Exela (XELA) Q3 Earnings call transcript Nov 29, 2024
2min read In a recent earnings call, Exela Technologies, Inc. provided an overview of its financial results for the third quarter of 2024. The call, led by Interim CFO Matt Brown, presented a mixed picture of the company's performance, highlighting both promising growth opportunities and challenges that lie ahead.
Financial Highlights
Exela reported third-quarter revenues of $269.2 million, marking a 6.3% year-over-year increase. This growth was primarily driven by Information and Transaction Processing Solutions, which experienced an impressive 11.5% increase year-over-year. However, Healthcare Solutions and Legal and Loss Prevention Services saw declines of 5.3% and 2.4%, respectively.
Sequentially, Information and Transaction Processing Solutions saw a significant 22.4% increase, largely due to a large project from a long-standing customer. Conversely, Healthcare Solutions and Legal and Loss Prevention Services saw declines of 6.7% and 28.8%, respectively. These fluctuations, particularly in the healthcare sector, may indicate challenges that Exela is facing in this area.
Gross margins for the quarter were down 330 basis points sequentially and 140 basis points year-over-year, primarily due to higher postage costs. This decrease in gross margins could potentially impact Exela's profitability in the coming quarters.
Operational Highlights
Exela reported a net loss of $24.9 million, a $2 million improvement sequentially. This improvement was driven by savings initiatives and a shift towards cloud infrastructure. The company has consolidated over 300,000 square feet of real estate year-to-date, with an additional 65,000 square feet planned for the fourth quarter.
Exela also highlighted its progress in achieving solid revenue growth and a 6.7% sequential improvement in adjusted EBITDA. The company reported over $113 million of TCV (Total Contract Value) renewals in the quarter, signaling a strong commitment from clients to continue partnering with Exela. Furthermore, Exela announced approximately $40 million in new Annual Contract Value (ACV) and 81 new logos added during the quarter. This growth in new ACV and logos is a positive sign for Exela's future prospects.
Challenges and Opportunities
Despite these positive strides, Exela faced a significant setback with its delisting from NASDAQ due to not meeting the Exchange's market cap minimum requirement for 30 consecutive business days. This delisting, while not impacting the company's operations or financials, could potentially affect investor confidence and the company's future fundraising abilities.
Looking ahead, Exela's focus remains on growing revenue, increasing gross margins, and pursuing strategic growth initiatives. The company's optimistic outlook is reflected in its plans to improve profitability and liquidity.
Conclusion
Exela's third-quarter financial results present a complex picture, with promising growth opportunities tempered by operational challenges. The company's strategic initiatives, such as the consolidation of real estate and the shift to cloud infrastructure, position it for future growth. However, the delisting from NASDAQ and the challenges in the healthcare sector may pose hurdles that need to be addressed. As Exela navigates these challenges, investors will be watching closely to see how the company manages these dynamics and positions itself for long-term success.