What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-07 · 99 added, 87 removed, 253 unchanged (42% of the section changed)

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We believe this focus on our portfolio rationalization strategy 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 2024 we have achieved the following:

• Completed the transfer of the BenefitWallet Portfolio, receiving the remaining $261 million of the $425 million total purchase price.

• Completed the sale of the Curbside Management and Public Safety Solutions businesses on April 30, 2024 with a purchase price of $230 million, $50 million of which is deferred to the second quarter of 2025.

• Announced the Casualty Claims Solutions divestiture on May 3, 2024, which is anticipated to close in the third quarter of 2024.

• Used the proceeds from the divested businesses to voluntarily prepay $300 million of the Term Loan B.

• Repurchased 43.3 million shares of common stock, including approximately 38 million shares of common stock purchased from the Icahn Parties pursuant to the Purchase Agreement.

The aggregate purchase price for the repurchase from the Icahn Parties was approximately $132 million.

During the third quarter of 2024 we achieved the following:

• Completed the sale of the Casualty Claims Solutions business on September 1, 2024 and received $224 million of cash consideration.

• Used the proceeds from the divested businesses to voluntarily prepay the entire remaining outstanding balance of $38 million of the Term Loan B and voluntarily prepaid $37 million of the Term Loan A.

• Repurchased 3.9 million shares of common stock during the quarter as part of the previously approved $75 million share repurchase program, which has now been completed.

• Appointed a new Group President of the Commercial segment and a new Head of Government Solutions.

Financial Information and Analysis of Results of Operations

Three Months Ended

June 30, 2024 vs.

September 30, 2024 vs.

(in millions) 2024 2023 $ Change % Change

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Interest expense 16 28 (12) (43) %

Goodwill impairment — 287 (287) n/m

(Gain) loss on divestitures and transaction costs, net (188) 3 (191) n/m

Litigation settlements (recoveries), net 1 (1) 2 (200) %

Litigation settlements (recoveries), net 1 — 1 n/m

Loss on extinguishment of debt 1 — 1 n/m

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

Other (income) expenses, net (2) (2) — — %

Total Operating Costs and Expenses 648 1,245 (597)

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CNDT Q3 2024 Form 10-Q

Six Months Ended

June 30, 2024 vs.

Nine Months Ended

September 30, 2024 vs.

(in millions) 2024 2023 $ Change % Change

7 unchanged sentences

Interest expense 62 82 (20) (24) %

Goodwill impairment — 287 (287) n/m

(Gain) loss on divestitures and transaction costs, net (696) 8 (704) n/m

1 unchanged sentence

Loss on extinguishment of debt 6 — 6 n/m

Other (income) expenses, net (2) (1) (1) n/m

Other (income) expenses, net (4) (3) (1) 33 %

Total Operating Costs and Expenses 1,970 3,097 (1,127)

2 unchanged sentences

Net Income (Loss) $ 438 $ (302) $ 740

Revenue for the three months ended June 30, 2024 decreased compared to the prior year period primarily due to the impact of the Benefit Wallet Transfer and the sale of The Curbside Management and Public Safety Solutions businesses.

Lost business in all three segments contributed to the decrease and was partially offset by new business ramp, particularly in our Transportation segment.

Revenue for the six months ended June 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the Benefit Wallet Transfer, the sale of the Curbside Management and Public Safety Solutions businesses and lost business in our Commercial and Government segments partially offset by new business ramp, including the State of Victoria contract, stronger volumes and improved operational execution in our Transportation segment.

Revenue for the three months ended September 30, 2024 decreased compared to the prior year period, approximately two thirds of which was due to the impact of the Benefit Wallet Transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses.

Excluding the divestitures impact, lost business and lower volumes contributed to the decrease and were partially offset by new business ramp, particularly in our Commercial and Transportation segments.

Revenue for the nine months ended September 30, 2024 decreased, compared to the prior year period, approximately three quarters of which was due to the impact of the Benefit Wallet Transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses.

Excluding the divestitures impact, lost business across our three segments was partially offset by new business ramp, including the State of Victoria contract.

Cost of Services (excluding depreciation and amortization)

Cost of services for the three months ended June 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the Benefit Wallet Transfer and the sale of the Curbside Management and Public Safety Solutions businesses.

Cost of services for the six months ended June 30, 2024 decreased slightly, compared to the prior year period, primarily driven by the impact of the Benefit Wallet Transfer and the sale of the Curbside Management and Public Safety Solutions businesses partially offset by the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period described in Note 16 – Contingencies and Litigation to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K.

Cost of services for the three months ended September 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the Benefit Wallet Transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses.

Excluding the divestitures impact, lower expenses on lower revenues and cost optimizations contributed to the decline.

Cost of services for the nine months ended September 30, 2024 decreased, compared to the prior year period, over half of which was primarily driven by the impact of the Benefit Wallet Transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses.

Excluding the divestitures impact, lower expenses on lower revenues and cost optimizations contributed to the decrease and were partially offset by the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period described in Note 16 – Contingencies and Litigation to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K.

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

SG&A for the three months ended June 30, 2024 decreased, compared to the prior year period, primarily due to the impact of the sale of the Curbside Management and Public Safety Solutions businesses.

SG&A for the six months ended June 30, 2024 increased, compared to the prior year periods, driven by costs to transition away from a technology vendor, partially offset by the impact of the sale of the Curbside Management and Public Safety Solutions businesses.

SG&A for the three months ended September 30, 2024 was unchanged, compared to the prior year period.

CNDT Q3 2024 Form 10-Q

SG&A for the nine months ended September 30, 2024 increased, compared to the prior year periods, primarily driven by costs to transition away from a technology vendor, partially offset by the impact of the sales of the Curbside Management and Public Safety Solutions business.

Depreciation and Amortization

Depreciation and amortization for the three and six months ended June 30, 2024 decreased, compared to the prior year periods due to the impact of the sale of the Curbside Management and Public Safety Solutions businesses and lower capital investments, partially offset by the current year write-off of an abandoned internal use software asset in our Commercial segment.

Depreciation and amortization for the three months ended September 30, 2024 decreased, compared to the prior year period due to the impact of the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses and a prior year write-off of an abandoned internal use software asset in our Commercial segment totaling $25 million, stemming from management's decision to abandon an internal use software product and a decision by a customer to not implement a product software solution.

Depreciation and amortization for the nine months ended September 30, 2024 decreased, compared to the prior year period due to the impact of the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses, the prior year write-off of an internal use software asset in our Commercial segment as noted above and lower capital investments.

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) 2024 2023 2024 2023

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Restructuring and related costs $ 4 $ 7 $ 21 $ 49

Restructuring and related costs for the six months ended June 30, 2024 decreased compared to the prior year period.

The decrease is primarily driven by severance and related costs due to the closure of one of our Commercial segment operations in Europe in the prior year period.

Restructuring and related costs for the nine months ended September 30, 2024 decreased compared to the prior year period.

The decrease is primarily driven by severance and related costs due to the closure of one of our Commercial segment operations in Europe in the prior year period as well as lower facilities downsizing costs in the current year.

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.

Interest expense for the three and six months ended June 30, 2024 decreased, compared to the prior year periods primarily due to voluntary prepayments of the Term Loan B with proceeds from divestitures.

Interest expense for the three and nine months ended September 30, 2024 decreased, compared to the prior year periods primarily due to voluntary prepayments of the entire Term Loan B balance outstanding and a portion of the Term Loan A balance with proceeds from divestitures.

(Gain) Loss on Divestitures and Transaction Costs

The completion of the BenefitWallet Transfer resulted in a gain of $261 million and $425 million for the three and six months ended June 30, 2024, respectively.

The completion of the sale of the Curbside Management and Public Safety businesses in the second quarter of 2024 resulted in a gain of $108 million for the three and six months ended June 30, 2024.

The completion of the BenefitWallet Transfer resulted in a gain of $425 million for the nine months ended September 30, 2024.

The completion of the sale of the Curbside Management and Public Safety businesses in the second quarter of 2024 resulted in a gain of $108 million for the nine months ended September 30, 2024.

The completion of the sale of the Casualty Claims Solutions business in the third quarter of 2024 resulted in a gain of $195 million for the three and nine months ended September 30, 2024.

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

Litigation Settlements (Recoveries), Net

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

The effective tax rate for the three months ended June 30, 2024 was 28.2%, compared to (3.3)% for the three months ended June 30, 2023.

The June 30, 2024 rate was higher than the U.S.

statutory rate of 21%, primarily due to state and local taxes, geographic mix of income, and other nondeductible permanent differences, partially offset by tax benefit of valuation allowances released due to the gain from divestitures and tax credits.

The effective tax rate for the three months ended June 30, 2023 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.

Litigation settlements (recoveries), net for the nine months ended September 30, 2023 primarily consisted of a $26 million reversal of reserves due to the settlement of the Cognizant matter.

CNDT Q3 2024 Form 10-Q

Excluding the impact of the gain from divestitures, restructuring costs, amortization of intangibles, valuation allowance release and other discrete tax adjustments, the normalized effective tax rate for the three months ended June 30, 2024 was 23.6%.

The normalized effective tax rate for the three months ended June 30, 2023 was 42.2%, primarily due to excluding the impact of restructuring costs, amortization of intangible assets and other discrete tax adjustments.

The normalized effective tax rate for the three months ended June 30, 2024 was lower than the rate for the three months ended June 30, 2023 due to the geographic mix of income.

The effective tax rate for the six months ended June 30, 2024 was 26.3%, compared to 9.2% for the six months ended June 30, 2023.

The June 30, 2024 rate was higher than the U.S.

statutory rate of 21%, primarily due to state and local taxes, geographic mix of income, and other nondeductible permanent differences, partially offset by tax benefit from valuation allowances and audit settlement reserve releases.

The effective tax rate for the six months ended June 30, 2023 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.

Excluding the impact of the gain from divestitures, restructuring costs, amortization of intangible assets, litigation reserve releases, audit settlement reserve release, valuation allowance and other discrete tax items, the normalized effective tax rate for the six months ended June 30, 2024 was 23.1%.

The normalized effective tax rate for the six months ended June 30, 2023 was 40.5%, primarily due to 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, 2024 was lower than the six months ended June 30, 2023 rate primarily due to the geographic mix of income.

The effective tax rate for the three months ended September 30, 2024 was 22.2%, compared to 7.8% for the three months ended September 30, 2023.

The September 30, 2024 rate was higher than the U.S.

statutory rate of 21%, primarily due to state and local taxes, geographic mix of income, and other discrete tax items, partially offset by a favorable permanent difference on gains from divestitures.

The effective tax rate for the three months ended September 30, 2023 was lower than the U.S.

statutory rate of 21% primarily due to permanently non-deductible amounts related to the book goodwill impairment and changes in the geographic mix of income.

Excluding the impact of the gains from divestitures, restructuring costs, amortization of intangibles, valuation allowance and other discrete tax adjustments, the normalized effective tax rate for the three months ended September 30, 2024 was 12.5%.

The normalized effective tax rate for the three months ended September 30, 2023 was (6.1)%, primarily due to excluding the impact of restructuring costs, amortization of intangible assets and goodwill impairment.

The normalized effective tax rate for the three months ended September 30, 2024 was higher than the rate for the three months ended September 30, 2023 primarily due to higher pre-tax loss and the geographic mix of income.

The effective tax rate for the nine months ended September 30, 2024 was 25.2%, compared to 7.8% for the nine months ended September 30, 2023.

The September 30, 2024 rate was higher than the U.S.

statutory rate of 21%, primarily due to state and local taxes and geographic mix of income, partially offset by favorable permanent difference on gain from divestitures, tax benefit from valuation allowances and audit settlement reserve releases.

The effective tax rate for the nine months ended September 30, 2023 was lower than the U.S.

statutory rate of 21%, primarily due to permanently non-deductible amounts related to the book goodwill impairment, the geographic mix of income and the charge for valuation allowances.

Excluding the impact of the gains from divestitures, restructuring costs, amortization of intangible assets, litigation reserve, audit settlement reserve release, valuation allowance and other discrete tax items, the normalized effective tax rate for the nine months ended September 30, 2024 was 19.7%.

The normalized effective tax rate for the nine months ended September 30, 2023 was (158.4)%, primarily due to excluding the impact of goodwill impairment, amortization of intangible assets, restructuring costs, litigation reserve releases and certain discrete tax items.

The September 30, 2023 rate was anomalous due to the small adjusted pre-tax loss and tax, which was a result of geographic mix of income and valuation allowances against losses in certain jurisdictions resulting in no tax benefit.

The normalized effective tax rate for the nine months ended September 30, 2024 was higher than the rate for the nine months ended September 30, 2023 primarily due to the geographic mix of income and higher pre-tax loss.

In 2021, the Organization for Economic Cooperation and Development released model rules for a 15% global minimum tax, known as Pillar Two.

This alternative minimum tax is treated as a period cost beginning in 2024 and does not have a material impact on the Company's financial results of operations for the current period.

The Company is continuing monitoring legislative developments, as well as additional guidance from countries that have enacted legislation.

We anticipate further legislative activity and administrative guidance in 2024.

The Company continues to monitor legislative developments, as well as additional guidance from countries that have enacted legislation.

Operations Review of Segment Revenue and Profit

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• Transportation.

Divestitures includes our BenefitWallet and Curbside Management and Public Safety Solutions businesses, which have been reclassified from our Commercial and Transportation segments, respectively.

Divestitures includes our BenefitWallet and Casualty Claims Solutions businesses (both of which were reclassified from our Commercial segment) and our Curbside Management and Public Safety Solutions businesses (which was reclassified from our Transportation segment).

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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Three Months Ended

September 30,

(in millions) Commercial Government Transportation Divestitures Unallocated Costs Total

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Adjusted EBITDA Margin 7.3 % 32.8 % 2.1 % 34.0 % — % 9.9 %

Six Months Ended

Nine Months Ended

September 30,

(in millions) Commercial Government Transportation Divestitures Unallocated Costs Total

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(in millions) Three Months Ended

June 30, Six Months Ended

Segment Profit (Loss) Reconciliation to Pre-tax Income (Loss) 2024 2023 2024 2023

September 30, Nine Months Ended

September 30,

Segment Profit (Loss) Reconciliation to Income (Loss) Before Income Taxes 2024 2023 2024 2023

Income (Loss) Before Income Taxes $ 159 $ (313) $ 586 $ (328)

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Interest expense 16 28 62 82

Goodwill impairment — 287 — 287

(Gain) loss on divestitures and transaction costs (188) 3 (696) 8

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Commercial Segment

Commercial revenue for the three and six months ended June 30, 2024 declined compared to the prior year periods, driven by lost business and lower volumes, partially offset by new business ramp.

Commercial revenue for the three months ended September 30, 2024 declined compared to the prior year period, driven by lower volumes, partially offset by new business ramp outpacing lost business.

Commercial revenue for the nine months ended September 30, 2024 declined compared to the prior year period, driven by lost business and lower volumes, partially offset by new business ramp.

Segment Profit and Adjusted EBITDA

Commercial segment profit and adjusted EBITDA for the three months ended June 30, 2024 decreased compared to the prior year period due to the impact of lost business and lower volumes, partially offset by new business ramp.

Commercial segment profit and adjusted EBITDA for the six months ended June 30, 2024 are substantially unchanged compared to the prior year period, with new business and cost efficiencies offsetting lost business and lower volumes.

Commercial segment profit also benefited slightly from the impact of lower depreciation.

Commercial segment profit and adjusted EBITDA for the three and nine months ended September 30, 2024 increased compared to the prior year periods primarily due to new business ramp and cost efficiencies, partially offset by the impact of lost business and lower volumes.

Commercial segment profit also benefited from the impact of lower depreciation due to the prior year write-off of internal use software and fully amortized assets.

Government Segment

Government revenue for the three and six months ended June 30, 2024 decreased, compared to the prior year periods, primarily driven by lost business and lower volumes, partially offset by the ramping of new business and a non-repeating item in the prior year period.

Government revenue for the three and nine months ended September 30, 2024 decreased, compared to the prior year periods, primarily driven by lost business in our Government Healthcare business and lower volumes in our Government Services business due to the change in funding mechanism for the Electronic Benefits Transfer ("EBT") programs.

Segment Profit and Adjusted EBITDA

Government segment profit and adjusted EBITDA for the three and six months ended June 30, 2024 decreased compared to the prior year periods primarily due to lost business, lower volumes and the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period and unfavorable revenue mix.

Transportation Segment

Transportation revenue for the three and six months ended June 30, 2024 increased compared to the prior year periods, primarily driven by the ramping of new business, including the State of Victoria contract, higher volumes, improved operational performance and less impact from extended implementation timelines compared to the prior year period, partially offset by the non-retained portion of a Tolling contract.

Government segment profit and adjusted EBITDA for the three months ended September 30, 2024 decreased compared to the prior year period primarily due to lost business and the lower volumes mentioned above.

Government segment profit and adjusted EBITDA for the nine months ended September 30, 2024 decreased compared to the prior year periods primarily due to the impact of lost business, lower volumes and the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year period and unfavorable revenue mix.

CNDT Q3 2024 Form 10-Q

Transportation Segment

Transportation revenue for the three months ended September 30, 2024 declined slightly compared to the prior year period, primarily due to lower small project activity.

New business ramp outpaced losses and a Tolling customer price decline.

In addition, operational performance improved with less impact from extended implementation timelines compared to the prior year period.

Transportation revenue for the nine months ended September 30, 2024 increased compared to the prior year period, primarily driven by the ramp of new business and improved operational performance with fewer delays from extended implementation timelines compared to the prior year period, partially offset by lost business, the price decline noted above and lower volumes.

Segment Profit and Adjusted EBITDA

Transportation segment profit and adjusted EBITDA for the three and six months ended June 30, 2024 decreased primarily due to the non-retained portion of a Tolling contract, partially offset by improved operational performance and less impact from extended implementation timelines compared to the prior year period.

Transportation segment profit and adjusted EBITDA for the three and nine months ended September 30, 2024 were slightly lower due to the non-retained portion of a Tolling contract, partially offset by improved operational performance and reduced impact from extended implementation timelines compared to the prior year period.

Revenue, Segment Profit and Adjusted EBITDA

The decrease in revenue, segment profit and Adjusted EBITDA for the three and six months ended June 30, 2024 was due to the BenefitWallet portfolio and the Curbside Management and Public Safety businesses being included in the full three and six months of the prior year period whereas their results were only included until the date of their transfer and sale, respectively, in 2024.

The decrease in revenue, segment profit and Adjusted EBITDA for the three and nine months ended September 30, 2024 was due to the BenefitWallet portfolio, the Curbside Management and Public Safety Solutions businesses and Casualty Claims Solutions businesses being included in the full three and nine months of the prior year period whereas their results were only included until the date of their transfer and sale, as applicable, in 2024.

Unallocated Costs

Unallocated Costs for the three and six months ended June 30, 2024 decreased compared to the prior year periods primarily due to lower technology costs and lower employee-related healthcare expenses.

Unallocated Costs for the three and nine months ended September 30, 2024 decreased compared to the prior year periods primarily due to lower technology costs.

We use metrics to evaluate our business, determine the allocation of our resources, make decisions regarding corporate strategies and evaluate forward-looking projections and trends affecting our business.

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New business Annual Contract Value ("ACV") is calculated as TCV divided by the contract term, in months, multiplied by 12 for an annual measure.

For the three and six months ended June 30, 2024, the Company signed $142 million and $239 million of new business ACV, respectively.

CNDT Q3 2024 Form 10-Q

Signing information for the three and six months ended June 30, 2024 and 2023 is as follows:

Signing information for the three and nine months ended September 30, 2024 and 2023 is as follows:

Three Months Ended

June 30, 2024 vs.

September 30, 2024 vs.

($ in millions) 2024 (3)

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$ 50 $ 96 $ (46) (48) %

Six Months Ended

June 30, 2024 vs.

Nine Months Ended

September 30, 2024 vs.

($ in millions) 2024 (3)

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

(3) Adjusted to remove Curbside Management and Public Safety new business signings.

The total new business pipeline at the end of June 30, 2024 and 2023 was $21.8 billion and $19.0 billion, respectively.

(3) Adjusted to remove Curbside Management and Public Safety Solutions businesses and Casualty Claims Solutions business new business signings.

The total new business pipeline at the end of September 30, 2024 and 2023 was $21.2 billion and $21.4 billion, respectively.

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

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Net ARR Activity

Net ARR Activity is a metric that is defined as Projected Annual Recurring Revenue for contracts signed in the prior 12 months, less the annualized impact of any client losses, contractual volume and price changes, and other known impacts for which the Company was notified in that same time period, which could positively or negatively impact results.

Net ARR Activity is a metric that is defined as Projected Annual Recurring Revenue ("ARR") for contracts signed in the prior 12 months, less the annualized impact of any client losses, contractual volume and price changes, and other known impacts for which the Company was notified in that same time period, which could positively or negatively impact results.

The metric annualizes the net impact to revenue.

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(in millions) Net ARR Activity metric

September 30, 2024 $ 46

June 30, 2024 (47)

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September 30, 2023 91

June 30, 2023 141

CNDT Q3 2024 Form 10-Q

Capital Resources and Liquidity

As of June 30, 2024 and December 31, 2023, total cash and cash equivalents were $300 million and $498 million, respectively.

As of September 30, 2024 and December 31, 2023, total cash and cash equivalents were $393 million and $498 million, respectively.

We also have a $550 million revolving line of credit for our various cash needs, of which $11 million was used for letters of credit.

The net amount available to be drawn upon under our revolving line of credit as of June 30, 2024, was $547 million.

As of June 30, 2024, our total principal debt outstanding was $833 million, of which $33 million was due within one year.

The net amount available to be drawn upon under our revolving line of credit as of September 30, 2024, was $539 million.

As of September 30, 2024, our total principal debt outstanding was $753 million, of which $26 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) 2024 2023 Better (Worse)

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Operating activities

The net increase in cash used in operating activities of $56 million, compared to the prior year period, was primarily due to lower adjusted EBITDA, slightly higher accounts receivable days sales outstanding and lower days payable outstanding.

These were partially offset by lower cash income tax and interest payments.

We expect cash tax payments to increase significantly in the second half of 2024 resulting from payments on gains related to our divestitures.

The net increase in cash used in operating activities of $58 million, compared to the prior year period, was primarily due to lower Adjusted EBITDA and a decrease in days payable outstanding, partially offset by lower interest payments.

We expect significant cash tax payments in the fourth quarter of 2024 due to gains on divestitures.

Investing activities

Investing cash flow increased by $595 million mainly due to $599 million of proceeds received from the transfer of the BenefitWallet Portfolio and the sale of the Curbside Management and Public Safety Solutions businesses.

Investing cash flow increased by $825 million mainly due to $823 million of proceeds received from the divestitures.

Financing activities

The increase in cash used in financing activities was primarily driven by the voluntary prepayment of $464 million of debt using the proceeds received for the transfer of the BenefitWallet Portfolio and the sale of the Curbside Management and Public Safety businesses as well as the repurchase of $168 million of treasury stock, including the $132 million purchased from the Icahn Parties.

CNDT Q2 2024 Form 10-Q

The increase in cash used in financing activities was due to the voluntary prepayment of $539 million of debt using the proceeds received from the recent divestitures, as well as the repurchase of $182 million of treasury stock, including the $132 million purchased from the Icahn Parties.

Sales of Accounts Receivable

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Cash proceeds from this arrangement are included in cash flow from operating activities in the Condensed 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 six months ended June 30, 2024 and 2023 was $(16) million and $(24) million, respectively.

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, 2024 and 2023 was $(4) million and $(14) million, respectively.

Material Cash Requirements from Contractual Obligations

The Company believes its balances of cash and cash equivalents, which totaled $300 million as of June 30, 2024, 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, 2024, the Company’s material cash requirements include debt, leases and estimated purchase commitments.

We believe our balances of cash and cash equivalents, which totaled $393 million as of September 30, 2024, along with cash generated by operations and amounts available for borrowing under our 2021 Revolving Credit Facility, will be sufficient to satisfy our cash requirements over the next 12 months and beyond.

CNDT Q3 2024 Form 10-Q

At September 30, 2024, 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, 2023 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, 2024 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no significant changes during the nine months ended September 30, 2024 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Changes

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Non-GAAP Financial Measures

We reported our financial results in accordance with accounting principles generally accepted in the U.S.

We report our financial results in accordance with accounting principles generally accepted in the U.S.

In addition, within this Form 10-Q Part I Item 2 we have discussed our financial results using non-GAAP measures.

CNDT Q2 2024 Form 10-Q

We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results.

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GAAP, to exclude the effects of certain items as well as their related tax effects.

Management believes that these non-GAAP financial measures provide an additional means of analyzing the results of the current period against the corresponding prior period.

Management believes that these non-GAAP financial measures provide an additional means of analyzing the results of the current period compared to the corresponding prior period.

However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with U.S.

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Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our strategic transformation program.

CNDT Q3 2024 Form 10-Q

• Goodwill impairment.

11 unchanged sentences

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