Alight(ALIT) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Performance Overview Alight reported $528 million in Q2 2025 revenue, with adjusted profitability growth, a significant net loss due to goodwill impairment, and a new wealth solutions partnership Key Highlights Alight's Q2 2025 highlights include $528 million in revenue, strong adjusted profitability, a substantial net loss from goodwill impairment, and a new strategic partnership - 95% of 2025 projected revenue is under contract[1] - New or expanded relationships with Thermo Fisher Scientific, Highmark Health, Reinsurance Group of America, Incorporated (RGA), and Trinity Industries[1][4] - Announced a new wealth solutions partnership with Goldman Sachs Asset Management[1][10] - Repurchased $20 million of common stock and paid a dividend of $0.04 per share[4] Q2 2025 Financial Performance Summary | Metric | Q2 2025 ($ Million) | Q2 2024 ($ Million) | Change (YoY) | | :-------------------------------- | :--------------- | :--------------- | :---------- | | Revenue | $528 | $538 | -1.9% | | Gross Profit | $176 | $167 | +5.4% | | Gross Profit Margin | 33.3% | 31.0% | +2.3 pp | | Adjusted Gross Profit | $205 | $196 | +4.6% | | Adjusted Gross Profit Margin | 38.8% | 36.4% | +2.4 pp | | Net Loss | $1,073 | $4 | -26725% | | Adjusted EBITDA | $127 | $105 | +21.0% | | Diluted Loss Per Share | $2.03 | $0.01 | -20200% | | Adjusted Diluted EPS | $0.10 | $0.05 | +100% | CEO Commentary CEO Dave Guilmette stated that core business operations continued to strengthen in Q2, with significant strategic advancements in client management and delivery capabilities through automation, AI, innovation, and partnerships, leading to enhanced client ROI and strong retention - Core business operations continued to strengthen in the second quarter[2] - Achieved significant strategic progress in client management and delivery capabilities through automation, artificial intelligence, innovation, and partnerships[2] - These initiatives helped clients improve the return on investment of their benefits solutions and drove continued growth in client retention[2] Detailed Financial Performance (Q2 2025) This section provides a detailed analysis of Alight's financial performance for the second quarter of 2025, covering revenue, profitability, operating expenses, and balance sheet highlights Revenue Analysis Q2 2025 revenue decreased by 1.9% year-over-year to $528 million, primarily due to reduced project revenue and net commercial activity, with recurring revenue comprising 93.2% of the total Revenue Breakdown | Metric | Q2 2025 ($ Million) | Q2 2024 ($ Million) | Change (YoY) | | :----------- | :--------------- | :--------------- | :---------- | | Total Revenue | $528 | $538 | -1.9% | | Recurring Revenue | $492 | $493 | -0.2% | | Project Revenue | $36 | $45 | -20.0% | - Revenue decline primarily attributed to lower project revenue and reduced net commercial activity[3] - Recurring revenue constituted 93.2% of total revenue[3] Profitability Metrics This section details Alight's profitability metrics for Q2 2025, including gross profit, net income, EPS, and adjusted EBITDA, highlighting the impact of goodwill impairment on net loss Gross Profit Q2 2025 gross profit increased to $176 million, with gross profit margin rising to 33.3%, and adjusted gross profit and margin also growing, primarily driven by productivity savings Gross Profit Performance | Metric | Q2 2025 ($ Million) | Q2 2024 ($ Million) | Change (YoY) | | :------------------- | :--------------- | :--------------- | :---------- | | Gross Profit | $176 | $167 | +5.4% | | Gross Profit Margin | 33.3% | 31.0% | +2.3 pp | | Adjusted Gross Profit | $205 | $196 | +4.6% | | Adjusted Gross Profit Margin | 38.8% | 36.4% | +2.4 pp | - Gross profit growth primarily resulted from productivity savings[5] Net Income and EPS In Q2 2025, the company's net loss significantly expanded to $1,073 million, with diluted loss per share at $2.03, mainly due to a $983 million non-cash goodwill impairment charge in the Health Solutions reporting unit; however, adjusted diluted EPS increased to $0.10 Net Income and EPS Summary | Metric | Q2 2025 ($ Million) | Q2 2024 ($ Million) | Change (YoY) | | :------------------- | :--------------- | :--------------- | :---------- | | Net Loss | $1,073 | $4 | -26725% | | Diluted Loss Per Share | $2.03 | $0.01 | -20200% | | Adjusted Diluted EPS | $0.10 | $0.05 | +100% | - Net loss was primarily driven by a $983 million non-cash goodwill impairment charge in the Health Solutions reporting unit[4][7] Adjusted EBITDA Q2 2025 adjusted EBITDA increased to $127 million from $105 million in the prior year period, with the adjusted EBITDA margin also improving from 19.5% to 24.1% Adjusted EBITDA Performance | Metric | Q2 2025 ($ Million) | Q2 2024 ($ Million) | Change (YoY) | | :------------------- | :--------------- | :--------------- | :---------- | | Adjusted EBITDA | $127 | $105 | +21.0% | | Adjusted EBITDA Margin | 24.1% | 19.5% | +4.6 pp | Operating Expenses and Other Items Operating expenses and interest costs decreased in Q2 2025, but a $1,076 million pre-tax loss from continuing operations was driven by goodwill impairment and financial instrument re-measurement - Selling, general, and administrative expenses decreased by $16 million year-over-year, primarily due to lower professional fees associated with the divestiture of the payroll and professional services business and reduced non-cash equity compensation expense[6] - Interest expense decreased by $11 million to $22 million, benefiting from the repricing of the 2028 term loan and a $740 million debt repayment in Q3 2024[7] - Pre-tax loss from continuing operations was $1,076 million, compared to $2 million in the prior year period, primarily attributable to the non-cash goodwill impairment charge in the Health Solutions reporting unit and non-operating fair value re-measurements of financial instruments and tax receivable agreements[8] Balance Sheet Summary As of June 30, 2025, the company reported cash and cash equivalents of $227 million, total debt of $2,015 million, and net debt of $1,788 million Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 ($ Million) | | :----------------------- | :--------------- | | Cash and Cash Equivalents | $227 | | Total Debt | $2,015 | | Net Debt (Total Debt less Cash) | $1,788 | Strategic Initiatives and Business Outlook This section outlines Alight's strategic partnerships and its financial outlook for 2025, emphasizing expected profitability, cash flow, and customer retention despite adjusted revenue forecasts New Partnerships Alight partnered with Goldman Sachs Asset Management to enhance wealth solutions, expanding client value and benefit portfolios through sub-advisory roles for Defined Contribution and IRA solutions - Partnered with Goldman Sachs Asset Management to advance Alight's wealth solutions offerings[10] - Goldman Sachs Asset Management will serve as a sub-advisor for Alight Financial Advisors Defined Contribution solutions and Alight IRA solutions[10] - This collaboration aims to deliver additional value to clients and expand their benefit portfolio options, driving growth in new categories[10] 2025 Business Outlook The company anticipates strong profitability and cash flow in 2025, maintaining high client retention, and while revenue forecasts were adjusted due to extended transaction closing times in the current environment, the sales pipeline remains robust, particularly in later stages - Expect strong profitability and cash flow through transformational initiatives, along with high client retention[11] - Revenue forecasts were adjusted due to extended transaction closing times in the current environment, but the sales pipeline remains strong, especially in later stages[11] 2025 Business Outlook | Metric | 2025 Outlook Range ($ Million) | | :------------------- | :--------------- | | Revenue | $2,282 - $2,329 | | Adjusted EBITDA | $620 - $645 | | Adjusted Diluted EPS | $0.58 - $0.64 | | Free Cash Flow | $250 - $285 | Corporate Information and Disclosures This section provides an overview of Alight Solutions, details forward-looking statements and associated risks, and explains the non-GAAP financial measures used in the report About Alight Solutions Alight is a leading cloud-based human capital technology and services provider, serving 35 million individuals globally, enhancing employee well-being and productivity through its Worklife platform and benefits management - Alight is a leading cloud-based human capital technology and services provider, serving numerous large organizations and 35 million individuals and their families globally[15] - Helps clients gain benefits advantage by managing employee benefits while building a healthy and financially secure workforce[15] - The Alight Worklife platform empowers employers with deeper insights into their workforce and enhances employee well-being, engagement and productivity through personalized benefits management and data-driven insights[15] Forward-Looking Statements This press release contains forward-looking statements about future performance and strategic outlook, subject to various risks and uncertainties, including economic, competitive, and regulatory factors, as detailed in the company's Form 10-K - This press release contains forward-looking statements regarding the company's expected revenue, strategic progress, client retention, partnership with Goldman Sachs Asset Management, profitability, and cash flow[16] - These statements are subject to various risks and uncertainties, including the successful execution of strategic transformation, economic downturns, industry competition, cyberattacks and information technology system disruptions, data security and privacy, activist shareholder actions, and compliance with applicable laws and regulations[16][17] - Investors should refer to the "Risk Factors" section in the company's Form 10-K annual report filed with the U.S. Securities and Exchange Commission (SEC) for additional factors that could cause actual results to differ materially from forward-looking statements[17] Explanation of Non-GAAP Financial Measures The company uses non-GAAP financial measures like adjusted EBITDA and free cash flow to enhance investor understanding of performance, providing detailed definitions and calculations, while clarifying they are not GAAP substitutes - Non-GAAP financial measures used by the company include: Adjusted EBITDA from continuing operations, Adjusted EBITDA margin from continuing operations, Adjusted Net Income from continuing operations, Adjusted Diluted EPS from continuing operations, Free Cash Flow, Adjusted Gross Profit, and Adjusted Gross Profit Margin[18] - These non-GAAP financial measures are intended to enhance the understanding of the company's financial performance for investors and lenders but are not substitutes for GAAP financial measures[18] - Detailed definitions for each non-GAAP metric are provided, such as Adjusted EBITDA excluding the impact of interest, taxes, depreciation and amortization, and certain non-cash and other items; Free Cash Flow defined as cash provided by operating activities less capital expenditures; and Revenue Under Contract as management's estimate of anticipated revenue[19][22][25] Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including statements of income (loss), balance sheets, and cash flows, for the specified periods, offering a comprehensive view of the company's financial position and performance Condensed Consolidated Statements of Income (Loss) This section provides the unaudited condensed consolidated statements of income (loss) for the three and six months ended June 30, 2025 and 2024, detailing key financial metrics such as revenue, costs, gross profit, operating expenses, net income (loss), and earnings (loss) per share Condensed Consolidated Statements of Income (Loss) (Selected) | ($ Million, except per share amounts) | Q2 2025 ($ Million) | Q2 2024 ($ Million) | H1 2025 ($ Million) | H1 2024 ($ Million) | | :----------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Revenue | $528 | $538 | $1,076 | $1,097 | | Gross Profit | $176 | $167 | $347 | $349 | | Selling, General and Administrative Expenses | $130 | $146 | $234 | $292 | | Goodwill Impairment | $983 | — | $983 | — | | Operating Income (Loss) from Continuing Operations | $(1,010) | $(52) | $(1,018) | $(92) | | Net Income (Loss) from Continuing Operations | $(1,073) | $(4) | $(1,090) | $(125) | | Net Income (Loss) Attributable to Alight, Inc. | $(1,073) | $23 | $(1,098) | $(91) | | Diluted Loss Per Share from Continuing Operations | $(2.03) | $(0.01) | $(2.05) | $(0.23) | Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, outlining the company's assets, liabilities, and stockholders' equity at the end of the reporting periods Condensed Consolidated Balance Sheets (Selected) | ($ Million, except par value) | June 30, 2025 ($ Million) | December 31, 2024 ($ Million) | | :----------------------------------- | :--------------- | :--------------- | | Cash and Cash Equivalents | $227 | $343 | | Goodwill | $2,229 | $3,212 | | Intangible Assets, Net | $2,714 | $2,855 | | Total Assets | $6,777 | $8,193 | | Long-Term Debt, Net | $1,995 | $2,000 | | Long-Term Tax Receivable Agreement | $600 | $757 | | Total Liabilities | $3,656 | $3,880 | | Total Stockholders' Equity Attributable to Alight, Inc. | $3,118 | $4,309 | | Total Stockholders' Equity | $3,121 | $4,313 | | Total Liabilities and Stockholders' Equity | $6,777 | $8,193 | Condensed Consolidated Statements of Cash Flows This section provides the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024, detailing net cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Selected) | ($ Million) | H1 2025 ($ Million) | H1 2024 ($ Million) | | :----------------------------------- | :--------------- | :--------------- | | Net Income (Loss) from Continuing Operations | $(1,090) | $(125) | | Goodwill Impairment | $983 | — | | Net Cash Provided by Operating Activities | $159 | $158 | | Net Cash Used in Investing Activities | $(57) | $(78) | | Net Cash Used in Financing Activities | $(242) | $(222) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $(140) | $(145) | Non-GAAP Financial Reconciliations and Supplemental Data This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, along with other selected financial data, for a comprehensive understanding of Alight's adjusted performance Adjusted EBITDA Reconciliation This section presents the reconciliation of net income (loss) from continuing operations to adjusted EBITDA from continuing operations for the three and six months ended June 30, 2025 and 2024, demonstrating the significant improvement in adjusted EBITDA and its margin Adjusted EBITDA Reconciliation from Continuing Operations (Selected) | ($ Million) | Q2 2025 ($ Million) | Q2 2024 ($ Million) | H1 2025 ($ Million) | H1 2024 ($ Million) | | :----------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Net Income (Loss) from Continuing Operations | $(1,073) | $(4) | $(1,090) | $(125) | | Goodwill Impairment and Other | $984 | $1 | $985 | $1 | | Adjusted EBITDA from Continuing Operations | $127 | $105 | $245 | $221 | | Adjusted EBITDA Margin from Continuing Operations | 24.1% | 19.5% | 22.8% | 20.1% | Adjusted Net Income and Diluted EPS Reconciliation This section provides the reconciliation of net income (loss) from continuing operations to adjusted net income and adjusted diluted EPS for the three and six months ended June 30, 2025 and 2024, illustrating the growth in adjusted metrics Adjusted Net Income and Diluted EPS Reconciliation from Continuing Operations (Selected) | ($ Million, except per share amounts) | Q2 2025 ($ Million) | Q2 2024 ($ Million) | H1 2025 ($ Million) | H1 2024 ($ Million) | | :----------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Net Income (Loss) from Continuing Operations Attributable to Alight, Inc. | $(1,072) | $(4) | $(1,089) | $(123) | | Goodwill Impairment and Other | $984 | $2 | $985 | $2 | | Adjusted Net Income from Continuing Operations | $56 | $29 | $108 | $86 | | Adjusted Diluted EPS from Continuing Operations | $0.10 | $0.05 | $0.20 | $0.15 | Adjusted Gross Profit Reconciliation This section presents the reconciliation of gross profit to adjusted gross profit for the three and six months ended June 30, 2025 and 2024, demonstrating the improvement in adjusted gross profit and margin Gross Profit to Adjusted Gross Profit Reconciliation | ($ Million) | Q2 2025 ($ Million) | Q2 2024 ($ Million) | H1 2025 ($ Million) | H1 2024 ($ Million) | | :------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Gross Profit | $176 | $167 | $347 | $349 | | Add: Stock-Based Compensation | $2 | $3 | $5 | $8 | | Add: Depreciation and Amortization | $27 | $26 | $53 | $47 | | Adjusted Gross Profit | $205 | $196 | $405 | $404 | | Gross Profit Margin | 33.3% | 31.0% | 32.2% | 31.8% | | Adjusted Gross Profit Margin | 38.8% | 36.4% | 37.6% | 36.8% | Free Cash Flow Reconciliation This section provides the reconciliation of cash provided by operating activities from continuing operations to non-GAAP free cash flow for the six months ended June 30, 2025 and 2024, indicating significant growth in free cash flow Non-GAAP Free Cash Flow Reconciliation | ($ Million) | H1 2025 ($ Million) | H1 2024 ($ Million) | | :----------------------------------- | :--------------- | :--------------- | | Cash Provided by Operating Activities from Continuing Operations | $159 | $93 | | Capital Expenditures | $(57) | $(67) | | Non-GAAP Free Cash Flow | $102 | $26 | Other Select Financial Data This section presents other selected financial data, including revenue breakdown (recurring and project revenue), BPaaS revenue, gross profit, adjusted gross profit, adjusted EBITDA, and free cash flow, for the three and six months ended June 30, 2025 and 2024 Other Select Financial Data | ($ Million) | Q2 2025 ($ Million) | Q2 2024 ($ Million) | H1 2025 ($ Million) | H1 2024 ($ Million) | | :----------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Revenue Breakdown: | | | | | | Recurring Revenue | $492 | $493 | $1,012 | $1,014 | | Project Revenue | $36 | $45 | $64 | $83 | | Total Revenue | $528 | $538 | $1,076 | $1,097 | | BPaaS Revenue | $124 | $115 | $250 | $232 | | Total Gross Profit | $176 | $167 | $347 | $349 | | Total Gross Profit Margin | 33.3% | 31.0% | 32.2% | 31.8% | | Total Adjusted Gross Profit | $205 | $196 | $405 | $404 | | Total Adjusted Gross Profit Margin | 38.8% | 36.4% | 37.6% | 36.8% | | Adjusted EBITDA from Continuing Operations | $127 | $105 | $245 | $221 | | Adjusted EBITDA Margin from Continuing Operations | 24.1% | 19.5% | 22.8% | 20.1% | | Free Cash Flow from Continuing Operations | | | $102 | $26 |