Conduent Q2 2025 slides: EBITDA margin improves amid continued revenue decline

Conduent Inc (NASDAQ:CNDT) presented its second-quarter 2025 financial results on August 6, revealing improved profitability metrics despite ongoing revenue challenges. The business process services provider reported progress on its strategic portfolio rationalization while showing signs of stabilizing revenue trends.

Quarterly Performance Highlights

Conduent reported adjusted revenue of $754 million for Q2 2025, representing a 2.6% year-over-year decline, which was in line with the company’s guidance but fell short of analyst expectations of $777 million. Despite the revenue shortfall, the company’s adjusted EBITDA increased significantly to $37 million from $24 million in the same period last year, resulting in an adjusted EBITDA margin of 4.9%, up from 3.1% in Q2 2024.

As shown in the following financial highlights chart, the company’s revenue decline rate has been improving compared to previous quarters:

The company’s new business metrics showed positive momentum, with Annual Contract Value (ACV) signings increasing to $150 million from $141 million in Q2 2024. Total (EPA:TTEF) Contract Value (TCV) signings saw a more substantial improvement, rising to $331 million from $273 million in the prior-year period.

The following chart illustrates the company’s key sales metrics:

Segment Analysis

Conduent’s performance varied significantly across its three business segments. The Transportation segment was the only one to achieve revenue growth, increasing by 7.1% year-over-year to $151 million. This growth was partially attributed to a cumulative catch-up adjustment in connection with a Transit contract amendment.

In contrast, the Commercial segment, which represents the largest portion of Conduent’s business, saw revenue decline by 5.9% to $365 million. The Government segment experienced a less severe decline of 2.9% to $238 million, showing improvement from the double-digit declines in previous quarters.

The segment breakdown and performance are illustrated in the following chart:

From a profitability perspective, all segments showed significant changes in adjusted EBITDA. The Transportation segment’s EBITDA increased by 166.7% year-over-year, while the Government segment saw a 22.4% increase. However, the Commercial segment experienced a 25.0% decrease in EBITDA contribution.

Strategic Initiatives

A central focus of Conduent’s strategy has been its portfolio rationalization program, which has progressed according to plan. Phase 1 of this initiative involved three divestitures executed in 2024, generating $778 million in net proceeds. The company has identified additional opportunities in Phase 2 that could represent up to $350 million in further proceeds.

The following chart details the progress of Conduent’s portfolio rationalization and capital allocation:

The company has deployed approximately 85% of its $1 billion capital allocation target, repurchasing around 64 million shares and repaying $639 million of debt. Conduent ended the quarter with $294 million in cash and a net adjusted leverage ratio of 2.7x.

CEO Cliff Skelton emphasized the company’s strategic initiatives during the presentation, highlighting AI implementations, open payment solutions in Transit, and go-to-market changes in the Commercial segment. The company also noted recent recognition, including a GM Supplier of the Year Award and inclusion in Newsweek’s Top 100 Global Most Loved Workplaces for the third consecutive year.

As outlined in the CEO update:

Financial Outlook

Looking ahead, Conduent maintained its full-year 2025 guidance, projecting adjusted revenue between $3.1 billion and $3.2 billion, with an adjusted EBITDA margin of 5.0% to 5.5%. The company also provided a mid-term outlook for its 2025 exit rates, targeting adjusted revenue of $3.2 billion to $3.3 billion and a significantly improved adjusted EBITDA margin of approximately 8%.

The company’s financial outlook is summarized in the following chart:

Adjusted free cash flow for fiscal year 2025 is expected to be between $0 million and $40 million, with projected improvement to $60-$80 million for the 2025 exit rates.

In pre-market trading following the results, Conduent’s stock rose 4.47% to $2.57, suggesting investor optimism about the company’s improving profitability and strategic direction despite the revenue challenges. The stock remains closer to its 52-week low of $1.90 than its high of $4.90, indicating potential room for recovery if the company continues to execute on its strategic initiatives and profitability improvements.

Full presentation:

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