Alight (ALIT) Q2 2024 earnings summary

Executive summary

• Completed the divestiture of Payroll & Professional Services for $1.0 billion upfront (up to $1.2 billion total), using proceeds for $740 million debt repayment and share repurchases.

• Achieved key strategic milestones, including a two-year cloud migration, decommissioning data centers, and streamlining operations.

• Focused on technology-rich benefit services and ARR bookings momentum, with 9% growth in H1 2024 and double-digit growth expected in H2 2024; notable client wins include UPS, Wayfair, American Honda, and The Adecco Group.

• Announced CEO succession plan, with Stephan Scholl to step down after a successor is named.

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

Financial highlights

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

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

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

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

• Year-to-date operating cash flow was $145 million (56% conversion), or $181 million (70% conversion) excluding separation costs.

Outlook and guidance

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

• Adjusted EBITDA forecasted at $326–$351 million, margin of 26.5%–29.1%; adjusted diluted EPS expected at $0.31–$0.36.

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

• Non-recurring project revenue (less than 10% of total) expected to decline ~20% in H2 2024; total year revenue expected to be down 2%-3%.

• Operating cash flow conversion guidance for 2024 is 55%-65%; midterm target 65%-80%.