Jim Mathias - VP, IR Ron Cogburn - CEO Jim Reynolds - CFO.

Joseph Foresi - Cantor Fitzgerald Arun Seshadri - Credit Suisse Brad Elliott - RBC.

Good afternoon, ladies and gentlemen, and welcome to the Exela Technologies First Quarter 2018 Call. My name is Austin. I'll be your host operator on this call. After today's prepared remarks, we will conduct a question-and-answer session. [Operator Instructions]. Please note today's event is being recorded.

I would now like to turn the meeting over to Jim Mathias, Vice President Investor Relations. Please go ahead..

Thanks, Austin. Good afternoon and welcome to the Exela Technologies first quarter 2018 conference call. Presenting on today's call are Ron Cogburn, our Chief Executive Officer; and Jim Reynolds, our Chief Financial Officer. Following prepared remarks made by Ron and Jim, we will take your questions.

Today's conference call is being broadcast live via webcast, which is available on our Exela Investor Relations website. A replay of this call will be available until May 17, 2018. Information to access the replay is listed in today's press release, which is available on our website under the Investors section.

During today's call Exela will make forward-looking statements regarding future events and financial performance. These forward-looking statements are subject to known and unknown risks and uncertainties and are based on current expectations and assumptions.

We undertake no obligation to update any statements to reflect the events that occur after this call. Please refer to the Company's filings with the SEC for factors that could cause our actual results to differ materially from any forward-looking statements.

Our 10-K includes risk factors that could cause our actual results to differ materially from the forward-looking statements. During the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP results we discuss on this call can be found on our Investor Relations page of our website.

As a reminder, financial results discussed on today's call reflect pro forma combined Company results for the business combination of SourceHOV and Novitex which closed on July 12, 2017. Please note the results or presentation that accompanies this conference call and an Investor Fact Sheet are also accessible in the IR section of our website.

We will begin by turning the call over to our CEO, Ron Cogburn..

Thanks, Jim. Good afternoon and thanks, everyone for joining us today. We're beginning to see the early signs of the benefits provided by the successful execution of our strategy of introducing business process automation to our customers, executing on cost savings, and investing for growth.

Based on our strong first quarter results, highlighted by pro forma revenue growth of 8.7%, and pro forma adjusted EBITDA growth of 10.9%, we're increasing our outlook for both revenue and adjusted EBITDA. Now I'd like to cover a few highlights for the quarter. Let's begin on Slide number 5. Here's a little more detail around the results.

First quarter results were highlighted by pro forma revenue growth of 8.7% year-over-year to $393 million. The segmentation of this revenue for the quarter included 79.3% for ITPS, 14.9% for Healthcare Solutions, and 5.8% for Legal and Loss Prevention Services.

Profitability was also up 10.9% year-over-year with pro forma adjusted EBITDA of $69.6 million. Exela continues to enjoy low CapEx intensity with only 2.2% of the revenue for Q1.

We continue to be excited about the six largest customers now generating more than $25 million in revenue, with an eye on the top 197 that generates between $1 million and $5 million of annual revenue.

This is where our organic growth will emerge, with approximately $1.5 billion in an annualized revenue stream over a broad base; our largest customer represents only 6% of our pro forma revenue. Customers' numbers between 2 and 20 represent 27% of our pro forma revenue.

The top 100 customers represent 58% of our pro forma revenue which means we have lots of whitespace opportunity. Now let's discuss the revenue generation by our team.

As I've mentioned in previous quarters, our revenue per full-time employee or FTE has dramatically improved over the last 10 years growing from a BPO type metric of $17,000 per FTE more than a decade ago, to a BPA type metric now at $69,000 per FTE. The revenue per FTE metric grew by 5% alone in the period between December 2017 and March 2018.

All of this is a result of our automation platforms that we utilize every day as well as our customers. Now let's turn to Slide number 6. The mission to extend Exela's global leadership position in business process automation continues. We have significant whitespace opportunity to harvest and we're expanding our customer engagements.

For example, we are opening Exela innovation centers in key business markets. At those centers we can showcase our full suite of solutions and collaborate with customers to solve their problems and to launch new services. If you haven't experienced our innovation center please reach out and we could host a meeting with you and your group.

Early signs of our efforts are very positive with over 24 pilots to-date, our work to share the breadth and depth of the Exela Solutions with our customers continues and we're investing in people and technology to further build customer awareness.

Our company is on a journey to work with our customers to identify manual processes where through the application of our proprietary software technology, we can provide automation.

Through automating previously manual processes workers become more efficient and productive, our customers benefit from automation and digitization of information, by gaining the ability to aggregate and make sense out of previously disparate pieces of data and to improve their decision-making capabilities.

Ultimately, we believe, this transformation will drive higher revenue and improved profitability for Exela. We have a high degree of revenue visibility on a trailing 12-month basis. Total contract value won was $1.525 billion. The level of visibility gives us confidence in our ability to accurately forecast the trajectory of our business going forward.

We also have a high renewal rate on strategic accounts over 95% which is further proof of how effective we are at working to configure and implement meaningful and valuable solutions to our customer's year-over-year.

Importantly, we continue on our path of growth, we aim to keep a broad customer base and generate revenue from a number of different customers. Our strategy to grow is focused on increasingly applying our solutions throughout our 3,500 customer base.

Long sales cycles are a fact of our business and that's why we are pleased to have over 24 pilot program in place today. Only a year ago we only had a handful of pilots. As I mentioned last quarter, we have several opportunities in financial services, insurance and health care that turned into these active pilots.

Pilots as you know began as a proof of concept then they moved to a small program utilizing a fraction of the customers' volume and then the full production.

One such example was an initial pilot for a large insurance company with 3,800 of their agents and after successful completion; we converted this to a full production roll out with their entire 14,000 agent network.

Our mobile deposit and payment processing app significant reduced the effort as well as the cost and it also accelerated the insurer's journey towards digital transformation and most importantly, it enhanced the customer experience.

In addition, just this last week or just this week excuse me our Zuma Liquidity Solutions platform will showcase the opening active Finovate, one of the largest Fintech conferences in the world.

Zuma was created to address the growing need for a more intelligent, efficient lending marketplace, which not only includes more asset classes than ever before, but also more potential financing sources willing to participate. You can check out the video next week of the conference and see our presentation.

Importantly, as a first mover in the BPA space, we're investing to increase the awareness of Exela and our solutions. We're committed to strategically making investments in people with sales, marketing and strategy as well as continuing to invest in our technologies.

To this end, some of you on the call had been to our innovation centers in New York or in Los Angeles. We're in the process of opening up other innovation centers across the globe geographically located in the areas where our customers can conveniently access them.

These centers are set up to demonstrate the breadth of our solutions to current and prospective customers, while early the response from the customers has been overwhelmingly positive.

In addition to the investments in building customer awareness we're also continuing to participate in industry trade groups and present it shows we're excited to tell others about the journey we're on insurance stakeholders fully understand and appreciate how our business process automation solutions are different than what the traditional BPO industry has previously offered.

Now let's turn to Slide number 7. Global presence, we're approximately 22,000 employees strong at nearly 1,100 on-site client facilities and 150 delivery centers at over 50 countries where we're conveniently close to our customers.

Note that our largest concentration of employees is in the North America and we have about only 30 FTEs with H1B Visas and we have virtually no contractors. Important to note from this slide is that we have over 2,000 FTEs dedicated to the IT and technology that's required to support our BPA platforms worldwide. Now let's turn to Slide number 8.

Our distinguished customer base, we work with many of the largest companies in their respective industries that they serve and our revenue comes from diverse end markets. The total addressable market for our solutions is large and it's growing.

We have over 3,500 customers which include 60% of the Fortune 100 along with many of the largest retail chains, banks, law firms, healthcare insurance payers and providers, and of course telecom companies. Over 50% of our revenue have been enjoys the tailwinds of the fastest growing segments in that industry and those are BFSI and healthcare.

Exela does business with the top 10 U.S. banks, eight of the top 10 retailers, nine of the top 10 U.S. insurance companies, and the top five U.S. telecoms along with the top five insurance payers. Now let's turn to Slide number 9. Our focus over the long-term through execution of our strategy is to drive shareholder value.

We've highlighted four broad initiatives that I'll bring you up to-date on. Let's start with the BPA. The creation of Exela in able and expanded business model and provided us with a first mover advantage in BPA.

Customer response has been very positive, growth within our largest customers as the head of our consolidated revenue growth, and we have a number of pilot programs that I've mentioned 24 and counting and we have a lot of interesting conversations with many of our largest customers which should drive future growth.

Secondly, when Exela was formed last year, we found that a lot of customers simply didn't know our name or they didn't completely understand the set of solutions we can provide them. Business Process Automation is a concept some of our customers are still becoming familiar with.

To address that need and to increase the level of overall awareness, we've opened a number of innovation centers that I mentioned previously. There's two open to-date and we have two more under construction.

Additionally we've invested in people and technology and other profile raising initiatives that we believe will help customers better appreciate our solutions. Third, let's talk about cost savings which is a big part of our story. During 2017 we delivered more than $40 million in cost saving initiatives.

Savings during 2017 included a lot of savings related to the business combination. Q1 2018 our achieved savings was $14.8 million. Our 2018 guidance includes $40 million to $45 million in savings with the remainder being realized in 2019.

Realization of savings in 2018 and beyond are increasingly related to COGS as we implement our technology and our customer engagement. And fourth, accretive M&A. Asterion is a good example of a tuck-in acquisition that we like.

Asterion used to be part of Novitex's and it's a business we feel we have a good knowledge of and a proven plan to transform the business unit. Essentially we truly believe it as an extended execution of our strategy to integrate similar businesses and to increase the opportunities for both revenue and even the transformation.

The acquisition comes with a minimal customer overlap and is highly strategic to expand Exela's pro forma combined European business revenue to over $200 million.

This acquisition will enable Asterion customers to access Exela's full suite of BPA solution and also strategically position Exela to expand the existing revenue base through a broader portfolio of offerings with a large European presence. The transaction is anticipated to be accretive and slightly de-leveraging in 2018.

Important though is we want to maintain our financial flexibility with an able to strategic acquisition like this and opportunistic actions and ultimately help drive future growth and profitability. We had a great start to the year with 8.7% top-line growth and adjusted EBITDA margins that increased year-over-year and sequentially.

We've increased our full year 2018 guidance for revenue and adjusted EBITDA. We are executing on a strategy that best position Exela for long-term sustainable growth and to achieve a valuation that better represents the strengths of our business.

And now I would like to hand over the call to Jim Reynolds, who will discuss our financial results in greater detail.

Jim?.

Thanks Ron. Let's turn to Slide 11. Based on our pro forma revenue growth of 8.7% and adjusted EBITDA growth of 10.9% we're increasing our 2018 annual guidance for both revenue and adjusted EBITDA. From a quarterly highlight perspective, in addition to higher revenue and adjusted EBITDA, we invested over $26.5 million in growth initiatives.

We reported net loss improved by $34.4 million from the fourth quarter of 2017. At the end of the first quarter, our total liquidity was $117 million, and finally, Exela has $334 million in usable net operating loss carry-forwards available to offset pre-tax income. Moving to Slide 12.

From a P&L perspective revenue for the first quarter were up 8.7% to $393.2 million compared with $361.9 million in Q1 of 2017, and up 1.8% from Q4 of 2017. On an accounting segment basis, Information and Transaction Processing Solutions or what we call ITPS revenue was $311.9 million and grew 11.6% year-over-year.

This segment revenue also increased 3.5% sequentially. The year-over-year increase in ITPS was driven by increased volumes and expansion of services within existing customers as well as new customers. We saw continued growth in our banking and financial services verticals as well as our commercial, manufacturing, and technology markets.

Revenue in our Healthcare Solutions segment was $58.6 million compared with $59.1 million in Q1 of 2017 and in line with our expectation. This segment was down slightly from $60.1 million in the fourth quarter of 2017. The decline from Q4 was driven by lower volumes, the company received during the quarter.

This is common as open enrollment volumes for insurance ends late in the fourth quarter. Finally in our third reporting segment, Legal and Loss Prevention Services or Legal, our revenue was $22.6 million down approximately 3.4% year- over-year compared with Q1 of 2017.

We had a small non-core asset sale in March of 2017 that impacted the year-over-year comparison by $1.1 million. As a reminder, our revenue in our Legal segment has a stable base but is more event driven and therefore can fluctuate between quarters. On the next page 13, we reported operating income of $14.7 million flat on a year-over-year basis.

Our operating income was driven by revenue growth slightly offset by higher costs of revenue along with lower SG&A expenses as a result of our flow-through cost savings initiatives. We saw 14% decrease in our SG&A expense year-over-year even after the investments in certain growth initiatives and higher public company costs.

Our operating income was also negatively impacted by $7 million increase in our amortization expense during the quarter related to an accelerated expensing of our legacy trade names. This accelerated expense will continue over the next three quarters.

Exela's net loss for the current quarter improved by $34.7 million over Q4 2017 to a net loss of $24 million. On a year-over-year basis it improved by $1.4 million. We are continuing down the path to transform our lower margin business Exela Enterprise Solutions which we acquired in July of 2017.

We are making good progress and we expect this transformation to take about 12 to 15 months. On Slide 14, our EBITDA in Q1 2018 increased by $13.1 million year-over-year to $56.1 million. Our adjusted EBITDA for Q1 of 2018 was $69.6 million representing a margin of 17.7% compared with $62.7 million and a margin of 17.3% from Q1 2017.

Business optimization and restructuring expenses increased during the quarter as we continue to execute on our plan to deliver between $40 million to $45 million in savings flow-through in 2018. Touching on cost savings, we realized nearly $14.8 million during the first quarter.

As we complete our savings initiatives in 2018 and 2019, we expect further adjusted EBITDA to converge with adjusted EBITDA during 2019. Now turning to Slide 15. On a pro forma basis full-year 2017 we reported a further adjusted free cash flow conversion rate of 87.8%.

Exela's strong free cash flow profile and conversion rate is due to our low CapEx operating model. In the first quarter of 2018, our CapEx was 2.2% or $8.7 million of our revenue and 90 points lower on a year-over-year basis.

Exela also invested $26.5 million in business initiatives during Q1 in working capital related to revenue expansion and business optimization cost to drive our future savings. Turning to the capital structure and other highlights on Slide 16. At March 31, 2018, total liquidity was $117 million and net debt was $1.366 billion.

We had global cash of $37.3 million and an undrawn $100 million revolving credit facility of which $20.6 million was blocked for standby letters of credit.

Cash was down from December 31, 2017, as expected due to interest payments of $66 million during the quarter of which approximately $50 million related to the senior secured notes and its payable as you remember semi-annually every January and July.

Additionally, since we announced our stock buyback plan for employee ESOP this last fall, we have purchased over 186,000 shares to-date. A majority this purchase was done in April before the quite period. Going forward, we will be opportunistic and continue to aggressively purchase shares given our view that the company's shares are undervalued.

On Slide 17, other items. Effective January 1, 2018, like all companies we adopted ASC 606 the new accounting standard for revenue recognition. The effect of the accounting change did not have a material impact on our financial position and we recognized a $1.4 million cumulative effect on adoption as an increase to our beginning equity balance.

With respect to the Tax Reform Act, we will generate income on a tax basis as a result of certain limitations on interest expense deductions and increased U.S. Tax from Global Intangible Low-Taxed Income on foreign income or GILTI which will be partially offset by 100% deduction of capital expenditures.

Even though, we will generate taxable income, Exela has over $334 million of usable NOLs that will fully offset our federal taxes. We currently do not anticipate paying any federal taxes until sometime in 2021 or 2022.

For this fiscal year, we estimate our cash taxes to be under $10 million, but payable for certain states and some foreign taxes for profitable international subsidiaries. We paid $1.1 million in cash taxes during the first quarter of 2018. On Slide 18, we are raising our 2018 guidance which we originally provided in March.

We expect revenue to be between $1.55 billion to $1.58 billion, up from $1.51 billion to $1.54 billion on a constant currency basis. We are also increasing the low-end guidance range of our adjusted EBITDA by $5 million. The new guidance range is $295 million to $310 million.

We have no change to our further adjusted EBITDA which we expect to be in the range of $330 million to $355 million translating into a 22% to 23% margin. In addition for 2018, our further adjusted free cash flow conversion in the range of 87% to 89%.

Our guidance includes delivering $40 million to $45 million in savings during 2018 with the remaining in 2019.

Our long-term growth view on the business remains unchanged, revenue growth on a constant currency basis in the range of 3% to 4% and adjusted EBITDA margin in the range of 22% to 23% and adjusted free cash flow conversion in the range of 87% to 89%. Thank you. And with that, operator, I'd like to open up the call for questions..

[Operator Instructions]. And our first question today will come from Joseph Foresi with Cantor Fitzgerald. Please go ahead..

Hi.

So I wanted to ask about obviously the raising guidance on the top-line, are there any maybe you can just talk about the drivers and what is giving you the confidence to raise that guidance and are there any one-time projects that are taking off or you're starting to get a boost from in the numbers and how does that sort of flow-through the year?.

Yes, thanks for the question, Joe. If you think about our business and our contracts, they are long-term in nature, right, they are typically three to five years and we have over 95% renewal rates. So we have good visibility into our revenue typically just over 90% at any point in time.

If you look at the numbers we delivered in the first quarter, we're very pleased with the results. And we continue to believe we're on the right trajectory. Ron talked about the large contract on the last call which is starting to ramp up.

So we feel really good from a top-line perspective and thought it made sense to increase the guidance given that time..

Got it.

And maybe you could give us a little color on your expectations by segment for 2018 just from a growth perspective, how should we think about that, I know that Legal has got some projects start fairly quickly but how do we think about that more in the segment level side?.

Yes. So given the overall growth percentages we see a majority of it coming through our largest segment are ITPS, right. We have over to 70% of our -- 75% of our revenue in that segment, that's a big driver that's where we're strong in industries with banking and financial services and insurance.

And as those industries grow, we pick up incremental volumes. We move along with the market, those markets looking out grow somewhere between 6% and 8%. With respect to the Legal, we think that's somewhere it's very steady as we talk and based on lot of singles and doubles, right we see that somewhere around $90 millionish give or take.

And then within Healthcare typically we see a little bit of a dip because open enrollment and people are using up their claim dollars in Q4, it starts to pick up throughout the year, so you will see growth in Healthcare this year but not to the extent as ITPS..

Got it. And then one last one I’ll get back in the queue.

You talked about the $45 million in savings maybe you could tell us a little bit more about that target is that something that you think you might be able to exceed this year, are you comfortable with the current pace of the flow-through into the rest of the income statement and what is that encompass particularly as far as the cost savings that you've been working on?.

Yes. I mean we feel really good about the cost savings and were on track. If you think about the $40 million to $45 million they're kind of broken up into our typical three buckets, our headcount savings are between $16 million and $18 million about $19 million to $22 million in vendor savings and then $4 million to $5 million in lease savings..

[Operator Instructions]. Our next question will come from Arun Seshadri with Credit Suisse. Please go ahead..

Hi guys. Thanks for taking my questions. Just a couple from me, the first I just wanted to understand obviously nice revenue growth in the quarter but it looks like gross profit actually declined just wanted to understand how that happened with the many ramp up costs et cetera and then also what was the impact of postage in the numbers..

So if you take a look -- we don't really look at in our gross margin basis because we have a lot of business optimization cost flowing through. We kind of focus on an EBITDA perspective it's a better measure at this point in time.

We incurred $14.5 million in optimization of which I would say somewhere about 75%, 80% give or take runs through cost of sales. So that's kind of the overall breakout we were pleased with the SG&A decrease.

We're going to continue to work on these cost savings and as you can see what we're looking at doing we feel highly confident things we control with a majority within the high count area. And then with respect to your comment on postage, I mean we don't really breakout postage separately, we follow U.S.

GAAP revenue we just adopted the 606 which drives the accounting for our revenue..

Got it. Okay thank you.

And then as far as the other thing was like there was a $7.5 equity I don't know what it shows up in your cash flow statements the cash paid for equity issue process? What was that related to?.

That's a good point. This was basically fees we incurred one-time related to the deal back in July and then finally we paid $7.5 million of it. So we were able to get pretty favorable terms..

Okay, got it..

So one-time..

One-time, okay. And then the last question is in terms of cost savings recognized already is there any way to give us how much of your full-year $40 million to $45 million of cost savings, how much of that was actually reflected in the numbers in Q1? Thank you..

About $14.8 million..

I'm sorry. So $14.8 million of cost saving -- of the $40 million to $45 million reflected..

Correct. Yes..

First quarter, okay. Got it. Thank you..

Thanks, Arun..

The next question comes from Brad Elliott with RBC. Please go ahead..

Hey guys.

I just wanted to follow-up on some of things the last two questions on some of the cost saving stuff, when you said that the -- in 2018 you're going to have $40 million to $45 million and then the balance is going to be in 2019, can you just refresh sort of what that balance is going to be given that in the OM that when you did the deal last year you had some cost savings and something you weren't included in your full adjustments can you kind of give us a refresh on what the 2019 number would look like or range?.

Well, sure I mean if you -- I mean what we have remaining is about $81 million or so in our further adjustment that we're working on. So I think that's in our factsheet and our website. So if we get $40 million to $45 million now you can do the math and there's a remainder of roughly 40ish for 2019 the flow-through..

Okay.

And then, Jim, in your prepared remarks you said that the full integration and the conversion was about 12 to 15 months is that from the deal closing in July or that kind of where you stand now?.

I would say from that perspective it's from when the deal closed. I mean we're working hard on the back half of this year that be incremental work to do into 2019 but if you remember some of these we're dealing with large customers that we have to work with their IT departments. There's CTOs when we start to move around some of the technology.

So we're ready to move as quick as it makes sense with our customers, so those are the types of things. Things like headcount, vendor saves those moves a lot quicker obviously..

Right. And then the last one on the incur costs in the first quarter which sort of the business optimization that $26.5 million do you expect more that throughout the balance of the year or that just for that those contracts that are starting up in the first quarter..

I think you're talking about the investment we made..

Yes..

Yes, I mean I think that this company generates a lot of cash. And we're looking to drive those incremental savings but I think that's going to come down over the next few quarters as we move through the end of the year, that's the trajectory..

Okay. And more anymore thoughts on the acquisition front I mean obviously the -- just doing acquisition with a nice tuck-in that you’re looking more for other global opportunities at this point or you kind of set with the integration at end..

So I mean overall we're pleased with this tuck-in it’s small, it makes a lot of sense. It's a simple integration to do. Looking out we may look at some tuck-ins down the road but I think at this point we're pretty satisfied with things..

We're focused on what we have --.

We're focusing on really de-levering to three times in driving top-line growth..

Was that acquisition was that something that they approached you or like how do you source those is that something one of your sponsors was in touch with us well..

So the reality of is these things come up every single day, right they kind of knew about the Novitex's deal obviously we bought the U.S. piece there was a kind of a short window for us to execute and it made a lot of sense, so that's typically how it works..

[Operator Instructions]. Our next question is a follow-up from Joseph Foresi with Cantor Fitzgerald. Please go ahead..

Hello..

Yes, can you hear me, okay..

Yes..

Yes.

So I had a since we have a little bit of time I had just kind of two final ones may be you can help me with the cadence of revenue and margins to the back half of this year anything we should know from a seasonality perspective and if you can talk about that steady pace of I guess you talked about $14 million is that what we should expect per quarter and then I have one other final question..

The thing is we have over 3,500 customers with different mandates, different margins et cetera as we ramp up we take typically start with a lower margin and then they start to improve as we get to steady state. I think part of the revenue growth during the quarter and sequentially was from ramping up a large customer.

We see as we move through the year that our margins will expand. You can kind of get to it through our guidance of adjusted EBITDA margins for an increase of 220 to 320 bps. And then we have Novitex's and as we put in BPA, you're going to start to see that expansion --.

Transformation.

And the transformation..

Got it. So its sounds like it's a gradual increase for the next couple of quarters..

That’s correct..

Yes. Okay, got it. And then just the last one for me on the use of cash.

Any thoughts about I was seeing [ph] to the small acquisition but what's your primary objective for the use of cash I assume is to pay down debt and could you be de-leveraging quicker than expected if cash flow improves for you just trying to get a sense of sort of what you need to be looking to use the cash flow..

I think it's a combination. I think we look at it de-leveraging is very important to us. That's important; I think that we can be opportunistic with respect to the stock buyback. It's not we haven't bought really back that many shares as of yet and then if there's a unique tuck-in acquisition we'll look at those.

But I think overriding our debt is a little expensive we're going to look to de-lever it..

Any chance to refinancing with that?.

Yes, I mean we're always. I think you’d ask every, I don't know if that's a fair question..

If you have any ideas, yes. Okay got it. Thank you..

Thanks, Joseph..

And our last question today will come from Arun Seshadri with Credit Suisse. It is follow-up. Please go ahead..

Thanks for letting me jump back in. Just wanted to get a sense for HS, how do you expect HS progress to balance in the year in terms of sort of growth cadence, when do you expect that to return to growth..

I think as we look out, we see it steadily increasing through the rest of this year. Back in previous quarters, we had the ICD-9 to 10 conversion where it was really lumpy and we had that kind of flow-through the system through the end of Q4 of this year. So I don't see anything lumpy in the back, in the next few quarters..

Okay, got it.

And then as far as the optimization on restructuring expenses we obviously saw that little bit higher like $14.5 million in Q1, how should in your full-year guidance two things, one how much -- what do you expect for full-year optimization restructuring expense?.

So I mean I think that obviously with the acquisition of Asterion we're going to have some more. I think we're working through that at this point in time. We just did the acquisition, we have some ideas but haven't fully divided on that. So I think that that will be on our follow-up earnings call once we start to digest..

Okay, so you probably have that but can you talk about sort of that is the only additive thing to what you said before was something like around $25 million of optimization and restructuring?.

Yes, I think the original guidance before this was around $25 million..

Yes, got it. And then the last thing is in terms of GAAP, in terms of GAAP EBITDA I don’t know if you could bridge for us again the improvement in adjusted EBITDA guidance, it is good to see, just wanted to get a sense for where do you think GAAP EBITDA ends up in a range for the year? Thanks..

We haven’t given that guidance yet. But what I would say is it continues to transform and improve. If you look at where we were in Q3 we went from 21 up to negative 21 up to positive 56. Obviously there were some impairments at that point in time.

We’re going to have some higher amortization this year related to the legacy trade names that we have to write-off over a year which we discussed on the Q4 call. So I think you will see us as the savings flow-through from this op into the P&L up above, you’ll start to see more GAAP as we move through the year..

And this will conclude our question-and-answer session. I would like to turn the conference back over to Ron Cogburn for any closing remarks..

Thanks, Austin. We really appreciate everybody participating in the call today. As you can tell, we’re very pleased with the quarter. For those of you that have not had the pleasure of visiting us at one of our innovation centers please reach out to myself, Jim Mathias or Jim Reynolds and we’d love to host you and your group there.

I think it makes a lot of sense in understanding our technology and the power of the business process automation. We look forward to speaking with everyone again next quarter. Thanks for participating..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..