Good morning, and thank you for holding. My name is Venju, and I will be your conference operator today. Welcome to Alight First Quarter 2025 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 it over to Jeremy Cohen, Head of Investor Relations at Alight to introduce today's speakers.

Good morning, and thank you for joining us. Earlier today, the company issued a press release with its first 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. 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. All year-over-year financial comparisons made on today's call are on a pro forma basis, giving effect to the payroll and professional services transaction completed last July and are consistent with the presentation we have published on our Investor Relations website. On the call from management today are Dave Guilmette, CEO; and Jeremy Heaton, CFO. After the prepared remarks, we will open the call up for questions. I will now hand the call over to Dave.

Thanks, Jeremy, and good morning. We're off to a strong start to 2025 with first quarter results that reflect continued progress against the strategy we outlined back in March during our Investor Day. We shared that we are the market leader in the employee benefits delivery space, and our strategy is grounded in a client-centric focus. Our integrated Alight Worklife platform paired with a deep data lake informs an enormous opportunity across AI and automation that enables us to innovate and bring additional value to our clients and efficiencies to Alight. As we focus every day on the execution of the strategy, we're also delivering financial results in line with our commitments with total revenue of $548 million and adjusted EBITDA of $118 million. While we continue to watch the economy with a cautious view, we feel good about our revenue under contract, the momentum from our renewals, and the operational initiatives underway that will continue to drive margin expansion and more free cash flow. As a result, we are reaffirming our financial outlook for the year. We talked at length about the importance of retention. And to start the year, our renewal trends remain on track with the execution of our renew everyday program. We have already renewed several top clients this year, including Starbucks, Baxter, US Foods, and Otis Elevator Company, who have been important clients, and we look forward to continuing to partner and innovate with them. These are examples of the confidence our clients have in our vision and the value we deliver, retaining and then expanding upon those relationships is a critical element that powers the flywheel to accelerating financial performance and delivering long-term shareholder value. Two key components of this are leveraging our technology transformation and delivering service excellence. Within technology, our team has been laser-focused on delivering value for our clients and participants through accelerating innovation and AI enablement. This quarter, we launched our self-service leaves administration reporting platform, which when coupled with AI insights, will deliver tremendous value for clients and simplify the complexity of absence management. Leaves continues to represent a large growth opportunity for us with only 10% penetration across our top 200 clients. At the same time, we are also working on similar modernized reporting platforms for health and wealth. At quarter end, nearly 80% of our clients were already leveraging AI in some capacity, and our road map positions us to meet and anticipate the needs of participants and drive better outcomes. We are also making headway on how we nail the basics by enhancing the delivery operating model, which as a reminder, is our initiative of moving from a solution-centric approach to a balanced centers of excellence approach. One example of how this is coming to life is within our COE or strategic implementation services. Our work simplifying implementation routines is creating a standardized approach across our solution domains. For example, the way we implement a navigation solution should not differ materially from other offerings, whether it be leaves, health, or wealth solutions, building muscle around a more consistent and predictable implementation experience will reduce costs and the time to go live for our clients. On the customer care front, service levels have improved, and we're proud that our NPS score related to annual enrollment increased 12 points this past year. We will have plenty more to share as the year progresses, but we're off to a strong start. The importance of the initiatives across technology and delivery cannot be understated. The value we're adding from these initiatives not only supports a better client experience but is a key element to driving stronger profitability and free cash flow. Many of these initiatives are independent of the top line. So with that, let me touch on the macro environment. The long cycle and recurring nature of our business helps to insulate us as we experienced during the pandemic, but we are not completely immune from any impact. We feel good about what is in our control. And like most companies, we are navigating current market conditions. There are really three areas we are watching closely: First, increasing market volatility can elongate the client decision-making process for both project and ARR deals and how quickly we can close them and go live. As is our norm, we would expect to have more visibility on our 2025 project work in year revenue in our overall pipeline as we move through this quarter. Our view, and that of clients I have recently met with, is that amid uncertainty, benefits programs aimed at helping employees to be healthy and financially secure are as important as ever. Helping clients navigate the current environment provides an opportunity to add even more value and strengthen our deep relationships. And those clients are continuing to look at ways to simplify and drive down their costs, which plays well into our strategy. This is reflected in our strong pipeline, which is up roughly 30%. Second, assets we manage through our financial advisers generate fees that vary with financial market performance. While this is only a small portion of our wealth business, the fees can be pressured by a protracted market downturn. And finally, we entered 2025 cautious on volumes or participant counts within our guide. We continue to watch participant counts. But as we saw during COVID, changes to employment levels did not impact our volumes materially over the short run, and typically the impact would lag the market by six months or more. Every day, our teams continue to execute in areas we can control. We performed as expected in Q1, and our work to renew and improve services is progressing and gives us confidence that the business is on track. We remain grounded in being a trusted partner that delivers service excellence and competitive solutions, and we look forward to supporting our clients and helping their people every day. With that, let me now turn it over to Jeremy.

Thank you, and good morning. As Dave mentioned, first quarter results were in line with expectations, and we're pleased with our team's execution around key initiatives underway that enable us to reaffirm our outlook. 2025 continues to be a transitional year during which we're taking steps forward, both strategically and financially towards our midterm objectives. Turning to the results. Revenue was $548 million and at the midpoint of our guidance range. Recurring revenue comprised nearly 95% of total revenue in the quarter and performed as expected. Nonrecurring project revenues were down $10 million or 26%, in line with our expectations as well. We entered the year fairly cautious on project revenue, and this continues to remain the case in the current market. With our progress in the first quarter, we now have 92% or $2.2 billion of projected 2025 revenue under contract. Our team is intensely focused on securing the remaining renewals in this cycle and commercial execution across both recurring and project revenue. Adjusted gross profit was $200 million for the quarter. Similar to prior quarters, this is impacted by costs to support the divested business, which are reimbursed for the TSA and other income. This amounted to $10 million in the quarter. Adjusted EBITDA was $118 million for the quarter at the high end of our guidance range. Free cash flow was $44 million for the quarter, in line with our expectations with timing impacts of tax payments and divestiture-related items. We remain on track towards our annual target of $250 million to $285 million of free cash flow. Finally, we returned $41 million to shareholders this quarter via share buybacks and our quarterly dividend. Turning to the balance sheet. Our quarter-end cash and cash equivalents balance was $223 million, and total debt was $2 billion. Our net leverage ratio was 3.1x, and we expect this to normalize below 3x again as we build cash through seasonality and as profitability ramps through the year. We continue to actively manage our debt, which is 70% fixed through 2025 and 40% through 2026. In January, we repriced our term loan, lowering our interest rate by 50 basis points, which will decrease our interest expense by $10 million annually. We repurchased $20 million worth of shares during the quarter and at the end of March, had $261 million of share buyback authorization remaining. Now let me turn to our outlook. We are seeing continued momentum during this renewal cycle. And in addition, while we navigate the current environment, we continue to execute on the day-to-day operations and value-creating initiatives we kicked off last year. As Dave mentioned, while we benefit from a more stable business model, we are watching a few key areas closely given the market dynamics, mostly around the demand environment and any longer-term impacts to client participant accounts. We are reaffirming our outlook for 2025, and this reflects our revenue under contract and operational levers driving enhanced productivity. Our transformation initiatives are on track to deliver a better client experience, streamline processes, and drive margin expansion. Today, we disclosed a 15-month restructuring program that supports these activities. Importantly, with all cash investment and benefits already included in our 2025 guide and midterm financial framework from Investor Day. Full year expectations include revenue of approximately $2.32 billion to $2.39 billion or negative 1.5% to positive 1.5% growth. Adjusted EBITDA of $620 million to $645 million, adjusted EPS of $0.58 to $0.64, which does not include any impact from share buybacks, and free cash flow of $250 million to $285 million or growth of 13% to 29%. Our full year view reflects our visibility today and assumes the current market conditions prevail. To close out, our teams delivered on expectations for the first quarter, and we feel good about the operational work underway. Our business benefits from a highly recurring revenue base tied to long-term contracts, delivering mission-critical services to the largest companies in the world, and we remain intensely focused on our execution while delivering exceptional value for our clients. 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.

The first question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets.

Congrats on moving into expansion. My question really, I want to focus on the project revenue. You guided for continued weakness for this year, but just kind of wanted to give your updated thoughts on the first quarter trends, the comps that you faced in the back half of the year and all the macro noise, obviously, that maybe is a headwind to M&A and whatnot. But just kind of get one of your updated thoughts on the project revenue as we look through the year.

Thank you for the question, Scott. I'll begin and then Jeremy will add in as well. The first quarter went as we anticipated. We didn't expect a significant increase in project work this year, as we mentioned earlier, and there remains a downturn in M&A activity and other factors that would usually occur in the first quarter. What’s crucial now is the second quarter. Our teams are actively engaging with our major clients regarding their plans and strategies for business, including changes in benefit design and vendor configurations, which typically affect the enrollment process in the latter half of the year. We will have a clearer understanding of how this is developing in the coming weeks. However, all signs indicate ongoing discussions about the importance of these changes, as they directly relate to the costs of these programs. Health care costs are continuing to rise, and our clients are working hard to manage those expenses. Jeremy?

Yes. What I might add there, Scott, is as we've talked about, the first half project work, which we had expected it to be really in line with where we ended up for the first quarter, tends to be more discretionary projects or ad hoc work that comes in from M&A and the regulatory changes that Dave mentioned. And so I think that was how we thought about the year and coming through and what we're seeing. So the pipeline really builds. I think the June, July timeframe in the large enterprise space is where you really get full visibility into what the back half of the year will look like, and as Dave said, tends to be more stable. The comps change a little bit for us. So we expect to see an improving profile there as we get into the back half of the year. But again, we'll get more visibility as we get through the quarter. And these are the teams working with our clients day to day. So we'll get pretty up-to-date information as we progress here.

Sorry for the background noise. And then Dave, I think you mentioned your pipeline is up 30%. Can you provide more color on that? Is that expansion? Was that penetrating into the middle markets? Just any more color on the pipeline update.

Yes. Certainly, Scott. So I would say it's kind of across the board. We're seeing nice opportunities in the core admin space. We see a very robust pipeline related to our leave solution and a similar amount of momentum related to our navigation solution. So all in, we feel good about that momentum. We feel good about the strength of the pipeline, and we're going to continue to pursue those opportunities pretty aggressively here through the second quarter.

Next question comes from the line of Kyle Peterson with Needham & Company.

Great results. I wanted to touch on the guidance and what you’re observing in the sales cycle. It seems you might think the deal cycles could lengthen a bit due to the macroeconomic environment. Is that commentary part of a cautious approach, or has there been any noticeable change in client behavior and decision-making over the past month due to factors like the trade war and uncertainty?

Yes, Kyle, it's Dave. Thank you for your question. We haven't observed any significant changes in buying patterns so far. The situation is more related to the overall environment we are all navigating. There are policy changes from the administration that cause our clients to take a moment to reconsider the types of projects they might pursue or any discretionary spending. However, nothing has been completely ruled out at this stage. Typically, we classify this into two categories. There are larger moves clients may consider, such as introducing new programs like our navigation solution or making adjustments to leaves administration and core benefit offerings. These usually align with standard contract renewal cycles, and I can confirm that all of that is progressing as planned. On the other hand, there may be short-term expansions that involve additional decision-making or a bit more caution, which could delay contract execution by a few weeks. Nevertheless, we haven't seen any prolonged issues or anything that raises serious concerns regarding buying patterns at this point.

Okay. That's really good color. And I guess a follow-up on capital allocation, you guys are thinking about the buyback, in particular, obviously, it seems like we're in just a more volatile market environment in general. But I guess, let's just say, if cash builds this year, would you guys be willing to maybe be a little more tactical or aggressive to try to support the stock if there are dislocations and such?

Sure. Thanks, Kyle. Yes, I think we discussed this a bit during Investor Day. We received an increase of $200 million, giving us a total of $261 million in available authorization. This is important for us as it provides flexibility in our decision-making and allows us to be opportunistic. As you noticed, we were active in the first quarter, and we plan to continue this approach. In this environment, our first priority regarding capital allocation is to strengthen the balance sheet. We will also explore opportunities for strategic partnerships or other inorganic options. However, returning capital remains a priority, as seen with our dividend and active share buybacks. We are well-positioned with the available authorization to be opportunistic this year.

Next question comes from the line of Pete Christiansen with Citi.

Thanks for the questions. I have two for Jeremy. Can you discuss the pipeline, which is currently at 92% for 2025? It's challenging to review this in a pro forma context, but how does this generally compare with the benefits business on a pro forma basis against previous years? It appears to be in a strong position.

Thank you for the question, Pete. We feel optimistic about the 92%. As you noted, we are beginning a normal year. We started this year at 89%, which is an improvement compared to previous years when we would typically begin in the high 70s to low 80s. This year, we benefited from a starting point of 89%, and we made significant progress in the first quarter. This progress enhances our confidence in our guidance based on the results we achieved. While there will always be execution necessary in any year, we are pleased with our advancements. Additionally, the renewal cycle plays a crucial role in our revenue under contract for this year and as we project into 2026 and 2027, both of which are better compared to the same time last year. Overall, we are very satisfied with our progress.

That's helpful. And have there been any implementations that have been rescheduled, I guess, lately?

Nothing material that we've seen at this point. You typically might have something that moves month-to-month based on something that might happen within a particular project or a go-live, but we have not seen large shifts in implementations at this point. We maintain full capacity to be able to implement deals on time and really going back even to the federal deal or the Thrift deal, we've really had no issues in terms of implementation and go-lives.

That's great. I have one last question. My phone cut out for a moment. Dave, you were discussing some of the potential challenges posed by a weaker macro environment affecting the wealth segment. Could you clarify that for us and how we should view that part of the business? Apologies for the interruption.

Yes, sure, Pete. Thank you. So maybe the way to think about this is, first of all, we have a team of financial advisers that for fee managed assets on behalf of retirees, order of magnitude, they manage tens of billions of dollars out of our $1.5 trillion of assets that we cover. So kind of as we sit here today, if we saw a really protracted weakened market with performance being down, we're talking about exposure here from a revenue standpoint, well less than $10 million.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the floor over to Dave Guilmette for closing comments.

Thank you, operator, and thank you, everyone, for joining us today. We feel good about our first quarter performance, which is a testament really to our colleagues and the support that they provide our clients every day, and I'd like to take a moment to thank them for everything that they do. We look forward to sharing our progress as we move through the rest of the year and seeing many of you in person over the next few weeks. Thank you.

Thank you. This concludes our today's teleconference. You may disconnect your lines at this time. Thank you for your participation.