CNDT 10-K & 10-Q changes, risk factors and insider trading

Our business may be adversely affected by geopolitical events and increasing geopolitical tensions, macroeconomic conditions, natural disasters and other factors that could directly impact certain of our employees, customers and vendors in countries or regions effected by such events and factors.

We have a global workforce and global customers. Our employees and customers in a particular country or region in the world may be impacted as a result of a variety of diversions, including: geopolitical events and increasing geopolitical tensions, such as war, the threat of war, or terrorist activity (including the war in the Ukraine and the conflict in the Middle East); macroeconomic conditions, such as the level of inflation, economic activity and interest rates; natural disasters or the effects of climate change (such as drought, flooding, wildfires, increased storm severity, and sea level rise); power shortages or outages,outages and major public health issues, including pandemics (such as the coronavirus)issues; and significant local, national or global events capturing the attention of a large part of the population. To date, while we do not believe our business, financial position or operations have been materially impacted by these factors, we continue to monitor world events closely. If any of these factors disrupt a country or region where we have a significant workforce (such as the U.S., India or the Philippines) or customers (such as the U.S. or Europe), or vendors, our business could be materially adversely affected.

Approximately 14%16% of our 20242025 revenues was generated from operations outside the United States. In addition, we maintain significant operations outside the United States. Our results of operations and financial condition could be materially adversely affected by changes in foreign currency exchange rates, as well as by several of other factors, including, without limitation, changes in economic conditions from country to country, changes in a country’s political conditions, trade controls and protection measures, financial sanctions, licensing requirements, local tax issues, capitalization and other related legal matters. If we are unable to effectively hedge these risks, our results of operations and financial condition could be materially adversely affected.

Our business and growth depend in large part on continued interest in outsourced business process services. Outsourcing means that an entity contracts with a third-party, such as us, to provide business process services rather than perform such services in-house. There can be no assurance that this interest will continue, as organizations may elect to perform such services themselves and/or the business process outsourcing industry could move to an as-a-service model, thereby eliminating traditional business process outsourcing tasks. A significant change in this interest in outsourcing could materially adversely affect our results of operations and financial condition. Additionally, there can be no assurance that our cross-selling efforts will cause clients to purchase additional services from us or adopt a single-source outsourcing approach.

We rely heavily on the use of intellectual property. We do not own all of the software that we use to run our business; insteadinstead, we license this software from a small number of primary vendors. If these vendors assert claims that we or our clients are infringing on their software or related intellectual property, we could incur substantial costs to defend these claims, which could materially adversely affect our results of operations and financial condition. In addition, if any of our vendors’ infringement claims are ultimately successful, our vendors could require us to (i) cease selling or using products or services that incorporate the challenged software or technology, (ii) obtain a license or additional licenses from our vendors or (iii) redesign our services which rely on the challenged software or technology. In addition, we may be exposed to claims for monetary damages. If we are unsuccessful in defending an infringement claim and our vendors require us to initiate any of the above actions, or we are required to pay monetary damages, then such actions could materially adversely affect our results of operations and financial condition.

Our success depends, in part, upon key managerial and technical personnel, including our ability to attract and retain additional qualified personnel, as well as qualified subcontractors. The loss of certain key personnel, such as our Chief Executive Officer ("CEO"), members of our executive team and other highly skilled employees, could materially adversely affect our results of operations and financial condition. There is no assurance that we can retain our key managerial personnel, or that we can attract similar employees, in the future. Our business strategy largely depends on the success of our recent CEO transition. On January 16, 2026, Clifford Skelton stepped down from his position as President and Chief Executive Officer, and the Company appointed Harsha V. Agadi, Chairman of the Board, as his successor. Any significant leadership change involves inherent risk and can be difficult to manage. Our new CEO is critical to executing on and achieving our business strategy, and our success depends, in large part, on the effectiveness of this transition. If our new CEO is unsuccessful at leading the Company and our management team, or is unable to successfully execute the Company’s strategy, our business may be harmed and our results of operations and financial condition may be adversely affected.

In addition, because we operate in intensely competitive markets, our success depends to a significant extent upon our ability to attract, retain and motivate highly skilled and qualified technical personnel and to subcontract with qualified, competent subcontractors. If we fail to attract, train and retain sufficient numbers ofenough qualified engineers, technical staff and sales and marketing representatives, or if we are unable to contract with qualified, competent subcontractors, our results of operations and financial condition could be materially adversely affected. Experienced and capable personnel in the services industry remain in high demand, and there is continual competition for their talents. Our ability to renegotiate certain of our legacy third-party contracts which we view as unfavorable, or to improve the service levels we expect from these contracts and third-party providers, is key to our ability to timely, efficiently and profitably deliver our services to our customers. Additionally, we have increased and expect to continue to increase our hiring in geographic areas outside of the United States, which could subject us to increased geopolitical and exchange rate risk. The loss of any key technical employee, the loss of a key subcontractor relationship or our inability to renegotiate or obtain required service levels from legacy and other third-party providers, could materially adversely affect our results of operations and financial condition.

The process of developing new service offerings, including new technology components, is inherently complex and uncertain. It requires accurate anticipation of customers’ changing needs and emerging technological trends. We must make long-term investments and commit significant resources before knowing whether these investments will eventually result in service offerings that achieve customer acceptance and generate the revenues required to provide desired returns. For example, establishing internal automation processes to help us develop new service offerings will require significant up-front costs and resources, which, if not monetized effectively, could materially adversely affect our revenues. In addition, some of our service offerings rely on technologies developed by and licensed from third-parties. We may not be able to obtain or continue to obtain licenses and technologies from these third-parties at all or on reasonable terms, or such third-parties may demand cross-licenses to our intellectual property. It is also possible that our intellectual property rights could be challenged, invalidated or circumvented, allowing others to use our intellectual property to our competitive detriment. We also must ensure that all of our service offerings comply with both existing and newly enacted regulatory requirements in the countries in which they are sold. If we fail to accurately anticipate and meet our customers’ needs through the development of new service offerings (including technology components) or if we fail to adequately protect our intellectual property rights or if our new service offerings are not widely accepted or if our current or future service offerings fail to meet applicable worldwide regulatory requirements, we could lose market share and customers to our competitors and that could materially adversely affect our results of operations and financial condition.

We have experienced certain disruptions in our operations and service delivery performance issues because of some of our information technology infrastructure that is outdated and that needs to be enhanced and updated, which disruptions have adversely impacted client and delivery performance. As a result, we embarked on a long-term project to modernize a significant portion of our information technology infrastructure with new systems and processes and to consolidate our data centers. We have systematically consolidated the majority of our technology infrastructure into two primary data centers leading to increased processing speeds, redundancy and stability, and improved performance for our clients. There is a risk, however, that our modernization efforts and data center consolidations could materially and adversely disrupt our operations and our service delivery to customers, could result in contractual penalties or damage claims from customers, could occur over a period longer than planned, and could require greater than expected investment and other internal and external resources. It may also take longer to realize the intended favorable benefits from an enhanced technology infrastructure than we expected, or disruptions may continue to occur while we enhance this infrastructure. Future service disruptions could hinder our ability to attract new customers, cause us to incur legal liability, contractual penalties or issue service credits to our customers and cause us to lose current customers, each of which could have a material adverse effect on our business, results of operations and financial condition.

Although there has been a recent shift in U.S. federal policy under the newcurrent presidential administration, many governments, regulators, investors, associates, clients and other stakeholders have been and/or remain focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human rights, and diversity, equity and inclusion.businesses. In addition, the Company makes statements about its environmental, social and governance goals and initiatives through its corporate social responsibility report, its other non-financial reports, information provided on its website, press releases and other communications.

Responding to these environmental, social and governance considerations and implementation of these goals and initiatives involves risks and uncertainties, requires capital and operating investments, and depends in part on third-party performance, or data and changing regulatory schemes that are outside the Company’s control. The Company cannot guarantee that it will achieve its announced environmental, social and governance goals and initiatives. In addition, some stakeholders may disagree with the Company’s goals and initiatives. Any failure, or perceived failure, by the Company to achieve its goals, further its initiatives, adhere to its public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against the Company and could materially adversely affect the Company’s business, ability to recruit and retain associates, reputation, results of operations, financial condition and stock price. In addition, complying or failing to comply with existing or future federal, state, local, and foreign legislation and regulations applicable to our environmental, social and governance goals and initiatives, which may conflict with one another, could cause us to incur additional compliance and operational costs or actions and suffer reputational harm, which could materially and adversely affect our business, financial condition and results of operations.

We cannot guarantee that our stock repurchase program, although fully utilized to the full value approved,program will enhance long-term stockholder value. Repurchases could increase the volatility of the price of our common stock and could have a negative impact on our available cash balance.

In May 2023,2025, our Board of Directors authorized a three-year stock repurchase program for up to $75$50 million of our common stock. This program was completed in September 2024. Stock repurchases could have an impact on our common stock trading prices, increase the volatility of the price of our common stock, or reduce our available cash balance such that we will be required to seek financing to support our operations. There is no guarantee that the repurchase program, even thoughif fully utilized, will enhance long-term stockholder value.

Artificial intelligence (“AI”) technologies create specific risks that require tailored governance and review. Insufficient oversight could lead to legal liability, financial loss, and reputational harm. We use AI to sort, organize, analyze, and generate data for business purposes. AI encompasses machine learning, generative AI, and other data processing techniques. The utilization of AI, whether implemented directly by us or in collaboration with third parties, will necessitate ongoing investment in governance and security resources to help ensure our responsible use of AI and to safeguard against potential risks and vulnerabilities. As these technologies evolve, some services and tasks currently performed by our associates may be replaced by automation, including AI-enabled solutions, which could lead to reduced demand for our services and/or reduce the required headcount for us to provide services. The use of AI carries considerable risks, and we cannot guarantee the achievement of intended outcomes. While we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise. As an evolving technology, AI may occasionally produce incomplete or misleading results. Despite training and risk management efforts, there is a possibility that employees might misuse AI, either intentionally or unintentionally. Should our AI generate suboptimal or contentious outcomes, or if public perception of AI shifts negatively due to perceived risks, we may encounter operational challenges, competitive disadvantages, legal liabilities, reputational harm, or other business impacts. AI-related legal and regulatory frameworks are evolving due to concerns about bias, discrimination, transparency, and security. The use of AI technologies involves issues associated with intellectual property, data privacy, consumer protection, competition, and equal opportunity, with potential for new regulations. Several jurisdictions where we operate are considering or have proposed or enacted legislation and policies regulating AI and non-personal data, such as the European Union’s AI Act and the U.S.’s Executive Order on AI,Orders and theU.S. recentstate electionslaws, some of which may influencebe the regulatory landscape in the United States.conflicting. New or expanded AI laws could raise compliance costs and pose unpredictable risks, which could materially adversely affect our results of operations and financial condition.

We receive, process, transmit and store information relating to identifiable individuals, both in our role as a service provider and as an employer. As a result, we are subject to numerous laws and regulations in the United States (both federal and state) and foreign laws and regulations designed to protect both individually identifiable information and personal health information, including the Health Insurance Portability and Accountability Act of 1996, as amended ("HIPAA"), and the regulations promulgated under HIPPA governing, among other things, the privacy, security and electronic transmission of individually identifiable health information, various state privacy laws, and the European Union General Data Protection Regulation ("GDPR"), which imposes stringent data protection requirements and significant penalties for non-compliance and has had a significant impact on how we process and handle certain data.

Additional laws of the United States (both federal and state) and foreign jurisdictions apply to our processing of individually identifiable information. These laws have been subject to frequent changes, and new legislation in this area may be enacted at any time. For example, the GDPR and the invalidation of the U.S.-EU Safe Harbor regime have required us to implement alternative mechanisms for some of our data flows from Europe to the United States to comply with applicable law. Changes to existing laws, the introduction of new laws in this area or our failure to comply with existing laws that are applicable to us may subject us to, among other things, additional costs or changes to our business practices, liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity, restrictions on our ability to obtain and process information and allegations by our customers and clients that we have not performed our contractual obligations, any of which could materially adversely affect our results of operations and financial condition.

Our data systems, information systems and network infrastructure have been, and may bein the future be, subject to hacking or other cybersecurity threats and other service interruptions, which could expose us to liability, impair our reputation or temporarily render us unable to fulfill our service obligations under our contracts.

We have in the past been, and remain, susceptible to breach of security systems which may result and has resulted in unauthorized access to our facilities and those of our customers and/or access to and exfiltration of the information we and our customers are trying to protect. Cybersecurity failure might be caused by computer hacking, compromised credentials, malware, computer viruses, worms, trojans, ransomware and other destructive software, “cyber-attacks” and other malicious activity, as well as natural disasters, power outages, terrorist attacks and similar events. Operational or business delays may also result from the disruption of network or information systems and subsequent remediation activities.

We have in the past experienced, and in the future could experience, an unauthorized party gaining physical access to one of our or one of our third-party service providers’ facilities or gain electronic access to our or one of our third-party service providers’ information systems. SuchFor example, on January 13, 2025, the Company experienced an operational disruption and learned that a threat actor gained unauthorized access to a limited portion of the Company’s environment and exfiltrated a set of files associated with a subset of the Company’s clients. For additional information, refer to Management's Discussion and Analysis of Financial Condition and Results of Operation – “Cyber Event” in Part II, Item 7 to this 10-K and Note 15 – Contingencies and Litigation to our Consolidated Financial Statements of Part II, Item 8 to this 10-K. This and any other such access could result in, among other things, unfavorable publicity and significant damage to our brand, governmental inquiry, oversight and possible regulatory action, difficulty in marketing our services, loss of existing and potential customers, allegations by our customers that we have not performed our contractual obligations, costs for contractual service level requirements or other financial impact experienced by customers, litigation by affected parties and possible financial obligations for substantial damages related to the theft or misuse of such information, any of which could materially adversely affect our results of operations and financial condition. Similar consequences may arise if sensitive or confidential information is misdirected, lost or stolen during transmission or transport, or is stolen or misused. Moreover, security breaches have and could require us to devote significant management resources to address the problems created by the security breach and to expend significant additional resources to upgrade further the security measures that we employ to guard such personal information against "cyber-attacks" and to maintain various systems and data centers for our customers. Often these systems and data centers must be maintained worldwide and on a 24/7 basis. We have in the past experienced and in the future could experience service interruptions that could result in curtailed operations and loss of existing and potential customers, which could significantly reduce our revenues and profits in addition to significantly impairing our reputation. If our information systems and our back-up systems are damaged, breached or cease to function properly, we may have to make a significant investment to repair or replace them, and we may suffer interruptions in our operations in the interim, each of which could materially adversely affect our results of operations and financial condition.

We are potentially subject to 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 concerning: securities laws; governmental and non-governmental entity contracting, servicing and governmental entity procurement laws; intellectual property laws; environmental laws; employment laws; the Employee Retirement Income Security Act of 1974 ("ERISA"); cyber-security and data privacy laws; and other laws, regulations and contractual undertakings, as discussed under Note 15 – Contingencies and Litigation to the Consolidated Financial Statements. If developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual or materially increase an existing accrual, or if any of these matters result in an adverse judgment or are settled for significant amounts above any existing accruals, it could materially adversely affect our results of operations and financial condition in the period or periods in which such change in determination, judgment or settlement occurs. There can be no assurances as to the favorable outcome of any claim, lawsuit, investigation or proceeding. It is possible that a resolution of one or more such proceedings, through judgment, settlement or otherwise, could require us to make substantial payments to satisfy judgments, fines or penalties or settlement amounts, any of which could materially adversely affect our results of operations and financial condition. Additionally, the terms of dismissal, settlement, release or other resolution may permit certain claims to be reopened under certain conditions. Claims, lawsuits investigations and proceedings involving the Company could also result in reputational harm, criminal sanctions, consent decrees or orders preventing us from offering certain services, requiring a change in our business practices in costly ways or requiring development of non-infringing or otherwise altered products or technologies, or make it more difficult to obtain adequate insurance in the future. In addition, it can be very costly to defend litigation and these costs could materially adversely affect our results of operations and financial condition. Refer to Note 15 – Contingencies and Litigation to the Consolidated Financial Statements.

Divestitures may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which would adversely affect our financial results. Refer to Note 4 – Divestitures and Assets/Liabilities Held for Sale to our Consolidated Financial Statements for additional information about our divestitures.

We are required under generally accepted accounting principles to review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our intangible assets and/or goodwill may not be recoverable include a decline in stock price and market capitalization, slower growth rates in our industry or our own operations, and/or other materially adverse events that have implications on the profitability of our business or business segments. We may be required to record additional charges to earnings during the period in which any impairment of our goodwill or other intangible assets is determined which could adversely impact our results of operations. As of December 31, 2024,2025, our goodwill balancebalance, related exclusively to our Government segment, was $609$617 million, which represented 23.4%25.7% of total consolidated assets.

Refer to Note 7 – Goodwill and Intangible Assets, Net to our Consolidated Financial Statements for additional information about our goodwill impairments.

The terms of our indebtedness include several restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries and limit our ability to engage in actions that may be in our long-term best interests. These may restrict our and our subsidiaries’ ability to take some or all of the following actions:

•enter into sale/leaseback transactions;

•enter into agreements restricting the ability to pay dividends or make other intercompany transfers;

•enter into transactions with affiliates;

As a result of all of these restrictions, we may be:

The failure to obtain or maintain a satisfactory credit rating and financial performanceperformance, or the requirement to post collateral for any of our business guarantees, could adversely affect our liquidity, capital position, borrowing costs, access to capital markets and our need or ability to post surety or performance bonds to support clients’ contracts.

Any future downgrades to our credit rating or perceived or actual weakness in our financial performance could negatively impact our ability to renew contracts with our existing clients and vendors, limit our ability to compete for new clients, result in increased premiums for surety or performance bonds and letters of credit to support our clients’ contracts, reduce our ability to obtain surety bonds, performance bonds and letters of credit and/or result in a requirement that we provide collateral to secure our surety or performance bonds and letters of credit. Further, certain of our commercial outsourcing contracts provide that, in the event our credit ratings are downgraded to specified levels, the client may elect to terminate its contract with us and either pay a reduced termination fee or, in some limited instances, no termination fee. Such a credit rating downgrade or perceived or actual weakness in our financial performance could adversely affect these client relationships.

There can be no assurance that we will be able to maintain our credit ratings or financial performance. Any additional actual or anticipated downgrades of our credit ratings, including any announcement that our ratings are under review for a downgrade, or perceived or actual weak financial performance may have a negative impact on our liquidity, capital position, access to capital markets and ability to obtain surety bonds, performance bonds and letters of credit sufficient to support our existing and future business needs.needs, and may also increase the likelihood or magnitude of collateral demands under our business guarantees.

The year-over-year comparisons in this MD&A are as of and for the years ended December 31, 20242025 and 2023,2024, unless stated otherwise. The discussion of 2023 items and related year-over-year comparisons as of and for the years ended December 31, 2024 and 2023 are found in Item 7 of Part II of our Form 10-K for the year ended December 31, 2024.

•Commercial – Our Commercial segment provides business process services that span our clients' business processes end-to-end from the front-office to the back-office for a variety of commercial industries. These solutions are both cross-industry and industry-specific in nature. 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 and deliver better experiences for their consumers and employees.

•Government – Our Government segment provides government-centric services and solutions to U.S. federal, state, local and foreign governments for public assistance, healthcare programs and administration, transaction processing, eligibility and enrollment processing, payment services and case management. In this segment, we help governments respond to changing rules for eligibility and keep pace with increasing citizen expectations, modernize legacy technology systems, combat benefits fraud and shift in responseadapt to an evolving regulatory environment.

•Divestitures – In 2024, we completed three divestitures as part of our portfolio rationalization strategy.strategy During the second quarter, we completed the transfer of- the BenefitWallet Portfolio for a total purchase price of $425 million and completed the sale ofPortfolio, the Curbside Management and Public Safety businesses with a purchase price of $230 million, $50 million of which is deferred to the first half of 2025. During the third quarter, we completed the sale ofand the Casualty Claims Solutions Businesses with a purchase price of $224 million.businesses. Refer to Note 4 – Divestitures and Assets/Liabilities Held for Sale in the Consolidated Financial Statements for additional information.

•Debt Prepayment – In 2024, we utilized a portion of the proceeds from the closing of our divestitures to voluntarily prepay all of the principal ($502 million) of the Term Loan B and $137a millionportion of the Term Loan A. Refer to Note 10 – Debt in the Consolidated Financial Statements for additional information.

•Icahn Share Repurchase – During the second quarter of 2024, we entered into a purchase agreement with Carl C. Icahn and certain of his affiliates pursuant to which we purchased their entire holdings or an aggregate of approximately 38 million shares of our common stock, at a price of $3.47 per share, for an aggregate purchase price of approximately $132 million.stock. We utilized a portion of the proceeds from the closing of our divestitures to fund the purchase. Refer to Note 16 – Common Stock and Preferred Stock in the Consolidated Financial Statements for additional information.

•Share Repurchases – In 2024, we completed our previously approved $75 million share repurchase program and bought back a total of 14 million shares of common stock.program.

Revenue for 20242025 decreased 10%,9%, compared to the prior year, overapproximately half57% of which was due to the impact of the BenefitWallet Portfolio transferTransfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. In addition to the divestitures impact, lost business acrossand ourlower threevolumes segmentscontributed wasto the decrease and were partially offset by new business ramp.ramp, higher equipment sales and positive impacts from a contract amendment with a customer in the Transportation segment.

Cost of services for 20242025 decreased 5%,9%, compared to the prior year, approximately three quarters of which was primarily drivendue byto the impact of the transfer of the BenefitWallet PortfolioTransfer and the sales of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses. In addition to the divestitures impact, lower expenses on lower revenues and continued cost optimizationsoptimization initiatives across segments contributed to the decrease and were partially offset by the absence of a $17 million benefit from reversal of liabilities due to the settlement of the Cognizant matter in the prior year. We expect Cost of services to decline in 2025 as a result of cost actions to be implemented throughout the year.decline.

Depreciation and amortization for 20242025 decreased 23%5% compared to the prior year. This decrease wasyear, primarily drivendue byto the impact of the salessale of the Curbside Management and Public Safety Solutions and Casualty Claims Solutions businesses,businesses. aThis priordecrease yearwas write-offpartially offset by increased amortization of capitalizeddeferred softwarecontract costs inrelated ourto Commercialnew segmentprojects totalingthat $25went million, older assets becoming fully depreciated and planned lower capital investmentslive in the past few years.2025.

We engage in a series of restructuring programs related to downsizingoptimizing 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. The following are the components of our Restructuring and related costs:

Interest expense represents interest on long-term debt and the amortization of debt issuance costs. The decrease in Interest expense for 2024,2025, compared to the prior year, was driven primarily bydue lowerto debt balances as we utilized proceeds from divestitures closed inthe 2024 tovoluntary voluntarily prepay allprepayments of ourthe entire Term Loan B balance outstanding and a portion of ourthe Term Loan A.A balance with proceeds from divestitures. The remaining Term Loan A balance was repaid at the execution of Amendment No. 3 to the Credit Facility. Refer to Note 10 – Debt to the Consolidated Financial Statements for additional information.

The goodwill impairment for 2024 is related to the write-down of the Transportation reporting unit's goodwill arising from the annual goodwill impairment test. The impairment in 2023 is related to the write-down of the carrying value of the Commercial reporting unit. This resulted from the evaluation of goodwill triggered by entering into the Custodial Transfer and Asset Purchase Agreement to transfer our BenefitWallet Portfolio. Refer to Note 7 – Goodwill and Intangible Assets, Net to the Consolidated Financial Statements for additional information on thesethis impairments.impairment.

Our 2024 divestitures resulted in gains of $721 million. Additionally, we recorded a $3 million gain adjustment related to a prior year divestiture following the partial settlement of the Skyview matter. This(Gain) financialloss statementon linedivestitures and transaction costs, net also includes professional fees and other costs associated with both consummated and non-consummated transactions totaling $30$9 million and $10$28 million in 20242025 and 2023,2024, respectively. The 2024 amount also includes a $2 million reimbursement of previously incurred legal fees related to the partial settlement of the Skyview matter. Refer to Note 4 – Divestitures and Assets/Liabilities Held for Sale and Note 15 – Contingencies and Litigation to the Consolidated Financial Statements for additional information on these matters.

Litigation settlements (recoveries), net for 2023 primarily consisted of a $26 million reversal of reserves due to the settlement of the Cognizant matter2025 and an $8 million reversal of reserves related to our former student loan business. There2024 were nonot individually significant items in 2024.material. Refer to Note 15 – Contingencies and Litigation to the Consolidated Financial Statements for additional information on these matters.

Other (income) expenses, net for 20242025 and 20232024 primarily includesinclude interest income on cash investments, accounts receivable factoring fees and foreign currency transaction losses (gains). TheIn increase2025, ininterest 2024income ison primarilyinvested cash was lower due to lower available cash and foreign currency transaction losses were higher due to unfavorable movements in foreign exchange rates, primarily the weakening of the U.S. dollar against certain foreign currencies during the year. In 2024, Other (income) expenses, net also included interest income of $8 million related to the partial settlement of the Skyview matter. Refer to Note 15 – Contingencies and Litigation in the Consolidated Financial Statements for additional information.

The 20242025 effective tax rate was 15.5%,(6.1)%, compared to 10.7%15.5% for 2023.2024. The 20242025 rate was lower than the U.S. statutory rate of 21% primarily due to favorablevaluation permanent adjustments from the internal reorganization and outside basis on a stock sale partially offset by the non-deductible Transportation reporting unit goodwill impairment, tax reserves andallowances, geographic mix of income.income and discrete taxes. The 20232024 rate was lower than the U.S. statutory rate of 21%, primarily due to thefavorable permanent differences from an internal reorganization and outside basis on a stock sale partially offset by non-deductible CommercialTransportation reporting unit goodwill impairment, tax reserves and geographic mix of income and return to provision adjustments, partially offset by tax benefits related to tax settlements and reversal of reserves.income.

Our financial performance is based on Segment Profit (Loss) and Segment Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the following three segments:

Divestitures include our BenefitWallet Portfolio and our Casualty Claims Solutions businesses (both of which were reclassified from our Commercial segment in 2024) and our Curbside Management and Public Safety Solutions businesses (which was reclassified from our Transportation segment). For the year ended December 31, 2022, Divestitures also includes our Midas business, which was sold in the first quarter of 2022.2024).

The section below provides a comparative discussion of our financial performance by segment between the years ended December 31, 20242025 and 2023.2024. TheSee Item 7. MD&A - Operations Review of Segments in our Annual Report on Form 10-K for the year ended December 31, 2024 for a comparative discussion of our financial performance by segment between the years ended December 31, 20232024 and 2022 is also included to reflect the impact of reclassifying divested businesses from our Commercial and Transportation segments as described above.2023.

(1) The 2024 amount represents a termination for convenience fee related to the termination of Convergint as a subcontractor for our State of Victoria contract. The 2023 amount represents a termination for convenience fee related to the termination of a contract with a significant IT outsourcing provider. Both the 2024 and 2023 items areis reported in Cost of Services on the Consolidated Statements of Income.

Commercial segment revenue for 20242025 decreased,decreased by 6%, compared to the prior year, driven by lostcontract businesslosses and lower volumes in certain industries within our client base,volumes, partially offset by new business ramp.ramps and multi-year licensing agreements with existing customers.

Commercial segment profit and Adjusted EBITDA for 20242025 increaseddecreased compared to the prior year primarily due to newthe businessrevenue rampdrivers noted above and costhigher efficiencies,fixed technology overhead, partially offset by cost efficiencies and the impact of lost business and lower volumes.depreciation Commercialdue segment profit also benefited from the absence ofto the prior year impact of a write-off of capitalized software totaling $25 million stemming from management’s decision to abandon an internal use software product and a decision by a customer to not implement a product software solution as well as fully amortized assets.

Government segment revenue for 20242025 decreased, compared to the prior year, attributableprimarily due to lostcontract business, primarily in our Government Healthcare business, andlosses, lower volumes in our Government Services business due toand the changeimpacts infrom fundinga mechanismU.S. forfederal government shutdown during the Electronicfourth Benefitsquarter Transferof ("EBT")2025, programs,as well as the completion or extension of several implementations. These declines were partially offset by ramp of new business ramp.business.

Reference is made to the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our risk factors as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2025.2025, except as set forth below.

The following Management’s Discussion and Analysis ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Unless otherwise noted, transactionsthe discussion of our results is on a continuing operations basis and does not include discontinued operations. Transactions and other factors significantly impacting our financial condition, results of operations and liquidity are generally discussed in order of magnitude. Our MD&A is presented in seven sections:

We deliver digital business solutions and services spanning the commercial, governmentcommercial and transportationgovernment spectrum – creating valuable outcomes for our clients and the millions of people who count on them. We leverage cloud computing, artificial intelligence ("AI"), machine learning, automation and advanced analytics to deliver mission-critical solutions. Through a dedicated global team of approximately 48,00046,000 associates, process expertise and advanced technologies, our solutions and services digitally transform our clients’ operations to enhance customer experiences, improve performance, increase efficiencies and reduce costs.

Headquartered in Florham Park, New Jersey, we have operations in 24 countries as of MarchJune 31,30, 2026.

Our reportable segments correspond to how we organize and manage the business and are aligned to the industries in which our clients operate. These threetwo segments are:

During the firstsecond quarter of 2026 we achieved the following:

While the Company did not experience material impacts to its operating environment or costs from the event itself, the Company incurred and accrued $25 million of non-recurring expenses in the first quarter of 2025 related to the event based on the notification requirements described above. We have made cash disbursements of $25 million through MarchJune 31,30, 2026 related to this matter. Any expense in excess of thesethis amountsamount up to the coverage limit have been and are anticipated to be covered by the cyber insurance policy that the Company maintains.

It is possible that future risks and uncertainties resulting from the January 2025 Cyber Event, including those related to impacted data, litigation, reputational harm, and regulatory actions, could adversely affect the Company’s financial condition or results of operations. See also Note 12 – Contingencies and Litigation contained herein and Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (Risk Factors).

Revenue for the three and six months ended MarchJune 31,30, 2026 decreased compared to the prior year period, primarily driven by lostcontract businesslosses, including the loss of the largest Commercial segment customer, and lower volumes in our Commercial segment,volumes, partially offset by new business ramp, particularly in our Government and Transportation segments.ramp.

Cost of services for the three and six months ended MarchJune 31,30, 2026 decreased compared to the prior year period,periods, primarily driven by lower expenses associated with reduced revenues and cost optimization initiatives.

SG&A for the threesix months ended MarchJune 31,30, 2026 decreased compared to the prior year over year,period, primarily driven by non-recurring items in the first quarter of 2025. These items included the $25 million of direct response costs related to the January 2025 Cyber Event and the $9 million benefit from the recovery of legal costs from one of our insurance carriers related to the previously disclosed State of Texas matter that settled in February 2019. In addition, cost efficiencies in our corporate functions in the current year and lower healthcare costs dueresulting tofrom lowerreduced U.S. headcount contributed to the decrease. The current year period SG&A also included two offsetting items. Separation costs of approximately $4 million related to the departure of our former Chief Executive Officer were offset by an approximate $3 million net benefit related to our 2025 Annual Performance Incentive Plan ("APIP") as described in Note 1213 – Preferred Stock and Common Stock.

Depreciation and amortization for the three and six months ended MarchJune 31,30, 2026 was substantially unchangeddecreased compared to the prior year period.periods due to lower capital investments.

Restructuring and related costs for the three and six months ended June 30, 2026 increased compared to the prior year periods due to the 2026 Restructuring Program noted above. Refer to Note 56 – Restructuring Programs and Related Costs to the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.

Interest expense represents interest on long-term debt and the amortization of debt issuance costs. Interest expense for the three and six months ended MarchJune 31,30, 2026 wasincreased unchanged,slightly, compared to the prior year periodperiods due to comparablehigher average outstanding debt balances andunder interestour rates.Credit Facility.

(Gain) Loss on Divestitures and Transaction Costs (Gain) loss on divestitures and transaction costs include professional fees and other costs related to consummated and certain other non-consummated transactions considered by the Company related to its portfolio rationalization activities. These costs exclude costs directly related to the pending divestitures of our Transit and Tolling businesses, which have been reclassified to Income (loss) from discontinued operations, net of tax. The remaining amount of these costs for the three and six months ended MarchJune 31,30, 2026 was unchanged,declined, compared to the prior year period.periods, due to reduced portfolio rationalization activities.

Litigation settlements (recoveries), net for the threesix months ended MarchJune 31,30, 2026 and 2025 were not material.

Other (income) expenses, net for the threesix months ended MarchJune 31,30, 2026 and 2025 primarily include interest income on cash investments, accounts receivable factoring fees and foreign currency transaction losses (gains).

The effective continuing operations tax rate for the three months ended MarchJune 31,30, 2026 was (21.520.8)%, compared to 9.0%2.7% for the three months ended MarchJune 31,30, 2025. The MarchJune 31,30, 2026 rate was lower than the U.S. statutory rate of 21%, primarily due to valuation allowances, geographic mix of income, valuation allowances recorded on net deferred tax assetsincome and discrete tax items.taxes. The effective tax rate for the three months ended MarchJune 31,30, 2025 was lower than the U.S. statutory rate of 21%, primarily due to incremental tax from geographic mix, valuation allowances recorded on net deferred tax assets and discretegeographic taxmix items.of income.

Excluding the impact of restructuring, former CEO separation costs, divestiture-related transaction costs, other expenses, amortization, valuation allowances and discrete tax items, the normalized effective tax rate for the three months ended MarchJune 31,30, 2026 was 25.7%.20.5%. The normalized effective tax rate for the three months ended MarchJune 31,30, 2025 was largely consistent at 23.9%,21.9%, primarily due to excluding the impact of amortization, restructuring, divestitures, reserves for the Direct response costs - cyber event, valuation allowances and discrete tax items.

Our financial performance is based on Segment Profit (Loss) for the following threetwo segments:

•Commercial; and

•Government; andGovernment.

Commercial revenue for the three and six months ended MarchJune 31,30, 2026 decreased by 10%decreased, compared to the prior year period,periods, primarily driven by contract losseslosses, including our largest customer, and lower volumes, partially offset by new business ramp.

Commercial segment profit and adjustedAdjusted EBITDA for the three months ended MarchJune 31,30, 2026 increased,decreased, compared to the prior year period, primarily drivendue by cost efficiencies implemented in the second half of the prior year, including lower fixed technology overhead, partially offset byto the revenue drivers noted above.above, as well as negative discrete impacts from penalties and unfavorable price adjustments.

Government segment profit and adjustedAdjusted EBITDA for the three months ended MarchJune 31,30, 2026 increased,decreased, compared to the prior year period, primarily due to the revenue drivers noted above,above. asGovernment wellAdjusted asEBITDA costMargin efficienciesfor the three months ended June 30, 2026 decreased compared to the prior year period, primarily due to reserves recorded in the current year and continueda lowerfavorable expensesreserve reversal recognized in ourthe Governmentsecond Servicesquarter business.of 2025.

TransportationGovernment segment profit and adjustedAdjusted EBITDA for the threesix months ended MarchJune 31,30, 2026 decreasedincreased, compared to the prior year period, primarily drivendue byto thecost absenceefficiencies ofand thecontinued discretelower revenue recognizedexpenses in theour priorGovernment yearServices period noted above, which had no significant associated costs, as well as higher expenses associated with this contract in the current period,business, partially offset by the revenue drivers noted above.

Unallocated Costs for the three and six months ended MarchJune 31,30, 2026 were favorable, compared to the prior year period, primarily driven by the absence of non-recurring items recognized in the prior year, including direct response costs related to the January 2025 Cyber Event and the recovery of legal costs from an insurance carrier related to the previously disclosed State of Texas matter, as well as cost efficiencies in our corporate functions.

We use metrics to evaluate our business, determine the allocation of our resources, make decisions regarding corporate strategies and evaluate forward-looking projections and trends affecting our business. We disclose these metrics to provide transparency in our performance trends. We present certain key metrics, including Signings and ACV Activity as defined below. All amounts exclude our Discontinued Operations.

SigningSignings information for the three and six months ended MarchJune 31,30, 2026 and 2025 is as follows:

The total new business pipeline as of MarchJune 31,30, 2026 and 2025 was $3.5$3.0 billion and $3.2$2.7 billion, respectively. Total new business pipeline is defined as total new business ACV pipeline of deals at or beyond the qualified prospect stage. This extends past the next twelve-month period to include total pipeline.

As of MarchJune 31,30, 2026 and December 31, 2025, total cash and cash equivalents were $228 million and $233 million, respectively. We also have a $357 million Revolving Credit Facility (the "Facility") (reducing to $187 million in October 2026 and maturing in August 2028) for our various cash needs. As of MarchJune 31,30, 2026 we had $144 million outstanding borrowings under the Facility and an additional $23 million was used for letters of credit. The net amount available under the Facility as of MarchJune 31,30, 2026, was $190 million and the amount of borrowings at each quarter-end may be limited by our leverage covenant. Subsequent to the balance sheet date, in July 2026, the Company borrowed $183 million under its Revolving Credit Facility and there are no plans to utilize the funds at this time.

As of MarchJune 31,30, 2026, our total principal debt outstanding was $725$722 million, of which $23$21 million was due within one year. We have the intent and ability to refinance the amount outstanding under the Facility on a long-term basis; thereforetherefore, all amounts outstanding as of MarchJune 31,30, 2026 are classified as long-term on our Condensed Consolidated Balance Sheets. Refer to Note 67 – Debt in the Condensed Consolidated Financial Statements for additional debt information.

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,operations (considering the impacts of the sale of our Transportation businesses), 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.