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    ALIT
    Earnings call· Jun 2026(Q2 FY26)

    Alight, Inc. / Delaware Q2 FY26 earnings call ALIT

    Aug 4, 2026 Source

    Executive summary

    Alight Q2 FY26 — Exceeded Expectations on Revenue, EBITDA, and FCF

    Alight reported a solid Q2 FY26, exceeding market expectations for revenue, adjusted EBITDA, and free cash flow, driven by strong project revenue. The company is undergoing significant transformation, including insourcing client service functions, expanding sales coverage, and strategically deploying AI to enhance user experience and operational efficiency. While recurring revenue declined due to prior commercial execution, management is focused on strengthening its foundation and expects to see momentum build in 2027, leading to quarter-over-quarter growth by 2028, supported by strong cash generation and a flexible capital allocation strategy.

    Highlights

    5

    • Second quarter revenue of $511 million exceeded market expectations, primarily due to strengthened project revenue and higher volumes.

    • Adjusted EBITDA of $92 million, representing 18% margin, exceeded market expectations.

    • Maintained a strong liquidity position, exiting the quarter with $545 million in total liquidity, consisting of $215 million of cash and a $330 million of undrawn revolver.

    • Year to date, generated $101 million in free cash flow, including $48 million in Q2.

    • Sales coverage expanded to 500 clients, up from 100.

    Concerns

    5

    • Recurring revenue was down 4.3% over the prior year period, reflecting commercial activity in 2025 and earlier.

    • Adjusted gross profit in the second quarter was $176 million, down $29 million from the prior year, with a margin decline of 440 basis points.

    • Adjusted EBITDA of $92 million was down from $127 million in the prior year period, with margin declining from 24% to 18%.

    • Adjusted net income was $26 million, down from $56 million in Q2 2025, with adjusted EPS of $0.91, down from $2.09.

    • Q3 FY26 revenue expected to be between $469 million and $479 million, with adjusted EBITDA between $55 million and $61 million, due to higher expenses for annual enrollment.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year FY26 Revenue
    $2,078,000,000 - $2,098,000,000
    high materiality
    High
    Full-year FY26 Adjusted EBITDA
    $400,000,000 - $415,000,000
    high materiality
    High
    Q3 FY26 Revenue
    $469,000,000 - $479,000,000
    medium materiality
    High
    Q3 FY26 Adjusted EBITDA
    $55,000,000 - $61,000,000
    medium materiality
    High
    Momentum and Platform Advantages
    Gain momentum and start to realize meaningful platform advantages
    high materiality
    Medium
    Quarter-over-quarter Growth
    Begin to drive quarter over quarter growth
    high materiality
    Medium
    AI Impact on Margin Expansion
    AI to have created a real and tangible impact on margin expansion
    high materiality
    Medium

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    Wealth Solutions
    Second largest business; includes a portfolio of financial and retirement-related benefit solutions, including defined contribution, defined benefits, and pension risk transfer.
    Assets under administration: $1.7 trillion
    		————

    Operational metrics

    13
    Revenue
    $511Mdown 3%
    Q2 FY26

    Total revenue for the quarter.

    Recurring revenue
    $471Mdown 4.3% YoY
    Q2 FY26

    Recurring revenue for the quarter, reflecting commercial activity in 2025 and earlier.

    Project revenue
    $40Mup 11% YoY
    Q2 FY26

    Project revenue for the quarter, which can vary and drive fluctuations.

    Adjusted gross profit
    $176Mdown $29M YoY
    Q2 FY26

    Adjusted gross profit for the quarter.

    Adjusted EBITDA
    $92Mdown from $127M YoY
    Q2 FY26

    Adjusted EBITDA for the quarter, exceeding market expectations due to higher than expected revenue performance.

    Adjusted net income
    $26Mdown from $56M YoY
    Q2 FY26

    Adjusted net income for the quarter.

    Adjusted EPS
    $0.91down from $2.09 YoY
    Q2 FY26

    Adjusted EPS for the quarter.

    Total liquidity
    $545M
    Q2 FY26

    Total liquidity position at the end of the quarter.

    Cash balance
    $215M
    Q2 FY26

    Cash balance at the end of the quarter.

    Undrawn revolver capacity
    $330M
    Q2 FY26

    Undrawn revolver capacity at the end of the quarter.

    Free cash flow conversion rate
    40-43%
    FY26

    Expected full-year free cash flow conversion rate against EBITDA.

    Sales coverage
    500up from 100
    Q2 FY26

    Expanded account executive coverage.

    CEO client meetings
    180+
    since taking role

    Number of client meetings conducted by the CEO.

    Industry KPIs

    1
    MetricValueDetails
    Peo metrics300thsolution

    Risks & headwinds

    3
    Lag in commercial execution to revenue realizationNext couple of quarters

    12 to 18 months lag for substantial recurring business

    Mitigation: Strengthening operational execution, deepening client relationships, enhancing commercial capabilities, expanding sales coverage.

    Seasonality of profitability due to annual enrollment expensesQ3 FY26

    Q3 FY26 adjusted EBITDA expected to be $55M-$61M, down from $92M in Q2 FY26

    Mitigation: Disciplined cost management, operational streamlining, progress on transformation initiatives.

    Impact of prior years' commercial activity on recurring revenueBack half of FY26

    Recurring revenue down 4.3% YoY in Q2 FY26

    Mitigation: Increased emphasis on rebuilding commercial execution, improving renewal activity, and investing in user experience.

    What to watch in Q3 FY26

    5

    Recurring Revenue Trend

    Next couple of quarters (Q3 FY26, Q4 FY26)
    CurrentDown 4.3% YoY in Q2 FY26
    TargetStabilization or reduced decline

    Why it matters

    Recurring revenue decline is a key concern, and management expects it to continue for the next couple of quarters due to past commercial execution.

    As a reminder, our lag from commercial execution to revenue realization for a substantial part of our recurring business is 12 to 18 months. This is reflected in the revenue reduction we are seeing now and expect to see for the next couple of quarters as the impact of that activity runs through our P&L.

    Q&A highlights

    5

    Inquired about the trend of retention rates for full-year 2025 and the first half of 2026, asking if they have deteriorated, bottomed, or improved.

    Rohit Verma stated that increased account coverage (from 100 to 500 clients) provides better visibility into renewal work. He is "very encouraged by the trends" in both loss and compression compared to last year, attributing it to improved delivery excellence and positive client feedback from recent council meetings and demos.

    “what I can tell you is that we're actually very encouraged by the trends that we're seeing both from a loss as well as compression side at this point of the year when we compare it to at this point last year”

    asked by Pete Heckman · answered by Rohit Verma

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Transformation and Leadership

    Rohit Verma highlighted the ongoing transformation initiatives, including insourcing critical client service functions and strengthening the leadership team with key hires like Steve Lasher as CFO, Dinesh Tosiani as President, Employer Solutions, and Naveen Bawaja as CTO. These changes aim to improve client experience and operational execution, with the leadership team now largely in place to guide the company's next phase.

    02

    Technology and AI Investment

    The company is making significant strategic investments in technology, focusing on creating a consumer-grade customer experience. This includes building an AI-native employee/employer experience with rollouts expected next year, developing a unified data framework for health, wealth, and leaves, modernizing the service model with AI-enabled agents, and automating client specification ingestion, with the first wave going live in Q3 2026.

    03

    Client Engagement and Feedback

    Management emphasized increased client engagement, with Rohit Verma conducting over 180 client meetings. Positive feedback from client council meetings and innovation days, along with improved renewal activity, indicates the effectiveness of their efforts to enhance service delivery and commercial execution. The expansion of sales coverage from 100 to 500 clients is also contributing to better visibility into renewal work.

    04

    Business Segments and Growth Opportunities

    Alight operates across Health, Wealth, and Leaves solutions. Health is the largest portfolio, Wealth is the second largest with $1.7 trillion in assets under administration, and Leaves is identified as the largest growth opportunity due to increasing demand for compliance and administration services. The company is exploring opportunities beyond Fortune 500 clients and strengthening broker and consultant relationships to further penetrate the market.

    05

    Long-Term Growth Trajectory

    The company outlined a phased growth strategy: 2026 focuses on building the foundation, reinvesting, and improving retention; 2027 is expected to bring momentum and efficiency gains from operational transformation and improved commercial execution; and 2028 is projected to see quarter-over-quarter growth and tangible AI-driven margin expansion, all supported by healthy liquidity and cash generation.

    06

    Capital Allocation Philosophy

    Management reiterated its commitment to maintaining flexibility in capital allocation, having canceled the dividend to build capital on the balance sheet. They are evaluating various options, including buybacks and debt management, to achieve the best cash-on-cash return for long-term strategy implementation, with a decision on deployment expected soon.

    AI-generated summary of the company’s earnings call. Not investment advice.