Exela Technologies Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36788

EXELA TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-1347291
(State of or other Jurisdiction Incorporation or Organization)	(I.R.S. Employer Identification No.)

2701 E. Grauwyler Rd. Irving, TX	75061
(Address of Principal Executive Offices)	(Zip Code)

Registrant's Telephone Number, Including Area Code: (844) 935-2832

Securities Registered Pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, Par Value $0.0001 per share	XELA	The Nasdaq Stock Market LLC
6.00% Series B Cumulative Convertible Perpetual Preferred Stock, par value $0.0001 per share Tandem Preferred Stock, par value of $0.0001 per share	XELAP	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☒
Non-Accelerated Filer ☐	Smaller Reporting Company ☒
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 30, 2023, the registrant had 6,365,353 shares of Common Stock outstanding.

Table of Contents

Exela Technologies, Inc.

Form 10-Q

For the quarterly period ended June 30, 2023

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	1

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)	2

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2023 and 2022 (Unaudited)	3

Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2023 and 2022 (Unaudited)	4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)	6

Notes to the Condensed Consolidated Financial Statements (Unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3. Quantitative and Qualitative Disclosures about Market Risk	56

Item 4. Controls and Procedures	56

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	58

Item 1A. Risk Factors	58

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities	58

Item 3. Defaults Upon Senior Securities	59

Item 4. Mine Safety Disclosures	59

Item 5. Other Information	59

Item 6. Exhibits	59

Signatures	61

Table of Contents

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)		(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
Income tax receivable		539		—
Inventories, net		11,055		16,848
Prepaid expenses and other current assets		21,463		26,206
Total current assets		193,861		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	$	675,343	$	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		—		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 debt		103,409		154,802
Total current liabilities		456,192		510,045
Long-term debt, net of current maturities		960,968		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		1,492,352		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	$	675,343	$	721,912

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

Table of Contents

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		2022		2023		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)

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

Table of Contents

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

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		2022		2023		2022
Net loss	$	(30,886)	$	(79,199)	$	(76,322)	$	(136,155)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		1,901		1,133		(204)		2,610
Unrealized pension actuarial gains (losses), net of tax		(116)		802		(205)		1,110
Total other comprehensive loss, net of tax	$	(29,101)	$	(77,264)	$	(76,731)	$	(132,435)

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

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Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

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)


																	Accumulated Other Comprehensive Loss
																			Unrealized
																	Foreign		Pension
																	Currency		Actuarial				Total
	Common Stock			Series A Preferred Stock			Series B Preferred Stock			Treasury Stock			Additional		Equity-Based		Translation		Losses,		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Paid in Capital		Compensation		Adjustment		net of tax		Deficit		Deficit
Balances at January 1, 2022	66,300	$	37	2,778,111	$	1	—	$	—	612	$	(10,949)	$	838,853	$	56,123	$	(7,463)	$	(10,946)	$	(1,532,428)	$	(666,772)
Net loss	—		—	—		—	—		—	—		—		—		—		—		—		(56,956)		(56,956)
Equity-based compensation	—		—	—		—	—		—	—		—		—		302		—		—		—		302
Foreign currency translation adjustment	—		—	—		—	—		—	—		—		—		—		1,477		—		—		1,477
Net realized pension actuarial gains, net of tax	—		—	—		—	—		—	—		—		—		—		—		308		—		308
Common Stock exchanged for Series B Preferred Stock	(4,502)		(2)	—		—	900,328		—	—		—		2		—		—		—		—		—
Issuance of Common Stock from at the market offerings, net of offering costs	59,070		24	—		—	—		—	—		—		114,509		—		—		—		—		114,533
Withholding of employee taxes on vested RSUs	—		—	—		—	—		—	—		—		—		(190)		—		—		—		(190)
Common Stock issued for vested RSUs	272		—	—		—	—		—	—		—		—		—		—		—		—		—
Balances at March 31, 2022	121,140	$	59	2,778,111	$	1	900,328	$	—	612	$	(10,949)	$	953,364	$	56,235	$	(5,986)	$	(10,638)	$	(1,589,384)	$	(607,298)
Net loss	—		—	—		—	—		—	—		—		—		—		—		—		(79,199)		(79,199)
Equity-based compensation	—		—	—		—	—		—	—		—		—		528		—		—		—		528
Foreign currency translation adjustment	—		—	—		—	—		—	—		—		—		—		1,133		—		—		1,133
Net realized pension actuarial gains, net of tax	—		—	—		—	—		—	—		—		—		—		—		802		—		802
Dividend declared and paid on Series B Preferred Stock ($0.46 per share)	—		—	—		—	—		—	—		—		(1,396)		—		—		—		—		(1,396)
Common Stock exchanged for Series B Preferred Stock	(10,648)		(4)	—		—	2,129,572		—	—		—		4		—		—		—		—		—
Issuance of Common Stock from at the market offerings, net of offering costs	90,948		36	—		—	—		—	—		—		56,328		—		—		—		—		56,364
Withholding of employee taxes on vested RSUs	—		—	—		—	—		—	—		—		—		(2)		—		—		—		(2)
Common Stock issued for vested RSUs	12		—	—		—	—		—	—		—		—		—		—		—		—		—
Agreed cancellation of Common Stock issued for Director's vested RSUs	(155)		—	—		—	—		—	—		—		—		—		—		—		—		—
Balances at June 30, 2022	201,297	$	91	2,778,111	$	1	3,029,900	$	—	612	$	(10,949)	$	1,008,300	$	56,761	$	(4,853)	$	(9,836)	$	(1,668,583)	$	(629,068)

Table of Contents

Exela Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

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)

Accumulated Other
Comprehensive Loss

Unrealized

Foreign

Pension

Currency

Actuarial

Total

Common Stock

Series A Preferred Stock

Series B Preferred Stock

Treasury Stock

Additional

Equity-Based

Translation

Losses,

Accumulated

Stockholders'

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Paid in Capital

Compensation

Adjustment

net of tax

Deficit

Balances at January 1, 2023

1,393,276

162

2,778,111