Alight CEO Plans to Step Down After Firm Appoints Successor

Alight Inc. announced in its second quarter earnings report on Tuesday that Stephan Scholl will step down as CEO and member of the board, effective after the board names a successor.

Scholl will continue as CEO and director during the search process. The board of directors has also appointed Dave Guilmette, an independent director, as vice chair of the board. Guilmette will work closely with Scholl to “ensure a smooth transition.”

According to Alight, one of the biggest retirement plan recordkeepers, the recent sale of its payroll and professional services segment—a $1.2 billion deal—falls in line with the CEO change.

The firm’s recent Form 8-K filing with the Securities and Exchange Commission stated, “Scholl’s departure is not related to a disagreement with the company on any matter relating to its operations, policies or practices.”

According to Heather Balsky, a research analyst at Bank of America who also covers Alight, the board has been searching for a new CEO for the last few months.

“It’s looking for a new CEO with benefits industry experience and [who]’s comfortable with technology,” Balsky wrote in a report this month. “We view this transition positively as we think [Alight’s] strategy and execution could benefit from a CEO that has direct industry experience.”

Balsky also wrote in her analysis that BofA is “a bit disappointed” after another quarter of Alight’s sales guidance falling short of the bank’s expectations.

“In our view, [Alight] needs to hit its revised plan for the stock to work,” Balsky wrote. “We think the new CEO (to be determined) has an opportunity to refine the company’s approach to forecasting.”

On a positive note, Balsky found that Alight’s recurring revenues are poised for improved sequential growth as it continues to build its pipeline.

Activist hedge fund investor Starboard Value LP has also recently pressured Alight to make leadership changes, as it nominated four directors to join Alight’s board in February, later withdrawing those nominations in a “cooperation agreement” with Alight. The firm then announced on May 6 two new independent directors to join the board. As of May, Starboard held 7.2% of Alight’s outstanding common stock.

According to the second quarter earnings report, Alight’s revenue decreased 4.1% to $538 million in the second quarter of 2024, down from $561 million in the prior-year period. The decrease was driven by lower volumes, net commercial activity and project revenue within Alight’s Employer Solutions segment and the wind-down of its Hosted Business segment operations.

Gross profit in Q2 was $167 million, or 31% of revenue, compared to $187 million, 33.3% of revenue, in the prior-year period. According to the report, the decrease in gross profit was primarily driven by lower revenue, partially offset by productivity savings.

Looking ahead to the second half of 2024, Alight expects revenue of $1.207 billion to $1.232 billion.

Chair of the Board William P. Foley II thanked Scholl in a statement and recognized his work during the COVID-19 pandemic and overseeing the development of the Alight Worklife platform for employee well-being and benefits.

“With the divestiture behind us, we are well positioned to deliver differentiated benefit services to our clients and profitable growth with significant margin and cash flow expansion for our shareholders,” Foley stated. “Stephan’s continued efforts and support through this transitionary period will help our next CEO hit the ground running with a substantially improved financial and operating model.”

Alight is the third-largest defined contribution recordkeeper by both assets and participants, following Fidelity and Empower in both categories, according to PLANSPONSOR’s 2024 Recordkeeping Survey. PLANSPONSOR is a sister publication of PLANADVISER.