ALIT

Leadership & Organizational Transformation

• Completed key senior leadership hires to strengthen the executive team: Steve Lasher (CFO, 30+ years of financial leadership across B2B tech and services), Dinesh Tulsiani (President, Employer Solutions, 20+ years of industry experience), and Naveen Baweja (CTO, transformation-focused technology executive)
• Expanded frontline sales and account management coverage from 100 to 500 clients to improve renewal tracking and client relationship management
• Completed the key phase of insourcing previously outsourced critical client service functions, which has received positive client and third-party evaluator feedback to improve renewal and new business prospects

Core Strategic Growth Priorities

• Long-term growth is focused on three core priorities: expanding market reach for Health Solutions beyond traditional Fortune 500 clients, growing market leadership in Leave Solutions, and expanding into complementary adjacent offerings leveraging existing scale
• Cross-selling Leave Solutions alongside existing Health Solutions client relationships is a key growth lever, given Alight's status as one of few scaled, experienced providers in the growing leave administration market
• Wealth Solutions continues to expand with new pension risk transfer (PRT) capabilities and broader financial wellness planning offerings for clients

AI & Technology Transformation

• Management is executing five key transformation initiatives under direct CEO oversight, all leveraging AI to improve user experience and operational efficiency:
  1. Building an AI-native end-to-end user journey for benefits administration; design is complete, user testing is underway, with full rollout planned for 2027
  2. Developing the industry's first unified data framework connecting health, wealth, and leave benefits to enable personalized AI interactions and reduce misinformation; rollout planned for 2027
  3. Modernizing the service model with AI-enabled call routing, expanded self-service, and AI-augmented agent tools; multiple enhancements are already live, with incremental rollouts each quarter
  4. Automating client specification ingestion, implementation, and enrollment configuration; first wave launching at the end of Q3 2026
  5. Enhancing automated file processing with proactive error intervention, which is already live and improving data interchange reliability
• Management follows a balanced approach combining AI tools and human support, with strict guardrails for security, privacy, and auditability

Operational Resilience

• The benefits administration market is highly resilient, as services are non-discretionary for employers regardless of economic conditions, with growing demand for outsourced compliance and technology support
• CEO Rohit Verma has completed over 180 client meetings since taking the role, with early improvements in renewal activity and commercial execution already visible

• Full year 2026 guidance is maintained at $2.78 billion to $2.98 billion in total revenue, and $400 million to $415 million in adjusted EBITDA
• Q3 2026 guidance calls for total revenue of $469 million to $479 million, and adjusted EBITDA of $55 million to $61 million, reflecting expected lower profitability due to seasonal elevated expenses for annual enrollment preparation
• Management expects a significant seasonal rebound in adjusted EBITDA and free cash flow in Q4 2026, consistent with historical seasonality, that will bring full year results into the guided range
• Full year 2026 free cash flow conversion to adjusted EBITDA is expected to be 40% to 43%, with lower conversion in Q3 2026 followed by a rebound in Q4 2026
• The back half of 2026 will see the largest P&L impact from prior weak commercial execution in 2024 and 2025, consistent with the 12 to 18 month lag between commercial activity and revenue recognition
• Management outlined a clear multi-year turnaround timeline: 2026 is for foundation building and reinvestment, 2027 will see momentum build with operational efficiency gains and improved bookings/renewals, and 2028 will bring consistent quarter-over-quarter growth with tangible AI-driven margin expansion
• Capital allocation flexibility is maintained, with all options (debt reduction, buybacks, M&A) still under evaluation with no commitments made at this time

Alight reported total Q2 2026 revenue of $511 million, a 3% year-over-year decrease. The firm operates three core product segments, with revenue breakdown as follows:

1. Health Solutions: Alight's largest segment, spanning core health administration, navigation, enrollment, spending accounts, engagement services, and point solutions. It accounts for the largest share of total recurring revenue.
2. Wealth Solutions: Alight's second largest business, with $1.7 trillion in assets under administration. It includes defined contribution, defined benefit, and pension risk transfer solutions, making up the second-largest share of recurring revenue.
3. Leave Solutions: Alight's fastest growing segment, offering leave of absence administration, medical and disability guidance, and short-term disability administration. It contributes the smallest share of current revenue but is targeted for significant expansion.

In aggregate, recurring revenue (the core revenue stream across all segments) totaled $471 million in Q2 2026 (92.2% of total revenue), a 4.3% year-over-year decrease driven by weaker commercial execution in 2024 and 2025. Project revenue, a non-recurring stream across segments, totaled $40 million (7.8% of total revenue), an 11% year-over-year increase. Adjusted EBITDA for the consolidated company was $92 million (18% margin), down from $127 million (24% margin) in Q2 2025. Adjusted net income was $26 million, or $0.91 adjusted EPS, down from $56 million, or $2.09 adjusted EPS, in the prior year period. Total liquidity at quarter-end was $545 million, with $101 million in year-to-date free cash flow.

• The 12 to 18 month lag between commercial execution and revenue recognition means that improvements in renewal rates and new business wins will not be reflected in financial results until 2027 to 2028, leaving near-term revenue exposed to prior weak commercial performance
• Project revenue is inherently unpredictable and drives quarterly consolidated revenue fluctuations
• Q3 seasonal elevated expenses for annual enrollment create predictable near-term pressure on profitability and free cash flow
• Evolving leave administration regulations create ongoing compliance complexity for clients and Alight, requiring ongoing investment to maintain competitive offerings
• AI deployment carries inherent risks of misinformation, which management is mitigating through a unified data framework and human oversight, but remains a potential operational risk

Q: Pete Heckman (DA Davidson) asked about 2025 retention rates, and whether retention trends have deteriorated, bottomed, or improved in the first half of 2026, given the long sales and revenue lag in the business. / A: CEO Rohit Verma responded that expanded account coverage from 100 to 500 clients has improved visibility into renewal activity. Management is encouraged by current trends for both client losses and revenue compression compared to the same period last year. Early feedback from recent client meetings and demos of new initiatives is very positive, though improvements will take time to flow through to the P&L due to long sales cycles.

Q: Curtis Nagel (Bank of America) asked to explain why the expected back-half 2026 recurring revenue step-down is occurring despite improving near-term retention trends. / A: Rohit Verma clarified that the 12 to 18 month lag between commercial activity and revenue recognition means the expected back-half step-down is almost entirely driven by weak renewal activity from 2024 and 2025, not current performance. Only a small minority of the impact comes from current point solution business.

Q: Ross Cole (Needham & Co.) asked what drives the large expected Q4 2026 EBITDA step-up from Q3 2026 guided levels. / A: Rohit Verma explained the step-up is entirely due to normal seasonality: Q3 has elevated expenses for annual enrollment preparation, which subsides in Q4. Q4 has historically been Alight's strongest EBITDA quarter, and the expected proportional lift is consistent with prior years, with some additional small support from new client launches in the quarter. CFO Steve Lasher confirmed the pattern holds for both revenue and free cash flow, aligned with historical seasonality.

Q: Pete Heckman (DA Davidson) asked for clarification on Rohit Verma's comment that quarter-over-quarter growth would return in 2028, and for more color on capital allocation and net leverage. / A: Verma explained the 2028 timeline reflects the long sales cycle: transformation improvements and new AI capabilities will be incorporated into RFP responses in 2027, leading to improved commercial execution that hits revenue in 2028. Management noted that after canceling the dividend to preserve cash, all capital allocation options (debt paydown, buybacks, M&A) remain open, and are currently being evaluated to maximize returns.