What changed in this filing

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Item 1. Financial Statements

2023-11-01 compared with 2023-08-02 · 155 added, 83 removed, 509 unchanged (32% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data) 2023 2022 2023 2022

7 unchanged sentences

Interest expense 28 22 82 59

Goodwill impairment 287 — 287 —

(Gain) loss on divestitures and transaction costs, net 3 1 8 ( 159 )

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2023 2022 2023 2022

11 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share data in thousands) June 30, 2023 December 31, 2022

(in millions, except share data in thousands) September 30, 2023 December 31, 2022

Cash and cash equivalents $ 451 $ 582

28 unchanged sentences

Accumulated other comprehensive loss ( 463 ) ( 466 )

Total Conduent Inc.

Equity 617 917

Noncontrolling Interest 3 —

Total Equity 620 917

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2023 2022

5 unchanged sentences

Deferred income taxes ( 23 ) 43

Goodwill impairment 287 —

Amortization of debt financing costs 3 3

19 unchanged sentences

Dividends paid on preferred stock ( 7 ) ( 7 )

Contribution from noncontrolling interest 3 —

Net cash provided by (used in) financing activities ( 48 ) ( 132 )

3 unchanged sentences

Cash, Cash Equivalents and Restricted Cash at End of period (1)

(1) Includes $ 5 million and $ 11 million of restricted cash as of June 30, 2023 and 2022, respectively, that were included in Other current assets on their respective Condensed Consolidated Balance Sheets.

(1) Includes $ 4 million and $ 10 million of restricted cash as of September 30, 2023 and 2022, respectively, that were included in Other current assets on their respective Condensed Consolidated Balance Sheets.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

(in millions) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

Shareholders' Equity

Balance at March 31, 2023 $ 2 $ — $ 3,926 $ ( 2,551 ) $ ( 448 ) $ 929

Non-controlling Interest Shareholders' Equity

Balance at June 30, 2023 $ 2 $ ( 1 ) $ 3,931 $ ( 2,561 ) $ ( 444 ) $ — $ 927

Dividends - preferred stock, $ 20 /share

2 unchanged sentences

Treasury stock purchases — ( 6 ) — — — — ( 6 )

Contribution from noncontrolling interest — — — — — 3 3

Comprehensive Income (Loss):

2 unchanged sentences

Total Comprehensive Income (Loss), Net — — — ( 289 ) ( 19 ) — ( 308 )

Balance at June 30, 2023 $ 2 $ ( 1 ) $ 3,931 $ ( 2,561 ) $ ( 444 ) $ 927

Three Months Ended June 30, 2022

Balance at September 30, 2023 $ 2 $ ( 7 ) $ 3,937 $ ( 2,852 ) $ ( 463 ) $ 3 $ 620

Three Months Ended September 30, 2022

(in millions) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

Shareholders'

Balance at March 31, 2022 $ 2 $ — $ 3,912 $ ( 2,217 ) $ ( 435 ) $ 1,262

Non-controlling Interest Shareholders'

Balance at June 30, 2022 $ 2 $ — $ 3,918 $ ( 2,220 ) $ ( 475 ) $ — $ 1,225

Dividends - preferred stock, $ 20 /share

2 unchanged sentences

Treasury stock purchases — — — — — — —

Contribution from noncontrolling interest — — — — — — —

Comprehensive Income (Loss):

2 unchanged sentences

Total Comprehensive Income (Loss), Net — — — 15 ( 38 ) — ( 23 )

Balance at June 30, 2022 $ 2 $ — $ 3,918 $ ( 2,220 ) $ ( 475 ) $ 1,225

Six Months Ended June 30, 2023

Balance at September 30, 2022 $ 2 $ — $ 3,924 $ ( 2,207 ) $ ( 513 ) $ — $ 1,206

Nine Months Ended September 30, 2023

(in millions) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

Shareholders'

Non-controlling Interest Shareholders'

Balance at December 31, 2022 $ 2 $ — $ 3,924 $ ( 2,543 ) $ ( 466 ) $ — $ 917

3 unchanged sentences

Treasury stock purchases — ( 7 ) — — — — ( 7 )

Contribution from noncontrolling interest — — — — — 3 3

Comprehensive Income (Loss):

2 unchanged sentences

Total Comprehensive Income (Loss), Net — — — ( 302 ) 3 — ( 299 )

Balance at June 30, 2023 $ 2 $ ( 1 ) $ 3,931 $ ( 2,561 ) $ ( 444 ) $ 927

Six Months Ended June 30, 2022

Balance at September 30, 2023 $ 2 $ ( 7 ) $ 3,937 $ ( 2,852 ) $ ( 463 ) $ 3 $ 620

Nine Months Ended September 30, 2022

(in millions) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

Shareholders'

Non-controlling Interest Shareholders'

Balance at December 31, 2021 $ 2 $ — $ 3,910 $ ( 2,351 ) $ ( 429 ) $ — $ 1,132

3 unchanged sentences

Treasury stock purchases — — — — — — —

Contribution from noncontrolling interest — — — — — — —

Comprehensive Income (Loss):

2 unchanged sentences

Total Comprehensive Income (Loss), Net — — — 151 ( 84 ) — 67

Balance at June 30, 2022 $ 2 $ — $ 3,918 $ ( 2,220 ) $ ( 475 ) $ 1,225

Balance at September 30, 2022 $ 2 $ — $ 3,924 $ ( 2,207 ) $ ( 513 ) $ — $ 1,206

(1) AOCL - Accumulated other comprehensive loss.

11 unchanged sentences

The unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.

GAAP) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC).

GAAP") on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the "SEC").

Accordingly, they do not include all of the information and notes required by U.S.

10 unchanged sentences

The Company evaluated the impact of the out-of-period adjustment and concluded it was not material to any previously issued interim or annual consolidated financial statements and the adjustment is not expected to be material to the year ending December 31, 2023.

The Company has evaluated subsequent events through August 2, 2023, and no material subsequent events were identified.

The Company has evaluated subsequent events through November 1, 2023, and no material subsequent events were identified.

Use of Estimates

4 unchanged sentences

The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

As of June 30, 2023, the effects of global macroeconomic and geopolitical uncertainty on the Company's business, results of operations and financial condition continue to evolve.

As of September 30, 2023, the effects of global macroeconomic and geopolitical uncertainty on the Company's business, results of operations and financial condition continue to evolve.

As a result, many of the Company's estimates and assumptions continue to require increased judgment and carry a higher degree of variability and volatility.

1 unchanged sentence

CNDT Q3 2023 Form 10-Q

To the extent there are significant contract losses, potential disposition or sale of assets and rising interest rates in response to persistent inflation, there exists a risk that the fair value of the Commercial reporting unit could fall below its carrying value, resulting in a goodwill impairment charge.

Summary of Significant Accounting Policies

There have been no changes to the Company's Significant Accounting Policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 other than the addition of a policy related to a share repurchase program as described below.

There have been no changes to the Company's Significant Accounting Policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 other than the addition of policies related to a share repurchase program and Noncontrolling interest as described below.

Share Repurchase Program

6 unchanged sentences

The Company recognizes a liability for share repurchases which have not settled and for which cash has not been paid in Other current liabilities on the Company's Condensed Consolidated Balance Sheets.

Noncontrolling Interest

The Company's Consolidated Financial Statements include the historical basis of assets, liabilities, revenues and expenses of the individual businesses of the Company, including joint ventures over which the Company has a controlling financial interest.

Control is based on ownership interest.

The ownership interest held by an owner other than the Company in a less than wholly owned subsidiary is classified as a non-controlling interest.

Net income (loss) is allocated to the noncontrolling interest based on ownership interest.

In May 2023, the Company signed a new customer contract with the State of Victoria, Australia to provide the next generation of the state's public transport ticketing system.

As a result, the Company and Convergint Australia Pty Ltd (“Convergint”) entered into a shareholder agreement to form Conduent Victoria Ticketing System Pty Ltd (“Conduent Victoria”).

The Company holds an 80 % equity investment in Conduent Victoria, while the remaining 20 % is owned by Convergint.

For the three and nine months ended September 30, 2023, noncontrolling interest in Conduent Victoria was not material to the Company's Condensed Consolidated Statements of Income (Loss) or Condensed Consolidated Statements of Comprehensive Income (Loss) and, therefore, the Company did not present any separate disclosures for such noncontrolling interest in those statements.

Note 2 – Recent Accounting Pronouncements

4 unchanged sentences

The Company has considered all recent accounting standards issued, but not yet effective, and does not expect any to have a material impact on its Consolidated Financial Statements.

CNDT Q3 2023 Form 10-Q

Note 3 – Revenue

2 unchanged sentences

Refer to Note 4 – Segment Reporting for additional information on the Company's reportable segments.

CNDT Q2 2023 Form 10-Q

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2023 2022 2023 2022

26 unchanged sentences

Unearned income includes payments received in advance of performance under the contract, which are realized when the associated revenue is recognized under the contract.

CNDT Q3 2023 Form 10-Q

The following table provides information about the balances of the Company's contract assets, unearned income and receivables from contracts with customers:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Contract Assets (Unearned Income)

8 unchanged sentences

(2) Presented in Other long-term liabilities in the Condensed Consolidated Balance Sheets.

CNDT Q2 2023 Form 10-Q

Revenues of $ 13 million and $ 42 million were recognized during the three and six months ended June 30, 2023, respectively, related to the Company's unearned income at December 31, 2022.

Revenues of $ 18 million and $ 53 million were recognized during the three and six months ended June 30, 2022, respectively, related to the Company's unearned income at December 31, 2021.

The Company had no material asset impairment charges related to contract assets for the three and six months ended June 30, 2023 or 2022.

Revenues of $ 8 million and $ 50 million were recognized during the three and nine months ended September 30, 2023, respectively, related to the Company's unearned income at December 31, 2022.

Revenues of $ 14 million and $ 67 million were recognized during the three and nine months ended September 30, 2022, respectively, related to the Company's unearned income at December 31, 2021.

The Company had no material asset impairment charges related to contract assets for the three and nine months ended September 30, 2023 or 2022.

Transaction Price Allocated to the Remaining Performance Obligations

Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially satisfied at June 30, 2023 was approximately $ 1.6 billion.

Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially satisfied at September 30, 2023 was approximately $ 1.6 billion.

The Company expects to recognize approximately 62 % of this revenue over the next two years and the remainder thereafter.

Note 4 – Segment Reporting

The Company's reportable segments correspond to how it organizes and manages the business, as defined by the Company's Chief Executive Officer, who is also the Company's Chief Operating Decision Maker (CODM).

The Company's segments involve the delivery of business process services and include service arrangements where it manages a customer's business activity or process.

10 unchanged sentences

Divestitures includes the Company's Midas Suite of patient safety, quality and advanced analytics solutions which it sold to a third party in the first quarter of 2022.

CNDT Q3 2023 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 the reportable segments.

1 unchanged sentence

Three Months Ended

September 30,

(in millions) Commercial Government Transportation Divestitures Unallocated Costs Total

3 unchanged sentences

Segment profit (loss) $ 44 $ 79 $ 16 $ — $ ( 87 ) $ 52

CNDT Q2 2023 Form 10-Q

Six Months Ended

Nine Months Ended

September 30,

(in millions) Commercial Government Transportation Divestitures Unallocated Costs Total

4 unchanged sentences

(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) 2023 2022 2023 2022

4 unchanged sentences

Interest expense 28 22 82 59

Goodwill impairment 287 — 287 —

(Gain) loss on divestitures and transaction costs, net 3 1 8 ( 159 )

3 unchanged sentences

Refer to Note 3 – Revenue for additional information on disaggregated revenues of the reportable segments.

Note 5 – Divestiture

Note 5 – Divestitures

Announced Transfer of BenefitWallet Portfolio

In September 2023, the Company entered into a Custodial Transfer and Asset Purchase Agreement to transfer its BenefitWallet health savings account and medical savings account portfolio (collectively, the "Portfolio") to HealthEquity, Inc.

("HealthEquity").

The transfer is expected to close in multiple tranches during the first half of 2024 and is subject to the satisfaction of certain customary closing conditions.

As of September 30, 2023, there were no asset or liability balances related to the Portfolio that would require disclosure as assets and liabilities held for sale on the Company's Condensed Consolidated Balance Sheet.

The Portfolio generated revenue of $ 32 million and $ 95 million in the three and nine months ended September 30, 2023, respectively and $ 20 million and $ 46 million in the three and nine months ended September 30, 2022, respectively.

CNDT Q3 2023 Form 10-Q

Completed Divestiture

On February 8, 2022, the Company completed the sale of its Midas business to Symplr Software, Inc.

2 unchanged sentences

The Company recorded approximately $ 62 million of income taxes in connection with the divestiture.

The revenue generated by this business was $ 7 million for the six months ended June 30, 2022.

There was no revenue generated by this business for the three months ended June 30, 2022.

The revenue generated by this business was $ 7 million for the nine months ended September 30, 2022.

Note 6 – Software, Net

Internal Use and Product Software

Internal use and Product software are included in Other long-term assets on the Company's Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, with their respective balances as follows:

(in millions) September 30, 2023 December 31, 2022

Internal use software, at cost $ 636 $ 621

Accumulated amortization and impairment ( 476 ) ( 432 )

Internal use software, net

Product software, at cost $ 221 $ 207

Accumulated amortization and impairment ( 126 ) ( 97 )

Product software, net

During the third quarter of 2023, the Company made a strategic decision to abandon an Internal use software project and a customer decided not to implement a Product software solution.

Consequently, the Company recorded an impairment charge of $ 19 million and $ 6 million in the third quarter of 2023, respectively, for the previously capitalized software costs associated with these projects.

The total impairment charge of $ 25 million related to these software projects are included in Depreciation and amortization line item on the Condensed Consolidated Statements of Income (Loss).

Note 7 – Goodwill

The following table presents the changes in the carrying amount of goodwill, by reportable segment:

(in millions) Commercial Government Transportation Total

Balance at December 31, 2022 $ 287 $ 611 $ 57 $ 955

Foreign currency translation — — — —

Impairment ( 287 ) — — ( 287 )

Balance at September 30, 2023 $ — $ 611 $ 57 $ 668

Gross goodwill $ 2,198 $ 1,365 $ 637 $ 4,200

Accumulated impairment ( 2,198 ) ( 754 ) ( 580 ) ( 3,532 )

Balance at September 30, 2023 $ — $ 611 $ 57 $ 668

Impairment Charge

In September 2023, the Company entered into a Custodial Transfer and Asset Purchase Agreement (the "Purchase Agreement") to transfer its BenefitWallet health savings account and medical savings account portfolio, which is reported within the Company’s Commercial segment.

Since the Purchase Agreement does not represent a disposition of a business, no goodwill was allocated to the Portfolio related to this transaction.

CNDT Q3 2023 Form 10-Q

Consequently, the Purchase Agreement was identified as a triggering event for the Commercial reporting unit that required the Company to evaluate goodwill for impairment.

This evaluation resulted in a full impairment of the Commercial reporting unit's goodwill, totaling $ 287 million.

The impairment charge was primarily driven by the Purchase Agreement, and was recognized during the quarter ended September 30, 2023.

The fair values of the goodwill impairment charge were estimated based on a determination of the implied fair value of goodwill, leveraging the results from the Income Approach and Market Approach, and are designated as level 3 of the fair value hierarchy.

In connection with the Commercial reporting unit impairment assessment, the Company first performed a recoverability assessment of long-lived assets and concluded that such assets were not impaired.

Note 8 – Restructuring Programs and Related Costs

1 unchanged sentence

The implementation of the Company's operational efficiency improvement initiatives has reduced the Company's real estate footprint across all geographies and segments resulting in lease right-of-use asset ("ROU") impairments and other related costs.

Also included in Restructuring and related costs are incremental, non-recurring costs related to the consolidation of the Company's data centers, which totaled $ 2 million and $ 3 million for the three months ended June 30, 2023 and 2022, respectively, and $ 4 million and $ 7 million for the six months ended June 30, 2023 and 2022, respectively.

Also included in Restructuring and related costs are incremental, non-recurring costs related to the consolidation of the Company's data centers, which totaled $ 3 million and $ 2 million for the three months ended September 30, 2023 and 2022, respectively, and $ 7 million and $ 9 million for the nine months ended September 30, 2023 and 2022, respectively.

Management continues to evaluate the Company's businesses and, in the future, there may be additional provisions for new plan initiatives and/or changes in previously recorded estimates as payments are made, or actions are completed.

2 unchanged sentences

Asset impairment costs related to the reduction of the Company's real estate footprint include impairment of operating lease ROU assets and associated leasehold improvements.

CNDT Q2 2023 Form 10-Q

A summary of the Company's restructuring program activity during the six months ended June 30, 2023 and 2022 is as follows:

A summary of the Company's restructuring program activity during the nine months ended September 30, 2023 and 2022 is as follows:

(in millions) Severance and Related Costs Termination and Other Costs Asset Impairments Total

4 unchanged sentences

Charges against reserve and currency ( 24 ) ( 17 ) ( 7 ) ( 48 )

Accrued Balance at June 30, 2023 $ 19 $ — $ — $ 19

Accrued Balance at September 30, 2023 $ 10 $ 1 $ — $ 11

(in millions) Severance and Related Costs Termination and Other Costs Asset Impairments Total

4 unchanged sentences

Charges against reserve and currency ( 7 ) ( 14 ) ( 6 ) ( 27 )

Accrued Balance at June 30, 2022 $ 1 $ 1 $ — $ 2

Accrued Balance at September 30, 2022 $ 1 $ — $ — $ 1

(1) Represents amounts recognized within the Consolidated Statements of Income (Loss) for the years shown.

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.

During the three and nine months ended September 30, 2023, the Company incurred $ 0 million and $ 6 million, respectively, of professional support costs associated with bringing certain technology functions in-house.

CNDT Q3 2023 Form 10-Q

The following table summarizes the total amount of costs incurred in connection with these restructuring programs by reportable and non-reportable segment:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2023 2022 2023 2022

8 unchanged sentences

Long-term debt was as follows:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Term loan A due 2026 $ 242 $ 252

7 unchanged sentences

Total Long-term Debt $ 1,266 $ 1,277

CNDT Q2 2023 Form 10-Q

As of June 30, 2023, the Company had no outstanding borrowings under its Revolver.

However, the Company utilized $ 2 million of the Revolver to issue letters of credit as of June 30, 2023.

The net Revolver available to be drawn upon as of June 30, 2023 was $ 548 million.

At June 30, 2023, the Company was in compliance with all debt covenants related to the borrowings in the table above.

As of September 30, 2023, the Company had no outstanding borrowings under its Revolver.

However, the Company utilized $ 2 million of the Revolver to issue letters of credit as of September 30, 2023.

The net Revolver available to be drawn upon as of September 30, 2023 was $ 548 million.

At September 30, 2023, the Company was in compliance with all debt covenants related to the borrowings in the table above.

Note 10 – Financial Instruments

1 unchanged sentence

As a part of the Company's foreign exchange risk management strategy, the Company uses derivative instruments, primarily forward contracts, to hedge the funding of foreign entities which have a non-dollar functional currency, thereby reducing volatility of earnings or protecting fair values of assets and liabilities.

At June 30, 2023 and December 31, 2022, the Company had outstanding forward exchange contracts with gross notional values of $ 119 million and $ 104 million, respectively.

At June 30, 2023, approximately 69 % of these contracts mature within three months, 12 % in three to six months, 15 % in six to twelve months and 4 % in greater than twelve months.

At September 30, 2023 and December 31, 2022, the Company had outstanding forward exchange contracts with gross notional values of $ 143 million and $ 104 million, respectively.

At September 30, 2023, approximately 68 % of these contracts mature within three months, 12 % in three to six months, 14 % in six to twelve months and 6 % in greater than twelve months.

Most of these foreign currency derivative contracts are designated as cash flow hedges and did not have a material impact on the Company's balance sheet, income statement or cash flows for the periods presented.

Refer to Note 11 – Fair Value of Financial Assets and Liabilities for additional information regarding the fair value of the Company's foreign exchange forward contracts.

CNDT Q3 2023 Form 10-Q

Note 11 – Fair Value of Financial Assets and Liabilities

5 unchanged sentences

Fair value is estimated using unobservable inputs that are significant to the fair value of the assets or liabilities.

CNDT Q2 2023 Form 10-Q

Summary of Financial Assets and Liabilities Accounted for at Fair Value on a Recurring Basis

1 unchanged sentence

The basis for the measurement at fair value in all cases was Level 2.

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Foreign exchange contract - forward $ 1 $ —

4 unchanged sentences

The estimated fair values of other financial assets and liabilities were as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in millions) Carrying

8 unchanged sentences

The Company, at its discretion, matches a portion of employee contributions.

The Company recognized an expense related to its defined contribution plans of $ 3 million and $ 3 million for the three months ended June 30, 2023 and 2022, respectively, and $ 6 million and $ 8 million for the six months ended June 30, 2023 and 2022, respectively.

The Company recognized an expense related to its defined contribution plans of $ 2 million and $ 4 million for the three months ended September 30, 2023 and 2022, respectively, and $ 8 million and $ 12 million for the nine months ended September 30, 2023 and 2022, respectively.

The balance sheet and income statement impacts of any remaining defined benefit plans are immaterial for all periods presented in these Condensed Consolidated Financial Statements.

CNDT Q3 2023 Form 10-Q

Note 13 – Accumulated Other Comprehensive Loss (AOCL)

3 unchanged sentences

Other comprehensive income (loss) 3 — — 3

Balance at June 30, 2023 $ ( 451 ) $ 2 $ 5 $ ( 444 )

Balance at September 30, 2023 $ ( 469 ) $ 1 $ 5 $ ( 463 )

(in millions) Currency Translation Adjustments Gains (Losses) on Cash Flow Hedges Defined Benefit Pension Items Total

1 unchanged sentence

Other comprehensive income (loss) ( 82 ) ( 2 ) — ( 84 )

Balance at June 30, 2022 $ ( 476 ) $ 1 $ — $ ( 475 )

Balance at September 30, 2022 $ ( 513 ) $ — $ — $ ( 513 )

(1) All amounts are net of tax.

Tax effects were immaterial.

CNDT Q2 2023 Form 10-Q

Note 14 – Contingencies and Litigation

10 unchanged sentences

Should developments in any of these matters cause a change in the Company's determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts in excess of any accrual for such matter or matters, this could have a material adverse effect on the Company's results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs.

The Company believes it has recorded adequate provisions for any such matters as of June 30, 2023.

The Company believes it has recorded adequate provisions for any such matters as of September 30, 2023.

Litigation is inherently unpredictable, and it is not possible to predict the ultimate outcome of these matters and such outcome in any such matters could be more than any amounts accrued and could be material to the Company's results of operations, cash flows or financial position in any reporting period.

4 unchanged sentences

However, while the ultimate liabilities resulting from such claims may be significant to results of operations in the period recognized, management does not anticipate they will have a material adverse effect on the Company's consolidated financial position or liquidity.

As of June 30, 2023, the Company had accrued its estimate of liability incurred under its indemnification arrangements and guarantees.

As of September 30, 2023, the Company had accrued its estimate of liability incurred under its indemnification arrangements and guarantees.

CNDT Q3 2023 Form 10-Q

Litigation Against the Company

9 unchanged sentences

The Court granted preliminary approval of the settlement terms and related documentation on January 27, 2023, and conducted the final Settlement Hearing on May 24, 2023, at which time the settlement received final approval as did plaintiffs' fee request.

The Court's preliminary order had previously noted that it "will likely be able to approve the proposed Settlement as fair, reasonable and adequate under Federal Rule of Civil Procedure 23(e)(2)." As a result, during the fourth quarter of 2022, the Company reversed the reserve pertaining to this matter.

The Company maintains insurance that covers the costs arising out of this litigation and resulting settlement having met the deductible and other terms and conditions thereof.

CNDT Q2 2023 Form 10-Q

The Court's preliminary order had previously noted that it "will likely be able to approve the proposed Settlement as fair, reasonable and adequate under Federal Rule of Civil Procedure 23(e)(2)." The Company maintains insurance that covers the costs arising out of this litigation and resulting settlement having met the deductible and other terms and conditions thereof.

As a result, during the fourth quarter of 2022, the Company reversed the reserve pertaining to this matter.

Skyview Capital LLC and Continuum Global Solutions, LLC v.

2 unchanged sentences

The lawsuit relates to the sale of a portion of Conduent Business Service, LLC's ("CBS") select standalone customer care call center business to plaintiffs, which sale closed in February 2019.

Under the terms of the sale agreement, CBS received approximately $ 23 million of notes from plaintiffs (Notes).

Under the terms of the sale agreement, CBS received approximately $ 23 million of notes from plaintiffs (the "Notes").

The lawsuit alleges various causes of action in connection with the acquisition, including:

6 unchanged sentences

Fact and expert discovery has been concluded and the parties filed summary judgment motions on July 24, 2023.

Conduent denies all of the plaintiffs' allegations, believes that it has strong defenses to all of plaintiffs’ claims and will continue to defend the litigation vigorously.

Briefings on the motions were completed as of September 29, 2023, and oral argument has been scheduled for December 5, 2023.

Conduent denies all the plaintiffs' allegations, believes that it has strong defenses to all of plaintiffs’ claims and will continue to defend the litigation vigorously.

The Company is not able to determine or predict the ultimate outcome of this proceeding or reasonably provide an estimate or range of estimate of the possible outcome or loss, if any, in excess of currently recorded reserves.

CNDT Q3 2023 Form 10-Q

Conduent Business Services, LLC v.

1 unchanged sentence

On April 12, 2017, CBS filed a lawsuit against Cognizant Business Services Corporation ("Cognizant") in the Supreme Court of New York County, New York.

The lawsuit relates to the Amended and Restated Master Outsourcing Services Agreement effective as of October 24, 2012, and the service delivery contracts and work orders thereunder, between CBS and Cognizant, as amended and supplemented (Contract).

The Contract contains certain minimum purchase obligations by CBS through the date of expiration.

The lawsuit alleges that Cognizant committed multiple breaches of the Contract, including Cognizant’s failure to properly perform its obligations as subcontractor to CBS under CBS’s contract with the New York Department of Health to provide Medicaid Management Information Systems.

In the lawsuit, CBS seeks damages in excess of $ 150 million.

The lawsuit alleged that Cognizant committed multiple breaches of the Contract, including Cognizant’s failure to properly perform its obligations as subcontractor to CBS under CBS’s contract with the New York Department of Health to provide Medicaid Management Information Systems.

In the lawsuit, CBS sought damages in excess of $ 150 million.

During the first quarter of 2018, CBS provided notice to Cognizant that it was terminating the Contract for cause and recorded in the same period certain charges associated with the termination.

CBS also alleges that it terminated the Contract for cause, because, among other things, Cognizant violated the Foreign Corrupt Practices Act.

In its answer, Cognizant asserted two counterclaims for breach of contract seeking recovery of damages in excess of $ 47 million, which includes amounts alleged not paid to Cognizant under the Contract and an alleged $ 25 million termination fee.

CBS also alleged that it terminated the Contract for cause, because, among other things, Cognizant violated the Foreign Corrupt Practices Act.

In its answer, Cognizant asserted two counterclaims for breach of contract seeking recovery of damages in excess of $ 47 million, which included amounts alleged not paid to Cognizant under the Contract and an alleged $ 25 million termination fee.

Cognizant's second amended counterclaim increased Cognizant's damages to $ 89 million.

7 unchanged sentences

As a result of the settlement agreements entered with the insurers, in the three months ended March 31, 2022, the Company received an aggregate sum of $ 38 million, of which $ 14 million was recognized as defense costs recovery in Selling, general and administrative and $ 24 million was recognized in Litigation settlements (recoveries), net.

CNDT Q2 2023 Form 10-Q

Since 2014, Conduent Education Services, LLC, formerly Xerox Education Services LLC ("CES"), has cooperated with several federal and state agencies regarding a variety of matters, including CES' self-disclosure to the U.S.

Department of Education (Department) and the Consumer Financial Protection Bureau (CFPB) that some third-party student loans under outsourcing arrangements for various financial institutions required adjustments.

With the exception of one remaining state attorney general inquiry, the Company has resolved all investigations by the CFPB, several state agencies, the Department and the U.S.

Department of Education (the "Department") and the Consumer Financial Protection Bureau (the "CFPB") that some third-party student loans under outsourcing arrangements for various financial institutions required adjustments.

Except for one remaining state attorney general inquiry, the Company has resolved all investigations by the CFPB, several state agencies, the Department and the U.S.

Department of Justice.

There have been three consecutive quarters with no material activity.

The Company is also nearing completion of the return of loan documentation to the pertinent lenders from the former business portfolio.

The Company cannot provide assurance that the CFPB, another regulator, a financial institution on behalf of which CES serviced third-party student loans, or another party will not ultimately commence a legal action against CES in which fines, penalties or other liabilities are sought from CES.

1 unchanged sentence

The Company could, in future periods, incur judgments or enter into settlements to resolve these potential matters for amounts in excess of current reserves and there could be a material adverse effect on the Company's results of operations, cash flows and financial position in the period in which such change in judgment or settlement occurs.

CNDT Q3 2023 Form 10-Q

Other Contingencies

Certain contracts, primarily in the Company's Government and Transportation segments, require the Company to provide a surety bond or a letter of credit as a guarantee of performance.

As of June 30, 2023, the Company had $ 639 million of outstanding surety bonds issued to secure its performance of contractual obligations with its clients and $ 97 million of outstanding letters of credit issued to secure the Company's performance of contractual obligations to its clients as well as other corporate obligations.

As of September 30, 2023, the Company had $ 637 million of outstanding surety bonds issued to secure its performance of contractual obligations with its clients and $ 184 million of outstanding letters of credit issued to secure the Company's performance of contractual obligations to its clients as well as other corporate obligations.

In general, the Company would only be liable for these guarantees in the event of default in the Company's performance of its obligations under each contract.

5 unchanged sentences

Each share of convertible preferred stock is convertible at any time, at the option of the holder, into 44.9438 shares of common stock for a total of 5,393,000 shares (reflecting an initial conversion price of approximately $ 22.25 per share of common stock), subject to customary anti-dilution adjustments.

CNDT Q2 2023 Form 10-Q

Note 16 – Earnings (Loss) per Share

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data in whole dollars and shares in thousands) 2023 2022 2023 2022

22 unchanged sentences

The components of Other assets and Other liabilities were as follows:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Other Current Assets

5 unchanged sentences

Other Current Liabilities

Accrued liabilities $ 178 $ 211

Accrued liabilities to vendors $ 167 $ 211

Litigation related accruals 15 37

20 unchanged sentences

Revenue and purchases from these entities were included in Revenue and Costs of services or Selling, general and administrative, respectively, on the Company's Condensed Consolidated Statements of Income (Loss).

Xerox Corporation ("Xerox") has historically been classified as a related party due to significant shares of both Xerox and the Company being held by entities controlled by one individual.

As of September 28, 2023, Xerox is no longer considered a related party due to the disposition of all Xerox stock by these entities and, therefore, the Company will not consider transactions with Xerox after that date to be transactions with related parties.

CNDT Q3 2023 Form 10-Q

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2023 2022 2023 2022

1 unchanged sentence

Purchases from related parties $ 6 $ 7 $ 18 $ 20

The Company's receivable and payable balances with related party entities were not material as of June 30, 2023 and December 31, 2022.

The Company's receivable and payable balances with related party entities were not material as of September 30, 2023 and December 31, 2022.

CNDT Q3 2023 Form 10-Q

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 1. Financial Statements