Exela Technologies, Inc. Reports Preliminary Second Quarter

Preliminary Second Quarter Highlights

Revenue of $272.9 million, up 2.3% year-over-year (up 2.5% on a constant currency basis)Net loss of $30.9 millionGross profit(1) of $60.9 million, up 23.0% or $11.4 million year-over-year, with a corresponding margin of 22.3% and up 3.8% year-over-year and up 1.4% sequentiallyAdjusted EBITDA of $40.9 million, up 12.1% year-over-year, with a corresponding margin of 15.0% and up 17.8% sequentially$106.2 million in new TCV(2) wins and renewal of $32.8M TCV reflect strength of award-winning best-in-class solutions and servicesLong-term Liability(3) reduced to $792 million from $1.608 billionValue enhancing initiatives include Completion of Debt Recapitalization and XBP Europe progress

Conference call scheduled for August 14, 2023 at 8:30 AM ET

IRVING, Texas, Aug. 14, 2023 (GLOBE NEWSWIRE) — Exela Technologies, Inc. (“Exela” or the “Company”) (NASDAQ: XELA, XELAP), a global business process automation leader, announced today its financial results for the second quarter ended June 30, 2023.

“Our improving metrics in the second quarter are a result of many factors but certain ones stand above all – focus on cost management, debt reduction and the value proposition of our services and solutions enhanced by evolving AI,” said Par Chadha, Executive Chairman of Exela.

Second Quarter Highlights

Revenue: Revenue for Q2 2023 was $272.9 million, up 2.3% compared to $266.8 million in Q2 2022. Revenue for the Information and Transaction Processing Solutions segment was $185.0 million, a decrease of 2.6% year-over-year, primarily due to lower volumes, customers rebalancing portfolios and attrition.Healthcare Solutions revenue was $63.6 million, an increase of 12.8% year-over-year, led by higher volumes from our new and existing customers.Legal and Loss Prevention Services revenue was $24.3 million, an increase of 19.5% year-over-year due to higher demand for services.

Operating income/(loss): Operating income for Q2 2023 was $11.2 million, compared with operating loss of $20.9 million in Q2 2022. The $32.1 million year over year improvement was primarily driven by higher revenue, lower cost of revenue, lower Selling, General and Administrative Expenses including a gain from sale of an asset.

Net Loss: Net loss for Q2 2023 was $30.9 million, compared with a net loss of $79.2 million in Q2 2022. EBITDA(4): EBITDA for Q2 2023 was $31.6 million compared to a loss of $17.6 million in Q2 2022. EBITDA margin for Q2 2023 was 11.6% compared to (6.6)% in Q2 2022.Adjusted EBITDA(5): Adjusted EBITDA for Q2 2023 was $40.9 million, an increase of 12.1% compared to $36.5 million in Q2 2022. Adjusted EBITDA margin for Q2 2023 was 15.0%, an increase of 130 basis points from 13.7% in Q2 2022.

Capital Expenditures: Capital expenditures for Q2 2023 were 1.4% of revenue compared to 2% of revenue in Q2 2022        

Nasdaq Non-Compliance Notice

On August 11, 2023, Exela received a notice of non-compliance from Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, as a result of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (the “Form 10-Q”), the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Rule”), which requires listed companies to timely file all periodic financial reports with the U.S. Securities and Exchange Commission (the “SEC”). Under Nasdaq’s listing rules, the Company has 60 calendar days to submit a plan to regain compliance. If the plan is accepted by Nasdaq, the Company can be granted up to 180 calendar days from the Form 10-Q due date, or until or until February 5, 2024, to regain compliance. The Company expects to complete its Form 10-Q and intends to file the Form 10-Q as soon as practicable to regain compliance with the Rule within the time period to provide the plan of compliance.

Earnings Conference Call and Audio Webcast

Exela will host a conference call to discuss its second quarter 2023 financial results at 8:30 AM ET on August 14, 2023. To access this call, dial 833-255-2831 or +1-412-902-6724 (international). The password for the call is “Exela Earnings Call”.

Shortly after the conclusion of the call, a replay will be available through May 18, 2023 at 877-344-7529 or +1-412-317-0088 (international). The replay passcode is 20333000. A replay will also be archived on the Exela investor relations website at http://investors.exelatech.com.

Exela invites all investors to ask questions that they would like addressed on the conference call. We ask 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.

Below are the notes referenced above:
(1)   Gross Profit is defined as revenue less cost of revenue excluding depreciation and amortization
(2)  TCV: Total Contract Value, the aggregate $USD value of a contract over its life
(3)  Long-term liability: Includes senior secured term loan and revolving facility, senior secured 2023 notes, senior secured 2026 notes, Securitization facility and interest-bearing current liabilities calculated ending July 2023 beginning June 2021
(4)  EBITDA is a non-GAAP measure. A reconciliation of EBITDA is attached to this release.
(5) 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 15,500 employees operating in 21 countries, Exela rapidly deploys integrated technology and operations as an end-to-end digital journey partner.

Find out more at www.exelatech.com
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Financial Disclosure Advisory
The preliminary unaudited financial results included in this press release are based on information available as of August 14, 2023 and management’s review of operations and financial results for the second quarter of 2023. Actual results may be materially different from these preliminary financial results. They remain subject to change based on the completion of customary review procedures and are forward-looking statements. The Company assumes no obligation to update these statements, except as may be required by law. The actual results may be materially different and are affected by the risk factors and uncertainties identified in this press release and in the Company’s annual and quarterly filings with the SEC. An independent registered public accounting firm has not reviewed or performed any procedures with respect to the preliminary unaudited financial information included in this release. The Company expects to file a quarterly report on Form 10-Q with respect to the period ended June 30, 2023, once an independent registered public accounting firm has reviewed the relevant unaudited financial information.

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 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/
Twitter: @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

Mary Beth Benjamin
E: IR@exelatech.com

Source: Exela Technologies, Inc.

Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of June 30, 2023 and December 31, 2022
(in thousands of United States dollars except share and per share amounts)          June 30,  December 31,    2023    2022      (Unaudited and
Not Reviewed)    (Audited) Assets         Current assets         Cash and cash equivalents $10,718  $15,073  Restricted cash  42,792   29,994  Accounts receivable, net of allowance for credit losses of $6,927 and $6,402, respectively  106,831   101,616  Related party receivables and prepaid expenses  463   759  Inventories, net  11,055   16,848  Prepaid expenses and other current assets  21,463   26,206  Total current assets   193,322    190,496  Property, plant and equipment, net of accumulated depreciation of $214,611 and $207,520, respectively  62,972   71,694  Operating lease right-of-use assets, net  37,400   40,734  Goodwill  170,391   186,802  Intangible assets, net  182,350   200,982  Deferred income tax assets  1,584   1,483  Other noncurrent assets  26,785   29,721  Total assets $ 674,804  $ 721,912          Liabilities and Stockholders’ Equity (Deficit)         Liabilities         Current liabilities       Accounts payable $64,105  $79,249  Related party payables  1,773   2,473  Income tax payable  (539)  2,045  Accrued liabilities  69,324   61,340  Accrued compensation and benefits  50,691   54,143  Accrued interest  60,103   60,901  Customer deposits  15,906   16,955  Deferred revenue  12,039   16,405  Obligation for claim payment  62,294   44,380  Current portion of finance lease liabilities  5,469   5,485  Current portion of operating lease liabilities  11,079   11,867  Current portion of long-term debts  106,372   154,802  Total current liabilities   458,616    510,045  Long-term debt, net of current maturities  958,005   942,035  Finance lease liabilities, net of current portion  7,745   9,448  Pension liabilities, net  17,732   16,917  Deferred income tax liabilities  11,968   11,180  Long-term income tax liabilities  3,801   2,742  Operating lease liabilities, net of current portion  27,991   31,030  Other long-term liabilities  5,955   6,104  Total liabilities   1,491,813    1,529,501  Commitments and Contingencies (Note 8)                 Stockholders’ equity (deficit)         Common Stock, par value of $0.0001 per share; 1,600,000,000 shares authorized; 6,365,965 shares issued and 6,365,353 shares outstanding at June 30, 2023 and 1,393,889 shares issued and 1,393,276 shares outstanding at December 31, 2022  261   162  Preferred stock, $0.0001 par value per share, 20,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively       Series A Preferred Stock, 2,778,111 shares issued and outstanding at June 30, 2023 and December 31, 2022  1   1  Series B Preferred Stock, 3,029,900 shares issued and outstanding at June 30, 2023 and December 31, 2022  —   —  Additional paid in capital  1,169,517   1,102,619  Less: Common Stock held in treasury, at cost; 612 shares at June 30, 2023 and December 31, 2022  (10,949)  (10,949) Equity-based compensation  57,272   56,958  Accumulated deficit  (2,024,331)  (1,948,009) Accumulated other comprehensive loss:       Foreign currency translation adjustment  (4,992)  (4,788) Unrealized pension actuarial losses, net of tax  (3,788)  (3,583) Total accumulated other comprehensive loss  (8,780)  (8,371) Total stockholders’ deficit   (817,009)   (807,589) Total liabilities and stockholders’ deficit $ 674,804  $ 721,912   Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2023 and 2022
(in thousands of United States dollars except share and per share amounts)
(Unaudited)               Three Months Ended June 30,  Six Months Ended June 30,      2023 (Not Reviewed)    2022     2023 (Not Reviewed)    2022 Revenue $272,938  $266,770  $546,558  $546,168 Cost of revenue (exclusive of depreciation and amortization)  212,059   217,277   428,526   440,781 Selling, general and administrative expenses (exclusive of depreciation and amortization)  32,026   50,195   76,407   93,235 Depreciation and amortization  14,890   17,993   31,450   36,205 Related party expense  2,739   2,186   5,851   4,173 Operating profit (loss)  11,224   (20,881)  4,324   (28,226)Other expense (income), net:            Interest expense, net  45,092   42,271   89,272   82,031 Debt modification and extinguishment costs (gain), net  (6,785)  8,117   (15,558)  9,001 Sundry expense (income), net  1,500   (741)  2,248   (434)Other expense (income), net  (232)  7,375   (514)  13,534 Net loss before income taxes  (28,351)  (77,903)  (71,124)  (132,358)  Income tax expense  (2,535)  (1,296)  (5,198)  (3,797)Net loss $(30,886) $(79,199) $(76,322) $(136,155)Cumulative dividends for Series A Preferred Stock  (967)  (876)  (1,921)  (1,740)Cumulative dividends for Series B Preferred Stock  (1,171)  (1,317)  (2,324)  (1,392)Net loss attributable to common stockholders $(33,024) $(81,392) $(80,567) $(139,287)Loss per share:            Basic and diluted $(5.19) $(643.71) $(14.40) $(1,310.32) Exela Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2023 and 2022
(in thousands of United States dollars except share and per share amounts)
(Unaudited)          Six Months Ended June 30,       2023 (Not Reviewed)    2022  Cash flows from operating activities       Net loss $(76,322) $(136,155) Adjustments to reconcile net loss       Depreciation and amortization  31,450   36,205  Original issue discount and debt issuance cost amortization  16,064   5,804  Debt modification and extinguishment costs (gain), net  (16,964)  3,533  Credit loss expense  2,865   285  Deferred income tax provision  776   1,383  Share-based compensation expense  313   836  Unrealized foreign currency losses (gain)  521   (989) Loss (Gain) on sale of assets  (5,831)  508  Change in operating assets and liabilities, net of effect from acquisitions       Accounts receivable  (7,703)  80,674  Prepaid expenses and other assets  6,495   (10,870) Accounts payable and accrued liabilities  (639)  45,148  Related party payables  (403)  (23) Additions to outsource contract costs  (298)  (199) Net cash provided by (used in) operating activities   (49,676)   26,140          Cash flows from investing activities         Purchase of property, plant and equipment  (3,357)  (10,689) Additions to patents  —   (15) Additions to internally developed software  (1,976)  (1,736) Proceeds from sale of assets  29,811   194  Net cash provided by (used in) investing activities   24,478    (12,246)         Cash flows from financing activities         Proceeds from issuance of Common Stock from at the market offerings  69,260   177,388  Dividend paid on Series B Preferred Stock  —   (1,396) Payment for fractional shares on reverse stock split  (28)  —  Cash paid for equity issuance costs from at the market offerings  (2,232)  (6,493) Borrowings under factoring arrangement and Securitization Facility  62,858   69,143  Principal repayment on borrowings under factoring arrangement and Securitization Facility  (63,577)  (160,684) Cash paid for withholding taxes on vested RSUs  —   (195) Lease terminations  —   (15) Cash paid for debt issuance costs  (6,398)  (7,125) Principal payments on finance lease obligations  (2,150)  (2,884) Borrowings from senior secured revolving facility and BRCC revolver  9,600   12,500  Repayments on senior secured revolving facility  —   (49,477) Proceeds from issuance of 2026 Notes  —   56,583  Borrowings from other loans  24,289   5,491  Cash paid for debt repurchases  (11,858)  —  Proceeds from Second Lien Note  31,500   —  Repayment of BRCC term loan  (44,775)  (46,202) Principal repayments on senior secured term loans and other loans  (32,991)  (15,007) Net cash provided by financing activities   33,498    31,627  Effect of exchange rates on cash  143   (404) Net increase in cash and cash equivalents    8,443    45,117  Cash, restricted cash, and cash equivalents       Beginning of period  45,067   48,060  End of period $53,510  $93,177  Supplemental cash flow data:       Income tax payments, net of refunds received $2,898  $4,453  Interest paid  72,608   19,103  Noncash investing and financing activities:       Assets acquired through right-of-use arrangements  405   231  Accrued capital expenditures  2,167   1,400   Exela Technologies
Schedule 1: Second Quarter 2023 vs. Second Quarter 2022
Financial Performance           $ in millionQ2-2023Q2-2022Increase (Decrease) YoY ($ mn)Increase (Decrease) YoY (%) YTD’23YTD’22Increase (Decrease) YoY ($ mn)Increase (Decrease) YoY (%)            Information and Transaction Processing Solutions$185.0 $190.0 $(5.0) (2.6%) 378.7 395.0 (16.3) (4.1%) Healthcare Solutions 63.6  56.4  7.2 12.8% 126.6 113.0 13.6 12.0% Legal and Loss Prevention Services 24.3  20.4  3.9 19.5% 41.2 38.2 3.0 7.9% Total Revenue$ 272.9 $ 266.8 $ 6.2 2.3% 546.6 546.2 0.4 0.1%            Gross profit 60.9  49.5  11.4 23.0% 118.0 105.4 12.6 12.0% Gross profit margin 22.3% 18.6% 3.8%380 bps 21.6%19.3%2.3%230 bps            SG&A 32.0  50.2  (18.2) (36.2%) 76.4 93.2 (16.8) (18.0%)            Operating (loss) income 11.2  (20.9) 32.1  (153.8%) 4.3 (28.2)32.6  (115.3%) Operating margin 4.1% (7.8%) 11.9%1190 bps 0.8%(5.2%)6.0%600 bps            Net income (loss) (30.9) (79.2) 48.3  (61.0%) (76.3)(136.2)59.8  (43.9%) Net income margin (11.3%) (29.7%) 18.4%1840 bps (14.0%)(24.9%)11.0%1100 bps            EBITDA 31.6  (17.6) 49.3  (279.3%) 49.6 (14.1)63.7  (451.2%) EBITDA Margin 11.6% (6.6%) 18.2%1820 bps 9.1%(2.6%)11.7%1170 bps            Adjusted EBITDA$ 40.9 $ 36.5 $ 4.4 12.1% 75.6 72.6 3.0 4.1% Adjusted EBITDA margin 15.0% 13.7% 1.3%130 bps 13.8%13.3%0.5%50 bps              Exela Technologies
Schedule 2: Reconciliation of Adjusted EBITDA and constant currency revenues                 Non-GAAP constant currency revenue reconciliation             ($ in millions) Three months ended Six months ended    30-Jun-23 30-Jun-22 31-Mar-23 30-Jun-23 30-Jun-22   Revenues, as reported (GAAP) $272.9  $266.8  $273.6  $546.6  $546.2    Foreign currency exchange impact (1)  0.4     3.2   0.4      Revenues, at constant currency (Non-GAAP) $273.3  $266.8  $276.8  $547.0  $546.2                  (1) Constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the three months and six months ended June 30, 2022, to the revenues during the corresponding period in 2023.                               Reconciliation of Adjusted EBITDA             ($ in millions) Three months ended Six months ended    30-Jun-23 30-Jun-22 31-Mar-23 30-Jun-23 30-Jun-22   Net loss (GAAP)  ($30.9)  ($79.2)  ($45.4)  ($76.3)  ($136.2)   Interest expense  45.1   42.3   44.2   89.3   82.0    Taxes  2.5   1.3   2.7   5.2   3.8    Depreciation and amortization  14.9   18.0   16.6   31.4   36.2    EBITDA (Non-GAAP)  $31.6   ($17.6)  $18.0   $49.6   ($14.1)   Transaction and integration costs  2.9   8.6   5.2   8.1   12.3    Gain / loss on derivative instruments  (0.0)  –   (0.1)  (0.1)  (0.0)   Other Charges / (gains)  0.3   38.9   5.5   5.7   61.0    Sub-Total (Adj. EBITDA before O&R)  $34.8   $29.9   $28.5   $63.3   $59.2    Optimization and restructuring expenses  6.1   6.6   6.2   12.3   13.4    Adjusted EBITDA (Non-GAAP)  $40.9   $36.5   $34.7   $75.6   $72.6