Exela Technologies, Inc. (NASDAQ:XELA), a global business process automation leader, reported its first quarter financial results for 2024, revealing a revenue decline alongside margin improvements and a reduction in net loss compared to the previous year. The company's revenue for the quarter was $258.8 million, a 5.4% decrease year-over-year, partially attributed to the sale of its high-speed scanner business and the loss of a significant contract. Despite the revenue drop, Exela Technologies saw an increase in gross margins and a substantial reduction in net loss, mainly due to lower interest and debt expenses.
Key Takeaways
- Exela Technologies reported a 5.4% year-over-year revenue decline in Q1 2024 to $258.8 million.
- Gross margins improved by 107 basis points year-over-year, attributed to automation and operational leverage.
- The company experienced a net loss of $25.6 million, which is a $20 million improvement from the previous year.
- Adjusted EBITDA stood at $12.9 million.
- Exela Technologies is focusing on revenue stabilization, margin improvement, and strategic growth initiatives for 2024.
Company Outlook
- Management is optimistic about achieving objectives for the year, with a focus on profitability and liquidity.
- Exela Technologies aims to continue driving margin improvement throughout 2024.
Bearish Highlights
- Information and Transaction Processing Solutions (ITPS) segment revenue decreased by 9% year-over-year.
- The company lost a $27 million low-margin contract, impacting revenues starting January.
- Legal and Loss Prevention Services (LLPS) segment saw a 12% sequential decrease due to project fluctuations.
Bullish Highlights
- Healthcare Solutions and LLPS segments grew by approximately 3% and 6% respectively.
- Exela Technologies achieved a 96% renewal rate in Q1 and won 85 new logos.
- SG&A expenses decreased by 43 basis points year-over-year, primarily due to reduced legal and professional fees.
Misses
- Despite gross margin improvement, the company reported a decline in revenues.
- The loss of a significant contract and fluctuations in project-based segments impacted financial performance.
Q&A Highlights
- During the Q&A session, management discussed strategies for revenue stabilization and growth opportunities.
- The company is progressing with various financing initiatives and managing rising taxes as Net Operating Losses (NOLs) are utilized.
In summary, Exela Technologies is navigating through a challenging period marked by revenue declines but is showing signs of operational efficiency gains. With a strategic focus on margin improvement and revenue stabilization, the company remains optimistic about its prospects for the remainder of 2024. Investors will be looking forward to the next earnings call for updates on the company's progress.
InvestingPro Insights
In light of Exela Technologies' Q1 2024 financial results, a deeper dive into the company's performance is facilitated by InvestingPro's real-time data and analytics. Here are some key metrics and tips for investors to consider:
- The company's Market Cap stands at a modest $16.93 million, reflecting a smaller enterprise that may be more susceptible to market fluctuations.
- Exela's P/E Ratio is currently negative at -0.12, indicating that the company is not profitable as of the last twelve months ending Q1 2024. This aligns with the reported net loss, despite improvements.
- Revenue for the last twelve months as of Q1 2024 was $1049.32 million, with a Gross Profit Margin of 22.14%, which is an important figure when considering the company's efficiency in generating income from its sales.
InvestingPro Tips for Exela Technologies (XELA) highlight several critical points for investors:
1. The stock has shown strong return over the last month and three months, which might interest short-term investors looking for recent positive momentum.
2. Exela Technologies does not pay a dividend, which could be a deciding factor for income-focused investors.
Investors seeking a more comprehensive analysis can find additional InvestingPro Tips for Exela Technologies at https://www.investing.com/pro/XELA. Currently, there are 9 additional tips available on InvestingPro, offering insights into aspects such as price volatility, short-term obligations, and trading valuation multiples.
For those interested in a deeper dive into Exela Technologies' financials and future outlook, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This could be a valuable tool for making informed investment decisions in a company navigating through a transformative period.
Full transcript - Exela Tech (XELA) Q1 2024:
Operator: Good afternoon, and welcome to the Exela Technologies First Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Vincent Kondaveeti, Head of Investor Relations. Please go ahead.
Vincent Kondaveeti: Thank you, Gary, and good afternoon. Welcome to our earnings call to discuss our first quarter results for the period ended March 31, 2024. Our presentation was uploaded to the IR section of our website. Matt Brown, our Interim CFO, will be hosting the call. Par unfortunately had some travel delays and can't dial in. Today's agenda will largely follow our prior calls with management commentary, followed by Q&A. Some of the matters we will discuss in 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?
Matt Brown: Good afternoon, everyone. Let's move to Slide 8, financial highlights. We reported first quarter revenues of $258.8 million, down 5.4% year-over-year or 4.3% pro forma for the sale of the high-speed scanner business. Information and Transaction Processing Solutions declined by 9% year-over-year, offset by growth in our Healthcare Solutions and Legal and Loss Prevention Services segments by approximately 3% and 6%, respectively. Sequentially, IPTS was down 3% in Q1 due to the loss of a $27 million low-margin contract renewal. Healthcare Solutions was up 4% with continued volume increases and LLPS was down 12% due to project fluctuations. Q1 gross margins were 22%, up 107 basis points year-over-year, and we continue to focus on driving automation and operational leverage. Healthcare and LLPS margins are up 296 basis points and 242 basis points year-over-year, and ITPS margin was relatively flat given the contract exit. SG&A is down 43 basis points year-over-year, primarily driven by reductions in legal and professional fees. We're making investments in new business divisions such as Reaktr.ai and shifting from CapEx to OpEx as we move our data center infrastructure to the cloud. Since year-end, we've consolidated over 100,000 square feet of real estate and have approximately 340,000 square feet of additional consolidations in process. We have made good progress on savings initiatives but still have significant opportunity for margin improvement throughout the rest of the year. We had a net loss of $25.6 million, an improvement of $20 million year-over-year, mainly driven by lower interest and debt expense. Adjusted EBITDA was $12.9 million, and we expect to continue driving margin improvement throughout the year. On Page 10, we have both our financial highlights and lowlights. We achieved gross margin improvement despite a number of headwinds. On the balance sheet, current liabilities are down 23% and our interest expense is down 52% year-over-year. While we had a large customer exit with a $27 million contract falling off starting in January, we are seeing revenue stabilization and growth opportunities with both the 96% renewal rate in Q1 along with 85 new logo wins. 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, while cash flow from operations continues to improve, and we're progressing various financing initiatives in parallel. In 2024, our focus remains on driving revenue stabilization, margin improvement and strategic growth initiatives. We are optimistic about achieving many of our objectives this year as we continue to improve profitability and liquidity. Thank you. We will now open the line up for questions.
Operator:
Matt Brown: Well, thank you, everyone, for joining. Look forward to keeping you updated on our future progress, and we'll see you again on the Q2 call.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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