Conduent's Confidence Game: Can Skelton's "Ample Liquidity" Outrun Reality?
Okay, so Conduent (CNDT) had a rough Friday. The stock tanked – down 12.16%, landing at $1.95. Not pretty. The immediate trigger was the Q3 2025 earnings release, and the numbers don't exactly inspire confidence. Revenue: $767 million, a 5% year-over-year drop. That's a miss against the $794.33 million analysts were expecting. Adjusted EPS? A loss of nine cents, also missing the consensus estimate (a loss of seven cents, but still). CNDT Earnings: Conduent Stock Tumbles as EPS & Revenue Miss Estimates
But here's where it gets interesting. CEO Cliff Skelton is talking up "ample liquidity" and hitting capital allocation targets. He's painting a picture of a company on track, despite the revenue headwinds. It’s a classic CEO move, but does the data back it up?
The Cash Cushion Conundrum
Let's dig into this "ample liquidity." They’re sitting on $264 million in cash, and they've got another $198 million in unused credit. Total debt is $713 million. So, roughly speaking, they have around $462 million of accessible liquidity. That sounds like a decent buffer, right?
Here's the rub: Operating cash flow for the quarter was negative $39 million. Adjusted free cash flow? Negative $54 million. They're burning cash. And while adjusted EBITDA did rise to $40 million (margin expanding to 5.2%), that's still a relatively thin margin. The adjusted revenue guidance for the full year 2025 has been lowered to $3.05 billion–$3.10 billion from a prior range of $3.10 billion–$3.20 billion.
They’re telling investors to focus on the EBITDA margin, but I'm more concerned about the top-line contraction and the negative cash flow. It reminds me of a company that's trying to optimize its way out of a fundamental demand problem. (And this is the part of the report that I find genuinely puzzling.)
They also repurchased approximately 4.7 million shares during the quarter. Share buybacks can be a good way to return value to shareholders, but it seems like they are trying to prop up the stock price while the business is deteriorating. Were those buybacks the best use of their limited cash?
The Data Breach Shadow
And let's not forget the elephant in the room: the massive data breach from October 2024. It affected over 10.5 million people. Lawsuits are piling up, and investigations are underway. The company says there is no evidence of any attempted or actual misuse of any information potentially affected by this incident.
But the potential liability here is significant. Legal fees, settlements, regulatory fines – these things add up. Plus, there's the reputational damage. How many potential clients are going to think twice about entrusting their data to Conduent after this? It’s like trusting a chef who just had a major salmonella outbreak in their kitchen.
The lawsuits allege negligence in failing to protect personal information. One lawsuit alleges that the company failed to implement reasonable data security measures and allowed threat actors to breach its computer systems and exfiltrate private information.
The breach notice posted on Conduent's website says that the personal information contained in the compromised files potentially included name, Social Security number, medical information and health insurance information.
Is This a Turnaround or a Slow Fade?
Skelton is trying to project confidence. He's talking about new business signings ($111 million in ACV) and the Net ARR Activity Metric (TTM) at $25 million. He’s also highlighting new contracts and expansions, like the Pay-by-Plate tolling contract with the Richmond Metropolitan Transportation Authority and the new Lipa-Malvar facility in the Philippines.
But those positive signs are overshadowed by the broader financial picture. The lowered revenue guidance speaks volumes. The company expects revenue for the year to range from $3.05 billion to $3.1 billion, missing Wall Street’s revenue estimate of $3.13 billion for 2025. Conduent Cuts 2025 Revenue Forecast, But CEO Says Capital Plan On Track With Cash Cushion - Conduent (NASDAQ:CNDT)
The question isn't whether Conduent can meet its short-term obligations. The question is whether it can reverse the revenue decline and generate sustainable, positive cash flow. I’m not seeing enough evidence to suggest they can.
Smoke and Mirrors?
Conduent's management is trying to manage the narrative, focusing on adjusted metrics and future potential. But as any good analyst knows, you can't eat adjusted EBITDA. At some point, you need real revenue and real cash flow. And right now, Conduent is coming up short.
