Share-Based Compensation Expense

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

10. Share-Based Compensation Expense

Share-based payments consist of grants of restricted share units (“RSUs”) and performance-based restricted share units (“PRSUs”). The Company recognizes compensation expense on a straight-line basis over the requisite service period for awards expected to ultimately vest.

Predecessor Replacement Awards

In connection with the Business Combination, the holders of certain unvested awards under the Predecessor plans were granted replacement awards in the Successor company.

•

Class B units: The unvested Class B units of Alight Holdings were granted replacement shares of unvested Class A, Class B-1 and Class B-2 Common Stock and ultimately vest on the third anniversary of the Closing Date, but could vest earlier based on the achievement of certain market-based conditions.

•

Class A-1 units: The unvested Class A-1 units of Alight Holdings were granted replacement shares of unvested Class A, Class B-1 and Class B-2 Common Stock on an equivalent fair value basis. The service-based portion of the grant vests ratably over periods of two to five years and the remaining vests upon the achievement of certain market-based conditions.

The Class B and Class A-1 units that were replaced represent the unvested shares of Class A, Class B-1 and Class B-2 Common Stock subject to the forfeiture re-allocation provision per the Class Z instruments discussed in Note 9 “Stockholders’ and Members’ Equity”. These unvested shares are accounted for as restricted stock in accordance with Accounting Standards Codification Topic 718, Compensation - Stock Compensation.

Successor Awards

In connection with the Business Combination, the Company adopted the Alight, Inc. 2021 Omnibus Incentive Plan. Under this plan, for grants issued during the Successor three and nine months ended September 30, 2022, approximately 55% of the units are subject to time-based vesting requirements and approximately 45% are subject to performance-based vesting requirements. The majority of the time-based RSUs vest ratably each March 10 over a three-year period with one-third vesting on each of March 10, 2023, 2024 and 2025. The PRSUs granted in 2021 vest upon achievement of the Company’s performance goal, Total Contract Value of Business Process as a Service ("BPaaS"). The PRSUs granted in 2022 vest upon achievement of the Company’s performance goal, Total BPaaS Revenue and Total Consolidated Revenue.

The Company begins to recognize expense associated with the PRSUs when the achievement of the performance condition is deemed probable. During the nine months ended September 30, 2022, based on management's analysis of the corresponding performance conditions, the Company increased expected achievement levels related to the PRSUs granted in 2021.

The fair value of each RSU and PRSU is based upon the grant date market price. The aggregate grant date fair value of RSUs and PRSUs granted during the Successor nine months ended September 30, 2022 was approximately $45 million and $162 million, respectively.

Restricted Share Units and Performance Based Restricted Share Units

The following tables summarizes the unit activity related to the RSUs and PRSUs during the nine months ended September 30, 2022:


				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
				Fair Value					Fair Value
	RSUs(1)			Per Unit		PRSUs(1)(2)			Per Unit
Balance as of December 31, 2021		7,148,416		$	12.27		16,743,113		$	11.20
Granted		4,987,126			9.01		13,919,562			11.64
Vested		(498,081	)		10.41		—			—
Forfeited		(1,206,180	)		11.67		(2,269,972	)		11.97
Balance as of September 30, 2022		10,431,281		$	10.85		28,392,703		$	11.30

(1) These share totals include both unvested shares and restricted stock units.

(2) PRSUs granted includes both new grants in the period as well as adjustments in the period to existing grants to account for the expected level of achievement of the performance-based vesting requirements.

Share-based Compensation

Total share-based compensation costs related to the RSUs and PRSUs are recorded in the Condensed Consolidated Statements of Comprehensive Income (Loss) as follows (in millions):


	Successor						Predecessor
	Three Months Ended		Nine Months Ended		Three Months Ended		Six Months Ended
	September 30,		September 30,		September 30,		June 30,
	2022		2022		2021		2021
Cost of services, exclusive of depreciation and amortization	$	12	$	29	$	3	$	1
Selling, general and administrative		42		100		12		4
Total share-based compensation expense	$	54	$	129	$	15	$	5

As of September 30, 2022, total future compensation expense related to unvested RSUs was $79 million, which will be recognized over a remaining weighted-average amortization period of approximately 1.4 years. As of September 30, 2022, total future compensation expense related to PRSUs was $189 million, which will be recognized over a remaining weighted-average amortization period of approximately 1.6 years.