Alight, Inc. (f/k/a Foley Trasimene Acquisition Corp.) — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Filed August 16, 2021. The financial statements are for the pre-combination SPAC, not Alight’s operating business. Alight had no operating revenue or operations reflected in this filing. The business combination closed July 2, 2021, after quarter-end.
Financial position and results
- Revenue and margins: No operating revenue; margins are not applicable. Activity primarily comprised SPAC formation, public-company and transaction costs, and changes in the fair values of warrants and forward purchase agreements (FPAs).
- Q2 net loss: $24.3 million, versus a $31.0 million loss in Q2 2020. The 2021 loss included a $25.0 million noncash warrant fair-value loss and a $5.0 million noncash FPA fair-value gain, $4.2 million of formation and administrative expenses, and $25,000 of trust interest.
- Six-month net income: $53.8 million, versus a $31.0 million loss from inception through June 30, 2020. The 2021 income was primarily driven by noncash fair-value gains of $21.9 million on warrants and $39.3 million on FPAs; it should not be read as operating earnings. The 2020 comparison covers a different, inception-to-date period.
- Cash flow: Cash used in operating activities was $482,000 in the first six months of 2021. Cash at June 30 was $14,551 outside the trust account; the trust held $1.036 billion. The trust funds were subsequently used in part to fund the business combination.
- Liquidity and liabilities: Current liabilities were $10.1 million, including $8.9 million of accrued expenses and $1.1 million due to the sponsor. Total liabilities were $166.8 million, including $105.5 million of warrant liabilities, $15.0 million of FPA liabilities, and a $36.2 million deferred underwriting fee. The filing reported no long-term debt or lease obligations. Sponsor advances were repaid at the July 2 closing.
Material changes, transaction and outlook
- The July 2 business combination created an Up-C structure: substantially all operating assets and business are held by Alight Holdings, with Alight as managing member. The transaction is subsequent to the reported quarter and is not reflected in the June 30 financial position.
- Cannae and THL each funded $150 million under the FPAs at closing, for $300 million in total. The filing describes approximately $1.016 billion in cash consideration to Tempo and Tempo Blocker securityholders, in addition to equity and unit consideration.
- The transaction-related tax receivable agreement entitles former equityholders to 85% of specified tax benefits realized by Alight. The company said payments may be substantial; actual amounts and timing depend on tax benefits and other factors.
- No Alight operating-business guidance or forecast is provided in this pre-combination report. Management said the effects of COVID-19 were uncertain and not readily determinable. The filing also warns that forward-looking statements may differ materially from actual results.
- Controls: Management concluded disclosure controls were ineffective at June 30 due to a material weakness involving the accounting classification of warrants and FPAs. Remediation was underway but not complete; management reported additional analysis to support the financial statements.
Key facts for investors to verify
- Use Alight’s post-combination filings for operating revenue, profitability, cash flow, debt and guidance; these Q2 statements are for the SPAC before the July 2 closing.
- Review closing and subsequent-period disclosures to confirm transaction funding, use of trust proceeds, and the combined company’s resulting capitalization and liquidity.
- Track remediation of the material weakness and assess the effect of the tax receivable agreement, including potential payment obligations and tax-benefit assumptions.
- Assess warrant dilution and related fair-value volatility; the reported quarterly and six-month earnings were materially affected by noncash remeasurement gains and losses.