Exela Technologies, Inc.

Good day, and welcome to the Accela Technologies Incorporated fourth quarter and full year 2021 financial results call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mark Griffin of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Accella Technologies' fourth quarter and 2021 conference call. I'm joined today by Ron Coburg, Accella's chief executive officer, and Shrikant Sauter, our chief financial officer. Following prepared remarks by Ron and Shrikant, we will take your questions. As a reminder, during the Q&A session of today's call, we will not be able to take questions on the pending acquisition offer due to legal restrictions on commenting on a securities issuing. Today's conference call is being recorded 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 also be available through March 17, 2022. Information to access this 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, Excel 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 10, 2022, 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 to reflect these events that occur after this call. Natural results could differ materially from any forward-looking statements. For more information, please refer to the risk factors discussed in Excel's most recently 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 in the Investment Relations page of Excel'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 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 the Investor Relations page of our website. With all the mandatory regulation FD disclosure out of the way, I'm pleased to turn the call over to our CEO, Ron Conburn. Ron, please go ahead.

Good afternoon, and thanks, everyone, for joining us on our fourth quarter and our full year 2021 call. We are pleased with the solid execution and transformation of our business in 2021. During the year, we executed a sizable debt reduction strategy, improve the efficiency of our business while stabilizing revenue and positioning our business for a return to growth. The fundamentals of our business are solid, and we are particularly pleased with the strong growth of our digital solutions for the SMB market, where we see opportunity for further geographic expansion and new product launches. Our enhanced capital structure and enhanced technology backbone will lead to additional improvements in margins and cash flow in 2022. Also, I want to thank our global team for their dedication to our customers and Excella's success. So with that, let's begin with slide number three, an overview of Excella's fourth quarter and full year highlights. Total revenue for the year was $1.167 billion, which was in line with our revised guidance for 2021. Revenue for the fourth quarter was $294 million. While both are down on a year-over-year basis, Q4 revenue was up $15 million sequentially by 5.4%. During 2021, we focused on the efficient delivery of our services, which resulted in good margin improvements for the year. Gross profit for Q4 was $59 million at 19.9% of revenue, down slightly by 80 basis points. Full year gross profit was $278 million, or 23.8% of revenue, an expansion of 300 basis points. And here's what's significant. We earned more gross profit dollars on lower revenue. Additionally, we generated adjusted EBITDA of $173.3 million, or 14.8% of revenue, an expansion of 135 basis points. More importantly, we generated adjusted EBITDA of $39.5 million in Q4, an increase of 6% or $1.3 million year over year that resulted in an adjusted EBITDA margin of 13.1%, which was up 124 basis points. Since the start of 2021, we've been laser focused on reducing our long-term debt and enhancing our capital structure. We are pleased that through a series of transactions, we were able to reduce our long-term debt by 30% for $454 million. With these improvements, Accella is on track for a $50 million cash flow improvement in 2022. We also increased our market capitalization of Accella by almost 300% to $238 million. Now let's turn to slide number four. And let's talk about our key performance metrics. The fundamental drivers of our business have inflected and are highlighted by the robust renewal rates, expansion activity, and increasing pipeline of new activity. Our renewal rates continue to improve and were 9% increase year over year. In terms of customer attraction, we closed 45% more deals sequentially. Our strategy continues to evolve, scaling up our cloud usage. Many of our platforms, including Intelligent Data Processing, or IDP, and our work from Anywhere Initiatives, or WFA, are driving fast adoption of the cloud. Cloud usage is expected to rise substantially from the 30% in Q4. Cloud usage continues to strengthen our margin profile and employee productivity. More than 50% of our employees are now on our work from Anywhere platform, and that percentage should rise. Now let's turn to slide number five. I'd like to focus on our strong positioning heading into 2022 based on the extensive accomplishments made in 2021. We have listed a number of tailwinds here, and we'll expand upon them in the subsequent slides. First, the work from anywhere adoption continues to rise, providing a hedge against rising costs while leveraging a global footprint. Second, anticipating COVID-19 is subsiding or stabilizing. Third, growing services, expanding products, solutions both in enterprise and rapidly growing SMB markets. Fourth, stronger balance sheet and improving fundamentals. And five, growing Wall Street and industry research analyst coverage. Looking ahead, in addition to the increased efficiency and stronger balance sheet, we're also experiencing notable demand and our products and services. Now, let's turn to slide number six, and let's talk about the Work From Anywhere solutions, or WFA, that address the rising cost and increasing productivity. Our cloud-based system, Work From Anywhere model, increases the efficiency of our services now and continues to provide a hedge against rising labor costs in all locales. The hiring market at large is challenging, and we are well-positioned to find lower-cost talent from the geographies that we serve. More importantly, our cloud-based system, Intelligent Data Processing, or IDP, and our WFA initiatives are driving margin expansion through more efficient delivery. During 2021, we made great strides in right-sizing our costs by reducing our real estate footprint and optimizing our headcount. We have increased our WFA revenue agents by more than 8,000 this past year, and we plan to accelerate that in 2022 to more than 25,000 agents. Over the year, we enhanced our WSA platform by changing our model to a cost per click so that our customers are paying for output rather than time. Our work from anywhere solution is secure, scalable, and global. As competition for talent is growing globally, Excello's solution gives our customers access to the labor pool on a global basis. Now let's look at slide number seven and let's talk about the renewal rates. Given the improvements we've seen in the current COVID-19 environment, including lower case rates and decreasing restrictions, we are optimistic about the future and the growth of our on-site business as we return to pre-2020 levels. COVID-19 had the hardest impact on our on-site business as the world eases restrictions and returns to a pre-pandemic level of activity. We are well positioned to benefit from that. In 2020 and 2021, we had approximately $90 million of annual revenues that have been delayed. We estimate that if the renewal rates were to recover to pre-pandemic level, that would include a $90 million uptick in our onsite business. Finally, let's turn to slide number eight for an update on our progress in the small to medium business sector, or SMB as we call it, which is part of our digital asset group, or DAC. Q4 was a very strong, or we finished very strong, to a solid year for the SMB offerings. Since our entrance into this segment in late 2020, we have seen a consistent, strong growth in the number of SMB customers for our digital mailroom, or DMR, and new users of our dry sign solution. In the fourth quarter, our DMR SMB customers grew 44% sequentially, and our dry sign users grew an impressive 135% in Q3 of 2021. DMR and Dry Sun also expanded across many new geographies, including Europe and Asia Pacific. The growth trajectory of our digital asset grid remains strong, and most recently we deployed Accela's robotic process automation platform, Eon, in healthcare and public sectors. Another notable launch in 2021 was Accela's human resource outsourcing, or HRO, business, which we call Accela HR Solutions. Finally, we launched our compact high-speed enterprise scanning platform called IntelliScan Raptor. The Raptor provides comparable capability as our existing IntelliScan suite of products, but at a much lower cost. In December, we also launched our remote online notarization platform. This platform will help us accelerate the conversion of SMBs onto our DMR platform and expand our value proposition to a much broader audience. We look forward to updating you on the progress of the remote online notarization platform in the coming quarters as the platform ramps up. Now let's turn to slide number nine, which is conceivably the most important slide in the deck, and it highlights points number four and five, which you saw on slide number five. So let's start with business growth and the steps Accela has taken to invest in future business growth of our company. For example, expanding our footprint into the data science consulting arena with new outside leadership and a goal of several hundred FTEs by the end of the year. Next, further expansion of our finance and accounting practice. followed by further alignment of our leadership compensation to the P&L goals at the enterprise level as well as the business unit level, additional talent investment, and continued expansion of the SMB across new markets and solutions. Next, let's talk about positioning. We've engaged with strategic partnerships and potential new M&A, which we hope to share some news with in the coming year term. Expansion of our digital offerings, which we plan to launch more platforms this year, 2022, than we did last year. And then new geographies leveraging cloud and IDP. Let's talk about financials. The lower cost of capital for better performance and stronger balance sheet. Increased financial flexibility through preferred equity and extended debt maturities to 2026. And, of course, the awards and recognition from Wall Street to the industry analyst. We continue, excuse me, as you can see, we've been very busy preparing for 2022, and we're confident that our positions and efforts will lead to further revenue growth and expanded profitability. We continue to focus on the growing Wall Street research coverage and are pleased that B. Reilly and Cantor Fitzgerald are making recommendations on Accela, With that, I'll now turn the call over to our CFO, Sriyakant Sorcher, to run through the numbers in more detail.