Alight, Inc.

Good afternoon and welcome to Alight's first quarter 2026 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 the 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 Olight. Please go ahead.

Thank you, Saatchi. Good afternoon and welcome to Alight's first quarter 2026 earning call. Joining me today is Greg Giometti, our interim chief financial officer, and Susan Davies, our chief accounting officer. It has been a busy and productive first few months for me, and I'm pleased to have this opportunity to share my thoughts with you. Today, we will cover my perspective on our results, some further transparency into the business, a view of the opportunity ahead, some reflections of what I've heard from clients, including its role in shaping our strategy, and a view of the team we are building, and finally, a perspective on AI. Our first quarter financial performance was solid, as we exceeded the guidance shared during the last earnings call, which you, as you will recall, took place just over 30 days into my time as CEO. Our outperformance was driven by higher than expected project revenue, as well as better than expected performance of partner revenue in the quarter. While our Q1 performance was better than expected, we will continue to see a difficult revenue comparison to prior year due to the commercial execution over the last couple of years. It will take the next several quarters for that revenue pressure to completely work through our P&L. For these reasons, the team and I are intently focused on improving commercial execution by retaining clients and winning new clients. I'm pleased to share that we are already seeing improvement in our new sales activity as well as our renewal execution. First quarter revenue of $534 million was comprised of $498 million in recurring revenue and $36 million in project revenue. As you all have observed before, our project revenue has been the major driver of volatility in our results. Project revenue was up 29% compared to Q1-25, and this comes in succession to Q4, where project revenue was down 27% to Q4-24, showing the volatility we have discussed before. Our recurring revenue was 4% below last year, resulting in a consolidated revenue decrease of 3%, which was better than expected. Adjusted EBITDA of $104 million benefited from the revenue flow through and lower than expected employee healthcare expenses in the quarter, which kept the margin decline to only 200 basis points. All in all, we are happy with where we landed compared to expectations and glad to see the progress we are making. We are maintaining strong liquidity and generating significant cash. We exited the first quarter with more than $500 million in total liquidity. This is after our Q1 26 TRA payment. At the end of Q1, we had $178 million in cash on our balance sheet and $330 million available on our revolver. Additionally, we generated free cash flow of $53 million in the quarter. a 20% increase compared to the same period last year, and we believe we'll continue to see solid cash generation through the end of the year. This provides us the foundation to execute our core strategies. Additionally, it gives us the flexibility to invest in our business, to accelerate the service and customer excellence initiatives that are critical to enabling industry-leading outcomes for our clients. I, along with our team, have operated with considerable intensity and urgency in the first quarter. I have met 90-plus clients to date in 26, made critical senior hires, and launch initiatives all focused on strengthening our market position and demonstrating our commitment to relentless execution. As I have met with clients over the last quarter, I have been increasingly energized about the strength of our solutions and quality of our customer base. Their feedback has been instructive and insightful. What is evident is that our clients want to work with the light. And we believe we are really the only company that can truly service the needs of a diverse client base. On many occasions, the exact quote of our clients was that we want to see Alight successful. These interactions have reinforced my confidence in our client retention and ultimately cash generation capabilities. During the quarter, we made key hires across the organization, including the head of delivery transformation, head of specialty sales, head of account management, and head of marketing. along with making some critical additions deeper in the organization. Following the close of the quarter, we announced our new Chief Technology Officer, Naveen Bhaveja, who previously led technology at the Consumer Products Division of Disney. I cannot think of anyone better to help reimagine customer experience and translate technology leadership into meaningful business and customer outcomes. Additionally, last week, we announced the appointment of Dinesh Tulsiani as President of Employer Solutions. Dinesh previously served as Alight's chief strategy officer and played an integral role in company's strategic evolution. In his new position, he'll collaborate with other key leaders across the business to continue to advance Alight's strategies to deliver outcomes for clients at scale. We also launched multiple initiatives across the organization to maximize operational excellence and drive consumer-level client experience. Notably, we have expanded from our previous strategic coverage of the top 100 accounts to now include our top 400 accounts that represent just over 90% of our ARR in aggregate. Our increased coverage gives us a greater handle on serving those clients even better, building stronger partnerships, improving retention, and building a deeper pipeline. We provide market-leading solutions derived from our full-service integrated approach to managing health, wealth, and leaves on behalf of our clients. Within our health solution, we provide comprehensive health benefits, including spending accounts as well as point solutions like healthcare navigation services. Our primary focus is on ensuring a seamless consumer-level experience, whether the consumer is simply checking their benefits eligibility or scheduling a physical or contending with a life-changing diagnosis. We also integrate 50-plus partners across the ecosystem, which positions the light at the critical nerve center of the benefits ecosystem. Wealth comprises a portfolio of solutions for financial planning, including defined contribution plans, retirement savings, and pension plans to enable employees access to a pathway for financial preparation. We administer pension both for corporations as well as various carriers who take on pension risks from corporations. Leaves business handles absences due to short or long-term disability, military leave, or family and medical leaves, which are not always straightforward or easy to navigate. Our LeadPro and Absence Connect platform help our clients and their employees develop appropriate solutions to meet the needs of both the individual and the organization when an extended absence is necessary. As we move through 2026, we are focused on leveraging our scale, market recognition, and financial strength to capitalize on attractive industry dynamics and grow our leadership role. Benefits programs are a fundamental, non-discretionary offering for most organizations. creating a large addressable market for our capabilities. Our ability to provide effective outsource benefits administration is an attractive alternative to employers who often lack the in-house expertise to manage the demands of compliance, delivery, and technology. Additionally, because benefits programs are fundamental and non-discretionary, our business tends to be more resilient through economic cycles. We believe our expertise across the benefits administration landscape, coupled with our scale, experience from a diverse client base, and disciplined execution creates a competitive advantage for us to win customers and establish long-term relationships with predictable revenue. We remain energized and committed to expanding our market-leading position and believe that the market opportunity in front of us is substantial. A life's opportunity in the marketplace is unique. we have established a leadership position as the only company to effectively service our customer base, ranging from large Fortune 500 companies to smaller, more main street operations, as well as organizations in the public sector. These companies and organizations are all unique in their own way and require benefits offerings that match their structures, legacy, and priorities. We have more than 30 million participants on our platform, including corporate executives, field operators, young new employees to retirees, and our products and solutions are designed to deliver the reliability and personalization these employees deserve. We understand the challenges inherent in navigating the benefits ecosystem, and we are well positioned not only to provide solutions, but to manage complexity and drive adoption. In addition to human expertise, we are leveraging enterprise AI adoption to capture efficiencies and further improve service excellence and user experience. To that point, we have all heard a lot about AI and its potential impact on a variety of industries. At Alight, we are uniquely positioned to deploy AI that is personalized, predictive, assistive, and grounded in real-world data by drawing on information from our large user base, participant interactions, and decades of domain expertise. We view AI not as a standalone solution, but as a force multiplier across our scale platform. By strategically implementing AI, we can turn data into guidance, turn guidance into action, and action into better outcomes in the moments that define health, wealth, and lead decisions. It is important to understand that we deal with situations of varying complexity that include unions, grandfathered plans, or multiple enrollment dates. We are also embedded in our clients' workflow as the core system of record for their benefits, and accountability is essential since regulatory compliance and outcomes both matter in our space. Health, wealth, and leaves all have a significant regulatory component. That accountability needs clear definition and ownership that cannot be made by an AI agent alone. AI isn't a replacement for what we do. Rather, it's a mechanism to unite the data, insights, and human expertise our clients depend on. A meaningful portion of our participants are navigating decisions related to managing a life-changing development, and those decisions cannot be made with the support of AI alone. Some of these are happy life events, and some require the empathy and guidance of the human touch. I expect to share more with you about our AI journey and its impact in coming quarters. As I mentioned on our last call, we are driving the business forward with our commitment to three clear operating principles. Deliver service and operational excellence, innovate products that create value and actionable insights, build relationships that result in enduring trusted partnerships. These operating principles are the compass as we continue to pioneer this space. We are the only company of our size and scale with a singular focus on benefits administration, providing a full range of health, wealth, and leave solutions, and we believe we have a substantial advantage in the industry where most of our competitors take a more singular approach, providing health or wealth or leave solution or benefits administration is a small non-core part of their business. Our focus on benefits as a whole allows us to provide deeper engagement, effective solutioning, and targeted investments. I'm confident that our team's commitment to these guiding principles and our leading position in the marketplace will drive favorable results for our clients and for Alight. And we're already seeing notable progress to enhance execution. With that, I'll turn the call over to Greg to go over the details of our first quarter 2026 financial performance.

Thanks, Rohit, and good afternoon, everyone. I'll now walk you through our first quarter 2026 results. Echoing Rohit's comments a moment ago, we delivered stronger than expected first quarter revenue, adjusted EBITDA, and free cash flow. Revenue for the first quarter was $534 million, a decrease of approximately 3%. We had anticipated a revenue decline in the high single digits for the quarter, and we were pleased to achieve a more favorable result. As you know, we think about our revenue mix in two distinct categories. revenue from recurring renewable business and non-recurring project-based business. In the first quarter, we recorded recurring revenue of $498 million, which was a decrease of 4% compared with the first quarter of last year, reflecting higher partner network revenue in the quarter that was originally expected later in the year. Project revenue for the quarter was $36 million, up 29% compared with the first quarter last year, exceeding expectations. Adjusted gross profit in the first quarter was $189 million, down $11 million from the prior year period, reflecting an adjusted gross profit margin decline of 110 basis points. First quarter 2026 adjusted EBITDA was $104 million, or adjusted EBITDA margin of nearly 20%, as compared to $118 million, or adjusted EBITDA margin of nearly 22% in the prior year period. The first quarter adjusted EBITDA decrease was less than anticipated due to flow through from the better than expected revenue performance and timing of expenses. Adjusted net income in the first quarter was $35 million with adjusted EPS of six cents compared to $52 million of adjusted net income and adjusted EPS of 10 cents in the first quarter of 2025. Looking forward with our visibility today, We expect second quarter 2026 revenue in the range of 490 to 505, adjusted EBITDA between 80 and $90 million, and free cash flow ranging from 35 to $45 million. Our guidance reflects the continued impact of prior commercial execution, which is expected to work its way through our P&L over the coming quarters. Turning to capital and liquidity, we closed the quarter with strong liquidity of more than $500 million following our 1Q26 TRA payment. At the end of 1Q2026, we maintained significant financial flexibility, including $178 million in cash and equivalents, $330 million of availability on a revolving credit facility, and free cash flow of $53 million. With cash flow growth in Q1, we have continued to strengthen our liquidity, providing us flexibility to pursue our capital allocation priorities, which include investing in the long-term growth of the business, deleveraging, and opportunistic share repurchases. With that, I'll turn the call back to Rohit.