Alight (ALIT) Q2 2024 earnings summary

Executive summary

• Completed the sale of Payroll & Professional Services for $1.0 billion upfront (up to $1.2 billion total), using proceeds for $740 million debt repayment and share repurchases, resulting in a simplified, higher-margin business.

• Achieved key strategic milestones: finished a two-year cloud migration, fully decommissioned data centers, and enhanced the Alight Worklife® platform, targeting $75 million in annualized cost savings.

• Focus shifted to technology-rich benefit services and BPaaS, with strong ARR bookings momentum (9% growth in H1 2024, double-digit growth expected in H2 2024) and notable client wins including UPS, Wayfair, and American Honda.

• CEO succession plan announced, with Stephan Scholl stepping down after a successor is named.

• 97% of 2024 revenue is under contract, providing strong revenue visibility and stability.

Financial highlights

• Q2 2024 pro forma adjusted revenue was $550 million, down 2% year-over-year excluding exited Hosted business; reported revenue was $538 million, down 4.1%.

• BPaaS revenue grew 12.7% year-over-year to $115 million, now 21.4% of total revenue.

• Adjusted gross margin was 39.8% (pro forma) and 36.4% (reported); adjusted EBITDA was $128 million (23.3% margin, pro forma) and $105 million (19.5% margin, reported).

• Adjusted diluted EPS was $0.05 in Q2 2024, down from $0.11 in Q2 2023.

• Net income attributable to Alight, Inc. was $23 million for Q2 2024, compared to a net loss of $67 million in Q2 2023.

Outlook and guidance

• Second half 2024 revenue expected between $1.207 billion and $1.232 billion, with BPaaS revenue guidance of $265–$275 million.

• Adjusted EBITDA forecasted at $326–$351 million (26.5%–29.1% margin); adjusted diluted EPS expected in the range of $0.31–$0.36.

• Core ARR business (over 90% of revenue) expected to improve sequentially; double-digit ARR bookings growth anticipated in H2 2024.

• Non-recurring project revenue projected to decline ~20% in H2 2024 due to client cost consciousness.

• Operating cash flow conversion rate projected at 55–65%.