Jim Mathias – Vice President of Investor Relations Ron Cogburn – Chief Executive Officer Jim Reynolds – Chief Financial Officer.

Joseph Foresi – Cantor Fitzgerald Matt Roswell – RBC Capital Markets Dan Dolev – Nomura Instinet Brad Eilert – RBC Arun Seshadri – Credit Suisse.

Good afternoon, ladies and gentlemen, and welcome to the Exela Technologies’ Second Quarter 2018 Call. My name is Denise, I’ll be your host operator on this call. After today’s prepared remarks, I’ll 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 of Investor Relations. Please go ahead, sir..

Thank you, Denise. Good afternoon, everyone, and welcome to the Exela Technologies’ second quarter 2018 conference call. I’m here today with Ron Cogburn, Exela’s Chief Executive Officer; and Jim Reynolds, 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 the Investor Relations page of Exela’s website, www.exelatech.com. A replay of this call will be available until August 16, 2018.

Information to access the replay is listed in today’s press release, which is also available on the Investor Relations page of Exela’s website.

During today’s call Exela will make certain statements regarding future events and financial performance that may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to known and unknown risks and uncertainties and are based on current expectations and assumptions. We undertake no obligations to update any statements to 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 Exela’s most recently filed periodic reports on Form 10-K and the Form 10-Q filed with the SEC today along with the associated press release and the company’s other filings with the SEC. Copies are available from the SEC or the Investor Relations page of Exela’s website.

During today’s call, we will refer to certain non-GAAP financial measures. Reconciliation between GAAP and non-GAAP results we discuss on this call can be found on the 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 Holdings and Novitex Holdings, which closed on July 12, 2017.

Please note, the presentation that accompanies this conference call and an investor fact sheet are also accessible on the Investor Relations page of our website. We will now begin by turning the call over to our CEO, Ron Cogburn.

Ron?.

Thanks, Jim. Good afternoon, and thanks, everyone, for joining us today. I am pleased to report second quarter revenue grew 17.3% and EBITDA grew 23.8% on a pro forma year-over-year basis. We saw growth across customers and geographies and increasing demand for our services.

With approximately 200 customers generating annual revenue over $1 million, backed by strong quarterly results and large contracted backlog, we are reaffirming our outlook for full year 2018, which Jim Reynolds will discuss a bit later in the presentation. Let’s turn to slide number 5.

I am pleased to report strong second quarter 2018 results that are highlighted by double-digit revenue growth of 17.3% to $410.4 million, EBITDA growth of 23.8% an adjusted EBITDA growth of 9% to $70.1 million. We are encouraged that 11% of our growth is organic coming from the deals that were sold late last year and early this year.

Additionally, not all the revenue expected from these deals has come through yet, we’re still ramping up both within existing customers as well as new logos. The remaining 6% growth is inorganic driven by acquisition, net of divestitures. Cash generation during Q2 was in line with our expectations.

And at the end of the quarter, we had approximately $140 million of liquidity, which was up 20% since March 31, 2018. Our spending on capital expenditures remains low at about 1.9% of revenue for the quarter. Another highlight of Q2 that we are excited about is the fact that Exela was added to both the Russell 2000 and Russell 3000 indices.

Inclusion in these indices should further increase our visibility and exposure among our investors. Looking at our shareholder base, we had 91% of institutional holders as of March 31, 2018. I am very pleased with Exela’s Q2 financial performance and hope that the market start recognizing our accomplishments and rewarding our efforts and our results.

As an update to our stock buyback program approved by the board late last year, we bought back about 770,000 shares during the second quarter. As we continue to think that we are undervalued, we expect to continue buying back the stock under this program as long as the stock continues to trade at these discounted levels.

Now let’s turn to slide number 6, which is about our growth across customers and geographies. With our customer interest increasing and the expanded white space opportunities, our contracted backlog is increasing as well and the mix is favorable, changing in line with the execution of our business strategy.

We have a high renewal rate, which further demonstrates our effectiveness in taking our customers on their digital and business transformational journey. With our quarterly results, strong backlog and high renewal rate, we are confident in the top line trajectory of the business going forward.

During the quarter, we added new contracts and statements of work, and now we have eight large customers, generating annual revenue in excess of $25 million. Importantly, as we grow our presence within our customers, we are maintaining a very diversified revenue base. Our top 150 customers account for 66% of our revenue.

Our strategy, which is to provide business process automation services to all of our customers, positions us for long-term growth.

We differentiate ourselves by enabling rapid deployment of business process automation using Exela’s proprietary technology suite covering robotic and cognitive automation, coupled with domain expertise that we’ve gathered over more than a decade of delivering BPO services.

We make it easy for customers to do business with us by offering hybrid deployment models through our sites or our customer sites or even SaaS. With our strategy in mind, we are growing across our customer base as well.

With approximately 200 customers generating between $1 million and $5 million in annual revenue, we have the right solutions and the platforms to capture these white space opportunities with our land-and-expand strategy which has worked so well over these past many years.

One our business strategies and our goal is to take these 200 customers on their digital and business transformation journey and increase our wallet share. We’re making investments in people and technologies to do just that. Exela is growing across the geographies we operate in as well. So let’s talk about Americas first.

The 9% growth in Americas was organic driven by the deals sold last year and early this year that are now ramping up. We’re also excited about the several pilots executed in the last few quarters that are expected to drive revenue in the future. Moving on to the rest of the world, especially Europe.

The growth of 103% helped us double in size year-over-year. This increase of $33 million in revenue is both organic and inorganic. 65% of the revenue growth in Europe and the rest of the world was due to the recent acquisition of Asterion. The remaining 38% of the revenue growth in Europe and the rest of the world is driven by organic growth.

Now let’s turn to slide number 7. We are well positioned with our 3,700 customers spread across diversified industries. We serve leading companies with over 60% of the Fortune 100, and we are well positioned doing business with the top 10 U.S. banks and 120 global banks, 14 of the top 20 U.S.

insurance companies and over 50 global insurance companies, the top five insurance payers in the U.S. and over 900 healthcare providers and four of the world’s five largest retail chains. Additionally, we serve the top five U.S. telecoms along with more than 40 utilities. Let’s turn to slide number eight.

With our customer growth, improving business improving business metrics and growth across diversified industries, we have the team that can deliver this. Over half of our employees are here in North America.

We have our 2,000 dedicated employees in IT and technology, supporting our BPA platforms worldwide, and our total global employee count stands at approximately 22,000 strong.

As a direct result of our automation strategy that we can deploy throughout our organization, our headcount declined year-over-year by 7% as you can see in the chart on the right, excluding the additions due to the acquisitions and net of increases due to growth.

Our investments in technology continue to pay off with lower variable cost additions and higher corresponding revenue growth with superior revenue per FTE metric, which differentiates us from our peer group. Our strategy is to drive automation. We provide BPA-powered BPO services both on-site and off-site.

Our view of BPO has evolved from the traditional model. We view on-site BPO as process outsourcing and transform it just as we do off-site processing. We have developed the technology in our BPA suite to provide attended and unattended automation for the process.

Using the power of our technology and recognizing the potential with BPA, many of our existing customers are now reanalyzing their on-site BPO business. The interest from customers has broadened, and this also includes interest in our platforms like print shop, digital mailroom, front-office automation and digital lockers.

The results of this strategy puts us in a unique position amongst our peer group. This essentially demonstrates that we are able to grow the revenue faster with a much lower – or slower variable cost increase. Put in other words, the growth in the revenue exceeds the growth in the variable cost in the form of headcount needed to service the revenue.

As a direct result, we expect our revenue per FTE to continue decline. The strategy drives the growth in revenue per FTE from about $18,000 FTE a decade ago to over $70,000 per FTE currently.

This is a growth and transformation story that we are sharing with our customers at innovation centers in New York, Dallas, Los Angeles as well as other key markets across the globe where our customers can conveniently access them.

Before I turn the call over to Jim, we had a great first half of 2018, and we are comfortable with our outlook and excited with the opportunities we see for the second half. And now I would like to hand the call over to Jim Reynolds, who will discuss our financial results in greater detail.

Jim?.

Thanks, Ron. Let’s turn to Slide 10. We are pleased with our results. Second quarter 2018 revenue increased by 17.3% to $410.4 million compared to pro forma Q2 of 2017. EBITDA increased by 23.8% to $51.3 million compared to pro forma Q2 2017. We continue to convert our savings actions over the quarter into EBITDA.

Our adjusted EBITDA increased by 9% to $70.1 million in Q2 of 2018 compared with $64.3 million in Q2 of 2017. This increase in EBITDA was partially offset by duplicate ramp costs incurred that we are no longer able to capitalize in 2018 under ASC 606. This makes our margin to appear weaker during the initial phase of ramp.

This decrease is also reflected in our CapEx comparisons year-over-year as there is approximately $2 million more of expense in the P&L in Q2 2018, which would have been historically capitalized.

Margins were also impacted by increased public company cost as we navigate through our first year of SOX compliance, and we have added more staff to the finance and accounting teams. This year, we have also increased our investments in sales and strategy teams, innovation centers and marketing initiatives to drive our top line growth.

Looking at the adjustments to EBITDA. We had a decrease of $6.5 million in transaction-related expenses in Q2 2018 compared to Q2 2017. These costs were incurred as a result of the business combination in July of 2017.

Optimization and restructuring expenses were up $2.8 million in Q2 2018 and our part of our plan in delivering $40 million to $45 million in flow-through P&L benefits in 2018. We will continue to identify and invest in achieving these savings. The total optimization and restructuring expenses have not changed.

Year-to-date, we have already incurred $27.5 million. The second half of 2018 and future quarter amounts will depend on the rate of conversion of these savings. In the third bucket, other charges, on a pro forma basis in Q2 of 2017, there were management fees of $5.4 million, which were terminated as part of the business combination.

The charges in Q2 of 2018 are non-cash expenses related to premerger equity awards that are still vesting. The last item relates to a small gain from our interest rate swap on the term loan that we entered into in January of 2018.

To summarize our Q2 and half-year performance, we have ramped up a few big deals won late in 2017 and early this year, which is evident in our top line growth. We are expecting the big deals will migrate towards normal margins in the next few quarters along with the savings actions being executed in parallel.

This will give us the gross margin lift that, in turn, will translate into higher EBITDA. Moving to Slide 11. On an accounting segment basis, Information and Transaction Processing Solutions, or what we call ITPS revenue, was $330.1 million and grew 22.1% year-over-year.

The 22.1% increase in ITPS was driven by increased volumes and expansion of services within new and existing customers. Our recent tuck-in acquisition added 7.7% of the growth in ITPS during the quarter. Revenue in our Healthcare Solutions segment was $56.3 million compared with $58.1 million in Q2 of 2018 or a slight decline of 3%.

The main reason for the decline was due to lower volumes from a single customer who lost a contract from one of its customers. We expect Healthcare Solutions to finish fiscal year 2018 higher than fiscal year 2017 based on our contracted revenue.

Finally, in our third reporting segment, Legal and Loss Prevention Services, or Legal, our revenue was $23.9 million, up approximately 10.9% year-over-year compared with Q2 of 2017. Revenue for this segment is event-driven and in line with expectations.

We would have had a larger increase in Q2 of 2018 but we sold a small non-core subsidiary in early Q2 that reduced the revenue growth by 2.5%. On the next Slide 12. We reported operating income of $11.9 million, an increase of $1.9 million on a year-over-year basis.

Our operating income results were driven by revenue growth offset by higher cost of revenue, which was driven by the impact of ramp-ups of large contracts offset by flow-through cost savings initiatives and lower SG&A.

These large contracts typically have very low margin in the initial phase but, as they reach steady-state, margins improve and expand over time. SG&A expense declined 7.1% year-over-year due to the flow-through of cost savings initiatives offset by continued investments in our growth strategy and public company costs.

Our operating income was also negatively impacted by a $5.3 million increase in our depreciation and amortization expense due to an accelerated write-off of legacy tradenames. This impact will continue during the remainder of 2018.

Exela’s net loss for the second quarter improved by $2.7 million on a year-over-year basis to a net loss of $25.2 million. As a reminder, we have a sizable amount of net operating loss carryforwards available to offset pretax income. Cash taxes we paid totaled only $2.8 million during the quarter. Moving to Slide 13.

We generated $47.4 million of net cash during the quarter. We ended the second quarter with a cash balance of approximately $86.9 million, an increase from the $39.4 million at the end of the first quarter of 2018. Driving the increase in cash was $68.3 million of operating cash flow.

This increase was reduced by $7.4 million in CapEx, $3.1 million in net cash spent for M&A, $3.5 million cash usage for our share buyback program and $6.4 million of cash for principal payments on debt. Now turning to Slide 14. During the second quarter of 2018, our CapEx was $7.7 million.

Through the first half of 2018, our capital expenditures totaled $16.1 million or 2% of revenue. Our current level of CapEx investment is below our guidance for 2018 of around 3%. The company had made significant investments in historical periods, and this will continue to benefit Exela as we increase our utilization of our infrastructure.

In addition, in 2018, the company has reduced the amount of internal cost historically capitalized. Turning to the capital structure on Slide 15. On June 30, 2018, total liquidity was $139.7 million, and net debt was $1.34 billion.

We had global cash of $60.3 million, excluding restricted cash for our credit agreement and an undrawn $100 million revolving credit facility, of which $20.6 million was set aside for standby letters of credit. Also during the second quarter, we purchased 768,693 shares of Exela common stock for about $3.5 million.

Since we launched the buyback in Q4 of 2017, we 1,043,497 shares. We will continue to do so under our share buyback program given our view that our shares are significantly undervalued. From a subsequent event perspective, on July 12, 2018, we repriced our term loan from L plus 750 to L plus 650.

We added an incremental $30 million in connection with the repricing. We anticipate using the funds for general corporate purposes including small, opportunistic tuck-in acquisitions. As we continue to deliver results, our plan is to reprice our term loan over the next few years to lower our cost of debt. On Slide 16.

Based on our strong second quarter results, we are reaffirming our 2018 and long-term guidance. Our current 2018 business outlook is as follows. We expect full year revenue to be between $1.55 billion to $1.58 billion. This is well achievable given our first half results in contracted revenue.

We expect adjusted EBITDA in the range of $295 million to $310 million. This represents a year-over-year growth of between 20% and 26% on a pro forma basis. We expect further adjusted EBITDA in the range of $330 million to $355 million. Our guidance includes delivering $40 million to $45 million in savings during 2018 with the remainder beyond.

We are very comfortable with our long-term guidance. Our long-term growth was established as part of the initial merger, and we were cautious being a new public company. Given our strong backlog and top line results to date, we will be updating in a future period. As of July 12, 2018, Exela also completed our first year as a public company.

We are pleased with the results to date, and we’ll continue to execute on our strategy. Thank you. And with that, operator, I would like to open up the call for questions..

Thank you, Mr. Reynolds. We will now begin the question-and-answer session. [Operator Instructions] And the first question today will come from Joseph Foresi of Cantor Fitzgerald. Please go ahead..

Hi. I wonder if we could start talking about what might have been onetime in the cost structure this quarter, particularly in the gross margins.

I know that you had a slide in there that showed your sort of puts and takes, but what can we consider to be, I guess, onetime in nature in 2Q?.

So hey, Joe, thanks for your call. I think that if you take a look at kind of a onetime impact during Q2, it was the capitalization we had done historically before 606 and some of the duplicate ramp cost that impacted us from a cost of sales perspective.

In addition, during the quarter, we had incremental biz op, we don’t break that between SG&A and cost of sales at this point in time. Really, as a public company, we’re really focusing on driving the EBITDA margins and converting, really, adjustments – or adjusted EBITDA to GAAP EBITDA..

Got it. And so about how much – what – can you wrap a number around those onetime charges in the quarter? And I assume you expect them to fall off in 3Q..

Yes. The onetime charges, we will continue to have some of the biz op and restructuring on a go-forward basis. We – as long as we don’t do any tuck-in acquisitions, transaction cost should be minimal to none. The non-cash charges will continue with respect to the restricted stock units that vest over the next year.

Those will be the major buckets on a go-forward basis. I think that we’ve done a good job of minimizing the amount of job spends as we convert the savings into GAAP..

Got it. And maybe you could talk about what the next two quarters look like because, with your annual guidance, that would imply a considerable ramp in the margins over the next two quarters.

So what do those look like from, I guess, a restructuring perspective? And how should we expect those margins to improve? What are your levers there?.

Yes. So if you look, Joe, we’ve ramped some large customer contracts which incur significant costs and sometimes duplicate costs. As we move further out into the contracts, the ramp becomes steady-state, so those margins will improve over time.

For the second half of the year, if you look at where we are year-to-date on an adjusted EBITDA, we’re going to have a significant increase to hit our guidance, which we’re very comfortable with..

Okay. And then just a final question. Maybe could you just give us some of the – it sounds like you’re expecting the ramps in those contracts to help you hit that guidance. But is there anything else – maybe you could just give us the different levers that get you to and give you the confidence in the back half of the year margins. Thanks..

Yes. So if you look at really the second half of the year, we’ve made investments this year early on. And we’re looking, as we move forward, to have significant savings flow through at the back half of the year. In addition, typically, the back half, we see an uptick in our revenue as these contracts get steady-state.

So a combination of the savings and the incremental revenue growth with less ramp cost should drive the margins..

Okay, thank you..

Thanks, Joe..

Thanks, Joe..

The next question will be from Dan Perlin of RBC Capital Markets. Please go ahead..

Yes, it’s actually Matt Roswell sitting in for Dan. I guess could you talk briefly about sort of the demand environment across the various industries, like banking versus insurance? And as part of that, I think you’ve generally talked about your larger clients growing faster, and I was just checking to see if that’s still the case..

Yes. You hit it right on the head. More than 50% of our revenue comes from healthcare, banking, financial services and insurance.

And as we see the opportunity to roll out the opportunity to do business process automation to our customers, we’re beginning to see those customers engage with us in the pilots that we’ve talked about in the past, but we’re also seeing new opportunities. And these are opportunities between the $1 million and $5 million customers.

Those large group of customers, that 200 I mentioned, we’re seeing that be able to provide us with a runway to accelerate our growth in a nice fashion..

Matt, to add to that, with the $1 million to $5 million customers, we have 200 of them, right, there’s a lot of white space because typically those are one or two statements of work we have between the white space and everything else we’re doing. Even if we just double those customers, there’s a significant amount of upside in revenue..

Okay.

And then I guess, in terms of sort of industry demand, are you seeing any major differences between them?.

No. The demand in the industries continue to be strong. Like we said banking, financial services, health care, are probably the strongest industry with the industry tailwinds that we’ve talked about in the past that are 6% to 8% CAGR between now and 2020. So we’re participating in that movement as well..

Okay. And then sort of a housekeeping question, was there any ASC 606 revenue impacts? You mentioned the gross margin and some of the capitalization and contract cost, but I was wondering on the revenue side, whether you ran into anything..

When we adopted 606 back at the beginning of the year, there was less than $1 million impact on revenue..

Okay. Thank you very much..

Thanks, Matt..

The next question will be from Dan Dolev of Nomura Instinet. Please go ahead..

Hi guys, great quarter..

Yes..

Hey guys, nice growth. Congrats. I saw that most of the great organic growth, I think you called out 11%. I saw that a lot of the growth came from Europe and rest of the world.

Is that – did the organic growth include the FX tailwind? Or is that net of the FX tailwind?.

That includes the FX tailwind. So we didn’t report on a constant currency basis. So if you take a look, currency probably hurt us by probably a few million in the top line over in Europe, but we did see growth on an organic basis in our Northern European region during the quarter, which we were very pleased with.

So we see – we’re growing very well organically, and the inorganic acquisition will give us just a little bit bigger diversity and less concentration in the U.S. because one of our goals is to minimize concentration on a customer level, and it’s also on a geographical level. We’re still well focused in the U.S.

with the acquisition we’ll have, maybe 15% top line thereabouts from Europe and the rest of the world..

Got it. If I understand it correctly, you said the currency hurt you. I thought the currency was a tailwind in the second quarter..

No. Sorry, you’re correct. I was thinking quarter-over-quarter, but it was approximately the same amount..

Got it, okay. And then regarding the guidance, I mean, obviously, you had a very strong revenue quarter and a very strong growth ex M&A, I’d say, right, including FX? What is the reason for not raising the revenue guidance? Is that just conservatism? Are you worried about the FX headwind coming on? Maybe you can give us some color on that. Thank you..

We feel really good about the backlog and the contracted revenue we have. We’re pleased with the growth this year. On an inorganic basis, I think that we were looking at doing that but, as time came on, we decided we were just going to keep it the same and take a look at it in future quarters.

As we hit 2019, we were more focused on really having a great year in 2018 and then looking at what we can do to the guidance on a go-forward basis because, obviously, we’re growing well above our initial guidance..

Got it, understood. And maybe one last question, sorry, to come back to that.

Can you give us maybe the organic growth equivalent to that 11% number in the first quarter?.

It was all organic growth in the first quarter, so I would have to – there were no acquisitions..

Yes, I meant more from an FX perspective, but we can do it offline, too, if that’s fine..

Yes, you can circle back, I’ll give you the detail..

Thank you. Great quarter and congrats..

Thank you..

Thanks..

[Operator Instructions] The next question will be from [indiscernible] of Citi. Please go ahead..

Hi, thank you for taking my question and congrats on the great quarter..

Thanks, David..

Can you talk a little bit – we’re all walking through this investment and gross profit that will roll through the quarters. And maybe we can talk something about the spike that you did have in the second quarter.

So how does trade through? Is that a seasonal pattern? Is it something that you got some early ramp quickly and there are some investment dollars? Because, look, I think people are still trying to – it looks like given your full year guidance that sales will decline a little bit sequentially, but margins look like they have to improve.

And so is that mix? Or is that – is it just a realization of profitability on it?.

So I think we feel really good with our revenue guidance for the 2018. I think that we had great growth in the first half of the year, and we’ve been ramping up customers. So typically we anticipate that, that revenue trajectory will remain. But we did not adjust our top line guidance for 2018.

So we feel really good as to where things are heading for the year..

Fair enough.

And on the M&A pipeline, are there many things that you’re looking at right now?.

What I would say with respect to the M&A, this industry is very fragmented, there is a lot of activity in the market for small – we probably see something every day like everybody else. But we’re very, very selective when we look at anything to make sure it matches up with our go-forward business strategy and that it is accretive.

Otherwise, we won’t do it or even look at it..

And the cash flow for the quarter was very strong. You have interest payments, semi-annual interest payments that will impact you.

Is there any – was there anything unusual in the second quarter cash flow that you want to talk about? Is that just pure profitability coming out of the business?.

No, I mean, I think if you look at it, Q1 was impacted, obviously, by the large interest payment. We did reprice the loan, which will help us a little bit going forward. But there was – it’s typical when we operate the business, generate the savings, we generate a lot of cash. There is great flow-through margin from a cash flow perspective..

Okay. That’s all my questions. Thank you..

Thanks..

The next question will come from Brad Eilert of RBC. Please go ahead..

Hey guys, thanks for taking the questions and strong quarter. Just a couple of questions I had. One was related to the Asterion acquisition. I believe the cash flow savings, it shows there was only cash paid of just over $4 million for it.

Is there more to come on that? Or are there other sort of compensations for that? I mean because it looked like in some of the press releases that were released by the parent company, it seemed like the acquisition was more in the range of like $18 million.

Is there – are we seeing that right? Or is there anything else to come on that one?.

No. There’s nothing else to come on that. We’re done. I mean the reality….

So it was really a $4 million acquisition?.

That’s what the cash flow shows, yes..

Great.

And the impact for the quarter on revenues for Asterion, is that – was that about just about $4.5 million kind of what you can back out?.

From a top line perspective?.

Yes..

From the top line it was about $18.6 million..

For the quarter?.

For the quarter..

And I have one question on – it seemed like there was a working cap swing between the first quarter and second quarter mostly in accounts payable.

Was there anything to sort of take away from that?.

That’s where the accrued interest shows up typically. So that’s kind of what’s driving that since its payable in January and July of each year..

Okay. So nothing more to take away from that..

No..

And then – and last on the – with the Asterion acquisition and sort of the trend that you’re seeing with the cost savings, when you talk about hitting the guidance of $40 million to $45 million for this year still and then further adjustments coming beyond it, do you still – do you have any sort of level that we can sort of model in what we think cost savings could be in 2019?.

So I mean I think on our investor fact sheet, we have a total of about $80 million – $88 million, $87.8 million, of which the $40 million to $45 million we’re seeing in our guidance to come through this year and the remainder beyond..

Okay, thanks. And then just the last one, and I’ll turn it over. In the revenue commentary you put in the press release, you talked about, under the health care services solutions, that there was a contract clause.

Do you – can you give any more color on that?.

Yes, sure. We have, obviously, large customers, and they have customers. So as a result of them losing one of their customers, we lost some volume in one of our statements of work. So it’s nothing we did. But because they had lost the business, we were impacted by it.

But we feel really good about our health care and where we’re positioned within the market based on our contracted revenue..

Right. And that’s more of a two – a second half business anyways..

Yes..

Okay, perfect. All right, thanks, guys..

Thank you..

The next question will be from Arun Seshadri of Credit Suisse. Please go ahead..

Hello gentlemen, thanks for taking my question. Just a couple from me. Good to see the revenue growth, but I just wanted to get a sense for LLPS. We saw that grow year-over-year. Is there sort of new business that you’re starting to sort of ramp again? And just any color there would be helpful..

So that’s really an event-driven business, and we picked up some nice business in Q2. So a lot of that is really event-driven. And then when we did the deal with Enterprise Solutions, they have a great legal base that we haven’t really sold into.

So I think that as part of having that footprint now and a lot of white space, we’ll see that there’s a lot of opportunities to convert within that legal space..

Got it, that’s good to hear. And then I just wanted to understand, as far as the sequential progression goes, your revenue kind of grew nicely on a sequential basis between $93 million to $410 million. But it looks like both gross profit and, I guess, cash EBITDA both declined sequentially.

Just wanted to understand, is there any way you could parse sort of why that’s happening and what the impact of the Asterion business was on a margin basis?.

Yes. So we haven’t really broken it down between Asterion but, obviously, with the amount we paid, Asterion did not have a significant margin, if you know what I mean. But it was really strategic to us to bring that back and expand our European operations.

With respect to the rest of the business, when you’re ramping up these large customers, you take the working capital hit first, and then the second is you get impacted by the duplicate cost. As you’re taking on employees and/or facilities, sometimes you have duplicate cost.

And then over time, as you’re ramping up that revenue, it will expand, and you’ll start to take out those costs. Because we had great success last year and into this year, we had a large amount of revenue come through at very little margin. So as we ramp up, you’re going to continue to see the revenue grow, those costs come out, and we will expand.

Usually, revenue comes first and then – on these large contracts, and then the margins will expand over time. We’re very pleased though with the top line growth..

Got it. That’s very helpful. Last question from me is just wanted to look at – so if we look at sort of EBITDA and the difference between EBITDA and adjusted EBITDA, I think it was like $56 million and $70 million for Q1, it was about sort of, I guess, almost $14 million of delta between EBITDA and adjusted EBITDA.

This quarter that delta widened a little bit to almost $19 million.

How should we see that progress towards the balance of the year?.

Yes. So as we discussed early in the year, we – our job is to minimize the amount of adjustments. It’s primarily driven by our biz op and restructuring, which helps us deliver the savings. I think the good news is you’ve seen the conversion and the significant growth within what we’ll call GAAP EBITDA.

So as we continue to convert the savings, our GAAP EBITDA will expand, and adjusted EBITDA will – and the percentage of adjustments will shrink in the future..

Got it. So you do expect some pretty meaningful growth in GAAP EBITDA for the next couple of quarters, it sounds like..

Yes. I mean that’s – we only comment really on the adjusted EBITDA at this point because we’re driving those savings through biz op. So we if we try and accelerate savings, GAAP EBITDA may be impacted a little bit, if you know what I mean..

Got it, understood. Thanks a lot..

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

Yes, thanks, everyone. We really appreciate you participating in the call today. We appreciate the questions. We look forward to speaking to everyone again next quarter. Thank you..

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today’s presentation. You may now disconnect your lines..