Alight Inc Delaware

Previous wording

Revenues were $559 million for the three months ended March 31, 2024 as compared to $586 million for the prior year period. The decrease of $27 million or 4.6% was driven by lower volumes, net commercial activity and project revenue within our Employer Solutions segment and the wind-down of our Hosted business operations. We expect short term impacts in the first half of 2024 when compared to the prior year period as a result of large deal go-live timing and previous softness in BPaaS bookings in the first half of 2023. We also measure revenue growth as it relates to our cloud-based products and solutions that are central to our Alight Worklife® platform and our next generation product suite, BPaaS Solutions. For the three months ended March 31, 2024, we recorded BPaaS revenue of $117 million, which represented growth of 20.6% compared to the prior year period.

Current wording

Revenues were $538 million for the three months ended June 30, 2024 as compared to $561 million for the prior year period. The decrease of $23 million or 4.1% was driven by lower volumes, Net Commercial Activity and project revenue within our Employer Solutions segment and the wind-down of our Hosted business operations. We experienced short term impacts in the first half of 2024 when compared to the prior year period as a result of large deal go-live timing and softness in BPaaS bookings in the first half of 2023. We continue to expect incremental improvement in year-over-year recurring revenue growth for the third and fourth quarters, relative to the growth in the first half of 2024. However, we anticipate continued headwinds with non-recurring project revenue in the second half of 2024 on a year-over-year basis, which we expect to temper total revenue in the second half of the year. We also measure revenue growth as it relates to our cloud-based products and solutions that are central to our Alight Worklife® platform and our next generation product suite, BPaaS Solutions. For the three months ended June 30, 2024, we recorded BPaaS revenue of $115 million, which represented growth of 12.7% compared to the prior year period.

Previous wording

Recurring revenues decreased by $22 million, or 4.1%, from $543 million in the prior year period to $521 million and are related to decreases in our Employer Solutions segment driven by lower volumes and Net Commercial Activity.

Current wording

Recurring revenues decreased by $21 million, or 4.1%, from $514 million in the prior year period to $493 million and are related to decreases in our Employer Solutions segment driven by lower volumes and Net Commercial Activity.

Previous wording

Cost of services, exclusive of depreciation and amortization, decreased $26 million, or 6.8%, for the three months ended March 31, 2024 as compared to the prior year period. The decrease was primarily driven by lower revenues and productivity initiatives, partially offset by continued investments in key resources.

Current wording

Cost of services, exclusive of depreciation and amortization, decreased $11 million, or 3.1%, for the three months ended June 30, 2024 as compared to the prior year period. The decrease was primarily driven by lower revenues, lower share-based compensation and productivity initiatives, partially offset by continued investments in key resources.

Previous wording

Loss before taxes from continuing operations was $148 million for the three months ended March 31, 2024 as compared to loss before taxes from continuing operations of $107 million for the three months ended March 31, 2023. The increase was primarily due to non-operating fair value remeasurements associated with financial instruments and the TRA.

Current wording

Loss before taxes from continuing operations was $2 million for the three months ended June 30, 2024 as compared to loss before taxes from continuing operations of $80 million for the three months ended June 30, 2023. The decrease was primarily due to non-operating fair value remeasurements associated with financial instruments and the TRA.

Previous wording

Income tax benefit was $27 million for the three months ended March 31, 2024, as compared to an income tax benefit of $23 million for the prior year period. The effective tax rate of 18% for the three months ended March 31, 2024 was lower than the 21% U.S. statutory corporate income tax rate primarily due to non-deductible portion of stock compensation expense. The effective tax rate of 21% for the three months ended March 31, 2023 was equal to the 21% U.S. statutory corporate income tax rate primarily due to the recognition of a benefit for an uncertain tax position for which the statute of limitations has lapsed, and partially offset by losses in certain non-U.S. jurisdictions for which tax benefits have not been recorded. See Note 7 “Income Taxes” for additional information.

Current wording

Income tax expense was $2 million for the three months ended June 30, 2024, as compared to an income tax benefit of $8 million for the prior year period. The effective tax rate of (100)% for the three months ended June 30, 2024 was lower than the 21% U.S. statutory corporate income tax rate primarily due to non-deductible portion of share-based compensation expense, the tax receivable agreement fair value adjustment, and the seller earnout liability fair value adjustment. The effective tax rate of 10% for the three months ended June 30, 2023 was lower than the 21% U.S. statutory corporate income tax rate primarily due to the Company’s non-deductible portion of share-based compensation expense, tax receivable agreement fair value adjustment, and the seller earnout liability fair value adjustment. See Note 7 “Income Taxes” for additional information.

Previous wording

Selling, general and administrative expenses decreased $5 million, or 3.3%, for the three months ended March 31, 2024 as compared to the prior year period. The decrease was driven by lower compensation expenses primarily related to share-based awards and lower costs incurred from our restructuring program, partially offset by professional fees related to the planned sale of our Payroll and Professional Services businesses.

Current wording

Selling, general and administrative expenses decreased $8 million, or 2.7%, for the six months ended June 30, 2024 as compared to the prior year period. The decrease was driven by lower compensation expenses primarily related to share-based awards and lower costs incurred from our restructuring program, partially offset by professional fees related to the sale of our Payroll and Professional Services businesses.

Previous wording

Depreciation and intangible amortization expenses remained consistent when comparing the three months ended March 31, 2024 to the prior year period.

Current wording

Depreciation and intangible amortization expenses decreased by$1 million, or 0.7%, when comparing the six months ended June 30, 2024 to the prior year period.

Previous wording

There was a $21 million loss related to the change in the fair value of financial instruments for the three months ended March 31, 2024 compared to a loss of $25 million for the prior year period. We are required to remeasure the financial instruments at the end of each reporting period and reflect a gain or loss for the change in fair value of the financial instruments in the period the change occurred. Changes in the fair value are due to changes in the underlying assumptions, including changes in the risk free interest rate, volatility, and the closing stock price for the period. See Note 14 "Financial Instruments" for additional information.

Current wording

There was a $31 million gain related to the change in the fair value of financial instruments for the six months ended June 30, 2024 compared to a loss of $25 million for the prior year period. We are required to remeasure the financial instruments at the end of each reporting period and reflect a gain or loss for the change in fair value of the financial instruments in the period the change occurred. Changes in the fair value are due to changes in the underlying assumptions, including changes in the risk-free interest rate, volatility, and the closing stock price for the period. See Note 14 "Financial Instruments" for additional information.

Previous wording

The change in the fair value of the TRA resulted in a loss of $55 million for the three months ended March 31, 2024, an increase of $47 million compared to a loss of $8 million for the prior year period. This revaluation loss is due to conversion of non-controlling interest during the three months ended March 31, 2024, changes in the Company's assumptions related to the timing of the utilization of tax attributes during the term of the TRA, changes in the discount rate, and passage of time.

Current wording

The change in the fair value of the TRA resulted in a loss of $24 million for the six months ended June 30, 2024, an increase of $5 million compared to a loss of $19 million for the prior year period. This revaluation loss is due to conversion of non-controlling interest during the six months ended June 30, 2024, changes in the Company's assumptions related to the timing of the utilization of tax attributes during the term of the TRA, changes in the discount rate, and passage of time.

Previous wording

Interest expense decreased $2 million for the three months ended March 31, 2024 as compared to the prior year period. The decrease was primarily due to increased hedging activity at favorable market rates, the opportunistic repricing of our 2028 term loan and higher interest income. See Note 8 “Debt” for additional information.

Current wording

Interest expense decreased $2 million for the six months ended June 30, 2024 as compared to the prior year period. The decrease was primarily due to increased hedging activity at favorable market rates, the opportunistic repricing of our 2028 term loan and higher interest income. See Note 8 “Debt” for additional information.

Previous wording

(1) Adjusted EBITDA excludes the impact of discontinued operations. Comparable periods have been recast to exclude these impacts.

Current wording

(1)Excludes the impact of discontinued operations. Comparable periods have been recast to exclude these impacts.

Previous wording

Transaction and integration expenses primarily relate to acquisitions and divestiture activities.

Current wording

(2)Transaction and integration expenses primarily relate to acquisitions and divestiture activities.

Previous wording

Income tax effects have been calculated based on statutory tax rates for both U.S. and foreign jurisdictions based on the Company's mix of income and adjusted for significant changes in fair value measurement.

Current wording

(3)Income tax effects have been calculated based on statutory tax rates for both U.S. and foreign jurisdictions based on the Company's mix of income and adjusted for significant changes in fair value measurement.

Previous wording

Assumes the full exchange of the units held by noncontrolling interests for shares of Class A Common Stock of Alight, Inc. pursuant to the exchange agreement.

Current wording

(4)Assumes the full exchange of the units held by noncontrolling interests for shares of Class A Common Stock of Alight, Inc. pursuant to the exchange agreement.

Previous wording

Includes non-vested time-based restricted stock units that were determined to be antidilutive for U.S. GAAP diluted earnings per share purposes.

Current wording

(5)Includes non-vested time-based restricted stock units that were determined to be antidilutive for U.S. GAAP diluted earnings per share purposes.

Previous wording

Excludes two tranches of contingently issuable seller earnout shares: (i) 7.5 million shares will be issued if the Company's Class A Common Stock's volume-weighted average price ("VWAP") is >$12.50 for any 20 trading days within a consecutive period of 30 trading days; (ii) 7.5 million shares will be issued if the Company's Class A Common Stock VWAP is >$15.00 for any 20 trading days within a consecutive period of 30 trading days. Both tranches have a seven-year duration.

Current wording

(6)Excludes two tranches of contingently issuable seller earnout shares: (i) 7.5 million shares will be issued if the Company's Class A Common Stock's volume-weighted average price ("VWAP") is >$12.50 for any 20 trading days within a consecutive period of 30 trading days; (ii) 7.5 million shares will be issued if the Company's Class A Common Stock VWAP is >$15.00 for any 20 trading days within a consecutive period of 30 trading days. Both tranches have a seven-year duration.

Previous wording

Excludes approximately 14.4 million and 31.0 million performance-based units, which represents the gross number of shares expected to vest based on achievement of the respective performance conditions as of March 31, 2024 and 2023, respectively.

Current wording

(7)Excludes approximately 14.1 million and 30.2 million performance-based units, which represents the gross number of shares expected to vest based on achievement of the respective performance conditions as of June 30, 2024 and 2023, respectively.

Previous wording

Adjusted EBITDA excludes the impact of discontinued operations. Comparable periods have been recast to exclude these impacts.

Current wording

(1)Adjusted EBITDA excludes the impact of discontinued operations. Comparable periods have been recast to exclude these impacts.

Previous wording

(2) Transaction and integration expenses primarily relate to acquisition and divestiture activities.

Current wording

(2)Transaction and integration expenses primarily relate to acquisition and divestiture activities.

Previous wording

(3) Adjusted EBITDA Margin From Continuing Operations is defined as Adjusted EBITDA From Continuing Operations as a percentage of revenue.

Current wording

(3)Adjusted EBITDA Margin From Continuing Operations is defined as Adjusted EBITDA From Continuing Operations as a percentage of revenue.

Previous wording

Employer Solutions revenue was $559 million for the three months ended March 31, 2024 as compared to $576 million for the prior year period. The overall decrease of $17 million was primarily driven by decreases in recurring revenues from lower volumes, net commercial activity and project revenue.

Current wording

Employer Solutions revenue was $538 million for the three months ended June 30, 2024 as compared to $552 million for the prior year period. The overall decrease of $14 million was primarily driven by decreases in recurring revenues from lower volumes, Net Commercial Activity and project revenue.

Previous wording

Employer Solutions gross profit was $182 million for the three months ended March 31, 2024 compared to $187 million for the prior year period. The decrease of $5 million was driven by a decrease in revenue and lower expenses related to productivity initiatives, partially offset by increases in costs associated with funding growth of current and future revenues. Employer Solutions adjusted gross profit for the three months ended March 31, 2024 decreased $2 million to $208 million from $210 million in the prior year period primarily driven by a decrease in revenue and lower expenses related to productivity initiatives, partially offset by increases in costs associated with funding growth of current and future revenues.

Current wording

Employer Solutions gross profit was $167 million for the three months ended June 30, 2024 compared to $189 million for the prior year period. The decrease of $22 million was driven by a decrease in revenue and lower expenses related to productivity initiatives, partially offset by increases in costs associated with funding growth of current and future revenues. Employer Solutions adjusted gross profit for the three months ended June 30, 2024 decreased $17 million to $196 million from $213 million in the prior year period primarily driven by a decrease in revenue and lower expenses related to productivity initiatives, partially offset by increases in costs associated with funding growth of current and future revenues.

Previous wording

We believe that our available cash and cash equivalents, cash flows from operations and availability under our revolving credit facility will be sufficient to meet our liquidity needs, including principal and interest payments on debt obligations, capital expenditures, payments on our Tax Receivable Agreement and anticipated working capital requirements for the foreseeable future. We believe our liquidity position at March 31, 2024 remains strong. We will continue to closely monitor and proactively manage our liquidity position in light of changing economic conditions and the volatility of interest rates. The Company expects to use the net after-tax cash proceeds from the expected sale of its Payroll & Professional Services business to reduce debt, return capital and for general corporate purposes, including reinvestment into growth opportunities.

Current wording

We believe that our available cash and cash equivalents, cash flows from operations and availability under our revolving credit facility will be sufficient to meet our liquidity needs, including principal and interest payments on debt obligations, capital expenditures, payments on our Tax Receivable Agreement and anticipated working capital requirements for the foreseeable future. We believe our liquidity position at June 30, 2024 remains strong. We will continue to closely monitor and proactively manage our liquidity position in light of changing economic conditions and the volatility of interest rates. In July 2024, we paid down $440 million of the Sixth Incremental Term Loans balance and the remaining principal balance of $300 million Secured Senior Notes with proceeds from the sale of our Payroll and Professional Services business that closed on July 12, 2024. We expect to use the remainder of after-tax cash proceeds to return capital and general corporate purposes, including reinvestment into growth opportunities.

Previous wording

In August 2022, we established a repurchase program allowing for up to $100 million in authorized share repurchases. In March 2024, the Company’s Board of Directors authorized the repurchase of up to an additional $200 million of the Company’s Class A common stock. As of March 31, 2024, approximately $248 million remained available for share repurchases under our share repurchase program.

Current wording

In August 2022, we established a repurchase program allowing for up to $100 million in authorized share repurchases. In March 2024, the Company’s Board of Directors authorized the repurchase of up to an additional $200 million of the Company’s Class A common stock. During the three and six months ended June 30, 2024, there were 10,134,600 Class A Common Stock shares repurchased under the Program for $80 million inclusive of shares repurchased under the ASR discussed below. Accordingly, as of June 30, 2024, the total amount authorized for repurchase remaining was $168 million.

Previous wording

The Company's cash flows are presented inclusive of discontinued operations on the condensed consolidated statement of cash flows for all periods presented. The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented.

Current wording

The following table provides a summary of cash flows from continuing operating, investing, and financing activities for the periods presented.

Previous wording

Net cash provided by operating activities was $100 million for the three months ended March 31, 2024 compared to $72 million for the three months ended March 31, 2023. The increase in cash provided by operating activities was primarily due to a decrease in our net working capital requirements.

Current wording

Net cash provided by operating activities was $93 million for the six months ended June 30, 2024 compared to $113 million for the six months ended June 30, 2023. The decrease in cash provided by operating activities was primarily due to increased overhead expenses related to the sale of the Payroll and Professional Services business.

Previous wording

Cash used for investing activities decreased $9 million to $36 million for the three months ended March 31, 2024 from $45 million for the prior year period, driven by capital expenditures.

Current wording

Cash used for investing activities decreased $11 million to $67 million for the six months ended June 30, 2024 from $78 million for the prior year period, driven by less capital expenditures.

Previous wording

Cash used for financing activities for the three months ended March 31, 2024 was $74 million as compared to cash used for financing activities of $160 million in the prior year. The primary drivers of cash used for financing activities were $62 million of TRA payments, $57 million of shares/units withheld in lieu of taxes, $9 million of finance lease payments, $6 million of debt repayments, partially offset by a $60 million net increase in fiduciary liabilities. The increase in fiduciary cash is primarily due to timing of client funding and subsequent disbursement of payments.

Current wording

Cash used for financing activities for the six months ended June 30, 2024 was $244 million as compared to cash used for financing activities of $74 million in the prior year. The primary drivers of cash used for financing activities were $80 million of share repurchases, $62 million of TRA payments, $58 million of shares/units withheld in lieu of taxes, $14 million of finance lease payments, $13 million of debt repayments, and a $17 million net decrease in fiduciary liabilities. The decrease in fiduciary cash is primarily due to timing of client funding and subsequent disbursement of payments.

Previous wording

At March 31, 2024, our continuing operations cash and cash equivalents were $256 million, a decrease of $68 million from December 31, 2023. Of the total balances of cash and cash equivalents as of March 31, 2024 and December 31, 2023, none of the balances were restricted as to use.

Current wording

At June 30, 2024, our continuing operations cash and cash equivalents were $183 million, a decrease of $141 million from December 31, 2023. Of the total balances of cash and cash equivalents as of June 30, 2024 and December 31, 2023, none of the balances were restricted as to use.

Previous wording

Some of our client agreements require us to hold funds on behalf of clients to pay obligations on their behalf. The levels of Fiduciary assets and liabilities can fluctuate significantly, depending on when we collect the amounts from clients and make payments on their behalf. Such funds are not available to service our debt or for other corporate purposes. There is typically a short period of time between when the Company receives funds and when it pays obligations on behalf of clients. We are entitled to retain investment income earned on fiduciary funds, when investment strategies are deployed, in accordance with industry custom and practice, which has historically been immaterial. In our Condensed Consolidated Balance Sheets, the amount we report for Fiduciary assets and Fiduciary liabilities are equal. Our continuing operations Fiduciary assets included cash of $250 million and $234 million at March 31, 2024 and December 31, 2023, respectively.

Current wording

Some of our client agreements require us to hold funds on behalf of clients to pay obligations on their behalf. The levels of Fiduciary assets and liabilities can fluctuate significantly, depending on when we collect the amounts from clients and make payments on their behalf. Such funds are not available to service our debt or for other corporate purposes. There is typically a short period of time between when the Company receives funds and when it pays obligations on behalf of clients. We are entitled to retain investment income earned on fiduciary funds, when investment strategies are deployed, in accordance with industry custom and practice, which has historically been immaterial. In our Condensed Consolidated Balance Sheets, the amount we report for Fiduciary assets and Fiduciary liabilities are equal. Our continuing operations Fiduciary assets included cash of $217 million and $234 million at June 30, 2024 and December 31, 2023, respectively.

Previous wording

Actual tax benefits realized by Alight may differ from tax benefits calculated under the TRA as a result of the use of certain assumptions in the TRA, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits. While the amount of existing tax basis, the anticipated tax basis adjustments and the actual amount and utilization of tax attributes, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, we expect that the payments that Alight may make under the TRA will be substantial. For the three months ended March 31, 2024, we paid $62 million related to the TRA and no further payments are expected to be made during the remainder of 2024. As of March 31, 2024, we expect to make payments of approximately $89 million in 2025.

Current wording

Actual tax benefits realized by Alight may differ from tax benefits calculated under the TRA as a result of the use of certain assumptions in the TRA, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits. While the amount of existing tax basis, the anticipated tax basis adjustments and the actual amount and utilization of tax attributes, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, we expect that the payments that Alight may make under the TRA will be substantial. For the six months ended June 30, 2024, we paid $62 million related to the TRA and no further payments are expected to be made during the remainder of 2024. As of June 30, 2024, we expect to make payments of approximately $89 million in 2025 and in the range of $190 million in 2026.

Previous wording

In March 2024, the Company entered into an agreement with a third-party provider in the ordinary course of business for the use of certain cloud services. Under this agreement, the Company is committed to purchase services totaling $250 million over a 5-year term. There have been no other material changes to our obligations and commitments during the three months ended March 31, 2024.

Current wording

In March 2024, the Company entered into an agreement with a third-party provider in the ordinary course of business for the use of certain cloud services. Under this agreement, the Company is committed to purchase services totaling $250 million over a 5-year term. There have been no other material changes to our obligations and commitments during the six months ended June 30, 2024.