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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39299

 

Alight, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

86-1849232

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

4 Overlook Point

Lincolnshire, IL

60069

(Address of principal executive offices)

(Zip Code)

(224) 737-7000

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

 

ALIT

 

New York Stock Exchange

 

 

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of May 3, 2024, the registrant had 550,348,057 shares of Class A Common Stock, par value $0.0001 per share, 4,914,939 shares of Class B-1 Common Stock, par value $0.0001 per share, 4,914,939 shares of Class B-2 Common Stock, par value $0.0001 per share, 734,248 shares of Class V Common Stock, par value $0.0001 per share, 376,637 shares of Class Z-A Common Stock, par value $0.0001 per share, 100,731 shares of Class Z-B-1 Common Stock, par value $0.0001 per share, and 100,731 shares of Class Z-B-2 Common Stock, par value $0.0001 per share, outstanding.

 

 


 

Table of Contents

 

Page

 

 

 

 

Forward-Looking Statements

 

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements

3

Condensed Consolidated Balance Sheets (Unaudited)

3

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

4

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

5

Condensed Consolidated Statements of Cash Flows (Unaudited)

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

36

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

Signatures

40

 

i


 

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements include, but are not limited to, statements regarding the sale of our Payroll & Professional Services business, including the likelihood of the consummation of the transaction, the expected time period to consummate the transaction, statements that relate to expectations regarding future financial performance, and business strategies or expectations for our business. Forward-looking statements can often be identified by the use of words such as “anticipate,” “appear,” “approximate,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” or similar expressions or the negative thereof. These forward-looking statements are based on information available as of the date of this report and the Company’s management’s current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside the control of the Company and its directors, officers and affiliates. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update, add or otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

our ability to complete the sale of our payroll and professional services business on the terms disclosed, or at all, and to realize the expected benefits of such transaction;
declines in economic activity in the industries, markets, and regions our clients serve, including as a result of macroeconomic factors beyond our control, heightened interest rates or changes in monetary and fiscal policies;
risks associated with competition;
cyber-attacks and security vulnerabilities and other significant disruptions in the Company’s information technology systems and networks that could expose the Company to legal liability, impair its reputation or have a negative effect on the Company’s results of operations;
our handling of confidential, personal or proprietary data;
actions or proposals from activist stockholders;
changes in applicable laws or regulations;
an inability to successfully execute on operational and technological enhancements designed to drive value for our clients or drive internal efficiencies;
issues relating to the use of new and evolving technologies, such as Artificial Intelligence (“AI”) and Machine Learning;
claims (particularly professional liability claims), litigation or other proceedings against us;
the inability to adequately protect key intellectual property rights or proprietary technology;
past and prospective acquisitions, including the failure to successfully integrate operations, personnel, systems, technologies and products of the acquired companies, adverse tax consequences of acquisitions, greater than expected liabilities of the acquired companies and charges to earnings from acquisitions;
the success of our strategic partnerships with third parties;
the possibility of a decline in continued interest in outsourced services;
our inability to retain and attract experienced and qualified personnel;
recovery following a catastrophic event, disaster or other business continuity problem;
our inability to deliver a satisfactory product to our clients;
damage to our reputation;
our reliance on third-party licenses and service providers;
our handling of client funds;

1


 

changes in regulations that could have an adverse effect on the Company’s business;
the Company’s international operations, including varying taxation requirements;
the profitability of our engagements due to unexpected circumstances;
our ability to achieve sustainable cost savings for our clients;
the success of our restructuring program;
changes in accounting principles or treatment;
the impact of goodwill or other impairment charges on our earnings;
contracting with government clients;
the significant influence of our sponsors;
the incurrence of increased costs and becoming subject to additional regulations and requirements as a result of being a public company;
our obligations under our Tax Receivable Agreement;
changes to our credit ratings or interest rates which could affect our financial resources, ability to raise additional capital, generate sufficient cash flows, or generally maintain operations; and
other risks and uncertainties indicated in this report and our other public filings, including those set forth under the section entitled “Risk Factors” in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on February 29, 2024 (the "Annual Report").

These risk factors do not identify all risks that we face, and our business, financial condition and results of operations could also be affected by factors, events or uncertainties that are not presently known to us or that we currently do not consider to present material risks.

Website and Social Media Disclosure

We use our website (www.alight.com) and our corporate Facebook (http://www.facebook.com/AlightGlobal), Instagram (@alight_solutions), LinkedIn (www.linkedin.com/company/alightsolutions), X (formerly known as Twitter) (@alightsolutions), and YouTube (www.youtube.com/c/AlightSolutions) accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, filings made with the SEC and public conference calls and webcasts. The information on our website is not part of this Quarterly Report.

The Company makes available free of charge on its website or provides a link on its website to the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the SEC. To access these filings, go to the Company’s website and under the “Investors” heading, click on “Financials.”

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Alight, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

March 31,

 

December 31,

 

 

 

2024

 

2023

 

(in millions, except par values)

 

 

 

 

 

 

Assets

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

$

 

256

 

$

 

324

 

Receivables, net

 

 

 

393

 

 

 

435

 

Other current assets

 

 

 

217

 

 

 

260

 

Fiduciary assets

 

 

 

250

 

 

 

234

 

Current assets held for sale

 

 

 

2,501

 

 

 

1,523

 

Total Current Assets

 

 

 

3,617

 

 

 

2,776

 

Goodwill

 

 

 

3,212

 

 

 

3,212

 

Intangible assets, net

 

 

 

3,066

 

 

 

3,136

 

Fixed assets, net

 

 

 

387

 

 

 

331

 

Deferred tax assets, net

 

 

 

86

 

 

 

38

 

Other assets

 

 

 

346

 

 

 

341

 

Long-term assets held for sale

 

 

 

 

 

 

948

 

Total Assets

 

$

 

10,714

 

$

 

10,782

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

 

278

 

$

 

325

 

Current portion of long-term debt, net

 

 

 

25

 

 

 

25

 

Other current liabilities

 

 

 

282

 

 

 

233

 

Fiduciary liabilities

 

 

 

250

 

 

 

234

 

Current liabilities held for sale

 

 

 

1,475

 

 

 

1,370

 

Total Current Liabilities

 

 

 

2,310

 

 

 

2,187

 

Deferred tax liabilities

 

 

 

32

 

 

 

32

 

Long-term debt, net

 

 

 

2,762

 

 

 

2,769

 

Long-term tax receivable agreement

 

 

 

784

 

 

 

733

 

Financial instruments

 

 

 

132

 

 

 

109

 

Other liabilities

 

 

 

166

 

 

 

142

 

Long-term liabilities held for sale

 

 

 

 

 

 

68

 

Total Liabilities

 

$

 

6,186

 

$

 

6,040

 

Commitments and Contingencies

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Preferred stock at $0.0001 par value: 1.0 shares authorized, none issued and outstanding

 

$

 

 

$

 

 

Class A Common Stock: $0.0001 par value, 1,000.0 shares authorized; 550.0 and 510.9 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

 

Class B Common Stock: $0.0001 par value, 20.0 shares authorized; 9.9 and 9.9 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

 

Class V Common Stock: $0.0001 par value, 175.0 shares authorized; 1.2 and 29.0 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

 

Class Z Common Stock: $0.0001 par value, 12.9 shares authorized; 0.6 and 3.4 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

 

Treasury stock, at cost (6.4 and 6.4 shares at March 31, 2024 and December 31, 2023, respectively)

 

 

 

(52

)

 

 

(52

)

Additional paid-in-capital

 

 

 

5,113

 

 

 

4,946

 

Retained deficit

 

 

 

(617

)

 

 

(503

)

Accumulated other comprehensive income

 

 

 

75

 

 

 

71

 

Total Alight, Inc. Stockholders' Equity

 

$

 

4,519

 

$

 

4,462

 

Noncontrolling interest

 

 

 

9

 

 

 

280

 

Total Stockholders' Equity

 

$

 

4,528

 

$

 

4,742

 

Total Liabilities and Stockholders' Equity

 

$

 

10,714

 

$

 

10,782

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

3


 

Alight, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

Three Months Ended

 

Three Months Ended

 

 

March 31,

 

March 31,

 

(in millions, except per share amounts)

2024

 

2023

 

Revenue

$

 

559

 

$

 

586

 

Cost of services, exclusive of depreciation and amortization

 

 

356

 

 

 

382

 

Depreciation and amortization

 

 

21

 

 

 

17

 

Gross Profit

 

 

182

 

 

 

187

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

Selling, general and administrative

 

 

146

 

 

 

151

 

Depreciation and intangible amortization

 

 

76

 

 

 

76

 

Total Operating expenses

 

 

222

 

 

 

227

 

Operating Income (Loss) From Continuing Operations

 

 

(40

)

 

 

(40

)

Other (Income) Expense

 

 

 

 

 

 

(Gain) Loss from change in fair value of financial instruments

 

 

21

 

 

 

25

 

(Gain) Loss from change in fair value of tax receivable agreement

 

 

55

 

 

 

8

 

Interest expense

 

 

31

 

 

 

33

 

Other (income) expense, net

 

 

1

 

 

 

1

 

Total Other (income) expense, net

 

 

108

 

 

 

67

 

Income (Loss) From Continuing Operations Before Taxes

 

 

(148

)

 

 

(107

)

Income tax expense (benefit)

 

 

(27

)

 

 

(23

)

Net Income (Loss) From Continuing Operations

 

 

(121

)

 

 

(84

)

Net Income (Loss) From Discontinued Operations, Net of Tax

 

 

5

 

 

 

10

 

Net Income (Loss)

 

 

(116

)

 

 

(74

)

Net income (loss) attributable to noncontrolling interests

 

 

(2

)

 

 

(6

)

Net Income (Loss) Attributable to Alight, Inc.

$

 

(114

)

$

 

(68

)

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

Basic

 

 

 

 

 

 

Continuing operations

$

 

(0.22

)

$

 

(0.16

)

Discontinued operations

$

 

0.01

 

$

 

0.02

 

Net Income (Loss)

$

 

(0.21

)

$

 

(0.14

)

Diluted

 

 

 

 

 

 

Continuing operations

$

 

(0.22

)

$

 

(0.16

)

Discontinued operations

$

 

0.01

 

$

 

0.02

 

Net Income (Loss)

$

 

(0.21

)

$

 

(0.14

)

 

 

 

 

 

 

 

Net Income (Loss)

$

 

(116

)

$

 

(74

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Change in fair value of derivatives

 

 

3

 

 

 

(23

)

Foreign currency translation adjustments

 

 

(2

)

 

 

3

 

Total Other comprehensive income (loss), net of tax:

 

 

1

 

 

 

(20

)

Comprehensive Income (Loss) Before Noncontrolling Interests

 

 

(115

)

 

 

(94

)

Comprehensive income (loss) attributable to noncontrolling interests

 

 

(6

)

 

 

(12

)

Comprehensive Income (Loss) Attributable to Alight, Inc.

$

 

(109

)

$

 

(82

)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

4


 

Alight, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

Total

 

 

 

Common

 

 

Treasury

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Alight, Inc.

 

 

Noncontrolling

 

 

Stockholders'

 

(in millions)

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

 

Interest

 

 

Equity

 

Balance at December 31, 2023

 

$

 

 

 

$

 

(52

)

 

$

 

4,946

 

 

$

 

(503

)

 

$

 

71

 

 

$

 

4,462

 

 

$

 

280

 

 

$

 

4,742

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(114

)

 

 

 

 

 

 

 

(114

)

 

 

 

(2

)

 

 

 

(116

)

Other comprehensive income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

4

 

 

 

 

(4

)

 

 

 

 

Conversion of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

 

(264

)

 

 

 

(65

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

 

 

 

 

 

28

 

Shares withheld in lieu of taxes

 

 

 

 

 

 

 

 

 

 

 

(57

)

 

 

 

 

 

 

 

 

 

 

 

(57

)

 

 

 

 

 

 

 

(57

)

Share repurchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

(1

)

 

 

 

(4

)

Balance at March 31, 2024

 

$

 

 

 

$

 

(52

)

 

$

 

5,113

 

 

$

 

(617

)

 

$

 

75

 

 

$

 

4,519

 

 

$

 

9

 

 

$

 

4,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

Total

 

 

 

Common

 

 

 

Treasury

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Alight, Inc.

 

 

Noncontrolling

 

 

Stockholders'

 

 

 

Stock

 

 

 

Stock

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

 

Interest

 

 

Equity

 

Balance at December 31, 2022

 

$

 

 

 

$

 

(12

)

 

$

 

4,514

 

 

$

 

(158

)

 

$

 

95

 

 

$

 

4,439

 

 

$

 

650

 

 

$

 

5,089

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(68

)

 

 

 

 

 

 

 

(68

)

 

 

 

(6

)

 

 

 

(74

)

Other comprehensive income (loss), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

(14

)

 

 

 

(6

)

 

 

 

(20

)

Conversion of non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

 

 

 

145

 

 

 

 

(194

)

 

 

 

(49

)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

37

 

Shares vested, net of shares
withheld in lieu of taxes

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

(6

)

Share repurchases

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

 

 

(10

)

Balance at March 31, 2023

 

$

 

 

 

$

 

(22

)

 

$

 

4,690

 

 

$

 

(226

)

 

$

 

81

 

 

$

 

4,523

 

 

$

 

444

 

 

$

 

4,967

 

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

 

5


 

Alight, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31,

 

March 31,

 

(in millions)

 

2024

 

2023

 

Operating activities:

 

 

 

 

 

Net income (loss)

 

$

 

(116

)

$

 

(74

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation

 

 

 

29

 

 

 

24

 

Intangible asset amortization

 

 

 

80

 

 

 

80

 

Noncash lease expense

 

 

 

5

 

 

 

6

 

Financing fee and premium amortization

 

 

 

(1

)

 

 

(1

)

Share-based compensation expense

 

 

 

28

 

 

 

37

 

(Gain) loss from change in fair value of financial instruments

 

 

 

21

 

 

 

25

 

(Gain) loss from change in fair value of tax receivable agreement

 

 

 

55

 

 

 

8

 

Release of unrecognized tax provision

 

 

 

 

 

 

(1

)

Deferred tax expense (benefit)

 

 

 

(30

)

 

 

(7

)

Other

 

 

 

 

 

 

1

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

 

48

 

 

 

40

 

Accounts payable and accrued liabilities

 

 

 

(63

)

 

 

(117

)

Other assets and liabilities

 

 

 

44

 

 

 

51

 

Cash provided by operating activities

 

$

 

100

 

$

 

72

 

Investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

 

 

(36

)

 

 

(45

)

Cash used in investing activities

 

$

 

(36

)

$

 

(45

)

Financing activities:

 

 

 

 

 

 

 

Net increase (decrease) in fiduciary liabilities

 

 

 

60

 

 

 

(121

)

Repayments to banks

 

 

 

(6

)

 

 

(6

)

Principal payments on finance lease obligations

 

 

 

(9

)

 

 

(7

)

Payments on tax receivable agreements

 

 

 

(62

)

 

 

(7

)

Tax payment for shares/units withheld in lieu of taxes

 

 

 

(57

)

 

 

(6

)

Deferred and contingent consideration payments

 

 

 

 

 

 

(3

)

Repurchase of shares

 

 

 

 

 

 

(10

)

Cash used in financing activities

 

$

 

(74

)

$

 

(160

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

 

(2

)

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

 

(12

)

 

 

(133

)

Cash, cash equivalents and restricted cash at beginning of period(a)

 

 

 

1,759

 

 

 

1,759

 

Cash, cash equivalents and restricted cash at end of period(a)

 

$

 

1,747

 

$

 

1,626

 

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets(a)

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

286

 

$

 

239

 

Restricted cash included in fiduciary assets

 

 

 

1,461

 

 

 

1,387

 

Total cash, cash equivalents and restricted cash

 

$

 

1,747

 

$

 

1,626

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

Fixed asset additions acquired through finance leases

 

$

 

52

 

$

 

4

 

Right of use asset additions acquired through operating leases

 

 

 

8

 

 

 

1

 

 

(a) The cash flows related to discontinued operations have not been separated and are included in the Condensed Consolidated Statements of Cash Flows. The Cash and cash equivalents and Restricted cash included in fiduciary assets amounts presented above differ from the Condensed Consolidated Balance Sheets due to cash and fiduciary assets included in Current assets held for sale.

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

6


 

Alight, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation and Nature of Business

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and should be read in conjunction with the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. All intercompany transactions and balances have been eliminated upon consolidation.

On July 2, 2021 (the “Closing Date”), Alight Holding Company, LLC (the "Predecessor" or "Alight Holdings") completed a business combination (the "Business Combination") with a special purpose acquisition company. On the Closing Date, pursuant to the Business Combination Agreement, the special purpose acquisition company became a wholly owned subsidiary of Alight, Inc. (“Alight”, the “Company”, “we” “us” “our” or the “Successor”). As of March 31, 2024, Alight owned approximately 99% of the economic interest in the Predecessor and had 100% of the voting power and controlled the management of the Predecessor. The non-voting ownership percentage held by noncontrolling interest was less than 1% as of March 31, 2024.

On March 20, 2024, Alight, Inc. entered into a definitive agreement (the “Disposition Agreement”) to sell its Professional Services segment and its Payroll & HCM Outsourcing businesses within the Employer Solutions segment (“Payroll and Professional Services business”) for a purchase price of up to approximately $1.2 billion, in the form of $1 billion in cash and up to $200 million in seller notes, of which $150 million is contingent upon the Payroll & Professional Services business 2025 financial performance, subject to certain adjustments (the “Disposition”). As a result of this agreement, the results of the Company’s Payroll and Professional Services businesses are reported separately as discontinued operations, net of tax, in our condensed consolidated statements of comprehensive income (loss) for all periods presented and its assets and liabilities are presented in our condensed consolidated balance sheets as assets and liabilities held for sale. The transaction is expected to close by mid-year 2024, subject to customary closing conditions, including regulatory approvals.

The Company's cash flows are presented inclusive of discontinued operations on the condensed consolidated statement of cash flows for all periods presented. The significant operating and investing non-cash components included in our condensed consolidated statement of cash flows for discontinued operations are included in Note 4.

Nature of Business

We are a leading cloud-based provider of integrated digital human capital and business solutions. We have an unwavering belief that a company’s success starts with its people, and our solutions connect human insights with technology. The Alight Worklife® employee engagement platform provides a seamless customer experience by combining content, plus artificial intelligence (“AI”) and data analytics to enable Alight’s business process as a service ("BPaaS") model. Our mission-critical solutions enable employees to enrich their health, wealth and wellbeing which helps global organizations achieve a high-performance culture.

Our primary business, Employer Solutions, is driven by our Alight Worklife platform, and includes total employee wellbeing, integrated benefits administration, healthcare navigation, financial wellbeing, leaves solutions, and retiree healthcare. We leverage data across all interactions and activities to improve the employee experience, reduce operational costs and better inform management processes and decision-making. Our clients’ employees benefit from an integrated platform and user experience, coupled with a full-service customer care center, helping them manage the full life cycle of their health wealth and wellbeing.

2. Accounting Policies and Practices

Use of Estimates

The preparation of the accompanying Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of reserves and expenses.

These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management believes its estimates to be reasonable given the current facts available. Management adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, and foreign currency exchange rate movements increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be predicted with certainty, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment would, if applicable, be reflected in the financial statements in future periods.

7


 

New Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the standard to determine the impact of adoption to its condensed consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating the standard to determine the impact of adoption to its condensed consolidated financial statements and disclosures.

3. Revenue from Contracts with Customers

The majority of the Company’s revenue is highly recurring and is derived from contracts with customers to provide integrated, cloud-based human capital solutions that empower clients and their employees to manage their health, wealth and HR needs. The Company’s revenues are disaggregated by recurring and project revenues within each reportable segment. Recurring revenues are typically longer term in nature and more predictable on an annual basis, while project revenues consist of project work of a shorter duration. See Note 12 “Segment Reporting” for quantitative disclosures of recurring and project revenues by reportable segment. The Company’s reportable segment is Employer Solutions. Employer Solutions is driven by our digital, software and AI-led capabilities powered by the Alight Worklife® platform and spanning total employee wellbeing and engagement, including integrated benefits administration, healthcare navigation, financial health and employee wellbeing. The Company believes the Employer Solutions revenue category depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Revenues are recognized when control of the promised services is transferred to the customer in the amount that best reflects the consideration to which the Company expects to be entitled in exchange for those services. The majority of the Company’s revenue is recognized over time as the customer simultaneously receives and consumes the benefits of our services. We may occasionally be entitled to a fee based on achieving certain performance criteria or contract milestones. To the extent that we cannot estimate with reasonable assurance the likelihood that we will achieve the performance target, we will constrain this portion of the transaction price and recognize it when or as the uncertainty is resolved. Any taxes assessed on revenues relating to services provided to our clients are recorded on a net basis. All of the Company’s revenues are described in more detail below.

 

Administrative Services

We provide benefits and human resource services across all of our solutions, which are highly recurring. The Company’s contracts may include administration services across one or multiple solutions and typically have three to five-year terms with mutual renewal options.

These contracts typically consist of an implementation phase and an ongoing administration phase:

Implementation phase – In connection with the Company’s long-term agreements, implementation efforts are often necessary to set up clients and their human resource or benefit programs on the Company’s systems and operating processes. Work performed during the implementation phase is considered a set-up activity because it does not transfer a service to the customer. Therefore, it is not a separate performance obligation. As these agreements are longer term in nature, our contracts generally provide that if the client terminates a contract, we are entitled to an additional payment for services performed through the termination date designed to recover our up-front costs of implementation. Any fees received from the customer as part of the implementation are, in effect, an advance payment for the future ongoing administration services to be provided.

Ongoing administration services phase – For all solutions, the ongoing administration phase includes a variety of plan and system support services. More specifically, these services include data management, calculations, reporting, fulfillment/communications, compliance services, call center support, and in our Health Solutions agreements, annual on-boarding and enrollment support. While there are a variety of activities performed across all solutions, the overall nature of the obligation is to provide integrated administration solutions to the customer. The agreement represents a stand-ready obligation to perform these activities across all solutions on an as-needed basis. The customer obtains value from each period of service, and each time increment (i.e., each month, or each benefit cycle in the case of our Health Solutions arrangements) is distinct and substantially the same. Accordingly, the ongoing administration services for each solution represents a series and each series (i.e., each month, or each benefit cycle including the enrollment period in the case of our Health Solutions arrangements) of distinct services are deemed to be a single performance obligation. In agreements that include multiple performance obligations, the transaction price related to each performance obligation is based on a relative stand-alone selling

8


 

price basis. We establish the stand-alone selling price using a suitable estimation method, which includes a market assessment approach using observable market prices the Company charges separately for similar solutions to similar customers, or an expected cost plus margin approach.

Our contracts with our clients specify the terms and conditions upon which the services are based. Fees for these services are primarily based on a contracted fee charged per participant per period (e.g., monthly or annually, as applicable). These contracts may also include fixed components, including lump-sum implementation fees. Our fees are not typically payable until the commencement of the ongoing administration phase. Once fees become payable, payment is typically due on a monthly basis as we perform under the contract, and we are entitled to be reimbursed for work performed to date in the event of termination.

For Health Solutions administration services, each benefits cycle inclusive of the enrollment period represents a time increment under the series guidance and is a single performance obligation. Although ongoing fees are typically not payable until the commencement of the ongoing administrative phase, we begin transferring services to our customers approximately four months prior to payments being due as part of our annual enrollment services. Although our per-participant fees are considered variable, they are typically predictable in nature, and therefore we do not generally constrain any portion of our transaction price estimates. We use an input method based on the labor costs incurred relative to total labor costs as the measure of progress in satisfying our Health Solutions performance obligation commencing when the customer’s annual enrollment services begin. Given that the Health Solutions enrollment and administrative services are stand-ready in nature, it can be difficult to estimate the total expected efforts or hours we will incur for a particular benefits cycle. Therefore, the input measure is based on the historical effort expended, which is measured as labor cost.

In the normal course of business, we enter into change orders or other contract modifications to add or modify services provided to the customer. We evaluate whether these modifications should be accounted for as separate contracts or a modification to an existing contract. To the extent that the modification changes a promise that forms part of the underlying series, the modification is not accounted for as a separate contract.

Other Contracts

In addition to the ongoing administration services, the Company also has services across all solutions that represent separate performance obligations and that are often shorter in duration, such as our participant financial advisory services and enrollment services not bundled with ongoing administration services.

Fee arrangements can be in the form of fixed-fee, time-and-materials, or fees based on assets under management. Payment is typically due on a monthly basis as we perform under the contract, and we are entitled to be reimbursed for work performed to date in the event of termination.

Services may represent stand-ready obligations that meet the series provision, in which case all variable consideration is allocated to each distinct time increment.

Other services are recognized over-time based on a method that faithfully depicts the transfer of value to the customer, which may be based on the value of labor hours worked or time elapsed, depending on the facts and circumstances.

The majority of the fees for enrollment services not bundled with ongoing administration services may be in the form of commissions received from insurance carriers for policy placement and are variable in nature. These annual enrollment services include both employer-sponsored arrangements that place both retiree Medicare coverage and voluntary benefits and direct-to-consumer Medicare placement. Our performance obligations under these annual enrollment services are typically completed over a short period upon which a respective policy is placed or confirmed with no ongoing fulfillment obligations. For both the employer-sponsored and direct-to-consumer arrangements, we recognize the majority of the placement revenue in the fourth quarter of the calendar year, which is when most of the placement or renewal activity occurs. However, the Company may continue to receive commissions from carriers until the respective policy lapses or is canceled. The Company bases the estimates of total transaction price on supportable evidence from an analysis of past transactions, and only includes amounts that are probable of being received or not refunded.

As it relates to the direct-to-consumer arrangements, because our obligation is complete upon placement of the policy, we recognize revenue at that date, which includes both compensation due to us in the first year as well as an estimate of the total renewal commissions that will be received over the lifetime of the policy. The variable consideration estimate requires significant judgement, and will vary based on product type, estimated commission rates and the expected lives of the respective policies and other factors.

For both the employer-sponsored and direct-to-customer arrangements, the estimated total transaction price may differ from the ultimate amount of commissions we may collect. Consequently, the estimate of total transaction price is adjusted over time as the Company receives confirmation of cash received, or as other information becomes available.

A portion of the Company's revenue is subscription-based where monthly fees are paid to the Company. The subscription-based revenue is recognized straight-line over the contract term, which is generally three years.

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The Company has elected to apply practical expedients to not disclose the revenue related to unsatisfied performance obligations if (1) the contract has an original duration of one year or less, or (2) the variable consideration is allocated entirely to an unsatisfied performance obligation which is recognized as a series of distinct goods and services that form a single performance obligation.

Contract Costs

Costs to obtain a Contract

The Company capitalizes incremental costs to obtain a contract with a customer that are expected to be recovered. Assets recognized for the costs to obtain a contract, which primarily includes sales commissions paid in relation to the initial contract, are amortized over the expected life of the underlying customer relationships, which is generally 7 years for our leaves solutions and generally 15 years for all of our other solutions. For situations where the duration of the contract is 1 year or less, the Company has applied a practical expedient and recognized the costs of obtaining a contract as an expense when incurred. These costs are recorded in Cost of services, exclusive of depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Costs to fulfill a Contract

The Company capitalizes costs to fulfill contracts which includes highly customized implementation efforts to set up clients and their human resource or benefit programs. Assets recognized for the costs to fulfill a contract are amortized on a systematic basis over the expected life of the underlying customer relationships, which is generally 7 years for our leaves solutions and generally 15 years for all of our other solutions. Amortization for all contracts costs is recorded in Cost of services, exclusive of depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss), see Note 5 “Other Financial Data”.

 

4. Discontinued Operations and Assets Held for Sale

 

On March 20, 2024, the Company entered into the Disposition Agreement to sell its Payroll & Professional Services business to an affiliate of H.I.G. Capital for up to $1.2 billion, in the form of $1 billion in cash and up to $200 million in a seller notes, of which $150 million is contingent upon the Payroll & Professional Services business 2025 financial performance. The transaction is expected to close by mid-year 2024, subject to customary closing conditions, including regulatory approvals.

 

After the sale is complete, upon satisfaction or waiver of the closing conditions, a number of services are expected to continue under a Transition Services Agreement.

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The following tables presents the carrying value of assets and liabilities for the Payroll & Professional Services business as presented within assets and liabilities held for sale on our condensed consolidated balance sheets and results as reported in income (loss) from discontinued operations, net of tax, within our condensed consolidated statements of comprehensive income (loss) (in millions):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

30

 

 

 $

 

34

 

Receivables, net

 

 

 

259

 

 

 

 

263

 

Other current assets

 

 

 

63

 

 

 

 

59

 

Fiduciary assets

 

 

 

1,211

 

 

 

 

1,167

 

Goodwill

 

 

 

330

 

 

 

 

 

Intangible assets, net

 

 

 

408

 

 

 

 

 

Fixed assets, net

 

 

 

40

 

 

 

 

 

Deferred tax assets, net

 

 

 

6

 

 

 

 

 

Other assets

 

 

 

154

 

 

 

 

 

Current assets held for sale

 

 

 

2,501

 

 

 

 

1,523

 

Goodwill

 

 

 

 

 

 

 

331

 

Intangible assets, net