Alight(ALIT) - 2025 Q2 - Quarterly Report

Forward-Looking Statements This report contains forward-looking statements about future financial performance and business strategies, subject to risks and uncertainties - This report contains forward-looking statements regarding future financial performance and business strategies, which are based on current expectations and involve known and unknown risks and uncertainties. These statements should not be relied upon as representing the Company's views as of any subsequent date, and the Company does not undertake to update them[9] - The Company uses its website and social media channels (Facebook, Instagram, LinkedIn, X, YouTube) as distribution channels for material Company information, advising investors to monitor these in addition to official SEC filings[10] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Alight, Inc.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of comprehensive income (loss), statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, revenue recognition, discontinued operations, and other financial data Condensed Consolidated Balance Sheets (Unaudited) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in millions) | (in millions, except par values) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $227 | $343 | | Receivables, net | $411 | $471 | | Other current assets | $160 | $214 | | Fiduciary assets | $215 | $239 | | Total Current Assets | $1,013 | $1,267 | | Goodwill | $2,229 | $3,212 | | Intangible assets, net | $2,714 | $2,855 | | Fixed assets, net | $389 | $396 | | Deferred tax assets, net | $53 | $41 | | Other assets | $379 | $422 | | Total Assets | $6,777 | $8,193 | | Liabilities | | | | Accounts payable and accrued liabilities | $280 | $355 | | Current portion of long-term debt, net | $20 | $25 | | Other current liabilities | $355 | $273 | | Fiduciary liabilities | $215 | $239 | | Total Current Liabilities | $870 | $892 | | Deferred tax liabilities | $22 | $22 | | Long-term debt, net | $1,995 | $2,000 | | Long-term tax receivable agreement | $600 | $757 | | Financial instruments | $21 | $51 | | Other liabilities | $148 | $158 | | Total Liabilities | $3,656 | $3,880 | | Total Stockholders' Equity | $3,121 | $4,313 | | Total Liabilities and Stockholders' Equity | $6,777 | $8,193 | - Total Assets decreased by $1,416 million (17.3%) from $8,193 million at December 31, 2024, to $6,777 million at June 30, 2025, primarily due to a significant goodwill impairment charge[14] - Total Liabilities decreased by $224 million (5.8%) from $3,880 million at December 31, 2024, to $3,656 million at June 30, 2025[14] - Total Stockholders' Equity decreased by $1,192 million (27.6%) from $4,313 million at December 31, 2024, to $3,121 million at June 30, 2025[14] Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) This section details the company's revenues, expenses, and net income or loss over specific periods, including comprehensive income adjustments Condensed Consolidated Statements of Comprehensive Income (Loss) (in millions, except per share amounts) | (in millions, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $528 | $538 | $1,076 | $1,097 | | Gross Profit | $176 | $167 | $347 | $349 | | 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) From Discontinued Operations, Net of Tax | $(1) | $27 | $(9) | $32 | | Net Income (Loss) | $(1,074) | $23 | $(1,099) | $(93) | | Net Income (Loss) Attributable to Alight, Inc. | $(1,073) | $23 | $(1,098) | $(91) | | Basic and Diluted EPS (Continuing operations) | $(2.03) | $(0.01) | $(2.05) | $(0.23) | | Basic and Diluted EPS (Net Income (Loss)) | $(2.03) | $0.04 | $(2.07) | $(0.17) | - Revenue decreased by $10 million (1.9%) for the three months ended June 30, 2025, and by $21 million (1.9%) for the six months ended June 30, 2025, compared to the prior year periods[16] - The Company reported a significant goodwill impairment charge of $983 million for both the three and six months ended June 30, 2025, which was not present in the prior year[16] - Net Income (Loss) Attributable to Alight, Inc. significantly declined to a loss of $(1,073) million for the three months and $(1,098) million for the six months ended June 30, 2025, from a profit of $23 million and a loss of $(91) million, respectively, in the prior year, primarily due to the goodwill impairment[16] Condensed Consolidated Statements of Stockholders' Equity (Unaudited) This section outlines changes in the company's equity accounts, including net income, share transactions, and other comprehensive income Condensed Consolidated Statements of Stockholders' Equity (in millions) | (in millions) | Balance at Dec 31, 2024 | Net income | Other comprehensive income, net | Common stock issued under ESPP | Share-based compensation expense | Share repurchases | Dividends | Other | Balance at June 30, 2025 | | :------------ | :---------------------- | :--------- | :------------------------------ | :----------------------------- | :------------------------------- | :---------------- | :-------- | :---- | :----------------------- | | Total Alight, Inc. Stockholders' Equity | $4,309 | $(1,098) | $(13) | $4 | $11 | $(40) | $(43) | $(1) | $3,118 | | Noncontrolling interest | $4 | $(1) | $— | $— | $— | $— | $— | $— | $3 | | Total Stockholders' Equity | $4,313 | $(1,099) | $(13) | $4 | $11 | $(40) | $(43) | $(1) | $3,121 | - Total Stockholders' Equity decreased from $4,313 million at December 31, 2024, to $3,121 million at June 30, 2025, primarily driven by a net loss of $1,099 million and share repurchases of $40 million[20] Condensed Consolidated Statements of Cash Flows (Unaudited) This section reports the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in millions) | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :----------------------------- | :----------------------------- | | Operating activities: | | | | Net cash provided by operating activities | $159 | $158 | | Investing activities: | | | | Net cash provided by (used in) investing activities | $(57) | $(78) | | Financing activities: | | | | Net Cash provided by (used in) financing activities | $(242) | $(222) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(140) | $(145) | | Cash, cash equivalents and restricted cash - end of period | $442 | $400 | - Net cash provided by operating activities remained stable at $159 million for the six months ended June 30, 2025, compared to $158 million in the prior year[23] - Cash used in investing activities decreased to $57 million for the six months ended June 30, 2025, from $78 million in the prior year, primarily due to lower capital expenditures[23] - Cash used for financing activities increased to $242 million for the six months ended June 30, 2025, from $222 million in the prior year, driven by dividend payments, TRA payments, and share repurchases[23] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. Basis of Presentation and Nature of Business This section describes the accounting principles used and the company's core business activities - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information[25] - Alight, Inc. completed a business combination on July 2, 2021, and as of June 30, 2025, owns approximately 99% of the economic interest in its Predecessor, Alight Holding Company, LLC[26] - On July 12, 2024, the Company completed the sale of its Professional Services segment and Payroll & HCM Outsourcing business (Divested Business), which are now reported as discontinued operations[27] - Alight is a technology-enabled services company providing human capital management solutions, primarily through its Alight Worklife® platform, focusing on employee benefits administration, healthcare navigation, financial wellbeing, and retiree healthcare[28][29] 2. Significant Accounting Policies This section outlines the key accounting principles and estimates applied in preparing the financial statements - There have been no material changes to significant accounting policies from the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[30] - The preparation of financial statements requires management to make estimates and assumptions, which are evaluated on an ongoing basis and adjusted as facts and circumstances dictate, with actual results potentially differing significantly[31][32][33] - The Company is evaluating new accounting pronouncements, ASU No. 2023-09 (Income Tax Disclosures, effective Dec 31, 2025) and ASU No. 2024-03 (Expense Disaggregation Disclosures, effective Dec 31, 2027), to determine their impact on future financial statements[34][35] 3. Revenue from Contracts with Customers This section details the company's revenue recognition policies and contract structures - The majority of the Company's revenue is highly recurring, derived from integrated, cloud-based human capital solutions, and recognized over time as services are consumed by customers[36][37] - Administrative services contracts typically span three to five years, including an implementation phase (set-up activity, not a separate performance obligation) and an ongoing administration phase, with fees primarily based on a per-participant per-period model[38][39][40][41] - Other contracts, often shorter in duration, include participant financial advisory and enrollment services, with fees structured as fixed-fee, time-and-materials, or based on assets under management[44][45] - The Company capitalizes incremental costs to obtain and fulfill contracts, amortizing them over the expected life of customer relationships (generally 7-15 years), and records amortization in Cost of services[51][52] 4. Discontinued Operations This section reports on the financial impact of business segments that have been sold or are held for sale - On July 12, 2024, Alight completed the sale of its Professional Services segment and Payroll & HCM Outsourcing business for total consideration of up to $1.2 billion, including $1.0 billion in cash, a $50 million Seller Note (fair value $35 million), and a contingent Additional Seller Note of up to $150 million (initial fair value $43 million)[53] - The Company entered into a Transition Services Agreement (TSA) to provide post-closing services to the Divested Business for an initial period of up to 18 months, recognizing $8 million and $18 million in TSA services income for the three and six months ended June 30, 2025, respectively[54][55] - An additional loss on sale of the Divested Business of $1 million and $8 million, net of tax, was recorded for the three and six months ended June 30, 2025, respectively, due to post-closing selling price adjustments[57] Income (Loss) from Discontinued Operations, Net of Tax (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $13 | $249 | $37 | $506 | | Net Income (Loss) from Discontinued Operations, Net of Tax | $(1) | $27 | $(9) | $32 | 5. Other Financial Data This section provides detailed breakdowns of various balance sheet accounts and other financial information Receivables, net (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Billed and unbilled receivables | $420 | $480 | | Allowance for expected credit losses | $(9) | $(9) | | Balance at end of period | $411 | $471 | Other current assets (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Deferred project costs | $25 | $23 | | Prepaid expenses | $42 | $56 | | Commissions receivable | $41 | $89 | | Other | $52 | $46 | | Total | $160 | $214 | Other assets (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Deferred project costs | $273 | $263 | | Operating lease right of use asset | $40 | $42 | | Commissions receivable | $13 | $15 | | Other | $53 | $102 | | Total | $379 | $422 | - Other current assets and Other assets include fair values of interest rate swaps ($12 million and $2 million respectively at June 30, 2025) and the Seller Note ($40 million at June 30, 2025). The Additional Seller Note's fair value was zero at June 30, 2025, down from $50 million at December 31, 2024[63] Other current liabilities (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Deferred revenue | $86 | $91 | | Operating lease liabilities | $18 | $17 | | Finance lease liabilities | $20 | $19 | | Other | $231 | $146 | | Total | $355 | $273 | Other liabilities (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Deferred revenue | $38 | $40 | | Operating lease liabilities | $55 | $56 | | Finance lease liabilities | $34 | $39 | | Other | $21 | $23 | | Total | $148 | $158 | - Other current liabilities include the current portion of the tax receivable agreement liability of $189 million at June 30, 2025, up from $100 million at December 31, 2024[66] 6. Goodwill and Intangible assets, net This section details the changes in goodwill and intangible assets, including impairment charges Changes in Goodwill (in millions) | (in millions) | Total | | :------------ | :---- | | Balance as of December 31, 2024 | $3,212 | | Impairment | $(983) | | Balance at June 30, 2025 | $2,229 | - The Company recorded a non-cash goodwill impairment charge of $983 million for its Health Solutions reporting unit during the second quarter of 2025, driven by macroeconomic, industry, and market conditions[69] - Goodwill for Health Solutions and Wealth Solutions reporting units stood at $2,101 million and $128 million, respectively, at June 30, 2025[72] Intangible Assets, Net (in millions) | (in millions) | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :------------ | :-------------------------------- | :------------------------------------ | | Customer-related and contract based intangibles | $2,342 | $2,450 | | Technology related intangibles | $78 | $97 | | Trade name | $294 | $308 | | Total | $2,714 | $2,855 | - Amortization expense from finite-lived intangible assets was $70 million and $141 million for the three and six months ended June 30, 2025, respectively[72] 7. Income Taxes This section discusses the company's effective tax rates and the factors influencing them - The Company's effective tax rates were 0% for the three months and 1% for the six months ended June 30, 2025, significantly lower than the 21% U.S. statutory rate[74] - These lower effective tax rates were primarily due to non-deductible expenses (including goodwill impairment), tax credits, and changes in valuation allowance[74][75] 8. Debt This section provides details on the company's debt structure, including outstanding amounts, maturities, and interest rates Debt Outstanding (in millions) | (in millions) | Maturity Date | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :------------ | :---------------- | | Seventh Incremental Term Loans | August 31, 2028 | $2,015 | $— | | Sixth Incremental Term Loans | August 31, 2028 | $— | $2,025 | | Total debt, net | | $2,015 | $2,025 | | Less: current portion of long-term debt, net | | $(20) | $(25) | | Total long-term debt, net | | $1,995 | $2,000 | - In January 2025, the Company established $2,030 million in Seventh Incremental Term Loans, repricing the Sixth Incremental Term Loans and reducing the applicable interest rate from SOFR + 2.25% to SOFR + 1.75%[78] - The Company's revolving credit facility was increased to $330 million and its maturity extended to May 31, 2030, in May 2025, with no borrowings outstanding at June 30, 2025[81] - Total interest expense related to debt instruments decreased to $32 million for the three months and $64 million for the six months ended June 30, 2025, compared to $54 million and $109 million in the prior year periods, respectively[84] 9. Stockholders' Equity This section details the components of stockholders' equity, including common stock, share repurchases, and dividends - As of June 30, 2025, there were 528,773,552 shares of Class A Common Stock outstanding, with holders entitled to one vote per share and ratable participation in dividends[87] - Class B-1 and Class B-2 Common Stock (4,955,297 shares each outstanding) are non-voting earnout shares that convert to Class A Common Stock upon achieving specific VWAP thresholds ($12.50 and $15.00, respectively)[91][94] - The Company's Board of Directors authorized an additional $200 million for share repurchases on February 13, 2025, bringing the total authorized amount to $281 million. As of June 30, 2025, $241 million remained authorized[105] - During the three and six months ended June 30, 2025, the Company repurchased 4,055,349 and 7,301,281 Class A Common Stock shares, respectively, under the program[106] Quarterly Dividends on Common Stock (in millions) | Declaration Date | Dividends Per Share | Total Payment (in millions) | Record Date | Payable Date | | :--------------- | :------------------ | :-------------------------- | :---------- | :----------- | | February 13, 2025 | $0.04 | $21 | March 3, 2025 | March 17, 2025 | | April 30, 2025 | $0.04 | $22 | June 2, 2025 | June 16, 2025 | 10. Share-Based Compensation This section describes the company's share-based compensation plans and related expenses - The Company's Incentive Plan authorizes share-based awards (RSUs and PRSUs) to key employees and non-employee directors, with 91,065,377 shares remaining authorized for issuance as of June 30, 2025[114] - Time-based RSUs generally vest ratably over three years, while PRSUs vest upon achievement of performance and service conditions[116][117] Share-Based Compensation Expense (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of services, exclusive of depreciation and amortization | $2 | $3 | $5 | $8 | | Selling, general and administrative | $3 | $17 | $6 | $40 | | Total share-based compensation expense | $5 | $20 | $11 | $48 | - Total future compensation expense for unvested RSUs and PRSUs was $44 million and $31 million, respectively, as of June 30, 2025[119] - The Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase Class A Common Stock at 85% of fair market value, with 12,792,789 shares remaining available for grant[120] 11. Earnings Per Share This section details the calculation of basic and diluted earnings per share, including factors affecting dilution Basic and Diluted (Net Loss) Earnings Per Share (in millions, except for share and per share amounts) | (in millions, except for share and per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) Attributable to Alight, Inc. - basic | $(1,073) | $23 | $(1,098) | $(91) | | Weighted-average shares outstanding - basic | 528,469,912 | 546,174,400 | 530,378,798 | 543,376,024 | | Basic and Diluted (net loss) earnings per share (Continuing operations) | $(2.03) | $(0.01) | $(2.05) | $(0.23) | | Basic and Diluted (net loss) earnings per share (Net Income (Loss)) | $(2.03) | $0.04 | $(2.07) | $(0.17) | - For the three and six months ended June 30, 2025, 510,115 noncontrolling interest units, 7,405,171 unvested RSUs, 14,999,998 Seller Earnout shares, and 5,906,515 unvested PRSUs were excluded from diluted EPS calculations due to anti-dilutive impact or unfulfilled market/performance conditions[124][125][126] 12. Segment Reporting This section describes the company's operating segments and how their performance is evaluated - The Company operates under one reportable segment, Employer Solutions, which is driven by the Alight Worklife platform and includes integrated benefits administration, healthcare navigation, financial wellbeing, leave management, and retiree healthcare[127] - The Chief Executive Officer, as the CODM, evaluates segment performance based on Revenue and Net Income (Loss) From Continuing Operations[128][129] Employer Solutions Revenue (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Recurring | $492 | $493 | $1,012 | $1,014 | | Project | $36 | $45 | $64 | $83 | | Total Revenue | $528 | $538 | $1,076 | $1,097 | - No single client accounted for more than 10% of the Company's revenues in any of the periods presented[133] 13. Derivative Financial Instruments This section details the company's use of derivative instruments and their fair value measurements - The Company uses interest rate swap agreements to fix floating interest rates associated with its Term Loan, with various notional amounts and fixed rates expiring between June 2025 and December 2026[135] Fair Values of Outstanding Derivative Instruments (in millions) | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Assets | | | | Other current assets | $12 | $23 | | Other assets | $2 | $8 | | Total Assets | $14 | $31 | | Liabilities | | | | Other current liabilities | $— | $— | | Other liabilities | $1 | $— | | Total Liabilities | $1 | $— | - Approximately $12 million of derivative gains included in Accumulated other comprehensive income as of June 30, 2025, are expected to be reclassified into earnings over the next twelve months[136] 14. Financial Instruments This section describes the company's financial instruments, including contingent consideration and their fair value - Seller Earnouts, contingent consideration in the form of Class B-1 and Class B-2 Common Stock, are accounted for as a contingent consideration liability at fair value, which was $21 million at June 30, 2025 (down from $51 million at Dec 31, 2024)[139][140] - The fair value of Seller Earnouts is determined using Monte Carlo simulation and Option Pricing Methods (Level 3 inputs), considering volatility, risk-free interest rate, expected holding period, dividend participation, and probability assessments[141] - The Additional Seller Note, part of the Divestiture consideration, had a fair value of zero at June 30, 2025, resulting in a $36 million loss for the three months and $50 million loss for the six months ended June 30, 2025, from fair value remeasurement[144] 15. Tax Receivable Agreement This section explains the Tax Receivable Agreement and its associated liability and payments - Alight entered into a Tax Receivable Agreement (TRA) to pay certain pre-Business Combination owners 85% of tax savings realized from tax basis adjustments and utilization of tax attributes[146] - The TRA liability, measured at fair value using Level 3 inputs, was $789 million at June 30, 2025, with a current portion of $189 million[150][151] - The fair value remeasurement of the TRA resulted in a loss of $23 million for the three months and $32 million for the six months ended June 30, 2025, due to changes in assumptions regarding tax attribute utilization and discount rates[151] 16. Fair Value Measurement This section describes the hierarchy used for fair value measurements of financial assets and liabilities - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[152] Financial Assets and Liabilities Measured at Fair Value (in millions) | (in millions) | June 30, 2025 Level 1 | June 30, 2025 Level 2 | June 30, 2025 Level 3 | June 30, 2025 Total | | :------------ | :-------------------- | :-------------------- | :-------------------- | :------------------ | | Assets | | | | | | Interest rate swaps | $— | $14 | $— | $14 | | Additional seller note | $— | $— | $— | $— | | Total assets recorded at fair value | $— | $14 | $— | $14 | | Liabilities | | | | | | Interest rate swaps | $— | $1 | $— | $1 | | Seller earnouts liability | $— | $— | $21 | $21 | | Tax receivable agreement liability | $— | $— | $556 | $556 | | Total liabilities recorded at fair value | $— | $1 | $577 | $578 | - The fair value of the Company's debt is classified as Level 2, and the Seller note is classified as Level 3[156] - There were no transfers between Level 1, Level 2, or Level 3 classifications during the six months ended June 30, 2025 and 2024[157] 17. Restructuring This section outlines the company's restructuring programs, associated costs, and expected savings - The Transformation Program, approved in February 2023, was substantially complete by March 31, 2025, incurring $140 million in total expenses for back-office infrastructure cloud migration and operating model transformation[158][161] - A new Post-Separation Plan (PSP) was approved in May 2025 to optimize operations post-Divestiture, with estimated pre-tax restructuring costs of approximately $65 million over 15 months, expected to yield over $75 million in annual savings[159] Total Restructuring Costs (in millions) | In millions | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Inception to Date | Estimated Remaining Cost | Estimated Total Cost | | :---------- | :------------------------------- | :----------------------------- | :---------------- | :----------------------- | :------------------- | | Transformation Program Costs | $— | $4 | $140 | $— | $140 | | Post-Separation Plan Costs | $36 | $36 | $36 | $29 | $65 | | Total Restructuring Costs | $36 | $40 | $176 | $29 | $205 | - As of June 30, 2025, approximately $25 million of the Company's total severance and related benefits restructuring liability remained unpaid[161][162] 18. Employee Benefits This section reports on the expenses related to the company's employee benefit plans - Expenses for defined contribution savings plans were $7 million for the three months and $14 million for the six months ended June 30, 2025[163] 19. Commitments and Contingencies This section discloses the company's legal claims, guarantees, and significant contractual obligations - The Company is subject to various legal claims and proceedings in the ordinary course of business, but management believes the final outcome will not have a material adverse effect on financial condition[164][165] - The Company provides service performance guarantees and indemnifications to clients, but potential payments are deemed immaterial to the financial statements[166][167] - Total expected cash outflow for non-cancellable purchase obligations for IT assets and services is $241 million through 2029, including a $250 million agreement for cloud services over 5 years[168] - Remaining cash outflow for non-cancellable service obligations related to the strategic partnership with Wipro is $403 million through 2028, following an amendment effective April 1, 2025[169] 20. Subsequent Event This section reports on significant events that occurred after the reporting period but before the financial statements were issued - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, making permanent key elements of the Tax Cuts and Jobs Act. The Company is evaluating the impact of OBBBA on its deferred tax balances and financial statements, which will be reflected in the Q3 2025 Form 10-Q[171] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective and analysis of Alight, Inc.'s financial condition and results of operations for the periods presented, focusing on continuing operations, key financial components, and a reconciliation of GAAP to non-GAAP measures. It also discusses liquidity, capital resources, and critical accounting estimates BUSINESS This section describes Alight's core business, recent corporate transactions, and strategic focus - Alight is a technology-enabled services company delivering human capital management solutions, leveraging its Alight Worklife® platform to provide integrated employee benefits administration, healthcare navigation, financial wellbeing, and retiree healthcare[173] - The Company completed a business combination on July 2, 2021, and as of June 30, 2025, holds approximately 99% economic interest in its Predecessor[174] - On July 12, 2024, Alight completed the sale of its Professional Services segment and Payroll & HCM Outsourcing business for up to $1.2 billion, including cash, a Seller Note, and a contingent Additional Seller Note[175] EXECUTIVE SUMMARY OF FINANCIAL RESULTS This section provides a high-level overview of the company's financial performance for the reporting periods Executive Summary of Financial Results (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $528 | $538 | $1,076 | $1,097 | | Gross Profit | $176 | $167 | $347 | $349 | | Goodwill impairment | $983 | $— | $983 | $— | | Operating Income (Loss) From Continuing Operations | $(1,010) | $(52) | $(1,018) | $(92) | | Net Income (Loss) Attributable to Alight, Inc. | $(1,073) | $23 | $(1,098) | $(91) | - The Company reported a significant net loss attributable to Alight, Inc. for both the three and six months ended June 30, 2025, primarily due to a $983 million goodwill impairment charge[176] REVIEW OF RESULTS Key Components of Our Continuing Operations This section identifies the primary revenue and expense drivers for the company's ongoing business activities - Revenue is primarily recurring, derived from fees for services based on a contracted fee per participant per period, with contracts typically having three to five-year terms[177] - Key expense components include Cost of Services (compensation, vendor costs, application development), Depreciation and Amortization (hardware, software), Selling, General and Administrative (administrative compensation, facilities, professional services), and Goodwill Impairment[178][179][180][181][182] - Other income/expense items include changes in fair value of financial instruments (Seller Earnouts, Additional Seller Note), changes in fair value of Tax Receivable Agreement, interest expense, and other non-operating items including TSA income[183][184][185][186] Results of Continuing Operations for the Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 This section analyzes the financial performance of continuing operations for the three-month period, highlighting key changes and their drivers - Revenue decreased by $10 million (1.9%) to $528 million, driven by lower project revenue and Net Commercial Activity, with recurring revenues decreasing slightly by $1 million (0.2%)[187][188] - Cost of services, exclusive of depreciation and amortization, decreased by $20 million (5.8%), primarily due to lower revenues and productivity savings[189] - Selling, general and administrative expenses decreased by $16 million (11.0%), mainly from lower professional fees related to the Divested business sale and reduced non-cash share-based compensation, partially offset by higher restructuring charges[191] - A $983 million non-cash goodwill impairment charge was recorded for the Health Solutions reporting unit, compared to no impairment in the prior year[193] - A $28 million loss from change in fair value of financial instruments was recorded (vs. $52 million gain prior year), primarily due to a $36 million write-down of the Additional Seller Note[194] - Interest expense decreased by $11 million, attributed to debt repayment, repricing of the term loan, and higher interest income[196] - Loss from continuing operations before taxes increased significantly to $1,076 million (vs. $2 million loss prior year), mainly due to the goodwill impairment and fair value remeasurements[198] Results of Continuing Operations for the Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 This section analyzes the financial performance of continuing operations for the six-month period, highlighting key changes and their drivers - Revenue decreased by $21 million (1.9%) to $1,076 million, driven by lower project revenue and Net Commercial Activity, with recurring revenues decreasing slightly by $2 million (0.2%)[200][201] - Cost of services, exclusive of depreciation and amortization, decreased by $25 million (3.6%), primarily due to lower revenues and productivity savings[202] - Selling, general and administrative expenses decreased by $58 million (19.9%), mainly from reduced non-cash share-based compensation and lower professional fees related to the Divested business sale[204] - A $983 million non-cash goodwill impairment charge was recorded for the Health Solutions reporting unit, compared to no impairment in the prior year[206] - A $20 million loss from change in fair value of financial instruments was recorded (vs. $31 million gain prior year), primarily due to a $50 million write-down of the Additional Seller Note[207] - Interest expense decreased by $20 million, attributed to debt repayment, repricing of the term loan, and higher interest income[210] - Loss from continuing operations before taxes increased significantly to $1,096 million (vs. $150 million loss prior year), mainly due to the goodwill impairment and fair value remeasurements[212] Non-GAAP Financial Measures This section explains the use and limitations of non-GAAP financial measures in evaluating performance - Non-GAAP financial measures are used to enhance understanding of financial performance, but should not be considered in isolation or as a substitute for U.S. GAAP measures[214] - Limitations of adjusted measures include not reflecting changes in working capital, cash requirements for debt or taxes, or cash requirements for asset replacements[215][218] Adjusted Net Income From Continuing Operations and Adjusted Diluted Earnings Per Share From Continuing Operations This section defines and reconciles adjusted net income and adjusted diluted earnings per share from continuing operations - Adjusted Net Income From Continuing Operations is defined as net income (loss) from continuing operations attributable to Alight, Inc., adjusted for intangible amortization and certain non-cash items[216] - Adjusted Diluted Earnings Per Share From Continuing Operations is calculated by dividing Adjusted Net Income From Continuing Operations by the adjusted weighted-average number of diluted common shares, including full exchange of non-controlling interest units and non-vested time-based restricted units[217] Adjusted Net Income and Adjusted Diluted EPS Reconciliation (in millions, except share and per share amounts) | (in millions, except share and per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) From Continuing Operations Attributable to Alight, Inc. | $(1,072) | $(4) | $(1,089) | $(123) | | Adjusted Net Income From Continuing Operations | $56 | $29 | $108 | $86 | | Adjusted Diluted Earnings Per Share From Continuing Operations | $0.10 | $0.05 | $0.20 | $0.15 | Adjusted EBITDA From Continuing Operations and Adjusted EBITDA Margin From Continuing Operations This section defines and reconciles adjusted EBITDA and adjusted EBITDA margin from continuing operations - Adjusted EBITDA From Continuing Operations is defined as earnings before interest, taxes, depreciation, and intangible amortization, adjusted for certain non-cash and other items[221] - Adjusted EBITDA Margin From Continuing Operations is Adjusted EBITDA divided by revenue, used by management and stakeholders to compare performance across periods and evaluate core operating performance[221] Adjusted EBITDA Reconciliation (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) From Continuing Operations | $(1,073) | $(4) | $(1,090) | $(125) | | Adjusted EBITDA From Continuing Operations | $127 | $105 | $245 | $221 | | Adjusted EBITDA Margin From Continuing Operations | 24.1% | 19.5% | 22.8% | 20.1% | Employer Solutions Results of Operations for the Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 This section analyzes the revenue performance of the Employer Solutions segment for the three-month period Employer Solutions Revenue Disaggregation (in millions) | ($ in millions) | 2025 | 2024 | | :-------------- | :--- | :--- | | Recurring | $492 | $493 | | Project | $36 | $45 | | Total Employer Solutions Revenue | $528 | $538 | - Total Employer Solutions revenue decreased by $10 million, primarily due to decreases in project revenue and Net Commercial Activity[223] Employer Solutions Results of Operations for the Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 This section analyzes the revenue performance of the Employer Solutions segment for the six-month period Employer Solutions Revenue Disaggregation (in millions) | ($ in millions) | 2025 | 2024 | | :-------------- | :----- | :----- | | Recurring | $1,012 | $1,014 | | Project | $64 | $83 | | Total Employer Solutions Revenue | $1,076 | $1,097 | - Total Employer Solutions revenue decreased by $21 million, primarily due to decreases in project revenue and Net Commercial Activity[224] Gross Profit to Adjusted Gross Profit Reconciliation for the Three and Six Months Ended June 30, 2025 Compared to the Three and Six Months Ended June 30, 2024 This section reconciles GAAP gross profit to adjusted gross profit, highlighting the impact of non-cash expenses - Adjusted gross profit is defined as revenue less cost of services, adjusted for depreciation, amortization, and share-based compensation, used by management to evaluate performance by eliminating certain non-cash expenses[225] Gross Profit to Adjusted Gross Profit Reconciliation (in millions) | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross Profit | $176 | $167 | $347 | $349 | | 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 % | - Employer Solutions gross profit increased by $9 million for the three months ended June 30, 2025, driven by lower expenses from productivity initiatives, while adjusted gross profit also increased by $9 million[226] - For the six months ended June 30, 2025, Employer Solutions gross profit decreased by $2 million due to lower revenue and increased costs for growth, partially offset by productivity savings, while adjusted gross profit remained consistent[227] Free Cash Flow Reconciliation This section defines and reconciles free cash flow, a key liquidity metric - Free Cash Flow is defined as cash provided by operating activities net of capital expenditures, serving as an important liquidity metric for debt repayment, acquisitions, investments, dividends, and stock repurchases[228] Non-GAAP Free Cash Flow Reconciliation (in millions) | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :----------------------------- | :----------------------------- | | Cash provided by operating activities - continuing operations | $159 | $93 | | Capital expenditures | $(57) | $(67) | | Non-GAAP free cash flow | $102 | $26 | - Free cash flow increased significantly to $102 million for the six months ended June 30, 2025, from $26 million in the prior period, primarily due to increased cash from operations and lower capital expenditures[230] LIQUIDITY AND CAPITAL RESOURCES Executive Summary This section summarizes the company's primary sources and uses of liquidity and capital - Primary liquidity sources include existing cash, cash flows from operations, and the revolving credit facility, which are expected to be sufficient for debt obligations, capital expenditures, dividends, TRA payments, and working capital needs[231][232] Indebtedness This section details the company's debt obligations, including repayments, new facilities, and interest rate changes - In July 2024, the Company paid down $440 million of Sixth Incremental Term Loans and fully repaid $300 million Secured Senior Notes using Divestiture proceeds[233] - In January 2025, the Company established $2,030 million in Seventh Incremental Term Loans, repricing the Sixth Incremental Term Loans to SOFR + 1.75%[234] - The revolving credit facility was increased to $330 million and its maturity extended to May 31, 2030, in May 2025[235] Share Repurchases This section reports on the company's share repurchase program and activity - The Board authorized an additional $200 million for Class A Common Stock repurchases on February 13, 2025, bringing the total authorized amount to $281 million, with $241 million remaining as of June 30, 2025[237][238] - The Company repurchased 4,055,349 shares for $20 million and 7,301,281 shares for $40 million during the three and six months ended June 30, 2025, respectively[238] Cash Dividends This section details the company's dividend declarations and payments to shareholders Quarterly Dividends on Common Stock (in millions) | Declaration Date | Dividends Per Share | Total Payment (in millions) | Record Date | Payable Date | | :--------------- | :------------------ | :-------------------------- | :---------- | :----------- | | February 13, 2025 | $0.04 | $21 | March 3, 2025 | March 17, 2025 | | April 30, 2025 | $0.04 | $22 | June 2, 2025 | June 16, 2025 | - The Board approved a quarterly dividend of $0.04 per share of Class A Common Stock, with payments made in March and June 2025, and another declared for September 2025[239][241] Cash on our balance sheet includes funds available for general corporate purposes. This section clarifies the nature of cash balances, distinguishing between corporate funds and fiduciary assets - Fiduciary assets, held on behalf of clients, are segregated and not available for general corporate purposes or as a source of liquidity[242] Operating Activities This section analyzes the cash flows generated from the company's primary business operations - Net cash provided by operating activities from continuing operations increased to $159 million for the six months ended June 30, 2025, from $93 million in the prior year, primarily due to changes in net working capital requirements[245] Investing Activities This section analyzes the cash flows related to the acquisition and disposal of long-term assets and investments - Cash used in investing activities decreased to $57 million for the six months ended June 30, 2025, from $67 million in the prior year, primarily due to a decrease in capital expenditures[246] Financing Activities This section analyzes the cash flows related to debt, equity, and dividend transactions - Cash used in financing activities was $242 million for the six months ended June 30, 2025, primarily driven by $100 million in TRA payments, $43 million in dividend payments, and $40 million in share repurchases[247] Cash, Cash Equivalents and Fiduciary Assets This section provides the balances of cash, cash equivalents, and fiduciary assets - Continuing operations cash and cash equivalents decreased by $116 million to $227 million at June 30, 2025, from December 31, 2024[248] - Fiduciary assets, which are not available for corporate use, were $215 million at June 30, 2025, with a corresponding amount in Fiduciary liabilities[250] Other Liquidity Matters This section addresses other factors that may impact the company's liquidity - The Company has no business, operations, or assets in Russia, Belarus, or Ukraine and has not been materially impacted by the actions of the Russian government[251] Tax Receivable Agreement This section details payments made and expected under the Tax Receivable Agreement - The Company paid $100 million related to the TRA for the six months ended June 30, 2025, with no further payments expected in the remainder of 2025[253] - As of June 30, 2025, expected TRA payments for 2026 are approximately $189 million[253] Contractual Obligations and Commitments This section outlines the company's significant contractual obligations and future commitments - Material contractual obligations include debt, non-cancellable contractual service and purchase obligations, and lease obligations[254] - Remaining cash outflow for non-cancellable service obligations with Wipro is $403 million through 2028, following an amendment effective April 1, 2025[255] OFF BALANCE SHEET ARRANGEMENTS This section confirms the absence of off-balance sheet arrangements - The Company does not have any off-balance sheet arrangements[257] [CRITICAL ACCOUNTING ESTIMATES](index=47&type=section&id=CRITICAL%20ACCOU