CONDUENT Inc 10-Q

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. Our MD&A is presented in seven sections: • Overview; • Financial Information and Analysis of Results of Operations; • Metrics; • Capital Resources and Liquidity; • Critical Accounting Estimates and Policies; • Recent Accounting Changes; and • Non-GAAP Financial Measures. The MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying Notes. Overview 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 ("AI"), machine learning, automation and advanced analytics to deliver mission-critical solutions. Through a dedicated global team of approximately 48,000 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 March 31, 2026. Our reportable segments correspond to how we organize and manage the business and are aligned to the industries in which our clients operate. These three segments are: • Commercial – Our Commercial segment provides business process services that span our clients' businesses 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. 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 deliver better experiences for their consumers and employees. • Government – Our Government segment provides government-centric services and solutions to U.S. federal, state, local and foreign governments for public assistance, healthcare programs administration, transaction processing, eligibility and enrollment processing, payment services and case management. In this segment, we help governments respond to changing rules for eligibility and keep pace with increasing citizen expectations, modernize legacy technology systems, combat benefits fraud and adapt to an evolving regulatory environment. • Transportation – Our Transportation segment provides government agencies and transportation authorities around the world with systems, support and revenue-generating solutions serving toll and fare collections as well as mobility and digital payments that help streamline operations and increase revenue to government transportation agencies. With an expanded focus on sustainability and enhancing the quality of life for citizens and communities around the world, our solutions help reduce congestion and greenhouse emissions, while creating seamless travel experiences for consumers throughout transportation ecosystems. CNDT Q1 2026 Form 10-Q 20 Table of Contents Executive Summary Our emphasis on growth, quality, and efficiency, launched in 2020 and reinforced in our 2023 investor briefing, continued into the first quarter of 2026 as we build on the progress achieved at the conclusion of our three-year plan. During the quarter, we remained focused on targeted-growth areas within each business, continued advancing our portfolio rationalization strategy, and invested in our solutions to improve operational efficiency and execution. We believe these actions continue to position Conduent as a more agile company with the potential for improved margins, stronger free cash flow, and a more resilient capital structure over time. During the first quarter of 2026 we achieved the following: • Successfully completed our first Conduent Medicaid Suite implementation for a large Government client, replacing a 24‑year old legacy system with a fully integrated, modern Medicaid platform supporting nearly one million members. This milestone strengthens our Government segment market position and demonstrates our ability to deliver large‑scale, mission‑critical Medicaid system modernizations at scale. • Successfully implemented an intelligent automation solution for a marquee Commercial client, modernizing Explanation of Benefits processing and improving operational efficiency and scalability. Cyber Event On January 13, 2025, the Company experienced an operational disruption and learned that a threat actor gained unauthorized access to a limited portion of the Company’s environment (the "January 2025 Cyber Event"). Upon detection, the Company activated its cybersecurity response plan with the help of external cybersecurity experts to contain, assess, and remediate the incident. The Company restored the affected systems and returned to normal operations within days, and in some cases, hours. The disruption did not have a material impact to the Company’s operations. As part of its investigation, the Company determined that the threat actor exfiltrated a set of files associated with a limited number of the Company’s clients. Due to the complexity of the files, the Company engaged cybersecurity data mining experts to conduct a detailed analysis of the affected files to identify the personal information contained therein. This detailed analysis confirmed that the data sets contained a significant number of individuals’ personal information associated with our clients’ end-users. Upon completion of this time intensive data analysis, the Company notified impacted clients concerning their affected end-users. The Company worked with affected clients to determine next steps as required by federal and state law, including individual and regulatory notifications that began in October 2025 and have been substantially concluded. To the Company’s knowledge, the exfiltrated data has not been released on the dark web or otherwise publicly. The Company has also notified federal law enforcement authorities of the incident. While the Company did not experience material impacts to its operating environment or costs from the event itself, the Company incurred and accrued $25 million of non-recurring expenses in the first quarter of 2025 related to the event based on the notification requirements described above. We have made cash disbursements of $25 million through March 31, 2026 related to this matter. Any expense in excess of these amounts up to the coverage limit are anticipated to be covered by the cyber insurance policy that the Company maintains. It is possible that future risks and uncertainties resulting from the January 2025 Cyber Event, including those related to impacted data, litigation, reputational harm, and regulatory actions, could adversely affect the Company’s financial condition or results of operations. See also Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (Risk Factors). CNDT Q1 2026 Form 10-Q 21 Table of Contents Financial Information and Analysis of Results of Operations Three Months Ended March 31, 2026 vs. 2025 (in millions) 2026 2025 $ Change % Change Revenue $ 723 $ 751 $ (28) (4) % Operating Costs and Expenses Cost of services (excluding depreciation and amortization) 587 618 (31) (5) % Selling, general and administrative (excluding depreciation and amortization) 91 120 (29) (24) % Research and development (excluding depreciation and amortization) 1 1 — — % Depreciation and amortization 47 48 (1) (2) % Restructuring and related costs 8 4 4 100 % Interest expense 12 12 — — % (Gain) loss on divestitures and transaction costs, net 3 3 — — % Litigation settlements (recoveries), net — 2 (2) n/m Other (income) expenses, net 1 (1) 2 n/m Total Operating Costs and Expenses 750 807 (57) Income (Loss) Before Income Taxes (27) (56) 29 Income tax expense (benefit) 6 (5) 11 Net Income (Loss) $ (33) $ (51) $ 18 Revenue Revenue for the three months ended March 31, 2026 decreased compared to the prior year period, primarily driven by lost business and lower volumes in our Commercial segment, partially offset by new business ramp, particularly in our Government and Transportation segments. Cost of Services (excluding depreciation and amortization) Cost of services for the three months ended March 31, 2026 decreased compared to the prior year period, primarily driven by lower expenses associated with reduced revenues and cost optimization initiatives. Selling, General and Administrative ("SG&A") (excluding depreciation and amortization) SG&A for the three months ended March 31, 2026 decreased year over year, primarily driven by non-recurring items in the first quarter of 2025. These items included the $25 million of direct response costs related to the January 2025 Cyber Event and the $9 million benefit from the recovery of legal costs from one of our insurance carriers related to the previously disclosed State of Texas matter that settled in February 2019. In addition, cost efficiencies in our corporate functions in the current year and lower healthcare costs due to lower U.S. headcount contributed to the decrease. The current year period SG&A included two offsetting items. Separation costs of approximately $4 million related to the departure of our former Chief Executive Officer were offset by an approximate $3 million net benefit related to our 2025 Annual Performance Incentive Plan ("APIP") as described in Note 12 – Preferred Stock and Common Stock. Depreciation and Amortization Depreciation and amortization for the three months ended March 31, 2026 was substantially unchanged compared to the prior year period. CNDT Q1 2026 Form 10-Q 22 Table of Contents Restructuring and Related Costs We engage in a series of restructuring programs related to optimizing our employee base, reducing our real estate footprint, exiting certain activities, outsourcing certain internal functions, consolidating our data centers and engaging in other actions designed to reduce our cost structure and improve productivity. The following are the components of our Restructuring and related costs: Three Months Ended March 31, (in millions) 2026 2025 Severance and related costs $ 6 $ 1 Contract termination and other costs 2 1 Asset impairments — 2 Restructuring and related costs $ 8 $ 4 Refer to Note 5 – Restructuring Programs and Related Costs to the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs. Interest Expense Interest expense represents interest on long-term debt and the amortization of debt issuance costs. Interest expense for the three months ended March 31, 2026 was unchanged, compared to the prior year period due to comparable average debt balances and interest rates. (Gain) Loss on Divestitures and Transaction Costs (Gain) loss on divestitures and transaction costs include professional fees and other costs related to consummated and certain other non-consummated transactions considered by the Company related to its portfolio rationalization activities. The amount of these costs for the three months ended March 31, 2026 was unchanged, compared to the prior year period. Litigation Settlements (Recoveries), Net Litigation settlements (recoveries), net for the three months ended March 31, 2026 and 2025 were not material. Other (Income) Expenses, Net Other (income) expenses, net for the three months ended March 31, 2026 and 2025 primarily include interest income on cash investments, accounts receivable factoring fees and foreign currency transaction losses (gains). Income Taxes The effective tax rate for the three months ended March 31, 2026 was (21.5)%, compared to 9.0% for the three months ended March 31, 2025. The March 31, 2026 rate was lower than the U.S. statutory rate of 21%, primarily due to geographic mix of income, valuation allowances recorded on net deferred tax assets and discrete tax items. The effective tax rate for the three months ended March 31, 2025 was lower than the U.S. statutory rate of 21%, primarily due to incremental tax from geographic mix, valuation allowances recorded on net deferred tax assets and discrete tax items. Excluding the impact of restructuring, former CEO separation costs, divestiture-related transaction costs, other expenses, amortization, valuation allowances and discrete tax items, the normalized effective tax rate for the three months ended March 31, 2026 was 25.7%. The normalized effective tax rate for the three months ended March 31, 2025 was largely consistent at 23.9%, primarily due to excluding the impact of amortization, restructuring, divestitures, reserves for the Direct response costs - cyber event, valuation allowances and discrete tax items. 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 our financial results of operations for the current period. We continue to monitor legislative developments, as well as additional guidance from countries that have enacted legislation. CNDT Q1 2026 Form 10-Q 23 Table of Contents Operations Review of Segment Revenue and Profit Our financial performance is based on Segment Profit (Loss) for the following three segments: • Commercial; • Government; and • Transportation. 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. We also present Segment Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") and Adjusted EBITDA Margin for the reasons described in Non-GAAP Financial Measures section of the MD&A below. Results of our financial performance were: Three Months Ended March 31, Commercial Government Transportation Unallocated Costs Total (in millions) Reportable Segments 2026 Segment revenue $ 361 $ 226 $ 136 $ — $ 723 Segment profit (loss) $ 22 $ 47 $ (11) $ (60) $ (2) Segment depreciation and amortization $ 21 $ 12 $ 7 $ 7 $ 47 Other adjustments (1) $ — $ — $ — $ 4 $ 4 Adjusted EBITDA $ 43 $ 59 $ (4) $ (49) $ 49 % of Total Revenue 49.9 % 31.3 % 18.8 % — % 100.0 % Adjusted EBITDA Margin 11.9 % 26.1 % (2.9) % — % 6.8 % 2025 Segment Revenue $ 402 $ 216 $ 133 $ — $ 751 Segment profit (loss) $ 16 $ 28 $ (2) $ (78) $ (36) Segment depreciation and amortization $ 24 $ 10 $ 8 $ 6 $ 48 Direct response costs - cyber event $ — $ — $ — $ 25 $ 25 Adjusted EBITDA $ 40 $ 38 $ 6 $ (47) $ 37 % of Total Revenue 53.5 % 28.8 % 17.7 % — % 100.0 % Adjusted EBITDA Margin 10.0 % 17.6 % 4.5 % — % 4.9 % _____ (1) Other adjustments in 2026 consist of former CEO separation costs. CNDT Q1 2026 Form 10-Q 24 Table of Contents (in millions) Three Months Ended March 31, Adjusted EBITDA and Segment Profit (Loss) Reconciliation to Income (Loss) Before Income Taxes 2026 2025 Adjusted EBITDA $ 49 $ 37 Reconciling items: Segment depreciation and amortization (47) (48) Direct response costs - cyber event — (25) Other adjustments (1) (4) — Segment Profit (Loss) $ (2) $ (36) Reconciling items: Amortization of acquired intangible assets (1) — Restructuring and related costs (8) (4) Interest expense (12) (12) Gain (loss) on divestitures and transaction costs, net (3) (3) Litigation (settlements) recoveries, net — (2) Other income (expenses), net (1) 1 Income (Loss) Before Income Taxes $ (27) $ (56) _____ (1) Other adjustments in 2026 consist of former CEO separation costs. Commercial Segment Revenue Commercial revenue for the three months ended March 31, 2026 decreased by 10% compared to the prior year period, primarily driven by contract losses 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 March 31, 2026 increased, compared to the prior year period, primarily driven by cost efficiencies implemented in the second half of the prior year, including lower fixed technology overhead, partially offset by the revenue drivers noted above. Government Segment Revenue Government revenue for the three months ended March 31, 2026 increased, compared to the prior year period, primarily driven by the ramp of new business, price increases, and a discrete benefit recognized during the quarter. The prior year also reflected discrete negative impacts from the establishment of reserves for service level disputes in the first quarter of 2025. These favorable items were partially offset by lost business. Segment Profit and Adjusted EBITDA Government segment profit and adjusted EBITDA for the three months ended March 31, 2026 increased, compared to the prior year period, primarily due to the revenue drivers noted above, as well as cost efficiencies and continued lower expenses in our Government Services business. Transportation Segment Revenue Transportation revenue for the three months ended March 31, 2026 increased modestly compared to the prior year period, primarily driven by increased volumes, favorable exchange rate movements and new business ramp. These increases were partially offset by lost business and the absence of discrete incremental revenue recognized in the prior year period related to the go-live of our congestion charging back-office solution under a Road Usage Charging contract. CNDT Q1 2026 Form 10-Q 25 Table of Contents Segment Profit and Adjusted EBITDA Transportation segment profit and adjusted EBITDA for the three months ended March 31, 2026 decreased compared to the prior year period, primarily driven by the absence of the discrete revenue recognized in the prior year period noted above, which had no significant associated costs, as well as higher expenses associated with this contract in the current period, partially offset by the revenue drivers noted above. Unallocated Costs Unallocated Costs for the three months ended March 31, 2026 were favorable, compared to the prior year period, primarily driven by the absence of non-recurring items recognized in the prior year, including direct response costs related to the January 2025 Cyber Event and the recovery of legal costs from an insurance carrier related to the previously disclosed State of Texas matter, as well as cost efficiencies in our corporate functions. Metrics Metrics 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 present certain key metrics, including Signings and ACV Activity as defined below. Signings Signings are defined as estimated future revenues from contracts signed during the period, including renewals of existing 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 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. Signing information for the three months ended March 31, 2026 and 2025 is as follows: Three Months Ended March 31, 2026 vs. 2025 ($ in millions) 2026 2025 $ Change % Change New business ACV $ 114 $ 109 $ 5 5 % New business TCV $ 206 $ 280 $ (74) (26) % Renewals TCV 287 243 44 18 % Total Signings $ 493 $ 523 $ (30) (6) % Annual recurring revenue signings (1) $ 41 $ 53 $ (12) (23) % Non-recurring revenue signings (2) $ 100 $ 59 $ 41 69 % ___________ (1) Recurring revenue signings are for new business contracts longer than one year. (2) Non-recurring revenue signings are for contracts shorter than one year. CNDT Q1 2026 Form 10-Q 26 Table of Contents The total new business pipeline as of March 31, 2026 and 2025 was $3.5 billion and $3.2 billion, respectively. Total new business pipeline is defined as total new business ACV pipeline of deals at or beyond the qualified prospect stage. This extends past the next twelve-month period to include total pipeline. ACV Activity ACV Activity reflects the Company’s trailing twelve-month (“TTM”) ACV sales activity and is used to evaluate trends in overall contract value generation across periods. Beginning in the current period, the Company replaced Net ARR Activity with ACV Activity to better reflect total annual contract value-based sales activity rather than projected recurring revenue impacts. The metric represents total ACV generated over the trailing twelve months, with the timing of revenue varying based on contract start dates and implementation timelines. ACV Activity during the period reflects positive fluctuations in the Company's sales activity, including the conversion of pipeline opportunities, large contract awards, renewals and extensions of existing client relationships, and expansion within key accounts across its segments. The ACV Activity metric for the trailing twelve months for each of the prior five quarters was as follows: (in millions) ACV Activity metric March 31, 2026 $ 522 December 31, 2025 517 September 30, 2025 502 June 30, 2025 502 March 31, 2025 498 Capital Resources and Liquidity As of March 31, 2026 and December 31, 2025, total cash and cash equivalents were $228 million and $233 million, respectively. We also have a $357 million Revolving Credit Facility (the "Facility") (reducing to $187 million in October 2026 and maturing in August 2028) for our various cash needs. As of March 31, 2026 we had $144 million outstanding borrowings under the Facility and an additional $23 million was used for letters of credit. The net amount available under the Facility as of March 31, 2026, was $190 million and the amount of borrowings at each quarter-end may be limited by our leverage covenant. As of March 31, 2026, our total principal debt outstanding was $725 million, of which $23 million was due within one year. We have the intent and ability to refinance the amount outstanding under the Facility on a long-term basis; therefore all amounts outstanding as of March 31, 2026 are classified as long-term on our Condensed Consolidated Balance Sheets. Refer to Note 6 – Debt in the Condensed Consolidated Financial Statements for additional debt information. To provide financial flexibility and finance certain investments and projects, we may continue to utilize external financing arrangements. However, we believe that our cash on hand, projected cash flow from operations, sound balance sheet and our revolving line of credit will continue to provide sufficient financial resources to meet our expected business obligations for at least the next twelve months. CNDT Q1 2026 Form 10-Q 27 Table of Contents Cash Flow Analysis The following table summarizes our cash flows, as reported in our Condensed Consolidated Statement of Cash Flows in the accompanying Condensed Consolidated Financial Statements: Three Months Ended March 31, (in millions) 2026 2025 Better (Worse) Net cash provided by (used in) operating activities $ (8) $ (58) $ 50 Net cash provided by (used in) investing activities $ (14) $ (17) 3 Net cash provided by (used in) financing activities $ 30 $ (10) 40 Operating activities The net improvement in cash used in operating activities of $50 million, compared to the prior year period, was primarily due to improved Adjusted EBITDA and favorable working capital results, which included, among other things, net timing differences in payment of variable compensation of $14 million, which benefited the first quarter of 2026. These were partially offset by January 2025 Cyber Event related payments. Investing activities Investing cash flow decreased slightly from the prior year due to planned reductions in capital expenditures. Financing activities The increase in cash provided by financing activities was due to a net $35 million usage of the Facility for various cash needs. Sales of Accounts Receivable We have entered into a factoring agreement in the normal course of business as part of our cash and liquidity management, to sell certain accounts receivable without recourse to a third-party financial institution. The transactions under this agreement are treated as sales and are accounted for as reductions in accounts receivable because the agreement transfers effective control over, and risk related to, the receivables to the buyer. Cash proceeds from this arrangement are included in cash flow from operating activities in the 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 three months ended March 31, 2026 and 2025 was $(8) million and $3 million, respectively. Material Cash Requirements from Contractual Obligations We believe our balances of cash and cash equivalents, which totaled $228 million as of March 31, 2026, along with cash generated by operations and amounts available for borrowing under our revolving credit facility, will be sufficient to satisfy our cash requirements over the next 12 months and beyond. At March 31, 2026, 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, 2025 for additional information on our material cash requirements. Critical Accounting Estimates and Policies Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions in certain circumstances that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on amounts reported in the accompanying Condensed Consolidated Financial Statements and notes thereto. CNDT Q1 2026 Form 10-Q 28 Table of Contents There have been no significant changes during the three months ended March 31, 2026 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. Recent Accounting Changes See Note 2 – Recent Accounting Pronouncements for information on accounting standards adopted during the current year, as well as recently issued accounting standards not yet required to be adopted and the expected impact of the adoption of these accounting standards. Non-GAAP Financial Measures We report our financial results in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). In addition, within this Form 10-Q Part I Item 2 we have discussed our financial results using non-GAAP measures. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with U.S. 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 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. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on certain of these non-GAAP measures. A reconciliation of the non-GAAP financial measure Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP is provided in the "Operations Review of Segment Revenue and Profit" section above. 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. GAAP results and the accompanying reconciliations to corresponding U.S. GAAP financial measures, provide a more complete understanding of our on-going business. Adjusted EBITDA 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, if applicable: • Amortization of acquired intangible assets. This is driven by acquisition activity, which can vary in size, nature and timing as compared to other companies within our industry and from period to period. • Restructuring and related costs. This includes restructuring and asset impairment charges as well as costs associated with our strategic transformation program. • Goodwill impairment. This represents goodwill impairment charges arising from annual or interim goodwill testing. • (Gain) loss on divestitures and transaction costs. This represents (gain) loss on divested businesses and transaction costs. • Litigation settlements (recoveries), net. This 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. • Direct response costs - cyber event. This represents costs related to investigating, remediating and responding to the January 2025 Cyber Event. • Other charges (credits). This includes Other (income) expenses, net on the Condensed Consolidated Statements of Income (Loss) and other adjustments, including former CEO separation costs. CNDT Q1 2026 Form 10-Q 29 Table of Contents Adjusted EBITDA is not intended to represent cash flows from operations, operating income (loss) or net income (loss) as defined by U.S. GAAP as indicators of operating performance. Management cautions that amounts presented in accordance with Conduent's definition of adjusted EBITDA and adjusted EBITDA Margin may not be comparable to similar measures disclosed by other companies because not all companies calculate adjusted EBITDA and adjusted EBITDA Margin in the same manner.