– Achieved total revenue growth of nearly
15% and Employer Solutions revenue growth of over 16% –
– Strong BPaaS revenue growth of 50%
–
– Surpassed $1.5 billion in cumulative BPaaS
bookings –
– Full year 2023 financial guidance
reaffirmed –
Alight (NYSE: ALIT), a leading cloud-based provider of
integrated digital human capital and business solutions, today
reported results for the first quarter ended March 31, 2023.
“Alight achieved a key milestone in the first quarter surpassing
$1.5 billion in cumulative BPaaS bookings, nine months earlier than
our original three-year projections, demonstrating continued
momentum from 2022,” said Chief Executive Officer Stephan Scholl.
“Ongoing investments in our platform strategy and a recently
announced partnership with Workday in key European countries are
enhancing our value proposition and the outcomes we deliver for
employers and their people, illustrated by new and expanded
customer relationships as well as a growing pipeline. Through our
continued focus on profitable growth, we believe we remain on track
to achieve our 2023 targets of double-digit growth, margin
expansion and improved operating cash flow conversion.”
First Quarter 2023 Highlights
- Revenue increased 14.6% over the prior year period to $831
million
- Business Process as a Service (BPaaS) revenue grew 50.0% to
$171 million, representing 20.6% of total revenue
- BPaaS bookings on a total contract value basis were $75
million, bringing cumulative BPaaS bookings above $1.5 billion
- Gross profit of $257 million and gross margin of 30.9% compared
to $223 million and 30.8%, and adjusted gross profit of $285
million and adjusted gross margin of 34.3% compared to $241 million
and 33.2%, in the prior year period
- Net loss of $74 million compared to net loss of $13 million,
and adjusted EBITDA of $154 million compared to $142 million, in
the prior year period
- 87% of projected 2023 revenue under contract at the end of the
first quarter
- New wins or expanded relationships with companies including
MasterBrand, Dentsu, and a Fortune 50 food and beverage
company
First Quarter 2023 Results
Consolidated Results
Revenue grew 14.6% to $831 million, as compared to $725 million
in the prior year period. The growth was driven by more than a 16%
increase in Employer Solutions revenue due to increased net
commercial activity, project revenue, and volumes as well as the
impact of our 2022 acquisition and 8.9% growth in Professional
Services revenue. Recurring revenues, which comprised 85.7% of
total revenue, increased by 16% to $712 million mainly due to
growth in Employer Solutions revenue.
Gross profit was $257 million or 30.9% of revenue compared to
$223 million, or 30.8% of revenue in the prior year period. The
increase in gross profit was primarily driven by revenue growth as
noted above, partially offset by increases in costs associated with
the growth in revenues.
Selling, general and administrative expenses were $185 million,
compared to $140 million in the prior year period. The change was
primarily due to progress made against our previously announced
restructuring program as well as the inclusion of expenses from our
2022 acquisition.
Interest expense was $33 million as compared to $29 million in
the prior year period. The increase in expense was primarily due to
higher interest expense on our Term Loan due to movement in market
interest rates.
The Company’s loss before income tax benefit of $82 million
compared to a loss before income tax expense of $12 million in the
prior year period. The change was primarily due to non-operating
fair value remeasurements of financial instruments and the tax
receivable agreement.
First Quarter 2023 Segment Results
Employer Solutions
Employer Solutions is driven by Alight’s digital, software and
AI-led capabilities and spans total employee wellbeing and
engagement, including integrated benefits administration,
healthcare navigation, financial health, employee wellness and
payroll.
Employer Solutions revenues grew more than 16% to $723 million,
as compared to $623 million in the prior year period, as a result
of increased net commercial activity, project revenue, and volumes
as well as the impact of our 2022 acquisition. Recurring revenue
grew more than 17% to $669 million, while project revenue grew
roughly 2% to $54 million.
Employer Solutions gross profit was $238 million, as compared to
$204 million in the prior year period, up 16.7% driven by revenue
growth and lower expenses related to productivity initiatives,
partially offset by employee compensation costs and increases in
costs associated with growth of current and future revenues.
Employer Solutions adjusted gross profit was $264 million, as
compared to $221 million in the prior year period, up almost 20% or
$43 million primarily due to the factors impacting gross profit
above.
Professional Services
Professional Services revenues were up 8.9% to $98 million as
compared to $90 million in the prior year period as a result of
higher recurring revenue and higher project revenue. Recurring
revenue and project revenue increased by $3 million and $5 million,
respectively.
Professional Services gross profit was flat at $19 million for
both periods. Professional Services adjusted gross profit for the
three months ended March 31, 2023 was $20 million as compared to
$19 million in the prior year period.
Balance Sheet Highlights
As of March 31, 2023, the Company’s cash and cash equivalents
balance was $239 million, total debt was $2,816 million and total
debt net of cash and cash equivalents was $2,577 million.
The interest rates on the Company’s debt are 84% fixed through
2024 and 60% through 2025. The Company has no debt maturities until
2025.
Business Outlook
The Company is reaffirming its 2023 outlook:
- Revenue of $3.47 billion to $3.51 billion (growth of 11% to
12%).
- Adjusted EBITDA of $735 million to $750 million.
- Adjusted diluted EPS of $0.62 to $0.67.
- BPaaS total contract value bookings of $900 million to $1.0
billion.
- Operating Cash Flow Conversion rate of 45-55%.
Reconciliations of the historical non-GAAP measures used in this
press release are included below. Because GAAP financial measures
on a forward-looking basis are not accessible, and reconciling
information is not available without unreasonable effort, we have
not provided reconciliations for forward-looking non-GAAP measures.
For the same reasons, we are unable to address the probable
significance of the unavailable information, which could be
material to future results.
Earnings Conference Call and Webcast Information
A conference call to discuss the Company’s first-quarter
financial results is scheduled for today, May 9, 2023 at 7:30 a.m.
Central Time (8:30 a.m. Eastern Time). Interested parties can
access the live webcast and accompanying presentation materials by
logging on to the Investor Relations section on the Company’s
website at http://investor.alight.com. A replay of the conference
call and the accompanying presentation materials will be available
on the investor relations website for approximately 90 days.
About Alight Solutions
Alight is a leading cloud-based human capital technology and
services provider that powers confident health, wealth and
wellbeing decisions for 36 million people and dependents. Our
Alight Worklife® platform combines data and analytics with a
simple, seamless user experience. Supported by our global delivery
capabilities, Alight Worklife is transforming the employee
experience for people around the world. With personalized,
data-driven health, wealth, pay and wellbeing insights, Alight
brings people the security of better outcomes and peace of mind
throughout life’s big moments and most important decisions. Learn
how Alight unlocks growth for organizations of all sizes at
alight.com.
For more information, please visit www.alight.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements include, but are
not limited to, statements related to the expectations regarding
the performance and outlook for Alight’s business, financial
results, liquidity and capital resources, and other non-historical
statements, including statements in the “Business Outlook” section
of this press release. In some cases, these forward-looking
statements can be identified by the use of words such as “outlook,”
“believes,” “expects,” “potential,” “continues,” “may,” “will,”
“should,” “could,” “seeks,” “projects,” “predicts,” “intends,”
“plans,” “estimates,” “anticipates” or the negative version of
these words or other comparable words. Such forward-looking
statements are subject to various risks and uncertainties
including, among others, risks related to declines in economic
activity in the industries, markets, and regions our clients serve,
including as a result of increases in inflation rates or interest
rates or changes in monetary and fiscal policies, bank failures,
risks related to the performance of our information technology
systems and networks, risks related to our ability to maintain the
security and privacy of confidential and proprietary information,
risks related to changes in regulation, and, competition in our
industry. Additional factors that could cause Alight’s results to
differ materially from those described in the forward-looking
statements can be found under the section entitled “Risk Factors”
of Alight’s Annual Report on Form 10-K, filed with the Securities
and Exchange Commission (the "SEC") on March 1, 2023, as such
factors may be updated from time to time in Alight's filings with
the SEC, which are, or will be, accessible on the SEC's website at
www.sec.gov. Accordingly, there are or will be important factors
that could cause actual outcomes or results to differ materially
from those indicated in these statements. These factors should not
be construed as exhaustive and should be considered along with
other factors noted in this presentation and in Alight’s filings
with the SEC. Alight undertakes no obligation to publicly update or
review any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as required
by law.
Non-GAAP Financial Measures
Pursuant to the requirements of Regulation G, the Company has
provided a reconciliation of each non-GAAP financial measure used
in this press release to the most directly comparable GAAP
financial measure in the tables below. The presentation of non-GAAP
financial measures is used to enhance our investors’ and lenders’
understanding of certain aspects of our financial performance. This
discussion is not meant to be considered in isolation, superior to,
or as a substitute for the directly comparable financial measures
prepared in accordance with GAAP.
Adjusted EBITDA, which is defined as earnings before interest,
taxes, depreciation and intangible amortization adjusted for the
impact of certain non-cash and other items that we do not consider
in the evaluation of ongoing operational performance, is a non-GAAP
financial measure used by management and our stakeholders to
provide useful supplemental information that enables a better
comparison of our performance across periods. Both Adjusted EBITDA
and Adjusted EBITDA less Capital Expenditures are non-GAAP measures
that are used by management and stakeholders to evaluate our core
operating performance.
Adjusted Net Income, which is defined as net loss attributable
to Alight, Inc. adjusted for intangible amortization and the impact
of certain non-cash items that we do not consider in the evaluation
of ongoing operational performance, is a non-GAAP financial measure
used solely for the purpose of calculating Adjusted Diluted
Earnings Per Share.
Adjusted Diluted Earnings per Share is defined as Adjusted Net
Income divided by the adjusted weighted-average number of shares of
Alight Inc. common stock, diluted. Adjusted Diluted Earnings per
Share is used by us and our investors to evaluate our core
operating performance and to benchmark our operating performance
against our competitors.
Operating Cash Flow Conversion is defined as cash provided by
operating activities divided by Adjusted EBITDA. Operating Cash
Flow Conversion is used by management and stakeholders to evaluate
our core operating performance.
Adjusted Gross Profit and Adjusted Gross Margin Percent.
Adjusted gross profit is defined as revenue less cost of services
adjusted for depreciation, amortization and share-based
compensation. Adjusted gross margin percent is defined as adjusted
gross profit divided by revenue. Management uses adjusted gross
profit and adjusted gross margin percent as key measures in making
financial, operating and planning decisions and in evaluating our
performance. We believe that presenting adjusted gross profit and
adjusted gross margin percent is useful to investors as it
eliminates the impact of certain non-cash expenses and allows a
direct comparison between periods.
Condensed Consolidated Statements of Income
(Loss)(Unaudited)
Three Months Ended
Three Months Ended
March 31,
March 31,
(in millions, except per share
amounts)
2023
2022
Revenue
$
831
$
725
Cost of services, exclusive of
depreciation and amortization
555
491
Depreciation and amortization
19
11
Gross Profit
257
223
Operating Expenses
Selling, general and administrative
185
140
Depreciation and intangible
amortization
85
85
Total operating expenses
270
225
Operating Income (Loss)
(13
)
(2
)
Other (Income) Expense
(Gain) Loss from change in fair value of
financial instruments
25
(13
)
(Gain) Loss from change in fair value of
tax receivable agreement
8
(5
)
Interest expense
33
29
Other (income) expense, net
3
(1
)
Total other (income) expense, net
69
10
Income (Loss) Before Income Tax
(82
)
(12
)
Income tax expense (benefit)
(8
)
1
Net Income (Loss)
(74
)
(13
)
Net loss attributable to noncontrolling
interests
(6
)
(2
)
Net (Loss) Income Attributable to
Alight, Inc.
$
(68
)
$
(11
)
Earnings Per Share
Basic (net loss) earnings per share
$
(0.14
)
$
(0.02
)
Diluted (net loss) earnings per share
$
(0.14
)
$
(0.02
)
Condensed Consolidated Balance
Sheets (Unaudited)
March 31,
December 31,
2023
2022
(in millions, except par values)
Assets
Current Assets
Cash and cash equivalents
$
239
$
250
Receivables, net
638
678
Other current assets
312
379
Total Current Assets Before Fiduciary
Assets
1,189
1,307
Fiduciary assets
1,387
1,509
Total Current Assets
2,576
2,816
Goodwill
3,680
3,679
Intangible assets, net
3,793
3,872
Fixed assets, net
342
320
Deferred tax assets, net
11
6
Other assets
515
542
Total Assets
$
10,917
$
11,235
Liabilities and Stockholders'
Equity
Liabilities
Current Liabilities
Accounts payable and accrued
liabilities
$
392
$
508
Current portion of long-term debt, net
25
31
Other current liabilities
335
300
Total Current Liabilities Before
Fiduciary Liabilities
752
839
Fiduciary liabilities
1,387
1,509
Total Current Liabilities
2,139
2,348
Deferred tax liabilities
34
60
Long-term debt, net
2,791
2,792
Long-term tax receivable agreement
594
568
Financial instruments
122
97
Other liabilities
270
281
Total Liabilities
$
5,950
$
6,146
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; 497.2 and 478.3 issued and outstanding
as of March 31, 2023 and December 31, 2022, respectively
—
$
—
Class B Common Stock: $0.0001 par value,
20.0 shares authorized; 10.0 issued and outstanding as of March 31,
2023 and December 31, 2022, respectively
—
—
Class V Common Stock: $0.0001 par value,
175.0 shares authorized; 44.1 and 63.5 issued and outstanding as of
March 31, 2023 and December 31, 2022, respectively
—
—
Class Z Common Stock: $0.0001 par value,
12.9 shares authorized; 5.2 issued and outstanding as of March 31,
2023 and December 31, 2022, respectively
—
—
Treasury stock, at cost (2.7 and 1.5
shares at March 31, 2023 and December 31, 2022, respectively)
(22
)
(12
)
Additional paid-in-capital
4,690
4,514
Retained deficit
(226
)
(158
)
Accumulated other comprehensive income
81
95
Total Alight, Inc. Stockholders'
Equity
$
4,523
$
4,439
Noncontrolling interest
444
650
Total Stockholders' Equity
$
4,967
$
5,089
Total Liabilities and Stockholders'
Equity
$
10,917
$
11,235
Condensed Consolidated Statements of
Cash Flows (Unaudited)
Three Months Ended
Three Months Ended
March 31,
March 31,
(in millions)
2023
2022
Operating activities:
Net income (loss)
$
(74
)
$
(13
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation
24
17
Intangible asset amortization
80
79
Noncash lease expense
6
7
Financing fee and premium amortization
(1
)
(1
)
Share-based compensation expense
37
33
(Gain) loss from change in fair value of
financial instruments
25
(13
)
(Gain) loss from change in fair value of
tax receivable agreement
8
(5
)
Release of unrecognized tax provision
(1
)
—
Deferred tax expense (benefit)
(7
)
—
Other
1
3
Changes in operating assets and
liabilities, net of business combinations:
Accounts receivable
40
(37
)
Accounts payable and accrued
liabilities
(117
)
(82
)
Other assets and liabilities
51
31
Cash provided by operating
activities
$
72
$
19
Investing activities:
Capital expenditures
(45
)
(41
)
Cash used in investing
activities
$
(45
)
$
(41
)
Financing activities:
Net increase (decrease) in fiduciary
liabilities
(121
)
327
Borrowings from banks
—
54
Financing fees
—
(3
)
Repayments to banks
(6
)
(60
)
Principal payments on finance lease
obligations
(7
)
(8
)
Payments on tax receivable agreements
(7
)
—
Tax payment for shares/units withheld in
lieu of taxes
(6
)
(1
)
Deferred and contingent consideration
payments
(3
)
—
Repurchase of shares
(10
)
—
Other financing activities
—
(4
)
Cash provided by (used in) financing
activities
$
(160
)
$
305
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
—
(2
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(133
)
281
Cash, cash equivalents and restricted
cash at beginning of period
1,759
1,652
Cash, cash equivalents and restricted
cash at end of period
$
1,626
$
1,933
Reconciliation of Net Income (Loss) to
Adjusted EBITDA and Adjusted EBITDA (Unaudited)
Three Months Ended
Three Months Ended
March 31,
March 31,
(in millions)
2023
2022
Net Income (Loss)
$
(74
)
$
(13
)
Interest expense
33
29
Income tax expense (benefit)
(8
)
1
Depreciation
24
17
Intangible amortization
80
79
EBITDA
55
113
Share-based compensation
37
33
Transaction and integration
expenses(1)
2
6
Restructuring
26
6
(Gain) Loss from change in fair value of
financial instruments
25
(13
)
(Gain) Loss from change in fair value of
tax receivable agreement
8
(5
)
Other(2)
1
2
Adjusted EBITDA
$
154
$
142
Revenue
$
831
$
725
Adjusted EBITDA Margin(3)
18.5
%
19.6
%
(1)
Transaction and integration expenses
primarily relate to acquisition activity.
(2)
Other primarily includes expenses related
to debt financing.
(3)
Adjusted EBITDA Margin is defined as
Adjusted EBITDA as a percentage of revenue.
Reconciliation of Net Income (Loss)
Attributable to Alight, Inc. to Adjusted Net Income and Adjusted
Diluted Earnings per Share (Unaudited)
Three Months Ended
Three Months Ended
March 31,
March 31,
(in millions, except share and per share
amounts)
2023
2022
Numerator:
Net (Loss) Income Attributable to Alight,
Inc.
$
(68
)
$
(11
)
Conversion of noncontrolling interest
(6
)
(2
)
Intangible amortization
80
79
Share-based compensation
37
33
Transaction and integration expenses
2
6
Restructuring
26
6
(Gain) Loss from change in fair value of
financial instruments
25
(13
)
(Gain) Loss from change in fair value of
tax receivable agreement
8
(5
)
Other
1
2
Tax effect of adjustments(1)
(33
)
(28
)
Adjusted Net Income
$
72
$
67
Denominator:
Weighted average shares outstanding -
basic
476,145,761
456,838,216
Exchange of noncontrolling units(2)
57,966,505
76,220,431
Impact of unvested RSUs(3)
10,412,840
11,137,394
Adjusted shares of Class A Common Stock
outstanding - diluted(4)
544,525,106
544,196,041
Basic (Net Loss) Earnings Per
Share
$
(0.14
)
$
(0.02
)
Adjusted Diluted Earnings Per
Share(4)(5)
$
0.13
$
0.12
(1)
Income tax effects have been calculated
based on the statutory tax rates for both U.S. and foreign
jurisdictions based on the Company's mix of income and adjusted for
significant changes in fair value measurement.
(2)
Assumes the full exchange of the units
held by noncontrolling interests for shares of Class A Common Stock
of Alight, Inc. pursuant to the exchange agreement.
(3)
Includes non-vested time-based restricted
stock units that were determined to be antidilutive for U.S. GAAP
diluted earnings per share purposes.
(4)
Excludes two tranches of contingently
issuable seller earnout shares: (i) 7.5 million shares will be
issued if the Company's Class A Common Stock's volume-weighted
average price ("VWAP") is >$12.50 for 20 consecutive trading
days; and (ii) 7.5 million shares will be issued if the Company's
Class A Common Stock VWAP is >$15.00 for 20 consecutive trading
days. Both tranches have a seven-year duration.
(5)
Excludes 31,079,227 and 35,501,399
performance-based units, which represents the gross number of
shares expected to vest based on achievement of performance
conditions as of March 31, 2023 and March 31, 2022,
respectively.
Reconciliation of Segment Profit to
Income (Loss) Before Income Tax Benefit (Unaudited)
Segment Profit
Three Months Ended
Three Months Ended
March 31,
March 31,
(in millions)
2023
2022
Employer Solutions
$
238
$
204
Professional Services
19
19
Total Gross Profit
257
223
Selling, general and administrative
185
140
Depreciation and intangible
amortization
85
85
Operating Income (Loss)
(13
)
(2
)
(Gain) Loss from change in fair value of
financial instruments
25
(13
)
(Gain) Loss from change in fair value of
tax receivable agreement
8
(5
)
Interest expense
33
29
Other (income) expense, net
3
(1
)
Income (Loss) Before Income Tax
$
(82
)
$
(12
)
Gross Profit to Adjusted Gross Profit
Reconciliation by Segment (Unaudited)
Three Months Ended March 31,
2023
($ in millions)
Employer Solutions
Professional Services
Other
Total
Gross Profit
238
19
-
257
Add: stock-based compensation
8
1
-
9
Add: depreciation and amortization
18
-
1
19
Adjusted Gross Profit
264
20
1
285
Gross Profit Margin
32.9
%
19.4
%
0.0
%
30.9
%
Adjusted Gross Profit Margin
36.5
%
20.4
%
10.0
%
34.3
%
Three Months Ended March 31,
2022
($ in millions)
Employer Solutions
Professional Services
Other
Total
Gross Profit
204
19
-
223
Add: stock-based compensation
7
-
-
7
Add: depreciation and amortization
10
-
1
11
Adjusted Gross Profit
221
19
1
241
Gross Profit Margin
32.7
%
21.1
%
0.0
%
30.8
%
Adjusted Gross Profit Margin
35.5
%
21.1
%
8.3
%
33.2
%
Other Select Financial Data
(Unaudited)
Three Months Ended
Three Months Ended
March 31,
March 31,
($ in millions)
2023
2022
Segment
Revenues
Employer Solutions:
Recurring
$
669
$
570
Project
54
53
Total Employer Solutions
723
623
Professional Services:
Recurring
33
30
Project
65
60
Total Professional Services
98
90
Total Reportable Segments
821
713
Other
10
12
Total revenue
$
831
$
725
Segment Adjusted
Gross Profit
Employer Solutions
$
264
$
221
Professional Services
20
19
Other
1
1
Total gross profit
$
285
$
241
Segment Adjusted
Gross Margin Percent
Employer Solutions
36.5
%
35.5
%
Professional Services
20.4
%
21.1
%
Other
10.0
%
8.3
%
Total adjusted gross margin percent
34.3
%
33.2
%
Adjusted EBITDA
$
154
$
142
Cash provided by operating
activities
$
72
$
19
Other Key
Statistics
Recurring revenue
$
712
$
612
BPaaS revenue
$
171
$
114
BPaaS revenue as % of total revenue
20.6
%
15.7
%
BPaaS bookings(2)
$
75
$
122
(1)
Excludes Other revenues primarily
attributable to the former Hosted Segment.
(2)
BPaaS bookings are reported on a total
contract value (TCV) basis.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230509005278/en/
Investors: Jeremy Cohen investor.relations@alight.com
Media: MacKenzie Lucas mackenzie.lucas@alight.com
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