Alight, Inc.

good morning and thank you for holding my name is peter and i will be your conference operator today welcome to allied's first quarter 2022 earnings conference call at this time all parties are in a recent only mode as a reminder today's call is being recorded and replay of the call will be available on the innovations section of the company's website and now i would like to turn it over to greg fajay head of investor relations at Alight, to introduce today's speakers.

Good morning. Thank you for joining us. Earlier today, the company issued a press release with first quarter 2022 results. A copy of the release can be found on the investor relations section of the company's website at investor.alight.com. Before we get started, please note that some of the company's discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are discussed in more detail in the company's filings with the SEC, including the company's 10-K filed with the SEC, as such factors may be updated from time to time in the company's periodic filings with the SEC. The company does not undertake any obligation to update forward-looking statements. Also, throughout this conference call, the company will be presenting non-GAAP financial measures. Reconciliation of the company's historical non-GAAP financial measures to the most directly comparable GAAP financial measures appear in today's earnings press release. On the call for management today are Stephan Scholl, CEO, and Katie Rooney, CFO. After their prepared remarks, we will open the call up for questions. I will now hand the call over to Stephan.

Thanks, Greg, and good morning, everyone. The last two years, Light has been embarking on an important transformation to create a differentiated approach to human capital management that allows companies to change the relationship they have with their people. As I've said before, two of the most important aspects of people's lives are their health and financial well-being, and the pandemic had a hugely negative impact on both for so many workers. But we're not in the clear. Coming out of the pandemic, companies continue to struggle with attracting and retaining a more discerning workforce. Employees want more from their employers, and that is not going to change. this is the new normal and this is accelerating the demand for a light approach the elite work-life platform brings together all aspects of physical mental and financial well-being positioning a light to be one of just a few enterprise-wide platforms that companies can rely on and the platform we believe is best positioned to drive outcomes for employers and their people when we combine the simple and seamless technology experience of the elite work-life platform With the data and analytics of our content layers and our global delivery capabilities, we can power more confident decisions for employees and provide companies with the information they need to make smarter decisions around their people, their most important asset. This powerful combination is the Alight business process as a service or BPaaS model. That approach is resonating in the market. We've continued to see momentum with major global brands like Navistar, Shell, and Sartorius. joining our already enviable client roster, and in Q1, we expanded that list further with the addition of NEC, Genuine Parts Company, Atavinta, and Rituals. In fact, one of our largest Fortune 50 clients recently shared something with me that I think really captures the value that we bring. She told me that previously their strategy was to offer a wide variety of programs to meet every employee's needs. but it was overwhelming and people weren't getting the most from the investments the company was making. Now, they're using the Alight Work Life platform, which will drive proactive, personalized communication to increase the engagement with their key programs. This positive momentum is also carrying over to our business results as seen by our key transformation metrics. During the first quarter, we signed 122 million in BPAS bookings, which is 205% higher than last year's $40 million, and we recognized $114 million in BPAS revenue, up 23% from last year, and now accounts for 15.7% of revenue, up from 13.5% a year earlier. We continued to make significant investments in the business, including in the upcoming go-live of the key federal contract. In technology to drive the Alight Work Life platform development, including our recent rollout to more than 450 clients, and in investments in our go-to-market strategy. As a result of these critical investments, Employer Solutions' gross profit margin declined to 32.7%. We are striking a balance between profits and growth as we self-fund investments that allow us to take advantage of secular trends and this unique intersection of a post-pandemic environment and a tight labor market. At the same time, we continue to generate strong annual cash flow, which reflects the strength of our foundational business and provides us with financial flexibility to do bolt on M&A. Taken all together, 22 is off to a solid start and we believe we are well positioned to deliver on our commitments for the year and are on our way to 10% revenue growth in 23. So what is BPAS? We've been moving quickly on our transformation journey, and for those who are new to our story, let me take a step back and talk more about our BPAS model that I touched on earlier. What we offer for clients is a differentiated approach to human capital management, an approach focused on leveraging data to drive outcomes. Our BPAS model, as I shared, is a combination of three elements. It starts with your light work life and enterprise-wide employee experience platform. A light work life is offered in four tiers, starting with the most foundational level that gives users access to our robust cloud-based content layers, and then moves all the way up to the highest tier that adds even greater analytics capabilities to measure ROI and employee outcomes. The second part of our BPaaS model is our content. Companies can layer in various content through the addition of our modular cloud-based solutions for health, wealth, payroll, wellbeing, clinical, and retiree health. These cloud solutions have three to five unique product tiers from a core digital offering all the way to comprehensive benefits administration with fully integrated point solutions. Most importantly, the data within the content layer allows us to deliver a highly personalized experience to meet the specific needs and circumstances of our users and their family members. Finally, We add in our vital global delivery capabilities that require a human skill set that can't be automated. Some of these services include one-on-one help to navigate important life moments like having a baby, talking with a nurse about managing a critical illness, or leveraging a financial advisor to prepare for retirement. We believe our approach is powerful, and when it comes down to it, the reason our clients buy from us are threefold. First, we have an incredibly strong core business with a long proven track record of serving some of the largest, most complex clients in the world, including over 70% of the Fortune 100. Secondly, because of our core business, we have approximately 200 million interactions from more than 30 million users and their family members, which provides us with an enormous data set that underpins our platform. And lastly, this data together with our platform allows us to drive more confident decisions and better outcomes. Our integrated approach is already delivering tangible results for our clients. Let me share some examples. The multinational Fortune 50 client I mentioned earlier already has some more than 4 million interactions yearly across its thousands of employees and offers a wide range of well-being programs to meet employee needs. But few employees are actually using these programs. Our BPAS approach, enabled by a light work life, will enable us to move the needle on the engagement rate of these programs. First, A Light Work Life provides one integrated experience that engages the employee in actions that drive physical, financial, and emotional well-being. Second, we can leverage that data to personalize the content delivered through the platform with prompts for the next best action to drive outcomes and motivate employees with the programs most relevant to them. Third, we create an incentive system to reward behaviors with the highest impact. Combined, we believe we will drive a more than 100% increase in engagement for this Fortune 50 client program. Switching to another client, we had a science and technology client that had two main challenges. First, its employees were having difficulty finding the best benefits resource at the right time, which led to poor health outcomes, care avoidance, reduced productivity and engagement, and increased claims expenses. Second, this client did not have high-touch concierge health services, which left the company at a recruitment and retention disadvantage in today's highly competitive market for talent. To address these challenges, we will provide the Alight Work Life platform paired with our HealthCloud solution, and this combination helps us meet these challenges head-on for our client. Specifically, using the data and AI, we can personalize the employee experience on the Alight Work Life platform and provide employees with a list of available and relevant benefits. This level of personalization will drive higher engagement and utilization of benefits programs. We also will provide real-time healthcare concierge support for all employees from a dedicated Alight Health Pro. The cost of implementing this solution is a fraction of the company's overall healthcare costs and has the potential to drive millions of dollars in savings and help partially offset healthcare cost inflation. Our ability to deliver those results is why the client saw the potential and signed with Alight. Our strategy and our deliberate approach to investment is why we have seen steady progress in our BPAS bookings with a cumulative total of $724 million since the first quarter of 21 And this is why we believe we are well on our way to our goal of 1.3 billion in BPAS bookings by year end, which allows us to reaffirm our 22 commitments and gives us confidence in our path to 10% growth in 23. Katie, over to you.