0001620179false0001620179xela:SixPercentSeriesBCumulativeConvertiblePerpetualPreferredStockParValueDollar0.0001PerShareMember2024-08-152024-08-150001620179us-gaap:CommonStockMember2024-08-152024-08-1500016201792024-08-152024-08-15

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 15, 2024

EXELA TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

001-36788

    

47-1347291

(State or other jurisdiction of
incorporation or organization)

 

(Commission File Number)

 

(I.R.S. Employer
Identification Number)

2701 E. Grauwyler Rd.

Irving, TX

    

75061

(Address of principal executive offices)

 

(Zip Code)

Company’s telephone number, including area code: (214) 740-6500

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

XELAP

The Nasdaq Stock Market LLC

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

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.

Item 2.02 Results of Operations and Financial Condition.

Attached hereto as Exhibit 99.1 is a copy of a press release of Exela Technologies, Inc., dated August 15, 2024, announcing certain operating results for the fiscal quarter ended June 30, 2024. The information in the press release is incorporated by reference into this Item 2.02 of this Current Report on Form 8-K.

In accordance with General Instruction B.2 on Form 8-K, the information set forth under this Item 2.02 of this Current Report on Form 8-K, including the press release attached as an exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.

    

Description of Exhibit

99.1

Press Release, dated August 15, 2024

104

Cover Page Interactive Data File (embedded within the Inline XBRL).

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: August 15, 2024

 

EXELA TECHNOLOGIES, INC.

 

 

 

 

By:

/s/ Zach Maul

 

 

Name: Zach Maul

 

 

Title: Secretary

3

Exhibit 99.1

Graphic

Exela Technologies, Inc. Reports Second Quarter 2024 Results

August 15, 2024

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, August 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 Companys 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 contracts 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.