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Alight, Inc. reported Q1 2026 revenue of $534 million and adjusted EBITDA of $104 million, both exceeding management's guidance despite a 3% year-over-year revenue decline. The beat was fueled by a 29% jump in project revenue and early partner network contributions. Free cash flow also showed strength, rising 20% to $53 million. Under new CEO Rohit Verma, the company is pivoting toward a more client-centric model, expanding account management to cover 400 key clients representing 90% of ARR. Verma highlighted a "relentless focus" on fixing past execution issues and has already seen improved renewal activity in Q1. The leadership team was bolstered by new hires in technology and operations to drive AI and service excellence initiatives. Verma framed AI as a tool to enhance decision-making across Alight’s health, wealth, and leave platforms while maintaining human empathy for complex cases. For Q2 2026, Alight expects revenue of $490M-$505M and EBITDA of $80M-$90M, reflecting planned investments and fluctuating project volumes. With over $500 million in liquidity and a stabilizing renewal pipeline, Alight aims to move past recent headwinds by leveraging its scale as a comprehensive benefits provider.

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Alight, Inc.: Dilution Tidal Wave and Litigation Clouds Obscure Deteriorating Tangible Equity

Full Earnings Call Transcript — Q1 • 2026-05-05

Operator: Good afternoon, and welcome to Alight, Inc.'s first quarter 2026 earnings conference call. Following their prepared remarks, we will open the call for questions. Instructions will be provided at that time. There is a presentation accompanying today’s call available on the Alight, Inc. Investor Relations website. I will now read the safe harbor statement. Today’s discussion includes forward-looking statements within the meaning of the federal securities laws. These statements reflect management’s current views and expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Factors that may cause such differences are described in today’s earnings release and in Alight, Inc.’s filings with the Securities and Exchange Commission, including in the Risk Factors section of its most recent Annual Report on Form 10-K. The company undertakes no obligation to update any forward-looking statements except as required by law. In addition, during today’s call, the company may reference certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in the earnings release available on the company’s website. I will now turn the call over to Rohit Verma, Chief Executive Officer of Alight, Inc. Please go ahead. Thank you, Sachi.
Rohit Verma: Good afternoon, and welcome to Alight, Inc.'s first quarter 2026 earnings call. Joining me today is Gregory Giometti, our interim Chief Financial Officer, and Susan Davies, our Chief Accounting Officer. It has been a busy and productive first few months for me, and I am pleased to have this opportunity to share my thoughts with you. Today, we will cover my perspective on our results, some further transparency into the business, a view of the opportunity ahead, some reflections of what I have heard from clients, including its role in shaping our strategy, a view of the team we are building, and finally, a perspective on AI. Our first quarter financial performance was solid, as we exceeded the guidance shared during the last earnings call, which, as you will recall, took place just over 30 days into my time as CEO. Our outperformance was driven by higher-than-expected project revenue, as well as better-than-expected performance of partner revenue in the quarter. While our Q1 performance was better than expected, we will continue to see a difficult revenue comparison to the prior year due to the commercial execution over the last couple of years. It will take the next several quarters for that revenue pressure to completely work through our P&L. For these reasons, the team and I are intently focused on improving commercial execution by retaining clients and winning new clients. I am pleased to share that we are already seeing improvement in our new sales activity as well as our renewal execution. First quarter revenue of $534 million was comprised of $498 million in recurring revenue and $36 million in project revenue. As you all have observed before, our project revenue has been the major driver of volatility in our results. Project revenue was up 29% compared to Q1 2025, and this comes in succession to Q4, where project revenue was down 27% to Q4 2024, showing the volatility we have discussed before. Our recurring revenue was 4% below last year, resulting in a consolidated revenue decrease of 3%, which was better than expected. Adjusted EBITDA of $104 million benefited from the revenue flow-through and lower-than-expected employee health care expenses in the quarter, which kept the margin decline to only 200 basis points. All in all, we are happy with where we landed compared to expectations and glad to see the progress we are making. We are maintaining strong liquidity and generating significant cash. We exited the first quarter with more than $500 million in total liquidity. This is after our Q1 2026 TRA payment. At the end of Q1, we had $178 million in cash on our balance sheet and $330 million available on our revolver. Additionally, we generated free cash flow of $53 million in the quarter, a 20% increase compared to the same period last year, and we believe we will continue to see solid cash generation through the end of the year. This provides us the foundation to execute our core strategies. Additionally, it gives us the flexibility to invest in our business to accelerate the service and customer excellence initiatives that are critical to enabling industry-leading outcomes for our clients. I, along with our team, have operated with considerable intensity and urgency in the first quarter. I have met 90+ clients to date in 2026, made critical senior hires, and launched initiatives all focused on strengthening our market position and demonstrating our commitment to relentless execution. As I have met with clients over the last quarter, I have been increasingly energized about the strength of our solutions and quality of our customer base. Their feedback has been instructive and insightful. What is evident is that our clients want to work with Alight, Inc., and we believe we are really the only company that can truly service the needs of a diverse client base. On many occasions, the exact quote of our clients was that they want to see Alight, Inc. successful. These interactions have reinforced my confidence in our client retention and ultimately cash generation capabilities. During the quarter, we made key hires across the organization, including the Head of Delivery Transformation, Head of Specialty Sales, Head of Account Management, and Head of Marketing, along with making some critical additions deeper in the organization. Following the close of the quarter, we announced our new Chief Technology Officer, Naveen Bhawaja, who previously led technology at the Consumer Products division of Disney. I cannot think of anyone better to help reimagine customer experience and translate technology leadership into meaningful business and customer outcomes. Additionally, last week, we announced the appointment of Dinesh Solsiani as President of Employer Solutions. Dinesh previously served as Alight, Inc.'s Chief Strategy Officer and played an integral role in the company’s strategic evolution. In his new position, he will collaborate with other key leaders across the business to continue to advance Alight, Inc.'s strategies to deliver outcomes for clients at scale. We also launched multiple initiatives across the organization to maximize operational excellence and drive consumer-level client experience. Notably, we have expanded from our previous strategic coverage of the top 100 accounts to now include our top 400 accounts that represent just over 90% of our ARR in aggregate. Our increased coverage gives us a greater handle on serving those clients even better, building stronger partnerships, improving retention, and building a deeper pipeline. We provide market-leading solutions derived from our full-service integrated approach to managing health, wealth, and leaves on behalf of our clients. Within our Health solution, we provide comprehensive health benefits, including spending accounts, as well as point solutions like health care navigation services. Our primary focus is on ensuring a seamless consumer-level experience, whether the consumer is simply checking their benefits eligibility or scheduling a physical, or contending with a life-changing diagnosis. We also integrate 50+ partners across the ecosystem, which positions Alight, Inc. at the critical nerve center of the benefits ecosystem. Wealth comprises a portfolio of solutions for financial planning, including defined contribution plans, retirement savings, and pension plans to enable employees access to a pathway for financial preparation. We administer pensions both for corporations as well as various carriers who take on pension risk from corporations. The Leaves business handles absences due to short- or long-term disability, military leave, or family and medical leaves, which are not always straightforward or easy to navigate. Our Leap Pro and Absence Connect platform help our clients and their employees develop appropriate solutions to meet the needs of both the individual and the organization when an extended absence is necessary. As we move through 2026, we are focused on leveraging our scale, market recognition, and financial strength to capitalize on attractive industry dynamics and grow our leadership role. Benefits programs are a fundamental, nondiscretionary offering for most organizations, creating a large addressable market for our capabilities. Our ability to provide effective outsourced benefits administration is an attractive alternative to employers who often lack the in-house expertise to manage the demands of compliance, delivery, and technology. Additionally, because benefits programs are fundamental and nondiscretionary, our business tends to be more resilient through economic cycles. We believe our expertise across the benefits administration landscape, coupled with our scale, experience from a diverse client base, and disciplined execution creates a competitive advantage for us to win customers and establish long-term relationships with predictable revenue. We remain energized and committed to expanding our market-leading position and believe that the market opportunity in front of us is substantial. Alight, Inc.'s opportunity in the marketplace is unique. We have established a leadership position as the only company to effectively service our customer base ranging from large Fortune 500 companies to smaller, more Main Street operations as well as organizations in the public sector. These companies and organizations are all unique in their own way and require benefits offerings that match their structures, legacy, and priorities. We have more than 30 million participants on our platform, including corporate executives, field operators, young new employees to retirees, and our products and solutions are designed to deliver the reliability and personalization these employees deserve. We understand the challenges inherent in navigating the benefits ecosystem, and we are well positioned not only to provide solutions but to manage complexity and drive adoption. In addition to human expertise, we are leveraging enterprise AI adoption to capture efficiencies and further improve service excellence and user experience. To that point, we have all heard a lot about AI and its potential impact on a variety of industries. At Alight, Inc., we are uniquely positioned to deploy AI that is personalized, predictive, assistive, and grounded in real-world data while drawing on information from our large user base, participant interactions, and decades of domain expertise. We view AI not as a stand-alone solution, but as a force multiplier across our scale platform. By strategically implementing AI, we can turn data into guidance, turn guidance into action, and action into better outcomes in the moments that define health, wealth, and leave decisions. It is important to understand that we deal with situations of varying complexity that include unions, grandfathered plans, or multiple enrollment dates. We are also embedded in our clients’ workflow as the core system of record for their benefits. Accountability is essential since regulatory compliance and outcomes both matter in our space. Health, wealth, and leaves all have a significant regulatory component. That accountability needs clear definition and ownership that cannot be made by an AI agent alone. AI is not a replacement for what we do; rather, it is a mechanism to unite the data, insights, and human expertise our clients depend on. A meaningful portion of our participants are navigating decisions related to managing a life-changing development, and those decisions cannot be made with the support of AI alone. Some of these are happy life events, and some require the empathy and guidance of the human touch. I expect to share more with you about our AI journey and its impact in coming quarters. As I mentioned on our last call, we are driving the business forward with our commitment to three clear operating principles: deliver service and operational excellence; innovate products that create value and actionable insights; build relationships that result in enduring, trusted partnerships. These operating principles are the compass as we continue to pioneer this space. We are the only company of our size and scale with a singular focus on benefits administration, providing a full range of health, wealth, and leave solutions, and we believe we have a substantial advantage in the industry where most of our competitors take a more singular approach, providing health, or wealth, or leave solutions, or where benefits administration is a small non-core part of their business. Our focus on benefits as a whole allows us to provide deeper engagement, effective solutioning, and targeted investments. I am confident that our team’s commitment to these guiding principles and our leading position in the marketplace will drive favorable results for our clients and for Alight, Inc., and we are already seeing notable progress to enhance execution. I will now turn the call over to Gregory Giometti for the financial results.
Gregory Giometti: Thanks, Rohit, and good afternoon, everyone. I will now walk you through our first quarter 2026 results. Echoing Rohit’s comments a moment ago, we delivered stronger-than-expected first quarter revenue, adjusted EBITDA, and free cash flow. Revenue for the first quarter was $534 million, a decrease of approximately 3%. We had anticipated a revenue decline in the high single digits for the quarter, and we were pleased to achieve a more favorable result. As you know, we think about our revenue mix in two distinct categories: revenue from recurring, renewable business and nonrecurring, project-based business. In the first quarter, we recorded recurring revenue of $498 million, which was a decrease of 4% compared with the first quarter of last year, reflecting higher partner network revenue in the quarter that was originally expected later in the year. Project revenue for the quarter was $36 million, up 29% compared with the first quarter last year, exceeding expectations. Adjusted gross profit in the first quarter was $189 million, down $11 million from the prior-year period, reflecting an adjusted gross profit margin decline of 110 basis points. First quarter 2026 adjusted EBITDA was $104 million, or adjusted EBITDA margin of nearly 20%, as compared to $118 million, or adjusted EBITDA margin of nearly 22%, in the prior-year period. The first quarter adjusted EBITDA decrease was less than anticipated due to flow-through from the better-than-expected revenue performance and timing of expenses. Adjusted net income in the first quarter was $35 million, with adjusted EPS of $0.[inaudible], compared to $52 million of adjusted net income and adjusted EPS of $0.10 in 2025. Looking forward, with our visibility today, we expect second quarter 2026 revenue in the range of $490 million to $505 million, adjusted EBITDA between $80 million and $90 million, and free cash flow ranging from $35 million to $45 million. Our guidance reflects the continued impact of prior commercial execution, which is expected to work its way through our P&L over the coming quarters. Turning to capital and liquidity, we closed the quarter with strong liquidity of more than $500 million. At the end of Q1 2026, we maintained significant financial flexibility including $178 million in cash and equivalents, $330 million of availability on a revolving credit facility, and free cash flow of $53 million. With cash flow growth in Q1, we have continued to strengthen our liquidity, providing us flexibility to pursue our capital allocation priorities, which include investing in the long-term growth of the business, deleveraging, and opportunistic share repurchases. With that, I will turn the call back to Rohit.
Rohit Verma: Thanks, Greg. My first few months at Alight, Inc. have been educational and productive, allowing me to synthesize the valuable customer feedback we received with what I have learned about the scope of our solutions and the scale of our capabilities. Since January, our team has made excellent progress executing our core operating principles and building on our solid foundation to strengthen our organization. Our success depends on our focus as a client-centric organization, and that starts from the top with me. As I mentioned, I have met with 90+ clients since joining Alight, Inc., and regular engagement with our client base will remain a top priority for me. We are assembling a leadership team that brings significant industry experience and who embrace a commitment to client engagement and service excellence. We are moving quickly and are building a team that can accelerate the pace of play. Key initiatives to decidedly strengthen our market leadership are underway. These are focused on reimagining the user experience and driving AI-based service that will help define the new standards for the industry. Our ability to deliver reliability and personalization in a scaled benefit management solution that provides value to our clients and better outcomes to their employees is a competitive advantage in the marketplace. I am confident that we have the right people and strategies in place to continue building momentum across the business, and I am optimistic about what the future holds for Alight, Inc. Finally, our CFO search is progressing well, and we expect to have some news to share shortly. Susan Davies, Alight, Inc.'s Chief Accounting Officer and Global Controller, will step in as interim Chief Financial Officer as Gregory Giometti leaves Alight, Inc. to pursue a new opportunity. We thank Greg for serving as interim CFO for the past several months and wish him all the best. Sachi, you can now open the call for questions. Thank you.
Operator: We will now open the call for questions. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. The first question is from Kyle Peters from Needham & Company. Please go ahead.
Ross Cole: Hi. This is Ross on for Kyle Peterson. Thank you for taking my question. I was wondering if you could provide any commentary on how the RFP season looked in the past quarter. In other words, have you won any business here? Thank you.
Rohit Verma: Thank you. As I mentioned in my remarks, our execution, both from a renewal perspective and new business, is getting better and better. We had a very good new business as well as renewal activity season in Q1, and it was better than Q1 last year.
Ross Cole: Great. Thank you. And if I can ask another question, could you talk a little more on the working capital dynamic and if it should start becoming a source of cash? And also, what percent of the book is up for renewal this year?
Gregory Giometti: I can take the first part, Rohit, and then I will let you comment on renewals. We definitely did see some working capital benefits in the first quarter across a variety of areas, including cash taxes and general working capital, that helped drive the free cash flow result.
Rohit Verma: And then the second part of the question was the size of renewals for the year. I would say it is definitely less than last year. I would put it somewhere within the 25% to 30% range of the total book, which is in the normal range that we would expect.
Operator: Thank you. The next question is from Curtis Nagle from Bank of America.
Curtis Nagle: Great, thanks very much. Maybe any help you might be able to give in terms of expectations for cadence of recurring revenue year-over-year growth? Then would you be able to size how much that influx of partner revenue—earlier partner revenue—helped in the Q1 recurring revenue in the quarter?
Rohit Verma: Sure. As we have mentioned, we have been giving revenue under contract at the start of the quarter. If you recall, when we started Q1, the recurring revenue under contract was about $1.97 billion. Our recurring revenue for the start of Q1 is just over $2.0 billion, so that effectively sets a floor for where we are in terms of revenue under contract. Just to clarify, that is total revenue under contract, 94% of which is recurring. On the partner revenue side, it was about $4 million to $5 million that we had expected to come over the full year, and that came in pretty much all in the first quarter. It is recurring, but it does not recur every quarter.
Curtis Nagle: Okay, great. And then any guidance you might be able to give for free cash flow for the year—expectations?
Rohit Verma: We believe that we will continue to see solid free cash flow generation for the year. We saw $53 million this quarter, which was about 20% higher, and Greg shared with you that we are expecting $35 million to $45 million in the second quarter. That is as much guidance as we are prepared to give right now. Thank you.
Operator: The next question is from Peter Heckmann from D.A. Davidson. Please go ahead.
Peter Heckmann: Good afternoon. Thanks for taking my questions and good to see the stronger-than-expected first quarter results. In terms of your EBITDA range for the second quarter—down significantly more than the first quarter—should we infer that, number one, you do not expect quite as strong a professional services quarter, and number two, some of the timing of expenses, some of those expenses that you plan to make, will kick in? Any other factors playing into the year-over-year decline in EBITDA in the second quarter that were not present in the first quarter?
Gregory Giometti: Yes, I think that is right. If you think about the guidance that we gave in terms of expectations around first quarter profitability, the second quarter guide is relatively in line with that. The exceeded expectations in the first quarter—given the high profit margin on project revenue—certainly drove higher margin in the first quarter. We are expecting a more muted project revenue at this point in the second quarter, which drives more consistency with what we had expected for the first quarter from a profitability perspective. And to your point, yes, we do see some of those expenses shifting between quarters. As a follow-up on free cash flow conversion, generally speaking, 44% to 50% is a reasonable range. There can be some variability quarter to quarter, especially with the seasonality of some of the commissions business and things we have in the back half of the year, but as we think about averages, that is a reasonable measure.
Peter Heckmann: Okay. I will get back in the queue. Thank you.
Operator: The next question is from Sharon House from KeyBanc Capital Markets. Please go ahead.
Analyst: Hi. This is Summer on for Scott. I was just wondering if you could talk more about the momentum you are seeing building out the new team and the impacts you have seen so far. Thank you.
Rohit Verma: Thank you so much for the question. We are very excited about the team that we are building. It is not just the senior hires that we have made, but also deeper in the organization. The most important piece for us is increasing the coverage of accounts. As you heard me say, we were covering about 100 strategic accounts for us with a true designated account executive. That number is up to 400 and covers 90%+ of our ARR. We believe that kind of coverage really gives us a good view of our clients, a good view of the health of our clients, and helps increase our ability to retain clients and build a pipeline along with them. As I mentioned earlier, we have had a good renewal season in Q1, we have had good commercial execution in Q1, and we are expecting to continue to build on that momentum. We still have a lot of work to do, as the team is new and we are building a newer muscle in the organization, but we feel good about the progress that we have made.
Operator: There are no further questions at this time. I would like to turn the floor back over to Rohit Verma for closing comments.
Rohit Verma: Thank you, Sachi, and thank you all for joining. I would like to thank our clients for their trust and confidence in us, and importantly, our employees who have been relentless in their efforts. I appreciate your continued interest in Alight, Inc., and I look forward to updating you on our progress in the quarters ahead. Thank you so much, and God bless.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.