Alight : Q1 2025 Earnings Presentation

Published: 2025-05-08 07:45:22 ET ALIT

Published on 05/08/2025 at 07:45

Disclaimer

Forward-looking statements

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements relating to our ability to execute on our strategy and enhance shareholder value, statements related to our expected revenue under contract and ARR bookings, and statements related to our expectations regarding the performance and outlook for Alight's business, financial results, liquidity and capital resources, including the impact of tariffs and activities from the Department of Government Efficiency, statements regarding our capital structure, expectations regarding our project revenue, and other non-historical statements, including certain statements in the "1Q25 strategic highlights", "Key drivers of revenue growth", "Business outlook (92% of projected 2025 revenue under contract)", "Capital structure update", and "FY25 Adjusted diluted EPS and modeling notes" sections of this presentation. In some cases, these forward-looking statements can be identified by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties including, among others, risks related to our ability to successfully execute the next phase of our strategie transformation, including our ability to effectively and appropriately separate the P0yroll and Professional Services business, risks reloted to declines in economic octivity in the industries, mo rkets, ond regions our clients serve, including as a result of macroeconomic foctors beyond our control, heightened interest rates or changes in monetary, trode ond fiscoI policies, competition in our industry, risks related to cyber-ottacks ond security vulnerobilities ond other significant disruptions in our informotion technology systems ond networks, risks related to our obility to mointain the security and privacy of confidentio I, persono I or proprieto ry doto, risks reloted to actions or proposals from activist stockholders, and risks related to our complio nce with applicable laws and regulotions, including cho nges thereto. Additional foctors thot couId cause Alight's results to differ moterio lly from those described in the forward-looking stotements con be found under the section entitled "Risk Factors" of Alight's Annual Report on Form 10- K, filed with the Securities and Exchange Commission (the "SEC") on Februa ry 27, 2025, as such factors may be updated from time to time in Alight's filings with the SEC, which ore, or will be, occessible on the SEC's website at www sec gov.Accordingly, there are or will be important factors thot couId cause octuo I outcomes or results to differ moterio lly from those indicated in these statements. These factors shouId not be construed os exhaustive ond should be considered olong with other foctors noted in this presentation and in Alight's filings with the SEC. Alight undertokes no obligation to publicly update or review ony forward-looking statement, whether os o result of new information, future developments or otherwise, except os required by

Financial statement presentation

This presentation is not considered to be prepared in accordance with GAAP and has not been prepared as proforma results under applicable regulations. Additionally, certain of the information in this presentation is not presented in accordance with GAAP or the requirements of Article 11 of Regulation S-X ("Regulation S-X") with respect to proforma financial information. In particular, this presentation includes supplemental

proforma financiol information thot includes certain management adjustments in addition to those permitted under Regulation S-X. We believe the supplemental informotion is helpful in, omong other things, presenting our results more consistently across prior periods. For more obout those management odjustments, pleose see "Background regording proforma adjusted supplemental financiol results" in the oppendix. For informotion presented in accordance with Regulotion S-X, please see our Current Report on Form &K filed with the SEC on February, 20 2025.

Non-GAAP financial measures and other information

Included in this presentation are certain non-GAAP financial measures, such as Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Net Income, Free Cash Flow, Net Leverage Ratio and Net Debt, designed to complement the financial information presented in accordance with U.S. GAAP because management believes such measures are useful to investors.

Additionally, Net Leverage Ratio and Net Debt, as presented herein, differ from the Net Leverage Ratio and Net Debt figures as those relate to the Credit Facility, as the Borrower under the Credit Facility is Tempo Acquisition, LLC rather than Alight. We also use proforma adjusted EBITDA to calculate the Net Leverage Ratio as presented herein. These non-GAAP financial measures should be considered only as supplemental to, and not superior to, financio I measures provided in occordo nce with GAAP. Pleose refer to the oppendix of this presentation for o reconciliotion of the historico I non-GAAP linoncial meosures included in this presentation to the most directly compo roble financio I measures prepo red in occordo nce with GAAP.

Reconciliations of the historical financial measures used in this presentation that are not recognized under

U.S. GAAP are included or described in the tables attached to the appendix. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

ARR bookings is an operotionaf metric thot represents mo nogement's estimate of new long-term ogreements closed in the period referenced. Revenue Under Contract is an operotional metric that represents management's estimote of onticipoted revenue expected to be recognized in the period referenced bosed on ovoilable informotion thot includes historical client contracting practices. Our ARR bookings and Revenue Under Controct metrics do not reflect potential future events such as unexpected client volume fluctuations, eorly contract terminotions or eorly contract renewo is. These metrics may differ from similo r terms used by other compo nies and therefore comparability moy be limited.

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1Q25 strategic highlights

Delivered first quarter results in line with expectations

Recurring revenue of $520 million in line with guidance

- Recurring revenue represented 94.9% of total revenue

Adjusted EBIT DA' of $118 million, high end of guidance range

Commercial momentum and renewal activity building revenue under controc

New wins or expanded relationships with companies including US Foods, Markel and D

92% of projected full year revenue under contract*

Healthy balance sheet and strong cosh flow enables capital return

Quarterly dividend of $0.04 per share

Repurchased $20 million of shares and authorization of $26a million remaining at quar1

Repriced $2 billion term loan with expected interest savings of $10 million on annualize

4 Continued advancements in AI supporting client outcomes and long-term strc

Nearly 80% of clients leveraging Alight's Al capabilities, up from 62% at end of 2024

Launched self-service reporting platform for Leaves, Al insights integration coming this

Gen-Al search summaries for end-users actively rolling out

' Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and intangible amortization adjusted for the impact of certain non cash and other items that we

consider in the evaluation of ongoing operational performance. A reconciliation of this non GAAP financial metric to its closest comparable GAAP metric is included in the ap Revenue Under Contract is an operational metric that does not have standard definitions and therefore comparability mav be limited. See disclaimer for more information.

1 Q25 financial results

($ in millions)

4 Q25

Change

Revenue

Recurring Revenue

$520

$530

-1.9%

Project Revenue

$28

$38

-26.3%

Total Revenue

$548

$568

-3.5%

Adjusted Gross Profit2

$200

$223

-10.3%

% margin

36.5%

393%

-280 bps

Adjusted EBITDA

$118

$131

-9.9%

% margin3

21.5%

23.1%

-160 bps

1Q24 results are presented on a proforma adjusted basis in light of the July 2024 divestiture of our P0yroll and Professional Services business, please see disclaimer slide for additional information about proforma adjustment presentation and see appendix for details regarding adjustments and reconciliations, where applicable.

Adjusted gross profit is defined as revenue less cost of services adjusted for depreciation, amortization and share based compensation. Adjusted gross profit margin percent is defined as adjusted gross profit divided by revenue. A reconciliation of this non GAAP financial metric to its closest comparable GAAP metric is included in the appendix.

Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. A reconciliation of this non GAAP financial metric to its closest comparable GAAP metric is included in the appendix.

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Key drivers of revenue growth

Revenue from New Wins: Bookings with new logos & existing client expansions that go-live and add revenue to the existing base of recurring revenue, including project revenue sold during current year

Volumes: Our revenue base is -90% PEPM (per employee per month) billing based on the # of eligible participants for each client and is variable each month based on our clients' growth or contraction in employees

Contract Renewals: Lost revenue from the prior year revenue base from clients who did not renew

Growth Model

+6 - 8%

+O - 2%

(4) - (2)%

+4 - 6%

2025 Outlook

-5 - 7%

-0-1%

(6.5)%

(1.5) - 1.5%

Notes on 2025 Expectations'

Revenue from new wins: Growth driven by 2023 and 2024 ARR bookings, as well as in-year revenue from 2025 bookings. Variability driven by project.

Volumes: Variability in underlying client employment.

Contract renewals: 2025 expected to resemble 2024 with lag effect of losses from 2023 and early 2024. Recent contract renewals impacting 2H25 and 2026 have improved.

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Disclaimer

Alight Inc. published this content on May 08, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 08, 2025 at 11:44 UTC.