Exela Technologies, Inc.

Good morning and welcome to the Accela Technologies second 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 touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to William Mena, Investor Relations. Please go ahead.

Thank you, and good morning, everyone, and welcome to the Accela Technologies second quarter 2021 conference call. I'm joined today by Ron Cogburn, Accela's Chief Executive Officer and SRECON Sorter, or Chief Financial Officer. Following prepared remarks made by Ron and SRECON, we'll take your questions. Today's conference call 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 August 17, 2021. Information to access the replay is listed on 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, August 10th, 2021, and are subject to a number of factors that may cause actual results to differ materially from those forward-looking statements. We undertake no obligation to update any statement that reflects 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 financial measures provide additional information on how management views the operating performance of our business. Reconciliations between GAAP and non-GAAP results we discussed 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 our website. With all the mandatory regulatory FD disclosures out of the way, I'd like to turn the call over to our CEO, Ron Cogburn. Ron, please go ahead.

Good morning, and thanks, everyone, for joining us on our second quarter 2021 conference call. I would like to take a moment and thank some folks. On behalf of the Board of Directors and our employees, I want to thank our shareholders, new and existing for the confidence and support that they have shown recently we are inspired to build upon our recent reported performance for a brighter future we are also grateful to our 18 000 employees globally who have been on the front line taking care of business and winning the hearts and minds of our customers today i would like to focus on three key takeaways first Excel is strong position in a large market where we have significant opportunity for growth. This opportunity is enhanced by our recently launched digital solutions for small and medium business segment where we are seeing strong growth and plan to accelerate our strategy in the coming quarters. Second, Excel is improving fundamentals. Our revenue base is stable and our pipeline reflects multiple avenues of growth. In addition, our profitability metrics are improving as we continue to focus on our efficiency plans. This is evident in our strong gross margin and EBITDA margin expansion in Q2. And third, Excel has improved liquidity position and strong financial flexibility. We have delivered on our November 2019 plan, achieving our liquidity target ahead of schedule and reducing our net debt by over $140 million. So with that, let's begin on slide number three with an overview of Accella's investment highlights. We have discussed various iterations of this slide on prior calls because it underscores our strong position. Accella is a leader in business process management solutions globally. We serve a large and growing total addressable market estimated at $207 billion. and we see significant incremental opportunity for an even larger SMB market where we have experienced strong growth since our entrance into the space in late 2020. Our extensive investments in our technology and numerous patents serve as a competitive moat and position us well to win with solutions that drive digital transformation and automation. We serve over 4,000 customers across 14 industry verticals, including 60% of the Fortune 100. So our customer base is not only large and diverse, but we work with some of the largest blue-chip companies in the world where we have long-tenured relationships. And finally, with decades of industry experience, we believe we have the right management team in place to capitalize on significant opportunities that we see ahead. Now let's turn to slide number four. Slide number four underscores our strong market position by highlighting the scale, reach, and the criticality of the services we provide. As you can see from this slide, our solutions help power critical business operations that touch the everyday lives of the majority of the population in the countries that we serve. The facts presented here demonstrate our ability to handle critical business processes at a tremendous scale, which is important This is something that sets us apart from the market. Furthermore, our digital transformation and automation, as well as our BPA solutions, are not only an integral part of our customers' core day-to-day operations, but they also facilitate increased efficiency. This is a powerful value proposition, which helps us drive our long-tenured blue-chip customer relations. Let's turn to slide number five. I would now like to discuss some of the second quarter highlights. Total revenue for the second quarter was in line with our expectations at $293 million, down modestly from Q1. Variations in our revenue mainly reflect continued COVID-19 impact, offset by the increased stabilization achieved after pruning non-strategic contracts. I'm pleased to say that we're seeing good momentum in our business, Our ACV renewal rates improved to 95% in Q2. We have added new statements of work across many of our key customers as well. The public sector is showing potential for solid growth, and the SMB vertical is exceeding all of our expectations. Now, here's an important fact worth noting. We generated adjusted EBITDA of $51 million in Q2. up approximately 10% sequentially and 18% year-over-year, and in line with our pre-pandemic adjusted EBITDA in Q4 of 2019. We find this noteworthy considering the current COVID-19 headwinds and believe it further underscores our continued efforts to increase our profitability. Also, we delivered strong margin improvement in the second quarter, Our Q2 gross margin was 28.6%, an increase of approximately 616 basis points sequentially and 722 basis points year over year. Our adjusted EBITDA margin was 17.4%, an increase of 189 basis points from last quarter and 336 basis points from Q2 of 2020. As we have mentioned in the past, with facility consolidations, we continue to utilize our work from anywhere model, as well as implementing additional automation technologies in our business. As a result, our operating profits increased by $21 million in Q1. Since the beginning of 2021, we have raised total gross proceeds of $224 million through our equity offerings. These transactions, combined with our strategy to reduce cost, increase efficiencies, have enabled us to reach total liquidity of $158 million as of August 6th, achieving our liquidity target range of $125 to $150 million as promised in late 2019. In addition, our efforts provided us with the capital to repurchase a portion of our outstanding debt Our net debt as of August 6 stood at $1.297 billion, $140 million reduction year to date. We ended Q2 with approximately 18,000 employees, and we expect our headcount to increase in the second half to meet the rising demand. Now let's turn to slide number six. I'd like to update you on our progress with the small and medium businesses, or The SMBs. The stats that you see on this slide give us confidence in the success of our current SMB offerings. Since our entrance into this segment in late 2020, we have seen consistent strong growth in the number of new SMB customers in our digital mailroom and new users of our dry sign solution. In the second quarter, our digital mailroom SMB customers grew 99% sequentially. and our dry sign users were up 144% from Q1 of 2021. With the launch of DMR in the United Kingdom in Q2 and launches in France and Germany this month, as well as the recent launch of dry sign in India, we expect our strong momentum will continue. With the success we have achieved in the SMB space so far with our DMR and dry sign solutions, we plan to add additional solutions to the SMB market across the Americas, Europe, and Asia, which we will discuss in the near future. Now let's turn to slide number seven. I'd like to focus on our Q2 segment results. We delivered strong sequential revenue growth in our healthcare solution segment of 10%, reflecting improved volumes due to new statements of work, New customer ads and a larger backlog. Our legal segment also had a nice quarter with 14% growth from Q1 of 2021 and 26% growth over last year. Our ITP segment had lower volumes due to COVID-19, but are slowly coming back as people return to work. And we continue to believe we are well positioned to see volumes and revenue improvement in this segment once the COVID-19 slowdown subsides. Overall, our current revenue base is stable and diversified from a customer, industry, and geographic standpoint. Our backlog is substantial, and our pipeline growth remains strong. This gives us increased confidence in our 2021 outlook, which we reaffirmed today. Now let's move to slide number eight. We have deep and trusted partnerships with over 4,000 customers worldwide. we believe we have only scratched the surface in terms of the potential market opportunity. As I mentioned before, and as shown on this slide, we currently serve a massive $207 billion total addressable market. In addition, we expect to further expand our TAM and growth opportunity by going after the small and medium business market, which I discussed earlier. The SMB market is enormous, representing over 400 million companies globally, and an estimated $676 billion in 2021 IT spend. So in closing, the items that brought us a successful quarter will continue to be our focus by having the right assets, technologies, and team in place to capitalize on our growing global team. We will continue to execute on our efficiency and operational improvement plans, to drive further margin expansion. We will also continue to focus on strengthening our balance sheet and financial flexibility. We remain positive with the global economy recovering and the customer sentiment becoming more optimistic. Our revenue base is stable and our pipeline is strong and we're seeing great results in the SMB market. In the second half of 2021, as the impacts from COVID-19 continue to normalize, We expect our results to also benefit from an improvement in volumes and renewal rates. I'll now turn the call over to our CFO, Sriyakant Soarcher, to run through the numbers and our guidance in more detail. Sriyakant? Sriyakant Soarcher Thank you, Ron.