Earnings Call Transcript - CNDT Q4 2025

Operator, Operator

Greetings and welcome to the Conduent Incorporated Q4 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. The formal presentation will begin shortly. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joshua Overholt, Vice President of Investor Relations. Thank you. You may begin.

Joshua Overholt, Vice President of Investor Relations

Thank you, operator, and thank you to everyone for joining us today to discuss Conduent Incorporated's fourth quarter 2025 earnings. I am joined today by Harshita Agadi, our CEO, and Giles Goodburn, our CFO. We hope you've had a chance to review our press release issued earlier this morning. This call is being webcast and a copy of the slides used during this call, as well as the press release, were filed with the SEC this morning on Form 8-Ks. Information and the detailed financial metrics package are available on the investor relations section of the Conduent Incorporated website. During this call, we may make forward-looking statements. These forward-looking statements reflect management's current beliefs, assumptions, and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. Information concerning these factors is included in Conduent’s annual report on Form 10-K with the SEC. We do not intend to update these forward-looking statements as a result of new information or future events or developments, except as required by law. The information presented today includes non-GAAP financial measures. Because these measures are not calculated in accordance with U.S. GAAP, they should be viewed in addition to, and not as a substitute for, the company's reported results. For more information regarding definitions of our non-GAAP measures, and how we use them, as well as limitations to their usefulness for comparative purposes, please see our press release. And now I would like to turn the call over to Harsh. Thank you, Josh.

Harshita Agadi, CEO

I want to welcome our investors, analysts, and clients, as well as colleagues around the world, to this call. I am confident you will be encouraged by what you hear as we discuss where Conduent Incorporated is headed and how we intend to get there. I also want to say good morning, good afternoon, and good evening to my 51,000 Conduent colleagues across the globe. Over the past few weeks, I've been energized by the stories I have heard. Stories of teams serving clients with commitment, resilience, and professionalism every single day. Thank you for what you do and for the pride you take in representing Conduent. Over the past three decades, I've had the opportunity to lead more than half a dozen companies across multiple sectors, both private and public. Most relevant to Conduent, I have founded in the past and led a BPO that scaled globally and eventually listed on the NYSE. Through those experiences, I have learned what it takes to build organizations that move with deliberate speed and purpose; deliver measurable outcomes for clients, generate sustainable growth and free cash flow for investors, and create meaningful development opportunities for all our employees on a global scale. I'm here because I believe Conduent Incorporated can deliver those same outcomes. My expectations are simple and my objectives are clear: to lead Conduent Incorporated to consistent year-over-year revenue and EBITDA growth supported by very strong and durable free cash flow generation. In the BPO industry, these are not aspirational results; they are the natural results of a healthy business with clear strategy, disciplined execution, and a relentless focus on serving clients on a daily basis. As clients focus on their business, our focus is to provide seamless BPO and KPO services to enable their daily services smoothly to their clients. Having been in the role for less than thirty days at Conduent Incorporated, it would be premature for me to present a fully detailed long-term plan for Conduent's return to sustained growth, improved earnings, and free cash flow. Ladies and gentlemen, this is a turnaround story. The work is underway, and we will move forward together. What I can commit to today is full transparency and cadence. In addition to our normal earnings reports, we intend to host an Analyst Day in New York City, where you will have the opportunity to meet our board and other members of the Conduent Incorporated executive team and hear directly about our strategy, priorities, and execution plan. While the full plan is still being finalized, this is not my first turnaround. Having led multiple transformations in various sectors, I know there are decisive actions that must happen early that set direction, change momentum, and create the conditions for sustainable results. Those actions are already underway and they inform the priorities I am here to outline. First and foremost, we will move faster. That means faster decision-making, faster execution, and faster improvement. The senior leadership team has already felt this increased pace, and we will only continue to accelerate it. The tone has to be set from the top. Opportunities do not wait, and neither will we. Our leaders are being empowered to act, and empowerment comes with clear accountability. We must move with speed to capitalize on the opportunities before us. Second, we will apply maximum financial discipline across every major decision, especially capital allocation. We will evaluate decisions through multiple lenses: revenue growth, margin expansion, and free cash flow generation. This framework will guide how we allocate capital, rationalize parts of our portfolio, manage working capital, and prioritize investments. Third, we will lower our cost structure. This includes reducing corporate overhead, particularly within SG&A, and taking a hard look at our entire technology spend and stack. However, we will not compromise quality or client outcomes, but we must be more efficient in how we deliver our services. At current levels, corporate overhead and technology expenses as a percentage of revenue must come down. Fourth, we will continue to rationalize our portfolio. My goal for Conduent Incorporated is clear: organic revenue growth resulting in strong free cash flow. To get there, we are reviewing every business, categorizing each as either fix, sell, or grow. Businesses that are categorized as fix will operate under formal improvement plans with clear metrics, timelines, and leadership accountability. Businesses that fall into the category of sale will be actively marketed with a focus on executing transactions efficiently and at fair value. Proceeds will first be used to reduce debt, followed by multiple other priorities. The third category, those businesses identified to grow, will receive the required investments and will be unconstrained so that they can grow. Fifth, our qualified ACV plan today stands at $3,200,000,000. Our priority is better conversion rates. Going forward, our focus will not just be on building pipelines, but consistently converting them. Across each of our businesses, pipeline development and execution will improve in a way that supports sustainable revenue growth. Finally, we will simplify and strengthen our organization. To deliver on these priorities, we will become a nimbler company with fewer layers, lower costs, and clear accountability. We will reduce organizational complexity that slows decision-making and empowers our leaders with full P&L ownership. I would now like to hand over to Giles to continue the update on the earnings calls, as he will be giving you a very clear update on Q4, which was not under my leadership as CEO. Thank you, Giles.

Joshua Overholt, Vice President of Investor Relations

Thanks, Harsh. As we've done in the past, we're reporting both GAAP and non-GAAP numbers.

Giles Goodburn, CFO

The reconciliations are in our filings and in the appendix of the presentation. Let's discuss our key sales metrics on Slides five and six. We signed $152,000,000 of new business ACV in the quarter, one of the highest quarters in recent years, up 11% versus Q4 2024. Our full year 2025 new business ACV was $517,000,000, up 6% versus 2024. Each quarter can be influenced by the timing of large deals, especially in the public sector segments. However, if you aggregate the ACV on a trailing full quarter basis, you can see we are trending in the right direction. On a full-year basis, our Government segment new business ACV is up 50% and our transportation segment is up 14% versus 2024, while our commercial segment is down 15% versus the prior year. The encouraging signs are that our new capability ACV, selling new products to our existing clients, is up again this year by 60%. Within the quarter, we signed 14 new logos and 20 new capabilities. On a full-year basis, we signed 41 new logos and 87 new capabilities. New business TCV for full year 2025 was up 16% versus 2024, driven by our Government and Transportation segments. As Harshita mentioned, our qualified ACV pipeline remains strong at $3,200,000,000, which is up 4% year-over-year. The strength here is driven by our government segment, which is up 29% year-over-year, with our in-year 2026 qualified pipeline almost double where it was at the beginning of 2025.

Joshua Overholt, Vice President of Investor Relations

This is a cornerstone of our commercial go-to-market strategy.

Giles Goodburn, CFO

Let's turn to Slide seven, and review our Q4 and full-year 2025 P&L metrics. Adjusted revenue for full year 2025 was $3,040,000,000, compared to $3,180,000,000 in 2024, down 4.2%. We ended the year with Q4 adjusted revenue growth in two of our three segments. Our Government segment grew 1.8% and our Transportation segment grew 1.9%. Both segments show positive momentum and are positioned well for growth in 2026. Adjusted EBITDA for the year was $164,000,000, as compared to $124,000,000 in 2024, and our adjusted EBITDA margin of 5.4% is up 150 basis points year-over-year and towards the top end of our guided range. We finished the year with a Q4 adjusted EBITDA margin of 6.5%, up 250 basis points versus Q4 2024, and a sequential improvement of 130 basis points versus Q3.

Joshua Overholt, Vice President of Investor Relations

Let's turn to Slide eight and review the segment results. Full year 2025 Commercial segment adjusted revenue was $1,500,000,000, down 5.9% as compared to 2024. The volume declines in our largest commercial clients drove approximately 40% of this revenue decline.

Giles Goodburn, CFO

The remaining top 10 commercial clients grew on an aggregate basis in 2025 versus 2024. Commercial adjusted EBITDA was $154,000,000, and adjusted EBITDA margin of 10.2% was down 30 basis points year-over-year. While we made good progress with our cost efficiency program in this segment, it wasn't enough to offset the impact of lower revenue. The five priorities Harshita outlined earlier will significantly accelerate the desired improvement in this segment. Government segment adjusted revenue for the year was down 0.3% at $922,000,000. Our new business revenue outpaced lost business revenue, with the primary driver of decline being the completion or winding down of large implementation projects, which we expect to replace in 2026. As I mentioned earlier, in the fourth quarter, our Government segment grew 1.8% year-over-year, and we are confident this will continue. The team is positioned to deliver full year 2026 revenue growth. Adjusted EBITDA was $221,000,000, with adjusted EBITDA margin of 24%, up 270 basis points versus 2024. The drivers here resulted from our AI initiatives and efficiency programs, resulting in lower fraud, labor, and telecom expenses offsetting the implementation run-offs.

Harshita Agadi, CEO

Transportation segment adjusted revenue was $609,000,000 for the year, an increase of 3.9%. While adjusted EBITDA was $18,000,000 and adjusted EBITDA margin was 3% for the year, up 300 basis points versus 2024. Both revenue and EBITDA improvements were driven by strong equipment sales and a contract amendment in our international transit business.

Operator, Operator

Unallocated costs were $229,000,000 for the year, a decrease of 10.2% versus 2024. The improvement here is driven by the cost efficiency programs in our corporate functions and a recovery of legal costs, which more than offset significantly higher U.S. employee healthcare claims activity.

Giles Goodburn, CFO

Let's turn to Slide nine and discuss the balance sheet and cash flow. We ended the year with approximately $243,000,000 of total cash on balance sheet, and adjusted free cash flow was negative $130,000,000. Adjusted free cash flow in the quarter was positive $28,000,000, a little less than we had anticipated due to the timing factors I mentioned last quarter. The updates on these timing factors are we signed the contract amendments that were delayed due to the government shutdown in Q4 and billed the client for the work already performed. However, we now expect to receive this cash later in Q1 or early in Q2, which accounts for the reduction in contract assets and the increase in accounts receivable on our year-end balance sheet. Our net leverage ratio decreased to 2.8 times this quarter, which was a result of the higher EBITDA, and our capital expenditure for the year was 3.4% of revenue, in line with our expectations. We continue to make progress with our portfolio rationalization plan, and regarding our full year 2026 guidance, as Harshita mentioned earlier, given the short tenure in the CEO role and the five priorities he has outlined, you can expect a more wholesome update on both these items with our Q1 financial results in early May. That concludes the financial review of 2025. And I'll now hand it back to Harshita.

Harshita Agadi, CEO

Thank you, Giles. I look forward to coming back in our Q1 to revisit these priorities and give you a very detailed update. Just so you're clear, the initiatives would have already started to take momentum well before our next call. We will also be prepared to outline their expected impact on Conduent Incorporated's financial performance. As I continue forward, I would say Conduent Incorporated has a strong foundation, meaningful client relationships, and a global team that knows how to deliver to our thousands of clients across the globe. What we are focused on now is execution.

Operator, Operator

Moving faster.

Harshita Agadi, CEO

Simplifying the business, allocating capital with discipline, and holding ourselves accountable for results. Our direction is clear, and our execution plan is now in motion. The actions we're taking are designed to return Conduent Incorporated to sustainable revenue growth, expanded margins, and generate strong free cash flow that is sustainable. As we execute, we will continue to communicate transparently, measure progress rigorously, and earn your confidence quarter by quarter. I am truly energized by the opportunity provided by the board and the support to lead from the front confidently. We do have a good leadership team in place, deeply committed to building a stronger, more focused, and more valuable Conduent for our clients, all our employees, and without any doubt, our shareholders. Ladies and gentlemen, that is the message for the day. And I think we can get the operator to open it up for questions.

Operator, Operator

Thank you. We will now be conducting a question and answer session. The first question is from Pat McCann from Noble Capital. Please go ahead.

Patrick Joseph McCann, Analyst

Morning. Thanks for taking my questions. Harsh, it's great to hear about your vision for the future of the company. I was curious, when it comes to the framework you outlined of looking at business units and deciding whether to fix or grow them, could you give any additional color into what metrics you will be looking at the various business units for determining whether to fix, grow, or sell them?

Harshita Agadi, CEO

Thank you very much for the question, and actually a very thoughtful question. There will be multiple variables at play. I'll start with the CEO's very important job: capital allocation. We have a lot of capital going in. Are we getting the right rate of return? And where should we place our bets? We currently have an accumulation of somewhere between fifteen and twenty small businesses covering not just the commercial side but also the government and transportation segments. I'm looking for does the sector have significant growth metrics? For example, healthcare will continue to grow. Second, can we achieve decent predictable EBITDA margins? Sometimes, when EBITDA margins are high, we may be misled into thinking it's a great business, but anything that's not sustainable will eventually run out of steam. We also need to think about how much capital needs to be allocated and what the free cash flow is coming in. Finally, is there a moat around the business? Can someone easily come in and replace us? Or not? And can that moat be breached with the number one question of the day being technology that is extremely dynamic at this time and is obviously driven by AI, Gen AI, and other variations? To me, these are some of the factors. So I intend to present a matrix at our next board meeting that outlines how we’re looking at the world. I've talked to the top 10 investors, and they've provided me with wonderful ideas to ensure that I cover all bases. Those would be the factors.

Patrick Joseph McCann, Analyst

Thank you. I'll just ask one more question and then I'll hop back in the queue because I know there are others. When it comes to the company, obviously, it has a number of different business units. Some of them are more closely related to each other, while some are not as much. What's your general philosophy moving forward regarding which businesses you would keep? Are you looking at it from the perspective of certain businesses having overlap, or do they have efficiencies because of the similarities of where certain business units operate, as opposed to the more disparate portfolio of businesses?

Harshita Agadi, CEO

It's actually not only is the question clear, it’s a good dilemma. What has been the case to some extent in the past is, let us be everything to everybody. Let us be anything to anybody. We need to walk away from that, and one of the things we as a team are doing is listing out things we will just not do. It’s not just important what you do, but you must also make a list of what you really won’t do and refrain from it. It may look good, but I've opted to say this is what we can do and we're the best at it. If you need additional services, maybe we can do it, but we might also find someone that we can partner with. We have deep client relationships, and I consider that worth a significant royalty. If I’m bringing in a partner to execute with me on a third or fourth service with a client, I may charge for that relationship because I bring strong relationship management to bear. So, I hope I've answered the question, but it will be case by case. Yet, even on a case-by-case basis, we must be very disciplined about it. We have 20 or 30 different services, but we're offering one and a half to two services in a completely different area. That does not generate scale or efficiency. For instance, a previous BPO I was involved with was doing tax returns only for partnerships, and when we received a request to do it for corporations, we actually declined the business, stating we were experts at doing back-office work for the largest partnerships and not for corporations.

Operator, Operator

Thank you. The next question is from Gowshihan Sri from Singular Research. Please go ahead.

Gowshihan Sriharan, Analyst

Good morning, guys. Can you hear me?

Giles Goodburn, CFO

Yes, sure. Very clearly.

Gowshihan Sriharan, Analyst

My question is on the commercial side. I know you laid out in the last call that the top 24 to 25 accounts were growing, and the new leadership would necessarily affect the 2026 performance. As you sit here in Q4, do you have any evidence that the revamped go-to-market approach is helping you outrun that one client that was lagging behind?

Giles Goodburn, CFO

Yes, Gowshihan, good question. The top 25 and the top 10 accounts I spoke about specifically relate to the commercial segment. As you think about 2026, as I said in the remarks, we've got some really good momentum in both our public sector businesses. Government grew for the first time in Q4 by 1.8%, and there is an extremely strong pipeline across all components of their product offerings, with a lot of that pipeline relating to 2026 opportunities. So, we feel really good about the government segment. Transportation is somewhat in the same boat with good relationships and a strong pipeline of work that we can deliver for continued year-over-year revenue growth. Commercial is where we've got a little bit of work to do. We've reshaped the go-to-market strategy and brought the teams closer to the clients so that we can better serve those client bases, especially those top 10 and top 25 clients. While many of those clients are growing revenue and expanding their capabilities with us, we recognize that we have work to do there. I wouldn’t anticipate growth in 2026, but I'm optimistic about the trajectory as we look forward to 2027.

Harshita Agadi, CEO

Here is, I’d call it good news. We are currently examining the leadership for commercial. When you look at mid-sized companies in the three to five billion range, the CEO often isn’t as close to the clients as they should be. I have a rare opportunity to have three of the leaders reporting directly to me right now. It's an easy answer to appoint someone to run commercial, and I have some candidates both inside and outside the company. It will ultimately result in a single leader, but at this time I am closely involved in the processes and getting close to the clients. I have at least one phone call a day, and some clients are not happy while others are thrilled or wanting more services. I have been active for many years in the CEO ranks, and I have taken care in cultivating relationships across the board. I will use these relationships to benefit my commercial colleagues in order to generate more business. The other good news is that the discipline around sales and how we're approaching sales has improved. Additionally, there is now a weekly meeting focused strictly on revenue generation for commercial, transportation, and government segments, where only the sales team and line management will participate.

Gowshihan Sriharan, Analyst

Thank you for that, Harsh. As you mentioned, the commercial segment healthcare has been particularly successful. Are you choosing to focus on a smaller selection of payers and health plans, particularly with your AI offering? Or do you think you still need more logos in this segment? I’m trying to understand whether the HSP and other platforms scale better by focusing on depth rather than breadth.

Harshita Agadi, CEO

I would say it’s not so much about acquiring more logos. We have plenty. Rather, it’s about getting deeper into certain sectors where we already have significant market presence. If you look at healthcare today, specifically Medicare spending, we're talking about a very large number, potentially four to five trillion. Healthcare spending in the U.S. has now become the third largest economy in the world after the United States and China. To me, focusing heavily on that and participating in it, while also helping our commercial and government clients simultaneously, is crucial. The new legislation has introduced a lot of complexities regarding eligibility, and we are positioned to simplify the application of these new regulations across various programs.

Gowshihan Sriharan, Analyst

Thank you for that. On the government side, you talked about margin expansion due to AI-driven fraud reduction and direct expenses in Medicaid as early showcases. As you scale those solutions, are you leaning more towards gain-sharing economics with clients or fixed-price contracts? What does that imply for margin improvement and revenue in 2026?

Harshita Agadi, CEO

First off, one risk we do have is that some clients may want to take AI in-house, but it may not be that simple. I want to differentiate between an AI company and Conduent. We have a strong distribution network, deep client relationships, operational know-how, proprietary data, and significant switching costs. While the disruptor may offer a solution that lowers costs and increases accuracy, we shouldn’t approach this with a large company mindset. It’s essential to partner with smaller disruptors who can provide solutions that enhance accuracy and reduce costs. In this context, we may share some of the savings with the client, whether that is government or commercial. However, the AI disruptor we partner with could vary by client sector, allowing us flexibility in how we implement these solutions. Those AI companies are eager for access to a bank of clients, which is another strength we possess.

Gowshihan Sriharan, Analyst

Excellent. Thanks for that. If you could walk us through the 2025 ACV and your expectations to convert that into revenue quickly, in which segment do you feel most confident? Your exit EBITDA margins were 6.5% for Q4. As you look into 2026, should we expect realistic margins once all the cost strategies and portfolio adjustments have been implemented?

Harshita Agadi, CEO

Here’s how I would frame it. Clearly, we haven’t given you guidance yet, which we will do in Q1. However, having not provided guidance, I’ll share how the businesses are performing as well as what I believe should be steady-state margins. When I say steady state, this could mean two to three years down the road, or we might be faster, depending on execution speed. The government sector is demonstrating strong growth, and the transportation sector is also performing positively. Commercial requires a turnaround, and the three individuals running it are intensely focused on achieving results. In our space, I believe we need to clip at between 8% and 10% margins in the medium term, potentially even higher, given the opportunities present. Today, I can see that there is low-hanging fruit that can be optimized. The senior leadership team has already come to me with opportunities for cost reduction and efficiency improvement. Thus, I expect margins to increase. Importantly, we need to ensure our EBITDA converts to free cash flow. This means tracking DSO, DPO, and ensuring we are effectively collecting receivables.

Gowshihan Sriharan, Analyst

Thank you, gentlemen, for taking my questions, and good luck, Harsh.

Operator, Operator

Thank you. The next question is from Matt Swoop from Baird. Please go ahead.

Matt Swoop, Analyst

Good morning, Harsh, Giles, and Josh. Harsh, you mentioned a couple of times the idea of a moat around the business. Can that moat be breached by technology or AI? Specifically, what impact do you think AI disruptors are having? Can you provide some comfort regarding how much of your existing revenue stream you think is exposed to AI disruptors or other technology threats?

Harshita Agadi, CEO

Having been here less than thirty days inside the company, I would humbly say I cannot answer that definitively right now. Nevertheless, I would estimate that safely about 15% to 20% of our business may be exposed to AI disruptors. However, technology, particularly AI, is continuously evolving and may increase this risk in the future. Therefore, we need to be proactive in our approach and either develop in-house capabilities or partner with those who can keep us ahead in this competitive landscape.

Giles Goodburn, CFO

To add onto that, there’s probably around 15% at risk in the commercial space. We are working to secure that moat with some of our own AI capabilities across various platforms that we have, whether that’s in commercial, using AI to streamline our benefit enrollment processes for our clients’ employees, or in certain areas like tolling and license plate recognition.

Matt Swoop, Analyst

I appreciate that guys; that’s helpful. Giles, this is maybe a question for you. As you bridge the gap in CEOs, we’ve heard a lot about these 2025 exit rates and the portfolio divestiture plan. Can you help us understand where that stands now for planning purposes? For instance, regarding the 2025 exit rate, free cash flow was projected to be $60,000,000 to $80,000,000, but obviously, we’re well into the negative cash flow territory. How should we think about modeling going forward?

Giles Goodburn, CFO

We clearly set these targets approximately three years ago, and they were aspirational targets. We are making progress toward achieving some of those targets, particularly in government and transportation, where we've seen revenue growth. There’s still additional work to be done in other areas. We still target a sub-one-time levered business as we consider the future. This will stem from the divestiture activities that Harshita has referenced. We expect to accelerate some of the cost initiatives we have across the organization including in our corporate functions and technology, while improving margins within the business. Additionally, a more disciplined management of working capital is needed. We had a couple of large implementations that didn’t meet our projections by 2025 and that has significantly impacted our cash generation. However, the cash hasn’t been lost; it’s expected to materialize in Q1 or early Q2. The larger projects will require better oversight. I want to reiterate that our destination hasn’t changed; we continue to aim for improved EBITDA margins on a sequential basis, profitability and free cash flow generation.

Matt Swoop, Analyst

Do you believe positive free cash flow can be achieved by 2026?

Giles Goodburn, CFO

To address that, we ended '25 with a negative $130 million. There is substantial effort ahead of us, but I will give it a shot. I am not providing guidance, but I will definitely set specific free cash flow goals. If you notice in my script and dialogue, I have mentioned the word 'free cash flow' at least ten times. I am fixated on it. We are going to work very hard, and I am optimistic about the turnaround.

Matt Swoop, Analyst

You have historically included portfolio rationalization slides in the earnings deck, which are currently absent. The Phase Two proceeds were previously targeted at up to $350 million. You mentioned that this was priority number four. What is the current timing and magnitude regarding portfolio rationalization relative to what we have heard in the past?

Harshita Agadi, CEO

Thank you for that thoughtful question. To clarify, the six priorities I mentioned do not have a sequence; we need to run and 'chew gum' at the same time. We have a strong leadership team capable of doing so. Portfolio rationalization is a very high priority. There are initiatives already in motion that were commenced before I took over as CEO. I was briefly the chairman and was familiar with those efforts. As Giles has mentioned, we are accelerating our focus on rationalization, and what I see is a thorough review of the entire portfolio that could unveil additional opportunities to work on simultaneously. We have bankers in place, and potentially more, to expedite the rationalization process. My objective is not to wait a year from now and still be discussing portfolio rationalization. The quicker we execute it, the more we can focus on our foundational business. Those in line management should operate under the premise that they own the business until the last day of transfer where necessary. They must not distract themselves with portfolio rationalization efforts. Meanwhile, our team focused on M&A and finance will keep their focus steady on this matter.

Matt Swoop, Analyst

That is helpful; thank you. I have one last, quick question before I finish. With your bonds trading down into the low 70s, would bond buybacks in the open market fit within your capital allocation strategy?

Harshita Agadi, CEO

You’ve posed an excellent question. My priority is to ensure we deleverage and structure our debt accurately first. Based on current trading conditions, it presents an opportunity that could be more lucrative than buying back shares. I will have our bankers run the numbers each time we allocate a dollar. Presently, the yield on our bonds is rather attractive, and given that, I also have to consider whether to buy more shares or buy more bonds. It’s a strategic consideration that I continue to evaluate.

Matt Swoop, Analyst

Thank you very much, guys.

Operator, Operator

Thank you. The next question is from David Nierenberg from Nierenberg Investment Management Company. Please go ahead.

David Nierenberg, Analyst

Harsh, it’s wonderful to be working with you again.

Harshita Agadi, CEO

Nice to hear your voice, David. You definitely surprised me by dialling in from the West Coast.

David Nierenberg, Analyst

I imagine that most people on the call don’t have the depth of experience that I've had with you. I’ve already purchased a million shares out of confidence because you are a great leader, businessman, salesman, diplomat, and tough guy with access to a global network across multiple industries for the benefit of this company. I am very excited to be working with you again. I am looking forward to you creating a great deal of wealth for shareholders just as you did when you succeeded me as the chairman of the board of Flowtech Industries. Best wishes.

Harshita Agadi, CEO

Thank you very much, David. I appreciate your support, not just verbally, but also in backing our shares with your investment. I have every intention of securing more shares for myself when the window opens. Your continued support means a lot.

Operator, Operator

My pleasure. This concludes the question and answer session as well as today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.