Exela Technologies, Inc. Reports Preliminary Second Quarter 2021 Results
Revenue of
Reiterates 2021 financial guidance
Achieves over
SMB business showing robust growth globally
Conference call scheduled for
Second Quarter 2021 Highlights:
- Revenue of
$293.0 million , a decline of 2.3% from Q1 2021 - Healthcare Solutions revenue increased ~10% and Legal and
Loss Prevention Services revenue grew ~14% from Q1 2021 - Gross profit (1) margin of 28.6%, an increase of ~720 basis points from Q2 2020 and ~620 basis points from Q1 2021
- Operating income of
$25.4 million , compared with operating loss of$5.1 million in Q2 2020 - Net loss of
$19.4 million , compared with net loss of$48.7 million in Q2 2020 - Gross Profit of
$83.9 million , an increase of 27% from$65.9 million in Q2 2020 - EBITDA (2) of
$44.9 million , an increase of 133% from$19.3 million in Q2 2020 - Adjusted EBITDA (3) of
$50.9 million , an increase of 18.0% from$43.1 million in Q2 2020 - Small-and-Medium-Sized Business “SMB” business continues robust growth globally with DMR and DrySign solutions
- Positive operating leverage driven by from Work-from-Anywhere adoption and automation
- Strong financial flexibility with
$158 million liquidity position enabled by the$224 million (4) in gross proceeds from recent equity offerings yielding over$140 million reduction in net debt(5) year-to-date throughAugust 6, 2021
“We generated strong margin expansion in the second quarter, which reflects our ongoing commitment to focus on our core businesses and drive operational improvement. We are pleased with the rapid growth of our digital solutions for the SMB market where we see significant opportunity for continued expansion. Finally, we are also pleased to report a
Second Quarter 2021 Financial Highlights
- Revenue: Revenue for Q2 2021 was
$293.0 million , a decline of 4.8% compared to$307.7 million in Q2 2020. Revenue for the Information and Transaction Processing Solutions segment was$217.3 million , a decline of 10.6% year-over-year, primarily due to lower volumes as a result of COVID-19 and transition revenue (6) roll off.Exela believes it is well positioned to see volumes return in the ITPS segment once COVID-19 impacts subside. Healthcare Solutions revenue was$56.2 million , an increase of 14.3% year-over-year, primarily due to increased volumes driven by new statements of work, new customers and backlog from existing customers. Legal andLoss Prevention Services revenue was$19.5 million , an increase of 25.9% year-over-year. - Operating income / (loss): Operating income for Q2 2021 was
$25.4 million , compared with operating loss of$5.1 million in Q2 2020. The year-over-year improvement in operating income was primarily attributable to higher gross profit, lower SG&A costs, and lower depreciation and amortization expenses. - Net Loss: Net loss for Q2 2021 was
$19.4 million , compared with a net loss of$48.7 million in Q2 2020, primarily due to increased operating income and lower interest expense. - Adjusted EBITDA: Adjusted EBITDA for Q2 2021 was
$50.9 million , an increase of 18.0% compared to$43.1 million in Q2 2020. Adjusted EBITDA margin for Q2 2021 was 17.4%, an increase of 336 basis points from 14.0% in Q2 2020 and 189 basis points from 15.5% in Q1 2021. - Common Stock: As of
June 30, 2021 , there were 70,409,282 total shares of common stock outstanding and an additional 1,245,758 shares of common stock reserved for issuance for our outstanding preferred shares on an as-converted basis.
Second Quarter 2021 Business Highlights
Contract and product updates:
- Completed the commercial launch of DrySign in
India onJune 1, 2021 , allowing businesses to sign documents from any internet connected device Launched Digital Mail Room (“DMR”) onJune 30, 2021 in theUnited Kingdom and launched inFrance andGermany inAugust 2020 , facilitating continued global expansion- Q2 2021 DrySign user growth of 144% and DMR customer growth of 99% from Q1 2021
- Expanded PCH Global Deployment for one of the world’s largest specialty care services insurance companies, paving the way to connecting claims and correspondence from over 27,000 unique hospital systems and providers across the country
Operating leverage improvement continues:
- Completed four real estate facility closures in the second quarter, underscoring continued adoption of Exela’s Work-From-Anywhere model
- Automation led efficiencies reduced employee count to approximately 18,000 as of
June 30, 2021 from 18,400 as ofMarch 31, 2021
Capital Expenditures: Capital expenditures for the second quarter of 2021 were 0.7% of revenue compared to 1.1% of revenue in the second quarter of 2020.
Balance Sheet and Liquidity(7): As of
Expanding financial flexibility: Raised a total of
- As of
August 6, 2021 , and after giving effect to the shares sold in the equity offerings, there were 144,041,323 shares of common stock outstanding. - In accordance with Exela’s plan to use proceeds from its equity offerings to strategically reduce its debt and associated interest expense obligations as well as explore ways to invest in its growth,
Exela repurchased an aggregate of$59.1 million of its term loans and senior secured notes for an aggregate purchase price of$35.1 million sinceJune 30, 2021 .
2021 Guidance
- Revenue range
$1.25 billion to$1.39 billion - Gross profit margin of 23% to 25%
- Adjusted EBITDA margin 16% to 17%
- Capital expenditures in the range of 1% of revenue
Note: Guidance is based on constant-currency.
Preliminary Results; Notes
The financial results discussed herein are presented on a preliminary basis; final data will be included in Exela’s Quarterly Report on Form 10-Q for the period ended
Below are the notes referenced above:
(1) – Gross Profit is defined as Revenue less cost of revenue excluding depreciation and amortization.
(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. A reconciliation of Adjusted EBITDA (2021 Guidance) is not available on forward-looking basis without unreasonable efforts due to the impact and timing on future operating results arising from items excludes from the measures.
(4) – The
(5) – Net debt is calculated as the difference between the total debt outstanding (including
(6) – Transition revenue includes the exit of contracts and statements of work from certain customers 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.
(7) – Liquidity as defined per the third amendment of the credit agreement effective
Earnings Conference Call and Audio Webcast
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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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.
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
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
Rounding : Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect absolute figures.
Investor and/or Media Contacts:
E: vincent.kondaveeti@exelatech.com
T: 929-620-1849
E: IR@exelatech.com
T: 646-277-1216
Source:
Condensed Consolidated Balance Sheets
As of
(in thousands of
(UNAUDITED)
2021 | 2020 | |||||||
(Unaudited) | (Audited) | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 45,866 | $ | 68,221 | ||||
Restricted cash | 1,998 | 2,088 | ||||||
Accounts receivable, net of allowance for doubtful accounts of |
201,929 | 206,868 | ||||||
Related party receivables and prepaid expenses | 712 | 711 | ||||||
Inventories, net | 15,130 | 14,314 | ||||||
Prepaid expenses and other current assets | 25,822 | 31,091 | ||||||
Total current assets | 291,457 | 323,293 | ||||||
Property, plant and equipment, net of accumulated depreciation of |
76,520 | 87,851 | ||||||
Operating lease right-of-use assets, net | 63,529 | 68,861 | ||||||
358,561 | 359,781 | |||||||
Intangible assets, net | 268,525 | 292,664 | ||||||
Deferred income tax assets | 6,643 | 6,606 | ||||||
Other noncurrent assets | 25,420 | 18,723 | ||||||
Total assets | $ | 1,090,655 | $ | 1,157,779 | ||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||
Liabilities | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 65,801 | $ | 76,027 | ||||
Related party payables | 489 | 97 | ||||||
Income tax payable | 1,654 | 2,466 | ||||||
Accrued liabilities | 111,713 | 126,399 | ||||||
Accrued compensation and benefits | 63,417 | 63,467 | ||||||
Accrued interest | 48,952 | 48,769 | ||||||
Customer deposits | 15,269 | 21,277 | ||||||
Deferred revenue | 20,935 | 16,377 | ||||||
Obligation for claim payment | 25,562 | 29,328 | ||||||
Current portion of finance lease liabilities | 9,960 | 12,231 | ||||||
Current portion of operating lease liabilities | 17,096 | 18,349 | ||||||
Current portion of long-term debts | 34,778 | 39,952 | ||||||
Total current liabilities | 415,626 | 454,739 | ||||||
Long-term debt, net of current maturities | 1,497,063 | 1,498,004 | ||||||
Finance lease liabilities, net of current portion | 11,884 | 13,287 | ||||||
Pension liabilities, net | 34,885 | 35,515 | ||||||
Deferred income tax liabilities | 10,331 | 9,569 | ||||||
Long-term income tax liabilities | 2,283 | 2,759 | ||||||
Operating lease liabilities, net of current portion | 49,391 | 56,814 | ||||||
Other long-term liabilities | 12,458 | 13,624 | ||||||
Total liabilities | 2,033,921 | 2,084,311 | ||||||
Commitments and Contingencies (Note 8) | ||||||||
Stockholders' equity (deficit) | ||||||||
Common stock, par value of |
17 | 15 | ||||||
Preferred stock, par value of |
1 | 1 | ||||||
Additional paid in capital | 489,176 | 446,739 | ||||||
Less: Common Stock held in treasury, at cost; 2,451,706 shares at |
(10,949 | ) | (10,949 | ) | ||||
Equity-based compensation | 53,163 | 52,183 | ||||||
Accumulated deficit | (1,448,605 | ) | (1,390,038 | ) | ||||
Accumulated other comprehensive loss: | ||||||||
Foreign currency translation adjustment | (8,763 | ) | (7,419 | ) | ||||
Unrealized pension actuarial losses, net of tax | (17,306 | ) | (17,064 | ) | ||||
Total accumulated other comprehensive loss | (26,069 | ) | (24,483 | ) | ||||
Total stockholders’ deficit | (943,266 | ) | (926,532 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 1,090,655 | $ | 1,157,779 |
Condensed Consolidated Statements of Operations
For the three and six months ended
(in thousands of
(UNAUDITED)
Three Months Ended |
Six Months Ended |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 293,009 | $ | 307,722 | $ | 593,064 | $ | 673,173 | ||||||||
Cost of revenue (exclusive of depreciation and amortization) | 209,080 | 241,788 | 441,666 | 534,326 | ||||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization) | 36,390 | 47,014 | 78,275 | 97,387 | ||||||||||||
Depreciation and amortization | 19,420 | 22,847 | 39,020 | 46,032 | ||||||||||||
Related party expense | 2,748 | 1,146 | 4,455 | 2,698 | ||||||||||||
Operating profit (loss) | 25,371 | (5,073 | ) | 29,648 | (7,270 | ) | ||||||||||
Other expense (income), net: | ||||||||||||||||
Interest expense, net | 42,867 | 44,440 | 85,999 | 86,028 | ||||||||||||
Sundry expense (income), net | (787 | ) | (899 | ) | (573 | ) | 183 | |||||||||
Other expense (income), net | 651 | (584 | ) | 803 | (35,241 | ) | ||||||||||
Net loss before income taxes | (17,360 | ) | (48,030 | ) | (56,581 | ) | (58,240 | ) | ||||||||
Income tax benefit (expense) | (2,007 | ) | (661 | ) | (1,989 | ) | (3,120 | ) | ||||||||
Net loss | $ | (19,367 | ) | $ | (48,691 | ) | $ | (58,570 | ) | $ | (61,360 | ) | ||||
Cumulative dividends for Series A Preferred Stock | (798 | ) | (858 | ) | 98 | 582 | ||||||||||
Net loss attributable to common stockholders | $ | (20,165 | ) | $ | (49,549 | ) | $ | (58,472 | ) | $ | (60,778 | ) | ||||
Loss per share: | ||||||||||||||||
Basic and diluted | $ | (0.33 | ) | $ | (1.01 | ) | $ | (1.04 | ) | $ | (1.24 | ) |
Condensed Consolidated Statements of Cash Flows
For the six months ended
(in thousands of
(UNAUDITED)
Six Months Ended |
||||||||
2021 | 2020 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (58,570 | ) | $ | (61,360 | ) | ||
Adjustments to reconcile net loss | ||||||||
Depreciation and amortization | 39,020 | 46,032 | ||||||
Original issue discount and debt issuance cost amortization | 7,829 | 6,857 | ||||||
Provision for doubtful accounts | 1,781 | (110 | ) | |||||
Deferred income tax provision | (41 | ) | (338 | ) | ||||
Share-based compensation expense | 980 | 1,782 | ||||||
Unrealized foreign currency losses | (485 | ) | (980 | ) | ||||
Gain on sale of assets | (238 | ) | (34,791 | ) | ||||
Fair value adjustment for interest rate swap | (125 | ) | 440 | |||||
Change in operating assets and liabilities, net of effect from acquisitions | ||||||||
Accounts receivable | 2,004 | 38,260 | ||||||
Prepaid expenses and other assets | (3,447 | ) | (9,157 | ) | ||||
Accounts payable and accrued liabilities | (34,785 | ) | (8,812 | ) | ||||
Related party payables | 391 | (642 | ) | |||||
Additions to outsource contract costs | (304 | ) | (297 | ) | ||||
Net cash used in operating activities | (45,990 | ) | (23,116 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of property, plant and equipment | (3,498 | ) | (5,766 | ) | ||||
Additions to internally developed software | (820 | ) | (2,216 | ) | ||||
Cash paid for acquisition, net of cash received | - | (3,500 | ) | |||||
Proceeds from sale of assets | 4,252 | 38,222 | ||||||
Net cash provided by (used in) investing activities | (66 | ) | 26,740 | |||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of Common Stock from private placement | 25,065 | - | ||||||
Proceeds from issuance of Common Stock from at the market offerings | 18,118 | - | ||||||
Cash paid for equity issuance costs from at the market offerings | (745 | ) | - | |||||
Borrowings under factoring arrangement and Securitization Facilities | 66,098 | 149,951 | ||||||
Principal repayment on borrowings under factoring arrangement and Securitization Facilities | (68,800 | ) | (66,114 | ) | ||||
Lease terminations | (119 | ) | (331 | ) | ||||
Cash paid for debt issuance costs | - | (12,708 | ) | |||||
Principal payments on finance lease obligations | (5,600 | ) | (6,353 | ) | ||||
Borrowings from senior secured revolving facility | 3,000 | 29,750 | ||||||
Repayments on senior secured revolving facility | (55 | ) | (14,200 | ) | ||||
Borrowings from other loans | 4,776 | 23,248 | ||||||
Principal repayments on senior secured term loans and other loans | (18,076 | ) | (29,040 | ) | ||||
Net cash provided by financing activities | 23,662 | 74,203 | ||||||
Effect of exchange rates on cash | (51 | ) | 1 | |||||
Net decrease in cash and cash equivalents | (22,445 | ) | 77,828 | |||||
Cash, restricted cash, and cash equivalents | ||||||||
Beginning of period | 70,309 | 14,099 | ||||||
End of period | $ | 47,864 | $ | 91,927 | ||||
Supplemental cash flow data: | ||||||||
Income tax payments, net of refunds received | $ | 1,994 | $ | 1,339 | ||||
Interest paid | 75,136 | 76,781 | ||||||
Noncash investing and financing activities: | ||||||||
Assets acquired through right-of-use arrangements | 2,159 | 772 | ||||||
Leasehold improvements funded by lessor | 125 | - | ||||||
Settlement gain on related party payable to Ex-Sigma 2 | - | 1,287 | ||||||
Accrued capital expenditures | 1,505 | 1,088 |
Schedule 1: Second Quarter 2021 vs. Second Quarter 2020 and First Half 2021 vs. First Half 2020 Financial Performance
(UNAUDITED)
$ in millions | Q2'21 | Q2'20 | H1'21 | H1'20 | ||||||
Information and Transaction Processing Solutions | 217.3 | 243.0 | 449.2 | 527.1 | ||||||
Healthcare Solutions | 56.2 | 49.2 | 107.3 | 113.2 | ||||||
Legal and |
19.5 | 15.5 | 36.6 | 32.8 | ||||||
Total Revenue | 293.0 | 307.7 | 593.1 | 673.2 | ||||||
% change | -5 | % | -21 | % | -12 | % | ||||
Cost of revenue (exclusive of depreciation and amortization) | 209.1 | 241.8 | 441.7 | 534.3 | ||||||
Gross profit | 83.9 | 65.9 | 151.4 | 138.8 | ||||||
as a % of revenue | 29 | % | 21 | % | 26 | % | 21 | % | ||
SG&A | 36.4 | 47.0 | 78.3 | 97.4 | ||||||
Depreciation and amortization | 19.4 | 22.8 | 39.0 | 46.0 | ||||||
Related party expense | 2.7 | 1.1 | 4.5 | 2.7 | ||||||
Operating (loss) income | 25.4 | (5.1 | ) | 29.6 | (7.3 | ) | ||||
as a % of revenue | 9 | % | -2 | % | 5 | % | -1 | % | ||
Interest expense, net | 42.9 | 44.4 | 86.0 | 86.0 | ||||||
Sundry expense (income) & Other income, net | (0.1 | ) | (1.5 | ) | 0.2 | (35.1 | ) | |||
Net loss before income taxes | (17.4 | ) | (48.0 | ) | (56.6 | ) | (58.2 | ) | ||
Income tax expense (benefit) | 2.0 | 0.7 | 2.0 | 3.1 | ||||||
Net income (loss) | (19.4 | ) | (48.7 | ) | (58.6 | ) | (61.4 | ) | ||
as a % of revenue | -7 | % | -16 | % | -10 | % | -9 | % | ||
Depreciation and amortization | 19.4 | 22.8 | 39.0 | 46.0 | ||||||
Interest expense, net | 42.9 | 44.4 | 86.0 | 86.0 | ||||||
Income tax expense (benefit) | 2.0 | 0.7 | 2.0 | 3.1 | ||||||
EBITDA | 44.9 | 19.3 | 68.4 | 73.8 | ||||||
as a % of revenue | 15 | % | 6 | % | 12 | % | 11 | % | ||
EBITDA Adjustments | ||||||||||
1 | Gain / loss on derivative instruments | - | (0.4 | ) | (0.1 | ) | 0.4 | |||
2 | Non-Cash and Other Charges | (0.3 | ) | 7.8 | 12.8 | (20.8 | ) | |||
3 | Transaction and integration costs | 1.4 | 4.8 | 6.0 | 9.2 | |||||
Sub-Total (Adj. EBITDA before O&R) | 46.0 | 31.4 | 87.1 | 62.7 | ||||||
4 | Optimization and restructuring expenses | 4.9 | 11.7 | 10.3 | 24.9 | |||||
Adjusted EBITDA | 50.9 | 43.1 | 97.4 | 87.5 | ||||||
as a % of revenue | 17 | % | 14 | % | 16 | % | 13 | % |
Schedule 2: Reconciliation of Adjusted EBITDA and constant currency revenues
Non-GAAP constant currency revenue reconciliation | |||||||||||||||
Three months ended | Six months ended | ||||||||||||||
($ in millions) | |||||||||||||||
Revenues, as reported (GAAP) | $293.0 | $307.7 | $300.1 | $593.1 | $673.2 | ||||||||||
Foreign currency exchange impact (1) | (5.5 | ) | (5.1 | ) | (10.6 | ) | |||||||||
Revenues, at constant currency (Non-GAAP) | $287.5 | $307.7 | $294.9 | $582.5 | $673.2 | ||||||||||
(1) Constant currency excludes the impact of foreign currency fluctuations and is computed by applying the average exchange rates for the three months and six months ended |
|||||||||||||||
Reconciliation of Adjusted EBITDA | |||||||||||||||
Three months ended | Six months ended | ||||||||||||||
($ in millions) | |||||||||||||||
Net loss (GAAP) | ($19.4 | ) | ($48.7 | ) | ($39.2 | ) | ($58.6 | ) | ($61.4 | ) | |||||
Interest expense | 42.9 | 44.4 | 43.1 | 86.0 | 86.0 | ||||||||||
Taxes | 2.0 | 0.7 | (0.0 | ) | 2.0 | 3.1 | |||||||||
Depreciation and amortization | 19.4 | 22.8 | 19.6 | 39.0 | 46.0 | ||||||||||
EBITDA (Non-GAAP) | $44.9 | $19.3 | $23.5 | $68.4 | $73.8 | ||||||||||
Transaction and integration costs | 1.4 | 4.8 | 4.6 | 6.0 | 9.2 | ||||||||||
Gain / loss on derivative instruments | - | (0.4 | ) | (0.1 | ) | (0.1 | ) | 0.4 | |||||||
Other Charges | (0.3 | ) | 7.8 | 13.1 | 12.8 | (20.8 | ) | ||||||||
Sub-Total (Adj. EBITDA before O&R) | $46.0 | $31.4 | $41.1 | $87.1 | $62.7 | ||||||||||
Optimization and restructuring expenses | 4.9 | 11.7 | 5.4 | 10.3 | 24.9 | ||||||||||
Adjusted EBITDA (Non-GAAP) | $50.9 | $43.1 | $46.5 | $97.4 | $87.5 |
Schedule 3: Non-GAAP Revenue reconciliation & Adjusted EBITDA margin on Revenue net of pass through
Non-GAAP revenue reconciliation & Adjusted EBITDA margin on revenue net of pass through | |||||||||||||||
Three months ended | Six months ended | ||||||||||||||
($ in millions) | |||||||||||||||
Revenues, as reported (GAAP) | $293.0 | $307.7 | $300.1 | $593.1 | $673.2 | ||||||||||
(-) Postage & postage handling | 52.8 | 55.2 | 59.3 | 112.2 | 125.0 | ||||||||||
Revenue - Net of pass through (Non-GAAP) | $240.2 | $252.5 | $240.7 | $480.9 | $548.2 | ||||||||||
Revenue growth % | (4.9 | %) | (12.3 | %) | |||||||||||
Adjusted EBITDA (Non-GAAP) | $50.9 | $43.1 | $46.5 | $97.4 | $87.5 | ||||||||||
Adjusted EBITDA margin | 21.2 | % | 17.1 | % | 19.3 | % | 20.2 | % | 16.0 | % |
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Source: Exela Technologies, Inc.