Exela Technologies, Inc.

Good day and welcome to Excel at Technologies, Inc. Fourth Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Will Mena, Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to the Accela Technologies fourth quarter and full year 2020 conference call. I'm joined today by Ron Cogburn, Accela's Chief Executive Officer and Shree Consort, our Chief Financial Officer. Following prepared remarks made by Ron and Srikanth will take your questions. Today's conference is being broadcast live via webcast, which is available on the Investor Relations page of Accela's website at accelatech.com. A replay of this call will be available through March 23, 2021. Information and access to replay is listed in today's press release, which is also available on the Investor Relations page of Accela's website. During today's call, Accela will make certain statements regarding future events and financial performance that may be characterized as forward-looking statements Under the Private Securities Litigation Reform Act of 1995, these statements reflect management's current beliefs, assumptions, and expectations as of today, March 16, 2021, and are subject to a number of factors that could cause actual results to differ materially from those statements. We undertake no obligation to update any statements to reflect the events that occur after this call, and actual results could differ materially from any forward-looking statements. For more information, please refer to the risk factors discussed in Accela's most recent filed periodic report on Form 10-K, along with today's press release and the company's other filings with the SEC. Copies are available from the SEC or the investor relations page of Accela's website. During today's call, we referred to certain non-GAAP financial measures. We believe these non-GAAP financial measures provide additional information on how management views the operating performance of our business. Reconciliations between GAAP and non-GAAP results we discuss on today's call can be found on the investor relations page of our website. Please note the presentation that accompanies this conference call is also accessible on the investor relations page of our website. I'd now like to turn the call over to Ron Cogburn, CEO. Ron, please go ahead.

Good morning and thanks everyone for joining us on our fourth quarter and full year 2020 call. We're going to provide a brief business update today and highlight a few of the key takeaways from 2020 and Excella Technologies overall. With the current climate and dynamic events in our world today, we are witnessing digital drive hypergrowth between B2B and B2C, which is leaving the traditional networks far behind. Excella is well positioned in this environment, leaning on our extensive investment in technology based on the business rules of our customers' processes and the industry guidelines. Excella Technologies is further enhanced by our multiple patents in process, robotics, and cognitive automation. With over 4,000 customers, including 60% of the Fortune 100, Accela's customers rely on our fully deployed technology stack across banking, insurance, healthcare, financial services, for payments and bills, and intelligent data processing and management and communications. Let's turn to slide number five. and we're going to discuss some of excella's 2020 financial highlights and our progress against our key initiatives so let's discuss revenue for a second excella exceeded our prior quarterly and annual revenue guidance in spite of the headwinds from covid19 variations in our full year 2020 revenue were primarily due to three factors the exit of about 147 million of non-strategic transition revenue, approximately $90 million of impact from COVID-19, and of course our non-core asset sales. Our digital asset group continues to scale, representing now 8% of our total revenue in 2020. We added $182 million of ACV in 2020, along with 14 new customers with TCV in excess of a million dollars each. In early 2021, our revenue has stabilized and we are seeing positive sentiment in our industry segments, except for public sector, which has lagged a little bit because of the switch of the new administration. We're very pleased to have recently announced a new 10-year, $90 million contract to provide a cloud-based automation service through our PCH global platform to a major U.S. insurer. Let's discuss our earnings for a second. Most of the variance between the 2020 adjusted EBITDA is due to lower revenue coupled with the biggest change being the professional fees and expenses. Accela plans to reduce those in 2021. Accela has $174 million of cost savings in our execution pipeline, with incremental cash realization of $38 million expected in 2021 due to the recently completed actions. With respect to key initiatives, in 2020, we completed non-core asset sales worth $50 million, and we continue to pursue additional sales of businesses that are not complementary to our long-term strategies. The remaining $100 to $150 million of non-core asset sales are in progress. Accela continues to eliminate the lagging trap costs from the non-strategic transition revenue roll-off, which we expect to exit by the end of this year. With respect to the balance sheet improvements, our liquidity was $108 million as of December 31, 2020. and 61 million dollars as of march 12 2021 including the outflow of our semi-annual interest payments on our bonds yesterday we announced an equity capital raise of 27 million dollars as part of our recent endeavors to expand our investor base and visibility into the equity capital markets after years of anonymity we intend to use those proceeds to to add to liquidity to the balance sheet to pursue cloud-hosted technology and BPO-type deals, as we just won, and prepare the company for growth and the return of the pre-COVID-19 volumes in 2021. Our liquidity levels, now get this, our liquidity levels are now higher than they were three years ago at December 31, 2017. After including the $53 million capacity, under the existing securitization facility that remains undrawn, but is subject to the loan and security agreement dated December 10th of 2020. With all such initiatives, including the in-progress asset sale, our goal is to take our surplus cash and opportunistically take advantage and reduce our debt service. We are creating value for our investors to become neutral to cash flow generating company on a levered basis in the near future. As a reminder, in Q4, we entered into a $145 million five-year term loan to refinance our existing AR securitization facility. And last but not least, we engaged UBS to pursue alternatives to strengthen the balance sheet. So overall, it has been a very busy year for Acela. I want to thank our entire team around the world for their dedication to our customers and excellent success, especially in this challenging year. We have a lot of work to do, but I'm encouraged for the strong progress that we're making and confident that we have the right strategy in place for continued improvement in 2021. Now let's look at slide number five. With a proven track record and global presence in more than 50 countries, let me highlight the current and the emerging solutions that we offer. Around the treasury functions, you have liquidity solutions, such as procure to pay, order to cash, and expense management. We have payment technologies and services like XBP, which we talked about at the fireside chat with the calendar analysts and some of their guests. My favorite, human capital management, This is our own platform we developed to replace Workday. We had up to 10,000 employees on Workday at one point. Of course, healthcare, both payer and provider. Then work from anywhere technologies and services, which we developed last year as a result of the pandemic. All this sits on a foundation of information management and communications. We see good opportunities with existing and new customers for each of these solutions in 2020 and beyond. Now let's look at slide number six. We highlight the opportunity landscape before us because it is very significant and it's very diversified. Now here's a fact. Banking and financial services, along with health care and commercial, represent Accela's largest industry segments by revenue, and they comprise $142 billion of this mammoth $207 billion total addressable market. We've only just scratched the surface penetrating about 1% of our growing addressable market. Let's turn to slide number seven. Diversification in revenue and industry served is a significant strength of Excella. With most of our revenue in the US, we are well positioned to ride the tailwinds of the economic recovery post the pandemic. With low customer concentration and focus on the industries that have the strongest Projected CAGRs, like the banking, financial service, insurance, and healthcare, our digital foundations are well positioned for growth. Now let's turn to slide number eight. Accela is an integral part of the essential critical supply chain infrastructure across the U.S. and Europe. Accela's services and products enhance or facilitate better efficiency, touching everything from communications to commercial facilities. providing critical essential services in finance, energy, government, healthcare, and information technology. Our digital foundation and our resilient business model was really tested during the global pandemic, and while we executed well and we earned the respect of our customers who view us as partners, we've also learned many valuable lessons that will serve us well in the near term. Now let's look at slide number nine. Excellus technology and services touch the majority of the population in the US. Just think about that for a second. As well as over 80% of all non-card network payments made in Ireland, 100% of the gyro payments made in Sweden, and significant volumes of payments made in the UK as well. I'm going to call out three statistics to take away from this slide. all U.S. taxpayers who file non-electronic taxes or paper taxes, and the subsequent payments made by or to the IRS are processed through Accela's remittance technology platform. Second, with over 200 million subscribers in health care and 20 million veterans, we process over 700,000 claims a day. Third, Accela processes over a trillion dollars in deposits each year.