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Exela Technologies Holdings, Inc. Reports First Quarter 2024 Results

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Exela Technologies (NASDAQ: XELA) reported its Q1 2024 financial results, highlighting a revenue decline of 5.4% year-over-year to $258.8 million. The gross margin improved by 1.1% to 22.0%. The company reported a significant reduction in interest expense by 52.3% to $21.1 million.

Operating profit was up, reaching $0.1 million compared to a loss of $6.9 million in the previous year. However, the net loss stood at $25.6 million, which showed an improvement of $19.9 million year-over-year. Adjusted EBITDA dropped by 11.1% to $12.9 million but showed a sequential increase of 41.7%.

Segment-wise, Information and Transaction Processing Solutions generated $176.1 million, down 9.1% year-over-year. Healthcare Solutions saw a revenue increase of 2.9% to $64.9 million, and Legal and Loss Prevention Services revenue rose by 5.6% to $17.8 million.

Positive
  • Gross margin increased by 1.1% year-over-year to 22.0%.
  • Interest expense reduced by 52.3% year-over-year to $21.1 million.
  • Operating profit increased from a loss of $6.9 million to a profit of $0.1 million.
  • Net loss improved by $19.9 million year-over-year to $25.6 million.
  • Healthcare Solutions revenue increased by 2.9% year-over-year to $64.9 million.
  • Legal and Loss Prevention Services revenue grew by 5.6% year-over-year to $17.8 million.
  • Sequential improvement in Adjusted EBITDA by 41.7%.
Negative
  • Revenue declined by 5.4% year-over-year to $258.8 million.
  • Adjusted EBITDA decreased by 11.1% year-over-year to $12.9 million.
  • Revenue for Information and Transaction Processing Solutions declined by 9.1% year-over-year to $176.1 million.
  • Net loss remains high at $25.6 million.

Insights

Exela Technologies' first quarter results present a mix of both encouraging and challenging metrics. The revenue drop of 5.4% year-over-year indicates some headwinds, although part of this decline is attributed to the sale of the high-speed scanner business. When excluding this, the decline is a more modest 4.3%. It's important for investors to differentiate between revenue loss due to business divestitures and organic performance declines.

On a positive note, the gross margin increased by 1.1% to 22.0%, suggesting better cost management. This margin improvement, despite the lower revenue, points to operational efficiency gains. The significant reduction in interest expense by 52.3% is particularly noteworthy, primarily driven by debt modifications. This improvement positively impacts the bottom line and indicates better financial health.

The operating profit shift from a loss of $6.9M to a positive $0.1M is a positive indicator of improving business fundamentals. However, the net loss of $25.6M remains a concern, although it's an improvement from the previous year. This suggests that while the company is moving in the right direction, it still faces significant financial challenges.

It's also worth noting the 7.9% reduction in SG&A expenses, reflecting tighter cost control. However, the decline in Adjusted EBITDA by 11.1% is an area of concern as it may indicate underlying issues in core business profitability. Overall, Exela appears to be making progress in several key areas, but the revenue decline and ongoing net loss warrant cautious optimism.

From a market perspective, Exela's performance in different segments is quite revealing. The Information and Transaction Processing Solutions segment, which experienced a 9.1% decline in revenue, highlights some sector-specific challenges. This segment's performance might need a strategic review to identify areas for improvement or potential innovation.

Conversely, the Healthcare Solutions segment saw a revenue increase of 2.9%, showcasing its resilience and potential growth in this sector. Similarly, the Legal and Loss Prevention Services segment's revenue increase of 5.6% indicates an expanding market or improved service offerings in this area.

Investors should closely watch how Exela leverages its strengths in the growing segments while addressing the weaknesses in others. The company’s emphasis on increasing operating leverage and planned investments suggests a focus on long-term growth, but the immediate revenue declines pose short-term risks.

First Quarter Highlights

  • Revenue of $258.8 million, down 5.4% year-over-year
  • Gross margin of 22.0%, up 1.1% year-over-year
  • Interest expense of $21.1M, down 52.3% year-over-year
  • SG&A of $40.9M, down 7.9% year-over-year
  • Operating profit of $0.1M versus a loss of $6.9 million year-over year
  • Net loss of $25.6 million ($24.9 million attributable to Exela Technologies Inc), an improvement of $19.9 million year-over-year
  • Adjusted EBITDA of $12.9M, down 11.1% year-over-year

IRVING, Texas, May 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 first quarter 2024.

“Our results show improvement across many operating metrics. We see benefits from increasing operating leverage and plan to prudently invest in expansion of solutions and people to grow wallet share from our sizable marquee customer base. We will remain focused on growth, cost management. We will continue to refine our strategy as needed to maintain momentum as we approach the second half of the year,” noted Par Chadha, Executive Chairman.

First Quarter Highlights

  • Revenue: Revenue for 1Q 2024 was $258.8 million, a decline of 5.4% compared to $273.6 million in 1Q 2023 or a decline of 4.3% pro forma excluding the sale of the high speed scanner business

    • Revenue for the Information and Transaction Processing Solutions segment was $176.1 million, a decline of 9.1% year-over-year or a decline of 7.6% on a pro forma basis when adjusted for the sale of the high speed scanner business.
    • Healthcare Solutions generated $64.9 million, a 2.9% increase year-over-year
    • Legal and Loss Prevention Services generated $17.8 million in revenue, a 5.6% increase year-over-year
  • Gross margin of 22.0%, up 1.1% year-over-year due to lower costs

  • Interest Expense of $21.1M, down 52.3% year-over-year due to debt modification

  • SG&A of $40.9M, down 7.9% year-over-year due to vigilant control over costs

  • Operating profit: Operating profit of $0.1M versus a loss of $6.9 million year-over year highlights a mix of lower costs and lower depreciation and amortization

  • Net Loss: Net loss of $25.6 million ($24.9 million attributable to Exela Technologies Inc), an improvement of $19.9 million year-over-year mainly driven by lower interest expense and no debt modification costs this quarter.

  • Adjusted EBITDA(1): Adjusted EBITDA was $12.9 million compared to $14.5 million in 2023, down 11.1% year-over-year while up 41.7% sequentially. Adjusted EBITDA margin was 5.0%, a decrease of 10 basis points from 1Q2023.

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 automation (BPA) leader, leveraging a global footprint and proprietary technology to provide digital transformation solutions enhancing quality, productivity, and end-user experience. With decades of experience operating mission-critical processes, Exela serves a growing roster of more than 4,000 customers throughout 50 countries, including 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 13,600 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 e-mail, please visit the Exela Investor Relations website, http://investors.exelatech.com/, and subscribe to E-mail Alerts. 

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:
Vincent Kondaveeti
E: vincent.kondaveeti@exelatech.com 

Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of March 31, 2024 and December 31, 2023
(in thousands of United States dollars except share and per share amounts)
      
 March 31, December 31,
 2024
 2023
 (Unaudited) (Audited)
Assets     
Current assets     
Cash and cash equivalents$9,501  $23,341 
Restricted cash 24,523   43,812 
Accounts receivable, net of allowance for credit losses of $5,551 and $6,628, respectively 75,777   76,893 
Related party receivables and prepaid expenses 474   296 
Inventories, net 12,473   11,502 
Prepaid expenses and other current assets 27,651   25,364 
Total current assets 150,399   181,208 
Property, plant and equipment, net of accumulated depreciation of $215,449 and $213,142, respectively 55,428   58,366 
Operating lease right-of-use assets, net 31,688   33,874 
Goodwill 170,355   170,452 
Intangible assets, net 157,078   164,920 
Deferred income tax assets 2,913   3,043 
Other noncurrent assets 23,943   24,474 
Total assets$591,804  $636,337 
      
Liabilities and Stockholders' Deficit     
Liabilities     
Current liabilities     
Current portion of long-term debt$29,057  $30,029 
Accounts payable 66,375   61,109 
Related party payables 2,463   1,938 
Income tax payable 2,352   2,080 
Accrued liabilities 63,404   63,699 
Accrued compensation and benefits 74,927   65,012 
Accrued interest 29,946   52,389 
Customer deposits 23,731   23,838 
Deferred revenue 14,524   12,099 
Obligation for claim payment 43,336   66,988 
Current portion of finance lease liabilities 4,348   4,856 
Current portion of operating lease liabilities 10,214   10,845 
Total current liabilities 364,677   394,882 
Long-term debt, net of current maturities 1,041,940   1,030,580 
Finance lease liabilities, net of current portion 5,170   5,953 
Pension liabilities, net 12,617   13,192 
Deferred income tax liabilities 12,638   11,692 
Long-term income tax liabilities 6,086   6,359 
Operating lease liabilities, net of current portion 24,916   26,703 
Other long-term liabilities 5,392   5,811 
Total liabilities 1,473,436   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; 6,365,355 shares issued and outstanding at March 31, 2024 and December 31, 2023 261   261 
Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized at March 31, 2024 and December 31, 2023     
Series A Preferred Stock, 2,778,111 shares issued and outstanding at March 31, 2024 and December 31, 2023 1   1 
Series B Preferred Stock, 3,029,900 shares issued and outstanding at March 31, 2024 and December 31, 2023     
Additional paid in capital 1,237,354   1,236,171 
Accumulated deficit (2,108,993)  (2,084,114)
Accumulated other comprehensive loss:     
Foreign currency translation adjustment (6,422)  (7,648)
Unrealized pension actuarial gains (losses), net of tax 37   (174)
Total accumulated other comprehensive loss (6,385)  (7,822)
Total stockholders’ deficit attributable to Exela Technologies, Inc. (877,762)  (855,503)
Noncontrolling interest in XBP Europe (3,870)  (3,332)
Total stockholders’ deficit (881,632)  (858,835)
Total liabilities and stockholders’ deficit$591,804  $636,337 
        

The accompanying notes are an integral part of these condensed consolidated financial statements.

Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the three months ended March 31, 2024 and 2023
(in thousands of United States dollars except share and per share amounts)
(Unaudited)
      
 Three Months Ended March 31,
 2024
 2023
Revenue$258,811  $273,620 
Cost of revenue (exclusive of depreciation and amortization) 201,988   216,467 
Selling, general and administrative expenses (exclusive of depreciation and amortization) 40,854   44,381 
Depreciation and amortization 13,507   16,560 
Related party expense 2,391   3,112 
Operating profit (loss) 71   (6,900)
Other expense (income), net:     
Interest expense, net 21,088   44,180 
Debt modification and extinguishment costs (gain), net    (8,773)
Sundry expense, net 1,881   748 
Other income, net (451)  (282)
Loss before income taxes (22,447)  (42,773)
Income tax expense (3,126)  (2,663)
Net loss (25,573)  (45,436)
Net loss attributable to noncontrolling interest in XBP Europe, net of taxes (694)   
Net loss attributable to Exela Technologies, Inc.$(24,879) $(45,436)
Cumulative dividends for Series A Preferred Stock (1,053)  (954)
Cumulative dividends for Series B Preferred Stock (1,224)  (1,153)
Net loss attributable to common stockholders$(27,156) $(47,543)
Loss per share:     
Basic and diluted$(4.27) $(9.88)
        

The accompanying notes are an integral part of these condensed consolidated financial statements.

Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2024 and 2023
(in thousands of United States dollars except share and per share amounts)
(Unaudited)
       
 Three Months Ended March 31,
 2024
 2023
Cash flows from operating activities      
Net loss$(25,573) $(45,436) 
Adjustments to reconcile net loss to cash used in operating activities      
Depreciation and amortization 13,507   16,560  
Original issue discount, debt premium and debt issuance cost amortization (9,916)  7,456  
Interest paid on BR Exar AR Facility (1,110)  (2,232)(1)
Debt modification and extinguishment gain, net    (9,760) 
Credit loss expense 4,491
   1,983  
Deferred income tax provision 957   521  
Share-based compensation expense 1,183   111  
Unrealized foreign currency (gain) loss 18   238  
(Gain) loss on sale of assets (602)  88  
Fair value adjustment for private warrants liability of XBP Europe (37)    
Change in operating assets and liabilities      
Accounts receivable (2,624)  950  
Prepaid expenses and other current assets (2,818)  (1,494) 
Accounts payable and accrued liabilities (6,420)  (24,232) 
Related party payables 346   94  
Additions to outsource contract costs (482)  (116) 
Net cash used in operating activities (29,080)  (55,269) 
Cash flows from investing activities      
Purchase of property, plant and equipment (2,378)  (1,888) 
Additions to internally developed software (855)  (1,014) 
Proceeds from sale of assets 2,649     
Net cash used in investing activities (584)  (2,902) 
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) 
Borrowings under factoring arrangement and Securitization Facility 348   31,985  
Principal repayment on borrowings under factoring arrangement and Securitization Facility (311)  (31,325) 
Cash paid for debt issuance costs (193)  (6,308) 
Principal payments on finance lease obligations (1,765)  (1,137) 
Borrowings under BRCC revolver    9,600  
Borrowings from other loans 3,219   2,152 (1)
Cash paid for debt repurchases    (3,633) 
Proceeds from Second Lien Note    31,500  
Borrowing under BR Exar AR Facility 14,914   10,000 (1)
Repayments under BR Exar AR Facility (11,103)  (4,130)(1)
Repayment of BRCC term loan    (34,204) 
Principal repayments on senior secured term loans, BRCC revolver and other loans (8,656)  (7,745)(1)
Net cash (used in) provided by financing activities (3,547)  63,783  
Effect of exchange rates on cash, restricted cash and cash equivalents 82
   140  
Net increase (decrease) in cash, restricted cash and cash equivalents (33,129)  5,752  
Cash, restricted cash, and cash equivalents      
Beginning of period 67,153   45,067  
End of period$34,024  $50,819  
Supplemental cash flow data:      
Income tax payments, net of refunds received$594  $1,147  
Interest paid 30,674   65,300  
Noncash investing and financing activities:      
Assets acquired through right-of-use arrangements 491   405  
Accrued PIK interest paid through issuance of PIK Notes 23,342     
Waiver and consent fees payable added to outstanding balance of Senior Secured Term loans 1,000     
Accrued capital expenditures$494  $1,945  
         

(1)   Exela restated the condensed consolidated statement of cash flows for the three months ended March 31, 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 paid 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.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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 Year ended (YTD)
 31-Mar-24 31-Mar-23 31-Dec-23 31-Mar-24 31-Mar-23
Revenues, as reported (GAAP) $258.8 $273.6 $264.4 $258.8 $273.6
Foreign currency exchange impact(1) (0.7) 3.2 (1.8) (0.7) 3.2
Revenues, at constant currency (Non-GAAP) $258.1 $276.8 $262.6 $258.1 $276.8
           
(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 March 31, 2023, to the revenues during the corresponding period in 2024.
           
           
           
Reconciliation of Adjusted EBITDA          
($ in millions) Three months ended Year ended (YTD)
 31-Mar-24 31-Mar-23 31-Dec-23 31-Mar-24 31-Mar-23
Net loss (GAAP) ($25.6) ($45.4) ($25.0) ($25.6) ($45.4)
Interest expense 21.1 44.2 25.7 21.1 44.2
Taxes 3.1 2.7 1.9 3.1 2.7
Depreciation and amortization 13.5 16.6 14.7 13.5 16.6
EBITDA (Non-GAAP) $12.1 $18.0 $17.2 $12.1 $18.0
Transaction and integration costs 0.1 5.2 0.4 0.1 5.2
Gain / loss on derivative instruments - - - - -
Other Charges / (gains) 0.6 (8.7) (8.6) 0.6 (8.7)
Adjusted EBITDA (Non-GAAP) $12.9 $14.5 $9.0 $12.9 $14.5
           

Source: Exela Technologies, Inc.


FAQ

What was Exela Technologies' revenue in Q1 2024?

Exela Technologies reported a revenue of $258.8 million in Q1 2024.

How did Exela Technologies' gross margin perform in Q1 2024?

Exela Technologies' gross margin improved to 22.0%, up 1.1% year-over-year.

What was Exela Technologies' interest expense in Q1 2024?

Interest expense for Exela Technologies was $21.1 million, down 52.3% year-over-year.

How much did Exela Technologies' operating profit improve in Q1 2024?

Exela Technologies' operating profit improved to $0.1 million from a loss of $6.9 million year-over-year.

What was Exela Technologies' net loss in Q1 2024?

Exela Technologies reported a net loss of $25.6 million in Q1 2024.

How did Healthcare Solutions perform for Exela Technologies in Q1 2024?

Healthcare Solutions generated $64.9 million in revenue, a 2.9% increase year-over-year.

What was the performance of Legal and Loss Prevention Services for Exela Technologies in Q1 2024?

Legal and Loss Prevention Services generated $17.8 million in revenue, a 5.6% increase year-over-year.

What was Exela Technologies' Adjusted EBITDA in Q1 2024?

Exela Technologies' Adjusted EBITDA was $12.9 million, down 11.1% year-over-year.

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