Alight Reports Second Quarter 2022 Results
August 03 2022 - 06:30AM
– Achieved 6.4% Revenue Growth and 7.9% Employer Solutions Revenue Growth –
– Delivered Strong BPaaS Revenue Growth of 36.2% to $128 Million –
–BPaaS Bookings of $356 Million in First Half Ahead of $680 to $700 Million 2022 Target –
– Over 90% of Anticipated 2022 Revenue Under Contract –
– Reiterating Outlook for 2022 and Providing Quarterly Expectation for Second Half of the Year –
– Authorized a $100 Million Stock Repurchase Program –
Alight (NYSE: ALIT), a leading cloud-based human capital technology and services provider, today reported results for the second quarter ended June 30, 2022.
"Over the past 5 years we have grown our estimated total addressable market by 121% from $33 billion to $73 billion by adding key content and leveraging the buildout of the Alight Worklife® platform that enables us to help people make better decisions around their health, wealth and wellbeing. It also drives ROI for our clients through higher engagement and cost savings. In the second quarter, we rolled out the second major update of Alight Worklife in just 12 weeks moving over 500 clients from a custom to a standardized platform with a focus on deepening employee engagement. In addition, we launched our Alight Digital Wallet solution, went live with our largest client ever and secured new client wins which is translating to higher BPaaS revenue and bookings," said Chief Executive Officer Stephan Scholl.
Second Quarter 2022 Highlights and Subsequent Events * (all comparisons are relative to second quarter 2021)
Grew revenue 6.4% to $715 million and net income to $52 million from prior year net loss of $(4) million
Gross profit rose 0.9% to $219 million led by 4.7% growth in Employer Solutions gross profit
Adjusted EBITDA was $142 million compared to $145 million due to 6.5% growth in Employer Solutions offset by a reduction in Professional Services
Business Process as a Service (BPaaS) revenue grew 36.2%, represents 17.9% of total revenue
BPaaS bookings on a total contract value basis of $234 million in second quarter and $356 million in first half more than halfway to 2022 target of $680 to 700 million
Over 90% of anticipated 2022 revenue under contract
Secured new wins and expanded relationships with AutoZone, Siemens Energy, Unilever, The Home Depot and Geodis
Authorized a $100 million stock repurchase program
* The Company’s discussion of the results of operations compares the results of the Successor three months ended June 30, 2022 ("Successor") to the results of the Predecessor three months ended June 30, 2021 ("Predecessor").
Second Quarter 2022 Consolidated Results
Revenue for the Successor three months ended June 30, 2022 grew 6.4% to $715 million, as compared to $672 million for the Predecessor prior year period. The growth was driven by a 7.9% increase in Employer Solutions revenue due to net commercial activity, increased volumes and acquisitions. This was partially offset by revenue reductions of 1.1% in Professional Services and 9.1% in Hosted Business.
Gross profit for the Successor three months ended June 30, 2022 increased 0.9% to $219 million or 30.6% of revenue, from $217 million, or 32.3% of revenue for the Predecessor prior year period. The improvement in gross profit was primarily driven by revenue growth, partially offset by higher costs associated with compensation expenses related to awards issued beginning in the second half of 2021, recent acquisitions in the fourth quarter of 2021 and higher costs related to growth in revenue, including investments in key resources.
Selling, general and administrative expenses for the Successor three months ended June 30, 2022 were $157 million, compared to $105 million for the Predecessor prior year period. The increase was primarily due to compensation expenses related to non-cash equity awards issued beginning in the second half of 2021.
Interest expense for the Successor three months ended June 30, 2022 improved to $29 million as compared to $61 million for the Predecessor prior year period. The reduction was primarily due to the redemption of our Unsecured Senior Notes and the partial paydown of a Term Loan in conjunction with the Business Combination completed during the third quarter of 2021.
Income before income tax benefit for the Successor three months ended June 30, 2022 was $43 million compared to a loss before income tax benefit of ($6) million for the Predecessor prior year period.
Second Quarter 2022 Segment Results
Employer Solutions
Employer Solutions is driven by Alight’s digital, software and AI-led capabilities and spans total employee wellbeing and engagement, including integrated benefits administration, healthcare navigation, financial health, employee wellness and payroll.
Employer Solutions revenues for the Successor three months ended June 30, 2022 grew 7.9% to $614 million, as compared to $569 million for the Predecessor prior year period, as a result of net commercial activity, increased volumes, acquisitions and project revenue. Recurring revenue grew 8.3% to $559 million, while project revenue was up 3.8% to $55 million.
Employer Solutions gross profit for the Successor three months ended June 30, 2022 was $200 million, as compared to $191 million for the Predecessor prior year period. The increase was primarily due to revenue growth partially offset by costs associated with growth of current and forecasted future revenues and increases in compensation expenses related to awards issued beginning in the second half of 2021.
Employer Solutions Adjusted EBITDA for the Successor three months ended June 30, 2022 was up 6.5% to $147 million, as compared to $138 million for the Predecessor prior year period. The increase was primarily due to revenue growth partially offset by increases in costs associated with growth of current and forecasted future revenues, including investments in our commercial functions and technology.
Professional Services
Professional Services revenues for the Successor three months ended June 30, 2022 were $91 million as compared to $92 million for the Predecessor prior year period as a result of lower project revenue. Recurring revenue grew by $1 million, while project revenue declined by $2 million.
Professional Services gross profit for the Successor three months ended June 30, 2022 was $20 million as compared to $26 million for the Predecessor prior year period. The decrease was primarily due to increases in costs associated with growth of forecasted future revenues, including investments in key resources and lower revenue in the current period.
Professional Services Adjusted EBITDA for the Successor three months ended June 30, 2022 was a loss of ($3) million as compared to $7 million for the Predecessor prior year period. The decrease was primarily due to increases in costs associated with growth of forecasted future revenues, including investments in our commercial functions.
Hosted Business
Hosted Business revenues for the Successor three months ended June 30, 2022 were $10 million as compared to $11 million for the Predecessor prior year period. The reduction of $1 million was due to lower volumes.
Hosted Business gross profit (loss) for the Successor three months ended June 30, 2022 was a loss of ($1) million as compared to an immaterial amount for the Predecessor prior year period. The decrease was due to lower revenue.
Hosted Business Adjusted EBITDA for the Successor three months ended June 30, 2022 was a loss of ($2) million compared to an immaterial amount for the Predecessor prior year period. The change was primarily due to lower revenue.
Balance Sheet Highlights
As of June 30, 2022, the Company’s cash and cash equivalents balance was $272 million, total debt was $2,840 million and total debt net of cash and cash equivalents was $2,568 million.
The Company’s debt portfolio, due to swaps, is 70% fixed rate for 2022 and 2023 and has no significant debt maturity until 2025.
Stock Repurchase Program
The Company’s Board of Directors authorized the purchase of up to $100 million of the Company’s Class A shares. Repurchases of shares of the Company’s Class A common stock may be conducted through open market purchases or privately negotiated transactions in compliance with Rule 10b-18 under the Exchange Act, including through 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 particular amount of common stock, and the program may be suspended or terminated at any time by Alight at its discretion without prior notice.
Business Outlook
The Company is affirming its full-year 2022 outlook:
Revenue of $3.09 to $3.12 billion (growth of 6% to 7%).
Adjusted EBITDA in the range of $650 to $662 million.
Adjusted diluted EPS of $0.54 to $0.60.
BPaaS total contract value bookings of $680 to $700 million.
The Company is also providing an outlook for the second half of 2022 to provide better insight into the seasonality of the business:
For the third quarter of 2022, revenue of $735 to $750 million and Adjusted EBITDA of $115 to $125 million.
For the fourth quarter of 2022, revenue of $915 to $930 million and Adjusted EBITDA of $245 to $255 million.
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