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EXHIBIT 99.2
Conduent Incorporated
Unaudited Pro Forma Condensed Consolidated Financial Statements
Introduction
On December 29, 2021 Conduent Business Services, LLC, a wholly owned subsidiary of Conduent Incorporated (“Conduent” or the “Company”), entered into a definitive agreement with Symplr Software, Inc., (“Buyer”) pursuant to which Conduent agreed to sell its Midas suite of patient safety, quality and advanced analytics solutions (the “Business”) for an aggregate cash purchase price of $340 million, less certain indebtedness and adjusted for the difference between estimated working capital at closing and a negotiated working capital target. On February 8, 2022, Conduent successfully completed the sale of the Business. At closing, the Buyer paid Conduent $321 million in cash, which is subject to settlement of customary post-closing adjustments; such settlement is likely to occur in the second quarter of 2022 and is not expected to be material.
The unaudited pro forma condensed consolidated financial data of the Company was derived from the historical condensed consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet assumes the sale of the Business occurred on September 30, 2021. The unaudited pro forma condensed consolidated statements of income (loss) for the nine months ended September 30, 2021, and the year ended December 31, 2020, give effect to the sale of the Business as if it occurred as of January 1, 2020. The following unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company’s historical financial statements and accompanying notes for the year ended December 31, 2020, which were included in the Form 10-K filed on February 24, 2021, and the Company’s historical condensed consolidated financial statements and accompanying notes for the nine months ended September 30, 2021, which were included in the Quarterly Report on Form 10-Q filed on November 4, 2021.
The transaction accounting adjustments for the sale of the Business remove the assets, liabilities and results of operations and also give effect to adjustments to reflect the cash proceeds of approximately $321 million from the sale of the Business, the payment of related income taxes of $52 million and the repayment of debt in the amount of $100 million on February 11, 2022.
The unaudited pro forma condensed consolidated financial information is based on information currently available and assumptions that the Company believes are reasonable and is provided for illustrative and informational purposes only and is not intended to reflect what the Company’s consolidated financial position and results of operations would have been had the sale of the Business occurred on the dates indicated above and is not necessarily indicative of the Company’s future consolidated financial position and results of operations.
Conduent Incorporated
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2021
| (in millions) |
Conduent Historical |
Transaction Accounting Adjustments |
Notes | Unaudited Pro Forma |
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| Assets |
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| Cash and cash equivalents |
$ | 394 | $ | 169 | (a | ) | $ | 563 | ||||||||
| Accounts receivable, net |
701 | (8 | ) | (b | ) | 693 | ||||||||||
| Contract assets |
159 | — | 159 | |||||||||||||
| Other current assets |
257 | (1 | ) | (b | ) | 256 | ||||||||||
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| Total current assets |
1,511 | 160 | 1,671 | |||||||||||||
| Land, buildings and equipment, net |
273 | — | 273 | |||||||||||||
| Operating lease right-of-use assets |
243 | — | 243 | |||||||||||||
| Intangible assets, net |
84 | — | 84 | |||||||||||||
| Goodwill |
1,506 | (162 | ) | (b | ) | 1,344 | ||||||||||
| Other long-term assets |
475 | (14 | ) | (b | ) | 461 | ||||||||||
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| Total Assets |
$ | 4,092 | $ | (16 | ) | $ | 4,076 | |||||||||
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| Liabilities and Equity |
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| Current portion of long-term debt |
$ | 21 | $ | — | $ | 21 | ||||||||||
| Accounts payable |
169 | (1 | ) | (b | ) | 168 | ||||||||||
| Accrued compensation and benefits costs |
252 | (2 | ) | (b | ) | 250 | ||||||||||
| Unearned income |
111 | (26 | ) | (b | ) | 85 | ||||||||||
| Other current liabilities |
434 | 1 | (b | ) (g) | 435 | |||||||||||
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| Total current liabilities |
987 | (28 | ) | 959 | ||||||||||||
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| Long-term debt |
1,384 | (100 | ) | (a | ) | 1,284 | ||||||||||
| Deferred taxes |
87 | 16 | (h | ) | 103 | |||||||||||
| Operating lease liabilities |
195 | — | 195 | |||||||||||||
| Other long-term liabilities |
114 | — | 114 | |||||||||||||
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| Total Liabilities |
2,767 | (112 | ) | 2,655 | ||||||||||||
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| Series A convertible preferred stock |
142 | — | 142 | |||||||||||||
| Common stock |
2 | — | 2 | |||||||||||||
| Additional paid-in capital |
3,912 | — | 3,912 | |||||||||||||
| Retained earnings (deficit) |
(2,308 | ) | 96 | (c | ) | (2,212 | ) | |||||||||
| Accumulated other comprehensive loss |
(423 | ) | — | (423 | ) | |||||||||||
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| Total Equity |
1,183 | 96 | 1,279 | |||||||||||||
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| Total Liabilities and Equity |
$ | 4,092 | $ | (16 | ) | $ | 4,076 | |||||||||
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See accompanying notes to unaudited pro forma condensed consolidated financial statements.
Conduent Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss)
For the Nine Months Ended September 30, 2021
| (in millions, except per share data) |
Conduent Historical |
Transaction Accounting Adjustments |
Notes | Unaudited Pro Forma |
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| Revenue |
$ | 3,092 | $ | (54 | ) | (d | ) | $ | 3,038 | |||||||
| Operating Costs and Expenses |
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| Cost of services (excluding depreciation and amortization) |
2,335 | (24 | ) | (d | ) | 2,311 | ||||||||||
| Selling, general and administrative (excluding depreciation and amortization) |
382 | (7 | ) | (d | ) | 375 | ||||||||||
| Research and development (excluding depreciation and amortization) |
3 | — | 3 | |||||||||||||
| Depreciation and amortization |
265 | (5 | ) | (d | ) | 260 | ||||||||||
| Restructuring and related costs |
31 | — | 31 | |||||||||||||
| Interest expense |
38 | (2 | ) | (e | ) | 36 | ||||||||||
| (Gain) loss on divestitures and transaction costs |
1 | — | 1 | |||||||||||||
| Litigation costs |
2 | — | 2 | |||||||||||||
| Loss on extinguishment of debt |
2 | — | 2 | |||||||||||||
| Other (income) expenses, net |
4 | — | 4 | |||||||||||||
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| Total Operating Costs and Expenses |
3,063 | (38 | ) | 3,025 | ||||||||||||
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| Income Before Income Taxes |
29 | (16 | ) | 13 | ||||||||||||
| Income tax expense |
17 | (4 | ) | (f | ) | 13 | ||||||||||
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| Net Income (Loss) |
$ | 12 | $ | (12 | ) | $ | — | |||||||||
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| Net Earnings (Loss) per Share: |
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| Basic |
$ | 0.02 | $ | (0.03 | ) | |||||||||||
| Diluted |
$ | 0.02 | $ | (0.03 | ) | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
Conduent Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss)
For the Year Ended December 31, 2020
| (in millions, except per share data) |
Conduent Historical |
Transaction Accounting Adjustments |
Notes | Unaudited Pro Forma |
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| Revenue |
$ | 4,163 | $ | (72 | ) | (d | ) | $ | 4,091 | |||||||
| Operating Costs and Expenses |
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| Cost of services (excluding depreciation and amortization) |
3,209 | (32 | ) | (d | ) | 3,177 | ||||||||||
| Selling, general and administrative (excluding depreciation and amortization) |
468 | (10 | ) | (d | ) | 458 | ||||||||||
| Research and development (excluding depreciation and amortization) |
1 | — | 1 | |||||||||||||
| Depreciation and amortization |
459 | (7 | ) | (d | ) | 452 | ||||||||||
| Restructuring and related costs |
67 | — | 67 | |||||||||||||
| Interest expense |
60 | (2 | ) | (e | ) | 58 | ||||||||||
| (Gain) loss on divestitures and transaction costs |
17 | (164 | ) | (i | ) | (147 | ) | |||||||||
| Litigation costs |
20 | — | 20 | |||||||||||||
| Loss on extinguishment of debt |
— | — | — | |||||||||||||
| Other (income) expenses, net |
1 | — | 1 | |||||||||||||
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| Total Operating Costs and Expenses |
4,302 | (215 | ) | 4,087 | ||||||||||||
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| Income (Loss) Before Income Taxes |
(139 | ) | 143 | 4 | ||||||||||||
| Income tax (benefit) expense |
(21 | ) | 63 | (f | ) | 42 | ||||||||||
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| Net Income (Loss) |
$ | (118 | ) | $ | 80 | $ | (38 | ) | ||||||||
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| Net Earnings (Loss) per Share |
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| Basic |
$ | (0.61 | ) | $ | (0.23 | ) | ||||||||||
| Diluted |
$ | (0.61 | ) | $ | (0.23 | ) | ||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
Conduent Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Statements
1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements give effect to the transaction accounting adjustments necessary to reflect the sale of the Business (the “Transaction”) as if it had occurred as of January 1, 2020, in the unaudited pro forma statements of operations for the nine months ended September 30, 2021, and the year ended December 31, 2020, and on September 30, 2021, in the unaudited pro forma balance sheet.
2. Pro Forma Adjustments
The unaudited pro forma condensed consolidated financial statements reflect the following adjustments:
(a) Adjustment reflects cash proceeds of approximately $321 million from sale of the Business less (i) repayment of approximately $100 million of debt and (ii) tax payment of $52 million related to the gain on the transaction with the remaining amount of $169 million designated as excess cash.
(b) Adjustments reflect the disposition of net assets of the Business as of September 30, 2021.
(c) Adjustment reflects after tax gain as if the Transaction had occurred on September 30, 2021. The after-tax gain on disposal is calculated as follows: $321 million representing the net cash proceeds less (i) the net assets of the disposed Business of $155 million, (ii) estimated direct transaction costs of $2 million and (iii) estimated income tax provision of $68 million.
(d) Adjustments reflect the elimination of revenue, costs of services, and operating expenses of the Business, including estimated IT infrastructure costs, enterprise application costs and certain corporate overhead expenses that are expected to be eliminated.
(e) Adjustments reflect the estimated reduction to interest and amortization of debt discount expense related to the intended use of a portion of the estimated net proceeds from the sale of the Business for repayment of approximately $100 million of debt as if such debt was repaid on January 1, 2020.
(f) Adjustments represent the estimated income tax effect of the transaction accounting adjustments.
(g) Adjustment represents accrual of estimated direct transaction costs of approximately $2 million.
(h) Adjustment represents the estimated utilization of deferred tax assets as a result of the Transaction.
(i) Adjustment reflects gain as if the Transaction had occurred on January 1, 2020. The gain on disposal is calculated as follows: $321 million representing the net cash proceeds less (i) the net assets of the disposed Business of $155 million and (ii) estimated direct transaction costs of $2 million.
