Good morning, and thank you for holding. My name is Irene, and I will be your conference operator today. Welcome to Alight's First Quarter 2023 Earnings Conference Call. 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 Cohen, Vice President of Investor Relations at Alight. Please go ahead.

Good morning, and thank you for joining us. Earlier today, the company issued a press release with first quarter 2023 results. A copy of the release can be found on the Investor Relations section of the company's website. 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, as such factors may be updated from time to time in the company's periodic filings. The company does not undertake any obligation to update forward-looking statements. Also, throughout this conference call, the company will be presenting 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. On the call from management today are Stephan Scholl, CEO; and Katie Rooney, CFO. After their prepared remarks, we will open the call up for questions. I will now hand the call over to Stephan.

Thanks, Jeremy. Good morning, everyone, and thank you all for joining us. Earlier today, we released our Q1 results and are pleased to report a strong quarter to begin the year, building on our momentum from 2022. At the start, we surpassed $1.5 billion in cumulative BPaaS bookings, nine months earlier than our original three-year projections. This important milestone signifies how we have improved both the quality of revenue and the trajectory of our business. And the bookings are translating into top-line performance, as we delivered quarterly revenue growth of nearly 15%, led by BPaaS growth of 50%. BPaaS represented over 20% of our total revenue for the quarter, a nearly 5 percentage point increase year-over-year. And our pipeline remains strong with robust activity throughout the sales funnel. Our platform and system of record combinations to drive employee engagement are resonating with customers that are looking to optimize the financial health and well-being of their people. The recent acquisition of ReedGroup has further amplified our pipeline by adding content and capabilities that allow us to support our clients through the lease process, creating even greater value for our clients and supporting our high retention rates. As we think about our positive trajectory, it's rooted in the technology and business transformation that we've talked about in previous quarters. Let me focus for a moment on how our commitment to strategic investments is driving this transformation and enhancing our growth. First, through our ongoing product innovation, we recently announced the latest release of the Alight Worklife platform. As you may recall, we are on a twice-yearly release cadence, and this release focused on two key areas. First, expanding access to the Alight Worklife platform to employees, spouses, and families, and second, expanding and more fully integrating our well-being capabilities within the platform. Taken together, these updates will improve the user experience and drive higher engagement and utilization for all employees and their families through complex moments that directly impact their physical, mental, and financial well-being. As we enhance our offering, we're also seeing market recognition of our leading capabilities. To that end, we recently announced an expanded partnership with Workday, a first of its kind to offer a powerful end-to-end solution in various European countries that empowers organizations to source, manage, and pay their global workforce with a simplified and unified offering. Additionally, our investments in product, technology, and go-to-market are translating to new client wins and expanded relationships with existing clients. I'm excited to announce the expansion of our relationship with a Fortune 50 food and beverage company that has been a long-time Alight client. We are building an Alight Worklife experience, which includes the integration of health, payroll, and cloud, and we are bringing on the client's retiree population. We're also pleased to announce new agreements with MasterBrand, the leading North American cabinets manufacturer, and Dentsu, one of the largest global marketing and advertising agency networks in the world. MasterBrand, like many employers, utilized a number of vendors, but it was a fragmented architecture that wasn't having the desired impact for their workforce. Alight Worklife brings the entire ecosystem together for their employees to meet the unique needs of their people, whether they're healthy or just diagnosed with a complex health issue. The relationship with Dentsu demonstrates our continued commitment to international markets and is an example of how we use the Alight Worklife platform to provide an integrated payroll experience. While we invest for growth, we're also making progress on our previously announced restructuring program. As a reminder, this initiative is focused on improving the efficiency of our backend infrastructure, complementing the transformational work we have already completed on the frontend. We are pleased to have completed Phase 1 of our migration to the cloud on time as we actively transition our customers and core applications. As we complete this process of shifting out of physical on-premise data centers, we expect to enhance our margin profile by eliminating redundant costs related to running dual infrastructures. At the same time, the move to the cloud will accelerate our pace of innovation and enhance our ability to deliver for customers every day. In light of our continued progress on both top and bottom-line initiatives, we are reaffirming our 2023 financial targets, which include double-digit growth, margin expansion, and strong operating cash flow generation. And in less than a week, we'll host an Investor Day at the New York Stock Exchange, where we will share the next phase of the Alight story. We will show how we drive outcomes for our clients and their people and how Alight is truly in a category of one. We look forward to seeing many of you there. And with that, I'll turn the call over to Katie to dive into our financial performance.

Thank you, Stephan, and good morning, everyone. We started the third year of our transformation on strong footing. As Stephan noted, our strategic investments are paying off and contributing to our positive results. Let me first start with our consolidated results. During the first quarter, we achieved revenue growth of 14.6%, highlighted by BPaaS revenue growth of 50% as prior bookings continue to translate into higher contracted revenue. As a result, we continue to see a shift towards more stable and resilient recurring revenues, which were up 16%. Recurring revenue comprised 85.7% of total revenue, a 130 basis point increase from the prior year. BPaaS bookings for the quarter were $75 million, and cumulatively, we have now achieved over $1.5 billion in total bookings since we began our transformation in 2021, which is nine months ahead of plan. As we've mentioned before, our bookings profile will continue to be impacted by the timing of large deals. Our pipeline remains robust, and we continue to expect full year BPaaS bookings of $900 million to $1 billion. Turning to profitability. Adjusted EBITDA increased 8.5% to $154 million with an adjusted EBITDA margin of 18.5%, which reflects the impact of certain strategic investments that I will describe in detail momentarily. Even as we make these investments in product, technology, and our go-to-market strategy, I'm pleased to say that we are still driving robust cash generation, delivering operating cash flow of $72 million for the quarter. This translates into an operating cash flow conversion rate of 47%, significantly ahead of our 13% conversion rate last year, even as we account for both our investments and restructuring activity. Let me spend a moment contextualizing those investments. For the year, we highlighted approximately $50 million in investments. Of that, roughly $30 million represents ongoing annual investments that span the full year. As noted, this includes investments in product and technology, specifically connected to our Alight Worklife platform, as well as in our go-to-market strategy. The remaining balance of $20 million is concentrated in the first half of the year in connection with our product release schedule as well as the transformation of our ongoing delivery and customer care model, which support our company defining 2022 Q4 deals, including GE and a Fortune 10 company. These investments are positioning us to sustainably capture the long-term opportunity. Next, I'm going to discuss the performance of our two segments. As we discuss the segment, it bears reminding that we recently realigned our three reporting segments into two, moving hosted into others as it is no longer core to our business operations. In addition, as you'll see in our disclosures, we changed how we present segment profitability from an adjusted EBITDA metric to a gross profit metric. We believe this best aligns with how we allocate resources and assess performance and will better represent the impact of our transformation and investments. So let me now turn to the Employer Solutions segment. First quarter revenue was up 16.1% with recurring revenue up 17.4% and project revenue up roughly 2%. Contributing to our growth was the federal Thrift go-live, as well as increased net commercial activity, volumes, and the impact from the Reed acquisition. Our strong growth translated into improving profitability with first quarter adjusted gross profit up 19.5% to $264 million. Adjusted gross margin increased by 100 basis points to 36.5%. Turning to our Professional Services segment. First quarter revenue was up 8.9% to $98 million, driven by 10% growth in recurring revenue and adjusted gross profit was up $1 million. This represents Professional Services' best quarterly top-line performance since going public, reflecting the strength of our OneAlight sales pipeline and backlog entering the year. Turning to our balance sheet. Our quarter-end cash and cash equivalents balance was $239 million, and our total debt was $2.8 billion. We continue to actively manage our debt with key actions taken during the quarter. First, we increased our hedge portfolio and are now 84% fixed through 2024 and 60% through 2025. Second, we modified our debt maturity profile by completing a leverage-neutral add-on of our $65 million 2024 term loan and combined it with our 2028 term loan. As a result, we now have no debt maturities until 2025. As part of the March secondary offering, we opportunistically repurchased 1.1 million shares at an attractive price. As of 3/31, our remaining share repurchase authorization stood at $78 million. As always, we will continue to evaluate stock buybacks against other attractive opportunities we have for investing in the business organically and inorganically through disciplined M&A. Turning to our outlook. We believe our strong first quarter performance keeps us on track for another successful year. Revenue under contract at quarter end was 87%. And while we remain confident in our visibility and trend line, as a normal course of business, we continue to watch the macro environment with project revenue tending to be impacted first by huge swings. We are reaffirming our full year 2023 guidance, consisting of revenue up $3.47 billion to $3.51 billion or growth of 11% to 12%: adjusted EBITDA of $735 million to $750 million or growth of 12% to 14%, with EBITDA margin expansion of 15 to 50 basis points even with the aforementioned $50 million of investment. Adjusted EPS of $0.62 to $0.67 or growth of 9% to 18%. BPaaS total contract value bookings of $900 million to $1 billion and an operating cash flow conversion rate of 45% to 55%, up from 43% in 2022. From a phasing perspective, we expect adjusted EBITDA to be weighted towards the second half with higher investments in the first half, and we expect revenue growth to be weighted towards the first half, in part due to the go-live of our large Federal Thrift contract last June and as we monitor project-based work for the second half. As mentioned previously, we're hosting our Investor Day at the New York Stock Exchange on the afternoon of May 15, and we'll be providing further color on our next chapter. In closing, we remain excited about our path ahead and believe our first quarter performance is yet another indication that our transformation is working and positioning us for long-term profitable growth. This concludes our prepared remarks, and now we will move into the question-and-answer session.

Thank you. The first question is from Scott Schoenhaus of KeyBanc Capital Markets. Please go ahead.

Hi, team, congrats on the strong results and new wins. I wanted to briefly touch on the international opportunities. I think, Stephan, you mentioned a little bit in the prepared comments. I kind of want to dig in more there. What you're seeing on the international side? I know we tend to focus on the domestic client base here. But if you could talk about your growth opportunities on the international side, Stephan, I'd really appreciate it?

Yes. Thanks, Scott. I appreciate that. And thanks for the comments. As I've said for the last couple of years, we're very excited about the international markets and with our structure of how we're going to market there with Cesar and the team. I think the exciting announcement was the Workday collaboration. As you've seen from Aneel and Carl in Workday's discussion, international, especially European markets, are a huge part of their growth. So we've locked in together arm-in-arm with a solid international joint go-to-market strategy. They're seeing the same thing I've been talking about for the last three years, which is that most companies internationally, just like U.S. clients, are looking for an enterprise-wide solution. They are fatigued around these complex architectures that involve multiple vendors and are now looking for a more integrated, enterprise-wide solution. Together with Workday, we bring the most complete solution into the international market. We've seen the strongest pipelines in Europe, and some of our deal sizes in Europe are the biggest we've ever seen internationally. So yes, this is a big part of our growth strategy for sure.

That's helpful. And then on the margin side, with all this talk about AI and ChatGPT, I'm wondering if you guys are actively exploring ways to integrate more AI-based functions into your offerings to eliminate some of the more labor-intensive parts of your business, i.e., call centers or whatnot. Have you started integrating these AI capabilities into your platform? Thanks.

Yes. I think the automation and digital piece is such a core element of our Worklife strategy. As you know, we launched Worklife across our customer base last May. The key thesis is to make it a better experience. People are using it on a mobile phone to drive annual enrollment and a whole bunch of activities that they used to call us for. So absolutely, we're using the Worklife platform. The AI piece of it is really about how we deliver a recommendation engine to the individual. As consumers, we all have wonderful experiences on platforms like Amazon and Netflix. I've talked for a long time that the employee market should have that same experience. So you need strong AI capability, data aggregation, and the API architecture we've built into the technology of Worklife is absolutely at the core of our strategy to drive automation and to deliver a personalized recommendation engine. So that is a significant playbook for us moving forward.

Thanks, guys.

Next question is from Tien-Tsin Huang of JPMorgan. Please go ahead.

Hey, thanks so much. I know the bookings can be lumpy, and I'm just curious about the implied step-up in the BPaaS bookings for the rest of the year. It looks like it's a little bit more than the usual step up we've seen in the last couple of years. So just want to check your confidence in replenishing the pipeline and getting to the full year BPaaS bookings figure?

Yes. Thanks, Tien. Our pipelines are the strongest we've seen, year-over-year, still featuring big deals. You mentioned the word 'lumpiness.' We just came off our largest sales quarter in the history of Alight in Q4, with over $300 million and over 114% growth. Those two defining deals that we closed last quarter won't really bring revenue until '24 and largely '25. The Q1 bookings actually allowed us to reaffirm '23 guidance. All the smaller bookings drove a lot of in-year revenue for us, which is exciting. We have a healthy and strong pipeline still ahead of us.

Perfect. I appreciate the balance comment as well. Maybe just my follow-up, I'll ask on the cloud migration. You mentioned Phase 1 is done. I didn't have a month on our side that we were tracking. So I'm curious about what's Phase 2 look like, how immediate could that be? And I know it takes time to get the full benefit, but what can we expect in the short and midterm with respect to the conversions?

Yes, good question, Tien. I think of it almost as a three-phase process. We won't be fully out of the data centers until next year. You have to run a dual infrastructure as you're going through that process, right? Phase 1 was about getting all of our existing clients into the new infrastructure, which was a huge milestone. You'll continue to see that. Phase 2 is the ongoing migration of all applications and transactions over this year. We'll take a pause through enrollment and complete that cycle in '24. The work the team did was phenomenal to get us through Phase 1 seamlessly for our clients and keep us on track.

Yes. As we said last year, Phase 1 was all about the front-end experience layer, the platform layer Worklife, getting it deployed last May. That was the most visible aspect to clients. Phase 2 deals with the infrastructure side, equally important. Our strategy to drive platform, aggregating data, making our applications headless, and incorporating third-party data requires a modernized back office. In a four-year window, we will replace 40 years of history. That is a significant milestone.

Yes. No, for sure. That's great to hear. See you all next week.

Thanks, Tien-Tsin.

Yes, thank you.

Looking forward to it.

The next question is from Kyle Peterson of Needham & Company. Please go ahead.

Great. Good morning, guys. Thanks for taking the questions. I want to check if you've had any impact from the ongoing regional bank volatility, either directly from clients that might be some of these banks or anyone that might have used these guys for payroll or anything that might have led to disruption on the execution side, either in March or quarter-to-date here?

Yes, Kyle. We have a very diverse client base across the ecosystem. We do have clients that have used some of the regional banks for payroll, but we've managed to navigate that with them. So we have not seen significant impact, as I think about our relationship with our client base. For us, from a corporate perspective, we focus on ensuring we are in a strong liquidity position. Overall, I would say we have not faced any significant impact.

That's great to hear. And maybe just a follow-up on capital deployment and priorities in the M&A pipeline. You've bought Reed in the fourth quarter and done some buybacks, but how should we think about deploying some of the free cash flow outside of the organic investments in the balance of the year?

Yes. The good news is cash flow continues to improve. We continue to have availability to look at various options for deployment. The first priority has been organic investment, which you're seeing us do. Next priority is to find the right acquisitions at attractive multiples that can accelerate our strategy. And we will also evaluate stock buybacks against other attractive opportunities we may have.

All right. That's good to hear. Nice quarter.

Thanks, Kyle.

Thank you.

The next question is from Peter Heckmann of D.A. Davidson. Please go ahead.

Good morning, everyone. Given the strong bookings over the last several years, how is your conversion backlog looking? Are you finding the ability to staff to schedule them and remain on time? Or have there been any push-outs or hurdles that we should be thinking about?

No, there really haven't been any delays. Even though we've signed large deals, we've seen some of them accelerate. The team has done a phenomenal job working through the implementation. This enables us to accelerate some of our investments and keep them on track. From where we sit today, there are no delays in the implementation. They take a long time, but we are on track with those big deals.

That's great to hear. And then just in terms of what other macro indicators does management really rely on to think about the potential for push-outs or impacts to the business?

Yes. The recurring revenue of our business under contract remains resilient. Even in short-term cycles, an immediate headwind is not as prevalent. So the focus is on longer-term impacts, such as increasing unemployment or customer demand in terms of M&A activity and plan design changes. Those factors could have longer-term impacts on project revenue.

As I've said last year, the headwinds in our Services business have been apparent. We've seen the rebound of that. Many clients are looking to consolidate and simplify their systems, which is beneficial for us to drive OneAlight platform dynamics.

Okay. Great. That's helpful. I look forward to digging a little bit more next week.

You bet.

Thanks, Pete.

The next question is from Kevin McVeigh of Credit Suisse. Please go ahead.

Great. Thanks so much. Maybe for Katie or Stephan, can you remind us about the sequencing of the restructuring and the P&L benefit from transitioning to the cloud?

Yes, Kevin. We have $50 million of investments flowing through the P&L this year for commercial go-to-market tech and other operations. Additionally, there is a $140 million restructuring program over two years, with $90 million expected this year, which we anticipate will yield a run rate benefit of $100 million. In '24, we expect further expansion in adjusted EBITDA.

That sounds terrific. Can you elaborate on your partnership with Workday?

It's a unique deal for both of us. Customers are looking for integrated solutions, and Global Payroll is vital to that. We've won sizeable deals, especially in Europe, where Workday is expanding. Our partnership integrates our products into their sales approach, establishing us as one of their largest implementers. Together, we form the most complete human capital management platform in the market.

Great. Is that for new clients, or could this also cross-pollinate with existing Workday clients?

The focus is to start in six key countries to target new clients, then expand into APAC, LATAM, and the U.S.

Terrific. Thank you.

Great, thanks, Kevin. Appreciate it.

The next question is from Emily Marzo on behalf of Heather Balsky. Please go ahead.

Have you seen any pullback in project revenue in light of greater macro uncertainty? Or have you seen lengthening in the sales cycles?

From our perspective, there is still a very strong pipeline for project revenue, particularly with the OneAlight deals and Professional Services. The area we continue to monitor is employer solutions which could be influenced by M&A activity and plan design changes. The big deals are taking longer, but our pipeline is solid.

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

Great. Thanks very much, and thank you, everybody, for joining us today. We really look forward to seeing many of you next week at our Investor Day in New York. Have a great day.

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