UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Washington, D.C. 20549
FORM 10-Q
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2024
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. Number: 001-39299
Alight, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 86-1849232 |
( |
incorporation or organization) | (I.R.S. Employer |
| |
4 Overlook Point Lincolnshire, IL | 60069 |
(Address of | (Zip Code) |
(224) 737-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which | ||
| ||||
ALIT | New York Stock Exchange | |||
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx ☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx ☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):. Yes x ☐ No ¨☒
As of August 4, 2020, there were 103,500,000May 3, 2024, the registrant had 550,348,057 shares of Class A common stock and 25,875,000Common Stock, par value $0.0001 per share, 4,914,939 shares of Class B common stockB-1 Common Stock, par value $0.0001 per share, 4,914,939 shares of the registrant issuedClass B-2 Common Stock, par value $0.0001 per share, 734,248 shares of Class V Common Stock, par value $0.0001 per share, 376,637 shares of Class Z-A Common Stock, par value $0.0001 per share, 100,731 shares of Class Z-B-1 Common Stock, par value $0.0001 per share, and 100,731 shares of Class Z-B-2 Common Stock, par value $0.0001 per share, outstanding.
Table of Contents
FOLEY TRASIMENE ACQUISITION CORP.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
i
Forward-Looking Statements
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
FOLEY TRASIMENE ACQUISITION CORP.
JUNE 30, 2020
(Unaudited)
ASSETS | ||||
Current assets | ||||
Cash | $ | 1,285,189 | ||
Prepaid expenses | 313,467 | |||
Total Current Assets | 1,598,656 | |||
Cash and marketable securities held in Trust Account | 1,035,124,456 | |||
Total Assets | $ | 1,036,723,112 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
Current liabilities | ||||
Accrued expenses | $ | 89,014 | ||
Accrued offering costs | 620,000 | |||
Income taxes payable | 15,636 | |||
Total Current Liabilities | 724,650 | |||
Deferred underwriting fee payable | 36,225,000 | |||
Total Liabilities | 36,949,650 | |||
Commitments and Contingencies | ||||
Class A common stock subject to possible redemption, 99,477,346 shares at $10.00 per share | 994,773,460 | |||
Stockholders’ Equity | ||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | |||
Class A common stock, $0.0001 par value; 400,000,000 shares authorized; 4,022,654 issued and outstanding (excluding 99,477,346 shares subject to possible redemption) | 402 | |||
Class B common stock, $0.0001 par value; 40,000,000 shares authorized; 25,875,000 shares issued and outstanding | 2,588 | |||
Additional paid-in capital | 4,998,596 | |||
Accumulated deficit | (1,584 | ) | ||
Total Stockholders’ Equity | 5,000,002 | |||
Total Liabilities and Stockholders’ Equity | $ | 1,036,723,112 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
FOLEY TRASIMENE ACQUISITION CORP.CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, | For the Period | |||||||
2020 | 2020 | |||||||
Formation and general and administrative expenses | $ | 109,445 | $ | 110,404 | ||||
Loss from operations | (109,445 | ) | (110,404 | ) | ||||
Other income: | ||||||||
Interest earned on marketable securities held in Trust Account | 124,456 | 124,456 | ||||||
Income before provision for income taxes | 15,011 | 14,052 | ||||||
Provision for income taxes | (15,636 | ) | (15,636 | ) | ||||
Net loss | $ | (625 | ) | $ | (1,584 | ) | ||
Weighted average shares outstanding of Class A redeemable common stock | 103,500,000 | 103,500,000 | ||||||
Basic and diluted income per share, Class A | $ | 0.00 | $ | 0.00 | ||||
Weighted average shares outstanding of Class B non-redeemable common stock | 25,875,000 | 25,875,000 | ||||||
Basic and diluted net loss per share, Class B | $ | (0.00 | ) | $ | (0.00 | ) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
FOLEY TRASIMENE ACQUISITION CORP.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED JUNE 30, 2020 AND
FOR THE PERIOD FROM MARCH 26, 2020 (INCEPTION) THROUGH JUNE 30, 2020
(Unaudited)
Class A | Class B | Additional | (Accumulated Deficit)/ | Total | ||||||||||||||||||||||||
Common Stock | Common Stock | Paid-in | Retained | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
Balance – March 26, 2020 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Net loss | — | — | — | — | — | (959 | ) | (959 | ) | |||||||||||||||||||
Balance – March 31, 2020 | — | — | — | — | — | (959 | ) | (959 | ) | |||||||||||||||||||
Issuance of Class B common stock to Sponsors | — | — | 25,875,000 | 2,588 | 22,412 | — | 25,000 | |||||||||||||||||||||
Sale of 103,500,000 Units, net of underwriting discounts | 103,500,000 | 10,350 | — | — | 977,039,696 | — | 977,050,046 | |||||||||||||||||||||
Sale of 15,133,333 Private Placement Warrants | — | — | — | — | 22,700,000 | — | 22,700,000 | |||||||||||||||||||||
Common stock subject to possible redemption | (99,477,346 | ) | (9,948 | ) | — | — | (994,763,512 | ) | — | (994,773,460 | ) | |||||||||||||||||
Net loss | — | — | — | — | — | (625 | ) | (625 | ) | |||||||||||||||||||
Balance – June 30, 2020 | 4,022,654 | $ | 402 | 25,875,000 | $ | 2,588 | $ | 4,998,596 | $ | (1,584 | ) | $ | 5,000,002 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
FOLEY TRASIMENE ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 26, 2020 (INCEPTION) THROUGH JUNE 30, 2020
(Unaudited)
Cash Flows from Operating Activities: | ||||
Net loss | $ | (1,584 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Interest earned on marketable securities held in Trust Account | (124,456 | ) | ||
Changes in operating assets and liabilities: | ||||
Prepaid expenses | (313,467 | ) | ||
Accrued expenses | 89,014 | |||
Income taxes payable | 15,636 | |||
Net cash used in operating activities | (334,857 | ) | ||
Cash Flows from Investing Activities: | ||||
Investment of cash into Trust Account | (1,035,000,000 | ) | ||
Net cash used in investing activities | (1,035,000,000 | ) | ||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of Class B common stock to Sponsor | 25,000 | |||
Proceeds from sale of Units, net of underwriting discounts paid | 1,014,300,000 | |||
Proceeds from sale of Private Placement Warrants | 22,700,000 | |||
Proceeds from promissory note - related party | 250,000 | |||
Repayment of promissory note - related party | (250,000 | ) | ||
Payment of offering costs | (404,954 | ) | ||
Net cash provided by financing activities | 1,036,620,046 | |||
Net Change in Cash | 1,285,189 | |||
Cash – Beginning of period | — | |||
Cash – End of period | $ | 1,285,189 | ||
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||
Offering costs included in accrued offering costs | $ | 620,000 | ||
Initial classification of Class A common stock subject to possible redemption | $ | 994,768,320 | ||
Change in value of Class A common stock subject to possible redemption | $ | 5,140 | ||
Deferred underwriting fee payable | $ | 36,225,000 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Foley Trasimene Acquisition Corp. (the “Company”) is a blank check company incorporated in DelawareThis Quarterly Report on March 26, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on identifying a prospective target business in financial technology or business process outsourcing, which acts as an essential utility to industries that are core to the economy. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2020, the Company had not commenced any operations. All activity for the period from March 26, 2020 (inception) through June 30, 2020 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on May 26, 2020. On May 29, 2020, the Company consummated the Initial Public Offering of 103,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriters of the over-allotment option to purchase an additional 13,500,000 Units, at $10.00 per Unit, generating gross proceeds of $1,035,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 15,133,333 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to Trasimene Capital Management FT, LP, an affiliate of Trasimene Capital Management, LLC, and Bilcar FT, LP, an affiliate of Bilcar Limited Partnership (collectively the “Sponsors”), generating gross proceeds of $22,700,000, which is described in Note 4.
Transaction costs amounted to $57,949,954, consisting of $20,700,000 of underwriting fees, $36,225,000 of deferred underwriting fees and $1,024,954 of other offering costs. In addition, as of June 30, 2020, cash of $1,285,189 was held outside of the Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes.
Following the closing of the Initial Public Offering on May 29, 2020, an amount of $1,035,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities,Form 10-Q contains forward-looking statements within the meaning set forth inof Section 2(a)(16)27A of the Investment CompanySecurities Act of 1940,1933, as amended, (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company must complete its initial Business Combination with one or more target businesses that together have a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding any deferred underwriting commissions and taxes payable on the interest earned in the Trust Account) at the time the Company signs a definitive agreement in connection with a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $10.00 per share), calculated as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange rules and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Second Amended and Restated Certificate of Incorporation (the “Second Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange rules, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsors have agreed to vote their Founder Shares (as defined in Note 5), and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination and not to convert any shares in connection with a stockholder vote to approve a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the Initial Public transaction or do not vote at all.
Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Second Amended and Restated Articles of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 1321E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act")), will be restricted from redeeming its shares with respect. These forward-looking statements include, but are not limited to, more than an aggregatestatements regarding the sale of 15%our Payroll & Professional Services business, including the likelihood of the Public Shares without the Company’s prior written consent.
The Sponsors have agreed (a) to waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Second Amended and Restated Articles of Incorporation (i) to modify the substance or timingconsummation of the Company’s obligation to redeem 100% oftransaction, the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment and (iii) to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company failsexpected time period to consummate a Business Combination.
The Company will have until May 29, 2022the transaction, statements that relate to consummate a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations exceptexpectations regarding future financial performance, and business strategies or expectations for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned (less up to $100,000 of interest to pay dissolution expenses), dividedour business. Forward-looking statements can often be identified by the numberuse of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rightswords such as stockholders (including“anticipate,” “appear,” “approximate,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” or similar expressions or the right to receive further liquidation distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Sponsors have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsors acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will benegative thereof. These forward-looking statements are based on information available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
In order to protect the amounts held in the Trust Account, the Sponsors have agreed that they will be liable to the Company, if and to the extent any claims by a third party for services rendered or products sold to the Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of this report and the liquidationCompany’s management’s current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside the control of the Trust AccountCompany and its directors, officers and affiliates. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update, add or otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
1
These risk factors do not identify all risks that we face, and our business, financial condition and results of operations could also be affected by factors, events or uncertainties that are not presently known to us or that we currently do not consider to present material risks.
Website and Social Media Disclosure
We use our website (www.alight.com) and our corporate Facebook (http://www.facebook.com/AlightGlobal), Instagram (@alight_solutions), LinkedIn (www.linkedin.com/company/alightsolutions), X (formerly known as Twitter) (@alightsolutions), and YouTube (www.youtube.com/c/AlightSolutions) accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, filings made with the SEC and public conference calls and webcasts. The information on our website is not part of this Quarterly Report.
The Company makes available free of charge on its website or provides a link on its website to the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the SEC. To access these filings, go to the Company’s website and under the “Investors” heading, click on “Financials.”
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Alight, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| March 31, |
| December 31, |
| ||||
|
| 2024 |
| 2023 |
| ||||
(in millions, except par values) |
|
|
|
|
|
| |||
Assets |
|
|
|
|
| ||||
Current Assets |
|
|
|
|
| ||||
Cash and cash equivalents |
| $ |
| 256 |
| $ |
| 324 |
|
Receivables, net |
|
|
| 393 |
|
|
| 435 |
|
Other current assets |
|
|
| 217 |
|
|
| 260 |
|
Fiduciary assets |
|
|
| 250 |
|
|
| 234 |
|
Current assets held for sale |
|
|
| 2,501 |
|
|
| 1,523 |
|
Total Current Assets |
|
|
| 3,617 |
|
|
| 2,776 |
|
Goodwill |
|
|
| 3,212 |
|
|
| 3,212 |
|
Intangible assets, net |
|
|
| 3,066 |
|
|
| 3,136 |
|
Fixed assets, net |
|
|
| 387 |
|
|
| 331 |
|
Deferred tax assets, net |
|
|
| 86 |
|
|
| 38 |
|
Other assets |
|
|
| 346 |
|
|
| 341 |
|
Long-term assets held for sale |
|
|
| — |
|
|
| 948 |
|
Total Assets |
| $ |
| 10,714 |
| $ |
| 10,782 |
|
|
|
|
|
|
|
| |||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ |
| 278 |
| $ |
| 325 |
|
Current portion of long-term debt, net |
|
|
| 25 |
|
|
| 25 |
|
Other current liabilities |
|
|
| 282 |
|
|
| 233 |
|
Fiduciary liabilities |
|
|
| 250 |
|
|
| 234 |
|
Current liabilities held for sale |
|
|
| 1,475 |
|
|
| 1,370 |
|
Total Current Liabilities |
|
|
| 2,310 |
|
|
| 2,187 |
|
Deferred tax liabilities |
|
|
| 32 |
|
|
| 32 |
|
Long-term debt, net |
|
|
| 2,762 |
|
|
| 2,769 |
|
Long-term tax receivable agreement |
|
|
| 784 |
|
|
| 733 |
|
Financial instruments |
|
|
| 132 |
|
|
| 109 |
|
Other liabilities |
|
|
| 166 |
|
|
| 142 |
|
Long-term liabilities held for sale |
|
|
| — |
|
|
| 68 |
|
Total Liabilities |
| $ |
| 6,186 |
| $ |
| 6,040 |
|
Commitments and Contingencies |
|
|
|
|
|
|
| ||
Stockholders' Equity |
|
|
|
|
|
| |||
Preferred stock at $0.0001 par value: 1.0 shares authorized, none issued and outstanding |
| $ |
| — |
| $ |
| — |
|
Class A Common Stock: $0.0001 par value, 1,000.0 shares authorized; 550.0 and 510.9 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively |
|
|
| — |
|
|
| — |
|
Class B Common Stock: $0.0001 par value, 20.0 shares authorized; 9.9 and 9.9 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively |
|
|
| — |
|
|
| — |
|
Class V Common Stock: $0.0001 par value, 175.0 shares authorized; 1.2 and 29.0 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively |
|
|
| — |
|
|
| — |
|
Class Z Common Stock: $0.0001 par value, 12.9 shares authorized; 0.6 and 3.4 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively |
|
|
| — |
|
|
| — |
|
Treasury stock, at cost (6.4 and 6.4 shares at March 31, 2024 and December 31, 2023, respectively) |
|
|
| (52 | ) |
|
| (52 | ) |
Additional paid-in-capital |
|
|
| 5,113 |
|
|
| 4,946 |
|
Retained deficit |
|
|
| (617 | ) |
|
| (503 | ) |
Accumulated other comprehensive income |
|
|
| 75 |
|
|
| 71 |
|
Total Alight, Inc. Stockholders' Equity |
| $ |
| 4,519 |
| $ |
| 4,462 |
|
Noncontrolling interest |
|
|
| 9 |
|
|
| 280 |
|
Total Stockholders' Equity |
| $ |
| 4,528 |
| $ |
| 4,742 |
|
Total Liabilities and Stockholders' Equity |
| $ |
| 10,714 |
| $ |
| 10,782 |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
3
Alight, Inc.
CondensedConsolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended |
| Three Months Ended |
| ||||
| March 31, |
| March 31, |
| ||||
(in millions, except per share amounts) | 2024 |
| 2023 |
| ||||
Revenue | $ |
| 559 |
| $ |
| 586 |
|
Cost of services, exclusive of depreciation and amortization |
|
| 356 |
|
|
| 382 |
|
Depreciation and amortization |
|
| 21 |
|
|
| 17 |
|
Gross Profit |
|
| 182 |
|
|
| 187 |
|
|
|
|
|
|
| |||
Operating Expenses |
|
|
|
|
|
| ||
Selling, general and administrative |
|
| 146 |
|
|
| 151 |
|
Depreciation and intangible amortization |
|
| 76 |
|
|
| 76 |
|
Total Operating expenses |
|
| 222 |
|
|
| 227 |
|
Operating Income (Loss) From Continuing Operations |
|
| (40 | ) |
|
| (40 | ) |
Other (Income) Expense |
|
|
|
|
|
| ||
(Gain) Loss from change in fair value of financial instruments |
|
| 21 |
|
|
| 25 |
|
(Gain) Loss from change in fair value of tax receivable agreement |
|
| 55 |
|
|
| 8 |
|
Interest expense |
|
| 31 |
|
|
| 33 |
|
Other (income) expense, net |
|
| 1 |
|
|
| 1 |
|
Total Other (income) expense, net |
|
| 108 |
|
|
| 67 |
|
Income (Loss) From Continuing Operations Before Taxes |
|
| (148 | ) |
|
| (107 | ) |
Income tax expense (benefit) |
|
| (27 | ) |
|
| (23 | ) |
Net Income (Loss) From Continuing Operations |
|
| (121 | ) |
|
| (84 | ) |
Net Income (Loss) From Discontinued Operations, Net of Tax |
|
| 5 |
|
|
| 10 |
|
Net Income (Loss) |
|
| (116 | ) |
|
| (74 | ) |
Net income (loss) attributable to noncontrolling interests |
|
| (2 | ) |
|
| (6 | ) |
Net Income (Loss) Attributable to Alight, Inc. | $ |
| (114 | ) | $ |
| (68 | ) |
|
|
|
|
|
| |||
Earnings Per Share |
|
|
|
|
|
| ||
Basic |
|
|
|
|
|
| ||
Continuing operations | $ |
| (0.22 | ) | $ |
| (0.16 | ) |
Discontinued operations | $ |
| 0.01 |
| $ |
| 0.02 |
|
Net Income (Loss) | $ |
| (0.21 | ) | $ |
| (0.14 | ) |
Diluted |
|
|
|
|
|
| ||
Continuing operations | $ |
| (0.22 | ) | $ |
| (0.16 | ) |
Discontinued operations | $ |
| 0.01 |
| $ |
| 0.02 |
|
Net Income (Loss) | $ |
| (0.21 | ) | $ |
| (0.14 | ) |
|
|
|
|
|
|
| ||
Net Income (Loss) | $ |
| (116 | ) | $ |
| (74 | ) |
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
| ||
Change in fair value of derivatives |
|
| 3 |
|
|
| (23 | ) |
Foreign currency translation adjustments |
|
| (2 | ) |
|
| 3 |
|
Total Other comprehensive income (loss), net of tax: |
|
| 1 |
|
|
| (20 | ) |
Comprehensive Income (Loss) Before Noncontrolling Interests |
|
| (115 | ) |
|
| (94 | ) |
Comprehensive income (loss) attributable to noncontrolling interests |
|
| (6 | ) |
|
| (12 | ) |
Comprehensive Income (Loss) Attributable to Alight, Inc. | $ |
| (109 | ) | $ |
| (82 | ) |
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
4
Alight, Inc.
CondensedConsolidated Statements of Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
| Total |
|
|
|
|
| Total |
| ||||||||||||||||
|
| Common |
|
| Treasury |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
| Alight, Inc. |
|
| Noncontrolling |
|
| Stockholders' |
| ||||||||||||||||
(in millions) |
| Stock |
|
| Stock |
|
| Capital |
|
| Deficit |
|
| Income |
|
| Equity |
|
| Interest |
|
| Equity |
| ||||||||||||||||
Balance at December 31, 2023 |
| $ |
| — |
|
| $ |
| (52 | ) |
| $ |
| 4,946 |
|
| $ |
| (503 | ) |
| $ |
| 71 |
|
| $ |
| 4,462 |
|
| $ |
| 280 |
|
| $ |
| 4,742 |
|
Net income |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (114 | ) |
|
|
| — |
|
|
|
| (114 | ) |
|
|
| (2 | ) |
|
|
| (116 | ) |
Other comprehensive income, net |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 4 |
|
|
|
| 4 |
|
|
|
| (4 | ) |
|
|
| — |
|
Conversion of noncontrolling interest |
|
|
| — |
|
|
|
| — |
|
|
|
| 199 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 199 |
|
|
|
| (264 | ) |
|
|
| (65 | ) |
Share-based compensation expense |
|
|
| — |
|
|
|
| — |
|
|
|
| 28 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 28 |
|
|
|
| — |
|
|
|
| 28 |
|
Shares withheld in lieu of taxes |
|
|
| — |
|
|
|
| — |
|
|
|
| (57 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (57 | ) |
|
|
| — |
|
|
|
| (57 | ) |
Share repurchases |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Other |
|
|
| — |
|
|
|
| — |
|
|
|
| (3 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (3 | ) |
|
|
| (1 | ) |
|
|
| (4 | ) |
Balance at March 31, 2024 |
| $ |
| — |
|
| $ |
| (52 | ) |
| $ |
| 5,113 |
|
| $ |
| (617 | ) |
| $ |
| 75 |
|
| $ |
| 4,519 |
|
| $ |
| 9 |
|
| $ |
| 4,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
| Total |
|
|
|
|
| Total |
| |||||||||||||||||
|
| Common |
|
|
| Treasury | Paid-in |
|
| Retained |
|
| Comprehensive |
|
| Alight, Inc. |
|
| Noncontrolling |
|
| Stockholders' |
| |||||||||||||||||
|
| Stock |
|
|
| Stock | Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
|
| Interest |
|
| Equity |
| |||||||||||||||||
Balance at December 31, 2022 |
| $ |
| — |
|
| $ |
| (12 | ) |
| $ |
| 4,514 |
|
| $ |
| (158 | ) |
| $ |
| 95 |
|
| $ |
| 4,439 |
|
| $ |
| 650 |
|
| $ |
| 5,089 |
|
Net loss |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (68 | ) |
|
|
| — |
|
|
|
| (68 | ) |
|
|
| (6 | ) |
|
|
| (74 | ) |
Other comprehensive income (loss), net |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (14 | ) |
|
|
| (14 | ) |
|
|
| (6 | ) |
|
|
| (20 | ) |
Conversion of non-controlling interest |
|
|
| — |
|
|
|
| — |
|
|
|
| 145 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 145 |
|
|
|
| (194 | ) |
|
|
| (49 | ) |
Share-based compensation expense |
|
|
| — |
|
|
|
| — |
|
|
|
| 37 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 37 |
|
|
|
| — |
|
|
|
| 37 |
|
Shares vested, net of shares |
|
|
| — |
|
|
|
| — |
|
|
|
| (6 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (6 | ) |
|
|
| — |
|
|
|
| (6 | ) |
Share repurchases |
|
|
| — |
|
|
|
| (10 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (10 | ) |
|
|
| — |
|
|
|
| (10 | ) |
Balance at March 31, 2023 |
| $ |
| — |
|
| $ |
| (22 | ) |
| $ |
| 4,690 |
|
| $ |
| (226 | ) |
| $ |
| 81 |
|
| $ |
| 4,523 |
|
| $ |
| 444 |
|
| $ |
| 4,967 |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
5
Alight, Inc.
CondensedConsolidated Statements of Cash Flows
(Unaudited)
|
| Three Months Ended |
| Three Months Ended |
| ||||
|
| March 31, |
| March 31, |
| ||||
(in millions) |
| 2024 |
| 2023 |
| ||||
Operating activities: |
|
|
|
|
| ||||
Net income (loss) |
| $ |
| (116 | ) | $ |
| (74 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
| ||
Depreciation |
|
|
| 29 |
|
|
| 24 |
|
Intangible asset amortization |
|
|
| 80 |
|
|
| 80 |
|
Noncash lease expense |
|
|
| 5 |
|
|
| 6 |
|
Financing fee and premium amortization |
|
|
| (1 | ) |
|
| (1 | ) |
Share-based compensation expense |
|
|
| 28 |
|
|
| 37 |
|
(Gain) loss from change in fair value of financial instruments |
|
|
| 21 |
|
|
| 25 |
|
(Gain) loss from change in fair value of tax receivable agreement |
|
|
| 55 |
|
|
| 8 |
|
Release of unrecognized tax provision |
|
|
| — |
|
|
| (1 | ) |
Deferred tax expense (benefit) |
|
|
| (30 | ) |
|
| (7 | ) |
Other |
|
|
| — |
|
|
| 1 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
| ||
Accounts receivable |
|
|
| 48 |
|
|
| 40 |
|
Accounts payable and accrued liabilities |
|
|
| (63 | ) |
|
| (117 | ) |
Other assets and liabilities |
|
|
| 44 |
|
|
| 51 |
|
Cash provided by operating activities |
| $ |
| 100 |
| $ |
| 72 |
|
Investing activities: |
|
|
|
|
|
|
| ||
Capital expenditures |
|
|
| (36 | ) |
|
| (45 | ) |
Cash used in investing activities |
| $ |
| (36 | ) | $ |
| (45 | ) |
Financing activities: |
|
|
|
|
|
|
| ||
Net increase (decrease) in fiduciary liabilities |
|
|
| 60 |
|
|
| (121 | ) |
Repayments to banks |
|
|
| (6 | ) |
|
| (6 | ) |
Principal payments on finance lease obligations |
|
|
| (9 | ) |
|
| (7 | ) |
Payments on tax receivable agreements |
|
|
| (62 | ) |
|
| (7 | ) |
Tax payment for shares/units withheld in lieu of taxes |
|
|
| (57 | ) |
|
| (6 | ) |
Deferred and contingent consideration payments |
|
|
| — |
|
|
| (3 | ) |
Repurchase of shares |
|
|
| — |
|
|
| (10 | ) |
Cash used in financing activities |
| $ |
| (74 | ) | $ |
| (160 | ) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
| (2 | ) |
|
| — |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
| (12 | ) |
|
| (133 | ) |
Cash, cash equivalents and restricted cash at beginning of period(a) |
|
|
| 1,759 |
|
|
| 1,759 |
|
Cash, cash equivalents and restricted cash at end of period(a) |
| $ |
| 1,747 |
| $ |
| 1,626 |
|
|
|
|
|
|
|
|
| ||
Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets(a) |
|
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
| 286 |
| $ |
| 239 |
|
Restricted cash included in fiduciary assets |
|
|
| 1,461 |
|
|
| 1,387 |
|
Total cash, cash equivalents and restricted cash |
| $ |
| 1,747 |
| $ |
| 1,626 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
| ||
Fixed asset additions acquired through finance leases |
| $ |
| 52 |
| $ |
| 4 |
|
Right of use asset additions acquired through operating leases |
|
|
| 8 |
|
|
| 1 |
|
(a) The cash flows related to discontinued operations have not been separated and are included in the valueCondensed Consolidated Statements of trustCash Flows. The Cash and cash equivalents and Restricted cash included in fiduciary assets in each case net ofamounts presented above differ from the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsors will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsors will have to indemnify the Trust AccountCondensed Consolidated Balance Sheets due to claimscash and fiduciary assets included in Current assets held for sale.
The accompanying Notes are an integral part of creditors by endeavoringthese Condensed Consolidated Financial Statements.
6
Alight, Inc.
Notes to have all vendors, service providers (other than the Company’s independent public accountants), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.Unaudited Condensed Consolidated Financial Statements
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Presentation and Nature of Business
Basis of Presentation
The accompanying unaudited condensed financial statementsCondensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto includedConsolidated Financial Statements contained in the Company’s final prospectusAnnual Report on Form 10-K for its Initial Public Offering asthe fiscal year ended December 31, 2023, filed with the SECSecurities and Exchange Commission (“SEC”) on May 28, 2020, as well asFebruary 29, 2024. In the audited balance sheet includedopinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. All intercompany transactions and balances have been eliminated upon consolidation.
On July 2, 2021 (the “Closing Date”), Alight Holding Company, LLC (the "Predecessor" or "Alight Holdings") completed a business combination (the "Business Combination") with a special purpose acquisition company. On the Closing Date, pursuant to the Business Combination Agreement, the special purpose acquisition company became a wholly owned subsidiary of Alight, Inc. (“Alight”, the “Company”, “we” “us” “our” or the “Successor”). As of March 31, 2024, Alight owned approximately 99% of the economic interest in the Company’s Current Report on Form 8-K, as filed with the SEC on June 4, 2020. The interim results for the three months ended June 30, 2020Predecessor and for the period from March 26, 2020 (inception) through June 30, 2020 are not necessarily indicativehad 100% of the results to be expected forvoting power and controlled the year ending December 31, 2020 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a)management of the Securities Act,Predecessor. The non-voting ownership percentage held by noncontrolling interest was less than 1% as modified byof March 31, 2024.
On March 20, 2024, Alight, Inc. entered into a definitive agreement (the “Disposition Agreement”) to sell its Professional Services segment and its Payroll & HCM Outsourcing businesses within the Jumpstart Our Business Startups ActEmployer Solutions segment (“Payroll and Professional Services business”) for a purchase price of 2012up to approximately $1.2 billion, in the form of $1 billion in cash and up to $200 million in seller notes, of which $150 million is contingent upon the Payroll & Professional Services business 2025 financial performance, subject to certain adjustments (the “JOBS Act”“Disposition”), and it may take advantage. As a result of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply withthis agreement, the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparisonresults of the Company’s Payroll and Professional Services businesses are reported separately as discontinued operations, net of tax, in our condensed consolidated statements of comprehensive income (loss) for all periods presented and its assets and liabilities are presented in our condensed consolidated balance sheets as assets and liabilities held for sale. The transaction is expected to close by mid-year 2024, subject to customary closing conditions, including regulatory approvals.
The Company's cash flows are presented inclusive of discontinued operations on the condensed consolidated statement of cash flows for all periods presented. The significant operating and investing non-cash components included in our condensed consolidated statement of cash flows for discontinued operations are included in Note 4.
Nature of Business
We are a leading cloud-based provider of integrated digital human capital and business solutions. We have an unwavering belief that a company’s success starts with its people, and our solutions connect human insights with technology. The Alight Worklife® employee engagement platform provides a seamless customer experience by combining content, plus artificial intelligence (“AI”) and data analytics to enable Alight’s business process as a service ("BPaaS") model. Our mission-critical solutions enable employees to enrich their health, wealth and wellbeing which helps global organizations achieve a high-performance culture.
Our primary business, Employer Solutions, is driven by our Alight Worklife platform, and includes total employee wellbeing, integrated benefits administration, healthcare navigation, financial statementswellbeing, leaves solutions, and retiree healthcare. We leverage data across all interactions and activities to improve the employee experience, reduce operational costs and better inform management processes and decision-making. Our clients’ employees benefit from an integrated platform and user experience, coupled with another public company which is neither an emerging growth company nor an emerging growth company which has opted outa full-service customer care center, helping them manage the full life cycle of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.their health wealth and wellbeing.
2. Accounting Policies and Practices
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
Use of Estimates
The preparation of condensed financial statementsthe accompanying Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosuredisclosures of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of revenuesreserves and expenses duringexpenses.
These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the reporting period.
Makingcurrent economic environment. Management believes its estimates requires management to exercise significant judgment. It is at least reasonably possible thatbe reasonable given the estimate ofcurrent facts available. Management adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, and foreign currency exchange rate movements increase the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considereduncertainty inherent in formulating its estimate, could change in the near term due to one or moresuch estimates and assumptions. As future events. Accordingly, theevents and their effects cannot be predicted with certainty, actual results could differ significantly from thosethese estimates. Changes in estimates resulting from continuing changes in the economic environment would, if applicable, be reflected in the financial statements in future periods.
7
New Accounting Pronouncements Not Yet Adopted
CashIn November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and Cash Equivalents
interim basis. This guidance will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company considers all short-term investments with an original maturityis currently evaluating the standard to determine the impact of three monthsadoption to its condensed consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or less when purchased to be cash equivalents.retrospectively. The Company did not have any cash equivalents asis currently evaluating the standard to determine the impact of June 30, 2020.adoption to its condensed consolidated financial statements and disclosures.
3. Revenue from Contracts with Customers
Class A Common Stock SubjectThe majority of the Company’s revenue is highly recurring and is derived from contracts with customers to Possible Redemption
provide integrated, cloud-based human capital solutions that empower clients and their employees to manage their health, wealth and HR needs. The Company’s revenues are disaggregated by recurring and project revenues within each reportable segment. Recurring revenues are typically longer term in nature and more predictable on an annual basis, while project revenues consist of project work of a shorter duration. See Note 12 “Segment Reporting” for quantitative disclosures of recurring and project revenues by reportable segment. The Company’s reportable segment is Employer Solutions. Employer Solutions is driven by our digital, software and AI-led capabilities powered by the Alight Worklife® platform and spanning total employee wellbeing and engagement, including integrated benefits administration, healthcare navigation, financial health and employee wellbeing. The Company accounts forbelieves the Employer Solutions revenue category depicts how the nature, amount, timing, and uncertainty of its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrumentrevenue and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within thecash flows are affected by economic factors.
Revenues are recognized when control of the holder or subjectpromised services is transferred to redemption upon the occurrence of uncertain events not solely withincustomer in the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rightsamount that are consideredbest reflects the consideration to which the Company expects to be outsideentitled in exchange for those services. The majority of the Company’s controlrevenue is recognized over time as the customer simultaneously receives and subjectconsumes the benefits of our services. We may occasionally be entitled to occurrence of uncertain future events. Accordingly, at June 30, 2020,a fee based on achieving certain performance criteria or contract milestones. To the 99,477,346 shares of Class A common stock subject to possible redemption are presented as temporary equity, outsideextent that we cannot estimate with reasonable assurance the likelihood that we will achieve the performance target, we will constrain this portion of the stockholders’ equity sectiontransaction price and recognize it when or as the uncertainty is resolved. Any taxes assessed on revenues relating to services provided to our clients are recorded on a net basis. All of the Company’s condensed balance sheet.revenues are described in more detail below.
Offering CostsAdministrative Services
We provide benefits and human resource services across all of our solutions, which are highly recurring. The Company’s contracts may include administration services across one or multiple solutions and typically have three to five-year terms with mutual renewal options.
Offering costsThese contracts typically consist of underwriting, legal, accountingan implementation phase and an ongoing administration phase:
Implementation phase – In connection with the Company’s long-term agreements, implementation efforts are often necessary to set up clients and their human resource or benefit programs on the Company’s systems and operating processes. Work performed during the implementation phase is considered a set-up activity because it does not transfer a service to the customer. Therefore, it is not a separate performance obligation. As these agreements are longer term in nature, our contracts generally provide that if the client terminates a contract, we are entitled to an additional payment for services performed through the termination date designed to recover our up-front costs of implementation. Any fees received from the customer as part of the implementation are, in effect, an advance payment for the future ongoing administration services to be provided.
Ongoing administration services phase – For all solutions, the ongoing administration phase includes a variety of plan and system support services. More specifically, these services include data management, calculations, reporting, fulfillment/communications, compliance services, call center support, and in our Health Solutions agreements, annual on-boarding and enrollment support. While there are a variety of activities performed across all solutions, the overall nature of the obligation is to provide integrated administration solutions to the customer. The agreement represents a stand-ready obligation to perform these activities across all solutions on an as-needed basis. The customer obtains value from each period of service, and each time increment (i.e., each month, or each benefit cycle in the case of our Health Solutions arrangements) is distinct and substantially the same. Accordingly, the ongoing administration services for each solution represents a series and each series (i.e., each month, or each benefit cycle including the enrollment period in the case of our Health Solutions arrangements) of distinct services are deemed to be a single performance obligation. In agreements that include multiple performance obligations, the transaction price related to each performance obligation is based on a relative stand-alone selling
8
price basis. We establish the stand-alone selling price using a suitable estimation method, which includes a market assessment approach using observable market prices the Company charges separately for similar solutions to similar customers, or an expected cost plus margin approach.
Our contracts with our clients specify the terms and conditions upon which the services are based. Fees for these services are primarily based on a contracted fee charged per participant per period (e.g., monthly or annually, as applicable). These contracts may also include fixed components, including lump-sum implementation fees. Our fees are not typically payable until the commencement of the ongoing administration phase. Once fees become payable, payment is typically due on a monthly basis as we perform under the contract, and we are entitled to be reimbursed for work performed to date in the event of termination.
For Health Solutions administration services, each benefits cycle inclusive of the enrollment period represents a time increment under the series guidance and is a single performance obligation. Although ongoing fees are typically not payable until the commencement of the ongoing administrative phase, we begin transferring services to our customers approximately four months prior to payments being due as part of our annual enrollment services. Although our per-participant fees are considered variable, they are typically predictable in nature, and therefore we do not generally constrain any portion of our transaction price estimates. We use an input method based on the labor costs incurred relative to total labor costs as the measure of progress in satisfying our Health Solutions performance obligation commencing when the customer’s annual enrollment services begin. Given that the Health Solutions enrollment and administrative services are stand-ready in nature, it can be difficult to estimate the total expected efforts or hours we will incur for a particular benefits cycle. Therefore, the input measure is based on the historical effort expended, which is measured as labor cost.
In the normal course of business, we enter into change orders or other contract modifications to add or modify services provided to the customer. We evaluate whether these modifications should be accounted for as separate contracts or a modification to an existing contract. To the extent that the modification changes a promise that forms part of the underlying series, the modification is not accounted for as a separate contract.
Other Contracts
In addition to the ongoing administration services, the Company also has services across all solutions that represent separate performance obligations and that are often shorter in duration, such as our participant financial advisory services and enrollment services not bundled with ongoing administration services.
Fee arrangements can be in the form of fixed-fee, time-and-materials, or fees based on assets under management. Payment is typically due on a monthly basis as we perform under the contract, and we are entitled to be reimbursed for work performed to date in the event of termination.
Services may represent stand-ready obligations that meet the series provision, in which case all variable consideration is allocated to each distinct time increment.
Other services are recognized over-time based on a method that faithfully depicts the transfer of value to the customer, which may be based on the value of labor hours worked or time elapsed, depending on the facts and circumstances.
The majority of the fees for enrollment services not bundled with ongoing administration services may be in the form of commissions received from insurance carriers for policy placement and are variable in nature. These annual enrollment services include both employer-sponsored arrangements that place both retiree Medicare coverage and voluntary benefits and direct-to-consumer Medicare placement. Our performance obligations under these annual enrollment services are typically completed over a short period upon which a respective policy is placed or confirmed with no ongoing fulfillment obligations. For both the employer-sponsored and direct-to-consumer arrangements, we recognize the majority of the placement revenue in the fourth quarter of the calendar year, which is when most of the placement or renewal activity occurs. However, the Company may continue to receive commissions from carriers until the respective policy lapses or is canceled. The Company bases the estimates of total transaction price on supportable evidence from an analysis of past transactions, and only includes amounts that are probable of being received or not refunded.
As it relates to the direct-to-consumer arrangements, because our obligation is complete upon placement of the policy, we recognize revenue at that date, which includes both compensation due to us in the first year as well as an estimate of the total renewal commissions that will be received over the lifetime of the policy. The variable consideration estimate requires significant judgement, and will vary based on product type, estimated commission rates and the expected lives of the respective policies and other expenses incurred throughfactors.
For both the Initial Public Offeringemployer-sponsored and direct-to-customer arrangements, the estimated total transaction price may differ from the ultimate amount of commissions we may collect. Consequently, the estimate of total transaction price is adjusted over time as the Company receives confirmation of cash received, or as other information becomes available.
A portion of the Company's revenue is subscription-based where monthly fees are paid to the Company. The subscription-based revenue is recognized straight-line over the contract term, which is generally three years.
9
The Company has elected to apply practical expedients to not disclose the revenue related to unsatisfied performance obligations if (1) the contract has an original duration of one year or less, or (2) the variable consideration is allocated entirely to an unsatisfied performance obligation which is recognized as a series of distinct goods and services that form a single performance obligation.
Contract Costs
Costs to obtain a Contract
The Company capitalizes incremental costs to obtain a contract with a customer that are directly relatedexpected to be recovered. Assets recognized for the costs to obtain a contract, which primarily includes sales commissions paid in relation to the Initial Public Offering. Offeringinitial contract, are amortized over the expected life of the underlying customer relationships, which is generally 7 years for our leaves solutions and generally 15 years for all of our other solutions. For situations where the duration of the contract is 1 year or less, the Company has applied a practical expedient and recognized the costs amountingof obtaining a contract as an expense when incurred. These costs are recorded in Cost of services, exclusive of depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss).
Costs to $57,949,954 were chargedfulfill a Contract
The Company capitalizes costs to stockholders’ equityfulfill contracts which includes highly customized implementation efforts to set up clients and their human resource or benefit programs. Assets recognized for the costs to fulfill a contract are amortized on a systematic basis over the expected life of the underlying customer relationships, which is generally 7 years for our leaves solutions and generally 15 years for all of our other solutions. Amortization for all contracts costs is recorded in Cost of services, exclusive of depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss), see Note 5 “Other Financial Data”.
4. Discontinued Operations and Assets Held for Sale
On March 20, 2024, the Company entered into the Disposition Agreement to sell its Payroll & Professional Services business to an affiliate of H.I.G. Capital for up to $1.2 billion, in the form of $1 billion in cash and up to $200 million in a seller notes, of which $150 million is contingent upon the completionPayroll & Professional Services business 2025 financial performance. The transaction is expected to close by mid-year 2024, subject to customary closing conditions, including regulatory approvals.
After the sale is complete, upon satisfaction or waiver of the Initial Public Offering.closing conditions, a number of services are expected to continue under a Transition Services Agreement.
10
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requiresfollowing tables presents the recognitioncarrying value of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis ofPayroll & Professional Services business as presented within assets and liabilities held for sale on our condensed consolidated balance sheets and results as reported in income (loss) from discontinued operations, net of tax, within our condensed consolidated statements of comprehensive income (loss) (in millions):
|
| March 31, |
|
| December 31, |
| ||||
|
| 2024 |
|
| 2023 |
| ||||
Assets |
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ |
| 30 |
|
| $ |
| 34 |
|
Receivables, net |
|
|
| 259 |
|
|
|
| 263 |
|
Other current assets |
|
|
| 63 |
|
|
|
| 59 |
|
Fiduciary assets |
|
|
| 1,211 |
|
|
|
| 1,167 |
|
Goodwill |
|
|
| 330 |
|
|
|
| — |
|
Intangible assets, net |
|
|
| 408 |
|
|
|
| — |
|
Fixed assets, net |
|
|
| 40 |
|
|
|
| — |
|
Deferred tax assets, net |
|
|
| 6 |
|
|
|
| — |
|
Other assets |
|
|
| 154 |
|
|
|
| — |
|
Current assets held for sale |
|
|
| 2,501 |
|
|
|
| 1,523 |
|
Goodwill |
|
|
| — |
|
|
|
| 331 |
|
Intangible assets, net |
|
|
| — |
|
|
|
| 418 |
|
Fixed assets, net |
|
|
| — |
|
|
|
| 40 |
|
Deferred tax assets, net |
|
|
| — |
|
|
|
| 3 |
|
Other assets |
|
|
| — |
|
|
|
| 156 |
|
Long-term assets held for sale |
| $ |
| — |
|
| $ |
| 948 |
|
|
|
|
|
|
|
|
| |||
Liabilities |
|
|
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ |
| 105 |
|
| $ |
| 119 |
|
Other current liabilities |
|
|
| 89 |
|
|
|
| 84 |
|
Fiduciary liabilities |
|
|
| 1,211 |
|
|
|
| 1,167 |
|
Deferred tax liabilities |
|
|
| — |
|
|
|
| — |
|
Other liabilities |
|
|
| 70 |
|
|
|
| — |
|
Current liabilities held for sale |
|
|
| 1,475 |
|
|
|
| 1,370 |
|
Deferred tax liabilities |
|
|
| — |
|
|
|
| — |
|
Other liabilities |
|
|
| — |
|
|
|
| 68 |
|
Long-term liabilities held for sale |
| $ |
| — |
|
| $ |
| 68 |
|
| Three Months Ended |
| ||||||
|
|
| ||||||
| 2024 |
| 2023 |
| ||||
Revenue | $ |
| 257 |
| $ |
| 245 |
|
Cost of services, exclusive of depreciation and amortization |
|
| 187 |
|
|
| 173 |
|
Depreciation and amortization |
|
| 3 |
|
|
| 2 |
|
Gross Profit |
|
| 67 |
|
|
| 70 |
|
|
|
|
|
|
|
| ||
Operating Expenses |
|
|
|
|
|
| ||
Selling, general and administrative |
|
| 37 |
|
|
| 34 |
|
Depreciation and intangible amortization |
|
| 8 |
|
|
| 9 |
|
Total Operating Expenses |
|
| 45 |
|
|
| 43 |
|
Income (loss) from Discontinued Operations |
|
| 22 |
|
|
| 27 |
|
Interest expense |
|
| - |
|
|
| - |
|
Other (income) expense, net |
|
| 2 |
|
|
| 2 |
|
Income (Loss) from Discontinued Operations Before Income Taxes |
|
| 20 |
|
|
| 25 |
|
Income tax expense (benefit) |
|
| 15 |
|
|
| 15 |
|
Net Income (Loss) from Discontinued Operations, Net of Tax | $ |
| 5 |
| $ |
| 10 |
|
The expense amounts reflected above represent only the direct costs attributable to the Payroll & Professional Services business and excludes allocations of corporate costs that will be retained following the sale. Neither the discontinued operations presented above, nor continuing operations, reflect the impact of any cost reimbursement that will be received under a Transition Services Agreement following the close of the transaction upon the satisfaction or waiver of closing conditions.
11
The Company's cash flows are presented inclusive of discontinued operations on the condensed consolidated statement of cash flows for all periods presented. The significant operating and investing non-cash components included in our condensed consolidated statement of cash flows for the expected future tax benefit to be derived from tax lossdiscontinued operations are as follows (in millions):
| Three Months Ended |
| ||||||
|
|
| ||||||
| 2024 |
| 2023 |
| ||||
Depreciation | $ |
| 3 |
| $ |
| 2 |
|
Intangible asset amortization | $ |
| 9 |
| $ |
| 9 |
|
Capital expenditures | $ |
| 5 |
| $ |
| 3 |
|
Share-based compensation expense | $ |
| — |
| $ |
| 3 |
|
5. Other Financial Data
Condensed Consolidated Balance Sheets Information
Receivables, net
The components of Receivables, net are as follows (in millions):
|
| March 31, |
|
|
| December 31, |
| ||||
|
| 2024 |
|
|
| 2023 |
| ||||
Billed and unbilled receivables |
| $ |
| 399 |
|
|
| $ |
| 442 |
|
Allowance for expected credit losses |
|
|
| (6 | ) |
|
|
|
| (7 | ) |
Balance at end of period |
| $ |
| 393 |
|
|
| $ |
| 435 |
|
Other current assets
The components of Other current assets are as follows (in millions):
|
| March 31, |
|
|
| December 31, |
| ||||
|
| 2024 |
|
|
| 2023 |
| ||||
Deferred project costs |
| $ |
| 22 |
|
|
| $ |
| 20 |
|
Prepaid expenses |
|
|
| 43 |
|
|
|
|
| 48 |
|
Commissions receivable |
|
|
| 66 |
|
|
|
|
| 107 |
|
Other |
|
|
| 86 |
|
|
|
|
| 85 |
|
Total |
| $ |
| 217 |
|
|
| $ |
| 260 |
|
Other assets
The components of Other assets are as follows (in millions):
|
| March 31, |
|
|
| December 31, |
| ||||
|
| 2024 |
|
|
| 2023 |
| ||||
Deferred project costs |
| $ |
| 242 |
|
|
| $ |
| 240 |
|
Operating lease right of use asset |
|
|
| 56 |
|
|
|
|
| 55 |
|
Commissions receivable |
|
|
| 20 |
|
|
|
|
| 22 |
|
Other |
|
|
| 28 |
|
|
|
|
| 24 |
|
Total |
| $ |
| 346 |
|
|
| $ |
| 341 |
|
The current and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portionnon-current portions of deferred tax assets will not be realized. Asproject costs relate to costs to obtain and fulfill contracts (see Note 3 “Revenue from Contracts with Customers”). Total amortization expense related to deferred project costs for each of June 30, 2020, the Company had a deferred tax asset of approximately $13,000, which had a full valuation allowance recorded against it of approximately $13,000.
The Company’s currently taxable income primarily consists of interest income on the Trust Account. The Company’s generalthree months ended March 31, 2024 and administrative costs are generally considered start-up costs2023 were $6 million, and are not currently deductible.recorded in Cost of services, exclusive of depreciation and amortization in the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss).
Other current assets and Other assets include the fair value of outstanding derivative instruments related to interest rate swaps. The balances in Other current assets as of March 31, 2024 and December 31, 2023 were $56 million and $60 million, respectively. The balances in Other assets as of March 31, 2024 and December 31, 2023 were $21 million and $17 million, respectively (see Note 13 “Derivative Financial Instruments” for additional information).
12
Other current liabilities
The components of Other current liabilities are as follows (in millions):
|
| March 31, |
|
|
| December 31, |
| ||||
|
| 2024 |
|
|
| 2023 |
| ||||
Deferred revenue |
| $ |
| 87 |
|
|
| $ |
| 97 |
|
Operating lease liabilities |
|
|
| 28 |
|
|
|
|
| 27 |
|
Finance lease liabilities |
|
|
| 22 |
|
|
|
|
| 10 |
|
Other |
|
|
| 145 |
|
|
|
|
| 99 |
|
Total |
| $ |
| 282 |
|
|
| $ |
| 233 |
|
Other liabilities
The components of Other liabilities are as follows (in millions):
|
| March 31, |
|
|
| December 31, |
| ||||
|
| 2024 |
|
|
| 2023 |
| ||||
Deferred revenue |
| $ |
| 45 |
|
|
| $ |
| 45 |
|
Operating lease liabilities |
|
|
| 62 |
|
|
|
|
| 65 |
|
Finance lease liabilities |
|
|
| 40 |
|
|
|
|
| 6 |
|
Other |
|
|
| 19 |
|
|
|
|
| 26 |
|
Total |
| $ |
| 166 |
|
|
| $ |
| 142 |
|
The current and non-current portions of deferred revenue relates to consideration received in advance of performance under client contracts. During the three months ended June 30, 2020March 31, 2024 and for the period from March 26, 2020 (inception) through June 30, 2020, the Company recorded income tax expense2023, revenue of approximately $16,000, primarily$77 million and $64 million was recognized that was recorded as deferred revenue at the beginning of each period, respectively.
Other current liabilities as of March 31, 2024 and December 31, 2023, included the current portion of tax receivable agreement liability of $89 million and $62 million, respectively (see Note 15 "Tax Receivable Agreement" for additional information).
Other current liabilities and Other liabilities include the fair value of outstanding derivative instruments related to interest income earned onrate swaps. There were no interest rate swaps recorded in Other current liabilities as of both March 31, 2024 and December 31, 2023 (see Note 13 “Derivative Financial Instruments” for additional information).
6. Goodwill and Intangible assets, net
The changes in the Trust Account. net carrying amount of goodwill are as follows (in millions):
Total | ||||
Balance as of December 31, 2023 | $ | 3,212 | ||
Foreign currency translation | — | |||
Balance at March 31, 2024 | $ | 3,212 |
Intangible assets by asset class are as follows (in millions):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||||||||||||||||||||||||
|
| Gross |
|
|
|
|
|
| Net |
|
| Gross |
|
|
|
|
|
| Net |
| ||||||||||
|
| Carrying |
|
| Accumulated |
|
| Carrying |
|
| Carrying |
|
| Accumulated |
|
| Carrying |
| ||||||||||||
|
| Amount |
|
| Amortization |
|
| Amount |
|
| Amount |
|
| Amortization |
|
| Amount |
| ||||||||||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Customer-related and contract based intangibles |
| $ |
| 3,193 |
|
| $ |
| 583 |
|
| $ |
| 2,610 |
|
| $ |
| 3,192 |
|
| $ |
| 529 |
|
| $ |
| 2,663 |
|
Technology related intangibles |
|
|
| 230 |
|
|
|
| 104 |
|
|
|
| 126 |
|
|
|
| 230 |
|
|
|
| 94 |
|
|
|
| 136 |
|
Trade name |
|
|
| 408 |
|
|
|
| 78 |
|
|
|
| 330 |
|
|
|
| 408 |
|
|
|
| 71 |
|
|
|
| 337 |
|
Total |
| $ |
| 3,831 |
|
| $ |
| 765 |
|
| $ |
| 3,066 |
|
| $ |
| 3,830 |
|
| $ |
| 694 |
|
| $ |
| 3,136 |
|
13
Amortization expense from finite-lived intangible assets for each of the three months ended March 31, 2024 and 2023, was $71 million and $71 million, respectively. Amortization expense from finite-lived intangible assets was recorded in Depreciation and intangible amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss).
The following table reflects intangible assets net carrying amount and weighted-average remaining useful lives as of March 31, 2024 and December 31, 2023 (in millions, except for years):
|
| March 31, 2024 |
|
| December 31, 2023 | |||||||||||||
|
| Net |
|
| Weighted-Average |
|
| Net |
|
| Weighted-Average | |||||||
|
| Carrying |
|
| Remaining |
|
| Carrying |
|
| Remaining | |||||||
|
| Amount |
|
| Useful Lives |
|
| Amount |
|
| Useful Lives | |||||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
| |||||||
Customer-related and contract-based intangibles |
| $ |
| 2,610 |
|
|
|
| 12.2 |
|
| $ |
| 2,663 |
|
|
| 12.5 |
Technology-related intangibles |
|
|
| 126 |
|
|
|
| 3.3 |
|
|
|
| 136 |
|
|
| 3.5 |
Trade name |
|
|
| 330 |
|
|
|
| 12.1 |
|
|
|
| 337 |
|
|
| 12.4 |
Total |
| $ |
| 3,066 |
|
|
|
|
|
| $ |
| 3,136 |
|
|
|
|
Subsequent to March 31, 2024, the annual amortization expense is expected to be as follows (in millions):
|
| Customer-Related |
|
| Technology |
|
| Trade |
|
|
| ||||||||
|
| and Contract Based |
|
| Related |
|
| Name |
|
|
| ||||||||
|
| Intangibles |
|
| Intangibles |
|
| Intangibles |
| Total |
| ||||||||
2024 (April - December) |
| $ |
| 160 |
|
| $ |
| 29 |
|
| $ |
| 22 |
| $ |
| 211 |
|
2025 |
|
|
| 214 |
|
|
| 39 |
|
|
|
| 28 |
|
|
| 281 |
| |
2026 |
|
|
| 214 |
|
|
| 38 |
|
|
|
| 27 |
|
|
| 279 |
| |
2027 |
|
|
| 214 |
|
|
|
| 19 |
|
|
|
| 27 |
|
|
| 260 |
|
2028 |
|
|
| 214 |
|
|
|
| 1 |
|
|
|
| 27 |
|
|
| 242 |
|
Thereafter |
|
|
| 1,594 |
|
|
| — |
|
|
|
| 199 |
|
|
| 1,793 |
| |
Total amortization expense |
| $ |
| 2,610 |
|
| $ |
| 126 |
|
| $ |
| 330 |
| $ |
| 3,066 |
|
7. Income Taxes
The Company’s effective tax rates for the three months ended March 31, 2024 and 2023 were 18% and 21%, respectively. The change in the effective tax rates was primarily driven by the Company’s non-deductible portion of stock compensation expense. The effective tax rate for the three months ended June 30, 2020 and forMarch 31, 2024 was lower than the period from March 26, 2020 (inception) through June 30, 2020 was approximately 104% and 111%, respectively, which differs from the expected21% U.S. statutory corporate income tax raterate. This difference is primarily due to the start-upnon-deductible portion of stock compensation expense.
8. Debt
Debt outstanding consisted of the following (in millions):
|
|
|
| March 31, |
|
| December 31, |
| ||||
|
| Maturity Date |
| 2024 |
|
| 2023 |
| ||||
Fifth Incremental Term Loans(1) |
| August 31, 2028 |
|
|
| 2,482 |
|
|
|
| 2,488 |
|
Secured Senior Notes |
| June 1, 2025 |
|
|
| 305 |
|
|
|
| 306 |
|
$300 million Revolving Credit Facility, Amended |
| August 31, 2026 |
|
|
| — |
|
|
|
| — |
|
Total debt, net |
|
|
|
|
| 2,787 |
|
|
|
| 2,794 |
|
Less: current portion of long-term debt, net |
|
|
|
|
| (25 | ) |
|
|
| (25 | ) |
Total long-term debt, net |
|
|
| $ |
| 2,762 |
|
| $ |
| 2,769 |
|
Term Loan
In May 2017, the Company entered into a 7-year Initial Term Loan. During November 2017 and November 2019, the Company entered into Incremental Term Loans under identical terms as the Initial Term Loan. In August 2020, the Company refinanced a portion of the Term Loan by paying down $270 million of principal using the proceeds from the August 2020 Unsecured Senior Notes issuance, extending the maturity date on $1,986 million of the balance to October 31, 2026, and adding an interest rate floor of 50 bps (the "Amended Term Loan"). As part of the consideration transferred in the Business Combination, $556 million of principal was repaid on
14
the portion of the Term Loan that was not amended. In August 2021, the Company entered into a new Third Incremental Term Loan facility for $525 million that matures August 31, 2028. In January 2022, the Company refinanced the Amended Term Loan and the Third Incremental Term Loan to have a concurrent maturity date of August 31, 2028 and updated interest rate terms as described below (the "B-1 Term Loan"). In March 2023, the Company refinanced the remaining portion of the 7-year Term Loan in full by increasing the existing B-1 Term Loan by approximately $65 million under identical terms as the B-1 Term Loan.
Interest rates on the B-1 Term Loan borrowings are not currently deductible.
ASC 740 also clarifiesbased on the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribesSecured Overnight Financing Rate ("SOFR") plus a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2020. margin. The Company is currently not awarerequired to make principal payments at the end of any issueseach fiscal quarter based on defined terms in the agreement with the remaining principal balances due on the maturity dates.
In September 2023, the Company entered into Amendment No. 9 to Credit Agreement with a syndicate of lenders to establish a new class of Fifth Incremental Term Loans with an aggregate principal amount of $2,507 million to reprice the outstanding Initial Term B-1 Loans due August 31, 2028 by reducing the applicable rate from a SOFR + 3.00% to SOFR + 2.75%. The Company utilized swap agreements to fix a portion of the floating interest rates through December 2026 (see Note 13 “Derivative Financial Instruments”).
During each of the three months ended March 31, 2024 and 2023, the Company made total principal payments of $6 million.
Secured Senior Notes
In May 2020, the Company issued $300 million of Secured Senior Notes. These Secured Senior Notes have a maturity date of June 1, 2025 and accrue interest at a fixed rate of 5.75% per annum, payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2020.
Revolving Credit Facility
In May 2017, the Company entered into a 5-year $250 million revolving credit facility with a multi-bank syndicate with a maturity date of May 1, 2022. During August 2020, the Company extended the maturity date for $226 million of the revolving credit facility to October 31, 2024. In August 2021, the Company replaced and refinanced the revolving credit facilities with a $294 million revolving credit facility with a maturity date of August 31, 2026. In March 2023, the Company amended and upsized the revolving credit facility to $300 million and updated the benchmark reference rate from LIBOR to Term SOFR. No changes were made to the maturity date. At March 31, 2024, approximately $3 million of unused letters of credit related to various insurance policies and real estate leases were issued under review that could result in significant payments, accruals or material deviation from its position.the revolving credit facility and there were no borrowings. The Company is subjectrequired to income tax examinations by major taxing authorities since inception.make periodic payments for commitment fees and interest related to the revolving credit facility and outstanding letters of credit. During each of the three months ended March 31, 2024 and 2023, the Company made immaterial payments related to these fees.
Financing Fees, Premiums and Interest Expense
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offeringcapitalized financing fees and private placement to purchase 49,633,333 shares of Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s unaudited condensed statements of operations include a presentation of income (loss) per share for common shares subject to redemption in a manner similarpremiums related to the two-class method of income per share. Net income per common share, basicTerm Loan, Revolver and diluted, for Class A redeemable common stock is calculated by dividingSecured Senior Notes issued. These financing fees and premiums were recorded as an offset to the aggregate debt balances and are being amortized over the respective loan terms.
Total interest income earned onexpense related to the Trust Account of $124,456debt instruments for the three months ended June March 31, 2024 and 2023 was $55 million and $51 million, respectively, which included a benefit of $1 million for each of the three months ended March 31, 2024 and 2023. Interest expense is recorded in Interest expense in the Condensed Consolidated Statements of Comprehensive Income (Loss), and is net of interest rate swap derivative gains recognized.
Principal Payments
Aggregate remaining contractual principal payments as of March 31, 2024 are as follows (in millions):
2024 |
| $ |
| 19 |
|
2025 |
|
|
| 325 |
|
2026 |
|
|
| 25 |
|
2027 |
|
|
| 25 |
|
2028 |
|
|
| 2,393 |
|
Total payments |
| $ |
| 2,787 |
|
9. Stockholders' Equity
Preferred Stock
Upon the Closing Date of the Business Combination, 1,000,000 preferred shares, par value $0.0001 per share, were authorized. There were no preferred shares issued and outstanding as of March 31, 2024.
Class A Common Stock
15
As of March 31, 2024, 549,961,741 shares of Class A Common Stock, including 712,237 of shares of unvested Class A Common Stock, were legally issued and outstanding. Holders of shares of Class A Common Stock are entitled to one vote per share, and together with the holders of shares of Class B Common Stock, will participate ratably in any dividends that may be declared by the Company’s Board of Directors.
Class B Common Stock
Upon the Closing Date of the Business Combination, certain equityholders of Alight Holdings received earnouts (the "Seller Earnouts") that resulted in the issuance of a total of 14,999,998 Class B instruments (including 312,208 unvested shares of Class B Common Stock related to employee compensation as of March 31, 2024) to the equityholders of the Predecessor. The equityholders of the Predecessor that exchanged their Predecessor Class A units for shares of Class A Common Stock in the Business Combination received shares of Class B Common Stock, and the equityholders of the Predecessor that continue to hold Class A units of Alight Holdings (“Continuing Unitholders”) received Class B common units of Alight Holdings.
The Class B Common Stock and Class B common units are not entitled to a vote and accrue dividends equal to amounts declared per corresponding share of Class A Common Stock and Class A unit; however, such dividends are paid if and when such share of Class B Common Stock or Class B unit converts into a share of Class A Common Stock or Class A unit. If any of the shares of Class B Common Stock or Class B common units do not vest on or before the seventh anniversary of the Closing Date, such shares or units will be automatically forfeited and cancelled for no consideration and will not be entitled to receive any cumulative dividend payments.
These Class B instruments (excluding the unvested shares of Class B Common Stock related to employee compensation) are liability classified; refer to Note 14 “Financial Instruments” for additional information.
As further described below, there are two series of Class B instruments outstanding.
Class B-1
As of March 31, 2024, 4,933,087 shares of Class B-1 Common Stock were legally issued and outstanding, including 156,104 unvested shares of Class B-1 Common Stock related to employee compensation. Shares of Class B-1 Common Stock vest and automatically convert into shares of Class A Common Stock on a 1-for-1 basis if the volume weighted average price (“VWAP”) of the shares of Class A Common Stock equals or exceeds $12.50 per share for 20 or more trading days within a consecutive 30 2020-trading day period (or in the event of a change of control or liquidation event that implies a $12.50 per share valuation on a diluted basis).
To the extent any unvested share of Class B-1 Common Stock automatically converts into a share of Class A Common Stock, (i) such share or unit shall remain unvested in accordance with the terms and conditions of the applicable award agreement until it vests or is forfeited in accordance with the terms thereof and (ii) such share or unit shall be treated as unvested Class A consideration as if such share or unit was part of the unvested Class A consideration as of the Closing Date.
As of March 31, 2024, 2,566,912 Class B-1 common units of Alight Holdings were legally issued and outstanding. Class B-1 common units vest and automatically convert into Class A common units of Alight Holdings on a 1-for-1 basis if the VWAP of the shares of Class A Common Stock equals or exceeds $12.50 per share for 20 or more trading days within a consecutive 30-trading day period (or in the event of a change of control or liquidation event that implies a $12.50 per share valuation on a diluted basis).
Class B-2
As of March 31, 2024, 4,933,087 shares of Class B-2 Common Stock were legally issued and outstanding, including 156,104 unvested shares of Class B-2 Common Stock related to employee compensation. Shares of Class B-2 Common Stock vest and automatically convert into shares of Class A Common Stock on a 1-for-1 basis if the VWAP of the shares of Class A Common Stock equals or exceeds $15.00 per share for 20 or more trading days within a consecutive 30-trading day period (or in the event of a change of control or liquidation event that implies a $15.00 per share valuation on a diluted basis).
To the extent any unvested share of Class B-2 Common Stock automatically converts into a share of Class A Common Stock, (i) such share or unit shall remain unvested in accordance with the terms and conditions of the applicable award agreement until it vests or is forfeited in accordance with the terms thereof and (ii) such share or unit shall be treated as unvested Class A consideration as if such share or unit was part of the unvested Class A consideration as of the Closing Date.
As of March 31, 2024, 2,566,912 Class B-2 common units of Alight Holdings were legally issued and outstanding. Class B-2 common units vest and automatically convert into Class A common units of Alight Holdings on a 1-for-1 basis if the VWAP of the shares of Class A Common Stock equals or exceeds $15.00 per share for 20 or more trading days within a consecutive 30-trading day period (or in the event of a change of control or liquidation event that implies a $15.00 per share valuation on a diluted basis).
Class B-3
Upon the Closing Date of the Business Combination, 10,000,000 shares of Class B-3 Common Stock, par value $0.0001, were authorized. There are no shares of Class B-3 Common Stock issued and outstanding as of March 31, 2024.
Class V Common Stock
16
As of March 31, 2024, 1,189,156 shares of Class V Common Stock were legally issued and outstanding. Holders of Class V Common Stock are entitled to one vote per share and have no economic rights. The Class V Common Stock is held on a 1-for-1 basis with Class A Units in Alight Holdings held by Continuing Unitholders. The Class A Units, together with an equal number of shares of Class V Common Stock, can be exchanged for an equal number of shares of Class A Common Stock.
Class Z Common Stock
Upon the Closing Date of the Business Combination, a total of 8,671,507 Class Z instruments were issued to the equityholders of the Predecessor. The equityholders of the Predecessor that exchanged their Predecessor Class A units for shares of Class A Common Stock in the Business Combination received shares of Class Z Common Stock, and the Continuing Unitholders received Class Z common units of Alight Holdings. The Class Z instruments were issued to the equityholders of the Predecessor to allow for the re-allocation of the consideration paid to the holders of unvested management equity (i.e., the unvested shares of Class A, Class B-1, and Class B-2 Common Stock) to the equityholders of the Predecessor in the event such equity is forfeited under the terms of the applicable award agreement and will only vest in connection with any such forfeiture.
As of March 31, 2024, 578,099 shares of Class Z Common Stock 376,637 Class Z-A, 100,731 Class Z-B-1, and 100,731 Class Z-B-2) were legally issued and outstanding. Holders of shares of Class Z-A, Class Z-B-1 and Class Z-B-2 Common Stock are not entitled to voting rights. The Class Z shares convert into shares of Class A Common Stock, Class B-1 Common Stock or Class B-2 Common Stock, as applicable, in connection with the ultimate forfeiture of the shares of unvested Class A, unvested Class B-1, and unvested Class B-2 common stock issued to participating management holders.
As of March 31, 2024, 317,783 Class Z common units (207,039 Class Z-A, 55,372 Class Z-B-1, and 55,372 Class Z-B-2) were legally issued and outstanding. Holders of Class Z-A, Class Z-B-1 and Class Z-B-2 common units are not entitled to voting rights. The Class Z units convert into units of Alight Holdings Class A common units, Alight Holdings Class B-1 or Alight Holdings Class B-2 common units, as applicable, in connection with the ultimate forfeiture of the shares of unvested Class A, unvested Class B-1, and unvested Class B-2 common stock issued to participating management holders.
Class A Units
Holders of Alight Holdings Class A units can exchange all or any portion of their Class A units, together with the cancellation of an equal number of shares of Class V Common Stock, for a number of shares of Class A Common Stock equal to the number of exchanged Class A units. Alight has the option to cash settle any future exchange.
The Continuing Unitholders’ ownership of Class A units represents the noncontrolling interest of the Company, which is accounted for as permanent equity on the Condensed Consolidated Balance Sheets. As of March 31, 2024, there were 551,150,897 Class A Units outstanding, of which 549,961,741 are held by the Company and 1,189,156 are held by the noncontrolling interest of the Company.
The Alight Holdings limited liability company agreement contains provisions which require that a one-to-one ratio is maintained between each class of Alight Holdings units held by Alight and its subsidiaries (including the Alight Group, Inc. and certain tax blocker entities, but excluding subsidiaries of Alight Holdings) and the number of outstanding shares of the corresponding class of Alight common stock, subject to certain exceptions (including in respect of management equity in the form of options, rights or other securities which have not been converted into or exercised for Alight common stock). In addition, the Alight Holdings limited liability company agreement permits Alight, in its capacity as the managing member of Alight Holdings, to take actions to maintain such ratio, including undertaking stock splits, combinations, recapitalizations and exercises of the exchange rights of holders of Alight Holdings units.
Exchange of Class A Units
During the three months ended March 31, 2024, 27,773,062 Class A units and a corresponding number of shares of Class V Common Stock were exchanged for Class A Common Stock. As a result of the exchanges, Alight, Inc. increased its ownership in Alight Holdings and accordingly increased its equity by approximately $264 million, recorded in Additional paid-in capital. Pursuant to the Tax Receivable Agreement (the "TRA") that we entered into in connection with the Business Combination, described in Note 15 "Tax Receivable Agreement," the Class A unit exchanges created additional TRA liabilities of $85 million, with offsets to Additional paid-in-capital. An additional $20 million increase to Additional paid-in-capital was due to exchanges as a result of deferred tax assets due to our change in ownership.
Share Repurchase Program
On August 1, 2022, the Company's Board of Directors authorized a share repurchase program (the "Program"), under which the Company may repurchase up to $100 million of issued and outstanding shares of Class A Common Stock, par value $0.0001 per share, from time to time, depending on market conditions and alternate uses of capital. The Program has no expiration date and may be suspended or discontinued at any time. The Program does not obligate the Company to purchase any particular number of shares and there is no guarantee as to any number of shares being repurchased by the Company. On March 20, 2024, the Company’s Board of Directors authorized the repurchase of up to an additional $200 million of the Company’s Class A common stock, providing a total amount authorized for repurchase of $248 million.
17
During the three months ended March 31, 2024, there were no Class A Common Stock shares repurchased under the Program. Repurchased shares are reflected as Treasury Stock on the Condensed Consolidated Balance Sheets as a component of equity. Accordingly, as of March 31, 2024, the total amount authorized for repurchase remained $248 million.
The following table reflects the changes in our outstanding stock:
|
| Class A(2) |
|
| Class B-1 |
|
| Class B-2 |
|
| Class V |
|
| Class Z |
|
| Treasury |
| ||||||
Balance at December 31, 2023 |
|
| 507,567,678 |
|
|
| 4,951,235 |
|
|
| 4,951,235 |
|
|
| 28,962,218 |
|
|
| 3,420,215 |
|
|
| 6,427,853 |
|
Conversion of noncontrolling interest |
|
| 27,773,062 |
|
|
| — |
|
|
| — |
|
|
| (27,773,062 | ) |
|
| — |
|
|
| — |
|
Shares granted upon vesting |
|
| 13,890,962 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,842,116 | ) |
|
| — |
|
Issuance for compensation to non-employees(1) |
|
| 17,802 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share repurchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Share forfeitures |
|
| — |
|
|
| (18,148 | ) |
|
| (18,148 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Balance at March 31, 2024 |
|
| 549,249,504 |
|
|
| 4,933,087 |
|
|
| 4,933,087 |
|
|
| 1,189,156 |
|
|
| 578,099 |
|
|
| 6,427,853 |
|
(1) Issued to certain members of the Board of Directors in lieu of cash retainer.
(2) Does not include 712,237 of unvested Class A common shares as of March 31, 2024.
Dividends
There were no dividends declared during the three months ended March 31, 2024.
Accumulated Other Comprehensive Income
As of March 31, 2024, the Accumulated other comprehensive income ("AOCI") balance included unrealized gains and losses for interest rate swaps and foreign currency translation adjustments related to our foreign subsidiaries that do not have the U.S. dollar as their functional currency. The tax effect on the Company's pre-tax AOCI items is recorded in the AOCI balance. This tax is comprised of two items: (1) the tax effects related to the unrealized pre-tax items recorded in AOCI and (2) the tax effect related to certain valuation allowances that have also been recorded in AOCI. When unrealized items in AOCI are recognized, the associated tax effects on these items will also be recognized in the tax provision.
Changes in accumulated other comprehensive income, net of noncontrolling interests, are as follows (in millions):
|
|
| Foreign |
|
|
|
|
|
|
|
|
| |||
|
|
| Currency |
|
|
| Interest |
|
|
| |||||
|
|
| Translation |
|
|
| Rate |
|
|
| |||||
|
|
| Adjustments (1) |
|
|
| Swaps (2) | Total |
| ||||||
Balance at December 31, 2023 |
| $ |
| (3 | ) |
| $ |
| 74 |
|
| $ |
| 71 |
|
Other comprehensive income (loss) before reclassifications |
|
|
| (4 | ) |
|
|
| 30 |
|
|
|
| 26 |
|
Tax (expense) benefit |
|
|
| 1 |
|
|
|
| (1 | ) |
|
|
| - |
|
Other comprehensive income (loss) before reclassifications, net of tax |
|
|
| (3 | ) |
|
|
| 29 |
|
|
|
| 26 |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
| - |
|
|
|
| (22 | ) |
|
|
| (22 | ) |
Tax expense |
|
|
| - |
|
|
|
| - |
|
|
|
| - |
|
Amounts reclassified from accumulated other comprehensive income, net of tax |
|
|
| - |
|
|
|
| (22 | ) |
|
|
| (22 | ) |
Net current period other comprehensive income (loss), net of tax |
|
|
| (3 | ) |
|
|
| 7 |
|
|
|
| 4 |
|
Balance at March 31, 2024 |
| $ |
| (6 | ) |
| $ |
| 81 |
|
| $ |
| 75 |
|
(1) Foreign currency translation adjustments include $1 million loss related to intercompany loans that have been designated long-term investment nature.
(2) Reclassifications from this category are recorded in Interest expense. See Note 13 “Derivative Financial Instruments” for additional information.
10. Share-Based Compensation
The Company has an active equity incentive plan, the Alight, Inc. 2021 Omnibus Incentive Plan (the "Incentive Plan"), under which the Company has been authorized to grant share-based awards to key employees and non-employee directors, which consist of restricted stock units ("RSUs") and performance share units ("PRSUs"). Under this plan, for grants issued during the three months ended March 31, 2024, approximately 42% of the units are subject to time-based vesting requirements and approximately 58% are subject to performance-based vesting requirements. As of March 31, 2024, there were 79,157,976 remaining shares of common stock authorized for issuance pursuant to the Company’s stock-based compensation plans under its 2021 Omnibus Incentive Plan.
18
Restricted Share Units and Performance Based Restricted Share Units
RSUs are valued at the market price of a share of the Company’s common stock on the date of grant. In general, these awards vest ratably over a three-yearperiod from the date of grant. All awards are expensed on a straight-line basis over a three-year period, which is considered to be the requisite service period.
The Company’s PRSUs contain various performance and service conditions that must be satisfied for an employee to earn the right to benefit from the award. The PRSUs vest upon achievement of various performance metrics aligned to goals established by the Company. Expense is recognized on a straight-line basis over the requisite service period, based on the probability of achieving the performance conditions, with changes in expectations recognized as an adjustment to earnings in the period of the change. Compensation cost is not recognized for performance share units that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed.
The weighted-average grant-date fair value per share of RSUs and PRSUs granted during the three months ended March 26, 2020 (inception) through June 30, 2020, less applicable franchise31, 2024 was approximately $8.99 and income taxes$8.83, respectively.
The following tables summarizes the RSU and PRSU activity during the three months ended March 31, 2024:
|
|
|
|
|
| Weighted |
|
|
|
|
|
| Weighted |
| ||||
|
|
|
|
|
| Average |
|
|
|
|
|
| Average |
| ||||
|
|
|
|
|
| Grant Date |
|
|
|
|
|
| Grant Date |
| ||||
|
|
|
|
|
| Fair Value |
|
|
|
|
|
| Fair Value |
| ||||
|
| RSUs |
|
|
| Per Unit |
|
| PRSUs(1) |
|
|
| Per Unit |
| ||||
Balance as of December 31, 2023 |
|
| 8,174,812 |
|
| $ |
| 9.78 |
|
|
| 28,041,674 |
|
| $ |
| 11.25 |
|
Granted |
|
| 4,603,556 |
|
|
|
| 8.99 |
|
|
| 6,310,482 |
|
|
|
| 8.83 |
|
Vested |
|
| (2,569,109 | ) |
|
|
| 9.00 |
|
|
| (19,755,498 | ) |
|
|
| 12.28 |
|
Forfeited |
|
| (50,718 | ) |
|
|
| 8.62 |
|
|
| (175,350 | ) |
|
|
| 8.73 |
|
Balance as of March 31, 2024 |
|
| 10,158,541 |
|
| $ |
| 8.87 |
|
|
| 14,421,308 |
|
| $ |
| 8.86 |
|
The Company expects to forfeit approximately 3.5 million shares upon closing of the Company’s planned sale of its Payroll and Professional Services business as discussed in Note 1 Basis of Presentation and Nature of Business.
Share-based Compensation Expense
Total share-based compensation expense related to the RSUs and PRSUs are recorded in the Condensed Consolidated Statements of Comprehensive Income (Loss) as follows (in millions):
|
|
| Three Months Ended |
|
| Three Months Ended |
| ||||
|
|
| March 31, |
|
| March 31, |
| ||||
|
|
| 2024 |
|
| 2023 |
| ||||
Cost of services, exclusive of depreciation and amortization |
|
| $ |
| 5 |
|
| $ |
| 7 |
|
Selling, general and administrative |
|
|
|
| 23 |
|
|
|
| 27 |
|
Total share-based compensation expense |
|
| $ |
| 28 |
|
| $ |
| 34 |
|
As of March 31, 2024, total future compensation expense related to unvested RSUs was $83 million, which will be recognized over a remaining weighted-average amortization period of approximately $66,0002.3 years. As of March 31, 2024, total future compensation expense related to PRSUs was $77 million, which will be recognized over a remaining weighted-average amortization period of approximately 2.0 years.
Employee Stock Purchase Plan
In December 2022, the Company began offering its employees an Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, all full-time and certain part-time employees of the Company based in the U.S. and certain other countries are eligible to purchase Class A Common Stock of the Company twice per year at the end of a six-month payment period (a “Payment Period”). During each Payment Period, eligible employees who so elect may authorize payroll deductions in an amount no less than 1% nor greater than 10% of his or her base pay for each payroll period in the Payment Period. At the end of each Payment Period, the accumulated deductions are used to purchase shares of Class A Common Stock from the Company up to a maximum of 1,250 shares for any one employee during a Payment Period. Shares are purchased at a price equal to 85% of the fair market value of the Company’s Class A Common Stock on the last business day of a Payment Period. As of March 31, 2024, there were 11,961,530 remaining shares available for grant under the ESPP.
19
As of March 31, 2024, 1,499,751 shares have been issued under the ESPP and the amount of share-based compensation expense related to the ESPP was $2 million for the three months ended June 30, 2020 and for the period from March 26, 2020 (inception) through June 30, 2020, by the weighted average number of Class A redeemable common stock since issuance. Net loss31, 2024.
11. Earnings Per Share
Basic earnings per common share basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income (loss), less income attributable to Class A redeemable common stock,Alight, Inc. by the weighted average number of shares of Class B non-redeemable common stock outstanding forA Common Stock issued and outstanding. The computation of diluted earnings per share reflects the periods.potential dilution that could occur if dilutive securities and other contracts to issue shares were exercised or converted into shares or resulted in the issuance of shares that would then share in the net income of Alight, Inc. The Company’s Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption featuresV Common Stock and Class Z Common Stock do not participate in the income earned on the Trust Account.
Concentrationearnings or losses of Credit Risk
Financial instruments that potentially subject the Company and are therefore not participating securities and have not been included in either the basic or diluted earnings per share calculations.
In conjunction with the Business Combination, the Company issued Seller Earnouts contingent consideration, which is payable in the Company’s Common Stock when the related market conditions are achieved. As the related conditions to concentrationspay the consideration had not been satisfied as of credit risk consistMarch 31, 2024, the Seller Earnouts were excluded from the diluted earnings per share calculations.
Basic and diluted (net loss) earnings per share are as follows (in millions, except for share and per share amounts):
|
| Three Months Ended |
|
| Three Months Ended |
| ||||
|
| March 31, |
|
| March 31, |
| ||||
|
| 2024 |
|
| 2023 |
| ||||
Basic and diluted (net loss) earnings per share: |
|
|
|
|
|
|
|
| ||
Numerator |
|
|
|
|
|
|
|
| ||
Net Income (Loss) From Continuing Operations |
| $ |
| (121 | ) |
| $ |
| (84 | ) |
Less: Net loss attributable to noncontrolling interest |
|
|
| 2 |
|
|
|
| 6 |
|
Net Income (loss) from continuing operations attributable to Alight, Inc. |
| $ |
| (119 | ) |
| $ |
| (78 | ) |
Net Income (Loss) From Discontinued Operations, Net of Tax |
|
|
| 5 |
|
|
|
| 10 |
|
Net Income (Loss) Attributable to Alight, Inc. - basic |
| $ |
| (114 | ) |
| $ |
| (68 | ) |
Loss impact of conversion of noncontrolling interest |
|
|
| (1 | ) |
|
|
| — |
|
Net income (loss) attributable to Alight, Inc. - diluted |
| $ |
| (115 | ) |
| $ |
| (68 | ) |
Denominator |
|
|
|
|
|
|
|
| ||
Weighted-average shares outstanding - basic |
|
|
| 540,780,315 |
|
|
|
| 476,145,761 |
|
Dilutive effect of the exchange of noncontrolling interest units |
|
|
| 1,189,156 |
|
|
|
| — |
|
Weighted-average shares outstanding - diluted |
|
|
| 541,969,471 |
|
|
|
| 476,145,761 |
|
Basic (net loss) earnings per share |
|
|
|
|
|
|
|
| ||
Continuing operations |
| $ |
| (0.22 | ) |
| $ |
| (0.16 | ) |
Discontinued operations |
| $ |
| 0.01 |
|
| $ |
| 0.02 |
|
Net Income (Loss) |
| $ |
| (0.21 | ) |
| $ |
| (0.14 | ) |
Diluted (net loss) earnings per share |
|
|
|
|
|
|
|
| ||
Continuing operations |
| $ |
| (0.22 | ) |
| $ |
| (0.16 | ) |
Discontinued operations |
| $ |
| 0.01 |
|
| $ |
| 0.02 |
|
Net Income (Loss) |
| $ |
| (0.21 | ) |
| $ |
| (0.14 | ) |
For the three months ended March 31, 2023 44,135,874 units related to noncontrolling interests were not included in the computation of diluted shares outstanding as their impact would have been anti-dilutive. For the three months ended March 31, 2024 and 2023, 10,158,541 and 10,412,840 of unvested RSUs, respectively, were not included in the computation of diluted shares outstanding as their impact would have been anti-dilutive.
In addition, for each of the three months ended March 31, 2024 and 2023, 14,999,998 shares related to the Seller Earnouts were excluded from the calculation of basic and diluted earnings per share as the market conditions had not yet been met as of the end of the period.
For the three months ended March 31, 2024 and 2023, 14,421,308 and 31,079,227 unvested PRSUs, respectively, were excluded from the calculation of basic and diluted earnings per share. For the three months ended March 31, 2024 and 2023, the share amounts were calculated based on expected achievement levels and were excluded as the performance conditions were not met as of the end of the respective periods.
12. Segment Reporting
On March 20, 2024, the Company entered into the Disposition Agreement to sell its Payroll & Professional Services business. As a cash account in a financial institution, which, at times, may exceedresult of the Federal Depository Insurance Coverage of $250,000. At June 30, 2020,agreement, the Company has not experienced losses on this accountone remaining reportable segment. See Notes 1 “Basis of Presentation and Nature of Business” and Note 4 “Discontinued Operations and Assets Held for Sale” for additional information.
20
The Company’s reportable segments have been determined using a management believesapproach, which is consistent with the basis and manner in which the Company’s chief operating decision maker (“CODM”) uses financial information for the purposes of allocating resources and evaluating performance. The Company’s Chief Executive Officer is its CODM. The CODM evaluates the performance of the Company based on its total revenue and segment profit.
The CODM also uses revenue and segment gross profit to manage and evaluate our business, make planning decisions, and as performance measures for Company-wide bonus plans. These key financial measures provide an additional view of our operational performance over the long-term and provide useful information that we use in order to maintain and grow our business.
The accounting policies of the segments are the same as those described in Note 2 “Accounting Policies and Practices.” The Company does not report assets by reportable segments as this information is not reviewed by the CODM on a regular basis.
Information regarding the Company’s reportable segment revenue is as follows (in millions):
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
|
|
| Three Months Ended |
|
|
| Three Months Ended |
| ||
|
|
| March 31, |
|
|
| March 31, |
| ||
|
|
| 2024 |
|
|
| 2023 |
| ||
Employer Solutions |
|
|
|
|
|
|
|
| ||
Recurring |
| $ |
| 521 |
|
| $ |
| 533 |
|
Project |
|
|
| 38 |
|
|
|
| 43 |
|
Total Employer Solutions |
|
|
| 559 |
|
|
|
| 576 |
|
Other |
|
|
| - |
|
|
|
| 10 |
|
Total revenue |
| $ |
| 559 |
|
| $ |
| 586 |
|
There was no single client who accounted for more than 10% of the Company’s revenues in any of the periods presented.
|
| Segment Profit |
| |||||||
|
|
| Three Months Ended |
|
|
| Three Months Ended |
| ||
|
|
| March 31, |
|
|
| March 31, |
| ||
|
|
| 2024 |
|
|
| 2023 |
| ||
Employer Solutions |
| $ |
| 182 |
|
| $ |
| 187 |
|
Other |
|
|
| - |
|
|
|
| - |
|
Total Gross Profit |
|
|
| 182 |
|
|
|
| 187 |
|
Selling, general and administrative |
|
|
| 146 |
|
|
|
| 151 |
|
Depreciation and intangible amortization |
|
|
| 76 |
|
|
|
| 76 |
|
Operating Income (Loss) From Continuing Operations |
|
|
| (40 | ) |
|
|
| (40 | ) |
(Gain) Loss from change in fair value of financial instruments |
|
|
| 21 |
|
|
|
| 25 |
|
(Gain) Loss from change in fair value of tax receivable agreement |
|
|
| 55 |
|
|
|
| 8 |
|
Interest expense |
|
|
| 31 |
|
|
|
| 33 |
|
Other (income) expense, net |
|
|
| 1 |
|
|
|
| 1 |
|
Income (Loss) From Continuing Operations Before Taxes |
| $ |
| (148 | ) |
| $ |
| (107 | ) |
13. Derivative Financial Instruments
The Company is exposed to significantmarket risks, including changes in interest rates. To manage the risk related to these exposures, the Company has entered into various derivative instruments that reduce these risks by creating offsetting exposures.
21
Interest Rate Swaps
The Company has utilized swap agreements that will fix the floating interest rates associated with its Term Loan as shown in the following table:
Designation Date |
| Effective Date |
| Initial Notional Amount |
|
| Notional Amount Outstanding as of |
|
| Fixed Rate |
| Expiration Date | |||||||
December 2021 |
| August 2020 |
| $ |
| 181,205,050 |
|
| $ |
| 514,914,770 |
|
|
| 0.7203 |
| % |
| April 2024 |
December 2021 |
| August 2020 |
| $ |
| 388,877,200 |
|
| $ |
| 643,286,150 |
|
|
| 0.6826 |
| % |
| April 2024 |
December 2021 |
| May 2022 |
| $ |
| 220,130,318 |
|
| $ |
| 269,641,030 |
|
|
| 0.4570 |
| % |
| April 2024 |
December 2021 |
| May 2022 |
| $ |
| 306,004,562 |
|
| $ |
| 343,349,050 |
|
|
| 0.4480 |
| % |
| April 2024 |
December 2021 |
| April 2024 |
| $ |
| 871,205,040 |
|
|
| n/a |
|
|
| 1.6533 |
| % |
| June 2025 | |
December 2021 |
| April 2024 |
| $ |
| 435,602,520 |
|
|
| n/a |
|
|
| 1.6560 |
| % |
| June 2025 | |
December 2021 |
| April 2024 |
| $ |
| 435,602,520 |
|
|
| n/a |
|
|
| 1.6650 |
| % |
| June 2025 | |
March 2022 |
| June 2025 |
| $ |
| 1,197,000,000 |
|
|
| n/a |
|
|
| 2.5540 |
| % |
| December 2026 | |
March 2023 |
| March 2023 |
| $ |
| 150,000,000 |
|
| $ |
| 150,000,000 |
|
|
| 3.9025 |
| % |
| December 2026 |
March 2023 |
| March 2023 |
| $ |
| 150,000,000 |
|
| $ |
| 150,000,000 |
|
|
| 3.9100 |
| % |
| December 2026 |
Concurrent with the refinancing of certain term loans, we amended our interest rate swaps to incorporate Term SOFR. In accordance with Accounting Standards Codification Topic 848, Reference Rate Reform, we did not redesignate the interest rate hedges when they were amended from LIBOR to SOFR; as we are permitted to maintain the designation through the transition. During the three months ended March 31, 2024, we have not executed any new interest rate swaps. Our interest rate swaps have been designated as cash flow hedges.
Certain swap agreements amortize or accrete based on such account.achieving targeted hedge ratios. All interest rate swaps have been designated as cash flow hedges. The Company currently has two instruments that the fair value of the instruments at the time of re-designation are being amortized into interest expense over the remaining life of the instruments.
Financial Instrument Presentation
Fair ValueThe fair values and location of outstanding derivative instruments recorded in the Condensed Consolidated Balance Sheets are as follows (in millions):
|
| March 31, |
|
|
| December 31, |
| ||||
|
| 2024 |
|
|
| 2023 |
| ||||
Assets |
|
|
|
|
|
|
|
|
| ||
Other current assets |
| $ |
| 56 |
|
|
| $ |
| 60 |
|
Other assets |
|
|
| 21 |
|
|
|
|
| 17 |
|
Total |
| $ |
| 77 |
|
|
| $ |
| 77 |
|
|
|
|
|
|
|
|
|
| |||
Liabilities |
|
|
|
|
|
|
|
|
| ||
Other current liabilities |
| $ |
| — |
|
|
| $ |
| — |
|
Other liabilities |
|
|
| — |
|
|
|
|
| 3 |
|
Total |
| $ |
| — |
|
|
| $ |
| 3 |
|
The Company estimates that approximately $54 million of derivative gains included in Accumulated other comprehensive income as of March 31, 2024 will be reclassified into earnings over the next twelve months.
14. Financial Instruments
Seller Earnouts
Upon completion of the Business Combination, the equity owners of Alight Holdings received an earnout in the form of non-voting shares of Class B-1 and Class B-2 Common Stock, which automatically convert into Class A Common Stock if, at any time during the seven years following the Closing Date certain criteria are achieved. See Note 9 “Stockholders’ Equity” for additional information regarding the Seller Earnouts.
The portion of the Seller Earnouts related to employee compensation is accounted for as share-based compensation. See Note 10 “Share-Based Compensation Expense” for additional information.
The portion of the Seller Earnouts, which are not related to employee compensation, are accounted for as a contingent consideration liability at fair value within Financial instruments on the Condensed Consolidated Balance Sheets because the Seller Earnouts do not meet the criteria for classification within equity. This portion of the Seller Earnouts are subject to remeasurement at each balance sheet date. At March 31, 2024 and December 31, 2023, the Seller Earnouts had a fair value of $114 million and $95 million, respectively. For
22
the three months ended March 31, 2024, the fair value remeasurement of the Seller Earnouts was a loss of $19 million. For the three months ended March 31, 2023, the Company recorded a loss of $13 million related to the fair value remeasurement of the Seller Earnouts. Gains or losses related to the remeasurement of Seller Earnouts are recorded in (Gain) Loss from change in fair value of financial instruments within the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss).
The fair value of the Company’s assetsClass B-1 and liabilities, which qualify as financialB-2 Seller Earnouts, and the Class Z-B-1 and Z-B-2 contingent consideration instruments, under ASC Topic 820, “Fairis determined using Monte Carlo simulation and Option Pricing Methods (Level 3 inputs, see Note 16 "Fair Value Measurement,” approximates the carrying amounts representedMeasurements"). Significant unobservable inputs are used in the accompanying condensed balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effectassessment of fair value, including the following assumptions: volatility of 45%, risk-free interest rate of 4.28%, expected holding period of 4.26 years and probability assessments based on the Company’s unaudited condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant tolikelihood of reaching the Initial Public Offering,performance targets defined in the Company sold 103,500,000 Units, at $10.00 per Unit, which includesBusiness Combination. An increase in the full exercise byrisk-free interest rate or expected volatility would result in an increase in the underwriters of their option to purchase an additional 13,500,000 Units. Each Unit consists of one share of Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closingfair value measurement of the Initial Public Offering,Seller Earnouts and vice versa.
In addition, the Sponsors purchased an aggregate of 15,133,333 Private Placement WarrantsClass Z instruments are also accounted for as a contingent consideration liability at a price of $1.50 per Private Placement Warrant,fair value within Financial instruments on the Condensed Consolidated Balance Sheets because these instruments do not meet the criteria for an aggregate purchase price of $22,700,000. Each Private Placement Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).classification within equity. The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
During the period from March 26, 2020 (inception) through April 7, 2020, the Sponsors purchased 21,562,500 of the Company’s Class B common stock (the “Founder Shares”) for an aggregate purchase price of $25,000. On May 18, 2020, Bilcar FT, LP transferred 4,312,500 of its Founder Shares to Trasimene Capital FT, LP at their original purchase price. On May 19, 2020, the Sponsors transferred 25,000 of the Founder Shares to each of the independent director nominees at their original purchase price. On May 26, 2020, the Company effected a stock dividend with respect to its Class B common stock of 4,312,500 shares thereof, resulting in an aggregate of 25,875,000 outstanding shares of Class B common stock. All share and per-share amounts have been retroactively restated to reflect the stock dividend. The Founder Shares included an aggregate of up to 3,375,000 Class B common stock subject to forfeiture by the Sponsors to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares would collectively represent 20% of the Company’s issued and outstanding shares upon the completion of the Initial Public Offering. As a result of the underwriters’ election to fully exercise their over-allotment option, 3,375,000 Founder Shares are no longer subject to forfeiture.
The Sponsors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination; and (B) subsequent to a Business Combination, (x) if the last reported sale pricefair value of the Class A common stock equals or exceeds $12.00 perZ-A contingent consideration is determined using the ending share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, stock exchange, reorganization or other similar transaction that results in allprice as of the Company’s stockholders having the right to exchange their shareslast day of Class A common stock for cash, securities or other property.
Promissory Note with Related Parties
On April 7, 2020, the Company issued a promissory note (the “Promissory Note”) to affiliates of the Sponsors, pursuant to which the Company could borrow up to an aggregate principal amount of $150,000. On May 20, 2020, the Promissory Note was amended and restated to increase the aggregate principal amount available for borrowing to $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) January 31, 2021 and (ii) the completion of the Initial Public Offering. The outstanding balance under the Promissory Note of $250,000 was repaid upon the consummation of the Initial Public Offering on May 29, 2020.
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsors or an affiliate of the Sponsors, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.50 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. No amounts have been borrowed under this arrangement as of June 30, 2020.
Administrative Services Agreement
The Company entered into an agreement whereby, commencing on May 26, 2020 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company will pay an affiliate of the Sponsors up to $5,000 per month for office space, and administrative support services. As of May 29, 2020, the Company incurred and paid $5,000 of such fees.each quarter. For the three months ended June 30, 2020March 31, 2024 and for the period from March 26, 2020 (inception) through June 30, 2020,2023, the Company incurred $10,000recorded losses of $2 million and $12 million, respectively, in fees for these services,(Gain) Loss from change in fair value of which $5,000 is included in accrued expensesfinancial instruments in the accompanying condensed balance sheet at June 30, 2020.
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration and Stockholder Rights
PursuantCondensed Consolidated Statements of Comprehensive Income (Loss) as a result of the forfeiture of unvested management equity relating to a registration rights agreement entered into on May 26, 2020,the consideration that will be re-allocated to the holders of the Founder Shares, Private Placement Warrants and warrants that may be issuedClass Z instruments upon conversion of the Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights. The holders ofvesting. See Note 9 “Stockholders’ Equity” for additional information regarding these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration and stockholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.instruments.
15. Tax Receivable Agreement
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $36,225,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Forward Purchase Agreement
In May 2020, the Company entered into forward purchase agreements with each of Cannae Holdings, Inc. and THL FTAC LLC. Pursuant to each agreement, Cannae Holdings, Inc. and THL FTAC LLC have each agreed to purchase shares of the Company’s Class A common stock in an aggregate share amount equal to 15,000,000 shares of the Company’s Class A Common stock (or a total of 30,000,000 shares of the Company’s Class A common stock), plus an aggregate of 5,000,000 redeemable warrants (or a total of 10,000,000 redeemable warrants) to purchase one share of the Company’s Class A common stock at $11.50 per share, for an aggregate purchase price of $150,000,000 (or a total of $300,000,000), or $10.00 for one share of the Company’s Class A common stock and one-third of one warrant, in a private placement to occur concurrently with the closing of a Business Combination. The warrants to be sold as part of the forward purchase agreements will be identical to the warrants underlying the Units sold in the Initial Public Offering.
In connection with the forward purchase securities sold to Cannae Holdings and THL FTAC, the Company expects that the initial stockholders will receive (by way of an adjustment to the conversion terms of their existing shares of the Company’s Class B common stock) an aggregate number of shares of Class A common stock so that the initial stockholders, in the aggregate, on an as-converted basis, will hold 20% of the Company’s Class A common stock at the time of the closing of a Business Combination, after giving effect toAlight entered into the issuances under the forward purchase agreements.
Under the forward purchase agreements, the Company will provide a rightTRA with certain owners of first offer to CannaeAlight Holdings Inc. and THL FTAC LLC, if the Company proposes to raise additional capital by issuing any equity, or securities convertible into, exchangeable or exercisable for equity securities, other than the units and certain excluded securities. In addition, if the Company seeks stockholder approval of a Business Combination, each of Cannae Holdings, Inc. and THL FTAC LLC has agreed under the forward purchase agreements to vote any shares of Class A common stock owned by each of Cannae Holdings, Inc. and THL FTAC LLC in favor of any proposed initial Business Combination.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock. The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001. The Company’s board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The board of directors will be able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. At June 30, 2020, there were no shares of preferred stock issued or outstanding.
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
Class A Common Stock. The Company is authorized to issue 400,000,000 shares of Class A common stock, with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At June 30, 2020, there were 4,022,654 shares of Class A common stock issued or outstanding excluding 99,477,346 shares of Class A common stock subject to possible redemption.
Class B Common Stock. The Company is authorized to issue 40,000,000 shares of Class B common stock, with a par value of $0.0001 per share. Holders of the Class B common stock are entitled to one vote for each share. At June 30, 2020, there were 25,875,000 shares of Class B common stock issued and outstanding.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. HoldersPursuant to the TRA, the Company will pay certain sellers, as applicable, 85% of Class A common stock and holdersthe tax benefits, of Class B common stock will vote togetherany savings that we realize, calculated using certain assumptions, as a single class on all other matters submitted to a vote of the Company’s stockholders except as otherwise required by law.
The Class B common stock will automatically convert into Class A common stock on the first business day following the completion of a business combination at a ratio such that the number of Class A common stock issuable upon conversion of all Class B common stock will equal, in the aggregate, 25% of the sumresult of (i) the total numbertax basis adjustments from sales and exchanges of shares of Class A common stock issued and outstanding upon completion of Initial Public Offering, plus (ii) the sum of (a) the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or deemed issued, by the CompanyAlight Holdings equity interests in connection with or in relation tofollowing the completion of a Business Combination (including the forward purchase shares, but not the forward purchase warrants), excluding any Class A common stock or equity-linked securities exercisable for or convertible into Class A common stock issued, or to be issued, to any seller in a Business Combination and any private placement warrants issued to the Sponsors upon conversion of Working Capital Loans, minus (b) the number of Public Shares redeemed by public stockholders in connection with a Business Combination. Any conversion of Class B common stock will take effect as a compulsory redemption of Class B common stock and an issuance of Class A common stock as a matter of Delaware law. In no event will the Class B common stock convert into Class A common stock at a rate of less than one to one.
Warrants. Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years from the completion of a Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Actcertain distributions with respect to Alight Holdings equity interests, (ii) our utilization of certain tax attributes, and (iii) certain other tax benefits related to entering into the TRA.
Actual tax benefits realized by Alight may differ from tax benefits calculated under the TRA as a result of the use of certain assumptions in the TRA, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits. While the amount of existing tax basis, the anticipated tax basis adjustments and the actual amount and utilization of tax attributes, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, we expect that the payments that Alight may make under the TRA will be substantial.
The Company’s TRA liability established upon completion of the Business Combination is measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The TRA liability balance at March 31, 2024 assumes: (i) a constant blended U.S. federal, state and local income tax rate of 27.0%; (ii) no material changes in tax law; (iii) the ability to utilize tax attributes based on current tax forecasts; and (iv) future payments under the TRA are made when due under the TRA. The amount of the expected future payments under the TRA has been discounted to its present value using a discount rate of 7.6%.
Subsequent to the Business Combination, we record additional liabilities under the TRA as and when Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will not be obligated to issue sharesunits of Class A common stock upon exercise of a warrant unless the Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statementAlight Holdings are exchanged for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the issuance of the Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. In addition, if the shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of the Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects to do so, the Company will not be required to file or maintain in effect a registration statement, but it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied the excess of the “fair market value” less the exercise price of the warrants by (y) the fair market value and (B) 0.361. The “fair market value” shall mean the volume weighted average price of the Class A common stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. However, we will not redeem the warrants unless an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00 — Once the warrants become exercisable, the Company may redeem the outstanding warrants:
The exercise price and number of shares of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Sponsors or their affiliates, without taking into account any Founder Shares held by the Sponsors or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Public Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described above adjacent to “Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00” and “Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
FOLEY TRASIMENE ACQUISITION CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSJUNE 30, 2020(Unaudited)
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that (x) the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (y) the Private Placement Warrants will be exercisable on a cashlessundiscounted basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees and (z) the Private Placement Warrants and the Class A common stock issuable upon exercise of the Private Placement Warrants will be entitled to registration rights. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recordednot remeasured at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.
At June 30, 2020, assets held in the Trust Account were comprised of $193 in cash and $1,035,124,263 in U.S. Treasury securities.fair value. During the three months ended June 30, 2020 and forMarch 31, 2024, an additional TRA liability of $85 million was established as a result of these exchanges. As of March 31, 2024, $627 million of the period from March 26, 2020 (inception) through June 30, 2020, the Company did not withdraw any interest income from the Trust Account.
The gross holding gains andTRA liability is measured at fair value of held-to-maturity securitieson a recurring basis and $246 million is undiscounted and not remeasured at June 30, 2020 arefair value.
23
The following table summarizes the changes in the TRA liabilities (in millions):
Tax Receivable | |||||
Agreement Liability | |||||
Beginning balance as of December 31, 2023 | $ | 795 | |||
Fair value remeasurement | 55 | ||||
Payments | (62 | ) | |||
Conversion of noncontrolling interest | 85 | ||||
Ending Balance as of March 31, 2024 | 873 | ||||
Less: current portion included in other current liabilities | (89 | ) | |||
Total long-term tax receivable agreement liability | $ | 784 |
16. Fair Value Measurement
Fair value is defined as follows:
Held-To-Maturity | Amortized Cost | Gross Holding Loss | Fair Value | |||||||||||
June 30, 2020 | U.S. Treasury Securities (Mature on 11/27/2020) | $ | 1,035,124,263 | $ | (60,585 | ) | $ | 1,035,063,678 |
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amountsprice that the Company would havebe received in connection with the sale of the assetsto sell an asset or paid in connection with theto transfer of the liabilitiesa liability in an orderly transaction between market participants at the measurement date. The accounting standards related to fair value measurements include a hierarchy for information and valuations used in measuring fair value that is broken down into three levels based on reliability, as follows:
The Company’s financial assets and liabilities measured at fair value on a recurring basis are as follows (in millions):
|
| March 31, 2024 |
| |||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
| $ |
| — |
|
| $ |
| 77 |
|
| $ |
| — |
|
| $ |
| 77 |
|
Total assets recorded at fair value |
| $ |
| — |
|
| $ |
| 77 |
|
| $ |
| — |
|
| $ |
| 77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
| $ |
| — |
|
| $ |
| — |
|
| $ |
| — |
|
| $ |
| — |
|
Contingent consideration liability |
|
|
| — |
|
|
|
| — |
|
|
|
| 3 |
|
|
|
| 3 |
|
Seller Earnouts liability |
|
|
| — |
|
|
|
| — |
|
|
|
| 114 |
|
|
|
| 114 |
|
Tax receivable agreement liability (1) |
|
|
| — |
|
|
|
| — |
|
|
|
| 627 |
|
|
|
| 627 |
|
Total liabilities recorded at fair value |
| $ |
| — |
|
| $ |
| — |
|
| $ |
| 744 |
|
| $ |
| 744 |
|
|
| December 31, 2023 |
| |||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
| $ |
| — |
|
| $ |
| 77 |
|
| $ |
| — |
|
| $ |
| 77 |
|
Total assets recorded at fair value |
| $ |
| — |
|
| $ |
| 77 |
|
| $ |
| — |
|
| $ |
| 77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
|
|
| — |
|
|
|
| 3 |
|
|
|
| — |
|
|
|
| 3 |
|
Contingent consideration liability |
|
|
| — |
|
|
|
| — |
|
|
|
| 3 |
|
|
|
| 3 |
|
Seller Earnouts liability |
|
|
| — |
|
|
|
| — |
|
|
|
| 95 |
|
|
|
| 95 |
|
Tax receivable agreement liability (1) |
|
|
| — |
|
|
|
| — |
|
|
|
| 634 |
|
|
|
| 634 |
|
Total liabilities recorded at fair value |
| $ |
| — |
|
| $ |
| 3 |
|
| $ |
| 732 |
|
| $ |
| 735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
The valuations of the derivatives intended to mitigate our interest rate risk are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. This analysis utilizes observable
24
market-based inputs, including interest rate curves, interest rate volatility, or spot and forward exchange rates, and reflects the contractual terms of these instruments, including the period to maturity. In connection with measuringaddition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential non-performance risk.
Contingent Consideration
The contingent consideration liabilities relate to acquisitions in previous years and are included in Other current liabilities on the Condensed Consolidated Balance Sheets. The fair value of these liabilities is determined using a discounted cash flow analysis. Changes in the fair value of its assetsthe liabilities are included in Other (income) expense, net in the Condensed Consolidated Statements of Comprehensive Income (Loss). Significant unobservable inputs are used in the assessment of fair value, including assumptions regarding discount rates and probability assessments based on the likelihood of reaching the various targets set out in the acquisition agreements.
The following table summarizes the changes in deferred contingent consideration liabilities (in millions):
|
| Three Months Ended March 31 |
| |||||||
|
| 2024 |
|
| 2023 |
| ||||
Beginning balance |
| $ |
| 3 |
|
| $ |
| 13 |
|
Measurement period adjustments |
|
|
| — |
|
|
|
| — |
|
Accretion of contingent consideration |
|
|
| — |
|
|
|
| — |
|
Remeasurement of acquisition-related contingent consideration |
|
|
| — |
|
|
|
| — |
|
Payments |
|
|
| — |
|
|
|
| — |
|
Ending Balance |
| $ |
| 3 |
|
| $ |
| 13 |
|
Additional Disclosures Regarding Fair Value Measurement
The fair value of the Company’s debt is classified as Level 2 within the fair value hierarchy and corroborated by observable market data is as follows (in millions):
|
| March 31, 2024 |
|
|
| December 31, 2023 |
| ||||||||||||||
|
| Carrying Value |
|
| Fair Value |
|
|
| Carrying Value |
|
| Fair Value |
| ||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Current portion of long-term debt, net |
| $ |
| 25 |
|
| $ |
| 25 |
|
|
| $ |
| 25 |
|
| $ |
| 25 |
|
Long-term debt, net |
|
|
| 2,762 |
|
|
|
| 2,775 |
|
|
|
|
| 2,769 |
|
|
|
| 2,780 |
|
Total |
| $ |
| 2,787 |
|
| $ |
| 2,800 |
|
|
| $ |
| 2,794 |
|
| $ |
| 2,805 |
|
The carrying value of the Term Loan, Secured Senior Notes include the outstanding principal balance, less any unamortized premium. The carrying value of the Term Loan approximates fair value as it bears interest at variable rates and we believe our credit risk is consistent with when the debt originated. The outstanding balances under the Senior Notes have fixed interest rates and the fair value is classified as Level 2 within the fair value hierarchy and corroborated by observable market data (see Note 8 “Debt”).
The carrying amounts of Cash and cash equivalents, Receivables, net and Accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these instruments.
During each of the three months ended March 31, 2024 and 2023, there were no transfers in or out of the Level 1, Level 2 or Level 3 classifications.
17. Restructuring
Transformation Program
On February 20, 2023, the Company seeksapproved a two-year strategic transformation restructuring program (the “Transformation Program”) intended to maximizeaccelerate the Company’s back-office infrastructure into the cloud and transform its operating model leveraging technology in order to reduce its overall future costs. The Transformation Program includes process and system optimization, third party costs associated with technology infrastructure transformation, and elimination of full-time positions. The Company currently expects to record in the aggregate approximately $122 million in pre-tax restructuring charges over the two-year period. The restructuring charges are expected to include severance charges with an estimated range from $27 million to $37 million over the two-year period and other restructuring charges related to items such as data center exit costs, third party fees, and costs associated with transitioning existing technology and processes with an estimated range of $85 million to $95 million over the two-year period. The Company estimates an annual savings of over $75 million after the Transformation Program is completed. The Transformation Program commenced in the first quarter of 2023 and is expected to be substantially completed over an estimated two-year period.
25
From the inception of the plan through March 31, 2024, the Company has incurred total expenses of $88 million. These charges are recorded in Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income (Loss).
The following table summarizes restructuring costs by type that have been incurred.
|
| Three Months Ended |
|
|
| Three Months Ended |
|
|
|
| Estimated |
|
| Estimated |
| ||||||||||
|
| March 31, |
|
|
| March 31, |
| Inception to |
|
| Remaining |
|
| Total |
| ||||||||||
|
| 2024 |
|
|
| 2023 |
|
|
| Date |
|
| Costs |
|
| Cost |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Employer Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Severance and Related Benefits |
| $ |
| 2 |
|
| $ |
| — |
|
| $ |
| 7 |
|
| $ |
| 5 |
|
| $ |
| 12 |
|
Other Restructuring Costs(1) |
|
|
| 11 |
|
|
|
| 17 |
|
|
|
| 62 |
|
|
|
| 24 |
|
|
|
| 86 |
|
Total Employer Solutions |
| $ |
| 13 |
|
| $ |
| 17 |
|
| $ |
| 69 |
|
| $ |
| 29 |
|
| $ |
| 98 |
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Severance and Related Benefits |
| $ |
| 2 |
|
| $ |
| 5 |
|
| $ |
| 17 |
|
| $ |
| 4 |
|
| $ |
| 21 |
|
Other Restructuring Costs(1) |
|
|
| — |
|
|
|
| 1 |
|
|
|
| 2 |
|
|
|
| 1 |
|
|
|
| 3 |
|
Total Corporate |
| $ |
| 2 |
|
| $ |
| 6 |
|
| $ |
| 19 |
|
| $ |
| 5 |
|
| $ |
| 24 |
|
Total Restructuring Costs |
| $ |
| 15 |
|
| $ |
| 23 |
|
| $ |
| 88 |
|
| $ |
| 34 |
|
| $ |
| 122 |
|
As of March 31, 2024, approximately $9 million of the Company's total restructuring liability is unpaid and is recorded in Accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets.
| Severance and |
|
| Other Restructuring |
|
|
|
|
| |||||
| Related Benefits |
|
| Costs |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
| |||
Accrued restructuring liability as of December 31, 2023 | $ |
| 6 |
|
| $ |
| 1 |
|
| $ |
| 7 |
|
Restructuring charges |
|
| 4 |
|
|
|
| 11 |
|
|
|
| 15 |
|
Cash payments |
|
| (4 | ) |
|
|
| (9 | ) |
|
|
| (13 | ) |
Accrued restructuring liability as of March 31, 2024 | $ |
| 6 |
|
| $ |
| 3 |
|
| $ |
| 9 |
|
18. Employee Benefits
Defined Contribution Savings Plans
Certain of the Company’s employees participate in a defined contribution savings plan sponsored by the Company. For the three months ended March 31, 2024 and 2023, expenses were $9 million and $14 million, respectively. Expenses were recognized in Cost of services, exclusive of depreciation and amortization and Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income (Loss).
19. Commitments and Contingencies
Legal
The Company is subject to various claims, tax assessments, lawsuits, and proceedings that arise in the ordinary course of business relating to the delivery of our services and the effectiveness of our technologies. The damages claimed in these matters are or may be substantial. Accruals for any exposures, and related insurance or other receivables, when applicable, are included on the Condensed Consolidated Balance Sheets and have been recognized in Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income (Loss) to the extent that losses are deemed probable and are reasonably estimable. These amounts are adjusted from time to time as developments warrant. Management believes that the reserves established are appropriate based on the facts currently known. Management believes that the reserves established are appropriate based on the facts currently known. The reserves recorded at March 31, 2024 and December 31, 2023 were not significant.
Guarantees and Indemnifications
The Company provides a variety of service performance guarantees and indemnifications to its clients. The maximum potential amount of future payments represents the notional amounts that could become payable under the guarantees and indemnifications if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or other methods. These notional amounts may bear no relationship to the future payments that may be made, if any, for these guarantees and indemnifications.
26
To date, the Company has not been required to make any payment under any client arrangement as described above. The Company has assessed the current status of performance risk related to the client arrangements with performance guarantees and believes that any potential payments would be immaterial to the Condensed Consolidated Financial Statements.
Purchase Obligations
In March 2024, the Company entered into an agreement with a third-party provider in the ordinary course of business for the use of observable inputs (market data obtained from independent sources) andcertain cloud services. Under this agreement, the Company is committed to minimize the usepurchase services totaling $250 million over a 5-year term. The Company’s total expected cash outflow for non-cancellable purchase obligations related to purchases of unobservable inputs (internal assumptions about how market participants would priceinformation technology assets and liabilities).services, including the new agreement, is $55 million, $59 million, $54 million, $54 million, $50 million, and $13 million for the remainder of 2024 and the years ended 2025, 2026, 2027, 2028, and thereafter, respectively.
Service Obligations
On September 1, 2018, the Company executed an agreement to form a strategic partnership with Wipro, a leading global information technology, consulting and business process services company. The following fair value hierarchyCompany’s expected cash outflow for non-cancellable service obligations related to our strategic partnership with Wipro is used to classify assets$116 million, $162 million, $170 million, $178 million, $154 million for the remainder of 2024 and liabilities based on the observable inputsyears ended 2025, 2026, 2027, 2028, respectively, and unobservable inputs used in order to value the assets and liabilities:none thereafter.
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred aftermay terminate its arrangement with Wipro for cause or for the balance sheet date up toCompany’s convenience. In the date that the condensed financial statements were issued. Based upon this review,case of a termination for convenience, the Company did not identifywould be required to pay a termination fee, including certain of Wipro’s unamortized costs, plus 25% of any subsequent events that would have required adjustment or disclosure inremaining portion of the condensed financial statements.minimum level of services the Company agreed to purchase from Wipro over the course of 10 years.
27
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Foley Trasimene Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsors” refer to Trasimene Capital Management FT, LP, an affiliate of Trasimene Capital Management, LLC, and Bilcar FT, LP, an affiliate of Bilcar Limited Partnership. The following discussion and analysis of the Company’sour financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and therelated notes thereto containedwhich are included elsewhere in this Quarterly Report on Form 10-Q and with the Annual Report. CertainIn addition to historical information, contained in the following discussion and analysis set forth below includescontains forward-looking statements that involve risks, uncertainties and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” that are not historical facts, and involve risks and uncertainties that could causeassumptions. Our actual results tocould differ materially from those expecteddiscussed in "Item 1A. Risk Factors" in our Annual Report and projected. All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, particularly under the caption "Forward-Looking Statements."
BUSINESS
Overview
Alight delivers human capital management solutions to many of the world’s largest and most complex companies. This includes the implementation and administration of both employee wellbeing (e.g. health, wealth and leaves benefits). In addition, the Company implements and runs human capital management software platforms on behalf of third-party providers. Alight’s numerous solutions and services are utilized year-round by employees and their family members in support of their overall health, wealth and wellbeing goals. Participants can access their solutions digitally, including without limitation, statementsthrough a mobile application on Alight Worklife®, our intuitive, cloud-based employee engagement platform. Through Alight Worklife, the Company believes it is defining the future of employee wellbeing by providing an enterprise level, integrated offering designed to drive better outcomes for organizations and individuals.
We aim to be the pre-eminent employee experience partner by providing personalized experiences that help employees make the best decisions for themselves and their families about their health, wealth and wellbeing. At the same time, we help employers tackle their biggest people and business challenges by helping them understand prevalence, trends and risks to generate better outcomes for the future, such as improved employee productivity and retention, while also realizing a return on their people investment. Our data, analytics and AI allow us to deliver actionable insights that drive measurable outcomes, such as healthcare claims savings, for companies and their people. We provide solutions to manage health and retirement benefits, tools for HR management, as well as solutions to manage the workforce from the cloud.
On July 2, 2021 (the “Closing Date”), Alight Holding Company, LLC (the "Predecessor" or "Alight Holdings") completed a business combination (the "Business Combination") with a special purpose acquisition company. On the Closing Date, pursuant to the Business Combination Agreement, the special purpose acquisition company became a wholly owned subsidiary of Alight, Inc. (“Alight”, the “Company”, “we” “us” “our” or the “Successor”). As of March 31, 2024, Alight owned approximately 99% of the economic interest in the Predecessor, had 100% of the voting power and controlled the management of the Predecessor. The non-voting ownership percentage held by noncontrolling interest was less than 1% as of March 31, 2024.
On March 20, 2024, the Company announced that it has signed a definitive agreement to sell its Professional Services segment and its Payroll & HCM Outsourcing businesses within the Employer Solutions segment (“Payroll & Professional Services business”) to an affiliate of H.I.G. Capital for up to $1.2 billion, subject to certain adjustments and regulatory approvals. Pursuant to the terms of the agreement, an affiliate of H.I.G. Capital will acquire the Payroll & Professional Services business for a transaction value of up to $1.2 billion, in the form of $1 billion in cash and up to $200 million in a seller note, of which $150 million is contingent upon the Payroll & Professional Services business' 2025 financial performance. The transaction is expected to close by mid-year 2024, subject to customary closing conditions, including regulatory approvals. The Company has incurred, and expects to continue to incur, higher operating expenses in 2024 as a result of professional fees incurred in conjunction with the transaction.
28
EXECUTIVE SUMMARY OF FINANCIAL RESULTS
The following table sets forth our historical results of operations for the periods indicated below:
|
|
|
|
|
|
|
| ||
|
|
| Three Months Ended | Three Months Ended |
| ||||
|
|
| March 31, | March 31, |
| ||||
(in millions) |
|
| 2024 | 2023 |
| ||||
Revenue |
| $ |
| 559 |
| $ |
| 586 |
|
Cost of services, exclusive of depreciation and amortization |
|
|
| 356 |
|
|
| 382 |
|
Depreciation and amortization |
|
|
| 21 |
|
|
| 17 |
|
Gross Profit |
|
|
| 182 |
|
|
| 187 |
|
|
|
|
|
|
|
| |||
Operating Expenses |
|
|
|
|
|
|
| ||
Selling, general and administrative |
|
|
| 146 |
|
|
| 151 |
|
Depreciation and intangible amortization |
|
|
| 76 |
|
|
| 76 |
|
Total Operating expenses |
|
|
| 222 |
|
|
| 227 |
|
Operating Income (Loss) From Continuing Operations |
|
|
| (40 | ) |
|
| (40 | ) |
Other (Income) Expense |
|
|
|
|
|
|
| ||
(Gain) Loss from change in fair value of financial instruments |
|
|
| 21 |
|
|
| 25 |
|
(Gain) Loss from change in fair value of tax receivable agreement |
|
|
| 55 |
|
|
| 8 |
|
Interest expense |
|
|
| 31 |
|
|
| 33 |
|
Other (income) expense, net |
|
|
| 1 |
|
|
| 1 |
|
Total Other (income) expense, net |
|
|
| 108 |
|
|
| 67 |
|
Income (Loss) Before Taxes From Continuing Operations |
|
|
| (148 | ) |
|
| (107 | ) |
Income tax expense (benefit) |
|
|
| (27 | ) |
|
| (23 | ) |
Net Income (Loss) From Continuing Operations |
|
|
| (121 | ) |
|
| (84 | ) |
Net Income (Loss) From Discontinued Operations, Net of Tax |
|
|
| 5 |
|
|
| 10 |
|
Net Income (Loss) |
|
|
| (116 | ) |
|
| (74 | ) |
Net income (loss) attributable to noncontrolling interests |
|
|
| (2 | ) |
|
| (6 | ) |
Net Income (Loss) Attributable to Alight, Inc. |
| $ |
| (114 | ) | $ |
| (68 | ) |
REVIEW OF RESULTS
Key Components of Our Continuing Operations
Revenue
Our clients’ demand for our services ultimately drives our revenues. We generate primarily all of our revenue, which is highly recurring, from fees for services provided from contracts across all solutions, which is primarily based on a contracted fee charged per participant per period (e.g., monthly or annually, as applicable). Our contracts typically have three to five-year terms for ongoing services with mutual renewal options. The majority of the Company’s revenue is recognized over time when control of the promised services is transferred, and the customers simultaneously receive and consume the benefits of our services. Payment terms are consistent with industry practice. We calculate growth rates for each of our solutions in relation to recurring revenues and revenues from project work. One of the components of our growth in recurring revenues is the increase in net commercial activity which reflects items such as client wins and losses (“Net Commercial Activity”). We define client wins as sales to new clients and sales of new solutions to existing clients. We define client losses as instances where clients do not renew or terminate their arrangements in relation to individual solutions or all of the solutions that we provide. We measure revenue growth as it relates to the cloud-based products and solutions that are central to our Alight Worklife® platform and next generation product suite, BPaaS Solutions.
Cost of Services, exclusive of Depreciation and Amortization
Cost of services, exclusive of depreciation and amortization includes compensation-related and vendor costs directly attributable to client-related services and costs related to application development and client-related infrastructure.
Depreciation and Amortization
Depreciation and amortization expenses include the depreciation and amortization related to our hardware, software and application development. Depreciation and amortization may increase or decrease in absolute dollars in future periods depending on the future level of capital investments in hardware, software and application development.
29
Selling, General and Administrative
Selling, general and administrative expenses include compensation-related costs for administrative and management employees, system and facilities expenses, and costs for external professional and consulting services.
Depreciation and Intangible Amortization
Depreciation and intangible amortization expenses consist of charges relating to the depreciation of the property and equipment used in our business and the amortization of acquired customer-related and contract based intangible assets and technology related intangible assets. Depreciation and intangible amortization may increase or decrease in absolute dollars in future periods depending on the future level of capital investments in hardware and other equipment as well as amortization expense associated with future acquisitions.
(Gain) Loss from Change in Fair Value of Financial Instruments
(Gain) loss from change in fair value of financial instruments includes the impact of the revaluation to fair value at the end of each reporting period for the Seller Earnouts contingent consideration.
(Gain) Loss from Change in Fair Value of Tax Receivable Agreement
(Gain) loss from change in fair value of Tax Receivable Agreement ("TRA") includes the impact of the revaluation to fair value at the end of each reporting period.
Interest Expense
Interest expense primarily includes interest expense related to our outstanding debt.
Other (Income) Expense, net
Other (income) expense, net includes non-operating expenses and income, including realized (gains) and losses from remeasurement of foreign currency transactions.
Results of Continuing Operations for the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023
Revenue
Revenues were $559 million for the three months ended March 31, 2024 as compared to $586 million for the prior year period. The decrease of $27 million or 4.6% was driven by lower volumes, net commercial activity and project revenue within our Employer Solutions segment and the wind-down of our Hosted business operations. We expect short term impacts in the first half of 2024 when compared to the prior year period as a result of large deal go-live timing and previous softness in BPaaS bookings in the first half of 2023. We also measure revenue growth as it relates to our cloud-based products and solutions that are central to our Alight Worklife® platform and our next generation product suite, BPaaS Solutions. For the three months ended March 31, 2024, we recorded BPaaS revenue of $117 million, which represented growth of 20.6% compared to the prior year period.
Recurring revenues decreased by $22 million, or 4.1%, from $543 million in the prior year period to $521 million and are related to decreases in our Employer Solutions segment driven by lower volumes and Net Commercial Activity.
Cost of Services, exclusive of Depreciation and Amortization
Cost of services, exclusive of depreciation and amortization, decreased $26 million, or 6.8%, for the three months ended March 31, 2024 as compared to the prior year period. The decrease was primarily driven by lower revenues and productivity initiatives, partially offset by continued investments in key resources.
Selling, General and Administrative
Selling, general and administrative expenses decreased $5 million, or 3.3%, for the three months ended March 31, 2024 as compared to the prior year period. The decrease was driven by lower compensation expenses primarily related to share-based awards and lower costs incurred from our restructuring program, partially offset by professional fees related to the planned sale of our Payroll and Professional Services businesses.
Depreciation and Intangible Amortization
Depreciation and intangible amortization expenses remained consistent when comparing the three months ended March 31, 2024 to the prior year period.
Change in Fair Value of Financial Instruments
There was a $21 million loss related to the change in the fair value of financial instruments for the three months ended March 31, 2024 compared to a loss of $25 million for the prior year period. We are required to remeasure the financial instruments at
30
the end of each reporting period and reflect a gain or loss for the change in fair value of the financial instruments in the period the change occurred. Changes in the fair value are due to changes in the underlying assumptions, including changes in the risk free interest rate, volatility, and the closing stock price for the period. See Note 14 "Financial Instruments" for additional information.
Change in Fair Value of Tax Receivable Agreement
The change in the fair value of the TRA resulted in a loss of $55 million for the three months ended March 31, 2024, an increase of $47 million compared to a loss of $8 million for the prior year period. This revaluation loss is due to conversion of non-controlling interest during the three months ended March 31, 2024, changes in the Company's assumptions related to the timing of the utilization of tax attributes during the term of the TRA, changes in the discount rate, and passage of time.
Interest Expense
Interest expense decreased $2 million for the three months ended March 31, 2024 as compared to the prior year period. The decrease was primarily due to increased hedging activity at favorable market rates, the opportunistic repricing of our 2028 term loan and higher interest income. See Note 8 “Debt” for additional information.
Income (Loss) Before Taxes From Continuing Operations
Loss before taxes from continuing operations was $148 million for the three months ended March 31, 2024 as compared to loss before taxes from continuing operations of $107 million for the three months ended March 31, 2023. The increase was primarily due to non-operating fair value remeasurements associated with financial instruments and the TRA.
Income Tax Expense (Benefit)
Income tax benefit was $27 million for the three months ended March 31, 2024, as compared to an income tax benefit of $23 million for the prior year period. The effective tax rate of 18% for the three months ended March 31, 2024 was lower than the 21% U.S. statutory corporate income tax rate primarily due to non-deductible portion of stock compensation expense. The effective tax rate of 21% for the three months ended March 31, 2023 was equal to the 21% U.S. statutory corporate income tax rate primarily due to the recognition of a benefit for an uncertain tax position for which the statute of limitations has lapsed, and partially offset by losses in certain non-U.S. jurisdictions for which tax benefits have not been recorded. See Note 7 “Income Taxes” for additional information.
Non-GAAP Financial Measures
The presentation of non-GAAP financial measures is used to enhance our management and stakeholders 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 U.S. GAAP. Management also uses supplemental non-GAAP financial measures to manage and evaluate the business, make planning decisions, allocate resources and as performance measures for Company-wide bonus plans. These key financial measures provide an additional view of our operational performance over the long-term and provide useful information that we use in order to maintain and grow our business.
The measures referred to as “adjusted”, have limitations as analytical tools, and such measures should not be considered either in isolation or as a substitute for net income or other methods of analyzing our results as reported under U.S. GAAP. Some of the limitations are:
Adjusted Net Income From Continuing Operations and Adjusted Diluted Earnings Per Share From Continuing Operations
Adjusted Net Income From Continuing Operations, which is defined as net income (loss) from continuing operations, adjusted for intangible amortization and the impact of certain non-cash items that we do not consider in the evaluation of ongoing operational
31
performance, is a non-GAAP financial measure used solely for the purpose of calculating Adjusted Diluted Earnings Per Share From Continuing Operations.
Adjusted Diluted Earnings Per Share From Continuing Operations is defined as Adjusted Net Income From Continuing Operations divided by the adjusted weighted-average number of shares of common stock, diluted. The adjusted weighted shares calculation assumes the full exchange of the non-controlling interest units and the full amount of non-vested time-based restricted units that were determined to be antidilutive and therefore excluded from the U.S. GAAP diluted earnings per share. Adjusted Diluted Earnings Per Share From Continuing Operations, including the adjusted weighted-average number of shares, is used by us and our investors to evaluate our core operating performance and to benchmark our operating performance against our competitors.
A reconciliation of Adjusted Net Income (Loss) From Continuing Operations and the computation of Adjusted Diluted Earnings Per Share From Continuing Operations is as follows:
|
|
| Three Months Ended |
|
|
| Three Months Ended |
| ||
|
| March 31, |
|
|
| March 31, |
| |||
(in millions, except share and per share amounts) |
|
| 2024 |
|
|
| 2023 |
| ||
Numerator: |
|
|
|
|
|
|
|
| ||
Net Income (Loss) From Continuing Operations Attributable to Alight, Inc. (1) |
| $ |
| (119 | ) |
| $ |
| (78 | ) |
Conversion of noncontrolling interest |
|
|
| (2 | ) |
|
|
| (6 | ) |
Intangible amortization |
|
|
| 71 |
|
|
|
| 71 |
|
Share-based compensation |
|
|
| 28 |
|
|
|
| 34 |
|
Transaction and integration expenses (2) |
|
|
| 17 |
|
|
|
| 2 |
|
Restructuring |
|
|
| 15 |
|
|
|
| 23 |
|
(Gain) Loss from change in fair value of financial instruments |
|
|
| 21 |
|
|
|
| 25 |
|
(Gain) Loss from change in fair value of tax receivable agreement |
|
|
| 55 |
|
|
|
| 8 |
|
Other |
|
|
| — |
|
|
|
| 1 |
|
Tax effect of adjustments (3) |
|
|
| (29 | ) |
|
|
| (29 | ) |
Adjusted Net Income From Continuing Operations |
| $ |
| 57 |
|
| $ |
| 51 |
|
|
|
|
|
|
|
|
| |||
Denominator: |
|
|
|
|
|
|
|
| ||
Weighted average shares outstanding - basic |
|
|
| 540,780,315 |
|
|
|
| 476,145,761 |
|
Dilutive effect of the exchange of noncontrolling interest units |
|
|
| 1,189,156 |
|
|
|
| — |
|
Weighted average shares outstanding - diluted |
|
|
| 541,969,471 |
|
|
|
| 476,145,761 |
|
Exchange of noncontrolling interest units(4) |
|
|
| 4,471,277 |
|
|
|
| 57,966,505 |
|
Impact of unvested RSUs(5) |
|
|
| 10,158,541 |
|
|
|
| 10,412,840 |
|
Adjusted shares of Class A Common Stock outstanding - diluted(6)(7) |
|
| 556,599,289 |
|
|
| 544,525,106 |
| ||
|
|
|
|
|
|
|
| |||
Basic (Net Loss) Earnings Per Share From Continuing Operations |
| $ |
| (0.22 | ) |
| $ |
| (0.16 | ) |
Diluted (Net Loss) Earnings Per Share From Continuing Operations |
| $ |
| (0.22 | ) |
| $ |
| (0.16 | ) |
Adjusted Diluted Earnings Per Share From Continuing Operations |
| $ |
| 0.10 |
|
| $ |
| 0.09 |
|
Adjusted EBITDA From Continuing Operations 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 the impact of certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance. Adjusted EBITDA Margin From Continuing Operations is defined as Adjusted EBITDA From Continuing Operations
32
divided by revenue. Adjusted EBITDA and Adjusted EBITDA Margin From Continuing Operations are non-GAAP financial measures used by management and our stakeholders to provide useful supplemental information that enables a better comparison of our performance across periods as well as to evaluate our core operating performance. A reconciliation of Adjusted EBITDA From Continuing Operations to Net Income (Loss) From Continuing Operations is as follows:
|
|
| Three Months Ended |
|
|
| Three Months Ended |
| ||
|
| March 31, |
|
|
| March 31, |
| |||
(in millions) |
|
| 2024 |
|
|
| 2023 |
| ||
Net Income (Loss) From Continuing Operations (1) |
| $ |
| (121 | ) |
| $ |
| (84 | ) |
Interest expense |
|
|
| 31 |
|
|
|
| 33 |
|
Income tax expense (benefit) |
|
|
| (27 | ) |
|
|
| (23 | ) |
Depreciation |
|
|
| 26 |
|
|
|
| 22 |
|
Intangible amortization |
|
|
| 71 |
|
|
|
| 71 |
|
EBITDA From Continuing Operations |
|
|
| (20 | ) |
|
|
| 19 |
|
Share-based compensation |
|
|
| 28 |
|
|
|
| 34 |
|
Transaction and integration expenses (2) |
|
|
| 17 |
|
|
|
| 2 |
|
Restructuring |
|
|
| 15 |
|
|
|
| 23 |
|
(Gain) Loss from change in fair value of financial instruments |
|
|
| 21 |
|
|
|
| 25 |
|
(Gain) Loss from change in fair value of tax receivable agreement |
|
|
| 55 |
|
|
|
| 8 |
|
Other |
|
|
| — |
|
|
|
| 1 |
|
Adjusted EBITDA From Continuing Operations |
| $ |
| 116 |
|
| $ |
| 112 |
|
Revenue |
| $ |
| 559 |
|
| $ |
| 586 |
|
Adjusted EBITDA Margin From Continuing Operations (3) |
|
|
| 20.8 | % |
|
|
| 19.1 | % |
(1) Adjusted EBITDA excludes the impact of discontinued operations. Comparable periods have been recast to exclude these impacts.
(2) Transaction and integration expenses primarily relate to acquisition and divestiture activities.
(3) Adjusted EBITDA Margin From Continuing Operations is defined as Adjusted EBITDA From Continuing Operations as a percentage of revenue.
Segment Revenue and Adjusted Gross Profit
Adjusted gross profit is defined as revenue less cost of services adjusted for depreciation, amortization and share-based compensation. Adjusted gross profit margin percent is defined as adjusted gross profit divided by revenue. Management uses adjusted gross profit and adjusted gross profit 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 profit margin percent is useful to investors as it eliminates the impact of certain non-cash expenses and allows a direct comparison between periods.
Employer Solutions Results
|
|
| Three Months Ended |
|
|
| Three Months Ended |
| ||
|
| March 31, |
|
|
| March 31, |
| |||
($ in millions) |
|
| 2024 |
|
|
| 2023 |
| ||
Employer Solutions Revenue |
|
|
|
|
|
|
|
| ||
Recurring |
| $ |
| 521 |
|
| $ |
| 533 |
|
Project |
|
|
| 38 |
|
|
|
| 43 |
|
Total Employer Solutions Revenue |
| $ |
| 559 |
|
| $ |
| 576 |
|
Employer Solutions Gross Profit |
| $ |
| 182 |
|
| $ |
| 187 |
|
Employer Solutions Gross Profit Margin |
|
|
| 32.6 | % |
|
|
| 32.5 | % |
Employer Solutions Adjusted Gross Profit |
| $ |
| 208 |
|
| $ |
| 210 |
|
Employer Solutions Adjusted Gross Profit Margin |
|
|
| 37.2 | % |
|
|
| 36.5 | % |
Employer Solutions Segment Results of Operations for the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023
Employer Solutions Revenue
Employer Solutions revenue was $559 million for the three months ended March 31, 2024 as compared to $576 million for the prior year period. The overall decrease of $17 million was primarily driven by decreases in recurring revenues from lower volumes, net commercial activity and project revenue.
Employer Solutions Gross Profit and Adjusted Gross Profit
Employer Solutions gross profit was $182 million for the three months ended March 31, 2024 compared to $187 million for the prior year period. The decrease of $5 million was driven by a decrease in revenue and lower expenses related to productivity initiatives, partially offset by increases in costs associated with funding growth of current and future revenues. Employer Solutions adjusted gross profit for the three months ended March 31, 2024 decreased $2 million to $208 million from $210 million in the prior year period
33
primarily driven by a decrease in revenue and lower expenses related to productivity initiatives, partially offset by increases in costs associated with funding growth of current and future revenues.
LIQUIDITY AND CAPITAL RESOURCES
Executive Summary
Our primary sources of liquidity include our existing cash and cash equivalents, cash flows from operations and availability under our revolving credit facility. Our primary uses of liquidity are operating expenses, funding of our debt requirements and capital expenditures.
We believe that our available cash and cash equivalents, cash flows from operations and availability under our revolving credit facility will be sufficient to meet our liquidity needs, including principal and interest payments on debt obligations, capital expenditures, payments on our Tax Receivable Agreement and anticipated working capital requirements for the foreseeable future. We believe our liquidity position at March 31, 2024 remains strong. We will continue to closely monitor and proactively manage our liquidity position in light of changing economic conditions and the volatility of interest rates. The Company expects to use the net after-tax cash proceeds from the expected sale of its Payroll & Professional Services business to reduce debt, return capital and for general corporate purposes, including reinvestment into growth opportunities.
In August 2022, we established a repurchase program allowing for up to $100 million in authorized share repurchases. In March 2024, the Company’s Board of Directors authorized the repurchase of up to an additional $200 million of the Company’s Class A common stock. As of March 31, 2024, approximately $248 million remained available for share repurchases under our share repurchase program.
Cash on our balance sheet includes funds available for general corporate purposes. Funds held on behalf of clients in a fiduciary capacity are segregated and shown in Fiduciary assets on the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023, with a corresponding amount in Fiduciary liabilities. Fiduciary funds are not used for general corporate purposes and are not a source of liquidity for us.
The Company's cash flows are presented inclusive of discontinued operations on the condensed consolidated statement of cash flows for all periods presented. The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented.
|
|
| Three Months Ended |
|
|
| Three Months Ended |
| ||
|
|
| March 31, |
|
|
| March 31, |
| ||
(in millions) |
|
| 2024 |
|
|
| 2023 |
| ||
Cash provided by operating activities |
| $ |
| 100 |
|
| $ |
| 72 |
|
Cash used in investing activities |
|
|
| (36 | ) |
|
|
| (45 | ) |
Cash used in financing activities |
|
|
| (74 | ) |
|
|
| (160 | ) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
| (2 | ) |
|
|
| — |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
| (12 | ) |
|
|
| (133 | ) |
Cash, cash equivalents, and restricted cash at end of period |
| $ |
| 1,747 |
|
| $ |
| 1,626 |
|
Operating Activities
Net cash provided by operating activities was $100 million for the three months ended March 31, 2024 compared to $72 million for the three months ended March 31, 2023. The increase in cash provided by operating activities was primarily due to a decrease in our net working capital requirements.
Investing Activities
Cash used for investing activities decreased $9 million to $36 million for the three months ended March 31, 2024 from $45 million for the prior year period, driven by capital expenditures.
Financing Activities
Cash used for financing activities for the three months ended March 31, 2024 was $74 million as compared to cash used for financing activities of $160 million in the prior year. The primary drivers of cash used for financing activities were $62 million of TRA payments, $57 million of shares/units withheld in lieu of taxes, $9 million of finance lease payments, $6 million of debt repayments, partially offset by a $60 million net increase in fiduciary liabilities. The increase in fiduciary cash is primarily due to timing of client funding and subsequent disbursement of payments.
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Cash, Cash Equivalents and Fiduciary Assets
At March 31, 2024, our continuing operations cash and cash equivalents were $256 million, a decrease of $68 million from December 31, 2023. Of the total balances of cash and cash equivalents as of March 31, 2024 and December 31, 2023, none of the balances were restricted as to use.
Some of our client agreements require us to hold funds on behalf of clients to pay obligations on their behalf. The levels of Fiduciary assets and liabilities can fluctuate significantly, depending on when we collect the amounts from clients and make payments on their behalf. Such funds are not available to service our debt or for other corporate purposes. There is typically a short period of time between when the Company receives funds and when it pays obligations on behalf of clients. We are entitled to retain investment income earned on fiduciary funds, when investment strategies are deployed, in accordance with industry custom and practice, which has historically been immaterial. In our Condensed Consolidated Balance Sheets, the amount we report for Fiduciary assets and Fiduciary liabilities are equal. Our continuing operations Fiduciary assets included cash of $250 million and $234 million at March 31, 2024 and December 31, 2023, respectively.
Other Liquidity Matters
Our cash flows from operations, borrowing availability and overall liquidity are subject to risks and uncertainties. For further information, see the “Risk Factors” section within Item 1A of our Annual Report.
We do not have any material business, operations or assets in Russia, Belarus or Ukraine and we have not been materially impacted by the actions of the Russian government. Our total revenues from these three countries are de minimis for all periods presented.
Tax Receivable Agreement
In connection with the Business Combination, we entered into the TRA with certain of our pre-Business Combination owners that provides for the payment by Alight to such owners of 85% of the benefits that Alight is deemed to realize as a result of the Company’s share of existing tax basis acquired in the Business Combination and other tax benefits related to entering into the Tax Receivable Agreement.
Actual tax benefits realized by Alight may differ from tax benefits calculated under the TRA as a result of the use of certain assumptions in the TRA, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits. While the amount of existing tax basis, the anticipated tax basis adjustments and the actual amount and utilization of tax attributes, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, we expect that the payments that Alight may make under the TRA will be substantial. For the three months ended March 31, 2024, we paid $62 million related to the TRA and no further payments are expected to be made during the remainder of 2024. As of March 31, 2024, we expect to make payments of approximately $89 million in 2025.
Contractual Obligations and Commitments
In March 2024, the Company entered into an agreement with a third-party provider in the ordinary course of business for the use of certain cloud services. Under this “Management’sagreement, the Company is committed to purchase services totaling $250 million over a 5-year term. There have been no other material changes to our obligations and commitments during the three months ended March 31, 2024.
Our material contractual obligations include debt, non-cancellable contractual service and purchase obligations and lease obligations. For additional information regarding debt and non-cancellable contractual service and purchases obligations, see the Condensed Consolidated Financial Statements within Item 1 of this Quarterly Report on Form 10-Q, Note 8 “Debt”, and Note 19 “Commitments and Contingencies”.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements.
Critical Accounting Estimates
There were no material changes from the Critical Accounting Estimates disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023. Please refer to "Critical Accounting Estimates" described in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategyOperations" in Part II of our Annual Report.
Item 3. Quantitative and the plansQualitative Disclosures About Market Risk.
For quantitative and objectivesqualitative disclosures about market risk, see Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intendedour Annual Report. Our exposures to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on March 26, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses. Wemarket risk have not selected any specific Business Combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any Business Combination target. We intend to effectuate our initial Business Combination using cash from the proceeds of our Initial Public Offering and the private placement of the Private Placement Warrants, the proceeds of the sale of our shares in connection with our initial Business Combination, shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The registration statement for our Initial Public Offering was declared effective on May 26, 2020. On May 29, 2020, we completed our Initial Public Offering of 103,500,000 Units, which includes the full exercise by the underwriters of the over-allotment option to purchase an additional 13,500,000 units, sold to the public at the price of $10.00 per Unit, generating gross proceeds of $1,035,000,000. Each Unit consists of one share of our Class A common stock and one-third of one redeemable warrant. Each whole Public Warrant entitles the holder to purchase one share of our Class A common stock at an exercise price of $11.50 per share, subject to adjustment. Simultaneously with the closing of our Initial Public Offering, we completed the sale to the Sponsors of an aggregate of 15,133,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, generating gross proceeds of approximately $22,700,000. Each Private Placement Warrant is exercisable for one share of our Class A common stock at a price of $11.50 per share, subject to adjustment. The proceeds from the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account.
Following our Initial Public Offering, the full exercise of the over-allotment option and the sale of the Private Placement Warrants, a total of $1,035,000,000 was placed in the Trust Account. We incurred $57,949,954 in transaction costs, including $20,700,000 of underwriting fees, $36,225,000 of deferred underwriting fees and $1,024,954 of other offering costs.
The issuance of additional shares in connection with an initial Business Combination, including the issuance of forward purchase securities:
Similarly, if we issue debt securities or otherwise incur significant debt, it could result in:
We expect to continue to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to complete our initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activitieschanged materially since inception have been organizational activities, those necessary to prepare for our Initial Public Offering and identifying a target company for our initial Business Combination. We do not expect to generate any operating revenues until after completion of our initial Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective Business Combination candidates.
For the three months ended June 30, 2020, we had a net loss of $625, which consists of operating costs of $109,445 and a provision for income taxes of $15,636, offset by interest income on marketable securities held in the Trust Account of $124,456.
For the period from March 26, 2020 (inception) through June 30, 2020, we had a net loss of $1,584, which consists of formation and operating costs of $110,404 and a provision for income taxes of $15,636, offset by interest income on marketable securities held in the Trust Account of $124,456.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, the Company’s only source of liquidity was an initial purchase of Class B ordinary shares by our Sponsor and loans from our Sponsor.
For the period from March 26, 2020 (inception) through June 30, 2020, cash used in operating activities was $334,857. Net loss of $1,584 was affected by interest earned on marketable securities held in the Trust Account of $124,456 and changes in operating assets and liabilities, which used $208,817 of cash from operating activities.
As of June 30, 2020, we had cash and marketable securities of $1,035,124,456 held in the Trust Account. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes paid and deferred underwriting commissions) to complete our initial Business Combination. We may withdraw interest to pay taxes. During the period ended June 30, 2020, we did not withdraw any interest earned on the Trust Account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2020, we had cash of $1,285,189 outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete our initial Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we would repay such loaned amounts. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.50 per warrant at the option of the lender.
We do not currently believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our initial Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial Business Combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
In March 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on our results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, our ability to complete our initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit our ability to have meetings with potential investors or affect the ability of a potential target company's personnel, vendors and service providers to negotiate and consummate our initial Business Combination in a timely manner.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2020. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsors a monthly fee up to $5,000 for office space and administrative support services. We began incurring these fees on May 26, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
Pursuant to a registration rights agreement entered into on May 26, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration and stockholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.the Annual Report.
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Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
The underwriters are entitled to a deferred feeOur management, with the participation of $0.35 per Unit, or $36,225,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the termsour principal executive officer and principal financial officer, evaluated, as of the underwriting agreement.
We entered into forward purchase agreements with eachend of Cannae Holdings, Inc. and THL FTAC LLC. Pursuant to each agreement, Cannae Holdings, Inc. and THL FTAC LLC have each agreed to purchase sharesthe period covered by this Quarterly Report on Form 10-Q, the effectiveness of our Class A common stock in an aggregate share amount equal to 15,000,000 shares of the our Class A Common stock (or a total of 30,000,000 shares of the our Class A common stock), plus an aggregate of 5,000,000 redeemable warrants (or a total of 10,000,000 redeemable warrants) to purchase one share of the Company’s Class A common stock at $11.50 per share, for an aggregate purchase price of $150,000,000 (or a total of $300,000,000), or $10.00 for one share of our Class A common stock and one-third of one warrant, in a private placement to occur concurrently with the closing of a Business Combination. The warrants to be sold as part of the forward purchase agreements will be identical to the warrants underlying the Units sold in the Initial Public Offering.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our unaudited condensed balance sheet.
Net Loss per Common Share
We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, by the weighted average number of shares of Class A redeemable common stock outstanding for the periods. Net income per common share, basic and diluted for and Class B non-redeemable common stock is calculated by dividing net income less income attributable to Class A redeemable common stock, by the weighted average number of shares of Class B non-redeemable common stock outstanding for the periods presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2020, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds received into the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls(as defined in Rules 13a-15(e) and other procedures that are15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed in ourthe reports filedthat it files or submittedsubmits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controlsforms and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluationor necessary disclosures. Based on the aforementioned evaluation, our principal executive officer and principal financial officer concluded that, as of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 underMarch 31, 2024, the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of ourCompany's disclosure controls and procedures as of June 30, 2020. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
Changes in Internal Control Overover Financial Reporting
During the most recently completed fiscal quarter, thereThere has been no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - II—OTHER INFORMATION
Item 1. Legal Proceedings.
ITEM 1. LEGAL PROCEEDINGS.We are a party to a variety of legal proceedings that arise in the normal course of our business. While the results of these legal proceedings cannot be predicted with certainty, we believe that the final outcome of these proceedings will not have a material adverse effect, individually or in the aggregate, on our results of operations or financial condition.
Item 1A. Risk Factors.
None.
Factors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q are any of the risks described in our final prospectus for our Initial Public OfferingAnnual Report filed with the SEC on May 28, 2020.February 29, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes
In addition to the risk factors previously disclosed under "Part I, Item IA. Factors" in the Company’s Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating our Company and our business. Any of the following risks could materially and adversely affect our business financial condition and results of operations.
Risks Related to the Disposition
Our business and financial results could be adversely impacted during the pending sale of our Payroll and Professional Services Businesses, particularly if there is a delay in the completion of the Disposition.
On March 20, 2024, the Company entered into an asset purchase agreement to sell its Payroll and Professional Services Businesses (the “Disposition”) to an affiliate of H.I.G. Capital (“HIG”). The pending Disposition may cause disruptions to the Company’s business or business relationships, and may create uncertainty surrounding the Company’s ongoing business operations, which could materially and adversely affect our financial condition or results of operations, regardless of whether the Disposition is completed, including as a result of the attention of Company’s management being directed to transaction-related considerations and being diverted from the day-to-day operations of the Company’s business, seeking alternative relationships with third parties or seeking to terminate or renegotiated their relationships with the Company, and preparing for the post-closing separation of the businesses. Following the closing of the Disposition, we will enter into an agreement with HIG, whereby we and HIG will provide various transition services for specified periods beginning on the closing date. In the course of performing our obligations under such agreement, we will allocate certain of our resources, including assets, facilities, equipment and the time and attention of our management and other teammates, for the benefit of the Payroll and Professional Services Business and not ours, which may negatively impact our financial condition or results of operations.
If the Disposition is not completed for any reason, investor confidence could decline. A failed transaction may result in negative publicity, protracted litigation, and may affect our relationships with our clients and other business partners. In addition, in the event of a failed transaction, we will have expended significant management resources in an effort to complete the sale, and we will have incurred significant transaction costs, including legal fees, financial advisor fees and other related costs, without any commensurate benefit. Accordingly, if the proposed Disposition is not completed on the terms set forth in the operative agreement or at all, our business, results of operations, financial condition, cash flows and stock price may be materially adversely affected.
The Company has incurred, and will continue to incur, transaction costs in connection with the pending Disposition, and many of these fees and costs are payable regardless of whether or not the sale is completed.
If the proposed sale of the Payroll and Professional Services Businesses is completed, the Company may not achieve the operational and financial results that it anticipates in the future.
If the proposed sale of the Payroll and Professional Services Businesses is completed, the Company’s operational and financial profile will change upon the Disposition. As a result, the Company’s diversification of revenue sources will diminish, and the Company’s results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and greater risk as a result of the concentration of its business. Moreover, shares of our Class A Common Stock will represent an investment in a smaller company than in existence today and our exposure to the risks inherent in our final prospectusremaining businesses will increase. Additionally, our ability to return to the payroll and professional services business line is restricted by the terms of the non-competition commitments made pursuant to the terms of the agreement governing the Disposition.
The price of our Class A Common Stock may be volatile during the pending Disposition, and stockholders could lose all or part of their investment.
The trading price of our Class A Common Stock may at times be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control. In addition to other factors, these factors may include the
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timing and process for completion of the Disposition, including potential delays which may cause significant fluctuations in the price of our Initial Public Offering filedClass A Common Stock.
The occurrence of any event, change or other circumstances that could give rise to the termination of the agreement governing the sale of our Payroll and Professional Services Businesses could adversely affect our future business.
There are significant risks and uncertainties associated with the SEC on May 28, 2020. Wepending Disposition. The occurrence of certain events, changes or any other circumstances could give rise to the termination of the agreement governing the Disposition and cause the sale not to be completed. For instance, there is no assurance that the parties to the agreement will receive the necessary regulatory approvals required to close the transaction. If the parties fail to obtain such approvals or to meet other conditions necessary to complete the sale as set forth in the operative agreement, the Company may disclose changesnot be able to close the transaction and the Company may not realize the anticipated benefits to its business and financial condition.
Our liquidity following the close of our pending sale of the Payroll and Professional Services Businesses and our planned used of proceeds may not be actualized, and we may use the proceeds from the Disposition and other available funds in ways that may not improve our results of operations, financial condition, cash flows or enhance the value of our Class A Common Stock.
Following the closing of the pending sale of our Payroll and Professional Services Businesses, we plan to use sale proceeds and other available funds in a variety of potential ways, including to repay debt, make stock repurchases and/or for general corporate purposes. A number of factors may impact our ability to repurchase stock and the timing of any such factors or disclose additional factorsstock repurchases, including market conditions, the price of our common stock, our results of operations, financial condition, cash flows, available financing, leverage ratios, and legal, regulatory and contractual requirements and restrictions. Accordingly, the actual amount of common stock we repurchase may be less, perhaps substantially, and the period of time over which we make any stock repurchases may be substantially longer, than we currently anticipate.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information regarding purchases of our Class A Common Stock that were made by us during the three months ended March 31, 2024.
Total number of | Approximate dollar | |||||||||||||||||
shares purchased as | value of shares that may | |||||||||||||||||
part of publicly | yet be purchased under | |||||||||||||||||
Total number of | Average price | announced plans | the plans or programs | |||||||||||||||
shares purchased | paid per share(1) | or programs | (in millions) (2) | |||||||||||||||
January 1, 2024 through January 31, 2024 | — | $ | — | — | $ | 48 | ||||||||||||
February 1, 2024 through February 29, 2024 | — | — | — | 48 | ||||||||||||||
March 1, 2024 through March 31, 2024 | — | — | — | 248 | ||||||||||||||
Balance as of March 31, 2024 | — | $ | — | — | $ | 248 |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Unregistered SalesCompany’s Board of Equity Securities
Simultaneously withDirectors authorized the consummationrepurchase of up to an additional $200 million of the Initial Public Offering andCompany’s Class A common stock. In the full exercisefirst quarter of 2024, we did not repurchase shares. For additional information, see Note 9 in "Part I. Financial Information - Item 1. Financial Statements" in this report.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Trading Arrangements
During the three months ended March 31, 2024, none of the over-allotment option, we consummated a private placement of 15,133,333, Private Placement Warrants to our Sponsor at a price of $1.50 per Private Placement Warrant, generating total proceeds of $22,700,000. Such securities were issued pursuant to the exemption from registration containedCompany’s directors or officers (as defined in Section 4(a)(2)Rule 16a-1(f) of the Securities Act.
The Private Placement WarrantsExchange Act of 1934, as amended) adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are identical to the Public Warrants underlying the Units solddefined in the Initial Public Offering except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completionItem 408 of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
UseRegulation S-K of Proceeds
On May 29, 2020, we consummated our Initial Public Offering of 103,500,000 Units, inclusive of the underwriters’ election to fully exercise their overallotment option to purchase an additional 13,500,000 Units. The Units were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $1,035,000,000. Credit Suisse Securities (USA) LLC and BofA Securities, Inc. acted as the joint book-running managers. The securities sold in the offering were registered under the Securities Act on registration statement on Form S-1 (No. 333-238135). The SEC declared the registration statement effective on May 26, 2020.
Of the gross proceeds received from the Initial Public Offering, $1,035,000,000 was placed in the Trust Account.
We paid a total of $20,700,000 in underwriting discounts and commissions and $1,024,954 for other offering costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $36,225,000 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
None.
1933, as amended).
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Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
* Filed herewith.
** Furnished herewith.
† The related exhibits and schedules are not being filed herewith. The registrant agrees to furnish supplementally a copy of any such exhibits and schedules to the Securities and Exchange Commission upon request.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Alight, Inc. |
(Registrant)
Date: May 8, 2024 | By: | /s/ Katie Rooney | |
Katie Rooney | |||
Chief Financial Officer and Chief Operating Officer | |||
(Principal Financial Officer, Principal Accounting Officer and |
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