Exela Technologies reported a 6.3% year-over-year increase in revenue for the third quarter of 2024, reaching $269.2 million. Despite the revenue growth, the company posted a net loss of $24.9 million, though this represented a $2 million improvement from the previous quarter. The earnings call revealed strategic shifts and ongoing challenges, including a potential NASDAQ delisting, which have influenced investor sentiment.
Key Takeaways
- Revenue increased by 6.3% year-over-year, led by strong performance in the ITPS segment.
- The company achieved positive cash flow from operations, totaling $5 million.
- Exela faces challenges with NASDAQ delisting due to market cap requirements.
- Strategic focus on cloud transition and new business investments like Reactor.ai.
- No questions were asked during the earnings call, indicating a lack of immediate investor concerns or queries.
Company Performance
Exela Technologies demonstrated resilience in the third quarter, with revenue driven primarily by the Information and Transaction (JO:TCPJ) Processing Solutions (ITPS) segment, which saw an 11.5% year-over-year growth. However, the Healthcare Solutions and Legal and Loss Prevention Services (LLPS) segments experienced declines of 5.3% and 2.4%, respectively. The company's efforts to streamline operations, including real estate consolidation and a shift from CapEx to OpEx, contributed to improved cash flow and a reduced net loss.
Financial Highlights
- Revenue: $269.2 million, up 6.3% year-over-year
- Gross Margins: 20.2%, down 330 basis points sequentially and 140 basis points year-over-year
- Net Loss: $24.9 million, a $2 million improvement sequentially
- Adjusted EBITDA: $14.6 million
- Positive cash flow from operations: $5 million
Company Outlook
Exela remains optimistic about its future, focusing on revenue growth, increasing gross margins, and strategic initiatives such as cloud transition and investments in new business divisions like Reactor.ai. Despite the NASDAQ delisting challenge, the company aims to maintain "business as usual" operations without disruptions.
Executive Commentary
"We are optimistic about achieving many of our objectives this year as we continue to focus on improving profitability and liquidity," stated Matt Brown, Interim CFO. He also emphasized the company's commitment to strategic investments and operational continuity, saying, "We will continue operating on a business as usual basis with no disruption to our operations or financials."
Q&A
The earnings call did not include any questions from analysts, suggesting either a comprehensive presentation from the company or a lack of pressing concerns from the investment community at this time.
Risks and Challenges
- NASDAQ delisting due to market cap requirements poses a significant risk to investor confidence.
- Declining revenues in Healthcare Solutions and LLPS segments could impact overall growth.
- Competitive pressures and macroeconomic uncertainties may affect strategic initiatives.
- Transitioning to a cloud-based infrastructure involves execution risks and potential cost overruns.
- Maintaining positive cash flow amid operational restructuring remains a challenge.
Full transcript - Exela Technologies Inc (XELA) Q3 2024:
Conference Operator: Good day, and welcome to the Exela Third Quarter 20 24 Financial Results. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to David Seamus, President of Investor Relations.
Please go ahead.
David Seamus, President of Investor Relations, Exela Technologies: Thank you, operator, and good afternoon. Welcome to our earnings call to discuss our Q3 results for the period ended September 30, 2024. Our presentation has been posted to the IR section of our website. On today's call will be Matt Brown, our Interim Chief Financial Officer. Some of the matters we will discuss on today's call are forward looking and involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in such forward looking statements.
Such risks and uncertainties are set forth in our presentation. So with that, I'll turn over the call to Matt.
Matt Brown, Interim Chief Financial Officer, Exela Technologies: Thanks, David. Good afternoon, everyone. Let's start on Slide 8, financial highlights. We reported 3rd quarter revenues of $269,200,000 up 6.3% year over year. Information and transaction processing solutions increased by 11.5% year over year, while health care solutions and legal and loss prevention services declined by 5.3% and 2.4% year over year, respectively.
Sequentially, Q3 was up 22.4% in ITPS, primarily driven by a large project from an existing customer, while down 6.7% in Healthcare Solutions and down 28.8% in LLPS due to project fluctuations. Q3 gross margins were 20.2%, down 330 basis points sequentially and 140 basis points year over year, primarily due to higher postage costs in the quarter. LLPS margins were down approximately 1,000 basis points, while ITPS margin was down 100 basis points and Healthcare margin was up 160 basis points. SG and A was down about 1% year over year and 16% sequentially, driven by reductions in legal and professional fees as well as employee related costs. We're continuing to make investments in new business divisions such as reactor dotai and shifting from CapEx to OpEx as we move our data center infrastructure to the cloud.
Year to date, we've consolidated over 300,000 square feet of real estate and have approximately 65,000 square feet of additional consolidations in process for the Q4. We have made good progress on savings initiatives and still have significant opportunities for margin improvement throughout the rest of the year. We had a net loss of $24,900,000 an improvement of $2,000,000 sequentially. Adjusted EBITDA was $14,600,000 In terms of highlights, we achieved solid revenue growth and 6.7% sequential improvement in our adjusted EBITDA. We also renewed over $113,000,000 of TCV in the quarter.
We are seeing growth opportunities with approximately $40,000,000 of new ACV 1 in the quarter and 81 new logos added. Our cash flow from operations also continues to improve with $5,000,000 of positive cash flow from operating in Q3. In terms of lowlights, Exela was delisted from NASDAQ earlier this month due to failure to meet the Exchange's $35,000,000 market cap minimum requirement for 30 consecutive business days. We will continue operating on a business as usual basis with no disruption to our operations or financials. Our focus for the rest of the year is to continue growing revenue, increased gross margin and strategic growth initiatives.
We are optimistic about achieving many of our objectives this year as we continue to focus on improving profitability and liquidity. Thank you. And we will now open the line up for questions.
Conference Operator: You're showing no questions. This concludes our question and answer session. Thank you for attending today's presentation. You may now disconnect.
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