Exela Technologies, Inc. (XELA)·Q2 2024 Earnings Summary

Executive Summary

• Revenue of $245.7M declined 10.0% year-over-year and 5.1% sequential; gross margin expanded to 23.5% (+120 bps YoY, +150 bps QoQ) as cost actions and operating leverage offset contract nonrenewals and the sale of the scanner business .
• Adjusted EBITDA of $13.7M fell 39.0% YoY, but rose 6.7% sequential; SG&A included a $10.1M noncash write-down tied to a partner contract amendment that raises pricing and expands services, impacting optics but improving future unit economics .
• Segment mix: ITPS revenue $156.8M (-15.2% YoY), Healthcare $62.9M (-1.1% YoY) with 630 bps margin improvement, LLPS $25.9M (+6.3% YoY) with strong sequential growth (+45%) on settlement administration activity .
• Liquidity and cash generation improved: unrestricted cash ended “over $30M”; operating cash flow exceeded $12M in Q2; interest expense down 48.7% YoY to $23.1M following 2023 debt modifications .
• Potential stock reaction catalysts: accelerating margin expansion, sequential EBITDA improvement, Healthcare margin gains, AI partnerships (Aidéo) and spin-off plans for the BPA business to unlock value and simplify the story .

What Went Well and What Went Wrong

What Went Well

• Gross margin expanded to 23.5% (+120 bps YoY, +150 bps QoQ) as efficiencies and cost reductions took hold .
• Healthcare segment margin improved by 630 bps YoY, driven by added technology features and savings flow-through .
• New business momentum: over $40M of new ACV in Q2 (+50% QoQ) and 119 new logos (+40% QoQ), signaling commercial traction despite lost renewals .
• “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,” Executive Chairman Par Chadha noted .

What Went Wrong

• Revenue fell 10.0% YoY and 5.1% sequential, pressured by 2023 nonrenewals (including a large contract) and the sale of the high-speed scanner business; ITPS revenue fell 15.2% YoY .
• Adjusted EBITDA of $13.7M decreased 39.0% YoY; SG&A rose 30.5% YoY due in part to the $10.1M write-down and prior-year scanner divestiture gain ($6.6M) creating unfavorable comparisons .
• ITPS margins declined 170 bps YoY on lower revenue; EMEA weakness and seasonality also weighed on segment results .

Financial Results

Notes: Q1 operating income and EPS not disclosed in reviewed documents; EBITDA margins contextual calculations based on reported revenue and adjusted EBITDA in cited documents.

Segment breakdown and margin changes

Selected KPIs

Guidance Changes

Management reiterated priorities (revenue stabilization, margin improvement, strategic growth initiatives) but did not issue specific numeric guidance ranges for revenue, margins, or EBITDA .

Earnings Call Themes & Trends

Management Commentary

• “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.” – Par Chadha, Executive Chairman .
• “We reported second quarter revenues of $245.7 million… Sequentially, revenue declined by 5.1%… Q2 gross margins at 23.5%, up 120 bps YoY and 150 bps sequentially… Q2 adjusted EBITDA was $13.7 million, but included a $10.1 million write-down… We have over $25 million of annualized savings in process.” – Matt Brown, Interim CFO .
• “Healthcare Solutions declined by 1.1% YoY… LLPS grew by 6.3% YoY and 45% sequentially… Healthcare Solutions [margins] with the 630 bps gain YoY… ITPS margins declined by 170 bps YoY.” – Matt Brown .

Q&A Highlights

• Q2 2024 call Q&A transcript was not accessible due to a retrieval error; key themes inferred from management remarks emphasize margin improvement, liquidity progress, and pipeline strength .
• Prior quarter (Q4 2023) Q&A focused on liquidity levers (asset sales, financing) to bridge cash flow needs; management highlighted working capital progress and debt service flexibility .

Estimates Context

• S&P Global consensus (EPS, revenue, EBITDA) for Q2 2024 was unavailable due to missing CIQ mapping for XELA; therefore, estimate comparisons cannot be provided. Values retrieved from S&P Global were unavailable due to CIQ mapping constraints.
• Given the lack of consensus, investors should focus on sequential trajectory (gross margin +150 bps QoQ, adjusted EBITDA +6.7% QoQ) and the improving cash generation profile .

Key Takeaways for Investors

• Margin expansion is the core positive: gross margin +150 bps QoQ and +120 bps YoY, with Healthcare margin +630 bps YoY – signaling tangible progress on cost and automation initiatives .
• Revenue headwinds persist (nonrenewals, scanner sale), but pipeline KPIs (>$40M ACV; 119 new logos) and LLPS strength (+45% QoQ) point to improving commercial momentum into 2H .
• Liquidity and cash generation improved: unrestricted cash >$30M; operating cash flow >$12M; interest expense down to $23.1M (-48.7% YoY) following 2023 debt modifications .
• SG&A optics were distorted by a $10.1M noncash write-down tied to a contract amendment that raises pricing and expands services; the amendment should support better unit economics going forward .
• Strategic options: potential spin-off of the BPA business could simplify the story and unlock value; monitor SEC filings for structure, tax status, and timing .
• AI partnership (Aidéo) strengthens healthcare coding automation narrative and supports Healthcare margin trajectory; watch for adoption and cross-sell within PCH Global .
• Tactical positioning: near-term trades may center on continued margin gains and cash flow execution; medium-term thesis hinges on stabilizing ITPS (including EMEA), sustaining LLPS momentum, and delivering on corporate actions (spin-off) .

Sources: Exela Q2 2024 press release and attached financials , Q2 call remarks , Aidéo alliance (July 22) , BPA spin-off plans (July 1) , breach remediation $35M win (June 24) , Q1 2024 call , Q4 2023 call .