Q3 2025 Alight Inc Earnings Call

At this time all parties are in listen only mode.

As a reminder, today's call is being recorded and a replay of the call will be available on the Investor Relations section of the company's website.

And now I would like to turn the call over to Jeremy Cowen head of Investor Relations at the light to introduce today's speakers. Please go ahead.

Good morning, and thank you for joining US earlier today the company issued a press release with its third quarter 2025 results a copy of the release can be found in the Investor Relations section of the company's web site at Investor data light Dot 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 Companys. 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.

The company does not undertake.

Any obligation to update forward looking statements, except as required by law.

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.

Financial comparisons related to prior year free cash flow 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 are 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.

Thank you Jeremy and good morning, everyone.

We've made significant progress during the quarter to strengthen our position as a technology enabled employee benefit services company.

We've accelerated our technology roadmap and delivery capabilities, while <unk> decline and participant experience with new solutions already in use by some of our largest clients.

Through our AI and automation investments and rapidly expanding partner collaborations we are bringing immediate benefit to clients and ensuring our competitive advantages for the long run.

We feel good about the substantial improvements we have made in our product line with more to come.

<unk> our service delivery is unmatched.

<unk> are impressed with our new AI centric services and delivery capabilities.

The next step is improving our commercial effectiveness, starting with a new leader with deep industry expertise.

Our emphasis includes the diversification of our revenue streams, including through our partner network, while continuing our operational progress.

With the current macro environment, the continuing an unprecedented rise of healthcare costs for our clients and the advancement of AI I'm more confident than ever that our initiatives coupled with our track record position us best to tackle these dynamics.

With that let's review our quarter.

For the third quarter revenue was $533 million compared to $555 million a year earlier and adjusted EBITDA was up 17% to $138 million.

Free cash flow year to date remains strong and is up 45% from the prior year to $151 million.

Jeremy will provide additional color on quarterly results in a few minutes.

As I mentioned, one way to accelerate our financial performance is by expanding our comprehensive partner ecosystem.

Our refreshed strategy in this area is making fast progress to meet the changing needs of clients and participants while sharing in the value creation with our partners.

Our relevance with 35 million participants is unmatched and potential partners are looking for ways to work with us to unlock their own value.

For example, <unk>.

Recently, we welcomed short health to be a light partner network complementing our long term partner hinge.

Participants now have access to an additional leading clinical grade resource for managing pain, and avoiding surgery as well as access to behavioral health and mental wellbeing platform.

Operator: Third quarter 2025 earnings conference call. At this time, all parties are in listen-only mode. As a reminder, today's call is being recorded, and a replay of the call will be available on the investor relations section of the company's website. I would like to turn the call over to Jeremy Cohen, Head of Investor Relations at Alight, to introduce today's speakers. Please go ahead.

Our Goldman Sachs asset management integration into a light work life.

Which we mentioned last quarter is well underway.

We've already signed our first client with several more active client conversations taking place.

And just last week, we introduced a new guaranteed income solution through Metlife.

This arrangement allows participants to purchase solutions that convert a portion of their savings into predictable monthly income as they prepare for retirement.

Jeremy Cohen: Good morning, and thank you for joining us. Earlier today, the company issued a press release with its third quarter 2025 results. A copy of the release can be found in 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 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 except as required by law.

Over a dozen proposals are outstanding from additional top tier partners and you should expect a regular cadence of announcements on this front.

At the same time, our investments in the most impactful technology and service capabilities are moving at an aggressive pace.

Within the call Center we.

We enhanced our automated voice response system.

This technology drives a better user experience and has contributed to a 13% drop in call volumes year over year.

Our Goldman Sachs Asset Management integration into a light work life, which we mentioned last quarter is well underway.

We've already signed our first client with several more active client conversations taking place.

Our new AI agent assist software is in pilot with nearly a dozen clients. This tool assesses calls in real time to provide customer care agents with next best actions to more effectively service participants.

And just last week, we introduced a new guaranteed income solution through MetLife.

Jeremy Cohen: 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. Financial comparisons related to prior year free cash flow 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 for 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.

This Arrangement allows participants to purchase solutions that convert a portion of their savings into predictable, monthly income as they prepare for retirement.

Finally in September we brought critical delivery and technology talent back in house, which allows us to better managed service quality and productivity.

Over a dozen proposals our outstanding from additional top tier partners and you should expect a regular Cadence of announcements on this front.

These actions along with previous improvements are strengthening our service quality or.

Our participant satisfaction scores increased to 90%, which is the highest level achieved since completing our technology transformation.

At the same time, our investments in the most impactful, technology and service capabilities are moving at an aggressive pace.

Within the call center.

We enhanced our automated voice response system.

Regarding product advancements in our AI roadmap continue to accelerate.

This technology drives a better user experience and has contributed to a 13% drop in call volume's year-over-year.

The embedded value in our Petabytes of data is unmatched, which means we can drive a far more accurate predictive and differentiated user experience than anyone in our market.

And assist software isn't pilot with nearly a dozen clients.

Dave Guilmette: Thank you, Jeremy, and good morning, everyone. We've made significant progress during the quarter to strengthen our position as a technology-enabled employee benefits services company. We've accelerated our technology roadmap and delivery capabilities, while reimagining the client and participant experience with new solutions already in use by some of our largest clients. Through our AI and automation investments, and rapidly expanding partner collaborations, we are bringing immediate benefit to clients and ensuring our competitive advantages for the long run. We feel good about the substantial improvements we have made in our product line, with more to come. Likewise, our service delivery is unmatched. Clients are impressed with our new AI-centric services and delivery capabilities. The next step is improving our commercial effectiveness, starting with a new leader with deep industry expertise. Our emphasis includes the diversification of our revenue streams, including through our partner network, while continuing our operational progress.

And our carefully curated mix of technology and services provides a trusted high tech human touch experience that is core to our success.

This tool assesses calls in real time to provide customer care agents with next best actions to more effectively service. Participants

I want to share a few highlights from the last three months.

finally in September, we brought critical delivery and Technology Talent back in-house which allows us to better manage service quality and productivity.

First we piloted a conversational AI agent solution with two of our largest clients to assist with annual enrollment this season.

These actions along with previous improvements, are strengthening our service quality.

Broadly available to all clients in 2026. This is a game changer to help participants feel more confident in their benefit selections, while requiring less human intervention.

Our participant satisfaction scores increase to 90%, which is the highest level achieved since completing our technology transformation.

Regarding product advancements in our AI roadmap. Continue to accelerate.

Next we've rolled out tsin AI enabled search summaries to more than 95% of our clients.

AI enabled searches are growing exponentially and we delivered over 300000 summaries in October alone.

The embedded value in our pabt of data is unmatched, which means we can drive a far more accurate predictive and differentiated user experience than anyone in our Market.

The breadth and depth of our platform will only get stronger as more users interface with this feature.

And finally, we announced our expanded collaboration with IBM, a decades long business partner.

And our carefully curated mix of technology and services provides a trusted high-tech human touch experience. That is core to Our Success.

I want to share a few highlights from the last 3 months.

To deploy Ibm's Watson ex orchestrate agenda framework across the light.

Dave Guilmette: With the current macro environment, the continuing and unprecedented rise of healthcare costs for our clients, and the advancement of AI, I'm more confident than ever that our initiatives, coupled with our track record, position us best to tackle these dynamics. With that, let's review our quarter. For the third quarter, revenue was $533 million compared to $555 million a year earlier, and adjusted EBITDA was up 17% to $138 million. Free cash flow, year to date, remains strong and is up 45% from the prior year to $151 million. Jeremy will provide additional color on quarterly results in a few minutes. As I mentioned, one way to accelerate our financial performance is by expanding our comprehensive partner ecosystem. Our refresh strategy in this area is making fast progress to meet the changing needs of clients and participants, while sharing in the value creation with our partners.

These advancements in our capabilities are critical to our renew everyday program agenda.

First we piloted, a conversational AI agent solution with 2 of our largest clients to assist with annual enrollment this season.

We have been successful at retaining top clients with a large majority of our largest clients going through the renewal process in the past two years.

Broadly available to all clients in 2026. This is a game changer to help participants feel more confident in their benefits selections while requiring less human intervention.

Since our last earnings call some of our noteworthy renewals include Campbell's Essilor luxottica.

Next, we've rolled out gen AI enabled search summaries to more than 95% of our clients.

Ally Bank Air, Canada and Metlife.

Our client management team is focused on proactively renewing and expanding relationships with our tremendous client base.

AI enable searches are growing exponentially and we delivered over 300,000 summaries in October alone.

The breadth and depth of our platform will only get stronger as more users interface with this feature.

Our renewal rate in the large market was up significantly in 'twenty four and we're pleased to maintain that same level in 2025.

And finally, we announced our expanded collaboration with IBM. A decades, long business partner.

And we're working hard on expanding renew every day to all of our clients strengthening the approach to supporting smaller clients and point solutions we.

To deploy IBM's. Watson X orchestrate, agentic framework, across the light.

These advancements in our capabilities are critical to our renew everyday program agenda.

We are making great progress with renew everyday program and expect continued improvement to our renewal levels over time.

I am very pleased to share that Steve Rush has joined as our new Chief Commercial officer, Steve's long history with a light along with his deep understanding of our clients' needs positioning to make a meaningful and quick impact Steve.

Dave Guilmette: Our relevance with 35 million participants is unmatched, and potential partners are looking for ways to work with us to unlock their own value. For example, recently, we welcomed Sword Health to the Alight partner network, complementing our long-term partner Hinge. Participants now have access to an additional leading clinical-grade resource for managing pain and avoiding surgery, as well as access to a behavioral health and mental well-being platform. Our Goldman Sachs asset management integration into Alight Worklife, which we mentioned last quarter, is well underway. We've already signed our first client, with several more active client conversations taking place. Just last week, we introduced a new guaranteed income solution through MetLife. This arrangement allows participants to purchase solutions that convert a portion of their savings into predictable monthly income as they prepare for retirement.

We have been successful at retaining top clients with a large majority of our largest clients going through the renewal process in the past 2 years.

Since our last earnings call, some of our noteworthy renewals include Campbell's aura luxottica.

Ally Bank, Air Canada and MetLife.

Steve is a highly respected leader in the benefits industry and he's excited to rejoin the team and business he already knows very well.

Our client management team is focused on proactively, renewing and expanding relationships with our tremendous client base.

As I step back of where we are today, our progress has been substantial and moving us forward to our future.

Our renewal rate in the large Market was up significantly in 24 and we're pleased to maintain that same level in 2025.

I am proud of how our team members have come together to advance our technology and operations and I want to thank them for their hard work and dedication.

And we're working hard on expanding renew every day, to all of our clients strengthening the approach to supporting smaller clients and point Solutions.

We have more scale scope and talent than any of our competitors today and the resulting opportunity in front of us is immense drive higher bookings retention and new streams of partnership revenue.

We are making great progress with the renew everyday program and expect continued improvements to our renewal levels over time.

The brush has joined as our new Chief commercial officer.

Operational results of our initiatives will be evident before they play through the financials and we are confident in our ability to deliver an unmatched benefits experience for clients that are embolden in new technology.

Steve's long history with the light along, with his deep, understanding of our clients needs physician him to make a meaningful and quick impact.

Dave Guilmette: Over a dozen proposals are outstanding from additional top-tier partners, and you should expect a regular cadence of announcements on this front. At the same time, our investments in the most impactful technology and service capabilities are moving at an aggressive pace. Within the call center, we enhanced our automated voice response system. This technology drives a better user experience and has contributed to a 13% drop in call volumes year over year. Our new AI Agent Assist software is in pilot with nearly a dozen clients. This tool assesses calls in real time to provide customer care agents with next best actions to more effectively service participants. Finally, in September, we brought critical delivery and technology talent back in-house, which allows us to better manage service quality and productivity. These actions, along with previous improvements, are strengthening our service quality.

Of that let me turn it over to Jeremy.

Steve is a highly respected leader in the benefits industry and he's excited to rejoin a team in business, he already knows very well.

Thanks, and good morning, we continue to make operational progress and competitively, we're well positioned for long term success.

As I step back on where we are today, our progress has been substantial in moving us. Forward to our future.

Validated by the third party evaluated and brokers in our space and echoed by the many clients who are renewed or expanded with us.

Our primary focus continues to be on adding value for our clients and there are people every day.

I'm proud of how our team members have come together to advance our technology and operations and I want to thank them for their hard work and dedication.

Moving into the quarter revenue was $533 million, which includes a 4 million one time revenue reduction from finalizing the commercial agreement with the divested <unk> business normalized for this total revenue would be $537 million.

We have more scale scope and talent than any of our competitors today. And the resulting opportunity in front of us is immense to drive higher, bookings, retention, and new streams of partnership Revenue.

Nonrecurring project revenues were down $7 million or 14% for the quarter.

Operational results of our initiatives will be evident before they play through the financials. And we are confident in our ability to deliver an unmatched benefits experience for clients that are emboldened in new technology.

Adjusted gross profit was $206 million up 3% from the prior year, reflecting 260 basis points of margin expansion.

And with that, let me turn it over to Jeremy.

Thanks and good morning.

Similar to prior quarters, our adjusted gross profit is impacted by cost to support the divested business, which are reimbursed through the TSA and other income normalized for this adjusted gross profit would have been higher by $7 million.

We continue to make operational progress and competitively we're well positioned for long-term success.

Dave Guilmette: Our participant satisfaction scores increased to 90%, which is the highest level achieved since completing our technology transformation. Regarding product, advancements in our AI roadmap continue to accelerate. The embedded value in our petabytes of data is unmatched, which means we can drive a far more accurate, predictive, and differentiated user experience than anyone in our market. Our carefully curated mix of technology and services provides a trusted high-tech, human-touch experience that is core to our success. I want to share a few highlights from the last three months. First, we've piloted a conversational AI agent solution with two of our largest clients to assist with annual enrollment this season. Broadly available to all clients in 2026, this is a game changer to help participants feel more confident in their benefit selections while requiring less human intervention.

Validated by the third party evaluators, and brokers in our space and echoed. By the many clients who have renewed or expanded with us.

Adjusted EBITDA was $138 million for the quarter up 17% and adjusted EBITDA margin expanded 460 basis points.

Our primary focus continues to be on adding value for our clients and their people every day.

Moving into the quarter.

Free cash flow for the first nine months was $151 million up 45% from the prior year period.

Given the business trends this year versus expectations, our profitability and cash flow results include a nonrecurring impact of lower variable and performance based costs.

Revenue was 533 million which includes a 4 million, 1-time Revenue, reduction from finalizing. The commercial agreement with the divested strata business normalized. For this total revenue would be 537 million.

Non-recurring project revenues were down 7 million or 14% for the quarter.

While we've made tremendous progress there is more work ahead to improve our topline results.

Longer term, we expect improved commercial results with an optimized go to market function along with key product enhancements.

Adjusted gross profit was 206 million up 3% from the prior year reflecting, 260 basis points of margin expansion.

We feel good about our renewal rates in the large market and expect the 2026 cycle to have over 30% fewer dollars up for renewal.

Similar to Prior quarters are adjusted. Gross. Profit is impacted by cost to support the divested business which are reimbursed through the TSA in other income normalize for this adjusted gross profit would have been Higher by 7 million.

We also have near term revenue opportunities through in your bookings partnerships and engagement services that our team is highly focused on to close out the year.

Dave Guilmette: Next, we've rolled out GenAI-Enabled Search Summaries to more than 95% of our clients. AI-enabled searches are growing exponentially, and we delivered over 300,000 summaries in October alone. The breadth and depth of our platform will only get stronger as more users interface with this feature. Finally, we announced our expanded collaboration with IBM, a decades-long business partner, to deploy IBM's Watsonx Orchestrate agentic framework across Alight. These advancements in our capabilities are critical to our Renew Every Day program agenda. We have been successful at retaining top clients, with a large majority of our largest clients going through the renewal process in the past two years. Since our last earnings call, some of our noteworthy renewals include Campbell's, EssilorLuxottica, Ally Bank, Air Canada, and MetLife. Our client management team is focused on proactively renewing and expanding relationships with our tremendous client base.

Adjusted Evita was 138 million for the quarter up, 17% and adjusted, even down, margin expanded, 460 basis points.

Our operational and technology initiatives continue to drive increased efficiency, while delivering a better experience for our clients and this has benefited our profitability and cash flow metrics.

Free cash flow for the first 9 months was 151 million up 45% from the prior year period.

Turning to the balance sheet, our quarter end cash and cash equivalents balance was $205 million and total debt was $2 billion.

Given the business trends this year versus expectations, our profitability and cash flow results include a non-recurring impact of lower variable and performance-based costs.

Our net leverage ratio improved sequentially to three times.

While we've made tremendous progress, there is more work ahead to improve our Topline results.

We continue to actively manage our debt, which is 70% fixed through 2025 and 40% through 2026.

Longer term. We expect improved commercial results with an optimized go to market function along with key product enhancements.

While having strong confidence in the long term with our market valuation change over the past quarter combined with current business trends, we recognized a noncash goodwill impairment charge of $1 3 billion.

We feel good about our renewal rates in the large market and expect the 2026 cycle to have over 30% fewer dollars up for renewal.

With respect to the tax receivable agreement or payment in the first quarter of 2026 is expected to be lower by $25 million compared to our previous estimate reflecting the completion of tax filings for 2024.

We also have near-term Revenue opportunities through in your bookings Partnerships and engagement services that our team is highly focused on to close out the year.

Our operational and Technology initiatives, continue to drive increased efficiency while delivering a better experience for our clients. And this has benefited our profitability and cash flow metrics.

We returned $47 million to shareholders this quarter via our quarterly dividend and through the repurchase of $25 million worth of shares.

Dave Guilmette: Our renewal rate in the large market was up significantly in 2024, and we're pleased to maintain that same level in 2025. We're working hard on expanding Renew Every Day to all of our clients, strengthening the approach to supporting smaller clients, and point solutions. We are making great progress with the Renew Every Day program and expect continued improvement to our renewal levels over time. I'm very pleased to share that Steve Rush has joined as our new Chief Commercial Officer. Steve's long history with Alight, along with his deep understanding of our clients' needs, position him to make a meaningful and quick impact. Steve is a highly respected leader in the benefits industry, and he's excited to rejoin a team and business he already knows very well.

Turning to the balance sheet, our quarter and cash and cash equivalents balance was 205 million and total debt was 2 billion.

Year to date, we've repurchased close to 14 million shares or approximately 3% of shares outstanding.

Our net leverage ratio improved sequentially to 3 times.

We ended September with $216 million remaining on our share buyback authorization.

We continue to actively manage our debt, which is 70%, fixed through 2025, and 40, through 2026.

Management and the board of Directors will continue to evaluate our capital allocation policy as it does on an ongoing basis.

With today's earnings report, we have updated our 2025 outlook and enter the quarter with $2 5 billion of revenue under contract.

While having strong confidence in the long term with our Market valuation change over the past quarter combined with current business Trends, we recognize the non-cash Goodwill impairment charge of 1.3 billion.

For the year, we expect revenue between $2 25, and $2 $2 8 billion adjusted EBITDA of $595 million to $620 million free.

With respect to the tax receivable agreement, our payment in the first quarter of 20126 is expected to be lower by 25 million compared to our previous estimate reflecting, the completion of tax filings for 2024.

Free cash flow of $225 million to $250 million in.

Dave Guilmette: As I step back on where we are today, our progress has been substantial in moving us forward to our future. I'm proud of how our team members have come together to advance our technology and operations, and I want to thank them for their hard work and dedication. We have more scale, scope, and talent than any of our competitors today, and the resulting opportunity in front of us is immense to drive higher bookings, retention, and new streams of partnership revenue. Operational results of our initiatives will be evident before they play through the financials, and we are confident in our ability to deliver an unmatched benefits experience for clients that are emboldened in new technology. With that, let me turn it over to Jeremy.

And EPS of <unk> 54 to 58.

We returned, 47 million to shareholders this quarter via our quarterly dividend and through the repurchase of 25 million worth of shares.

We are intensely focused on execution and improving our top line performance and remain confident in our position for the long term.

Year to date, we've repurchased close to 14 million shares, or approximately 3% of shares outstanding.

This concludes our prepared remarks, and we will now move into the question and answer session.

We ended September with $216 million remaining on our share buyback authorization.

Operator would you please instruct the participants on how to ask questions.

Management. And the board of directors will continue to evaluate our Capital allocation policy as it does on an ongoing basis.

Thank you Sam.

We will now be conducting a question and answer session.

I would like to ask a question. Please press Star then one on your telephone keypad.

With today's earnings report, we have updated our 2025 Outlook and enter the quarter with 2.25 billion of Revenue under contract.

A confirmation tone will indicate your line is in the question queue.

For the year we expect revenue between 2.25 and 2.28 billion.

You May press Star and then two if you would like to remove your question from the queue.

Adjusted IBA of 595 to 620 million.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Jeremy Heaton: Thanks and good morning. We continue to make operational progress, and competitively, we're well positioned for long-term success. Validated by the third-party evaluators and brokers in our space, and echoed by the many clients who have renewed or expanded with us. Our primary focus continues to be on adding value for our clients and their people every day. Moving into the quarter, revenue was $533 million, which includes a $4 million one-time revenue reduction from finalizing the commercial agreement with the divested Strata business. Normalized for this, total revenue would be $537 million. Non-recurring project revenues were down $7 million, or 14%, for the quarter. Adjusted gross profit was $206 million, up 3% from the prior year, reflecting 260 basis points of margin expansion. Similar to prior quarters, our adjusted gross profit is impacted by costs to support the divested business, which are reimbursed through the TSA and other income.

An EPS of 54 to 58 cents.

If you would like to ask a question. Please press star and then one no.

The first question we have comes from Kyle Peterson of Needham <unk> Company. Please go ahead.

We are intensely focused on execution and improving our Topline performance and remain confident in our position for the long term.

This concludes our prepared remarks and we will now move into the question and answer session.

Great.

Good morning, guys. Thanks for taking the question guys.

Operator, would you please instruct participants on how to ask questions?

No.

Yes.

Wanted to start on the update to the guide.

Thank you. So

we'll now be conducting a question.

Sure.

See if you guys could walk us through some of the moving pieces.

if you would like to ask a question, please press star, then 1 on your telephone keypad,

On the reduction here it looks.

A confirmation tone. Will indicate your line is in the question queue?

From the slides it looks like it's from kind of a combination of <unk>.

you may press star and then 2, if you would like to remove your question from the queue,

Volumes in.

New business wins, but I guess any clarity or contacts as to what you guys are seeing.

4, participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

When.

At least from the new business wins, obviously, you made some announcements during in the release today, but I guess like when should.

Again, if you would like to ask a question, please press star and then 1 now.

Jeremy Heaton: Normalized for this, adjusted gross profit would have been higher by $7 million. Adjusted EBITDA was $138 million for the quarter, up 17%, and adjusted EBITDA margin expanded 460 basis points. Free cash flow for the first nine months was $151 million, up 45% from the prior year period. Given the business trends this year versus expectations, our profitability and cash flow results include a non-recurring impact of lower variable and performance-based costs. While we've made tremendous progress, there is more work ahead to improve our top-line results. Longer term, we expect improved commercial results with an optimized go-to-market function, along with key product enhancements. We feel good about our renewal rates in the large market, and expect the 2026 cycle to have over 30% fewer dollars up for renewal.

Some of the fruit from those wins start to pay dividends.

The first question we have comes from Kyle Peterson of needam and Company, please go ahead.

Sure I'll start Kyle.

So yes, so still in the guide we reduced at the midpoint revenue down $40 million, It's really split between project and recurring project is the biggest with again a $20 million.

Great. Um, good morning, guys. Thanks for taking the questions. Um, yep. Uh, wanted to start on uh, the updates to the guide. Um,

See if you guys could walk us through some of the the moving pieces. Um

Update there on project and we just have not seen an inflection in pipeline and activity I think some continued cautiousness as we're going through the annual enrollment process right now so even on a low comp.

on the reduction here, it looks

uh, from the slides looks like it's from kind of a combination of

We had expectations to see more build in the pipeline coming into the fourth quarter and just not seeing that on the recurring side, it's a bit of volumes.

You see in the update in the deck that we've got.

And that is really we've seen modest declines so far year to date, but just the sentiment overall, just a cautiousness around that we're not going to certainly expected with the headlines see any upside there. So really just expecting flat to slightly down on the volume side.

Volumes and uh new business wins but I guess any Clarity or context as to what you guys are seeing. And um you know when uh at least from the the new business wins obviously made some announcements during in the release today, but I guess like when should uh some of the fruits from those wins start to pay dividends

Jeremy Heaton: We also have near-term revenue opportunities through in-year bookings, partnerships, and engagement services that our team is highly focused on to close out the year. Our operational and technology initiatives continue to drive increased efficiency while delivering a better experience for our clients, and this has benefited our profitability and cash flow metrics. Turning to the balance sheet, our quarter-end cash and cash equivalents balance was $205 million, and total debt was $2 billion. Our net leverage ratio improved sequentially to 3x. We continue to actively manage our debt, which is 70% fixed through 2025 and 40% through 2026. While having strong confidence in the long term, with our market valuation change over the past quarter combined with current business trends, we recognize the non-cash goodwill impairment charge of $1.3 billion.

<unk> update on the customer care agreement was impacted in the third quarter and so that's part of the update as well as going through and as you said a small amount of just the in year revenue from the bookings that we've had so far this year. So those are the guide as you think beyond revenue. The biggest piece is just the project.

Update for US is really the biggest piece that drives the EBITDA and free cash flow aspects and the guide and the update there is we still feel really good in terms of the initiatives underway around the operational side around delivery around the AI and technology and the customer care side of the house on the call centers. It's just again as you know.

Jeremy Heaton: With respect to the Tax Receivable Agreement, our payment in the first quarter of 2026 is expected to be lower by $25 million compared to our previous estimate, reflecting the completion of tax filings for 2024. We returned $47 million to shareholders this quarter via our quarterly dividend, and through the repurchase of $25 million worth of shares. Year to date, we've repurchased close to 14 million shares, or approximately 3% of shares outstanding. We ended September with $216 million remaining on our share buyback authorization. Management and the Board of Directors will continue to evaluate our capital allocation policy, as it does on an ongoing basis. With today's earnings report, we have updated our 2025 outlook and entered the quarter with $2.25 billion of revenue under contract.

That's about a 90% to 100% drop through and so seeing project at this levels is just what we see in terms of the roll through around profitability and free cash flow, there's always going to be elements of retiree health and some other areas within the business that can drive upside into the higher end of the range here, but but that's those are the dynamic.

Sure, I'll I'll start Kyle. Uh, so so yeah. So so in the guide we reduced at the midpoint Revenue um, down 40 million. It's really split between project and and recurring project is the biggest with, you know, again a 20 million, um, update their on project and we just have not seen an inflection in Pipeline and activity. I think some continued cautiousness as we're going through the annual enrollment process right now. So even on a low comp, um, we had expectations to see more build in the, in the, in the pipeline coming into the fourth quarter. And, and just not seeing that on the recurring side, it's a bit of volumes. Um, you see in the update in, in the deck that we've got, um, some in that is, is really we've seen modest declines, uh, so far year to date, but just a sentiment overall, just a cautiousness around that we're not going to certainly expect to with the headlines.

See any upside there. Um, so really just expecting flat to slightly down on the volume side.

We're seeing as we go into the fourth quarter.

Okay. Thank you that's that's helpful and then.

Maybe just a follow up.

I wanted to see if you guys are seeing any impact or whether it's client decision, making or around open enrollment.

Related to the government shutdown, obviously, it's been getting kind of long in the queue here, but I guess any impact on your business client decision, making.

Jeremy Heaton: For the year, we expect revenue between $2.25 and $2.28 billion, adjusted EBITDA of $595 to $620 million, free cash flow of $225 to $250 million, and EPS of $0.54 to $0.58. We are intensely focused on execution and improving our top-line performance, and remain confident in our position for the long term. This concludes our prepared remarks, and we will now move into the question-and-answer session. Operator, would you please instruct participants on how to ask questions?

Employee considering making any anything that you guys are seeing or so far has it been.

Something has been able to work through.

Carlos Thank you for the question, let me, let me take that so as Jeremy mentioned, you've got a few of the headlines that are out there.

The strata update on the customer. Care agreement was impacted in the third quarter. And so that's part of the update as well as going through and, and as you said, a small amount of just the in your revenue from the bookings that we've had so far this year. So those are the guys. Did you think Beyond Revenue the biggest piece is just the project. Um, update for us is really the the biggest piece that drives the ebit down free cash flow aspects in the guide. In the update, there is we still feel really good in terms of the initiatives underway around the operational side around delivery around the AI and technology and the customer care side of the house on the call centers. It's just, you know, again as you know, that's about a 90 to 100% drop through. And so seeing project at this levels is just, you know what we see in terms of the the role through around profitability and free cash flow, there's always going to be elements of retiree health and some other areas within the business that can drive, you know, upside into the higher end of the range here. But but that's, you know, those are the Dynamics we're seeing as we go.

Into the fourth quarter.

But in general whether it's the government shutdown and the impact on federal employees or it's what passes through to.

Declines, we've really not seen anything material come through at this stage and just keep in mind that even if there is an action a reduction enforce with a big company Theres, a pretty big lag factor associated with that Youll have individuals.

Okay, thank you. That's that's helpful. And then you know, maybe just a a follow-up. Um, I want to see if you guys are seeing any impact or whether it's client decision, making or around, open enrollment. Um,

Operator: Thank you, Sam. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star and then 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. Again, if you would like to ask a question, please press Star and then 1 now. The first question we have comes from Kyle Peterson of Needham & Company. Please go ahead.

Individuals will be on Cobra for a period of time, sometimes they're furloughed, so theres still sort of there.

So or in the case of the federal government's you've got people working and not being paid in some circumstances. So.

Related to, you know, the government shutdown. Obviously. It's been getting kind of long in the tooth here, but I guess any impact on your business client decision making. Um employee decision-making. Any anything you guys are are seeing or so far? Is it been um something you guys have been able to work through?

Yes.

Longer term the volume that we typically pick up we're not anticipating but we haven't really seen a material negative impact at least through this quarter and we're not envisioning that through the fourth quarter.

Great.

All the context and color. Thank you.

Kyle Peterson: Great. Good morning, guys. Thanks for taking the questions.

Thank you welcome. Thank you.

[Company Representative] (Alight): Morning, Kyle.

Kyle Peterson: Yep. I wanted to start on the update to the guide. See if you guys could walk us through some of the moving pieces on the reduction here. It looks from the slides, it looks like it's from kind of a combination of volumes and new business wins, but I guess any clarity or context as to what you guys are seeing and when, at least on the new business wins, obviously made some announcements in the release today, but I guess when should some of the fruits from those wins start to pay dividends?

The next question we have comes from Scott <unk> of Keybanc capital markets. Please go ahead.

Thanks for taking my question.

If you strip out the project revenue.

Hey, how are you. So if we stripped out the project revenue noise recurring revenue down low single digits.

<unk> here and you walked us through some of the assumptions just now and on the slides, but how do we think about returning to flat to low single digit growth for the business is it.

Obviously, securing renewals it sounds like the sales cycle like you talked about last quarter's elongated you talked about up selling opportunities as well and we're seeing maybe some slowness on leave can you walk us through like how do we get this business back to flat to up and growth on the top line.

Through at this stage and and just keep in mind that even if there is an action, you know, a reduction in force with a big company. There's a pretty big lag Factor associated with that. You'll have, you know, individuals who will be on COBRA for a period of time. Sometimes they're, they're furloughed, so they're still sort of there, you know? So or and in the case of the federal government, you've got people working and not being paid in some circumstances. So, um, you know, longer term, the the volume that, you know, would typically tick up. We're not anticipating, but we haven't really seen a material negative impact at least through this quarter and we're not envisioning that through the fourth quarter.

Great. I appreciate all the —

Color. Thank you.

Jeremy Heaton: Sure. I'll start, Kyle. In the guide, we reduced at the midpoint revenue down $40 million. It's really split between project and recurring. Project is the biggest with, again, a $20 million update there on project, and we just have not seen an inflection in pipeline and activity. I think some continued cautiousness as we're going through the annual enrollment process right now. Even on a low comp, we had expectations to see more build in the pipeline coming into the fourth quarter and just not seeing that. On the recurring side, it's a bit of volumes. You see in the update in the deck that we've got, some in that is really we've seen modest declines so far year to date, but just a sentiment overall, just a cautiousness around that. We're not going to certainly expect to, with the headlines, see any upside there.

You're welcome. Thank you.

The next question we have comes from Scott scone house.

Keybanc Capital markets.

Please go ahead.

Yes.

Thanks, Scott, it's Dave I'll take that one so there's a few elements here that that we're sharply focused on and you've touched on a little of those.

Thank you. Thanks for taking my question.

Some of those things in your question Firstly, just on the on the renewal activity. We're seeing good results as it relates to our largest client base and that's coming through the renew everyday program initiatives and we're looking to cascade that through our entire client portfolio. So one we think improving upon the return.

So if we ship out the project Revenue, you know, hey, how are you? So, if we stripped out the project, Revenue noise, recurring Revenue down loaded with single digits

Rates for our existing clients kind of locking the back door to the house so to speak is important.

Bringing more clients through some new logos or expansion on existing clients again, we've got some good activity out there in the leaf space. We've got a number of opportunities that we're deep in discussions or near to contracting on core Ben admin for middle market up to some of the larger opportunities. So that's kind of take.

Jeremy Heaton: Really just expecting flat to slightly down on the volume side. The Strata update on the customer care agreement was impacted in the third quarter, so that's part of the update as well as going through. As you said, a small amount of just the in-year revenue from the bookings that we've had so far this year. Those are the guide. As you think beyond revenue, the biggest piece is just the project. Update for us is really the biggest piece that drives the EBITDA and free cash flow aspects in the guide, and the update there is we still feel really good in terms of the initiatives underway around the operational side, around delivery, around the AI and technology, and the customer care side of the house on the call centers.

Implied here and you walked us through some of the assumptions just now and on the slides. But how do we think about returning to Flat to low single digit growth for the business? Is it? You know, obviously, it's appearing, renewals it sounds like the, the sales cycle like you talked about last quarter is elongated, you talked about upselling opportunities as well, and we're seeing maybe some slowness on leave. Can you walk us through? Like, how do we get this business back to Flat to up and and growth on the top line, thanks?

The clients in through the front door as well.

So all of that really bodes well for the return to the growth that you are asking about theres a lag effect involved in that if this is a big client large clients Ben admin typically youre looking at implementation cycles that could run 12 to 15 months right. So some of that revenue on a new business win that could occur.

Now might not make its way through to our financials until 2027 or beyond smaller deals have shorter gestation periods.

Jeremy Heaton: It's just, again, as you know, that's about a 90% to 100% drop-through, and so seeing project at this level is just what we see in terms of the roll-through around profitability and free cash flow. There's always going to be elements of retiree health and some other areas within the business that can drive upside into the higher end of the range here, but those are the dynamics we're seeing as we go into the fourth quarter.

<unk> deals depending upon how big they are could be shorter gestation periods as well so as we continue to build back the momentum and the strength of our pipeline under Steve's leadership in collaboration with Rob feel good about where that's headed.

Uh, thanks Scott. It's Dave, I'll take that 1. So there's there's a few elements here that that were sharply focused on and and you've touched on a little of those in, in some of those in, in your question, firstly, just on the on the renewal activity. We're seeing good results as relates to our largest client base. Um, and that's coming through the renew every day program initiatives and we're looking to Cascade that through our entire client portfolio. So 1 we think you know, improving upon the retention rates for our existing clients, kind of locking the back door to the house. So to speak is important um bringing more clients through so new logos or expansion on existing clients. Again, we've got some good activity out there in the leaf space. We've got a number of of uh opportunities that were deep in discussions or near the Contracting on court, Ben admin from Middle Market up to some of the larger opportunities so that's kind of take

And our product positioning is strong as its ever been.

[Company Representative] (Alight): Thank you. That's helpful. Maybe just a follow-up. I want to see if you guys are seeing any impact, whether it's client decision-making or around open enrollment, related to the government shutdown. Obviously, it's been getting kind of long in the tooth here. I guess any impact on your business, client decision-making, employee decision-making, anything you guys are seeing, or so far, has it been something you guys have been able to work through?

Great and then as a follow up again stripping out project business will fall down to the bottom line what can you guys do.

I have a company to drive secular margin expansion and you know we've always talked about the call center and it sounds like that's you're moving some things back in house on the service side, which I imagine would be a little bit more expensive, but just can you help us walk X. The project business can you help us walk through.

You previously outlined your longer term margin opportunities or goals or targets just help us walk through where you see your ability to drive margin improvements in the near and longer term. Thank you.

Yes, Scott I'm going to have Jeremy talked through some of the elements of how that drops through.

Dave Guilmette: Kyle at State, thank you for the question. Let me take that. As Jeremy mentioned, you've got a few of the headlines that are out there, but in general, whether it's the government shutdown and the impact on federal employees or what passes through to clients, we've really not seen anything material come through at this stage. Just keep in mind that even if there is an action, a reduction in force with a big company, there's a pretty big lag factor associated with that. You'll have individuals who will be on COBRA for a period of time. Sometimes they're furloughed, so they're still sort of there, or in the case of the federal government, you've got people working and not being paid in some circumstances.

One thing I want to make sure we focused on as part of your first question is the opportunities that exist across our partner network, we highlighted that.

Taking the clients in through the front door as well. Um, so all of that really bodes well for, you know, the return to, to the growth that you're asking about. There's a lag effect involved in that if this is a big client, large client, Ben admin, typically, you're looking at implementation cycles, that could run, you know, 12 to 15 months, right? So, some of that revenue on a new business win that could occur. Now, might not make its way through to our financials. You know, until 2027 or Beyond smaller deals, have shorter gestation periods. Um, leave deals depending upon how big they are, could be shorter gestation periods as well. So as we continue to build back the momentum and the strength of our pipeline under Steve's leadership, and in collaboration with Rob feel good about where that's headed. Um, and our product positioning is as strong as it's ever been.

Opening remarks, we're feeling really good about the level of activity and the interest that the partners are expressing in being part of our network just given our size and scale and reach for the for the customers and the clients that we have and that represents revenue growth opportunity as well.

That will face its way in it takes a bit of time before you get a contract established then you get the run rate going as it is indicative of what we talked about last quarter with Goldman Sachs, but the more of those that we put in place a stronger our revenue opportunities for growth are going to be there as it pertains to your question on margin expansion.

Great. And as a follow-up, again, stripping out project business that falls down to the bottom line. What can you guys do? Um, I have a company to drive secular margin expansion. You know, we've always talked about the call center and it sounds like actually you're moving some things back in-house on the service side which I imagine would be a little bit more expensive but just can you help us walk X? The project business? Can you help us walk through? You know, you previously outlined your longer term margin opportunities or goals or targets, just help us walk through where you see, your ability to drive margin and improvements in the near end.

Charm. Thank you.

Dave Guilmette: Longer term, the volume that would typically tick up, we're not anticipating, but we haven't really seen a material negative impact, at least through this quarter, and we're not envisioning that through the fourth quarter.

We are deploying AI in a variety of different places we've got to make investments in that those are not trivial and we expect to see some impact on the way we serve our customers with AI right either a reduction in the call volumes that we've talked about in the opening remarks.

[Company Representative] (Alight): Great, appreciate all the context and color. Thank you.

Dave Guilmette: Thanks, Kyle. You're welcome. Thank you.

Operator: The next question we have comes from Scott Schoonhaus of KeyBanc Capital Markets. Please go ahead.

Or a change in the kind of in the way that work gets done.

We've also pulled a number of resources back in house and that's a strategy that will continue to look at Germany, and you want to add on the dropdown.

Scott Schoenhaus: Hey, team. Thanks for taking my question. If we strip out the project revenue.

I think it is in line with what we've talked about earlier this year. Scott. So you I think we feel very good in terms and I think we're probably ahead of where we thought we would be around the operating model in which our delivery teams. So if you think about delivery is.

[Company Representative] (Alight): More, Kyle.

Scott Schoenhaus: Hey, how are you? If we stripped out the project revenue noise, recurring revenue down, low to single digits implied here, and you walked us through some of the assumptions just now and on the slides, how do we think about returning to flat to low single-digit growth for the business? Is it obviously securing renewals? It sounds like the sales cycle, like you talked about last quarter, is elongated. You talked about upselling opportunities as well, and we're seeing maybe some slowness on leaves. Can you walk us through how do we get this business back to flat to up in growth on the top line? Thanks.

The bulk of the teams that are sitting with our clients every day.

So from a from a cost standpoint, that's where we need to drive a better experience for our clients first but.

But we've standardized a lot of that work across the different groups and the solutions that we've got we've got coes in place now, bringing some of that work back from third parties, it's actually more cost effective Scott just given the way that.

Dave Guilmette: Thanks, Scott. It's Dave. I'll take that one. There are a few elements here that we're sharply focused on, and you've touched on some of those in your question. Firstly, just on the renewal activity, we're seeing good results as it relates to our largest client base, and that's coming through the Renew Every Day program initiatives. We're looking to cascade that through our entire client portfolio. We think improving upon the retention rates for our existing clients, kind of locking the back door to the house, so to speak, is important. Bringing more clients through, so new logos or expansion on existing clients. We've got some good activity out there in the leave space. We've got a number of.

The terms and conditions work and also the flexibility around where the productivity sets and the things that we can drive and the flexibility. So it gives us much more room to kind of drive the expansion in what we do and probably our largest cost base in the business on the delivery side and then as Dave said, we have seen a big reduction.

And call Center.

We talked about last quarter with Goldman Sachs but the more of those that we put in place the stronger, our Revenue opportunities for growth are going to be there as it pertains to your your question on, on margin expansion. You know, we're deploying AI in a variety of different places. We've got to make investments in that, you know, those aren't trivial and we expect to see some impact on the way. We serve our customers with AI right either reduction. In the call volumes that we talked about in the opening remarks um or a change in the kind of in the way that work gets done. Um, and we've also pulled a number of resources back in house. And that's a a strategy that we'll continue to look at Jeremy. Anything you want to add on the drop down? No, I mean I I think it is in line with what we've talked about earlier this year, Scott. So you, you know, I think we feel very good in terms and I think slight, you know, we're probably ahead of of where we thought we would be around the, the operating model in which our delivery team. So, if you think about, you know, delivery is, you know, the, the bulk of

Opex over the past couple of years and the work that we've been doing but there are step functions and some of the new technologies that we've rolled out and so really just want to get through this annual enrollment period to really see the impacts of that helps US staff then going forward as we think about <unk> 26, and 27 of the elements that we can drive there.

But we feel really good in terms of everything that we've got around the efficiencies within this business I would say, we're we're ahead of what the timing would have been around those expectations. Some of that has to offset some of the top line that we've got but certainly as we get some of that operating leverage back.

Dave Guilmette: Opportunities that were deep in discussions or near to contracting on core Ben Admin from middle market up to some of the larger opportunities. That's kind of taking the clients in through the front door as well. All of that really bodes well for the return to the growth that you're asking about. There's a lag effect involved in that. If this is a big client, large client Ben Admin, typically you're looking at implementation cycles that could run 12 to 15 months, right? Some of that revenue on a new business win that could occur now might not make its way through to our financials until 2027 or beyond. Smaller deals have shorter gestation periods. Leave deals, depending upon how big they are, could be shorter gestation periods as well.

Of the teams that are sitting with our clients every day. Uh, so from a, from a cost standpoint that's where we need to drive a better experience for our clients first. Um, but we've standardized a lot of that work across the different groups and the solutions that we've got we've got Coes in place now bringing some of that work back from third parties. It's it's actually more cost-effective Scott. Just given the way that the, you know, the the terms and conditions work and also the flexibility around where the productivity sits and

Certain certainly drops through in a more significant way.

Very helpful. Thank you.

Sure. Thank you.

The next question we have comes from Kevin Mcveigh of UBS. Please go ahead.

Great.

Hey, I guess I want to start with I've never seen.

And initiative on approval for deep classification can.

Can you just help us understand what that is.

What drove the decision to do that.

Dave Guilmette: As we continue to build back the momentum and the strength of our pipeline under Steve's leadership, in collaboration with Rob, feel good about where that's headed. Our product positioning is as strong as it's ever been.

Sure I think Kevin as Jeremy I'll start just from a board perspective, what that is is today, we have a staggered board. So four directors are up for nomination every year.

And Justin through ongoing discussions with our board and from a governance perspective, and I think in discussions with investors frankly is to over time D. Stagger This board, which would eventually have.

Scott Schoenhaus: Great. As a follow-up, again, stripping out project business that falls down to the bottom line, what can you guys do as a company to drive secular margin expansion? We've always talked about the call center. It sounds like actually you're moving some things back in-house on the service side, which I imagine would be a little bit more expensive. Just can you help us walk extra project business? Can you help us walk through? You've previously outlined your longer-term margin opportunities or goals or targets. Just help us walk through where you see your ability to drive margin improvements in the near and longer term. Thank you.

And the things that we can drive and the flexibility, so it gives us much more room, um, to to kind of Drive the expansion in what we do and probably our largest cost base in the business on the delivery side. And then as Dave said, we have seen a big reduction in in call center, you know, Opex over the past couple of years and the work that we've been doing. But there are step functions in some of the new technologies that we've rolled out. Um, and so really, just want to get through this annual enrollment period, to really see the impacts of. That helps us staff, then going forward as we think about 26, and 27 of the elements that we can drive there. But we feel really good in terms of everything that we've got around the efficiencies, within this business. And I would say we're, we're, we're ahead of what the timing would have been around those expectations. Some of that is to offset, you know, some of the top line that we've got but certainly, as we get the, you know, some of that operating leverage back. Um, certain certainly drops through in a more significant way.

Very helpful. Thank you.

Sure, thank you.

All directors up for nomination annually as we go through that process. So it's just a governance update for us as we transition out of going from <unk>.

The next question we have comes from Kevin McVay of UBS. Please go ahead.

Great. Hey um I guess I want to start with. I've never seen.

Private to public through this back and just kind of more I call. It more normal course governance of a public company and Kevin I would just add you know as part of the process. We're letting you know.

An initiative on approval for declassification can you just help us understand what that is and what your decision to do that?

The shareholders know that Thats, our intent, but this will be up for a vote of shareholders at our annual meeting next year.

Dave Guilmette: Yes, Scott. I'm going to have Jeremy talk through some of the elements of how that drops through. One thing I want to make sure we focus on as part of your first question is the opportunities that exist across our partner network. We highlighted that in the opening remarks. We're feeling really good about the level of activity, and the interest that the partners are expressing in being part of our network, just given our size, scale, and reach for the customers and the clients that we have. That represents revenue growth opportunity as well. That will phase its way in. It takes a bit of time before you get a contract established and you get the run rate going, as is indicative of what we talked about last quarter with Goldman Sachs.

Got it and then I guess I mean, you've had two consecutive meaningful impairments you've got it down two consecutive quarters.

Just help us understand just the modeling on the guidance relative to where you are coming in particularly given we're nine months into the year because it just continues to be.

In issue.

Or how youre guiding.

Sure.

I think the guide and then is there just walk through briefly I think in the fourth quarter. The biggest piece is the project revenue, which I would say is we've never seen levels. This low in terms of project revenue, we did expect and our team is going through with clients every day as we build through the second half of the year in terms of where that pipeline.

Dave Guilmette: The more of those that we put in place, the stronger our revenue opportunities for growth are going to be there. As it pertains to your question on margin expansion, we're deploying AI in a variety of different places. We've got to make investments in that. Those aren't trivial. We expect to see some impact on the way we serve our customers with AI, right? Either a reduction in the call volumes that we talked about in the opening remarks, or a change in the kind of way that work gets done. We've also pulled a number of resources back in-house, and that's a strategy that we'll continue to look at. Jeremy, anything you want to add on the dropdown?

Sure, I I think Kevin is Jeremy. I'll, I'll start, you know, just from a board perspective. I mean, what that is is today we have a staggered board. So for directors are up for nomination every year and just in through, ongoing discussions with our board and from a governance perspective, and I think in discussions with investors frankly is to over time D stagger this board which would eventually have, you know, all directors up for nomination annually as we go through that process. So it's just a governance update for us as we transition out of, you know, going from, you know, private to public through the SPAC and and, you know, just kind of more. I call it more normal course, governance of a public company and Kevin. I just add, you know, as part of the process, we're letting, you know, the, the shareholders know that that's our intent, but this will be up for a vote of shareholders at our annual meeting next year.

And is its well below our expectations in terms of project revenue. So so absolutely yes.

The biggest piece coming through here. There is also the impacts of what we've talked about in terms of the bookings element that we have and just the macro factors around the headlines around employee and participant counts. So those are the biggest pieces for us in the guide.

Got it. And then I guess I mean you've had 2 consecutive meaningful impairments. You've got it Down 2 consecutive quarters, you know, just help us understand. Just the modeling on the guidance relative to where you're coming in particularly given. We're we're 9 months into the year because you just you know, continues to be

an issue in terms of how you're guiding.

As you can see in the transcript we talked about this morning, we are at $2 25 billion of revenue under contracts coming into the quarter and the range on the guide at 2.25 to two point to wait so.

Jeremy Heaton: No, I mean, I think it is in line with what we've talked about earlier this year, Scott. I think we feel very good in terms, and I think we're probably ahead of where we thought we would be around. The operating model in which our delivery team, so if you think about delivery, is the bulk of the teams that are sitting with our clients every day. From a cost standpoint, that's where we need to drive a better experience for our clients first. We've standardized a lot of that work across the different groups and the solutions that we've got. We've got COEs in place now. Bringing some of that work back from third parties, it's actually more cost-effective, Scott, just given the way that.

As you think about this this is what we see today in terms of what's in front of us for execution.

At the end of the quarter on the on the impairment side of it that's a factor of again noncash.

Impairment accounting adjustment largest piece being just the valuation change at the company.

Through the quarter and Thats Theres, a market valuation tests, which is done every quarter. It's normal course controls that we have around the financials and need to go through the valuation process.

And that takes into account the trends that we do see in the business, but it's a much longer term view taking into the market cap and market value of the company. So we recognize that charge here this quarter and in line with where we closed out the quarter from a valuation of the company.

Jeremy Heaton: The terms and conditions work, and also the flexibility around where the productivity sits and the things that we can drive, and the flexibility. It gives us much more room to kind of drive the expansion in what we do in probably our largest cost base in the business on the delivery side. As Dave said, we have seen a big reduction in call center OpEx over the past couple of years in the work that we've been doing, but there are step functions in some of the new technologies that we've rolled out. I really just want to get through this annual enrollment period to really see the impacts of that. Helps us staff then going forward as we think about 2026 and 2027 of the elements that we can drive there.

Got it thank you.

Thank you thank you Kevin.

The next question we have comes from Peter Heckmann of D. A Davidson. Please go ahead.

And just the macro factors around the headlines around employee and and participant counts. So those are the biggest pieces for us in the guide. Uh as you can see in in you know the transcript, we talked about this morning, we are at 2.25 billion of Revenue, under contract coming into the quarter and the range on the guide is 2.25 to 2.28. So I think, you know, as you think about this, this is what we see today, in terms of what's in front of us for, you know, execution in in The Inn at the end of the quarter, on the, on the impairment side of it, that's a factor of, you know, again non-cash, um, impairment accounting adjustment, largest piece, being just the valuation, change of the company.

Hey, good morning, everyone.

Good morning.

Wanted to see if you could give us an update.

Just on the.

The follow on payments from.

From the divestiture I think there's $150 million contingent based on.

Jeremy Heaton: We feel really good in terms of everything that we've got around the efficiencies within this business. I would say we're ahead of what the timing would have been around those expectations. Some of that is to offset some of the top line that we've got, but certainly as we get some of that operating leverage back, it certainly drops through in a more significant way.

Performance of that business, and 23, 5% to $50 million fixed payment.

Can you give us an update on the first alone timing.

On both potential payments.

Sure. So the timing on the payments themselves are a seven year term from the close of the deal.

Uh, through the quarter. And and that's, you know, there's a market valuation test, which is done every quarter. Its normal course controls that we have around the financials and need to go through the valuation process. The, you know, that takes into account the trends that we do see in the business, but it's a much longer term view taking into the market cap, uh, and market value of the company. So, um, we we recognize that charge here, this quarter and in line with where we closed out the quarter, um, from evaluation of the company.

Got it. Thank you.

Thank you, thank you. Kevin

$50 million. So there was $200 million of deferred payments 50 million was.

Scott Schoenhaus: Very helpful. Thank you.

Dave Guilmette: Sure, thank you.

The next question we have comes from Peter Heckman of Da Davidson please go ahead.

And in fact guaranteed.

Operator: The next question we have comes from Kevin McVeigh of UBS. Please go ahead.

Which will be paid out there was a $150 million, which was contingent on EBITDA performance of the divested business through 2025, So we have that.

Hey, good morning, everyone.

Scott Schoenhaus: Great. Hey, I guess I want to start with I've never seen an initiative on approval for declassification. Can you just help us understand what that is and what drove the decision to do that?

Wanted to see if you could give us an update, uh, just on the, um,

Really recognized at zero value on the balance sheet today contingent upon the performance of the <unk> business and their EBITDA in 2025. So we'll go through a full annual look at that as we close out 2025 to see what the valuation is there that will be recognized on the balance sheet and then will be paid out at the end.

The the follow on payments uh from the destitute. I think it was 150 million contingent based on

Jeremy Heaton: Sure. I think, Kevin, it is Jeremy. I'll start. Just from a board perspective, what that is is today we have a staggered board. Four directors are up for nomination every year. Just through ongoing discussions with our board and from a governance perspective, and I think in discussions with investors, frankly, is to over time destagger this board, which would eventually have all directors up for nomination annually as we go through that process. It is just a governance update for us as we transition out of going from private to public through the SPAC and just kind of more, I call it more normal course governance of a public company.

The performance of that business in 2025 and then a 50 million fixed payment. Can you give us an update on the first and then the timing on the uh, on both potential payments.

That seven year anniversary of the close.

That deal.

Okay, both both both payments would be on the seven year anniversary.

Correct Okay.

Okay.

Okay, and then on the the headwind you have given.

Stronger retention levels in 'twenty 'twenty, four and inventory 35, do we do.

Do we still expect.

<unk>.

Attrition to be a smaller drag.

On revenue growth in 2020, sick, maybe something closer to 450 basis points versus something like 66 50 this year.

Dave Guilmette: Kevin, I'd just add as part of the process, we're letting the shareholders know that that's our intent, but this will be up for a vote of shareholders at our annual meeting next year.

Yeah, Peter Steve So let me take that one firstly, we had a considerable.

Sure. So the timing on the payments themselves are a 7-year term from the close of the deal 50 million. So there was 200 million of of deferred payments. 50 million was um, in effect guaranteed, uh, and which will be paid out there was 150 million, which was contingent on Ava performance of the the divested business through 2025. So we have that and you know, really recognized at at zero value on the balance sheet today contingent upon the performance of the strata business and their IBA in 2025. So we'll go through a full annual. Look at that as we close out 2025 to see what the valuation is there, that will be recognized on the balance sheet.

The amount of volume that played through and through the renewal process in 2025, and as we said in our opening remarks, we're going to see a pretty material drop in that activity next year and in addition, among our largest clients, which is where there is a pretty big concentration of revenue.

Scott Schoenhaus: Got it. I mean, you've had two consecutive meaningful impairments. You've got it down two consecutive quarters. Just help us understand the modeling on the guidance relative to where you're coming in, particularly given we're nine months into the year, because it just continues to be an issue in terms of how you're guiding.

Sheet and then we'll be paid out at the end. You know that 7 year anniversary of the clothes.

Of that deal.

Okay, both both both payments uh would be on the 7-year anniversary.

Vast majority of those have gone through the renewal process in the last couple of years. So we've had a lot of renewal activity in 2024 and 2025, we feel good about our retention rates for those largest clients and we're going to see a drop going into 2026. In addition, or expansion of the renew everyday program.

Jeremy Heaton: Sure. I think the guide, and as I just walked through briefly, I think in the fourth quarter, the biggest piece is the project revenue, which I would say is, we've never seen levels this low in terms of project revenue. We did expect, in our teams going through with clients every day as we build through kind of the second half of the year in terms of where that pipeline is, it's well below our expectations in terms of project revenue. Absolutely, that's the biggest piece coming through here. There's also the impacts of what we've talked about in terms of the bookings element that we have, and just the macro factors around the headlines around employee and participant counts. Those are the biggest pieces for us in the guide.

Correct potential. Okay, okay. And then on the, um, the headwind, you know, given, uh, uh, Stronger retention levels in 2024 and into 2035. Do we expel, do we still expect? Um,

attrition to be a smaller draft, um, on Revenue growth in 2026, maybe something closer to

<unk> and the collaboration between Rob and Steve is going to push that level of client management focus down through all of our clients and the initial focus was on our largest ones. So as we continue to expand that initiative through the full client suite, we expect to see some positive returns on both retention and the.

450 basis points versus something like 60, 650 this year.

The upside upside and cross sell opportunities that exist by bringing new services to those solutions to those clients.

Oh.

That's helpful. I appreciate it.

Jeremy Heaton: As you can see in the transcript we talked about this morning, we are at $2.25 billion of revenue under contract coming into the quarter, and the range on the guide is $2.25 to 2.28 billion. I think as you think about this, this is what we see today in terms of what's in front of us for execution at the end of the quarter. On the impairment side of it, that's a factor of, again, non-cash impairment, accounting adjustment, the largest piece being just the valuation change of the company through the quarter. There's a market valuation test, which is done every quarter. It's normal course controls that we have around the financials and need to go through the valuation process.

Thank you Peter Thanks, Pete.

Thank you. The final question, we have comes from Andrew <unk> of Jpmorgan. Please go ahead.

Good morning, guys.

Good morning, Andrew.

I wanted to ask so last quarter you spoke to changes within your go to market organization, including greater specialization domain expertise in the sales force. Obviously these things take time to ramp but I was curious if you could just provide an update three months later about the progress here. How these things have resonated with yourselves force.

The penis stage. So let me take that 1. First, firstly, we had a considerable in, you know, amount of volume that played through and through the renewal process in 2025. And, as we said, in our opening remarks, we're going to see a pretty material drop in that activity next year. And in addition, among our largest clients which is where there's a pretty big concentration of Revenue. Uh, the vast majority of those have gone through the renewal process in the last couple of years. So we've had a lot of renewal activity in 2024 and 2025, we feel good about our retention rates for those largest clients and we're going to see a drop going into 2026. In addition, you know, our expansion of the renew every day, program initiative and the collaboration between Rob and Steve is going to push that.

Sure. So it's Dave I'll take that one Andrew Firstly, bringing Steve rush back to a light has been a tremendous boost.

Level of client management focused down through all of our clients and the initial Focus was on our largest ones. So as we continue to expand that initiative through the full client Suite, um, we expect to see some positive Returns on both retention and the upside upside, uh, and cross-sell opportunities that exist by bringing new services to those solutions to those clients.

That's helpful. I appreciate it.

Boost for us and for our sales team. This is somebody who knows our business really well.

Jeremy Heaton: That takes into account the trends that we do see in the business, but it's a much longer-term view taking in the market cap and market value of the company. We recognize that charge here this quarter in line with where we closed out the quarter from the valuation of the company.

Thank you, peace.

<unk> tremendous credibility in the marketplace and.

It is a great team players so as collaborating working through looking at every deal et cetera. So that's helpful.

Good morning, guys.

Brought some industry expertise on board as well with specialty areas of focus.

Morning morning, Andrew.

Scott Schoenhaus: Got it. Thank you.

In the lease space in the navigation solutions and in core health admin and Steve's intent to continue to build out that domain expertise across the sales force to your point.

Jeremy Heaton: Thank you.

Dave Guilmette: Thank you, Kevin.

Operator: The next question we have comes from Peter Heckmann of D.A. Davidson. Please go ahead.

Those changes then has to play their way through on new business situations and opportunities. We're laser focused on those deals that are deep in the pipeline right now we still have a material number of those that we're pursuing and the key there is to improve our close ratio and I feel confident that with Steve and the additions that he has already.

Peter Heckmann: Hey, good morning, everyone.

I wanted to ask. So last quarter, you spoke to changes, um, within your go to market organization, including greater specialization domain, expertise in the Salesforce. Um, obviously these things take time to ramp, but I was curious, if you could just provide an update, 3 months later about the progress here, how these things have resonated with your sales force,

Scott Schoenhaus: Morning, Pete.

Peter Heckmann: Wanted to see if you could give us an update just on the follow-on payments from the divestiture. I think it was $150 million contingent based on the performance of that business in 2025 and then a $50 million fixed payment. Can you give us an update on the first and then timing on both potential payments?

Ready.

<unk>, we've impacted we should see some uptick on our our success with closing on those deals.

And then as we enter into 2026, we're going to have the right alignment of our go to market teams.

Jeremy Heaton: Sure. The timing on the payments themselves are a seven-year term from the close of the deal. $50 million, so there was $200 million of deferred payments. $50 million was, in effect, guaranteed, which will be paid out. There was $150 million, which was contingent on EBITDA performance of the divested business through 2025. We have that really recognized at zero value on the balance sheet today, contingent upon the performance of the Strata business and their EBITDA in 2025. We will go through a full annual look at that as we close out 2025 to see what the valuation is there. That will be recognized on the balance sheet and then will be paid out at the seven-year anniversary of the close of that deal.

Our client teams, which I feel really confident is going to give us the opportunity both for up sell cross sell and for new logos coming into the company.

Great that's good to hear.

One follow up for me more of a macro question I was curious if theres been any changes in the hiring assumption of net hiring assumption you laid out last quarter and the outlook understanding there's offsets like you called out there.

With kind of lagged impact so maybe even just adding on to that question. How material is the hiring assumption within your model or within your outlook. Considering you have those offset thank you.

Sure. Uh, so it's Dave, I'll take that 1. First, let me bring you Steve brush back to a light, has been a tremendous, uh, boost for us. And for our sales team, this is somebody who knows our business really well, um, has tremendous credibility in the marketplace, um, and is a great team player. So he's collaborating working through looking at every deal. Um, Etc. So that's helpful. Um, we brought some industry expertise on board as well, with specialty, uh, areas of focus um in the leave space uh in the navigation Solutions and in core Health admin. And it's Steve's intent to continue to build out that domain expertise uh, across the sales force to your point, you know, those those changes then, you know, have to play their way through on new business situations and opportunities where laser focused on those deals that are deep in the pipeline. Right now, we still have, you know, a material number of those that were pursuing. And and the key there is to improve our close ratio and I feel confident.

From are included in the guide for this year, Andrew We've got and you'll see it in the deck that we posted online. So we've got about down down a half a point to flat is what we've got in for 2025 and again year to date, it's been really minimal in terms of any impacts I'd say slightly down.

Peter Heckmann: Okay, both payments would be on the seven-year anniversary.

That was Steve and the additions that he has already impacted and we've impacted. We should see some uptick on our, um, our success with closing on those deals. Um, and then as we enter into 2026, we're going to have the right alignment uh of our go to market teams. Um and our client teams which I feel really confident is going to give us the opportunity both for upsell crosselle and for new logos coming in at the company.

Jeremy Heaton: Correct.

Peter Heckmann: Potentially. Okay. On the headwind, given stronger retention levels in 2024 and into 2025, do we still expect attrition to be a smaller drag on revenue growth in 2026, maybe something closer to 450 basis points versus something like 650 this year?

But again on Youre talking basis points, and so certainly not seeing what we historically have had with the call it 1% to 2% of of help on the growth side.

So our expectations right now and we would know typically.

In the fourth quarter right now as we stand if we had larger impacts that were happening already through our client base and so that's.

That's the call on the guide and based on what we see so far this year and then as we think about next year I would say, yes, it's hard with the headlines to think that it's certainly going to be anything that.

Great, that's good to hear. Um, and this 1 follow up for me, more of a macro question. Um, I was curious if there's been any changes to the hiring assumption or net hiring assumption. Um, you laid out last quarter in the Outlook, you know, understanding there's offsets like you call out Dave um with kind of lagged impact. So you know maybe even just adding on to that question. How material is the hiring assumption within your model or within your outlook? Um, considering you have those offsets? Um, thank you.

Dave Guilmette: Yeah, Peter's safe. Let me take that one. Firstly, we had a considerable amount of volume that played through the renewal process in 2025. As we said in our opening remarks, we're going to see a pretty material drop in that activity next year. In addition, among our largest clients, which is where there's a pretty big concentration of revenue, the vast majority of those have gone through the renewal process in the last couple of years. We've had a lot of renewal activity in 2024 and 2025. We feel good about our retention rates for those largest clients, and we're going to see a drop going into 2026. In addition, our expansion of the Renew Every Day program initiative and the collaboration between Rob and Steve is going to push that level of client management focus down through all of our clients.

<unk> is additive to growth, but we'll manage that our teams stay close with clients on a daily basis, and so we're always getting.

Our pre REIT, if you will around what might be happening within the client basis.

Yeah.

Great makes sense. Thank you guys.

Thank you thank you Andrew.

Thank you.

No further questions at this time I would like to turn the floor back over to Dave Gilbert for closing comments. Please go ahead Sir.

Thank you from a included in the guide, uh, for this year, Andrew, we've got and you'll see it in the deck that we posted online. So we've got about down down a half, a point to Flat is, is what we've got in for, for 2025, and again, year to date. It's been really minimal in terms of any impacts, I'd say slightly down. But again on you're you're talking, you know, basis points. And so certainly not seeing what we historically have had with, you know, the call it 1 to 2% of of help on the growth side. Um, so our expectations right now and and we would know

Typically.

Thank you operator, so in closing our strategic execution is transforming our delivery services and is re envisioning the client and participant experience or.

Our progress is making a real impact across our current clients and operations and we're confident in how that translates to our competitiveness and our long term growth.

Dave Guilmette: The initial focus was on our largest ones. As we continue to expand that initiative through the full client suite, we expect to see some positive returns on both retention and the upside, and cross-sell opportunities that exist by bringing new services to those clients.

Thank you for joining us today.

In the fourth quarter right now, as we stand, if we had larger impacts that were happening already through our client base. And so, um, that's the the call on the guide. And, and based on what we see so far this year. And then, as we think about next year, I I'd say, yeah, it's hard with the headlines to think that it's certain going to be anything that that, um, is additive to growth. But we'll, we'll manage that our teams stay close with clients on a daily basis. And so, we're always getting

Thank you Sir.

Ladies and gentlemen that then concludes today's conference. Thank you for joining US you may now disconnect your lines.

you know, a a pre-read, if you will around what might be happening within the client basis,

Great makes sense. Thank you guys.

Peter Heckmann: That's helpful. I appreciate it.

Thank you. Thank you, Andrew.

Dave Guilmette: Thank you, Pete.

Jeremy Heaton: Thanks, Pete.

Thank you.

Operator: Thank you. The final question we have comes from Andrew Polkovitz of JPMorgan. Please go ahead.

There are no further questions at this time. I would like to turn the floor back over to Dave. Gilmer for closing comments, please go ahead, sir.

Peter Heckmann: Good morning, guys.

Dave Guilmette: Morning.

Scott Schoenhaus: Morning, Andrew.

Peter Heckmann: Morning.

Scott Schoenhaus: I wanted to ask, last quarter, you spoke to changes within your go-to-market organization, including greater specialization, domain expertise, and the sales force. Obviously, these things take time to ramp, but I was curious if you could just provide an update three months later about the progress here, how these things have resonated with your sales force.

Thank you operator. So in closing, our strategic execution is Transforming Our delivery services and is re-envisioning the client participant experience.

Our progress is making a real impact across our current clients and operations. And we're confident in how that translates to our competitiveness and our long-term growth.

Thank you for joining us today.

Dave Guilmette: Sure. It's Dave. I'll take that one, Andrew. Firstly, bringing Steve Rush back to Alight has been a tremendous boost for us and for our sales team. This is somebody who knows our business really well, has tremendous credibility in the marketplace, and is a great team player. He's collaborating, working through, looking at every deal, etc. That's helpful. We brought some industry expertise on board as well with specialty areas of focus in the leave space, in the navigation solutions, and in core health admin. It's Steve's intent to continue to build out that domain expertise across the sales force. To your point, those changes then have to play their way through on new business situations and opportunities. We're laser-focused on those deals that are deep in the pipeline right now. We still have a material number of those that we're pursuing.

No, disconnect your lines.

Dave Guilmette: The key there is to improve our close ratio. I feel confident that with Steve and the additions that he has already impacted and we've impacted, we should see some uptick on our success with closing on those deals. As we enter into 2026, we're going to have the right alignment of our go-to-market teams and our client teams, which I feel really confident is going to give us the opportunity both for upsell, cross-sell, and for new logos coming into the company.

Peter Heckmann: Great, that's good to hear. Just one follow-up for me, more of a macro question. I was curious if there's been any change to the hiring assumption or net hiring assumption you laid out last quarter in the outlook, understanding there's offsets, like you called out, Dave, with kind of lagged impact. Maybe even just adding on to that question, how material is the hiring assumption within your model or within your outlook, considering you have those offsets? Thank you.

Jeremy Heaton: Included in the guide for this year, Andrew, we've got, and you'll see it in the deck that we posted online, so we've got about down. A half a point to flat is what we've got in for 2025. Again, year to date, it's been really minimal in terms of any impact. I'd say slightly down. Again, you're talking basis points. Certainly not seeing what we historically have had with the, call it, 1% to 2% of help on the growth side. Our expectations right now, and we would know typically in the fourth quarter right now as we stand if we had larger impacts that were happening already through our client base. That's the call on the guide and based on what we see so far this year.

Jeremy Heaton: As we think about next year, I'd say, yeah, it's hard with the headlines to think that it's certainly going to be anything that is additive to growth, but we'll manage that. Our teams stay close with clients on a daily basis, and so we're always getting a pre-read, if you will, around what might be happening within the client bases.

Peter Heckmann: Great. Makes sense. Thank you, guys.

Jeremy Heaton: Thank you.

Dave Guilmette: Thank you, Andrew.

Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Dave Guilmette for closing comments. Please go ahead, sir.

Dave Guilmette: Thank you, Operator. In closing, our strategic execution is transforming our delivery services and is re-envisioning the client and participant experience. Our progress is making a real impact across our current clients and operations, and we're confident in how that translates to our competitiveness and our long-term growth. Thank you for joining us today.

Operator: Thank you, sir. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.