SEC Info - Alight, Inc./Delaware - ‘424B3’ on 8/5/22

Alight, Inc./Delaware – ‘424B3’ on 8/5/22

On: Friday, 8/5/22, at 6:46am ET · Accession #: 950170-22-14939 · File #: 333-258350

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Prospectus – New Facts or Events — Rule 424(b)(3)

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This prospectus supplement amends and supplements the prospectus dated April 20, 2022, as supplemented or amended from time to time (the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (No. 333-258350). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our quarterly report on Form 10-Q for the period ended June 30, 2022, filed with the U.S. Securities and Exchange Commission on August 4, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.

This Prospectus relates to the offer and sale, from time to time, by the selling holders identified in the Prospectus (the “Selling Holders”), or their permitted transferees, of up to 352,056,664 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”).

Our Class A Common Stock is listed on The New York Stock Exchange (the “NYSE”) under the symbol “ALIT.” On August 4, 2022, the last sale price of our Class A Common Stock as reported on the NYSE was $7.83 per share.

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

Investing in our Class A Common Stock involves risks. See “Risk Factors” starting on page 8 of the Prospectus.

Neither the Securities and Exchange Commission (“SEC”) nor any other state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement. Any representation to the contrary is a criminal offense.

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. Yes ☒ 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). Yes ☒ 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.

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 ☐ No ☒

As of August 1, 2022, the registrant had 465,749,457 shares of Class A Common Stock, par value $0.0001 per share, 4,990,453 shares of Class B-1 Common Stock, par value $0.0001 per share, 4,990,453 shares of Class B-2 Common Stock, par value $0.0001 per share, 75,886,716 shares of Class V Common Stock, par value $0.0001 per share, 5,046,819 shares of Class Z-A Common Stock, par value $0.0001 per share, 274,379 shares of Class Z-B-1 Common Stock, par value $0.0001 per share, and 274,379 shares of Class Z-B-2 Common Stock, par value $0.0001 per share, outstanding.

This Quarterly Report on Form 10-Q includes information pertaining to periods prior to the closing of the Alight Business Combination (as defined below). Refer to Note 1 “Basis of Presentation and Nature of Business”, for further information regarding the basis of presentation.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements include, but are not limited to, statements that relate to expectations regarding future financial performance, and business strategies or expectations for our business. Forward-looking statements can often be identified by the use of words such as “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 negative thereof. These forward-looking statements are based on information available as of the date of this report and the Company’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 Company 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 by law.

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:

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declines in economic activity in the industries, markets, and regions our clients serve, including as a result of increases in inflation rates or changes in monetary and fiscal policies;

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cyber attacks and security vulnerabilities and other significant disruptions in the Company’s information technology systems and networks that could expose the Company to legal liability, impair its reputation or have a negative effect on the Company’s results of operations;

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past and prospective acquisitions, including the failure to successfully integrate operations, personnel, systems, technologies and products of the acquired companies, adverse tax consequences of acquisitions, greater than expected liabilities of the acquired companies and charges to earnings from acquisitions;

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the ongoing COVID-19 pandemic and future outbreak of any other highly infectious or contagious disease, including the global economic uncertainty and measures taken in response;

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the potential for conflicts of interest arising out of any members of our board of directors allocating their time to other businesses and not exclusively to us, and that our charter contains a corporate opportunities waiver so directors will not be required to present potential business opportunities to us;

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changes in our capital structure, including from the issuance of new shares by us or sales of shares by existing investors, which could adversely affect the market price of our stock;

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changes to our credit ratings or interest rates which could affect our financial resources, ability to raise additional capital, generate sufficient cash flows, or generally maintain operations; and other risks and uncertainties indicated in this report and our other public filings, including those set forth under the section entitled “Risk Factors” in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on March 10, 2022 (the "Annual Report").

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.

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), 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, SEC filings and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this Quarterly Report on Form 10-Q.

The accompanying Notes are an integral part of these condensed consolidated financial statements.

Foley Trasimene Acquisition Corp. (“FTAC”) was incorporated in Delaware on March 26, 2020. FTAC 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.

On July 2, 2021 (the “Closing Date”), FTAC completed the business combination (the “Business Combination”) with Alight Holding Company, LLC (f/k/a Tempo Holding Company, LLC) (“Alight Holdings” or the “Predecessor”) contemplated by the Business Combination Agreement (as amended and restated as of April 29, 2021) between FTAC, Alight Holdings and other interested parties (the “Business Combination Agreement”). On the Closing Date, pursuant to the Business Combination Agreement, FTAC became a wholly owned subsidiary of Alight, Inc. (“Alight”, the “Company”, “we” “us” “our” or the “Successor”) and was renamed Alight Group, Inc. As a result of the Business Combination, and by virtue of such series of mergers and related transactions, the combined company is now organized in an “Up-C” structure, in which substantially all of the assets and business of Alight are held by Alight Holdings, of which Alight is the managing member pursuant to the terms of the Second Amended and Restated Limited Liability Company Agreement of Alight Holdings that went into effect upon the completion of the Business Combination. As of June 30, 2022, Alight owns approximately 86% of the economic interest in Alight Holdings, but has 100% of the voting power and controls the management of Alight Holdings. As of June 30, 2022, the non-voting ownership percentage held by noncontrolling interest was approximately 14% (see Note 9 "Stockholders' and Members' Equity" for additional information).

As a result of the Business Combination, for accounting purposes, the Company is the acquirer and Alight Holdings is the acquiree and accounting predecessor. While the Closing Date was July 2, 2021, we determined that as the impact of one day would be immaterial to the results of operations, we utilized July 1, 2021 as the date of the Business Combination for accounting purposes. Therefore, the financial statement presentation includes the financial statements of Alight Holdings as Predecessor for the periods prior to July 1, 2021 and the Company as Successor for the periods including and after July 1, 2021, including the consolidation of Alight Holdings.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and should be read in conjunction with the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 10, 2022. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. All significant intercompany transactions and balances have been eliminated upon consolidation. The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full fiscal year ending December 31, 2022.

We are a leading cloud-based human capital technology and services provider that powers confident health, wealth and wellbeing decisions for millions of people and their dependents. Our Alight Worklife® platform combines data and analytics with a simple, seamless user experience. Supported by our global delivery capabilities, Alight Worklife® is transforming the employee experience for people around the world through personalized, data-driven health, wealth and wellbeing insights. Our solutions include:

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Employer Solutions: driven by our digital, software and artificial intelligence ("AI")-led capabilities powered by the Alight Worklife® platform and spanning total employee wellbeing and engagement, including integrated benefits administration, healthcare navigation, financial health, employee wellbeing and payroll. These solutions are designed to support employers in effectively managing their workforce through a seamless, integrated platform. We leverage data across all interactions and activities to improve the employee experience, reduce operational costs and better inform management processes and decision-making. In addition, employees benefit from an integrated platform and user experience, coupled with a full-service client care center, helping them manage the full life cycle of their health, wealth and careers.

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Professional Services: includes our project-based cloud deployment and consulting offerings that provide expertise with both human capital and financial platforms. Specifically, this includes cloud advisory and deployment, and optimization services for cloud platforms such as Workday, SAP SuccessFactors, Oracle, and Cornerstone OnDemand.

The preparation of the 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, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of reserves and expenses.

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 current economic environment. Management believes its estimates to be reasonable given the current 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 uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be predicted with certainty, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment would, if applicable, be reflected in the financial statements in future periods.

In connection with the Business Combination, we entered into a Tax Receivable Agreement (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. The Company accounts for the TRA as a liability at fair value and is subject to remeasurement at each balance sheet date. Any change in fair value is recognized within the Condensed Consolidated Statements of Comprehensive Income (Loss).

Subsequent to the Business Combination, upon equity exchanges of the noncontrolling interests, the Company records obligations under the TRA at the gross undiscounted amount of the expected future payments as an increase to the liability with an offset to Additional paid-in capital.

There are no pending accounting pronouncements that are expected to have a material impact upon our Consolidated Financial Statements.

The majority of the Company’s revenue is highly recurring and is derived from contracts with customers to 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 segments are Employer Solutions, Professional Services and Hosted Business. Employer Solutions are 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 and payroll. Professional Services includes project-based cloud deployment and consulting offerings. The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Revenues are recognized when control of the promised services is transferred to the customer in the amount that best reflects the consideration to which the Company expects to be entitled in exchange for those services. The majority of the Company’s revenue is recognized over time as the customer simultaneously receives and consumes the benefits of our services. On occasion, we may be entitled to a fee based on achieving certain performance criteria or contract milestones. To the extent that we cannot estimate with reasonable assurance the likelihood that we will achieve the performance target, we will constrain this portion of the transaction 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 revenues are described in more detail below.

We provide benefits, human resource and payroll administration 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.

These contracts typically consist of an implementation phase and an ongoing administration phase:

Implementation phase – In connection with the Company’s long-term agreements, highly customized implementation efforts are often necessary to set up clients and their human resource, payroll 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 payroll administration services 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 price basis. We establish the stand-alone selling price using observable market prices that the Company charges separately for similar solutions to similar customers.

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 each month, which is measured as labor cost.

For all other benefits administration, human resources and payroll services where each month represents a distinct time increment under the series guidance, we allocate the transaction price to the month we are performing our services. Therefore, the amount recognized each month is the variable consideration related to that month plus any fixed monthly or annual fee, which is recognized on a straight-line basis. Revenue for these types of arrangements are therefore more consistent throughout the year.

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.

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 cloud deployment services, cloud advisory services, 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 cancelled. 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 factors.

For both the employer-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.

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.

The Company capitalizes incremental costs to obtain a contract with a customer that are expected to be recovered. Assets recognized for the costs to obtain a contract, which primarily includes sales commissions paid in relation to the initial contract, are amortized over the expected life of the underlying customer relationships, which is 7 years for our payroll and cloud solutions and 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 of 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).

The Company capitalizes costs to fulfill contracts which includes highly customized implementation efforts to set up clients and their human resource, payroll 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 7 years for our payroll and cloud solutions and 15 years for all of our other solutions.

Amortization for all contracts costs are 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”).

On July 2, 2021, the Company completed the Business Combination for consideration transferred of approximately $5.0 billion. The Business Combination was accounted for using the acquisition method under Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The final consideration and allocation of the purchase price to the fair value of the combined assets acquired and liabilities assumed is presented below.

On the Closing Date, the Company paid $36 million of deferred underwriting costs related to FTAC’s initial public offering and $37 million of fees related to the private placement transaction, which were treated as a reduction of equity. Approximately $21 million of the Company’s acquisition-related costs were paid on the Closing Date. Additionally, $39 million of seller transaction costs were paid on the Closing Date, including $36 million in advisory and investment banker fees that were contingent upon the consummation of the Business Combination. As these fees are considered success fees in nature, they are considered to have been incurred “on the line”, and therefore, were not recognized in the Condensed Consolidated Statements of Comprehensive Income (Loss) in either the Predecessor or Successor periods.

On the Closing Date, approximately $36 million of certain executive compensation-related expenses that were contingent upon the closing of the Business Combination were triggered. As these expenses were contingent upon the change-in-control event, they are considered to have been incurred “on the line”, and therefore, were not recognized in the Condensed Consolidated Statements of Comprehensive Income (Loss) in either the Predecessor or Successor periods.

The following table summarizes the final consideration transferred (in millions):

The Company issued approximately 141 million shares of Class A Common Stock that had a total fair value of approximately $1.4 billion based on the price of $10 per share on July 2, 2021, the acquisition date.

The TRA and Seller Earnouts represent liability classified contingent consideration. Refer to Note 9 “Stockholders’ and Members’ Equity”, Note 14 “Financial Instruments” and Note 15 “Tax Receivable Agreement” for further discussion.

The fair value of the noncontrolling interest is based on the fair value of acquired business, which was determined based on the price of the Company's Class A Common Stock at the July 2, 2021 Closing Date, plus the contingent consideration related to the Seller Earnouts. The noncontrolling interest is exchangeable for Class A Common Stock at the option of the holder. Refer to Note 9 “Stockholders’ and Members’ Equity” for additional information.

The following table summarizes the final purchase price allocation (in millions):

During the first half of 2022, the Company recorded measurement period adjustments to its initial allocation of purchase price as a result of ongoing valuation procedures on assets acquired and liabilities assumed, including (i) a decrease in Receivables of $2 million, (ii) a decrease in Other current liabilities of $2 million, (iii) a decrease in consideration transferred of $8 million due to an updated TRA valuation, and (iv) a decrease of $1 million in noncontrolling interest due to the change in consideration transferred. The impact of these measurement period adjustments on the Condensed Consolidated Statements of Comprehensive Income (Loss) was not material.

Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. The trade name intangible asset represents the corporate Alight tradename, which was valued using the relief-from-royalty method. The technology related intangible assets represent software developed by Alight Holdings to differentiate its product/service offerings for its customers, valued using the relief-from-royalty method. The customer-related and contract-based intangible assets represent strong, long-term relationships with customers, valued using the multi-period excess earnings method. The values allocated to identifiable intangible assets and their estimated useful lives are as follows:

Approximately $3.4 billion has been allocated to goodwill following the closing of the Business Combination. Goodwill represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable definite-lived intangible assets acquired. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, including assembled workforce and expected future market conditions. Of the goodwill established, $1.6 billion was tax deductible.

On October 1, 2021, the Company completed the acquisition of AON Retiree Health Exchange, Inc., a retiree health exchange, for consideration transferred of approximately $199 million. The acquisition was accounted for using the acquisition method under ASC 805, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The preliminary consideration and allocation of the purchase price to the fair value of the combined assets acquired and liabilities assumed is presented below. The preliminary measurement of consideration transferred and the allocations reflect the best estimates of the valuations currently available and are subject to change once additional analyses are completed. The accounting for the acquisition is not complete as the valuation for acquired assets and liabilities have not been finalized and these final valuations of the assets and liabilities could have a material impact on the preliminary purchase price allocation disclosed below. The allocation will be finalized as soon as practicable, but no later than one year from the acquisition date.

The following table summarizes the preliminary purchase price allocation (in millions):

Intangible assets include customer-related and contract-based intangibles and technology with estimated useful lives of 13 years and 5 years, respectively. Approximately $78 million has been preliminarily allocated to goodwill, all of which was tax deductible.

The current and non-current portions of deferred project costs relate to costs to obtain and fulfill contracts (see Note 3 “Revenue from Contracts with Customers”). During the Successor three and six months ended June 30, 2022 and the Predecessor three and six months

ended June 30, 2021, total amortization expense of $13 million, $25 million, $17 million and $33 million was recorded in Cost of services, exclusive of depreciation and amortization in the Condensed Consolidated Statements of Comprehensive Income (Loss), respectively.

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 June 30, 2022 and December 31, 2021 were $39 million and $1 million, respectively. The balances in Other assets as of June 30, 2022 and December 31, 2021 were $57 million and $16 million, respectively (see Note 13 “Derivative Financial Instruments” for additional information).

The current and non-current portions of deferred revenue relates to consideration received in advance of performance under client contracts. During the Successor six months ended June 30, 2022 and the Predecessor six months ended June 30, 2021, revenue of approximately $94 million and $101 million was recognized and recorded as deferred revenue at the beginning of each period.

Other current liabilities as of December 31, 2021 included an accrual for a deferred consideration payment of $83 million related to an acquisition completed in the fourth quarter of 2021. A payment of $81 million was made during the second quarter of 2022 and the remaining consideration will be paid during the fourth quarter of 2022.

Other current liabilities as of June 30, 2022 included the current portion of tax receivable agreement liability of $7 million (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 rate swaps. The balances in Other current liabilities as of June 30, 2022 and December 31, 2021 were immaterial and $8 million, respectively. The balances in Other liabilities as of June 30, 2022 and December 31, 2021 were immaterial and $1 million, respectively (see Note 13 “Derivative Financial Instruments” for additional information).

The changes in the net carrying amount of goodwill are as follows (in millions):

The net carrying amount of Intangible assets as of June 30, 2022 includes preliminary fair values for certain customer-related and contract-based identifiable intangible assets, technology-related intangible assets and tradename assets based on management’s preliminary estimate of fair value (see Note 4 “Acquisitions” for additional information).

The change in gross carrying amounts for customer-related and contract-based intangibles also relates to the unfavorable impact of foreign currency translation adjustments.

Amortization expense from finite-lived intangible assets for the Successor three and six months ended June 30, 2022 and the Predecessor three and six months ended June 30, 2021 was $80 million, $159 million, $50 million and $100 million respectively, which 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 June 30, 2022 (in millions, except for years):

Subsequent to June 30, 2022, the annual amortization expense is expected to be as follows (in millions):

The Company’s effective tax rates for the Successor three and six months ended June 30, 2022 were (21%) and (24%), respectively, and for the Predecessor three and six months ended June 30, 2021 were 34% and 16%, respectively.

The changes in the effective tax rates were primarily driven by the Business Combination as the Predecessor and certain of its subsidiaries operated in the U.S. as partnerships for income tax purposes and generally as corporate entities in non-U.S. jurisdictions.

The Predecessor effective tax rates for the applicable periods were substantially higher due to certain non-recurring items included in pre-tax and tax expense during the Successor periods.

The effective tax rates for the Successor three and six months ended June 30, 2022 were lower than the 21% U.S. statutory corporate income tax rate primarily due to losses in certain non-U.S. jurisdictions for which a tax benefits have not been recorded, as well as changes to the Company's required valuation allowance.

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 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 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").

Interest rates on the original Term Loan borrowings are based on the London Interbank Offered Rate (“LIBOR”) plus a margin based on defined ratios (275 or 300 bps). The Company used the 1‑month LIBOR rate for all periods presented. Interest rates on the B-1 Term Loan borrowings are based on the Secured Overnight Financing Rate ("SOFR") plus a margin of 300 bps. The Company is required to make principal payments at the end of each fiscal quarter based on defined terms in the agreement with the remaining principal balances due on the maturity dates.

During the Successor six months ended June 30, 2022 and the Predecessor six months ended June 30, 2021, the Company made total principal payments of $16 million and $13 million, respectively. The Company utilized swap agreements to fix a portion of the floating interest rates through December 2026 (see Note 13 “Derivative Financial Instruments”).

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.

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. At June 30, 2022, $4 million of unused letters of credit related to various insurance policies and real estate leases were issued under the revolving credit facility and there were no additional borrowings. The Company is required to make periodic payments for commitment fees and interest related to the revolving credit facility and outstanding letters of credit. During the Successor three and six months ended June 30, 2022 and the Predecessor three and six months ended June 30, 2021, the Company made immaterial payments related to these fees.

As part of the acquisition of NGA Human Resources ("NGA HR") during the year ended December 31, 2019, the Company acquired a revolving credit facility of approximately $20 million secured on the accounts receivable balance of NGA HR. During the six months ended June 30, 2022, the Company made principal payments of $110 million, offset by borrowings of $104 million. Interest was calculated based on an applicable reference rate plus a margin. The facility was terminated on June 29, 2022, with all borrowings and associated interest repaid at that time.

The Company capitalized financing fees and premiums related to the Term Loan, Revolver and Secured 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 expense related to the debt instruments for the Successor three and six months ended June 30, 2022 and Predecessor three and six months ended June 30, 2021 was $28 million, $55 million, $52 million and $105 million respectively, which included amortization of financing fees of immaterial and $1 million benefit for the Successor three and six months ended June 30, 2022, respectively, and expenses of approximately $4 million and $8 million for the Predecessor three and six months ended June 30, 2021, respectively. Interest expense is recorded in Interest expense in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Aggregate contractual principal payments as of June 30, 2022 are as follows (in millions):

There were no grants of Class A common units during the six months ended June 30, 2021. Each holder of Class A common units is entitled to one vote per unit.

During the six months ended June 30, 2021, the Company granted 643 Restricted Class A-1 common units. Holders of Class A-1 common units are not entitled to voting rights.

During the six months ended June 30, 2021, there were no grants of Class B common units. Holders of Class B common units are not entitled to voting rights.

Upon the Closing 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 June 30, 2022.

As of June 30, 2022, 465,629,457 shares of Class A Common Stock, including 7,583,284 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.

Upon the Closing of the Business Combination, the Seller Earnouts resulted in the issuance of a total of 14,999,998 Class B instruments (including 808,276 unvested shares of Class B Common Stock related to employee compensation) 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.

As of June 30, 2022, 4,990,453 shares of Class B-1 Common Stock were legally issued and outstanding, including 404,138 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-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 June 30, 2022, 2,509,546 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).

As of June 30, 2022, 4,990,453 shares of Class B-2 Common Stock were legally issued and outstanding, including 404,138 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 June 30, 2022, 2,509,546 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).

Upon the Closing 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 June 30, 2022.

As of June 30, 2022, 75,886,716 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.

Upon the Closing 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 June 30, 2022, 5,595,577 shares of Class Z Common Stock (5,046,819 Class Z-A, 274,379 Class Z-B-1, and 274,379 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 June 30, 2022, 3,075,930 Class Z common units (2,774,272 Class Z-A, 150,829 Class Z-B-1, and 150,829 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.

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 June 30, 2022, there were 541,516,173 Class A Units outstanding, of which 465,629,457 are held by the Company and 75,886,716 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.

During the six months ended June 30, 2022, 1,572,971 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 $16 million, recorded in Additional paid-in capital. Pursuant to the TRA, described in Note 15 "Tax Receivable Agreement," the Class A unit exchanges created additional TRA liabilities of $7 million, with offsets to Additional paid-in-capital.

(1) Issued to certain members of the Board of Directors in lieu of cash retainer.

There were no dividends declared during the Successor three and six months ended June 30, 2022.

As of June 30, 2022, the Accumulated other comprehensive income balance included unrealized 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.

Changes in accumulated other comprehensive income, net of noncontrolling interests and tax, are as follows (in millions):

(1) Reclassifications from this category are recorded in Interest expense. See Note 13 “Derivative Financial Instruments” for additional information.

Share-based payments consist of grants of restricted share units (“RSUs”) and performance-based restricted share units (“PRSUs”). The Company recognizes compensation expense on a straight-line basis over the requisite service period for awards expected to ultimately vest.

In connection with the Business Combination, the holders of certain unvested awards under the Predecessor plans were granted replacement awards in the Successor company.

•

Class B units: The unvested Class B units of Alight Holdings were granted replacement shares of unvested Class A, Class B-1 and Class B-2 Common Stock and ultimately vest on the third anniversary of the Closing Date, but could vest earlier based on the achievement of certain market-based conditions.

•

Class A-1 units: The unvested Class A-1 units of Alight Holdings were granted replacement shares of unvested Class A, Class B-1 and Class B-2 Common Stock on an equivalent fair value basis. The service-based portion of the grant vests ratably over periods of two to five years and the remaining vests upon the achievement of certain market-based conditions.

The Class B and Class A-1 units that were replaced represent the unvested shares of Class A, Class B-1 and Class B-2 Common Stock subject to the forfeiture re-allocation provision per the Class Z instruments discussed in Note 9 “Stockholders’ and Members’ Equity”. These unvested shares are accounted for as restricted stock in accordance with Accounting Standards Codification Topic 718, Compensation - Stock Compensation.

In connection with the Business Combination, the Company adopted the Alight, Inc. 2021 Omnibus Incentive Plan. Under this plan, for grants issued during the Successor three and six months ended June 30, 2022, approximately 55% of the units are subject to time-based vesting requirements and approximately 45% are subject to performance-based vesting requirements. The majority of the time-based RSUs vest ratably each March 10 over a three-year period with one-third vesting on each of March 10, 2023, 2024 and 2025. The PRSUs granted in 2021 vest upon achievement of the Company’s performance goal, Total Contract Value of Business Process as a Service ("BPaaS"). The PRSUs granted in 2022 vest upon achievement of the Company’s performance goal, Total BPaaS Revenue and Total Consolidated Revenue.

The Company begins to recognize expense associated with the PRSUs when the achievement of the performance condition is deemed probable. During the first half of 2022, based on management's analysis of the corresponding performance conditions, the Company increased expected achievement levels related to the PRSUs granted in 2021.

The fair value of each RSU and PRSU is based upon the grant date market price. The aggregate grant date fair value of RSUs and PRSUs granted during the Successor six months ended June 30, 2022 was approximately $44 million and $113 million, respectively.

The following tables summarizes the unit activity related to the RSUs and PRSUs during the six months ended June 30, 2022:

(2) PRSUs granted includes both new grants in the period as well as adjustments in the period to existing grants to account for the expected level of achievement of the performance-based vesting requirements.

Total share-based compensation costs related to the RSUs and PRSUs are recorded in the Condensed Consolidated Statements of Comprehensive Income (Loss) as follows (in millions):

As of June 30, 2022, total future compensation expense related to unvested RSUs was $96 million, which will be recognized over a remaining weighted-average amortization period of approximately 1.5 years. As of June 30, 2022, total future compensation expense related to PRSUs was $195 million, which will be recognized over a remaining weighted-average amortization period of approximately 1.9 years.

Basic earnings per share is calculated by dividing the net income attributable to Alight, Inc. by the weighted average number of shares of Class A Common Stock issued and outstanding for the Successor period. The computation of diluted earnings per share reflects the 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 V Common Stock and Class Z Common Stock do not participate in the earnings or losses of 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 pay the consideration had not been satisfied as of June 30, 2022, the Seller Earnouts were excluded from the diluted earnings per share calculations.

Basic and diluted earnings per share are as follows (in millions, except for share and per share amounts):

For the Successor three and six months ended June 30, 2022, 10,791,134 and 9,954,778 unvested RSUs were not included in the computation of diluted shares outstanding as their impact would have been anti-dilutive.

In addition, 14,999,998 shares related to the Seller Earnouts and 34,577,418 unvested PRSUs, based on maximum achievement levels, were excluded from the calculation of basic and diluted earnings per share as the market and performance conditions had not yet been met as of the end of the period.

The Company’s reportable segments have been determined using a management approach, 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 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 current reportable segments is as follows (in millions):

There was no single client who accounted for more than 10% of the Company’s revenues in any of the periods presented.

For the three and six months ended June 30, 2022, Other primarily includes expenses related to debt refinancing completed in the first quarter of 2022 and other non-operational expenses, offset by Other income, net. For the three and six months ended June 30, 2021, Other includes long-term incentive expenses, offset by Other expense, net.

The Company is exposed to market 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.

The Company has utilized swap agreements that will fix the floating interest rates associated with its Term Loan as shown in the following table:

Concurrent with the Term Loan refinancing, 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. Also during the Successor six months ended June 30, 2022, we executed an additional interest rate swap, which has been designated as a cash flow hedge.

Our swap agreements amortize or accrete based on achieving targeted hedge ratios. All interest rate swaps have been designated as cash flow hedges. As a result of hedge amendments in December 2021 and July 2021, 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. During the first quarter of 2022, the Company also entered into a new interest rate swap that will be effective June 2025 and will mature December 2026.

The fair values and location of outstanding derivative instruments recorded in the Condensed Consolidated Balance Sheets are as follows (in millions):

The Company estimates that approximately $38 million of derivative gains included in Accumulated other comprehensive income as of June 30, 2022 will be reclassified into earnings over the next twelve months.

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’ and Members’ 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.

In addition, a portion of the Seller Earnouts relates to Class Z instruments that were forfeited by individual equityholders and will be re-allocated to the holders of unvested management equity upon the ultimate vesting date. See Note 9 “Stockholders’ and Members’ Equity” for additional information regarding the Class Z instruments. This portion of Seller Earnouts is accounted for as a contingent consideration liability recorded at the fair value on the individual forfeiture date. These instruments are not subject to remeasurement at each balance sheet date. As of June 30, 2022, the balance for this portion of the Seller Earnouts was $1 million, offset in Gain from change in fair value of financial instruments in the Condensed Consolidated Statements of Comprehensive Income (Loss).

The majority 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 June 30, 2022 and December 31, 2021, the Seller Earnouts had a fair value of $71 million and $135 million, respectively. For the Successor three and six months ended June 30, 2022, a gain of $50 million and $64 million, respectively, was recorded in Gain from change in fair value of financial instruments in the Condensed Consolidated Statements of Comprehensive Income (Loss).

The fair value of the Seller Earnouts is determined using Monte Carlo simulation and Option Pricing Methods (Level 3 inputs, see Note 16 "Fair Value Measurements"). Significant unobservable inputs are used in the assessment of fair value, including the following assumptions: volatility, risk-free interest rate, expected holding period and probability assessments based on the likelihood of reaching the performance targets defined in the Business Combination.

In connection with the Business Combination, Alight entered into the TRA with certain owners of Alight Holdings prior to the Business Combination. Pursuant to the TRA, the Company will pay certain sellers, as applicable, 85% of the tax benefits, of any savings that we realize, calculated using certain assumptions, as a result of (i) tax basis adjustments from sales and exchanges of Alight Holdings equity interests in connection with or following the Business Combination and certain 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.

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 June 30, 2022 assumes: (i) a constant blended U.S. federal, state and local income tax rate of 26.17%; (ii) no material changes in tax law; (iii) the ability to utilize tax attributes based on current alternative 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 9.6%.

Subsequent to the Business Combination, we will record additional liabilities under the TRA when Class A units of Alight Holdings are exchanged for Class A Common Stock. Liabilities resulting from these exchanges will be recorded on a gross undiscounted basis and are not remeasured at fair value. During the Successor six months ended June 30, 2022, an additional TRA liability of $7 million was established as a result of these exchanges.

The following table summarizes the changes in the TRA liabilities (in millions):

Fair value is defined as the price that would be received to sell an asset or paid to transfer a 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):

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 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 addition, 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.

The contingent consideration liabilities relate to acquisitions completed during the Successor six months ended December 31, 2021, the Predecessor years ended December 31, 2020 and 2018, and are included in Other current liabilities and Other 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 the 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):

The Company’s financial liabilities not measured at fair value on a recurring basis are as follows (in millions):

The carrying value of the Term Loan, Secured Senior Notes and Unsecured Senior Notes include the outstanding principal balances, less any unamortized discount or 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 the Successor six months ended June 30, 2022, there were no transfers in or out of the Level 1, Level 2 or Level 3 classifications.

During the third quarter of 2019, management initiated a restructuring and integration plan (“the Plan”) following the completion of the Hodges acquisition and in anticipation of the NGA HR acquisition, which was completed on November 1, 2019. The Plan is intended to integrate and streamline operations across the Company and is expected to generate cost reductions related to position eliminations and facility and system rationalizations. The Company expects to incur costs related to severance, contract and lease exits and other related costs. The Company expects these restructuring and integration activities and related expenses to affect continuing operations through the fourth quarter of 2022.

The Plan is expected to result in cumulative costs of approximately $140 million through the end of the Plan, consisting of approximately $69 million in severance and related benefits, and approximately $71 million in other costs, including technology realization, lease consolidation costs, advisory and consulting fees. The Plan is expected to generate annual cost savings of approximately $196 million by 2022.

From the inception of the Plan through June 30, 2022, the Company has incurred total expenses of $125 million. These charges are recorded in Cost of services, exclusive of depreciation and amortization and 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 through June 30, 2022 and are estimated to be incurred through the end of the Plan. Estimated costs by type may be revised in future periods as these assumptions are updated:

Actual costs, when incurred, may vary due to changes in the assumptions built into the Plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.

As of June 30, 2022, approximately $5 million of the restructuring liability is unpaid and is recorded in Accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets.

Certain of the Company’s employees participate in a defined contribution savings plan sponsored by the Company. For the Successor three and six months ended June 30, 2022 and the Predecessor three and six months ended June 30, 2021, expenses were $14 million, $31 million, $15 million and $31 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).

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. The reserves recorded at June 30, 2022 and December 31, 2021 were not significant.

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.

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.

The Company’s expected cash outflow for non-cancellable purchase obligations related to purchases of information technology assets and services is $11 million, $26 million, $27 million, $9 million, $4 million and $3 million, for the remainder of 2022 and the years ended 2023, 2024, 2025, 2026 and thereafter, respectively.

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 Company’s expected cash outflow for non-cancellable service obligations related to our strategic partnership with Wipro is $71 million, $147 million, $154 million, $162 million, $170 million and $332 million for the remainder of 2022 and the years ended 2023, 2024, 2025, 2026 and thereafter, respectively.

The Company may terminate its arrangement with Wipro for cause or for the Company’s convenience. In the case of a termination 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.

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements except for the transaction described below.

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 may be effected 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 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.

Item 2. 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 audited consolidated financial statements which are included in the Company's Annual Report on Form 10K for the fiscal year ended December 31, 2021 (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 from those discussed in the forward-looking statements as a result of many factors.

On July 2, 2021 (the “Closing Date”), Foley Trasimene Acquisition Corp. ("FTAC") completed the business combination (the “Business Combination”) with Alight Holding Company, LLC (f/k/a Tempo Holding Company, LLC) (“Alight Holdings” or the “Predecessor”) contemplated by the Business Combination Agreement (as amended and restated as of April 29, 2021) between FTAC, Alight Holdings and other interested parties (the “Business Combination Agreement”). On the Closing Date, pursuant to the Business Combination Agreement, FTAC became a wholly owned subsidiary of Alight, Inc. (“Alight”, the “Company”, “we” “us” “our” or the “Successor”) and was renamed Alight Group, Inc. As a result of the Business Combination, and by virtue of such series of mergers and related transactions, the combined company is now organized in an “Up-C” structure, in which substantially all of the assets and business of Alight are held by Alight Holdings, of which Alight is the managing member pursuant to the terms of the Second Amended and Restated Limited Liability Company Agreement of Alight Holdings that went into effect upon the completion of the Business Combination. As of June 30, 2022, Alight owns approximately 86% of the economic interest in Alight Holdings, but has 100% of the voting power and controls the management of Alight Holdings. As of June 30, 2022, the non-voting ownership percentage held by noncontrolling interest was approximately 14%.

We currently report our results of operations in three segments: Employer Solutions, Professional Services and Hosted Business. Employer Solutions, Professional Services and Hosted Business accounted for approximately 86%, 13% and 1% and 85%, 14% and 1% of consolidated revenue for both the Successor three and six months ended June 30, 2022 and both the Predecessor three and six months ended June 30, 2021, respectively.

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Revenues are principally derived from fees paid by clients for services. Payment terms are consistent with current industry practice.

We deliver our solutions through a set of proprietary and partner technologies, a well-developed network of providers and a structured approach to instill and sustain enterprise-wide practices of excellence. With this in mind, there are four layers to our technology strategy, all reinforced with a critical security framework:

Due to buying patterns and delivery of certain products in the markets we serve, particularly given the timing of annual benefits enrollment, our revenues tend to be higher in the third and fourth quarters of each year.

Our business activities are subject to licensing requirements and extensive regulation under the laws of countries in which we operate, including United States (“U.S.”) federal and state laws. See the discussion contained in the "Risk Factors" section of our Annual Report, for information regarding how actions by regulatory authorities or changes in legislation and regulation in the jurisdictions in which we operate may have an adverse effect on our business.

We serve a broad range of clients, including Fortune 500 companies and mid-market businesses, and seek to establish high-quality, strong, long-term relationships with our clients. We proactively solicit client feedback through ongoing surveys and client councils held throughout the year, and we use this critical feedback to enhance our client services and correct course when necessary. Through these surveys, we have learned that clients value the strength and depth of our relationships, scale and breadth of our solutions and our commitment to innovation and continuous improvement.

The markets for our solutions are competitive, rapidly evolving and fragmented. Our business faces competition from other global and national companies. The market for our solutions is subject to change as a result of economic, regulatory and legislative changes, technological developments, shifting client needs and increased competition from established and new competitors.

We do not believe there is any single competitor with the breadth of our solutions, and thus our competitors vary for each of our solutions. Our primary competitors include Accenture, Accolade, ADP, Benefitfocus, bswift, Businessolver, Cognizant, Conduent, Deloitte, eHealth, Empower, Fidelity, GoHealth, Grand Rounds, HealthEquity, Mercer, OneSource Virtual, Quantum Health, SD Worx, Vanguard, Voya, Willis Towers Watson, and Workday.

We compete primarily on the basis of product and service quality, technology, breadth of offerings, ease of use and accessibility of technology, data protection, innovation, trust and reliability, price, and reputation.

As a result of a number of factors, our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief discussion of the key factors that may impact the comparability of our results of operations in future operations.

Alight is subject to corporate level tax rates at the federal, state and local levels. The Predecessor was and is treated as a flow-through entity for U.S. federal income tax purposes, and as such, has generally not been subject to U.S. federal income tax at the entity level. Accordingly, other than for certain consolidated subsidiaries of the Predecessor that are structured as corporations and unless otherwise specified, the historical results of operations and other financial information presented does not include any provision for U.S. federal income tax.

Alight (together with certain corporate subsidiaries through which it owns its interest in the Predecessor) pays U.S. federal and state income taxes as a corporation on its share of our taxable income. The Business Combination was accounted for as a business combination using the acquisition method of accounting. Accordingly, the assets and liabilities, including any identified intangible assets, were recorded at their fair values at the date of completion of the Business Combination, with any excess of the purchase price over the fair value recorded as goodwill. The application of business combination accounting required the use of significant estimates and assumptions.

As a result of the application of accounting for the Business Combination, the historical Consolidated Financial Statements of the Predecessor are not necessarily indicative of the Successor’s future results of operations, financial position and cash flows. For example, increased tangible and intangible assets resulting from adjusting the basis of tangible and intangible assets to their fair value would result in increased depreciation and amortization expense in the periods following the consummation of the Business Combination.

Additionally, in connection with the Business Combination, we have accounted for Seller Earnout contingent consideration as a liability that requires remeasurement to fair value at the end of each reporting period and adopted the Alight 2021 Omnibus Incentive Plan which will result in higher share-based compensation expenses. Lastly, the redemption of our Unsecured Senior Notes and partial paydown of the Term Loan in conjunction with the Business Combination, resulted in lower interest expense.

As a result of becoming a public company, we incur additional costs related to human resources, legal, consulting, regulatory, insurance, accounting, investor relations and other expenses that we did not incur as a private company.

We prepared our discussion of the results of operations by comparing the results of the Successor three and six months ended June 30, 2022 to the results of the Predecessor three and six months ended June 30, 2021. The core business operations of the Predecessor and Successor were not significantly impacted by the consummation of the Business Combination.

The following table sets forth our historical results of operations for the periods indicated below:

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.

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 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 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 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 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 from change in fair value of Tax Receivable Agreement includes the impact of the revaluation to fair value at the end of each reporting period.

Interest expense primarily includes interest expense related to our outstanding debt.

Other (income) expense, net includes non-operating expenses and income, including realized currency translation.

Results of Operations for the Three Months Ended June 30, 2022 (Successor) Compared to the Three Months Ended June 30, 2021 (Predecessor)

Revenues were $715 million for the Successor three months ended June 30, 2022 as compared to $672 million for the Predecessor prior year period. The increase of $43 million reflects growth of 8% in our Employer Solutions segment, partially offset by declines of 9% and 1% in our Hosted Business segment and our Professional Services segment, respectively. We measure revenue growth as it relates to the cloud-based products and solutions that are central to our Alight Worklife® platform and our next generation product suite, Business Process as a Service ("BPaaS") Solutions. These products capitalize on our robust data combined with AI & analytics to deliver greater employee engagement and employer outcomes. BPaaS products and services span across both the Employer Solutions and Professional Services segments and for the Successor three months ended June 30, 2022, we recorded BPaaS revenue of $128 million, which represents growth of 36% compared to the Predecessor prior year period.

In addition, we also consider BPaaS bookings, defined as total contract value for BPaaS customer agreements executed in the period, to be a key indicator of future revenue growth and used as a metric of commercial activity by management and investors. For the Successor three months ended June 30, 2022, BPaaS bookings of $234 million represents a decline of 3% compared to the Predecessor prior year period.

Recurring revenues increased by $43 million, or 8%, from $558 million to $601 million and are related to growth in both Employer Solutions and Professional Services, partially offset by a decline in the Hosted Business. Growth in Employer Solutions is a result of higher revenues related to acquisitions, increased volumes and increases in Net Commercial Activity. Growth in Professional Services is a result of increases in Net Commercial Activity. Project revenues were $114 million for both periods and are related to an increase in Employer Solutions, offset by a decline in Professional Services. The decline in Professional Services project revenues is driven by client timing delays.

In addition, a majority of our revenue is generated in the U.S., which reflected all of the revenue increase for the Successor three months ended June 30, 2022 as compared to the Predecessor prior year period.

Cost of services, exclusive of depreciation and amortization, increased $47 million, or 11%, for the Successor three months ended June 30, 2022 as compared to the Predecessor prior year period. The increase was primarily driven by acquisitions in the fourth quarter of 2021, higher costs related to growth in current and forecasted future revenues, including investments in key resources and compensation expenses related to awards issued beginning in the second half of 2021.

Selling, general and administrative expenses increased $52 million, or 50%, for the Successor three months ended June 30, 2022 as compared to the Predecessor prior year period. The increase was primarily driven by compensation expenses related to awards issued beginning in the second half of 2021.

Depreciation and intangible amortization expenses increased $29 million, or 52%, for the Successor three months ended June 30, 2022 as compared to the Predecessor prior year period. The increase was primarily driven by amortization related to the identifiable intangible assets acquired in conjunction with the Business Combination completed in the third quarter of 2021 and acquisitions completed during the fourth quarter of 2021.

A gain from a change in the fair value of financial instruments of $50 million was recorded for the Successor three months ended June 30, 2022. The gain is due to the revaluation of our financial instruments, which we are required to revalue at the end of each reporting period. We did not have outstanding financial instruments in the Predecessor period prior to the Business Combination.

A gain from the change in the fair value of the tax receivable agreement of $38 million was recorded for the Successor three months ended June 30, 2022. The revaluation gain is due to changes in the discount rate, partially offset by accretion of interest and changes in the Company's assumptions related to the timing of the utilization of the tax attributes during the term of the TRA, which we are required to revalue at the end of each reporting period. We did not have a tax receivable agreement in the Predecessor period prior to the Business Combination.

Interest expense decreased $32 million, or 52%, for the Successor three months ended June 30, 2022 as compared to the Predecessor prior year period. The decrease was primarily due to the redemption of our Unsecured Senior Notes and partial paydown of the Term Loan each in conjunction with the Business Combination completed during the third quarter of 2021. See Note 8 “Debt” for additional information.

Income before income tax benefit was $43 million for the Successor three months ended June 30, 2022, an improvement of $49 million compared to a loss before income tax benefit of $6 million for the Predecessor three months ended June 30, 2021, due to the drivers identified above.

Income tax benefit was $9 million for the Successor three months ended June 30, 2022, as compared to an income tax benefit of $2 million in the Predecessor prior year period. The effective tax rate of (21%) for the Successor three months ended June 30, 2022 is lower than the 21% U.S. statutory corporate income tax rate primarily due to losses in certain non-U.S. jurisdictions for which a tax benefit has not been recorded. The effective tax rate of 34% for the Predecessor three months ended June 30, 2021 was primarily driven by foreign and state income taxes payable in jurisdictions where the Company had operations that generated operating income. See Note 7 “Income Taxes” for additional information.

Results of Operations for the Six Months Ended June 30, 2022 (Successor) Compared to the Six Months Ended June 30, 2021 (Predecessor)

Revenues were $1,440 million for the Successor six months ended June 30, 2022 as compared to $1,361 million for the Predecessor prior year period. The increase of $79 million reflects growth of 7% in our Employer Solutions segment and 5% in our Hosted Business segment, partially offset by a decline of 2% in our Professional Services segment. We measure revenue growth as it relates to the cloud-based products and solutions that are central to our Alight Worklife® platform and our next generation product suite, BPaaS Solutions. These products capitalize on our robust data combined with AI & analytics to deliver greater employee engagement and employer outcomes. BPaaS products and services span across both the Employer Solutions and Professional Services segments and for the Successor six months ended June 30, 2022, we recorded BPaaS revenue of $242 million, which represents growth of 29% compared to the Predecessor prior year period.

In addition, we also consider BPaaS bookings, defined as total contract value for BPaaS customer agreements executed in the period, to be a key indicator of future revenue growth and used as a metric of commercial activity by management and investors. For the Successor six months ended June 30, 2022, BPaaS bookings of $356 million represents growth of 27% compared to the Predecessor prior year period.

Recurring revenues increased by $83 million, or 7%, from $1,130 million to $1,213 million and are related to growth in all three segments. Growth in Employer Solutions is a result of higher revenues related to acquisitions, increased volumes and increases in Net Commercial Activity. Growth in Professional Services is a result of increases in Net Commercial Activity. Project revenues decreased by $4 million, or 2%, from $231 million to $227 million and are related to a decline in Professional Services, partially offset by growth in Employer Solutions. The decline in Professional Services project revenues is driven by client timing delays.

In addition, a majority of our revenue is generated in the U.S., which reflected 98% of the revenue increase for the Successor six months ended June 30, 2022 compared to the Predecessor prior year period.

Cost of services, exclusive of depreciation and amortization, increased $86 million, or 10%, for the Successor six months ended June 30, 2022 as compared to the Predecessor prior year period. The increase was primarily driven by acquisitions in the fourth quarter of 2021, higher costs related to growth in current and forecasted future revenues, including investments in key resources and compensation expenses related to awards issued beginning in the second half of 2021.

Selling, general and administrative expenses increased $75 million, or 34%, for the Successor six months ended June 30, 2022 as compared to the Predecessor prior year period. The increase was primarily driven by compensation expenses related to awards issued beginning in the second half of 2021.

Depreciation and intangible amortization expenses increased $59 million, or 53%, for the Successor six months ended June 30, 2022 as compared to the Predecessor prior year period. The increase was primarily driven by amortization related to the identifiable intangible assets acquired in conjunction with the Business Combination completed in the third quarter of 2021 and acquisitions completed during the fourth quarter of 2021.

A gain from a change in the fair value of financial instruments of $63 million was recorded for the Successor six months ended June 30, 2022. The gain is due to the revaluation of our financial instruments, which we are required to revalue at the end of each reporting period. We did not have outstanding financial instruments in the Predecessor period prior to the Business Combination.

A gain from the change in the fair value of the tax receivable agreement of $43 million was recorded for the Successor six months ended June 30, 2022. The revaluation gain is due to changes in the discount rate, partially offset by accretion of interest and changes in the Company's assumptions related to the timing of the utilization of the tax attributes during the term of the TRA, which we are required to revalue at the end of each reporting period. We did not have a tax receivable agreement in the Predecessor period prior to the Business Combination.

Interest expense decreased $65 million, or 53%, for the Successor six months ended June 30, 2022 as compared to the Predecessor prior year period. The decrease was primarily due to the redemption of our Unsecured Senior Notes and partial paydown of the Term Loan in conjunction with the Business Combination completed during the third quarter of 2021. See Note 8 “Debt” for additional information.

Income before income tax benefit was $31 million for the Successor six months ended June 30, 2022, an improvement of $61 million compared to a loss before income tax benefit of $30 million for the Predecessor six months ended June 30, 2021, due to the drivers identified above.

Income tax benefit was $8 million for the Successor six months ended June 30, 2022, as compared to an income tax benefit of $5 million in the Predecessor prior year period. The effective tax rate of (24%) for the Successor six months ended June 30, 2022 is lower than the 21% U.S. statutory corporate income tax rate primarily due to losses in certain non-U.S. jurisdictions for which a tax benefit has not been recorded. The effective tax rate of 16% for the Predecessor six months ended June 30, 2021 was primarily driven by foreign and state income taxes payable in jurisdictions where the Company had operations that generated operating income. See Note 7 “Income Taxes” for additional information.

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:

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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

Adjusted Net Income, which is defined as net income attributable to Alight, Inc. adjusted for intangible amortization and the impact of certain non-cash items that we do not consider in the evaluation of ongoing operational performance, is a non-GAAP financial measure used solely for the purpose of calculating Adjusted Diluted Earnings Per Share.

Adjusted Diluted Earnings Per Share is defined as Adjusted Net Income divided by the adjusted weighted-average number of shares of common stock, diluted. The adjusted weighted shares calculation includes 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, 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 to Net Income Attributable to Alight, Inc. and the computation of Adjusted Diluted Earnings Per Share is as follows:

(1)

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.

(3)

Excludes two tranches of contingently issuable earnout shares: (i) 7.5 million shares will be issued if the volume-weighted average price ("VWAP") of the Company's Class A Common Stock is >$12.50 for 20 consecutive trading days; and (ii) 7.5 million shares will be issued if the VWAP of the Company's Class A Common Stock is >$15.00 for 20 consecutive trading dates. Both tranches have a seven-year duration.

(4)

Excludes 34,577,418 performance-based units, which represents maximum achievement of the respective performance conditions for units granted during the year ended December 31, 2021 and the six months ended June 30, 2022.

Adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation and intangible amortization adjusted for the impact of certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance, is a non-GAAP financial measure used by management and our stakeholders to provide useful supplemental information that enables a better comparison of our performance across periods. Both Adjusted EBITDA and Adjusted EBITDA less Capital Expenditures are non-GAAP measures that are used by management and stakeholders to evaluate our core operating performance.

Adjusted EBITDA and Adjusted EBITDA less Capital Expenditures should not be considered as discretionary cash available to us to reinvest in the growth of our business or to distribute to stockholders or as a measure of cash that will be available to us to meet our obligations.

A reconciliation of Adjusted EBITDA and Adjusted EBITDA less Capital Expenditures to Net Income (Loss) is as follows:

(3)

For the three and six months ended June 30, 2022, other primarily includes expenses related to debt refinancing completed in the first quarter of 2022 and other non-operational expenses. For the three and six months ended June 30, 2021, other includes long-term incentive expenses.

Employer Solutions Segment Results of Operations for the Three Months Ended June 30, 2022 (Successor) Compared to the Three Months Ended June 30, 2021 (Predecessor)

Employer Solutions revenue was $614 million for the Successor three months ended June 30, 2022 as compared to $569 million for the Predecessor prior year period. The overall increase of $45 million was due to an increase of recurring revenues of $43 million, or 8%, from $516 million to $559 million as a result of acquisitions, increased volumes and increases in Net Commercial Activity and an increase in project revenues of $2 million, or 4%, from $53 million to $55 million.

Employer Solutions gross profit was $200 million for the Successor three months ended June 30, 2022, as compared to $191 million for the Predecessor prior year period. The increase of $9 million, or 5%, was primarily due to revenue growth as discussed above and partially offset by increases in costs associated with growth of current and forecasted future revenues and compensation expenses related to awards issued beginning in the second half of 2021.

Employer Solutions Adjusted EBITDA was $147 million for the Successor three months ended June 30, 2022, as compared to $138 million for the Predecessor prior year period. The increase of $9 million was primarily due to revenue growth as discussed above, partially offset by increases in costs associated with growth of current and forecasted future revenues, including investments in our commercial functions and technology. For the Successor three months ended June 30, 2022, material expenses and benefits attributable to the Employer Solutions segment that are not included in Employer Solutions Adjusted EBITDA included depreciation and intangible amortization of $96 million and share-based compensation of $36 million, partially offset by gains from change in fair values of financial instruments and the TRA of $80 million. For the Predecessor three months ended June 30, 2021, material expenses attributable to the Employer Solutions segment that are not included in Employer Solutions Adjusted EBITDA included depreciation and intangible amortization of $67 million and share-based compensation of $2 million.

Employer Solutions Segment Results of Operations for the Six Months Ended June 30, 2022 (Successor) Compared to the Six Months Ended June 30, 2021 (Predecessor)

Employer Solutions revenue was $1,237 million for the Successor six months ended June 30, 2022 as compared to $1,156 million for the Predecessor prior year period. The overall increase of $81 million was due to an increase of recurring revenues of $80 million, or 8%, from $1,049 million to $1,129 million as a result of acquisitions, increased volumes and increases in Net Commercial Activity and an increase in project revenues of $1 million, or 1%, from $107 million to $108 million.

Employer Solutions gross profit was $404 million for the Successor six months ended June 30, 2022, as compared to $392 million for the Predecessor prior year period. The increase of $12 million, or 3%, was primarily due to revenue growth as discussed above and partially offset by increases in costs associated with growth of current and forecasted future revenues and compensation expenses related to awards issued beginning in the second half of 2021.

Employer Solutions Adjusted EBITDA was $289 million for the Successor six months ended June 30, 2022, as compared to $274 million for the Predecessor prior year period. The increase of $15 million was primarily due to revenue growth as discussed above,

partially offset by increases in costs associated with growth of current and forecasted future revenues, including investments in our commercial functions and technology. For the Successor six months ended June 30, 2022, material expenses and benefits attributable to the Employer Solutions segment that are not included in Employer Solutions Adjusted EBITDA included depreciation and intangible amortization of $188 million and share-based compensation of $65 million, partially offset by gains from change in fair values of financial instruments and the TRA of $96 million. For the Predecessor six months ended June 30, 2021, material expenses attributable to the Employer Solutions segment that are not included in Employer Solutions Adjusted EBITDA included depreciation and intangible amortization of $134 million and share-based compensation of $4 million.

Professional Services Segment Results of Operations for the Three Months Ended June 30, 2022 (Successor) Compared to the Three Months Ended June 30, 2021 (Predecessor)

Professional Services revenue was $91 million for the Successor three months ended June 30, 2022, as compared to $92 million for the Predecessor prior year period. The decrease of $1 million, or 1%, was due to a decrease in project revenues of $2 million, or 3%, from $61 million to $59 million, partially offset by an increase of recurring revenues of $1 million, or 3%, from $31 million to $32 million. The decline in Professional Services project revenues is driven by client timing delays.

Professional Services gross profit was $20 million for the Successor three months ended June 30, 2022, as compared to $26 million for the Predecessor prior year period. The decrease of $6 million, or 23%, was primarily due to increases in costs associated with growth of forecasted future revenues, including investments in key resources and revenue declines as discussed above.

Professional Services Adjusted EBITDA was ($3) million for the Successor three months ended June 30, 2022, as compared to $7 million for the Predecessor prior year period. The decrease of $10 million, or 143%, is primarily due to increases in costs associated with growth of forecasted future revenues, including investments in our commercial functions. For the Successor three months ended June 30, 2022, material expenses and benefits attributable to the Professional Services segment that are not included in Professional Services Adjusted EBITDA included depreciation and intangible amortization of $2 million and share-based compensation of $5 million, offset by gains from change in fair values of financial instruments and the TRA of $8 million. For the Predecessor three months ended June 30, 2021, material expenses attributable to the Professional Services segment that are not included in Professional Services Adjusted EBITDA included depreciation and intangible amortization of $7 million and share-based compensation of $1 million.

Professional Services Segment Results of Operations for the Six Months Ended June 30, 2022 (Successor) Compared to the Six Months Ended June 30, 2021 (Predecessor)

Professional Services revenue was $181 million for the Successor six months ended June 30, 2022, as compared to $184 million for the Predecessor prior year period. The decrease of $3 million, or 2%, was due to a decrease in project revenues of $5 million, or 4%, from $124 million to $119 million, partially offset by an increase of recurring revenues of $2 million, or 3%, from $60 million to $62 million. The decline in Professional Services project revenues is driven by client timing delays.

Professional Services gross profit was $39 million for the Successor six months ended June 30, 2022, as compared to $46 million for the Predecessor prior year period. The decrease of $7 million, or 15%, was primarily due to increases in costs associated with growth of forecasted future revenues, including investments in key resources and revenue declines as discussed above.

Professional Services Adjusted EBITDA ($3) million for the Successor six months ended June 30, 2022, as compared to $7 million for the Predecessor prior year period. The decrease of $10 million, or 143%, is primarily due to increases in costs associated with growth of forecasted future revenues, including investments in our commercial functions. For the Successor six months ended June 30, 2022, material expenses and benefits attributable to the Professional Services segment that are not included in Professional Services Adjusted EBITDA included depreciation and intangible amortization of $5 million and share-based compensation of $9 million, partially offset by gains from change in fair values of financial instruments and the TRA of $10 million. For the Predecessor six months ended June 30, 2021, material expenses attributable to the Professional Services segment that are not included in Professional Services Adjusted EBITDA included depreciation and intangible amortization of $13 million and share-based compensation of $1 million.

Hosted Business Segment Results of Operations for the Three Months Ended June 30, 2022 (Successor) Compared to the Three Months Ended June 30, 2021 (Predecessor)

Hosted Business revenue was $10 million for the Successor three months ended June 30, 2022 as compared to $11 million for the Predecessor prior year period. The decrease of $1 million, or 9%, was due to volumes.

Hosted Business gross profit was ($1) million for the Successor three months ended June 30, 2022, as compared to an immaterial amount for the Predecessor prior year period. The decrease of $1 million was due to lower revenue as discussed above.

Hosted Business Adjusted EBITDA was ($2) million for the Successor three months ended June 30, 2022, as compared to an immaterial amount for the Predecessor prior year period. The decrease of $2 million was primarily due to lower revenue as discussed above. For the Successor three months ended June 30, 2022, material expenses attributable to the Hosted Business segment that are not included in Hosted Business Adjusted EBITDA included share-based compensation of $1 million. For the Predecessor three months ended June 30, 2021, material expenses attributable to the Hosted Business segment that are not included in Hosted Business Adjusted EBITDA included depreciation and intangible amortization of $1 million.

Hosted Business Segment Results of Operations for the Six Months Ended June 30, 2022 (Successor) Compared to the Six Months Ended June 30, 2021 (Predecessor)

Hosted Business revenue was $22 million for the Successor six months ended June 30, 2022 as compared to $21 million for the Predecessor prior year period. The increase of $1 million, or 5%, was due to volumes.

Hosted Business gross profit ($1) million for the Successor six months ended June 30, 2022, as compared to immaterial for the Predecessor prior year period. The decrease of $1 million was due to lower revenue as discussed above.

Hosted Business Adjusted EBITDA was ($2) million for the Successor six months ended June 30, 2022, as compared to an immaterial amount for the Predecessor prior year period. The decrease of $2 million was primarily due to lower revenue as discussed above. For the Successor six months ended June 30, 2022, material expenses attributable to the Hosted Business segment that are not included in Hosted Business Adjusted EBITDA included depreciation and intangible amortization of $1 million and share-based compensation of $1 million. For the Predecessor six months ended June 30, 2021 material expenses attributable to the Hosted Business segment that are not included in Hosted Business Adjusted EBITDA included depreciation and intangible amortization of $2 million.

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 June 30, 2022 remains strong. We continue to closely monitor and proactively manage our liquidity position in light of changing economic conditions and the impact of a rising interest rate environment.

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 June 30, 2022 and December 31, 2021, 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 operating, investing, and financing activities for the periods presented.

Net cash provided by operating activities increased by $60 million to $118 million for the Successor six months ended June 30, 2022 from $58 million for the Predecessor prior year period, driven by an increase in our net income position and a decrease in working capital requirements, partially offset by lower non-cash items. Working capital requirements decreased by $4 million primarily related to cash receipts related to commissions receivable and net impacts of higher deferred revenues and costs associated with new client implementations, partially offset by the timing of billings. The decrease in non-cash items of $8 million is primarily due to gains from changes in fair value for both financial instruments and the tax receivable agreement, partially offset by higher intangible amortization and share-based compensation expenses, all of which were related to the Business Combination completed in the third quarter of 2021.

Cash used for investing activities for the Successor six months ended June 30, 2022 and Predecessor six months ended June 30, 2021 was $79 million and $55 million, respectively, driven by capital expenditures.

Cash used for financing activities for the Successor six months ended June 30, 2022 was $56 million. The primary drivers of the cash used for financing activities were loan repayments of $126 million, payments for deferred consideration of $81 million, finance lease payments of $17 million, payments for settlements related to interest rate swaps of $6 million and financing fees related to debt refinancing of $3 million, partially offset by a net increase in the cash flow from borrowings of $104 million and client funds obligations of $74 million, primarily due to timing of client funding and subsequent disbursement of payments.

Cash used for financing activities for the Predecessor six months ended June 30, 2021 was $64 million. The primary drivers of the cash used for financing activities were loan repayments of $124 million, finance lease payments of $17 million, a net decrease in the cash flow from client funds obligations of $15 million, primarily due to timing of client funding and subsequent disbursement of

payments, payments for settlements related to interest rate swaps of $14 million, unit repurchases of $2 million, and payments for contingent consideration of $1 million, partially offset by bank borrowings of $110 million.

At June 30, 2022, our cash and cash equivalents were $272 million, a decrease of $100 million from December 31, 2021. Of the total balances of cash and cash equivalents as of June 30, 2022 and December 31, 2021, 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 Fiduciary assets included cash of $1,354 million and $1,280 million at June 30, 2022 and December 31, 2021, respectively.

Our cash flows from operations, borrowing availability and overall liquidity are subject to risks and uncertainties. For further information, see the “Risk Factors” section in 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.

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. As of June 30, 2022, we do not expect to make any material payments within the next year, and anticipate payments to become more material beginning in 2024.

There have been no material changes to our obligations and commitments during the six months ended June 30, 2022.

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”.

There were no material changes from the Critical Accounting Estimates disclosed in the Annual Report. 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 the Annual Report, from which there have been no material changes.

For quantitative and qualitative disclosures about market risk, see Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" of the Annual Report. Our exposures to market risk have not changed materially since the filing of the Annual Report.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Management does not expect that our disclosure controls and procedures will necessarily prevent all errors and all fraud. However, management does expect the control system provides reasonable assurance that its objectives will be met. Based upon that evaluation, our principal executive officer and principal financial officer concluded

that the Company’s disclosure controls and procedures are effective at a reasonable assurance level in ensuring that the information required to be included in the Company’s periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, to allow for timely decisions regarding required disclosure.

There 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.

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.

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 Annual Report. 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.

There have been no material changes from the risk factors previously disclosed in the Company’s filings mentioned in the aforementioned paragraph.

On August 1, 2022, the Board approved a change in title for each of Gregory R. Goff and Cesar Jelvez, with such changes becoming effective immediately. Mr. Goff’s title has been changed from Chief Product and Technology Officer to Chief Technology and Delivery Officer. Mr. Jelvez’s title has been changed from Chief Customer Experience Officer to Chief Professional Services and Global Payroll Officer. The changes were made in connection with an internal realignment of certain management responsibilities among the current executive team. No salary or other compensation changes were made in connection with either Mr. Goff’s or Mr. Jelvez’s changes in title.

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.

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.


Delaware	86-1849232
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4 Overlook Point Lincolnshire, IL	60069
(Address of principal executive offices)	(Zip Code)


		Page
	Explanatory Note	1
	Forward-Looking Statements	1
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Stockholders’ and Members’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47


	June 30,			December 31,
	2022			2021
(in millions, except share and per share amounts)	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	272		$	372
Receivables, net		551			515
Other current assets		260			302
Total Current Assets Before Fiduciary Assets		1,083			1,189
Fiduciary assets		1,354			1,280
Total Current Assets		2,437			2,469
Goodwill		3,624			3,638
Intangible assets, net		4,007			4,170
Fixed assets, net		281			236
Deferred tax assets, net		4			3
Other assets		525			472
Total Assets	$	10,878		$	10,988

Liabilities and Stockholders' Equity
Liabilities
Current Liabilities
Accounts payable and accrued liabilities	$	349		$	406
Current portion of long-term debt, net		31			38
Other current liabilities		271			401
Total Current Liabilities Before Fiduciary Liabilities		651			845
Fiduciary liabilities		1,354			1,280
Total Current Liabilities		2,005			2,125
Deferred tax liabilities		33			36
Long-term debt, net		2,809			2,830
Long-term tax receivable agreement		530			581
Financial instruments		72			135
Other liabilities		334			353
Total Liabilities	$	5,783		$	6,060
Commitments and Contingencies (Note 19)
Stockholders' Equity
Class A Common Stock; $0.0001 par value, 1,000,000,000 shares authorized; 465,629,457 issued and outstanding as of June 30, 2022	$	—		$	—
Class B Common Stock; $0.0001 par value, 20,000,000 shares authorized; 9,980,906 issued and outstanding as of June 30, 2022		—			—
Class V Common Stock; $0.0001 par value, 175,000,000 shares authorized; 75,886,716 issued and outstanding as of June 30, 2022		—			—
Class Z Common Stock; $0.0001 par value, 12,900,000 shares authorized; 5,595,577 issued and outstanding as of June 30, 2022		—			—
Additional paid-in-capital		4,311			4,228
Retained deficit		(56	)		(96	)
Accumulated other comprehensive income		61			8
Total Alight, Inc. Equity	$	4,316		$	4,140
Noncontrolling interest		779			788
Total Stockholders' Equity	$	5,095		$	4,928
Total Liabilities and Stockholders' Equity	$	10,878		$	10,988


	Successor
									Accumulated
			Additional						Other		Total						Total
	Common		Paid-in			Retained			Comprehensive		Alight, Inc.			Noncontrolling			Stockholders'
(in millions)	Stock		Capital			Deficit			Income		Equity			Interest			Equity
Balance at December 31, 2021	$	—	$	4,228		$	(96	)	$	8	$	4,140		$	788		$	4,928
Net loss		—		—			(11	)		—		(11	)		(2	)		(13	)
Other comprehensive income, net		—		—			—			36		36			8			44
Measurement period adjustment		—		—			—			—		—			(1	)		(1	)
Conversion of noncontrolling interest		—		7			—			—		7			(13	)		(6	)
Share-based compensation expense		—		33			—			—		33			—			33
Shares vested, net of shares withheld in lieu of taxes		—		(1	)		—			—		(1	)		—			(1	)
Balance at March 31, 2022	$	—	$	4,267		$	(107	)	$	44	$	4,204		$	780		$	4,984
Net income		—		—			51			—		51			1			52
Other comprehensive income, net		—		—			—			17		17			1			18
Conversion of noncontrolling interest		—		2			—			—		2			(3	)		(1	)
Share-based compensation expense		—		42			—			—		42			—			42
Balance at June 30, 2022	$	—	$	4,311		$	(56	)	$	61	$	4,316		$	779		$	5,095


	Predecessor
																		Accumulated
	Members' Equity																	Other
	Class A Units					Class A-1 Units						Class B Units						Comprehensive
(in millions, except unit amounts)	Units		Amount			Units			Amount			Units			Amount			(Loss) Income			Total
Balance at December 31, 2020		123,700	$	699			1,800		$	12			1,736		$	14		$	(42	)	$	683
Comprehensive (loss) income, net of tax		—		(21	)		—			—			—			—			21			—
Restricted share units vested, net of units withheld in lieu of taxes		—		—			1			—			50			—			—			—
Unit repurchases		—		—			(75	)		(1	)		(89	)		(1	)		—			(2	)
Share-based compensation expense		—		—			—			—			—			2			—			2
Balance at March 31, 2021		123,700	$	678			1,726		$	11			1,697		$	15		$	(21	)	$	683
Comprehensive (loss) income, net of tax		—		(4	)		—			—			—			—			10			6
Restricted share units vested, net of units withheld in lieu of taxes		—		—			91			(1	)		391			—			—			(1	)
Share-based compensation expense		—		—			—			1			—			2			—			3
Balance at June 30, 2021		123,700	$	674			1,817		$	11			2,088		$	17		$	(11	)	$	691

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company


☒	QUARTERLY 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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	ALIT	New York Stock Exchange


	Successor						Predecessor
	Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
	June 30,			June 30,			June 30,			June 30,
(in millions, except per share amounts)	2022			2022			2021			2021
Revenue	$	715		$	1,440		$	672		$	1,361
Cost of services, exclusive of depreciation and amortization		483			974			436			888
Depreciation and amortization		13			24			19			38
Gross Profit		219			442			217			435

Operating Expenses
Selling, general and administrative		157			297			105			222
Depreciation and intangible amortization		85			170			56			111
Total operating expenses		242			467			161			333
Operating (Loss) Income		(23	)		(25	)		56			102
Other (Income) Expense
Gain from change in fair value of financial instruments		(50	)		(63	)		—			—
Gain from change in fair value of tax receivable agreement		(38	)		(43	)		—			—
Interest expense		29			58			61			123
Other (income) expense, net		(7	)		(8	)		1			9
Total other (income) expense, net		(66	)		(56	)		62			132
Income (Loss) Before Income Tax Benefit		43			31			(6	)		(30	)
Income tax benefit		(9	)		(8	)		(2	)		(5	)
Net Income (Loss)		52			39			(4	)		(25	)
Net income (loss) attributable to noncontrolling interests		1			(1	)		—			—
Net Income (Loss) Attributable to Alight, Inc.	$	51		$	40		$	(4	)	$	(25	)

Earnings Per Share
Basic earnings per share	$	0.11		$	0.09
Diluted earnings per share	$	0.10		$	0.07

Net Income (Loss)	$	52		$	39		$	(4	)	$	(25	)
Other comprehensive income, net of tax:
Change in fair value of derivatives		30			77			6			23
Foreign currency translation adjustments		(12	)		(15	)		4			8
Total other comprehensive income, net of tax:		18			62			10			31
Comprehensive Income Before Noncontrolling Interests		70			101			6			6
Comprehensive income attributable to noncontrolling interests		2			8			—			—
Comprehensive Income Attributable to Alight, Inc.	$	68		$	93		$	6		$	6


Cash consideration to prior equityholders(1)	$	1,055
Repayment of debt		1,814
Total cash consideration	$	2,869
Continuing unitholders rollover equity into the Company(2)		1,414
Contingent consideration - Tax Receivable Agreement(3)		610
Contingent consideration - Seller Earnouts(3)		109
Total consideration transferred	$	5,002
Noncontrolling interest(4)	$	799


Cash and cash equivalents	$	460
Receivables		484
Fiduciary assets		1,015
Other current assets		162
Fixed assets		205
Other assets		425
Accounts payable and accrued liabilities		(327	)
Fiduciary liabilities		(1,015	)
Other current liabilities		(291	)
Debt assumed		(2,370	)
Deferred tax liabilities		(3	)
Other liabilities		(396	)
Intangible assets		4,078
Total identifiable net assets	$	2,427
Goodwill	$	3,374


	Fair value		Useful life
Identifiable intangible assets	(in millions)		(in years)
Definite lived trade names	$	400		15
Technology related intangibles	$	222		6
Customer-related and contract-based intangibles	$	3,456		15


	Employer			Professional
	Solutions			Services			Total
Balance as of December 31, 2021	$	3,564			74			3,638
Measurement period adjustments		(10	)		—			(10	)
Foreign currency translation		(3	)		(1	)		(4	)
Balance as of June 30, 2022	$	3,551			73			3,624


	June 30, 2022						December 31, 2021
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Intangible assets:
Customer-related and contract based intangibles	$	3,658		243		3,415	$	3,662	$	119	$	3,543
Technology related intangibles		254		41		213		254		20		234
Trade name (finite life)		407		28		379		407		14		393
Total	$	4,319		312		4,007	$	4,323	$	153	$	4,170


Remainder of 2022 (July - December)	$	16
2023		31
2024		83
2025		325
2026		25
Thereafter		2,356
Total payments	$	2,836


				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
				Fair Value					Fair Value
	RSUs(1)			Per Unit		PRSUs(1)(2)			Per Unit
Balance as of December 31, 2021		7,148,416		$	12.27		16,743,113		$	11.20
Granted		4,809,866			9.07		10,009,102			11.30
Vested		(341,745	)		9.90		—			—
Forfeited		(684,059	)		11.96		(1,225,719	)		11.99
Balance as of June 30, 2022		10,932,478		$	10.94		25,526,496		$	11.14


	Net		Weighted-Average
	Carrying		Remaining
	Amount		Useful Lives
Intangible assets at June 30, 2022:
Customer-related and contract-based intangibles	$	3,415		14.0
Technology-related intangibles		213		5.0
Trade name (finite life)		379		13.8
Total	$	4,007


	Customer-Related		Technology		Trade
	and Contract Based		Related		Name
	Intangibles		Intangibles		Intangible
2022 (July - December)	$	123	$	22	$	14
2023		245		43		28
2024		245		43		28
2025		245		43		28
2026		245		42		27
Thereafter		2,312		20		254
Total amortization expense	$	3,415	$	213	$	379


		June 30,			December 31,
	Maturity Date	2022			2021
Term Loan	May 1, 2024	$	68		$	72
Term Loan, Amended	October 31, 2026		—			1,958
Term Loan, Third Incremental(1)	August 31, 2028		—			517
Term Loan, B-1(2)	August 31, 2028		2,460			—
Secured Senior Notes	June 1, 2025		312			314
$294m Revolving Credit Facility, Amended	August 31, 2026		—			—
Other	June 30, 2022		—			7
Total debt, net			2,840			2,868
Less: current portion of long-term debt, net			(31	)		(38	)
Total long-term debt, net		$	2,809		$	2,830


	Class A		Class B-1		Class B-2		Class V			Class Z
Balance at December 31, 2021		456,282,881		4,990,453		4,990,453		77,459,687			5,595,577
Conversion of noncontrolling interest		1,239,256		—		—		(1,239,256	)		—
Shares granted upon vesting		106,188		—		—		—			—
Issuance for compensation to non-employees(1)		13,743		—		—		—			—
Balance at March 31, 2022		457,642,068		4,990,453		4,990,453		76,220,431			5,595,577
Conversion of noncontrolling interest		333,715		—		—		(333,715	)		—
Shares granted upon vesting		50,132		—		—		—			—
Issuance for compensation to non-employees(1)		20,258		—		—		—			—
Balance at June 30, 2022		458,046,173		4,990,453		4,990,453		75,886,716			5,595,577


	Foreign
	Currency			Interest
	Translation			Rate
	Adjustments			Swaps(1)			Total
Balance at December 31, 2021	$	—		$	8		$	8
Other comprehensive (loss) income before reclassifications		(4	)		53			49
Tax expense (benefit)		1			(14	)		(13	)
Other comprehensive (loss) income before reclassifications, net of tax		(3	)		39			36
Amounts reclassified from accumulated other comprehensive income		—			—			—
Tax expense		—			—			—
Amounts reclassified from accumulated other comprehensive income, net of tax		—			—			—
Net current period other comprehensive income, net of tax		(3	)		39			36
Balance at March 31, 2022	$	(3	)	$	47		$	44
Other comprehensive (loss) income before reclassifications		(11	)		19			8
Tax expense (benefit)		—			9			9
Other comprehensive (loss) income before reclassifications, net of tax		(11	)		28			17
Amounts reclassified from accumulated other comprehensive income		—			—			—
Tax expense		—			—			—
Amounts reclassified from accumulated other comprehensive income, net of tax		—			—			—
Net current period other comprehensive income, net of tax		(11	)		28			17
Balance at June 30, 2022	$	(14	)	$	75		$	61


	Segment Profit

	Successor						Predecessor
	Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2022			2022			2021			2021
Employer Solutions	$	147		$	289		$	138		$	274
Professional Services		(3	)		(3	)		7			7
Hosted Business		(2	)		(2	)		—			(3	)
Total of all reportable segments		142			284			145			278
Share-based compensation		42			75			3			5
Transaction and integration expenses(1)		3			9			—			—
Non-recurring professional expenses(2)		—			—			9			18
Restructuring		14			20			2			9
Other(3)		8			11			—			(5	)
Depreciation		18			35			25			49
Intangible amortization		80			159			50			100
Operating (Loss) Income		(23	)		(25	)		56			102
Gain from change in fair value of financial instruments		(50	)		(63	)		—			—
Gain from change in fair value of tax receivable agreement		(38	)		(43	)		—			—
Interest expense		29			58			61			123
Other (income) expense, net		(7	)		(8	)		1			9
Income (Loss) Before Income Tax Benefit	$	43		$	31		$	(6	)	$	(30	)


Designation Date	Effective Date	Initial Notional Amount		Notional Amount Outstanding as of June 30, 2022			Fixed Rate			Expiration Date
July 2021	August 2020	$	557,500,000	$		557,500,000		2.5069	%	May 2022
July 2021	August 2020	$	89,863,420	$		100,000,000		3.0680	%	February 2023
December 2021	August 2020	$	181,205,050	$		483,171,957		0.7203	%	April 2024
December 2021	August 2020	$	388,877,200	$		602,676,513		0.6826	%	April 2024
December 2021	May 2022	$	220,130,318	$		219,653,493		0.4570	%	April 2024
December 2021	May 2022	$	306,004,562	$		304,838,287		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


	Tax Receivable
	Agreement Liability
Beginning balance as of December 31, 2021	$	581
Measurement period adjustment		(8	)
Fair value remeasurement		(43	)
Conversion of noncontrolling interest		7
Ending Balance as of June 30, 2022		537
Less: current portion included in other current liabilities		(7	)
Total long-term tax receivable agreement liability	$	530


	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
Interest rate swaps	$	—	$	96	$	—	$	96
Total assets recorded at fair value	$	—	$	96	$	—	$	96

Liabilities
Interest rate swaps	$	—	$	—	$	—	$	—
Contingent consideration liability		—		—		25		25
Seller Earnouts liability		—		—		71		71
Tax receivable agreement liability		—		—		530		530
Total liabilities recorded at fair value	$	—	$	—	$	626	$	626


	June 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities
Current portion of long-term debt, net	$	31	$	31	$	38	$	38
Long-term debt, net		2,809		2,656		2,830		2,834
Total	$	2,840	$	2,687	$	2,868	$	2,872