Exela Technologies, Inc.

Good morning and welcome to the Accela Technologies first quarter 2021 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 telephone keypad. 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 William Maina, Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to the Accella Technologies first quarter 2021 conference call. I'm joined today by Ron Codburn, Accella's Chief Executive Officer, and Srikanth Surajar, our Chief Financial Officer. Following prepared remarks made by Ron and Srikanth, we'll 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. The replay of this call will be available through May 11th, 2021. Information to access the 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 categorized 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, May 4th, 2021, and are subject to a number of factors that may cause actual results to differ materially from those statements. We undertake no obligation to update any statements that 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 Excel's most recent 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 Excel's website. During today's call, we will refer to certain non-GAAP financial measures. We believe these non-GAAP 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 available on the Investor Relations page of our website. With all the mandatory Reg FD disclosures out of the way, I'm pleased to turn the call over to our CEO, Ron Cogburn. Ron, please go ahead.

Good morning, and thanks, everyone, for joining us on our first quarter 2021 conference call. Today I would like to highlight a few key topics, which I hope everyone takes away from this call. To begin with, Excel is improving key performance metrics, especially our profitability, which grew considerably in Q1. Second, I will address Excel's participation in the digital transformation of our customers by building digital roads over broken processes, which drives growth in the B2B and B2C, leaving the existing networks behind. Next, we'll talk about new products and markets, which represent exciting growth opportunities for Accela. These include our Digital Asset Group, or DAG, our Accela Bills and Payments, or XBP, and Intelligent Data Processing, or IDP, solutions, along with the adoption of these solutions in the small and medium business markets. Next, we'll talk about our ongoing efforts driving operational leverage and margin improvement, strengthening our balance sheet and financial flexibility. And then we will also highlight the stability of our revenue base, growing pipeline, improving customer sentiment, all of which gives us increased confidence in our 2021 outlook. So let's begin today on slide number four. with an overview of our Q1 results and some recent business highlights. Revenue for the first quarter was in line with our expectations at $300 million. Variations from Q1 of last year were primarily due to the exit of non-strategic transition revenue, volume impacts from COVID-19, and our non-core asset sales. Our revenue base is stable and diversified from a customer- industry, and geography standpoint. Our backlog is substantial, and our pipeline growth remains strong, particularly for our DAG solutions, where we're seeing increased demand with new and existing customers. Through Q1 of 2021, our DAG business represented about 8% of our total revenue, including our SMB business. From a profitability perspective, we delivered strong margin improvements in the first quarter as well. Our Q1 gross margin was 22.5%, an increase of approximately 370 basis points sequentially, and 250 basis points year over year. Q1 adjusted EBITDA margin was 15.5%, an increase of 365 basis points from the last quarter, and 334 basis points year over year. This is noteworthy in this environment. We delivered multiple key new business wins and solution launches in the first quarter as well. With respect to the new business wins, our recent expansion into the small and medium business market showed strong growth in Q1 2021. SMB customers for our digital mailroom solution grew 117% sequentially in Q1, And our SMB dry sign users increased almost 170%. This is the kind of adoption we were looking for. Our pipeline continues to grow in this segment, and we have plans for further global expansion of this business. As we previously announced in early March, we also delivered our first cloud-hosted deployment of PCH Global with a major U.S. insurer. Under this $90 million 10-year licensing agreement, Accela has deployed its PCH global digital exchange platform to execute the end-to-end processing of complex healthcare claims for this large customer. Now, regarding the new products and recent solution launches, I was happy to announce the global expansion of our Exchange for Bills and Payments, or XBP, into the Americas, continental Europe, and the Asia markets. Now, we discussed our XBP platform at length during our recent Cal and Fireside chat. The legacy billing processes for both payers and receivers today is fraught with inefficient manual processes that are inherently expensive, risky, and they don't give companies the full transparency into their corporate bills and payment processes. XBP enables billers to send bills to businesses and consumers electronically, offering transparency and simple reconciliation. It also allows payers to receive all their bills in one place with analytics, alerts, and more payment options. Our XBP solution is garnering accelerating interest across our existing and new customers, and I look forward to providing you with updates on future calls. And we're also excited about our recent rollout of our Intelligent Data Processing, or IDP, platform. Now IDP was designed to provide customers with an easy to implement, highly scalable, secure cloud-based environment to run their critical business processes. Our IDP platform leverages artificial intelligence, deep learning architecture, And Excel has a vast library of knowledge from customer and industry rules across existing and future processes to generate continuously improved results for our customers. Next is our RPA, our robotic process automation. It's another digital solution we're excited to talk about. We invite you to join us for another Fireside Chat with D.A. Davidson on May 20th. But we'll go into further detail on the use cases and how these bots are working hard for our customers. Now, turning to our operational leverage improvement initiatives, we have a couple of important highlights to mention here. In the first quarter, we completed 25% of our multi-year plan to reduce our facilities footprint, rationalizing our footprint. Also, our initiatives to increase automation in our organization enable us to continue optimizing our workforce. Our total employees as of March 31, 2021 were 18,400 as compared to 19,000 on December 31, 2020. Finally, with respect to our balance sheet, we remain focused on strengthening our financial flexibility and liquidity positions. As a reminder, in mid-March, we raised $26.8 million in gross proceeds via an equity offering. Now let's turn to slide number five. Now many of you will be familiar with this slide from our last earnings call, but I think it's important and it gets to the heart of our strong market position and illustrates the significant addressable market opportunity that we have for our BPM and digital solutions. You know, with over 30 years of experience, we serve 4,000 plus customers globally, including 60% of the Fortune 100. Excel has customers across verticals such as banking, insurance, commercial, healthcare, and public sector rely on a fully deployed technology stack, 140 plus delivery centers, and over 18,000 employees to execute mission-critical business processes. Now, our solutions are integral parts of our customers' day-to-day operations, and they include liquidity solutions, payment and technology solutions, my favorite, human capital management, which we replaced Workday, work-from-anywhere technologies, and of course, information management and communication. We believe we've only just scratched the surface in terms of a significant market opportunity with our current customer base. Now let's turn to slide number six. I'll note that we have deep, valuable, and long-tenured relationship with our customers, including many of the world's largest enterprises. Our largest customers have been with Accela an average of 15 years. With low customer concentration and a focus on the industries that have the strongest projected CAGRs like banking, financial services, insurance, and healthcare, we're well positioned for growth. Furthermore, with most of our revenue in the U.S. and in Europe, we're strategically positioned to benefit from the economic recovery post-COVID-19. Accela's digital foundation and our engineering heritage powers our long-tenured customer relationship, and this is what enables us to continue to innovate and launch new disruptive solutions that further widen our competitive moat. Let's turn to slide number seven. You heard me mention at the beginning of the call Excella's expansion into the SMB segment. While we have significant white space opportunity available with our large enterprise customers, we see strong potential for our leading solutions for small and medium businesses. SMB today is an untapped market for Excella, and we believe it represents a significant future opportunity. Here are some stats and some recent stats that really give us confidence in our offerings. As shown on the left side of the page, we've seen a very strong growth in the number of new SMB customers, which I mentioned earlier in the call. For our digital mailroom, as I mentioned, it's up 117% quarter over quarter. Dry sign is up 170% quarter over quarter, driven by by an increase in demand for the work-from-anywhere solutions that we offer. With the success we've achieved within this space so far, we plan to bring more subscription-based business process-as-a-service, or BPaaS, solutions, software-as-a-service, or SaaS, to the SMB market across Americas, Europe, and Asia. Now, software licenses and subscriptions for our digital platform strengthen our backlog and improve our profitability. Our enterprise customer contracts tend to be 5 to 10 years with renewals, annual maintenance, and support services. They also generate higher gross margins as well. Now, our SMB customers are a little different. Their contracts tend to be per user per month, and are cloud-hosted solutions with features and flexibility ideal for that marketplace. So in closing, Accela remains well-positioned in today's environment. The global trend toward digital transformation to grow market share, increase productivity, and reduce costs through modernization and automation of a business process is generating strong tailwinds for our sector. Our extensive investment in technology enables us to build longstanding, trusted relationships with our customers. Our multiple patents and process and new digital solutions deepens and widens our competitive mode as well. As we execute against our strategy and benefit from the normalization of volumes and customer renewal weights toward pre-COVID levels, we anticipate improving performance throughout 2021. We will continue to execute on our cost efficiency and operational improvement plans to drive future margin expansion while continuing to focus on strengthening our balance sheet and financial flexibility. Based on our Q1 results and the momentum we're seeing in our business, we're reiterating our prior 2021 guidance. With this, I'll turn the call over to Srikanth Sorcher, our CFO, to run through the numbers in more detail. Shreya Khan.