– Accelerates Transformation Toward Simplified
and Focused Platform Company for Employee Wellbeing and Benefits
–
– At Closing, Recurring Revenue to Increase
From 84% to Over 90% and Margin Profile to Improve by Nearly 300
Basis Points –
– Raises Mid-Term Adjusted EBITDA Margin
Guidance to 28% –
– New Commercial Partnership with the Divested
Company –
– Expect to Reduce Net Leverage Ratio to Below
Three Times –
– Increased Stock Repurchase Program by $200
Million –
– Company to Host Webcast to Discuss
Transaction at 10:00 a.m. ET –
Alight, Inc. (NYSE: ALIT), a leading cloud-based human capital
technology and services provider, today announced that it has
signed a definitive agreement to sell its Professional Services
segment and its Payroll & HCM Outsourcing businesses within the
Employer Solutions segment (the “Payroll & Professional
Services business”) to an affiliate of H.I.G. Capital for up to
$1.2 billion, subject to certain adjustments. This values the
Payroll & Professional Services business at a multiple of
approximately 10 times its estimated 2023 adjusted EBITDA and 24
times its estimated unlevered free cash flow.
Following the transaction, Alight and the Payroll &
Professional Services business will establish a commercial
partnership to bolster their collective competitiveness, coupling
world-class service capabilities with a compelling value
proposition for clients.
The transaction is a pivotal step, accelerating Alight’s
evolution into a more simplified and focused employee wellbeing and
benefits platform company. The Alight Worklife® platform is
optimally positioned to help clients enhance employee engagement
and achieve cost savings through advanced solutions. By
concentrating resources on strengthening its platform, service
capabilities, and go-to-market strategy, Alight will be even better
positioned to drive improved cost, experience and productivity
outcomes for its clients.
Throughout its transformation, Alight has delivered strong
growth while building a robust pipeline and record backlog of
revenue under contract. Alight’s focus over the last four years
around standardization, automation, and Cloud migration has
significantly enhanced the margin profile of the remaining core
business. As a result, Alight will achieve nearly 300 basis points
of adjusted EBITDA margin expansion upon deal closing.
Additionally, the Company is increasing its mid-term adjusted
EBITDA margin target to 28%, which would mark a total of 600 basis
points of potential margin expansion versus 2023. Alight also
expects to accelerate the achievement of other mid-term financial
objectives including higher cash generation and a de-levered
balance sheet with net leverage ratio expected to be below three
times. This will enable continued strategic investment in the
business and the return of excess capital to shareholders.
“This strategic transaction results in a more agile Alight and
enhances our competitiveness as we strengthen our technology and
services value proposition,” said Chief Executive Officer, Stephan
Scholl. “Coupling our strategic partnership with the Payroll &
Professional Services business alongside our strong benefits
business, delivery capabilities, data analytics, and artificial
intelligence will ensure prospective and new clients remain on the
frontier for wellbeing and benefits solutions. With today’s
announcement, we believe the stage is set for Alight to unlock the
power of its platform transformation and deliver world-class,
innovative solutions that improve client outcomes and enhance
shareholder value.”
“We are excited to partner with H.I.G. to establish a standalone
global leader in payroll and professional services. By focusing our
investments and energy on enhancing our highly differentiated,
end-to-end technology and service capabilities, we will be able to
add significant incremental value for our clients. With H.I.G.’s
support, expertise, and resources, as well as our continued
commercial partnership with Alight, we are well-positioned as the
partner of choice for global enterprises,” said Luca Saracino, Head
of the Payroll and Professional Services business.
“We are thrilled to partner with Luca and the entire Payroll
& Professional Services team,” commented Matt Lozow, Managing
Director at H.I.G. “As businesses grow increasingly global and face
complex technology and compliance requirements, we believe that the
Payroll & Professional Services business is uniquely positioned
to help clients address the many challenges which this creates. We
see a tremendous opportunity for continued growth and look forward
to working with the team to build upon their success and leadership
position in the market.”
Transaction Details
Pursuant to the terms of the agreement, an affiliate of H.I.G.
Capital will acquire Alight’s Payroll & HCM Outsourcing
businesses within the Employer Solutions segment which offer North
American payroll services, global payroll services, and HCM
outsourcing services and Alight’s Professional Services segment,
which offers application management and cloud deployment support
for Workday, SAP and Oracle.
The sale represents a transaction value of up to $1.2 billion,
in the form of $1 billion in cash and up to $200 million in seller
notes, of which $150 million is contingent upon the Payroll &
Professional Services business’ 2025 financial performance. Alight
expects to use the net after-tax cash proceeds to reduce debt,
return capital and for general corporate purposes, including
reinvestment into growth opportunities.
The transaction has been approved by Alight’s Board of Directors
and is expected to close by mid-year 2024, subject to customary
closing conditions, including regulatory approvals. The Company
expects to update its full-year 2024 financial guidance after
closing.
J.P. Morgan Securities LLC served as financial advisor and
Simpson Thacher & Bartlett LLP served as legal counsel to
Alight. Guggenheim Securities, LLC served as financial advisor and
Kirkland & Ellis LLP served as legal counsel to H.I.G.
Capital.
Stock Repurchase Program
Complementing its existing stock repurchase program, the
Company’s Board of Directors has authorized the repurchase of up to
an additional $200 million of the Company’s Class A common stock,
providing a total amount authorized for repurchase of $248 million
after giving effect to the increase. Repurchases may be conducted
through open market purchases or privately negotiated transactions
in compliance with Rule 10b-18 under the Securities Exchange Act of
1934, as amended, including pursuant to Rule 10b5-1 trading plans.
The actual timing and amount of future repurchases are subject to
business and market conditions, corporate and regulatory
requirements, stock price, acquisition opportunities and other
factors. The stock repurchase program does not obligate Alight to
acquire any amount of common stock, and the program may be
suspended or terminated at any time by Alight at its discretion
without prior notice.
Conference Call
Alight will host a webcast to discuss the transaction beginning
at 10:00 a.m. (ET) on March 20, 2024 and will post presentation
materials regarding the transaction on its website shortly prior to
the webcast. Interested parties can access the live webcast and
accompanying presentation materials by logging onto the Investor
Relations section on the Company's website at
http://investor.alight.com, which will also have a replay of the
conference call.
About Alight Solutions
Alight is a leading cloud-based human capital technology and
services provider that powers confident health, wealth and
wellbeing decisions for 36 million people and 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. With personalized,
data-driven health, wealth, pay and wellbeing insights, Alight
brings people the security of better outcomes and peace of mind
throughout life’s big moments and most important decisions. Learn
how Alight unlocks growth for organizations of all sizes at
alight.com.
About H.I.G. Capital
H.I.G. Capital is a leading global alternative investment firm
with $60 billion of capital under management.* Based in Miami, and
with offices in New York, Boston, Chicago, Dallas, Los Angeles, San
Francisco, and Atlanta in the U.S., as well as international
affiliate offices in London, Hamburg, Madrid, Milan, Paris, Bogotá,
Rio de Janeiro and São Paulo, H.I.G. specializes in providing both
debt and equity capital to small and mid-sized companies, utilizing
a flexible and operationally focused/ value-added approach:
- H.I.G.’s equity funds invest in management buyouts,
recapitalizations, and corporate carve-outs of both profitable as
well as underperforming manufacturing and service businesses.
- H.I.G.’s debt funds invest in senior, unitranche and junior
debt financing to companies across the size spectrum, both on a
primary (direct origination) basis, as well as in the secondary
markets. H.I.G. also manages a publicly traded BDC, WhiteHorse
Finance.
- H.I.G.’s real estate funds invest in value-added properties,
which can benefit from improved asset management practices.
- H.I.G. Infrastructure focuses on making value-add and core plus
investments in the infrastructure sector.
Since its founding in 1993, H.I.G. has invested in and managed
more than 400 companies worldwide. The firm's current portfolio
includes more than 100 companies with combined sales in excess of
$53 billion. For more information, please refer to the H.I.G.
website at www.higcapital.com.
*Based on total capital raised by H.I.G. Capital and
affiliates
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements include, but are
not limited to, statements regarding the sale of our Payroll and
Professional Services business to an affiliate of H.I.G. Capital,
including the likelihood of the consummation of the transaction,
the expected time period to consummate the transaction, the
anticipated benefits of the transaction (including the achievement
of our financial objectives), support plans, opportunities,
anticipated future performance (including our expected recurring
revenue and margin profile) and expected stock buyback programs,
and statements regarding our pro forma capital structure. In some
cases, these forward-looking statements can be identified by the
use of words such as “outlook,” “believes,” “expects,” “potential,”
“continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,”
“predicts,” “intends,” “plans,” “estimates,” “anticipates” or the
negative version of these words or other comparable words. Such
forward-looking statements are subject to various risks and
uncertainties including, among others, risks related to declines in
economic activity in the industries, markets, and regions our
clients serve, including as a result of elevated interest rates or
changes in monetary and fiscal policies, competition in our
industry, risks related to the performance of our information
technology systems and networks, risks related to our ability to
maintain the security and privacy of confidential and proprietary
information, risks related to actions or proposals from activist
stockholders, risks related to the ability to meet the contingent
payment conditions of the seller note, and risks related to changes
in regulation, including developments on the use of artificial
intelligence and machine learning. Additional factors that could
cause Alight’s results to differ materially from those described in
the forward-looking statements can be found under the section
entitled “Risk Factors” of Alight’s Annual Report on Form 10-K,
filed with the Securities and Exchange Commission (the "SEC") on
February 29, 2024, as such factors may be updated from time to time
in Alight's filings with the SEC, which are, or will be, accessible
on the SEC's website at www.sec.gov. Accordingly, there are or will
be important factors that could cause actual outcomes or results to
differ materially from those indicated in these statements. These
factors should not be construed as exhaustive and should be
considered along with other factors noted in this presentation and
in Alight’s filings with the SEC. Alight undertakes no obligation
to publicly update or review any forward-looking statement, whether
as a result of new information, future developments or otherwise,
except as required by law.
Non-GAAP Financial Measures and Financial Statement
Presentation
Included in this press release are certain non-GAAP financial
measures, such as Adjusted EBITDA Margin and Net Leverage Ratio, as
well as Unlevered Free Cash Flow and Adjusted EBITDA for the
Payroll & Professional Services business, designed to
complement the financial information presented in accordance with
U.S. GAAP because management believes such measures are useful to
investors. These non-GAAP financial measures should be considered
only as supplemental to, and not superior to, financial measures
provided in accordance with GAAP.
Disclosures in this press release related to the Company’s past,
present and future performance following the completion of the
proposed sale of our Payroll & Professional Services business
are unaudited, preliminary metrics are often based on internal
estimates that may be subject to change. Our objective is to
provide some preliminary information to allow investors and others
to begin to evaluate our business as it will operate after the
completion of the proposed sale.
Because GAAP financial measures on a forward-looking basis are
not accessible, and reconciling information is not available
without unreasonable effort, we have not provided reconciliations
for forward-looking non-GAAP measures, including our anticipated
net leverage ratio and adjusted EBITDA margin following the
completion of the pending transaction.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240320744957/en/
Investors: Jeremy Cohen Investor.Relations@alight.com
Media: Mariana Fischbach mariana.fischbach@alight.com
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