Exela Technologies, Inc. Reports First Quarter 2021 Results

Exela Technologies, Inc. Reports First Quarter 2021 Results

 

 

First Quarter 2021 Highlights:

  • Revenue of $300.1 million, a decline of 17.9% from Q1 2020
  • Gross profit(1) margin of 22.5%, an increase of 250 basis points from Q1 2020 and 370  basis points from Q4 2020
  • Operating income of $4.3 million, compared with operating loss of $2.2 million in Q1 2020
  • Net loss of $39.2 million, compared with a loss of $12.7 million in Q1 2020
  • EBITDA(2) of $23.5 million, compared with $54.6 million in Q1 2020
  • Adjusted EBITDA(3) of $46.5 million, an increase of 4.7% from $44.4 million in Q1 2020
  • Recently launched SMB business showing robust growth QoQ – DMR customers grew 117% and DrySign users grew 170%
  • First cloud hosted deployment of PCH Global platform with a major insurer for a $90 million, 10 year licensing agreement
  • Operating leverage improvement continues with 25% of the announced reduction in facilities completed as part of a multi-year plan
  • Automation led efficiencies reduced employee count to 18,400 as of March 31, 2021 from 19,000 as of December 31, 2020

•    Expanding financial flexibility with $26.8 million in gross proceeds(4) raised in an equity offering

 

Irving, TX– May 4, 2021 – Exela Technologies, Inc. (“Exela” or the “Company”) (NASDAQ: XELA), a location-agnostic global business process automation (“BPA”) leader, announced today its financial results for the first quarter ended March 31, 2021.

 

“We are pleased with the strong expansion of both our gross margin and adjusted EBITDA margin in the first quarter, which reflects our ongoing commitment to focus on our core businesses and drive continued operational improvement. We are also impressed with the adoption of the various Digital Assets Group solutions in the SMB and enterprise markets. Based on our first quarter results and the momentum we see in the business, we reiterate our prior 2021 guidance,” said Ronald Cogburn, Chief Executive Officer of Exela.

 

First Quarter 2021 Financial Highlights

 

  • Revenue: Revenue for Q1 2021 was $300.1 million, a decline of 17.9% compared to  $365.5 million from Q1 2020, primarily due to lower volumes as a result of COVID-19, pruning of transition revenue(5), and strategic asset sales. Revenue for the Information and Transaction Processing Solutions segment was $231.9 million, a decline of 18.4% year-over-year. Healthcare Solutions revenue was $51.1 million, a decrease of 20.2% year-over-year. Legal and Loss Prevention Services revenue was $17.1 million, consistent with the prior year period.

 

 

  • Net Loss: Net Loss for Q1 2021 was $39.2 million, compared with a net loss of $12.7 million in Q1 2020, primarily due to a gain of $35.3 million recognized on the sale of SourceHOV Tax, LLC during Q1 2020. Net loss excluding the gain on sale of SourceHOV Tax improved by 22.1% in the quarter compared to the prior year period.

 

  • Adjusted EBITDA: Adjusted EBITDA for Q1 2021 was $46.5 million, an increase of 4.7% compared to $44.4 million in Q1 2020. Adjusted EBITDA margin for Q1 2021 was 15.5%, up  334 basis points from 12.1% in Q1 2020. Adjusted EBITDA margin, based on revenue excluding pass through revenue(6), was 19.3% in Q1 2021, an increase of approximately 429 basis points from 15.0% compared to Q1 2020 and an increase of 501 basis points from 14.3% sequentially from  Q4 2020.

 

  • Common Stock: After accounting for the 1:3 reverse split, as of March 31, 2021, there were 59,192,012 total shares of common stock outstanding and an additional 1,215,924 shares of common stock reserved for issuance for our outstanding preferred shares on an as-converted basis.

 

First Quarter 2021 Business Highlights

Contract and product updates:

  • First cloud hosted deployment of Exela’s PCH Global platform with a major insurer for a $90 million, 10 year licensing agreement
  • Global expansion of the Exchange for Bills and Payments (XBP) into the Americas, Continental Europe and Asia
  • Accelerating demand for WFA and BPM solutions as go to market expands beyond enterprise customers: Recently launched SMB business showing robust growth QoQ – DMR customers grew 117% and DrySign users grew 170% with a strong pipeline of additional solutions.

 

Operating leverage improvement continues:

  • Real estate: 25% of the announced reduction in facilities already completed as part of a multi-year plan
  • Automation led efficiencies reduced employee count to 18,400 as of March 31, 2021 from 19,000 as of December 31, 2020
  • Exela cloud hosted services expanding with Intelligent Data Processing (IDP) to additional industries; will further enhance WFA initiatives and business continuity globally with faster deployments, greater security and increased autonomy.

 

Capital Expenditures: Capital expenditures for the first quarter of 2021 were 0.8% of revenue compared to 1.3% of revenue in the first quarter of 2020.

 

Balance Sheet and Liquidity(7): On March 31, 2021, Exela’s total liquidity was $62 million. Additionally, $53 million of committed facility under the existing Securitization Facility remains undrawn in accordance with its terms. Exela’s total net debt at March 31, 2021 was $1.48 billion (as determined in accordance with the Company's credit agreement).

 

Expanding financial flexibility: Raised $26.8 million in gross proceeds via an equity offering

On March 18, 2021, Exela completed the sale of 9,731,819 shares of common stock at a price of $2.75 per share and warrants to purchase 9,731,819 shares of common stock at an exercise price of $4.00 per share to equity focused investors. The gross proceeds to Exela from this offering were approximately $26.8 million excluding placement agent fees and other offering expenses. 

 

Exela plans to continue working on expanding its financial flexibility with the objective to improve consolidated cash flows from all activities.  

 

2021 Guidance

  • Revenue range $1.25 billion to $1.39 billion
  • Gross margin of 23% to 25%
  • Adjusted EBITDA margin 16% to 17%
  • Capital expenditures in the range of 1% of revenue

 

Note: Guidance is based on constant-currency.

 

Below are the notes referenced above:

(1) – Gross Profit is defined as Revenue less cost of revenue excluding depreciation and amortization.

(2) – EBITDA is a non-GAAP measure. A reconciliation of EBITDA is attached to this release.

(3) – Adjusted EBITDA is a non-GAAP measure. A reconciliation of Adjusted EBITDA is attached to this release. A reconciliation of Adjusted EBITDA (2021 Guidance) is not available on forward-looking basis without unreasonable efforts due to the impact and timing on future operating results.

 

 

(4) – Gross proceeds of $26.8 million from the Equity offering are before any fees and expenses. Please refer to the equity capital raise related press release dated March 15,, 2021 and Form 8-K dated March 19, 2021 for more details.

 (5) – Transition revenue includes the exit of contracts and statements of work from certain customers that the Company believes are unpredictable, non-recurring, and were not a strategic fit to its long-term success or unlikely to achieve long-term target margins.

(6)  – Pass through revenue is defined as postage and postage handling revenue with either zero or nominal margins.  A reconciliation of revenue net of pass through revenue is attached to this release. 

(7)

Liquidity is defined per the third amendment to the Company’s credit agreement effective May 15, 2020. At March 31, 2021, total cash and cash equivalents was $22 million (including restricted cash not subject to legal restriction). The Company had $20 million availability under its global credit facilities.

 

 

Earnings Conference Call and Audio Webcast

Exela will host a conference call to discuss its first quarter 2021 financial results at 11:00 a.m. ET on May 4, 2021.  To access this call, dial 833-255-2831 or +1-412-902-6724 (international).  A replay of this conference call will be available through May 1, 2021 at 877-344-7529 or +1-412-317-0088 (international).  The replay passcode is 10155612

 

Exela invites all investors to ask questions that they would like addressed on the conference call. We ask individual investors to submit questions via email to IR@exelatech.com.

 

A live webcast of this conference call will be available on the “Investors” page of the Company’s website (www.exelatech.com). A supplemental slide presentation that accompanies this call and webcast can be found on the investor relations website (http://investors.exelatech.com/) and will remain available after the call. 

 

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. With foundational technologies spanning information management, workflow automation, and integrated communications, Exela’s software and services include multi-industry department solution suites addressing finance and accounting, human capital management, and legal management, as well as industry-specific solutions for banking, healthcare, insurance, and public sectors. Through cloud-enabled platforms, built on a configurable stack of automation modules, and over 18,300 employees operating in 23 countries, Exela rapidly deploys integrated technology and operations as an end-to-end digital journey partner.

 

Find out more at www.exelatech.com

 

Follow Exela on Twitter: https://twitter.com/exelatech

Follow Exela on LinkedIn: https://www.linkedin.com/company/11174620/

 

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 the combination of Quinpario Acquisition Corp. 2, SourceHOV Holdings, Inc. and Novitex Holdings, Inc. on July 12, 2017 (the “Novitex Business Combination”) and capital markets-based activities). Adjusted EBITDA also seeks to remove the effects of integration and related costs to achieve the savings, any expected reduction in operating expenses due to the Novitex Business Combination, asset base (such as depreciation and amortization) and other similar non-routine items outside the control of our management team.  Optimization and restructuring expenses and merger adjustments are primarily related to the implementation of strategic actions and initiatives related to the Novitex Business Combination. All of these costs are variable and dependent upon the nature of the actions being implemented and can vary significantly driven by business needs. 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 those discussed under the heading “Risk Factors” in the Annual Report. 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.

 

 

Investor and/or Media Contacts:

Vincent Kondaveeti

E: vincent.kondaveeti@exelatech.com

T: 929-620-1849

 

Mary Beth Benjamin

E: IR@exelatech.com

T: 646-277-1216