Exela Technologies, Inc. Reports Second Quarter 2024 Results

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Second Quarter Highlights

  • Revenue of $245.7 million, down 10.0% year-over-year
  • Gross margin of 23.5%, up 120 bps year-over-year
  • Interest expense of $23.1 million, down 48.7% year-over-year
  • SG&A of $41.8 million, up 30.5% year-over-year
  • Operating loss of $2.4 million, vs $11.2 million operating profit, year-over-year
  • Net loss of $26.9 million ($25.7 million attributable to Exela Technologies, Inc.), an improvement of $4.0 million year-over-year
  • Adjusted EBITDA of $13.7 million, down 39.0% year-over-year

IRVING, Texas, Aug. 15, 2024 (GLOBE NEWSWIRE) -- Exela Technologies, Inc. (“Exela” or the “Company”) (NASDAQ: XELA, XELAP), a global business process automation (“BPA”) leader, announced today its financial results for the quarter ended June 30, 2024.

“Our increased operating leverage and continued focus on cost management and rationalization of our real estate footprint are reflected in the solid expansion of our gross margin. We continue to add new logos and remain cautiously optimistic as we head into the second half of the year,” noted Par Chadha, Executive Chairman.

  • Revenue: Revenue for 2Q 2024 was $245.7 million, a decline of 10.0% compared to $272.9 million in 2Q 2023 (or a decline of 9.3% when excluding the sale of the high-speed scanner business in June 2023).

    • Revenue for the Information and Transaction Processing Solutions segment was $156.8 million, a decline of 15.2% year-over-year (or a decline of 14.0% on a pro forma basis when adjusted for the sale of the high-speed scanner business that occurred in June 2023).

    • Healthcare Solutions generated $62.9 million in revenue, a 1.1% decline year-over-year.

    • Legal & Loss Prevention Services generated $25.9 million in revenue, a 6.3% increase year-over-year.

  • Gross margin of 23.5%, up 1.2% year-over-year due to lower costs.

  • Interest Expense of $23.1M, down 48.7% year-over-year due to the Company’s debt modification in July 2023.

  • SG&A of $41.8M, up 30.5% year-over-year due to profit on the sale of our high-speed scanner business of $6.6M recognized in 2Q 2023. Other SG&A expenses were higher by $9.0 million, due to $10.1 in Q2FY24 write-downs, predominantly driven by a partner contract amendment, which provides for higher pricing and service expansion but resulted in a non-cash write down of the original contract’s straight-line revenue recognition and related contract assets. The SG&A increase was further offset by lower legal and professional fees and employee related costs.

  • Operating Loss: Operating loss of $2.4 million, versus an Operating profit of $11.2 million in 2Q 2023, primarily driven by lower revenue and higher SG&A, partially offset by higher gross profits.

  • Net Loss: Net loss of $26.9 million ($25.7 million attributable to Exela Technologies, Inc.), an improvement of $4.0 million year-over-year, primarily driven by lower interest expense following debt modification in July 2023, partially offset by higher SG&A.

  • Adjusted EBITDA(1): Adjusted EBITDA was $13.7 million compared to $22.5 million in 2Q 2023, a decline of 39.0% year-over-year, while up 6.7% sequentially. Adjusted EBITDA margin was 5.6%, a decrease of 260 basis points from 2Q 2023.

Below is the note referenced above:
(1)   Adjusted EBITDA is a non-GAAP measure. A reconciliation of Adjusted EBITDA is attached to this release.

About Exela
Exela Technologies is a business process outsourcing and automation leader, leveraging a global footprint and proprietary technology to help turn the complex into the simple through user friendly software platforms and solutions that enable our customers’ digital transformation. With decades of experience operating mission-critical processes, Exela serves a growing roster of more than 4,000 customers worldwide, including many of the world’s largest enterprises and over 60% of the Fortune® 100. Utilizing foundational technologies spanning information management, workflow automation, and integrated communications, Exela’s software and services include multi-industry, departmental solution suites addressing finance and accounting, human capital management, and legal management, as well as industry-specific solutions for banking, healthcare, insurance, and the public sector. Through cloud-enabled platforms, built on a configurable stack of automation modules, and approximately 13,100 employees operating in 20 countries, Exela rapidly deploys integrated technology and operations as an end-to-end digital journey partner.

To automatically receive Exela financial news by email, please visit the Exela Investor Relations website at http://investors.exelatech.com/ and subscribe to E-mail Alerts.
    
About Non-GAAP Financial Measures

This press release includes constant currency, EBITDA and Adjusted EBITDA, each of which is a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Exela believes that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance, results of operations and liquidity and allows investors to better understand the trends in our business and to better understand and compare our results. Exela’s board of directors and management use constant currency, EBITDA and Adjusted EBITDA to assess Exela’s financial performance, because it allows them to compare Exela’s operating performance on a consistent basis across periods by removing the effects of Exela’s capital structure (such as varying levels of debt and interest expense, as well as transaction costs resulting from capital markets-based activities). Adjusted EBITDA also seeks to remove the effects of integration and related costs to achieve the savings, asset base (such as depreciation and amortization) and other similar non-routine items outside the control of our management team.  All of these costs are variable and dependent upon the nature of the actions being implemented and can vary significantly. Accordingly, due to that significant variability, we exclude these charges since we do not believe they truly reflect our past, current or future operating performance. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency revenue and Adjusted EBITDA on a constant currency basis by converting our current-period local currency financial results using the exchange rates from the corresponding prior-period and compare these adjusted amounts to our corresponding prior period reported results. Exela does not consider these non-GAAP measures in isolation or as an alternative to liquidity or financial measures determined in accordance with GAAP. A limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in Exela’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures and therefore the basis of presentation for these measures may not be comparable to similarly-titled measures used by other companies. These non-GAAP financial measures are not required to be uniformly applied, are not audited and should not be considered in isolation or as substitutes for results prepared in accordance with GAAP. Net loss is the GAAP measure most directly comparable to the non-GAAP measures presented here. For reconciliation of the comparable GAAP measures to these non-GAAP financial measures, see the schedules attached to this release.

Forward-Looking Statements
Certain statements included in this press release are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “may”, “should”, “would”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “seem”, “seek”, “continue”, “future”, “will”, “expect”, “outlook” or other similar words, phrases or expressions. These forward-looking statements include statements regarding our industry, future events, estimated or anticipated future results and benefits, future opportunities for Exela, and other statements that are not historical facts. These statements are based on the current expectations of Exela management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties, including without limitation the network outage described in this press release and those discussed under the heading “Risk Factors” in our Annual Report and in subsequent filings with the U.S. Securities and Exchange Commission (“SEC”). In addition, forward-looking statements provide Exela’s expectations, plans or forecasts of future events and views as of the date of this communication. Exela anticipates that subsequent events and developments will cause Exela’s assessments to change. These forward-looking statements should not be relied upon as representing Exela’s assessments as of any date subsequent to the date of this press release.
     
For more Exela news, commentary, and industry perspectives, visit:
Website: https://investors.exelatech.com/
X: @ExelaTech
LinkedIn: exela-technologies
Facebook: @exelatechnologies
Instagram: @exelatechnologies

The information posted on the Company’s website and/or via its social media accounts may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company’s website and its social media accounts in addition to the Company’s press releases, SEC filings and public conference calls and webcasts.

Investor and/or Media Contacts:
ir@exelatech.com

   
Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of June 30, 2024 and December 31, 2023
(in thousands of United States dollars except share and per share amounts)		  
   
    June 30,    December 31,   
    2024     2023    
    (Unaudited)   (Audited)  
Assets               
Current assets              
Cash and cash equivalents   $ 30,327     $ 23,341    
Restricted cash     20,933       43,812    
Accounts receivable, net of allowance for credit losses of $6,813 and $6,628, respectively     61,501       76,893    
Related party receivables and prepaid expenses     449       296    
Inventories, net     13,251       11,502    
Prepaid expenses and other current assets     30,140       25,364    
Total current assets     156,601       181,208    
Property, plant and equipment, net of accumulated depreciation of $216,695 and $213,142, respectively     58,448       58,366    
Operating lease right-of-use assets, net     31,421       33,874    
Goodwill     170,354       170,452    
Intangible assets, net     148,364       164,920    
Deferred income tax assets     2,990       3,043    
Other noncurrent assets     19,775       24,474    
Total assets   $ 587,953     $ 636,337    
               
Liabilities and Stockholders' Deficit              
Liabilities              
Current liabilities              
Current portion of long-term debt   $ 53,723     $ 30,029    
Accounts payable     68,628       61,109    
Related party payables     3,047       1,938    
Income tax payable     4,211       2,080    
Accrued liabilities     57,611       63,699    
Accrued compensation and benefits     71,192       65,012    
Accrued interest     55,776       52,389    
Customer deposits     27,898       23,838    
Deferred revenue     14,018       12,099    
Obligation for claim payment     38,913       66,988    
Current portion of finance lease liabilities     6,422       4,856    
Current portion of operating lease liabilities     9,590       10,845    
Total current liabilities     411,029       394,882    
Long-term debt, net of current maturities     1,015,252       1,030,580    
Finance lease liabilities, net of current portion     8,203       5,953    
Pension liabilities, net     12,879       13,192    
Deferred income tax liabilities     12,516       11,692    
Long-term income tax liabilities     6,511       6,359    
Operating lease liabilities, net of current portion     24,676       26,703    
Other long-term liabilities     5,621       5,811    
Total liabilities     1,496,687       1,495,172    
Commitments and Contingencies (Note 8)              
Stockholders' deficit              
Common Stock, par value of $0.0001 per share; 1,600,000,000 shares authorized; 6,365,363 shares issued and outstanding at June 30, 2024 and 6,365,355 shares issued and outstanding at December 31, 2023     261       261    
Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized at June 30, 2024 and December 31, 2023              
Series A Preferred Stock, 2,778,111 shares issued and outstanding at June 30, 2024 and December 31, 2023     1       1    
Series B Preferred Stock, 3,029,900 shares issued and outstanding at June 30, 2024 and December 31, 2023     —       —    
Additional paid in capital     1,237,687       1,236,171    
Accumulated deficit     (2,134,670 )     (2,084,114 )  
Accumulated other comprehensive loss:              
Foreign currency translation adjustment     (7,282 )     (7,648 )  
Unrealized pension actuarial gains (losses), net of tax     215       (174 )  
Total accumulated other comprehensive loss     (7,067 )     (7,822 )  
Total stockholders’ deficit attributable to Exela Technologies, Inc.     (903,788 )     (855,503 )  
Noncontrolling interest in XBP Europe     (4,946 )     (3,332 )  
Total stockholders’ deficit     (908,734 )     (858,835 )  
Total liabilities and stockholders’ deficit   $ 587,953     $ 636,337    


 
Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2024 and 2023
(in thousands of United States dollars except share and per share amounts)
(Unaudited)
 
    Three Months Ended June 30,    Six Months Ended June 30, 
    2024     2023     2024     2023  
Revenue   $ 245,653     $ 272,938     $ 504,464     $ 546,558  
Cost of revenue (exclusive of depreciation and amortization)     187,964       212,059       389,952       428,526  
Selling, general and administrative expenses (exclusive of depreciation and amortization)     41,778       32,026       82,632       76,407  
Depreciation and amortization     14,983       14,890       28,490       31,450  
Related party expense     3,282       2,739       5,673       5,851  
Operating profit (loss)     (2,354 )     11,224       (2,283 )     4,324  
Other expense (income), net:                        
Interest expense, net     23,129       45,092       44,217       89,272  
Debt modification and extinguishment costs (gain), net     —       (6,785 )     —       (15,558 )
Sundry (income) expense, net     (204 )     1,500       1,677       2,248  
Other income, net     (423 )     (232 )     (874 )     (514 )
Loss before income taxes     (24,856 )     (28,351 )     (47,303 )     (71,124 )
Income tax expense     (2,049 )     (2,535 )     (5,175 )     (5,198 )
Net loss     (26,905 )     (30,886 )     (52,478 )     (76,322 )
Net loss attributable to noncontrolling interest in XBP Europe, net of taxes     (1,228 )     —       (1,922 )     —  
Net loss attributable to Exela Technologies, Inc.   $ (25,677 )   $ (30,886 )   $ (50,556 )   $ (76,322 )
Cumulative dividends for Series A Preferred Stock     (1,067 )     (967 )     (2,120 )     (1,921 )
Cumulative dividends for Series B Preferred Stock     (1,242 )     (1,171 )     (2,466 )     (2,324 )
Net loss attributable to common stockholders   $ (27,986 )   $ (33,024 )   $ (55,142 )   $ (80,567 )
Loss per share:                        
Basic and diluted   $ (4.40 )   $ (5.19 )   $ (8.66 )   $ (14.40 )

                                               

 
Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2024 and 2023
(in thousands of United States dollars)
 
    Six Months Ended June 30, 
    2024     2023
    
Cash flows from operating activities              
Net loss   $ (52,478 )   $ (76,322 )  
Adjustments to reconcile net loss to cash used in operating activities              
Depreciation and amortization     28,490       31,450    
Original issue discount, debt premium and debt issuance cost amortization     (20,022 )     16,064    
Interest on BR Exar AR Facility     (2,558 )     (5,066 ) (1)
Debt modification and extinguishment gain, net     —       (16,964 )  
Credit loss expense     14,683       2,865    
Deferred income tax provision     757       776    
Share-based compensation expense     1,560       314    
Unrealized foreign currency (gain) loss     (131 )     521    
Gain on sale of assets     (533 )     (5,831 )  
Fair value adjustment for private warrants liability of XBP Europe     (40 )     —    
Change in operating assets and liabilities              
Accounts receivable     6,379       (7,703 )  
Prepaid expenses and other current assets     (6,842 )     6,495    
Accounts payable and accrued liabilities     13,427       (639 )  
Related party payables     955       (403 )  
Additions to outsource contract costs     (573 )     (298 )  
Net cash used in operating activities     (16,926 )     (54,741 )  
Cash flows from investing activities              
Purchase of property, plant and equipment     (4,033 )     (3,357 )  
Additions to internally developed software     (1,947 )     (1,976 )  
Proceeds from sale of assets     2,893       29,811    
Net cash (used in) provided by investing activities     (3,087 )     24,478    
Cash flows from financing activities              
Proceeds from issuance of Common Stock from at the market offerings     —       69,260    
Cash paid for equity issuance costs from at the market offerings     —       (2,232 )  
Payment for fractional shares on reverse stock split     —       (31 )  
Borrowings under factoring arrangement and Securitization Facility     496       62,858    
Principal repayment on borrowings under factoring arrangement and Securitization Facility     (511 )     (63,577 )  
Cash paid for debt issuance costs     (237 )     (6,398 )  
Principal payments on finance lease obligations     (3,837 )     (2,150 )  
Borrowings from senior secured term loans and BRCC revolver     —       9,600    
Borrowings from other loans     20,594       4,289   (1)
Cash paid for debt repurchases     —       (11,858 )  
Proceeds from Second Lien Note     —       31,500    
Borrowing under BR Exar AR Facility     30,614       20,000   (1)
Repayments under BR Exar AR Facility     (25,580 )     (12,484 ) (1)
Repayment of BRCC term loan     —       (44,775 )  
Principal repayments on senior secured term loans, BRCC revolver and other loans     (17,763 )     (15,441 ) (1)
Net cash provided by financing activities     3,776       38,561    
Effect of exchange rates on cash, restricted cash and cash equivalents     344       145    
Net (decrease) increase in cash, restricted cash and cash equivalents     (15,893 )     8,443    
Cash, restricted cash, and cash equivalents              
Beginning of period     67,153       45,067    
End of period   $ 51,260     $ 53,510    
Supplemental cash flow data:              
Income tax payments, net of refunds received   $ 1,978     $ 2,898    
Interest paid     38,694       72,608    
Noncash investing and financing activities:              
Assets acquired through right-of-use arrangements   $ 7,673     $ 405    
Accrued PIK interest paid through issuance of PIK Notes     23,342       —    
Waiver and consent fee payable added to outstanding balance of Senior Secured Term Loan     1,000       —    
Accrued capital expenditures     288       2,167    

(1)   Exela restated the condensed consolidated statement of cash flows for the six months ended June 30, 2023 by reclassifying borrowing and repayments under BR Exar AR Facility as separate line items which were previously included in borrowings from other loans and principal repayments on senior secured term loans and other loans, respectively under cash flow from financing activities. Interest on BR Exar AR Facility which was previously included in principal repayments on senior secured term loans and other loans under cash flow from financing activities is restated by reclassification as cash flow from operating activities.

 
Exela Technologies, Inc. and Subsidiaries

Schedule 1: Reconciliation of Adjusted EBITDA and constant currency revenues
 
Non-GAAP constant currency revenue reconciliation
 
($ in millions)   Three months ended June 30,   Year ended (YTD) June 30,
        2024       2023       2024         2023
Revenues, as reported (GAAP)   $245.7   $272.9   $504.5     $546.6
Foreign currency exchange impact (1)       0.3       0.4       (0.4 )       3.6
Revenues, at constant currency (Non-GAAP)   $246.0   $273.3   $504.1     $550.2

(1)   Constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the three months and six months ended June 30, 2023, to the revenues during the corresponding period in 2024.

Reconciliation of Adjusted EBITDA

($ in millions)   Three months ended June 30,   Year ended (YTD) June 30,
      2024       2023       2024       2023  
Net loss (GAAP)     ($26.9 )     ($30.9 )     ($52.5 )     ($76.3 )
Income tax expense     2.0       2.5       5.2       5.2  
Interest expense, net     23.1       45.1       44.2       89.3  
Depreciation and Amortization     15.0       14.9       28.5       31.5  
EBITDA (Non-GAAP)   $13.3     $31.6     $25.4     $49.6  
Transaction and integration costs     0.0       2.9       0.2       8.1  
Non-cash equity compensation     0.4       0.2       1.6       0.3  
Other charges including non-cash     -       0.3       -       0.2  
Loss/(gain) on sale of assets     0.1       0.7       (0.5 )     0.8  
Loss/(gain) on business disposals     -       (6.5 )     -       (6.5 )
Debt modification and extinguishment costs (gain), net   -       (6.8 )     -       (15.6 )
Adjusted EBITDA   $13.7     $22.5     $26.6     $37.0  


Source: Exela Technologies, Inc.


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Source: Exela Technologies, Inc.

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