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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-21 · 159 added, 154 removed, 312 unchanged (50% of the section changed)

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Our MD&A is presented in seven sections:

• Financial Information and Analysis of Results of Operations;

• Financial Information;

• Capital Resources and Liquidity;

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The year-over-year comparisons in this MD&A are as of and for the years ended December 31, 2024 and 2023, unless stated otherwise.

The discussion of 2022 results and related year-over-year comparisons as of and for the years ended December 31, 2022 and 2021 are found in Item 7 of Part II of our Form 10-K for the year ended December 31, 2022.

Throughout the MD&A, we refer to various notes to our Consolidated Financial Statements which appear in Item 8 of this Form 10-K, and the information contained in such notes is incorporated by reference into the MD&A in the places where such references are made.

We deliver digital business solutions and services spanning the commercial, government and transportation spectrum – creating valuable 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 business process solutions.

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.

Headquartered in Florham Park, New Jersey, we have a team of approximately 59,000 people as of December 31, 2023, servicing customers from service centers in 26 countries.

We leverage cloud computing, artificial intelligence ("AI"), machine learning, automation and advanced analytics to deliver mission-critical solutions.

Through a dedicated global team of approximately 56,000 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.

Headquartered in Florham Park, New Jersey, we have operations in 24 countries as of December 31, 2024.

In 2024, approximately 14% of our revenue was generated outside the U.S.

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These three segments are:

• Commercial – Our Commercial segment provides business process services and customized solutions to clients in a variety of commercial industries.

Across the Commercial segment, we operate on our clients’ behalf to deliver mission-critical solutions and services to reduce costs, improve efficiencies and enable revenue growth for our clients and their consumers and employees.

• Government – Our Government segment provides government-centric business process services to U.S.

federal, state and local and foreign governments for public assistance, healthcare programs and administration, transaction processing and payment services.

Our solutions in this segment help governments respond to changing rules for eligibility and increasing citizen expectations.

• Transportation – Our Transportation segment provides systems, support, and revenue-generating solutions to government transportation agency clients.

We deliver mission-critical public safety, mobility and digital payment

• Commercial – Our Commercial segment provides business process services that span our clients' business processes end-to-end from the front-office to the back-office for a variety of commercial industries.

These solutions are both cross-industry and industry-specific in nature.

• Government – Our Government segment provides government-centric services and solutions to U.S.

federal, state, local and foreign governments for public assistance, healthcare programs and administration, transaction

CNDT 2024 Annual Report

solutions that streamline operations, increase revenue and reduce congestion while creating safe, seamless travel experiences for consumers while reducing impact on the environment.

processing, payment services and case management.

In this segment, we help governments respond to changing rules for eligibility and increasing citizen expectations, modernize legacy technology systems, combat benefits fraud and shift in response to an evolving regulatory environment.

• Transportation – Our Transportation segment provides systems, support, and revenue-generating solutions to government transportation agency clients.

We deliver mission-critical tolling, transit and digital payment solutions that streamline operations, increase revenue and reduce congestion while creating safe, seamless experiences for travelers.

We help transportation agencies contend with rising urbanization and mobility, the need for system efficiency and an increased focus on transportation infrastructure.

Executive Summary

During the first quarter of 2023, we held an investor briefing to communicate the next chapter in the Conduent journey.

Our intense emphasis on growth, quality, and efficiency, beginning in the first quarter of 2020, resulted in a strengthened foundation.

We remain focused on accelerating growth and enhancing value for our stakeholders and intend to achieve this by doubling down on key themes outlined in the March 2023 investor briefing.

We also intend to continue our portfolio rationalization strategy, divesting certain solutions which have either scarcity value outside of Conduent or are capital intensive relative to their growth opportunity, and thereby allowing management the bandwidth and increased capital to devote focus to solutions where we believe we have competitive advantages or higher growth expectations.

We believe this renewed 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.

Building on this solid foundation, during 2023, we held an investor briefing outlining our three-year strategy.

We continue to execute on this strategy and remain focused on accelerating growth and enhancing value for our stakeholders.

We intend to achieve this by doubling down on key themes outlined in the 2023 investor briefing including focusing on key growth areas within each of our businesses, continuing our portfolio rationalization strategy, divesting certain solutions which have either scarcity value outside of Conduent or are capital intensive relative to their growth opportunity, and taking a balanced approach to allocating capital including internal investments in our solutions, pre-paying debt and repurchasing common shares.

We believe this strategy has resulted and will continue to result in a more nimble and faster growing Conduent with modest levels of net leverage, enhanced valuation, and a stronger balance sheet.

Significant 2024 Actions

• Portfolio Rationalization – In the March 2023 investor briefing we set an expectation of generating between $500 million to $700 million of after-tax proceeds from divestiture activity, and we have made significant progress this year towards this goal.

On September 29, 2023, we entered into an agreement to transfer our BenefitWallet portfolio for approximately $425 million.

The portfolio is expected to transfer in multiple phases in the first half of 2024, with an estimated pre-tax gain of approximately $425 million.

Also, on December 27, 2023, we entered into a definitive agreement to sell our Curbside Management Solutions and Public Safety Solutions businesses for $230 million plus the assumption of certain liabilities.

This transaction is expected to close in the first half of 2024.

The after-tax proceeds from these two transactions, plus other anticipated divestitures in 2024 will drive an upward revision of total net proceeds from divestitures to between $600 million and $800 million.

Refer to Note 4 – Assets/Liabilities Held for Sale and Divestitures in the Consolidated Financial Statements for additional information.

• Divestitures – In 2024, we completed three divestitures as part of our portfolio rationalization strategy.

During the second quarter, we completed the transfer of the BenefitWallet Portfolio for a total purchase price of $425 million and completed the sale of the Curbside Management and Public Safety businesses with a purchase price of $230 million, $50 million of which is deferred to the first half of 2025.

During the third quarter, we completed the sale of the Casualty Claims Solutions Businesses with a purchase price of $224 million.

Refer to Note 4 – Divestitures and Assets/Liabilities Held for Sale in the Consolidated Financial Statements for additional information.

• Debt Prepayment – In 2024, we utilized a portion of the proceeds from the closing of our divestitures to voluntarily prepay all of the principal ($502 million ) of the Term Loan B and $137 million of the Term Loan A.

Refer to Note 10 – Debt in the Consolidated Financial Statements for additional information.

• Icahn Share Repurchase – During the second quarter of 2024, we entered into a purchase agreement with Carl C.

Icahn and certain of his affiliates pursuant to which we purchased an aggregate of approximately 38 million shares of our common stock, at a price of $3.47 per share, for an aggregate purchase price of approximately $132 million.

We utilized a portion of the proceeds from the closing of our divestitures to fund the purchase.

Refer to Note 16 – Common Stock and Preferred Stock in the Consolidated Financial Statements for additional information.

• Share Repurchases – In 2024, we completed our previously approved $75 million share repurchase program and bought back a total of 14 million shares of common stock.

• Leadership Updates – In 2024, we continued to enhance our leadership team and appointed a new Group President of the Commercial segment and a new Head of Government Solutions.

Significant 2023 Actions

• Strategic Growth Efforts – During 2023, we continued to see opportunities in our Government Healthcare segment, particularly with our cloud-native Medicaid Claims solution, and we now have a number of significant implementations underway in the space.

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We also continued to make progress with our Immediate Payments offering, laying the marketing and educational foundation with our existing clients, and enhancing our partnership strategy.

We were the first organization to execute transactions over the newly implemented FedNow capability and we anticipate an acceleration of new business signings to occur in 2024.

• New Business Signings – While we experienced some softness in New Business Signings in 2023, we successfully attained the highest Total Contract Value ("TCV" as defined in Metrics section below) in several years, with an increase of 20% versus 2022.

We were the first organization to

CNDT 2024 Annual Report

execute transactions over the newly implemented FedNow capability and we anticipate an acceleration of new business signings to occur in 2024.

• New Business Signings – Successfully attained the highest Total Contract Value ("TCV" as defined in Metrics section below) in several years, with an increase of 20% versus 2022.

This was predominantly driven by the $1 billion TCV deal in our Transportation segment, with the State of Victoria, Australia.

This is our largest TCV deal in the history of Conduent and continues to grow our international presence.

Our New Business pipeline remains strong at approximately $25 billion, with significant opportunities across the portfolio.

• Return to Shareholders – 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 5).

Through December 31, 2023, we acquired $27 million worth of our shares under this share repurchase program.

Significant 2022 Actions

• Disposition and Portfolio Review – On February 8, 2022, we closed a transaction with Symplr Software, Inc.

to sell our Midas suite of patient safety, quality and advanced analytics solutions ("Midas business") for cash consideration of $322 million resulting in a pre-tax gain of $166 million.

The Midas business represented approximately $7 million, $70 million and $72 million of revenue in 2022, 2021 and 2020, respectively.

Refer to Note 4 – Assets/Liabilities Held for Sale and Divestitures in the Consolidated Financial Statements for additional

CNDT 2023 Annual Report

During the fourth quarter of 2022, we concluded our long-range planning processes which included a full evaluation of our portfolio of solutions and identified incremental opportunities to streamline the portfolio.

• New Business Signings – In 2022 we introduced a new primary signings metric Annual Contract Value ("ACV" as defined in Metrics section below), which provides more focus on the near-term revenue generation of new business signings as compared to the traditional view of TCV.

This ACV metric increased sequentially each quarter in 2022, totaling $724 million in 2022, an increase of 16.8% versus 2021 excluding the impact of Government stimulus payments.

• Strategic Growth Efforts – During the latter part of 2022, we dedicated a small number of senior associates with the mission to accelerate future revenue growth by selling existing solutions into new and adjacent markets and geographies.

The results of this action started to become visible, for example, by the collaboration with a major bank to launch a Digital Payments Hub delivering faster, easier, and more secure payments.

• Operational Service Levels – We continued to make significant improvements with our operational and technology service levels, and while we will always believe there is room for improvement in these areas, we have reached a standard consistent with the markets that we operate in.

These operational improvements together with the significant progress being made in closing out major litigation cases, positioned us well with a solid foundation to embark on the next chapter of our journey.

• Share Repurchases – 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.

In 2023, 9 million shares were repurchased under this program.

This program was completed in September 2024.

Macroeconomic and Geopolitical Uncertainty

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Interest expense 75 111 (36) (32) %

Loss on extinguishment of debt 8 — 8 n/m

Goodwill impairment 28 287 (259) (90) %

(Gain) loss on divestitures and transaction costs, net 10 (158) 168 (106) %

(Gain) loss on divestitures and transaction costs, net (696) 10 (706) n/m

Litigation settlements (recoveries), net 9 (30) 39 (130) %

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Net Income (Loss) $ 426 $ (296) $ 722

Revenue for 2024 decreased 10%, compared to the prior year, over half of which was due to the impact of the BenefitWallet Portfolio transfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses.

In addition to the divestitures impact, lost business across our three segments was partially offset by new business ramp.

CNDT 2024 Annual Report

Revenue for 2023 decreased 4%, compared to the prior year, primarily due to lost business from prior periods and non-repeating items in the prior year including recognition of the revenue benefit associated with an annual minimum volume commitment contract with a large client in our Commercial segment and federal stimulus revenue in our Government segment.

These were partially offset by higher interest rates positively impacting our BenefitWallet business and new business ramp in our Government segment.

Cost of Services (excluding depreciation and amortization)

Cost of services for 2023 decreased 4%, compared to the prior year, primarily driven by the impact of reduced revenue, increased operational efficiency and a $17 million reversal of liabilities due to the settlement of the Cognizant matter described in Note 16 – Contingencies and Litigation to the Consolidated Financial Statements.

Cost of services for 2024 decreased 5%, compared to the prior year, approximately three quarters of which was primarily driven by the impact of the transfer of the BenefitWallet Portfolio and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses.

In addition to 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 benefit from reversal of liabilities due to the settlement of the Cognizant matter in the prior year.

We expect Cost of services to decline in 2025 as a result of cost actions to be implemented throughout the year.

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

SG&A for 2023 increased 4%, compared to the prior year, primarily 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 2024 decreased 1%, compared to the prior year, primarily driven by the impact of the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses.

Cost efficiencies were partially offset by costs to transition away from a technology vendor.

We expect SG&A to decline in 2025 as a result of cost actions to be implemented throughout the year.

Depreciation and Amortization

Depreciation and amortization for 2023 increased 15% compared to the prior year.

This increase was primarily driven by the write-off of capitalized software costs 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 2024 decreased 23% compared to the prior year.

This decrease was primarily driven by the impact of the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses, a prior year write-off of capitalized software costs in our Commercial segment totaling $25 million, older assets becoming fully depreciated and planned lower capital investments in the past few years.

Restructuring and Related Costs

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Reduction in headcount (3)

(1) 2023 costs represent costs incurred for disengagement from a significant IT outsourcing provider.

(2) 2022 costs represent professional support costs associated with certain strategic transformation programs.

(1) 2023 includes costs related to the closure of one of our Commercial segment operations in Europe.

(2) Includes costs in 2024 and 2023 incurred for disengagement from a significant IT outsourcing provider.

(3) Relates to approximate headcount reductions worldwide associated with Severance and related costs.

Severance and related costs for 2023 include costs related to the closure of one of our Commercial segment operations in Europe.

Refer to Note 8 – Restructuring Programs and Related Costs to the Consolidated Financial Statements for additional information regarding our restructuring programs.

CNDT 2023 Annual Report

Interest Expense

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

The increase in Interest expense for 2023, compared to the prior year, was driven primarily by higher interest rates on our variable rate debt, including finance leases and other debt.

The decrease in Interest expense for 2024, compared to the prior year, was driven primarily by lower debt balances as we utilized proceeds from divestitures closed in 2024 to voluntarily prepay all of our Term Loan B and a portion of our Term Loan A.

Refer to Note 10 – Debt to the Consolidated Financial Statements for additional information.

CNDT 2024 Annual Report

Goodwill Impairment

The goodwill impairment for 2023 is related to the write-down of the carrying value of the Commercial reporting unit.

This resulted from the evaluation of goodwill triggered by entering into the Custodial Transfer and Asset Purchase Agreement to transfer our BenefitWallet health savings account and medical savings account portfolio.

The goodwill impairment for 2022 related to the write-down of the carrying value of the Commercial reporting unit.

The goodwill impairment for 2024 is related to the write-down of the Transportation reporting unit's goodwill arising from the annual goodwill impairment test.

The impairment in 2023 is related to the write-down of the carrying value of the Commercial reporting unit.

This resulted from the evaluation of goodwill triggered by entering into the Custodial Transfer and Asset Purchase Agreement to transfer our BenefitWallet Portfolio.

Refer to Note 7 – Goodwill and Intangible Assets, Net to the Consolidated Financial Statements for additional information on these impairments.

(Gain) Loss on Divestitures and Transaction Costs

The divestiture of the Midas business in the first quarter of 2022 resulted in a pre-tax gain of $166 million.

Additionally, this financial statement line item also includes professional fees and other costs associated with both consummated and non-consummated transactions considered by us.

Our 2024 divestitures resulted in gains of $721 million.

Additionally, we recorded a $3 million gain adjustment related to a prior year divestiture following the partial settlement of the Skyview matter.

This financial statement line also includes professional fees and other costs associated with both consummated and non-consummated transactions totaling $30 million and $10 million in 2024 and 2023, respectively.

The 2024 amount also includes a $2 million reimbursement of previously incurred legal fees related to the partial settlement of the Skyview matter.

Refer to Note 4 – Divestitures and Assets/Liabilities Held for Sale and Note 15 – Contingencies and Litigation to the Consolidated Financial Statements for additional information on these matters.

Litigation Settlements (Recoveries), Net

Litigation settlements (recoveries), net for 2023 primarily consisted of a $26 million reversal of reserves due to the settlement of the Cognizant matter and an $8 million reversal of reserves related to our former student loan business.

The amount for 2022 primarily consisted of $24 million of insurance recoveries recorded in the first quarter of 2022 related to the previously disclosed State of Texas matter.

There were no individually significant items in 2024.

Refer to Note 15 – Contingencies and Litigation to the Consolidated Financial Statements for additional information on these matters.

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Other (income) expenses, net for 2024 and 2023 primarily includes interest income on cash investments, accounts receivable factoring fees and foreign currency transaction losses (gains).

The increase in 2024 is primarily due to interest income of $8 million related to the partial settlement of the Skyview matter.

Refer to Note 15 – Contingencies and Litigation in the Consolidated Financial Statements for additional information.

In the fourth quarter of 2024, we implemented an internal reorganization in which we sold a portion of our top tier foreign holding company to a lower tier subsidiary.

This transaction and a subsequent tax election to treat the holding company as a partnership resulted in recognition of a built-in capital loss for tax purposes that offset capital gains from divestitures resulting in net tax savings of $59 million.

The determination of the tax characteristic of this transaction requires management to make judgments about the application of tax laws and regulations.

The United States Internal Revenue Service could determine a different tax treatment that would have an adverse impact on the Company.

However, the Company has obtained advice from its third-party advisor concluding that the current tax treatment should prevail on its merits.

The 2024 effective tax rate was 15.5%, compared to 10.7% for 2023.

The 2024 rate was lower than the U.S.

statutory rate of 21% due to non-deductible expenses, primarily the non-deductible Commercial reporting unit goodwill impairment, geographic mix of income and return to provision adjustments, partially offset by tax benefits related to tax settlements and reversal of reserves.

The 2022 rate was negative and lower than the U.S.

statutory rate of 21%, primarily due to pre-tax book loss, an increase in taxes due to the geographic mix of income and non-deductible expenses, primarily driven by book and tax basis difference in the Midas divestiture goodwill and the Commercial reporting unit goodwill impairment.

Excluding the impact of the goodwill impairment, amortization of intangible assets, restructuring, litigation reserve releases and certain discrete tax items, the normalized effective tax rate for 2023 was 107.3%.

The rate is anomalous due to small adjusted pre-tax income and tax which is a result of geographic mix of income and valuation allowances against losses in certain jurisdictions resulting in no tax benefit.

The 2022 rate was 34.3% excluding the impact of amortization, restructuring, the divestiture of the Midas business, insurance recoveries, goodwill impairment and discrete tax items.

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 developments are anticipated regarding global tax initiatives in 2024.

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.

statutory rate of 21% due to favorable permanent adjustments from the internal reorganization and outside basis on a stock sale partially offset by the non-deductible Transportation reporting unit goodwill impairment, tax reserves and geographic mix of income.

The 2023 rate was lower than the U.S.

statutory rate of 21%, primarily due to the non-deductible Commercial reporting unit goodwill impairment, geographic mix of income and return to provision adjustments, partially offset by tax benefits related to tax settlements and reversal of reserves.

Excluding the impact of the internal reorganization, divestitures, goodwill impairment, amortization of intangible assets, restructuring costs and certain discrete tax items, the normalized effective tax rate for 2024 was 21.2%.

The 2023 rate was 107.3% excluding the impact of goodwill impairment, amortization of intangible assets, restructuring, litigation reserve releases and certain discrete tax items.

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

CNDT 2024 Annual Report

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

Operations Review of Segments

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• Transportation.

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

Divestitures include our BenefitWallet Portfolio and our 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).

For the year ended December 31, 2022, Divestitures also includes our Midas business, which was sold in the first quarter of 2022.

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.

The section below provides a comparative discussion of our financial performance by segment between the years ended December 31, 2024 and 2023.

MD&A - Operations Review of Segments in our Annual Report on Form 10-K for the year ended December 31, 2022 for a comparative discussion of our consolidated results of operations by segment between 2022 and 2021.

The comparative discussion of our financial performance by segment between the years ended December 31, 2023 and 2022 is also included to reflect the impact of reclassifying divested businesses from our Commercial and Transportation segments as described above.

CNDT 2024 Annual Report

Segment Performance Review

(in millions) Commercial Government Transportation Divestitures Unallocated Costs Total

Commercial Government Transportation Divestitures Unallocated Costs Total

(in millions) Reportable Segments

Year Ended Dec 31, 2024

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9.9 % 29.7 % 3.4 % 32.6 % — % 10.2 %

Year Ended Dec 31, 2022

Total Revenue $ 1,769 $ 1,150 $ 562 $ 377 $ — $ 3,858

Segment profit (Loss) $ 71 $ 294 $ 34 $ 70 $ (293) $ 176

Segment depreciation and amortization $ 94 $ 37 $ 21 $ 22 $ 46 $ 220

Adjusted EBITDA (1)

$ 165 $ 331 $ 55 $ 92 $ (247) $ 396

% of Total Revenue 45.8 % 29.8 % 14.6 % 9.8 % — % 100.0 %

Adjusted EBITDA Margin (1)(2)

9.3 % 28.8 % 9.8 % 24.4 % — % 10.3 %

(1) Refer to "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.

(2) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue.

CNDT 2023 Annual Report

(in millions) Year Ended December 31,

Segment Profit (Loss) Reconciliation to Pre-tax Income (Loss) and Adjusted EBITDA 2023 2022 2021

Income (Loss) Before Income Taxes $ (332) $ (127) $ (25)

Adjusted EBITDA and Segment Profit (Loss) Reconciliation to Income (Loss) Before Income Taxes 2024 2023 2022

Adjusted EBITDA $ 172 $ 378 $ 396

Reconciling items:

Segment depreciation and amortization (202) (260) (220)

Other adjustments (1)

Segment Pre-Tax Income (Loss) $ (34) $ 112 $ 176

Reconciling items:

Amortization of acquired intangible assets (5) (7) (13)

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Other (income) expenses, net 13 3 1

Segment Pre-Tax Income (Loss) $ 112 $ 176 $ 237

Segment depreciation and amortization 260 220 218

Abandonment of internal project — — 32

Other adjustments (1)

Adjusted EBITDA $ 378 $ 396 $ 487

(1) Represents a termination for convenience fee related to the termination of a contract with a significant IT outsourcing provider, which is reported in Cost of Services on the Consolidated Statements of Income.

Income (Loss) Before Income Taxes $ 504 $ (332) $ (127)

(1) The 2024 amount represents a termination for convenience fee related to the termination of Convergint as a subcontractor for our State of Victoria contract.

The 2023 amount represents a termination for convenience fee related to the termination of a contract with a significant IT outsourcing provider.

Both the 2024 and 2023 items are reported in Cost of Services on the Consolidated Statements of Income.

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Commercial Segment

Commercial segment revenue for 2023 decreased, compared to the prior year, driven by lost business, lower volumes in certain industries within our client base and non-repeating items in the prior year, partially offset by new business ramp and higher interest rates positively impacting our BenefitWallet business.

Commercial segment revenue for 2024 decreased, compared to the prior year, driven by lost business and lower volumes in certain industries within our client base, partially offset by new business ramp.

Segment Profit and Adjusted EBITDA

Commercial segment profit for 2023 increased compared to the prior year and was positively impacted by higher interest rates positively impacting our BenefitWallet business and cost efficiency, partially offset by a write-off of capitalized software 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.

Commercial segment adjusted EBITDA and adjusted EBITDA margin for 2023 also increased compared to the prior year primarily driven by the segment profit drivers mentioned above, partially offset by the impact of reduced revenue and the non-repeating items in the prior year.

Commercial segment profit and Adjusted EBITDA for 2024 increased compared to the prior year primarily due to new business ramp and cost efficiencies, partially offset the impact of lost business and lower volumes.

Commercial segment profit also benefited from the absence of the prior year impact of a write-off of capitalized software 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 as well as fully amortized assets.

Commercial segment profit for 2023 decreased compared to the prior year driven by a write-off of capitalized software totaling $25 million described above.

Commercial segment Adjusted EBITDA for 2023 was unchanged from the prior year.

Government Segment

Government segment revenue for 2024 decreased, compared to the prior year, attributable to lost business, primarily 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, partially offset by new business ramp.

Government segment revenue for 2023 decreased, compared to the prior year, primarily driven by lost business from prior years, non-repeating federal stimulus revenue in the prior year and the impact of an out of period adjustment of $7 million in the first quarter of 2023.

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Segment Profit and Adjusted EBITDA

Government segment profit and Adjusted EBITDA for 2024 decreased compared to the prior year, primarily due to the impact of lost business and the lower volumes mentioned above and the absence of a $17 million reversal of liabilities due to the settlement of the Cognizant matter in the prior year, partially offset by cost efficiencies.

Government segment profit for 2023 decreased slightly compared to the prior year and was impacted 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 as well as by higher depreciation driven by the deployment of our new modularized CMdS platform in our Government Healthcare Solutions business.

CNDT 2023 Annual Report

Government segment adjusted EBITDA for 2023 decreased slightly compared to the prior year due to the Government segment profit drivers, excluding depreciation, mentioned above.

These were partially offset by the $17 million reversal of reserves due to the settlement of the Cognizant matter, a contractual change to a client implementation positively impacting revenue recognition and cost efficiency.

Government segment adjusted EBITDA margin for 2023 increased compared to the prior year mainly due to the mix of adjusted EBITDA variances mentioned above on lower revenue.

Transportation Segment

Transportation revenue for 2024 increased compared to the prior year, primarily driven by the ramp of new business and improved operational performance with fewer delays from extended completion timelines compared to the prior year, partially offset by lost business, a Tolling customer price decrease and lower volumes.

CNDT 2024 Annual Report

Transportation revenue for 2023 decreased compared to the prior year, primarily driven by extended completion timelines on our larger implementations to meet client requirements, 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 and favorable exchange rate movement, particularly the Euro.

Segment Profit and Adjusted EBITDA

Transportation segment profit and adjusted EBITDA for 2024 decreased compared to the prior year.

This was primarily due to a Tolling contract with decreased price and lower volumes attributable to a portion of the contract not being retained.

This was partially offset by improved operational performance and reduced impact from extended implementation timelines compared to the prior year.

Transportation segment profit, adjusted EBITDA and adjusted EBITDA margin for 2023 all 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 2023 was primarily due to the sale of the Midas Suite of products in 2022.

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

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

The increase in revenue, segment profit and Adjusted EBITDA for 2023 was primarily due to higher interest rates positively affecting the BenefitWallet business in 2023.

Unallocated Costs

Unallocated Costs for 2023 increased compared to the prior year primarily due to the prior year reflecting 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, and expense credits in the prior year.

Unallocated Costs for 2024 decreased compared to the prior year primarily due to cost savings from insourcing certain technology functions, lower networking and corporate IT costs and lower depreciation costs as certain data center assets became fully depreciated.

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.

We disclose these metrics to provide transparency in our performance trends.

We discuss certain key metrics, including Signings and Net ARR Activity below.

We present certain key metrics, including Signings and Net ARR Activity below.

The metrics for all periods presented below have been recast to remove the activity related to the BenefitWallet Portfolio, the Casualty Claims Solutions business and the Curbside Management and Public Safety Solutions businesses.

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

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

Total Contract Value ("TCV") is the estimated total contractual revenue related to signed contracts.

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

Due to the inconsistency of when existing contracts end, quarterly and yearly comparisons may not provide an accurate measure of renewal performance.

The Annual Contract Value ("ACV") for new business is calculated by dividing the TCV by the contract term, in months, and then multiplying by 12 to obtain an annual measure.

For the year ended December 31, 2023, the Company signed $639 million of new business ACV, including the May 2023 award of a significant contract in the Transportation segment.

Due to the inconsistency of when existing contracts end, quarterly and yearly comparisons are not a good measure of renewal performance.

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

CNDT 2024 Annual Report

For the year ended December 31, 2023, the Company signed $2,257 million of new business TCV, representing a 20% increase compared to the prior year.

Renewal TCV for the year ended December 31, 2023 was $2,341 million, a decrease of 5% compared to the prior year due to timing on renewals;

however, the renewal rate for the year ended December 31, 2023 was consistent with the prior year.

The amounts in the following table exclude the impact of divestitures.

Signing information for the years ended December 31, 2024 and 2023 is as follows:

Year Ended December 31, 2024 vs.

(in millions) 2023 2022 (3)

$ Change % Change

(in millions) 2024 2023 $ Change % Change

New business ACV $ 485 $ 605 $ (120) (20) %

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$ 309 $ 589 $ (280) (48) %

(1) New business ARR measures the revenue from recurring services provided to the client for any new business signing.

ARR represents the recurring services provided to a customer with the opportunity for renewal at the end of the contract term.

(2) New business NRR measures the non-recurring revenue for any new business signing, including (i) signing value of any contract with term less than 12 months and (ii) signing value of project-based revenue, not expected to continue long term.

(3) Adjusted to remove Midas new business signings.

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

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

The total new business pipeline at the end of December 31, 2024 and 2023 was $22.2 billion and $22.8 billion, respectively.

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Net ARR Activity

The Net ARR Activity metric 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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The metric is for indicative purposes only.

This metric excludes COVID-related volume impacts and non-recurring revenue signings.

This metric excludes non-recurring revenue signings.

This metric is not indicative of any specific 12-month timeframe.

The Net ARR Activity metric for the trailing twelve months for each of the prior five quarters was as follows:

(in millions)

(in millions) Net ARR activity metric

December 31, 2024 $ 92

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December 31, 2023 49

CNDT 2024 Annual Report

Capital Resources and Liquidity

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We also have a $550 million Revolving Credit Facility for our various cash needs, of which none has been utilized for borrowings and $11 million has been utilized for letters of credit as of December 31, 2024.

On February 11, 2022, we repaid the then-outstanding borrowing under the Revolving Credit Facility of $100 million.

CNDT 2023 Annual Report

As of December 31, 2023, there was a total of $1,263 million of outstanding borrowings under our Term Loan A, Term Loan B and Senior Notes, of which $18 million was due within one year.

The amount of borrowings outstanding under the Revolving Credit Facility at each quarter-end may be limited by our leverage covenant.

In February 2025, the Company borrowed $50 million under the Revolving Credit Facility for working capital purposes.

As of December 31, 2024, there was a total of $608 million of outstanding borrowings under our Term Loan A and Senior Notes, of which $14 million was due within one year.

Additionally, as of December 31, 2024, we had $10 million of finance lease and other debt due within one year.

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Operating Activities

The net decrease in cash flow provided by operating activities of $55 million was primarily related to the absence of the $38 million of insurance recoveries related to the State of Texas matter in 2022, higher net cash interest payments, the negative impact of the sales of accounts receivable as described below and higher restructuring payments, all partially offset by lower cash income taxes.

The net decrease in cash flow provided by operating activities of $139 million was primarily related to lower Adjusted EBITDA due to divestitures and higher cash taxes, partially offset by improved accounts receivable Days Sales Outstanding and lower cash interest expense.

Investing Activities

The decrease in cash provided by investing activities of $266 million was primarily due to the proceeds from the divestiture of the Midas business in the prior year.

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

The increase in cash provided by investing activities of $888 million was primarily due to the proceeds from our 2024 divestitures of $830 million and proceeds from the settlement of the Skyview matter related to notes receivable of $21 million.

In addition, there was a planned decrease in capital spending in the current year.

Financing Activities

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 the purchase of treasury stock under our share repurchase program of $27 million, higher scheduled debt repayments and higher taxes paid for settlement of stock-based compensation.

The increase in cash used in financing activities was mainly driven by the $642 million early repayment of Term Loan B and Term Loan A utilizing funds received from our divestitures.

In addition, $132 million was utilized to purchase all of the common shares owned by the Icahn Parties.

Sales of Accounts Receivable

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Refer to Note 11 – Financial Instruments to the Consolidated Financial Statements for additional information.

CNDT 2024 Annual Report

Material Cash Requirements from Contractual Obligations

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At December 31, 2024, our material cash requirements include the following contractual and other obligations.

CNDT 2023 Annual Report

As of December 31, 2024, we had total outstanding debt, including Finance leases, with floating and fixed rates totaling $646 million, of which $24 million was due within 12 months.

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For a detailed discussion of the application of these and other accounting policies, refer to Note 1 – Basis of Presentation and Summary of Significant Accounting Policies to the Consolidated Financial Statements.

Assets/Liabilities Held for Sale

We classify assets as held for sale in the period when the following conditions are met:

(i) management, having the authority to approve the action, commits to a plan to sell the asset (disposal group);

(ii) the asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal group);

(iii) an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated;

(iv) the sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset (disposal group) beyond one year;

(v) the asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A long-lived asset (disposal group) that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset (disposal group) until the date of sale.

The fair value of a long-lived asset (disposal group) less any costs to sell is assessed each reporting period it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the asset (disposal group), as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.

Upon determining that a long-lived asset (disposal group) meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group in the line items Assets held for sale and Liabilities held for sale, respectively, in the Consolidated Balance Sheets.

Refer to Note 4 – Assets/Liabilities Held for Sale and Divestitures to the Consolidated Financial Statements for additional information.

Revenue Recognition

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Refer to Note 1 – Basis of Presentation and Summary of Significant Accounting Policies and Note 2 – Revenue to the Consolidated Financial Statements for additional information regarding our revenue recognition policies.

CNDT 2023 Annual Report

Goodwill is not amortized but rather tested for impairment annually, or more frequently if an event or circumstance indicates that impairment may have been incurred.

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Commercial, Government and Transportation.

Interim Goodwill Impairment Evaluation

In September 2023, we entered into the Purchase Agreement to transfer our BenefitWallet health savings account and medical savings account portfolio (collectively, the "Portfolio"), which is reported within our 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.

Consequently, the Purchase Agreement was identified as a triggering event for the Commercial reporting unit that required us 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.

The most significant assumptions used in the goodwill analysis relate to revenue growth rates, discount rate and long-term organic growth rate.

Annual Goodwill Impairment Evaluation

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In addition, we are required to make certain assumptions and estimates regarding the current economic environment, industry factors and the future profitability of our businesses.

CNDT 2024 Annual Report

When performing our discounted cash flow analysis for each reporting unit, we incorporate the use of projected financial information and discount rates that are developed using market participant-based assumptions.

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The most significant assumptions used in the goodwill analysis relate to discount rates and long-term organic growth rates.

CNDT 2023 Annual Report

Based on our quantitative assessments, we concluded that the fair value of our Government and Transportation reporting units exceeded their respective carrying values and, accordingly, we did not record any goodwill impairment charge as a result of our annual quantitative impairment test of goodwill as of October 1, 2023.

If we used different assumptions for discount rates or long-term organic growth rates in these annual assessments, our calculated fair values of our reporting units could be higher or lower which could result in a goodwill impairment.

Based on our quantitative assessments, we concluded that the fair value of our Government reporting unit exceeded its carrying value and, accordingly, we did not record any goodwill impairment charge as a result of our annual quantitative impairment test of goodwill for this reporting unit.

If we used different assumptions for discount rates or long-term organic growth rates in this annual assessment, our calculated fair values of our Government reporting unit could be higher or lower which could result in a goodwill impairment.

Refer to Note 7 – Goodwill and Intangible Assets, Net to the Consolidated Financial Statements for additional information on the impairment of the remaining goodwill in our Transportation reporting unit.

We are subject to income taxes in the United States and numerous foreign jurisdictions.

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Refer to Note 14 – Income Taxes to the Consolidated Financial Statements for additional information regarding deferred income taxes and unrecognized tax benefits.

CNDT 2024 Annual Report

Loss Contingencies

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Refer to Note 15 – Contingencies and Litigation to the Consolidated Financial Statements for additional information regarding loss contingencies.

CNDT 2023 Annual Report

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 U.S.

In addition, within this Form 10-K Part II Item 7 we have discussed our financial results using non-GAAP measures.

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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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GAAP are provided in the Segment Performance Review above.

Adjusted EBITDA and EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA Margin

We use Adjusted EBITDA and Adjusted EBITDA Margin as an additional way of assessing certain aspects of our operations that, when viewed with the U.S.

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GAAP financial measures, provide a more complete understanding of our on-going business.

Adjusted EBITDA Margin is Adjusted EBITDA divided by revenue.

Adjusted EBITDA

CNDT 2024 Annual Report

Margin is Adjusted EBITDA divided by revenue.

Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation and amortization and contract inducement amortization adjusted for the following items:

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• Goodwill impairment.

This represents goodwill impairment charges related to entering the agreement to transfer the BenefitWallet portfolio.

This represents goodwill impairment charges arising from annual or interim goodwill testing.

• (Gain) loss on divestitures and transaction costs.

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• Litigation settlements (recoveries), net represents settlements or recoveries for various matters subject to litigation.

• Loss on extinguishment of debt.

This represents write-off of debt issuance costs related to prepayments of debt.

• Other charges (credits).

This includes Other (income) expenses, net on the Consolidated Statements of Income (loss) and other insignificant (income) expenses and other adjustments.

• Abandonment of Cloud Computing Project.

This includes charges in connection with the abandonment of a cloud computing project.

The costs include writing off previously capitalized costs and accruing remaining hosting fees that continue to be incurred without any economic benefit.

CNDT 2023 Annual Report

This includes Other (income) expenses, net on the Consolidated Statements of Income (loss) and other adjustments.

Adjusted EBITDA is not intended to represent cash flows from operations, operating income (loss) or net income (loss) as defined by U.S.

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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-K

Item 7. Management’s Discussion and Analysis