UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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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 | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL). |
2
Exhibit 99.1
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 Company’s 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 contract’s 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.