Alight, Inc. (ALIT) Earnings Call Transcript & Summary

Fantastic. Good afternoon, everyone. My name is Pete Christiansen. I'm on Citi's Payments Processors and IT Services team. This afternoon, we are fortunate to have Jeremy Heaton, recently appointed Operating CFO of Alight Inc. A very interesting story that we recently -- not so long ago launched coverage on. So please feel free to reach out. Jeremy, you're welcome to the conference.

First of all, thank you for having us. Great to be here.

Now that you're kind of getting into this new role, taking over a lot of the operational side of the CFO from Katie. I just would love to hear a little bit about your background. Maybe before with the Alight experience, now with Alight, for how long you've been with them and a little bit about your background.

Sure, happy to. So I've been at Alight since May of 2020. So came in really at the starting point, I think of -- if you think about the transformation for us, platform being kind of at the center point in terms of our transformation, I've been here since the beginning. So I think continuity, I've worked with Katie, partnered very closely with Katie since I joined. And before that, I was with GE for just over 20 years in different operating corporate finance roles, lots of M&A and transformation work as well. So a lot of experience, I think, plays well. And obviously, tons of public company experience as well. So seeing Alight from the private equity ownership through the SPAC into the public world, has been great.

Wow.

No, it's been an interesting journey. And it's -- I get a lot of calls from clients. I'm not really familiar with the story. I'm like, remember the old Hewitt? I'm like, "Oh, yes."

But I think that would be -- maybe if you could tell the story a little bit. I know that we have a lot of new investor clients that are looking at the name. Certainly, Alight has a long history. Short on the public side, in and out. Why don't you explain a little bit of the history of the background, and then we'll get more until some of the transformational items.

Great. Great. Happy to. Yes. So as you said. I mean, there's a rich history of this business that goes back decades, with Hewitt Associates. Ultimately, what we do every day is deliver mission-critical solutions in the HCM space on behalf of some of the largest and most complex clients in the world. And so what that means is, we implement and run payroll administration, benefits administration. We implement large Workday, SAP systems and run them on behalf of these companies. So there's a ton of history. Our average client tenure goes back -- for our largest clients, over 15 years. So there's a ton of history, a great foundation. Ultimately, 36 million participants that we support for employers around the world. And it's just a great foundation for us, for our transformation perspective, right? To effectively supercharge the growth and provide real value and outcomes. Leveraging all the data and all the history that we have from this business.

I know that's a huge aspect of the story, and we'll get into that in a little bit. You do have an impressive client list and you mentioned 36 million, I guess, underlying employees and their families and beneficiaries. You have some very large clients as well, including some recent big wins. Why don't you take us through some of the larger clients, notable ones that you've onboarded, and perhaps some of the larger wins you've had in the last year or so?

Sure, sure. So in often times, right, in the quarters, we'll talk about large new logo wins. I think use cases is one of the best ways for us to really talk about the transformation and the value that we can drive for clients. As part of the transformation, right? So we talk about bookings, BPaaS bookings, importantly, right? The cumulative effect of all of what we've done over the last 2.5 years is driving 700 new client -- new logo wins over the last 2.5 years. A couple of -- just as an example, PwC was an example of a large new logo win about 1.5 years ago. It's important, right? What platform drives for us as a differentiator allows us to go in. In a case like that, 4 separate RFPs, from a siloed buyer in different parts of the company, our ability to integrate it all and seamlessly into the platform drives just a different experience for them. And so a great win of a logo, a great transformational deal for both us and PwC to partner. And it's a great, sticky business for us to be able to deliver great outcomes for them. So PwC is one. GE is the other one we talked about quite a bit. Going through their own transformation and separating into 3 public companies. The trust that they put into us in terms of what we can deliver. Implement Workday on behalf of all 3 companies, bring them live. This will be a deal that's signed in the fourth quarter of last year. It won't be fully live until 2025. Highly complex, lots of work for our teams that are currently implementing that today. It's part of what's in our professional services segment revenue this year, translates into BPaaS revenue, and that's a customer that will be with us for a long time. So a huge company-defining transformational deals.

And we were talking about this earlier. Super interesting, the GE deal itself, very complex. And they're obviously affording you a huge amount of trust during this implementation period. Like what have you -- what is the proof point that you can go to a GE and say, "Hey, we got this. We can do this implementation, and handle this level of complexity." What some of the proof points that have helped them get over that hump?

Sure. I mean, some of it's back to the foundation of this business, right? Being able to manage, in the large employer space, these complex companies. What it takes to run all the solutions that we can provide on their behalf. One other -- we took the Federal Thrift live in 401(k) last year, 6 million participants. And so I think our ability to execute on that, drive -- get the implementation done on time and delivering well for them is a proof point that serves us very well and was a big part of what we -- what you use in the sales cycle in terms of showing what level of complexity and there's not a larger deal out there than the Federal Thrift. So that was a huge proof point for us, and we continue to build on them.

That's fantastic. Since going public, Actually, even while you're in private stage, the company has been going through quite a bit of transformation itself. Now going public, continuing on those efforts. I know you got rid of the -- you discontinued the hosted business and are now accelerating more into BPaaS, things like that. Why don't you talk about some of the transformational activities that Alight has gone through in the last few years? And where do you see that direction going from here?

Sure. So two parts. One, I'll start with the front end. From a transformation standpoint, as we looked at -- 2.5 years ago, was one on technology, right? The platform, the Alight Worklife platform is the differentiator for us. Moving to being a platform company, there's nobody else in this industry that has it. It's probably the only industry that hasn't yet made that transition. And so a huge opportunity for us to, again, build on the foundation we have, but really differentiate and just drive a different experience, easier for employees to understand and navigate and to move forward. That's taken significant investment for us on the technology side. So that's been point one. The second point on the front end is just our commercial go-to-market strategy. We did not have a new logos team. We did not have a value engineering team. So our ability to drive a commercial intensity for growth in this business. We've signed over 700 new logos in the last 2.5 years. So it's a real big element for us in terms of the growth trajectory. And so that was the focus on the transformation upfront. What remains and it has become more in focus this year is that we've got a restructuring program around the technology on the back-end infrastructure for the company. So we're removing our -- getting out of physical data centers, everything will be in the cloud. We won't have to run dual sets of technology. It just enables us to drive a better experience for clients. And it's a different cost to serve model for us. And so how we serve better and drive margin expansion for us. I mean, those are the really big elements of the transformation.

And I like that element of the story. I mean, the company is changing both its back-end systems of record and also it's front-end systems of engagement. That is pretty compelling. Along with these types of transformational initiatives that the company is going through right now, you also introduced a new pricing model. I was just wondering if you could talk to that, and how that's resonating with the sales department and new logos potentially looking at that? Would love to hear your color on that.

Sure, sure. So there's a legacy in this industry of what we call a bundled PEPM. So PEPM, per employee per month pricing, right? And so with that bundle, it's one price, but ultimately, there's no real clear segmentation between the products and solutions that sit underneath it. For us, it's important now with the strategy to segment everything that we've got between platform and services, right? In a more standardized way. The bundle historically has been customized per client. The coverage, from a services perspective, was highly customized, and we could never monetize truly the investments that we were making. And it didn't connect to the value that we were bringing to our customers. And so in the platform, in the structure we're moving to now, you've got platform very clearly. You've got engagement solutions that are separate. Examples would be health care and clinical navigation or our well-being programs, which are separate product SKUs that have a value proposition that plays well. You're pricing that on its own, still on a per employee basis. But it's connected to values and outcomes that you're driving and it's different than what others are doing in the market today. And then the services become more standardized, right? Tiered structures around services. This is all in more of a software-centric model of how you would look at the products that you're bringing to the market. The price in which you connect that to value for the clients. And then ultimately, for us, our ability to segment that can also enhance and accelerate the timing of getting parts of the product to go live, to revenue, to cash flow. So that's a huge element for us in terms of the financial trajectory as well. So again, it's all back to value and outcomes for clients and delivering our product in a way that connects to actually how we deliver, how we talk about it and getting paid for it. And the ability to separate it. The last piece I'd give you is twice a year now, we have rollouts of new product. This is the right way now for us as new products roll out, to monetize those new products. In the old world, they would all kind of sit within the bundle. You wouldn't actually be able to talk about it or think about it and what drove value. This is a separate way for us now, each year with new products to monetize.

Do you hear like, "But Jeremy, we've always done it this way." [indiscernible]

For sure. For sure.

So what has been, like, that client reaction? Do you think has there been pushback? Is it accelerating the sales cycle? Or is it, "Oh, I'm used to buying other services, non-HCM this way. This makes sense."

For sure. We have had rapid acceptance. Where it's been delivering out is specifically in new logos. On an existing client, this happens more through the renewal cycle, in terms of the program. For clients that have been with us for a long time, for sure. There's a first reaction of, tell me more, let's have a conversation and understand it better. But again, if you go back to value and outcomes for the clients, it's understandable, right? And again, it forces us to make sure that, right, we are delivering the right value and outcomes, and that sits within the model as well. So I think it's a great conversation to have with clients, to make sure that we're very clear on what we're delivering for them and what's most important, and what they're going to pay for.

Customers at, obviously, a proof point. 98% retention. You talked about it. So...

That's right.

[indiscernible] the fears.

That's right. The metrics are there. We do have a great recurring revenue base, long tenured clients, high revenue retention. So it's a great spot. But again, this kind of ignites great conversations with our customers in terms of listen, I might have -- I've been serving you this way for 15 years. Here's these new products that we've rolled out in the last 2 years. Let's talk about enhancing the value and the outcomes that we can drive. For us, it's more share of wallet, it's greater products and solutions. So it's been great so far. But it's early days, right? You've got -- we've got to manage it through the renewal cycle with existing clients, and that will take a few years to get fully through that -- we're not going to go in and break all the contracts for existing clients today.

Right. So there is some level of conversion into the new level, and typical contract length, 3 to 5 years. So it does take time to work through that, which to do it right, should take that long to do.

That's right. That's right.

I want to talk about a topic near and dear to most investors and certainly to the management, is BPaaS and what that means for Alight. And I think, there's a little bit of confusion on what BPaaS means for Alight and why it matters from a product experience point of view, from a cost of delivery point of view. Can you take us through -- let's start with the basic elements and really walk us through what this means for Alight, particularly during its transformation.

Sure, of course. So BPaaS, right, is a set of solutions that are technology-led for us. Much of what we've invested and built out over the last 3 years, that deliver a different level of value and outcomes. If you think about health care claim savings, ROI structures, managing retention for employees through the onboarding process, well-being programs that drive higher engagement and well-being and employee experience. They are technology-led set of solutions, more standard in the technology. So generally, we can carry a higher gross margin, just from a product perspective. It leverages all the foundational data that we've had though. I've got -- if I've got 4 decades of data for 36 million participants, I can bring so much more value to a client than without that technology set and going through the process to connect the dots on how do I become more proactive in engaging with your employees to bring them to the right place, right? So if you talk about foundationally non-BPaaS, we can run administration and payroll and benefits for our company and that's great long-term sticky work for us. But I'm recording a transaction for you. I'm a system of record. You make a decision on your benefits. That might be a good decision. That might be a bad decision. I'm recording that I'm managing the transaction. BPaaS will say, listen, Peter was just in the system. He clicked into -- he's just got a promotion. How should we help Peter think about what to do with kind of his financials here going forward in his new role or, hey, there's a life event happening, and it seems like they're starting a family. How can I proactively drive an engagement with you as the employee, in getting you to the right care, getting you to the lowest cost within your current plan, and it helps out-of-pocket cost for you in claim savings overall for the company. And I can put an ROI structure on that, right? That did not exist -- that's BPaaS. That did not exist 3 years ago in terms of what we can do. And so that's the difference maker in terms of different conversation with a client, either a current client or prospective client. It's a growth generator for us. I mean, we've laid out 15-plus percent growth on BPaaS going forward. It's elevated the conversation into the C-suite. It is coming out of COVID, the labor challenges that our customers have been having around retention and engagement. And now, around cost savings, right? I mean everybody is looking at overall spend, given the macro. How can I think about costs but not impact the employee experience? We can do both. And so that's BPaaS. So it's a set of those solutions that will drive the value and outcomes.

First off, thanks for the promotion.

Yes.

So it sounds to me that proactive on the engagement side, through automation, through intelligence analytics, helping underlying employees engage with more services, get more value out of the proposition.

That's right.

So you're improving the value proposition generally.

And that's the differentiator, right? It's all -- again, the front door of it is the Worklife -- the Alight Worklife platform is the front door. And again, it's -- call it the iPhone, right? But the content is really the apps inside, and it's those solutions that sit within the platform that can really drive the value.

I want to dig into the bookings guidance, and how that's gone through. But first, before we do that, what's that transformation at the client end going from non-BPaaS to BPaaS? What's that conversation like? And what is Alight doing trying to accelerate that transformation?

So it's -- when I talked about value engineers, and it's the data that we have, that we can harness and give back. It's -- so our ability to go in and benchmark if a company today has -- some have 50 or 100 separate programs that are available to their employees, but they're relatively disconnected. There's no -- there's nothing really draws the eyeballs in to get usage. And so utilization typically can be less than 10% on many of those programs. And so that conversation with an existing client typically starts with them looking at what we provide for services, the value that they're getting from it for the spend. And it's with us, taking a first pass with their team and going through, okay, let's look at the program set that you have today, what's being utilized? What have we seen differently across our customer sets in the market, and optimize the programs that they have? What's most useful, what can drive the most value and eliminate the parts that are not being used? And so that's a transition for them in terms of the outcomes and what they've got in terms of where their spend is.

In my years covering tech, I always know, HCM, payroll, last thing you mess with.

Sure.

But also, it sounds like there's a lot of surrounding infrastructure that sometimes, within a corporation, that may influence timing on when they can implement some of these newer types.

It's the case for change, right? And depending on, again, if it's an existing client, you're upgrading into. And so there's -- you're adding on solutions. You've already got the foundational administration, whether it's health or wealth or payroll. I might be taking more of that. I might be picking up more of the broad administration solutions. But again, a clinical navigation or well-being programs added on is quite a bit and -- but shorter cycle. Now to take a new logo, get them live on payroll and benefit administration, and well-being, that's -- those can be up to 18 months in terms of implementation time. And a customer needs to be ready for it. It's transformational on their side. That requires time and effort on their side. And so as you think about the timeline and the sales cycle on some of these deals, all of that needs to be lined up for it to be successful and for the rollout to happen. And so that does take time, and it's a big priority for companies.

And with all these levels of complexity. And we always know that this is the case across all enterprise spending, bookings can be lumpy. Things happen. And I know that BPaaS bookings were brought down this year. And growth will certainly not happen in a straight line because of these lumpy implementation cycles, and sales cycles, which get pushed from here to there. But how should we think about midterm growth? What is Alight's commitment to longer-term growth on the BPaaS side? What -- how should investors peg their expectations?

Sure. No change from what we laid out at Investor Day. 6% to 8% growth through the midterm, which is driven by BPaaS growing at greater than 15% through that same period. It is the high-growth part of this business, right? High growth, low growth, BPaaS 15% plus, the non-BPaaS 2% to 4% on average. There will be -- that mix can change slightly in particular years or quarters. But that's the path for us in terms of the overall growth trajectory that's there. Just -- and I think it's important just for context on the bookings target in the guidance for the year. We did bring down from 900 million to 1 billion to 700 million to 900 million. The way to think about that, right? No, we've seen no change in demand. We still have a strong pipeline. We talked about 20 deals today with greater than $20 million of TCV each on those deals. And that's just a portion. That's not the entire pipeline. So we do see a great pipeline with demand not changing. The timing to get some of these deals across the line has taken us longer. Like I said, they are harder deals, larger deals, typically 2.5x of size. So the timeline, and as we got through the first half and looking at the back half of the year in terms of the guide, it was important to us to think through the timing aspects of getting the deals through the pipeline and to sign, to -- within the guidance frame. So we moved it to 700 million to 900 million. The way to think about that and how we think about it would be, some of the deals we expected to happen in '23 likely could happen in 2024 instead. Haven't gone away. But the real context on the growth for the company is midpoint to midpoint, about $150 million of TCV change for this year. Again, it's 20% of our business today. But that $150 million of TCV is over a 5-year period. So call it, $30 million of revenue per year, starting a year from now. Less than 1% revenue growth for us. So that's why there's no change for us on the midterm outlook. There's no change in this year's guidance in terms of revenue. We are still well ahead of what our original 3-year plan was, in terms of cumulative TCV bookings. That's really the driver of the midterm guide. It's really the cumulative aspects of all that we booked over the last 2.5 years. And so that's really the element of how we think about it. But again, timing is important for us. But we really just haven't seen a big change in demand. But I think, that wasn't, I don't think it's clear, coming out of our earnings and conversations that we've had. So I think, that context is important.

I want to ask 2 questions. A little bit digging into that, a little bit more. Implementation schedules. Obviously, you have a forward-looking schedule. Does -- maybe somebody's onboarding needs to push out a quarter, one reason or another. Do you still have that capacity to flip in somebody...

We do.

Sooner, like or, how should we think about capacity on the onboarding side? Is that a constraint?

Capacity has not been a constraint. Like I said, I mean, we -- last year, we were able to -- we got the Federal Thrift live at 6 million, and we were able to still manage every other deal that we were working through. It's really not a constraint for us. I mean, you're always looking at the time to implement the deal. And then what's the right time? So if it's a benefit deal, for instance, typically, you would start -- have a January 1 start date. So it's the normal seasonality of this business as we build up resources into the back half to manage the enrollment process anyway in the January go-lives and starts. And so that is something we're very familiar with in the business.

So I guess, at the time when you book the sale, you know what the implementation cycle is?

Correct. That's right. I mean, that is part of the sales. Absolutely. You talk about the trust and expertise that's required to do some of these deals. You have teams working through that process of what that looks like, what the requirements are on the side of our Alight team. What the requirements are on the side of the client team that we're bringing on board.

And then there are certainly -- we're in a certainly interesting economic environment, macro. Are you seeing macro playing into decision delay or into corporate spending habits in general? Are you seeing any elements of that more conservatism?

We're not. I mean, what we always talk about, right, is we do have a nonrecurring portion of the business that's in the professional services world. And then we do project work on behalf of clients, in both the payroll and benefit spaces. That work, seasonally, is busiest in the late third and into the fourth quarters with enrollment. And it's a very short sales cycle. So if we sit here -- at the end of the second quarter, we said we had 90% of '23 revenue under contract. We're never at 100%, and that work still remains. But from a pipeline and demand perspective, we haven't seen anything analytically that says it's different from what we've seen in the past.

That's great. Great to hear a strong pipe. Let's talk about the non-BPaaS part of the business real quick.

Sure.

And why is that still attractive? I know, this is the big effort. Let's get everybody on BPaaS at some point. But the non-BPaaS part is still pretty good.

It's a great business. It's a foundation, right? It's what allows us to do what we're doing with platform and drive different levels of conversation and value and outcomes. But the non-BPaaS businesses, that's what's been around for decades, right? It is long cycle, sticky, high revenue retention, recurring revenue for large employers. So it's a great opportunity. Now, some may not be in the right position or at the time to say, it's the next step into some of the more technology-heavy BPaaS solutions. But that's great business. We still have the expertise to be able to manage it. In some of those cases, these are very large employers. And we've got a value proposition to be able to deliver on their behalf. So I think, and sometimes, we'll talk more on just as the transformation is focused in the platform and differentiation. But it's a great business for us that gives us a real moat in terms of recurring revenue and great customers.

It's funny. I talk to Katie, I talk to Stephan. And I say, "All right, what differentiates Alight from the pack, who are your competitors, all that kind of stuff?" And it's like, the obvious answer is really the platform, platform, platform. So -- and I think it speaks to the question who are your competitors, right? And it seems like it's very fragmented.

It is.

Some pieces here, some pieces there. That kind of thing. Can you walk us through who you believe your main competitors are? And maybe, some of the dynamics that you're seeing from the competitive field today.

Sure, sure. So nobody today does what we do in terms of the full product set that we bring to the market. And so from a comp standpoint, that's sometimes challenging to talk through that. But if we're in the health world, you're competing with Willis Towers Watson, Benefitfocus, bswift, Businessolver, typically who we see on the wealth space, Voya, Fidelity, Empower. Payroll is typically ADP and Ceridian. So -- but again, the value proposition for us is back to platform, and nobody can integrate into 1 seamless experience across all of those different solutions. Health care navigation, we'll see accolading grand rounds. That's a solution that you want to -- from a -- you need to drive engagement and you need to bring the eyeballs in to drive the utilization of those services. Our -- the fact that we have health-benefits payroll in the platform, we're bringing the eyeballs already in. So we can just -- from a utilization and driving engagement, we have a much greater opportunity to do that than if we were just a point solution who operated within that space. And so that's really the differentiator. I mean, we see those companies when we're in market. Again, there would be typically -- the legacy here is there's an RFP process that these companies will go through. It's typically a -- one part of the business that's going through an RFP back to PwC. That's where we can come and change the conversation and grab the whole thing.

I was just going to say that, the proof is in the pudding, GE PwC, Federal Thrift. Another one, I know another big one this year that hasn't been fully mentioned. Is the platform the reason why you're winning these nice big logos?

It's a big part of it.

It's not price?

It's not. In this space, right, I mean, the stickiness of what we do, right? Movement on price. It's typically not just -- price is not the reason. Platform differentiate. It is a different conversation, right? The value proposition is different and what we can drive. The hundreds of millions of dollars customers are spending anyway, right, is significant, and they're looking at what they're getting from a value. And so the platform elevates the conversation. It becomes a C-suite where you're not necessarily talking to a procurement person in a certain part of the business. You're talking to the CHRO or the CFO or the Head of Benefits and driving a value conversation because they're getting the question from the Board or the CEO on where is this spend going and what are we getting for it? And so it's been a great differentiator for us in those conversations.

And the consolidation always helps.

That's right. That's right.

Yes. Absolutely. Let's talk a little bit about margins, cash flow, all those things. You have a lot of interesting things that are happening with the business in totality. You have mix shift occurring, what's the business no longer a part, which is healthy. The pricing element, also helpful. Steady-state margins, you feel pretty confident on a certain level of expansion. If you could talk a little bit about that, maybe how BPaaS contributes to that incremental margin, way above where we are today. So I had a long runway on the margin side. If you could take us through.

Sure, we do. Yes...

[indiscernible] outlook there.

So we laid out 400 to 500 basis points of EBITDA margin expansion through 2026. And certainly, the pricing, BPaaS carries a different margin profile. So there's incremental margins on those deals as we've talked about. The big pieces for us, though, really, is back to your question on transformation and the technology infrastructure. I mean, we've intentionally invested into -- significantly into the technology side that allows us to drive the front end. But that back-end infrastructure, this restructuring program that we just rolled out this year is a 2-year program. It's a $140 million program, with $100 million of annual cost saving benefits. The big piece of that is, which is important, it's not just cost takeout. It's actually delivering a better experience. Do you want to call and talk to a call center for 15 minutes to find out the status of a ticket that was placed in? Or would you rather, a more contemporary text feature proactively that comes to you? That saves us -- we have significantly -- 4 million calls like that a year that we have. And so leveraging the technology and how we deliver care every day for our customers, and how we manage digitally through the technology stack, and what we're getting out of on-premise data centers. There's significant uplift just in the cost to serve while driving a better experience. And so the digital care and how -- for call centers and our customers every day, 200 to 400 basis points. It's the biggest piece of that walk I gave you on the EBITDA margins. It's really in this technology. We're running dual technologies today. We've got people. We've got real estate for the data centers. We've got CapEx that's going into the different levels of technology. So you're right. We've moved out of hosted, from a customer standpoint on the front end, now the back end goes into the cloud. And then there's operating leverage. Just we've got a great base to grow from now. And so that's also a part of the walk for EBITDA.

Yes, the margin walk really has all the elements you're looking for. It has -- I talked about it earlier, systems of record, systems of engagement, improvement, cost saves at both those levels, mix shift to a new offering. Let's hope we get some pricing on that side as well. So it's not just cost savings, it's also product enhancement itself, just driving an overall higher value proposition.

That's right. That's right. And it's -- at the end of the day, you asked about, it drives cash flow, right? I mean, so the -- after EBITDA, and to think about it, right, is operating cash flow conversion and expanding that to 60% to 80% we've laid out, right? 2 years ago, that was 19% then it went to 43% last year. We've guided to 45% to 55% this year going to 60% to 80%. And so at the end of the day, many conversations that we're having with investors, it's -- that's the cash flow progression for this business. Again, per employee per month, we're getting -- it's a great recurring revenue base and the cash flow outside of when we're able to manage the technology stack, drives great expansion there.

Jeremy, you got to also spend money to make money. Increase your margin. So let's talk about free cash flow conversion.

Of course.

Are there chunks of CapEx that we should think of? Is this margin progression. And then ultimately, free cash flow conversion projection? Does that happen in chunks, or is that more of a gradual way?

It's more gradual. But it will -- once we get through the 2-year restructuring program, you do start to see a larger pickup in terms of that projection over time. Just as if you were kind of sequencing out through the midterm, getting through this 2 years, from a restructuring program, impacts both the -- because it's an adjustment from an EBITDA standpoint. The charges on the restructuring. But it's included in the cash flow -- the operating cash flow guidance that we give. So certainly, if you thought about the $90 million this year going to $50 million the following year, and then we're done with the restructuring program, that's operating cash, correct. CapEx...

At the same time, you have operating leverage.

That's right. That's right. That's right. And so to your point on CapEx, we've been running closer to 5% of revenue. Once we're out of the dual technologies, and we've shifted the mix heavily towards innovation versus maintenance in there. But the right path is longer term for us, is closer to 4%.

And at the same time, pre-SPAC, you're 6x levered, 3.7 now, goal to be 3.

That's right.

And [indiscernible] the time frame on that or...

It's within the midterm range we've given. But we're naturally delevering today. Yes, we're down to 3.7 through the first half. And so it's a big component for us. I mean, capital allocation, it's always going to be strength of the balance sheet first. Secondly, it's going to be our organic and inorganic investments in the company, technology as well as any great opportunities. But then it's capital to shareholders through our share buyback program and delevering.

I'm going to ask two wrap-up questions real quick. Out of the platform, are there -- are the capabilities that you need just -- are there tuck-in opportunities out there that you see are reasonable?

Yes, there are. I mean, it's all about content, right? It's build by partner, is how we'll think about it from an inorganic standpoint. We've got great partnerships as well. We've made small tuck-in acquisitions that drive just a really great level of content to tuck-in within our platform to, again, integrate and what drives value for customers. Valuation, we're still going to stay disciplined now. I mean, the valuations have not necessarily come down with lineup. So we'll continue to look for it, but that's how we think but partnerships have been great for us as well.

I continually hear from existing investors who say, look at the valuation of the stock today and like, wow. Particularly compared to some of your larger market cap peers. Maybe you can talk through, from management's perspective maybe, what are some of the overhangs that you see on the stock, and how are you thinking about them?

Sure. I mean, the first one was just the SPAC overhang. We came public through a SPAC. We've -- the importance there is just track record of doing what we say we're going to do, right, and delivering on our commitments. We laid out a profile for the first 3 years. We've now given midterm guidance for the next 3 years. I think, maintaining that and executing and the track record has been big just relative to whether SPACs that came out at the same time. So that's been one element for us. I think, the ownership structure has been the other. And I think progress continues there. I'm sure you saw the announcement earlier this week on our Blackstone directors stepping down from the Board. We've had block trades, and so the exit of the investment. Just based on a time horizon and a profile of ownership...

Improved quite a bit.

It has. And so I think, those have been probably the two aspects that I'd give you that. Again, for us, it's execution. It's being opportunistic. It's driving the platform strategy and delivering on it. And I think, time has helped in terms of our execution against those.

Fantastic. All right. We're 15 seconds over. Jeremy Heaton, this was fun. It's fun story. I'm very excited.

Thanks for having me.

Yes. Great to have you. Thank you.

Great to be up here. Thanks.