Alight, Inc. Q3 FY2025 earnings call

• Technology and Product Advancements: Accelerated AI road map and delivery capabilities, enhanced automated voice response system in call centers with 13% drop in call volumes Y/Y, AI agent assist software in pilot with clients, brought critical delivery and technology talent back in-house. - Partner Ecosystem: Expanded partner network with additions like Sword Health, progress with Goldman Sachs Asset Management integration, introduced new guaranteed income solution with MetLife. - Client and Participant Experience: Participant satisfaction scores at 90%, piloted conversational AI agent solution for annual enrollment, rolled out Gen AI-enabled search summaries to over 95% of clients. - Leadership: Steve Rush joined as Chief Commercial Officer, bringing deep industry expertise.

For the third quarter, revenue was $533 million compared to $555 million a year earlier. Adjusted EBITDA was up 17% to $138 million. Free cash flow year-to-date was up 45% from the prior year to $151 million. Adjusted gross profit was $206 million, up 3% from the prior year, reflecting 260 basis points of margin expansion. Normalized for certain factors, adjusted gross profit would have been higher. The company's financial performance across segments showed both growth and adjustments due to various factors.

For 2025, the company expects revenue between $2.25 billion and $2.28 billion, adjusted EBITDA of $595 million to $620 million, free cash flow of $225 million to $250 million, and EPS of $0.54 to $0.58. The guide was reduced due to factors like project revenue not meeting expectations, cautious market sentiment affecting pipeline, and modest declines in recurring revenue volumes.

• Macro Environment: Impact on client decision-making due to factors like government shutdowns. - Market Sentiment: Cautious market sentiment leading to lack of inflection in pipeline and activity. - Lag in New Business: New business wins taking time to translate to financials, with longer implementation cycles for large client deals.

Q: Kyle Peterson asked about the update to the guide, specifically reduction in revenue and when new business wins would pay dividends.

A: Jeremy Heaton responded that revenue reduction is split between project and recurring, with project being the biggest factor due to lack of pipeline inflection and cautious market during annual enrollment.

Q: Scott Schoenhaus asked about returning to flat to low single-digit growth.

A: Dave Guilmette said focus is on renewal activity, new logos/expansion, and product positioning, with lag effects in implementation cycles.

Q: Kevin McVeigh asked about declassification initiative.

A: Jeremy Heaton explained it's a governance update to destagger the Board.

Q: Peter Heckmann asked about follow-on payments from divestiture.

A: Jeremy Heaton said $50M is guaranteed and $150M is contingent on Strada's 2025 EBITDA.

Q: Andrew Polkowitz asked about progress in go-to-market organization.

A: Dave Guilmette said Steve Rush's return and domain expertise additions are helping, focusing on improving close ratio.