Q2 2025 Alight Inc Earnings Call
Jeremy Heaton: 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 most recent Form 10-K and Form 10-Q, as such factors may be updated from time to time in the company's periodic filings. The company does not undertake any obligation to update forward-looking statements. Also, during this conference call, the company will be presenting certain non-GAAP financial measures. Reconciliations of the company's historical non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's earnings press release.
Performance.
Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.
Factors are discussed in more detail in the company's filings with the SEC, including the company's most recent Form 10-K and Form 10-Q as such factors may be updated from time to time in the company's periodic filings.
The company does not undertake any obligation to update forward looking statements.
Also during this conference call the company will be presenting certain non-GAAP financial measures.
Conciliation of the Companys historical non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's earnings press release.
Jeremy Heaton: All year-over-year financial comparisons made on today's call are on a pro forma basis, giving effect to the payroll and professional services transaction completed in July of 2024, and are consistent with the presentation we have published on our Investor Relations website. On the call from management today are Dave Guilmette, CEO, and Jeremy Heaton, CFO. After the prepared remarks, we will open the call up for questions. I will now hand the call over to Dave.
All year over year financial comparisons made on today's call are on a pro forma basis, giving effect to the payroll and professional services transaction completed in July of 2024 and are consistent with the presentation, we published on our Investor Relations website.
On the call from management today are Dave <unk>, CEO and Jeremy Hayden CFO.
After the prepared remarks, we will open the call up for questions I will now hand, the call over to Dave.
Dave Guilmette: Thanks, Jeremy, and good morning, everyone. During the second quarter, we continued to advance our leadership position as a technology-enabled employee benefits services company. We delivered solid results in what is a transitional year for Alight. Revenue for the quarter was $528 million, and adjusted EBITDA was $127 million, representing an 80 basis point margin increase over the prior year. Free cash flow for the first half was up over 30%, and taken together, these results position us to deliver strong profitability and robust cash flow over the long term. New deals are taking longer to close through the first half, and in response, we are taking actions to improve our commercial execution. We have updated our revenue outlook for 2025 and reaffirmed the rest of our guidance, which we will discuss in more detail during today's call.
Thanks, Jeremy and good morning, everyone.
During the second quarter, we continued to advance our leadership position as a technology enabled employee benefit services company.
We delivered solid results in what is a transitional year for life.
Revenue for the quarter was $528 million and adjusted EBITDA was $127 million, representing an 80 basis point margin increase over the prior year.
Free cash flow for the first half was up over 30% and taken together these results position us to deliver strong profitability and robust cash flow over the long term.
New deals are taking longer to close through the first half and in response, we are taking actions to improve our commercial execution.
We have updated our revenue outlook for 2025, and reaffirm the rest of our guidance, which we'll discuss in more detail during today's call.
Dave Guilmette: Importantly, we are making strategic progress to accelerate our client management and delivery capabilities through AI, automation, and partnerships. Our initiatives are designed to drive a better ROI for our clients and, in turn, enhance our retention and future growth. Let me cover some of our key highlights from this past quarter. First, we are using natural language, interactive voice response to create a large automation shift, resulting in more accurate and timely responses to participant questions. With our enhancements to the Alight Worklife platform, we have seen a 17% reduction in call volumes during the first half of 2025 versus the prior year. Second, on the technology front, we made significant advancements this quarter and are using AI not only for efficiency but to redefine the user experience for clients, participants, and our colleagues.
Importantly, we are making strategic progress to accelerate our client management and delivery capabilities through AI automation and partnerships.
Our initiatives are designed to drive a better ROI for our clients and in turn enhance our retention and future growth now.
Now let me cover some of our key highlights from this past quarter.
First we are using natural language interactive voice response to create a large automation shift, resulting in more accurate and timely responses to participant questions.
And with our enhancements to the light work life platform, we've seen a 17% reduction in call volumes during the first half of 2025% versus the prior year.
On the technology front, we made significant advancements this quarter and are using AI, not only proficiency, but to redefine the user experience for clients participants and our colleagues within.
Dave Guilmette: Within Alight, we are developing an AI-first culture, which will help us streamline our processes and provide a better colleague experience across all areas of the company. We are intensifying this work through powerful collaborations with Microsoft and IBM to help us scale our AI capabilities and unlock the full value of our data. You can expect to hear more details in coming quarters as we co-innovate to deliver pilots that allow us to scale our solutions faster. Third, we continue to pursue partnerships that propel service excellence and value to our clients and their employees. I am proud to share, as announced in this morning's earnings release, we are partnering with Goldman Sachs Asset Management on an expansion of our wealth offerings.
Within light we are developing an AI first culture, which will help us streamline our processes and provide a better colleague experience across all areas of the company.
We're intensifying this worked through powerful collaborations with Microsoft and IBM to help us scale, our AI capabilities and unlock the full value of our data.
You can expect to hear more details in coming quarters, as we co innovate to deliver pilots that allow us to scale our solutions faster.
Third we continue to pursue partnerships that propel service excellence and value to our clients and their employees I'm proud to share as announced in this mornings earnings release, we are partnering with Goldman Sachs asset management on an expansion of our wealth offerings.
Dave Guilmette: Goldman Sachs Asset Management will bring its scalable technology and broad retirement experience to support our clients as part of our Alight Financial Advisor Solution and our recently launched individual IRA product. We view this as a significant revenue growth opportunity over the next few years, and it is just one example of the type of differentiated revenue streams we are pursuing that will contribute to our long-term growth. These initiatives are positioned as well to retain clients. As a result, our renewals are tracking in line to better than we saw in 2024. Notable renewals for the quarter include Target, Johnson & Johnson, Hyatt, the State of Georgia, Best Buy, Highmark Health, and John Hancock. These wins further validate the trust our clients place in Alight to deliver better outcomes.
Goldman Sachs asset management will bring its scalable technology and broad retirement experience to support our clients as part of our life financial advisor solution and our recently launched individual IRA product.
We view this as a significant revenue growth opportunity over the next few years and is just one example of the type of differentiated revenue streams. We are pursuing that will contribute to our long term growth.
These initiatives are positioning us well to retain clients and as a result of our renewals are tracking in line to better than we saw in 2024.
Notable renewals for the quarter include target Johnson and Johnson Hyatt.
The state of Georgia, Bestbuy, Highmark health and John Hancock. These.
These wins further validate the trust our clients place in light to deliver better outcomes more importantly, combined with efforts from the renew everyday program. We are seeing a number of these renewals, including target lead to an expansion of services and growing our share of wallet with top clients.
Dave Guilmette: More importantly, combined with efforts from the Renew Every Day program, we are seeing a number of these renewals, including Target, lead to an expansion of services and growing our share of wallet with top clients. We are nailing the basics across delivery. Our technology and AI strategy are positioning us to unlock the full potential of our platform, and our renewals are on track. We recognize there is more work to be done. Last quarter, we talked about the market environment we are operating in, and I want to give you an update on the elements that drive our revenue. The pace of ARR bookings was not at the level we expected coming into the quarter for two primary reasons. First, buying expansion opportunities are taking longer to close in the current environment. Second, our commercial execution to get deals across the line has not been sufficient.
No.
We're nailing the basics across delivery.
Our technology and AI strategy are positioning us to unlock the full potential of our platform and our renewals are on track.
And we recognize there is more work to be done.
Last quarter, we talked about the market environment, we're operating in and I wanted to give you an update on the elements that drive our revenue.
The pace of our bookings was not at the level, we expected coming into the quarter for two primary reasons.
First by an.
<unk> opportunities are taking longer to close in the current environment.
And second our commercial execution to get deals across the line has not been sufficient overall, our solution competitiveness and positioning remains strong, but the timing of deals impacts eventual start dates and in this case, our expected second half 2025 revenue.
Dave Guilmette: Overall, our solution competitiveness and positioning remain strong, but the timing of deals impacts eventual start dates, and in this case, our expected second half 2025 revenue. To accelerate our commercial execution, we are building more domain expertise with specialty sales experience to balance with our enterprise sales team. We have recently made changes within our commercial organization and have a search underway for a new Chief Commercial Officer. The success of the commercial team is a top priority of mine, and I am pleased with the quality of talent who have expressed interest in Alight and the opportunity to advance our commercial capabilities. Our ARR pipeline remains strong, particularly for deals in the later stages. Opportunities where we are a finalist are up 35% versus this time last year, which should increase our conversion rates in the second half sales cycle.
To accelerate our commercial execution, we are building more domain expertise with specialty sales experience to balance with our enterprise sales team.
We have recently made changes within our commercial organization and have a search underway for a new chief commercial officer.
The success of the commercial team is a top priority of mine and I am pleased with the quality of talent, who have expressed interest in our life and the opportunity to advance our commercial capabilities.
Our pipeline remains strong, particularly for deals in later stages opportunities, where we are fine lists are up 35% versus this time last year, which should increase our conversion rates in the second half sales cycle.
Dave Guilmette: For project revenue, we have not yet seen an uptick in our pipeline. Clients are still assessing their go-forward plan design strategies, while M&A and regulatory work remains at low levels. Given this backdrop, we are updating our expectations for second half revenue, which Jeremy will cover in more detail. As we double down on employee benefits services, we continue to build out a management team with internal and external talent who can extend our competitive advantages. During the quarter, Alight welcomed David Essery as our Chief Strategy Officer and Donna Dorsey as our Chief Human Resources Officer, two dynamic leaders who bring deep industry and functional expertise, respectively, and who have proven capabilities in progressing strategy. Let me close by saying we have the set of solutions we need. Our operational improvements are well on track.
For project revenue, we have not yet seen an uptick in our pipeline volumes are still assessing their go forward plan design strategies, while M&A and regulatory work remains at low levels.
So given this backdrop, we are updating our expectations for second half revenue, which Jeremy will cover in more detail.
As we double down on employee benefit services, we continue to build out a management team with internal and external talent, who can extend our competitive advantages.
During the quarter a light welcome David <unk>, as our Chief strategy Officer, and Donna Dorsey as our Chief Human Resources Officer, two dynamic leaders, who bring deep industry and functional expertise, respectively, and who have proven capabilities and progressing strategy.
Let me close by saying we have the set of solutions, we need our operational improvements are well on track.
Dave Guilmette: We are making significant progress in accelerating our strategy through AI and strategic partnerships, and we are laser-focused on improving our commercial execution and top-line growth. With that, let me turn it over to Jeremy.
We are making significant progress in accelerating our strategy through AI and strategic partnerships and we are laser focused on improving our commercial execution and top line growth with that let me turn it over to Jeremy.
Thanks, Dave and good morning.
Jeremy Heaton: Thanks, Dave, and good morning. Second quarter results reflect our strategic steps toward improving profitability and cash flow. Revenue was $528 million, with recurring revenue comprising over 93% of total revenue in the quarter. Recurring revenue was $492 million for the quarter and reflects a slight impact from overall participant counts, which were flat versus our expectation of moderate growth. Non-recurring project revenues were down $9 million, or 20%. As a reminder, we entered the year cautious on project revenue, and this remains the case in the current environment. Adjusted Gross Profit was $205 million. Similar to prior quarters, this is impacted by costs to support the divested business, which are reimbursed through the TSA and other income. Normalized for this, Adjusted Gross Profit would be $8 million higher.
Quarter results reflect our strategic steps towards improving profitability and cash flow.
Revenue was 528 million with recurring revenue comprising over 93% of total revenue in the quarter.
Recurring revenue was $492 million for the quarter and reflects a slight impact from overall participant counts, which were flat versus our expectation of moderate growth.
Nonrecurring project revenues were down $9 million or 20%.
As a reminder, we entered the year cautious on project revenue and this remains the case in the current environment.
Adjusted gross profit was $205 million.
Similar to prior quarters. This was impacted by cost to support the divested business, which are reimbursed through the TSA and other income.
Normalized for this adjusted gross profit would be $8 million higher.
Adjusted EBITDA was $127 million for the quarter and adjusted EBITDA margin expanded 80 basis points as our prior transformational initiatives are delivering favorable results as expected.
Jeremy Heaton: Adjusted EBITDA was $127 million for the quarter, and Adjusted EBITDA margin expanded 80 basis points as our prior transformational initiatives are delivering favorable results as expected. Free cash flow for the first half was $102 million, up 31% from the prior year, and on track towards our annual target of $250 million to $285 million. While we continue to have strong confidence in the prospects of our Health Solutions Reporting Unit, the current market valuation of Alight, as compared to the value when going public, combined with the current macro and industry conditions, requires us to take a non-cash goodwill impairment charge of $983 million. This value is consistent with the long-term forecast as communicated at our 2025 Investor Day. Finally, we returned $42 million to shareholders this quarter via our quarterly dividend and through the repurchase of $20 million worth of shares.
Free cash flow for the first half was $102 million up 31% from the prior year and on track towards our annual target of $250 million to $285 million.
While we continue to have strong confidence in the prospects of our health solutions reporting unit. The current market valuation of our light as compared to the value on going public.
Bind with the current macro and industry conditions requires us to take a noncash goodwill impairment charge of $983 million.
This value is consistent with the long term forecast as communicated at our 2025 Investor day.
Finally, we returned $42 million to shareholders this quarter via our quarterly dividend and through the repurchase of $20 million worth of shares.
Jeremy Heaton: We ended June with $241 million remaining on our share buyback authorization. Turning to the balance sheet, our quarter-end cash and cash equivalents balance was $227 million, and total debt was $2 billion. Our net leverage ratio remained at 3.1 times, and we expect this to normalize below three times as we build cash through seasonality and as profitability ramps through the year. We continue to actively manage our debt, which is 70% fixed through 2025 and 40% through 2026. During the quarter, we extended our corporate revolver and decreased pricing in line with our term loan. Now let me turn to our outlook. Dave mentioned a number of important clients who renewed long-term contracts with us, including expansions. The momentum during this renewal cycle remains strong.
We ended June with $241 million remaining on our share buyback authorization.
Turning to the balance sheet, our quarter end cash and cash equivalents balance was 227 million and total debt was $2 billion.
Our net leverage ratio remained at three one times and we expect this to normalize below three times as we build cash through seasonality and as profitability ramps through the year.
We continue to actively manage our debt, which is 70% fixed through 2025 and 40% through 2026.
During the quarter, we extended our corporate revolver and decreased pricing in line with our term loan.
Now, let me turn to our outlook Dave.
Dave mentioned, a number of important clients, who renewed long term contracts with us including expansions the momentum during this renewal cycle remains strong.
Jeremy Heaton: With what we see today, the 2025 renewal cycle is in line with our original guidance, and we continue to expect an improved retention rate in 2026. There are, however, factors that have made us more cautious in the second half. Our initial ARR bookings guidance was for double-digit growth, and today we are expecting bookings that are closer to flat or slightly down year over year. This is not where we expect it to be, and our in-year revenue resulting from first-half bookings will be lower in the second half. Our pipeline remains strong, and we expect a higher conversion rate as we finish 2025 based on the number of late-stage deals in process, as well as changes we have already made within the team.
With what we see today the 2025 renewal cycle is in line with our original guidance and we continue to expect an improved retention rate in 2026.
There are however factors that have made us more cautious in the second half.
Our initial <unk> bookings guidance was for double digit growth and today, we're expecting bookings that are closer to flat or slightly down year over year.
This is not where we expect it to be and our in year revenue, resulting from first half bookings will be lower in the second half.
Our pipeline remains strong and we expect a higher conversion rate as we finished 2025 based on the number of late stage deals in process as well as changes we have already made within the team.
Jeremy Heaton: Moving to project revenue, June and July are typically when we see the project pipeline build and have more transparency into our enrollment work for the remainder of the year. At this point, we are not seeing the second-half pipeline build to levels that would drive an inflection in project revenue. Clients continue to assess how to move forward with their people strategies as they navigate the current environment, while M&A and regulatory changes remain low. We expect third-quarter project revenue in line with the second quarter rate, which was down 20%. Finally, we have not seen growth in participant counts and expect volumes to remain flat this year. We now expect total revenue to be lower by roughly $45 million at the midpoint.
Moving to project revenue June and July are typically when we see the project pipeline build and have more transparency into our enrollment work for the remainder of the year.
At this point, we are not seeing the second half pipeline build to levels that would drive an inflection in project revenue.
Clients continue to assess how to move forward with their people strategies as they navigate the current environment, while M&A and regulatory changes remained low.
And so we expect third quarter project revenue in line with the second quarter rate, which was down 20%.
Finally, we have not seen growth in participant counts and expect volumes to remain flat this year.
We now expect total revenue to be lower by roughly $45 million at the midpoint.
Jeremy Heaton: In the categories of our growth model, which can be found on slide five of our presentation, of the $45 million, the timing of new wins is $35 million, volumes is $10 million, and retention is unchanged. We expect sequential improvement in growth for each quarter in the second half. As it relates to other key metrics, we are reaffirming the remainder of our 2025 outlook, which reflects the initiatives we have already completed and operational levers that are independent of top-line growth. Our expectations for adjusted EBITDA are $620 to $645 million, adjusted EPS of $0.58 to $0.64, and free cash flow of $250 to $285 million. In closing, we are intensely focused on execution and improving our top-line performance while continuing to drive greater margin expansion and cash flow. This concludes our prepared remarks, and we will now move into the question and answer session.
In the categories of our growth model, which can be found on slide five of our presentation.
Of the $45 million, the timing of new wins is $35 million.
Volumes of $10 million and retention is unchanged.
We expect sequential improvement in growth for each quarter in the second half.
As it relates to other key metrics, we are reaffirming the remainder of our 2025 outlook, which reflects the initiatives. We have already completed and operational levers that are independent of topline growth.
Our expectations for adjusted EBITDA, our $620 million to $645 million.
Adjusted EPS of <unk> 58 to 64.
And free cash flow of $250 million to $285 million.
In closing, we are intensely focused on execution and improving our top line performance, while continuing to drive greater margin expansion and cash flow.
This concludes our prepared remarks, and we will now move into the question and answer session.
Jeremy Heaton: Operator, would you please instruct participants on how to ask questions?
Operator would you please instruct participants on how to ask questions.
Thank you, Sir we will now be conducting a question and answer session.
Operator: Thank you, sir. We will now be conducting the question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate that a line is in the question queue. You may press star and then two to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We further ask that you limit yourself to two questions. You are then welcome to rejoin the question queue. We will pause a moment to allow the question queue to board. Our first question comes from Kyle Peterson of Needham & Company. Please go ahead.
It is not half a question. Please press star and then one on each telephone keypad.
A confirmation tone will indicate that Youre line is in the question queue.
You May press Star and then two to leave the question queue.
For participants, making use of speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
We ask that you limit yourself to two questions.
Welcome to rejoin the question queue.
People put amendments to allow the question queue to build.
Our first question comes from Kyle Peterson of Needham <unk> Company. Please go ahead.
Hey, good morning, guys. Thanks for taking the questions.
Analyst: Hey, good morning, guys. Thanks for taking the questions. I wanted to start off on the sales cycle. It does sound like things have gotten a little longer, and I understand that is the reason for the drift down in revenue for this year. I wanted to ask a little bit about how those client conversations are going. Do you guys remain confident that you are going to be able to still hit on your targets specifically for next year? Is it just that maybe these deals take an extra month or two here or there, and that limits the in-year revenue, and next year should be fine? Or is there potential for a longer-term, more prolonged impact that we should be mindful of?
Wanted to start off on the <unk>.
Sales cycle. It does sound like things have gotten a little longer and understand that the that's the reason for the drift down in revenue for this year.
Wanted to ask a little bit about how those client conversations are going do you guys remain confident that.
You guys are going to be able to.
Still had on your targets for next year is it just that maybe these deals take an extra month or two here or there and that limits senior revenue and next year should be fine or is there potential for like a longer term more prolonged impact that we should be mindful of.
Hey, Kyle it's Dave. Thank you for for the question and for joining US. This morning, Let me, let me take a stab at that so.
Dave Guilmette: Kyle, it is Dave. Thank you for the question and for joining us this morning. Let me take a stab at that. I think it is important that we just break down where we think the growth opportunities are going to be. As I have said in repeated meetings, we have a lot of opportunity for upsell and cross-sell with our existing client base. That process requires some demand generation as we are talking about problems that need to be solved differently and the solutions that we have that can bring to bear on those problems. That process and those discussions have been protracted. It is just taking longer to reach those decisions. We feel good about the opportunities that sit in the pipeline for that. In fact, in my opening remarks, I said that we are up 35% in deals that are in the finalist stages.
I think it's important that we we just break down kind of where we think the growth opportunities are going to be.
And as I've said and repeated meetings, we have a lot of opportunity for up sell and cross sell with our existing client base.
That process requires some demand generation as we're talking about problems that need to be solved differently and the solutions that we have that can bring bring to bear on those problems and that process and those discussions have been protracted is just taking longer to reach those decisions. So we feel good about the opportunities that sit in the pipeline for that.
In fact in my opening remarks said that were up 35% and deals that are in the final stages. So there is some real timing.
Dave Guilmette: There is some real timing headwind that we have experienced there through the first half of the year. We also, in the new business, new logo pursuit areas, have, in my view, finished second too often, and we have to improve upon our execution there. There are a number of things that we have done to strengthen that. I feel good about those changes that have been made as well, and also feel good about the pipeline related to that and the finalist stages that we are in. Overall, we have made adjustments so that we can be better at commercial execution, and we are going to continue to pursue the opportunities with our existing clients to bring those to close the second half of the year. To your question around the longer-term view, we have got to execute in the second half.
Headwind that we've experienced there through the first half of the year.
We also in the in the new business new logo pursuit areas.
Have.
And my view finished second too often and we have to improve upon our execution there and there are a number of things that we've done to strengthen that so feel good about those changes that have been made as well and also feel good about the pipeline related to that in the final stages that we're in so overall, we've made adjustments so that we can be better and commercial execution.
And we're going to continue to pursue the opportunities with our existing clients to bring those to close the second half of the year to your question around the longer term view, we've got to execute in the second half we execute in the second half we're going to feel good about 'twenty six and feel good about the mid range.
Dave Guilmette: We execute in the second half, we are going to feel good about 2026 and feel good about the mid-range.
Great. Thank you very much and then just a follow up I wanted to ask about the Goldman Sachs partnership it.
Analyst: Great. Thank you very much. Then just to follow up, I wanted to ask about the Goldman Sachs partnership. It seems like a really good opportunity for you guys. I understand that is probably more of an out-year contribution, but maybe a little more high level, how do you guys see that evolving? I guess do you see direct revenue synergies between that, or is this something that you guys feel like makes you more competitive and makes deals easier to close or gives you more pricing power? I just wanted to see the benefits that you guys see from that partnership over the next two, three, four years.
It seems like a really good opportunity for you guys.
Understand thats, probably more of a out year contribution, but maybe a little more high level like how do you guys see that evolving and I guess do you see like direct revenue synergies between that or is this something that you guys feel like makes you more competitive and makes deals easier to close or it gives you more pricing power.
I just wanted to see like the benefits that you guys see from that partnership over the next two or three or four years.
Yes, Thanks, Carlos Dave I'll take a crack at that again, so we're super excited about the partnership with Goldman Sachs asset management.
Dave Guilmette: Yeah, thanks, Kyle. It's Dave. I will take a crack at that again. We are super excited about the partnership with Goldman Sachs Asset Management. We see that as generating significant revenue for us in the out years, as we mentioned in the opening remarks. It is one example of a number of partnerships that we are in the process of strengthening and deepening. We serve 35 million participants on our platform, and we have over 120 Alight partners right now that we interact with in different capacities, and more that are calling us every day to want to be a part of our system and our network. We see opportunity to bring more value to each of those partners and, in turn, be able to share in that value creation. I would say Goldman is one very prominent one. It should strengthen our positioning relative to our wealth solution.
That is generating significant revenue for us in the out years as we've mentioned in the in the opening remarks and as one example of a number of partnerships that we are in the process of strengthening and deepening.
We serve 35 million participants on our platform and we've got over 120 light partners right now that we interact with in different capacities and and more that are calling us every day to want to be a part of our system and our network and we see opportunity to bring more value to each of those partners and in turn be able to share in that value creation.
<unk>.
I would say Goldman is one very prominent one it should strengthen our positioning relative to our wealth solution. So I think it's going to help us in new business pursuits, and as importantly, it's going to help us to continue to deliver more value for our current wealth clients.
Dave Guilmette: I think it is going to help us in new business pursuits, and as importantly, it is going to help us to continue to deliver more value for our current wealth clients.
Great really appreciate the color and nice results guys.
Analyst: Great. Really appreciate the color and nice results, guys.
Thanks Scott.
Dave Guilmette: Thanks, Kyle.
The next question comes from Scott schoolhouse.
Operator: The next question comes from Scott Schoenhaus of KeyBanc Capital Markets. Please go ahead.
Keybanc capital markets. Please go ahead.
Thanks, Jim Thanks for taking my question and it's kind of a follow up from the first question here, but.
Analyst: Hey, team. Thanks for taking my question. It is kind of a follow-up from the first question here, but I guess if we could get more color on this $35 million impact push-out in revenue. Was it, you know, if you could give us color around it, was it several large clients that you were looking to close early this year and it is getting pushed out? Was it a collection of smaller or mid-sized clients? Just any more color you can give around the conversations, the types of deals, and then the conversations that you had with these potential clients.
I guess, if we could get more color on this $35 million impact pushout in revenue.
Is it.
If you could give us color around it was at several large clients that.
You were looking to close.
This year and that's getting pushed out with it with a collection of smaller and mid sized clients.
Just any more color you can give around the conversations the types of deals and then the conversations that you.
<unk> had with these.
These these potential clients.
Scott, It's Dave I'll take that one thank you for for the question.
Dave Guilmette: Scott, it's Dave. I will take that one. Thank you for the question. As you think about the opportunities that exist in the marketplace, those that we would sell in the year, so the first half of 2025 that would bear revenue in the second half, tend to be smaller. So, think about that as mid-market administration. Think about that as smaller-sized execution relative to leaves or navigation or retiree health solutions, things of that nature. If those decisions are getting delayed, it is going to push the start dates. In many cases, the push to the start date pushed us into 1/1/26 or the very, very end of Q4 of 2025. We are going to miss some of that early revenue that would have otherwise been picked up in the second half of the year.
As you think about the opportunities that exist in the marketplace. Those that we would sell in the year. So the first half of 2025 that would bear revenue in the second half tend to be smaller so think about that as mid market administration think about that is smaller sized.
Execution relative to leaves or navigation or retiree health solutions things of that nature and if those decisions are getting delayed it's going to push the start dates and in many cases the push to the start date pushed us into one $1 26, or the very very end of Q4 of $25. So we're going to Miss some of that early revenue.
That would have otherwise been picked up in the second half of the year and obviously if the deals didn't close in our favor then that's not revenue that's coming across so it was a combination of execution on some of the new business and new logos.
Dave Guilmette: Obviously, if the deals did not close in our favor, then that is not revenue that is coming across. It was a combination of execution on some of the new business and new logos and these deals getting protracted on the existing client relationships.
And these deals getting protracted on the existing client relationships.
That's helpful. Dave and then you mentioned you know.
Analyst: That's helpful, Dave. You mentioned, you know, sort of a change around the sales team, and you mentioned more domain expertise as a potential catalyst or a focus. Maybe talk about that and what you saw with these, you know, in this current last 90 days that made you more focused on a commercial team with more domain expertise. Thanks.
Sort of a change around the sales team and you mentioned more domain expertise as a potential catalyst or any of our focus can maybe talk about that and what you saw with.
These in this current last 90 days that made you more focused on our commercial team with more domain expertise. Thanks.
Sure Scott. Thank you for that question.
Dave Guilmette: Sure, Scott. Thank you for that question. I am in the market a lot. I am in front of our clients a lot. I am in front of our TPEs a lot. There is not a week that goes by that I am not in the market, and in many cases, in these pursuits directly with the sales team. My observation over the last 90 days or so is that some of these sales require real deep domain expertise to be able to bring to life our value proposition. We are in every one of these deals, and that is the feedback that we get from our TPEs. If something does not come our way, oftentimes it is on the margins. It is not like the core positioning of the sales pursuit or the execution.
I'm in the market a lot I'm in front of our clients a lot I'm in front of our TPS a lot there isn't a week that goes by that I'm not in the market and in many cases in these pursuits directly with the sales team and my observation over the last 90 days or so is that some of these sales require real deep domain expertise to be able to bring to life.
Our value proposition.
Like these things were in every one of these deals and that's the feedback that we get from our TPS, but if something doesn't come our way oftentimes. It's on the margins is not like the core positioning of the sales pursuit of the execution and that's where in my opinion, we need real strong deep domain expertise and particularly when you look at some of the specialty.
Dave Guilmette: That is where, in my opinion, we need real strong, deep domain expertise, in particular when you look at some of the specialty opportunities that we are talking about, navigation and leaves. Leaves is a complex space, and you need real expertise to be able to bring that to life. I like what we have done in terms of building out our capacity on the enterprise sales front. We have got plenty of capacity, plenty of feet on the street, and we have got lots of good opportunities that are coming through the top of the pipeline. We like our qualified pipeline. We have got to close more deals. To close more deals, we need that subject matter expertise at the table.
Opportunities that we're talking about navigation and leaves leaves us a complex space and you need real expertise to be able to bring that to life. So I like what we've done in terms of building out our capacity on the enterprise sales front, we've got plenty of capacity plenty of feet on the street and we've got lots of good opportunities that are coming through the top of the pipeline and we like our.
Our qualified pipeline, we got to close more deals and to close more deals we need that subject matter expertise of the table.
Thanks, Dave.
Analyst: Thanks, Dave.
The next question comes from Kevin Mcveigh of UBS. Please go ahead.
Operator: The next question comes from Kevin McVeigh of UBS. Please go ahead.
Great. Thanks so.
Analyst: Great, thanks. So, if I do the math right, you beat the first half of the year by about $10 million, and it looks like you caught the second half by $45. So, it is about $55 million in total. Is that right? Is the math right there?
If I do the math right you beat the first half of the year by about $10 million and it looks like you caught the second half by 45.
So it's about $55 million in total is that right like it is the math right there.
Bit less than that in terms of midpoint to midpoint is the math that we gave Kevin for the update is about $47 million I think is the change. So as we said really this is a dynamic largely from the in year revenue that would come from bookings in the first half of the year. So as you think.
Dave Guilmette: A bit less than that in terms of midpoint to midpoint is the math that we gave, Kevin, for the update is about $47 million, I think is the change. As we said, really this is a dynamic largely from the in-year revenue that would come from bookings in the first half of the year. As you think about the bigger portions of the change in revenue, about $35 million of that update is related to in-year revenue. Of that $35, I would say about $25 to $30 is from ARR bookings, and the remainder is from the project side. As we did update that midpoint on project, we had about down 6% for the year in the original guide, and I'd look at that today as closer to 9% or 10% down for the year.
The bigger portions of the the change in revenue about $35 million of that update is related to in year revenue of that 35, I would say about 25 to 30 is from our bookings and the remainder is from the project side as we did update that mid point on project, we had about down six.
<unk> percent for the year in the original guide and then look at that today is closer to nine or 10% down for the year and then there's a balance of again, we had a pretty cautious view already around participant counts in what we call volumes that we've brought down to flat. So that's about a 10 minute $10 million to $12 million update as well for the second half.
Dave Guilmette: There's a balance of, again, we had a pretty cautious view already around participant counts and what we've, call volumes that we've brought down to flat. That's about a $10 to $12 million update as well for the second half.
Got it and then you gave a pretty specific project number for Q3 can you just give us one for Q4 to try to.
Analyst: Got it. You gave a pretty specific project number for Q3. Can you just give us one for Q4 to try to manage the case?
Men manage the.
The case sure.
Dave Guilmette: Sure. It is likely still negative, but closer to flat, Kevin, and that is just built on the enrollment activity that, again, not seeing the inflection that we had hoped for, and we are looking at as we watch the pipeline build over the last couple of months. But we do not expect that it will be down at the levels that we would see in the first three quarters. Some of that is the comp, some of that is just the base activity that kind of rolls into the fourth quarter. So, again, I think it is probably closer to, you know, down single digits, closer to flat.
Got it.
It's likely still negative but closer to flat Kevin Gen. That's just built on the enrollment activity that again not seeing the inflection that we had hoped for and we're looking at as we watch the pipeline build over the last couple of months, but we don't expect that it will be down at the levels that we would see in the first three quarters. Some of that is the comp. Some of that is just the base activity that kind of rolls into.
The fourth quarter. So again, I think it's probably closer to <unk>.
Down single digits closer to flat.
Okay. Thank you.
Analyst: Okay. Thank you.
Thank you.
Dave Guilmette: Thank you.
The next question comes from Andrew pockets of J P. Morgan. Please go ahead.
Operator: The next question comes from Andrew Polkovitz of JPMorgan. Please go ahead.
Good morning, guys and thanks for all the color I wanted to start by asking a follow up on just the focus on the commercial commercial organization.
Analyst: Morning, guys, and thanks for all the color. I wanted to start by asking a follow-up on the focus on the commercial organization. You mentioned that you have capacity. Given those comments, how should we think about Salesforce hiring plans and what is embedded in the outlook for the second half and into 2026?
You mentioned that you have capacity so given those comments how should we think about sales force hiring plans and what's embedded in the outlook for the second half and into 2026.
Hi, its Dave Andrew Thank you for the question.
Dave Guilmette: It's Dave Guilmette. Andrew, thank you for the question. I would characterize the hiring plans as looking for that specialty expertise. We've already brought on a number of individuals in Q2 to help in that regard. Navigation sales leadership, for example, beefing up what we're doing on the leave side, beefing up what we're doing in terms of how we tell our AI story. We've got a really impactful one that we're proud of. So, we're making those changes as well by bringing in certain experts to really help bring that to life. So, all of that, I think, has happened already in addition to our looking to bring in a new Chief Commercial Officer. We feel really good about the talent that has identified themselves to want to come here.
I would I would characterize that.
Irene plans is looking for that specialty expertise, we've already brought on a number of individuals in the second quarter to help in that regard navigation sales leadership for example.
Beefing up what we're doing on the leaf side beefing up what we're doing in terms of.
How we tell our AI story, we've got a really.
<unk> for one that we're proud of.
So, making those those changes as well by bringing in certain experts to really help bring that to life. So all of that I think has happened already in addition to or looking to bring in a new chief commercial officer, we feel really good about the talent that has identified themselves to want to come here. So I'm confident we're going to have the right person right fit in short order and I think we're.
Dave Guilmette: So, I'm confident we're going to have the right person, the right fit in short order, and I think we're going to be fine as we look at the second half of the year going into 2026 from a sales execution capacity standpoint.
Be fine as we look at the second half of the year going into 'twenty six from a sales execution capacity standpoint.
Got it makes sense and then for my follow up I wanted to know if you could talk through and give some color kind of on the composition of these late stage deals in pipeline positivity, we're talking about I'm, just anything to call out as far as client size or even mix.
Analyst: Got it. Makes sense. For my follow-up, I wanted to know if you could talk through and give some color on the composition of these late-stage deals and pipeline positivity we are talking about. Just anything to call out as far as client size or even mix of new logos versus upsell. Thank you.
New logos versus Upsells. Thank you.
Yeah I appreciate the question so consider it to be off of a lot of existing client relationships right. So that's going to by definition just given the market that we are so so.
Dave Guilmette: Yeah, I appreciate the question. So, consider it to be off of a lot of existing client relationships, right? So, that is going to, by definition, just given the market that we are so substantially supporting these days, it is going to be Fortune 500 type companies. We are looking at a lot of lead deals that are quite sizable. Navigation support, retiree health solutions opportunities, Alight Financial Advisory. So, think about some of the work that we talked about that will be enhanced by Goldman Sachs in terms of our partnership. So, these are all extensions off of, in many cases, core man-admin relationships that have been around for years.
<unk> substantially supporting these days can be fortune 500 type companies.
And we're looking at a lot of lead deals that are quite sizable.
Navigation support retiree health solutions opportunities are like financial advisory So think about some of the work that we talked about that will be enhanced by Goldman Sachs in terms of our partnership. So these are all extensions off of in many cases core Ben admin relationships that have been around for years.
Okay.
Great. Thank you.
Analyst: Great. Thank you.
Youre welcome.
Dave Guilmette: You're welcome.
Ladies and gentlemen, we have reached the end of our question and answer session.
Operator: Ladies and gentlemen, we have reached the end of our question and answer session. I will now hand over to the CEO, David Guilmette, for closing remarks.
I'll now hand over to the sea is David Gill, Matt Okay.
Yes.
Thank you operator.
Dave Guilmette: Thank you, Operator. I'm excited by the ongoing work across our organization with our partners to leverage our deep domain expertise, unmatched data and insights, and relentless focus on service excellence so we can deliver consistently exceptional experiences that help our clients and their people thrive, and in the process reignite our leadership position in long-term growth. Thank you for joining us today.
I am excited by the ongoing work across the organization with our partners to leverage our deep domain expertise.
Match data and insights and relentless focus on service excellence. So that we can deliver consistently exceptional experiences that help our clients and there are people thrive and in the process reignite, our leadership position and long term growth. Thank.
Thank you for joining us today.
Thank you, Sir ladies and gentlemen that concludes today's event. Thank you for attending and you may now disconnect your lines.
Operator: Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your
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