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Introduction & Market Context
Conduent Inc (NASDAQ:CNDT) released its Q1 2025 financial results on May 7, 2025, revealing a continued revenue decline but showing progress on its strategic transformation and portfolio rationalization initiatives. The business process services provider’s stock traded up 2.94% to $2.11 following the presentation, a modest recovery after experiencing significant pressure in recent months.
The company’s Q1 results come after a disappointing Q4 2024, when Conduent missed earnings expectations with an EPS of -$0.15 versus the forecasted -$0.12, causing an 8.88% stock drop at that time. While revenue continues to face headwinds, the company highlighted improvements in profitability metrics and sales momentum.
Quarterly Performance Highlights
Conduent reported Q1 2025 adjusted revenue of $751 million, representing an 8.5% year-over-year decline from $821 million in Q1 2024. Despite the revenue contraction, the company managed to improve its adjusted EBITDA to $37 million (4.9% margin), a slight increase from $36 million (4.4% margin) in the prior year period.
As shown in the following summary of Q1 2025 highlights:
The revenue decline was primarily attributed to lost business in the Government segment and lower volumes in the Commercial segment, partially offset by new business ramp. The slight improvement in adjusted EBITDA was driven by a recovery of legal costs, new business ramp, and cost efficiencies.
Breaking down performance by segment, all three of Conduent’s business units experienced year-over-year revenue declines:
The Commercial segment, which represents the largest portion of revenue at $402 million, saw a 4.1% decline driven by lower volumes. The Government segment experienced the steepest drop at 16.3%, falling to $216 million due to the loss of a contract. Transportation revenue decreased by 7.6% to $133 million, primarily due to reduced project activity.
Portfolio Rationalization Progress
A key focus of Conduent’s strategy has been its portfolio rationalization efforts, which showed significant progress in Q1 2025. The company completed Phase 1 of its divestiture plan, generating $778 million in net proceeds from three divestitures executed in 2024.
The following chart illustrates Conduent’s capital deployment progress:
The company has deployed 85% of its $1 billion capital target, including $61 million in share repurchases and $639 million in debt repayment. Phase 2 of the rationalization plan is now underway, with additional opportunities identified that could generate up to $350 million in net proceeds, surpassing the original $1 billion target.
Despite this progress, Conduent’s balance sheet metrics showed some deterioration, with the net adjusted leverage ratio increasing to 2.7x from 1.6x reported at the end of 2024. Cash position stood at $293 million at the end of Q1, down from $377 million at year-end 2024.
Strategic Initiatives
Conduent outlined its transformation journey, dividing it into "Today," "Medium-Term," and "Long-Term" phases. The company emphasized its progress in portfolio rationalization, improved operations and technology, and strengthened balance sheet, while acknowledging that growth remains negative and margins are held back by growth challenges and price compression.
The transformation roadmap highlights Conduent’s strategic priorities:
CEO Cliff Skelton provided an update on progress across business segments, noting that the company is "well-positioned with the New Administration’s focus on efficiency and fraud." He highlighted that new business TCV sales were up 96% versus the prior year, with 10 new logos added to the client base and new capability ACV sales up 4X year-over-year.
Sales metrics showed encouraging momentum, with new business ACV increasing from $96 million in Q1 2024 to $109 million in Q1 2025, and new business TCV growing from $143 million to $280 million over the same period:
The company is placing particular emphasis on government efficiency support through fraud reduction tools, positioning itself to benefit from increased government focus on preventing benefit fraud:
Forward-Looking Statements
For full-year 2025, Conduent maintained its outlook with adjusted revenue expected to be between $3,100 million and $3,250 million, and adjusted EBITDA margin projected at 4.5% to 5.5%. The company continues to target 2025 exit rates of $3,200-$3,300 million in adjusted revenue with an adjusted EBITDA margin of approximately 8%.
The following table details Conduent’s financial outlook:
Adjusted free cash flow is expected to improve from $(59) million in FY 2024 to between $0 million and $40 million in 2025, with interest expense projected to decrease from $75 million to $45 million, reflecting the company’s debt reduction efforts.
The segment revenue outlook shows expectations for modest growth by the end of 2025, with the Commercial segment projected to grow 3-5%, Government segment around 3%, and Transportation segment approximately 4%:
While Conduent faces continued revenue challenges in the near term, management remains focused on its strategic transformation and portfolio optimization to improve profitability and position the company for future growth. The company’s ability to execute on these initiatives will be critical to achieving its ambitious 2025 exit rate targets and reversing the negative growth trend that has pressured its stock price.
Full presentation:
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