Good morning, and thank you for holding. My name is Dani, and I will be your conference operator today. Welcome to Alight's Third 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 the call over to Jeremy Cohen, Head of Investor Relations at Alight, 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 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. 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 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.

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 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 benefits 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. 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 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, 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 through 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. 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. 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. 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. 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. First, we piloted a conversational AI agent solution with 2 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. Next, we've rolled out Gen AI-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. And 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 Everyday 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 2 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. Our renewal rate in the large market was up significantly in 2024, and we're pleased to maintain that same level in 2025. And we're working hard on expanding Renew Everyday to all of our clients, strengthening the approach to supporting smaller clients and point solutions. We are making great progress with the Renew Everyday 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. 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. And with that, let me turn it over to Jeremy.

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 onetime revenue reduction from finalizing the commercial agreement with the divested Strada business. Normalized for this, total revenue would be $537 million. Nonrecurring 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. 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 9 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. 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. 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 recognized a noncash goodwill impairment charge of $1.3 billion. 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 enter the quarter with $2.25 billion of revenue under contract. For the year, we expect revenue between $2.25 billion and $2.28 billion, adjusted EBITDA of $595 million to $620 million, free cash flow of $225 million 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?

The first question we have comes from Kyle Peterson of Needham & Company.

I wanted to start with an update on the guidance and see if you could explain some of the factors behind the reduction. From the slides, it seems like this is due to a mix of volumes and new business wins. Could you provide any clarity or context on what you're observing, especially regarding the new business wins? You made some announcements in today's release, so when can we expect to see the benefits from those wins?

Sure. I'll start. We lowered our revenue guidance by $40 million at the midpoint, which is split between project and recurring revenues. The project revenue reduction is the largest, with a $20 million decrease. We haven't seen an improvement in the pipeline or activity levels, and there's a sense of caution as we go through the annual enrollment process. Even with lower comparisons from last year, we expected to see more activity building in the pipeline coming into the fourth quarter, but that hasn't materialized. On the recurring side, we've experienced some volume declines year-to-date, and overall sentiment remains cautious, so we anticipate being flat to slightly down on volumes. The update on the customer care agreement affected our performance in the third quarter and is included in the revisions, along with some revenue from our bookings this year. The most significant factor affecting our EBITDA and free cash flow moving forward is the project update. We're optimistic about our ongoing initiatives in operations, delivery, and technology, particularly in customer care at our call centers, but project levels at this stage impact our profitability and cash flow. There will always be aspects like retiree health that could improve our performance, but these are the trends we're observing as we enter the fourth quarter.

Okay. That's helpful. And then maybe just a follow-up. I want to see if you guys are seeing any impact or whether it's client decision-making around open enrollment related to 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, employee decision-making? Anything you guys are seeing? Or so far, has it been something you guys have been able to work through?

Thank you for the question. Let me take that. As Jeremy mentioned, there are a few key points to note. In general, whether related to the government shutdown and its effects on federal employees or what gets passed on to clients, we haven't observed any significant impact at this time. It's also important to remember that when a large company undergoes a reduction in force, there is often a considerable delay before the effects are felt. Individuals may remain on COBRA for a while, and some may be furloughed, so they are still technically part of the workforce. In the case of the federal government, there are employees who are working but not receiving pay in certain situations. Over the long term, we do not expect the volume to increase as it typically would, but so far, there hasn't been any substantial negative effect this quarter, and we do not foresee that changing in the fourth quarter.

The next question we have comes from Scott Schoenhaus of KeyBanc Capital Markets.

So if we stripped out the project revenue noise, recurring revenue down low to mid-single digits 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 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 leads. Can you walk us through like how do we get this business back to flat to up in growth on the top line?

Thanks, Scott. It's Dave. I'll take that one. So there's a few elements here that we're sharply focused on, and you've touched on a little of those in 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 Everyday program initiatives. And we're looking to cascade that through our entire client portfolio. So one, 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. Again, we've got some good activity out there in the leave space. We've got a number of opportunities that were deep in discussions or near to contracting on core ben admin from middle market up to some of the larger opportunities. So that's kind of taking the clients in through the front door as well. So 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? 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, lead 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, I feel good about where that's headed. And our product positioning is as strong as it's ever been.

Great. As a follow-up, aside from the project business that impacts the bottom line, what can your company do to achieve long-term margin expansion? You've mentioned the call centers, and it seems you are bringing some services back in-house, which I assume might increase costs. Can you help us understand, excluding the project business, how you envision your opportunities for margin improvements in both the near and long term?

Scott, I'm going to have Jeremy discuss some aspects of how that translates. One key focus we should have in response to your first question is the opportunities present within our partner network. We mentioned this in our opening remarks. We're quite optimistic about the level of engagement and interest our partners are showing in joining our network, given our size, scale, and reach among customers and clients. This represents a potential for revenue growth as well. It will take some time to establish contracts and initiate the run rate, similar to what we discussed last quarter with Goldman Sachs. The more contracts we secure, the stronger our revenue growth opportunities will become. Regarding your question on margin expansion, we're implementing AI across various areas. We need to invest in this, and those investments are significant. We anticipate that these changes will affect how we serve our customers with AI, either by reducing call volumes as mentioned earlier or altering the way work is performed. Additionally, we have brought some resources back in-house, a strategy that we will continue to evaluate. Jeremy, do you have anything to add about the drop-down?

No, I believe it aligns with our earlier discussions this year, Scott. We feel positive about our progress, particularly with our operating model for delivery teams, which are essential as they are present with our clients daily. From a cost perspective, we aim to enhance the client experience first, having standardized much of our work across various groups and solutions. We now have Centers of Excellence established, allowing us to bring work back in-house from third parties, which is more cost-effective due to the favorable terms and flexibility in productivity. This approach enables us to expand our services while managing our largest cost base effectively. Additionally, as Dave mentioned, we've experienced a significant reduction in call center operating expenses over the past few years due to our initiatives, though new technologies have introduced some challenges. We're looking forward to concluding the annual enrollment period to assess the impacts, which will help us in planning for 2026 and 2027. Overall, we are optimistic about the efficiencies we've achieved, and we feel we are ahead of our expectations. Some of this is intended to balance our top-line performance, but as we regain some operating leverage, it should have a more pronounced effect.

The next question we have comes from Kevin McVeigh of UBS.

Great. I want to start by asking about the initiative on approval for declassification. Can you help us understand what that entails and what influenced the decision to pursue it?

Sure. I think, Kevin, it's Jeremy. I'll start. From a Board perspective, we currently have a staggered Board, meaning that four directors are nominated each year. Justin has been in ongoing discussions with our Board and from a governance standpoint, as well as with investors, about eventually destaggering the Board. This would allow all directors to be up for nomination annually as we move through this process. It's simply a governance update as we transition from being a private company to a public one through the SPAC, reflecting what I would consider a more standard governance structure for a public company.

And 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.

Got it. And then I guess, I mean, you had 2 consecutive meaningful impairments. You've guided down 2 consecutive quarters. Just help us understand just the modeling on the guidance relative to where you're coming in, particularly given we're 9 months into the year because it just continues to be an issue in terms of how you're guiding.

Sure. In the fourth quarter, the primary concern is project revenue, which has reached unprecedented low levels. While we anticipated this situation, our teams are actively engaging with clients to assess the pipeline, and it remains significantly below our projections. The bookings element and macro factors regarding employee and participant counts also contribute to our guidance. As mentioned earlier, we have $2.25 billion in revenue under contract entering the quarter, with guidance ranging from $2.25 billion to $2.28 billion. This reflects our current outlook for execution as we wrap up the quarter. Regarding the impairment, it results from a noncash accounting adjustment primarily related to the company's valuation changes during the quarter. We conduct a market valuation test every quarter as part of our normal financial controls, which considers long-term trends in our business while factoring in the market capitalization and value of the company. We accounted for this charge in alignment with the company’s valuation at the end of the quarter.

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

I wanted to see if you could give us an update just on the follow-on payments from the divestiture. I think there's $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?

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 deferred payments, $50 million was, in effect, guaranteed and which will be paid out. There was $150 million, which was contingent on EBITDA performance of the divested business through 2025. So we have that really recognized at zero value on the balance sheet today, contingent upon the performance of the Strada 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 that 7-year anniversary of the close of that deal.

Okay. Both payments would be on the 7-year anniversary. Potentially.

Correct.

Okay. And then 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?

Pete, it's Dave. So let me take that one. Firstly, we had a considerable amount of volume that played 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, 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, our expansion of the Renew Everyday 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. 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 upside and cross-sell opportunities that exist by bringing new services to those clients.

The final question we have comes from Andrew Polkowitz of JPMorgan.

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 3 months later about the progress here, how these things have resonated with your sales force.

Sure. So 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. So he's collaborating, working through, looking at every deal, et cetera. So 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. And 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, and 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 impacted and we've impacted, we should see some uptick on 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 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.

Great. That's good to hear. And just one follow-up for me, more of a macro question. I was curious if there's been any change in the hiring assumption or net hiring assumption you laid out last quarter and the outlook, understanding there's offsets like you called out, Dave, 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 offsets?

I think included in the guide for this year, Andrew, we've indicated that for 2025, we are projecting a decline of about 0.5 points to flat. So far this year, the impact has been minimal, slightly down, but it’s just a matter of basis points. We are not seeing the typical support of 1% to 2% for growth. Our current expectations are based on what we observe up to now, and we usually have a clearer picture by the fourth quarter if there are larger impacts affecting our clients. This reflects our guidance based on this year's observations. Looking ahead to next year, it’s challenging to predict additions to growth given the current headlines, but we will manage the situation. Our teams engage closely with clients daily, providing us with a pre-read on potential developments within their bases.

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.

Thank you, operator. So in closing, our strategic execution is transforming our delivery services and is reenvisioning 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.

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