Conduent Q3 Revenue Falls 11.7% as Margin Expands

Conduent Inc. (NASDAQ: CNDT) reported lower third-quarter 2026 revenue but stronger adjusted profitability from continuing operations, as cost-efficiency measures helped offset contract losses, reduced volumes and lost business. Revenue fell 11.7% year over year to $534 million, while adjusted EBITDA rose 16.1% to $36 million and adjusted EBITDA margin expanded to 6.7% from 5.1%.

The business-services provider posted a GAAP loss from continuing operations of $40 million, compared with a $42 million loss a year earlier. Diluted loss per share from continuing operations was $0.27, unchanged from the prior-year period. On an adjusted basis, the net loss from continuing operations was $15 million, or $0.11 per diluted share, compared with $14 million, or $0.11 per share, in the third quarter of 2025.

Cost savings support margins as segment revenue declines

Commercial revenue declined 5% to $308 million, primarily because of lost business and lower volumes, partly offset by the ramp-up of new business. Commercial adjusted EBITDA decreased 5% to $29 million, and the segment’s margin fell 70 basis points to 9.4%. Conduent said cost-efficiency programs partly offset the effect of the revenue decline.

Government revenue dropped 16.1% to $226 million as contract losses and lower volumes outweighed new-business ramps. Despite the revenue contraction, Government adjusted EBITDA increased 3.3% to $63 million. Its margin rose 230 basis points to 27.9%, reflecting cost efficiencies and lower expenses.

Unallocated costs improved 21.6% to $56 million, driven primarily by efficiencies in corporate functions. Conduent said it has identified $106 million of its $120 million cost-savings target and has significantly reduced capital expenditures. Capital expenditures represented 2.8% of quarterly revenue.

New-business annual contract value signings from continuing operations were $61 million, down from $70 million a year earlier. New-business total contract value declined to $117 million from $134 million, while total contract value signings, including renewals, were $349 million. The company reported a qualified pipeline of $2.9 billion and identified converting that pipeline into revenue as a management priority.

Cash outflow and leverage remain constraints

Adjusted free cash flow was negative $117 million in the quarter, compared with negative $54 million a year earlier. Operating cash flow was negative $107 million, while free cash flow was negative $116 million.

Conduent ended the quarter with $295 million in total cash. Its adjusted net leverage ratio increased to 2.9 times from 2.2 times at the end of 2025. The company reported $327 million outstanding under its revolving credit facility as of Sept. 30.

On Oct. 23, Conduent completed a refinancing that provided $447 million of revolving credit commitments maturing in May 2029, including $90 million of additional commitments. Management said the transaction strengthened liquidity and financial flexibility.

Portfolio reshaping and multi-year outlook

Conduent completed the sale of its Public Transit business to Modaxo for $164 million and continues to work toward an expected year-end closing of the Tolling divestiture. Together, the transactions represent the company’s exit from Transportation, and the related businesses are reported as discontinued operations. Conduent is focusing its continuing operations on its Commercial and Government businesses.

For full-year 2026, management expects revenue of $2.15 billion to $2.25 billion and adjusted EBITDA from continuing operations of $140 million to $170 million, representing an adjusted margin of 6.5% to 7.6%. Adjusted free cash flow is expected to remain negative, while the company targets a 2.5-times net leverage ratio.

The company’s three-year outlook calls for 2027 revenue of $2.15 billion to $2.25 billion and adjusted EBITDA of $170 million to $200 million, with adjusted free cash flow turning positive. For 2028, Conduent projects revenue of $2.25 billion to $2.35 billion, adjusted EBITDA of $210 million to $250 million and an adjusted EBITDA margin of 9.3% to 10.6%. Its 2028 net leverage target is 1.5 times.

Management also established an enterprise AI Center of Excellence to prioritize high-value opportunities, develop reusable capabilities and governance, and scale validated AI solutions across the company. Its broader priorities include simplifying the organization, strengthening leadership and improving accountability.

The outlook depends on Conduent’s ability to convert its pipeline, renew major commercial and government contracts, realize planned cost savings and execute its transformation. Other disclosed risks include the timing and completion of the Tolling sale, receipt of holdback amounts from the Transit transaction, government spending changes, significant debt, receivables collection, information-system disruptions and legal or insurance outcomes related to the January 2025 cyber event.