Question · Q4 2025
Matt Swoope from Baird questioned the extent to which Conduent's existing revenue stream is exposed to AI disruptors and other technology threats. He also asked for clarification on bridging the gap between CEOs regarding 2025 exit rates, particularly the negative free cash flow, and how to model for 2026. Additionally, he inquired about the timing and magnitude of portfolio rationalization compared to past targets and whether bond buybacks would fit into the capital allocation strategy given current bond trading levels.
Answer
CEO Harsha Agadi estimated that roughly 15-20% of the business might be exposed to AI disruption, acknowledging it's a moving target and emphasizing the need to move quickly or partner. He noted that the commercial segment might be disrupted faster than transportation or government. CFO Giles Goodburn added that Conduent is shoring up its 'moat' with its own AI capabilities across platforms. Regarding free cash flow, Mr. Goodburn stated that while 2025 ended negatively, the destination of improving EBITDA margins and positive free cash flow hasn't changed, with acceleration expected under Mr. Agadi. Mr. Agadi expressed determination to achieve positive free cash flow in 2026, though not as guidance. For portfolio rationalization, Mr. Agadi clarified it's a high priority, with existing efforts being accelerated and new opportunities being reviewed simultaneously, involving bankers to expedite the process. On capital allocation, Mr. Agadi suggested that bond buybacks might be more lucrative than share buybacks given current trading yields, but a thorough analysis would be conducted.
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