Good morning and thank you for holding. My name is Irene and I will be your conference operator today. Welcome to Alight's Second Quarter 2022 Earnings Conference Call. At this time, all parties are in listen-only mode. As a reminder, today's call is being recorded and a replay of the call will be available on the Investor Relations section of the company's website. And now I would like to turn the call over to Greg Faje Head of Investor Relations at Alight to introduce today's speakers.

Good morning. Thank you for joining us. Earlier today the company issued a press release with second quarter 2022 results. A copy of the release can be found on the Investor Relations section of the company's website at investor.alight.com. Before we get started, please note that some of the company's discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are discussed in more detail in the company's filings with the SEC, including the company's most recent Form 10-K filed with the SEC as such factors may be updated from time-to-time in the company's periodic filings with the SEC. The company does not undertake any obligation to update forward-looking statements. Also, throughout this conference call, the company will be presenting non-GAAP financial measures. Reconciliations of the company's historical non-GAAP financial measures to the most directly comparable GAAP financial measures will appear in today's earnings press release. On the call from management today are Stephan Scholl, CEO; and Katie Rooney, CFO. After their prepared remarks, we will open up the call for questions. I will now hand the call over to Stephan.

Thanks Greg and good morning everyone. When we announced plans to go public in January 2021, we laid out an ambitious plan focused on transforming Alight from a custom services-led model into a technology-led organization that delivers better engagement and outcomes for companies and their workforces. We are midway through our three-year journey and we can already see the impact of that transformation and have a clear vision for the opportunity ahead. We've delivered first half year revenue growth of 5.8%, successfully launched the Federal Thrift contract, and have over 90% of 2022 revenue under contract. And we've recorded $958 million in cumulative BPaaS bookings since the first quarter of 2021, putting us well on the path towards $1.3 billion in bookings by year end 2022. Taken all together with the revenue visibility we have into the next six months, we are reaffirming our full year revenue growth projections of 6% to 7% and adjusted EBITDA guidance of $650 million to $662 million. Katie will provide more details on the quarterly cadence shortly. We continue to make progress against our 2023 goal of double-digit revenue growth and already have over $2.4 billion of revenue under contract. Given the confidence we have in our business, we are also announcing a stock repurchase program of up to $100 million. Our progress is due in large part to our technology-focused approach and the investments we have made. Over the past five years, we have grown our estimated total addressable market from $33 billion to $73 billion by adding key content and leveraging the build-out of the Alight Worklife platform to drive better outcomes for clients and their people. This differentiated approach leads to better health, wealth, and well-being decisions and delivers ROI for our clients through higher engagement and cost savings. Alight Worklife…

Thank you, Stephan and good morning, everyone. On a total contract basis, BPaaS bookings for the second quarter, were $234 million and for the first half totaled $356 million, which is tracking ahead of our $680 million to $700 million target for 2022. Bookings growth has translated into revenue growth and higher contracted revenue. Our BPaaS revenue growth was 36.2% for the second quarter, and now comprises 17.9% of revenue. With our strong bookings, as of June, we already had more than 90% of projected 2022 revenue under contract. Moving to our consolidated results. We continue to make steady headway. On a year-over-year basis, second quarter total revenue increased 6.4% to $715 million and total revenue excluding our legacy Hosted business, increased 6.7% to $705 million. Recurring revenue, which comprises 84% of our total revenue, increased 7.7%. And adjusted EBITDA was $142 million in the quarter, even with our strategic investments. Next, I'm going to discuss performance for our two primary segments. Employer Solutions' second quarter revenue grew 7.9%, which reflects a combination of net commercial activity, increased volumes, acquisitions and project revenue. Recurring revenue increased 8.3%, while project revenue grew 3.8%. Gross profit increased 4.7% to $200 million, while gross margin decreased 100 basis points to 32.6%. And adjusted EBITDA increased 6.5% to $147 million, with adjusted EBITDA margins at 23.9%. This reflects the seasonality profile of the acquisitions completed late last year and key investments we're making into the business. Turning to our Professional Services segment. Second quarter revenue decreased slightly by $1 million to $91 million due to a 3.3% decline in project revenue due to timing delays on three large projects that we anticipate will start by year-end, partially offset by stronger-than-anticipated recurring revenue. Gross profit declined by $6 million to $20 million and gross margin…

Thank you. [Operator Instructions] Our first question is from Kevin McVeigh of Credit Suisse. Please go ahead.

Great. Thanks so much and congratulations on the results. Hey, it's probably for Katie. Katie I just want to make sure in terms of the guidance the $15 million of headwind that you talked about was that already in the EBITDA? Or I guess said another way would you have been able to increase the EBITDA if not for that incremental $15 million? And it sounds like, it's more demand driven than anything else.

Yeah, Kevin that's right. And some of it again is the misalignment of cost to revenue, right? When you think about the staffing we do for some of that annual enrollment work we're hiring for that in the third quarter, but we recognize all the revenue right once those clients are in the enrollment process in the fourth quarter. So it's really kind of the timing of the cost versus the revenue.

Great. And then just really, really nice momentum on the bookings, maybe talk to that a little bit because it seems like from a macro perspective even though we're hearing about the storm clouds definitely doesn't seem like you're seeing it in the results. So maybe talk to that a little bit if you could call out maybe size or anything like that around the bookings number.

Yeah. Thanks Kevin. It's -- as we've talked about before the people agenda is top of mind with Boards and CEOs like never before. And that hasn't changed. If anything all the investments we've made into platform, into engagement discussions and into our value engineering teams have highlighted that this 70% cost bucket for most companies is an area that is really the next opportunity for everybody to go in and look at. And see how do we rationalize simplify one client is at best to me which is enough of the Christmas tree approach which is throwing 80, 90 different offerings at employees getting 1% to 3% engagement rate, they're all looking to us to help consolidate and simplify that into a much more comprehensive enterprise approach to it. And so, we see big opportunities in taking cost out and taking a bigger share of wallet as Katie said earlier. And by doing that, -- excuse me we'll be able to get a bigger piece of the pie ourselves while still having them save money.

Thanks so much and congrats.

Our next question is from Peter Heckmann of D.A. Davidson. Please go ahead.

Good morning everyone. Thanks for taking my questions. So, on the Professional Services side you talked about three large projects that saw timing delays but you retain the bench. And so the lower level of utilization dragged on margins. Do you assume about that same level in the third quarter in the fourth quarter, or is it possible that some of those projects could go live before year-end?

Yeah. Good question, Pete. Some of those projects are on track to go live in the fourth quarter. So I think you'll see an improvement in the fourth quarter and then, a more substantial improvement into 2023, because again going back to the pipeline and the backlog. I mean, it's the highest we've seen. So we have good visibility into that revenue coming in line later this year and into 2023. But those delays have obviously hurt us in the first three quarters.

Okay. Okay. And then, in terms of some of the other large deals that we've been talking about on prior calls like PwC or Navistar, generally do you feel like you're on track with those conversions and the hiring need to support those conversions?

Yeah. Hey Pete, it's Stephan here, absolutely. And I think the biggest testament is, if you just look at the Thrift program I mean, how many companies in the world can deliver on some of that scale. They're on one hand and now we're a part of that. So, I think that should give everybody significant confidence that in all the strategy, we set out two and half years ago, and invested hundreds of millions, since then are now really in the last several months coming to fruition with the go-lives for the Thrift program. The launch of our platform Worklife live with over 500 clients, I can't underscore the importance of that statement that last one, which is our ability to execute is super exciting because that sets the foundation for everything else that we're doing. So, and we're on track on all these big programs. And don't forget look at the new wins that we just had. I mean, the AutoZone win for us was a dramatic 100,000 person employee organization looking to a full enterprise approach. And they look to all the other deals that we had closed and found confidence in those wins in the previous year to really make a big, big investment on an enterprise scale with us.

That's great. That's great. And then if I just sneak one more in. Talk about your ability to pass on wage inflation as it comes. Like, what are you experiencing in your current employee base? And then, how do you start those conversations with your customers about trying to pass some of that on?

Yeah, Pete, actually a lot of that is already contractually included in our agreement. So we look at the employment cost index, which as of June was 5.7%, and kind of how the majority of our contracts work is that, we cover on average the first 3%. But then above that right we passed that incremental cost on to the employer for that contract year. So for contracts that have a July one start date right we'd be passing on that difference between the 5%, 7% and the 3%. So that helps offset a portion of inflation. And then obviously, we have to continue to look for ways to gain efficiencies going back to the example around the workflow tracker right, and taking calls out of the system. I mean, that's something we're looking at every day to make sure we have kind of those levers to help with the environment we're in.

Okay. Great. That's good to hear. I'll get back in the queue.

Thanks, Pete.

Our next question is from Tien-Tsin Huang of JPMorgan. Please go ahead.

Thanks. You hear me, I had to jump off for a second. I just wanted to ask on the visibility question Katie on the fourth quarter ramp, especially for some of the deals. I get this question a lot. To – with the way the calendar cuts and the timing of projects and with enrollment period is that what drives some of the visibility into the projects cutting on definitively in the fourth quarter? Just trying to better understand how that visibility comes together.

Yes. Thanks Tien-Tsin. It's a couple of things. I think first as you said right, given the time line from sales to revenue, right? I mean, we kind of have visibility to just even new deals coming online in the fourth quarter that are on track, right? So you first have already kind of visibility from bookings to revenue in terms of kind of that ramp. Second, obviously, with the Thrift going live on track that helps our kind of visibility into the year. And then to your point on the project side, particularly around the Employer Solutions business, what we're seeing more of this year is again demand for – like think about companies doing plan design changes they need more support actually through the enrollment process not necessarily leading up to it. So a lot of our companies are going through enrollment right in the October November time frame. At times, we'll be doing support work for them leading up to that. And in this year, where we're seeing more demand is actually helping them through changes during enrollment. And so that's – again, so we're already contracted with those clients to provide those capabilities right? They know we're ramping now to prepare for that, which kind of gives us that visibility.

Yeah, I would add in the seasonality piece for our retirement business, Katie. I'll get into that for a second, because I think that's a big piece of.

Yeah. I think that's the other dynamic Tien-Tsin, which is different for us this year, right? We talked about it a little bit late last year, but also with our – the retiree health business kind of our – the commissions businesses remember how those work again you're staffing now for those companies to enroll right in the fourth quarter and really late in the fourth quarter. But again that – I almost think of that a little bit as more recurring, right, because they're already working with the employer. They're just going through a re-enrollment process. So again, you have – you don't see a lot of volatility around that which gives us kind of the added confidence in the outlook.

Understood. Yeah. No, it makes sense. We'll be doing ours in real moment in a couple of months. I think on the – Stephan for you just thinking about the pipeline here. And I totally hear your comment on right cost savings is a bigger focus for enterprises probably and still critically important to get the wellness right. So as we turn to 2023, and the end of the year here how does the pipeline feel for you and sort of the pathway to get more of your existing clients as well to convert to BPaaS?

Yeah. Thanks. Listen, our pipeline is the largest we've ever had at this point in time. And when you look at a win like AutoZone, and they let us speak to it as much as they are just hopefully shows excitement to our investors, and frankly to all our employees on the path that we're on. That one was less about cost savings, that was one where if you look at the frustration around the Fortune 500 especially on the lack of engagement across these 70 to 80 to 100. If you look at our investor deck, you'll see these companies are dealing with so much complexity and the employees are frustrated. And then, we've unraveled and unpacked for them the cost that comes with running this Christmas tree-type approach and then have shown them the path of simplification enterprise. And the fact that 500 customers adopted worklife within -- on a weekend and we had that happen again another testament to people moving away from best-of-breed, moving to enterprise, consolidation, wanting to drive engagement. And by the way, you're going to save some money along the way. So kind of the best of both worlds coming together, which we're excited about. And by the way Tien-Tsin, we also mentioned -- I mean I don't want to -- I talk about AutoZone 100,000 people, but look at Siemens Energy. I mean AutoZone, we took away from one of our largest competitors, it was their second largest client. We are replacing them at AutoZone and adding so much more to what we had before. On Siemens Energy, we competed against our biggest competitors and we beat them in that deal. When you think of the Unilever on the global payroll side again another -- that's our fourth Fortune 500 win just in the last few months again some of our biggest competitors. So just the brands and names of big companies betting on us is I think a big testament to the pipeline and to the growth and where we're headed.

Yeah. No, I appreciate the case studies. And the slides are really useful. So thanks for that.

You bet. Thank you.

[Operator Instructions] Since we have no further questions, ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Stephan for any closing remarks.

Thanks, Irene. Appreciate that. Thank you everyone. I really appreciate you all joining us today. We are executing on our strategy. We're expanding relationships with new and current clients. And we're making key investments to fuel our results, not just for the rest of this year, but really into 2023 and 2024. So thank you for the time today and look forward to further discussions. Thank you.

This concludes today's conference. Thank you for joining us. You may now disconnect your lines.