

The total new business pipeline at the end of June 30, 2023 and 2022 was $20.7 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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(in millions) Net ARR Activity metric

June 30, 2023 $ 137

March 31, 2023 108

2 unchanged sentences

June 30, 2022 104

March 31, 2022 102

CNDT Q2 2023 Form 10-Q

Capital Resources and Liquidity

As of March 31, 2023 and December 31, 2022, total cash and cash equivalents were $526 million and $582 million, respectively.

As of June 30, 2023 and December 31, 2022, total cash and cash equivalents were $500 million and $582 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.

The net amount available to be drawn upon under our revolving line of credit as of March 31, 2023, was $548 million.

As of March 31, 2023, our total debt outstanding was $1,277 million of which $38 million was due within one year.

The net amount available to be drawn upon under our revolving line of credit as of June 30, 2023, was $548 million.

As of June 30, 2023, our total debt outstanding was $1,336 million of which $41 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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However, we believe that our cash on hand, projected cash flow from operations, sound balance sheet and our revolving line of credit will continue to provide sufficient financial resources to meet our expected business obligations for at least the next twelve months.

CNDT Q1 2023 Form 10-Q

Cash Flow Analysis

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) 2023 2022 Better (Worse)

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Operating activities

The net decrease in cash generated from operating activities of $23 million, compared to the prior year period, was primarily related to the absence of the $38 million of insurance recoveries related to the previously disclosed State of Texas matter.

The net increase in cash used in operating activities of $17 million, compared to the prior year period, was primarily related to the absence of the $38 million of insurance recoveries related to the State of Texas matter and higher cash interest payments, partially offset by improved working capital performance and lower cash income taxes.

Investing activities

Investing cash flow decreased by $295 million primarily due to the proceeds from the divestiture of the Midas business in the prior year, partially offset by decreased capital spending in the current year.

Investing cash flow decreased by $284 million mainly due to the proceeds from the divestiture of the Midas business in the prior year.

This was partially offset by decreased capital spending in the current year.

Financing activities

The decrease in cash used in financing activities was primarily related to the repayment of the $100 million borrowed under the revolver in the prior year partially offset by higher taxes paid for settlement of stock-based compensation.

The decrease in cash used in financing activities was mainly driven by the repayment of the $100 million borrowed under the revolver in the prior year.

This was partially offset by higher taxes paid for settlement of stock-based compensation.

Sales of Accounts Receivable

We have entered into a factoring agreement in the normal course of business as part of our cash and liquidity management, to sell certain accounts receivable without recourse to a third-party financial institution.

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.

The transactions under this agreement are treated as sales and are accounted for as reductions 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 three months ended March 31, 2023 and 2022 was $(27) million and $(8) million, respectively.

The net impact from the sales of accounts receivable on net cash provided by (used in) operating activities for the six months ended June 30, 2023 and 2022 was $(24) million and $(14) million, respectively.

Material Cash Requirements from Contractual Obligations

The Company believes its balances of cash and cash equivalents, which totaled $526 million as of March 31, 2023, 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 March 31, 2023, 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 $500 million as of June 30, 2023, 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.

CNDT Q2 2023 Form 10-Q

At June 30, 2023, 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, 2022 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 three months ended March 31, 2023 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

CNDT Q1 2023 Form 10-Q

There have been no significant changes during the six months ended June 30, 2023 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

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