Alight, Inc. Q4 FY2025 earnings call

Rohit Verma joined Alight at the start of the year and has focused on meeting colleagues and clients. Alight has strong underlying DNA with scale, client relationships, etc. In 2025, didn't meet internal financial targets. Immediate focus is driving service and operational excellence, innovating products with AI, and building enduring partnerships. Piloted conversational AI with large clients in Q4 2025 showing reduced channel jumping. Greg Giometti walked through financials, and Rohit discussed capital allocation reallocation towards higher return priorities like debt reduction and share repurchases. Focus on delivering service and operational excellence, advancing product innovation with AI, and strengthening relationships.

In 2025, Alight generated $2.3 billion in revenue. Recurring revenue was approximately $2.1 billion, down 2.2% from the prior year. Project revenue was $154 million, down 22%. Adjusted gross profit for the full year was $883 million, down from $942 million in 2024. Full year adjusted EBITDA was $561 million with a margin of 24.8%, compared to $594 million and 25.2% in 2024. Fourth quarter revenue was $653 million, with recurring revenue $607 million down 1.6% and project revenue $46 million down 27%. Adjusted EBITDA in the fourth quarter was $178 million, impacted by increased compensation expense. A noncash goodwill impairment charge of $803 million was recognized in the fourth quarter of 2025, with remaining goodwill of $83 million on the balance sheet.

Rohit Verma said he's 30 working days into his role and won't provide full year guidance. Anticipates first quarter 2026 revenue to be down by high single-digit percentage range. Planned investments in sales, account management, and user experience will create short-term adjusted EBITDA margin pressure, resulting in a decline of 500 to 750 basis points compared to last year's first quarter. Viewed as critical to executing priorities. Strong cash flow provides flexibility to invest $100 million to drive product innovation, partner expansion, and enhanced client experience.

Q: What are the drivers of financial underperformance in recent periods?

A: Big challenge is driving operational excellence, execution around client management, relationship management, technology, and product innovation.

Q: What do you bring from previous CEO role at Crawford?

A: Experience in turning around execution, cultural change, leadership philosophy, rhythm, and staying focused on priorities.

Q: Dive deeper into first quarter guidance?

A: Revenue expected to be high single digits lower, margin decline 500 - 750 basis points due to less than stellar renewal season last year.

Q: Are clients not renewing due to testing their own AI bots?

A: Clients in 3 categories, no meaningful disruption from AI perspective yet.

Q: Portion of comp and $100 million investment as recurring?

A: Compensation expected to be recurring, $100 million capital investment with some part repeating.

Q: Is 2026 a lighter renewal cohort?

A: Yes, 2026 is lower compared to 2025 by about 30% - 40%.

Q: Internal impact of AI and margin improvement?

A: No near-term impact on productivity from AI, working on data and knowledge layer, expect efficiencies more in 2027.

Q: Driver of renewal slippage?

A: Clients' requests for operational excellence, modern user interface, and deep consistent relationships.

Q: Why pay TRA in 2026?

A: TRA payment in 2026 is for 2024 tax return related to gain on sale of Strada with 2-year lag.