Katie Rooney: And the only thing I’d add Tien-tsin on an OpEx is, right, as you saw right, some of the key investments we’ve made this year in commercial and products, right, from an OpEx standpoint wrap around into next year. So, you have kind of that run rate first, I think some of the efficiencies we’re driving hitting for us at first.
Tien-tsin Huang: Thanks. That’s helpful from the view. So, OpEx in the second half versus the first half, anything to underlined there?
Katie Rooney: I mean, I think what we kind of have Jeremy phrased it is, you’re going to see a ramp in margin, both gross margin and and in EBITDA through the course of the year, because you will see more of the benefit in terms of the savings coming in Q3 and Q4.
Tien-tsin Huang: Okay. So just a same event is the preliminary view. Okay. Thank you.
Katie Rooney: That’s right.
Tien-tsin Huang: Thanks for clarifying
Operator: Thank you. Our next question is from Pete Christiansen with Citi. Please go ahead.
Pete Christiansen: Good morning. Thanks for your question for the opportunity to ask questions. Stephan and Katie, I’m just curious on the timing of the strategic review. I mean, just considering your – you are reiterating your medium-term outlook last quarter I’ve seen an upbeat on a number of aspects granted. There’s been some prop holder rotation and in recent weeks. I’m just trying to understand how we got to this point. And then, just as a follow-up, hopefully the last question on this Retiree Client Act change. Is there any aspect of the revenue profile for that contract that now work deferred? Is it the timing of revenues being different or is it just the bulk of the message is really just realized here at this point? Thank you.
Katie Rooney: Yeah, thanks, Pete. think I’ll start with your last question, which is exactly how you ended it, right? It’s kind of a one-time reduction in revenue as those participants have moved to the group plan. So we won’t see that, revenue return next year, but we also won’t see additional decline. That’s the new baseline as I said. From a strategic review portfolio portfolio, I think what I said Stephan kind of said it earlier, which is we do believe in our strategy and I think we have made progress for our clients for our colleagues for our shareholders, but I aren’t necessarily seeing the return in the market and I think should always be evaluating are there ways to accelerate our strategy, right? In terms of, as we look at the next three years. So we’ve executed on what we said for the past three and now it’s time to take a look and make sure we’re evaluating all options to continue to accelerate our strategy and in the best way possible.
Stephan Scholl: When you look at where we started with this journey, just three years ago, $300 million now going to a billion over this last midterm in this one. That by itself, between 30% CAGR in the first midterm going to 15% CAGR in this midterm. That’s pretty – we think it’s exciting and we see the impact of that book of business being a recurring book of business, better profitable book of business. And as we said now a few times, the impact of that to our clients, I mean at the end of the day the north star of what a light is all about is, if we have 40 million people looking to a light to be the front door will keep them healthy and financially secure, the TAM of that opportunity puts us into one of the most important opportunities in the marketplace.
Period and I’ve been doing this for long enough across different segments and I have never seen an opportunity at this large-scale. So, it’s always you know, but it’s all wrapped up in this larger company with high growth and low growth and different segments of the business that I’ve talked about for the last few years. So how do we recast the recipe and as Katie just said and I’ve said it earlier, and we’re just and we’re not getting value as a total company or as an entity within the rest of the light for what we’re doing as you can see, right? And so we’re trying to figure out how to unlock that. How to double down on that. How to get a better capital structure to support the continued investments in driving towards a platform company, because whoever arrives at that station will become one of the most important companies in this industry, because that’s the sheer size of the opportunity in front of us and the other good news is as crowded as the tech world is there’s no will be doing this today effectively at our size and scale like nobody and I think that’s the opportunity.
So we have to move quickly at base to take advantage of that and that’s the other piece of this which is how do we actually accelerate the success we had in that category.
Pete Christiansen: Thank you both. I think there is some fair comments in that. Thank you.
Stephan Scholl: Thank you.
Operator: Thank you. Our next question is from Heather Balsky with Bank of America. Please go ahead.
Heather Balsky: On the strategic review, you talked about moving to a more recurring book of business your focus on our recurring book of business. And I know we spend a lot of time talking about the BPaaS forum and its growth. And I think our understanding of sort of the legacy business in the broader portfolio. I think there’s a lot kind of maybe we felt analyst or investors don’t fully appreciate and can you just kind of walk us through the portfolio at a high level? How much of your revenues are recurring what outside of project revenues? What else it is there that’s more transactional in your business? Just this kind of like a high level of what the portfolio looks like today?
Katie Rooney: Yeah, thanks Heather and I think I mean you see a little bit of it obviously in our financials. So we’re 83% recurring today, 82 to 83, 84. Sorry 84% recurring today is Jeremy, correct me, right which is great. But I think there’s still when you think about how we enter the year in terms of revenue under contracts, there’s still a, you know, an opportunity to continue to enhance that. And so within I mean within the portfolio again, we love all our assets that. We’re not saying there’s an asset that doesn’t necessarily make sense. It’s how do we optimize, how we’re utilizing those assets to best serve our clients. And are there other ways to continue to do that in a form of partnerships right, where there can be additional investment into you know different parts of the business to accelerate that trajectory.
So, again, from a portfolio perspective, we’ve talked about it length. You’ve got Employer Solutions, you have Professional Services. Within that there’s obviously a number of assets that comprise both but the recurring revenue nature today is about 84% if that helps.
Jeremy Heaton : And that’s only one set of perspectives, Heather, right? The other piece is not every dollar is created equally even within the recurring landscape. Some of them have higher profits. As you move up the food chain on value around Ai and platform. Those are driving higher gross margin contribution. So we’re also focused on not just a recurring equation, but the margin contribution equation and the value of what that drives in terms of just giving us capital light capability to go after from other investments. So it’s not just a recurring it’s also, you know the margin contribution profile of it.
Katie Rooney: Does that help?
Heather Balsky: Yeah, it does. Thank you. And a follow-up another other big picture question. But as you look to 2025, and I realized we are a long way from there. But as you think about the bookings you have to-date especially with the GE contracts coming in, it sounds like later in the year, I guess what do you need to accomplish this year to be back at that 60% range as you exit the year? How much visibility do you have to the acceleration? Especially it when you think of your guidance range, low end, high end just kind of help us think that through.
Jeremy Heaton : Hi Heather, it’s Jeremy. I’ll take that one. It’s I think that’s exactly why we’re now showing this three-year of you. Right I mean you can look and see two point 1 billion dollars already under contract in 2025 that does include some of those larger deals right, as in you can talk in the shorter term period you don’t quite get the visibility into what that looks like. So, that’s a starting point for us today. If you look at continued commercial momentum that we had in the second half for our teams to deliver on, that – those are the bigger pieces of what we need to deliver on. So we’re on the way already with the momentum that we had in the last two quarters in build in continuing to build that revenue under contract. Those are the biggest pieces that we look at today in terms of just the overall execution plan.
Stephan Scholl : I mean in three years Heather in ‘21, we had $2.1 billion of revenue under contract and in the ‘24 we have $3 billion. That $900 million delta is a collection of just the sales momentum, the quality of the book of business. And I think that’s pretty powerful in terms of getting visibility into what the future revenue architecture looks like. That’s a big swing from 2.1 to 3 and then as Jeremy said in our midterm in 2026, we already have $1.5 billion in place three years out. That’s pretty powerful for us to consider as a baseline three years out to have that much already under contracts.
Heather Balsky: Got it. Thank you.
Katie Rooney: Thanks, Heather.
Operator: Thank you. Our next question is from the line of Joseph Vafi with Canaccord Genuity. Please go ahead.
Joseph Vafi: Hey guys. Good morning. Thanks for taking my questions. Just maybe on some of that momentum in the go-to-market and the potential for share gains, new logo wins, I think a lot of a lot of large enterprises today clearly have best-of-breed capability and all the services you provide, but they’re all siloed a little bit more with different vendors. And so, I’m just kind of thinking about almost even from my own personal experience, the cost to deliver for you for – a single holistic, you know approach for employees of large Enterprises versus the kind of best-of-breed siloed approach. Just trying to get a little bit more understanding on one, overall cost to provide for you versus those others. And then, a quick follow-up.
Jeremy Heaton : Yeah, this is the I’ve talked about that just to be on this call a couple times right, around and I’m lucky to have been part of the probably the biggest technology transformation wave with that to breach Enterprise across European supply chains. We’ve all lived it right, when best there were hundreds and hundreds of vendors across GLA, BPO and financials and that world largely collapsed with Oracle and SAP and a few handful of vendors and for where I was as well. Owning that move from best-of-breed enterprise, that never happened over the last 20 years in HCM, right, and in the space that we’re in. So, four years ago when I came here, I saw exactly the point you just said which is there’s got to be a better way employees engaged today with between 20 and 50 different systems, the engagement rates, I mean, are between 1% and 5%.
The fact that these companies get away with that for their employees is staggering. You would never have those kind of statistics in a world of ERP or supply chain or revenue type systems. You would never survive that. And so I always have to ask myself why do companies survive that today and it’s just lack of focus, lack of the fact that there is somebody out there who’s built this end-to-end platform. So that’s what we started four years ago. Because the ROI the cost take out you talk to a CIO in Fortune 500 and the world how they’ve changed their world the last couple of years. They were 90% focused all around driving ERP Revenue systems clients consolidation work. They’ve all flipped over now to the HR side and saying wow, what a what a mess and what an opportunity at the same time and that’s the void we’ve been trying to fill.
And we’ve given some great use cases. Katie wants to talk about the Siemens one as an example.
Katie Rooney: Yeah, Joe, I mean even we discussed Siemens on the call today, right? I mean, part of the reason because we you know own the underlying administration right, and then you can add you add some of the guidance those capabilities as Stephan said, you increase engagement you can guarantee an improved outcome for not only the client, but their people. And so I think that’s really powerful. So when your question on underlying cost I’d almost turn it around a little bit. It’s almost more like underlying outcomes that reduce cost right, and improve the experience. That’s the Power of what we do.
Stephan Scholl : And the reason why I’m here just to be super blunt about it is not because I want to drive consolidation on the ERP and revenue systems. There’s a higher calling opportunity I’ve talked about before years. It makes me so frustrated how many people make the wrong decisions on back surgery, knee surgery, clinical decisions. How many people can’t save enough for retirement because they just make the wrong decisions. I mean, half the employees make wrong decisions around benefits. I mean, it’s staggering to see the mistakes that happen across our employee population. And these are the biggest most important companies in the world. So I sit here and say, we can do better. And how do we help our clients do better by their employees.
You got to use systems of record powerful data sets like we have access to trillions of data sets not billions, we have trillions of datasets that we have access to across people’s money and people’s health decisions. And if we use that the right way through a consolidated mobile experience and Worklife I know and we have shown it we can make a big impact in how you know employees make better decisions in the most important area of life. And there’s nothing more important than being healthy first and then having enough money to retire when you when you want.
Joseph Vafi: Sure. That’s great. That’s great commentary. It was a busy morning. So I apologize if this was asked, but on the strategic review, should we be looking for kind of different data points or different pieces of news coming out of the strategic review, or do you think it would be kind of a all at once outcome there? Thanks a lot.
Katie Rooney: Yeah, I think what I did is, we’re well underway as I’ve said with the review. So our intent is, as we have kind of outcomes to share we will we will obviously bring into the market. So tough to say given where we are in the process. But I think that the key in that pieces, the idea is to accelerate our strategy from where we are today and we’ll be back with as soon as we have an update on our next steps.
Joseph Vafi: Great. Thank you very much,
Stephan Scholl : Thanks, Joe. We appreciate it.
Operator: Thank you. As there are no further questions, I would now hand the conference over to Stephan Scholl for closing comments.
Stephan Scholl : Thank you everyone for joining us. Really appreciate the time you took with us today. We look forward to seeing many of you with upcoming conferences in the next few weeks and months. Thanks for the time.
Operator: Thank you. The conference of Alight has now concluded. Thank you for your participation. You may now disconnect your lines.
