0001677703-26-000059
SEC filingRevenue declined 4% YoY to $723M, driven by Commercial segment losses, partially offset by Government and Transportation growth.
For the three months ended March 31, 2026, Conduent reported revenue of $723 million, a 4% decline from $751 million in the prior year period. The decrease was primarily driven by lost business and lower volumes in the Commercial segment, partially offset by new business ramp in Government and Transportation. Net loss improved to $33 million from $51 million in Q1 2025, reflecting a $29 million improvement in pre-tax income. Gross margin (calculated as revenue less cost of services excluding D&A) improved to 18.8% from 17.7%, driven by cost optimization. Operating margin improved to -3.7% from -7.5%, a 380 bps improvement, largely due to the absence of $25 million in cyber event costs and lower SG&A. Adjusted EBITDA rose to $49 million (6.8% margin) from $37 million (4.9% margin), supported by cost efficiencies and the non-recurrence of cyber response costs.
Commercial segment revenue fell 10% YoY to $361 million, reflecting contract losses and lower volumes, partially offset by new business ramp. Despite the revenue decline, segment profit improved to $22 million from $16 million, driven by cost efficiencies implemented in the second half of 2025, including lower fixed technology overhead. Adjusted EBITDA margin improved to 11.9% from 10.0%.
Government segment revenue increased to $226 million from $216 million, driven by new business ramp, price increases, and a discrete benefit. The prior year included negative impacts from service level dispute reserves. Segment profit more than doubled to $47 million from $28 million, and Adjusted EBITDA margin expanded to 26.1% from 17.6%, reflecting revenue growth and cost efficiencies.
Transportation segment revenue grew modestly to $136 million from $133 million, supported by increased volumes, favorable FX, and new business ramp, partially offset by lost business and the absence of prior year discrete revenue from a congestion charging contract go-live. Segment profit swung to a loss of $11 million from a loss of $2 million, and Adjusted EBITDA margin declined to -2.9% from 4.5%, driven by higher contract costs and the absence of high-margin discrete revenue.
Management emphasized continued focus on targeted growth areas, portfolio rationalization, and operational efficiency. The company successfully completed a large Medicaid implementation and an intelligent automation solution for a marquee client, signaling execution capability. The total new business pipeline grew to $3.5 billion from $3.2 billion, and new business ACV signings increased 5% to $114 million. The company expects sufficient liquidity from cash ($228 million), operating cash flow, and a $357 million revolving credit facility to meet obligations for at least 12 months. No formal guidance was provided for future periods.
As of March 31, 2026, Conduent held $228M in cash and cash equivalents, with total debt of $721M ($23M current + $698M long-term). Net debt (cash minus total debt) is -$493M. Shareholders' equity stood at $641M, down from $685M at year-end 2025, primarily due to net loss and other comprehensive loss. The current ratio (current assets $1,088M / current liabilities $685M) is 1.59x, indicating adequate short-term liquidity. Goodwill remains $614M.
Conduent reported $1.2B in remaining performance obligations (RPO) as of March 31, 2026, representing estimated future revenue from contracts. Approximately 75% of this backlog is expected to be recognized over the next two years. Additionally, the company had $578M in outstanding surety bonds and $123M in letters of credit securing contractual performance (Note 11). These off-balance-sheet commitments are typical for government and transportation contracts.
Conduent's capital allocation in Q1 2026 focused on debt management and minimal capex. The company drew $60M from its revolver and repaid $25M, netting a $35M increase in revolver borrowings. Combined with $5M in other debt repayments, total debt principal increased by $34M. No share buybacks were executed; the preferred stock dividend of $2M was declared but not paid in cash (reflected in retained earnings reduction). Capital expenditures totaled $14M ($9M equipment + $5M software), representing 1.94% of revenue, a decline from the prior year's $18M.
Segment results (Note 4) show Commercial generated $361M revenue (down 10.2% YoY) with a 6.1% segment margin. Government revenue grew 4.6% to $226M, with a strong 20.8% margin. Transportation revenue increased 2.3% to $136M but posted a segment loss of -8.1% margin. Unallocated costs of $60M (including $4M former CEO separation costs and a $3M stock compensation benefit) weighed on overall profitability. No geographic breakdown was disclosed.
Operating cash flow (CFO) improved significantly year-over-year, from -$58M to -$8M, despite a net loss of -$33M (vs. -$51M in Q1 2025). The improvement was driven by favorable working capital changes, particularly a $16M swing in accounts receivable (from +$16M to -$1M) and a $19M improvement in other current and long-term liabilities. Depreciation and amortization remained stable at $47M, providing a non-cash buffer. Deferred income taxes were a -$2M use, compared to -$8M in the prior year.
Capital expenditures (capex) totaled $14M, down from $18M in Q1 2025, reflecting disciplined spending on property, equipment, and internal-use software. Free cash flow (CFO minus capex) was -$22M, an improvement from -$76M in the prior year. The company did not repurchase any shares and paid no preferred dividends in Q1 2026 (vs. $2M in Q1 2025). Financing activities provided $30M, primarily from net borrowings under the revolving credit facility ($35M net).
Overall, cash flow quality improved due to better working capital management and reduced capex, though the company remains in a net cash consumption position. The $8M increase in cash and restricted cash to $251M provides a modest liquidity cushion.