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Alight Announces Agreement to Sell Payroll and Professional Services Business for up to $1.2 Billion

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., 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.”