-$21.21
$69.01
bear -$21.21
base $21.46
bull $69.01
margin of safety $8.00
market price* $8.98
Alight runs outsourced employee-benefits administration for large employers and public-sector clients, almost entirely in the United States: health-benefit enrollment, retirement-plan administration and leave-of-absence management, delivered through its Worklife platform and service centers. Contracts typically run three to five years and revenue is highly recurring; the company kept 94% of the prior year's client revenue in 2025 (95% in 2024). In July 2024 Alight sold its Payroll & Professional Services business, so we value only what remains, using the 2022-2025 results the company restated on that basis plus the first half of 2026. What the business earns. We measure the cash the business produces for its owners: operating cash flow with working-capital timing swings removed, less stock-based pay and the capital spending needed to keep the business running. Because Alight carries heavy obligations, we measure this before interest, value the business, and then subtract what it owes. On that basis the business produced about $185 million in 2023, $209 million in 2024 and $375 million in 2025. Much of the 2025 jump came from stock-based pay falling from $139 million (2023) to $19 million as awards from the 2021 listing finished vesting, plus overhead cuts. Stock pay has stayed low in 2026 ($11 million in the first half), so we treat that saving as permanent: restating 2023-2025 at today's stock-pay level gives roughly $302 million, $263 million and $372 million, and we start from about $300 million a year (about $11.40 per share), the middle of that range. We did not simply use 2025, because the first half of 2026 shows that level is not holding: revenue fell 2.9% to $1,045 million, gross profit fell 14% to $298 million (gross margin from 32.3% to 28.5%), and cash generation fell about 24% from the first half of 2025 ($108 million versus $142 million). Both 2026 quarters were weaker, so this is not a single bad quarter. The filings we reviewed do not explain the margin decline beyond lower commercial activity and project work, and the company does not disclose half-year cash interest, so we used reported interest expense for those periods. Accounting judgements. About $281 million a year of amortisation of customer relationships and technology from the 2017 buyout, and a $3.1 billion goodwill write-down in 2025, are non-cash and excluded from cash generation. Those customer relationships are a wasting asset, though, so their erosion is built into a declining forecast rather than ignored. Cash taxes are currently low because of tax benefits inherited from the company's pre-IPO structure; we assume a 10% reduction in cash generation in the long-run years, once those benefits are used up. Growth. We credit no growth. Revenue has fallen three periods running (down 2.3% in 2024, 3.0% in 2025 and 2.9% in the first half of 2026), which the company attributes to lower net commercial activity and project revenue, and gross profit has fallen faster than revenue. Cash generation rose 79% in 2025, but that was a one-time step from lower stock pay and cost cuts, not a repeatable trend. Our first forecast year is $290 million, below both 2025 and our starting level. The company's Post-Separation Plan, begun in the second quarter of 2025, targets more than $75 million of annual savings. Because that is a management target and first-half 2026 profit fell anyway, we credit it only in the bull case. What it owes. At June 30, 2026 Alight owed about $1,999 million on its term loan due August 31, 2028 (priced at SOFR + 1.75%) and $45 million of finance leases. It also owed about $463 million under a tax receivable agreement with its pre-IPO owners, payable as the company uses those inherited tax benefits. It paid $136 million of this in the first half of 2026 and expects less than $1 million in 2027, and the other side has disputed the 2026 calculation by up to $20 million. We treat $115 million of the $215 million cash balance as surplus. Today's interest cost, about 4.8%, is below our 6% yardstick until 2028. The loan traded at about 96 cents on the dollar at the end of 2025, though, which points to refinancing nearer 7%; in the base case these two effects roughly cancel out. The August 2028 maturity of about $1.97 billion is the most important date for shareholders. In February 2026 Alight eliminated its dividend to prioritise paying down debt. After an NYSE notice in March 2026 for trading below $1, it carried out a 1-for-20 reverse stock split on June 30, 2026. All per-share figures here use the post-split count of about 26.35 million diluted shares. The three cases (all discounted at 6%): Bear case: the first-half 2026 margin squeeze continues and client retention slips below 94%. Cash generation starts at $255 million, falls 8% a year to 2030 and 5% a year after that. With earnings shrinking toward the interest bill, the 2028 refinancing costs about 9%, and the tax-agreement dispute goes against the company. The business is worth about $2.04 billion against obligations of about $2.59 billion, so the company would owe roughly $560 million more than it is worth, about -$21 per share. In this case shareholders would likely be wiped out in a restructuring.
Base case: revenue keeps slipping about 3% a year, as it has since 2024. Cash generation starts at $290 million, falls 4% a year for four years and 3% a year after that. It keeps shrinking at that pace beyond year ten, because the contracts are sticky (94-95% retention) but the client base is eroding. Refinancing comes at about 7%. The business is worth about $2.99 billion against about $2.42 billion owed, leaving about $565 million, or roughly $21.50 per share.
Bull case: retention returns to the 95% seen in 2024 and the Post-Separation Plan savings arrive in full. Cash generation starts at $310 million, rises to about $325 million, then slips 1.5% a year. The 2028 loan is refinanced near 6%. The business is worth about $4.17 billion against about $2.35 billion owed, leaving about $1.82 billion, or roughly $69 per share. What changed since our previous analysis. We previously estimated about $22, $68 and $94 per share. That analysis assumed cash generation would hold near the 2025 level with modest growth. Since then the first half of 2026 has shown a 14% drop in gross profit and a continued decline in revenue, and we no longer credit growth the business has not shown it can deliver. As a result our base case now starts lower and declines. The tax-agreement obligation is smaller ($463 million versus $664 million) because $136 million was paid and the balance was remeasured. We also corrected a small per-share error: the reverse split was exactly 1-for-20. Margin-of-safety price. Shareholders own a thin slice of value on top of about $2.4 billion of obligations, so small changes in the business swing the share value enormously. A 10% lower cash-generation path cuts the base-case value roughly in half, to about $10. The shares become worthless if cash generation runs about 19% below our base path, a point between our bear and base cases. Given what looks like roughly a one-in-four chance of losing everything, the margin-of-safety price is about $8 per share. From that price, if the shares reach the base-case value within about three years, the base case implies roughly 39% a year, enough to cover the risk of total loss and still imply 20% a year. What would make this wrong: if the 2026 margin decline proves temporary (for example, start-up costs on new clients) and gross margin recovers above 32%, value would be meaningfully higher. If a few large clients leave at renewal, or the 2028 refinancing is difficult, the bear case becomes more likely.