UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
_______________
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2017March 31, 2023
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to
Commission File Number 001-37817
conduentlogoq2a05.jpg
CONDUENT INCORPORATED
(Exact Name of Registrant as specified in its charter)
New York81-2983623
(State or other jurisdiction of

incorporation or organization)
(IRS Employer

Identification No.)
100 Campus Drive,Suite 200E
Florham Park, New Jersey
200,		07932
Florham Park,New Jersey07932
(Address of principal executive offices)(Zip Code)
(844) 663-2638
(Registrant’s telephone number, including area code)
_________________________________________________  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueCNDTNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Small reporting company☐Emerging growth company☐
Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o Emerging Growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o ☐ No ý☒
ClassOutstanding at April 30, 2023
Common Stock,$0.01 par value218,443,105
ClassOutstanding at October 31, 2017
Common Stock, $0.01 par value210,377,257CNDT Q1 2023 Form 10-Q







Conduent Form 10-Q
1






FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (Form 10-Q) and any exhibits to this ReportForm 10-Q may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995.1995 (the "Litigation Reform Act"). These forward-looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available. The words “anticipate,” “believe,” “estimate,” “expect,” "plan," “intend,” “will,” “should”“aim,” “should,” “could,” “forecast,” “target,” “may,” "continue to," "endeavor," "if,” “growing,” “projected,” “potential,” “likely,” "see," "ahead," "further," "going forward," "on the horizon," and similar expressions, as they relate to us, are intended to identify forward-looking statements.statements, but the absence of these words does not mean that a statement is not forward-looking. These statements reflect Management'sour current beliefs, assumptions and expectationsviews with respect to future events and are subject to a numbercertain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied herein as anticipated, believed, estimated, expected or intended or using other similar expressions.
In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors and uncertainties that maycould cause actual results to differ materially. Suchmaterially from those contemplated by the forward-looking statements contained in this Form 10-Q, any exhibits to this Form 10-Q and other public statements we make. Our actual results may vary materially from those expressed or implied in our forward-looking statements.
Important factors and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements include, but are not limited to: government appropriations and termination rights contained in our government contracts; our ability to renew commercial and government contracts, including contracts awarded through competitive bidding processes; our ability to recover capital and other investments in connection with our contracts; our reliance on third-party providers; risk and impact of geopolitical events and increasing geopolitical tensions (such as the war in Ukraine), macroeconomic conditions, natural disasters and other factors (such as pandemics, including coronavirus) in a particular country or region on our workforce, customers and vendors; conditions abroad, including local economics, political environments, fluctuating foreign currencies and shifting regulatory schemes; relying on third party providers; our ability to deliver on our contractual obligations properly and on time; changes in interest in outsourced business process services; claims of infringement of third-party intellectual property rights; our ability to estimate the scope of work or the costs of performance in our contracts; the loss of key senior management and our ability to attract and retain necessary technical personnel and qualified subcontractors; our abilityfailure to deliver ondevelop new service offerings and protect our contractual obligations properly and on time; competitive pressures; our significant indebtedness; changes in interest in outsourced business process services;intellectual property rights; our ability to obtain adequate pricing formodernize our servicesinformation technology infrastructure and to improveconsolidate data centers; the continuing effects of the COVID-19 pandemic on our cost structure; claims of infringement of third-party intellectual property rights;business, operations, financial results and financial condition, which is dependent on developments which are uncertain and cannot be predicted; the failure to comply with laws relating to individually identifiable information and personal health information andinformation; the failure to comply with laws relating to processing certain financial transactions, including payment card transactions and debit or credit card transactions; breaches of our information systems or security systems andor any service interruptions; our ability to estimatecomply with data security standards; developments in various contingent liabilities that are not reflected on our balance sheet, including those arising as a result of being involved in a variety of claims, lawsuits, investigations and proceedings; changes in tax and other laws and regulations; risk and impact of potential goodwill and other asset impairments; our significant indebtedness and the scopeterms of worksuch indebtedness; our failure to obtain or the costs of performance inmaintain a satisfactory credit rating and financial performance; our contracts;ability to receive dividends or other payments from our subsidiaries; our ability to obtain adequate pricing for our services and to improve our cost structure; our ability to collect our receivables, including those for unbilled services; a decline in revenues from, or a loss of, or a reduction in business from or failure of significant clients; fluctuations in our non-recurring revenue; our failure to maintain a satisfactory credit rating; our ability to attract and retain key employees; increases in the cost of telephonevoice and data services or significant interruptions in such services; our failure to develop new service offerings; our ability to receive dividends or other payments from our subsidiaries; changes in tax and other laws and regulations; changes in government regulation and economic, strategic, political and social conditions; changesvolatility of our stock price and the risk of litigation following a decline in U.S. GAAP or other applicable accounting policies;the price of our stock; economic factors such as inflation, the level of economic activity and labor market conditions, as well as rising interest rates; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q as well as in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017 and our 20162022 Annual Report on Form 10-K filed with the Securities and Exchange Commission.Commission (SEC) and any subsequent Quarterly Report on Form 10-Q and Current Report on Form 8-K. Any forward-looking statements made by us in this Quarterly Report on Form 10-Q speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a resultbecause of new information, subsequent events or otherwise.





otherwise, except as required by law.
Conduent
CNDT Q1 2023 Form 10-Q
1







CONDUENT INCORPORATED

FORM 10-Q
September 30, 2017
March 31, 2023
TABLE OF CONTENTS
Page
Financial Statements (Unaudited)
3
Condensed Consolidated Statements of Income (Loss)
3
Condensed Consolidated Statements of Comprehensive Income (Loss)
4
Condensed Consolidated Balance Sheets
5
Condensed Consolidated Statements of Cash Flows
6
Condensed Consolidated Statements of Shareholders' Equity
7
Notes to the Condensed Consolidated Financial Statements
78
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1821
23
Market Risk Management
24
Non-GAAP Financial Measures
24
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
2829
Controls and Procedures
2829
Legal Proceedings
29
29
Unregistered Sales of Equity Securities and Use of Proceeds
2930
Item 6.
Exhibits
29
Exhibits
30
31

For additional information about Conduent Incorporated and access to our Annual Reports to Shareholders and SEC filings, free of charge, please visit our website at www.conduent.com/investor.https://investor.conduent.com/. Any information on or linked from the website is not incorporated by reference into this Form 10-Q.


Conduent
CNDT Q1 2023 Form 10-Q
2






PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED)


CONDUENT INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
 Three Months Ended
March 31,
(in millions, except per share data)20232022
Revenue$922 $967 
Operating Costs and Expenses
Cost of services (excluding depreciation and amortization)720 755 
Selling, general and administrative (excluding depreciation and amortization)111 102 
Research and development (excluding depreciation and amortization)2 1 
Depreciation and amortization61 61 
Restructuring and related costs29 9 
Interest expense27 19 
(Gain) loss on divestitures and transaction costs, net2 (163)
Litigation settlements (recoveries), net(21)(28)
Other (income) expenses, net(1)1 
Total Operating Costs and Expenses930 757 
Income (Loss) Before Income Taxes(8)210 
Income tax expense (benefit)(2)74 
Net Income (Loss)$(6)$136 
Net Income (Loss) per Share:
Basic$(0.04)$0.62 
Diluted$(0.04)$0.61 
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in millions, except per-share data) 2017 2016 2017 2016
Revenues        
Revenue $1,470
 $1,585
 $4,497
 $4,856
Related party 10
 11
 32
 38
Total Revenues 1,480
 1,596
 4,529
 4,894
         
Cost of services 1,210
 1,319
 3,742
 4,079
Related party cost of services 9
 9
 24
 28
Gross Margin 261
 268
 763
 787
         
Operating Costs and Expenses        
Research and development 4
 7
 11
 25
Selling, general and administrative 144
 164
 466
 517
Restructuring and related costs 22
 8
 76
 57
Amortization of intangible assets 60
 63
 182
 200
Interest expense 35
 1
 105
 3
Related party interest —
 10
 —
 30
Separation costs 2
 15
 8
 34
(Gain) loss on sale of asset and businesses (16) —
 (41) 1
Other (income) expenses, net (3) (2) (24) 6
Total Operating Costs and Expenses 248
 266
 783
 873
         
Income (Loss) before Income Taxes 13
 2
 (20) (86)
Income tax expense (benefit) 30
 1
 11
 (54)
(Loss) Income from Continuing Operations (17) 1
 (31) (32)
Income from discontinued operations, net of tax —
 —
 4
 —
Net (Loss) Income $(17) $1
 $(27) $(32)
         
Basic Earnings (Loss) per Share:        
Continuing operations $(0.09) $0.01
 $(0.19) $(0.16)
Discontinued operations —
 —
 0.02
 —
Total Basic (Loss) Income per Share $(0.09) $0.01
 $(0.17) $(0.16)
         
Diluted Earnings (Loss) per Share:        
Continuing operations $(0.09) $0.01
 $(0.19) $(0.16)
Discontinued operations —
 —
 0.02
 —
Total Diluted (Loss) Income per Share $(0.09) $0.01
 $(0.17) $(0.16)


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


Conduent
CNDT Q1 2023 Form 10-Q
3






CONDUENT INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 Three Months Ended
March 31,
(in millions)20232022
Net Income (Loss)$(6)$136 
Other Comprehensive Income (Loss), Net(1)
Currency translation adjustments, net17 (5)
Unrecognized gains (losses), net1 (1)
Other Comprehensive Income (Loss), Net18 (6)
Comprehensive Income (Loss), Net$12 $130 
__________
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in millions) 2017 2016 2017 2016
Net (Loss) Income $(17) $1
 $(27) $(32)
         
Other Comprehensive Income (Loss), Net(1):
 
 
 
 
Translation adjustments, net 8
 (10) 34
 (25)
Unrealized gains, net —
 —
 2
 1
Changes in defined benefit plans, net —
 1
 —
 2
Other Comprehensive Income (Loss), Net 8
 (9) 36
 (22)
         
Comprehensive (Loss) Income, Net $(9) $(8) $9
 $(54)
(1)All amounts are net of tax. Tax effects were immaterial.

(1) Refer to Note 10 - Other Comprehensive Income (Loss) for gross components of Other Comprehensive Income (Loss), reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects.



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.





Conduent
CNDT Q1 2023 Form 10-Q
4




CONDUENT INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share data in thousands)March 31, 2023December 31, 2022
Assets
Cash and cash equivalents$526 $582 
Accounts receivable, net590 630 
Contract assets163 171 
Other current assets277 242 
Total current assets1,556 1,625 
Land, buildings and equipment, net259 266 
Operating lease right-of-use assets192 197 
Intangible assets, net37 39 
Goodwill965 955 
Other long-term assets494 489 
Total Assets$3,503 $3,571 
Liabilities and Equity
Current portion of long-term debt$38 $35 
Accounts payable176 228 
Accrued compensation and benefits costs174 197 
Unearned income79 81 
Other current liabilities375 382 
Total current liabilities842 923 
Long-term debt1,277 1,277 
Deferred taxes85 83 
Operating lease liabilities158 160 
Other long-term liabilities70 69 
Total Liabilities2,432 2,512 
Contingencies (See Note 12)
Series A convertible preferred stock142 142 
Common stock2 2 
Additional paid-in capital3,926 3,924 
Retained earnings (deficit)(2,551)(2,543)
Accumulated other comprehensive loss(448)(466)
Total Equity929 917 
Total Liabilities and Equity$3,503 $3,571 
Shares of common stock issued and outstanding218,443 218,348 
Shares of series A convertible preferred stock issued and outstanding120 120 
(in millions, except share data in thousands) September 30,
2017		 December 31,
2016
Assets    
Cash and cash equivalents $468
 $390
Accounts receivable, net 1,380
 1,286
Net receivable from former parent company 31
 —
Other current assets 233
 241
Total current assets 2,112
 1,917
Land, buildings and equipment, net 249
 283
Intangible assets, net 959
 1,144
Goodwill 3,899
 3,889
Other long-term assets 328
 476
Total Assets $7,547
 $7,709
     
Liabilities and Equity    
Short-term debt and current portion of long-term debt $71
 $28
Accounts payable 147
 164
Accrued compensation and benefits costs 221
 269
Unearned income 184
 206
Net payable to former parent company —
 124
Other current liabilities 591
 611
Total current liabilities 1,214
 1,402
Long-term debt 1,991
 1,913
Pension and other benefit liabilities 151
 172
Deferred taxes 605
 619
Other long-term liabilities 132
 173
Total Liabilities 4,093
 4,279
     
Contingencies (See Note 11) 

 

Series A Convertible Preferred Stock 142
 142
     
Common Stock 2
 2
Additional paid-in-capital 3,834
 3,812
Retained deficit (34) —
Accumulated other comprehensive loss (490) (526)
Total Equity 3,312
 3,288
Total Liabilities and Equity $7,547
 $7,709
     
Shares of common stock issued and outstanding 210,372
 202,875
Shares of Series A convertible preferred stock issued and outstanding 120
 120


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 

Conduent
CNDT Q1 2023 Form 10-Q
5




CONDUENT INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Three Months Ended
March 31,
(in millions)20232022
Cash Flows from Operating Activities:
Net income (loss)$(6)$136 
Adjustments required to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization61 61 
Contract inducement amortization1 — 
Deferred income taxes(8)31 
Amortization of debt financing costs1 1 
(Gain) loss on divestitures and sales of fixed assets, net— (164)
Stock-based compensation2 2 
Changes in operating assets and liabilities:
Accounts receivable42 27 
Other current and long-term assets(33)(69)
Accounts payable and accrued compensation and benefits costs(65)(33)
Other current and long-term liabilities(9)(17)
Net change in income tax assets and liabilities2 36 
Net cash provided by (used in) operating activities(12)11 
Cash Flows from Investing Activities:
Cost of additions to land, buildings and equipment(11)(34)
Cost of additions to internal use software(11)(16)
Proceeds from divestitures— 323 
Net cash provided by (used in) investing activities(22)273 
Cash Flows from Financing Activities:
Payments on revolving credit facility— (100)
Payments on debt(10)(8)
Taxes paid for settlement of stock-based compensation(7)— 
Dividends paid on preferred stock(2)(2)
Net cash provided by (used in) financing activities(19)(110)
Effect of exchange rate changes on cash, cash equivalents and restricted cash2 (1)
Increase (decrease) in cash, cash equivalents and restricted cash(51)173 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period598 420 
Cash, Cash Equivalents and Restricted Cash at End of period(1)
$547 $593 
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in millions) 2017 2016 2017 2016
Cash Flows from Operating Activities:        
Net (loss) income $(17) $1
 $(27) $(32)
Adjustments required to reconcile net loss to cash flows from operating activities:        
Depreciation and amortization 123
 135
 378
 417
Deferred tax expense (benefit) 24
 (35) (7) (11)
Gain on investments (3) (3) (10) (6)
Amortization of debt financing costs 3
 —
 7
 —
Net (gain) loss on sale of asset and businesses (16) —
 (48) 1
Stock-based compensation 8
 8
 26
 18
Changes in operating assets and liabilities:        
Increase in accounts receivable, net (6) (27) (76) (137)
Decrease (increase) in other current and long-term assets 12
 2
 (34) (64)
Decrease in accounts payable and accrued compensation (1) (15) (86) (154)
Increase (decrease) in restructuring liabilities 1
 (17) 25
 8
Decrease in other current and long-term liabilities (26) (74) (80) (164)
Net change in income tax assets and liabilities 5
 167
 3
 91
Other operating, net (3) (2) (6) (5)
Net cash provided by (used in) operating activities 104
 140
 65
 (38)
Cash Flows from Investing Activities:        
Cost of additions to land, buildings and equipment (20) (31) (57) (86)
Proceeds from sales of land, buildings and equipment —
 —
 33
 —
Cost of additions to internal use software (11) (11) (26) (31)
Proceeds (payments) from sale (purchase) of businesses 56
 (1) 56
 (54)
Proceeds from investments 117
 —
 117
 —
Net payments on related party notes receivable —
 43
 —
 43
Other investing (1) (1) (1) (1)
Net cash provided by (used in) investing activities 141
 (1) 122
 (129)
Cash Flows from Financing Activities:        
Proceeds on long term debt —
 2
 306
 6
Debt issuance fee payments —
 ���
 (9) —
Payments on debt (79) (6) (232) (18)
Net (payments to) transfer from former parent —
 (145) (161) 190
Employee stock plans (tax) / proceeds, net (3) —
 (5) —
Dividends paid on preferred stock (2) —
 (7) —
Other financing (2) —
 (3) (1)
Net cash (used in) provided by financing activities (86) (149) (111) 177
Effect of exchange rate changes on cash and cash equivalents —
 (2) 2
 (2)
Increase (decrease) in cash and cash equivalents 159
 (12) 78
 8
Cash and cash equivalents at beginning of period 309
 160
 390
 140
Cash and Cash Equivalents at End of Period $468
 $148
 $468
 $148
 ___________

(1)Includes $21 million and $5 million of restricted cash as of March 31, 2023 and 2022, respectively, that were included in Other current assets on their respective Condensed Consolidated Balance Sheets.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Conduent
CNDT Q1 2023 Form 10-Q
6




CONDUENT INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Three Months Ended March 31, 2023
(in millions)Common StockAdditional Paid-in CapitalRetained Earnings (Deficit)
AOCL(1)
Shareholders'
Equity
Balance at December 31, 2022$2 $3,924 $(2,543)$(466)$917 
Dividends - preferred stock, $20/share— — (2)— (2)
Stock incentive plans, net— 2 — — 2 
Comprehensive Income (Loss):
Net Income (Loss)— — (6)— (6)
Other comprehensive income (loss), net— — — 18 18 
Total Comprehensive Income (Loss), Net— — (6)18 12 
Balance at March 31, 2023$2 $3,926 $(2,551)$(448)$929 

Three Months Ended March 31, 2022
(in millions)Common StockAdditional Paid-in CapitalRetained Earnings (Deficit)
AOCL(1)
Shareholders'
Equity
Balance at December 31, 2021$2 $3,910 $(2,351)$(429)$1,132 
Dividends - preferred stock, $20/share— — (2)— (2)
Stock incentive plans, net— 2 — — 2 
Comprehensive Income (Loss):
Net Income (Loss)— — 136 — 136 
Other comprehensive income (loss), net— — — (6)(6)
Total Comprehensive Income (Loss), Net— — 136 (6)130 
Balance at March 31, 2022$2 $3,912 $(2,217)$(435)$1,262 



 ___________
(1)AOCL - Accumulated other comprehensive loss. Refer to Note 11 – Accumulated Other Comprehensive Loss for the components of AOCL.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
CNDT Q1 2023 Form 10-Q
7



Note 1 – Basis of Presentation
References herein to “we,” “us,” “our,” the “Company” and “Conduent” refer to Conduent Incorporated and its consolidated subsidiaries unless the context suggests otherwise.
The condensed balance sheet asDescription of December 31, 2016 has been derived from audited financial statementsBusiness
Conduent Incorporated is a New York corporation, organized in 2016. As a global technology-led business process solutions company, Conduent delivers digital business solutions and services spanning the commercial, government and transportation spectrum – creating exceptional outcomes for its clients and the millions of people who count on them. Through a dedicated global team of associates, process expertise, and advanced technologies, Conduent’s solutions and services digitally transform its clients’ operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs.
Basis of Presentation
The unaudited interim condensed financial statementsCondensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant(U.S. GAAP) on a basis consistent with reporting interim financial information in accordance with instructions to those rulesForm 10-Q and regulations, althoughArticle 10 of Regulation S-X of the Company believes that the disclosures made are adequate to makeSecurities and Exchange Commission (SEC). Accordingly, they do not include all of the information not misleading. You should read theseand notes required by U.S. GAAP for complete financial statements. The year-end Condensed Consolidated Financial Statements, and notes thereto, in conjunction withBalance Sheet was derived from the audited Consolidated Financial Statements included in our 2016the Company's Annual Report.
Report on Form 10-K for the year ended December 31, 2022. Certain reclassifications have been made to prior year information to conform to current year presentation. Intercompany balances and transactions have been eliminated. In ourthe opinion of management, all adjustments which are necessary for a fair statement of the financial position, operating results of operations and cash flows for the interim periods presented have been made. These adjustments consist of normal recurring items. InterimThe interim results of operations are not necessarily indicative of the results of the full year. For convenienceThese financial statements should be read in conjunction with the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
In the first quarter of 2023, the Company identified an error and easerecorded an out-of-period adjustment to correct the recognition of reference, we referrevenue on a Government segment contract that originated in 2020 and impacted all quarterly periods through December 31, 2022. This adjustment resulted in a reduction to revenue and income (loss) before income taxes of $7 million and a corresponding decrease to accounts receivable of $1 million and an increase to other current liabilities of $6 million in the first quarter of 2023. The Company evaluated the impact of the out-of-period adjustment and concluded it was not material to any previously issued interim or annual consolidated financial statements and the adjustment is not expected to be material to the financial statement caption “Income (Loss) before Income Taxes ” as “pre-tax income (loss)”.

Separation from Xerox Corporation
Onyear ending December 31, 2016, Conduent Incorporated spun-off2023.
The Company has evaluated subsequent events through May 3, 2023, and no material subsequent events were identified.
Use of Estimates
Preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from Xerox Corporation (Xerox), pursuantthese estimates. On an ongoing basis, the Company evaluates its estimates, including those related to fair values of financial instruments, goodwill and intangible assets, income taxes and contingent liabilities, among others. The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the Separationresults of which form the basis for making judgments about the carrying values of assets and Distribution Agreement. The separation was completed by wayliabilities.
As of a pro rata distributionMarch 31, 2023, the effects of Conduent Incorporated shares held by Xeroxglobal macroeconomic and geopolitical uncertainty on the Company's business, results of operations and financial condition continue to Xerox’s shareholders.evolve. As a result, many of the spin-off, we now operate as an independent, publicly traded company onCompany's estimates and assumptions continue to require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the New York Stock Exchange, underCompany's estimates may change materially in the ticker "CNDT".future.
Prior to December 31, 2016, the Financial Statements of the Company were derived from the Consolidated Financial Statements and accounting records of Xerox as if the Company operated on a standalone basis and were prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and pursuant to the rules and regulations of the SEC. Historically, the Company consisted of the Business Process Outsourcing Operating segment within Xerox’s reportable Services segment and did not operate as a separate, standalone company. Accordingly, Xerox had reported the financial position and the related results of operations, cash flows and changes in equity of the Company in Xerox’s Consolidated Financial Statements.
CNDT Q1 2023 Form 10-Q

8


Note 2 – Recent Accounting Pronouncements

The Company's significant accounting policies are described in Note 1 – Basis of Presentation and Summary of Significant Accounting Policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
New Accounting Standards Adopted
The Company has not adopted any new accounting standards in 2023 that had a material impact on its Consolidated Financial Statements.
New Accounting Standards To Be Adopted

The Company has considered all recent accounting standards issued, but not yet effective, and does not expect any to have a material impact on its Consolidated Financial Statements.

Note 3 – Revenue Recognition: In May 2014, the Financial Accounting Standards Board (FASB) updated the accounting guidance related to
Disaggregation of Revenue
The following table provides information about disaggregated revenue recognition to clarify the principles for recognizing revenue and replaces all existing revenue recognition guidance in U.S. GAAP with one accounting model. The core principle of the guidance is that an entity should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated guidance also requires additional qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers largely on a disaggregated basis. We continue to evaluate the adoption impact of the updated accounting guidance on our financial statements, disclosures and internal controls. However, we do expect that the new guidance could impact (1)by major service offering, the timing of revenue recognition associated with certain contract modifications; (2) revenue associated with postage recognized onand a net basis versus the current gross treatment, (3) certain volume discounts, and (4) timingreconciliation of the amortization of contract acquisition costs. We will adopt this updated accounting guidance beginning January 1, 2018 usingdisaggregated revenue by reportable segment. Refer to Note 4 – Segment Reporting for additional information on the modified retrospective method under which we will recognize a cumulative-effect adjustment at the date of adoption supplemented with disclosures.Company's reportable segments.

Three Months Ended
March 31,
(in millions)20232022
Commercial:
Customer experience management$177 $161 
Business operations solutions135 151 
Healthcare claims and administration solutions90 90 
Human capital solutions106 110 
Total Commercial508 512 
Government:
Government healthcare solutions143 145 
Government services solutions121 141 
Total Government264 286 
Transportation:
Road usage charging & management solutions75 76 
Transit solutions40 49 
Curbside management solutions19 19 
Public safety solutions14 16 
Commercial vehicles2 2 
Total Transportation150 162 
Divestitures— 7 
Total Consolidated Revenue$922 $967 
Timing of Revenue Recognition:
Point in time$27 $19 
Over time895 948 
Total Revenue$922 $967 

Conduent
CNDT Q1 2023 Form 10-Q
79




Contract Balances
Leases: In February 2016,The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the FASB updatedright to consideration becomes unconditional. Contract assets are the accounting guidance relatedCompany’s rights to leases requiring lesseesconsideration for services provided when the right is conditioned on something other than passage of time (for example, meeting a milestone for the right to recognize a right-of-use asset and a lease liability onbill under the balance sheet for all leases except short term leases (lease termcost-to-cost measure of 12 months or less)progress). Contract assets are transferred to Accounts receivable, net when the rights to consideration become unconditional. Unearned income includes payments received in advance of performance under the contract, which are realized when the associated revenue is recognized under the contract.
The accounting for lessors is largely unchanged. This updated guidance is effective for us beginning January 1, 2019, with early adoption permitted. This guidance must be adopted using a modified retrospective approach through a cumulative-effect adjustment for leases that exist or are entered into afterfollowing table provides information about the beginningbalances of the earliest comparative periodCompany's contract assets, unearned income and receivables from contracts with customers:
(in millions)March 31, 2023December 31, 2022
Contract Assets (Unearned Income)
Current contract assets$163 $171 
Long-term contract assets(1)
14 12 
Current unearned income(79)(81)
Long-term unearned income(2)
(40)(42)
Net Contract Assets$58 $60 
Accounts receivable, net$590 $630 
__________
(1)Presented in Other long-term assets in the financial statements. We are currently evaluating the impact of the updated accounting guidance on our consolidated financial statements.Condensed Consolidated Balance Sheets.
Cash Flows: In November 2016 the FASB issued updated accounting guidance regarding the presentation of restricted cash(2)Presented in Other long-term liabilities in the statementCondensed Consolidated Balance Sheets.
Revenues of cash flows. Specifically, this update requires that restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling$29 million were recognized during the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. At September 30, 2017 and Decemberthree months ended March 31, 2016, we had $25 million and $22 million of restricted cash, respectively, reported in other current assets. This update is effective for us beginning January 1, 2018.
Business Combinations: In January 2017, the FASB issued clarifying accounting guidance2023 related to the definitionCompany's unearned income at December 31, 2022. Revenues of a business$35 million were recognized during the three months ended March 31, 2022 related to assist entities with evaluating whether transactions shouldthe Company's unearned income at December 31, 2021.
The Company had no material asset impairment charges related to contract assets for the three months ended March 31, 2023 or 2022.
Transaction Price Allocated to the Remaining Performance Obligations
Estimated revenue expected to be accounted for as acquisitions (or disposals) of assetsrecognized in the future related to performance obligations that are unsatisfied or businesses. This update is effective for us beginning January 1, 2018, with early adoption permitted.partially satisfied at March 31, 2023 was approximately $1.1 billion. The amendment in this update will be applied prospectively. We are currently evaluating the impact of the adoptionCompany expects to recognize approximately 75% of this clarifying accounting guidance on our consolidated financial statements.revenue over the next two years and the remainder thereafter.


Accounting Standards Implemented
Goodwill: In January 2017, the FASB issued updated accounting guidance for simplifying the goodwill impairment test. Under the new guidance an entity does not have to calculate the implied fair value of goodwill at the impairment testing date of its assets and liabilities as if those assets and liabilities had been acquired in a business combination. Instead the goodwill impairment test will compare the fair value of a reporting unit with its carrying amount and recognize as an impairment charge any amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. We have elected to early adopt this new guidance for our goodwill impairment tests performed after January 1, 2017. Adoption did not have any effect on our financial condition, results of operations or cash flows.

Note 34 – Segment Reporting
OurThe Company's reportable segments correspond to how we organizeit organizes and managemanages the business, as defined by the Company's Chief Executive Officer, who is also the Company's Chief Operating Decision Maker (CODM). The Company's segments involve the delivery of business process services and are aligned to the industries in which our clients operate.include service arrangements where it manages a customer's business activity or process.
Beginning in 2017, in an effort to better reflect how we manage our business, we changed our reporting segments to align the Healthcare business based upon customer focus between Commercial Industries and Public Sector.
OurThe Company's financial performance is based on "SegmentSegment Profit / (Loss)" which is defined as income before amortization of intangibles, restructuring for its three reportable segments (Commercial, Government and related costs, interest, gain on sale of anTransportation), Divestitures and Unallocated Costs. The Company's CODM does not evaluate operating segments using discrete asset separation costs, other (income) expense, net and income taxes for the following three segments:information.
Commercial: The Commercial Industries
Public Sector
Other
Commercial Industries: Our Commercial Industries segment provides business process services and customized solutions to clients in a variety of industries. Across the Commercial Industries segment, wethe Company operates on its clients’ behalf to deliver end-to-end business-to-businessmission-critical solutions and business-to-customer services thatto reduce costs, improve efficiencies and enable ourrevenue growth for the Company's clients to optimizeand their key processes. Our multi-industry competencies include customer care, human resource managementconsumers and finance and accounting services.employees.
Public Sector: Our Public SectorGovernment: The Government segment provides government-centric business process services to U.S. federal, state and local and foreign governments for transportation, public assistance, health services, program administration, transaction processing and payment services.
Other:Other includes our Government Health Enterprise Medicaid Platform business, where we are limiting our focus The solutions in this segment help governments respond to our current Health Enterprise clientschanging rules for eligibility and our Student Loan business, which is in run-off mode. Other also includes non-allocated corporate expenses as well as inter-segment eliminations.

increasing citizen expectations.
Conduent
CNDT Q1 2023 Form 10-Q
810




Transportation: The Transportation segment provides systems, support, and revenue-generating solutions, to government transportation agency clients. The Company delivers mission-critical public safety, mobility and digital payment solutions that streamline operations, have a positive impact on the environment and increase revenue and reduce congestion while creating safe, seamless travel experiences for consumers.
Divestitures includes the Company's Midas Suite of patient safety, quality and advanced analytics solutions which it sold to a third party in the first quarter of 2022.
Unallocated Costs includes IT infrastructure costs that are shared by multiple reportable segments, enterprise application costs and certain corporate overhead expenses not directly attributable or allocated to the reportable segments.
Selected financial information for ourthe Company's reportable segments iswas as follows:
Three Months Ended
March 31,
(in millions)CommercialGovernmentTransportationDivestituresUnallocated CostsTotal
2023
Revenue$508 $264 $150 $— $— $922 
Segment profit (loss)$35 $73 $(8)$— $(70)$30 
2022
Revenue$512 $286 $162 $7 $— $967 
Segment profit (loss)$28 $75 $8 $2 $(59)$54 

(in millions)Three Months Ended
March 31,
Segment Profit (Loss) Reconciliation to Pre-tax Income (Loss)20232022
Income (Loss) Before Income Taxes$(8)$210 
Reconciling items:
Amortization of acquired intangible assets2 6 
Restructuring and related costs29 9 
Interest expense27 19 
(Gain) loss on divestitures and transaction costs, net2 (163)
Litigation settlements (recoveries), net(21)(28)
Other (income) expenses, net(1)1 
Segment Profit (Loss)$30 $54 
Refer to Note 3 – Revenue for additional information on disaggregated revenues of the reportable segments.

Note 5 – Divestiture
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in millions) 
Segment
Revenue
 Segment Profit (Loss) 
Segment
Revenue
 Segment Profit (Loss)
2017        
Commercial Industries $864
 $53
 $2,663
 $114
Public Sector 540
 59
 1,629
 179
Other 76
 1
 237
 (7)
Total $1,480
 $113
 $4,529
 $286
2016        
Commercial Industries $923
 $42
 $2,869
 $103
Public Sector 584
 78
 1,734
 217
Other 89
 (23) 291
 (75)
Total $1,596
 $97
 $4,894
 $245
On February 8, 2022, the Company completed the sale of its Midas business to Symplr Software, Inc. The Company received $322 million of cash consideration for this divestiture ($321 million in the first quarter of 2022 and $1 million in the second quarter of 2022). The divestiture generated a pre-tax gain of $166 million ($165 million in the first quarter of 2022 and $1 million in the second quarter of 2022), which is included in (Gain) loss on divestitures and transaction costs, net. The Company recorded approximately $62 million of income taxes in connection with the divestiture. The revenue generated by this business was $7 million for the three months ended March 31, 2022.
(in millions)Three Months Ended
September 30,		 Nine Months Ended
September 30,
Reconciliation to Pre-tax Income (Loss)2017 2016 2017 2016
Segment Profit$113
 $97
 $286
 $245
Reconciling items:       
Amortization of intangible assets(60) (63) (182) (200)
Restructuring and related costs(22) (8) (76) (57)
Interest Expense(35) (1) (105) (3)
(Gains) loss on sale of asset and businesses16
 —
 41
 (1)
Related party interest—
 (10) —
 (30)
Separation costs(1)
(2) (15) (8) (34)
Other income (expense), net3
 2
 24
 (6)
Pre-tax Income (Loss)$13
 $2
 $(20) $(86)
__________________________
(1)Separation costs are expenses incurred in connection with the separation into an independent, publicly-traded company. These costs are primarily for third-party investment banking, accounting, legal, consulting and other similar types of services related to the separation transaction as well as costs associated with the operational separation of the two companies, such as those related to human resources, brand management, real estate and information management to the extent not capitalized.CNDT Q1 2023 Form 10-Q
Goodwill
Due to the first quarter 2017 change in segments, we were required to test Goodwill for impairment. As a result of the impairment test, the fair value of both the Commercial Industries and Public Sector reporting units exceeded their carrying values. To the extent the assumptions underlying the goodwill impairment test change, there could be additional impairments in the future.11

No interim goodwill impairment trigger was identified as there was no significant change in the assumptions underlying the impairment test, including profitability in each of the reporting units.

Note 4 – Accounts Receivable, Net
Accounts receivable, net was as follows:
(in millions) September 30, 2017 December 31, 2016
Amounts billed or billable $1,115
 $1,014
Unbilled amounts 267
 279
Allowance for doubtful accounts (2) (7)
Accounts Receivable, Net $1,380
 $1,286

Conduent Form 10-Q
9





Unbilled amounts include amounts associated with percentage-of-completion accounting and other earned revenues not currently billable due to contractual provisions. Amounts to be invoiced in the subsequent months for current services provided are included in amounts billable, and at September 30, 2017 and December 31, 2016 were approximately $418 million and $429 million, respectively.

We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. The allowance for uncollectible accounts receivables is determined principally on the basis of past collection experience, as well as consideration of current economic conditions and changes in our customer collection trends.

In the first quarter 2017 we settled a customer dispute over an aged accounts receivable balance for $19 million. We applied $5 million of the proceeds to net accounts receivable and a $14 million gain was recorded as follows:
$7 million to discontinued operations as a portion of the receivable was related to a business that was part of our Information Technology Outsourcing (ITO) discontinued operation; and
$7 million to continuing operations as the remainder of the receivable was related to our continuing Healthcare Provider business; the majority of the $7 million is reflected in legal settlements in Other (income) expense, net.

Note 56 – Restructuring Programs and Related Costs
DuringThe Company engages in a series of restructuring programs related to exiting certain activities, downsizing its employee base, outsourcing certain internal functions and engaging in other actions designed to reduce its cost structure and improve productivity. The implementation of the nine months ended September 30, 2017, we recorded net restructuringCompany's operational efficiency improvement initiatives has reduced the Company's real estate footprint across all geographies and segments resulting in lease right-of-use asset impairment charges of $68 million, which(ROU) impairments and other related costs. Also included approximately $38 million of severancein Restructuring and related costs are incremental, non-recurring costs related to headcount reductionsthe consolidation of approximately 3,200 employees worldwide, $33the Company's data centers, which totaled $2 million of lease cancellation costs and $4 million of asset impairments. These costs were offset by $7 million of net reversals, primarily resulting fromfor the three months ended March 31, 2023 and 2022, respectively. Management continues to evaluate the Company's businesses, and in the future, there may be additional provisions for new plan initiatives and/or changes in estimated reservespreviously recorded estimates as payments are made, or actions are completed.
Costs associated with restructuring, including employee severance and lease termination costs, are generally recognized when it has been determined that a liability has been incurred, which is generally upon communication to the affected employees or exit from prior period initiatives. The restructuring reserve balance asthe leased facility. In those geographies where the Company has either a formal severance plan or a history of September 30, 2017, for all programs was $40 million, of which approximately $28 million is expected to be spent over the next twelve months.
We also recorded $8 million ofconsistently providing severance benefits representing a substantive plan, it recognizes employee severance costs during the nine months ended September 30, 2017, primarilywhen they are both probable and reasonably estimable. Asset impairment costs related to professional support services associated with the implementationreduction of the strategic transformation program.Company's real estate footprint include impairment of operating lease ROU assets and associated leasehold improvements.
Information related toA summary of the Company's restructuring program activity during the ninethree months ended September 30, 2017March 31, 2023 and 2022 is outlined below:as follows:
(in millions)Severance and Related CostsTermination and Other CostsAsset ImpairmentsTotal
Accrued Balance at December 31, 2022$10 $— $— $10 
Provision20 7 2 29 
Changes in estimates— — — — 
Total Net Current Period Charges(1)
20 7 2 29 
Charges against reserve and currency(8)(3)(2)(13)
Accrued Balance at March 31, 2023$22 $4 $— $26 
(in millions)Severance and Related CostsTermination and Other CostsAsset ImpairmentsTotal
Accrued Balance at December 31, 2021$5 $1 $— $6 
Provision1 4 4 9 
Changes in estimates(1)— — (1)
Total Net Current Period Charges(1)
— 4 4 8 
Charges against reserve and currency(4)(4)(4)(12)
Accrued Balance at March 31, 2022$1 $1 $— $2 
__________
(1)Represents amounts recognized within the Consolidated Statements of Income (Loss) for the years shown.

In addition, during the three months ended March 31, 2023, the Company also incurred $4 million of professional support costs associated with bringing certain technology functions in-house.
CNDT Q1 2023 Form 10-Q
12


(in millions)
Severance and
Related Costs
 
Lease Cancellation
and Other Costs
 Asset Impairments Total
Accrued Balance at December 31, 2016$15
 $5
 $1
 $21
Restructuring provision38
 33
 4
 75
Reversals of prior accruals(5) (2) —
 (7)
Net Current Period Charges33
 31
 4
 68
Payments and asset impairments(34) (9) (6) (49)
Accrued Balance at September 30, 2017$14
 $27
 $(1) $40
The following table summarizes the total amount of costs incurred in connection with these restructuring programs by reportable and non-reportable segment:
 Three Months Ended
March 31,
(in millions)20232022
Commercial$20 $— 
Government— — 
Transportation— — 
Divestitures— — 
Unallocated Costs(1)
9 8 
Total Net Restructuring Charges$29 $8 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in millions)2017 2016 2017 2016
Commercial Industries$13
 $—
 $44
 $36
Public Sector7
 —
 21
 5
Other2
 —
 3
 4
Total Net Restructuring and Asset Impairment Charges$22
 $—
 $68
 $45
__________

(1)Represents costs related to the consolidation of the Company's data centers, operating lease ROU assets impairment, termination and other costs not allocated to the segments.


Conduent Form 10-Q
10


Note 6 -7 – Debt

Long termLong-term debt was as follows:
(in millions) September 30, 2017 December 31, 2016
Term loan A due 2021(1)
 $727
 $694
Term loan B due 2023 844
 750
Senior notes due 2024 510
 510
Capital lease obligations 39
 43
Principal Debt Balance $2,120
 $1,997
Debt issuance costs and unamortized discounts (58) (56)
Less: current maturities (71) (28)
Total Long-term Debt $1,991
 $1,913
_______
(1)The aggregate principal debt for Term Loan A includes borrowings in both U.S Dollars and Euros.

(in millions)March 31, 2023December 31, 2022
Term loan A due 2026$249 $252 
Term loan B due 2028509 510 
Senior notes due 2029520 520 
Revolving credit facility maturing 2026— — 
Finance lease obligations28 20 
Other31 33 
Principal debt balance1,337 1,335 
Debt issuance costs and unamortized discounts(22)(23)
Less: current maturities(38)(35)
Total Long-term Debt$1,277 $1,277 
Term Loan B Repricing
On April 7, 2017, we entered into Amendment No. 1 (Repricing Amendment)As of March 31, 2023, the Company had no outstanding borrowings under its Revolver. However, the Company utilized $2 million of the Revolver to issue letters of credit as of March 31, 2023. The net Revolver available to be drawn upon as of March 31, 2023 was $548 million.
At March 31, 2023, the Company was in compliance with all debt covenants related to the Credit Agreement, dated December 7, 2016. As a result of the Repricing Amendment, we were required to pay the Term B Lenders a 1% principal prepayment fee on approximately $848 million principal balanceborrowings in the amount of approximately $8 million, and the Term B Loan interest rate was reduced by 1.5%, from 5.5% over LIBOR to 4.0% over LIBOR. Transaction fees of $1 million were expensed.table above.



Note 78 – Financial Instruments

We areThe Company is a global company that is exposed to foreign currency exchange rate fluctuations in the normal course of ourits business. As a part of ourthe Company's foreign exchange risk management strategy, we usethe Company uses derivative instruments, primarily forward contracts, to hedge the funding of foreign entities which have a non-dollar functional currency, thereby reducing volatility of earnings or protecting fair values of assets and liabilities.
At September 30, 2017, weMarch 31, 2023 and December 31, 2022, the Company had outstanding forward exchange contracts with gross notional values of $99 million and $104 million, respectively. At March 31, 2023, approximately $160 million, which is typical of the amounts that are normally outstanding at any point during the year. Approximately 68%59% of these contracts mature within three months, 12%17% in three to six months, 15%18% in six to 12twelve months and 5%6% in greater than 12twelve months. The majorityMost of these foreign currency derivative contracts are designated as cash flow hedges and did not have a material impact on ourthe Company's balance sheet, income statement or cash flows for the periods presented.
Refer to Note 9 – Fair Value of Financial Assets and Liabilities for additional information regarding the fair value of the Company's foreign exchange forward contracts.


Conduent
CNDT Q1 2023 Form 10-Q
1113




Note 89 – Fair Value of Financial Assets and Liabilities
Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP established a hierarchy framework to classify the fair value based on the observability of significant inputs to the measurement. The levels of the fair value hierarchy are as follows:
Level 1: Fair value is determined using an unadjusted quoted price in an active market for identical assets or liabilities.
Level 2: Fair value is estimated using inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.
Level 3: Fair value is estimated using unobservable inputs that are significant to the fair value of the assets or liabilities.
Summary of Financial Assets and Liabilities Accounted for at Fair Value on a Recurring Basis
The following table represents assets and liabilities measured at fair value on a recurring basis. The basis for the measurement at fair value isin all cases was Level 1 for cash and cash equivalents, restricted cash and accounts receivable,net and Level 2 – Significant Other Observable Inputs for all other instruments.2. 
(in millions) September 30, 2017 December 31, 2016
Assets:    
Cash and cash equivalents $468
 $390
Restricted cash 25
 22
Accounts receivable, net 1,380
 1,286
Foreign exchange contracts - forwards 2
 1
Deferred compensation investments in cash surrender life insurance(1)
 —
 99
Deferred compensation investments in mutual funds(1)
 —
 10
Total $1,875
 $1,808
Liabilities:    
Foreign exchange contracts - forwards $1
 $3
Deferred compensation plan liabilities 116
 113
Total $117
 $116
_______
(1)(in millions)In September 2017, the Company terminated the legacy deferred compensation plans (“Plans”) and the Company Owned Life Insurance (COLI), which held the Plans’ investments. As a result, the Company sold the Plans’ investments and has approximately $141 million of cash, of which $25 million is overfunded. The only impact to the income statement is a $19 million tax expense that resulted from the fair market value of the sold investments exceeding the Plans’ tax basis. The Company will make payments to Plan participants of approximately $15 million and $101 million in the fourth quarters of 2017 and 2018, respectively.March 31, 2023December 31, 2022
Assets:
Foreign exchange contract - forward$1 $— 
Total Assets$1 $— 
Liabilities:
Foreign exchange contracts - forward$— $1 
Total Liabilities$— $1 

We utilize the income approach to measure the fair value for our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices.
Summary of Other Financial Assets and Liabilities Accounted at Fair Value on a Nonrecurring Basis
The estimated fair values of our other financial assets and liabilities not measured at fair value on a recurring basis were as follows:
September 30, 2017 December 31, 2016 March 31, 2023December 31, 2022
(in millions)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
(in millions)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Short-term debt71
 71
 28
 28
Liabilities:Liabilities:
Long-term debt1,991
 2,085
 1,913
 1,933
Long-term debt$1,277 $1,162 $1,277 $1,155 
The fair value amounts for Cash and cash equivalents, andRestricted cash, Accounts receivable, net and Short-term debt approximate carrying amounts due to the shortshort-term maturities of these instruments.
The fair value of Short and Long-term debt was estimated based on the current rates offered to ususing quoted market prices for debt ofidentical or similar maturitiesinstruments (Level 2)2 inputs).

Note 910 – Employee Benefit Plans
WeThe Company has post-retirement savings and investment plans in several countries, including the U.S., India and the Philippines. In many instances, employees participating in defined benefit pension plans that have been amended to freeze future service accruals were transitioned to an enhanced defined contribution plan. In these plans, employees are permitted to contribute a portion of their salaries and bonuses to the plans. The Company, at its discretion, matches a portion of employee contributions.
The Company recognized an expense related to ourits defined contribution plans of $8$3 million and $10$5 million for the three months ended September 30, 2017March 31, 2023 and 2016, respectively,2022, respectively. The balance sheet and $27 million and $28 million,income statement impacts of any remaining defined benefit plans are immaterial for the nine months ended September 30, 2017 and 2016, respectively.all periods presented in these Condensed Consolidated Financial Statements.

Note 10 - Other Comprehensive Income (Loss)
Other comprehensive income for the three and nine months ended September 30 2017, increased $16 million ($17 million net of tax) and $57 million ($58 million net of tax), respectively, from the prior year periods. The increase primarily reflects gains from translation adjustments.



Conduent
CNDT Q1 2023 Form 10-Q
1214




Note 11 – Accumulated Other Comprehensive Loss (AOCL)
Below are the balances and changes in AOCL is comprised(1):
(in millions)Currency Translation AdjustmentsGains (Losses) on Cash Flow HedgesDefined Benefit Pension ItemsTotal
Balance at December 31, 2022$(472)$1 $5 $(466)
Other comprehensive income (loss)17 1 — 18 
Balance at March 31, 2023$(455)$2 $5 $(448)
(in millions)Currency Translation AdjustmentsGains (Losses) on Cash Flow HedgesDefined Benefit Pension ItemsTotal
Balance at December 31, 2021$(431)$2 $— $(429)
Other comprehensive income (loss)(5)(1)— (6)
Balance at March 31, 2022$(436)$1 $— $(435)
__________
(1)All amounts are net of the following:tax. Tax effects were immaterial.

(in millions) September 30, 2017 December 31, 2016
Cumulative translation adjustments $(438) $(472)
Other unrealized gains (losses), net 1
 (1)
Benefit plans net actuarial losses and prior service credits (53) (53)
Total Accumulated Other Comprehensive Loss $(490) $(526)

Note 1112 – Contingencies and Litigation

As more fully discussed below, we arethe Company is involved in a variety of claims, lawsuits, investigations and proceedings concerning: securities law;concerning a variety of matters, including: governmental entity contracting, servicing and procurement law; intellectual property law; environmental law; employment law; commercial and contracts law; the Employee Retirement Income Security Act (ERISA); and other laws and regulations. We determineThe Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess ourThe Company assesses its potential liability by analyzing ourits litigation and regulatory matters using available information. We develop our viewsThe Company develops its view on estimated losses in consultation with outside counsel handling ourits defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in ourthe Company's determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts theyin excess of any accrual for such matter or matters, this could have a material adverse effect on ourthe Company's results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. The Company believes it has recorded adequate provisions for any such matters and, as of September 30, 2017,March 31, 2023. Litigation is inherently unpredictable, and it wasis not reasonably possible that a material loss had been incurredto predict the ultimate outcome of these matters and such outcome in connection withany such matters could be more than any amounts accrued and could be material to the Company's results of operations, cash flows or financial position in excess of the amounts recognized in its financial statements.any reporting period.
Additionally, guarantees, indemnifications and claims arise during the ordinary course of business from relationships with suppliers, customers and nonconsolidatednon-consolidated affiliates when we undertakethe Company undertakes an obligation to guarantee the performance of others if specified triggering events occur. Nonperformance under a contract could trigger an obligation of the Company. These potential claims include actions based upon alleged exposures to products, real estate, intellectual property such(such as patents,patents), environmental matters and other indemnifications. The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of these claims. However, while the ultimate liabilities resulting from such claims may be significant to results of operations in the period recognized, management does not anticipate they will have a material adverse effect on the condensed financialCompany's Consolidated Financial position or liquidity. As of September 30, 2017, we haveMarch 31, 2023, the Company had accrued ourits estimate of liability incurred under ourits indemnification arrangements and guarantees.
CNDT Q1 2023 Form 10-Q
15


Litigation Against the Company
StateEmployees’ Retirement System of Texasthe Puerto Rico Electric Power Authority et al v. Xerox Corporation, Xerox State Healthcare, LLC,Conduent Inc. et al.: On March 8, 2019, a putative class action lawsuit alleging violations of certain federal securities laws in connection with our statements and ACS State Healthcare, LLC: On May 9, 2014,alleged omissions regarding the State of Texas, viaCompany's financial guidance and business and operations was filed against the Texas Office of Attorney General (the “State”), filed a lawsuitCompany, its former Chief Executive Officer, and its former Chief Financial Officer in the 53rd JudicialUnited States District Court for the District of Travis County, Texas. The lawsuit alleges that Xerox Corporation, Xerox State Healthcare, LLC and ACS State Healthcare (collectively, the "Xerox Defendants") violated the Texas Medicaid Fraud Prevention Act in the administration of its contract with the Texas Department of Health and Human Services (“HHSC”)New Jersey (the Court). The State alleges thatcomplaint seeks certification of a class of all persons who purchased or otherwise acquired the Xerox Defendants made false representations of material facts regarding the processes, procedures, implementationCompany's securities from February 21, 2018 through November 6, 2018, and results regarding the prior authorization of orthodontic claims. The Statealso seeks recovery of actualunspecified monetary damages, two times the amount of any overpayments made as a result of unlawful acts, civil penalties, pre- and post-judgment interest and all costs, and attorneys’ fees. The State referencesCompany moved to dismiss the amountclass action complaint in controversyits entirety. In June 2020, the Court denied the motion to dismiss and allowed the claims to proceed. The Court granted Class Certification on February 28, 2022. Upon the substantial completion of document discovery, the parties agreed to engage in mediation, and the Court administratively terminated the litigation to permit those efforts to proceed. Without any admission of liability or damages, in the third quarter of 2022, the parties settled this matter following that mediation, and filed the necessary documentation for preliminary approval by the court, class notice, and the claims administration process. The Court granted preliminary approval of the settlement terms and related documentation on January 27, 2023, with a final Settlement Hearing scheduled for May 24, 2023. The Court's order notes that it "will likely be able to approve the proposed Settlement as exceeding hundredsfair, reasonable and adequate under Federal Rule of millionsCivil Procedure 23(e)(2)." As a result, during the fourth quarter of dollars. The Xerox Defendants filed their Answer in June, 2014 denying all allegations. The Xerox Defendants will continue2022, the Company reversed the reserve pertaining to vigorously defend themselves in this matter. We do not believe it is probableThe Company maintains insurance that we will incur a material loss in excesscovers the costs arising out of this litigation and resulting settlement having met the amount accrued for this matter. In the course of litigation, we periodically engage in discussions with plaintiff’s counsel for possible resolution of the matter. Should developments cause a change in our determination as to an unfavorable outcome, or result in a final adverse judgment or settlement for a significant amount, there could be a material adverse effect on our results of operations, cash flowsdeductible and financial position in the period in which such change in determination, judgment or settlement occurs.other terms and conditions thereof.

Skyview Capital LLC and Continuum Global Solutions, LLC v. Conduent Form 10-Q
13


Dennis Nasrawi v. Buck Consultants et al.:Business Services, LLC: On October 8, 2009,February 3, 2020, plaintiffs Skyview LLC (Skyview) filed a lawsuit in the Superior Court of California, StanislausNew York County, and on November 24, 2009, the case was removedNew York. The lawsuit relates to the U.S. Court forsale of a portion of Conduent Business Service, LLC's (CBS) select standalone customer care call center business to plaintiffs, which sale closed in February 2019. Under the Eastern Districtterms of California, Fresno Division. Plaintiffs allege actuarial negligence against Buck Consultants, LLC (“Buck”) for the usesale agreement, CBS received approximately $23 million of faulty actuarial assumptionsnotes from plaintiffs (Notes). The lawsuit alleges various causes of action in connection with the 2007 actuarial valuationacquisition, including: indemnification for the Stanislaus County Employees Retirement Association (“StanCERA”).breach of representation and warranty; indemnification for breach of contract and fraud. Plaintiffs allege that their obligation to mitigate damages and their contractual right of set-off permits them to withhold and deduct from any amounts that are owed to CBS under the employer contribution rate adopted by StanCERA basedNotes, and plaintiffs seek a judgement that they have no obligation to pay the Notes. On August 20, 2020, Conduent filed a counterclaim against Skyview seeking the outstanding balance on Buck’s valuation was insufficientthe Notes, the amounts owed for the Jamaica deferred closing, and other transition services agreement and late rent payment obligations. Conduent also moved to funddismiss Skyview’s claims in 2020. In May 2021, the benefits promised bycourt denied the County. On July 13, 2012,motion and allowed the Court entered its rulingclaims to proceed. This matter has been proceeding through fact and expert discovery. Conduent denies all of the plaintiffs' allegations, believes that the plaintiffs lacked standingit has strong defenses to sue in a representative capacity on behalfall of all plan participants. The Court also ruled that plaintiffs had adequately pleaded their claim that Buck allegedly aidedplaintiffs’ claims and abetted StanCERA in breaching its fiduciary duty. Plaintiffs then filed their Fifth Amended Complaint and added StanCERA to the litigation. Buck and StanCERA filed demurrers to the amended complaint. On September 13, 2012, the Court sustained both demurrers with prejudice, completely dismissing the matter and barring plaintiffs from refiling their claims. Plaintiffs appealed, and ultimately the California Court of Appeals (Sixth District) reversed the trial court’s ruling and remanded the case back to the trial court. Buck will continue to aggressively defend these lawsuits.the litigation vigorously. The Company is not able to determine or predict the ultimate outcome of this proceeding or reasonably provide an estimate or range of estimate of the possible outcome or loss, if any, in excess of currently recorded reserves.

CNDT Q1 2023 Form 10-Q
16


Conduent Business Services, LLC v. Cognizant Business Services Corporation: On April 12, 2017, CBS filed a lawsuit against Cognizant Business Services Corporation (Cognizant) in the Supreme Court of New York County, New York. The lawsuit relates to the Amended and Restated Master Outsourcing Services Agreement effective as of October 24, 2012, and the service delivery contracts and work orders thereunder, between CBS and Cognizant, as amended and supplemented (Contract). The Contract contains certain minimum purchase obligations by CBS through the date of expiration. The lawsuit alleges that Cognizant committed multiple breaches of the Contract, including Cognizant’s failure to properly perform its obligations as subcontractor to CBS under CBS’s contract with the New York Department of Health to provide Medicaid Management Information Systems. In the lawsuit, CBS seeks damages in excess of $150 million. During the first quarter of 2018, CBS provided notice to Cognizant that it was terminating the Contract for cause and recorded in the same period certain charges associated with the termination. CBS also alleges that it terminated the Contract for cause, because, among other things, Cognizant violated the Foreign Corrupt Practices Act. In its answer, Cognizant asserted two counterclaims for breach of contract seeking recovery of damages in excess of $47 million, which includes amounts alleged not paid to Cognizant under the Contract and an alleged $25 million termination fee. Cognizant's second amended counterclaim increased Cognizant's damages to $89 million. The parties participated in a mediation in late February 2023, and this matter settled, following negotiations that continued thereafter. The parties executed the Settlement Agreement and Mutual Release on March 30, 2023, with no admission of liability or wrongdoing by either party. In April 2023, each side made reciprocal payments of $6 million to the other, with Conduent’s payment made toward the termination fee payable under the applicable service delivery contract. As a result of the settlement, during the first quarter of 2023, the Company adjusted the balance sheet amounts recorded pertaining to this matter. As such, the Company recognized a $17 million benefit in Cost of services (excluding depreciation and amortization) and a $26 million benefit in Litigation settlements (recoveries), net.
Other Matters
On January 5, 2016,During the first quarter of 2022, the Company entered into settlement agreements with six of its insurers under its 2012–2013 errors and omission insurance policy in which the Company agreed to resolve its claims for insurance coverage in connection with the previously disclosed State of Texas matter that settled in February 2019, as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. As a result of the settlement agreements entered with the insurers, in the three months ended March 31, 2022, the Company received an aggregate sum of $38 million, of which $14 million was recognized as defense costs recovery in Selling, general and administrative and $24 million was recognized in Litigation settlements (recoveries), net.
Since 2014, Conduent Education Services, LLC, formerly Xerox Education Services LLC (CES), has cooperated with several federal and state agencies regarding a variety of matters, including CES' self-disclosure to the U.S. Department of Education (Department) and the Consumer Financial Protection Bureau (the "CFPB") notified Xerox Education Services, Inc. (XES)(CFPB) that in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (NORA) process, the CFPB’s Office of Enforcement is considering recommending that the CFPB take legal action against XES, alleging that XES violated the Consumer Financial Protection Act’s prohibition of unfair practices. Should the CFPB commence an action, it may seek restitution, civil monetary penalties, injunctive relief, or other corrective action. The purpose of a NORA letter is to provide a party being investigated an opportunity to present its position to the CFPB before an enforcement action is recommended or commenced. This notice stems from an inquiry that commenced in 2014 when XES received and responded to a Civil Investigative Demand containing a broad request for information. During this process, XES self-disclosed to the Department of Education and the CFPB certain adjustments of which it had become aware that had not been timely made relating to its servicing of a small percentage ofsome third-party student loans under outsourcing arrangements for various financial institutions. Theinstitutions required adjustments. With the exception of one remaining state attorney general inquiry, the Company has resolved all investigations by the CFPB, several state agencies, the Department and the U.S. Department of Education, as well as certain states' attorney general offices and other regulatory agencies, began similar reviews. XES has cooperated and continues to fully cooperate with all regulatory agencies, and XES has submitted its NORA response. WeJustice. The Company cannot provide assurance that the CFPB, another regulator, a financial institution on behalf of which CES serviced third-party student loans, or another party will not ultimately commence a legal action against XESCES in this matter norwhich fines, penalties or other liabilities are wesought from CES. Nor is the Company able to predict the likely outcome of the investigations into this matter. Wethese matters, should any such matter be commenced, or reasonably provide an estimate or range of estimates of any loss in excess of currently recorded reserves. The Company could, in future periods, incur judgments or enter into settlements to resolve these potential matters for amounts in connection with this matterexcess of current reserves and there could be a material adverse effect on ourthe Company's results of operations, cash flows and financial position in the period in which such change in judgment or settlement occurs.
Other Contingencies

Certain contracts, primarily in our Public Sector segment,the Company's Government and Transportation segments, require usthe Company to provide a surety bond or a letter of credit as a guarantee of performance. As of September 30, 2017, weMarch 31, 2023, the Company had $570$631 million of outstanding surety bonds usedissued to secure ourits performance of contractual obligations with ourits clients and we had $238$91 million of outstanding letters of credit and bank guarantees usedissued to secure ourthe Company's performance of contractual obligations to ourits clients as well as other corporate obligations.
In general, wethe Company would only be liable for the amount of these guarantees in the event of default in ourthe Company's performance of ourits obligations under each contract; the probability of which we believe is remote. We believe we havecontract. The Company believes it has sufficient capacity in the surety markets and liquidity from ourits cash flow and ourits various credit arrangements including those with our former parent, to allow usit to respond to future requests for proposals that require such credit support.


Conduent
CNDT Q1 2023 Form 10-Q
1417




We have service arrangements where we service third-party student loans in the Federal Family Education Loan program (FFEL) on behalf of various financial institutions. We service these loans for investors under outsourcing arrangements and do not acquire any servicing rights that are transferable by us to a third-party. At September 30, 2017, we serviced a FFEL portfolio of approximately 0.8 million loans with an outstanding principal balance of approximately $12.8 billion. Some servicing agreements contain provisions that, under certain circumstances, require us to purchase the loans from the investor if the loan guaranty has been permanently terminated as a result of a loan default caused by our servicing error. If defaults caused by us are cured during an initial period, any obligation we may have to purchase these loans expires. Loans that we purchase may be subsequently cured, the guaranty reinstated and the loans repackaged for sale to third parties. We evaluate our exposure under our purchase obligations on defaulted loans and establish a reserve for potential losses, or default liability reserve, through a charge to the provision for loss on defaulted loans purchased. The reserve is evaluated periodically and adjusted based upon management’s analysis of the historical performance of the defaulted loans. As of September 30, 2017, other current liabilities include reserves of approximately $1 million for losses on defaulted loans purchased which we believe to be adequate. In addition to potential purchase obligations arising from servicing errors, various laws and regulations applicable to student loan borrowers could give rise to fines, penalties and other liabilities associated with loan servicing errors.

Note 12 -13 – Preferred Stock
Series A Preferred Stock

In connection withDecember 2016, the Separation from Xerox, weCompany issued 120 thousand120,000 shares of Series A convertible perpetual preferred stock with an aggregate liquidation preference of $120 million and an initial fair value of $142 million. The convertible preferred stock paysearns quarterly cash dividends at a rate of 8% per year ($9.6 million per year). Each share of convertible preferred stock is convertible at any time, at the option of the holder, into 44.9438 shares of common stock for a total of 5,393 thousand5,393,000 shares (reflecting an initial conversion price of approximately $22.25 per share of common stock), subject to customary anti-dilution adjustments.


Note 13 – Shareholders’ Equity
(in millions)
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
AOCL(1)
 Former Parent Company Investment 
Conduent Shareholders'
Equity
Balance at December 31, 2016$2
 $3,812
 $—
 $(526) $—
 $3,288
Comprehensive (loss) income, net—
 —
 (27) 36
 —
 9
Cash dividends paid - preferred stock(2)
—
 —
 (7) —
 —
 (7)
Stock option and incentive plans, net—
 22
 —
 —
 —
 22
Balance at September 30, 2017$2
 $3,834
 $(34) $(490) $—
 $3,312
(in millions)
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
AOCL(1)
 Former Parent Company Investment 
Conduent Shareholders'
Equity
Balance at December 31, 2015$—
 $—
 $—
 $(181) $5,343
 $5,162
Comprehensive loss, net—
 —
 —
 (22) (32) (54)
Net transfers from former parent—
 —
 —
 —
 382
 382
Balance at September 30, 2016$—
 $—
 $—
 $(203) $5,693
 $5,490
_____________________________
(1)AOCL - Accumulated other comprehensive loss.
(2)
Cash dividends on preferred stock of $20.00 per share for the first, second and third quarters of 2017.


Conduent Form 10-Q
15


Note 14 – Earnings (Loss) per Share
WeThe Company did not declare any common stock dividends in the periods presented.
The following table sets forth the computation of basic and diluted earnings (loss) per share of common stock (shares in thousands):stock:
 Three Months Ended
March 31,
(in millions, except per share data in whole dollars and shares in thousands)20232022
Basic Net Earnings (Loss) per Share:
Net Income (Loss)$(6)$136 
Dividend - Preferred Stock(2)(2)
Adjusted Net Income (Loss) Available to Common Shareholders - Basic$(8)$134 
Diluted Net Earnings (Loss) per Share:
Net Income (Loss)$(6)$136 
Dividend - Preferred Stock(2)— 
Adjusted Net Income (Loss) Available to Common Shareholders - Diluted$(8)$136 
Weighted Average Common Shares Outstanding - Basic218,410 215,503 
Common Shares Issuable With Respect To:
Restricted Stock And Performance Units / Shares— 2,994 
8% Convertible Preferred Stock— 5,393 
Weighted Average Common Shares Outstanding - Diluted218,410 223,890 
Net Earnings (Loss) per Share:
Basic$(0.04)$0.62 
Diluted$(0.04)$0.61 
The following securities were not included in the computation of diluted earnings per share as they were either contingently issuable shares or shares that if included would have been anti-dilutive (shares in thousands):
Restricted stock and performance shares/units5,574 2,698 
Convertible preferred stock5,393 — 
Total Anti-Dilutive and Contingently Issuable Securities10,967 2,698 

CNDT Q1 2023 Form 10-Q
18


 Three Months Ended
September 30,		 Nine Months Ended
September 30,
(in millions, except per-share data)2017 2016 2017 2016
Basic Earnings (Loss) per Share:       
Net (loss) income from continuing operations$(17) $1
 $(31) $(32)
Accrued dividends on preferred stock(2) —
 (7) —
Adjusted Net (Loss) Income From Continuing Operations Available to Common Shareholders(19) 1
 (38) (32)
Income from discontinued operations, net of tax—
 —
 4
 —
Adjusted Net (Loss) Income Available to Common Shareholders$(19) $1
 $(34) $(32)
Weighted average common shares outstanding204,356
 202,875
 203,838
 202,875
        
Basic Earnings (Loss) per Share:       
Continuing operations$(0.09) $0.01
 $(0.19) $(0.16)
Discontinued operations—
 —
 0.02
 —
Basic (Loss) Income per Share$(0.09) $0.01
 $(0.17) $(0.16)
        
Diluted Earnings (Loss) per Share:       
Net (loss) income from continuing operations$(17) $1
 $(31) $(32)
Accrued dividends on preferred stock(2) —
 (7) —
Adjusted Net (Loss) Income from Continuing Operations Available to Common Shareholders(19) 1
 (38) (32)
Net income from discontinued operations—
 —
 4
 —
Adjusted Net (Loss) Income Available to Common Shareholders$(19) $1
 $(34) $(32)
Weighted average common shares outstanding(1)
204,356
 202,875
 203,838
 202,875
        
Diluted Earnings (Loss) per Share:       
Continuing operations$(0.09) $0.01
 $(0.19) $(0.16)
Discontinued operations—
 —
 0.02
 —
Diluted (Loss) Income per Share:$(0.09) $0.01
 $(0.17) $(0.16)
        
(1) With the exception of the third quarter 2016, the computation of weighted average shares is the same for basic and diluted earnings per share due to the net loss from continuing operations. For third quarter 2016, there were no Conduent options outstanding.
Note 15 – Supplementary Financial Information
The components of Other assets and Other liabilities were as follows:
(in millions)March 31, 2023December 31, 2022
Other Current Assets
Prepaid expenses$101 $88 
Income taxes receivable40 41 
Value-added tax (VAT) receivable11 10 
Restricted cash21 16 
Current portion of capitalized cloud computing implementation costs, net4 5 
Other100 82 
Total Other Current Assets$277 $242 
Other Current Liabilities
Accrued liabilities$190 $211 
Litigation related accruals21 37 
Current operating lease liabilities55 57 
Restructuring liabilities26 10 
Income tax payable2 2 
Other taxes payable15 16 
Accrued interest14 6 
Other52 43 
Total Other Current Liabilities$375 $382 
Other Long-term Assets
Internal use software, net$188 $189 
Deferred contract costs, net80 82 
Product software, net104 110 
Cloud computing implementation costs, net3 4 
Deferred tax assets30 20 
Other89 84 
Total Other Long-term Assets$494 $489 
Other Long-term Liabilities
Income tax liabilities8 7 
Unearned income40 42 
Other22 20 
Total Other Long-term Liabilities$70 $69 


Note 1516 – Related Party Transaction

Transactions
In January 2017, in connectionthe normal course of business, the Company provides services to, and purchases from, certain related parties with the Separationsame shareholders. The services provided to these entities included those related to human resources, end-user support and Distribution Agreement, we paid Xerox $161 million for final settlement.
other services and solutions. The purchases from these entities included office equipment and related services and supplies. Revenue and purchases from these entities were included in Revenue and Costs of services or Selling, general and administrative, respectively, on the Company's Condensed Consolidated Statements of Income (Loss), Condensed Consolidated Statements of Comprehensive Loss and Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2016 included an allocation of general corporate expenses from Xerox, the Company's former parent. Management considered these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided, by Xerox. Allocations for management costs and corporate support services provided totaled $41 million and $125 million for the three and nine months ended September 30, 2016, respectively. These amounts included costs for corporate functions including, but not limited to, senior management, legal, human resources, finance and accounting, treasury, information technology and other shared services. Where possible, these costs were allocated based on direct usage, with the remainder allocated on a basis of costs, headcount or other measures we have determined as reasonable.


.
Conduent
CNDT Q1 2023 Form 10-Q
1619




Transactions with related parties were as follows:
Note 16 – Subsequent Event
Three Months Ended
March 31,
 (in millions)20232022
Revenue from related parties$2 $3 
Purchases from related parties$6 $5 
On October 10, 2017, we entered into Amendment No. 2 (Repricing Amendment) to the Credit Agreement, dated
The Company's receivable and payable balances with related party entities were not material as of March 31, 2023 and December 7, 2016, as amended by Amendment No. 1 dated April 7, 2017. This Repricing Amendment of Term B Loan reduced the interest rate 1.0% from 4.0% over LIBOR to 3.0% over LIBOR.31, 2022.



Conduent
CNDT Q1 2023 Form 10-Q
1720





ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis (MD&A) is intended to helpprovide a reader of our financial statements with a narrative from the reader understand theperspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and financial conditionliquidity are discussed in order of Conduent Incorporatedmagnitude. Our MD&A is presented in six sections:
•Overview;
•Financial Information and its consolidated subsidiaries.Analysis of Results of Operations;
•Metrics;
•Capital Resources and Liquidity;
•Critical Accounting Estimates and Policies; and
•Recent Accounting Changes.
The MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes.Notes.

Overview
Separation from Xerox Corporation
On December 31, 2016, Conduent Incorporated completed its spin-off from Xerox Corporation. As a resultglobal technology-led business process solutions company, we deliver digital business solutions and services spanning the commercial, government and transportation spectrum – creating exceptional outcomes for our clients and the millions of the spin-off, we now operate as an independent, publicly traded companypeople who count on the New York Stock Exchange, under the ticker "CNDT". Referthem. Through a dedicated global team of associates, process expertise, and advanced technologies, our solutions and services digitally transform our clients’ operations to Note 1 - Basisenhance customer experiences, improve performance, increase efficiencies and reduce costs. We add momentum to our clients’ missions in many ways including delivering 43 percent of Presentation,nutrition assistance payments in the Condensed Consolidated Financial Statements for additional information regarding the separation.U.S., enabling 1.3 billion customer service interactions annually, empowering millions of employees through HR services every year and processing nearly 12 million tolling transactions every day.
Currency Impact
To understand the trendsHeadquartered in our business,Florham Park, New Jersey, we believe that it is helpful to analyze the impact of changes in the translation of foreign currencies into U.S. Dollars on revenue and expenses. We refer to this analysis as “currency impact” or “the impact from currency” or "constant currency" and is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate.

Financial Review of Operations
  Three Months Ended
September 30,		   Nine Months Ended
September 30,		  
(in millions) 2017 2016 $ Change 2017 2016 $ Change
Total Revenues $1,480
 $1,596
 (116) $4,529
 $4,894
 (365)
Total Cost of services 1,219
 1,328
 (109) 3,766
 4,107
 (341)
Gross Margin 261
 268
 (7) 763
 787
 (24)
             
Operating Costs and Expenses            
Research and development 4
 7
 (3) 11
 25
 (14)
Selling, general and administrative 144
 164
 (20) 466
 517
 (51)
Restructuring and related costs 22
 8
 14
 76
 57
 19
Amortization of intangible assets 60
 63
 (3) 182
 200
 (18)
Interest expense 35
 1
 34
 105
 3
 102
Related party interest —
 10
 (10) —
 30
 (30)
Separation costs 2
 15
 (13) 8
 34
 (26)
(Gain) loss on sale of asset and businesses (16) —
 (16) (41) 1
 (42)
Other (income) expenses, net (3) (2) (1) (24) 6
 (30)
Total Operating Costs and Expenses $248
 $266
 (18) $783
 $873
 (90)
             
Income (Loss) before Income Taxes $13
 $2
 $11
 $(20) $(86) $66
Income tax expense (benefit) 30
 1
 29
 11
 (54) 65
(Loss) Income from Continuing Operations $(17) $1
 (18) $(31) $(32) 1

Revenue
Total revenuesfor the three months and nine months ended September 30, 2017 declined across all segments due primarily to lost business, the wind-down of the New York Medicaid Management Information System (NY MMIS) contract, the run-off of our Student Loan business, strategic contract actions taken by management as part of our portfolio rationalization, lower volumes and overall price declines that were consistent with prior-period trends. Partially offsetting the decline was the ramp up in new contracts in the Commercial Industries and Public Sector businesses.

Conduent Form 10-Q
18


Cost of Services
Cost of services for the three and nine months ended September 30, 2017 decreased compared to the prior year periods due primarily to lost business, the wind-down of the NY MMIS contract, the run-off of our Student Loan business, strategic contract actions taken by management as part of portfolio management and lower volumes.

Gross Margin
Declines in gross margin for the three and nine months ended September 30, 2017 compared to the prior year periods reflect lost business and margin pressures in our customer experience service offerings, price declines and tohave a lesser degree the impact of the hurricanes.
Research and Development
Research and development for the three and nine months ended September 30, 2017, decreased compared to the prior year periods due to cost savings initiatives.
Selling, General and Administrative (SG&A)
SG&A for the three and nine months ended September 30, 2017 was lower than the prior year periods reflecting the impact of our strategic transformation initiatives that drove lower wages and benefits.
Restructuring and Related Costs
Net restructuring and related costs for the three months ended September 30, 2017 includes approximately $7 million of severance costs due to headcount reductionsteam of approximately 700 employees worldwide, $17 million of lease cancellation costs and $2 million of asset impairments. These costs were offset by $4 million of net reversals primarily resulting from changes in estimated reserves from prior-period initiatives.
Net restructuring and related costs for the nine months ended September 30, 2017 includes strategic transformation costs of $8 million and approximately $38 million of severance costs related to headcount reductions of approximately 3,200 employees worldwide, $33 million of lease cancellation costs and $4 million of asset impairments. These costs were offset by $7 million of net reversals, primarily resulting from changes in estimated reserves from prior-period initiatives.
Net restructuring and related costs for the three months ended September 30, 2016 relates to the strategic transformation program. Severance costs of $4 million related to headcount reductions and were offset by $4 million of net reversals for changes in estimated reserves from prior-period initiatives.
Net restructuring and related costs for the nine months ended September 30, 2016 includes approximately $52 million of severance costs related to headcount reductions of approximately 3,300 employees worldwide, $12 million of professional support services associated with the implementation of our strategic transformation program, $2 million of lease cancellation costs and $2 million of asset impairments. These costs were partially offset by $11 million of net reversals for changes in estimated reserves from prior-period initiatives.
The restructuring reserve balance59,000 associates as of September 30, 2017, for all programs was $40 million, of which approximately $28 million is expected to be spent over the next twelve months.
Refer to Note 5 - Restructuring Programs and Related Costs,March 31, 2023, servicing customers from service centers in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.
Amortization of Intangible Assets
Amortization of intangible assets for the three and nine months ended September 30, 2017 decreased compared to the prior year periods as the nine months ended September 30, 2016 included the accelerated amortization related to the loss of a large customer contract.
Interest Expense
Interest expense represents interest on long-term debt and the amortization of debt issuance costs. Interest expense for the three and nine months ended September 30, 2017 increased compared to the prior year periods primarily due to the issuance of debt in connection with the capitalization of the company during the spin-off in December 2016, the subsequent additional borrowing under the Term Loan B in January 2017 and amounts outstanding under the Company’s $750 million committed credit facility (Credit Facility).

Conduent Form 10-Q
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Refer to Note 6 - Debt, in the Condensed Consolidated Financial Statements for additional information.
Separation Costs
Separation costs are primarily for third-party investment banking, accounting, legal, consulting and other similar types of services related to the separation transaction as well as costs associated with the operational separation from Xerox Corporation, such as those related to human resources, brand management, real estate and information management to the extent not capitalized. Separation costs also include the costs associated with bonuses and restricted stock grants awarded to employees for retention related to separation.
Gain on Sale of Asset and Businesses
We sold a property in June 2017 for a pre-tax gain of $24 million.

Additionally, we completed the divestiture of: (1) our Firehouse business and suite of emergency records management products used by fire departments across the country for their incident reporting and Emergency Management System information and records management; (2) our healthcare provider consulting services business, which advises healthcare organizations on IT application optimization; (3) the Breakaway Group business, which provides advisory project services to assist healthcare organizations optimize their health IT applications; (4) the mobile device management business of Wireless Data Services Limited; and (5) the Global Mobility business. The aggregate proceeds for these divestitures was $56 million in cash. The businesses sold represents $82 million of 2016 revenue and $60 million for the nine months ended September 30, 2017. We recorded a pre-tax gain of $16 million on these divestitures.
Other (Income) Expenses, Net
Other (income) expenses, net primarily includes foreign currency transaction (gains) losses, litigation and other contingent matters and deferred compensation investment results.

The increase in Other income for the three months ended September 30, 2017 is primarily related to an adjustment to contingent consideration on a previous acquisition. The increase in Other income for the nine months ended September 30, 2017 is primarily related to income received as a result of several customer dispute settlements and an adjustment to contingent consideration on a previous acquisition.
Pre-tax Income (Loss)
Improvement in Pre-tax income (loss) for the three and nine months ended September 30, 2017 as compared to the prior year periods was primarily driven by improvements in our Commercial and Other segments, benefits from our strategic transformation program, gain on sale of asset and businesses and lower separation costs, partially offset by higher interest expense, higher restructuring and related costs and dis-synergies.
Income Taxes
The effective tax rate for the three months ended September 30, 2017, was 230.8% as compared with 50.0% for the three months ended September 30, 2016. The September 30, 2017 rate is higher than the U.S. statutory tax rate of 35% primarily due to a taxable gain on the termination of the Company Owned Life Insurance plan (COLI) and gains on U.S. divestitures.

Excluding primarily the tax on the termination of the COLI, gains on U.S. divestitures and amortization, the normalized effective tax rate for the three months ended September 30, 2017 was 36.8%. Primarily excluding the amortization and restructuring costs, the normalized effective rate was 39.5% for the three months ended September 30, 2016.

The effective tax rate for the nine months ended September 30, 2017, was (55.0)% as compared with 62.8% for the nine months ended September 30, 2016. The September 30, 2017 negative rate is lower than the U.S. statutory tax rate of 35% due to pre-tax loss and tax from taxable gain on the termination of the COLI and gains on U.S. divestitures. The September 30, 2016 effective tax rate was higher than the U.S. statutory tax rate due primarily to U.S. pre-tax losses that are taxed at a higher rate than foreign pre-tax income, which has the effect of increasing the overall effective tax rate.

Conduent Form 10-Q
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Excluding primarily the tax on the termination of the COLI, gain on U.S. divestitures and amortization, the normalized effective tax rate for the nine months ended September 30, 2017 was 35.0%. Primarily excluding the amortization and restructuring costs, the normalized effective rate was 23.6% for the nine months ended September 30, 2016.
Worldwide Employment
Worldwide employment was approximately 90,000 as of September 30, 2017 and decreased by 6,000 from December 31, 2016, due primarily to the impact of restructuring and productivity reductions as well as seasonal reductions and divestitures.

Operations Review of Segment Revenue and Profit25 countries.
Our reportable segments correspond to how we organize and manage the business and are aligned to the industriessolutions we offer our clients.
We organize and manage our businesses through three reportable segments.
•Commercial – Our Commercial segment provides business process services and customized solutions to clients in whicha variety of industries. Across the Commercial segment, we operate on our clients’ behalf to deliver mission-critical solutions and services to reduce costs, improve efficiencies and enable revenue growth for our clients operate.and their consumers and employees.
Beginning•Government – Our Government segment provides government-centric business process services to U.S. federal, state and local and foreign governments for public assistance, health services, program administration, transaction processing and payment services. Our solutions in 2017,this segment help governments respond to changing rules for eligibility and increasing citizen expectations.
•Transportation – Our Transportation segment provides systems and support, as well as revenue-generating services, to government clients. On behalf of government agencies and authorities in the transportation industry, we deliver mission-critical mobility and payment solutions that improve automation, interoperability and decision-making to streamline operations, increase revenue and reduce congestion while creating safer communities and seamless travel experiences for consumers.
CNDT Q1 2023 Form 10-Q
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Executive Summary
During the first quarter of 2023, we held an effortinvestor briefing to better reflect howcommunicate the next chapter in the Conduent journey. Our intense emphasis on growth, quality, and efficiency, beginning in the first quarter of 2020 resulted in a strengthened foundation and we manageremain focused on accelerating growth and enhancing value for our stakeholders. We intend to achieve this by doubling down on key themes outlined in the briefing, as well as through a process of portfolio rationalization, divesting certain solutions which have either scarcity value outside of Conduent or are capital intensive relative to their growth opportunity, enabling management bandwidth and capital investments to be focused on solutions where we believe we have competitive advantages or higher growth expectations.
This renewed portfolio focus will result in a more nimble and faster growing Conduent with modest levels of net leverage, enhanced valuation, and significant excess capital to be deployed over time.
Macroeconomic and Geopolitical Uncertainty
Given the nature of our business we changedand our reportingglobal operations, the effects of global macroeconomic and geopolitical uncertainty could have a materially adverse effect on our business, results of operations and financial condition.
Financial Information and Analysis of Results of Operations
Three Months Ended
March 31,		2023 vs. 2022
($ in millions)20232022$ Change% Change
Revenue$922 $967 $(45)(5)%
Operating Costs and Expenses
Cost of services (excluding depreciation and amortization)720 755 (35)(5)%
Selling, general and administrative (excluding depreciation and amortization)111 102 9 9 %
Research and development (excluding depreciation and amortization)2 1 1 100 %
Depreciation and amortization61 61 — — %
Restructuring and related costs29 9 20 222 %
Interest expense27 19 8 42 %
(Gain) loss on divestitures and transaction costs, net2 (163)165 n/m
Litigation settlements (recoveries), net(21)(28)7 (25)%
Other (income) expenses, net(1)1 (2)n/m
Total Operating Costs and Expenses930 757 173 
Income (Loss) Before Income Taxes(8)210 (218)
Income tax expense (benefit)(2)74 (76)
Net Income (Loss)$(6)$136 $(142)
Revenue
Revenue for the three months ended March 31, 2023 decreased, compared to the prior year period, primarily due to non-repeating federal stimulus revenue, lost business in our Government and Commercial segments, extended completion timelines to alignmeet client requirements in the HealthcareTransit solutions division of our Transportation segment and the impact of an out of period adjustment in our Government segment further described below, partially offset by higher interest rates positively impacting our Benefit Wallet business basedand new business ramp.
In the first quarter of 2023, the Company identified an error and recorded an out-of-period adjustment to correct the recognition of revenue on customer focus betweena Government segment contract that originated in 2020 and impacted all quarterly periods through December 31, 2022. This adjustment resulted in a reduction to revenue and income (loss) before income taxes of $7 million.
CNDT Q1 2023 Form 10-Q
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Cost of Services (excluding depreciation and amortization)
Cost of services for the three months ended March 31, 2023 decreased, compared to the prior year periods, primarily driven by the impact of reduced revenue and a $17 million reversal of liabilities due to the settlement of the Cognizant matter described in Note 12 – Contingencies and Litigation to the Condensed Consolidated Financial Statements.
Selling, General and Administrative (SG&A) (excluding depreciation and amortization)
SG&A for the three months ended March 31, 2023 increased, compared to the prior year period, driven by the absence of the recovery of $14 million of defense costs as part of the settlement with insurance carriers relating to the previously disclosed State of Texas matter that occurred in 2022.
Depreciation and Amortization
Depreciation and amortization for the three months ended March 31, 2023 was unchanged from the prior year. This reflects new depreciation from recent capital expenditures being offset by run-off of depreciation on older assets.
Restructuring and Related Costs
We engage in a series of restructuring programs related to optimizing our employee base, reducing our real estate footprint, exiting certain activities, outsourcing certain internal functions, consolidating our data centers and engaging in other actions designed to reduce our cost structure and improve productivity. In addition, during the three months ended March 31, 2023, the Company also incurred $4 million of professional support costs associated with bringing certain technology functions in-house. The following are the components of our Restructuring and related costs:
Three Months Ended
March 31,
(in millions)20232022
Severance and related costs$20 $— 
Data center consolidation costs2 4 
Termination, insourcing and asset impairment costs7 4 
Total net current period charges29 8 
Consulting and other costs(1)
— 1 
Restructuring and related costs$29 $9 
___________
(1)Represents professional support costs associated with certain strategic transformation programs.
The severance and related costs included costs related to the closure of one of our Commercial Industriessegment operations in Europe.
Refer to Note 6 – Restructuring Programs and Public Sector.Related Costs to the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.
Interest Expense
Interest expense represents interest on long-term debt and the amortization of debt issuance costs. The increase in Interest expense for the three months ended March 31, 2023, compared to the prior year periods, was driven by higher interest rates on our credit facilities, partially offset by a lower total outstanding debt balance.
(Gain) Loss on Divestitures and Transaction Costs
The divestiture of the Midas business in the first quarter of 2022 resulted in a gain of $166 million ($165 million in the first quarter of 2022 and $1 million in the second quarter of 2022). Additionally, professional fees and other costs related to certain consummated and non-consummated transactions considered by the Company are included in this financial statement line item for both years.
CNDT Q1 2023 Form 10-Q
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Litigation Settlements (Recoveries), Net
Litigation settlements (recoveries), net for the three months ended March 31, 2023 primarily consist of a $26 million reversal of reserves due to the settlement of the Cognizant matter.
Litigation settlements (recoveries), net for the three months ended March 31, 2022 primarily consist of $24 million of insurance recoveries recorded in the first quarter of 2022 related to the previously disclosed State of Texas matter.
Refer to Note 12 – Contingencies and Litigation to the Condensed Consolidated Financial Statements for additional information.
Income Taxes
The effective tax rate for the three months ended March 31, 2023 was 20.8%, compared to 35.2% for the three months ended March 31, 2022. The March 31, 2023 rate approximates the U.S. statutory rate of 21%.
The effective tax rate for the three months ended March 31, 2022 was higher than the U.S. statutory rate of 21%, primarily due to the geographic mix of income, state and local taxes and permanently non-deductible amounts related to the divestiture transaction, partially offset by the tax benefit of valuation allowances released due to the gain from divestiture and tax credits.
Excluding the impact of restructuring costs, litigation reserve releases, valuation allowance and certain discrete tax items, the normalized effective tax rate for the three months ended March 31, 2023 was 35.0%. The normalized effective tax rate for the three months ended March 31, 2022 was 29.6%, predominantly due to excluding the impact of the Midas divestiture, the litigation insurance recoveries, amortization of intangible assets, restructuring costs and certain discrete tax items. The normalized effective tax rate for the three months ended March 31, 2023 was higher than the three months ended March 31, 2022 due to the geographic mix of income.
Operations Review of Segment Revenue and Profit
Our financial performance is based on "Segment Profit / Segment Profit/(Loss)" which is defined as income before amortization of intangibles, restructuring and related costs, interest, gain on sale of an asset, separation costs, other (income) expense, net and income taxesSegment Adjusted EBITDA for the following three segments:
Commercial Industries,•Commercial;
Public Sector,•Government; and
Other•Transportation.
RevenuesDivestitures includes our Midas business which was sold in the first quarter of 2022.
Unallocated Costs includes IT infrastructure costs that are shared by multiple reportable segments, enterprise application costs and certain corporate overhead expenses not directly attributable or allocated to our reportable segments.
CNDT Q1 2023 Form 10-Q
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Results of financial performance by segment for the three and nine months ended September 30 were:
  Three Months Ended September 30, Nine Months Ended September 30,
(in millions) Revenue % of Total
Revenue		 Segment
Profit (Loss)		 Segment
Profit (Loss)%		 Revenue 
% of Total
Revenue
 
Segment
Profit (Loss)
 
Segment
Profit (Loss)%

2017                
Commercial Industries $864
 58% $53
 6.1 % $2,663
 59% $114
 4.3 %
Public Sector 540
 37% 59
 10.9 % 1,629
 36% 179
 11.0 %
Other 76
 5% 1
 1.3 % 237
 5% (7) (3.0)%
Total $1,480
 100% $113
 7.6 % $4,529
 100% $286
 6.3 %
                 
2016                
Commercial Industries $923
 58% $42
 4.6 % $2,869
 59% $103
 3.6 %
Public Sector 584
 37% 78
 13.4 % 1,734
 35% 217
 12.5 %
Other 89
 5% (23) (25.8)% 291
 6% (75) (25.8)%
Total $1,596
 100% $97
 6.1 % $4,894
 100% $245
 5.0 %
Three Months Ended
March 31,
(in millions)CommercialGovernmentTransportationDivestituresUnallocated CostsTotal
2023
Revenue$508 $264 $150 $— $— $922 
Segment profit (loss)$35 $73 $(8)$— $(70)$30 
Segment depreciation and amortization$30 $10 $11 $— $9 $60 
Adjusted EBITDA$65 $83 $3 $— $(61)$90 
% of Total Revenue55.1 %28.6 %16.3 %— %— %100.0 %
Adjusted EBITDA Margin12.8 %31.4 %2.0 %— %— %9.8 %
2022
Revenue$512 $286 $162 $7 $— $967 
Segment profit (loss)$28 $75 $8 $2 $(59)$54 
Segment depreciation and amortization$26 $8 $9 $— $12 $55 
Adjusted EBITDA$54 $83 $17 $2 $(47)$109 
% of Total Revenue52.9 %29.6 %16.8 %0.7 %— %100.0 %
Adjusted EBITDA Margin10.5 %29.0 %10.5 %— %— %11.3 %

(in millions)Three Months Ended
March 31,
Segment Profit (Loss) Reconciliation to Pre-tax Income (Loss)20232022
Income (Loss) Before Income Taxes$(8)$210 
Reconciling items:
Amortization of acquired intangible assets2 6 
Restructuring and related costs29 9 
Interest expense27 19 
(Gain) loss on divestitures and transaction costs2 (163)
Litigation settlements (recoveries)(21)(28)
Other (income) expenses, net(1)1 
Segment Profit (Loss)$30 $54 
Segment depreciation and amortization (including contract inducements)60 55 
Adjusted EBITDA$90 $109 
Commercial Industries Segment
Revenue
Commercial Industries revenue for the three and nine months ended September 30, 2017 was 58% and 59%, respectively, of total revenue and decreased 6% and 7%, respectively, from the prior year periods. The declines were driven primarily by strategic contract actions and lost business in the Healthcare Payer, High Tech Industrial & Retail and Provider businesses and lower volumes from existing clients, partially offset by revenue from new contracts.
Segment Profit
Increase in the Commercial Industries segment profit for the three months ended September 30, 2017March 31, 2023 was driven by benefits from our strategic transformation cost initiatives and from new business, partially offset by losses in our customer experience services offering and the overall revenue decline from existing clients, investments and dis-synergy costs.

Conduent Form 10-Q
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Increase in the Commercial Industries segment profit for the nine months ended September 30, 2017 was driven by benefits from our strategic transformation cost initiatives, partially offset by losses in our customer experience services offering and the overall revenue decline from existing clients, investments and dis-synergy costs.
Public Sector Segment
Revenue
Public Sector revenue for the three and nine months ended September 30, 2017 was 37% of total revenue for both periods and decreased 8% and 6%, respectively,lower compared to the prior year periods. The decreases wereperiod primarily drivendue to the final impact of the merger of two of our clients disclosed in the second quarter of 2022 resulting in lower volumes, partially offset by contract losses in State & Local, Government Healthcare and Payment Services. These declines for the nine months ended were partially mitigated by growth inhigher interest rates positively impacting our TransportationBenefit Wallet business.
Segment Profit and Adjusted EBITDA
DecreaseIncreases in the Public SectorCommercial segment profit, adjusted EBITDA and adjusted EBITDA margin for the three and nine months ended September 30, 2017 were due to contract losses in Government Healthcare, State & Local, and Payment Services, dis-synergies and investments in our core offerings.

Other Segment
Revenue
Other revenue for the three and nine months ended September 30, 2017 was 5% of total revenues for both periods and decreased 15% and 19%, respectively, driven by the exit from the NY MMIS contract and the run-off of the student loan business.
Segment Profit (Loss)
Other segment profit (loss) of $1 million and $(7) million for the three and nine months ended September 30, 2017 improved $24 million and $68 million, respectively,March 31, 2023, compared to the prior year periodsperiod, were mainly driven by higher interest rates positively impacting our Benefit Wallet business.
CNDT Q1 2023 Form 10-Q
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Government Segment
Revenue
Government revenue for the three months ended March 31, 2023 decreased, compared to the prior year period. This decrease was primarily driven by non-repeating federal stimulus revenue, lost business from prior years and the out of period adjustment mentioned above, partially offset by the ramping of new business in Government Healthcare solutions and higher volumes in Government services solutions.
Segment Profit and Adjusted EBITDA
Government segment profit and adjusted EBITDA for the three months ended March 31, 2023 were substantially unchanged compared to the prior year period with the $17 million reversal of reserves due to the settlement of the Cognizant matter being offset by the out of period adjustment and lower revenue. Adjusted EBITDA margin improved due to the Cognizant matter partially offset by the out of period adjustment and the non-repeating federal stimulus revenue.
Transportation Segment
Revenue
Transportation revenue for the three months ended March 31, 2023 decreased compared to the prior year period, primarily driven by extended completion timelines to meet client requirements in our Transit solutions service offering, which affected the recognition timeframe for revenue.
Segment Profit and Adjusted EBITDA
Transportation segment profit, adjusted EBITDA and adjusted EBITDA margin for the three months ended March 31, 2023 decreased primarily due to improved profitabilityextended completion timelines to meet client requirements in our Transit solutions service offering.
Divestitures
Revenue, Segment Profit (Loss) and Adjusted EBITDA
The decline in revenue, segment profit and Adjusted EBITDA for the three months ended March 31, 2023 was due to the sale of the Midas Suite of products. The prior year included activity through the date of disposition whereas there was no activity in the student loan business, improvements in the HE business.current year.

Unallocated Costs
Health Enterprise

In February 2017, we determined that it was not probable that the NY MMIS project would be completed. As a result of this determination, we recorded a pre-tax charge of $161 million ($98 million after-tax) in the fourth quarter 2016 financial results. The charge included $83 millionUnallocated Costs for the write-off of contract receivables which were recorded as a reduction of revenue and $78 million recorded in costs of outsourcing, including $36 million for wind down costs, a $28 million non-cash charge for the impairment of software and $14 million for the write-off of deferred contract set-up and transition costs and other related assets and liabilities. The three and nine months ended September 30, 2017, includes adjustmentsMarch 31, 2023 increased compared to increase our estimated wind-downthe prior year period primarily due to the prior year reflecting the recovery of defense costs as part of approximately $1 million and $10 million, respectively.

We have reached agreement in principlethe settlement with insurance carriers relating to the previously disclosed State of New York regarding resolution of the Health Enterprise (HE) platform project, which would result in settlement ofTexas matter, partially offset by progress with our New York Health Enterprise platform exposure. Under this agreement in principle, we would pay, or incur costs on behalf of, the State of New York in the amount of approximately $20 million which is reserved. This agreement in principle remains subject to ongoing negotiations and a settlement will not be effective unless and until we enter into a definitive agreement with the State of New York. Our HE platform has been fully implemented in New Hampshire, Alaska and North Dakota and we are in the process of obtaining certification for Alaska and North Dakota.efficiency initiatives.
Metrics
Signings
Signings are defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts. Total Contract Value (TCV)TCV is the estimated total contractual revenue related to signed contracts. TCV signings is defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts. Due to the inconsistency of when existing contracts end, quarterly and yearly comparisons are not a good measure of renewal performance. New business ACV is calculated as TCV divided by the contract term, in months, multiplied by 12 for an annual measure.


For the three months ended March 31, 2023, the Company signed $125 million of new business ACV.
Conduent
CNDT Q1 2023 Form 10-Q
2226




SigningsSigning information for the three and nine months ended September 30, were:
March 31, 2023 and 2022 is as follows:
Three Months Ended
March 31,		2023 vs. 2022
($ in millions)($ in millions)
2023(3)
2022(3)
$ Change% Change
New business ACVNew business ACV$125 $167 $(42)(25)%
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2017 2016 2017 2016
New business TCV $390
 $633
 $1,577
 $1,803
New business TCV$244 $464 $(220)(47)%
Renewals TCV 657
 913
 1,645
 3,388
Renewals TCV390 936 (546)(58)%
Total Signings $1,047
 $1,546
 $3,222
 $5,191
Total Signings$634 $1,400 $(766)(55)%
        
Annual recurring revenue signings $92
 $167
 $366
 $408
Non-recurring revenue signings $86
 $104
 $287
 $326
Annual recurring revenue signings(1)
Annual recurring revenue signings(1)
$61 $108 $(47)(44)%
Non-recurring revenue signings(2)
Non-recurring revenue signings(2)
$67 $62 $5 8 %
Signings ___________
(1)Recurring revenue signings are for new business contracts longer than one year.
(2)Non-recurring revenue signings are for contracts shorter than one year.
(3)Adjusted to remove Midas new business signings.
The total new business pipeline at the threeend of March 31, 2023 and nine months ended September 30, 2017 decreased 32%2022 was $23.2 billion and 38%, from$22.0 billion, respectively. Total new business pipeline is defined as total new business TCV pipeline of deals in all sell stages. This extends past the prior year periods, respectively, reflectingnext twelve-month period to include total pipeline, excluding the impact of lower contract renewals, partially resulting from our strategic contract remediation actions in 2017 and a large contract renewal in the second quarter of 2016.divested business as required.
Renewal RateNet ARR Activity
Renewal rateThe Net ARR Activity metric is defined as Projected Annual Recurring Revenue for contracts signed in the annual recurring revenue (ARR) on contracts that are renewed duringprior 12 months, less the period as
a percentageannualized impact of ARR on all contractsany client losses, contractual volume and price changes, and other known impacts for which a renewal decisionthe Company was made duringnotified in that same time period, which could positively or negatively impact results. The metric annualizes the period, excludingnet impact to revenue. Timing of revenue impact varies and may not be realized within the forward 12-month timeframe. The metric is for indicative purposes only. This metric excludes COVID-related volume impacts and non-recurring revenue signings. This metric is not indicative of any contracts that were not renewed and where a strategic action to improve the risk or profitability had been initiated. Renewal ratespecific 12-month timeframe.
The Net ARR activity metric for the three and ninetrailing twelve months ended September 30, 2017for each of the prior five quarters was 98% and 93%, respectively, and exceeded our target range of 85%-90%. Excluding these strategic actions, renewals would have been approximately 95% and 83% for the three and nine months ended September 30, 2017 .as follows:

(in millions)Net ARR Activity metric
March 31, 2023$108 
December 31, 2022114 
September 30, 202270 
June 30, 2022104 
March 31, 2022102 

Capital Resources and Liquidity
As of September 30, 2017March 31, 2023 and December 31, 2016,2022, total cash and cash equivalents were $468$526 million (inclusive of $141 million cash related to the termination of the deferred compensation plan) and $390$582 million, respectively. We had no outstanding borrowingsalso have a $550 million revolving line of credit for our various cash needs, of which $2 million was used for letters of credit. The net amount available to be drawn upon under our Revolving Credit Facilityrevolving line of credit as of September 30, 2017.March 31, 2023, was $548 million.
Additionally, we have lettersAs of credit and bank guaranteesMarch 31, 2023, our total debt outstanding from time-to-time to secure our performancewas $1,277 million of contractual obligation to our clients and other corporate obligations.which $38 million was due within one year. Refer to Note 11 - Contingencies and Litigation,7 – Debt in the Condensed Consolidated Financial Statements for additional information regarding these guarantees.debt information.
In order to provide financial flexibility and finance certain investments and projects, we may continue to utilize external financing arrangements. However, we believe that our cash on hand, projected cash flow from operations, sound balance sheet and our revolving line of credit will continue to provide sufficient financial resources to meet our expected business obligations for at least the next twelve months.
CNDT Q1 2023 Form 10-Q
27


Cash Flow Analysis
The following table summarizes our cash flows, as reported in our Condensed Consolidated Statement of Cash Flows in the accompanying Condensed Consolidated Financial Statements:
 Three Months Ended March 31,
(in millions)20232022Better (Worse)
Net cash provided by (used in) operating activities$(12)$11 $(23)
Net cash provided by (used in) investing activities$(22)$273 (295)
Net cash provided by (used in) financing activities$(19)$(110)91 
  Nine Months Ended
September 30,		  
(in millions) 2017 2016 Increase (Decrease)
Net cash provided by (used in) operating activities $65
 $(38) $103
Net cash provided by (used in) investing activities 122
 (129) 251
Net cash (used in) provided by financing activities (111) 177
 (288)
Operating activities
Operating activities:The increasenet decrease in cash generated from operating activities was primarily attributableof $23 million, compared to improvements in working capital, reduced wind-down payments associated with implementations in California, Montana and New York, partially offset by income-tax payments.
Investing activities: The increase in cash provided by investing activitiesthe prior year period, was primarily related to the following:absence of the $38 million of insurance recoveries related to the previously disclosed State of Texas matter.
$116Investing activities
Investing cash flow decreased by $295 million increaseprimarily due to the proceeds received on long-term investments driven byfrom the terminationdivestiture of the deferred compensation plan.Midas business in the prior year, partially offset by decreased capital spending in the current year.
$109 million increase due to proceeds received from 2017 divestitures ($56 million) and payment made to Atos for an adjustment to purchase price related to a divestiture in 2016 ($53 million).Financing activities

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Financing activities:The decrease in cash used fromin financing activities was primarily related to the following:repayment of the $100 million borrowed under the revolver in the prior year partially offset by higher taxes paid for settlement of stock-based compensation.
$351 million decrease due to net transfers to former parent.Sales of Accounts Receivable
$214 million decrease due to increase in payments of debt.
$300 million increase due to proceeds on issuance of debt.
Capital Market Activity

On October 10, 2017, weWe have entered into Amendment No. 2a factoring agreement in the normal course of business as part of our cash and liquidity management, to sell certain accounts receivable without recourse to a third-party financial institution. The transactions under this agreement are treated as a sale and are accounted for as a reduction in accounts receivable because the agreement transfers effective control over, and risk related to, the receivables to the buyer. Cash proceeds from this arrangement are included in cash flow from operating activities in the Consolidated Statements of Cash Flows.
The net impact from the sales of accounts receivable on net cash provided by (used in) operating activities for the three months ended March 31, 2023 and 2022 was $(27) million and $(8) million, respectively.
Material Cash Requirements from Contractual Obligations
The Company believes its balances of cash and cash equivalents, which totaled $526 million as of March 31, 2023, along with cash generated by operations and amounts available for borrowing under its 2021 Revolving Credit Agreement datedFacility, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.
At March 31, 2023, the Company’s material cash requirements include debt, leases and estimated purchase commitments. See Part II, Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the year ended December 7, 2016 and amended by Amendment No. 1 dated April 7, 2017. Amendment No. 2 reduced the interest rate31, 2022 for additional information on our Term Loan B by 1.0% from 4.0% over LIBORmaterial cash requirements.
Critical Accounting Estimates and Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to 3.0% over LIBOR.

On April 7, 2017, we entered into Amendment No. 1 tomake estimates and assumptions in certain circumstances that affect amounts reported in the Credit Agreement, dated December 7, 2016 which reduced the interest rate on our Term Loan B by 1.5% from 5.5% over LIBOR to 4.0% over LIBOR.
In January 2017, we borrowed an additional $100 million on Term Loan B with proceeds used for general corporate purposes.
Refer to Note 6 - Debt, in theaccompanying Condensed Consolidated Financial Statements and notes thereto. There have been no significant changes during the three months ended March 31, 2023 to our critical accounting estimates and policies from those disclosed in our Annual Report on Form 10-K for additional information.the year ended December 31, 2022.

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Market Risk Management


Recent Accounting Changes
See Note 2 – Recent Accounting Pronouncements for information on accounting standards adopted during the current year, as well as recently issued accounting standards not yet required to be adopted and the expected impact of the adoption of these accounting standards.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in foreign currency exchange rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. TheseWe may utilize derivative financial instruments are utilized to hedge economic exposures, as well as to reduce earnings and cash flow volatility resulting from shifts in market rates.

We also may hedge the cost to fund material non-dollar entities by buying currencies periodically in advance of the funding date. This is accounted for using derivative accounting.
Recent market and economic events have not caused us to materially modify nor change our financial risk management strategies with respect to our exposures to foreign currency risk. Refer to Note 78 – Financial Instruments in the Condensed Consolidated Financial Statements for additional discussion on our financial risk management.

Non-GAAP Financial Measures
WeDuring the reporting period, there have reportedbeen no material changes to the quantitative and qualitative disclosures regarding our financial results in accordance with U.S. GAAP. In addition, we have discussed our results using certain non-GAAP measures.

We believe these non-GAAP measures allow investors to better understand the trendsmarket risk set forth in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods’ results against the corresponding prior periods’ results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing such non-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures.
A reconciliation of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided below.

These reconciliations also include the income tax effects for our non-GAAP performance measures in total, to the extent applicable. The income tax effects are calculated under the same accounting principles as applied to our reported pre-tax performance measures under ASC 740, which employs an annual effective tax rate method. The noted income tax effect for our non-GAAP performance measures is effectively the difference in income taxes for reported and adjusted pre-tax income calculated under the annual effective tax rate method. The tax effect of the

Conduent Form 10-Q
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non-GAAP adjustments was calculated based upon evaluation of the statutory tax treatment and the applicable statutory tax rate in the jurisdictions in which such charges were incurred.

Constant Currency

To better understand trends in our business, we believe that it is helpful to adjust revenue to exclude the impact of changes in the translation of foreign currencies into U.S. Dollars. We refer to this adjusted revenue as “constant currency.” Currency impact is the difference between actual growth rates and constant currency growth rates.

Adjusted Operating Income and Adjusted Operating Margin
We make adjustments to Pre-Tax Income (Loss) for the following items for the purpose of calculating Adjusted Operating Income and Adjusted Operating Margin.
Amortization of intangible assets. The amortization of intangible assets is driven by acquisition activity, which can vary in size, nature and timing as compared to other companies within our industry from period to period.
Restructuring and related costs. Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our strategic transformation program.
Separation costs. Separation costs are expenses incurred in connection with the separation from Xerox Corporation into a separate, independent, publicly traded company. These costs primarily relate to third-party investment banking, accounting, legal, consulting and other similar types of services related to the separation transaction as well as costs associated with the operational separation of the two companies.
Interest expense. Interest expense includes interest on long-term debt and amortization of debt issuance costs and related party interest.
Other (income) expenses net. Other (income) expenses, net includes currency (gains) losses, net, litigation matters and all other (income) expenses, net.
NY MMIS (2017 only). Costs associated with the company not fully completing the State of New York Health Enterprise Platform project.
HE charge (2017 only). Costs associated with not fully completing the Health Enterprise Medical Platform implementation projects in California and Montana.
(Gain) loss on sale of asset and businesses.

We provide our investors with adjusted operating income and adjusted operating margin information, as supplemental information, because we believe it offers added insight, by itself and for comparability between periods, by adjusting for certain non-cash items as well as certain other identified items which we do not believe are indicative of our ongoing business, and may also provide added insight on trends in our ongoing business.
Adjusted Net Income (Loss), Adjusted Earnings per Share and Adjusted Effective Tax Rate
We make adjustments to Income (Loss) before Income Taxes for the following items for the purpose of calculating Adjusted Net Income (Loss), Adjusted Earnings per Share and Adjusted Effective Tax Rate:
Amortization of intangible assets.
Restructuring and related costs.
Separation costs.
Other (income) expenses, net.
NY MMIS (2017 only).
HE charge (2017 only).
(Gain) loss on sale of asset and businesses.

The Company provides adjusted net income and adjusted EPS financial measures to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which may be recurring or non-recurring and which in our view do not necessarily reflect ongoing performance.  We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions.

Management believes that adjusted effective tax rate, provided as supplemental information, facilitates a comparison by investors of our actual effective tax rate with an adjusted effective tax rate which reflects the impact of the items which are excluded in providing adjusted net income, and may provide added insight into our underlying business results and how effective tax rates impact our ongoing business.

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Operating Income / Margin Reconciliation:
 Three Months Ended
September 30, 2017		   Three Months Ended
September 30, 2016		  
(in millions)Pre Tax Income (Loss) Revenue Margin Pre Tax Income (Loss) Revenue Margin
GAAP as Reported(1)
$13
 $1,480
 0.9% $2
 1,596
 0.1%
Adjustments:           
Amortization of intangible assets60
     63
    
NY MMIS1
     —
    
Restructuring and related costs22
     8
    
HE charge(3) 
   —
 
  
Separation costs2
     15
    
Interest expense35
     1
    
Related party interest—
     10
    
(Gain) loss on sale of asset and businesses(16)     —
    
Other (income) expenses, net(3)     (2) —
  
Adjusted Operating Income/Margin$111
 $1,480
 7.5% $97
 $1,596
 6.1%
            
(1) Pre-Tax Income (Loss) and revenue from continuing operations.

 Nine Months Ended
September 30, 2017		   Nine Months Ended
September 30, 2016		  
(in millions)Pre Tax Income (Loss) Revenue Margin Pre Tax Income (Loss) Revenue Margin
GAAP as Reported(1)
$(20) $4,529
 (0.4)% $(86) 4,894
 (1.8)%
Adjustments:           
Goodwill impairment182
     200
    
Amortization of intangible assets10
     —
    
NY MMIS76
     57
    
Restructuring and related costs(8) 
   —
 
  
HE charge8
     34
    
Interest expense105
     3
    
Related party interest—
     30
    
(Gain) loss on sale of asset and businesses(41)     1
    
Other (income) expenses, net(24)     6
 —
  
Adjusted Operating Income/Margin$288
 $4,529
 6.4 % $245
 $4,894
 5.0 %
            
(1) Pre-Tax Income (Loss) and revenue from continuing operations.


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Effective Tax Rate Reconciliation:
 Three Months Ended
September 30, 2017		 Three Months Ended
September 30, 2016
(in millions)Pre-Tax Income (Loss) Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax Income (Loss) Income Tax (Benefit) Expense Effective Tax Rate
GAAP as Reported From Continuing Operations$13
 $30
 230.8% $2
 $1
 50.0%
Non-GAAP adjustments(1)
63
 17
   84
 33
  
Termination of COLI plan—
 (19)   —
 —
  
Adjusted(2)
$76
 $28
 36.8% $86
 $34
 39.5%
            
(1) Refer to Net Income (Loss) reconciliation for details.
(2) The tax impact of Adjusted Pre-Tax Income (Loss) from continuing operations is calculated under the same accounting principles applied to the As Reported Pre-Tax Income, which employs an annual effective tax rate method to the results.
 Nine Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2016
(in millions)Pre-Tax Income (Loss) Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax Income (Loss) Income Tax (Benefit) Expense Effective Tax Rate
GAAP as Reported From Continuing Operations$(20) $11
 (55.0)% $(86) $(54) 62.8%
Non-GAAP adjustments(1)
203
 72
   298
 104
  
Termination of COLI plan—
 (19)   —
 —
  
Adjusted(2)
$183
 $64
 35.0 % $212
 $50
 23.6%
            
(1) Refer to Net Income (Loss) reconciliation for details.
(2) The tax impact of Adjusted Pre-Tax Income (Loss) from continuing operations is calculated under the same accounting principles applied to the As Reported Pre-Tax Income, which employs an annual effective tax rate method to the results.

Net Income (Loss) and EPS Reconciliation:
  Three Months Ended
September 30, 2017		 Three Months Ended
September 30, 2016
(in millions, except earnings per share) Net Income (Loss) EPS Net Income (Loss) EPS
GAAP as Reported From Continuing Operations $(17) $(0.09) $1
 $0.01
Adjustments:        
Amortization of intangible assets 60
   63
  
NY MMIS 1
   —
  
Restructuring and related costs 22
   8
  
HE charge (3)   —
  
Separation costs 2
   15
  
(Gain) loss on sale of asset and businesses (16)   —
  
Other (income) expenses, net (3)   (2)  
Less: Income tax adjustments(1)
 2
   (33)  
Adjusted Net Income (Loss) and EPS $48
 $0.22
 $52
 $0.24
         
(shares)        
Weighted average common shares outstanding   204
   203
Restricted stock and performance shares   3
   3
8% Convertible preferred stock   —
   5
Adjusted Weighted Average Shares Outstanding(2)
   207
   211
(1) Reflects the income tax (expense) benefit of the adjustments. Refer to the Effective Tax Rate reconciliation details.
(2) Average shares for the 2017 calculation of adjusted EPS excludes 5 million shares associated with our Series A convertible preferred stock and includes the impact of the preferred stock quarterly dividend of $2 million for the three months ended September 30, 2017. Average shares for the 2016 calculation of adjusted EPS includes 5 million shares associated with our Series A convertible preferred stock and excludes the impact of the preferred stock quarterly dividend.

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  Nine Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2016
(in millions, except earnings per share) Net Income (Loss) EPS Net Income (Loss) EPS
GAAP as Reported From Continuing Operations $(31) $(0.19) $(32) $(0.16)
Adjustments:        
Amortization of intangible assets 182
   200
  
NY MMIS 10
   —
  
Restructuring and related costs 76
   57
  
HE charge (8)   —
  
Separation costs 8
   34
  
(Gain) loss on sale of asset and businesses (41)   1
  
Other (income) expenses, net (24)   6
  
Less: Income tax adjustments(1)
 (53)   (104)  
Adjusted Net Income (Loss) and EPS $119
 $0.54
 $162
 $0.77
         
(shares)        
Weighted average common shares outstanding   204
   203
Restricted stock and performance shares   3
   3
8% Convertible preferred stock   —
   5
Adjusted Weighted Average Shares Outstanding(2)
   207
   211
(1) Reflects the income tax (expense) benefit of the adjustments. Refer to the Effective Tax Rate reconciliation details.
(2) Average shares for the 2017 calculation of adjusted EPS excludes 5 million shares associated with our Series A convertible preferred stock and includes the impact of the preferred stock quarterly dividend of $7 million for the nine months ended September 30, 2017. Average shares for the 2016 calculation of adjusted EPS includes 5 million shares associated with our Series A convertible preferred stock and excludes the impact of the preferred stock quarterly dividend.


ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the “Market Risk Management” section of this QuarterlyAnnual Report on Form 10-Q is hereby incorporated by reference in answer to this Item.10-K for the year ended December 31, 2022.
 
ITEM 4 — CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures
The Company’s management evaluated, with the participation of our principal executive officer and principal financial officer, or persons performing similar functions, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act"), as of the end of the period covered by this report.Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report,Form 10-Q, our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms relating to Conduent Incorporated,the Company, including our consolidated subsidiaries, and was accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b)Changes in Internal ControlsControl Over Financial Reporting
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there wasThere were no change identifiedchanges in our internal control over financial reporting that occurred during the last fiscal quarter ended March 31, 2023, that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.




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PART II — OTHER INFORMATION


ITEM 1 — LEGAL PROCEEDINGS
The information set forth under Note 1112 – Contingencies and Litigation in the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q is incorporated herein by reference in answer to this Item.
 
ITEM 1A — RISK FACTORS
Reference is made to the Risk Factors set forth in Part I, Item 1A of our 2016 Annual Report.Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to our risk factors as previously reported in our 2016 Annual Report.Report on Form 10-K for the year ended December 31, 2022.

CNDT Q1 2023 Form 10-Q
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ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
Sales of Unregistered Securities during the Quarter ended September 30, 2017
(a)Sales of Unregistered Securities during the Quarter ended March 31, 2023
During the quarter ended September 30, 2017,March 31, 2023, the Company did not issue any securities in transactions that were not registered under the Securities Act of 1933, as amended.

(b)Issuer Purchases of Equity Securities during the Quarter ended September 30, 2017
None.(b)Issuer Purchases of Equity Securities during the Quarter ended March 31, 2023

None.

ITEM 6 — EXHIBITS
3.1
Incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K dated December 23, 2016.
3.2
3.2
Incorporated by reference to Exhibit 3.2 to RegistrantsRegistrant's Current Report on Form 8-K dated December 23, 2016.
10.6(a)(i)
10.1(d)
10.6(a)(ii)Incorporated by reference to Registrant's Current Report on Form 8-K, filed October 10, 2017.
10.6(h)
10.6(a)(iii)Incorporated by reference to Registrant's Current Report on
of Performance Stock Unit Award Agreement 2023 (rTSR) under the 2021 PIP.
31(a)
31(b)
32
101.CAL
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase.
101.INS101.LABXBRL Instance Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase.
101.SCHInline XBRL Taxonomy Extension Schema Linkbase.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



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SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CONDUENT INCORPORATED
(Registrant)
By:
/S/ ALLAN COHEN
S/ STEPHEN WOOD
Allan Cohen
Vice President and
Stephen Wood
Chief AccountingFinancial Officer

(Principal AccountingFinancial Officer)

Date: November 8, 2017May 3, 2023



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CNDT Q1 2023 Form 10-Q
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