Alight (ALIT) Q4 2025 Earnings Call Transcript

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Date

Thursday, February 19, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Rohit Verma
• Interim Chief Financial Officer — Greg Giametti

Takeaways

• Total revenue -- $2.3 billion for the year; $653 million for the quarter, with full-year revenue under contract beginning 2026 down 5%.
• Adjusted EBITDA -- $561 million for the year, representing a margin of 24.8%; $178 million for the quarter, with a margin of 27.3%.
• Recurring revenue -- $2.1 billion annually, down 2.2%; $607 million for the quarter, down 1.6%.
• Project revenue -- $154 million for the year, down 22%; $46 million for the quarter, down 27%.
• Adjusted gross profit -- $883 million for the year, down from $942 million; $272 million for the quarter, down 9.3%.
• Adjusted EPS -- $0.50 for the year, $0.18 for the quarter.
• Adjusted net income -- $266 million for the year; $96 million for the quarter.
• Goodwill impairment -- $83 million non-cash charge recognized, leaving $83 million goodwill balance.
• Liquidity -- $273 million in cash and equivalents, plus a $330 million fully undrawn credit facility.
• Free cash flow -- $250 million for the year.
• Capital allocation shift -- Company discontinued its quarterly dividend and will prioritize debt repayment and opportunistic share repurchases; $216 million in remaining buyback authorization.
• TRA payment outlook -- $156 million scheduled for 2026, with no significant TRA payments expected in 2027 or 2028 due to tax reform.
• Compensation expense -- Adjusted EBITDA impacted by approximately $45 million in higher compensation, which management expects to be recurring to support execution and performance incentives.
• AI product deployment -- Piloted conversational AI for two major clients during annual enrollment, leading to a substantial reduction in "channel jumping" from digital to call center.
• Operational priorities -- Management highlighted acute focus on execution regarding operational excellence, client management, and technology innovation as central drivers for renewed growth.
• Investment commitment -- Over $100 million in planned capital investments for 2026 targeting service quality, sales, account management, user experience, and AI infrastructure.
• Renewal cohort size -- Renewal cohort in 2026 will be 30%-40% smaller than in 2025.
• Guidance commentary -- Management expects first quarter 2026 revenue to decline by a high single-digit percentage range and adjusted EBITDA margin to decrease by 500-750 basis points compared with the prior-year quarter.
• Segment guidance -- Management declined to provide full-year quantitative guidance due to the transitional nature of leadership and the need for further assessment of business dynamics.

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Risks

• CEO Verma said, "In 2025, we did not meet our internal financial targets, and new bookings and renewals did not meet our expectations, leading us to miss our forecast to the market."
• Interim CFO Giametti noted recurring revenue and project revenue both declined for the year and quarter, contributing to an overall decrease in gross profit and profitability metrics.
• Management stated, "the weakness experienced in 2025 will spill into 2026," and projected first quarter 2026 revenue and margin to decline materially.
• CEO Verma acknowledged the renewal rate was "significantly below" target and revenue under contract starting 2026 is approximately 5% lower, indicating continuing retention and pipeline pressure.

Summary

Alight (NYSE:ALIT) delivered disappointing 2025 results characterized by broad-based declines in recurring and project revenue, profitability, and client renewals, as explicitly acknowledged by management. Capital allocation policy has shifted, with the quarterly dividend suspended in favor of debt reduction and opportunistic share repurchases, enabled by a large liquidity position and a pause in TRA obligations following 2026. Strategic emphasis has been placed on operational excellence and targeted investment in sales, client management, and AI-enabled platforms, but management cautioned that short-term performance will remain pressured as these initiatives are executed. Near-term financial guidance remains limited, though a significant decline in both revenue and margins is expected in the first quarter of 2026 due to continued headwinds and increased investment spend.

• CEO Verma identified execution failures in operational excellence, client retention, and technology as primary causes of underperformance and set these as immediate priorities for the new management team.
• The company’s client renewal cohort will decrease by 30%-40% in 2026, reducing exposure to renewal risk relative to the previous year.
• Management revealed the 2026 TRA payment is elevated due to a lagged tax impact from a prior divestiture, and cited tax law changes as eliminating large obligations for 2027 and 2028, increasing future capital flexibility.
• Piloted conversational AI yielded material improvements in operational efficiency for large clients, with further scaling dependent on building out foundational AI data infrastructure.

Industry glossary

• TRA (Tax Receivable Agreement): A contractual arrangement requiring the company to remit a portion of certain tax benefits realized post-IPO or corporate reorganization to pre-IPO owners or sponsors, typically over multiple years following such transactions.
• Channel jumping: The participant behavior of switching from digital self-service (e.g., online enrollment) to higher-cost channels, such as a live call center, during a transaction process.

Full Conference Call Transcript

Rohit Verma: Good morning, and welcome to Alight, Inc.'s fourth quarter 2025 earnings call. Joining me today is Greg Giametti, our interim Chief Financial Officer. This is my first earnings call as Alight, Inc. CEO, and I am pleased to have this opportunity to speak with you so early in my tenure. I joined Alight, Inc. at the start of the year, and over the past 30 working days, I have focused on meeting with our colleagues and clients and diving into our operations. I am extremely pleased with the very warm welcome from our colleagues as well as the support I have received from the board and the connections I have already created with our clients.

I would like to take this moment to share why I chose to join Alight, Inc. and over the last six weeks have only strengthened my conviction in the opportunity ahead of our business. Alight, Inc. has strong underlying DNA. Our scale, client relationships, domain expertise, and operational footprint provide a significant competitive advantage and leadership position in the marketplace. We serve a wide spectrum of employers, including the majority of the Fortune 100. We offer essential and unmatched benefit solutions via a platform that offers extensive flexibility to accommodate a wide range of client needs from straightforward to the most complex plans in the market.

Our mid-sized clients benefit from simpler platforms, and we also provide specialty solutions such as leave administration to meet our clients where they are. Our vast data lake creates a proprietary advantage that enables predictive, end-to-end orchestration implementing AI, which will allow us to transform employee experiences into proactive life journeys, driving better outcomes for employers, employees, and their families. And our top-tier partner network allows us to provide participants a holistic experience, putting us at the center of the benefits ecosystem.

More than 30,000,000 people and dependents rely on us in their most important moments when someone is sick and needs access to their insurance, when someone is looking to start a family and wants to better understand their health and wealth benefits, or when someone is disabled and needs to understand their leave options. At the end of the day, it is about delivering a frictionless experience with empathy and care that delivers a compelling outcome. The ability to provide benefits is a fundamental offering for most organizations. Yet, regulatory requirements and rising costs make it challenging for organizations to do this on their own.

Most employers do not have the in-house expertise, scale, or technology required to manage the complexity effectively, making the outsourced administration of health, wealth, leave an essential purchase. We believe our products and solutions are needed regardless of external economic cycles, and when we execute well, we create sticky relationships with predictable revenue. Our expertise across the benefits administration landscape and our ability to provide effective plan solutions to a wide variety of employee groups is a competitive advantage. The strength of our solutions and our organizational expertise lead us to believe that the market opportunity in front of us is substantial.

Not only do we see opportunity in the broader market, we believe there is meaningful white space within our existing client base. With deep penetration among large and midsized employers, we have a solid foundation from which to expand our relationships and grow market share over time. That said, we have work to do. In 2025, we did not meet our internal financial targets, and new bookings and renewals did not meet our expectations, leading us to miss our forecast to the market.

During my first six weeks at the company, I have connected with more than 35 clients, and it is clear to me that clients want to continue working with us as we play a critical role in helping them manage increasingly complex health, wealth, and leave programs. They are also clear in their request that we bring simplicity to their participants and management by providing cutting-edge solutions. Our clients expect flawless service delivery and continued innovation in products that create better outcomes. The attractiveness of our market, our coveted position, and the clarity of the asks from our clients enable us to be clear-eyed about our priorities going forward.

As a result, our immediate focus is driving service and operational excellence across an unmatched portfolio of benefit solutions, innovating products enabled by AI, creating a cutting-edge user experience, real value, and actionable insights for clients and participants, while building relationships that result in enduring trusted partnerships with clients, participants, and partners. These priorities are all things within our control, which give me great confidence in our ability to improve, as does some of our recent progress. For example, during the fourth quarter, we piloted conversational AI with two of our largest clients during the recent annual enrollment cycle.

We are very encouraged by the results where we saw a significant reduction in channel jumping, which is when a user moves from digital enrollments to calling the call center. This high reduction rate is indicative of the improved efficiency and participant efficacy experienced with the conversational AI product. Before I turn the call over to Greg, I want to provide some details on our 2025 financial performance. We generated $2,300,000,000 in revenue, with adjusted EBITDA of $561,000,000 and an adjusted EBITDA margin of approximately 25%. With that said, I would reiterate that we believe there is significant opportunity to improve our performance moving forward.

Our adjusted EBITDA in the fourth quarter was impacted by an increase in compensation expense driven by our commitment to invest in the business with a focus on promoting service quality, strengthening relationships, and positioning the business for growth. Importantly, the business generated $250,000,000 of free cash flow in 2025, which enabled us to maintain a strong liquidity position and positions us well as we head into 2026. With that, I will turn the call over to Greg to walk through the financials in more detail. Thanks, Rohit, and good morning, everyone.

Greg Giametti: I will walk you through our fourth quarter and full year 2025 results. Turning to our fourth quarter results, we continue to think about revenue mix across two categories: recurring renewable business and nonrecurring project-based work. Revenue for the fourth quarter was $653,000,000. Recurring revenue of $607,000,000 was down 1.6% compared with the prior-year period. Project revenue of $46,000,000 was down 27%. Fourth quarter adjusted gross profit was $272,000,000, down 9.3% from the prior-year period, reflecting an adjusted gross profit margin decline of 240 basis points. Adjusted EBITDA for the fourth quarter was $178,000,000 as compared to $217,000,000 in the prior-year period. Fourth quarter 2025 adjusted EBITDA margin was 27.3%, compared to 31.9% in the prior-year period.

Adjusted EBITDA during 2025 was adversely impacted by increased compensation expense, which we believe is critical to executing on our priorities. This impacted adjusted EBITDA by approximately $45,000,000. Excluding this, adjusted EBITDA would have been within our previously communicated guidance range. Adjusted net income in the fourth quarter was $96,000,000, with adjusted EPS of $0.18, compared to $127,000,000 of adjusted net income and adjusted EPS of $0.24 in 2024. Looking at the full year, total revenue was approximately $2,300,000,000. Recurring revenue of approximately $2,100,000,000 was down 2.2% compared to the prior-year period. Project revenue of $154,000,000 was down 22%. Adjusted gross profit for the full year was $883,000,000, compared to adjusted gross profit of $942,000,000 in 2024.

Full-year adjusted gross profit margin decreased 100 basis points compared to 2024. Full-year adjusted EBITDA was $561,000,000, with adjusted EBITDA margin of 24.8%, compared to adjusted EBITDA of $594,000,000 with adjusted EBITDA margin of 25.2% in 2024. Adjusted net income for the full year was $266,000,000, with adjusted EPS of $0.50, compared to $313,000,000 of adjusted net income and adjusted EPS of $0.57 in 2024. In 2025, we recognized a non-cash goodwill impairment charge of $83,000,000. We have remaining goodwill of $83,000,000 on the balance sheet. Turning to capital and liquidity, we ended the year with $273,000,000 in cash and equivalents, in addition to a $330,000,000 fully undrawn revolving credit facility.

Free cash flow for the year was $250,000,000, providing us with significant financial flexibility. With this, we are well positioned to fund our 2026 TRA payment, which is estimated to be $156,000,000. Importantly, as a result of tax reform related to the One Big Beautiful bill, we do not expect to make a significant TRA payment in 2027 or 2028, which meaningfully increases our flexibility around capital allocation. After reviewing our capital allocation priorities with the board, the company has decided to reallocate capital in favor of higher return priorities, including investing in the long-term growth of the business, deleveraging, and opportunistic share repurchases, which will replace future dividend payments. With that, I will turn the call back to Rohit.

Operator: Thanks, Greg.

Rohit Verma: Let me build on that and provide some more detail on our capital allocation. With the support of the board, we are thinking more holistically about capital allocation. Our goal is to create the best return for our cash deployed. The current structure locks us into a dividend and takes away the flexibility to be more thoughtful on our capital allocation. With our strong cash flow and anticipated TRA deferral, we believe it makes sense to take this opportunity to return value to our shareholders through a combination of reducing the company's leverage and through the opportunistic repurchase of stock rather than continuing our quarterly dividend at this time.

Our existing repurchase plan has a remaining buyback authorization of $216,000,000, giving us the ability to reengage our repurchase activities in the near term. At the current levels, we believe our stock is undervalued, and that repurposing our capital allocation towards debt reduction and share repurchases is a more efficient and effective use of capital. As I shared with you earlier, we are disappointed with our 2025 results. While we are focused on embracing a disciplined execution plan, we do believe the weakness experienced in 2025 will spill into 2026, and our performance improvement hinges on the successful execution of our priorities over the next nine to twelve months. We will keep you up to date on our progress.

We view 2026 as a launching pad for our performance inflection as we focus on positioning Alight, Inc. for sustainable long-term growth. We entered 2026 with strong liquidity and a solid cash position and a portfolio of strong client relationships. We are being methodical in our approach with a focus on a small set of key operating priorities and expect to deploy more than $100,000,000 of capital to strengthen the foundations of the business and position Alight, Inc. for long-term growth.

Rohit Verma: First, we are focused on delivering service and operational excellence. That includes investing in our client-facing teams by adding sales and account management professionals to increase coverage across our client base. Second, we are advancing product innovation by creating a world-class user experience, using AI as an enabler to simplify user interactions and improve insight for both clients and participants. Alight, Inc.'s deep and highly differentiated data lake is enriched by decades of domain expertise and scale, and we are uniquely positioned to deliver more personalized, predictive, and outcome-driven experiences that set us apart in the market.

Likewise, we plan to more broadly deploy AI internally to assist with routine tasks so that our professionals can focus on providing the thoughtful expertise our clients and their employees expect. Driving innovation in our solutions from the top down is another critical priority for us. To that effect, we recently announced that Karen Frost will lead our health and navigation solution and Kevin Curry will lead our solution. We intend to announce a leader for our wealth solution shortly. We believe these additions will effectively align our solution strategy and heighten our ability to deliver a high-quality benefits experience for our clients. Third, we are focused on strengthening our existing relationships while adding to our client base.

We have proven our ability to provide operating efficiency, consistency, reliability, and execution across the complex benefits landscape, and we will leverage this success to expand our relationships with current and new clients and establish partner collaborations that allow us to serve at the front door a holistic benefit experience. I am confident that we are at the forefront of implementing the right strategy to return the business to long-term growth, but this will take some time. Given that we missed guidance targets several times in 2025, I do not think it is prudent for me to provide full-year guidance when I am just 30 working days into my role.

What I can say is that we expect first quarter 2026 revenue to be down by a high single-digit percentage range. Likewise, we anticipate that our planned investments in sales, account management, and user experience will create short-term adjusted EBITDA margin pressure, resulting in a decline of 500 to 750 basis points as compared to last year's first quarter. We view these investments as critical to executing on our stated priorities and meeting the expectations of our stakeholders. While our business has faced challenges, attractive market dynamics, our strong leadership position, and clear direction from our clients give us a very achievable roadmap for driving margin expansion and growth in the midterm.

Our strong cash flow provides us the financial flexibility to invest $100,000,000 to drive product innovation, partner expansion, and an enhanced experience for our clients and their employees. Our recent service and innovation successes leave us confident that we can further expand our already enviable market position. I am energized with what I have seen so far and certain that we have the right strategy in place. I believe we can put the business back on a path to sustained profitable growth with the expertise and focus of our teams. With that, let me open the call for questions.

Operator: Thank you. We will now be conducting a question and answer session. 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. For participants using speaker equipment, it may be necessary to pick up your handsets. One moment please while we poll for questions. The first question is from Pete Christiansen from Citi. Please go ahead.

Rohit Verma: Thank you. Good morning. Welcome, Rohit. For the question here. Good morning, Peter. So the messaging that you on the scale, the partner

Pete Christiansen: ecosystem, the mission critical platform capability, platform capability this has been quite consistent with the prior execution teams here. But there has been a real gap between this sentiment in the asset value of the company and the core financial performance. It has been regular misses on client retention, pipeline conversion, and any stability to growth. Recognize that you have been in role for 30 days. But I was just curious, what are your take on what have been some of the drivers in some of the financial underperformance in recent periods? Second question, your experience CEO at Crawford, what do you bring to the table in terms of being able to turn around the company?

Just curious on that perspective. And then final, I understand this is yet another transition year for the company. How should we think about measuring any milestones in the next twelve months? Thank you. I appreciate it.

Rohit Verma: Thank you, Peter. Great set of questions. So let me start from the top. Right? What do I think are the drivers for the financial underperformance? You know, first and foremost, I had a hypothesis when I was coming into the organization. That hypothesis was, as you stated, right, we are in a great industry. We have been here for a long time. Our brand is well recognized. We have got an enviable client base. And we have a service that if we execute well, it should be sticky. Thirty days in, I have only strengthened that conviction. Right, which is that those things are absolutely correct.

Obviously, while coming in, I also knew that financially we had not met the expectations of the organization as well as that of the Street, and that also I have seen.

Pete Christiansen: I would say the biggest challenge for us

Rohit Verma: has been on driving operational excellence, which to me is an execution piece. Right? So this is not a change in the strategic direction of the company. This is a change in the execution of the company. So the biggest piece that we need to tighten is around execution. It is execution around operational excellence. It is execution around client management and relationship management. It is execution around technology. And it is execution around continuing to innovate our product and services. So that to me are the three biggest pieces, right, that we have to push on. That leads me into my experience as a CEO at Crawford. When I joined Crawford, right, we had not grown for ten years.

And, again,

Kevin Damien McVeigh: when I was there, what I realized was it was again in a market that was that was strong. It had an eighty-year legacy. It had the expertise but, again, the execution was what? What was missing. So I have had several experiences of turning around execution. And turning around execution is a cultural change, a change in leadership philosophy, a leadership rhythm. It is being clear-eyed about what the priorities are and staying focused on what the priorities are continuously and consistently. And that is the experience that I had before, and I have done that two or three times, you know, once as a CEO, before that as more of an operating leader.

And that is the experience that I am going to bring here in and drive that execution. In terms of measuring, I want to make sure that you know, first, let me start by saying that the investor community is a very important stakeholder for us. So I want to make sure that what I am giving you is something that is very clear, very definitive, and something that I can consistently report on. So that is the reason why I want to hold back. I am thirty days in, as you know. While Greg is doing a great job as our interim CFO, I am in the process of appointing a full-time CFO.

I want to make sure that appointment is done and we collectively put our heads together on what are the things that we need to come back to the investor community with that we can share with you consistently and continuously so that you can measure how we are doing against our progress.

Pete Christiansen: Thank you. Good color.

Rohit Verma: Thank you. I look forward to meeting with you soon.

Operator: The next question is from Scott Anthony Schoenhaus from KeyBanc Capital Markets. Please go ahead.

Greg Giametti: Thanks, team. Welcome, Rohit. I guess maybe you can dive deeper into the first quarter guidance. All the moving parts, renewals, pipeline,

Pete Christiansen: pricing,

Greg Giametti: just walk us through what you are seeing at the start of the year here, Rohit, how you think you can manage this throughout the year, how we should expect the cadence both in the near term without providing distinct guidance. And then the longer-term targets of approaching mid-single-digit revenue growth at 30% adjusted EBITDA margins, can you recommit to that target?

Kevin Damien McVeigh: Todd, thank you so much for your question. I think what I would say to you is that as I mentioned before, right, that we did not execute well in 2025. Specifically on our renewals. And that is why I said that the financial underperformance of 2025 is expected to spill into 2026. There is a whole bunch of data that I am analyzing with the team. And right now, that is the reason why I am projecting to be high single digits lower on the revenue, as well as about a 500 to 750 basis points lower on the margin.

Because we had a less than stellar renewal season last year, I would say that, you know, typically, we want to target our renewals at the mid to high nineties. We were significantly below that number. We had I think we had given you guys last year revenue under contract, which was about $2,100,000,000. Our revenue under contract starting 2026 is about 5% down. So and then the level of volatility that we have seen in the project revenue, right now, I am just not comfortable in giving any more things just because I do not want to put something out there and then have to track back.

Given I am thirty days in, there is a lot of work that I am doing right now with the team. And I can assure you, like I said to Peter, the investment community is a very important stakeholder for us. So as I get a more full-time CFO in place, as I get a better handle on all of the moving pieces, I will be coming back to something very definitive.

Pete Christiansen: Great. I guess this is a more of a sort of thematic AI industry question here. But are you seeing clients

Greg Giametti: you know, not renewing partly because they are testing their own AI bots and their own products themselves, their own applications internally themselves using these AI platforms? Thanks.

Kevin Damien McVeigh: Scott, Scott, I am so glad you asked that question because, you know, that gets asked to me all the time. Look. I think I mentioned that I have met 35 to 40 clients so far. Our client base typically tends to be on the upper end of middle, right, and then all the way up to the Fortune 100. The level of complexity that you have in those plans, right, whether it is in terms of the various grandfathered plans that they have, whether it is in terms of the unions that they have, that it is really not possible to do this in-house by coding AI to do this work. Right?

If we were talking about a company that has 100 people or 200 or maybe even a thousand people, I think the conversation is a little bit different than the scale at which we are talking about. And I would tell you that I would put clients in three categories. There are clients that already have the governance structure in place in their organizations for AI. They are very open to putting AI in.

In fact, I will tell you that there was a large client that I spoke to just a couple of weeks ago who said, I do not want you to enable any AI because we ourselves are trying to figure out how to manage AI with all the security and privacy risk that it opens up. So you have a second category of clients who are still figuring out how do they actively manage what AI is doing and what other controls they have in place. And they are cautious about that. And then you have a third where, you know, they have put the infrastructure in place on AI.

They want to run with it, but they are still waiting to see what is the best way to deploy AI and where it is going to have the biggest impact. In fact, I think I heard one of the large bank CEOs just a couple of days ago quote that from their perspective, AI is not delivering what they had expected AI to deliver. So look, there is a lot of promise. I am a computer engineer by education myself. I studied AI, you know, thirty years ago in college. And, obviously, AI today is very different than what it was at that time.

But what I can tell you is that we have not seen a meaningful or any kind of disruption right now from an AI perspective. Neither in terms of the employee base that we have. You know, we have, as I said before, we have about over 30,000,000 participants on our system. We have not seen any major change in the number of employees. Now I would also tell you that several of our large employees have had very public layoffs but also several of our large clients have had new acquisitions. So we have not seen a meaningful change in the number of employees on the platform.

Pete Christiansen: Thank you.

Kevin Damien McVeigh: Hope that helps.

Operator: As a reminder, to ask a question, please press 1. Next question is from Kevin Damien McVeigh from UBS. Please go ahead. Kevin, your line is open. We will move on. The next question is from Peter Heckmann from D.A. Davidson. Please go ahead.

Greg Giametti: Hey, good morning everyone. Rohit, congrats on the new role. I think it is good to have you at the firm and look forward to working with you. I think the determination of the dividend program right off the bat was the right decision. And as we look into some of the initiatives here that we have just talked about, the additional comp in the fourth quarter 2025 and then the $100,000,000 of incremental investment spend in certain areas, I guess, what portion of both of those do you view as recurring versus one-time? And in terms of the $100,000,000 recurring, would you expect that to be front-end loaded in 2026?

Kevin Damien McVeigh: Great question, Peter. Thank you so much, and I look forward to meeting you as well. Peter, the way I would think about it is that the $100,000,000 is not an additional investment. It is the capital that we have planned for this year. It is the capital investment we have planned for this year. You know, do I expect it to be repeated? I expect some part of it to repeat. Right? Because a lot of things that we are trying to do are not going to be done in one year. But as I had answered to Peter from Citi before, this has been an execution journey for us, or this will be an execution journey for us.

And a large part of that depends on us bringing about changes in our organization, bringing about changes in our systems, modernizing those things to really meet the needs and asks of our clients. As far as the nature of the compensation, I do expect that to be recurring. And the reason I say that is because we are adding more horsepower from a sales management perspective. I want to make sure that individuals are incentivized for driving performance. And because I want execution to be the way we do business, I expect that part of the expense to be recurring.

Greg Giametti: Okay. Great. I am glad I clarified that. I must have misheard, kind of rushing through the press release here. No. No problem.

Kevin Damien McVeigh: Great, great. Just the second question, if I remember correctly, is

Greg Giametti: is 2026 does 2026 represent a bit of a lighter renewal cohort versus the last two years?

Kevin Damien McVeigh: Yeah. You are absolutely right. 2026 is definitely lower compared to 2025 particularly.

Rohit Verma: And it is lower by

Kevin Damien McVeigh: 40 thirty percent. Thirty percent. Thirty to 40 percent compared to what it was last year.

Greg Giametti: Okay. That is helpful. I will get back in the queue. I appreciate it.

Operator: Next question is from Ross Cole from Needham and Company. Please go ahead.

Pete Christiansen: I was wondering if you could talk a little bit more about the internal impact of AI and if you are expecting to see any margin improvement related to that through 2026?

Kevin Damien McVeigh: Or if that is something that is expected, you know, in the out years?

Pete Christiansen: Thank you.

Kevin Damien McVeigh: Yeah. I would say that, you know, right now, there is a lot of work that we need on technology within the organization. And I believe that we are making a lot of progress on that. So I would say that, you know, I do not see any near-term impact on productivity improvement purely from AI. I think there are a bunch of other things that we are doing that should continue to have productivity improvement. We are leveraging AI across, I would say, three parts within the organization. One is which is also client-facing. One is on the user experience side, which obviously is going to impact more the participants that we have from our clients.

The second is in how we configure the system. So today, what happens is when we onboard a new client or when we set up a client for annual enrollment, there is a lot of manual work that happens in terms of taking the requirements from the client, going through them, and then actually configuring them in the system. We are exploring using AI to actually configure the system. As I shared before, some of the clients that we work with have 100, 150,000 employees and multiple classes of employees. By classes, I mean, like, you can have unionized, non-unionized, full-time, part-time. And all those require today a significant level of configuration that we believe can be managed with AI.

And that is something that we will be working on this year. And then the third thing that I would say from an AI perspective is we do a lot of file handling today. So what happens is a client sends us a file of their employees, and then we take that file, and then we send that over to, let us say, a carrier. We could be sending that to a financial services provider. We expect that there is a lot of opportunity there with AI, not just from the standpoint of efficiency, but also accuracy.

And then the final thing that I would say is that one of the most proven use cases of generative AI has been in call centers. We have a pretty large call center, and that is also something that offers an opportunity for us. But remember, for AI to be effective, the most important piece that you need is data. Right? And we have tons of data, but that data has to be organized into a knowledge layer. And unless you organize it into a knowledge layer, your ability to actually capitalize on that is very limited. So a big push for us in 2026 is to build that data and knowledge layer.

Once we do that, we will be in a much better position to drive the efficiencies that come from AI. And that is why those appear to be more 2027 opportunities than 2026. So hope that helps, Ross. I know it was a rather elongated answer.

Pete Christiansen: No. That was very helpful. I appreciate that. Thank you.

Operator: Next question is from Kevin Damien McVeigh from UBS.

Pete Christiansen: Please go ahead. Can you hear me?

Rohit Verma: Yep. Yes, I can. Hi, Kevin.

Pete Christiansen: Oh, great. Hey. Thank you so much, Rohit. Hey. And thank you for the time on the call. Hey. Can you help us understand, sounds like some of the renewals that slipped from a retention perspective, what was driving that? Because, obviously, that kind of cascades into

Kevin Damien McVeigh: 2026 overall. But just maybe help us understand what drove some of that slippage. Was it just churn? You know, consolidation? Like, what was the main driver of that?

Rohit Verma: Yeah. And I think the main driver actually

Kevin Damien McVeigh: through what I said in the asks or the request from the clients, right, which is driving operational excellence, being more modern with our user interface, making sure that the relationships that we are building are deep and consistent. So those are the three things that the clients have been very clear about, and that is what I am attributing right now from a retention perspective as the reasons why we underperformed on that. And those are the three things that you heard from me are very clear priorities that we are working on right now.

Kevin Damien McVeigh: Got it. And then just to think from the dividend perspective, makes sense. I think that was about $86,000,000, but maybe help us understand, like, why are we even paying a TRA in 2026? It is $130,000,000, but, like, it is a massive use of cash.

Pete Christiansen: I get the 2027–2028, but is there no way to

Kevin Damien McVeigh: maybe manage that a little bit better just given how much the dynamics of the business have changed?

Kevin Damien McVeigh: Kevin, first of all, I would love that we did not have to, but I will let Greg explain the mechanics of why we are doing this in 2026.

Greg Giametti: Yeah. So the TRA payment in 2026 is for our 2024 tax return. And so what it includes is the gain on the sale of Strata. And so that is why the payment is so elevated. It is really around the divestiture transaction. There is just a two-year lag in terms of when the payment actually goes out.

Kevin Damien McVeigh: Got it. And I guess with the impairment, because, obviously, you had massive impairment charges, things like that. That does not impact that calculation at all.

Greg Giametti: No. Because those kind of impact the 2025 tax year, which then will kind of roll into our 2027–2028 payments. Got it.

Rohit Verma: Okay. Thank you.

Operator: There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Pete Christiansen: Thank you, Sashi.

Rohit Verma: Thank you all for joining. I appreciate your continued interest in Alight, Inc. I look forward to updating you on our progress in the quarters ahead. Thank you, and God bless.

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

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