UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 2.02 Results of Operation and Financial Condition.
On August 10, 2020, Exela Technologies, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2020. A copy of the press release is furnished herewith as Exhibit 99.1.
The information in this Current Report on Form 8-K furnished pursuant to Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section, and they shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. The Company is making reference to non-GAAP financial information in the press release. A reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
As expected, on August 11, 2020 the Company received a delisting determination letter from the Nasdaq Stock Market Listing Qualifications Department due to the Company’s failure to regain compliance with the Nasdaq Capital Market's minimum $1.00 per share bid price requirement for the continued listing of its Common Stock on The Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2) within the time provided by Nasdaq to regain compliance under its rules. As previously announced, pursuant to Nasdaq Listing Rules, as tolled for the current COVID-19 pandemic, the Company had until August 10, 2020 to regain compliance with the minimum bid price requirement. The Company intends to appeal the determination by requesting a hearing before a Hearings Panel within seven days of receipt of the letter. A hearing request will stay the delisting until the hearing process concludes and the Hearing Panel has issued a written decision. The Company is considering a number of alternatives to regain compliance with the continued listing requirement, however, there can be no assurance that the Hearing Panel will grant the Company's request for continued listing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Exhibit Description | |
| 99.1* | Press release, dated August 10, 2020 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Furnished herewith
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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 11, 2020
| EXELA TECHNOLOGIES, INC. | |||
| By: | /s/ Shrikant Sortur | ||
| Name: | Shrikant Sortur | ||
| Title: | Chief Financial Officer | ||
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Exhibit 99.1
Exela Technologies, Inc. Reports Second Quarter 2020 Results
Second Quarter Revenue of $307.7M Exceeds Prior Guidance
Delivers Sequential Expansion in Gross Profit and Adj. EBITDA Margins
Advances Debt Reduction and Liquidity Improvement Plan through Divestment of Records Storage business
Conference Call Scheduled for August 11, 2020 at 11:00 AM ET
Second Quarter 2020 & Other Recent Highlights:
| · | Revenue of $307.7 million, a decline of 21.3% on a reported basis and 20.9%(1) on a constant currency basis from Q2 2019 |
| · | Gross profit margin of 21.4%, an increase of 148 basis points from Q1 2020 |
| · | Operating loss of $5.1 million |
| · | EBITDA(2) of $19.3 million |
| · | Adjusted EBITDA(3) of $43.1 million on a reported basis; $43.3 million on a constant currency basis; Adjusted EBITDA margin of 14.0%, an increase of 190 basis points from Q1 2020 |
| · | On July 23, 2020, Exela announced the sale of its records storage business for $12.3 million as part of its strategic plan to sell non-core assets and improve liquidity |
Irving, TX– August 10, 2020 – Exela Technologies, Inc. (“Exela” or the “Company”) (NASDAQ: XELA), a location-agnostic global business process automation (“BPA”) leader across numerous industries, announced today its financial results for the second quarter ended June 30, 2020.
“We are pleased with our second quarter 2020 results and execution in light of the difficult operating environment due to COVID-19. We generated revenue above our prior guidance and delivered sequential improvements in both our gross profit and adjusted EBITDA margins in the second quarter. In addition, we continued to make progress against our liquidity improvement and core business optimization initiatives by completing the divestiture of our non-core records storage business in July. So far, our 2020 results are playing out as we previously expected with the second quarter representing our fiscal year low point, and we have increased confidence that our financial performance will improve in the back half of 2020 as volumes begin to rise and our incremental cost reduction initiatives continue to flow through the model. We remain confident that Exela is well positioned to navigate this uncertain environment and emerge a stronger company than before,” said Ronald Cogburn, Chief Executive Officer of Exela.
Second Quarter 2020 Financial Highlights
| · | Revenue: Revenue was $307.7 million, a decline of 21.3% from $390.8 million in the second quarter of 2019. Revenue for the Information and Transaction Processing Solutions segment was $243.0 million, a decline of 21.6% year-over-year, primarily due to reduced customer volumes as a result of COVID-19, as well as the exit of contracts and statements of work from certain customers with revenue 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. Healthcare Solutions revenue was $49.2 million, a decrease of 22.4% year-over-year, driven by reduced volumes as a result of COVID-19. Legal and Loss Prevention Services revenue was $15.5 million, a decline of 11.9% from the second quarter of 2019. |
1
Revenue excluding the previously announced low margin contract exit (“LMCE”) and pass through revenues from postage and postage handling with either zero or nominal margins (“pass through revenue”) (4) was $252.5 million in the second quarter of 2020, representing a decrease of 22.2% from $324.4 million in the second quarter of 2019.
83% of second quarter 2020 revenue was earned in the Americas, 15% in EMEA and 2% in rest of world.
| · | Operating income / (loss): Operating loss for the second quarter of 2020 was $5.1 million, compared with operating income of $5.7 million in the second quarter of 2019. The year-over-year decrease in operating income was primarily attributable to lower revenue and gross profit, partially offset by lower SG&A expense, depreciation and amortization expense, and related party expenses, compared with the second quarter of 2019. |
| · | Net Loss: Net Loss for the second quarter of 2020 was $48.7 million, compared with a net loss of $41.6 million in the second quarter of 2019. |
| · | Adjusted EBITDA: Adjusted EBITDA for the second quarter of 2020 was $43.1 million, compared to $44.4 million in the first quarter of 2020 and $64.9 million in the second quarter of 2019. Adjusted EBITDA margin for the second quarter of 2020 was 14.0%, compared to 12.1% in the first quarter of 2020 and 16.6% in the second quarter of 2019. The sequential improvement in second quarter 2020 Adjusted EBITDA margin reflects flow through of the Company’s ongoing cost containment initiatives. |
Adjusted EBITDA margin, based on revenue excluding LMCE and pass through revenue, was 17.1% in the second quarter of 2020, compared with 15.0% in the first quarter of 2020 and 20.0% in the second quarter of 2019.
| · | Capital Expenditures: Capital expenditures for the second quarter of 2020 were 1.1% of revenue compared to 1.4% of revenue in the second quarter of 2019. |
| · | Common Stock: As of June 30, 2020, there were 147,511,430 total shares of common stock outstanding and an additional 4,022,415 shares of common stock reserved for issuance for our outstanding preferred shares on an as-converted basis. |
| · | Total employees as of June 30, 2020 were 21,073 as compared to 22,058 as of March 31, 2020. |
Balance Sheet: At June 30, 2020, Exela’s total net debt was $1.515 billion.
Debt Reduction and Liquidity Improvement
On November 12, 2019, Exela announced that its Board of Directors adopted a debt reduction and liquidity improvement initiative (“Initiative”), with the goal of increasing the Company’s liquidity to approximately $125.0 to $150.0 million, and repaying debt with a target debt reduction of approximately $150.0 to $200.0 million. In accordance with this Initiative, Exela has announced three transactions year-to-date 2020.
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| · | On January 15, 2020, Exela announced that the Company entered into a 5-year, $160.0 million accounts receivable securitization facility to improve liquidity. The facility is for an initial five-year term, may be extended in accordance with its terms, and is incremental to Exela’s existing $100.0 million revolving facility maturing in July 2022. |
| · | On March 17, 2020, Exela announced the sale of its Tax Benefit Group (“TBG”) business for $40.0 million, or approximately 1.93x 2019 revenue. Net of closing costs and adjustments, this transaction resulted in proceeds of $38.2 million. For full year 2019, TBG generated total revenue of $20.7 million. |
| · | On July 23, 2020, Exela announced the sale of its physical records storage and logistics business for $12.3 million. The assets involved in the business generated approximately $1.0 million of EBITDA in 2019. |
| · | The Company believes it is on schedule for additional divestitures with expected proceeds in the range of $100.0 million to $150.0 million in the aggregate. |
Third Quarter and Full Year 2020 Outlook
| · | For the third quarter of 2020, Exela currently expects revenue to be in the range of $305 million to $312 million. |
| · | The depth and duration of the economic impact from COVID-19 on Exela and its customers’ businesses remains unknown. Given the uncertainties surrounding COVID-19 and its impacts on visibility, Exela has maintained suspension of providing financial guidance for full year 2020. The Company continues to expect that gross profit margins will increase post COVID-19 downdraft as volumes normalize. |
(1) – Constant currency is a non-GAAP measure. A reconciliation of constant currency is attached to this release.
(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.
(4) – Pass through revenue is defined as postage and postage handling revenue with either zero or nominal margins. LMCE is defined as revenue from the low margin contract exit announced in the third quarter of 2018. A reconciliation of revenue net of pass through revenue and LMCE is attached to this release.
Earnings Conference Call and Audio Webcast
Exela will host a conference call to discuss its second quarter 2020 financial results at 11:00 a.m. ET on August 11, 2020. To access this call, dial 833-255-2831 or +412-902-6724 (international). A replay of this conference call will be available through August 18, 2020 at 877-344-7529 or + 412-317-0088 (international). The replay passcode is 10146883. 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.
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About Exela
Exela Technologies, Inc. is a business process automation leader, leveraging a global footprint and proprietary technology to provide digital transformation solutions enhancing quality, productivity, and end-user experience. With decades of expertise 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 21,000 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.
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Restatement: As described in additional detail in the Explanatory Note to the Company’s Annual Report on Form 10-K filed with the SEC on June 9, 2020 (the “Annual Report”), the Company restated its audited consolidated financial statements in the for the years ended December 31, 2018 and 2017 and its unaudited quarterly results for the first three fiscal quarters in the fiscal year ended December 31, 2019 and each fiscal quarter in the fiscal year ended December 31, 2018 in the Annual Report. Previously filed annual reports on Form 10-K and quarterly reports on Form 10-Q for the periods affected by the restatement have not been amended. See Note 20, Unaudited Quarterly Financial Data, of the Notes to the consolidated financial statements in the Annual Report for the impact of these adjustments on each of the quarterly periods in fiscal 2018 and for the first three quarters of fiscal 2019. All amounts in this release affected by the restatement adjustments reflect such amounts as restated.
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.
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Exela Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
As of June 30, 2020 and December 31, 2019
(in thousands of United States dollars except share and per share amounts)
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 86,470 | $ | 6,198 | ||||
| Restricted cash | 5,457 | 7,901 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $5,362 and $4,975, respectively | 219,433 | 261,400 | ||||||
| Related party receivables | 906 | 716 | ||||||
| Inventories, net | 17,268 | 19,047 | ||||||
| Prepaid expenses and other current assets | 33,695 | 23,663 | ||||||
| Total current assets | 363,229 | 318,925 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $187,260 and $176,995, respectively | 100,878 | 113,637 | ||||||
| Operating lease right-of-use assets, net | 90,067 | 93,627 | ||||||
| Goodwill | 359,009 | 359,771 | ||||||
| Intangible assets, net | 317,630 | 342,443 | ||||||
| Deferred income tax assets | 11,769 | 12,032 | ||||||
| Other noncurrent assets | 25,961 | 17,889 | ||||||
| Total assets | $ | 1,268,543 | $ | 1,258,324 | ||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Accounts payables | $ | 67,385 | $ | 86,167 | ||||
| Related party payables | 2 | 1,740 | ||||||
| Income tax payable | 2,333 | 352 | ||||||
| Accrued liabilities | 116,376 | 121,553 | ||||||
| Accrued compensation and benefits | 52,636 | 48,574 | ||||||
| Accrued interest | 48,127 | 48,769 | ||||||
| Customer deposits | 27,301 | 27,765 | ||||||
| Deferred revenue | 19,179 | 16,282 | ||||||
| Obligation for claim payment | 34,801 | 39,156 | ||||||
| Current portion of finance lease liabilities | 12,831 | 13,788 | ||||||
| Current portion of operating lease liabilities | 24,271 | 25,345 | ||||||
| Current portion of long-term debts | 36,101 | 36,490 | ||||||
| Total current liabilities | 441,343 | 465,981 | ||||||
| Long-term debt, net of current maturities | 1,493,775 | 1,398,385 | ||||||
| Finance lease liabilities, net of current portion | 14,437 | 20,272 | ||||||
| Pension liabilities | 23,881 | 25,681 | ||||||
| Deferred income tax liabilities | 7,685 | 7,996 | ||||||
| Long-term income tax liabilities | 2,808 | 2,806 | ||||||
| Operating lease liabilities, net of current portion | 71,661 | 73,282 | ||||||
| Other long-term liabilities | 12,807 | 6,962 | ||||||
| Total liabilities | 2,068,397 | 2,001,365 | ||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Stockholders' equity (deficit) | ||||||||
| Common stock, par value of $0.0001 per share; 1,600,000,000 shares authorized; 154,866,550 shares issued and 147,511,430 shares outstanding at June 30, 2020 and 153,638,836 shares issued and 150,851,689 shares outstanding at December 31, 2019 | 15 | 15 | ||||||
| Preferred stock, par value of $0.0001 per share; 20,000,000 shares authorized; 3,290,050 shares issued and outstanding at June 30, 2020 and 4,294,233 shares issued and outstanding at December 31, 2019 | 1 | 1 | ||||||
| Additional paid in capital | 446,739 | 445,452 | ||||||
| Less: Common Stock held in treasury, at cost; 7,355,120 shares at June 30, 2020 and 2,787,147 shares at December 31, 2019 | (10,949 | ) | (10,949 | ) | ||||
| Equity-based compensation | 51,118 | 49,336 | ||||||
| Accumulated deficit | (1,272,869 | ) | (1,211,508 | ) | ||||
| Accumulated other comprehensive loss: | ||||||||
| Foreign currency translation adjustment | (6,387 | ) | (7,329 | ) | ||||
| Unrealized pension actuarial losses, net of tax | (7,522 | ) | (8,059 | ) | ||||
| Total accumulated other comprehensive loss | (13,909 | ) | (15,388 | ) | ||||
| Total stockholders’ deficit | (799,854 | ) | (743,041 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 1,268,543 | $ | 1,258,324 | ||||
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Exela Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019
(in thousands of United States dollars except share and per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2019 | 2019 | |||||||||||||||
| 2020 | (Restated) | 2020 | (Restated) | |||||||||||||
| Revenue | $ | 307,722 | $ | 390,849 | $ | 673,173 | $ | 795,206 | ||||||||
| Cost of revenue (exclusive of depreciation and amortization) | 241,788 | 303,831 | 534,326 | 614,432 | ||||||||||||
| Selling, general and administrative expenses (exclusive of depreciation and amortization) | 47,014 | 51,162 | 97,387 | 100,839 | ||||||||||||
| Depreciation and amortization | 22,847 | 24,779 | 46,032 | 51,403 | ||||||||||||
| Related party expense | 1,146 | 5,331 | 2,698 | 6,329 | ||||||||||||
| Operating income (loss) | (5,073 | ) | 5,746 | (7,270 | ) | 22,203 | ||||||||||
| Other expense (income), net: | ||||||||||||||||
| Interest expense, net | 44,440 | 39,959 | 86,028 | 79,660 | ||||||||||||
| Debt modification and extinguishment costs | — | 1,404 | — | 1,404 | ||||||||||||
| Sundry expense (income), net | (899 | ) | (1,311 | ) | 183 | 1,404 | ||||||||||
| Other expense (income), net | (584 | ) | 2,527 | (35,241 | ) | 4,020 | ||||||||||
| Net loss before income taxes | (48,030 | ) | (36,833 | ) | (58,240 | ) | (64,285 | ) | ||||||||
| Income tax expense | (661 | ) | (4,738 | ) | (3,120 | ) | (9,458 | ) | ||||||||
| Net loss | $ | (48,691 | ) | $ | (41,571 | ) | $ | (61,360 | ) | $ | (73,743 | ) | ||||
| Cumulative dividends for Series A Preferred Stock | (858 | ) | (914 | ) | 582 | (1,828 | ) | |||||||||
| Net loss attributable to common stockholders | $ | (49,549 | ) | $ | (42,485 | ) | $ | (60,778 | ) | $ | (75,571 | ) | ||||
| Loss per share: | ||||||||||||||||
| Basic and diluted | $ | (0.34 | ) | $ | (0.29 | ) | $ | (0.41 | ) | $ | (0.52 | ) | ||||
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Exela Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the six months ended June 30, 2020 and 2019
(in thousands of United States dollars unless otherwise stated)
| Six Months Ended June 30, | ||||||||
| 2019 | ||||||||
| 2020 | (Restated) | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (61,360 | ) | $ | (73,743 | ) | ||
| Adjustments to reconcile net loss | ||||||||
| Depreciation and amortization | 46,032 | 51,403 | ||||||
| Original issue discount and debt issuance cost amortization | 6,857 | 5,749 | ||||||
| Debt modification and extinguishment costs | — | 1,049 | ||||||
| Provision for doubtful accounts | (110 | ) | 3,334 | |||||
| Deferred income tax provision | (338 | ) | 4,623 | |||||
| Share-based compensation expense | 1,782 | 5,459 | ||||||
| Foreign currency remeasurement | (980 | ) | 288 | |||||
| Loss (gain) on sale of assets | (34,791 | ) | 85 | |||||
| Fair value adjustment for interest rate swap | 440 | 4,385 | ||||||
| Change in operating assets and liabilities, net effect from acquisitions: | ||||||||
| Accounts receivable | 38,260 | 624 | ||||||
| Prepaid expenses and other assets | (9,157 | ) | 1,260 | |||||
| Accounts payable and accrued liabilities | (8,812 | ) | (12,595 | ) | ||||
| Related party balances | (642 | ) | (3,899 | ) | ||||
| Additions to outsource contract costs | (297 | ) | (2,860 | ) | ||||
| Net cash used in operating activities | (23,116 | ) | (14,838 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property, plant, and equipment | (5,766 | ) | (9,072 | ) | ||||
| Additions to internally developed software | (2,216 | ) | (4,007 | ) | ||||
| Cash paid in acquisition, net of cash received | (3,500 | ) | (5,000 | ) | ||||
| Proceeds from sale of assets | 38,222 | 20 | ||||||
| Net cash provided by (used in) investing activities | 26,740 | (18,059 | ) | |||||
| Cash flows from financing activities | ||||||||
| Repurchases of Common Stock | — | (3,480 | ) | |||||
| Borrowings from other loans | 23,248 | 14,092 | ||||||
| Borrowings under factoring arrangement and A/R Facility | 149,951 | 34,050 | ||||||
| Principal repayment on borrowings under factoring arrangement and A/R Facility | (66,114 | ) | (31,624 | ) | ||||
| Proceeds from senior secured term loans | — | 29,850 | ||||||
| Lease terminations | (331 | ) | (95 | ) | ||||
| Cash paid for debt issuance costs | (12,708 | ) | (7 | ) | ||||
| Borrowings from senior secured revolving facility | 29,750 | 68,000 | ||||||
| Repayments on senior secured revolving facility | (14,200 | ) | (68,000 | ) | ||||
| Principal payments on finance lease obligations | (6,353 | ) | (9,180 | ) | ||||
| Principal repayments on senior secured term loans and other loans | (29,040 | ) | (21,248 | ) | ||||
| Net cash provided by financing activities | 74,203 | 12,358 | ||||||
| Effect of exchange rates on cash | 1 | 111 | ||||||
| Net increase (decrease) in cash and cash equivalents | 77,828 | (20,428 | ) | |||||
| Cash, restricted cash, and cash equivalents | ||||||||
| Beginning of period | 14,099 | 43,854 | ||||||
| End of period | $ | 91,927 | $ | 23,426 | ||||
| Supplemental cash flow data: | ||||||||
| Income tax payments, net of refunds received | $ | 1,339 | $ | 5,181 | ||||
| Interest paid | 76,781 | 71,211 | ||||||
| Noncash investing and financing activities: | ||||||||
| Assets acquired through right-of-use arrangements | 772 | 6,778 | ||||||
| Settlement gain on related party payable to Ex-Sigma 2 | 1,287 | — | ||||||
| Accrued capital expenditures | 1,088 | 1,083 | ||||||
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Exela Technologies
Schedule 1: Second Quarter 2020 vs. Second Quarter 2019 Financial Performance
| $ in millions | Q2'20 | Q2'19 | Change ($) | YTD'20 | YTD'19 | Change ($) | ||||||||||||||||||
| Information and Transaction Processing Solutions | 243.0 | 309.8 | (66.8 | ) | 527.1 | 635.0 | (107.9 | ) | ||||||||||||||||
| Healthcare Solutions | 49.2 | 63.4 | (14.2 | ) | 113.2 | 124.7 | (11.5 | ) | ||||||||||||||||
| Legal and Loss Prevention Services | 15.5 | 17.6 | (2.1 | ) | 32.8 | 35.4 | (2.6 | ) | ||||||||||||||||
| Total Revenue | 307.7 | 390.8 | (83.1 | ) | 673.2 | 795.2 | (122.0 | ) | ||||||||||||||||
| % change | -21 | % | -5 | % | -15 | % | ||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | 241.8 | 303.8 | (62.0 | ) | 534.3 | 614.4 | (80.1 | ) | ||||||||||||||||
| Gross profit | 65.9 | 87.0 | (21.1 | ) | 138.8 | 180.8 | (41.9 | ) | ||||||||||||||||
| as a % of revenue | 21 | % | 22 | % | -0.8 | % | 21 | % | 23 | % | -2.1 | % | ||||||||||||
| SG&A | 47.0 | 51.2 | (4.1 | ) | 97.4 | 100.8 | (3.5 | ) | ||||||||||||||||
| Depreciation and amortization | 22.8 | 24.8 | (1.9 | ) | 46.0 | 51.4 | (5.4 | ) | ||||||||||||||||
| Impairment of goodwill and other intangible assets | - | - | - | - | - | - | ||||||||||||||||||
| Related party expense | 1.1 | 5.3 | (4.2 | ) | 2.7 | 6.3 | (3.6 | ) | ||||||||||||||||
| Operating (loss) income | (5.1 | ) | 5.7 | (10.8 | ) | (7.3 | ) | 22.2 | (29.5 | ) | ||||||||||||||
| as a % of revenue | -2 | % | 1 | % | -3.1 | % | -1 | % | 3 | % | -3.9 | % | ||||||||||||
| Interest expense, net | 44.4 | 40.0 | 4.5 | 86.0 | 79.7 | 6.4 | ||||||||||||||||||
| Loss on extinguishment of debt | - | 1.4 | (1.4 | ) | - | 1.4 | (1.4 | ) | ||||||||||||||||
| Sundry expense (income) & Other income, net | (1.5 | ) | 1.2 | (2.7 | ) | (35.1 | ) | 5.4 | (40.5 | ) | ||||||||||||||
| Net loss before income taxes | (48.0 | ) | (36.8 | ) | (11.2 | ) | (58.2 | ) | (64.3 | ) | 6.0 | |||||||||||||
| Income tax expense (benefit) | 0.7 | 4.7 | (4.1 | ) | 3.1 | 9.5 | (6.3 | ) | ||||||||||||||||
| Net income (loss) | (48.7 | ) | (41.6 | ) | (7.1 | ) | (61.4 | ) | (73.7 | ) | 12.4 | |||||||||||||
| as a % of revenue | -16 | % | -11 | % | -5.2 | % | -9 | % | -9 | % | 0.2 | % | ||||||||||||
| Depreciation and amortization | 22.8 | 24.8 | (1.9 | ) | 46.0 | 51.4 | (5.4 | ) | ||||||||||||||||
| Interest expense, net | 44.4 | 40.0 | 4.5 | 86.0 | 79.7 | 6.4 | ||||||||||||||||||
| Income tax expense (benefit) | 0.7 | 4.7 | (4.1 | ) | 3.1 | 9.5 | (6.3 | ) | ||||||||||||||||
| EBITDA | 19.3 | 27.9 | (8.6 | ) | 73.8 | 66.8 | 7.0 | |||||||||||||||||
| as a % of revenue | 6 | % | 7 | % | -0.9 | % | 11 | % | 8 | % | 2.6 | % | ||||||||||||
| EBITDA Adjustments | ||||||||||||||||||||||||
| 1 Gain / loss on derivative instruments | (0.4 | ) | 2.7 | (3.1 | ) | 0.4 | 4.4 | (3.9 | ) | |||||||||||||||
| 2 Non-Cash and Other Charges | 7.8 | 13.5 | (5.8 | ) | (20.8 | ) | 24.7 | (45.4 | ) | |||||||||||||||
| 3 Transaction and integration costs | 4.8 | 2.0 | 2.8 | 9.2 | 3.0 | 6.1 | ||||||||||||||||||
| Sub-Total (Adj. EBITDA before O&R) | 31.4 | 46.2 | (14.8 | ) | 62.7 | 98.9 | (36.2 | ) | ||||||||||||||||
| 4 Optimization and restructuring expenses | 11.7 | 18.7 | (7.0 | ) | 24.9 | 42.4 | (17.5 | ) | ||||||||||||||||
| Adjusted EBITDA | 43.1 | 64.9 | (21.7 | ) | 87.5 | 141.2 | (53.7 | ) | ||||||||||||||||
| as a % of revenue | 14.0 | % | 16.6 | % | -2.6 | % | 13.0 | % | 17.8 | % | -4.8 | % | ||||||||||||
9
Exela Technologies
Schedule 2: Reconciliation of Adjusted EBITDA and constant currency revenues
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
Non-GAAP constant currency revenue reconciliation
| Three months ended | Six months ended | |||||||||||||||
| ($ in millions) | 30-Jun-20 | 30-Jun-19 | 30-Jun-20 | 30-Jun-19 | ||||||||||||
| Revenues, as reported (GAAP) | $ | 307.7 | $ | 390.8 | $ | 673.2 | $ | 795.2 | ||||||||
| Foreign currency exchange impact (1) | 1.4 | 3.2 | ||||||||||||||
| Revenues, at constant currency (Non-GAAP) | $ | 309.2 | $ | 390.8 | $ | 676.4 | $ | 795.2 | ||||||||
(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, 2019, to the revenues during the corresponding period in 2020.
Reconciliation of Adjusted EBITDA
| Three months ended | Six months ended | |||||||||||||||
| ($ in millions) | 30-Jun-20 | 30-Jun-19 | 30-Jun-20 | 30-Jun-19 | ||||||||||||
| Net loss (GAAP) | $ | (48.7 | ) | $ | (41.6 | ) | $ | (61.4 | ) | $ | (73.7 | ) | ||||
| Interest expense | 44.4 | 40.0 | 86.0 | 79.7 | ||||||||||||
| Taxes | 0.7 | 4.7 | 3.1 | 9.5 | ||||||||||||
| Depreciation and amortization | 22.8 | 24.8 | 46.0 | 51.4 | ||||||||||||
| EBITDA (Non-GAAP) | $ | 19.3 | $ | 27.9 | $ | 73.8 | $ | 66.8 | ||||||||
| Transaction and integration costs | 4.8 | 2.0 | 9.2 | 3.0 | ||||||||||||
| Optimization and restructuring expenses | 11.7 | 18.7 | 24.9 | 42.4 | ||||||||||||
| Gain / loss on derivative instruments | (0.4 | ) | 2.7 | 0.4 | 4.4 | |||||||||||
| Other Charges | 7.8 | 13.5 | (20.8 | ) | 24.7 | |||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 43.1 | $ | 64.9 | $ | 87.5 | $ | 141.2 | ||||||||
| Foreign currency exchange impact (1) | 0.2 | 1.1 | - | |||||||||||||
| Adjusted EBITDA, at constant currency (Non-GAAP) | $ | 43.3 | $ | 64.9 | $ | 88.6 | $ | 141.2 | ||||||||
(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, 2019, to the adjusted EBITDA during the corresponding period in 2020.
Schedule 3: Non-GAAP Revenue reconciliation & Adjusted EBITDA margin on Revenue net of pass through & LMCE
Non-GAAP revenue reconciliation & Adjusted EBITDA margin on revenue net of pass through & LMCE
| Three months ended | Six months ended | |||||||||||||||
| ($ in millions) | 30-Jun-20 | 30-Jun-19 | 30-Jun-20 | 30-Jun-19 | ||||||||||||
| Revenues, as reported (GAAP) | $ | 307.7 | $ | 390.8 | $ | 673.2 | $ | 795.2 | ||||||||
| (-) Postage & postage handling | 55.2 | 66.2 | 125.0 | 141.6 | ||||||||||||
| Revenue - Net of pass through (Non-GAAP) | $ | 252.5 | $ | 324.7 | $ | 548.2 | $ | 653.6 | ||||||||
| (-) LMCE | - | 0.3 | - | 2.1 | ||||||||||||
| Revenue - Net of pass through & LMCE (Non-GAAP) | $ | 252.5 | $ | 324.4 | $ | 548.2 | $ | 651.5 | ||||||||
| Revenue growth % | (22.2 | )% | (15.9 | )% | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 43.1 | $ | 64.9 | $ | 87.5 | $ | 141.2 | ||||||||
| Adjusted EBITDA margin | 17.1 | % | 20.0 | % | 16.0 | % | 21.7 | % | ||||||||
10
Media Contact: Kevin McLaughlin
E: kevin.mclaughlin@icrinc.com
T: 646-277-1234
Investor Contact: William Maina
E: IR@exelatech.com
T: 646-277-1236
11