Executive Summary

Q2 topline modestly declined while profitability improved: revenue $0.528B (-1.9% YoY), adjusted EBITDA $0.127B (24.1% margin, +460 bps YoY), adjusted EPS $0.10; GAAP EPS was $(2.03) driven by a non‑cash $0.983B goodwill impairment in Health Solutions .
Guidance: revenue outlook cut to $2.282–$2.329B (from $2.318–$2.388B) on slower ARR bookings and flat volumes; EBITDA ($620–$645M), adjusted EPS ($0.58–$0.64), and FCF ($250–$285M) reaffirmed; 95% of 2025 revenue under contract provides visibility .
Estimate context: Q2 revenue slightly beat ($528M vs $525.2M*), EPS in line ($0.10 vs $0.1045*), and adjusted EBITDA effectively in line versus consensus ($127M actual vs $126.4M*). Focus shifts to second-half bookings conversion and project revenue stabilization .
Strategic narrative: AI/automation driving service efficiencies (e.g., 17% call volume reduction YTD), and new GSAM partnership expands wealth solutions; commercial execution being upgraded (search for new CCO, adding domain specialists) to accelerate ARR .

What Went Well and What Went Wrong

What Went Well
- Margin and cash metrics improved: adjusted EBITDA rose to $127M with 24.1% margin (+460 bps YoY), and 1H free cash flow reached $102M, up from $26M YoY .
- Operational efficiency gains from AI: “natural language interactive voice response” and Alight Worklife enhancements produced a 17% reduction in call volume YTD; collaborations with Microsoft and IBM to scale AI capabilities .
- Portfolio momentum and partnerships: renewals/expansions with Target, J&J, Hyatt, Best Buy, Highmark Health, John Hancock; new wealth solutions relationship with Goldman Sachs Asset Management to sub-advise DC and Alight IRA offerings .
What Went Wrong
- Topline pressure: revenue down 1.9% YoY to $528M due to lower project revenue and net commercial activity; project revenue declined to $36M (from $45M) .
- Outlook trimmed: 2025 revenue guidance cut by ~$45M at the midpoint due to slower first‑half ARR bookings (now flat to slightly down YoY) and flat participant volumes; retention unchanged .
- Sales cycle elongation and execution gaps: client expansions taking longer and new logo pursuits finishing “second too often,” prompting commercial org changes and a search for a new Chief Commercial Officer .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$680	$548	$528
Recurring Revenue ($USD Millions)	$617	$520	$492
Project Revenue ($USD Millions)	$63	$28	$36
BPaaS Revenue ($USD Millions)	$146	$126	$124
Gross Profit ($USD Millions)	$271	$171	$176
Gross Margin %	39.9%	31.2%	33.3%
Adjusted Gross Profit ($USD Millions)	$300	$200	$205
Adjusted Gross Margin %	44.1%	36.5%	38.8%
Adjusted EBITDA ($USD Millions)	$217	$118	$127
Adjusted EBITDA Margin %	31.9%	21.5%	24.1%
GAAP Diluted EPS ($)	$0.05	$(0.03)	$(2.03)
Adjusted Diluted EPS ($)	$0.24	$0.10	$0.10

Notes and drivers

Sequential revenue declined from $548M to $528M on softer project revenue and net commercial activity; recurring mix remained >93% .
GAAP loss reflects a non‑cash $983M goodwill impairment in Health Solutions; no cash impact to operations .
CFO noted adjusted gross profit is normalized higher by ~$8M due to TSA reimbursements classified in other income (presentation nuance) .

Q2 2025 vs. Wall Street Consensus (S&P Global)

Metric	Actual	Consensus	Result
Revenue ($USD Millions)	$528	$525.2*	Beat (≈+$2.8M)
Primary EPS ($)	$0.10	$0.1045*	In line/slight miss
Adjusted EBITDA ($USD Millions)	$127	$126.4*	Beat (≈+$0.6M)

Values marked with * retrieved from S&P Global.

Balance Sheet and Cash Flow (Q2 2025)

Cash & equivalents: $227M; Total debt: $2,015M; Net debt: $1,788M .
1H Free cash flow: $102M (CFO target: $250–$285M for FY25) .
Net leverage ~3.1x; majority of debt fixed through 2025; revolver extended and priced down .

Guidance Changes

Metric	Period	Previous Guidance (Q1 2025)	Current Guidance (Q2 2025)	Change
Revenue	FY 2025	$2.318B–$2.388B	$2.282B–$2.329B	Lowered
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

Management attribution of revenue trim: ~$35M timing of new wins (ARR bookings conversion), ~$10M volumes (flat participant counts), retention unchanged .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
AI/Automation	Tech modernization and AI enablement across platform; 80% of clients using AI; launched self-service leaves reporting; NPS +12 pts for annual enrollment .	Natural language IVR and Worklife enhancements drove a 17% YTD reduction in call volumes; partnerships with Microsoft/IBM to scale AI .	Strengthening execution and measurable efficiency gains.
Commercial execution/sales cycle	Pipeline up ~30%; watching for elongation but no major buyer behavior change; reaffirmed outlook .	ARR bookings slower; expansions taking longer; org changes underway incl. search for new CCO; finalist pipeline up 35% YoY .	Mixed: healthy pipeline, but timing/execution weigh on near-term growth.
Project revenue	Entered 2025 cautious; 1H discretionary projects/M&A soft; back-half visibility builds in June/July .	Q3 project revenue to mirror Q2’s -20% YoY; Q4 closer to flat (down single digits) .	Stabilizing late year; still a headwind short term.
Client retention/renewals	Early renewals (Starbucks, Baxter, US Foods, Otis); revenue under contract 92% .	Renewals in line or better than 2024; notable renewals incl. Target, J&J, Hyatt, Best Buy, Highmark, John Hancock; 95% of FY25 revenue under contract .	Solid and supportive to visibility.
Partnerships/Wealth	Benefits of capital allocation flexibility; opportunistic buybacks .	New GSAM sub-advisory relationship for AFA DC and Alight IRA; viewed as multi‑year revenue opportunity .	Positive optionality and product breadth.
Macro/participant counts	Volatility can elongate decisions; participant counts cautious but impacts lag .	Participant counts flat; volumes unchanged in outlook .	Neutral-to-slight headwind in-year.

Management Commentary

“We delivered solid results in what is a transitional year… updated our revenue outlook for 2025 and reaffirm the rest of our guidance” .
“Using natural language interactive voice response… we’ve seen a 17% reduction in call volumes during 2025 versus the prior year” .
“Partnering with Goldman Sachs Asset Management… a significant revenue growth opportunity over the next few years” .
CFO: “We now expect total revenue to be lower by roughly $45 million at the midpoint… timing of new wins $35 million, volumes $10 million, and retention unchanged,” while “reaffirming… adjusted EBITDA $620–$645M, adjusted EPS $0.58–$0.64 and free cash flow $250–$285M” .
CFO noted presentation nuance: adjusted gross profit affected by TSA reimbursements (would be ~$8M higher on a normalized basis) .

Q&A Highlights

Sales cycle and bookings: Expansions taking longer and new logo execution gaps; adding domain experts, upgrading commercial leadership (new CCO search). Finalist-stage opportunities up 35% YoY, supporting 2H conversions .
Revenue guide mechanics: ~+$10M 1H performance offset by -$45M 2H reduction; ~$(25–30)M ARR in‑year revenue impact, remainder project and volumes .
Project revenue cadence: Q3 similar to Q2 (down ~20% YoY); Q4 closer to flat/down single digits on enrollment activity and comps .
Deal composition: 2H in‑year revenue typically smaller/mid-market admin and specific solutions (leaves/navigation/retiree health); delays push starts into late 2025/2026 .
Capital allocation: Dividend and buybacks ongoing; $241M remaining authorization at quarter end; net leverage 3.1x with expectation to normalize sub-3x through seasonality and cash build .

Estimates Context

Q2 revenue slightly beat consensus ($528M vs $525.2M*); EPS essentially in line ($0.10 vs $0.1045*); adjusted EBITDA tracked in line/beat modestly ($127M vs $126.4M*). Values retrieved from S&P Global.
Given revenue guide reduction (midpoint down ~~$45M), Street revenue estimates for FY25 (~~$2.268B*) may drift toward the company’s range ($2.282–$2.329B). Profitability guide intact suggests limited changes to FY25 EBITDA/EPS consensus if execution holds in 2H .
Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Near-term: Expect muted topline in 2H on slower ARR conversion and flat volumes, with project revenue headwinds persisting into Q3; watch for Q4 stabilization and late-stage pipeline conversion as potential catalysts .
Profitability durability: Despite the revenue trim, 2025 adjusted EBITDA, EPS, and FCF outlooks held, underpinned by productivity savings and mix shift; margin expansion remained evident in Q2 .
Execution watch items: Commercial retooling (CCO hire, domain specialists) and ARR timing are key to re-accelerating growth into 2026; management highlighted finalist pipeline up 35% YoY .
Strategic upside: GSAM partnership broadens wealth solutions and could add multi‑year revenue streams; AI initiatives delivering tangible service efficiencies and should compound operational leverage .
Risk checks: Goodwill impairment is non‑cash but underscores market/macro reassessment in Health Solutions; participant counts flat and elongated sales cycles remain short-term headwinds .
Visibility: 95% of 2025 revenue under contract and stable retention support confidence in cash generation and capital returns (dividend and buybacks) .

Additional Reference Data (Q2 press release facts)

Revenue mix: recurring 93.2% ($492M) and project $36M; BPaaS $124M .
Balance sheet: cash $227M; total debt $2,015M; net debt $1,788M .
Shareholder returns: $20M buybacks; $0.04/share dividend declared and paid .

Alight, Inc. / Delaware (ALIT)·Q2 2025 Earnings Summary