Alight(ALIT) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for Alight, Inc., including financial statements, management's discussion and analysis, and market risk disclosures Financial Statements This section presents Alight, Inc.'s unaudited condensed consolidated financial statements for Q1 2022, distinguishing between Successor and Predecessor periods Condensed Consolidated Balance Sheets Total assets increased to $11.22 billion as of March 31, 2022, driven by fiduciary assets, with total liabilities rising to $6.24 billion Condensed Consolidated Balance Sheet Data (in millions) | Account | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $326 | $372 | | Goodwill | $3,627 | $3,638 | | Intangible assets, net | $4,090 | $4,170 | | Total Current Assets | $2,733 | $2,469 | | Total Assets | $11,221 | $10,988 | | Liabilities & Equity | | | | Long-term debt | $2,818 | $2,830 | | Total Current Liabilities | $2,360 | $2,125 | | Total Liabilities | $6,237 | $6,060 | | Total Stockholders' Equity | $4,984 | $4,928 | Condensed Consolidated Statements of Comprehensive Income (Loss) Q1 2022 revenue increased to $725 million, with net loss improving to $13 million from $21 million in the prior year Q1 2022 Statement of Comprehensive Income (Loss) (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2022 (Successor) | Three Months Ended March 31, 2021 (Predecessor) | | :--- | :--- | :--- | | Revenue | $725 | $689 | | Gross Profit | $223 | $218 | | Operating (Loss) Income | $(2) | $46 | | Net Loss | $(13) | $(21) | | Net Loss Attributable to Alight, Inc. | $(11) | $(21) | | Basic & Diluted Net Loss Per Share | $(0.02) | N/A | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $19 million in Q1 2022, while financing activities provided $305 million Cash Flow Summary (in millions) | Cash Flow Category | Three Months Ended March 31, 2022 (Successor) | Three Months Ended March 31, 2021 (Predecessor) | | :--- | :--- | :--- | | Cash provided by operating activities | $19 | $39 | | Cash used for investing activities | $(41) | $(27) | | Cash provided by financing activities | $305 | $155 | | Net increase in cash, cash equivalents and restricted cash | $281 | $168 | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes explain the Business Combination, segment reporting, revenue recognition, debt structure, and share-based compensation - The company operates in an "Up-C" structure following the Business Combination on July 2, 2021. As of March 31, 2022, Alight, Inc. holds an 86% economic interest and 100% voting power in Alight Holdings[20] - The company's primary segments are Employer Solutions (digital/AI-led benefits, payroll, etc.) and Professional Services (project-based cloud deployment and consulting)[22][23] - In connection with the Business Combination, the company entered into a Tax Receivable Agreement (TRA), paying 85% of realized tax benefits to pre-business combination owners. The TRA liability is remeasured to fair value each period[26][108] - As of March 31, 2022, total debt outstanding was approximately $2.86 billion, primarily consisting of a $2.47 billion B-1 Term Loan maturing in 2028 and $313 million in Secured Senior Notes due 2025[63][64] - Share-based compensation expense was $33 million for Q1 2022, a significant increase from $2 million in Q1 2021, driven by new awards under the 2021 Omnibus Incentive Plan[92] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2022 financial results, highlighting 5.2% revenue growth, improved net loss, and strong liquidity, alongside segment performance and non-GAAP measures Results of Operations Q1 2022 revenue grew 5.2% to $725 million, driven by Employer Solutions, with net loss improving due to a 53% decrease in interest expense Consolidated Results of Operations (in millions) | Metric | Q1 2022 (Successor) | Q1 2021 (Predecessor) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $725 | $689 | +5.2% | | Gross Profit | $223 | $218 | +2.3% | | Operating (Loss) Income | $(2) | $46 | N/A | | Net Loss | $(13) | $(21) | +38.1% | | Interest Expense | $29 | $62 | -53.2% | - BPaaS (Business Process as a Service) revenue, a key growth indicator, reached $114 million in Q1 2022, a 23% increase from the prior year period. BPaaS bookings grew 205% to $122 million[159] - The increase in Depreciation and Intangible Amortization expense (+$30 million) was primarily driven by amortization of identifiable intangible assets acquired in the Business Combination[162] Segment Results Employer Solutions revenue grew 6.1% to $623 million, while Professional Services declined slightly and Hosted Business improved to breakeven Employer Solutions Segment Results (in millions) | Metric | Q1 2022 (Successor) | Q1 2021 (Predecessor) | | :--- | :--- | :--- | | Total Revenue | $623 | $587 | | Adjusted EBITDA | $142 | $136 | Professional Services Segment Results (in millions) | Metric | Q1 2022 (Successor) | Q1 2021 (Predecessor) | | :--- | :--- | :--- | | Total Revenue | $90 | $92 | | Adjusted EBITDA | $0 | $0 | Hosted Business Segment Results (in millions) | Metric | Q1 2022 (Successor) | Q1 2021 (Predecessor) | | :--- | :--- | :--- | | Total Revenue | $12 | $10 | | Adjusted EBITDA | $0 | $(3) | Non-GAAP Financial Measures Adjusted EBITDA increased to $142 million in Q1 2022, with Adjusted Net Income at $67 million and Adjusted Diluted EPS of $0.12 Reconciliation of Net Loss to Adjusted EBITDA (in millions) | Line Item | Q1 2022 (Successor) | Q1 2021 (Predecessor) | | :--- | :--- | :--- | | Net Loss | $(13) | $(21) | | Interest, Taxes, D&A | $126 | $133 | | EBITDA | $113 | $112 | | Adjustments (Share-based comp, restructuring, etc.) | $29 | $21 | | Adjusted EBITDA | $142 | $133 | | Capital expenditures | $(41) | $(27) | | Adjusted EBITDA less Capital Expenditures | $101 | $106 | Adjusted Diluted Earnings Per Share (EPS) | Metric | Q1 2022 | | :--- | :--- | | Adjusted Net Income | $67 million | | Adjusted diluted shares outstanding | 544,196,041 | | Adjusted Diluted EPS | $0.12 | Liquidity and Financial Condition Liquidity is supported by $326 million cash on hand, with net cash from operations decreasing due to working capital needs - As of March 31, 2022, cash and cash equivalents were $326 million, a decrease of $46 million from December 31, 2021[192] - Net cash provided by operating activities decreased by $20 million year-over-year, primarily due to higher working capital requirements[192] - The company does not expect to make material payments under the Tax Receivable Agreement (TRA) within the next two years, with more material payments anticipated to begin in 2024[196] Quantitative and Qualitative Disclosures About Market Risk Market risk exposures have not materially changed since the last Annual Report on Form 10-K - There have been no material changes in the company's market risk exposures since the last Annual Report[200] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures are effective[201] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[203] PART II. OTHER INFORMATION This section covers other information including legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits Legal Proceedings Ongoing legal proceedings are not expected to have a material adverse effect on the company's financial condition or operations - The company does not expect ongoing legal proceedings to have a material adverse effect on its business[205] Risk Factors No material changes have occurred in the risk factors previously disclosed in the Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the company's Annual Report[206] Other Items (Items 2, 3, 4, 5) This section confirms no unregistered equity sales, no defaults on senior securities, and no applicable mine safety disclosures - Item 2: No unregistered sales of equity securities[206] - Item 3: No defaults upon senior securities[206] - Item 4: Mine Safety Disclosures are not applicable[206] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and SOX certifications - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Sections 302 and 906[208]