Alight, Inc.

Good morning and welcome to Alight's fourth quarter and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will open the call for questions. Instructions will be provided at that time. There is a presentation accompanying today's presentation available on Alight Investor Relations website. I will now read the safe harbor statement. Today's discussion includes forward-looking statements within the meaning of the federal securities laws. These statements reflect management's current views and expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Factors that may cause such differences are described in today's earnings release and in Alight's filings with the Securities and Exchange Commission, including in the risk factors section of its most recent annual report on Form 10-K. The company undertakes no obligation to update any forward-looking statements except as required by law. In addition, during today's call, the company may reference certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in the earnings release available on the company's website. I will now turn the call over to Rohit Verma, Chief Executive Officer of Alight. Please go ahead.

Good morning and welcome to Alight's fourth quarter 2025 earnings call. Joining me today is Greg Giometti, our interim chief financial officer. This is my first earnings call as Alight's CEO, and I'm pleased to have this opportunity to speak with you so early in my tenure. I joined Alight at the start of the year, and over the past 30 working days have focused on meeting with our colleagues and clients and diving into our operations. I'm extremely pleased with the very warm welcome from our colleagues as well as the support I have received from the board and the connections I've already created with our clients. I'd like to take this moment to share why I chose to join Alight and over the last six weeks have only strengthened my conviction in the opportunity ahead of our business. Alight has strong underlying DNA. Our scale, client relationships, domain expertise, and operational footprint provide a significant competitive advantage and leadership position in the marketplace. We serve a wide spectrum of employers, including the majority of the Fortune 100. We offer essential and unmatched benefit solutions via a platform that offers extensive flexibility to accommodate a wide range of client needs, from straightforward to the most complex plans in the market. Our midsize clients benefit from simpler platforms, And we also provide specialty solutions, such as leaves administration, to meet our clients where they are. Our vast data lake creates a proprietary advantage that enables predictive end-to-end orchestration when implementing AI, which will allow us to transform employee experiences into proactive life journeys, driving better outcomes for employers, employees, and their families. And our top-tier partner network allows us to provide participants a holistic experience putting us at the center of the benefits ecosystem. More than 30 million people and dependents rely on us in their most important moments when someone is sick and needs access to their insurance, when someone is looking to start a family and wants to better understand their health and wealth benefits, or when someone is disabled and needs to understand their leave options. At the end of the day, it is about delivering a frictionless experience with empathy and care that delivers a compelling outcome. The ability to provide benefits is a fundamental offering for most organizations. Yet, regulatory requirements and rising costs make it challenging for organizations to do this on their own. Most employers do not have the in-house expertise, scale, or technology required to manage the complexity effectively, making the outsource administration of health, wealth, and leaves an essential purchase. We believe our products and solutions are needed regardless of external economic cycles. And when we execute well, we create sticky relationships with predictable revenue. Our expertise across the benefits administration landscape and our ability to provide effective land solutions to a wide variety of employee groups is a competitive advantage. The strength of our solutions and our organizational expertise lead us to believe that the market opportunity in front of us is substantial. Not only do we see opportunity in the broader market, We believe there is meaningful white space within our existing client base. With deep penetration among large and mid-sized employers, we have a solid foundation from which to expand our relationships and grow market share over time. That said, we have work to do. In 2025, we did not meet our internal financial targets, and new bookings and renewals did not meet our expectations, leading us to miss our forecast to the market. During my first six weeks at the company, I've connected with more than 35 clients, and it is clear to me that clients want to continue working with us as we play a critical role in helping them manage increasingly complex health, wealth, and lease programs. They're also clear in their requests that we bring simplicity to their participants and management by providing cutting-edge solutions. Our clients expect flawless service delivery and continued innovation in products that create better outcomes. The attractiveness of our market, our coveted position, and the clarity of the asks from our clients enable us to be clear-eyed about our priorities going forward. As a result, our immediate focus is driving service and operational excellence across our unmatched portfolio of benefit solutions, innovating products enabled by AI to create a cutting-edge user experience, real value and actionable insights for clients and participants, while building relationships that result in enduring, trusted partnerships with clients, participants, and partners. These priorities are all things within our control, which give me great confidence in our ability to improve, as does some of our recent progress. For example, during the fourth quarter, we piloted conversational AI with two of our largest clients during the recent annual enrollment cycle. We are very encouraged by the results, where we saw a significant reduction in channel jumping, which is when a user moves from digital enrollment to calling the call center. This high reduction rate is indicative of the improved efficiency and participant efficacy experienced with the conversational AI product. Before I turn the call over to Greg, I want to provide some details on our 2025 financial performance. We generated $2.3 billion in revenue with adjusted EBITDA of $561 million and an adjusted EBITDA margin of approximately 25%. With that said, I would reiterate that we believe there is significant opportunity to improve our performance moving forward. Our adjusted EBITDA in the fourth quarter was impacted by an increase in compensation expense driven by our commitment to invest in the business with a focus on promoting service quality, strengthening relationships, and positioning the business for growth. Importantly, the business generated $250 million of free cash flow in 2025, which enabled us to maintain a strong liquidity position and positions as well as we head into 2026. With that, I'll turn the call over to Greg to walk through the financials in more detail.

Thanks, Rohit, and good morning, everyone. I'll walk you through our fourth quarter and full year 2025 results. Turning to our fourth quarter results, we continue to think about revenue mix across two categories, recurring renewable business and non-recurring project-based work. Revenue for the fourth quarter was $653 million. Recurring revenue of $607 million was down 1.6% compared with the prior year period. project revenue of $46 million was down 27%. Fourth quarter adjusted gross profit was $272 million, down 9.3% from the prior year period, reflecting an adjusted gross profit margin decline of 240 basis points. Adjusted EBITDA for the fourth quarter was $178 million, as compared to $217 million in the prior year period. Fourth quarter, 2025 adjusted EBITDA margin was 27.3%, compared to 31.9% in the prior year period. Adjusted EBITDA during the fourth quarter of 2025 was adversely impacted by increased compensation expense, which we believe is critical to executing on our priorities. This impacted adjusted EBITDA by approximately $45 million. Excluding this, adjusted EBITDA would have been within our previously communicated guidance range. Adjusted net income in the fourth quarter was $96 million with adjusted EPS of 18 cents compared to $127 million of adjusted net income and adjusted EPS of 24 cents in the fourth quarter of 2024. Looking at the full year, total revenue was approximately $2.3 billion. Recurring revenue of approximately $2.1 billion was down 2.2% compared to the prior year period. Project revenue of $154 million was down 22%. Adjusted gross profit for the full year was $883 million compared to adjusted gross profit of $942 million in 2024. Full year adjusted gross profit margin decreased 100 basis points compared to 2024. Full year adjusted EBITDA was $561 million with adjusted EBITDA margin of 24.8%. compared to adjusted EBITDA of $594 million, with adjusted EBITDA margin of 25.2% in 2024. Adjusted net income for the full year was $266 million, with adjusted EPS of 50 cents, compared to $313 million of adjusted net income and adjusted EPS of 57 cents in 2024. In the fourth quarter of 2025, we recognized a non-cash goodwill impairment charge of $803 million. We have remaining goodwill of $83 million on the balance sheet. Turning to capital and liquidity, we ended the year with $273 million in cash and equivalents, in addition to a $330 million fully undrawn revolving credit facility. And free cash flow for the year was $250 million, providing us with significant financial flexibility. With this, we are well positioned to fund our 2026 TRA payment, which is estimated to be $156 million. Importantly, as a result of tax reform related to the One Big Beautiful Bill, we do not expect to make a significant TRA payment in 2027 or 2028, which meaningfully increases our flexibility around capital allocation. After reviewing our capital allocation priorities with the Board, the company has decided to reallocate capital in favor of higher return priorities, including investing in the long-term growth of the business, deleveraging, and opportunistic share repurchases, which will replace future dividend payments. With that, I'll turn the call back to Rohit.