Alight Inc.

11/06/2025 | Press release | Distributed by Public on 11/06/2025 08:19

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes which are included elsewhere in this Quarterly Report on Form 10-Q and with the Annual Report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially as a result of the factors discussed in "Item 1A. Risk Factors" in our Annual Report. See "Forward-Looking Statements" in this Quarterly Report on Form 10-Q.
BUSINESS
Overview
Alight is a technology-enabled services company delivering human capital management solutions to many of the world's largest and most complex organizations. This includes the implementation and administration of employee benefits (e.g. health, wealth and leaves) solutions. 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 through 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 benefits 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.
Business Combination
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 September 30, 2025, 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 September 30, 2025.
Divestiture
On July 12, 2024, the Company, completed the previously announced sale (the "Transaction") of the "Divested Business" entities affiliated with H.I.G. Capital, L.L.C. (collectively, "Buyer"), pursuant to the terms of the Stock and Asset Purchase Agreement (the "Purchase Agreement"), dated as of March 20, 2024. Under the terms of the Purchase Agreement, the Buyer agreed to acquire the Divested Business for total consideration of up to $1.2 billion, in the form of (1) $1.0 billion in cash (the "Closing Cash Consideration") payable at the closing of the transactions (the "Closing") contemplated by the Purchase Agreement, (2) a note with an aggregate principal amount of $50 million, and an initial fair value of $35 million as of July 12, 2024 issued at Closing (the "Seller Note") by an indirect parent of Buyer (the "Note Issuer") and (3) contingent upon the financial performance of the Divested Business for the 2025 fiscal year, a note with an aggregate principal amount of up to $150 million (the "Additional Seller Note") and an initial fair value of $43 million as of July 12, 2024 to be issued by the Note Issuer. The Seller Note has a stated interest rate of 8.0%. The Company incurred higher operating expenses in 2024 as a result of professional fees paid in conjunction with the Transaction.
EXECUTIVE SUMMARY OF FINANCIAL RESULTS
The following table sets forth our historical results of operations for the periods indicated below:
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2025 2024 2025 2024
Revenue $ 533 $ 555 $ 1,609 $ 1,652
Cost of services, exclusive of depreciation and amortization 327 358 1,003 1,059
Depreciation and amortization 28 23 81 70
Gross Profit 178 174 525 523
Operating Expenses
Selling, general and administrative 87 142 321 434
Depreciation and intangible amortization 75 74 223 223
Goodwill impairment 1,338 - 2,321 -
Total Operating expenses 1,500 216 2,865 657
Operating Income (Loss) From Continuing Operations (1,322) (42) (2,340) (134)
Other (Income) Expense
(Gain) Loss from change in fair value of financial instruments (19) (23) 1 (54)
(Gain) Loss from change in fair value of tax receivable agreement (66) 27 (34) 51
Interest expense 24 19 68 83
Other (income) expense, net (8) (12) (26) (11)
Total Other (income) expense, net (69) 11 9 69
Income (Loss) From Continuing Operations Before Taxes (1,253) (53) (2,349) (203)
Income tax expense (benefit) (198) (9) (204) (34)
Net Income (Loss) From Continuing Operations (1,055) (44) (2,145) (169)
Net Income (Loss) From Discontinued Operations, Net of Tax (13) (30) (22) 2
Net Income (Loss) (1,068) (74) (2,167) (167)
Net income (loss) attributable to noncontrolling interests (1) - (2) (2)
Net Income (Loss) Attributable to Alight, Inc. $ (1,067) $ (74) $ (2,165) $ (165)
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 use annual revenue retention rates as an important measure to manage our business. We calculate annual revenue retention on a gross basis by identifying the clients from whom we generated revenue in the prior year and determining what percentage of that revenue is generated from those same clients for the same solutions in the subsequent year.
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.
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.
Goodwill impairment
Goodwill impairment consists of charges relating to Goodwill. We review goodwill for impairment annually on October 1 and more frequently if events or changes in circumstances indicate that an impairment may exist. If the carrying value of the reporting unit exceeds its fair value, the fair value of the reporting unit's goodwill is calculated and an impairment loss equal to the excess is recorded.
(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 and the Additional Seller Note.
(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 and, is net of interest rate swap derivative gains recognized and interest income.
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, and Transition Services Agreement (the "TSA") income for providing various corporate services to the Divested Business.
Results of Continuing Operations for the Three Months Ended September 30, 2025Compared to the Three Months Ended September 30, 2024
Revenue
Revenues were $533 million for the three months ended September 30, 2025 as compared to $555 million for the prior year period. The decrease of $22 million, or 4.0%, was driven by lower Net Commercial Activity, lower project revenue and an approximately $4 million impact from the finalization of the commercial agreement related to the Transaction. The Company experienced lower than expected bookings and larger than anticipated losses from contract renewals during the first nine months of 2025, which impacted revenue growth and is also expected to impact revenue growth in the fourth quarter of 2025 and fiscal year 2026.
Recurring revenues for the three months ended September 30, 2025 decreased by $15 million, or 3.0%, from $504 million in the prior year period to $489 million, primarily driven by lower Net Commercial Activity.
Cost of Services, exclusive of Depreciation and Amortization
Cost of services, exclusive of depreciation and amortization, decreased $31 million, or 8.7%, for the three months ended September 30, 2025 as compared to the prior year period. The decrease was primarily driven by lower compensation expenses, savings realized in conjunction with productivity initiatives and lower revenues.
Depreciation and Amortization
Depreciation and amortization expenses increased by $5 million, or 21.7%, as compared to the prior year period, primarily driven by capitalized software.
Selling, General and Administrative
Selling, general and administrative expenses decreased $55 million, or 38.7%, for the three months ended September 30, 2025 as compared to the prior year period. The decrease was driven by lower professional fees incurred related to the sale and separation of the Divested Business, a reduction in compensation and severance expenses and productivity savings.
Depreciation and Intangible Amortization
Depreciation and intangible amortization expenses wereconsistent with the prior year period.
Goodwill Impairment
During the three months ended September 30, 2025, the Company identified interim indicators of impairment and recorded a $1,338 million non-cash impairment charge for the period. There was no impairment recognized for the three months ended September 30, 2024. See Note 6 "Goodwill and Intangible assets, net" within the Condensed Consolidated Financial Statements for additional information.
Change in Fair Value of Financial Instruments
There was a $19 million gain related to the change in the fair value of financial instruments for the three months ended September 30, 2025compared to a gain of $23 million for the prior year period. We are required to remeasure the financial instruments at 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 primarily due to changes in the underlying assumptions of each respective instrument, including changes in the risk-free interest rate, volatility, cost of debt, forecasts, and the closing stock price for the period. See Note 14 "Financial Instruments" within the Condensed Consolidated Financial Statements for additional information.
Change in Fair Value of Tax Receivable Agreement
The change in the fair value of the TRA resulted in a gain of $66 millionfor the three months ended September 30, 2025, an increase of $93 millioncompared to a loss of $27 millionfor the prior year period. The change in fair value was due to 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 the passage of time.
Interest Expense
Interest expense increased $5 millionfor the three months ended September 30, 2025, as compared to the prior year period. The increase was primarily due tolower interest income in the current year and a non-cash gain on extinguishment from the partial debt paydown in 2024.
Other (Income) Expense, net
Under the terms of the TSA as described in Note 4 "Discontinued Operations" within the Condensed Consolidated Financial Statements, the Company is providing technology infrastructure, risk and security, and various other corporate services to the Divested Business subsequent to the close. We recorded $7 million and $9 million for services performed under the TSA for the three months ended September 30, 2025 and 2024, respectively, in Other (income) expense, net. The corresponding expenses were recognized in Cost of services and Selling, general and administrative expense in the Condensed Consolidated Statement of Comprehensive Income (Loss).
Income (Loss) From Continuing Operations Before Taxes
Loss from continuing operations before taxes was $1,253 million for the three months ended September 30, 2025 as compared to a loss from continuing operations before taxes of $53 million for the three months ended September 30, 2024. The increase in loss was primarily attributable to the $1,338 million non-cash goodwill impairment charge, partially offset by the change in fair value of the TRA, lower selling, general and administrative expenses, and a change in fair value of financial instruments.
Income Tax Expense (Benefit)
Income tax benefit was $198 million for the three months ended September 30, 2025, as compared to an income tax benefit of $9 million for the prior year period. The effective tax rate of 16% for the three months ended September 30, 2025 was lower than the 21% U.S. statutory corporate income tax rate primarily due to the Company's non-deductible expenses, tax credits, changes in valuation allowance, and certain non-recurring items, including non-deductible goodwill impairment. The effective tax rate of 17% for the three months ended September 30, 2024 was lower than the 21% U.S. statutory corporate income tax rate primarily due to the Company's non-deductible expenses, tax credits, and changes in valuation allowance. See Note 7 "Income Taxes" within the Condensed Consolidated Financial Statements for additional information.
In July 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law in the U.S. The OBBBA made several changes to business tax provisions including modifications to the Section 163j interest expense limitation and immediate expensing of domestic research and development expenditures. For the three months ended September 30, 2025, the primary impact of the OBBBA was a deferred tax benefit of approximately $12 million which is included in Income tax expense (benefit) within the Condensed Consolidated Statement of Comprehensive Income (Loss) due to the realizability of the Company's deferred tax assets. The Company will continue to monitor any developments and guidance related to the OBBBA.
Results of Continuing Operations for the Nine Months Ended September 30, 2025Compared to the Nine Months Ended September 30, 2024
Revenue
Revenues were $1,609 million for the nine months ended September 30, 2025, as compared to $1,652 million for the prior year period. The decrease of $43 million, or 2.6%, was driven by lower project revenue, Net Commercial Activity and an approximately $4 million impact from the finalization of the commercial agreement related to the Transaction. The Company experienced lower than expected bookings and larger than anticipated losses on contract renewals during the first nine months of 2025, which impacted revenue growth and is also expected to impact revenue growth in the fourth quarter of 2025 and fiscal year 2026.
Recurring revenues for the nine months ended September 30, 2025 decreased by $17 million, or 1.1%, from $1,518 million in the prior year period to $1,501 million, primarily driven by lower Net Commercial Activity.
Cost of Services, exclusive of Depreciation and Amortization
Cost of services, exclusive of depreciation and amortization, decreased $56 million, or 5.3%, for the nine months ended September 30, 2025 as compared to the prior year period. The decrease was primarily driven by savings realized in conjunction with productivity initiatives and lower revenues.
Depreciation and Amortization
Depreciation and amortization expenses increased by $11 million, or 15.7%, as compared to the prior year period, primarily driven by capitalized software.
Selling, General and Administrative
Selling, general and administrative expenses decreased $113 million, or 26.0%, for the nine months ended September 30, 2025as compared to the prior year period. The decrease was driven by a reduction in compensation expense, primarily from lower non-cash share-based awards, lower professional fees incurred related to the sale and separation of the Divested Business and productivity savings.
Depreciation and Intangible Amortization
Depreciation and intangible amortization expenses were consistent with the prior year period.
Goodwill Impairment
During the nine months ended September 30, 2025, the Company identified interim indicators of impairment and recorded a total of $2,321 million non-cash goodwill impairment charges for the period. There was no impairment recognized for the nine months ended September 30, 2024. See Note 6 "Goodwill and Intangible assets, net" within the Condensed Consolidated Financial Statements for additional information.
Change in Fair Value of Financial Instruments
There was a $1 million loss related to the change in the fair value of financial instruments for the nine months ended September 30, 2025compared to a gain of $54 million for the prior year period, primarily due to the $50 million
write down of our Additional Seller Note in the current year, partially offset by a gain on remeasurement of the Seller Earnout.We are required to remeasure the financial instruments at 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 primarily due to changes in the underlying assumptions of each respective instrument, including changes in the risk-free interest rate, volatility, cost of debt, forecasts, and the closing stock price for the period. See Note 14 "Financial Instruments" within the Condensed Consolidated Financial Statements for additional information.
Change in Fair Value of Tax Receivable Agreement
The change in the fair value of the TRA resulted in a gain of $34 million for the nine months ended September 30, 2025, an increase of $85 million compared to a loss of $51 million for the prior year period. The change in fair value was due to 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 the passage of time.
Interest Expense
Interest expense decreased $15 million for the nine months ended September 30, 2025 as compared to the prior year period. The decrease was primarily due tothe partial repayment of debt in the prior year andthe opportunistic repricing of our 2028 term loan in the first quarter of 2025, partially offset by the Company's hedges. See Note 8 "Debt" within the Condensed Consolidated Financial Statements for additional information.
Other (Income) Expense, net
Under the terms of the TSA as described in Note 4 "Discontinued Operations" within the Condensed Consolidated Financial Statements, the Company is providing technology infrastructure, risk and security, and various other corporate services to the Divested Business subsequent to the close. We recorded $25 million and $9 million for services performed under the TSA for the nine months ended September 30, 2025 and 2024, respectively, in Other (income) expense, net. The corresponding expenses were recognized in Cost of services and Selling, general and administrative expense in the Condensed Consolidated Statement of Comprehensive Income (Loss).
Income (Loss) From Continuing Operations Before Taxes
Loss from continuing operations before taxes was $2,349 million for the nine months ended September 30, 2025 as compared to loss from continuing operations before taxes of $203 million for the nine months ended September 30, 2024. The increase in loss was primarily attributable to the $2,321 non-cash goodwill impairment charge, the non-operating fair value remeasurements of financial instruments, partially offset by lower selling, general and administrative expenses, a change in fair value remeasurements of the tax receivable agreement, lower interest expense as a result of the debt pay down and other income recorded in conjunction with the TSA entered into with the purchaser of the Divested Business.
Income Tax Expense (Benefit)
Income tax benefit was $204 million for the nine months ended September 30, 2025, as compared to an income tax benefit of $34 million for the prior year period. The effective tax rate of 9% for the nine months ended September 30, 2025 was lower than the 21% U.S. statutory corporate income tax rate primarily due to the Company's non-deductible expenses, tax credits, changes in valuation allowance, and certain non-recurring items, including non-deductible goodwill impairment. The effective tax rate of 17% for the nine months ended September 30, 2024 was lower than the 21% U.S. statutory corporate income tax rate primarily due to the Company's non-deductible expenses, tax credits, and changes in valuation allowance. See Note 7 "Income Taxes" within the Condensed Consolidated Financial Statements for additional information.
In July 2025, the OBBBA was enacted into law in the U.S. The OBBBA made several changes to business tax provisions including modifications to the Section 163j interest expense limitation and immediate expensing of domestic research and development expenditures. As of September 30, 2025, the primary impact of the OBBBA was a deferred tax benefit of approximately $12 million which is included in Income tax expense (benefit) within the Condensed Consolidated Statement of Comprehensive Income (Loss) due to the realizability of the Company's deferred tax assets. The Company will continue to monitor any developments and guidance related to the OBBBA.
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:
•Measure does not reflect changes in, or cash requirements for, our working capital needs or contractual commitments;
•Measure does not reflect our interest expense or the cash requirements to service interest or principal payments on our indebtedness;
•Measure does not reflect our tax expense or the cash requirements to pay our taxes, including payments related to the Tax Receivable Agreement;
•Measure does not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
•Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often need to be replaced in the future, and the adjusted measure does not reflect any cash requirements for such replacements; and
•Other companies may calculate adjusted measures differently, limiting its usefulness as a comparative measure.
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 attributable to Alight, Inc., adjusted for intangible amortization and the impact of certain non-cash items, including goodwill impairment charges, that we do not consider in the evaluation of ongoing operational performance, is a non-GAAP financial measure used solely for the purpose of calculating Adjusted Diluted Earnings Per Share 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 September 30, Nine Months Ended September 30,
(in millions, except share and per share amounts) 2025 2024 2025 2024
Numerator:
Net Income (Loss) From Continuing Operations Attributable to Alight, Inc. (1)
$ (1,054) $ (44) $ (2,143) $ (167)
Conversion of noncontrolling interest (1) - (2) (2)
Intangible amortization 70 70 211 210
Share-based compensation 3 11 14 59
Transaction and integration expenses (2)
4 21 12 57
Restructuring 4 12 44 45
(Gain) Loss from change in fair value of financial instruments (19) (23) 1 (54)
(Gain) Loss from change in fair value of tax receivable agreement (66) 27 (34) 51
Goodwill impairment and other (3)
1,338 6 2,323 8
Tax effect of adjustments (4)
(217) (32) (256) (73)
Adjusted Net Income From Continuing Operations $ 62 $ 48 $ 170 $ 134
Denominator:
Weighted average shares outstanding - basic 526,576,757 535,828,896 529,206,657 545,659,335
Dilutive effect of the exchange of noncontrolling interest units - - - 560,433
Dilutive effect of RSUs - - - -
Weighted average shares outstanding - diluted 526,576,757 535,828,896 529,206,657 546,219,768
Exchange of noncontrolling interest units(5)
510,115 663,057 510,115 2,189,169
Impact of unvested RSUs(6)
8,289,609 7,358,510 8,289,609 7,358,510
Adjusted shares of Class A Common Stock outstanding - diluted(7)(8)
535,376,481 543,850,463 538,006,381 555,767,447
Basic (Net Loss) Earnings Per Share From Continuing Operations $ (2.00) $ (0.08) $ (4.05) $ (0.31)
Diluted (Net Loss) Earnings Per Share From Continuing Operations $ (2.00) $ (0.08) $ (4.05) $ (0.31)
Adjusted Diluted Earnings Per Share From Continuing Operations $ 0.12 $ 0.09 $ 0.32 $ 0.24
__________________________________________________________
(1)Excludes the impact of discontinued operations.
(2)Transaction and integration expenses primarily relate to acquisitions and divestiture activities.
(3)Goodwill impairment and other primarily includes $1,338 million and $2,321 million non-cash goodwill impairment charges for the three and nine months ended September 30, 2025, respectively.
(4)Income tax effects have been calculated based on statutory tax rates for both U.S. and foreign jurisdictions based on the Company's mix of income and adjusted for significant changes in fair value measurement.
(5)Assumes the full exchange of the units held by noncontrolling interests for shares of Class A Common Stock of Alight, Inc. pursuant to the exchange agreement.
(6)Includes non-vested time-based restricted stock units that were determined to be antidilutive for U.S. GAAP diluted earnings per share purposes.
(7)Excludes two tranches of contingently issuable seller earnout shares: (i) 7.5 million shares will be issued if the Company's Class A Common Stock's volume-weighted average price ("VWAP") is >$12.50 for any 20 trading days within a consecutive period of 30 trading days; (ii) 7.5 million shares will be issued if the Company's Class A Common Stock VWAP is >$15.00 for any 20 trading days within a consecutive period of 30 trading days. Both tranches have a seven-year duration.
(8)Excludes approximately 1.2 million and 10.2 million performance-based units, which represents the gross number of shares expected to vest based on achievement of the respective performance conditions as of September 30, 2025and 2024, respectively.
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, including goodwill impairments, 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 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 September 30, Nine Months Ended September 30,
(in millions) 2025 2024 2025 2024
Net Income (Loss) From Continuing Operations $ (1,055) $ (44) $ (2,145) $ (169)
Interest expense 24 19 68 83
Income tax expense (benefit) (198) (9) (204) (34)
Depreciation 33 27 93 83
Intangible amortization 70 70 211 210
EBITDA From Continuing Operations (1,126) 63 (1,977) 173
Share-based compensation 3 11 14 59
Transaction and integration expenses (2)
4 21 12 57
Restructuring 4 12 44 45
(Gain) Loss from change in fair value of financial instruments (19) (23) 1 (54)
(Gain) Loss from change in fair value of tax receivable agreement (66) 27 (34) 51
Goodwill impairment and other (3)
1,338 7 2,323 8
Adjusted EBITDA From Continuing Operations (1)
$ 138 $ 118 $ 383 $ 339
Revenue $ 533 $ 555 $ 1,609 $ 1,652
Adjusted EBITDA Margin From Continuing Operations (4)
25.9 % 21.3 % 23.8 % 20.5 %
(1)Adjusted EBITDA excludes the impact of discontinued operations.
(2)Transaction and integration expenses primarily relate to acquisition and divestiture activities.
(3)Goodwill impairment and other primarily includes $1,338 million and $2,321 million non-cash goodwill impairment charges for the three and nine months ended September 30, 2025, respectively.
(4)Adjusted EBITDA Margin From Continuing Operations is defined as Adjusted EBITDA From Continuing Operations as a percentage of revenue.
Employer Solutions Results of Operations for the Three and Nine Months Ended September 30, 2025 Compared to the Three and Nine Months Ended September 30, 2024
Revenue Disaggregation
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions) 2025 2024 2025 2024
Employer Solutions Revenue
Recurring $ 489 $ 504 $ 1,501 $ 1,518
Project 44 51 108 134
Total Employer Solutions Revenue $ 533 $ 555 $ 1,609 $ 1,652
Employer Solutions revenue was $533 million for the three months ended September 30, 2025as compared to $555 million for the prior year period. The overall decrease of $22 million was primarily driven by decreases in project revenue and Net Commercial Activity.
Employer Solutions revenue was $1,609 million for the nine months ended September 30, 2025as compared to $1,652 million for the prior year period. The overall decrease of $43 million was primarily driven by decreases in project revenue and Net Commercial Activity.
Gross Profit to Adjusted Gross Profit Reconciliation for the Three and Nine Months Ended September 30, 2025 Compared to the Three and Nine Months Ended September 30, 2024
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.
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2025 2024 2025 2024
Gross Profit $ 178 $ 174 $ 525 $ 523
Add: stock-based compensation - 3 5 11
Add: depreciation and amortization 28 23 81 70
Adjusted Gross Profit $ 206 $ 200 $ 611 $ 604
Gross Profit Margin 33.4 % 31.4 % 32.6 % 31.7 %
Adjusted Gross Profit Margin 38.6 % 36.0 % 38.0 % 36.6 %
Employer Solutions gross profit was $178 million for the three months ended September 30, 2025compared to $174 million for the prior year period. The increase of $4 million was driven by lower compensation expenses and productivity savings. Employer Solutions adjusted gross profit for the three months ended September 30, 2025 increased $6 million to $206 million from $200 million in the prior year period, primarily driven by lower compensation expenses and productivity savings.
Employer Solutions gross profit was $525 million for the nine months ended September 30, 2025 compared to $523 million for the prior year period. The increase of $2 million was driven by lower expenses related to productivity initiatives. Employer Solutions adjusted gross profit increased $7 million for the nine months ended September 30, 2025, to $611 million from $604 million in the prior year period, primarily driven by lower expenses related to productivity initiatives.
Free Cash Flow Reconciliation
Free Cash Flow is defined as cash provided by operating activities net of capital expenditures. Management believes that free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make strategic acquisitions and investments and for certain other activities such as dividends and stock repurchases.
Nine Months Ended
(in millions) September 30,
2025 		September 30,
2024
Non-GAAP free cash flow reconciliation:
Cash provided by operating activities - continuing operations $ 236 $ 75
Capital expenditures (85) (95)
Non-GAAP free cash flow $ 151 $ (20)
Net cash provided by operating activities was $236 million for the nine months ended September 30, 2025 as compared to $75 million for the nine months ended September 30, 2024. The increase in cash provided by operating activities was primarily due to lower separation costs incurred in conjunction with the sale and separation of the Divested Business and changes in our net working capital requirements.
Free cash flow was $151 million for the nine months ended September 30, 2025 compared to $(20) million from the prior period. The increase in free cash flow was primarily due to an increase in cash provided from operations and lower capital expenditures.
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, anticipated quarterly dividend payments, payments on our TRA and anticipated working capital requirements for the foreseeable future. We believe our liquidity position at September 30, 2025 remained strong. We will continue to closely monitor and proactively manage our liquidity position in consideration of the evolving economic outlook and changing interest rate environment.
Indebtedness
In July 2024, we paid down $440 million of the Sixth Incremental Term Loans balance and we fully repaid the principal balance of $300 million Secured Senior Notes with proceeds from the Transaction. We used the remainder of after-tax cash proceeds to return capital and for general corporate purposes, including reinvestment into growth opportunities.
In January 2025, the Company entered into Amendment No. 11 to the Credit Agreement with a syndicate of lenders to establish a new class of Seventh Incremental Term Loans with an aggregate principal amount of $2,030 million and to reprice the outstanding Sixth Incremental Term Loans due August 31, 2028 by reducing the applicable rate from SOFR + 2.25% to SOFR + 1.75%.
In May 2025, the Company entered into Amendment No. 12 to the revolving credit facility, which increased the aggregate principal amount of the revolving credit facility to $330 million and extended the maturity date to May 31, 2030.
Share Repurchases
In August 2022, we established a repurchase program allowing for 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.
On February 13, 2025, 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 $281 million after giving effect to the increase. Repurchases may be conducted through open market purchases or privately negotiated transactions in compliance with Rule 10b-18 under the Exchange Act, including pursuant to Rule 10b5-1 trading plans. The actual timing and amount of future repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. The stock repurchase program does not obligate Alight to acquire any amount of common stock, and the program may be suspended or terminated at any time by Alight at its discretion without prior notice.
During the three and nine months ended September 30, 2025, the Company repurchased 6,580,136 and 13,881,417 shares of Class A Common Stock, respectively, for an aggregate purchase price of $25 million and $65 million, respectively. As of September 30, 2025, the total remaining amount authorized for repurchase was $216 million.
Cash Dividends
In 2024, our Board of Directors approved a quarterly dividend program. Any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors, whose decision will depend on, among
other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant.
The following table provides information with respect to quarterly dividends on common stock during the nine months ended September 30, 2025.
Declaration Date Dividends Per Share Total Payment (in millions) Record Date Payable Date
February 13, 2025 $0.04 $21 March 3, 2025 March 17, 2025
April 30, 2025 $0.04 $22 June 2, 2025 June 16, 2025
July 23, 2025 $0.04 $22 September 2, 2025 September 15, 2025
On November 5, 2025, the Company announced that its Board of Directors approved the payment of a quarterly dividend in the amount of $0.04 per share of Class A Common Stock on December 15, 2025, to shareholders of record as of the close of business on December 1, 2025.
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 September 30, 2025 and December 31, 2024, 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 following table provides a summary of cash flows from continuing operating, investing, and financing activities for the periods presented.
Nine Months Ended September 30,
(in millions) 2025 2024
Cash provided by operating activities - continuing operations $ 236 $ 75
Cash provided by (used in) investing activities - continuing operations (98) 877
Cash used for financing activities - continuing operations (288) (1,028)
Operating Activities
Net cash provided by operating activities was $236 million for the nine months ended September 30, 2025 as compared to $75 million for the nine months ended September 30, 2024. The increase in cash provided by operating activities was primarily due to lower professional fees incurred related to the sale and separation of the Divested Business and changes in our net working capital requirements.
Investing Activities
Cash used in investing activities was $98 million for the nine months ended September 30, 2025 as compared to cash provided by investing activities of $877 million for the nine months ended September 30, 2024. The increase in cash used in investing activities was primarily driven by the net proceeds from the sale of the Divested Business in the prior year period, partially offset by lower capital expenditures.
Financing Activities
Cash used in financing activities for the nine months ended September 30, 2025 was $288 million as compared to cash used in financing activities of $1,028 million for the nine months ended September 30, 2024. The primary drivers of cash used in financing activities for the nine months ended September 30, 2025 were $100 million of TRA payments, $65 million of dividend payments, $65 million of share repurchases, $17 million of finance lease payments, $15 million of debt repayments, a $12 million net decrease in fiduciary liabilities, and $12 million of shares/units withheld in lieu of taxes. The decrease in fiduciary cash was primarily due to timing of client funding and subsequent disbursement of payments.
Cash, Cash Equivalents and Fiduciary Assets
At September 30, 2025, our continuing operations cash and cash equivalents were $205 million, a decrease of $138 million from December 31, 2024. Of the total balances of cash and cash equivalents as of September 30, 2025 and December 31, 2024, 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 $227 million and $239 million at September 30, 2025 and December 31, 2024, 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 on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2025.
We do not have any business, operations or assets in Russia, Belarus or Ukraine and we have not been materially impacted by the actions of the Russian government. We have no revenue from these three countries 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 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. For the nine months ended September 30, 2025, we paid $100 million related to the TRA and no further payments are expected to be made during the remainder of 2025. As of September 30, 2025, we expect to make payments of approximately $164 million in 2026.
Contractual Obligations and Commitments
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".
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. Effective April 1, 2025, the Company executed Amendment No. 2 which adjusted the mix of services provided by Wipro. Following the Amendment, the Company's expected remaining cash outflow for non-cancellable service obligations related to our strategic partnership with Wipro is $49 million, $168 million, $104 million, and $28 million for the remainder of 2025 and the years ended 2026, 2027, and 2028, respectively, and none thereafter, totaling $349 million.
The Company may terminate certain elements of its arrangement with Wipro for cause or for the Company's convenience with no penalty. In the case of a termination of the entire contract for convenience, the Company would be required to pay a termination fee, including certain of Wipro's unamortized costs, plus 25% of any remaining portion of the minimum level of services the Company agreed to purchase from Wipro over the course of 10 years.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes from the Critical Accounting Estimates disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024. Please refer to "Critical Accounting Estimates" described in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our Annual Report.
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