Executive Summary

Q1 2025 was in line to slightly better than expectations: revenue $548M vs S&P Global consensus $541.5M (beat), adjusted EPS $0.10 vs $0.10 (in line), while GAAP diluted EPS was $(0.03) . Consensus values from S&P Global.*
Mix headwinds persisted as non-recurring project revenue fell 26% YoY to $28M, but recurring revenue remained resilient (95% of total); adjusted EBITDA margin improved 70 bps YoY to 21.5% on cost actions .
Management reaffirmed FY25 guidance (revenue $2.318–$2.388B, adjusted EBITDA $620–$645M, adjusted EPS $0.58–$0.64, FCF $250–$285M), underpinned by 92% of FY25 revenue already under contract and renewal momentum .
Catalysts/stock narrative: visibility (92% contracted), an announced 15‑month restructuring expected to drive >$75M annual savings upon completion, and AI-enabled delivery initiatives across the Worklife platform; watch continued project softness and macro-driven deal-cycle elongation commentary .

What Went Well and What Went Wrong

What Went Well
- High visibility and resilient base: 92% of FY25 revenue already under contract; renewal trends on track with notable client renewals (Starbucks, Baxter, US Foods, Otis) .
- Margin execution despite lower revenue: adjusted EBITDA margin rose to 21.5% (+70 bps YoY) on lower SG&A (–$42M YoY) and productivity savings; interest expense improved $9M YoY .
- Technology/AI delivery progress: “At quarter end, nearly 80% of our clients were already leveraging AI in some capacity,” with new self‑service leaves reporting and standardized implementations to lower cost and speed go‑lives .
What Went Wrong
- Top-line pressure from projects: revenue declined 2.0% YoY to $548M, driven by lower project revenue (–$10M YoY, –26%); gross margin contracted 140 bps to 31.2% as mix worsened .
- Free cash flow down YoY: FCF of $44M vs $61M in Q1’24, reflecting timing of taxes and divestiture-related items; still tracking to FY25 FCF target .
- Macro risk watch items: management remains cautious on demand (elongated sales cycles) and flagged modest wealth-fee sensitivity in a protracted downturn (well less than $10M revenue exposure) .

Financial Results

Metric	Q1 2024	Q4 2024	Q1 2025 (Actual)	Q1 2025 (Consensus)*
Revenue ($ USD Millions)	$559	$680	$548	$541.5*
YoY Growth	—	—	–2.0%	—
QoQ Growth	—	—	–19.4%	—
Gross Margin %	32.6%	39.9%	31.2%	—
Adjusted Gross Margin %	37.2%	44.1%	36.5%	—
Adjusted EBITDA ($M)	$116	$217	$118	—
Adjusted EBITDA Margin %	20.8%	31.9%	21.5%	—
GAAP Diluted EPS ($)	$(0.22)	$0.05	$(0.03)	—
Adjusted Diluted EPS ($)	$0.10	$0.24	$0.10	$0.10*

Consensus values marked with an asterisk (*) are from S&P Global.

Segment/Revenue Mix

Mix Metric	Q1 2024	Q4 2024	Q1 2025
Recurring Revenue ($M)	$521	$617	$520
Project Revenue ($M)	$38	$63	$28
BPaaS Revenue ($M)	$117	$146	$126

Operational KPIs (YoY)

KPI	Q1 2024	Q1 2025	YoY Change
Free Cash Flow ($M)	$61	$44	–$17
Adjusted EBITDA Margin %	20.8%	21.5%	+0.7 ppt
BPaaS Revenue ($M)	$117	$126	+$9
Gross Margin %	32.6%	31.2%	–1.4 ppt
Recurring Revenue ($M)	$521	$520	–$1
Project Revenue ($M)	$38	$28	–$10

Notes: Recurring revenue accounted for 94.9% of total in Q1’25; management highlighted recurring resilience and project softness .

Guidance Changes

Metric	Period	Previous Guidance (Feb 20, 2025)	Current Guidance (May 8, 2025)	Change
Revenue	FY 2025	$2.318B – $2.388B	$2.318B – $2.388B	Maintained
Adjusted EBITDA	FY 2025	$620M – $645M	$620M – $645M	Maintained
Adjusted Diluted EPS	FY 2025	$0.58 – $0.64	$0.58 – $0.64	Maintained
Free Cash Flow	FY 2025	$250M – $285M	$250M – $285M	Maintained
Dividend	Ongoing	$0.04/qtr initiated in Q4’24	$0.04/qtr declared Q1’25	Maintained

Restructuring program (PSP) approved May 6, 2025: ~$65M pre-tax costs over ~15 months; estimated annual savings of >$75M after completion (investments/savings already included in FY25 guide) .

Earnings Call Themes & Trends

Topic	Q3 2024 (Prior-2)	Q4 2024 (Prior-1)	Q1 2025 (Current)	Trend
AI/Technology enablement	—	“Technology modernization now complete; 2025 transitional year focused on execution”	80% of clients leveraging AI; new self-service leaves reporting; standardized implementations lowering cost/time	Increasing adoption/impact
Project demand/Mix	Revenue decline tied to lower project revenue	Project revenue lower; 2H growth expected despite lag from 2023–24 losses	Project revenue –26% YoY; continued caution; visibility builds by June/July	Soft/gradual stabilization
Pipeline/Renewals/Visibility	Key wins (HPE, Nokia, Siemens)	Retention up 8 pts YoY; FY25 growth impacted by legacy losses but improving 2H	92% of FY25 revenue under contract; pipeline up ~30%; renewals (Starbucks, Baxter, US Foods, Otis)	Improving
Margins/Productivity	Adj. EBITDA margin 21.3%; productivity savings cited	Adj. EBITDA margin 31.9% (seasonal peak)	Adj. EBITDA margin 21.5%; new PSP restructuring to unlock >$75M annual savings	Structural levers in place
Capital return	Initiated $0.04/qtr dividend; $75M buyback	Added $200M to buyback authorization	Repurchased $20M; dividend maintained; opportunistic stance reiterated	Ongoing
Macro & wealth fee sensitivity	—	—	Monitoring elongated cycles; wealth-fee exposure “well less than $10M” in a prolonged downturn	Watch list

Management Commentary

Strategic focus and execution: “We’re off to a strong start to 2025 … delivering financial results in line with our commitments with total revenue of $548 million and adjusted EBITDA of $118 million” .
AI/automation embedded in delivery: “At quarter end, nearly 80% of our clients were already leveraging AI … our road map positions us to meet and anticipate the needs of participants and drive better outcomes” .
Renewals and client confidence: “Our renewal trends remain on track … we have already renewed several top clients this year, including Starbucks, Baxter, US Foods and Otis Elevator Company” .
Visibility and guidance: “We now have 92% or $2.2 billion of projected 2025 revenue under contract … we are reaffirming our outlook for 2025” .
Cost discipline and balance sheet: “Net leverage ratio was 3.1x … repriced our term loan, lowering our interest rate by 50 bps, which will decrease interest expense by $10 million annually” .
Restructuring to drive savings: 15‑month PSP to optimize operations (AI/automation, tech spend, real estate), ~$65M costs and >$75M annual savings expected after completion .

Q&A Highlights

Project revenue trajectory: Q1 played out as expected; early-year projects remained soft (M&A/regulatory), with clearer visibility for back-half project work in June–July; comps ease later in the year .
Pipeline strength: Pipeline up ~30% across core admin, leaves and navigation; management pursuing aggressively into Q2 .
Sales cycles/macro: No material shift in buying patterns, but added layers of approval can extend timing by weeks; larger platform decisions still on typical cycles .
Capital allocation: $261M remaining authorization; willing to be opportunistic on buybacks while prioritizing balance sheet strength and strategic opportunities .
Revenue under contract pacing/implementations: 92% for FY25 vs 89% at start; pacing better than historical given business mix; no material implementation delays; capacity in place .
Wealth exposure: Fee revenue sensitivity to markets is small (well less than $10M in a protracted downturn) relative to $1.5T administered .

Estimates Context

Q1 2025 revenue was $548M vs S&P Global consensus $541.5M, a ~1.2% beat; adjusted/normalized EPS was $0.10 vs $0.10 consensus (in line). Consensus values from S&P Global.*
Continued project softness and higher recurring mix explain the slight revenue outperformance alongside margin stability; no change to FY guide suggests consensus may consolidate around current ranges pending 2H project visibility .

Estimates vs Actuals (S&P Global*)

Metric	Q1 2025 Consensus*	Q1 2025 Actual
Revenue ($M)	$541.5*	$548
Normalized/Primary EPS ($)	$0.10*	$0.10

Consensus values marked with an asterisk (*) are from S&P Global.

Key Takeaways for Investors

Resilient core with high visibility: 92% of FY25 revenue contracted supports the reaffirmed guide despite macro caution; renewals and pipeline breadth are positive leading indicators .
Mix is the swing factor: project revenue remains the key headwind to near-term growth; watch June–July funnel conversion for 2H acceleration and its impact on margins .
Margin levers intact: Q1 adjusted EBITDA margin expanded YoY; the 15‑month PSP restructuring should underpin medium-term margin expansion (> $75M annual savings after completion) .
Capital returns continuing with balance sheet tailwinds: dividend maintained; active buybacks; term loan repricing reduces annual interest by ~$10M; net leverage ~3.1x expected to trend below 3x .
AI-driven operating model: broad AI adoption (80% of clients) and standardized implementations should lower delivery cost and speed time-to-value, supporting both retention and expansion .
Trading setup: modest revenue beat and in-line EPS with reaffirmed guide likely keep focus on 2H project recovery and execution of cost actions; catalysts include renewal disclosures, pipeline wins, and color on PSP savings cadence .
Risk monitor: macro-related decision delays, sustained project softness, and any deterioration in participant volumes or capital markets (small wealth-fee exposure) .

Footnotes:

Consensus values marked with an asterisk (*) are from S&P Global.

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