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DATE
Wednesday, Nov. 5, 2025 at 8:30 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — David Guilmette
Chief Financial Officer — Jeremy Heaton
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RISKS
Jeremy Heaton stated, "we've never seen levels this low in terms of project revenue," in reference to Q4. Significantly reduced pipeline activity is expected to continue impacting results.
A $1.3 billion noncash goodwill impairment was recognized due to the company’s market valuation decline in Q3 2025.
David Guilmette remarked, "Project is the biggest with, you know, again, a $20 million update there on project," in reference to the 2025 outlook. Citing weak project pipeline and persistent client cautiousness as primary reasons for reduced revenue guidance.
TAKEAWAYS
Revenue -- Alight (ALIT 7.04%) reported $533 million in revenue, including a $4 million one-time reduction from the Strata business agreement.
Adjusted EBITDA -- Adjusted EBITDA was $138 million, up 17% from the prior year, and adjusted EBITDA margin expanded 460 basis points compared to the prior year.
Free Cash Flow (Year-to-Date) -- Free cash flow for the first nine months was $151 million, up 45% from the prior year.
Adjusted Gross Profit -- Adjusted gross profit was $206 million, up 3% from the prior year, with adjusted gross profit margin improved by 260 basis points compared to the prior year. Normalized adjusted gross profit would be $213 million without costs to support the divested business.
Guidance Update -- 2025 revenue outlook lowered to $2.25 billion-$2.28 billion and adjusted EBITDA to $595 million-$620 million.
Share Repurchases -- Nearly 14 million shares repurchased year to date; $216 million remains on the buyback authorization as of September.
Retention & Renewals -- The company achieved high renewal rates among large clients, maintaining renewal activity from 2024 into 2025, and expects a more than 30% reduction in renewal dollars for 2026.
Call Center Technology Impact -- Automated voice response implementation contributed to a 13% decline in call volumes year over year.
AI-enabled Solutions Rollout -- Piloted conversational AI with two large clients and delivered GenAI-enabled search summaries to more than 95% of clients, totaling over 300,000 summaries in October.
Balance Sheet -- Quarter-end cash was $205 million, total debt at $2 billion, and net leverage ratio improved sequentially to three times.
Goodwill Impairment -- Recognized a $1.3 billion noncash goodwill impairment charge as a result of market value assessment.
Tax Receivable Agreement -- 2026 payment expected to be $25 million lower based on completion of 2024 tax filings.
Dividend & Capital Return -- $47 million returned to shareholders via dividend and share repurchases.
Leadership Addition -- Steve Rush appointed Chief Commercial Officer, with a mandate to accelerate commercial execution and enhance sales effectiveness.
Partner Ecosystem Expansion -- Welcomed Sword Health and launched a new guaranteed income product with MetLife, building on the Goldman Sachs integration into Alight Work Life.
SUMMARY
Management confirmed that slower project revenue activity remains a major headwind, directly contributing to reduced revenue and adjusted EBITDA guidance. The company highlighted operational efficiency improvements, including AI and automation deployments, which decreased call volumes. Executives stated that the ongoing technology transformation enabled a significant increase in participant satisfaction, now at its highest since the company's overhaul, with scores rising to 90%. The call noted capital returns through both dividends and buybacks, reflecting ongoing financial discipline amid a challenged top line. Future attrition drag is expected to decline in 2026 due to the completion of renewal cycles for key large clients, based on renewal activity in 2024 and 2025.
Chief Financial Officer Jeremy Heaton said, "our profitability and cash flow results include a nonrecurring impact of lower variable and performance-based costs," acknowledging one-time benefits in recent performance.
Steve Rush’s appointment is intended to strengthen sales execution, with management emphasizing focused efforts on both client renewals and pipeline expansion.
Leadership identified near-term revenue opportunities from in-year bookings, new partnerships, and engagement services to offset lower project volumes.
Expansions in the partner ecosystem, such as recent collaborations, are positioned as incremental growth drivers, though contract ramp times may delay revenue recognition.
INDUSTRY GLOSSARY
Renew Everyday program: Alight's strategic initiative focused on client retention, renewal, and expansion across its client portfolio.
COE (Center of Excellence): An internal group established to standardize best practices and drive efficiency in service delivery within Alight.
GenAI: Generative Artificial Intelligence solutions deployed for client benefit administration and support tasks.
Tax Receivable Agreement: An agreement to pay certain tax benefits to pre-IPO owners following a public listing.
Full Conference Call Transcript
David Guilmette: To strengthen our position as a technology-enabled employee benefits services company. We've accelerated our technology roadmap and delivery capabilities while reimagining the client and participant experience with new solutions already in use by some of our largest clients. Through our AI and automation investments, and rapidly expanding partner collaborations, we are bringing immediate benefit to clients and ensuring our competitive advantages for the long run. We feel good about the substantial improvements we have made in our product line, with more to come. Likewise, our service delivery is unmatched. Clients are impressed with our new AI-centric services and delivery capabilities. The next step is improving our commercial effectiveness starting with a new leader with deep industry expertise.
Our emphasis includes the diversification of our revenue streams, including through our partner network, while continuing our operational progress. With the current macro environment, the continuing and unprecedented rise of healthcare costs for our clients, and the advancement of AI, I'm more confident than ever that our initiatives coupled with our track record position us best to tackle these dynamics. With that, let's review our quarter. For the third quarter, revenue was $533 million compared to $555 million a year earlier. And adjusted EBITDA was up 17% to $138 million. Free cash flow year to date remains strong and is up 45% from the prior year to $151 million.
Jeremy will provide additional color on quarterly results in a few minutes. As I mentioned, one way to accelerate our financial performance is by expanding our comprehensive partner ecosystem. Our refreshed strategy in this area is making fast progress to meet the changing needs of clients and participants while sharing in the value creation with our partners. Our relevance with 35 million participants is unmatched. And potential partners are looking for ways to work with us to unlock their own value. For example, recently, we welcomed Sword Health to the Alight Partner Network, complementing our long-term partner Hinge.
Participants now have access to an additional leading clinical-grade resource for managing pain and avoiding surgery as well as access to behavioral health and mental well-being platform. Our Goldman Sachs asset management integration into Alight Work Life, which we mentioned last quarter, is well underway. We've already signed our first client with several more active client conversations taking place. And just last week, we introduced a new guaranteed income solution through MetLife. This arrangement allows participants to purchase solutions that convert a portion of their savings into predictable monthly income as they prepare for retirement. Over a dozen proposals are outstanding from additional top-tier partners, and you should expect a regular cadence of announcements on this front.
At the same time, our investments in the most impactful technology and service capabilities are moving at an aggressive pace. Within the call center, we enhanced our automated voice response system. This technology drives a better user experience and has contributed to a 13% drop in call volumes year over year. Our new AI agent assist software is in pilot with nearly a dozen clients. This tool assesses calls in real-time to provide customer care agents with next best actions to more effectively service participants. Finally, in September, we brought critical delivery and technology talent back in-house, which allows us to better manage service quality and productivity. These actions, along with previous improvements, are strengthening our service quality.
Our participant satisfaction scores increased to 90%, which is the highest level achieved since completing our technology transformation. Regarding product, advances in our AI roadmap continue to accelerate. The embedded value in our petabytes of data is unmatched, which means we can drive a far more accurate, predictive, and differentiated user experience than anyone in our market. And our carefully curated mix of technology and services provides a trusted high-tech human touch experience that is core to our success. I want to share a few highlights from the last three months. First, we piloted a conversational AI agent solution with two of our largest clients to assist with annual enrollment this season.
Broadly available to all clients in 2026, this is a game changer to help participants feel more confident in their benefit selections while requiring less human intervention. Next, we've rolled out GenAI-enabled search summaries to more than 95% of our clients. AI-enabled searches are growing exponentially; we delivered over 300,000 summaries in October alone. The breadth and depth of our platform will only get stronger as more users interface with this feature. And finally, we announced our expanded collaboration with IBM, a decades-long business partner, to deploy IBM's Watson X Orchestrate AgenTeq framework across Alight. These advancements in our capabilities are critical to our Renew Everyday program agenda.
We have been successful at retaining top clients, with a large majority of our largest clients going through the renewal process in the past two years. Since our last earnings call, some of our noteworthy renewals include Campbell's, Essilor Luxottica, Ally Bank, Air Canada, and MetLife. Our client management team is focused on proactively renewing and expanding relationships with our tremendous client base. Our renewal rate in the large market was up significantly in '24, and we're pleased to maintain that same level in 2025. And we're working hard on expanding Renew Everyday to all of our clients, strengthening the approach to supporting smaller clients' endpoint solutions.
We are making great progress with the Renew Everyday program and expect continued improvement to our renewal levels over time. I'm very pleased to share that Steve Rush has joined as our new Chief Commercial Officer. Steve's long history with Alight, along with his deep understanding of our clients' needs, positions him to make a meaningful and quick impact. Steve is a highly respected leader in the benefits industry, and he's excited to rejoin a team and business he already knows very well. As I step back on where we are today, our progress has been substantial in moving us forward to our future.
I'm proud of how our team members have come together to advance our technology and operations, and I want to thank them for their hard work and dedication. We have more scale, scope, and talent than any of our competitors today, and the resulting opportunity in front of us is immense. Drive higher bookings, retention, and new streams of partnership revenue. Operational results of our initiatives will be evident before they play through the financials. And we are confident in our ability to deliver an unmatched benefits experience for clients that are emboldened in new technology. And with that, let me turn it over to Jeremy. Thanks, and good morning.
Jeremy Heaton: We continue to make operational progress and competitively, we're well positioned for long-term success, validated by the third-party evaluators and brokers in our space, and echoed by the many clients who have renewed or expanded with us. Our primary focus continues to be on adding value for our clients and their people every day. Moving into the quarter, revenue was $533 million, which includes a $4 million one-time revenue reduction from finalizing the commercial agreement with the divested Strata business. Normalized for this, total revenue would be $537 million. Nonrecurring project revenues were down $7 million or 14% for the quarter. Adjusted gross profit was $206 million, up 3% from the prior year, reflecting 260 basis points of margin expansion.
Similar to prior quarters, our adjusted gross profit is impacted by costs to support the divested business, which are reimbursed through the TSA and other income. Normalized for this, adjusted gross profit would have been higher by $7 million. Adjusted EBITDA was $138 million for the quarter, up 17%, and adjusted EBITDA margin expanded 460 basis points. Free cash flow for the first nine months was $151 million, up 45% from the prior year period. Given the business trends this year versus expectations, our profitability and cash flow results include a nonrecurring impact of lower variable and performance-based costs. While we've made tremendous progress, there's more work ahead to improve our top-line results.
Longer term, we expect improved commercial results with an optimized go-to-market function along with key product enhancements. We feel good about our renewal rates in the large market and expect the 2026 cycle to have over 30% fewer dollars up for renewal. We also have near-term revenue opportunities through in-year bookings, partnerships, and engagement services that our team is highly focused on to close out the year. Our operational and technology continue to drive increased efficiency while delivering a better experience for our clients. This has benefited our profitability and cash flow metrics. Turning to the balance sheet, our quarter-end cash and cash equivalents balance was $205 million, and total debt was $2 billion.
Our net leverage ratio improved sequentially to three times. We continue to actively manage our debt, which is 70% fixed through 2025 and 40% through 2026. While having strong confidence in the long term, with our market valuation change over the past quarter combined with current business trends, we recognized a noncash goodwill impairment charge of $1.3 billion. With respect to the tax receivable agreement, our payment in 2026 is expected to be lower by $25 million compared to our previous estimate, reflecting the completion of tax filings for 2024. We returned $47 million to shareholders this quarter via quarterly dividend and through the repurchase of $25 million worth of shares.
Year to date, we've repurchased close to 14 million shares or approximately 3% of shares outstanding. We ended September with $216 million remaining on our share buyback authorization. Management and the board of directors will continue to evaluate our capital allocation policy as it does on an ongoing basis. With today's earnings report, we have updated our 2025 outlook and enter the quarter with $2.25 billion of revenue under contract. For the year, we expect revenue between $2.25 and $2.28 billion, adjusted EBITDA of $595 million to $620 million, free cash flow of $225 to $250 million, and EPS of 54 to 58 cents.
We are intensely focused on execution and improving our top-line performance and remain confident in our position for the long term. This concludes our prepared remarks, and we will now move into the question and answer session. Operator, would you please instruct participants on how to ask questions? Thank you, Phil.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad. You may press star and then 2. It may be necessary to pick up your handset before pressing the star keys. Again, if you would like to ask a question, please press star and then 1. Now. The first question we have comes from Kyle Peterson of Needham and Company. Please go ahead.
Kyle Peterson: Great. Good morning, guys. Thanks for taking the questions. Good morning, Phil. Yep. Wanted to start on the update to the guide.
Jeremy Heaton: See if you guys could walk us through some of the moving pieces on the reduction here. It looks from the slides, it looks like it's from kind of a combination of volumes and new business wins. But I guess any clarity or context as to what you guys are seeing and, you know, when at least from the new business wins, obviously, made some announcements during in the release today, but I guess, like, when should some of the fruits from those wins start to pay dividends?
David Guilmette: Sure. I'll start, Kyle. So yeah. So still in the guide, we reduced at the midpoint revenue down $40 million. It's really split between project and recurring. Project is the biggest with, you know, again, a $20 million update there on project. And we just have not seen an inflection in pipeline and activity. I think some continued cautiousness as we're going through the annual enrollment process right now. So even on a low comp, we had expectations to see more build in the pipe coming into the fourth quarter and just not seeing that. On the recurring side, it's a bit of volumes.
You see in the update in the deck that we've got, some in that is really we've seen modest declines so far year to date, but it's just a sentiment overall, just a cautiousness around that. We're not gonna certainly expect to, with the headlines, see any upside there. So really just expecting flat to slightly down on the volume side. The Strata update on the customer care agreement was impacted in the third quarter, and so that's part of the update as well as going through. And as you said, a small amount of just the in-year revenue from the bookings that we've had so far this year. So those are the guide.
As you think beyond revenue, the biggest piece is just the project update for us is really the biggest piece that drives the EBITDA and free cash flow aspects in the guide and the update there is we still feel really good in terms of the initiatives underway around the operational side, around delivery, around the AI and technology and the customer care side of the house on the call centers. It's just, you know, again, as you know, that's about a 90 to a 100% drop through. And so seeing project at this levels is just you know, what we see in terms of the roll through our profitability and free cash flow.
There's always gonna be elements of retiring health and some other areas within the business that can drive you know, upside into the higher end of the range here. But that's, you know, those are the dynamics we're seeing as we go into the fourth quarter.
Kyle Peterson: Okay. Thank you. That's helpful. And then, you know, maybe just a I wanna see if you guys are seeing any impact or whether it's client decision making or around open enrollment. Related to, you know, the government shutdown. Obviously, it's been getting kinda long in the tooth here. But I guess, impact on your business client decision making employee decision making, anything you guys are seeing, or so far, is it been, something you guys been able to work through?
David Guilmette: Kyle, it's Dave. Thank you for the question. Let me take that. So as Jeremy mentioned, you know, you've got a few of the headlines that are out there. But in general, whether it's the government shutdown and the impact on federal employees or it's what passes through, you know, to clients. We've really not seen anything material, you know, come through at this stage. And just keep in mind that even if there is an action, you know, a reduction in force with a big company, there's a pretty big lag fact associated with that. You'll have, you know, individuals who'll be on COBRA for a period of time. Sometimes they're furloughed, so they're still sort of there.
So or in the case of the federal government, you've got people working and not being paid in some circumstances. So, you know, longer term, the volume that, you know, would typically tick up, we're not anticipating, but we haven't really seen a material negative impact at least through this quarter, and we're not envisioning that through the fourth quarter.
Kyle Peterson: Great. Appreciate all the contacts and color. Thank you.
Jeremy Heaton: Thanks, John. Thank you.
Operator: The next question we have comes from Scott Schoenhaus of KeyBanc Capital Markets. Please go ahead.
Scott Schoenhaus: Hey team, thanks for taking my question.
Jeremy Heaton: So if we strip out the project revenue,
Scott Schoenhaus: Hey. How are you? So we stripped out the project revenue noise, recurring revenue, down low to mid single digits. Implied here, and you walked us through some of the assumptions just now and on the slides. But how do we think about returning to Slack
David Guilmette: to low single digit growth for the business? Is it obviously securing renewals? It sounds like the sales cycle, like you talked about last quarter, is elongated. You talked about upselling opportunities as well, and we're seeing maybe some slowness on leads. Can you walk us through, like, how do we get this business back to flat to up in growth on the top line? Thanks.
David Guilmette: Thanks, Scott. It's Dave. I'll take that one. So there's a few elements here that we're sharply focused on, and you've touched on a little of those in some of those in your question. Firstly, just on the renewal act, we're seeing good results as it relates to our largest client base, and that's coming through the Renew Everyday program initiatives. And we're looking to cascade that through our entire client portfolio. So one, we think, you know, improving upon the retention rates for our existing clients kinda locking the back door to the house, so to speak, is important.
Bringing more clients through, so new logos or expansion on existing clients, again, we've got some good activity out there in the leave space. We've got a number of opportunities that were deep in discussions or near to contracting. On core ben admin middle market up to some of the larger opportunities. So that's kinda taking the clients in through the front door as well. So all of that really bodes well for, you know, the return to the growth that you're asking about. There's a lag effect involved in that. If this is a big client, large client, then admin, typically, you're looking at implementation cycles that could run, you know, twelve to fifteen months. Right?
So some of that revenue on a new business win that could occur now might not make its way through to our financials, you know, until 2027 or beyond. Smaller deals have shorter gestation periods. Leave deals depending upon how big they are could be shorter gestation periods as well. So as we continue to build back the momentum and the strength of our pipeline under Steve's leadership and in collaboration with Rob. Feel good about where that's headed. And our product positioning is as strong as it's ever been.
Scott Schoenhaus: Great. And as a follow-up again, stripping out project business that falls down to the bottom line, what can you guys do as a company to drive secular margin expansion? We've always talked about the call center. It sounds like that you're moving some things back in-house on the service side, which I imagine would be a little bit more expensive. But just can you help us walk ex the project business, can you help us walk through you previously outlined your longer-term margin opportunities or goals or targets. Just help us walk through where you see your ability to drive margin improvements in the near and longer term? Thank you.
David Guilmette: Yes, Scott. I'm gonna have Jeremy talk through some of the elements of how that drops through. One thing I wanna make sure we focus on as part of your first, you know, question is the opportunities that exist across our partner network. We highlighted that, you know, in the opening remarks. We're feeling really good about the level of activity and the interest that the partners are expressing in being part of our network just given our size and scale and reach for the customers and the clients that we have. And that represents revenue growth opportunity as well. That will phase its way in.
It takes a bit of time before you get a contract established, then you get the run rate going as is indicative of what we talked about last quarter with Goldman Sachs. But the more of those that we put in place, the stronger our revenue opportunities for growth are gonna be there. As it pertains to your question on margin expansion, you know, we're deploying AI in a variety of different places. We've got to make investments in that. You know, those aren't trivial. And we expect to see some impact on the way we serve our customers with AI. Right?
Either reduction in the call volumes that we talked about, in the opening remarks, or a change in the kind of in the way that work gets done. And we've also pulled a number of resources back in-house, that's a strategy that we'll continue to look at. Jeremy, anything you wanna add on the drop down?
Jeremy Heaton: No. I mean, I think it is in line with what we've talked about earlier this year, Scott. So you know, I think we feel very good in terms and I think, like, you know, we're probably ahead of where we thought we would be around the operating model in which our delivery teams if you think about, you know, delivery is, you know, the bulk of the teams that are sitting with our clients every day. So from a cost standpoint, that's where we need to drive a better experience for our clients first. But we've standardized a lot of that work across the different groups and the solutions that we've got. We've got COEs in place now.
Bringing some of that work back from third parties. It's actually more cost-effective, Scott, just given the way that the, you know, the terms and conditions work and also the flexibility around where the productivity sits in and the things that we can drive and the flexibility. So it gives us much more room to kinda drive the expansion in what we do and probably our largest cost base in the business on the delivery side. And then as Dave said, we have seen a big reduction in call center, you know, OpEx over the past couple of years and the work that we've been doing.
But there are step functions in some of the new technologies that we've rolled out. And so, really, just wanna get through this annual enrollment period to really see the impacts of that. Helps us staff then going forward as we think about '26 and '27. Of the elements that we can drive there. But we feel really good in terms of everything that we've got around the efficiencies within this business, and I would say we're ahead of what the timing would have been around those expectations. Some of that is to offset some of the top line that we've got.
But, certainly, as we get the, you know, some of that operating leverage back, certainly drops through in a more significant way. Very helpful. Thank you.
David Guilmette: Sure. Thank you.
Operator: The next question we have comes from Kevin McVeigh of UBS. Please go ahead.
Kevin McVeigh: Great.
Operator: Hey. I guess
David Guilmette: I wanna start with I've never seen
Jeremy Heaton: an initiative on approval for declassification. Can you just help us understand what that is and what drove the decision to do that?
Jeremy Heaton: Sure. I think Kevin, it's Jeremy. I'll start. You know, just from a board perspective, and what that is today, we have a staggered board. So four directors are up for nomination every year. And Justin, through ongoing discussions with our board, from a governance perspective, and I think in discussions with investors, frankly, is to over time destagger this board, which would eventually have, you know, all directors up for nomination annually as we go through that process.
So it's just a governance update for us as we transition out of, you know, going from, you know, private to public through the SPAC and, you know, just kinda more I call it more normal course governance of a public company. And, Kevin, I'd just add, you know, as part of the process, we're letting
David Guilmette: you know, the shareholders know that's our intent, but this will be up for a vote of shareholders at our annual meeting next year.
Kevin McVeigh: Got it.
David Guilmette: And then, I guess, I mean, you've had two consecutive meaningful impairments. You've got it down two consecutive quarters. Just help us understand just the modeling on the guidance relative where you're coming in, particularly given we're nine months into the year.
Kevin McVeigh: Because it just, you know, continues to be an issue.
David Guilmette: In terms of how you're guiding.
Jeremy Heaton: Sure. I think the guide and as I've just walked through briefly, I think, you know, in the fourth quarter, the biggest piece is the project revenue, which I would say is, you know, we've never seen levels this low in terms of project revenue. We did expect in our teams going through with clients every day as we build through kind of the second half of the year in terms of where that pipeline is. It's well below our expectations in terms of project revenue. So absolutely, you know, that's the biggest piece coming through here. There's also the impact of what we've talked about in terms of the bookings element that we have.
And just the macro factors around the headlines around employee and participant. So those are the biggest pieces for us in the guide. As you can see in, you know, the transcript, and we talked about this morning, we are at $2.25 billion of revenue under contract coming into the quarter. And the range on the guide is $2.25 to $2.28. So I think, you know, as you think about this, this is what we see today in terms of what's in front of us for, you know, execution in the end of the quarter. On the impairment side of it, that's a factor of, you know, again, noncash impairment accounting adjustment.
Largest piece being just the valuation change of the company through the quarter. And that's, you know, there's a market valuation test, which is done every quarter. It's normal course controls that we have around the financials. And need to go through the valuation process. The, you know, that takes into account the trends that we do see in the business, but it's a much longer-term view taking in the market cap and market value of the company. So we recognize that charge here this quarter and in line with where we closed out the quarter from evaluation of the company.
Kevin McVeigh: Got it.
Jeremy Heaton: Thank you. Thank you. Thank you, Kevin.
Operator: The next question we have comes from Peter Heckmann of D. A. Davidson. Please go ahead.
Peter Heckmann: Hey. Good morning, everyone.
Jeremy Heaton: Morning, Pete.
Peter Heckmann: Wanted to see if you could give us an update, just on the follow-on payments from the divestiture, I think there's a $150 million contingent based on performance of that business in 2025 and then a $50 million fixed payment. Can you give us an update on the first and then the timing on both potential payments? Sure. So
Jeremy Heaton: the timing on the payments themselves are a seven-year term from the close of the deal. $50 million, so there was $200 million of deferred payments. $50 million was in effect, guaranteed, which will be paid out. There was a $150 million, which was contingent on EBITDA performance of the divested business through 2025. So we have that, you know, really recognized at zero value on the balance sheet today. Contingent upon the performance of the Strata business in their EBITDA in 2025. So we'll go through a full annual look at that as we close out 2025 to see what the value is there.
That will be recognized on the balance sheet and then will be paid out at the end of, you know, that seven-year anniversary of the close of that deal.
Peter Heckmann: Okay. Both payments would be on the seven-year anniversary.
Jeremy Heaton: Correct. Mhmm.
Peter Heckmann: Potentially. Oh, Okay. And then on the headwind, you've given stronger retention levels in 2024 and into 2025, do we still expect attrition to be a smaller drag on revenue growth in 2026, maybe something closer to 450 basis points versus something more like 60 six fifty this year?
David Guilmette: Yeah. Pete, it's Dave. So let me take that one. Firstly, we had a considerable amount of volume that played through and through the renewal process in 2025. As we said in our opening remarks, gonna see a pretty material drop in that activity next year. And in addition, among our largest clients, which is where there's a pretty big concentration of revenue, the vast majority of those have gone the renewal process in the last couple of years. So we've had a lot of renewal activity in 2024 and 2025, We feel good about our retention rates for those largest clients. We're gonna see a drop going into 2026.
In addition, you know, our expansion of the Renew Every Day program initiative and the collaboration between Rob and Steve is going to push that level of client management focus down all of our clients. And the initial focus was on our largest ones, as we continue to expand that initiative through the full client suite, we expect to see some positive returns on both retention and the upside and cross-sell opportunities that exist by bringing new services to those clients.
Peter Heckmann: That's helpful. I appreciate it.
Jeremy Heaton: Thank you, Pete.
Operator: Pete. Thank you. The final we have comes from Andrew Polkowitz of JPMorgan. Please go ahead.
Andrew Polkowitz: Good morning, guys.
Jeremy Heaton: Morning. Morning, Andrew.
Andrew Polkowitz: Good.
Scott Schoenhaus: Wanted to ask. So last quarter, you spoke to changes within your go-to-market organization, including greater specialization, domain expertise in the Salesforce. Obviously, these things take time to ramp, but I was curious if you could just provide an update three months later about the progress here, how these things have resonated with your Salesforce.
David Guilmette: Sure. So it's Dave. I'll take that one, Andrew. Firstly, bringing Steve Rush back to Alight has been a tremendous boost for us and for our sales team. This is somebody who knows our business really well. Has tremendous credibility in the marketplace, and is a great team player. So he's collaborating working through, looking at every deal, etcetera. So that's helpful. We brought some industry expertise on board as well with specialty areas of focus. In the leave space. In the navigation solutions, and in core health admin. And it's Steve's intent to continue to build out that domain expertise across the Salesforce.
To your point, you know, those changes then, you know, have to play their way through on new business situations and opportunities. We're laser-focused on those deals that are deep in the pipeline right now. We still have, you know, a material number of those that we're pursuing. And the key there is to improve our close ratio. And I feel confident that with Steve, and the additions that he is already impacted and we've impacted, we should see some uptick on our success with closing on those deals.
And then as we enter into 2026, we're gonna have the right alignment of our go-to-market teams and our client teams, which I feel really confident is gonna give us the opportunity both for upsell, cross-sell, and for new logos coming in at the company.
Andrew Polkowitz: Great. That's good to hear. And just one follow-up
Scott Schoenhaus: for me, more of a macro question. I was curious if there's been any change to the hiring assumption or net hiring assumption you laid out last quarter in the outlook, you know, understanding there's offset like you called out day with kind of lagged impact. So, you know, maybe even just adding on to that question, how material is the hiring assumption within your model or within your outlook considering you have those offsets. Thank you. Think from a included in the guide,
Jeremy Heaton: for this year, Andrew, we've got and you'll see it in the deck that we posted online. So we've got about down a half a point to flat. Is what we've got in for 2025. And again, year to date, it's been really minimal in terms of any impact. I'd say slightly down. Mhmm. But, again, on you're talking, you know, basis points. And so certainly not seeing what we historically have had with the, call it, one to 2% of help. On the growth side. So our expectations right now and we would know typically, in the fourth quarter right now as we stand if we had larger impacts that were happening already through our client base.
And so that's the call on the guide and based on what we see so far this year.
Operator: Then as we think about next year, I'd say, yeah, it's hard with the headlines to think that it's certainly gonna be anything that is additive to growth, but we'll manage that. Our teams stay close with clients on a daily basis, and so we're always getting, you know, a pre-read, if you will, around what might be happening within the client basis.
Andrew Polkowitz: Great. Makes sense. Thank you, guys.
Jeremy Heaton: Thank you. Thank you, Andrew.
Andrew Polkowitz: Thank you.
Operator: There are no further questions at this time. I would like to turn the floor back over to David Guilmette for closing comments. Please go ahead, sir.
David Guilmette: Thank you, operator. So in closing, our strategic execution is transforming our delivery services and is re-envisioning the client and participant experience. Our progress is making a real impact across our current clients and operations. And we're confident in how that translates to our competitiveness and our long-term growth. Thank you for joining us today.
Operator: Thank you, Saul.
Operator: Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.