Executive Summary

Q1 2025 revenue was $751M and Adjusted EBITDA margin was 4.9%, reflecting improved profitability despite lower year-over-year revenue and maintained FY25 outlook; management called it “a good start to 2025” with margin ahead of expectations . Versus S&P Global consensus, revenue missed ($751M vs $776M*) while Primary EPS (proxying to adjusted EPS) beat (-$0.13 vs -$0.23*) .
Government and Transportation dynamics drove mix: Government revenue fell on a lapped contract termination and reserve-related one-time items (~$8M impact), while Transportation improved margins and contributed via NYC congestion pricing implementation .
Management reiterated portfolio rationalization, targeting in excess of $1B of deployable capital and pursuing another ~$350M of asset proceeds to narrow focus, reduce debt, and support capital allocation flexibility .
Catalysts: maintained FY25 guide (Adj. Revenue $3.10–$3.25B; Adj. EBITDA margin 4.5%–5.5%) ; AI-driven fraud prevention traction and Conduent’s Vector platform role in NYC congestion pricing; potential additional divestitures; and improving sales metrics (ACV, Net ARR) .

Estimates marked with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well
- Profitability resilience: Adjusted EBITDA rose to $37M with margin up 50 bps YoY to 4.9%, ahead of internal expectations . CEO: “Adjusted EBITDA margins exceeded expectations” .
- Transportation margin recovery: Revenue down 7.6% YoY to $133M, but adjusted EBITDA rose to $6M and margin to 4.5% (+380 bps YoY), aided by operational execution and absence of prior-year termination costs .
- Sales momentum and forward indicators: New business ACV increased 14% YoY to $109M; Net ARR Activity Metric (TTM) improved to $116M; management expects a “relatively strong Q2 in sales” .
What Went Wrong
- Top-line pressure: Adjusted revenue declined 8.5% YoY to $751M (GAAP revenue -18.5% YoY due to 2024 divestiture gains), with Government segment down 16% driven by a large healthcare contract terminated in Q1 2024 and reserves (~$8M top and bottom) .
- Cash flow softness: Operating cash flow of $(58)M and Adjusted FCF of $(74)M, with management noting YoY comparisons are distorted by 2024 tax refunds/divestiture contributions; normalized performance better than Q1 2024 .
- Cyber event costs: Incurred ~$3M and accrued ~$22M of costs related to the January 2025 cyber event; however, operations impact was minimal and protections have been remediated .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025	Q1 2025 Consensus*
Revenue ($M)	$807	$800	$751	$776*
Adjusted Revenue ($M)	$781	$800	$751	—
GAAP Diluted EPS ($)	$0.72	$(0.09)	$(0.33)	$(0.23)* (Primary EPS)
Adjusted Diluted EPS ($)	$(0.14)	$(0.15)	$(0.13)	$(0.23)* (Primary EPS)
Adjusted EBITDA ($M)	$32	$32	$37	$15.7* (EBITDA)
Adjusted EBITDA Margin (%)	4.1%	4.0%	4.9%	—
Cash from Operating Activities ($M)	$(13)	$41	$(58)	—
Adjusted Free Cash Flow ($M)	$(6)	$62	$(74)	—

Notes: S&P Global consensus figures marked with *. EBITDA consensus may not be directly comparable to company Adjusted EBITDA (company-adjusted Q1 EBITDA = $37M vs S&P ‘EBITDA actual’ of ~$4M before company adjustments) . Values retrieved from S&P Global.

Segment breakdown (Q1 2025)

Segment	Adjusted Revenue ($M)	Adjusted EBITDA ($M)	Adjusted EBITDA Margin (%)	YoY Revenue
Commercial	$402	n/a (margin only)	10.0%	(4.1)%
Government	$216	$38	17.6%	(16.0)%
Transportation	$133	$6	4.5%	(7.6)%

KPIs and sales indicators

KPI	Q3 2024	Q4 2024	Q1 2025
New Business Signings ACV ($M)	$111	$137	$109
New Business TCV ($M)	—	—	$280
Net ARR Activity Metric (TTM, $M)	$46	$92	$116

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Revenue	FY 2025	$3,100M–$3,250M	$3,100M–$3,250M	Maintained
Adjusted EBITDA Margin	FY 2025	4.5%–5.5%	4.5%–5.5%	Maintained

Additional color: Management expects Q2 2025 revenue to be sequentially higher than Q1 but slightly below Q2 2024, with adjusted EBITDA margin 4.0%–4.5% and top-line growth in H2 2025 as cost programs flow through .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2025)	Trend
AI/technology initiatives	Conni GenAI assistant launched and Azure OpenAI collaboration highlighted (Feb 2025) ; Q3 2024 noted tech awards and open payments expansions	AI used for fraud prevention; language/IVR/portal enhancements; no regulatory hurdles reported	Improving adoption/impact
Supply chain, tariffs, macro	Q4 2024: liquidity strong, modest leverage; 2025 bullish	Largely insulated; minimal tariff exposure in transit equipment supply chain	Stable/limited risk
Portfolio rationalization	2024 divestitures completed; 50% debt reduction vs YE 2023	Targeting another ~$350M of assets; >$1B deployable capital objective; proceeds to reduce debt/repurchases	Continuing/accelerating
Government programs & fraud	Q4 2024: digital payment solutions combat fraud	Fraud prevention line of business; 150% increase in detection of account takeover attempts; EBT chip cards roadmap	Improving traction
Cybersecurity/legal	Not a factor in Q3/Q4 releases	January 2025 cyber event: ~$25M total related cost (incurred/accrued); minimal operational impact; reserve booked	Addressed/remediated
Transportation execution	Q3 2024: open payments in EU cities	NYC congestion pricing go-live via Vector; NJ TRANSIT 3D fare gates contract	Improving execution/pipeline
Sales pipeline/new logos	Q3 2024 ACV $111M; Q4 2024 ACV $137M	Q1 2025 ACV $109M; 10 new logos; pipeline up; expect stronger Q2	Solid, building into Q2

Management Commentary

“Q1 represented a strong start to the year… adjusted EBITDA and EBITDA margin… were ahead of our expectations.” — CEO Cliff Skelton .
“Government ACV was up sequentially again this quarter… New business TCV was up 96% YoY at $280M… Net ARR metric… was positive and sequentially higher… at $116M.” — CFO Giles (Giles) Goodburn .
“Our portfolio rationalization efforts… targeted assets… will generate another $350M of proceeds, then surpassing our $1B target.” — CEO .
“We played an integral role in implementing congestion management pricing in New York City… facilitating toll transactions and payment processing through our Vector platform.” — CFO .
“We increased fraud detection rates and account takeover efforts by 150%… intend to help solve [EBT/SNAP] with chip cards and other fraud prevention capabilities.” — CEO .

Q&A Highlights

State/local government opportunity: Management sees upside as states pursue fraud reduction and administrative efficiencies; Conduent’s role in SNAP and Medicaid eligibility/detection positions it to benefit irrespective of federal policy changes .
Cyber event status: Costs are “baked in”; minimal operational impact; systems restored quickly; ongoing data examination with clients; reserve recorded .
AI regulation: No material regulatory hurdles encountered across commercial and government deployments; AI augments, not replaces, complex people-driven work .
Macro/tariffs exposure: Limited to small elements in transit equipment; Medicaid tech matching rate untouched; close client dialogue continues .
Capital allocation/leverage: Phase II rationalization will mirror Phase I’s balanced approach (debt reduction and reinvestment); net leverage expected to trend toward ~1.5x in H2 and ~1x by YE 2025 .

Estimates Context

Metric (Q1 2025)	Actual	S&P Global Consensus*	Beat/Miss
Revenue ($M)	$751	$776*	Miss ($25M; ~3.2%)
Primary EPS ($)	$(0.13)	$(0.23)*	Beat $0.10

Notes: Primary EPS from S&P Global aligns closely to company “Adjusted Diluted EPS.” S&P’s “EBITDA” (estimate ~$15.7M*, actual ~$4M* before company adjustments) is not directly comparable to company-reported Adjusted EBITDA of $37M for Q1 . Values retrieved from S&P Global.

Where estimates may adjust:

Lower Q1 revenue vs consensus, combined with segment commentary on Government headwinds/reserves, could push near-term revenue estimates modestly lower; however, margin outperformance and reiterated FY25 guide may support EPS/margin estimates .

Key Takeaways for Investors

Margin delivery ahead of plan despite revenue pressure: Adj. EBITDA margin expanded 50 bps YoY to 4.9%, with one-time items net helping margin by ~1 point; focus shifts to sustaining profitability as Government resets .
Transportation execution is a bright spot: NYC congestion pricing and fare-gate wins showcase platform leverage and potential for follow-on adoption in other states and international markets .
Fraud prevention is a tangible AI use case: 150% improvement in detection and an emerging product line in EBT/SNAP create monetizable opportunities with state agencies .
Portfolio actions remain a catalyst: Management is pursuing an additional ~$350M of asset proceeds to surpass the $1B deployable capital target, supporting deleveraging and strategic reinvestment .
FY25 guidance maintained: Adj. Revenue $3.10–$3.25B and Adj. EBITDA margin 4.5%–5.5% underpin a second-half recovery narrative (Q2 sequential growth, H2 top-line and margin expansion) .
Near-term trading lens: Expect debate on revenue trajectory (miss vs consensus) vs. positive margin execution and divestiture optionality; watch Q2 sales conversion and Government reserve normalization for inflection signals .
Risk monitor: Cyber-related costs and any ensuing legal/regulatory developments; volume softness at largest commercial client; residual stranded costs as transitions complete in 2025 .

Estimates marked with * are from S&P Global. Values retrieved from S&P Global.

Appendix: Additional Context And Data Points

FY25 Outlook (unchanged from Q4): Adj. Revenue $3.10–$3.25B; Adj. EBITDA margin 4.5%–5.5% .
Balance sheet: Cash $293M at Q1-end; $550M revolver largely undrawn .
Operating cash flow seasonality: Typically cash users in 1H and generators in 2H; net leverage expected to fall as cost programs land and EBITDA improves in H2 .

CONDUENT Inc (CNDT)·Q1 2025 Earnings Summary