Name: Exela Technologies, Inc. Q1 2024 Earnings Call
Start: 2024-05-28T20:31:00.000Z

Executive Summary

Q1 2024 revenue was $258.8M, down 5.4% year-over-year and down 2.1% sequentially; adjusted EBITDA was $12.9M, up 41.7% sequentially as gross margin rose to 22.0% despite headwinds from a $27M annual contract loss starting January .
Interest expense fell 52.3% YoY to $21.1M as debt costs declined, while net loss improved to $(25.6)M from $(45.4)M in Q1 2023; operating profit turned slightly positive at $0.1M .
Segment mix: ITPS revenue fell to $176.1M (-9.1% YoY) while Healthcare Solutions grew to $64.9M (+2.9% YoY) and LLPS to $17.8M (+5.6% YoY); segment margins improved in Healthcare and LLPS, flat in ITPS .
Post‑quarter catalyst: a $35M breach remediation contract expected to be accretive to ITPS (June 2024), showcasing rapid capacity scaling in incident response and cybersecurity services .

What Went Well and What Went Wrong

Gross margin expanded 107 bps YoY to 22.0% as automation and operational leverage took hold; Healthcare and LLPS margins improved 296 bps and 242 bps YoY, respectively .
Adjusted EBITDA rose to $12.9M with a 41.7% sequential increase, aided by lower interest expense and cost actions; operating profit turned positive (from a loss in Q1 2023) .
Commercial metrics were resilient: 96% renewal rate and 85 new logo wins; management emphasized driving revenue stabilization, margin improvement, and liquidity initiatives this year. “We are optimistic about achieving many of our objectives… as we continue to improve profitability and liquidity.” (Matt Brown) .

The exit of a large low‑margin customer reduced ACV by ~$27M, pressuring ITPS revenue (-9.1% YoY) and total company sales (-5.4% YoY) .
Liquidity remains tight: unrestricted cash was ~$10M after the interest payment; management is “focused on expanding liquidity… as our NOLs are reduced” .
Taxes and cash requirements rising; management highlighted the need to “expand liquidity” while migrating from CapEx to OpEx during the cloud shift, which increases near-term operating expense .

Metric	Q1 2023	Q4 2023	Q1 2024
Revenue ($USD Millions)	$273.6	$264.4	$258.8
Operating Profit (Loss) ($USD Millions)	$(6.9)	—	$0.1
Net Loss ($USD Millions)	$(45.4)	$(25.0)	$(25.6)
Adjusted EBITDA ($USD Millions)	$14.5	$9.0	$12.9
Gross Margin %	—	—	22.0%
EBITDA Margin %	5.1%	—	5.0%
Interest Expense ($USD Millions)	$44.2	$25.7	$21.1

Segment breakdown (Q1 2024):

Segment	Revenue ($USD Millions)	YoY Change	Gross Margin %
Information & Transaction Processing Solutions (ITPS)	$176.1	-9.1%	18.0%
Healthcare Solutions	$64.9	+2.9%	28.8%
Legal & Loss Prevention Services (LLPS)	$17.8	+5.6%	35.9%

KPIs (Q1 2024):

KPI	Value
Renewal Rate	96%
New Logos Won	85
ACV Won	~$27.3M
ACV Renewed	~$43.9M
Facility Consolidation (completed/in process)	104K sq ft completed; ~340K sq ft in process

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q1 2024	Not provided in reviewed materials	Not provided in reviewed materials	Maintained (no formal guidance)
Adjusted EBITDA	FY/Q1 2024	Not provided in reviewed materials	Not provided in reviewed materials	Maintained (no formal guidance)
Margins/OpEx/Tax/OI&E	FY/Q1 2024	Not provided in reviewed materials	Not provided in reviewed materials	Maintained (no formal guidance)

Note: No formal numerical guidance was issued in the Q1 2024 earnings slides or transcript content reviewed .

Topic	Previous Mentions (Q4 2023)	Current Period (Q1 2024)	Trend
Automation & margin improvement	“Gross margins improved by $31M in 2023… leveraging automation; headcount -1,900”	GM up to 22.0%; segment margins up in Healthcare/LLPS; continued drive for operational leverage	Improving execution
Cloud migration (CapEx→OpEx)	Shift from CapEx to OpEx as data center moves to cloud; CapEx down $10M YoY	“Shifting from CapEx to OpEx as we move our data center infrastructure to the cloud”	Continuing investment
Liquidity & interest expense	Interest expense down ~40% in Q4; reduced current liabilities; focus on debt	Unrestricted cash ~$10M post interest payment; interest expense down 52% YoY	Mixed: cost relief vs cash tightness
AI/cyber initiatives (Reaktr.ai)	Investments in FAO and AI (reactor.ai) for growth	Post‑Q1 $35M breach remediation contract win; cybersecurity compliance & remediation at scale	Expanding pipeline
Customer/contract dynamics	Q4 sequential growth with large new logo	$27M ACV customer exit pressured Q1; 96% renewal rate; 85 new logos	Stabilizing after exit

“We reported first quarter revenues of $258.8 million… Gross margins were 22%, up 17 basis points year-over-year… Adjusted EBITDA was $12.9 million…” (Matt Brown) .
“We are focused on expanding liquidity and managing rising taxes as our NOLs are reduced… Unrestricted cash ending Q1 was approximately $10 million after we made our interest payment” (Matt Brown) .
“In 2024, our focus remains on driving revenue stabilization, margin improvement and strategic growth initiatives… improve profitability and liquidity” (Matt Brown) .
“Exela worked diligently and expeditiously with our client on a legally sensitive situation… positioned to help customers in their time of need as cybersecurity becomes increasingly critical” (Suresh Yannamani, re breach remediation) .

The Q1 2024 transcript made available included prepared remarks and opening for Q&A; detailed Q&A content was not accessible in the document retrieval due to database inconsistency .
As context, prior-quarter Q&A focused on liquidity/asset sales (“we will continue to expand liquidity… premature to detail”), balance sheet strengthening, and margin baselines (automation driving Healthcare margin gains) .

Wall Street consensus (S&P Global) estimates for XELA were unavailable in our system due to missing CIQ mapping; therefore, comparison versus consensus cannot be provided at this time [SpgiEstimatesError].
Based on company materials, Q1 results featured revenue of $258.8M and adjusted EBITDA of $12.9M; without consensus, we cannot classify beats/misses relative to Street expectations .

Revenue headwind was concentrated in ITPS from a single customer exit ($27M ACV); watch stabilization trajectory given 96% renewal rate and 85 new logos in Q1 .
Margin story is improving: company-level GM at 22.0%, with Healthcare and LLPS margin expansion; continued automation and facility consolidation should drive operating leverage through 2024 .
Liquidity is the key risk: ~$10M unrestricted cash post interest payment, rising taxes, and ongoing cloud migration OpEx; monitor near-term financing initiatives cited by management .
Interest burden is easing (52.3% YoY reduction to $21.1M), supporting net loss improvement; continued deleveraging would be a meaningful equity catalyst .
Near-term revenue catalyst: $35M breach remediation contract (June 2024) accretive to ITPS, highlighting strategic growth in incident response/cybersecurity (Reaktr.ai, Rust Consulting) .
Execution priorities: maintain segment momentum (Healthcare/LLPS), expand alliances in RCM/FAO/cyber, and manage the CapEx→OpEx cloud shift to avoid margin leakage .
With no formal guidance and unavailable Street estimates, trading will key off operational metrics (renewals/new ACV, margins, cash/interest) and follow-through on liquidity actions; posture tactically until financing visibility improves .

Sources: Q1 2024 earnings slides and transcript, Q4 2023 transcript, selected press releases.
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