Exela Technologies, Inc.

Good day and welcome to the Accela Technologies third quarter 2022 financial results conference call. All participants will be in a 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. To ask a question, you may press star then one on your touchtone phone. And 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 Mr. Vince Condoviti. Please go ahead, sir.

Thank you, Chuck, and good evening, everyone. Welcome to our earnings call to discuss our third quarter results for the period ended September 30th, 2022. Our earnings release and presentation were posted to the IR section of our website. Speakers on today's call are Par Chadha, Executive Chairman, and Srikanth Sautar, our Chief Financial Officer. Today's agenda will be as follows. Par will provide an overview of our results and update you on our strategic initiatives. Srikanth will then walk you through our financial performance for the quarter, and then we will take your questions. We've been in communication with many investors via Speak Up, and we hope that you're finding it useful. I also wanted to mention that we are accepting questions ahead of our Fireside Chat with PAR on November 30th. You can propose questions up until the day before Thanksgiving on fireside.excelotech.com. Some of the matters we will discuss in today's call are forward-looking and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those in such forward-looking statements. Such risks and uncertainties are set forth in our press release. I'll turn the call over to Par, our executive chairman. Par?

Good evening, and thanks for joining our Q3 business update. I shared my strategy and objectives for the company when I stepped into this role a little over a year ago. The macro environment was different then. We have completed some of our objectives, added a few new ones, and adjusted a few to stay nimble and focused on our mission, changing from market exuberance to our reality. We have evolved, and so has our mantra. Today it is converting actions into results. I'd like to turn to slide number three. I want to share seven highlights for this quarter and set the stage for Q4 and 2023. Number one, our European business will go public following the business combination at a value of $220 million with Accella remaining as the majority stockholder. We look forward to sharing more on this over the coming months. Number two, our Serve the Shareholder initiative aligns all of our stakeholders. We are pleased that we have set aside 70 million of 2026 senior notes to begin with. It's never enough, but let's call it a good start. These are some of the examples of how the funds we raised in equity markets have been deployed. This is an important topic, and I will provide some more color on the next slide. Number three, our revenue was lowered this quarter due to several factors, including network outage, currency translation, transition revenue, and tight job markets. These events combined with the changing macro environment require us to recheck our business models and assumptions. And we have been doing just that. And I'll share the steps we have taken to address these. In short, while we're on the right track, we do not need to get ahead of the events that impacted us or could impact us in future. Number four, I want to emphasize the importance of our strategic decision to pivot to work from anywhere or WFA, which we adopted some time ago. We didn't know at the time that inflation, low unemployment, rising costs, and yes, strong dollar will impact us the way it did. I'm so glad that we adopted WFA when we did. Our actions to offset these impacts are tracking to reach approximately 40.5 million of operational improvements estimated in 2023. I'll cover that in more detail over the next coming slides. Number five, we are having a decent conversion of our pipeline into contracts. TCV came in at $87 million. I'm not happy that only a small amount of our contract wins have converted into revenue in this quarter. So no surprise, our focus has gotten even sharper on converting this into revenue as soon as practical. Number six, our SMB SaaS business continues to show stellar growth. It's nice to see this is rubbing into our enterprise business as well. We see demand rising there too. I primarily am referring to DMR at DrySign. And as we launch our next SaaS platforms, we have a few more platforms, as you know, and we'll benefit from lessons we have learned and our experienced team. Number seven, we continue to fix and strengthen our balance sheet with help from our shareholders, of course. As you know, in this regard, we still have some more work to do. Primarily, our focus for now has shifted to performance, converting actions into results. Let's turn to slide number four. We have raised a substantial amount of equity capital, and let me walk you through how we have used it, prudently between investing in the business and balancing between our stakeholders. Look at the sum of the parts analysis. We own 100% of Accela BPA. In addition, we estimate the value of other assets to be over 600 million. Yes, 617.5 million plus whatever equity value you want to allocate to Accella BPA. Our shareholders own these assets. The bottom line is that Accella is trading far below its intrinsic value. We plan to address this by focusing on performance as fixing this gap is of utmost importance. Let's turn to slide number five. Let me walk through six items that have impacted our revenue. Historically, our Q3 is a seasonally soft quarter. That aside, the total negative impact in Q3 was $26.6 million, which was offset by revenue growth in Q3 of $7.2 million and $4.6 million of cleared backlog from Q2. We were also impacted by currency translation to the tune of approximately $7 million Net-net revenue was down 15.2 million. Let us turn to slide six. Some more color on revenue. As I mentioned, we're seeing stable TCV conversion from pipeline into new contracts. We need to get our renewals up and but we are very satisfied with the recurring revenue at 98%. We're seeing healthy growth in healthcare and legal segments. We do have businessmen in XBP that's part of ITPS segment that as they convert into revenue will start to show as revenue growth as well. Despite the macro headwinds, Conversations with our customers remain robust and demand continues to improve across various segments. The network outage that we talked about in the Q2 call is largely behind us. However, we are having some lingering impacts in our discussions with customers. We are a mission-critical vendor to our customers And it's important to showcase our leadership and solutions and resiliency of our solutions to assuage concerns of our customers. We're having many successful conversations with our customers as well. Our objective remains to put us in a position to grow pipeline and not ultimately win more business. Let us turn to slide number seven. I touched on this earlier and over the next few slides I will highlight the actions we have taken for operational improvements to grow our margins and use tools in our control to manage our business. What a better outcome. We've examined and continue to examine our performance across all functions and we have taken steps to align the size, reduced weight appropriate, and acted based on performance to fix. Ultimately, we are prepared for a better outcome with a reduction in overall costs. Backed by WFA, we have the potential to accomplish this goal. For example, on slide number eight, we began to implement our WFH solutions during the pandemic, but quickly saw that solutions could help mitigate the inflationary environment, tight job markets, and rising costs to address the impact we were seeing. We took this initiative to expand our team across current and additional geographies. Now, 49% of our employees work from anywhere they want and whenever they want. Our Uberization platform now is targeting to reach 30,000 workers by the end of 2022. You ask, what will this allow us to do? Well, I say prepare for a feast at a lower cost by complimenting our existing team members. Many additional good things happen too. This enables much larger usage of cloud as many, I'm sorry, as when majority of our team is using cloud tools. This has many additional positive add-on effects. Another benefit, as we turn to slide number nine, This permits to shed real estate cost in all geographies and allow us to consolidate smaller locations into bigger locations as well. At the beginning of Q3, we had 2.8 million square feet. Our goal is to, in Q2023, come down to 2.17 million square feet. not an easy task, but made possible by WFA. I want to share what many of you already know. The salary of an employee is by far the largest expense. We are also addressing this expense by blending work from anywhere and reduced real estate expense and physical expense This all leads to the key question of how much infrastructure in our data centers is affected by this. We spend over $30 million on software and hardware maintenance, including over $30 million in real estate costs. That's just the least cost, not including all the other cost expenses that come with leasing a building. No surprise, this expense is under the lens as well. Upon successful completion of migration to cloud, this $60 million of cost start to become less important, maybe even secondary, and start coming down as the real estate starts to come down. We may have to pay one-time cost to exit some buildings, but savings materially favor the decision. One decision to pivot to WFA that we made during pandemic has enabled us to become more nimble and a better organization. Better organizations for not just us, but also for our customers. Let me add up the current benefit of these actions. On slide 10, These five initiatives total over 40 million in operational improvements. I assure you, we're not done. In my experience, we'll continue to find more previously unknown operational improvements across all functions. I'm glad we adopted WFA to initially protect our employees, and embarked on a mission to uberize our workforce. It is just beginning to flow through and will benefit in 2023. Our goal is to reach and cross the inflection point as soon as possible. Our mantra these days is converting actions into reality, into results, reflecting our current reality. Many thanks to our shareholders, lenders, employees, and many others. And with that, Chirikant, our CFO, please take it away.